~~Western New England, with 23 branches, includes~~quarter of 2021, the Company’s ~~traditional Berkshire County market, where it has a~~markets were among the leading ~~market share in many of its product lines. This region also includes Southern Vermont, and many~~areas of the ~~region’s branches are~~country in ~~communities close to Route 7, which runs north/south through the valleys to the west~~achieving high rates of the Berkshire Hills and Green Mountains. This region is within commuting range of both Albany, N.Y., and Springfield, Mass., and is known throughout the world as a tourist and recreational destination area,vaccination with ~~vacation and second home traffic from Boston and New York City. The Pittsfield 2016 MSA GDP totaled $6 billion.~~

new vaccines that were deployed.

~~New York,~~ with 39 branches serving the Albany Capital District and Central New York. Albany is the state capital and is part of New York’s Tech Valley which is gaining prominence as a world technology hub including leading edge nanotechnology initiatives representing a blend of private enterprise and public investment. The Company’s Central New York area includes operations in the Rome/Utica MSA and in the Syracuse MSA. These are markets along Interstate 90 with longstanding local industries and expansion influences from the Albany Capital District. The Albany/Schenectady 2016 MSA GDP was $52 billion, and the Rome/Utica/Syracuse total 2016 MSA GDP was $38 billion.

~~Hartford/Springfield,~~ with 24 branches serving the market along the Connecticut River in this region, which is the second largest economic area in New England. This region is centrally located between Boston and New York City at the crossroads of Interstate 91, which traverses the length of New England, and Interstate 90, which traverses the width of Massachusetts. This region also has easy access to Bradley International Airport, which is a major airport serving central New England. Major local industries include insurance, defense manufacturing, education, and assembly/distribution. The Springfield area is receiving major commercial investment including the first Massachusetts casino/entertainment complex. The Hartford/Springfield combined 2016 MSA GDP was $114 billion.

~~Mid-Atlantic~~, with 8 branches and mortgage banking and SBA lending operations. Berkshire established its presence in this region in 2016 with its acquisition of First Choice Bank (“First Choice”) located in the Princeton, New Jersey area and its acquisition of the business assets and operations of 44 Business Capital, LLC ("44 Business Capital"), located in the greater Philadelphia area. Major local industries include bio-science, financial services, trade, iron, steel and rubber. The Philadelphia MSA 2016 GDP was $431 billion, while the Trenton 2016 MSA GDP was $27 billion.

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~~Shown below is information about total loans and deposits within the Company’s banking footprint, by region, as of year-end 2017 (wholesale deposit and loan balances are excluded).~~

These regions are viewed as having favorable economic and demographic characteristics and provide an attractive regional niche for the Bank to distinguish itself from larger national and super-regional banks, as well as from smaller community banks, while serving its market area. The Company’s regions have competitive economic strengths in precision manufacturing, distribution, technology, health care, and education which are expected to continue to support above average personal incomes and wealth. These regions include two major U.S. metropolitan areas and port cities - Boston and the Philadelphia area. As a result of its growth, the Company has increased and diversified its revenues both geographically and by product type and this has improved its flexibility in pursuing growth opportunities as they arise. The Company believes it has attractive long-term growth prospects because of the Bank’s positioning as a leading regional bank in its markets with the ability to serve retail and commercial customers with a strong product set and responsive local management. The Company has acquired and is developing targeted national lending operations to support its strategic growth and profitability. The Company also pursues organic growth through ongoing business development, de novo branching, product development, and delivery channel diversification and enhancement. The Bank promotes itself as America’s Most Exciting Bank®. Its vision is to excel as a high performing market leader with the right people, attitude, and energy providing an engaging and exciting customer and team member experience. This brand and culture statement is viewed as driving customer engagement, loyalty, market share, and profitability. The Company utilizes Six Sigma tools to improve operational effectiveness and efficiency. It focuses on the recruitment and acquisition of teams with established market reach and experience to support its overall growth and development.

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~~COMPANY WEBSITE AND AVAILABILITY OF SECURITIES AND EXCHANGE COMMISSION~~ FILINGS

Information regarding the Company is available through the Investor Relations tab at berkshirebank.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge at sec.gov and, as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission, at berkshirebank.com under the Investor Relations tab. Information on the website is not incorporated by reference and is not a part of this annual report on Form 10-K.

COMPETITION

The Company is subject to strong competition from banks and other financial institutions and financial service providers. Its competition includes national and super-regional banks. Non-bank competitors include credit unions, brokerage firms, insurance providers, financial planners, and the mutual fund industry. New technology is reshaping customer interaction with financial service providers and the increase of internet-accessible financial institutions increases competition for the Company’s customers. The Company generally competes on the basis of customer service, relationship management, and the fair pricing of ~~loan and deposit products and wealth management and insurance services.~~ its products.The location and convenience of branch offices is also a significant competitive factor, particularly regarding new offices. The Company is pursuing a “banker heavy, branch light” model in newer markets, and uses its mobile MyBanker teams which provide personalized service to customers with committed relationships.The Company does not rely on any individual, group, or entity for a material portion of its deposits.Due to recent mergers of in-market bank competitors, the Company is pursuing opportunities to expand its market share and talent recruitment.

LENDING ACTIVITIES

General. The Bank originates loans in the four basic portfolio categories discussed below. Lending activities are limited by federal and state laws and regulations. Loan interest rates and other key loan terms are affected principally by the Bank’s credit policy, asset/liability strategy, loan demand, competition, and the supply of money available for lending purposes. These factors, in turn, are affected by general and economic conditions, monetary policies of the federal government, including the Federal Reserve, legislative tax policies, and governmental budgetary matters. Most of the Bank’s loans held for investment are made in its market areas and are secured by real estate located in its market areas. Lending is therefore affected by activity in these real estate markets. The Bank ~~does not engage in subprime lending activities. The Bank~~ monitors and manages the amount of long-term fixed-rate lending volume. Adjustable-rate loan products generally reduce interest rate risk but may produce higher loan losses in the event of sustained rate increases. The Bank generally originates loans for investment except for residential mortgages, which are generally originated for sale on a servicing released basis. Additionally, the Bank also originates ~~SBA~~Small Business Administration ("SBA") 7A loans for sale to investors. The Bank also conducts wholesale purchases and sales of loans and loan participations generally with other banks doing business in its markets, including selected national banks.

The ~~Bank changed its charter several years ago from a savings bank to a trust company, which is~~information discussed below describes the ~~common charter for Massachusetts chartered commercial banks.~~ Company’s ongoing lending activities.The ~~majority of~~COVID-19 pandemic conditions that affected the ~~Bank’s held for investment loans~~Company’s activities in 2021 and 2020 are ~~commercial loans. The Company’s strategy is to be a leading regional bank commercial banking provider~~discussed in ~~its regional markets,~~Management’s Discussion and ~~to develop commercial market share and wallet share across its commercial banking product areas. The Company’s recent expansion into more urban markets is targeted to facilitate further development~~Analysis in Item 7 of this strategy. The Company also is building its specialized commercial business lines which have higher margins and provide for revenue diversification and geographic expansion into other national markets. The Bank has focused on team recruitments to establish its market prominence and deliver revenue synergies in new markets entered by acquisition.report.

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Loan Portfolio Analysis. The following table sets forth the year-end composition of the Bank’s loan portfolio in dollar amounts and as a percentage of the portfolio at the dates indicated. Further information about the composition of the loan portfolio is contained in Note 67 - Loans of the Consolidated Financial Statements.

Item 1 - Table 1 - Loan Portfolio Analysis


	2021				2020				2019
(In millions)	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Loans:
Construction	$	324	4.7	%	$	455	5.6	%	$	449	4.7	%
Commercial multifamily	516		7.6		483		6.0		632		6.7
Commercial real estate owner occupied	607		8.9		552		6.8		673		7.1
Commercial real estate non-owner occupied	2,157		31.6		2,119		26.2		2,190		23.0
Commercial and industrial	1,285		18.8		1,943		24.0		1,844		19.4
Residential real estate	1,489		21.8		1,932		23.9		2,853		30.0
Home equity	252		3.7		294		3.7		379		4.0
Consumer other	196		2.9		303		3.8		483		5.1
Total	$	6,826	100.0	%	$	8,081	100.0	%	$	9,503	100.0	%
Allowance for credit losses (1)	(106)				(127)				(64)
Net loans	$	6,720			$	7,954			$	9,439

2017 2016 2015 2014 2013
Percent Percent Percent Percent Percent
of of of of of
(In millions) Amount Total Amount Total Amount Total Amount Total Amount Total
Commercial real estate $ 3,264
39 % $ 2,617
40 % $ 2,060
36 % $ 1,612
35 % $ 1,417
34 %
Commercial and industrial loans 1,804
22
1,062
16
1,048
18
804
17
687
16
Total commercial loans 5,068
61
3,679
56
3,108
54
2,416
52
2,104
50
Residential mortgages 2,103
25
1,893
29
1,815
32
1,496
32
1,384
33
Consumer 1,128
14
978
15
802
14
768
16
692
17
Total loans $ 8,299
100 % $ 6,550
100 % $ 5,725
100 % $ 4,680
100 % $ 4,180
100 %

Allowance for loan losses (52 )

(44 )

(39 )

(35 )
(33 )
Net loans $ 8,247

$ 6,506

$ 5,686

$ 4,645

$ 4,147

(1) Beginning January 1, 2020, the allowance calculation is based on current expected loss methodology. Prior to January 1, 2020, the allowance calculation was based on the incurred loss model.

Commercial Real Estate. The Bank originates commercial real estate loans on properties used for business purposes such as small office buildings, industrial, healthcare, lodging, recreation, or retail facilities. Commercial real estate loans are provided on owner-occupied properties and on investor-owned properties. The portfolio includes commercial 1-4 family and multifamily properties. ~~The Bank’s expansion in Greater Boston may involve increased lending to finance new types of properties and reliance on more expensive property values compared to its traditional markets.~~ Loans may generally be made with amortizations of up to 2530 years and with interest rates that adjust periodically (primarily from short-term to five years). Most commercial real estate loans are originated with final maturities of 10 years or less. As part of its business activities, the Bank also enters into commercial loan participations with regional and national banks and purchases and sells commercial loans. The Bank views its owner-occupied commercial real estate loans together with its commercial and industrial loans as constituting the primary relationship based component of its commercial lending activities.participations.

Commercial real estate loans are among the largest of the Bank’s loans, and may have higher credit risk and lending spreads. Because repayment is often dependent on the successful operation or management of the properties, repayment of commercial real estate loans may be affected by adverse conditions in the real estate market or the economy. The Bank seeks to manage these risks through its underwriting disciplines and portfolio management processes. The Bank generally requires that borrowers have debt service coverage ratios (the ratio of available cash flows before debt service to debt service) of at least 1.25 times based on stabilized cash flows of leases in place, with some exceptions for national credit tenants. For variable rate loans, the Bank underwrites debt service coverage to interest rate shocks of 300 basis points or higher based on a minimum of 1.0 times coverage and it uses loan maturities to manage risk based on the lease base and interest sensitivity. Loans at origination may be made up to 80% of appraised value based on property type and risk, with sublimits of 75% or less for designated specialty property types. Generally, commercial real estate loans are supported by full or partial personal guarantees by the principals. Credit enhancements in the form of additional collateral or guarantees are normally considered for start-up businesses without a qualifying cash flow history.

The Bank offers interest rate swaps to certain larger commercial mortgage borrowers. These swaps allow the Bank to originate a mortgage based on short-term ~~LIBOR~~published interest rates and allow the borrower to swap into a longer-term fixed rate. The Bank simultaneously sells an offsetting back-to-back swap to an investment grade national bank so that it does not retain this fixed-rate risk. The Bank also records fee income on these interest rate swaps based on the terms of the offsetting swaps with the bank counterparties.

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The Bank originates construction loans to developers and commercial borrowers in and around its markets. The maximum loan to value limits for construction loans follow ~~FDIC~~Federal Deposit Insurance Corporation ("FDIC") supervisory limits, up to a maximum of 85 percent. The Bank commits to provide the permanent mortgage

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financing on most of its construction loans on income-producing property. Advances on construction loans are made in accordance with a schedule reflecting the cost of the improvements. Construction loans include land acquisition loans up to a maximum 50 percent loan to value on raw land. Construction loans may have greater credit risk due to the dependence on completion of construction and other real estate improvements, as well as the sale or rental of the improved property. The Bank generally mitigates these risks with presale or preleasing requirements and phasing of construction.

Commercial and Industrial ~~Loans.~~Loans ("C&I"). C&I loans are mostly managed through the Bank’s commercial middle market banking organization. The Bank offers secured commercial term loans with repayment terms which are normally limited to the expected useful life of the asset being financed, and generally not exceeding ten years. The Bank also offers revolving loans, lines of credit, letters of credit, time notes and ~~Small Business Administration~~SBA guaranteed loans. Business lines of credit have adjustable rates of interest and can be committed or are payable on demand, subject to annual review and renewal. Commercial and industrial loans are generally secured by a variety of collateral such as accounts receivable, inventory and equipment, and are generally supported by personal guarantees. Loan-to-value ratios depend on the collateral type and generally do not exceed 80 percent of orderly liquidation value. Some commercial loans may also be secured by liens on real estate. The Bank generally does not make unsecured commercial loans. Commercial loans are of higher risk and are made primarily on the basis of the borrower’s ability to make repayment from the cash flows of its business. Further, any collateral securing such loans may depreciate over time, may be difficult to monitor and appraise and may fluctuate in value. The Bank gives additional consideration to the borrower’s credit history and the guarantor’s capacity to help mitigate these risks. Additionally, the Bank uses loan structures including shorter terms, amortizations, and advance rate limitations to additionally mitigate credit risk. The Company considers these loans, together with its owner-occupied commercial real estate loans, as constituting the primary relationship based component of its commercial lending activities. The loans originated through the Company’s participation in the SBA’s Paycheck Protection Program (“PPP”) lending program in 2020 were classified as C&I loans.This program was an integral component of federal support programs in response to the emergence of the pandemic in the first half of 2020. These loans were viewed as zero credit risk due to the related SBA guarantee. Most of these loans were repaid via SBA forgiveness in 2021.The balance of these PPP loans was $30 million at year-end 2021, compared to $633 million at year-end 2020.

Asset Based Lending. The Asset Based Lending Group serves the commercial middle market in New England, as well as the Bank’s market in northeastern New ~~York. In 2017, this group expanded into~~York and in the Mid-Atlantic. The group expands the Bank’s business lending offerings to include revolving lines of credit and term loans secured by accounts receivable, inventory, and other assets to manufacturers, distributors and select service companies experiencing seasonal working capital needs, rapid sales growth, a turnaround, buyout or recapitalization with credit needs generally ranging from $2 to $25 million. Asset based lending involves monitoring loan collateral so that outstanding balances are always properly secured by business assets, which reduces the risks associated with these loans. ~~At year-end 2017, asset based loans outstanding totaled $306 million.~~

~~In 2016,~~Small Business Banking. This group is also referred to as Business Banking, and handles most business relationships which are smaller than the ~~Bank created the new Specialty Lending Group to oversee its equipment lending, SBA lending, and small~~middle market category. Additionally, some smaller business lending activities. The specialty equipment lending operation is conducted by Firestone Financial Corp. ("Firestone"), which was acquired in 2015. Firestone originates loans secured by business-essential equipmentneeds are handled through over 160 equipment distributors and manufacturers and directly via the end borrower in all 50 states. Key customer segments include the fitness, carnival, gaming, and entertainment industries. These loans function similarly to the Bank’s commercial and industrial portfolio. However, some credits have payment schedules tailored to the meet the needs of the seasonality of these borrowers’ businesses. These loans generally have higher interest rates than the Bank's other commercial loans, reflecting the niche expertise required in servicing these industries. Firestone’s loans outstanding totaled $227 million at year-end 2017.

