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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended: March 31, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                    to                  
 
Commission File Number: 001-15781
BHLB-20210331_G1.JPG   
BERKSHIRE HILLS BANCORP, INC.
(Exact name of registrant as specified in its charter)
 
Delaware 04-3510455
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
     
60 State Street Boston Massachusetts 02109
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (800) 773-5601, ext. 133773

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.01 per share BHLB The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý   No o
    


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer    o    Accelerated filer        ý     
Non-accelerated filer    o     Smaller reporting company    
    Emerging growth company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes   No 
 
As of May 6, 2021, the Registrant had 51,203,211 shares of common stock, $0.01 par value per share, outstanding


BERKSHIRE HILLS BANCORP, INC.
FORM 10-Q
 
INDEX 
    Page
     
 
 
  Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020
4
  Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020
5
  Consolidated Statements of Comprehensive (Loss) for the Three Months Ended March 31, 2021
and 2020
7
  Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2021 and 2020
8
  Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020
9
  Notes to Consolidated Financial Statements (Unaudited)  
   
11
13
   
14
   
15
19
   
31
   
31
   
33
39
41
42
   
46
   
47
   
48
   
57
Item 2.
58
 
58
 
60
 
62
75
76
2


3

PART I
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
  March 31,
2021
December 31,
2020
(In thousands, except share data)
Assets    
Cash and due from banks $ 81,285  $ 91,219 
Short-term investments 1,818,323  1,466,656 
Total cash and cash equivalents 1,899,608  1,557,875 
Trading security, at fair value 9,350  9,708 
Marketable equity securities, at fair value 15,801  18,513 
Securities available for sale, at fair value 1,627,330  1,695,232 
Securities held to maturity (fair values of $627,297 and $491,855)
610,637  465,091 
Federal Home Loan Bank stock and other restricted securities 28,680  34,873 
Total securities 2,291,798  2,223,417 
Less: Allowance for credit losses on held to maturity securities (111) (104)
Net securities 2,291,687  2,223,313 
Loans held for sale 18,377  17,748 
Total loans 7,658,778  8,081,519 
Less: Allowance for credit losses on loans (123,800) (127,302)
Net loans 7,534,978  7,954,217 
Premises and equipment, net 108,538  112,663 
Other real estate owned 149  149 
Other intangible assets 33,500  34,819 
Cash surrender value of bank-owned life insurance policies 234,043  232,695 
Other assets 332,766  387,230 
Assets held for sale 303,697  317,304 
Total assets $ 12,757,343  $ 12,838,013 
Liabilities    
Demand deposits $ 2,750,393  $ 2,484,249 
NOW and other deposits 1,856,988  1,003,005 
Money market deposits 2,486,261  3,371,353 
Savings deposits 1,047,506  972,116 
Time deposits 2,103,222  2,385,085 
Total deposits 10,244,370  10,215,808 
Short-term debt —  40,000 
Long-term Federal Home Loan Bank advances and other 351,354  434,357 
Subordinated borrowings 97,338  97,280 
Total borrowings 448,692  571,637 
Other liabilities 229,832  232,730 
Liabilities held for sale 659,310  630,065 
Total liabilities $ 11,582,204  $ 11,650,240 
(continued)
March 31,
2021
December 31,
2020
Shareholders’ equity    
Common stock ($0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 50,988,285 shares outstanding in 2021; 51,903,190 shares issued and 50,833,087 shares outstanding in 2020)
528  528 
Additional paid-in capital - common stock 1,424,349  1,427,239 
Unearned compensation (7,722) (6,245)
Retained earnings (deficit) (226,516) (233,344)
Accumulated other comprehensive income 10,721  30,871 
Treasury stock, at cost (914,905 shares in 2021 and 1,070,103 shares in 2020)
(26,221) (31,276)
Total shareholders’ equity 1,175,139  1,187,773 
Total liabilities and shareholders’ equity $ 12,757,343  $ 12,838,013 
The accompanying notes are an integral part of these consolidated financial statements.
4

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
(In thousands, except per share data) 2021 2020
Interest and dividend income from continuing operations    
Loans $ 75,933  $ 101,695 
Securities and other 12,220  14,500 
Total interest and dividend income 88,153  116,195 
Interest expense from continuing operations    
Deposits 9,583  23,838 
Borrowings 3,477  5,929 
Total interest expense 13,060  29,767 
Net interest income from continuing operations 75,093  86,428 
Non-interest income from continuing operations    
Deposit related fees 7,126  7,947 
Insurance commissions and fees 3,130  3,024 
Wealth management fees 2,772  2,570 
Mortgage banking originations 802  959 
Loan fees and revenue 10,246  1,302 
Total fee income 24,076  15,802 
Other, net 2,148  (436)
(Loss) on securities, net (31) (9,730)
Total non-interest income 26,193  5,636 
Total net revenue from continuing operations 101,286  92,064 
Provision for credit losses 6,500  34,807 
Non-interest expense from continuing operations    
Compensation and benefits 38,735  36,909 
Occupancy and equipment 11,024  11,132 
Technology and communications 8,593  8,081 
Marketing and promotion 595  1,165 
Professional services 6,614  2,720 
FDIC premiums and assessments 1,120  1,482 
Other real estate owned and foreclosures 27 
Amortization of intangible assets 1,319  1,580 
Acquisition, restructuring, and other expenses 3,486  — 
Other 6,666  8,229 
Total non-interest expense 78,154  71,325 
Income/(loss) from continuing operations before income taxes $ 16,632  $ (14,068)
Income tax (benefit)/expense 3,601  (1,996)
Net income/(loss) from continuing operations $ 13,031  $ (12,072)
(Loss)/income from discontinued operations before income taxes $ —  $ (10,629)
Income tax (benefit)/expense —  (2,831)
Net (loss)/income from discontinued operations $ —  $ (7,798)
Net income/(loss) $ 13,031  $ (19,870)
Preferred stock dividend —  125 
Income/(loss) available to common shareholders $ 13,031  $ (19,995)
(continued)
5

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (CONCLUDED)
Three Months Ended
March 31,
2021 2020
Basic earnings/(loss) per common share:    
Continuing operations $ 0.26  $ (0.24)
Discontinued operations —  (0.16)
Total $ 0.26  $ (0.40)
Diluted earnings/(loss) per common share:
Continuing operations $ 0.26  $ (0.24)
Discontinued operations —  (0.16)
Total $ 0.26  $ (0.40)
Weighted average shares outstanding:    
Basic 50,330  50,204 
Diluted 50,565  50,204 
The accompanying notes are an integral part of these consolidated financial statements.
6

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
Three Months Ended
March 31,
(In thousands) 2021 2020
Net income/(loss) $ 13,031  $ (19,870)
Other comprehensive income, before tax:    
Changes in unrealized gain on debt securities available-for-sale (27,013) 25,614 
Income taxes related to other comprehensive income:    
Changes in unrealized gain on debt securities available-for-sale 6,863  (6,590)
Total other comprehensive (loss)/income (20,150) 19,024 
Total comprehensive (loss) $ (7,119) $ (846)
The accompanying notes are an integral part of these consolidated financial statements.

7

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
  Preferred stock Common stock Additional
paid-in capital
Unearned compensation Retained earnings (deficit) Accumulated
other
comprehensive income/(loss)
Treasury stock
(In thousands) Shares Amount Shares Amount Total
Balance at December 31, 2019 522  $ 40,633  49,585  $ 517  $ 1,422,441  $ (8,465) $ 361,082  $ 11,993  $ (69,637) $ 1,758,564 
Comprehensive income:              
Net (loss) —  —  —  —  —  —  (19,870) —  —  (19,870)
Other comprehensive income —  —  —  —  —  —  —  19,024  —  19,024 
Total comprehensive (loss) —  —  —  —  —  —  (19,870) 19,024  —  (846)
Impact of ASC 326 Adoption —  —  —  —  —  —  (24,380) —  —  (24,380)
Conversion of preferred stock to common stock (261) (20,308) 522  5,391  —  —  —  14,911  — 
Cash dividends declared on common shares ($0.24 per share)
—  —  —  —  —  —  (12,050) —  —  (12,050)
Cash dividends declared on preferred shares ($0.48 per share)
—  —  —  —  —  —  (125) —  —  (125)
Treasury shares repurchased —  —  (14) —  —  —  —  —  (473) (473)
Forfeited shares —  —  (11) —  (84) 375  —  —  (291) — 
Exercise of stock options —  —  24  —  —  —  (215) —  734  519 
Restricted stock grants —  —  108  —  52  (3,133) —  —  3,081  — 
Stock-based compensation —  —  —  —  —  1,459  —  —  —  1,459 
Other, net —  —  (15) —  —  —  —  —  (390) (390)
Balance at March 31, 2020 261  $ 20,325  50,199  $ 523  $ 1,427,800  $ (9,764) $ 304,442  $ 31,017  $ (52,065) $ 1,722,278 
Balance at December 31, 2020 —  $ —  50,833  $ 528  $ 1,427,239  $ (6,245) $ (233,344) $ 30,871  $ (31,276) $ 1,187,773 
Comprehensive income:              
Net income —  —  —  —  —  —  13,031  —  —  13,031 
Other comprehensive (loss) —  —  —  —  —  —  —  (20,150) —  (20,150)
Total comprehensive income —  —  —  —  —  —  13,031  (20,150) —  (7,119)
Cash dividends declared on common shares ($0.12 per share)
—  —  —  —  —  —  (6,124) —  —  (6,124)
Forfeited shares —  —  (52) —  (234) 1,333  —  —  (1,099) — 
Exercise of stock options —  —  —  —  —  (79) —  148  69 
Restricted stock grants —  —  210  —  (2,660) (3,485) —  —  6,145  — 
Stock-based compensation —  —  —  —  —  675  —  —  —  675 
Other, net —  —  (8) —  —  —  —  (139) (135)
Balance at March 31, 2021 —  $ —  50,988  $ 528  $ 1,424,349  $ (7,722) $ (226,516) $ 10,721  $ (26,221) $ 1,175,139 
The accompanying notes are an integral part of these consolidated financial statements.
8

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Months Ended
March 31,
(In thousands) 2021 2020
Cash flows from operating activities:    
Net income/(loss) from continuing operations $ 13,031  $ (12,072)
Net (loss) from discontinued operations —  (7,798)
Net income/(loss) $ 13,031  $ (19,870)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:    
Provision for credit losses 6,500  34,807 
Net amortization of securities 389  762 
Change in unamortized net loan costs and premiums (2,755) 386 
Premises and equipment depreciation and amortization expense 2,839  2,680 
Stock-based compensation expense 675  1,459 
Accretion of purchase accounting entries, net (1,305) (3,121)
Amortization of other intangibles 1,319  1,580 
Income from cash surrender value of bank-owned life insurance policies (1,348) (1,106)
Securities losses, net 31  9,730 
Net change in loans held-for-sale 3,938  4,472 
Loss on disposition of assets 2,811  — 
Amortization of interest in tax-advantaged projects 33  486 
Net change in other (2,584) (11,571)
Net cash provided by operating activities of continuing operations 23,574  28,492 
Net cash provided (used) by operating activities of discontinued operations —  6,560 
Net cash provided by operating activities 23,574  35,052 
Cash flows from investing activities:    
Net decrease in trading security 192  181 
Purchases of marketable equity securities —  (11,437)
Proceeds from sales of marketable equity securities 2,849  12,329 
Purchases of securities available for sale (103,877) (160,925)
Proceeds from sales of securities available for sale —  3,520 
Proceeds from maturities, calls, and prepayments of securities available for sale 166,998  90,758 
Purchases of securities held to maturity (155,417) — 
Proceeds from maturities, calls, and prepayments of securities held to maturity 9,377  20,372 
Net change in loans 412,255  217,429 
Net change in Mid-Atlantic region loans held for sale 16,830  — 
Proceeds from surrender of bank-owned life insurance —  553 
Purchase of Federal Home Loan Bank stock —  (6,741)
Proceeds from redemption of Federal Home Loan Bank stock 6,193  454 
Net investment in limited partnership tax credits —  (2,783)
Purchase of premises and equipment, net (2,297) (3,386)
Net cash provided by investing activities 353,103  160,324 
9

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)
  Three Months Ended
March 31,
(In thousands) 2021 2020
(continued)
Cash flows from financing activities:    
Net increase/(decrease) in deposits 28,562  (262,203)
Net increase in Mid-Atlantic region deposits held for sale 29,245  — 
Proceeds from Federal Home Loan Bank advances and other borrowings —  315,854 
Repayments of Federal Home Loan Bank advances and other borrowings (123,022) (102,382)
Purchase of treasury stock —  (473)
Exercise of stock options 69  519 
Common and preferred stock cash dividends paid (6,124) (12,175)
Settlement of derivative contracts with financial institution counterparties 36,326  (108,925)
Net cash used by financing activities (34,944) (169,785)
Net change in cash and cash equivalents 341,733  25,591 
Cash and cash equivalents at beginning of period 1,557,875  579,829 
Cash and cash equivalents at end of period $ 1,899,608  $ 605,420 
Supplemental cash flow information:    
Interest paid on deposits $ 10,149  $ 26,830 
Interest paid on borrowed funds 3,655  6,033 
Income taxes (refunded) paid, net (2,386) 178 
Other non-cash changes:    
Other net comprehensive income $ (20,150) $ 19,024 
Impact to retained earnings from adoption of ASC 326, net of tax —  24,380 
Unsettled transactions related to security purchases 22,126  — 
Reclass of seasoned loan portfolios to held-for-sale, net 9,500  27,940 
Real estate owned acquired in settlement of loans —  224 
The accompanying notes are an integral part of these consolidated financial statements.
10


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.           BASIS OF PRESENTATION

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

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

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

The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the audited financial statements and disclosures Berkshire Hills Bancorp, Inc. previously filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. In management’s opinion, all adjustments necessary for a fair statement are reflected in the interim periods.

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

Refer to Note 10 – Other Commitments, Contingencies, and Off-Balance Sheet Activities for pandemic related risks and uncertainties.

Recently Adopted Accounting Principles
In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” This ASU amends and modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The amendments in this update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. As ASU No. 2018-14 only revises disclosure requirements, the adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU No. 2019-12 removes specific exceptions to the general principles in FASB ASC Topic 740. It eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intraperiod tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also improves financial statement preparers’ application of income tax-related guidance and simplifies: (1) franchise taxes that are partially based on income; (2) transactions with a government that result in a step up in the tax basis of goodwill; (3) separate financial statements of legal entities that are not subject to tax; and (4) enacted changes in tax laws in interim periods. The adoption of ASU No. 2019-12 did not have a material impact on the Company's Consolidated Financial Statements.
11


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2020, the FASB issued ASU No. 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force)”. ASU No. 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, this ASU provides direction that a company should not consider whether the underlying securities would be accounted for under the equity method or the fair value option when it is determining the accounting for certain forward contracts and purchased options, upon either settlement or exercise. The amendments are to be applied prospectively. The adoption of ASU No. 2020-01 did not have a material impact on the Company's Consolidated Financial Statements.

In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope.” ASU No. 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU No. 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU No. 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. The adoption of ASU 2021-01 did not significantly impact the Company’s Consolidated Financial Statements.

Future Application of Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. For instance, entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. Finally, entities can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. It is anticipated that this ASU will simplify any modifications that are executed between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. The Company is currently evaluating the impact of adopting the new guidance on the Consolidated Financial Statements.


12


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2.           DISCONTINUED OPERATIONS AND HELD FOR SALE

During the first quarter of 2019, the Company reached the decision to pursue the sale of the national mortgage banking operations of First Choice Loan Services, Inc. (“FCLS”), – a subsidiary of the Bank. The decision was based on a number of strategic priorities and other factors, including the competitiveness of the mortgage industry. FCLS continued to operate and serve its customers as the Company initiated the process of identifying a buyer. As a result of these actions, the Company classified the operations of FCLS as discontinued under ASC 205-20. The Consolidated Balance Sheets, Consolidated Statements of Operations, and Consolidated Statements of Cash Flows present discontinued operations retrospectively for current and prior periods.

On May 7, 2020, the Company completed a transaction to sell certain assets and liabilities related to the operations of FCLS. During the fourth quarter of 2020, the Company completed the final wind-down of the operations of FCLS. Operating results for the year ended December 31, 2020, include expenses related to the wind-down of operations.

As of March 31, 2021 and December 31, 2020, there were no assets or liabilities related to the discontinued operations of FCLS.

The following presents operating results of the discontinued operations of FCLS for the three months ended March 31, 2021 and March 31, 2020:
Three Months Ended March 31,
(In thousands) 2021 2020
Interest income $ —  $ 729 
Interest expense —  282 
Net interest income —  447 
Non-interest income —  1,358 
Total net revenue —  1,805 
Non-interest expense —  12,434 
(Loss) from discontinued operations before income taxes —  (10,629)
Income tax (benefit) —  (2,831)
Net (loss) from discontinued operations $ —  $ (7,798)


13


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mid-Atlantic Branch Sale
The Company has entered into an agreement to sell its eight Mid-Atlantic branches to Investors Bank of Short Hills, New Jersey, subject to customary regulatory approvals. The transfer is targeted for completion in the first half of 2021. The branch sale includes loans with a total balance of $284 million and deposit accounts with a total balance of $647 million as of March 31, 2021. These balances are included in assets held for sale and liabilities held for sale on the Consolidated Balance Sheets. The buyer has agreed to pay a premium equal to 3.0% of the final deposit balance transferred. The sale includes all branch premises and equipment, and the agreement provides that the buyer intends to offer employment to all associated staff. Berkshire expects to complete the net transfer with funds from short-term investments. The branch sale will have no effect on Berkshire’s Mid-Atlantic specialized commercial lending operations, including SBA lending at its 44 Business Capital Division and its asset-based lending relationships.

The following is a summary of the assets and liabilities related to the branch sale at March 31, 2021 and December 31, 2020:
(In thousands) March 31, 2021 December 31, 2020
Assets
Loans $ 283,769  $ 300,599 
Other assets 19,928  16,705 
Total assets $ 303,697  $ 317,304 
Liabilities
Deposits $ 646,622  $ 617,377 
Other liabilities 12,688  12,688 
Total liabilities $ 659,310  $ 630,065 


NOTE 3.           TRADING SECURITY

The Company holds a tax-advantaged economic development bond accounted for at fair value. The security had an amortized cost of $8.5 million and $8.7 million, and a fair value of $9.3 million and $9.7 million, at March 31, 2021 and December 31, 2020, respectively. As discussed further in Note 8 - Derivative Financial Instruments and Hedging Activities, the Company entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there were no other securities in the trading portfolio at March 31, 2021 or December 31, 2020.
14


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. SECURITIES AVAILABLE FOR SALE, HELD TO MATURITY, AND MARKETABLE
        EQUITY SECURITIES

The following is a summary of securities available for sale, held to maturity, and marketable equity securities:
(In thousands) Amortized  Cost Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value Allowance
March 31, 2021        
Securities available for sale        
Municipal bonds and obligations
$ 83,922  $ 6,378  $ —  $ 90,300  $ — 
Agency collateralized mortgage obligations
713,215  14,922  (3,583) 724,554  — 
Agency mortgage-backed securities
453,042  2,813  (8,659) 447,196  — 
Agency commercial mortgage-backed securities
267,596  4,020  (3,101) 268,515  — 
Corporate bonds
44,294  729  (9) 45,014  — 
Other bonds and obligations
50,691  1,068  (8) 51,751  — 
Total securities available for sale 1,612,760  29,930  (15,360) 1,627,330  — 
Securities held to maturity        
Municipal bonds and obligations
266,609  16,884  (592) 282,901  71 
Agency collateralized mortgage obligations
151,092  4,764  (1,054) 154,802  — 
Agency mortgage-backed securities
65,052  155  (1,682) 63,525  — 
Agency commercial mortgage-backed securities
124,379  398  (2,288) 122,489  — 
Tax advantaged economic development bonds
3,210  75  —  3,285  40 
Other bonds and obligations
295  —  —  295  — 
Total securities held to maturity 610,637  22,276  (5,616) 627,297  111 
Marketable equity securities 15,707  218  (124) 15,801  — 
Total $ 2,239,104  $ 52,424  $ (21,100) $ 2,270,428  $ 111 
(In thousands) Amortized  Cost Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value Allowance
December 31, 2020        
Securities available for sale        
Municipal bonds and obligations
$ 90,273  $ 7,530  $ —  $ 97,803  $ — 
Agency collateralized mortgage obligations
740,225  16,836  (235) 756,826  — 
Agency mortgage-backed securities
433,311  4,954  (133) 438,132  — 
Agency commercial mortgage-backed securities
278,990  9,835  (175) 288,650  — 
Corporate bonds
59,098  942  (10) 60,030  — 
Other bonds and obligations
52,080  1,719  (8) 53,791  — 
Total securities available for sale 1,653,977  41,816  (561) 1,695,232  — 
Securities held to maturity        
Municipal bonds and obligations
246,520  20,106  —  266,626  64 
Agency collateralized mortgage obligations
153,561  5,989  (171) 159,379  — 
Agency mortgage-backed securities
35,865  198  (29) 36,034  — 
Agency commercial mortgage-backed securities
25,481  590  (12) 26,059  — 
Tax advantaged economic development bonds
3,369  93  —  3,462  40 
Other bonds and obligations
295  —  —  295  — 
Total securities held to maturity 465,091  26,976  (212) 491,855  104 
Marketable equity securities 18,061  767  (315) 18,513  — 
Total $ 2,137,129  $ 69,559  $ (1,088) $ 2,205,600  $ 104 

15


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity in the allowance for credit losses for debt securities held to maturity by security type for the three months ended March 31, 2021 and 2020:
(In thousands) Municipal bonds and obligations Tax advantaged economic development bonds Total
Balance at December 31, 2020 $ 64  $ 40  $ 104 
Provision for credit losses — 
Balance at March 31, 2021 $ 71  $ 40  $ 111 
(In thousands) Municipal bonds and obligations Tax advantaged economic development bonds Total
Balance at December 31, 2019 $ —  $ —  $ — 
Impact of ASC 326 adoption 83  226  309 
Provision for credit losses - reversal —  (168) (168)
Balance at March 31, 2020 $ 83  $ 58  $ 141 
Credit Quality Information
The Company monitors the credit quality of held to maturity securities through credit ratings from various rating agencies. Credit ratings express opinions about the credit quality of a security and are utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade are considered to have distinctively higher credit risk than investment grade securities. For securities without credit ratings, the Company utilizes other financial information indicating the financial health of the underlying municipality, agency, or organization.

As of March 31, 2021, none of the Company's investment securities were delinquent or in non-accrual status.

The amortized cost and estimated fair value of available for sale (“AFS”) and held to maturity (“HTM”) securities segregated by contractual maturity at March 31, 2021 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable.
  Available for sale Held to maturity
  Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
Within 1 year $ 31,134  $ 31,147  $ 1,872  $ 1,874 
Over 1 year to 5 years 7,206  7,331  4,270  4,317 
Over 5 years to 10 years 51,953  53,260  23,311  24,210 
Over 10 years 88,614  95,327  240,661  256,080 
Total bonds and obligations 178,907  187,065  270,114  286,481 
Mortgage-backed securities 1,433,853  1,440,265  340,523  340,816 
Total $ 1,612,760  $ 1,627,330  $ 610,637  $ 627,297 

During the three months ended March 31, 2021, purchases of AFS securities totaled $103.9 million. During the three months ended March 31, 2021, there were no sales of AFS securities. During the three months ended March 31, 2020, purchases of AFS securities totaled $160.9 million and the proceeds from the sale of AFS securities totaled $3.5 million. During the three months ended March 31, 2021, there were no gross gains or losses on AFS securities. During the three months ended March 31,2020, there were no gross gains on AFS securities and gross losses totaled $1 thousand. These gains and losses are included in gain/(loss) on securities, net on the consolidated statements of operations.


16


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Securities available for sale and held to maturity with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:
  Less Than Twelve Months Over Twelve Months Total
  Gross   Gross   Gross  
  Unrealized Fair Unrealized Fair Unrealized Fair
(In thousands) Losses Value Losses Value Losses Value
March 31, 2021            
Securities available for sale            
Agency collateralized mortgage obligations
$ 3,583  $ 150,110  $ —  $ —  $ 3,583  $ 150,110 
Agency mortgage-backed securities
8,654  346,395  384  8,659  346,779 
Agency commercial mortgage-backed securities 3,101  132,234  —  —  3,101  132,234 
Corporate bonds
—  —  4,876  4,876 
Other bonds and obligations
—  —  981  981 
Total securities available for sale $ 15,338  $ 628,739  $ 22  $ 6,241  $ 15,360  $ 634,980 
Securities held to maturity            
Municipal bonds and obligations $ 592  $ 23,359  $ —  $ —  $ 592  $ 23,359 
Agency collateralized mortgage obligations 1,054  83,449  —  —  1,054  83,449 
Agency mortgage-backed securities 1,682  59,167  —  —  1,682  59,167 
Agency commercial mortgage-backed securities 2,288  103,015  —  —  2,288  103,015 
Total securities held to maturity 5,616  268,990  —  —  5,616  268,990 
Total $ 20,954  $ 897,729  $ 22  $ 6,241  $ 20,976  $ 903,970 
December 31, 2020            
Securities available for sale            
Agency collateralized mortgage obligations
$ 235  $ 77,898  $ —  $ —  $ 235  $ 77,898 
Agency mortgage-backed securities
131  39,939  256  133  40,195 
Agency commercial mortgage-backed securities 175  51,435  —  —  175  51,435 
Corporate bonds
10  4,875  —  —  10  4,875 
Other bonds and obligations
—  —  1,030  1,030 
Total securities available for sale $ 551  $ 174,147  $ 10  $ 1,286  $ 561  $ 175,433 
Securities held to maturity            
Agency collateralized mortgage obligations
$ 171  $ 25,048  $ —  $ —  $ 171  $ 25,048 
Agency mortgage-backed securities
29  20,710  —  —  29  20,710 
Agency commercial mortgage-backed securities
12  10,216  —  —  12  10,216 
Total securities held to maturity 212  55,974  —  —  212  55,974 
Total $ 763  $ 230,121  $ 10  $ 1,286  $ 773  $ 231,407 

17


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debt Securities
The Company expects to recover its amortized cost basis on all debt securities in its AFS and HTM portfolios. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of March 31, 2021, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low portfolio turnover.

The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS and HTM portfolios were not other-than-temporarily impaired at March 31, 2021:

AFS collateralized mortgage obligations
At March 31, 2021, 25 of the 256 securities in the Company’s portfolio of AFS collateralized mortgage obligations were in unrealized loss positions. Aggregate unrealized losses represented 2.2% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), and Government National Mortgage Association (“GNMA”) guarantee the contractual cash flows of all of the Company’s collateralized mortgage obligations. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

AFS commercial and residential mortgage-backed securities
At March 31, 2021, 33 of the 125 securities in the Company’s portfolio of AFS mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 2.4% of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of all of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

AFS corporate bonds
At March 31, 2021, 1 of the 14 securities in the Company’s portfolio of AFS corporate bonds was in an unrealized loss position. Aggregate unrealized losses represents 0.2% of the amortized cost of the bond in an unrealized loss position. The Company reviews the financial strength of all of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities.

AFS other bonds and obligations
At March 31, 2021, 3 of the 6 securities in the Company’s portfolio of other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 0.9% of the amortized cost of securities in unrealized loss positions. The securities are all investment grade rated, and there were no material underlying credit downgrades during the quarter. All securities are performing.
 
HTM municipal bonds and obligations
At March 31, 2021, 15 of the 207 securities in the Company’s portfolio of HTM municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 2.5% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing.

HTM collateralized mortgage obligations
At March 31, 2021, 5 of the 13 securities in the Company’s portfolio of HTM collateralized mortgage obligations were in unrealized loss positions. Aggregate unrealized losses represented 1.3% of the amortized cost of the securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of all of the Company's collateralized residential mortgage obligations. The securities are investment grade rated, and there were no material underlying credit downgrades during the quarter. All securities are performing.

18


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HTM commercial and residential mortgage-backed securities
At March 31, 2021, 12 out of 14 securities in the Company’s portfolio of HTM mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 2.3% of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.


NOTE 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following is a summary of total loans by regulatory call report code with sub-segmentation based on underlying collateral for certain loan types:
(In thousands) March 31, 2021 December 31, 2020
Construction $ 454,388  $ 454,513 
Commercial multifamily 483,646  483,350 
Commercial real estate owner occupied 556,286  552,413 
Commercial real estate non-owner occupied 2,129,572  2,119,263 
Commercial and industrial 1,719,304  1,943,164 
Residential real estate 1,774,504  1,931,681 
Home equity 279,017  293,981 
Consumer other 262,061  303,154 
Total loans $ 7,658,778  $ 8,081,519 
Allowance for credit losses 123,800  127,302 
Net loans $ 7,534,978  $ 7,954,217 

As of March 31, 2021, outstanding loans originated under the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") totaled $444.2 million. These loans are 100% guaranteed by the SBA and the full principal amount of the loan may qualify for forgiveness. These loans are included in commercial and industrial.

During the three months ended March 31, 2021, the Company reclassified $9.5 million of commercial loans, reflecting its intent to sell these loans. These loans are not contained in the balances within this note and are accounted for at the lower of carrying value or fair market value.

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

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

Commercial and industrial loans - Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment include asset based loans which generally have no scheduled repayment and which are closely monitored against formula based collateral advance ratios. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.
19


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Allowance for Credit Losses for Loans
The Allowance for Credit Losses for Loans (“ACLL”) is comprised of the allowance for loan losses and the allowance for unfunded commitments which is accounted for as a separate liability in other liabilities on the balance sheet. The level of the ACLL represents management’s estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company uses a static pool migration analysis method, applying expected historical loss trend and observed economic metrics. The level of the ACLL is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past and current events, utilizing a 7 quarter reasonable and supportable forecast period with a 1 year reversion period. The ACLL reserve is overlaid with qualitative factors based upon:
the existence and growth of concentrations of credit;
the volume and severity of past due financial assets, including nonaccrual assets;
the institutions lending and credit review as well as the experience and ability of relevant management and staff and;
the effect of other external factors such as regulatory, competition, regional market conditions, legal and technological environment and other events such as natural disasters;
the effect of other economic factors such as economic stimulus and customer forbearance programs.
The allowance for unfunded commitments is maintained at a level by the Company to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit).

The Company’s activity in the allowance for credit losses for loans for the three months ended March 31, 2021 and March 31, 2020 was as follows:
(In thousands) Balance at Beginning of Period Impact of Adopting ASC 326 Sub-total Charge-offs Recoveries Provision for Credit Losses Balance at End of Period
Three months ended March 31, 2021
Construction $ 5,111  $ —  $ 5,111  $ —  $ —  $ (714) $ 4,397 
Commercial multifamily 5,916  —  5,916  (124) 62  497  6,351 
Commercial real estate owner occupied 12,380  —  12,380  (376) 12  2,241  14,257 
Commercial real estate non-owner occupied 35,850  —  35,850  (6,658) 126  5,243  34,561 
Commercial and industrial 25,013  —  25,013  (3,320) 644  3,734  26,071 
Residential real estate 28,491  —  28,491  (377) 437  (2,751) 25,800 
Home equity 6,482  —  6,482  (77) 24  (680) 5,749 
Consumer other 8,059  —  8,059  (528) 160  (1,077) 6,614 
Total allowance for credit losses $ 127,302  $ —  $ 127,302  $ (11,460) $ 1,465  $ 6,493  $ 123,800 

20


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) Balance at Beginning of Period Impact of Adopting ASC 326 Sub-total Charge-offs Recoveries Provision for Credit Losses Balance at End of Period
Three months ended March 31, 2020
Construction $ 2,713  $ (342) $ 2,371  $ —  $ —  $ 2,202  $ 4,573 
Commercial multifamily 4,413  (1,842) 2,571  —  —  1,882  4,453 
Commercial real estate owner occupied 4,880  6,062  10,942  (6,376) 258  6,783  11,607 
Commercial real estate non-owner occupied 16,344  11,201  27,545  (135) 47  1,406  28,863 
Commercial and industrial 20,099  (2,189) 17,910  (4,916) 1,402  10,106  24,502 
Residential real estate 9,970  6,799  16,769  (171) 70  9,389  26,057 
Home equity 1,470  4,884  6,354  (77) 1,501  7,780 
Consumer other 3,686  861  4,547  (758) 180  1,706  5,675 
Total allowance for credit losses $ 63,575  $ 25,434  $ 89,009  $ (12,433) $ 1,959  $ 34,975  $ 113,510 


21


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (other liability on consolidated balance sheet), with adjustments to the reserve recognized in other noninterest expense in the consolidated statement of operations. The Company’s activity in the allowance for credit losses on unfunded commitments for the three months ended March 31, 2021 and March 31, 2020 was as follows:

Three Months Ended
March 31,
(In thousands) 2021 2020
Balance at beginning of period $ 7,629  $ 100 
Impact of adopting ASC 326 —  7,993 
Sub-Total 7,629  8,093 
Expense for credit losses 200  330 
Balance at end of period $ 7,829  $ 8,423 