~~In 2016,~~retail branch system. Berkshire ~~acquired~~Bank also owns 44 Business Capital, a dedicated SBA ~~7(A)~~7A program lending team based in the Philadelphia area. This team originates loans ~~primarily~~ in the Northeast, Mid-Atlantic ~~area.~~and nationally. 44 Business Capital also works with business banking and small business teams to provide SBA guaranteed loans to business Banking Customers in Berkshire’s footprint. This team sells the guaranteed portions of these loans with servicing retained and the Bank retains the unguaranteed portions of the loans ~~which are pari-passu with the SBA for~~in its C&I loan ~~repayment. Some of the SBA’s underwriting parameters are outside of the Bank’s normal commercial lending standards.~~portfolio. The Bank is a preferred SBA lender and closely manages the servicing portfolio pursuant to SBA requirements. This team is the Bank’s largest source of commercial lending fee revenue, and it is targeting to further expand these ~~operations to other markets, as well as increasing SBA product penetration to~~operations. Berkshire Bank also owns Firestone Financial Corp. ("Firestone"), which is located in Needham, MA. Firestone originates loans secured by business-essential equipment through over 160 equipment distributors and manufacturers and directly via the ~~market served by Firestone. Berkshire also originates SBA loans~~end borrower in ~~its regional markets. The SBA’s annual report of SBA originators for~~all 50 states. Key customer segments include the ~~year-ended September 30, 2017 ranked Berkshire 17~~^th ~~in the nation~~fitness, carnival, gaming, and entertainment industries.

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~~by number of loans and 32~~^nd ~~by dollar amount of loans. Berkshire has the top SBA ranking in several of its regional markets.~~

Residential Mortgages. Through its mortgage banking operations, the Bank offers fixed-rate and adjustable-rate residential mortgage loans to individuals with maturities of up to 30 years that are fully amortizing with monthly loan payments. The majority of loans are originated for sale with rate lock commitments which are recorded as

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derivative financial instruments. Mortgages are generally underwritten according to U.S. government sponsored enterprise guidelines designated as “A” or “A-” and referred to as “conforming loans”. The Bank also originates jumbo loans above conforming loan amounts which generally are consistent with secondary market guidelines for these loans and are often held in portfolio. The Bank does not offer subprime mortgage lending programs. The Bank buys and sells seasoned mortgages primarily with smaller financial institutions operating in its markets.The Bank is developing conduit relationships in its markets as an additional business channel for newly originated mortgages.

The majority of the Bank’s secondary marketing is to U.S. secondary market investors on a servicing-released basis. The Bank also sells directly to government sponsored enterprises with servicing retained. Mortgage sales generally involve customary representations and warranties and are nonrecourse in the event of borrower default. The Bank is also an approved originator of loans for sale to the Federal Housing Administration (“FHA”), U.S. Department of Veteran Affairs (“VA”), state housing agency programs, and other government sponsored mortgage programs.

The Bank does not offer interest-only or negative amortization mortgage loans. ~~At year-end 2017, the Bank’s mortgage portfolio repricing within five years totaled $494 million.~~ Adjustable rate mortgage loan interest rates may rise as interest rates rise, thereby increasing the potential for default. The Bank also originates construction loans which generally provide 15-month construction periods followed by a permanent mortgage loan, and follow the Bank’s normal mortgage underwriting guidelines.

Most of the Bank’s mortgages are originated by commissioned mortgage lenders. With the First Choice Bank acquisition in December 2016, the Company acquired First Choice Loan Services Inc. ("First Choice Loan Services"), which now operates its mortgage banking business as a subsidiary of Berkshire Bank. This operation has a team of more than 400 members originating mortgages in targeted markets in nine states, with headquarters in East Brunswick, N.J. With First Choice Loan Services, Berkshire is now one of the top 50 bank originators of mortgages in the U.S. First Choice Loan Services originates directly through its originators as well as online including a mortgage marketing partnership with Costco.

Berkshire’s mortgage banking operations are its largest source of non-interest income. The Company targets to earn a pre-tax margin of approximately 0.30% on its origination volume. The portfolio of mortgages held for sale is a high yielding short term asset. The Bank’s portfolio of mortgages held for investment is a significant source of interest income to the bank. Mortgage operations require significant interest rate risk management both for the interest rate lock derivative financial instruments and for the long term assets held in portfolio. Mortgage banking also requires flexible and scalable operations due to the volatility of mortgage demand over time. Investor management is integral to maintaining the secondary market support that is required for these operations. ~~The management of commissioned originations staff across national markets~~In 2021, the Bank entered into a third party relationship to service the residential mortgages and real estate secured consumer loans in ~~this highly regulated business line requires strong controls and compliance management.~~its portfolio.

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Consumer Loans. The Bank’s consumer loans are centrally underwritten and processed by its experienced consumer lending team based in Syracuse, New York. The Bank’s primary consumer lending activity isin recent years was indirect auto lending. In 2019, the ~~second half~~Company decided to end the origination of ~~2015, the Bank recruited new leadership to expand this activity from its Central New York base to other parts of Berkshire’s footprint. The Bank provides prime~~indirect auto ~~loans to finance new and used autos and is evaluating secondary marketing to further support this activity. At year-end 2017, outstanding auto and other loans totaled $718 million.~~ loans.The Bank’s other major consumer lending activity is prime home equity lending, following its conforming mortgage underwriting guidelines with more streamlined verifications and documentation. Most of these outstanding loans are prime based home equity lines with a maximum combined loan-to-value of 85 percent. Home equity line credit risks include the risk that higher interest rates will affect repayment and possible compression of collateral coverage on second lien home equity lines. ~~At year-end 2017, home equity~~In 2021, the Company expanded its consumer lending in its markets through a third party relationship with a financial technology company which originates unsecured consumer loans ~~totaled $410 million.~~through the internet using artificial intelligence technology in combination with the Bank’s underwriting criteria.

Maturity and Sensitivity of Loan Portfolio. The following table shows contractual final maturities of ~~selected loan categories~~loans at year-end ~~2017.~~2021. The contractual maturities do not reflect premiums, discounts, deferred costs, or prepayments.

Item 1 - Table 22A - Loan Contractual Maturity - Scheduled ~~Loan Amortizations~~loan amortizations are not included in the maturities presented.

Contractual Maturity One Year One to More Than
(In thousands) or Less Five Years Five Years Total
Construction real estate loans:

Commercial $ 59,909
$ 206,427
$ —
$ 266,336
Residential 2,717
124
2,569
5,410
Commercial and industrial loans 307,577
918,136
578,226
1,803,939
Total $ 370,203
$ 1,124,687
$ 580,795
$ 2,075,685


Contractual Maturity	One Year		One to		Five to		More Than
(In thousands)	or Less		Five Years		Fifteen Years		Fifteen Years		Total
Loans:
Construction	$	80,052	$	142,114	$	87,478	$	14,638	$	324,282
Commercial multifamily	39,899		177,740		293,666		4,512		515,817
Commercial real estate owner occupied	45,827		173,858		316,684		70,108		606,477
Commercial real estate non-owner occupied	280,160		1,049,631		748,396		78,742		2,156,929
Commercial and industrial	303,706		683,365		274,324		23,034		1,284,429

Residential real estate	3,430		33,530		233,909		1,218,379		1,489,248
Home equity	1,388		4,195		65,897		180,886		252,366
Consumer other	9,396		133,138		44,001		9,764		196,299
Total	$	763,858	$	2,397,571	$	2,064,355	$	1,600,063	$	6,825,847

~~For the $1.7 billion of loans above which mature in more than one year, $0.5 billion of these loans are fixed-rate and $1.2 billion are variable rate.~~

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Item 1 - Table 2B - Total loans due after one year as of December 31, 2021 - fixed and variable interest rates


(In thousands)	Fixed Interest Rate		Variable Interest Rate		Total
Loans:
Construction	$	28,215	$	216,015	$	244,230
Commercial multifamily	115,278		360,640		475,918
Commercial real estate owner occupied	199,055		361,595		560,650
Commercial real estate non-owner occupied	581,824		1,294,945		1,876,769
Commercial and industrial	356,189		624,534		980,723

Residential real estate	1,148,983		336,835		1,485,818
Home equity	2,045		248,933		250,978
Consumer other	180,932		5,971		186,903
Total	$	2,612,521	$	3,449,468	$	6,061,989

Loan Administration.Lending activities are governed by a loan policy approved by the Board’s Risk Management and Capital Committee. Internal staff perform and monitor post-closing loan documentation review, quality control, and commercial loan administration. The lending staff assigns a risk rating to all commercial loans, excluding point scored small business loans. Management primarily relies on internal risk management staff to review the risk ratings of the majority of commercial loan balances.

The Bank’s lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by the Risk Management and Capital Committee and Management, under the leadership of the Chief Risk Officer. The Bank’s loan underwriting is based on a review of certain factors including risk ratings, recourse, loan-to-value ratios, and material policy exceptions. The Risk Management and Capital Committee has established individual and combined loan limits and lending approval authorities. Management’s Executive Loan Committee is responsible for commercial loan approvals in accordance with these standards and procedures. Generally, pass rated secured commercial loans can be approved jointly up to $7 million by the ~~regional lending manager~~business line Managing Director and ~~regional credit officer.~~Credit Director. Loans up to ~~$15~~$10 million can be approved with the additional signature of the Chief Credit Officer. Loans in excess of this amount, and designated lower rated loans are approved by the Executive Loan Committee. ~~These limits were expanded in 2016.~~ The Bank tracks loan underwriting exceptions and exception reports are actively monitored by executive lending management.

The Bank’s lending activities are conducted by its salaried and commissioned loan personnel. Designated salaried branch staff originate conforming residential mortgages and receive bonuses based on overall performance. Additionally, the Bank employs commissioned residential mortgage originators. Commercial lenders receive salaries and are eligible for bonuses based on individual and overall performance. The Bank purchases whole loans and participations in loans from banks headquartered in its market and from outside of its market. These loans are underwritten according to the Bank’s underwriting criteria and procedures and are generally serviced by the originating lender under terms of the applicable agreement. The Bank routinely sells newly originated, fixed-rate residential mortgages in the secondary market. Customer rate locks are offered without charge and rate locked applications are generally committed for forward sale or hedged with derivative financial instruments to minimize interest rate risk pending delivery of the loans to the investors. The Bank also sells interest rate derivatives to larger commercial borrowers desiring to fix their interest rates, and includes these derivatives in its underwriting and administrative procedures.

The Bank also sells residential mortgages and commercial loan participations on a non-recourse basis. The Bank issues loan commitments to its prospective borrowers conditioned on the occurrence of certain events. Loan origination commitments are made in writing on specified terms and conditions and are generally honored for up to 60 days from approval; some commercial commitments are made for longer terms. The Company also monitors pipelines of loan applications and has processes for issuing letters of interest for commercial loans and pre-approvals for residential mortgages, all of which are generally conditional on completion of underwriting prior to the issuance of formal commitments.

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The loan policy sets certain limits on concentrations of credit and requires periodic reporting of concentrations to the Risk Management and Capital Committee. The Bank ~~also actively monitors~~has heightened monitoring of its 25 largest borrower relationships. Commercial real estate is generally managed within federal regulatory monitoring guidelines of 300% of risk based capital for non-owner occupied commercial real estate and 100% for construction loans. ~~At year-end 2017, non-owner occupied commercial real estate totaled 270% of Bank risk based capital and outstanding construction loans were 40% of Bank risk based capital.~~ The Bank has hold limits for ~~several~~numerous categories of commercial specialty lending including healthcare, hospitality, designated franchises, and leasing, as well as hold limits for designated commercial loan participations purchased. In most cases, these limits are below 100% of risk based capital for all ~~outstandings~~outstanding loans in each monitored category.

Problem Assets. The Bank prefers to work with borrowers to resolve problems rather than proceeding to foreclosure. For commercial loans, this may result in a period of forbearance or restructuring of the loan, which is normally done at current market terms and does not result in a “troubled” loan designation. For residential mortgage loans, the Bank generally follows FDIC guidelines to attempt a restructuring that will enable owner-occupants to remain in their home. However, if these processes fail to result in a performing loan, then the Bank generally will initiate foreclosure or other proceedings no later than the 90th day of a delinquency, as necessary, to minimize any potential loss. Management reports delinquent loans and non-performing assets to the Board quarterly. Loans are generally removed from accruing status when they reach 90 days delinquent, except for certain loans which are well secured and in the process of collection. Loan collections are managed by a combination of the related business

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units and the Bank’s special assets group, which focuses on larger, riskier collections and the recovery of purchased credit ~~impaired~~deteriorated loans.

Real estate obtained by the Bank as a result of loan collections, including foreclosures, is classified as real estate owned until sold. When property is acquired it is recorded at fair market value less estimated selling costs at the date of foreclosure, establishing a new cost basis. Holding costs and decreases in fair value after acquisition are expensed. Interest income that would have been recorded for 2017, if non-accruing loans had been current according to their original terms, amounted to $1.2 million. Included in the amount is $181 thousand related to troubled debt restructurings. The amount of interest income on those loans that was recognized in net income in 2017 was $0.7 million. Included in this amount is $362 thousand related to troubled debt restructurings. Interest income on accruing troubled debt restructurings totaled ~~$1.6~~$0.2 million for ~~2017.~~2021. The total carrying value of troubled debt restructurings was ~~$42.0~~$26.8 million at year-end.

The following table sets forth additional information on year-end problem assets and accruing troubled debt restructurings (“TDR”). Due to accounting standards for business combinations, non-accrual loans of acquired banks are recorded as accruing on the acquisition date. Therefore, measures related to accruing and non-accruing loans reflect these standards and may not be comparable to prior periods.

~~Item 1 - Table 3 - Problem Assets and Accruing TDR~~

(In thousands) 2017 2016 2015 2014 2013
Non-accruing loans:

Commercial real estate $ 7,267
$ 5,883
$ 4,882
$ 12,878
$ 13,739
Commercial and industrial loans 7,311
7,523
8,259
1,705
2,355
Residential mortgages 2,883
3,795
3,966
3,908
7,868
Consumer 5,438
5,039
3,768
3,214
3,493
Total non-performing loans 22,899
22,240
20,875
21,705
27,455
Real estate owned —
151
1,725
2,049
2,758
Repossessed assets 1,147
—
—
—
—
Total non-performing assets $ 24,046
$ 22,391
$ 22,600
$ 23,754
$ 30,213

Troubled debt restructurings (accruing) $ 36,172
$ 28,241
$ 12,497
$ 12,612
$ 8,344
Accruing loans 90+ days past due $ 16,480
$ 9,863
$ 5,229
$ 4,568
$ 9,223

Total non-performing loans/total loans 0.28 % 0.34 % 0.36 % 0.46 % 0.66 %
Total non-performing assets/total assets 0.21 % 0.24 % 0.29 % 0.37 % 0.53 %

Asset Classification and Delinquencies. The Bank performs an internal analysis of its commercial loan portfolio and assets to classify such loans and assets in a manner similar to that employed by federal banking regulators. There are four classifications for loans with higher than normal risk: Loss, Doubtful, Substandard, and Special Mention. Usually an asset classified as Loss is fully charged-off. Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values questionable, and there is a high possibility of loss. Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses, are designated Special Mention. Please see the additional discussion of non-accruing and potential problem loans in Item 7 and additional information in ~~Note 7 - Loan Loss Allowance of~~notes to the ~~Consolidated Financial Statements.~~ financial statements.Impaired loans acquired in business combinations are normally rated Substandard or lower and the fair value assigned to such loans at acquisition includes a component for the possibility of loss if deficiencies are not corrected.

~~Table of Contents~~

Allowance for ~~Loan Losses.~~Credit Losses on Loans. The Bank’s loan portfolio is regularly reviewed by management to evaluate the adequacy of the allowance for loan losses. ~~The~~Prior to 2020, the allowance ~~represents~~represented management’s estimate of inherent incurred losses that are probable and estimable as of the date of the financial statements. The allowance ~~includes~~included a specific component for impaired loans (a “specific loan loss reserve”) and a general component for portfolios of all outstanding loans (a “general loan loss reserve”). At the time of acquisition, no allowance for loan losses iswas assigned to loans acquired in business combinations. These loans ~~are carried~~were initially recorded at fair value, including the impact of expected losses, as of the acquisition date. An allowance on such loans iswas established subsequent to the acquisition date through the provision for loan losses based on an analysis of factors including environmental factors.

On January 1, 2020, the Company adopted the new loan loss allowance standard based on Current Expected Credit losses (“CECL”). Under this standard, management makes estimates of future economic conditions over the life of the loan portfolio and other future conditions and arrives at a reasonable estimate of expected loan losses. The basis

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of the allowance changed from an incurred model to an expected model based on this standard. As a result, the amount of the loan loss allowance and the loan loss provision beginning in 2020 is not comparable to prior years. Also, since different banks may use different estimates and arrive at different expectations, comparisons between banks are more difficult. Further, since the accounting is based on future projections our estimates may change significantly from period to period, the amounts of the allowance and provision may be more volatile than under the previous model. Further information about the allowance is discussed further in Note 1 - Summary of Significant Accounting Policies of the Consolidated Financial Statements.