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

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

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


22


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Company’s loans by risk category:
Term Loans Amortized Cost Basis by Origination Year
(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
As of March 31, 2021
Construction
Risk rating
Pass $ 25,422  $ 43,662  $ 275,525  $ 65,371  $ 27,177  $ 2,501  $ 1,000  $ —  $ 440,658 
Special Mention —  —  —  313  —  —  —  —  313 
Substandard —  —  —  9,429  3,988  —  —  —  13,417 
Total $ 25,422  $ 43,662  $ 275,525  $ 75,113  $ 31,165  $ 2,501  $ 1,000  $ —  $ 454,388 
Commercial multifamily:
Risk rating
Pass $ 17,100  $ 31,295  $ 55,210  $ 74,123  $ 78,148  $ 219,175  $ 61  $ —  $ 475,112 
Special Mention —  —  2,187  —  —  —  —  —  2,187 
Substandard —  —  —  —  —  6,204  143  —  6,347 
Total $ 17,100  $ 31,295  $ 57,397  $ 74,123  $ 78,148  $ 225,379  $ 204  $ —  $ 483,646 
Commercial real estate owner occupied:
Risk rating
Pass $ 13,652  $ 53,164  $ 81,473  $ 99,224  $ 63,148  $ 218,342  $ 1,506  $ —  $ 530,509 
Special Mention —  535  3,389  1,136  1,966  2,432  —  —  9,458 
Substandard —  —  1,266  3,333  1,627  10,093  —  —  16,319 
Total $ 13,652  $ 53,699  $ 86,128  $ 103,693  $ 66,741  $ 230,867  $ 1,506  $ —  $ 556,286 
Commercial real estate non-owner occupied:
Risk rating
Pass $ 77,638  $ 174,898  $ 292,528  $ 469,718  $ 218,525  $ 725,223  $ 17,394  $ —  $ 1,975,924 
Special Mention —  231  270  2,971  6,904  58,403  1,059  —  69,838 
Substandard —  7,804  3,529  3,730  20,135  48,418  194  —  83,810 
Total $ 77,638  $ 182,933  $ 296,327  $ 476,419  $ 245,564  $ 832,044  $ 18,647  $ —  $ 2,129,572 
Commercial and industrial:
Risk rating
Pass $ 25,240  $ 563,757  $ 131,781  $ 203,153  $ 110,240  $ 182,949  $ 372,075  $ —  $ 1,589,195 
Special Mention —  1,952  9,887  7,477  3,881  4,011  10,806  —  38,014 
Substandard 146  8,807  37,772  22,909  6,826  7,857  7,456  —  91,773 
Doubtful —  —  —  —  —  —  322  —  322 
Total $ 25,386  $ 574,516  $ 179,440  $ 233,539  $ 120,947  $ 194,817  $ 390,659  $ —  $ 1,719,304 
Residential real estate
Risk rating
Pass $ 55,071  $ 148,622  $ 127,817  $ 218,785  $ 273,160  $ 931,322  $ 3,261  $ —  $ 1,758,038 
Special Mention —  —  —  —  284  814  —  —  1,098 
Substandard —  700  31  1,836  2,434  10,367  —  —  15,368 
Total $ 55,071  $ 149,322  $ 127,848  $ 220,621  $ 275,878  $ 942,503  $ 3,261  $ —  $ 1,774,504 

23


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Term Loans Amortized Cost Basis by Origination Year
(In thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
As of December 31, 2020
Construction
Risk rating
Pass $ 38,374  $ 255,377  $ 114,690  $ 28,474  $ 9,519  $ 2,766  $ 1,000  $ —  $ 450,200 
Special Mention —  —  313  —  —  —  —  —  313 
Substandard —  —  —  4,000  —  —  —  —  4,000 
Total $ 38,374  $ 255,377  $ 115,003  $ 32,474  $ 9,519  $ 2,766  $ 1,000  $ —  $ 454,513 
Commercial multifamily:
Risk rating
Pass $ 31,438  $ 57,659  $ 74,932  $ 77,746  $ 81,066  $ 153,818  $ 20  $ —  $ 476,679 
Special Mention —  —  —  —  —  —  —  —  — 
Substandard —  —  —  —  47  6,479  145  —  6,671 
Total $ 31,438  $ 57,659  $ 74,932  $ 77,746  $ 81,113  $ 160,297  $ 165  $ —  $ 483,350 
Commercial real estate owner occupied:
Risk rating
Pass $ 58,327  $ 84,839  $ 104,797  $ 64,693  $ 44,300  $ 169,197  $ 1,194  $ —  $ 527,347 
Special Mention 535  2,569  1,136  1,009  800  2,579  —  —  8,628 
Substandard —  1,266  3,597  1,685  1,439  8,451  —  —  16,438 
Total $ 58,862  $ 88,674  $ 109,530  $ 67,387  $ 46,539  $ 180,227  $ 1,194  $ —  $ 552,413 
Commercial real estate non-owner occupied:
Risk rating
Pass $ 180,520  $ 292,386  $ 435,440  $ 223,935  $ 303,221  $ 497,066  $ 15,393  $ —  $ 1,947,961 
Special Mention —  279  2,068  6,958  11,798  44,961  1,068  —  67,132 
Substandard 7,804  3,529  4,235  19,632  2,124  66,651  195  —  104,170 
Total $ 188,324  $ 296,194  $ 441,743  $ 250,525  $ 317,143  $ 608,678  $ 16,656  $ —  $ 2,119,263 
Commercial and industrial:
Risk rating
Pass $ 754,260  $ 159,046  $ 205,651  $ 130,985  $ 48,326  $ 148,222  $ 368,769  $ —  $ 1,815,259 
Special Mention 1,467  5,753  5,267  2,851  1,601  65  12,408  —  29,412 
Substandard 7,392  39,822  24,951  7,765  3,504  5,630  9,099  —  98,163 
Doubtful —  —  —  —  —  —  330  —  330 
Total $ 763,119  $ 204,621  $ 235,869  $ 141,601  $ 53,431  $ 153,917  $ 390,606  $ —  $ 1,943,164 
Residential real estate
Risk rating
Pass $ 150,583  $ 146,142  $ 272,399  $ 320,384  $ 333,159  $ 691,078  $ 3,281  $ —  $ 1,917,026 
Special Mention 384  —  454  1,430  —  362  —  —  2,630 
Substandard 991  39  703  902  417  8,964  —  12,025 
Total $ 151,958  $ 146,181  $ 273,556  $ 322,716  $ 333,576  $ 700,404  $ 3,290  $ —  $ 1,931,681 

24


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For home equity and consumer other loan portfolio segments, Berkshire evaluates credit quality based on the aging status of the loan and by payment activity. The performing or nonperforming status is updated on an ongoing basis dependent upon improvement and deterioration in credit quality. The following table presents the amortized cost based on payment activity:
Term Loans Amortized Cost Basis by Origination Year
(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
As of March 31, 2021
Home equity:
Payment performance
Performing $ 703  $ 2,623  $ 1,469  $ 309  $ 1,829  $ 2,234  $ 267,103  $ —  $ 276,270 
Nonperforming —  —  —  —  —  —  2,747  —  2,747 
Total $ 703  $ 2,623  $ 1,469  $ 309  $ 1,829  $ 2,234  $ 269,850  $ —  $ 279,017 
Consumer other:
Payment performance
Performing $ 4,870  $ 14,084  $ 30,924  $ 87,205  $ 57,753  $ 54,399  $ 7,965  $ —  $ 257,200 
Nonperforming —  69  381  1,325  1,457  1,619  10  —  4,861 
Total $ 4,870  $ 14,153  $ 31,305  $ 88,530  $ 59,210  $ 56,018  $ 7,975  $ —  $ 262,061 
Term Loans Amortized Cost Basis by Origination Year
(In thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
As of December 31, 2020
Home equity:
Payment performance
Performing $ 2,445  $ 1,960  $ 316  $ 1,859  $ 499  $ 1,882  $ 282,123  $ —  $ 291,084 
Nonperforming —  —  —  —  —  2,896  —  2,897 
Total $ 2,445  $ 1,960  $ 317  $ 1,859  $ 499  $ 1,882  $ 285,019  $ —  $ 293,981 
Consumer other:
Payment performance
Performing $ 15,193  $ 35,317  $ 101,730  $ 69,366  $ 35,421  $ 31,327  $ 9,339  $ —  $ 297,693 
Nonperforming 39  316  1,511  1,599  1,585  407  —  5,461 
Total $ 15,232  $ 35,633  $ 103,241  $ 70,965  $ 37,006  $ 31,734  $ 9,343  $ —  $ 303,154 
25


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of loans by past due status at March 31, 2021 and December 31, 2020:
(In thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Loans
March 31, 2021
Construction $ 3,988  $ —  $ —  $ 3,988  $ 450,400  $ 454,388 
Commercial multifamily —  —  4,068  4,068  479,578  483,646 
Commercial real estate owner occupied 6,174  487  4,610  11,271  545,015  556,286 
Commercial real estate non-owner occupied 703  —  21,790  22,493  2,107,079  2,129,572 
Commercial and industrial 9,479  1,540  9,486  20,505  1,698,799  1,719,304 
Residential real estate 2,990  1,098  14,476  18,564  1,755,940  1,774,504 
Home equity 647  159  2,747  3,553  275,464  279,017 
Consumer other 1,052  248  4,764  6,064  255,997  262,061 
Total $ 25,033  $ 3,532  $ 61,941  $ 90,506  $ 7,568,272  $ 7,658,778 

(In thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Loans
December 31, 2020
Construction $ —  $ —  $ —  $ —  $ 454,513  $ 454,513 
Commercial multifamily —  —  757  757  482,593  483,350 
Commercial real estate owner occupied 809  631  4,894  6,334  546,079  552,413 
Commercial real estate non-owner occupied 315  168  38,389  38,872  2,080,391  2,119,263 
Commercial and industrial 3,016  3,259  12,982  19,257  1,923,907  1,943,164 
Residential real estate 2,068  2,630  11,115  15,813  1,915,868  1,931,681 
Home equity 244  284  2,897  3,425  290,556  293,981 
Consumer other 2,109  777  5,364  8,250  294,904  303,154 
Total $ 8,561  $ 7,749  $ 76,398  $ 92,708  $ 7,988,811  $ 8,081,519 

26


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of loans on nonaccrual status and loans past due 90 days or more and still accruing as of March 31, 2021 and December 31, 2020:
(In thousands) Nonaccrual Amortized Cost Nonaccrual With No Related Allowance Past Due 90 Days or Greater and Accruing Interest Income Recognized on Nonaccrual
At or for the three months ended March 31, 2021
Construction $ —  $ —  $ —  $ — 
Commercial multifamily 4,068  4,068  —  — 
Commercial real estate owner occupied 4,232  1,832  378  — 
Commercial real estate non-owner occupied 18,856  11,691  2,934  — 
Commercial and industrial 9,364  3,005  122  — 
Residential real estate 11,941  7,419  2,535  — 
Home equity 2,599  211  148  — 
Consumer other 4,757  — 
Total $ 55,817  $ 28,234  $ 6,124  $ — 
The commercial and industrial loans nonaccrual amortized cost as of March 31, 2021 included medallion loans with a fair value of $1.4 million and a contractual balance of $45.0 million.
(In thousands)  Nonaccrual Amortized Cost Nonaccrual With No Related Allowance Past Due 90 Days or Greater and Accruing Interest Income Recognized on Nonaccrual
At or for the three months ended December 31, 2020
Construction $ —  $ —  $ —  $ — 
Commercial multifamily 757  591  —  — 
Commercial real estate owner occupied 4,509  2,290  385  — 
Commercial real estate non-owner occupied 29,572  13,912  8,817  — 
Commercial and industrial 12,441  4,725  541  — 
Residential real estate 9,711  5,739  1,404  — 
Home equity 2,654  159  243  — 
Consumer other 5,304  60  — 
Total $ 64,948  $ 27,418  $ 11,450  $ — 

The commercial and industrial loans nonaccrual amortized cost as of December 31, 2020 included medallion loans with a fair value of $2.3 million and a contractual balance of $53.9 million.

The following table summarizes information about total loans rated Special Mention or lower at March 31, 2021 and December 31, 2020. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified as performing based on payment activity.

(In thousands) March 31, 2021 December 31, 2020
Non-Accrual $ 55,817  $ 64,948 
Substandard Accruing 179,150  185,207 
Total Classified 234,967  250,155 
Special Mention 121,437  109,299 
Total Criticized $ 356,404  $ 359,454 


27


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table presents the amortized cost basis of individually analyzed collateral-dependent loans by loan portfolio segment:
Type of Collateral
(In thousands) Real Estate Investment Securities/Cash Other
March 31, 2021
Construction $ —  $ —  $ — 
Commercial multifamily 4,070  —  — 
Commercial real estate owner occupied 5,351  —  — 
Commercial real estate non-owner occupied 20,805  —  — 
Commercial and industrial 1,361  18  977 
Residential real estate 7,048  —  — 
Home equity 198  —  — 
Consumer other 34  —  — 
Total loans $ 38,867  $ 18  $ 977 
December 31, 2020
Construction $ —  $ —  $ — 
Commercial multifamily 591  —  — 
Commercial real estate owner occupied 5,714  —  — 
Commercial real estate non-owner occupied 30,950  —  — 
Commercial and industrial 973  36  3,758 
Residential real estate 5,081  —  — 
Home equity 145  —  — 
Consumer other 51  —  — 
Total loans $ 43,505  $ 36  $ 3,758 


28


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Troubled Debt Restructuring Loans
The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring ("TDR"), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. TDRs are evaluated individually for impairment and may result in a specific allowance amount allocated to an individual loan.

The following table presents activity in TDRs for the three months ended March 31, 2021 and March 31, 2020:
(In thousands) Balance at Beginning of Period Principal Payments TDR Status Change Other Additions/(Reductions) Newly Identified TDRs Balance at End of Period
Three months ended March 31, 2021
Construction $ —  $ —  $ —  $ —  $ —  $ — 
Commercial multifamily 754  (13) —  —  —  741 
Commercial real estate owner occupied 1,731  (6) —  —  —  1,725 
Commercial real estate non-owner occupied 13,684  (14) —  511  544  14,725 
Commercial and industrial 2,686  (199) —  —  146  2,633 
Residential real estate 1,524  (31) —  —  —  1,493 
Home equity 133  (3) —  —  —  130 
Consumer other 36  (2) —  —  —  34 
Total $ 20,548  $ (268) $ —  $ 511  $ 690  $ 21,481 

(In thousands) Balance at Beginning of Period Principal Payments TDR Status Change Other Additions/(Reductions) Newly Identified TDRs Balance at End of Period
Three months ended March 31, 2020
Construction $ —  $ —  $ —  $ —  $ —  $ — 
Commercial multifamily 793  (14) —  —  —  779 
Commercial real estate owner occupied 13,331  (5,693) —  —  —  7,638 
Commercial real estate non-owner occupied 1,373  —  —  —  —  1,373 
Commercial and industrial 1,449  (37) —  —  902  2,314 
Residential real estate 2,045  (22) —  —  —  2,023 
Home equity 277  —  —  —  278 
Consumer other 48  (4) —  —  —  44 
Total $ 19,316  $ (5,769) $ —  $ —  $ 902  $ 14,449 


29


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents loans modified as TDRs that occurred during the three months ended March 31, 2021 and March 31, 2020:
(dollars in thousands) Total
Three months ended March 31, 2021
TDR:
Number of loans
Pre-modification outstanding recorded investment $ 690 
Post-modification outstanding recorded investment $ 690 
Three months ended March 31, 2020
TDR:
Number of loans
Pre-modification outstanding recorded investment $ 902 
Post-modification outstanding recorded investment $ 902 

There were no TDRs for which there was a payment default within twelve months following the modification during the three months ended March 31, 2021 and March 31, 2020.

Beginning in March 2020, the Company has offered three-month payment deferrals for customers with a current payment status who were negatively impacted by economic disruption caused by the COVID-19 pandemic. Refer to Note 10 - Other Commitments, Contingencies, and Off-Balance Sheet Activities for more information regarding these modifications.
30


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6.               DEPOSITS

A summary of time deposits is as follows:
(In thousands) March 31,
2021
December 31,
2020
Time less than $100,000 $ 630,244  $ 663,324 
Time $100,000 through $250,000 999,329  1,219,210 
Time more than $250,000 473,649  502,551 
Total time deposits $ 2,103,222  $ 2,385,085 

Included in total deposits are brokered deposits of $431.5 million and $610.6 million at March 31, 2021 and December 31, 2020, respectively. Included in total deposits are reciprocal deposits of $100.7 million and $119.0 million at March 31, 2021 and December 31, 2020, respectively.

NOTE 7.               BORROWED FUNDS

Borrowed funds at March 31, 2021 and December 31, 2020 are summarized, as follows:
  March 31, 2021 December 31, 2020
    Weighted   Weighted
    Average   Average
(Dollars in thousands) Principal Rate Principal Rate
Short-term borrowings:        
Advances from the FHLB $ —  —  % $ 40,000  1.05  %
Total short-term borrowings: —  —  40,000  1.05 
Long-term borrowings:        
Advances from the FHLB and other borrowings 351,354  1.88  434,357  1.89 
Subordinated borrowings 74,455  7.00  74,411  7.00 
Junior subordinated borrowing - Trust I 15,464  2.03  15,464  2.06 
Junior subordinated borrowing - Trust II 7,419  1.88  7,405  1.92 
Total long-term borrowings: 448,692  2.73  531,637  2.61 
Total $ 448,692  2.73  % $ 571,637  2.50  %

Short-term debt includes Federal Home Loan Bank (“FHLB”) advances with an original maturity of less than one year and a short-term line-of-credit drawdown through a correspondent bank. The Bank also maintains a $3.0 million secured line of credit with the FHLB that bears a daily adjustable rate calculated by the FHLB. There was no outstanding balance on the FHLB line of credit for the periods ended March 31, 2021 and December 31, 2020. The Bank's available borrowing capacity with the FHLB was $1.4 billion and $1.6 billion for the periods ended March 31, 2021 and December 31, 2020, respectively.