Management believes that it uses the best information available to establish the ~~allowance for loan losses.~~allowance. However, future adjustments to the allowance for ~~loan~~credit losses on loans may be necessary, and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making its determinations. ~~Because the estimation of inherent losses cannot be made with certainty, there~~There can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loan or loan portfolio category deteriorate as a result of the factors discussed above. Additionally, the regulatory agencies, as an integral part of their examination process, also periodically review the Bank’s allowance for loan losses. Suchdeteriorate. Regulatory agencies may require the Bank to make additional provisions for ~~estimated~~credit losses based upon judgments different from those of management. Any material increase in the allowance ~~for loan losses~~ may adversely affect the Bank’s financial condition and results of operations.

~~The following table presents an analysis of the allowance for loan losses for the five years indicated:~~

Item 1 - Table 43 - ~~Allowance~~Credit Quality Ratios


	2021		2020		2019



























Ratios:
Allowance for credit losses/total loans	1.55	%	1.58	%	0.67	%
Non-accrual loans/total loans	0.52		0.80		0.42
Allowance for credit losses/non-accruing loans	300.33		196.01		160.38
Net charge-offs/average loans	0.29		0.41		0.35

Item 1 - Table 3.a - Net charge-offs to average loans for ~~Loan Loss~~each loan category


	2021		2020		2019
Net charge-offs to average loans:
Construction	—	%	0.01	%	—	%
Commercial multifamily	—		—		0.01
Commercial real estate owner occupied	0.02		0.08		0.05
Commercial real estate non-owner occupied	0.18		0.12		—
Commercial and industrial	0.09		0.16		0.24
Residential real estate	—		0.01		0.01
Home equity	—		—		0.01
Consumer other	0.01		0.02		0.03

(In thousands) 2017 2016 2015 2014 2013
Balance at beginning of year $ 43,998
$ 39,308
$ 35,662
$ 33,323
$ 33,208
Charged-off loans:

Commercial real estate 4,646
3,104
7,546
5,684
5,026
Commercial and industrial loans 4,217
5,715
3,110
3,010
2,917
Residential mortgages 1,603
2,865
1,857
2,596
2,426
Consumer 4,118
2,342
2,175
2,563
2,467
Total charged-off loans 14,584
14,026
14,688
13,853
12,836
Recoveries on charged-off loans:

Commercial real estate 235
303
582
270
549
Commercial and industrial loans 424
389
458
228
211
Residential mortgages 313
304
205
365
399
Consumer 423
358
363
361
414
Total recoveries 1,395
1,354
1,608
1,224
1,573
Net loans charged-off 13,189
12,672
13,080
12,629
11,263
Provision for loan losses 21,025
17,362
16,726
14,968
11,378
Balance at end of year $ 51,834
$ 43,998
$ 39,308
$ 35,662
$ 33,323

Ratios:

Net charge-offs/average loans 0.19 % 0.21 % 0.25 % 0.29 % 0.29 %
Recoveries/charged-off loans 9.57
9.65
10.95
8.84
12.25
Net loans charged-off/allowance for loan losses 25.44
28.80
33.28
35.41
33.80
Allowance for loan losses/total loans 0.62
0.67
0.69
0.76
0.80
Allowance for loan losses/non-accruing loans 226.36
197.83
188.30
164.30
121.37

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The following tables present year-end data for the approximate allocation of the allowance for loan losses by loan categories at the dates indicated (including an apportionment of any unallocated amount). The first table shows for each category the amount of the allowance allocated to that category as a percentage of the outstanding loans in that category. The second table shows the allocated allowance together with the percentage of loans in each category to total loans. Management believes that the allowance can be allocated by category only on an approximate basis. The allocation of the allowance to each category is not indicative of future losses and does not restrict the use of any of the allowance to absorb losses in any category. Due to the impact of accounting standards for acquired loans, data in the accompanying tables may not be comparable between accounting periods.

Item 1 - Table 4A - Allocation of Allowance for Credit Losses by Category (as of year-end)


	2021				2020				2019
(Dollars in thousands)	Amount Allocated		Percent Allocated to Total Loans in Each Category		Amount Allocated		Percent Allocated to Total Loans in Each Category		Amount Allocated		Percent Allocated to Total Loans in Each Category
Construction	$	3,206	1.0	%	$	5,111	1.1	%	$	2,713	0.6	%
Commercial multifamily	6,120		1.2		5,916		1.2		4,413		0.7
Commercial real estate owner occupied	12,752		2.1		12,380		2.2		4,880		0.7
Commercial real estate non-owner occupied	32,106		1.5		35,850		1.7		16,344		0.8
Commercial and industrial	22,584		1.8		25,013		1.3		20,099		1.1
Residential real estate	22,734		1.5		28,491		1.5		9,970		0.4
Home equity	4,006		1.6		6,482		2.2		1,470		0.4
Consumer other	2,586		1.3		8,059		2.7		3,686		0.8
Total (1)	$	106,094	1.6	%	$	127,302	1.6	%	$	63,575	0.7	%

(1) Beginning January 1, 2020, the allowance calculation is based on current expected loss methodology. Prior to January 1, 2020, the allowance calculation was based on the incurred loss model.

Item 1 - Table 5A4B - Allocation of Allowance for ~~Loan Loss by Category~~Credit Losses (as of year-end)


	2021				2020				2019
(Dollars in thousands)	Amount Allocated		Percent of Loans in Each Category to Total Loans		Amount Allocated		Percent of Loans in Each Category to Total Loans		Amount Allocated		Percent of Loans in Each Category to Total Loans
Construction	$	3,206	4.8	%	$	5,111	5.6	%	$	2,713	4.7	%
Commercial multifamily	6,120		7.5		5,916		6.0		4,413		6.7
Commercial real estate owner occupied	12,752		8.9		12,380		6.8		4,880		7.1
Commercial real estate non-owner occupied	32,106		31.6		35,850		26.2		16,344		23.0
Commercial and industrial	22,584		18.8		25,013		24.0		20,099		19.4
Residential real estate	22,734		21.8		28,491		23.9		9,970		30.0
Home equity	4,006		3.7		6,482		3.7		1,470		4.0
Consumer other	2,586		2.9		8,059		3.8		3,686		5.1
Total (1)	$	106,094	100.0	%	$	127,302	100.0	%	$	63,575	100.0	%

(1) Beginning January 1, 2020, the allowance calculation is based on current expected loss methodology. Prior to January 1, 2020, the allowance calculation was based on the incurred loss model.

2017 2016 2015 2014 2013
(Dollars in thousands) Amount
Allocated Percent Allocated to Total Loans in Each Category Amount
Allocated Percent Allocated to Total Loans in Each Category Amount
Allocated Percent Allocated to Total Loans in Each Category Amount
Allocated Percent Allocated to Total Loans in Each Category Amount
Allocated Percent Allocated to Total Loans in Each Category
Commercial real estate $ 20,699
0.63 % $ 18,801
0.72 % $ 16,494
0.80 % $ 15,539
0.96 % $ 16,112
1.13 %
Commercial and industrial loans 14,975
0.83 % 10,611
1.00 % 8,715
0.83 % 6,322
0.79 % 5,770
0.85 %
Residential mortgages 10,018
0.48 % 8,571
0.45 % 8,589
0.47 % 7,480
0.50 % 7,562
0.55 %
Consumer 6,142
0.54 % 6,015
0.61 % 5,510
0.69 % 6,321
0.82 % 3,879
0.56 %

Total $ 51,834
0.62 % $ 43,998
0.67 % $ 39,308
0.69 % $ 35,662
0.76 % $ 33,323
0.80 %

~~Item 1 - Table 5B - Allocation of Allowance for Loan Loss (as of year-end)~~

2017 2016 2015 2014 2013
(Dollars in thousands) Amount
Allocated Percent of
Loans in
Each
Category to Total
Loans Amount
Allocated Percent of
Loans in
Each
Category to Total
Loans Amount
Allocated Percent of
Loans in
Each
Category to Total
Loans Amount
Allocated Percent of
Loans in
Each
Category to Total
Loans Amount
Allocated Percent of
Loans in
Each
Category to Total
Loans
Commercial real estate $ 20,699
39.33 % $ 18,801
39.95 % $ 16,494
41.96 % $ 15,539
34.43 % $ 16,112
41.26 %
Commercial and industrial loans 14,975
21.74 % 10,611
16.22 % 8,715
22.10 % 6,322
17.19 % 5,770
9.08 %
Residential mortgages 10,018
25.34 % 8,571
28.90 % 8,589
21.91 % 7,480
31.97 % 7,562
33.11 %
Consumer 6,142
13.59 % 6,015
14.93 % 5,510
14.03 % 6,321
16.41 % 3,879
16.55 %

Total $ 51,834
100.00 % $ 43,998
100.00 % $ 39,308
100.00 % $ 35,662
100.00 % $ 33,323
100.00 %

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INVESTMENT SECURITIES ACTIVITIES

The securities portfolio provides cash flow to protect the safety of customer deposits and as a potential source of liquidity. The portfolio is also used to manage interest rate risk and to earn a reasonable return on investment. Decisions are made in accordance with the Company’s investment policy and include consideration of risk, return, duration, and portfolio concentrations. Day-to-day oversight of the portfolio rests with the Chief Financial Officer and the Treasurer. The Enterprise Risk Management/Asset-Liability Committee meets multiple times each quarter and reviews investment strategies. The Risk Management and Capital Committee of the Board of Directors provides general oversight of the investment function.

Historically, the Company has maintained short-term investment balances as a component of cash and cash equivalents which are a component of short-term liquidity management.Due to the pandemic, with a surge in demand deposits and a reduction in loan balances, the balance of short-term investments has increased due to the comparatively low yields and spreads on longer duration investment securities.Most short-term investments have been maintained at the Federal Reserve Bank of Boston.

The Company has historically maintained a high-quality portfolio of managed duration mortgage-backed securities, together with a portfolio of municipal bonds including national and local issuers and local economic development bonds issued to non-profit organizations. Nearly all of the mortgage-backed securities are issued by Ginnie Mae, Fannie Mae, or Freddie Mac, consisting principally of collateralized mortgage obligations (generally consisting of planned amortization class ~~bonds)~~bonds and pass-through securities). ~~Other than securities issued by the above agencies, no other issuer concentrations exceeding 10% of stockholders’ equity existed at year-end 2017.~~ The municipal portfolio provides tax-advantaged yield, and the local economic development bonds were originated by the Company to area borrowers. The Company invests in investment grade corporate bonds and Agency commercial mortgage-backed securities. Purchases of non-investment grade fixed-income securities have consisted primarily of capital instruments issued by local and regional financial ~~institutions and a mutual fund investing in non-investment grade bonds of national corporate issuers and in community reinvestment projects.~~institutions. The Company also invests in equity securities of local financial institutions, including those that might be future potential partners, as well as dividend yielding equity securities of national corporate exchange traded issuers. Historically, the Company acquired equity securities in the Bank, which was allowed under its savings bank charter. As a result of the Bank's charter change in 2014, equity security purchases after that date have been conducted at the holding company level.funds financing community reinvestment projects. The Bank owns restricted equity in the Federal Home Loan Bank of Boston (“FHLBB”) based on its operating relationship with the FHLBB. The Company has various hold limits limiting credit and instrument exposures.

The Company owns an interest rate swap against a tax advantaged economic development bond issued to a local not-for-profit organization, and as a result this security is carried as a trading account security. The Company generally designates ~~investment~~debt securities as available for sale, but sometimes designates longer-duration municipal and other securities as held to maturity based on its intent. This also allows the Company to more effectively manage the potential impact of longer-duration, fixed-rate securities on stockholders' equity in the event of rising interest rates. Based on a new accounting pronouncement effective in 2018, unrealized gains and losses on equity securities available for sale will be recorded to current period income, rather than to equity. The Company is assessing its portfolio strategies in the context of this accounting change.

~~The following tables present the year-end amortized cost and fair value of the Company’s securities, by type of security, for the three years indicated.~~

~~Item 1 - Table 6A - Amortized Cost and Fair Value of Securities~~

2017 2016 2015
(In thousands) Amortized
Cost Fair
Value Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Securities available for sale

Municipal bonds and obligations $ 113,427
$ 118,233
$ 117,910
$ 119,816
$ 99,922
$ 104,561
Mortgage-backed securities 1,142,656
1,130,403
948,661
945,129
960,907
959,865
Other bonds and obligations 131,167
132,278
78,877
79,051
57,742
56,064
Marketable equity securities 36,483
45,185
47,858
65,541
30,522
33,967
Total securities available for sale $ 1,423,733
$ 1,426,099
$ 1,193,306
$ 1,209,537
$ 1,149,093
$ 1,154,457

Securities held to maturity

Municipal bonds and obligations $ 270,310
$ 278,895
$ 203,463
$ 204,986
$ 94,642
$ 97,967
Mortgage-backed securities 92,115
92,242
95,302
95,495
68
71
Tax advantaged economic development bonds 34,357
33,818
35,278
36,874
36,613
38,537
Other bonds and obligations 321
321
325
325
329
329
Total securities held to maturity $ 397,103
$ 405,276
$ 334,368
$ 337,680
$ 131,652
$ 136,904

Trading account security $ 10,755
$ 12,277
$ 11,387
$ 13,229
$ 11,984
$ 14,189
Restricted equity securities $ 63,085
$ 63,085
$ 71,112
$ 71,112
$ 71,018
$ 71,018

~~Item 1 - Table 6B - Amortized Cost and Fair Value of Securities~~

2017 2016 2015
(In thousands) Amortized
Cost Fair
Value Amortized
Cost Fair
Value Amortized
Cost Fair
Value
U.S. Treasuries, other Government agencies and corporations $ 1,271,254
$ 1,267,830
$ 1,091,821
$ 1,106,165
$ 991,497
$ 993,903
Municipal bonds and obligations 428,849
443,223
368,038
374,905
243,161
255,254
Other bonds and obligations 194,573
195,684
150,314
150,488
129,089
127,411

Total Securities $ 1,894,676
$ 1,906,737
$ 1,610,173
$ 1,631,558
$ 1,363,747
$ 1,376,568

~~The schedule includes available-for-sale and held-to-maturity securities, as well as the trading security and restricted equity securities.~~

~~Table of Contents~~

The following table summarizes year-end ~~2017~~2021 amortized cost, weighted average yields, and contractual maturities of debt securities. Yields are shown on a fully taxable equivalent ~~basis.~~basis and are based on amortized cost. A significant portion of the mortgage-based securities are planned amortization class bonds. Their expected durations are 3-5 years at current interest rates, but the contractual maturities shown reflect the underlying maturities of the collateral mortgages. Additionally, the mortgage-based securities maturities shown below are based on final maturities and do not include scheduled amortization. Yields include amortization and accretion of premiums and discounts. There were no material changes in the tax-exempt portfolio.