The Bank is approved to borrow on a short-term basis from the Federal Reserve Bank of Boston as a non-member bank. The Bank has pledged certain loans and securities to the Federal Reserve Bank to support this arrangement. No borrowings with the Federal Reserve Bank under this arrangement took place for the periods ended March 31, 2021 and December 31, 2020. As a participant in the SBA Paycheck Protection Program ("PPP"), the Bank may pledge originated loans as collateral at face value to the Federal Reserve Bank of Boston for term financings. As of March 31, 2021, the Bank had no pledged PPP loans. The Bank's available borrowing capacity with the Federal Reserve Bank was $596.8 million and $815.6 million for the periods ended March 31, 2021 and December 31, 2020, respectively.


31


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-term FHLB advances consist of advances with an original maturity of more than one year and are subject to prepayment penalties. The advances outstanding at March 31, 2021 included callable advances totaling $10.0 million and amortizing advances totaling $4.8 million. The advances outstanding at December 31, 2020 included callable advances totaling $10.0 million and amortizing advances totaling $5.2 million. All FHLB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally all residential first mortgage loans and certain securities.

A summary of maturities of FHLB advances as of March 31, 2021 is as follows:
  March 31, 2021
    Weighted Average
(In thousands, except rates) Principal Rate
Fixed rate advances maturing:    
2021 $ 272,985  1.86  %
2022 58,270  1.92 
2023 10,659  2.16 
2024 50  — 
2025 and beyond 9,390  1.63 
Total FHLB advances $ 351,354  1.88  %

The Company did not have variable-rate FHLB advances for the periods ended March 31, 2021 and December 31, 2020.

In September 2012, the Company issued fifteen year subordinated notes in the amount of $75.0 million at a discount of 1.15%. The interest rate is fixed at 6.875% for the first ten years. After ten years, the notes become callable and convert to an interest rate of three-month LIBOR rate plus 5.113%. The subordinated note includes reduction to the note principal balance of $184 thousand and $215 thousand for unamortized debt issuance costs as of March 31, 2021 and December 31, 2020, respectively.

The Company holds 100% of the common stock of Berkshire Hills Capital Trust I (“Trust I”) which is included in other assets with a cost of $0.5 million. The sole asset of Trust I is $15.5 million of the Company’s junior subordinated debentures due in 2035. These debentures bear interest at a variable rate equal to LIBOR plus 1.85% and had a rate of 2.03% and 2.06% at March 31, 2021 and December 31, 2020, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value. Trust I is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust I is not consolidated into the Company’s financial statements.

The Company holds 100% of the common stock of SI Capital Trust II (“Trust II”) which is included in other assets with a cost of $0.2 million. The sole asset of Trust II is $8.2 million of the Company’s junior subordinated debentures due in 2036. These debentures bear interest at a variable rate equal to LIBOR plus 1.70% and had a rate of 1.88% and 1.92% at March 31, 2021 and December 31, 2020, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value. Trust II is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust II is not consolidated into the Company’s financial statements.

32


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

As of March 31, 2021, the Company held derivatives with a total notional amount of $3.8 billion. The Company had economic hedges totaling $3.8 billion and $10.3 million non-hedging derivatives, which are not designated as hedges for accounting purposes with changes in fair value recorded directly through earnings. Economic hedges included interest rate swaps totaling $3.4 billion, risk participation agreements with dealer banks of $0.3 billion, and $8.7 million in forward commitment contracts.

As part of the Company’s risk management strategy, the Company enters into interest rate swap agreements to mitigate the interest rate risk inherent in certain of the Company’s assets and liabilities. Interest rate swap agreements involve the risk of dealing with both Bank customers and institutional derivative counterparties and their ability to meet contractual terms. The agreements are entered into with counterparties that meet established credit standards and contain master netting and collateral provisions protecting the at-risk party. The derivatives program is overseen by the Risk Management and Capital Committee of the Company’s Board of Directors. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not significant at March 31, 2021.

The Company pledged collateral to derivative counterparties in the form of cash totaling $70.3 million and securities with an amortized cost of $36.9 million and a fair value of $37.1 million as of March 31, 2021. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back economic hedges. However certain language is written into the International Swaps Dealers Association, Inc. (“ISDA”) and loan documents where, in default situations, the Bank is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.

Information about derivative assets and liabilities at March 31, 2021, follows:
    Weighted Weighted Average Rate Estimated
  Notional Average   Contract Fair Value
  Amount Maturity Received pay rate Asset (Liability)
  (In thousands) (In years)     (In thousands)
Economic hedges:          
Interest rate swap on tax advantaged economic development bond $ 8,463  8.7 0.48  % 5.09  % $ (1,432)
Interest rate swaps on loans with commercial loan customers 1,720,659  6.0 4.15  % 1.92  % 101,216 
Offsetting interest rate swaps on loans with commercial loan customers (1)
1,720,659  6.0 1.92  % 4.15  % (40,670)
Risk participation agreements with dealer banks 341,662  8.8     336 
Forward sale commitments 8,661  0.2     326 
Total economic hedges 3,800,104        59,776 
Non-hedging derivatives:          
Commitments to lend 10,316  0.2     185 
Total non-hedging derivatives 10,316        185 
Total $ 3,810,420        $ 59,961 
(1) Fair value estimates include the impact of $61.3 million settled to market contract agreements.

33


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information about derivative assets and liabilities at December 31, 2020, follows:
    Weighted Weighted Average Rate Estimated
  Notional Average   Contract Fair Value
  Amount Maturity Received pay rate Asset (Liability)
  (In thousands) (In years)     (In thousands)
Economic hedges:          
Interest rate swap on tax advantaged economic development bond $ 8,654  8.9 0.52  % 5.09  % $ (1,778)
Interest rate swaps on loans with commercial loan customers 1,734,978  6.1 4.15  % 1.95  % 159,016 
Offsetting interest rate swaps on loans with commercial loan customers (1)
1,734,978  6.1 1.95  % 4.15  % (64,645)
Risk participation agreements with dealer banks 326,862  8.0     665 
Forward sale commitments 11,544  0.2     320 
Total economic hedges 3,817,016        93,578 
Non-hedging derivatives:          
Commitments to lend 40,099  0.2     735 
Total non-hedging derivatives 40,099        735 
Total $ 3,857,115        $ 94,313 
(1) Fair value estimates include the impact of $97.6 million settled to market contract agreements.
34


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Economic hedges
As of March 31, 2021, the Company has an interest rate swap with a $8.5 million notional amount to swap out the fixed rate of interest on an economic development bond bearing a fixed rate of 5.09%, currently within the Company’s trading portfolio under the fair value option, in exchange for a LIBOR-based floating rate. The intent of the economic hedge is to improve the Company’s asset sensitivity to changing interest rates in anticipation of favorable average floating rates of interest over the 21-year life of the bond. The fair value changes of the economic development bond are mostly offset by fair value changes of the related interest rate swap.

The Company also offers certain derivative products directly to qualified commercial borrowers. The Company economically hedges derivative transactions executed with commercial borrowers by entering into mirror-image, offsetting derivatives with third-party financial institutions. The transaction allows the Company’s customer to convert a variable-rate loan to a fixed rate loan. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts mostly offset each other in earnings. Credit valuation loss adjustments arising from the difference in credit worthiness of the commercial loan and financial institution counterparties totaled $2.5 million as of March 31, 2021. The interest income and expense on these mirror image swaps exactly offset each other.

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

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

The Company uses the following types of forward sale commitments contracts:
Best efforts loan sales,
Mandatory delivery loan sales, and
To Be Announced (“TBA”) mortgage-backed securities sales.

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

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

The Company may sell TBA mortgage-backed securities to hedge the changes in fair value of interest rate lock commitments and held for sale loans, which do not have corresponding best efforts or mandatory delivery contracts. These security sales transactions are closed once mandatory contracts are written. On the closing date the price of the security is locked-in, and the sale is paired-off with a purchase of the same security. Settlement of the security purchase/sale transaction is done with cash on a net-basis.
35


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

Amounts included in the Consolidated Statements of Income related to economic hedges and non-hedging derivatives were as follows:
  Three Months Ended March 31,
(In thousands) 2021 2020
Economic hedges    
Interest rate swap on industrial revenue bond:    
Unrealized gain/(loss) recognized in other non-interest income $ 346  $ (563)
Interest rate swaps on loans with commercial loan customers:    
Unrealized (loss)/gain recognized in other non-interest income (60,302) 102,382 
Favorable/(unfavorable) change in credit valuation adjustment recognized in other non-interest income 2,502  (2,538)
Offsetting interest rate swaps on loans with commercial loan customers:    
Unrealized gain/(loss) recognized in other non-interest income 60,302  (102,382)
Risk participation agreements:    
Unrealized (loss)/gain recognized in other non-interest income (329) 266 
Forward commitments:    
Unrealized gain/(loss) recognized in other non-interest income (4,263)
Realized gain/(loss) in other non-interest income (6) (1,922)
Non-hedging derivatives    
Commitments to lend    
Unrealized (loss)/gain recognized in other non-interest income $ (550) $ 2,208 
Realized gain in other non-interest income 1,352  9,300 
36


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

The Company had net asset positions with its financial institution counterparties totaling $1.3 million and $1.0 million as of March 31, 2021 and December 31, 2020, respectively. The Company had net asset positions with its commercial banking counterparties totaling $103.8 million and $159.0 million as of March 31, 2021 and December 31, 2020, respectively. The Company had net liability positions with its financial institution counterparties totaling $43.0 million and $66.8 million as of March 31, 2021 and December 31, 2020, respectively. The Company had net liability positions with its commercial banking counterparties totaling $2.6 million as of March 31, 2021. The Company had no net liability positions with its commercial banking counterparties as of December 31, 2020. The Company has collateral pledged to cover this liability.

The following table presents the assets and liabilities subject to an enforceable master netting arrangement as of March 31, 2021 and December 31, 2020:

Offsetting of Financial Assets and Derivative Assets
Gross
Amounts of
Gross Amounts
Offset in the
Net Amounts
of Assets
Presented in the
Gross Amounts Not Offset in
the Statements of Condition
  Recognized Statements of Statements of Financial Cash  
(In thousands) Assets Condition Condition Instruments Collateral Received Net Amount
March 31, 2021            
Interest Rate Swap Agreements:            
Institutional counterparties $ 3,086  $ (1,832) $ 1,254  $ —  $ —  $ 1,254 
Commercial counterparties 103,799  —  103,799  —  —  103,799 
Total $ 106,885  $ (1,832) $ 105,053  $ —  $ —  $ 105,053 

Offsetting of Financial Liabilities and Derivative Liabilities
Gross
Amounts of
Gross Amounts
Offset in the
Net Amounts
of Liabilities
Presented in the
Gross Amounts Not Offset in
the Statements of Condition
  Recognized Statements of Statements of Financial Cash  
(In thousands) Liabilities Condition Condition Instruments Collateral Pledged Net Amount
March 31, 2021            
Interest Rate Swap Agreements:            
Institutional counterparties $ (104,770) $ 61,750  $ (43,020) $ 37,116  $ 70,333  $ 64,429 
Commercial counterparties (2,582) —  (2,582) —  —  (2,582)
Total $ (107,352) $ 61,750  $ (45,602) $ 37,116  $ 70,333  $ 61,847 
37


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Offsetting of Financial Assets and Derivative Assets
Gross
Amounts of
Gross Amounts
Offset in the
Net Amounts
of Assets
Presented in the
Gross Amounts Not Offset in
the Statements of Condition
  Recognized Statements of Statements of Financial Cash  
(In thousands) Assets Condition Condition Instruments Collateral Received Net Amount
December 31, 2020            
Interest Rate Swap Agreements:            
Institutional counterparties $ 1,124  $ (78) $ 1,046  $ —  $ —  $ 1,046 
Commercial counterparties 159,016  —  159,016  —  —  159,016 
Total $ 160,140  $ (78) $ 160,062  $ —  $ —  $ 160,062 

Offsetting of Financial Liabilities and Derivative Liabilities
Gross
Amounts of
Gross Amounts
Offset in the
Net Amounts
of Liabilities
Presented in the
Gross Amounts Not Offset in
the Statements of Condition
  Recognized Statements of Statements of Financial Cash  
(In thousands) Liabilities Condition Condition Instruments Collateral Pledged Net Amount
December 31, 2020            
Interest Rate Swap Agreements:            
Institutional counterparties $ (164,543) $ 97,740  $ (66,803) $ 37,815  $ 75,070  $ 46,082 
Commercial counterparties —  —  —  —  —  — 
Total $ (164,543) $ 97,740  $ (66,803) $ 37,815  $ 75,070  $ 46,082 
38


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. LEASES

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space. Most of the Company’s leases are classified as operating leases. At March 31, 2021, lease expiration dates ranged from 1 month to 19 years.

The following table represents the Consolidated Balance Sheets classification of the Company’s right-of-use (“ROU”) assets and lease liabilities:
(In thousands) March 31, 2021 December 31, 2020
Lease Right-of-Use Assets Classification
Operating lease right-of-use assets Other assets $ 56,704  $ 60,018 
Finance lease right-of-use assets Premises and equipment, net 7,066  7,197 
Total Lease Right-of-Use Assets $ 63,770  $ 67,215 
Lease Liabilities
Operating lease liabilities Other liabilities $ 61,481  $ 63,894 
Finance lease liabilities Other liabilities 10,252  10,383 
Total Lease Liabilities $ 71,733  $ 74,277 

Supplemental information related to leases was as follows:
March 31, 2021 December 31, 2020
Weighted-Average Remaining Lease Term (in years)
Operating leases 9.8 9.8
Finance leases 13.6 13.8
Weighted-Average Discount Rate
Operating leases 2.82  % 2.81  %
Finance leases 5.00  % 5.00  %

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

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

Lease expense for operating leases for the three months ended March 31, 2021 was $2.8 million. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Lease expense for operating leases for the three months ended March 31, 2020 was $3.5 million, of which $0.5 million was related to discontinued operations. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.


39


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental cash flow information related to leases was as follows:
Three Months Ended
(In thousands) March 31, 2021 March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (1)
$ 3,330  $ 3,628 
Operating cash flows from finance leases 127  134 
Financing cash flows from finance leases 131  124 
(1) There were operating cash flows from operating leases related to discontinued operations of $0.5 million at March 31, 2020.

The following table presents a maturity analysis of the Company’s lease liability by lease classification at March 31, 2021:
(In thousands) Operating Leases Finance Leases
2021 $ 7,966  $ 766 
2022 9,774  1,031 
2023 8,549  1,037 
2024 7,414  1,037 
2025 5,727  1,037 
Thereafter 31,593  9,223 
Total undiscounted lease payments 71,023  14,131 
Less amounts representing interest (9,542) (3,879)
Lease liability $ 61,481  $ 10,252 
40


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. OTHER COMMITMENTS, CONTINGENCIES, OFF-BALANCE SHEET ACTIVITIES, AND PANDEMIC IMPACT

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported to have surfaced in China and has since spread to a number of other countries, including the United States. In March 2020, the World Health Organization declared COVID-19 a global pandemic and the United States declared a National Public Health Emergency. The impact of the COVID-19 pandemic is fluid and continues to evolve, which is adversely affecting some of the Company’s clients. The COVID-19 pandemic and its associated impacts on trade (including supply chains and export levels), travel, employee productivity, unemployment, consumer spending, and other economic activities has resulted in less economic activity, lower equity market valuations and significant volatility and disruption in financial markets and has had an adverse effect on the Company’s business, financial condition and results of operations. The ultimate extent of the impact of the COVID-19 pandemic on the Company’s business, financial condition and results of operations is currently uncertain and will depend on various developments and other factors, including, among others, the duration and scope of the pandemic, as well as governmental, regulatory and private sector responses to the pandemic, and the associated impacts on the economy, financial markets, and our clients, employees, and vendors.

The Company’s business, financial condition and results of operations generally rely upon the ability of the Company’s borrowers to repay their loans, the value of collateral underlying the Company’s secured loans, and demand for loans and other products and services the Company offers, which are highly dependent on the business environment in the Company’s primary markets where it operates and in the United States as a whole.

At this time, it is difficult to quantify the impact COVID-19 will have on the Company during the current year. These circumstances could cause the Company to experience a material adverse effect on our business operations, asset valuations, financial condition, results of operations and prospects. Material adverse impacts may include all or a combination of valuation impairments on the Company’s intangible assets, investments, loans, loan servicing rights, deferred tax assets, lease right-of-use assets, or counter-party risk derivatives.

Beginning in March 2020, the Company has offered three-month payment deferrals for customers with a current payment status who were negatively impacted by economic disruption caused by the COVID-19 pandemic. As of March 31, 2021, the Company had 337 active modified loans outstanding with a carrying value of $173 million, which excluded loans returning to payment or awaiting evaluation for further deferral. As of December 31, 2020, the Company had 746 active modified loans outstanding with a carrying value of $316 million, which excluded loans returning to payment or awaiting evaluation for further deferral.The Company continues to accrue interest on these loans during the deferral period. In accordance with interagency guidance issued in March 2020 and Section 4013 (Temporary Relief from Troubled Debt Restructurings) of the CARES Act, these short-term deferrals are not considered troubled debt restructurings (“TDRs”) unless the borrower was previously experiencing financial difficulty. In addition, the risk-ratings on COVID-19 modified loans did not automatically change as a result of payment deferrals, and these loans will not be considered past due until after the deferral period is over and scheduled payments resume.
41


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11.           CAPITAL RATIOS AND SHAREHOLDERS’ EQUITY

The actual and required capital ratios were as follows:
March 31,
2021
December 31,
2020

Minimum Capital Requirement
Company (consolidated)    
Total capital to risk weighted assets 16.6  % 16.1  % 8.0  %
Common equity tier 1 capital to risk weighted assets 14.2  13.8  4.5 
Tier 1 capital to risk weighted assets 14.4  14.1  6.0 
Tier 1 capital to average assets 9.5  9.4  4.0 
March 31,
2021
December 31,
2020
Regulatory Minimum to be Adequately Capitalized Regulatory
Minimum to be
Well Capitalized
Bank
Total capital to risk weighted assets 15.4  % 15.0  % 8.0  % 10.0  %
Common equity tier 1 capital to risk weighted assets 14.2  13.9  4.5  6.5 
Tier 1 capital to risk weighted assets 14.2  13.9  6.0  8.0 
Tier 1 capital to average assets 9.3  9.2  4.0  5.0 

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

Effective January 1, 2015, the Company and the Bank became subject to the Basel III rule that requires the Company and the Bank to assess their Common equity Tier 1 capital to risk weighted assets. The Bank's Common equity Tier 1 capital to risk weighted assets exceeds the minimum to be well capitalized. In addition, the final capital rules added a requirement to maintain a minimum conservation buffer, composed of Common equity Tier 1 capital, of 2.5% of risk-weighted assets, to be phased in over three years and applied to the Common equity Tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio, and the Total risk-based capital ratio. As of January 1, 2019, banking organizations must maintain a minimum Common equity Tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5%, and a minimum Total risk-based capital ratio of 10.5%. The final capital rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum capital conservation buffer is not met.

At March 31, 2021, the capital levels of both the Company and the Bank exceeded all regulatory capital requirements and the Bank's regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes. The capital levels of both the Company and the Bank at March 31, 2021 also exceeded the minimum capital requirements including the currently applicable capital conservation buffer of 2.5%.
42


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated other comprehensive income
Components of accumulated other comprehensive income is as follows:
(In thousands) March 31,
2021
December 31,
2020
Other accumulated comprehensive income, before tax:    
Net unrealized holding gain on AFS securities $ 17,975  $ 44,988 
Net unrealized holding (loss) on pension plans (3,511) (3,511)
Income taxes related to items of accumulated other comprehensive income:    
Net unrealized tax (expense) on AFS securities (4,667) (11,530)
Net unrealized tax benefit on pension plans 924  924 
Accumulated other comprehensive income $ 10,721  $ 30,871 

The following table presents the components of other comprehensive income for the three months ended March 31, 2021 and 2020:
(In thousands) Before Tax Tax Effect Net of Tax
Three Months Ended March 31, 2021
     
Net unrealized holding gain on AFS securities: x  
Net unrealized (losses) arising during the period $ (27,013) $ 6,863  $ (20,150)
Less: reclassification adjustment for gains realized in net income —  —  — 
Net unrealized holding (loss) on AFS securities (27,013) 6,863  (20,150)
Other comprehensive (loss) $ (27,013) $ 6,863  $ (20,150)
Three Months Ended March 31, 2020
     
Net unrealized holding gain on AFS securities:    
Net unrealized gains arising during the period $ 25,613  $ (6,590) $ 19,023 
Less: reclassification adjustment for (losses) realized in net income (1) —  (1)
Net unrealized holding gain on AFS securities 25,614  (6,590) 19,024 
Other comprehensive income $ 25,614  $ (6,590) $ 19,024 

43


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the changes in each component of accumulated other comprehensive income, for the three ended March 31, 2021 and 2020:
(In thousands) Net unrealized
holding loss
on AFS Securities
Net unrealized
holding loss
on pension plans
Total
Three Months Ended March 31, 2021      
Balance at Beginning of Period $ 33,458  $ (2,587) $ 30,871 
Other comprehensive income before reclassifications (20,150) —  (20,150)
Less: amounts reclassified from accumulated other comprehensive income —  —  — 
Total other comprehensive (loss) (20,150) —  (20,150)
Balance at End of Period $ 13,308  $ (2,587) $ 10,721 
Three Months Ended March 31, 2020      
Balance at Beginning of Period $ 14,204  $ (2,211) $ 11,993 
Other comprehensive income before reclassifications 19,023  —  19,023 
Less: amounts reclassified from accumulated other comprehensive income (1) —  (1)
Total other comprehensive income 19,024  —  19,024 
Balance at End of Period $ 33,228  $ (2,211) $ 31,017 

44


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the amounts reclassified out of each component of accumulated other comprehensive income for the three ended March 31, 2021 and 2020:
      Affected Line Item in the
  Three Months Ended March 31, Statement where Net Income
(In thousands) 2021 2020 is Presented
Realized gains on AFS securities:    
  $ —  $ (1) Non-interest income
  —  —  Tax expense
  —  (1) Net of tax
   
Total reclassifications for the period $ —  $ (1) Net of tax


45


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EARNINGS/(LOSS) PER SHARE

Earnings/(loss) per share have been computed based on the following (average diluted shares outstanding are calculated using the treasury stock method):
  Three Months Ended March 31,
(In thousands, except per share data) 2021 2020
Income/(loss) from continuing operations $ 13,031  $ (12,072)
(Loss)/income from discontinued operations —  (7,798)
Net income/(loss) $ 13,031  $ (19,870)
Average number of common shares issued 51,903  51,903 
Less: average number of treasury shares 948  1,744 
Less: average number of unvested stock award shares 625  488 
Plus: average participating preferred shares —  533 
Average number of basic shares outstanding 50,330  50,204 
Plus: dilutive effect of unvested stock award shares 235  — 
Plus: dilutive effect of stock options outstanding —  — 
Average number of diluted shares outstanding 50,565  50,204 
Basic earnings/(loss) per common share:    
Continuing operations $ 0.26  $ (0.24)
Discontinued operations —  (0.16)
Total $ 0.26  $ (0.40)
Diluted earnings/(loss) per common share:
Continuing operations $ 0.26  $ (0.24)
Discontinued operations —  (0.16)
Total $ 0.26  $ (0.40)

For the three months ended March 31, 2021, 390 thousand shares of unvested restricted stock and all options outstanding were anti-dilutive and therefore excluded from the earnings per share calculation. For the three months ended March 31, 2020, all unvested restricted stock and options outstanding were considered anti-dilutive and therefore excluded from the earnings per share calculation.

46


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. STOCK-BASED COMPENSATION PLANS

A combined summary of activity in the Company’s stock award and stock option plans for the three months ended March 31, 2021 is presented in the following table:
  Non-Vested Stock Awards Outstanding Stock Options Outstanding
(Shares in thousands) Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Exercise Price
December 31, 2020 517  $ 28.35  112  $ 22.95 
Granted 210  16.58  —  — 
Acquired —  —  —  — 
Stock options exercised —  —  (5) 13.70 
Stock awards vested (44) 30.63  —  — 
Forfeited (52) 25.82  —  — 
Expired —  —  (10) 17.46 
March 31, 2021 631  $ 20.09  97  $ 24.85 

During the three months ended March 31, 2021, proceeds from stock option exercises totaled $69 thousand. During the three months ended March 31, 2020, proceeds from stock option exercises totaled $519 thousand. During the three months ended March 31, 2021 and March 31, 2020, there were 44 thousand and 53 thousand shares vested in connection with stock awards, respectively. All of these shares were issued from available treasury stock. Stock-based compensation expense totaled $0.7 million and $1.5 million during the three months ended March 31, 2021 and 2020, respectively. Stock-based compensation expense is recognized over the requisite service period for all awards.

47


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE MEASUREMENTS

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

Recurring Fair Value Measurements
The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.
  March 31, 2021
  Level 1 Level 2 Level 3 Total
(In thousands) Inputs Inputs Inputs Fair Value
Trading security $ —  $ —  $ 9,350  $ 9,350 
Securities available for sale:  
Municipal bonds and obligations —  90,300  —  90,300 
Agency collateralized mortgage obligations —  724,554  —  724,554 
Agency residential mortgage-backed securities —  447,196  —  447,196 
Agency commercial mortgage-backed securities —  268,515  —  268,515 
Corporate bonds —  45,014  —  45,014 
Other bonds and obligations —  51,751  —  51,751 
Marketable equity securities 15,129  672  —  15,801 
Loans held for investment at fair value —  —  1,448  1,448 
Loans held for sale —  8,877  —  8,877 
Derivative assets —  106,665  511  107,176 
Capitalized servicing rights —  —  2,968  2,968 
Derivative liabilities —  47,215  —  47,215 
  December 31, 2020
  Level 1 Level 2 Level 3 Total
(In thousands) Inputs Inputs Inputs Fair Value
Trading security $ —  $ —  $ 9,708  $ 9,708 
Securities available for sale:
Municipal bonds and obligations —  97,803  —  97,803 
Agency collateralized mortgage obligations —  756,826  —  756,826 
Agency residential mortgage-backed securities —  438,132  —  438,132 
Agency commercial mortgage-backed securities —  288,650  —  288,650 
Corporate bonds —  45,030  15,000  60,030 
Other bonds and obligations —  53,791  —  53,791 
Marketable equity securities 17,841  672  —  18,513 
Loans held for investment at fair value —  —  2,265  2,265 
Loans held for sale —  12,992  4,756  17,748 
Derivative assets —  159,016  1,055  160,071 
Capitalized servicing rights —  —  3,033  3,033 
Derivative liabilities —  65,758  —  65,758 
 

There were no transfers between levels during the three months ended March 31, 2021.

48


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

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

Loans Held for Investment. The Company’s held for investment loan portfolio includes loans originated by Company and loans acquired through business combinations. The Company intends to hold these assets until maturity as a part of its business operations. For one acquired portfolio subset, the Company previously accounted for these purchased-credit impaired loans as a pool under ASC 310, as they were determined to have common risk characteristics. These loans were recorded at fair value on acquisition date and subsequently evaluated for impairment collectively. Upon adoption of ASC 326, the Company elected the fair value option on this portfolio, recognizing an $11.2 million fair value write-down charged to Retained Earnings, net of deferred tax impact, as of January 1, 2020. The fair value of this loan portfolio is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable; therefore, the loans meet the definition of Level 3 assets. The discount rate used in the valuation is consistent with assets that have significant credit deterioration. The cash flow assumptions include payment schedules for loans with current payment histories and estimated collateral value for delinquent loans. All of these loans were nonperforming as of March 31, 2021.
      Aggregate Fair Value
March 31, 2021 Aggregate Aggregate Less Aggregate
(In thousands) Fair Value Unpaid Principal Unpaid Principal
Loans held for investment at fair value $ 1,448  $ 44,969  $ (43,521)

      Aggregate Fair Value
December 31, 2020 Aggregate Aggregate Less Aggregate
(In thousands) Fair Value Unpaid Principal Unpaid Principal
Loans held for investment at fair value $ 2,265  $ 53,945  $ (51,680)
Loans Held for Sale. The Company elected the fair value option for all loans held for sale (HFS) originated for sale on or after May 1, 2012. Loans HFS are classified as Level 2 as the fair value is based on input factors such as quoted prices for similar loans in active markets.
      Aggregate Fair Value
March 31, 2021 Aggregate Aggregate Less Aggregate
(In thousands) Fair Value Unpaid Principal Unpaid Principal
Loans held for sale $ 8,877  $ 8,518  $ 359 
      Aggregate Fair Value
December 31, 2020 Aggregate Aggregate Less Aggregate
(In thousands) Fair Value Unpaid Principal Unpaid Principal
Loans held for sale $ 12,992  $ 12,639  $ 353 
49


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The changes in fair value of loans held for sale for the three months ended March 31, 2021, were gains of $6 thousand. During the three months ended March 31, 2021, originations of loans held for sale totaled $44.0 million and sales of loans originated for sale totaled $46.9 million.

The changes in fair value of loans held for sale for the three months ended March 31, 2020, were losses of $49 thousand from continuing operations and gains of $0.5 million from discontinued operations. During the three months ended March 31, 2020, originations of loans held for sale from continuing operations totaled $16.6 million and sales of loans originated for sale from continuing operations totaled $21.1 million.

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

Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2021, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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

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

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

50


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below presents the changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis for the three months ended March 31, 2021 and 2020.
  Assets (Liabilities)
    Securities Loans   Capitalized
  Trading Available Held for Commitments Forward Servicing
(In thousands) Security for Sale Investment to Lend Commitments Rights
Three Months Ended March 31, 2021
December 31, 2020 $ 9,708  $ 15,000  $ 2,265  $ 735  $ 320  $ 3,033 
Maturities, calls, and prepayments of
AFS Security
—  (15,000) —  —  — 
Unrealized (loss)/gain, net recognized in other non-interest income (166) —  414  818  (65)
Paydown of asset (192) —  (1,231) —  —  — 
Transfers to held for sale loans —  —  —  (1,368) —  — 
March 31, 2021 $ 9,350  $ —  $ 1,448  $ 185  $ 326  $ 2,968 
Unrealized gain/(loss) relating to instruments still held at March 31, 2021 $ 887  $ —  $ —  $ 185  $ 326  $ — 
51


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Securities Loans Capitalized
  Trading Available Held for Commitments Servicing
(In thousands) Security for Sale Investment to Lend (1) Rights (1)
Three Months Ended March 31, 2020      
December 31, 2019 $ 10,769  $ 42,966  $ —  $ 2,628  $ 12,299 
Adoption of ASC 326 —  —  7660 —  — 
Maturity of AFS security —  (9,000) —  —  — 
Unrealized gain, net recognized in other non-interest income (759) —  (2,216) —  — 
Unrealized gain included in accumulated other comprehensive loss —  538  —  —  — 
Unrealized gain/(loss), net recognized in discontinued operations —  —  —  11,039  (3,781)
Paydown of asset (181) —  (549) —  — 
Transfers to held for sale loans —  —  —  (8,831) — 
Additions to servicing rights —  —  —  —  — 
March 31, 2020 $ 9,829  $ 34,504  $ 4,895  $ 4,836  $ 8,518 
Unrealized gains relating to instruments still held at March 31,2020 $ 620  $ 151  $ —  $ 4,836  $ — 
(1) Classified as assets from discontinued operations on the consolidated balance sheets.

Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities is as follows:
  Fair Value     Significant
Unobservable Input
(In thousands) March 31, 2021 Valuation Techniques Unobservable Inputs Value
Assets (Liabilities)        
Trading security $ 9,350  Discounted Cash Flow Discount Rate 2.66  %
Loan held for investment 1,448  Discounted Cash Flow Discount Rate 25.00  %
Collateral Value
$6.7 - $19.7
Commitments to lend 185  Historical Trend Closing Ratio 74.29  %
    Pricing Model Origination Costs, per loan $
Forward commitments 326  Historical Trend Closing Ratio 74.29  %
    Pricing Model Origination Costs, per loan $
Capitalized servicing rights 2,968  Discounted cash flow Constant Prepayment Rate (CPR) 21.07  %
Discount Rate 10.00  %
Total $ 14,277       

52


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fair Value     Significant
Unobservable Input
(In thousands) December 31, 2020 Valuation Techniques Unobservable Inputs Value
Assets (Liabilities)        
Trading security $ 9,708  Discounted Cash Flow Discount Rate 2.72  %
AFS Securities 15,000  Indication from Market Maker Price 102.00  %
Loans held for investment 2,265  Discounted Cash Flow Discount Rate 30.00  %
Collateral Value
$8.1- $21.9
Commitments to lend 735  Historical Trend Closing Ratio 74.54  %
    Pricing Model Origination Costs, per loan $
Forward commitments 320  Historical Trend Closing Ratio 74.54  %
    Pricing Model Origination Costs, per loan $
Capitalized servicing rights 3,033  Discounted Cash Flow Constant Prepayment Rate (CPR) 26.52  %
Discount Rate 10.00  %
Total $ 31,061       
53


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-Recurring Fair Value Measurements
The Company is required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements. There are no liabilities measured at fair value on a non-recurring basis.
  March 31, 2021 December 31, 2020 Fair Value Measurement Date as of March 31, 2021
  Level 3 Level 3 Level 3
(In thousands) Inputs Inputs Inputs
Assets    
Individually evaluated $ 21,762  $ 28,028  March 2021
Capitalized servicing rights 13,763  13,315  March 2021
Other real estate owned 149  149  March 2021
Total $ 35,674  $ 41,492 

Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets is as follows:
  Fair Value      
(In thousands) March 31, 2021 Valuation Techniques Unobservable Inputs Range (Weighted Average) (1)
Assets        
Individually evaluated $ 21,762  Fair Value of Collateral Discounted Cash Flow - Loss Severity
0.32% to 100.00% (49.39%)
      Appraised Value
$0 to $11,842 ($7,827)
Capitalized servicing rights 13,763  Discounted Cash Flow Constant Prepayment Rate (CPR)
11.32% to 19.49% (15.38%)
      Discount Rate
8.33% to 11.00% (9.12%)
Other Real Estate Owned 149  Fair Value of Collateral Appraised Value
 $182
Total $ 35,674       
(1)     Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.
  Fair Value      
(In thousands) December 31, 2020 Valuation Techniques Unobservable Inputs Range (Weighted Average) (1)
Assets        
Individually evaluated $ 28,028  Fair Value of Collateral Discounted Cash Flow - loss severity
0.07% to 100.00% (46.36%)
      Appraised Value
$0 to $11,432 ($9,800)
Capitalized servicing rights 13,315  Discounted Cash Flow Constant Prepayment Rate (CPR)
14.49% to 23.29% (16.98%)
      Discount Rate
10.00% to 11.00% (10.56%)
Other Real Estate Owned 149  Fair Value of Collateral Appraised Value
$94 - $182
Total $ 41,492       
(1)     Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.