Item 1 - Table 75 - Weighted Average Yield


	One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
(In millions)	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield
Municipal bonds and obligations	$	2.1	3.0	%	$	5.5	5.0	%	$	36.5	5.0	%	$	309.2	4.0	%	$	353.3	4.0	%
Mortgage-backed securities	0.1		2.0	%	31.8		2.0	%	255.4		2.0	%	1,752.8		1.0	%	2,040.1		2.0	%
Other bonds and obligations	61.0		—	%	1.7		2.0	%	40.1		4.0	%	22.3		3.0	%	125.1		2.0	%
Total	$	63.2	0.3	%	$	39.0	2.7	%	$	332.0	2.4	%	$	2,084.3	1.9	%	$	2,518.5	1.9	%

One Year or Less More than One
Year to Five Years More than Five Years
to Ten Years More than Ten Years Total
(In millions) Amortized
Cost Weighted
Average
Yield Amortized
Cost Weighted
Average
Yield Amortized
Cost Weighted
Average
Yield Amortized
Cost Weighted
Average
Yield Amortized
Cost Weighted
Average
Yield
Municipal bonds and obligations $ 1.6
3.6 % $ 28.7
3.8 % $ 26.4
4.8 % $ 327.0
5.0 % $ 383.7
4.9 %
Mortgage-backed securities 0.1
3.0 % 4.1
2.4 % 45.8
2.3 % 1,184.6
2.5 % 1,234.6
2.5 %
Other bonds and obligations 0.3
4.7 % 29.8
5.0 % 57.6
5.4 % 78.4
3.5 % 166.1
4.4 %
Total $ 2.0
3.7 % $ 62.6
4.3 % $ 129.8
4.2 % $ 1,590.0
3.1 % $ 1,784.4
3.2 %

DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS

Deposits are the major source of funds for the Bank’s lending and investment activities. Deposit accounts are the primary product and service interaction with the Bank’s customers. The Bank serves personal, commercial, non-profit, and municipal deposit customers. Most of the Bank’s deposits are generated from the areas surrounding its branch offices. The Bank offers a wide variety of deposit accounts with a range of interest rates and terms. The Bank also periodically offers promotional interest rates and terms for limited periods of time. The Bank’s deposit accounts consist of demand deposits (non-interest-bearing checking), NOW (interest-bearing checking), regular savings, money market savings, and time certificates of deposit. The Bank emphasizes its transaction deposits --– checking and NOW accounts --– for personal accounts and checking accounts promoted to businesses. These accounts have the lowest marginal cost to the Bank and are also often a core account for a customer relationship. The Bank offers a courtesy overdraft program to improve customer service, and also provides debit cards and other electronic fee producing payment services to transaction account customers. The Bank offers targeted online and mobile deposit account opening capabilities for personal accounts. The Bank promotes remote deposit capture devices so that commercial accounts can make deposits from their place of business. Additionally, the Bank offers a variety of retirement deposit accounts to personal and business customers. Deposit related fees are a significant source of fee income to the Bank, including overdraft and interchange fees related to debit card usage. Deposit service fee income also includes other miscellaneous transactions and convenience services sold to customers through the branch system as part of an overall service relationship. The Bank offers compensating balance arrangements for larger business customers as an alternative to fees charged for checking account services. Berkshire’s Business Connection is a personal financial services benefit package designed for the employees of its business customers. In addition to providing service through its branches, Berkshire provides services to deposit customers through its private bankers, MyBankers, commercial/small business relationship managers, and call center representatives. Commercial cash management services are an important commercial service offered to commercial and governmental depositors and a fee income source to the bank. ~~With the Commerce acquisition, the~~The Bank ~~acquired~~also operates a commercial payment processing business that serves regional and national payroll service bureau customers. Online banking and mobile banking functionality is increasingly important as a component of deposit account access and service delivery. The Bank is also gradually deploying its MyTeller video tellers to complement and extend its service capabilities in its branches.The Bank has partnered with a third party fintech company to provide enhanced online deposit account opening services. The Company also is monitoring the development of payment services which are growing in their importance in the personal and commercial deposit markets. Near year-end, the Company recruited experienced senior officers to enhance its offerings and market development for government banking and international services, which are expected to support further development of commercial deposit sources.

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institutional accounts. These balances are viewed as part of overall relationship balances with regional customers. Brokered deposits are sourced through selected Board approved brokers; these deposits are viewed as potentially more volatile than other deposits and are managed as a component of the Bank's liquidity policies.

The following table presents information concerning average balances and weighted average interest rates on the Bank’s interest-bearing deposit accounts for the years indicated.

Item 1 - Table 86 - Average Balance and Weighted Average Rates for Deposits


	2021						2020						2019
(In millions)	Average Balance		Percent of Total Average Deposits		Weighted Average Rate		Average Balance		Percent of Total Average Deposits		Weighted Average Rate		Average Balance		Percent of Total Average Deposits		Weighted Average Rate

Demand	$	3,008.5	30	%	—	%	$	2,324.6	23	%	—	%	$	1,745.2	18	%	—	%
NOW and other	976.4		10		0.1		1,216.6		12		0.3		1,053.9		11		0.6
Money market	3,293.5		32		0.2		2,713.6		26		0.6		2,542.6		26		1.2
Savings	1,111.6		11		0.1		914.1		9		0.1		798.2		8		0.2
Time	1,678.9		17		0.9		3,102.9		30		1.7		3,754.2		37		2.0
Total	$	10,068.9	100	%	0.3	%	$	10,271.8	100	%	0.7	%	$	9,894.1	100	%	1.2	%

2017 2016 2015
(In millions) Average
Balance Percent
of Total
Average
Deposits Weighted
Average
Rate Average
Balance Percent
of Total
Average
Deposits Weighted
Average
Rate Average
Balance Percent
of Total
Average
Deposits Weighted
Average
Rate
Demand $ 1,296.4
18 % — % $ 1,081.0
19 % — % $ 972.6
19 % — %
NOW 591.0
8
0.3
487.8
8
0.1
462.9
9
0.2
Money market 1,935.8
27
0.6
1,470.3
26
0.5
1,444.1
28
0.4
Savings 680.1
10
0.1
610.8
11
0.1
582.4
11
0.2
Time 2,581.1
37
1.2
2,094.8
36
1.1
1,684.8
33
0.9
Total $ 7,084.4
100 % 0.6 % $ 5,744.7
100 % 0.5 % $ 5,146.8
100 % 0.5 %

Estimated uninsured deposits were $3.7 billion and $4.1 billion at December 31, 2021 and 2020, respectively. At year-end ~~2017,~~2021, time deposits in excess of the ~~Bank had~~FDIC insurance limit and estimated time ~~deposit accounts in amounts of $100 thousand or more maturing~~deposits that are otherwise uninsured by maturity were as follows:

Item 1 - Table 97 - Maturity of Deposits ~~> $100,000~~>$250,000


Maturity Period	Amount		Weighted Average Rate		Maturity Period	Time Deposits that Meet or Exceed the FDIC Insurance Limit		Estimated Aggregate Time Deposits that Meet or Exceed the FDIC Insurance Limit and Otherwise Uninsured Time Deposits
(In thousands)					(In thousands)
Three months or less	$	656,814	1.10	%	Three months or less	$	114,373	$	180,053
Over 3 months through 6 months	350,824		1.31		Over 3 months through 6 months	102,789		153,912
Over 6 months through 12 months	395,429		1.39		Over 6 months through 12 months	77,235		123,310
Over 12 months	753,353		1.72		Over 12 months	97,390		177,493
Total	$	2,156,420	1.40	%	Total	$	391,787	$	634,768

The Bank’s deposits are insured by the FDIC. The Bank utilizes brokered time deposits to broaden its funding base, augment its interest rate risk management vehicles, and to support loan growth. The Bank also offers brokered reciprocal money market arrangements to provide additional deposit protection to certain large commercial and institutional accounts. These balances are viewed as part of overall relationship balances with regional customers. Brokered deposits are sourced through selected Board approved brokers; these deposits are viewed as potentially more volatile than other deposits and are managed as a component of the Bank's liquidity policies.

The Company also uses borrowings from the FHLBB as an additional source of funding, particularly for daily cash management and for funding longer duration assets. FHLBB advances also provide more pricing and option alternatives for particular asset/liability needs. The FHLBB functions as a central reserve bank providing credit for member institutions. As an FHLBB member, the Company is required to own capital stock of the organization. Borrowings from this institution are secured by a blanket lien on most of the Bank’s mortgage loans and mortgage-related securities, as well as certain other assets. Advances are made under several different credit programs with different lending standards, interest rates, and range of maturities. The Bank also has access to borrowings from the Federal Reserve Bank of Boston.

The Company ~~has~~had a $15 million trust preferred obligation and a $7 million trust preferred obligation outstanding, as well as $74 million in senior subordinated ~~notes.~~notes at year-end 2021. The Company’s common stock is listed on the New York Stock ~~Exchange.~~Exchange under the ticker “BHLB”. Subject to certain limitations, the Company can also choose

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to issue common stock, preferred stock, subordinated debt, or senior debt in public stock offerings or private placements. ~~The~~In 2020, the Company ~~maintains a~~renewed its universal securities shelf registration with the SEC to facilitate potential future ~~potential~~ capital issuances. The Company has maintained a shelf registration as part of its routine capital management for many years.

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DERIVATIVE FINANCIAL INSTRUMENTS

The Company offers interest rate swaps to commercial loan customers who wish to fix the interest rates on their loans, and the Company backs these swaps with offsetting swaps with national bank counterparties. With other lending institutions, the Company engages in risk participation agreements. These arrangements are structured similarly to its swaps with commercial borrowers, but a different bank is the lead underwriter. 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. These swaps are designated as economic hedges. ~~Based on changes in federal regulation, interest~~Interest rate swaps that meet certain criteria to be viewed as conforming are required to be cleared through ~~exchanges beginning when the $10 billion threshold is crossed.~~exchanges. The Bank has designated a national financial institution as its clearing agent.

The Company’s mortgage banking activities result in derivatives. Commitments to lend are provided on applications for residential mortgages intended for resale and are accounted for as non-hedging derivatives. The Company arranges offsetting forward sales commitments for most of these rate-locks with national bank counterparties, which are designated as economic hedges. Commitments on applications intended to be held for investment are not accounted for as derivative financial instruments. The Company has a policy for managing its derivative financial instruments, and the policy and program activity are overseen by the Risk Management and Capital Committee. Derivative financial instruments with counterparties which are not customers are limited to a select number of national financial institutions. Collateral may be required based on financial condition tests. The Company works with third-party firms which assist in marketing derivative transactions, executing transactions, and providing information for bookkeeping and accounting purposes.

The Company sometimes uses interest rate swap instruments for its own account to fix the interest rate on some of its borrowings, all of which have been designated as cash flow hedges. The Company ~~terminated its outstanding cash flow hedges in the first quarter of 2017. The Company evaluates these hedges as part of its overall interest rate risk management. The Company~~ also ~~expects to begin~~has begun offering forward foreign exchange derivatives to its commercial markets as part of its expanded international banking services. The Company expects to back these forwards with offsetting forwards with national bank counterparties. This activity would be targeted to support routine commercial needs of customers engaged in international trading activities and would only be offered for bank approved currencies and durations.

LIBOR BASED INSTRUMENTS

The Company’s floating-rate funding, certain hedging transactions and certain of the Company’s products, such as floating-rate loans and mortgages, determine the applicable interest rate or payment amount by reference to a benchmark rate using the London Interbank Offered Rate (“LIBOR”). Pursuant to bank regulations, the use of LIBOR as an index for new contracts was prohibited beginning in 2022. The use of LIBOR as an index on existing “Legacy” contracts will be discontinued beginning in 2023. There is further discussion of the LIBOR transition in Item 1A and Item 7 of this report.

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WEALTH MANAGEMENT SERVICES

The Company’s Wealth Management Group provides consultative investment management, trust administration, and financial planning to individuals, businesses, and institutions, with an emphasis on personal investment management. The Wealth Management Group has built a track record over more than a decade with its dedicated in-house investment management team. The Bank also provides a full line of investment products, financial planning, and brokerage services through BerkshireBanc Investment Services utilizing Commonwealth Financial Network as the broker/dealer. The Group’s principal operations are in Western New England and it is expanding services in the Company’s other regions. In 2016, the Bank purchased the business assets and operations of Ronald N. Lazzaro, P.C., a provider of financial advisory services in Rutland, Vermont. At year-end 2017, assets under management totaled $1.5 billion, including $1.0 billion in the Bank’s traditional wealth/trust platform and the remainder is managed through its investment services and financial advisory teams. The Bank is integrating with its growing private banking and MyBanker teams to further develop wealth management account generation.

~~INSURANCE~~

~~As an independent insurance agent,~~ The Wealth Management Group reported $1.7 billion in total assets under management at year-end 2021. The Company expanded this team during the Berkshire Insurance Group represents a carefully selected group of financially sound, reputable insurance companies offering attractive coverage at competitive prices. The Insurance Group offers a full line of personalyear and commercial property and casualty insurance. It also offers employee benefits insurance and a full line of personal life, health, and financial services insurance products. Berkshire Insurance Group operates a focused cross-sell program of insurance and banking products through all offices and branchesintroduced Socially Responsible Investment portfolios as another element of the ~~Bank with some~~Company’s overall vision of being a leading socially responsible company.

HUMAN CAPITAL MANAGEMENT

Berkshire’s people are the ~~Group’s offices located within the Bank’s branches. The Group’s principal operations are~~core of its ability to deliver on its Berkshire’s Exciting Strategic Transformation (BEST) plan and vision of being a high performing, leading socially responsible community bank in ~~Western~~ New England and beyond.The Company’s approach to human capital management is grounded in its Be FIRST values and focuses on:

•Strong oversight and risk management practices

•Recruitment

•Compensation & Benefits

•Retention, Training, Development & Engagement

•Health & Wellness

Oversight

The Board of Directors has ultimate responsibility for the strategy of the Company. The Compensation Committee of the Board of Directors oversees executive compensation matters and the Corporate Responsibility & Culture committee oversees company culture, diversity, and employee engagement. The Company proactively identifies potential human capital related risks, such as the labor market shortage, rising labor costs, and employee retention and designs strategies to mitigate those risks. Strong human capital management is viewed as integral to the Company's strategic transformation.

Recruitment

Berkshire operates in a highly competitive labor market with strong competition for top talent. To help power Berkshire’s transformation, it relies on and continues to recruit employees with the right mix of skills, expertise and experiences. The Company leverages several strategies to support its talent pipeline and talent acquisition activities including internship placements, affinity group relationships, and the use of experienced recruiters for key management and specialized positions. Berkshire continues to pursue a hybrid work model to expand its access to top talent and provide its employees with workplace flexibility. These strategies have proved effective in meeting the demand for talent demonstrated by the Company’s strong track record attracting new talent across retail, commercial, wealth management, business banking and operational areas. In addition, as market disruptions from mergers remain, Berkshire will continue to leverage its differentiated brand and unique market positioning to hire community-focused bankers from its competitors.

Compensation & Benefits

While the labor market shortage and other factors can contribute to increased labor costs, Berkshire continually evaluates its strategies and looks at best practices to provide competitive pay and benefits packages that reward performance and retain top talent at all levels of the Company. The Company offers comprehensive medical coverage, paid vacation and personal time, along with other benefits, all of which are available to married same-sex or different-sex couples as well as domestic partners. In addition to its compensation and health benefits, Berkshire offers volunteer-time off, an employee assistance program, regular performance reviews and the You FIRST Fund to help employees impacted by personal financial hardships.

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Retention, Training, Development & Engagement

Strong employee retention will help reduce expense, create efficiencies and contribute to the success of BEST. In addition to compensation and benefits packages, Berkshire employs a collection of strategies to strengthen employee retention. The Company offers a menu of development and training programs consistent with one’s job responsibilities and professional goals including a mentoring program to pair high potential junior employees with senior staff. Berkshire continues to reskill and upskill employees from across the Company to take on new responsibilities and roles. For employees looking to expand their professional experience in the classroom, the Company offers an education assistance program. In 2021, Berkshire further enhanced its commitment to creating a strong workplace culture by rolling out a comprehensive employee engagement survey to identify strengthens and opportunity areas within the organization. Action plans were developed in areas that did not meet the Company’s high expectations. It expects to continue to enhance its efforts through intentional actions including offering a new employee rewards and recognition program.

Health & Wellness

Like all businesses, Berkshire has been impacted by the ongoing COVID-19 pandemic and continues to proactively manage impacts to protect the health and safety of its employees, customers and communities as well as retain and attract top talent.During the height of the pandemic, the Company provided protective equipment to front-line employees, including masks and gloves, and offered all additional paid sick time, paid vaccine time, paid quarantine/isolation leave, job protected personal leave, flexible work schedules for remote employees, premium pay for onsite employees and maintained full pay for employees with reduced schedules, as a result of the pandemic. The Company continues to maintain a largely hybrid working environment with the majority of non-branch staff working remotely at least part-time.

Future of the Workplace

Berkshire continues to evolve and enhance its human capital management strategies to help drive organizational growth in support of BEST while combating risks, such as the labor market shortage and rising labor costs. The Company intends to continue to evolve its workplace model into a hybrid environment over the long-term. It also plans to pursue its DigiTouch™ service delivery model, a powerful combination of personal service driven by bankers fused with the convenience of user-centric technology that combined, delivers a superior customer experience. While technology will play a bigger role in the future of Berkshire helping to improve processes and drive efficiencies, people will always be at the core of its ability to deliver value to its customers and communities. The Company remains confident that the Berkshire brand, value proposition and socially-responsible vision will continue to be a differentiator in the market and help overcome labor market disruptions.


Human Capital*	◦Total Full Time Equivalent	1319
	◦Turnover Rate	31%
	◦Retention Rate	64%

*All metrics reported are as of or for the year-ended December 31, 2021.