There were no Level 1 or Level 2 nonrecurring fair value measurements for the periods ended March 31, 2021 and December 31, 2020.
54


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

55


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Estimated Fair Values of Financial Instruments
The following tables summarize the estimated fair values (represents exit price), and related carrying amounts, of the Company’s financial instruments. Certain financial instruments and all non-financial instruments are excluded. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
  March 31, 2021
  Carrying Fair      
(In thousands) Amount Value Level 1 Level 2 Level 3
Financial Assets          
Cash and cash equivalents $ 1,899,608  $ 1,899,608  $ 1,899,608  $ —  $ — 
Trading security 9,350  9,350  —  —  9,350 
Marketable equity securities 15,801  15,801  15,129  672  — 
Securities available for sale 1,627,330  1,627,330  —  1,627,330  — 
Securities held to maturity 610,637  627,297  —  624,012  3,285 
FHLB bank stock and restricted securities 28,680  N/A N/A N/A N/A
Net loans 7,534,978  7,778,261  —  —  7,778,261 
Loans held for sale 18,377  18,377  —  8,877  9,500 
Accrued interest receivable 45,990  45,990  —  45,990  — 
Derivative assets 107,176  107,176  —  106,665  511 
Financial Liabilities          
Total deposits $ 10,244,370  $ 10,256,878  $ —  $ 10,256,878  $ — 
Short-term debt —  —  —  —  — 
Long-term Federal Home Loan Bank advances and other 351,354  353,481  —  353,481  — 
Subordinated borrowings 97,338  95,729  —  95,729  — 
Derivative liabilities 47,215  47,215  —  47,215  — 
  December 31, 2020
  Carrying Fair      
(In thousands) Amount Value Level 1 Level 2 Level 3
Financial Assets          
Cash and cash equivalents $ 1,557,875  $ 1,557,875  $ 1,557,875  $ —  $ — 
Trading security 9,708  9,708  —  —  9,708 
Marketable equity securities 18,513  18,513  17,841  672  — 
Securities available for sale and other 1,695,232  1,695,232  —  1,680,232  15,000 
Securities held to maturity 465,091  491,855  —  488,393  3,462 
FHLB bank stock and restricted securities 34,873  N/A N/A N/A N/A
Net loans 7,954,217  8,243,437  —  —  8,243,437 
Loans held for sale 17,748  17,748  —  12,992  4,756 
Accrued interest receivable 46,919  46,919  —  46,919  — 
Derivative assets 160,071  160,071  —  159,016  1,055 
Assets held for sale 317,304  317,304  —  16,705  300,599 
Financial Liabilities          
Total deposits $ 10,215,808  $ 10,230,822  $ —  $ 10,230,822  $ — 
Short-term debt 40,000  40,025  —  40,025  — 
Long-term Federal Home Loan Bank advances 434,357  438,064  —  438,064  — 
Subordinated borrowings 97,280  95,178  —  95,178  — 
Derivative liabilities 65,758  65,758  —  65,758  — 
Liabilities held for sale 630,065  631,268  —  631,268  — 
56


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

Presented below is net interest income after provision for credit losses for the three months ended March 31, 2021 and 2020, respectively.
Three Months Ended March 31,
(In thousands) 2021 2020
Net interest income from continuing operations $ 75,093  $ 86,428 
Provision for credit losses 6,500  34,807 
Net interest income from continuing operations after provision for credit losses $ 68,593  $ 51,621 
57

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

SELECTED FINANCIAL DATA
The following summary data is based in part on the consolidated financial statements and accompanying notes and other information appearing elsewhere in this or prior Forms 10-Q. Stock price information is for Berkshire’s common shares traded on the New York Stock exchange under the symbol “BHLB”.
At or for the
Three Months Ended March 31,
  2021 2020
NOMINAL AND PER SHARE DATA    
Net earnings/(loss) per common share, diluted $ 0.26  $ (0.40)
Adjusted earnings/(loss) per common share, diluted (1)(2)
0.32  (0.07)
Net income/(loss), (thousands) 13,031  (19,870)
Adjusted net income/(loss), (thousands) (1)(2)
16,015  (3,645)
Total common shares outstanding, (thousands) 50,988  50,199 
Average diluted shares, (thousands) 50,565  50,204 
Total book value per common share 23.05  33.90 
Tangible book value per common share (2)
22.39  22.00 
Dividends per common share 0.12  0.24 
Full-time equivalent staff, continuing operations 1,467  1,548 
PERFORMANCE RATIOS (3)
Return on equity 4.50  % (4.58) %
Adjusted return on equity (1)(2)
5.53  (0.84)
Return on tangible common equity (1)(2)
4.98  (6.76)
Adjusted return on tangible common equity (1)(2)
6.04  (0.94)
Return on assets 0.42  (0.62)
Adjusted return on assets (1)(2)
0.51  (0.11)
Net interest margin, fully taxable equivalent (FTE) (4)(6)
2.62  3.04 
Efficiency ratio (1)(2)
71.32  66.92 
FINANCIAL DATA (in millions, end of period)
Total assets $ 12,757  $ 13,122 
Total earning assets 12,071  11,785 
Total loans 7,659  9,303 
Allowance for credit losses 124  114 
Total deposits 10,244  10,072 
Loans/deposits (%)
75  92 
ASSET QUALITY (5)
   
Allowance for credit losses, (millions) $ 124  $ 114 
Net charge-offs, (millions) (10) (10)
Net charge-offs (QTD annualized)/average loans 0.51  % 0.45  %
Provision expense, (millions) $ $ 35 
Non-performing assets, (millions) 58  53 
Non-performing loans/total loans 0.73  % 0.55  %
Allowance for credit losses/non-performing loans 222  222 
Allowance for credit losses/total loans 1.62  1.22 
CAPITAL RATIOS
Common equity tier 1 capital to risk weighted assets 14.5  % 12.0  %
Tier 1 capital leverage ratio 9.5  9.4 
Tangible common shareholders' equity/tangible assets (2)
9.0  8.8 
58

At or for the
Three Months Ended March 31,
2021 2020
FOR THE PERIOD: (In thousands)
   
Net interest income from continuing operations $ 75,093  $ 86,428 
Non-interest income from continuing operations 26,193  5,636 
Net revenue from continuing operations 101,286  92,064 
Provision for credit losses 6,500  34,807 
Non-interest expense from continuing operations 78,154  71,325 
Net income/(loss) 13,031  (19,870)
Adjusted income (1)(2)
16,015  (3,465)
____________________________________________________________________________________________
(1)  Adjusted measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions and restructuring activities. Refer to the Reconciliation of non-GAAP Financial Measures for additional information.
(2)     Non-GAAP financial measure. Refer to the Reconciliation of non-GAAP Financial Measures for additional information.
(3)  All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(4) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.
(5)    The effect of purchase accounting accretion for loans, time deposits, and borrowings on the net interest margin was an increase in all periods presented. The increase for the three months ended March 31, 2021 and 2020 was 0.05% and 0.11%, respectively.
59

AVERAGE BALANCES AND AVERAGE YIELDS/RATES
The following table presents average balances and an analysis of average rates and yields on an annualized fully taxable equivalent basis for the periods included:
  Three Months Ended March 31,
  2021 2020
(Dollars in millions) Average
Balance
Yield/Rate
(FTE basis)
Average
Balance
Yield/Rate
(FTE basis)
Assets
Loans:        
Commercial real estate $ 3,630  3.27  % $ 4,000  4.41  %
Commercial and industrial loans 1,865  4.62  1,796  5.03 
Residential mortgages 1,740  3.71  2,654  3.77 
Consumer loans 634  3.79  922  4.28 
Total loans (1)
7,869  3.73  9,372  4.33 
Investment securities (2)
2,195  2.36  1,745  3.32 
Short-term investments & loans held for sale (3)
1,351  0.13  375  1.78 
Mid-Atlantic region loans held for sale(4)
295  — 
Total interest-earning assets 11,710  3.07  11,492  4.08 
Intangible assets 34  X 598   
Other non-interest earning assets 724    663   
Assets from discontinued operations —  99 
Total assets $ 12,468    $ 12,852   
Liabilities and shareholders’ equity
Deposits:        
NOW and other $ 1,325  0.15  % $ 1,159  0.46  %
Money market 2,802  0.27  2,753  0.98 
Savings 1,003  0.08  847  0.13 
Time 2,266  1.12  3,333  1.87 
Total interest-bearing deposits 7,396  0.48  8,092  1.18 
Borrowings and notes (5)
500  2.78  949  2.60 
Mid-Atlantic region interest-bearing deposits(4)
518  — 
Total interest-bearing liabilities 8,414  0.63  9,041  1.33 
Non-interest-bearing demand deposits 2,537    1,849   
Other non-interest earning liabilities 358    204   
Liabilities from discontinued operations —  24 
Total liabilities 11,309    11,118   
Total preferred shareholders' equity —  21 
Total common shareholders' equity 1,159  1,713 
Total shareholders’ equity (2)
1,159    1,734   
Total liabilities and stockholders’ equity $ 12,468    $ 12,852   
60

Three Months Ended March 31,
2021 2020
Average
Balance
Yield/Rate
(FTE basis)
Average
Balance
Yield/Rate
(FTE basis)
Net interest spread 2.44  %   2.75  %
Net interest margin (6)
2.62    3.04 
Cost of funds 0.48    1.11 
Cost of deposits 0.36    0.96 
Supplementary data    
Total deposits (In millions) $ 9,932  $ 9,941   
Fully taxable equivalent income adj. (In thousands) (7)
1,494  1,824   
____________________________________
(1)     The average balances of loans include nonaccrual loans and deferred fees and costs.
(2)     The average balance for securities available for sale is based on amortized cost. The average balance of equity also reflects this adjustment.
(3)     Interest income on loans held for sale is included in loan interest income on the income statement.
(4)    The Mid-Atlantic region loans are not included in the loan yields; however they are included in the total earning assets yield and the net interest margin. The Mid-Atlantic region deposits are not included in the deposit costs; however, they are included in the total interest-bearing liabilities cost.
(5)     The average balances of borrowings includes the capital lease obligation presented under other liabilities on the consolidated balance sheet.
(6)     Purchased accounting accretion totaled $1.3 and $3.1 million for the three months ended March 31, 2021 and 2020, respectively.
(7)    Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.
61

NON-GAAP FINANCIAL MEASURES
This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP adjusted earnings can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP adjusted 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 adjusted 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 securities gains/losses, merger costs, restructuring costs, goodwill impairment, and discontinued operations. Discontinued operations are the Company’s national mortgage banking operations for which the Company is pursuing sale opportunities. Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. 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. Restructuring costs also include severance and consulting expenses related to the Company’s strategic review.

The Company also calculates adjusted earnings per share based on its measure of adjusted 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. Management believes that the computation of non-GAAP adjusted earnings and adjusted 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.
62

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The following table summarizes the reconciliation of non-GAAP items recorded for the periods indicated:
    At or for the Three Months Ended March 31,
(In thousands)   2021 2020
GAAP Net income/(loss)   $ 13,031  $ (19,870)
Adj: Net losses/(gains) on securities (1)
  31  9,730 
Adj: Restructuring and other expense   3,486  — 
Adj: Loss/(income) from discontinued operations before income taxes —  10,629 
Adj: Income taxes   (533) (4,134)
Total adjusted income/(loss) (non-GAAP) (2)
(A) $ 16,015  $ (3,645)
GAAP Total revenue   $ 101,286  $ 92,064 
Adj: Losses/(gains) on securities, net (1)
  31  9,730 
Total operating revenue (non-GAAP) (2)
(B) $ 101,317  $ 101,794 
GAAP Total non-interest expense   $ 78,154  $ 71,325 
Less: Total non-operating expense (see above)   (3,486) — 
Operating non-interest expense (non-GAAP) (2)
(C) $ 74,668  $ 71,325 
(In millions, except per share data)      
Total average assets (D) $ 12,468  $ 12,852 
Total average shareholders’ equity (E) 1,159  1,734 
Total average tangible shareholders’ equity (2)
(F) 1,125  1,135 
Total average tangible common shareholders' equity (2)
(G) 1,125  1,115 
Total tangible shareholders’ equity, period-end (2)(3)
(H) 1,142  1,124 
Total tangible common shareholders' equity, period-end (2)(3)
(I) 1,142  1,104 
Total tangible assets, period-end (2)(3)
(J) 12,724  12,524 
Total common shares outstanding, period-end (thousands) (K) 50,988  50,199 
Average diluted shares outstanding (thousands) (L) 50,565  50,204 
Earnings per common share, diluted $ 0.26  $ (0.40)
Adjusted earnings per common share, diluted (2)
(A/L) 0.32  (0.07)
Book value per common share, period-end 23.05  33.90 
Tangible book value per common share, period-end (2)
(I/K) 22.39  22.00 
Total shareholders' equity/total assets 9.21  13.13 
Total tangible shareholder's equity/total tangible assets (2)
(H/J) 8.98  8.98 
Performance ratios (4)
     
GAAP return on equity 4.50  % (4.58) %
Adjusted return on equity (2)
(A/E) 5.53  (0.84)
Return on tangible common equity (2)(5)
4.98  (6.76)
Adjusted return on tangible common equity (2)(5)
(A+O)/(G) 6.04  (0.94)
GAAP return on assets 0.42  (0.62)
Adjusted return on assets (2)
(A/D) 0.51  (0.11)
Efficiency ratio (2)
(C-O)/(B+M+P) 71.32  66.92 
(in thousands)  
Supplementary data (In thousands)
     
Tax benefit on tax-credit investments (6)
(M) $ 41  $ 608 
Non-interest income charge on tax-credit investments (7)
(N) (33) (486)
Net income on tax-credit investments (M+N) 122 
Intangible amortization (O) 1,319  1,580 
Fully taxable equivalent income adjustment (P) 1,494  1,824 
63

_________________________________________________________________________________________
(1)     Net securities losses/(gains) for the periods ending March 31, 2021 and 2020 include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(2)    Non-GAAP financial measure.
(3)    Total tangible shareholders’ equity is computed by taking total shareholders’ equity less the intangible assets at period-end. Total tangible assets is computed by taking total assets less the intangible assets at period-end.
(4)     Ratios are annualized and based on average balance sheet amounts, where applicable.
(5)     Adjusted return on tangible common equity is computed by dividing the total adjusted income adjusted for the tax-affected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6)     The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.
(7)     The non-interest income charge is the reduction to the tax-advantaged commercial project investments, which are incurred as the tax credits are generated.

64

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 2020 Annual Report on Form 10-K. In the following discussion, income statement comparisons are against the same period of the previous year and balance sheet comparisons are against the previous fiscal year-end, unless otherwise noted. Operating results discussed herein are not necessarily indicative of the results for the year 2021 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”) and Berkshire Insurance Group, Inc. Established in 1846, the Bank operates as a commercial bank under a Massachusetts trust company charter.

FORWARD-LOOKING STATEMENTS
Certain statements contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (referred to as the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (referred to as the Securities Exchange Act), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions, increased competitive pressures, changes in the interest rate environment, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that Berkshire Hills Bancorp files with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the Risk Factors in Item 1A of this report. Because of these and other uncertainties, Berkshire’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, Berkshire’s past results of operations do not necessarily indicate Berkshire’s combined future results. You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made. Berkshire is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law. Berkshire qualifies all of its forward-looking statements by these cautionary statements.


65

SUMMARY
Berkshire recorded first quarter 2021 net income of $13 million, or $0.26, per share. The Company’s non-GAAP measure of adjusted earnings totaled $16 million, or $0.32 per share. Return on tangible common equity measured 5.0%, and the non-GAAP measure of adjusted return on tangible common equity measured 6.0%.

In the first half of 2020, the Company posted losses due to the COVID-19 pandemic. While operations returned to profitability in the third quarter of 2020, it remains below the levels achieved before the onset of the pandemic due to changes in the operating environment. The Company consolidated nine branch offices in the first quarter of 2021 as part of an announced plan to consolidate 16 branch offices in 2021. The Company also made progress towards completing the sale of its eight Mid-Atlantic branches targeted for the second quarter of 2021. These actions are planned to reduce the total branch count to 106 offices from 130 offices at the start of 2021.

The second wave of COVID-19 disease appears to have peaked in the most recent quarter, with many economic and social activities continuing to be restricted in the first quarter. Certain economic and social activities began to reopen in the second quarter of 2021. The Company’s market area generally was receiving COVID-19 vaccinations at a higher proportionate rate than many other regions at the beginning of the second quarter. Berkshire was active in channeling new rounds of federal stimulus to its markets during the quarter, supporting its customers and recognizing revenue and interest expense benefits from this support. Most key indicators of loan performance improved during the quarter, and provision expenses and the allowance for credit losses decreased. The heavy loss provisioning in the first half of 2020 is expected to absorb pandemic related credit losses that are expected to occur in upcoming quarters based on current conditions and forecasts.

In January 2021, Nitin J. Mhatre was appointed as President and Chief Executive Officer of the Company, following a national search undertaken by the Board after the separation of the previous CEO in August 2020. In March 2021, Subhadeep Basu was appointed as Senior Executive Vice President and Chief Financial Officer, following the resignation of the prior CFO. During the quarter, the Company also recruited teams and senior leadership in Mid-Atlantic asset based lending, Boston business banking, and Boston private banking, along with senior hires in investor relations and financial planning and analysis, together with a new chief diversity officer.

Also in March 2021, the Company entered into a Cooperation Agreement with HoldCo Asset Management, LP, an investment adviser owning approximately 3.3% of the Company’s outstanding shares. The Board nominated a principal of this shareholder, Michael Zeitzeff, for election as a director at the next annual meeting of shareholders. In connection with the Cooperation Agreement, the Board also nominated Deborah Bailey for election as a director. Ms. Bailey is a member of the Board of Governors of FINRA and previously served as Deputy Director of Banking Regulation and Supervision of the Board of Governors of the Federal Reserve.

In April 2021, the Company announced that the Board had approved a one year authorization for the repurchase of approximately 5% of the Company’s common stock. The Company also announced a planned investor strategic plan update on May 18, 2021 of its Berkshire Exciting Strategic Transformation (“BEST”) plans for improving Company performance over the next three years. This plan is targeted to make Berkshire’s purpose-driven community-dedicated bank better and stronger; with the goal of improving customer experience and enhancing value for shareholders.

Since the start of 2021, several significant local competitors have announced planned mergers and consolidations. These events may give rise to changes in competitive conditions and may in some cases create disruptions which could provide opportunities for market share gains as well as recruitment opportunities. Also, in the first quarter of 2021, long term interest rates increased as markets reacted to the economic stimulus provided by the federal government as well as higher growth expectations of the economy as it recovers from the pandemic. As a result unrealized gains on debt securities decreased, and expected lives of mortgage related assets increased. The stimulus is expected to result in record near-term economic growth.

66

Compared to the linked quarter, the Company recorded a 13% decrease in GAAP net income, while adjusted net income increased by 14%. First quarter adjusted income excludes $3 million in restructuring and other expenses. Quarter-over-quarter results benefited from higher revenues and lower credit loss provision expense.

FIRST QUARTER FINANCIAL HIGHLIGHTS (Comparisons are to the prior quarter unless otherwise stated)

•    2% increase in net revenue and 6% increase in net revenue excluding gains/(losses)
•    13% decrease in GAAP income; 14% increase in adjusted income (non-GAAP measure)
•    2.62% net interest margin, stable for last four quarters
•    35% reduction in provision for credit losses on loans
•    42% reduction in annualized net loan charge-offs to 0.51% of loans from 0.80%
•    86% decrease in COVID-19 loan modifications compared to June 30, 2020
•    26% reduction in wholesale funding to 7% of assets
•    $23.05 book value per share; $22.39 tangible book value per share (non-GAAP measure)





67

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2021 AND DECEMBER 31, 2020
Summary: Total assets remained steady at $12.8 billion in the first quarter, and there was further progress in improving the structure and composition of the balance sheet. Proceeds from loan paydowns were primarily channeled into short-term investments. Growth in demand deposits was used to paydown maturing wholesale funds. Asset quality, liquidity, and capital metrics improved.

Investments: Short-term investments increased by $352 million to $1.82 billion in the first quarter due to the funds inflows from loan paydowns. The Company is targeting to use some of these balances to complete the planned branch sale and also to fund payoffs of maturing wholesale funds.

The portfolio of investment securities increased by $68 million to $2.29 billion. Amortizations and prepayments of higher yielding securities contributed to the decrease in the average portfolio yield to 2.36% from 2.69% in the first quarter of 2021 compared to the linked quarter. Securities purchases totaling $259 million were concentrated in agency mortgage backed and commercial mortgage backed securities. The portfolio is highly liquid, and the weighted average life of the bond portfolio was 3.7 years at period-end. All rated bonds are investment grade; unrated bonds totaling $26 million were all pass rated in the Company’s internal rating system. The portfolio of investment securities had an unrealized gain of $31 million, or 1.4% of cost at period-end, compared to $68 million, or 3.2% of cost at the start of the year, due to the rise in medium term interest rates during the first quarter. The Company continues to evaluate possible expansion of the securities portfolio to utilize a portion of excess short-term investments.

Loans: During the first quarter of 2021, total loans decreased by $423 million, or 5%, to $7.7 billion,
including a $189 million reduction attributable to the forgiveness of SBA guaranteed Paycheck Protection Program (“PPP”) loans. Through its relationship with a funding third party, Berkshire participated in the origination of $206 million of new PPP loans during the quarter, many of which provided further assistance to existing borrowers. Loan balances decreased in the other major loan categories reflecting targeted runoff and impacts from the pandemic and government relief programs, which have resulted in prepayments and reduced borrowing demand. Included in assets held for sale are $284 million in Mid-Atlantic loan balances which are targeted to be sold as part of the planned branch sale in the second quarter.

The $444 million balance of PPP loans at period-end is expected to be largely repaid through forgiveness by the SBA during 2021. The $181 million balance of indirect auto loans is expected to be largely repaid through amortization during 2021 and 2022. The Company targets to mostly offset continuing runoff of residential mortgage loans through direct and indirect mortgage originations in its footprint. The Company’s origination of loans improved quarter-over quarter and year-over year, and lending pipelines were firming near the end of the quarter, with further expansion expected from newly recruited teams.

The first quarter 2021 average loan portfolio yield was 3.73%. The yield on commercial real estate and residential mortgage loans decreased quarter-over-quarter due to ongoing prepayments and amortization of higher rate loans. The yield on commercial and industrial (“C&I”) loans increased quarter-over-quarter to 4.62% from 4.05% due to the forgiveness of PPP loans, which resulted in the recognition of $3.5 million in deferred revenue. The impact of this forgiveness on the C&I yield was approximately 0.76% during the most recent quarter.

The Company has designated certain industries as sensitive to direct and indirect COVID-19 impacts based on exposure, risk rating, and use of federally supported lending and loan modification programs. The Company has focused on hospitality, Firestone (specialty equipment lending), restaurants, and nursing/assisted living facilities, which collectively totaled $840 million at period-end. The Company’s greatest focus is on hospitality loans, which totaled $302 million at period-end and loans by the Company’s Firestone specialty equipment lending subsidiary, which totaled $227 million at period-end.


68

Asset Quality and Credit Loss Allowance: Most loan performance metrics improved during the first quarter of 2021. Total net loan charge-offs decreased by 42% to $10 million from $17 million in the prior quarter. Annualized net loan charge-offs measured 0.51% of first quarter average loans. First quarter charge-offs were comprised principally of loans to businesses in industries designated as COVID sensitive by the Company – hospitality, skilled nursing/assisted living, and Firestone equipment loans.

Total non-performing loans decreased by $9 million, or 14%, to $56 million due primarily to loans exited during the quarter. At period-end, the ratio of non-performing loans to total loans decreased to 0.73% from 0.80%. The decrease in non-performing loans was due to the exit of a hospitality loan which was sold for approximately $10 million. Non-performing loans to COVID sensitive industries decreased to $24 million from $36 million due to this loan sale, with total hospitality and Firestone nonaccruals decreasing to $4 million from $18 million.

Total COVID-19 related loan modifications, including in-process modifications, decreased to $214 million, or 2.8% of total loans from $350 million, or 4.3% of total loans, at the start of the quarter. Modifications to COVID sensitive industries decreased to $176 million from $275 million, with total hospitality and Firestone loan modifications decreasing to $153 million from $225 million. More than 90% of hospitality loans with modifications were on interest-only payment terms at period-end and were supported by interest reserves. Further improvement in hospitality modifications is expected to depend on the timing of recoveries in leisure and business travel activities. More than 90% of Firestone modifications were on interest-only payment terms at period-end and most were expected to return to regular payment schedules in the second quarter based on easing of various state restrictions.

Delinquent accruing loans increased to $35 million, or 0.45% of total loans from $28 million, or 0.34% of total loans during the first quarter of 2021. This increase was due to payment delays for SBA loans under the CARES act as a result of delay at the SBA payment processor at quarter-end, which are expected to be resolved in the second quarter.

Period-end criticized loans decreased to $356 million, at period-end, compared to $359 million at year-end 2020. Classified loans decreased to $235 million from $250 over this time. At period-end, criticized loans measured 4.7% of total loans and classified loans measured 3.1% of total loans. Criticized loans to COVID-19 sensitive industries decreased to $208 million from $223 million over the first quarter of 2021. Included in these totals were criticized loans to hospitality and Firestone borrowers, which declined to $146 million from $158 million.

The Company has traditionally viewed its potential problem loans as those loans from business activities which are rated as classified and continue to accrue interest. These loans have a possibility of loss if weaknesses are not corrected. Accruing classified loans totaled $179 million at period-end. Due to the circumstances of the pandemic, the Company also views deferred special mention loans as having elevated risk of deterioration. These loans totaled $46 million at period-end.

The Company’s estimate of expected credit losses at quarter-end resulted in a ratio of the allowance to total loans measuring 1.62%, which was little changed from 1.58% at the start of the quarter. Excluding the $444 million balance of PPP loans, the allowance was also little changed, measuring 1.72% of total loans at quarter-end. The outlook for expected credit losses as a result of improved economic forecasts was offset under the Company’s reserve calculation methodology by the continuing emergence of credit losses and the level of commercial loans with ongoing modifications. If economic forecasts remain stable or improve, and based on other conditions remaining unchanged, it is anticipated that COVID-related charge-offs could largely be absorbed by the current credit loss allowance. Under the above assumptions, the Company anticipates that the ratio of the allowance to total loans would decrease in 2022 to the general range of the level before the pandemic at the time of the adoption of the Current Expected Credit Losses (“CECL”) accounting methodology.


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Deposits and Borrowings: Total deposits were unchanged at $10.2 billion in the first quarter of 2021, as a $266 million increase in demand deposits offset paydowns of maturing brokered deposits and lower payroll related balances. The growth in demand deposits benefited from the distribution of federal stimulus payments, together with some proceeds from the $206 million in PPP loans facilitated by the Company in the first quarter. Personal checking account balances increased by $98 million to $1.1 billion. Commercial checking account balances increased by $173 million to $1.6 billion. Payroll balances shifted from money market accounts to NOW accounts due to calendar impacts related to payroll cycles. These balances fluctuate daily and ended the period at $965 million. Some maturing higher cost retail time deposits shifted to other lower rate deposit products. The $282 million reduction in time deposits was primarily due to a $179 million reduction in brokered deposits to $431 million at period-end. At period-end, liabilities held for sale included $647 million in Mid-Atlantic branch deposit balances which are targeted for sale in the second quarter. Borrowings decreased in the first quarter by $123 million to $449 million, as maturing FHLBB borrowings were repaid from liquid assets. Wholesale funds, which include brokered deposits and borrowings, decreased during the quarter by $303 million, or 26%, to $880 million from $1.183 billion.

Derivative Financial Instruments: There were no material changes in the portfolio of outstanding derivative financial instruments, which totaled $3.8 billion in notional amount at period-end. The estimated fair value of these instruments was an asset of $60 million at period-end, which decreased from $94 million at year-end 2020 due to the impact of rising medium term interest rates on the value of outstanding commercial loan interest rate swaps.

Shareholders' Equity: Total shareholders’ equity decreased by $13 million, or 1%, to $1.175 billion during the first quarter. The Company recorded a $20 million decrease in accumulated other comprehensive income due to the after tax impact of a reduction in unrealized debt security gains resulting from the increase in medium term interest rates during the quarter. This was partially offset by the benefit of $7 million in retained earnings. Quarter-end book value per share totaled $23.05 and the non-GAAP measure of tangible book value per share measured $22.39. Capital metrics remained strong, with equity/assets measuring 9.2% and the non-GAAP measure of tangible equity/tangible assets was 9.0%. The Common Equity Tier 1 Ratio improved to 14.2% from 13.8% during the quarter.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2021 and MARCH 31, 2020

Summary: The Company recorded first quarter net income of $13 million, or $0.26 per share in 2021, compared to a loss of $20 million, or $0.40 per share in 2020. The largest contributor to the $31 million improvement in pre-tax income from continuing operations was a $28 million reduction in the provision of credit losses on loans compared to the large provision made in the first quarter of 2020 reflecting the emergence of expected future pandemic related credit losses. Additionally, a $10 million charge was recorded in the first quarter of 2020 due to unrealized losses on equity securities as a result of the severe stock market contraction that initially resulted from the pandemic. While this charge did not recur in 2021, the income benefit was partially offset by a $7 million year-over-year increase in expenses related to branch restructuring and professional services. The total net loss in the first quarter of 2020 also reflected an $8 million loss on discontinued national mortgage banking operations. The Company’s non-GAAP measure of adjusted earnings excludes discontinued operations, securities gains and losses, and restructuring expenses. First quarter adjusted net income measured $16 million, or $0.32 per share in 2021, compared to an adjusted loss of $4 million, or $0.07 per share, in 2020. This $20 million improvement was primarily due to the $21 million after-tax reduction in the credit loss provision, offset by higher operating expenses in 2021.

The first quarter efficiency ratio moved adversely to 71% in 2021 compared to 67% in 2020. The first quarter 2020 return on assets was a loss due primarily to the credit loss provision. The first quarter 2021 GAAP return on assets measured 0.42%, and the non-GAAP measure of adjusted return on assets measured 0.51%


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Revenue: Total first quarter net revenue from continuing operations increased year-over-year by $9 million due to the $10 million loss on equity securities in 2020 that resulted from the stock market decline as the pandemic led to widespread shutdowns. Excluding securities gains and losses, net revenue from continuing operations was unchanged at $101 million. An $11 million decrease in net interest income was offset by an $11 million increase in non-interest income excluding securities gains and losses.

Net Interest Income: Following the approximate 150 basis point downward parallel shock in interest rates near the end of the first quarter of 2020, net interest income decreased by 10% from $86 million in the first quarter of 2020 to $76 million in the following quarter. The net interest margin decreased from 3.04% to 2.62% for these respective periods. The quarterly net interest margin has remained generally stable since the second quarter of 2020, measuring 2.62% in the most recent quarter. For this period, net interest income decreased 3% to $75 million in the most recent quarter. Net interest income in the most recent period included a $3.5 million benefit from the recognition of deferred origination revenue related to PPP loans that were forgiven during the period. The balance of unamortized deferred PPP revenue decreased from $13 million to $7 million. Most of this balance is expected to be recognized in income as additional PPP loans are forgiven in upcoming quarters. The total impact of PPP loans on the net interest margin, including the 1% coupon on the loans, was an increase in the margin of 11 basis points in the most recent quarter. The effect of purchase accounting accretion from past bank acquisitions was to provide 5 basis points of margin benefit in the most recent quarter.

Over the last year, the yield on earning assets has declined steadily from 4.08% in the first quarter of 2020 to 3.07% in the first quarter of 2021, due to asset yield compression in the low rate environment as well as to a shift in mix from loans towards low yielding short-term investments. The cost of funds decreased from 1.11% to 0.48% over this time and the cost of deposits decreased from 0.96% to 0.36%. The cost of deposits has benefited from growth in demand deposits and decreases in higher cost brokered deposits and maturing retail time deposits. The cost of funds has also benefited from the paydown of borrowings. The quarterly cost of borrowings increased slightly due to the higher remaining proportional impact of subordinated debt as shorter term FHLBB borrowings are paid down.

Non-Interest Income: First quarter non-interest income excluding gains and losses increased year-over-year by $11 million to $26 million from $15 million. This was primarily due to an $8 million swing in changes in the fair value of financial instruments related to mortgage servicing rights, outstanding interest rate swap derivatives, and fair valued loans. Due to the decrease in interest rates in the first quarter of 2020, these impacts resulted in a total of $5 million in charges against non-interest income. In the most recent quarter, due to the increase in interest rates, these impacts provided a $3 million benefit to non-interest income. Fees related to the $206 million in PPP loan applications in the most recent quarter generated a $1.5 million fee revenue benefit during the quarter. The PPP program in 2021 is scheduled to be completed in May, and the Company does not expect material revenue from this program after the first quarter. Higher volumes in other lending related activities offset lower overdraft fees as a result of lower overdraft activity, which reflects consumer benefits from stimulus payments received during the quarter and previously.