Diversity, Equity & Inclusion

Creating a diverse, equitable, and inclusive workplace is ~~expanding~~a critical component to the success of Berkshire’s Exciting Strategic Transformation (BEST) and its ~~services~~BEST Community Comeback. At the core of Berkshire’s strategy is a goal to ensure that its workforce reflects the communities in which it operates, that its employees feel that they are valued and can reach their full potential and that it leverages its core business to improve the access and affordability of financial solutions to support economic growth of under-represented populations and communities.

The Company instituted a strong foundation of governance practices to ensure that diversity, equity and inclusion is embedded into Berkshire’s business activities. This includes the Corporate Responsibility & Culture Committee of the Board of Directors which has ultimate oversight responsibility. Berkshire’s Diversity, Equity & Inclusion Committee, which reports into the Board committee, provides additional management level oversight to the Company’s programming and performance. To further strengthen those efforts in 2021, Berkshire named a Senior Vice President/Chief Diversity Officer.

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The Company continues to work to improve representation within its workplace leveraging a combination of strategies. Berkshire identifies opportunities in targeted markets and business lines, develops deeper partnerships with non-profit organizations and affinity groups and uses external recruitment professionals to ensure it receives candidate pools that reflect the rural and urban communities in which it operates. In addition, the Company regularly reviews the gender and ethnic diversity of its workforce at the employee, manager and executive management level.


Diversity & Inclusion*	◦Percent of women in workforce	67	%
	◦Percent of ethnic minorities in workforce	15	%
	◦Percent of women on the Board	25	%
	◦Percent of ethnic minorities on the Board	25	%
	◦Percent of women in management (officer+)	20	%
	◦Percent of ethnic minorities in management officer+)	4	%

*All metrics reported are as of December 31, 2021.

Berkshire provides a full suite of diversity, equity & inclusion trainings to build understanding and afford employees with strategies they can put into practice. All employees complete training annually. In addition, Berkshire offers seven Employee Resource Groups (ERGs) each playing an integral role for employees and the culture of the company. Every Employee Resource Group provides a safe space for dialogue, education, and collective action on topics relevant to their members and the Company. Through the ERGs, employees concerns and ideas to strengthen Berkshire’s culture are elevated to members of management and the Diversity, Equity & Inclusion Committee for action, empowering employees to collectively be engines of positive change within the workplace.

Additional information on Berkshire’s Human Capital Management and Diversity, Equity & Inclusion practices can be found in the Company’s ~~other regions. The Group focuses on~~annual Corporate Responsibility Report, which details the ~~Bank’s distribution channels in order to broaden its retail~~company's environmental, social and ~~commercial customer base. The Company may consider acquisitions of insurance agencies in support of its growth strategy.~~governance programs.

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~~PERSONNEL~~

At year-end 2017, the Company had 1,992 full time equivalent employee positions -- an increase of 261 since the end of 2016, including positions added through the Commerce business combination and the impact of the First Choice integration in 2017. Commerce reported FTE staff of 226 positions shortly before the merger date. Berkshire continues to develop it’s staffing, including staff for new branches and hires related to team development. The Company has also developed staff with targeted skills to deepen the Company’s infrastructure. The Company’s employees are not represented by a collective bargaining unit.

SUBSIDIARY ACTIVITIES

The Company wholly-owns ~~two active consolidated subsidiaries: the Bank and~~ Berkshire ~~Insurance Group, Inc.~~ Bank.The Bank operates as a commercial bank under a Massachusetts trust company charter. Berkshire ~~Insurance Group is incorporated in Massachusetts. Berkshire~~ Bank owns Firestone Financial, LLC which is a Massachusetts limited liability company, ~~First Choice Loan Services Inc. which is a New Jersey corporation,~~ as well as consolidated subsidiaries operated as Massachusetts securities ~~corporations.~~corporations and other subsidiary entities. The Company also owns all of the common stock of a Delaware statutory business ~~trust,~~trusts, Berkshire Hills Capital Trust I.I and SI Capital Trust II. The capital ~~trust is~~trusts are unconsolidated and ~~its~~their only material ~~asset is a $15 million~~assets are trust preferred ~~security~~securities related to the junior subordinated debentures reported in the Company’s Consolidated Financial Statements. Additional information about the subsidiaries is contained in Exhibit 21 to this report.

REGULATION AND SUPERVISION

The Company is a Delaware corporation and a bank holding company that has elected financial holding company status within the meaning of the Bank Holding Company Act of 1956, as amended. As such, it is registered with, supervised by and required to comply with the rules and regulations of the Federal Reserve Board. The Federal Reserve Board requires the Company to file various reports and also conducts examinations of the Company. The Company must receive the approval of the Federal Reserve Board to engage in certain transactions, such as acquisitions of additional banks and savings ~~associations.~~associations, and the Company must seek nonobjection for various capital actions, including stock repurchases.

The Bank is a Massachusetts-chartered trust company and its deposits are insured up to applicable limits by the FDIC. The Bank was previously a Massachusetts-chartered savings bank and converted to a Massachusetts-chartered trust company in July 2014. The Bank is subject to extensive regulation by the Massachusetts Commissioner of Banks (the “Commissioner”), as its chartering agency, and by the FDIC, as its deposit insurer. The Bank is required to file reports with the Commissioner and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers

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with, or acquisitions of, other depository institutions or branches of other institutions. Under specified conditions, the Bank must also seek regulatory approval of capital distributions to the Company, its sole shareholder.

The Commissioner and the FDIC conduct periodic examinations to test the Bank’s safety and soundness and compliance with various regulatory requirements. The regulatory structure gives the regulatory authorities extensive discretion in connection with supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulatory requirements and policies, whether by the Commissioner, the Massachusetts legislature, the FDIC, the Federal Reserve Board, or Congress, could have a material adverse impact on the Company, the Bank, and their operations.

~~Federal Legislation~~

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted in 2010. The Dodd-Frank Act has significantly changed the bank regulatory structure and is affecting the lending, investment, trading and operating activities of depository institutions and their holding companies.

Many of the provisions of the Dodd-Frank Act are subject to delayed effective dates and/or require the issuance of implementing regulations. The regulatory process is ongoing and the impact on operations cannot yet be fully assessed. However, there is a significant expectation that the Dodd-Frank Act will, at a minimum, result in increased regulatory burden, compliance costs and interest expense for the Company and the Bank.

Certain regulatory requirements applicable to the Company ~~including certain changes made by~~and the ~~Dodd-Frank Act,~~Bank are referred to below. The description of statutory provisions and regulations applicable to financial institutions and their holding companies set forth in this Form 10-K does not purport to be a complete description of such statutes

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and regulations and their effects on the Company and is qualified in its entirety by reference to the actual laws and regulations. A summary of the regulatory requirements referred to below is as follows:

•Massachusetts Banking Laws and Supervision

•Federal Regulations

•Enforcement

•Holding Company Regulation

•Mergers and Acquisitions

•Other Regulations

•Taxation

Massachusetts Banking Laws and Supervision

General. As a Massachusetts-chartered depository institution, the Bank is subject to various Massachusetts statutes and regulations which govern, among other things, investment powers, lending and deposit-taking activities, borrowings, maintenance of surplus and reserve accounts, distribution of earnings and payment of dividends. In addition, the Bank is subject to Massachusetts consumer protection and civil rights laws and regulations. The approval of the Commissioner is required for a Massachusetts-chartered institution to establish or close branches, merge with other financial institutions, issue stock, and undertake certain other activities.

Massachusetts law and regulations generally allow Massachusetts institutions to engage in activities permissible for federally chartered banks or banks chartered by another state. There is a 30-day notice procedure to the Commissioner in order to engage in such activities. Massachusetts law also authorized Massachusetts institutions to engage in activities determined to be “financial in nature,” or incidental or complementary to such a financial activity, subject to a 30-day notice to the Commissioner.

Dividends.Under Massachusetts law, the Bank may declare cash dividends from net profits not more frequently than quarterly and non-cash dividends at any time. No dividends may be declared, credited, or paid if the institution’s capital stock is impaired. An institution with outstanding preferred stock may not, without the prior approval of the Commissioner, declare dividends to the common stock without also declaring dividends to the preferred stock. The approval of the Commissioner is generally required if the total of all dividends declared in any calendar year exceeds the total of its net profits for that year combined with its retained “net profits,” as defined, of the preceding two years. The approval of both the Commissioner and the FDIC is required for the Bank to pay a dividend from its surplus account, which was the case during 2021 as to Bank dividends to the Company, and is expected to be the case for 2022.

Loans to One Borrower Limitations. Massachusetts banking law grants broad lending authority. However, with certain limited exceptions, total obligations of one borrower to an institution may not exceed 20.0% of the total of the institution’s capital, which is defined under Massachusetts law as the sum of the institution’s capital stock, surplus account and undivided profits.

Investment Activities. In general, Massachusetts-chartered institutions may invest in preferred and common stock of any corporation organized under the laws of the United States or any state provided such investments do not involve control of any corporation and do not, in the aggregate, exceed 4.0% of the bank’s deposits. ~~Massachusetts-chartered~~Massachusetts-

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chartered institutions may also invest an amount equal to 1.0% of their deposits in stocks of Massachusetts corporations or companies with substantial employment in Massachusetts which have pledged to the Commissioner that such monies will be used for further development within the Commonwealth. However, these powers are constrained by federal law, which generally limit the activities and equity investments of state banks to those permitted for national banks.

Regulatory Enforcement Authority. Any Massachusetts-chartered institution that does not operate in accordance with the regulations, policies, and directives of the Commissioner may be sanctioned for non-compliance, including seizure of the property and business of the institution and suspension or revocation of its charter. The Commissioner may, under certain circumstances, suspend or remove officers or directors who have violated the law, conducted the institution’s business in a manner which is unsafe, unsound or contrary to the ~~depositors~~depositors’ interests, or been negligent in the performance of their duties. In addition, upon finding that an institution has engaged in an unfair or deceptive act or practice, the Commissioner may issue an order to cease and desist and impose a fine on the institution concerned. Finally, Massachusetts consumer protection and civil rights statutes applicable to the Bank permit private individual and class action lawsuits and provide for the rescission of consumer transactions, including loans, and the recovery of statutory and punitive damage and attorney’s fees in the case of certain violations of those statutes.

Massachusetts has other statutes or regulations that are similar to the federal provisions discussed below.

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Federal Regulations

Capital Requirements. Federal regulations require FDIC insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio. The ~~existing~~definitions of these capital ~~requirements were effective January 1, 2015~~categories and the ratio metrics are ~~the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.~~

Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interestsset out in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. The Bank chose the opt-out election. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in thefederal regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% and 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented at 2.5% on January 1, 2019. During the 2017 calendar year, the capital conservation buffer was 1.275%. The buffer increased to 1.875% on January 1, 2018.

In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary. As a bank holding company, the Company is also subject to regulatory capital requirements, as described in a subsequent section.

Interstate Banking and Branching. Federal law permits an institution, such as the Bank, to acquire another institution by merger in a state other than Massachusetts unless the other state has opted out. Federal law, as amended by the Dodd-Frank Act, authorizes de novo branching into another state to the extent that the target state allows its ~~state chartered~~state-chartered banks to establish branches within its borders. ~~The~~As of December 31, 2021, the Bank ~~operates~~operated branches in New York, Vermont, Connecticut ~~New Jersey,~~ and ~~Pennsylvania~~Rhode Island, as well as Massachusetts. At its interstate branches, the Bank may conduct any activity authorized under Massachusetts law that is permissible either for an institution chartered in that state (subject to applicable federal restrictions) or a branch in that state of an out-of-state national bank. The New York State Superintendent of Banks, the Vermont Commissioner of Banking and Insurance, the Connecticut Commissioner of Banking ~~the New Jersey Commissioner of Banking and Insurance~~ and the ~~Pennsylvania Secretary~~Director of ~~Banking and Securities~~the Rhode Island Department of Business Regulation may exercise certain regulatory authority over the Bank’s branches in their respective states.

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Prompt Corrective Regulatory Action. Federal law requires that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. ~~For this purpose,~~At December 31, 2021, the Bank met the criteria for being considered “well capitalized” as defined in the prompt corrective action regulations.

The law establishes three categories of capital deficient institutions: undercapitalized, significantly undercapitalized, and critically undercapitalized. The FDIC regulations implementing the prompt corrective action law were amended to incorporate the previously discussed increased regulatory capital standards that were effective January 1, 2015. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater, and a common equity Tier 1 ratio of

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6.5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater, and a common equity Tier 1 ratio of 4.5% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0%, or a common equity Tier 1 ratio of less than 4.5%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0%, or a common equity Tier 1 ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

“Undercapitalized” banks must adhere to growth, capital distribution (including dividend), and other limitations and are required to submit a capital restoration plan. A bank’s compliance with such plans must be guaranteed by its holding company in an amount equal to the lesser of 5% of the institution’s total assets when deemed “undercapitalized” or the amount needed to comply with regulatory capital requirements. If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce assets and cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers, and capital distributions by the holding company. “Critically undercapitalized” institutions must comply with additional sanctions including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

~~At December 31, 2017, the Bank met the criteria for being considered “well capitalized” as defined in the prompt corrective action regulations.~~

Transactions with Affiliates and Loans to Insiders. Transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act. In a holding company context, at a minimum, the parent holding company of an institution and any companies which are controlled by the holding company are affiliates of the institution. Generally, Section 23A limits the extent to which the institution or its subsidiaries may engage in “covered transactions,” such as loans, with any one affiliate to 10% of such institution’s capital stock and surplus. There is also an aggregate limit on all such transactions with all affiliates to 20% of capital stock and surplus. Loans to affiliates and certain other specified transactions must comply with specified collateralization requirements. Section 23B requires that transactions with affiliates be on terms that are no less favorable to the institution or its subsidiary as similar transactions with non-affiliates.

Federal law also restricts an institution with respect to loans to directors, executive officers, and principal stockholders (“insiders”). Loans to insiders and their related interests may not exceed, together with all other outstanding loans to such persons and affiliated entities, the institution’s total capital and surplus. Loans to insiders above specified amounts must receive the prior approval of the Board of Directors. Further, loans to insiders must be made on terms substantially the same as offered in comparable transactions to other persons, except that such insiders may receive preferential loans made under a benefit or compensation program that is widely available to the institution’s employees and does not give preference to the insider over the employees. Federal law places additional limitations on loans to executive officers. Massachusetts law previously had a separate law regarding insider transactions, but that law was amended in 2015 to generally incorporate the federal restrictions.

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Insurance of Deposit Accounts. The Bank’s deposit accounts are insured by the Deposit Insurance Fund of the FDIC up to applicable limits. The FDIC insures deposits up to the standard maximum deposit insurance amount (“SMDIA”) of $250,000.

The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. The Dodd-Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits.

Under the FDIC’s risk-based assessment system, insured institutions are assessed based on perceived risk to the Deposit Insurance Fund with institutions deemed less risky pay lower FDIC assessments. ~~Effective July 1, 2016, assessments~~Assessments for ~~most~~ institutions with $10 billion or more of assets are primarily based on ~~financial measures~~a scorecard approach by the FDIC, including factors such as examination ratings and ~~supervisory ratings derived from statistical~~ modeling ~~estimating~~measuring the ~~probability of failure within three years.~~institution’s ability to withstand asset-related and funding-related stress and potential loss to the Deposit Insurance Fund should the bank fail. The assessment range ~~(inclusive~~

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(inclusive of possible ~~adjustments) was reduced to 1.5 basis points to 30 basis points~~adjustments specified by the regulations) for institutions ~~of less than $10 billion in total assets, also effective July 1, 2016. The Dodd-Frank Act required that banks of~~with greater than $10 billion ~~in assets bear the burden of raising the Deposit Insurance Fund reserve ratio from 1.15% to 1.35%. Such institutions are now subject to an annual surcharge of 4.5 basis points~~ of total assets exceeding $10 billion. This surcharge will remain in place until the earlier of the Deposit Insurance Fund reaching the 1.35% ratio or December 31, 2018, at which point a shortfall assessment would be applied.is 1.5 to 40 basis points.

FDIC insured institutions are also required to pay assessments to the FDIC to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize a predecessor deposit insurance fund. These assessments will continue until the Financing Corporation bonds mature in 2017 through 2019. The assessment rate is adjusted quarterly to reflect changes in the assessment base of the fund. For the quarter ended December 31, 2017, the Financing Corporation assessment amounted to 0.54 basis points of total assets less Tier 1 capital.

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a regulator. Management does not know of any practice, condition or violation that might lead to termination of FDIC deposit insurance.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what insurance assessment rates will be in the future.