Credit Loss Provision Expense: The first quarter provision decreased year-over-year to $6.5 million from $35 million. The expense in 2020 reflected the initial recognition of expected credit losses from the emergence of the pandemic. In the first quarter of 2021, the allowance balance decreased and the ratio of the allowance to loans was little changed. The amount of the provision could decrease in the future if expectations for economic factors and/or loan performance improve. The amount of the provision could increase if these expectations worsen. The provision may also be affected by changes in the size or mix of the loan portfolio.

Non-Interest Expense and Tax Expense: Total first quarter non-interest expense increased year-over-year by $7 million to $78 million from $71 million. Excluding $3 million in restructuring and other expense, the non-GAAP measure of adjusted expense increased year-over-year by $4 million to $75 million from $71 million. This was primarily due to higher professional services expense, which included $3 million in 2021 for legal, financial, and other advisory services related to management and board matters during the most recent quarter. A $2 million increase in compensation expense was offset by a $2 million decrease in the category of all other expense. Compensation expense increased due to higher business development accruals and severance expense. The decrease in all other expense was primarily related to lower loan workout and other commercial lending expense.
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During the most recent quarter, the Company completed the consolidation of nine branch offices, reducing its total branch count from 130 offices at the start of the quarter to 121 offices at the end of the quarter. Full-time equivalent staff decreased to 1,467 positions at March 31, 2021, compared to 1,505 positions at year-end 2020. Full-time equivalent staff in continuing operations totaled 1,548 positions at the end of the first quarter of 2020. The first quarter 2021 effective tax rate was 22% due to a seasonal decrease in tax credit investments recorded during the quarter. In the first quarter of 2020, the Company received an effective tax benefit on continuing operations of 14% due to the $14 million pre-tax loss on continuing operations recorded in that period.

Discontinued Operations: In the fourth quarter of 2020, the Company completed the exit of its national mortgage banking operations. These operations generated a net loss of $20 million in 2020, of which $8 million was recorded in the first quarter of 2020. These operations are excluded from the Company’s measures of adjusted income.

Total Comprehensive Income: Total comprehensive income includes net income together with other comprehensive income, which primarily consists of unrealized gains/losses on debt securities available for sale, after tax. The decrease in interest rates in 2020 resulted in $19 million in other net comprehensive income and the increase in medium term interest rates in 2021 resulted in a $20 million other net comprehensive loss.

Liquidity and Cash Flows: The primary source of cash in the first quarter of 2021 was the decrease in total loans, and the primary use of cash was an increase in short-term investments. Growth in demand deposits contributed to the paydown of maturing wholesale funds. As a result, liquidity improved, with short-term investments increasing to 14% of total assets and total investments increasing to 32% of assets, from 11% and 29%, respectively, at the start of the year. The ratio of loans to deposits decreased to 75% from 79%. The ratio of wholesale funds to assets decreased to 7% from 9%. The Company expects to use approximately $300 million in liquidity to close the planned branch sale in the second quarter. The Company also expects that the majority of the remaining $444 million of outstanding PPP loans are expected to be repaid by the SBA through loan forgiveness in the coming months. The Company expects to repay approximately $475 million in maturing wholesale funds over the rest of the year.

At period-end, unused borrowing capacity at the FHLBB was $1.4 billion, compared to $1.0 billion at the start of the year. Borrowing availability at the Fed discount window was $0.6 billion and $0.8 billion for these dates respectively. Total cash held by the holding company was $92 million and $84 million for these respective dates. The Company targets to use cash at the holding company together with dividends from the Bank to fund dividends and stock repurchases over the coming year.

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

The Company views its regulatory capital measures as providing it with a cushion of excess capital in relation to its operating condition and risk profile, and compared to peers. The Company’s last stock repurchase authorization was allowed to expire in 2020 without completion, due to the emergence of the pandemic. This authorization had been approved to facilitate the return of capital to shareholders as a result of planned reductions in the balance sheet which released capital that had been used to support loans and other assets which were no longer viewed as contributing to the Company’s strategic direction.

On April 28, 2021, the Company announced that its Board had approved a stock repurchase program pursuant to which the Company may repurchase up to 2,500,000 shares of its common stock through April 30, 2022. This represents approximately 5% of its outstanding shares as of March 31, 2021. The authorization does not constitute a commitment to repurchase shares. The Company may conduct the repurchases through open market purchases, block trades, unsolicited negotiated transactions, pursuant to a trading plan that may be adopted in accordance with Securities and Exchange Commission (“SEC”) Rule 10b5-1, or in any other manner that complies with the provisions of the Securities Exchange Act of 1934, as amended.

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Off-Balance Sheet Arrangements and Contractual Obligations: In the normal course of operations, Berkshire engages in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in the Company’s financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. Further information about the Company’s off-balance sheet arrangements and information relating to payments due under contractual obligations is presented in the most recent Form 10-K. Changes in the fair value of derivative financial instruments and hedging activities are included on the balance sheet and information related to these matters is reported in the related footnote to the consolidated financial statements, and was included in management’s discussion of changes in financial condition. There were no major changes in off-balance sheet arrangements and contractual obligations during the first quarter of 2021.

Fair Value Measurements: Fair value measurements are discussed in the related financial statement footnote. The most significant measurements of recurring fair values of financial instruments primarily relate to securities available for sale, loans held for sale, and derivative instruments. These measurements were generally based on Level 2 market-based inputs. The premium or discount value of loans has historically been the most significant element of this period-end presentation. This premium or discount is a Level 3 estimate and reflects management’s subjective judgments. At period-end, the premium value of the loan portfolio was estimated at $243 million, or 3.2% of loans, compared to $289 million, or 3.6% of loans, at year-end 2020. The decrease in the premium value was primarily due to the increase in medium term interest rates during the period. Of note, the fair value of non-maturity deposits is made equal to their cost basis under accounting guidelines, and this value does not reflect any factors related to market and economic conditions as of the measurement date.


CORPORATE RESPONSIBILITY UPDATE

Berkshire is committed to purpose-driven, community-dedicated banking that enhances value for all its stakeholders. Learn more about the steps Berkshire is taking at www.berkshirebank.com/csr and in its most recent Corporate Responsibility Report.

Key developments in the quarter include:
Corporate Responsibility Report- Earlier this month, the Company released its 2020 Corporate Responsibility Report, Meaningful Moments: Answering the Call. The report highlights how the Company’s 175 year heritage guided its response to the COVID-19 pandemic as well as its environmental, social, and governance performance. Berkshire seeks to enhance its purpose-driven, community-dedicated approach to banking to be the leading socially responsible bank in the communities it serves.
Chief Diversity Officer- As the Bank continues to build on its efforts to be a diverse, inclusive and equitable Company, it has appointed Angela Dixon, a 30-year veteran in the Human Resources and the Diversity, Equity, Inclusion space to the role of Chief Diversity Officer. As Chief Diversity Officer, Dixon will be responsible for driving the Company’s diversity, equity and inclusion strategy in collaboration with executive management and each of Berkshire’s business lines. She will also work to enhance the impact of Berkshire’s existing diversity initiatives and programs.
Bloomberg Gender Equality IndexBerkshire Bank's focus on diversity, ensuring gender equality and pay equity was highlighted as Bloomberg announced the company would be included in the 2021 Bloomberg Gender-Equality Index (GEI) for the second consecutive year. The GEI tracks the performance of public companies committed to disclosing their efforts to support gender equality through policy development, representation and transparency and rewards the top performing companies with inclusion in the index.
Human Rights Campaign Best Places to Work for LGBTQ Equality- Berkshire received the top adjusted score of 100 on the Human Rights Campaign Foundation’s 2021 Corporate Equality Index (CEI), the nation’s foremost benchmarking survey and report measuring corporate policies and practices related to LGBTQ workplace equality. The CEI rates employers providing these crucial protections across four central pillars including non-discrimination policies; equitable benefits for LGBTQ workers and their families; supporting an inclusive culture; and corporate social responsibility
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APPLICATION OF CRITICAL ACCOUNTING POLICIES
The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in its most recent Annual Report on Form 10-K. Modifications to significant accounting policies made during the year are described in Note 1 to the consolidated financial statements included in Item 1 of this report. The preparation of the consolidated financial statements in accordance with GAAP and practices generally applicable to the financial services industry requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates.

Management has identified the Company's most critical accounting policies as related to:
•    Allowance for Credit Losses
•    Fair Value of Financial Instruments

These particular significant accounting 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 most critical accounting policies were significant in determining income and financial condition based on events in 2021.


ENTERPRISE RISK MANAGEMENT
Following sections of this report on Form 10-Q include discussion of market risk and risk factors. Risk management is overseen by the Company’s Chief Risk Officer, who reports directly to the CEO. This position oversees risk management policy, credit, compliance, and information security. Enterprise risk assessments are brought to the Company’s Enterprise Risk Management Committee, and then are reported to the Board’s Risk Management and Capital Committee. The high level corporate risk assessment focuses on the following material business risks: credit risk, interest rate risk, price risk, liquidity risk, operational risk, compliance risk, strategic risk, and reputation risk, with the credit risk category having the highest weighting. Based on management's recent review, all risks were within corporate appetites. Increases in risks were noted for credit risk and compliance risk over the past year due largely to the pandemic; liquidity risks were declining due to elevated liquid assets. For all material business risks, residual risk was viewed as medium/low to medium due to mitigating controls functioning in the Company.

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ITEM 3.                 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For additional discussion about the Company’s Quantitative and Qualitative Aspects of Market Risk, please review Item 7A of the most recent report on Form 10-K which sets forth the methodologies employed by the Company and the various aspects of its analysis of its interest rate sensitivity. Berkshire’s objective is to maintain a neutral or asset sensitive interest rate risk profile, as measured by the sensitivity of net interest income to market interest rate changes.

The Company’s asset sensitivity increased in the first quarter of 2021. This reflected the impact of loan portfolio runoff reinvested in short-term investments, as well as the increase in demand deposits which were used to paydown short-term wholesale borrowings. The percentage change in net interest income in the second year of a 200 basis point upward parallel ramp in interest rates increased to 10.8%, compared to 4.0% at the end of 2020. At period-end, the Company was positively sensitive to upward shocks, with the year one impact of an up 200 basis point shock being in the same range as the year two ramp impact cited above. Additionally, the Company’s model indicates that net interest income is positively sensitive to a yield curve twist that results in a steepening of the yield curve compared to conditions at first quarter period-end.

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ITEM 4.           CONTROLS AND PROCEDURES
a)  Disclosure controls and procedures.
The principal executive officers, including the principal financial officer, based on their evaluation of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that the Company’s disclosure controls and procedures were effective.

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

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PART II
ITEM 1.            LEGAL PROCEEDINGS
As of March 31, 2021, neither the Company nor the Bank was involved in any pending legal proceedings believed by management to be material to the Company’s financial condition or results of operations. Periodically, there have been various claims and lawsuits involving the Bank, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the making and servicing of real property loans, and other issues incident to the Bank’s business. A summary of certain legal matters involving unsettled litigation or pertaining to pending transactions are as follows:

On February 4, 2020, the Bank filed a complaint in the New York State Supreme Court for the County of Albany against Pioneer Bank (“Pioneer”) seeking damages of approximately $16.0 million. The complaint alleges that Pioneer is liable to the Bank for a credit loss of approximately $16.0 million suffered by the Bank in the third quarter of 2019 as a result of Pioneer’s breach of loan participation agreements in which it served as the lead bank, as well as constructive fraud, fraudulent concealment and/or negligent misrepresentation. Pioneer has filed a motion to dismiss aspects of the Bank’s complaint, to which the Bank is in the process of responding. The Company wrote down the underlying credit loss in its entirety in the third quarter of 2019, but recognized a partial recovery of $1.7 million early in the second quarter of 2020. The Company has not accrued for any additional anticipated recovery at this time.

On September 11, 2020, the Company received notice of a demand letter served on the Company and the Bank by a former mortgagee of the Bank pursuant to the Massachusetts Consumer Protection Act, M.G.L Ch. 93A (“Chapter 93A). The demand letter alleges that a mortgage payoff statement tendered by the Bank to the mortgagee included a mortgage discharge preparation fee that is purportedly impermissible under Massachusetts law. The demand letter also claims that the Bank failed to provide a copy of the recorded mortgage discharge to the mortgagee in a timely manner. The demand letter further purports to state claims on behalf of a putative class of similarly situated Massachusetts mortgage customers of the Bank, who allegedly may have suffered similar violations of Massachusetts law. The demand letter seeks monetary damages for the original mortgagee claimant and the putative class, plus double or treble damages and reasonable attorneys’ fees, as may be allowed under Chapter 93A. The Company and the Bank have retained outside litigation counsel, who has responded to the demand letter and denied all claims on behalf of the Company and the Bank. No class action or other lawsuit has been served on the Company or the Bank as of the date of this filing.

On or about August 10, 2020, a former employee of the Bank’s subsidiary First Choice Loan Services Inc. (“FCLS”) filed a complaint in the Court of Common Pleas, Bucks County Pennsylvania against FCLS and two of its former senior corporate officers generally alleging wrongful termination as a result of purported whistleblower retaliation and other violations of New Jersey state employment law. The complaint also purports to name the Bank and the Company as additional defendants, even though neither entity ever employed, paid wages to or contracted with the plaintiff. On November 16, 2020, the plaintiff filed a First Amended Complaint reiterating the same claims against the same defendants. The Company's liability insurer has provided outside litigation counsel to defend the Company and the Bank in this matter, as well as FCLS and its former senior corporate officers. On December 7, 2020, defense counsel filed Preliminary Objections on behalf of the Company, the Bank, FCLS and FCLS’s former senior corporate officers denying the plaintiff’s claims and seeking dismissal of the case and an order that the plaintiff’s claims must proceed through arbitration in accordance with contractual obligations set forth in plaintiff’s previous employment agreement with FCLS.
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ITEM 1A.               RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed below and in Part I, “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K, which could materially affect the Company's business, financial condition, or future operating results. Please also see the earlier discussion in this report about Enterprise Risk Management. The risks described in this form are not the only risks presently facing the Company. Additional risks and uncertainties not currently known to the Company, or currently deemed to be immaterial, also may materially adversely affect the Company's business, financial condition, and/or operating results. There were no other major changes in risk factors identified during the first quarter of 2021.


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ITEM 2.               UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)                Recent Sales of Unregistered Securities
The Company occasionally engages in the practice of transferring unregistered securities for the purpose of completing business transactions. These shares are issued to vendors or other organizations as consideration for services performed in accordance with each contract. During the three months ended March 31, 2021 and 2020 there were no shares transferred.

(b)                 Not applicable.

(c)                 The following table provides certain information with regard to shares repurchased by the Company in the first quarter of 2021:
Total number of Average price Total number of shares
purchased as part of
publicly announced
Maximum number of
shares that may yet
be purchased under
Period  shares purchased paid per share plans or programs the plans or programs
January 1-31, 2021 —  $ —  —  — 
February 1-28, 2021 —  —  —  — 
March 1-31, 2021 —  —  —  — 
Total —  $ —  —  — 

On April 28, 2021, the Company announced that its Board of Directors has approved a stock repurchase program pursuant to which the Company may repurchase up to 2,500,000 shares of its common stock through April 30, 2022. This represents approximately 5% of its outstanding shares as of March 31, 2021.


ITEM 3.                DEFAULTS UPON SENIOR SECURITIES
None.


ITEM 4.                  MINE SAFETY DISCLOSURES
Not applicable.


ITEM 5.                OTHER INFORMATION
None.
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ITEM 6.                   EXHIBITS
3.1  
3.2  
4.1  
4.2
10.1
10.2
31.1  
31.2  
32.1  
32.2  
101   The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL: (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements tagged as blocks of text and including detailed tags. 
104 The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL.
_______________________________________
(1)     Incorporated herein by reference from the Exhibits to the Form 10-Q as filed on August 9, 2018.
(2)    Incorporated herein by reference from the Exhibits to the Form 8-K as filed on June 26, 2017.
(3)    Incorporated herein by reference from the Exhibits to the Form S-1, Registration Statement and amendments thereto, initially filed on March 10, 2000, Registration No. 333-32146.
(4)    Incorporated herein by reference from the Exhibits to the Form 8-K as filed on October 16, 2017.
(5)    Incorporated herein by reference from Exhibit 10.1 to the Form 8-K as filed on January 26, 2021.
(6)    Incorporated herein by reference from Exhibit 10.1 to the Form 8-K as filed on March 8, 2021.
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
  BERKSHIRE HILLS BANCORP, INC.
   
     
Dated: May 10, 2021 By: /s/ Nitin J. Mhatre
  Nitin J. Mhatre
  President and Chief Executive Officer
   
     
Dated: May 10, 2021 By: /s/ Subhadeep Basu
  Subhadeep Basu
  Senior Executive Vice President, Chief Financial Officer

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