Federal Home Loan Bank System. The Bank is a member of the Federal Home Loan Bank system, which consists of 12 regional Federal Home Loan Banks that provide a central credit facility primarily for member institutions. The Bank, as a member, is required to acquire and hold shares of capital stock in the FHLBB.

The Federal Home Loan Banks are required to provide funds for certain purposes including contributing funds for affordable housing programs. These requirements, and general financial results, could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members. Historically, the FHLBB has paid dividends to member banks based on money market rates.

Enforcement

The FDIC has primary federal enforcement responsibility over ~~state chartered~~state-chartered banks that are not members of Federal Reserve System, which includes the Bank. The FDIC has authority to bring enforcement actions against such institutions and their “institution-related parties,” including officers, directors, certain shareholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution or receivership or conservatorship in certain circumstances. Potential civil money penalties cover a wide range of violations and actions, and are adjusted annually for inflation. Such penalties currently range up to ~~$25~~more than $50 thousand per day or, in extreme cases, as high as ~~$1.0~~$2 million per day.

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Holding Company Regulation

General. The Company is subject to examination, regulation, and periodic reporting as a bank holding company under the Bank Holding Company Act of 1956, as amended. The Company is required to obtain the prior approval of the Federal Reserve Board to acquire all, or substantially all, of the assets of any other bank or bank holding company. Prior Federal Reserve Board approval would be required for the Company to acquire direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after such acquisition, it would, directly or indirectly, own or control more than five percent of any class of voting shares of the bank or bank holding company.

A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than five percent of the voting securities of any company engaged in non-banking activities. The Federal Reserve Board has allowed by regulation some exceptions based on activities closely related to banking including: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; and (v) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets specified conditions, including being “well capitalized” and “well managed” as defined in the regulations, to opt to become a “financial holding company” and thereby engage in a broader array of financial activities. Such activities can include insurance and investment banking. The Company has elected to become a financial holding company.

The Company is subject to the Federal Reserve Board’s capital adequacy requirements for bank holding companies. The Dodd-Frank Act required the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components

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of capital, than those applicable to institutions themselves. ~~The previously discussed final rule regarding regulatory capital requirements implemented the Dodd-Frank Act as to bank holding company capital standards.~~ Consolidated regulatory capital requirements identical to those applicable to the Bank ~~applied~~apply also to the ~~Company, effective January 1, 2015. As is the case with institutions themselves, the capital conservation buffer is being phased in between 2016 and 2019.~~Company.

Federal Reserve Board policy requires that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. The Dodd-Frank Act codified the source of strength doctrine.

The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior ~~regulatory~~ consultation with and nonobjection of the Federal Reserve Board with respect to dividends in certain circumstances, such as where the company’s net income for the past four quarters, net of ~~dividends’~~dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. Such Federal Reserve Board consultation and nonobjection was required for certain dividends paid by the Company during the first half of 2021. The Federal Reserve Board guidance also provides for consultation and nonobjection for material increases in the amount of a bank holding company’s common stock dividend. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

Federal regulations require a bank holding company to give the Federal Reserve Board prior written notice of any repurchase or redemption of then outstanding equity securities if the gross consideration for the repurchase or redemption, when combined with the net consideration paid for all such repurchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption under certain circumstances. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions. Federal Reserve ~~policy~~guidance provides for regulatory consultation and nonobjection under specified circumstances prior to a holding company redeeming or repurchasing regulatory capital instruments, ~~under specified circumstances~~including common stock, regardless of the applicability of the previously referenced notification requirement.

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These regulatory policies could affect the ability of the Company to pay dividends, repurchase shares of its stock, or otherwise engage in capital distributions.

The status of the Company as a registered bank holding company under the Bank Holding Company Act does not exempt it from certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws.

Acquisition of the Company. Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as the Company unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined ~~under federal law,~~for this purpose, means ownership, control of or ~~holding irrevocable proxies representing~~power to vote 25% or more ~~than 25%~~ of any class of voting stock, control in any manner of the election of a majority of the company’s directors, or a determination by the regulator that the acquirer has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution.stock. Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

Massachusetts Holding Company Regulation. In addition to the federal holding company regulations, a bank holding company organized or doing business in Massachusetts must comply with requirements under Massachusetts law. Approval of the Massachusetts regulatory authorities is generally be required for the Company to acquire 25 percent or more of the voting stock of another depository institution. Similarly, prior regulatory approval would be necessary for any person or company to acquire 25 percent or more of the voting stock of the Company.

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Mergers and Acquisitions

The Company and the Bank have authority to engage, and have engaged, in acquisitions of other depository institutions. Such transactions are subject to a variety of conditions including, but not limited to, required stockholder approvals and the receipt of all necessary regulatory approvals. Necessary regulatory approvals include those required by the federal Bank Holding Company Act and/or Bank Merger Act, Massachusetts law and, if the target institution is located in a state other than Massachusetts, the law of that state. When considering merger applications, the federal regulators must evaluate such factors as the financial and managerial resources and future prospects of the parties, the convenience and needs of the communities to be served (including performance of the parties under the Community Reinvestment Act), competitive factors, any risk to the stability of the United States banking or financial system and the effectiveness of the institutions involved in combating money laundering activities. Both the Bank Holding Company Act and the Bank Merger Act provide for a waiting period of 15 to 30 days following approval by the federal banking regulator within which the United States Department of Justice may file objections to the merger under the federal antitrust laws. Massachusetts law requires the Commissioner (or Board of Bank Incorporation in certain cases) to consider such factors as whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted (including whether the merger will result in net new benefits).

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Other Regulations

Consumer Protection Laws. The Bank is subject to federal and state consumer protection statutes and regulations applicable to depository institutions. These include the Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; Home Mortgage Disclosure Act, requiring financial institutions to provide certain information about home mortgage and refinance loans; the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; the Fair Credit Reporting Act, governing the provision of consumer information to credit reporting agencies and the use of consumer information; the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and the Electronic Funds Transfer Act, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services. Since the Bank has exceeded $10 billion of consolidated assets, compliance with such federal consumer protection statutes and regulations is examined for and enforced by the Consumer Finance Protection Bureau rather than the FDIC.

The Bank also is subject to Massachusetts and federal laws protecting the confidentiality of consumer financial records, and limiting the ability of the institution to share non-public personal information with third parties.

The Community Reinvestment Act (“CRA”) establishes a requirement for federal banking agencies that, in connection with examinations of depository institutions within their jurisdiction, the agencies evaluate the record of the depository institutions in meeting the credit needs of their local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or new facility. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” A less than “satisfactory” rating would result in the suspension of any growth of the Bank through acquisitions or opening de novo branches until the rating is improved. As of the most recent CRA examination by the FDIC, the Bank’s CRA rating was “satisfactory.”

Anti-Money Laundering Laws. The Bank is subject to extensive anti-money laundering provisions and requirements, which require the institution to have in place a comprehensive customer identification program and an anti-money laundering program and procedures. These laws and regulations also prohibit depository institutions from engaging in business with foreign shell banks; require depository institutions to have due diligence procedures and, in some cases, enhanced due diligence procedures for foreign correspondent and private banking accounts; and improve information sharing between depository institutions and the U.S. government. The Bank has established policies and procedures intended to comply with these provisions.

Taxation

The Company reports its income on a calendar year basis using the accrual method of accounting. This discussion of tax matters is only a summary and is not a comprehensive description of the tax rules applicable to the Company

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and its subsidiaries. Further discussion of income taxation is contained in ~~Note 15 - Income Taxes of~~a note to the ~~Consolidated Financial Statements.~~financial statements. The federal income tax laws apply to the Company in the same manner as to other corporations with some exceptions. The Company may exclude from income 100 percent of dividends received from the Bank and from Berkshire Insurance Group as members of the same affiliated group of corporations. The Company reports income on a calendar year basis to the Commonwealth of Massachusetts. Massachusetts tax law generally permits special tax treatment for a qualifying limited purpose “securities corporation.” The Bank’s securities corporations all qualify for this treatment, and are taxed at a 1.3% rate on their gross income.

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ITEM 1A. RISK FACTORS

The risks set forth below, in addition to the other risks described in this Annual Report on Form 10-K, may adversely affect the Company's business, financial condition, strategic objectives, and operating results. In addition to the risks set forth below and the other risks described in this annual report, there may ~~also~~ be additional risks and uncertainties that are not currently known to the Company or that the Company currently deems to be immaterial that could materially and adversely affect the Company's business, financial condition, strategic objectives, or operating results. As a result, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company.

The COVID-19 global pandemic affected all aspects of the company’s business in 2021 and 2020. The impact of the pandemic is discussed in the "Operating" risk factors below, but it should be understood as affecting the overall risk environment and risk factors of the Company.

Risk Factors Summary

Lending Risks

•Deterioration in the Housing Sector, Commercial Real Estate, and Related Markets May Adversely Affect Business and Financial Results.

•The Company’s Emphasis on Commercial Lending May Expose the Company to Increased Lending Risks, Which Could Hurt Profits.

•The Company is Subject to a Variety of Risks in Connection With Any Sale of Loans it May Conduct.

•The Company is Exposed to Risk of Environmental Liability When It Takes Title to Property.

•New Third Party Lending Relationships and Sourcing Channels May Increase Lending Risk

Operating Risks

•The COVID-19 Pandemic is Adversely Affecting, and Will Likely Continue to Adversely Affect, the Company’s Business, Financial Condition, Liquidity, and Results of Operations.

•The Company is Subject to Security and Operational Risks Relating to the Use of Technology that Could Damage the Company's Reputation and Business.

•The Company Faces Cybersecurity Risks, Including Denial of Service Attacks, Ransomware, Hacking and Identity Theft that Could Result in the Disclosure of Confidential Information or the Creation of Unauthorized Transactions, Which Could Adversely Affect the Company’s Business or Reputation and Create Significant Legal and Financial Exposure.

•Counterparties and Correspondents Expose the Company to Risks.

•The Company’s Business is Reliant on Outside Vendors.

•Development of New Products and Services May Impose Additional Costs on the Company and May Expose It to Increased Operational Risk.

•The Discontinuation of LIBOR and the Emergence of One or More Alternative Benchmark Indices to Replace LIBOR Could Adversely Impact the Company’s Business and Results of Operations.

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Liquidity Risks

•The Company's Wholesale Funding Sources May Prove Insufficient to Replace Deposits at Maturity and Support Operations and Future Growth.

•The Company's Ability to Service Our Debt, Pay Dividends, and Otherwise Pay Obligations as They Come Due Is Substantially Dependent on Capital Distributions from the Bank, and These Distributions Are Subject to Regulatory Limits and Other Restrictions. The Company’s Stock Repurchase Program is also Dependent on These Distributions.

•The Loss Recorded in 2020 May Have an Adverse Effect on Future Dividend Payments to Common Shareholders.

•Secondary Mortgage Market Conditions Could Have a Material Impact on the Company’s Financial Condition and Results of Operations.

Interest Rates

•Market Interest Rate Conditions Could Adversely Affect Results of Operations and Financial Condition.

Securities Market Value Risks

•Declines in the Value of Certain Investment Securities Could Require Write-Downs, Which Would Reduce Earnings.

Regulatory Matters Risks

•Legislative and Regulatory Initiatives May Affect Business Activities and Increase Operating Costs.

•Provisions of the Company's Certificate of Incorporation, Bylaws, and Delaware Law, as Well as State and Federal Banking Regulations, Could Delay or Prevent a Takeover of Us by a Third Party.

Significant Accounting Estimates Risks

•Various Factors May Cause Our Allowance for Credit Losses on Loans to Increase.

•Fair Value Measurements May Be Affected by Inherent Uncertainties

Trading of the Company's Common Stock

•The Trading History of the Company’s Common Stock is Characterized By Low Trading Volume. The Value of Shareholder Investments May be Subject to Sudden Decreases Due to the Volatility of the Price of the Common Stock.

Lending

Deterioration in the Housing Sector, Commercial Real Estate, and Related Markets May Adversely Affect Business and Financial Results.

Real estate lending is a major business activity for the Company. Real estate market conditions affect the value and marketability of real estate collateral, and they also affect the cash flows, liquidity, and net worth of many borrowers whose operations and finances depend on real estate market conditions. Adverse conditions in the Company's market areas could reduce growth rates, affect the ability of our customers to repay their loans, and generally affect the Company's financial condition and results of operations. Potential increases in interest rates could increase capitalization rates which could adversely affect commercial property appraisals and collateral value. Similarly, if residential mortgage interest rates increase from lows in recent years, residential property values may be adversely impacted.Pandemic impacts on the supply and demand of residential properties have caused unusual price appreciation in many markets, which may not be sustained if market conditions normalize.

The Company’s Emphasis on Commercial Lending May Expose the Company to Increased Lending Risks, Which Could Hurt Profits.

The Company emphasizes commercial lending, which generally exposes the Company to a greater risk of nonpayment and loss because repayment of such loans often depends on the successful operations and income stream of the borrowers. Commercial loans are historically more susceptible to delinquency, default, and loss during economic downturns. Commercial lending involves larger loan sizes and larger relationship exposures, with greater

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potential impact on profits in the event of adverse loan performance. The majority of the Company’s commercial loans are secured by real estate and subject to the previously discussed real estate risk ~~factors.~~ factors, as well as risks specific to individual properties and property types. Geographic expansion may result in ~~new~~ risks not ~~identified~~previously experienced by the Company or which it is unfamiliar with monitoring or resolving. Recent expansion has been focused on the Greater Boston market, where the Bank may be financing projects with larger loan amounts ~~and~~ where the Bank has less experience than in its traditional market areas and where competition may result in different lending structures. Recent expansion of the commercial lending team may expose the Company to new markets and risks if new lenders are not integrated with the Company’s policies, controls, and procedures.

Commercial lending activities pose higher risk of fraud. In 2019, the Company wrote-off the $16 million balance of a secured commercial loan in circumstances involving alleged borrower fraud. This asset was a participating interest in a commercial loan managed by another financial institution. Such participating interests involve risks related to counterparty performance, as further described in a later risk factor. In the case of this loan, the Company has filed legal claims against the agent bank in pursuit of the recovery of some of the loss recorded by the Company. The outcome of such legal proceedings is subject to uncertainty.

The Company is ~~subject~~Subject to a ~~variety~~Variety of ~~risks~~Risks in ~~connection with any sale~~Connection With Any Sale of Loans it May Conduct.

The Company routinely sells newly originated residential mortgage loans itand SBA guaranteed business loans, and may ~~conduct.~~

~~In connection with the Company’s sale of one~~also sell other loans or ~~more loan portfolios, it~~loans portfolios. It may make certain representations and warranties to the purchaser concerning the loans sold and the procedures under which those loans have been originated and serviced. If any of these representations and warranties are invalid, the Company may be required to refund premiums, indemnify the purchaser for any related costs or losses, or it may be required to repurchase part or all of the affected loans, which may be impaired. The Company may also be required to repurchase loans as a result of borrower fraud or in the event of early payment default by the borrower on a loan it has sold. The Company’s ability to maintain seller/servicer relationships with government agencies and government backed entities may be jeopardized in the event of the emergence of one or more of the above risks. Demand for the Company’s loans in the secondary markets could also be affected by these risks, which could lead to a reduction in related business activities.

The Company may be required to reduce the value of any loans it marks as held for sale, which could adversely affect its results of operations. As a result of the Company’s strategic initiatives, the Company sold certain loans which were previously held for investment and conducted sales with buyers who it had not previously transacted with.

The Company is ~~exposed~~Exposed to ~~risk~~Risk of ~~environmental liability when it takes title~~Environmental Liability When It Takes Title to ~~property.~~Property.

In the course of its business, the Company may foreclose on and take title to real estate. As a result, the Company could be subject to environmental liabilities with respect to these properties for property damage, personal injury, investigation and clean-up costs. The costs associated with investigation or remediation activities could be substantial. The Company

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may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.

New Third Party Lending Relationships and Sourcing Channels May Increase Lending Risk.

The Company is expanding its lending sourcing channels, including forming a residential mortgage conduit, partnering with fintech online lenders, and expanding its commercial loan sourcing channels.It is also relying more on third party loan servicing. These activities may increase the underwriting risks and loan administration risks in managing its lending activities.

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Operating

~~Expansion, Growth,~~The COVID-19 Pandemic is Adversely Affecting, and ~~Acquisitions Could Negatively Impact Earnings If Not Successful.~~

~~The Company plans~~Will Likely Continue to grow organically, by geographic expansion, through business line expansion, and through acquisitions. Successful expansion depends on the maintenance and development of an adequate infrastructure. Success also depends on customer acceptance and the long-term recruitment and retention of key personnel and acquired customer relationships. Profitability depends on whether the income generated will offset the increased operating expenses. The Company implemented certain expense restructuring activities, related in part to the rationalization of acquired operations. Changes in operations may result in inefficiencies or control deficiencies.

Merger and acquisition activities are subject to a number of risks, including lending, operating, and integration risks. Such growth requires careful due diligence, evaluation of risks, and projections of future operations and financial conditions. Adverse developments could have a material adverse effect on the Company's financial condition and results of operations. Acquisitions often involve extensive merger agreements, which may lead to litigation risks or operating constraints.

The Company has recruited executive and business line management to support its growth and expansion, and it has absorbed management of acquired operations. This involves retention risks, operating risks, and financial risks. Such recruitment can affect the retention of new and old business, and can also be affected by competitive reactions and other relationship risks in retaining accounts. The relocation of the Company’s headquarters may affect operational functioning.

Regulatory examinations may identify matters requiring attention. Deficiencies related to regulatory compliance may result in changes that affect operating revenues and costs, including the scope or scale of business activities and/or potential future expansion initiatives. The Company has crossed the $10 billion threshold for additional Dodd Frank regulatory requirements. These regulations affect revenues and operating costs, and introduce additional compliance requirements. If targeted earnings accretion is not achieved, some profitability metrics may be reduced. The Company may also face additional acquisition approval requirements, and growth plans could be slowed if expected approvals are not obtained.

~~Competition From Financial Institutions and Other Financial Service Providers May~~ Adversely Affect, the Company’s ~~Growth~~Business, Financial Condition, Liquidity, and ~~Profitability.~~Results of Operations.

~~Competition~~The COVID-19 pandemic has negatively impacted the U.S. and global economy; disrupted U.S. and global supply chains and labor markets; created significant volatility and disruption in financial markets; impacted rates and yields on U.S. Treasury securities; resulted in increased credit risk in certain industries; increased demands on capital and liquidity; and affected employment and consumer confidence. In addition, the pandemic has resulted in temporary closures and curtailment of individual and business activities in our footprint. The pandemic has caused us, and could continue to cause us, increases in the ~~banking~~Company's allowance for credit losses and subsequent increases in credit losses in our loan portfolios. Some of the risks the Company faces from the pandemic include, but are not limited to: the health and availability of our colleagues, the supply of labor, inflationary impacts on operating costs, the financial condition of our clients and the demand for our products and services, ~~industry is intense. Larger banking institutions have substantially greater resources~~changes in interest rates, recognition of credit losses and ~~lending limits~~increases in the allowance for credit losses, impactsif customers draw on their lines of credit or draw down deposits or seek additional loans to help finance their businesses, and ~~may offer certain services not offered by~~a significant deterioration of business conditions in our markets. Furthermore, the ~~Company. Local competitors with excess capital may accept lower returns on new business. There is increased competition by out-of-market competitors through the internet~~pandemic has caused us to recognize impairment of our goodwill and mobile technology. Federal regulations and financial support programs may in some cases favor competitors. Competition includes competition for banking teams and talent. Competition creates risk that revenues, earnings, or market sharethere could be ~~adversely affected by the loss~~impairment of ~~talent.~~

~~Market Changes May Adversely Affect Demand For The Company’s Services and Impact Revenue, Costs, and Earnings.~~

~~Channels for servicing the Company’s customers are evolving rapidly, with less reliance on traditional branch facilities, more use~~our financial assets. Sustained adverse effects may also increase our cost of ~~online and mobile banking, and demand for universal bankers~~capital, prevent us from satisfying our minimum regulatory capital ratios and other ~~relationship managers who can~~supervisory requirements, or result in downgrades in our credit rating. The extent to which the COVID-19 pandemic impacts our business, financial condition, liquidity and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the continued effectiveness of our business continuity plan, the direct and indirect impact of the pandemic on our customers, colleagues, counterparties and service ~~multiple product lines. The Company has an ongoing process for evaluating the profitability of its branch system~~providers, and actions taken by governmental authorities and other ~~office~~third parties in response to the pandemic.

Governmental authorities have taken significant measures to provide economic assistance to individual households and ~~operational facilities.~~businesses, stabilize the markets, and support economic growth. The ~~identification~~future impact of ~~unprofitable operations~~these measures is unknown, and ~~facilities can lead~~they may not be sufficient to ~~restructuring charges and introduce~~mitigate the negative impact of the pandemic. We also face an increased risk of ~~disruptions~~litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions.

The length of the pandemic and the effectiveness of the measures being put in place to address it are unknown.Until the effects of the pandemic subside, we face possible impacts on liquidity, operating revenues, and ~~customer relationships. The Company competes with larger providers who are rapidly evolving their service channels and escalating~~credit performance.To the ~~costs~~extent the pandemic adversely affects our business, financial condition, liquidity, or results of ~~evolving~~operations, it may also have the ~~service process.~~effect of heightening many of the other risks described in this Annual Report on Form 10-K.

The Company is Subject to Security and Operational Risks Relating to the Use of Technology that Could Damage the Company's Reputation and Business.

Security breaches of confidential information in our technology platforms could expose the Company to possible liability and damage its reputation. Any compromise of data security could also deter customers from using the

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Company's services. The Company relies on industry standard internet security and authentication systems to effect secure transmission of data. These precautions may not protect the Company's security systems from compromises or breaches and could result in damage to its reputation and business. The Company utilizes third party core banking software, in addition to other outsourced data processing. If third party providers encounter difficulties or if the Company has difficulty in communicating and/or transmitting with such third parties, it could significantly affect its ability to adequately process and account for customer transactions, which could significantly affect its business operations. The Company interfaces with electronic payments systems which are subject to security and operational risks. The Company utilizes file encryption in designated internal systems and networks and is subject to certain state and federal regulations regarding how the Company manages data security. The Company's enterprise governance risk and compliance function includes a framework of controls, policies and technologies to monitor and protect information from cyberattacks, mishandling, and loss, together with safeguards related to the confidentiality, integrity, and availability of information. Natural disasters and disaster recovery risks could affect its operating systems, which could affect its reputation. The Company's business continuity program addresses crisis

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management, business impact, and data and systems recovery. Potential problems with the management of technology security and operational risks may affect regulatory compliance, which could affect operating costs and expansion plans.

The Company Faces Cybersecurity Risks, Including Denial of Service Attacks, Ransomware, Hacking and Identity Theft that Could Result in the Disclosure of Confidential Information or the Creation of Unauthorized Transactions, Which Could Adversely Affect the Company’s Business or Reputation and Create Significant Legal and Financial Exposure.

Banking institutions face increased cybersecurity risks due to the number of employees that are working remotely in regions impacted by stay-at-home orders. Increased levels of remote access create additional opportunities for cybercriminals to exploit vulnerabilities, and employees may be more susceptible to phishing and social engineering attempts due to work responsibilities at home. In addition, technological resources may be strained due to the number of remote users. Banking institutions should evaluate their cybersecurity risks in light of these issues and update their existing risk factors for any material changes or developments

The Company’s computer systems and network infrastructure are subject to security risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, steal financial assets, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Denial of service attacks have been launched against a number of large financial services institutions. As a growing regional bank, the Company may be subject to similar attacks in the future. Hacking and identity theft risks could cause serious reputational harm and possible financial loss to the Company. Cyber threats are rapidly evolving and the Company may not be able to anticipate or prevent all such attacks.

The Company may incur increasing costs in an effort to minimize these risks and could be held liable for any security breach or loss. Despite efforts to ensure the integrity of its systems, the Company will not be able to anticipate all security breaches of these types, and the Company may not be able to implement effective preventive measures against such security breaches. The techniques used by cyber criminals change frequently and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments. Those parties may also attempt to fraudulently induce employees, customers or other users of the Company’s systems to disclose sensitive information in order to gain access to its data or that of its clients or to conduct unauthorized financial transactions.

These risks may increase in the future as the Company continues to increase its mobile-payment and other internet-based product offerings and expands its internal usage of web-based products and applications. A successful penetration or circumvention of system security could cause serious negative consequences to the Company, including significant disruption of operations, misappropriation of confidential information of the Company or that of its customers, or damage to computers or systems of the Company or those of its customers and counterparties. A security breach could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in the Company’s security measures, significant litigation exposure, and harm to the Company’s reputation, all of which could have a material adverse effect on the Company.

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~~The Company is subject to regulatory environment changes regarding privacy~~Counterparties and ~~data protection and could have a material impact on our results of operations.~~

The growth and expansion of the company into a variety of new fields may potentially involve new regulatory issues/requirements such as the EU General Data Protection Regulation (GDPR) or the New York Department of Financial Services (NYDFS) Cybersecurity Regulation. The potential costs of compliance with or imposed by new/existing regulations and policies that are applicable to us may affect the use of our products and services and could have a material adverse impact on our results of operations.

~~The Company needs to stay current on technological changes in order to compete and meet customer demands.~~

The financial services market is changing rapidly with frequent introductions of new technologies which increase service and improve efficiency. Some of the Company’s competitors have substantially greater resources to invest in technological improvements than it currently has. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers.

~~Financial and Operating Counterparties~~Correspondents Expose the Company to Risks.

The Company's use of derivative financial instruments exposes us to financial and contractual risks with counterparties. The Company maintains correspondent bank relationships, manage certain loan participations, engage in securities and funding transactions, and undergo other activities with financial counterparties that are customary to its industry. The Company also utilizes services from major vendors of technology, telecommunications, and other essential operating services. There is financial, reputational, and ~~operating~~operational risk in these relationships, which the Company seeks to manage through internal controls and procedures, but there are no assurances that the Company will not experience loss or interruption of its business as a result of unforeseen events with these providers. The Company's ~~expanded~~ mortgage banking operations have ~~also~~ exposed us to ~~more~~ counterparty transactions including the use of third parties to participate in the management of interest rate risk and mortgage sales and

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hedging. Financial, reputational, and operational risks are inherent in these counterparty and correspondent relationships. The Company could experience losses if there are failures in the controls or accounting, including those related to derivatives activities or if there are performance failures by any counterparties. The risk of loss is increased when interest rates change suddenly and if the intended hedging objectives are not achieved as a result of market or counterparty behaviors.

The Company’s Business is Reliant on Outside Vendors.

The Company’s business is highly dependent on the use of certain outside vendors for its day-to-day operations. The Company’s operations and reputationare exposed to risk that a vendor may not perform in accordance with established performance standards required in its agreements for any number of reasons including a change in their senior management, their financial condition, their product line or mix and how they support existing customers, or a simple change in their strategic focus. While the Company has comprehensive programs, policies and procedures in place to mitigate risk at all phases of vendor management from selection, to performance monitoring and renewals, the failure of a vendor to perform in accordance with contractual agreements could be disruptive to its business, which could have a material adverse effect on its financial condition, strategic objectives, and results of operations.

Development of New Products and Services May ~~Not Be Able~~Impose Additional Costs on the Company and May Expose It to ~~Attract and Retain Skilled People.~~Increased Operational Risk.

The ~~Company's success~~Company’s financial performance depends, in ~~large~~ part, on its ability to ~~attract~~develop and market new ~~employees, retain~~ and ~~motivate~~innovative services and to adopt or develop new technologies that differentiate its ~~existing employees,~~products or provide cost efficiencies, while avoiding increased related expenses. This dependency is exacerbated in the current “FinTech” environment, where financial institutions are investing significantly in evaluating new technologies, such as “Blockchain,” and ~~continue~~developing potentially industry-changing new products, services and industry standards. The introduction of new products and services can entail significant time and resources, including regulatory approvals. Substantial risks and uncertainties are associated with the introduction of new products and services, including technical and control requirements that may need to ~~compensate employees competitively. Competition for~~be developed and implemented, rapid technological change in the ~~best people~~industry, the Company’s ability to access technical and other information from its clients, the significant and ongoing investments required to bring new products and services to market in a timely manner at competitive prices and the preparation of marketing, sales and other materials that fully and accurately describe the product or service and its underlying risks. The Company’s failure to manage these risks and uncertainties also exposes it to enhanced risk of operational lapses which may result in the recognition of financial statement liabilities. Regulatory and internal control requirements, capital requirements, competitive alternatives, vendor relationships and shifting market preferences may also determine if such initiatives can be ~~intense~~brought to market in a manner that is timely and attractive to the Company’s clients. Products and services relying on internet and mobile technologies may expose the Company ~~may not be able~~ to ~~hire or retain appropriately qualified individuals. As a result of restructuring activities, the Company could experience challenges~~fraud and cybersecurity risks. Failure to successfully manage these risks in the ~~retention~~development and implementation of ~~existing employees.~~

~~Controls and Procedures May Fail~~new products or ~~Be Circumvented.~~

Management regularly reviews and updates the Company’s internal controls, disclosure requirements and practices, and corporate governance policies and procedures. Any system of controls, however well designed and operated, can only provide reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and proceduresservices could have a material adverse effect on the Company’s business and reputation, as well as on its consolidated results of operations and financial condition.

The Discontinuation of LIBOR and the Emergence of One or More Alternative Benchmark Indices to Replace LIBOR Could Adversely Impact the Company’s Business and Results of Operations.

The Company’s floating-rate funding, certain hedging transactions and certain of the Company’s products, such as floating-rate loans and mortgages, determine the applicable interest rate or payment amount by reference to a benchmark rate, such as the London Interbank Offered Rate (“LIBOR”), or to an index, currency, basket or other financial metric. Pursuant to regulations, the use of LIBOR on new contracts was discontinued on December 31, 2021, and LIBOR will cease publication after June 30, 2023.

Regulators and various financial industry groups have sponsored or formed committees (e.g., the Federal Reserve-sponsored Alternative Reference Rates Committee) to, among other things, facilitate the identification of an alternative benchmark index to replace LIBOR, and publish consultations on recommended practices for transitioning away from LIBOR, including (i) the utilization of recommended fallback language for LIBOR-linked financial instruments, and (ii) development of alternative pricing methodologies for recommended alternative benchmarks such as the Secured Overnight Financing Rate (“SOFR”). SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-based

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repurchase transactions. At this time, it is still not possible to predict whether these recommendations and proposals will be broadly accepted in the market, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-rate financial instruments.The Company has adopted SOFR as its preferred benchmark as an alternative to LIBOR for use in new contracts beginning on January 1, 2022.

The discontinuation of LIBOR could result in changes to the Company’s risk exposures (for example, if the anticipated discontinuation of LIBOR adversely affects the availability or cost of floating-rate funding and, therefore, the Company’s exposure to fluctuations in interest rates) or otherwise result in losses on a product or having to pay more or receive less on securities that the Company has issued or owns. A substantial portion of the Company’s on- and off-balance sheet financial instruments are indexed to LIBOR, including interest rate swap agreements and other contracts used for hedging and trading account purposes, loans to commercial customers and consumers (including mortgage loans and other loans), and long-term borrowings. In addition, such uncertainty could result in pricing volatility and increased capital requirements, loss of market share in certain products, adverse tax or accounting impacts, and compliance, legal and operational costs and risks.

Liquidity

The Company's Wholesale Funding Sources May Prove Insufficient to Replace Deposits at Maturity and Support Operations and Future Growth.

The Company must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of its liquidity management, the Company uses a number of funding sources in addition to deposit growth and cash flows from loans and investments. These sources include Federal Home Loan Bank advances, proceeds from the sale of loans, and liquidity resources at the holding company. The Company uses brokered deposits both to support ongoing growth and to provide enhanced deposit insurance to support large dollar commercial relationships. The Company's financial flexibility will be severely constrained if the Company is unable to maintain access to wholesale funding or if adequate financing is not available to accommodate future growth at acceptable costs. Turbulence in the capital

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and credit markets may adversely affect liquidity and financial condition and the willingness of certain counterparties and customers to do business with the Company.

The Company's Ability to Service Our Debt, Pay Dividends, and Otherwise Pay Obligations as They Come Due Is Substantially Dependent on Capital Distributions from the Bank, and These Distributions Are Subject to Regulatory Limits and Other Restrictions. The Company’s Stock Repurchase Program is also Dependent on These Distributions.

A substantial source of holding company income is the receipt of dividends from the Bank, from which the Company services debt, pay obligations, and pay shareholder dividends. The availability of dividends from the Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition of the Bank and other factors, that the applicable regulatory authorities could assert that payment of dividends or other types of payments are an unsafe or unsound practice. If the Bank is unable to pay dividends, the Company may not be able to service debt, pay debt obligations, or pay dividends on its common stock. The Company may also be unable to repurchase common stock under its Stock Repurchase Program.

The Loss Recorded in 2020 May Have an Adverse Effect on Future Dividend Payments to Common Shareholders.

Due to the loss in the first half of 2020 and its impact on retained earnings, the Bank requires approval from the Massachusetts Division of Banks in order to continue to be a source of dividend income to the Company. Over the long term, these dividends are a source of funds to the parent to support dividend payments to Company shareholders. Also due to the loss, the Company requires nonobjection from the Federal Reserve Bank of Boston for future shareholder dividend payments. Future payments of dividends will also depend on the Board’s holistic assessment of the Company’s operating, risk, and financial situations and current circumstances, as well as regulatory assessments of these factors.

Secondary ~~mortgage market conditions could have~~Mortgage Market Conditions Could Have a ~~material impact~~Material Impact on the Company’s ~~financial condition~~Financial Condition and ~~results~~Results of ~~operations.~~Operations.

In addition to being affected by interest rates, the secondary mortgage markets are also subject to investor demand for residential mortgage loans and increased investor yield requirements for these loans. These conditions may

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fluctuate or worsen in the future. As a result, a prolonged period of secondary market illiquidity may reduce the Company’s loan production volumes and operating results.

Secondary markets are significantly affected by Fannie Mae, Freddie Mac and Ginnie Mae (collectively, the “Agencies”) for loan purchases that meet their conforming loan requirements. These agencies could limit purchases of conforming loans due to capital constraints, a change in the criteria for conforming loans or other factors. Proposals to reform mortgage finance could affect the role of the Agencies and the market for conforming loans which comprise the majority of the Company’s mortgage lending and related originations income.

Interest Rates

Market Interest Rate Conditions Could Adversely Affect Results of Operations and Financial Condition.

Net interest income is the Company's largest source of income. Changes in interest rates can affect the level of net interest income and other elements of net income. The Company’s interest rate sensitivity is discussed in more detail in Item 7A of this report and is the primary market risk to its condition and operations. Changes in interest rates can also affect the demand for the Company’s products and services, and the supply conditions in the U.S. financial and capital markets. Changes in the level of interest rates may negatively affect the Company’s ability to originate real estate loans, the value of its assets and its ability to realize gains from the sale of assets, all of which ultimately affect earnings.Changes in interest rates may also affect the market value of the Company’s investment securities portfolio, which may affect the level and adequate of its regulatory capital.The Federal Open Market Committee has indicated that it plans to increase interest rates in 2022.

Securities Market Values

Declines in the Value of Certain Investment Securities Could Require Write-Downs, Which Would Reduce Earnings.

Declines in the value of investment securities due to market conditions and/or issuer impairment could result in losses that can reduce capital and earnings. The Company’s investment in equity securities and non-investment grade debt securities present heightened credit and price risks. Under new accounting standards, equity gains and losses are recorded to current period operating results. The Company has an investment in the stock of the Federal Home Loan Bank of Boston ("FHLBB") which could result in write-down in the event of impairment.

~~Taxation~~

~~Changes in Tax Preference Items May Affect Results of Operations.~~

~~Higher tax expense due to planned or unplanned changes in tax preference items may result in lower profitability. Quarterly results may vary significantly from annual results.~~

~~Changes in Federal Tax Policy May Affect Results of Operations.~~

Changes in federal tax policy may result in unexpected impacts to markets and customer behaviors. New tax regulations may result in changes to deductions and tax preferences, which could require a further write-down of the

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~~deferred tax asset. Changes could affect the Company’s financial results and also could affect the profitability of tax preferred investments.~~

Regulatory Matters

Legislative and Regulatory Initiatives May Affect Business Activities and Increase Operating Costs.

New federal or state laws and regulations could affect lending, funding practices, capital, and liquidity standards. New laws, regulations, and other regulatory changes may also increase compliance costs and affect business and operations. Moreover, the FDIC sets the cost of FDIC insurance premiums, which can affect profitability.

Regulatory capital requirements and their impact on the Company may change. ItThe Company may need to raise additional capital in the future to support operations and continued growth. The Company's ability to raise capital, if needed, will depend on its condition and performance, and on market conditions. If additional capital is not available when needed, it could affect operations and the execution of the strategic plan, which includes further expanding operations through internal growth and acquisitions.

New laws, regulations, and other regulatory changes, along with negative developments in the financial industry and the domestic and international credit markets, may significantly affect the markets in which the Company does business, the markets for and value of its loans and investments, and ongoing operations, costs and profitability. For more information, see “Regulation and Supervision” in Item 1 of this report.

~~In 2017, the Company crossed the~~With total assets over $10 billion, ~~asset threshold established by~~ the ~~Dodd-Frank act. The~~ Company and the Bank are ~~now~~ subject to closer supervision by their primary regulators and, as to compliance with consumer protection laws and regulations, the Consumer Financial Protection Bureau. The Company and the Bank are subject to ~~new~~ capital stress testing ~~requirements~~expectations which require significant ~~new~~ resources and infrastructure. If the Company’s compliance with the enhanced supervision and requirements is insufficient, there can be significant negative consequences for its operations, profitability, and ability to further pursue its strategic growth plan.

Provisions of the Company's Certificate of Incorporation, Bylaws, and Delaware Law, as Well as State and Federal Banking Regulations, Could Delay or Prevent a Takeover of Us by a Third Party.

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Provisions in the Company's certificate of incorporation and bylaws, the corporate law of the State of Delaware, and state and federal regulations could delay, defer or prevent a third party from acquiring us, despite the possible benefit stockholders, or otherwise adversely affect the price of its common stock. These provisions include: limitations on voting rights of beneficial owners of more than 10 percent of common stock; supermajority voting requirements for certain business combinations; the election of directors to terms of one year; and advance notice requirements for nominations for election to the Company's Board of Directors and for proposing matters that stockholders may act on at stockholder meetings. In addition, the Company is subject to Delaware laws, including one that prohibits engaging in a business combination with any interested stockholder for a period of three years from the date the person became an interested stockholder unless certain conditions are met. These provisions may discourage potential takeover attempts, discourage bids for the Company's common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, its common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors other than the candidates nominated by the Board.

Significant Accounting Estimates

Various Factors May ~~Not Be Realized in Accordance with Recorded Estimates.~~

~~Unexpected Changes May Adversely Affect Condition or Performance.~~Cause our Allowance for Credit Losses on Loans to Increase.

The ~~Company’s significant accounting policies are described in Note 1 - Summary~~Company has an allowance for current expected credit losses on loans maintained through a provision for credit losses charged to expense. This represents our estimate of ~~Significant Accounting Policies~~current expected credit losses based on an evaluation of risks within the portfolio of loans. The level of the ~~Consolidated Financial Statements~~allowance represents management’s estimate of current expected credit losses over the contractual life of the existing loan portfolio. The determination of the appropriate level of the allowance inherently involves a degree of subjectivity and requires that we make significant estimates of current credit risks and current trends and reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and material changes. Changes in ~~Item 8 of this report.~~ economic and other conditions affecting borrowers, along with new information regarding existing loans other factors, may indicate the need for a future increase in the allowance.

Fair Value Measurements May Be Affected by Inherent Uncertainties

The ~~SEC defines “critical accounting policies”~~Company uses fair value measurements to determine fair value disclosures and to record fair value adjustments to certain assets and liabilities, such as ~~those that require~~interest rate swaps, impaired loans, securities available for sale, and derivatives. Additionally, from time to time, the Company may be required to record certain assets at fair value on a non-recurring basis, such as certain impaired loans held for investment and capitalized servicing rights. Whenever there is no readily available market data, management uses its best estimate and assumptions in determining fair value, but these estimates involve inherent uncertainties and the application of management’s ~~most difficult, subjective or complex judgments, often as~~judgment. As a result, ~~of the need to make estimates about the effect of matters that are inherently uncertain and may change~~if other assumptions had been used, our recorded earnings or disclosures could have been materially different from those reflected in future periods. The Company’s critical accounting policies are further discussed in Item 7 of this report. If actual events and results do not conform to critical estimates, there could be a material impact onthese financial ~~condition, operating performance, and execution of the strategic plan.~~statements.

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~~Mergers and Acquisitions~~

~~Acquisitions may disrupt the Company’s business and dilute stockholder value.~~

The Company completed its acquisition of Commerce Bancshares Corp. in October 2017. The Company regularly evaluates merger and acquisition opportunities with other financial institutions and financial services companies. Future mergers or acquisitions involving cash, debt, or equity securities may occur from time to time. The Company seeks acquisition partners that offer either significant market presence or the potential to expand its market footprint and improve profitability through economies of scale or expanded services.

Acquiring other banks, businesses, or branches may have an adverse effect on the Company’s financial results and may involve various other risks commonly associated with acquisitions, including, among other things:

~~difficulty in estimating the value of the target company~~

~~payment of a premium over book and market values that may dilute the Company’s tangible book value and earnings per share in the short and long term;~~

~~exposure to unknown or contingent liabilities, or asset quality problems, of the target company;~~

~~unexpected regulatory responses to merger related applications~~

~~larger than anticipated merger-related expenses;~~

~~difficulty and expense of integrating the operations and personnel of the target company, and retaining key employees and customers;~~

~~inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits; and~~

~~potential diversion of Company management’s time and attention.~~

If the Company is unable to successfully integrate an acquired company, the anticipated benefits may not be realized fully or may take longer to realize than expected. A significant decline in asset valuations or cash flows may also prevent the attainment of targeted results. Additional discussion about the risk of acquisitions is included above in the discussion of Operating Risk.

Trading of the Company's Common Stock

The Trading History of ~~The~~the Company’s Common Stock Isis Characterized By Low Trading Volume. The Value of Shareholder Investments May be Subject Toto Sudden Decreases Due Toto the Volatility of the Price of the Common Stock.

The level of interest and trading in the Company’s stock depends on many factors beyond the Company's control. The market price of the Company's common stock may be highly volatile and subject to wide fluctuations in response to numerous factors, including, but not limited to, the factors discussed in other risk factors and the following: actual or anticipated fluctuations in operating results; changes in interest rates; changes in the legal or regulatory environment; press releases, announcements or publicity relating to the Company or its competitors or relating to trends in its industry; changes in expectations as to future financial performance, including financial estimates or recommendations by securities analysts and investors; future sales of its common stock; changes in economic conditions in the marketplace, general conditions in the U.S. economy, financial markets or the banking industry; and other developments. These factors may adversely affect the trading price of the Company's common stock, regardless of actual operating performance, and could prevent stockholders from selling their common stock at a desirable price.

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In the past, stockholders have brought securities class action litigation against a company following periods of volatility in the market price of their securities. The Company could be the target of similar litigation in the future, which could result in substantial costs and divert management’s attention and resources.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company's headquarters are located at 60 State Street in leased property in Boston, ~~Mass.~~MA. The Bank's headquarters are located in owned and leased facilities located in Pittsfield, ~~Mass.~~MA. The Company also owns or leases other facilities within its primary market areas: Greater Boston (including Worcester, MA); Berkshire County, Massachusetts; Pioneer Valley (Springfield area), Massachusetts; Southern Vermont; the Capital Region (Albany area), New York; Central New York; ~~Northern~~Central and Eastern Connecticut; and ~~and Princeton area, New Jersey.~~Southern Rhode Island. As of December 31, ~~2017,~~20201 the Company had ~~113~~106 full-service branches in Massachusetts, New York, Connecticut, ~~Vermont, Central~~and Vermont. The Company opened a commercial banking offices in Providence, Rhode Island and New ~~Jersey, and Eastern Pennsylvania.~~Haven, Connecticut during 2021.

The Company also has regional locations which are full-service commercial offices located in Boston, MA.; Pittsfield, MA.; Springfield, MA.; Albany, N.Y.; East Syracuse, N.Y.; Hartford, ~~Conn.~~CT.; Willimantic, CT. Worcester, MA.; Burlington, ~~MA.;~~MA, Providence RI, and ~~Lawrenceville, N.J. In addition, the Company has eight lending locations in Central/Eastern, Massachusetts.~~New Haven, CT. The Bank's wholly-owned subsidiary, Firestone Financial, LLC, is headquartered in the Boston metro area.

~~Berkshire Insurance Group Inc. operates from 12 locations in Western Massachusetts and East Syracuse, N.Y. in both stand-alone premises as well as in rented space located in the Bank’s premises.~~

~~The Company acquired Commerce Bancshares ("Commerce") in October of 2017, obtaining 13 branches in and around the Worcester, MA area. The Company also assumed Commerce's three branches and three~~ Its 44 Business Capital lending ~~offices in the Boston metro area.~~

The Company acquired First Choice Bank in December of 2016, assuming eight full-service branches in the Princeton, N.J. and greater Philadelphia areas. As a part of the acquisition, First Choice Loan Services Inc.,division is headquartered in East Brunswick, N.J., became a wholly-owned subsidiary of the Bank. As a national mortgage lender, the Company acquired its 12 loan production offices across six states. In 2016, the Company sold two existing branches that management determined to have redundancy with its current footprint.Blue Bell, Pennsylvania.

Berkshire continues to enhance its new retail branch design which eliminates traditional teller counters and provides an interactive customer service environment through “pod” stations which include automated cash handling technology. In many cases, this branch design also includes a multimedia community room which is offered for use by nonprofit community groups. The Company has begun introducing MyTeller automated remote teller stations at new offices and targeted existing offices. The Bank has made its workplace more flexible as certain designated functions are approved for telecommuting arrangements. As a result of its merger and efficiency initiatives, the Bank has excess facilities space in various locations which is some cases is owned or subject to leases. The Company has designated certain excess real estate as held for sale and is evaluating further real estate consolidations.

Access to most Company properties was restricted during periods of 2020 and 2021 due to the pandemic, and special cleaning and safety protocols were instituted. Drive-up teller facilities, automated teller machines, and interactive teller machines were relied on to maintain ongoing customer access, in addition to the Bank’s internet, telephone, mobile banking channels, and its MyBanker teams. Most back-office staff used home environments and telecommunications capacities to accommodate the shift out of the office due to the pandemic.

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ITEM 3. LEGAL PROCEEDINGS

As of December 31, ~~2017,~~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. ~~However, other than the items noted below, neither the Company nor~~A summary of certain legal matters involving unsettled litigation or pertaining to pending transactions are as follows:

On February 4, 2020, the Bank isfiled a ~~defendant party to any pending legal proceedings that it believes,~~complaint in the ~~aggregate, would have a material adverse effect on~~New York State Supreme Court for the ~~financial condition or operations~~County of ~~the Company. Additionally, an estimate~~Albany against Pioneer Bank (“Pioneer”) seeking damages of ~~future, probable losses cannot be estimated as of December 31, 2017.~~

~~On April 28, 2016, Berkshire Hills and Berkshire Bank were served with a complaint filed in the United States District Court, District of Massachusetts, Springfield Division.~~approximately $16.0 million. The complaint ~~was filed by an individual Berkshire Bank depositor, who claims~~alleges that Pioneer is liable to have filed the complaint on behalf of a purported class of Berkshire Bank depositors, and alleges violations of the Electronic Funds Transfer Act and certain regulations thereunder, among other matters. On July 15, 2016, the complaint was amended to add purported claims under the Massachusetts Consumer Protection Act. The complaint seeks, in part, compensatory, consequential, statutory, and punitive damages. Berkshire Hills and Berkshire Bank deny the allegations contained in the complaint and are vigorously defending this lawsuit.

~~On January 29, 2018,~~ the Bank ~~was served with an amended complaint filed nominally against Berkshire Hills in the Business Litigation Session~~for a credit loss of ~~the Massachusetts Superior Court sitting in Suffolk County. The amended complaint was filed by two residuary beneficiaries of an estate planning trust that was administered~~approximately $16.0 million suffered by the Bank in the third quarter of 2019 as ~~successor trustee following~~a result of Pioneer’s breach of loan participation agreements in which it served as the ~~death~~lead bank, as well as constructive fraud, fraudulent concealment and/or negligent misrepresentation. Pioneer has filed a motion to dismiss aspects of the ~~trust donor,~~Bank’s complaint, which motion was allowed in part by the court to dismiss the Bank’s negligent misrepresentation claim, and ~~alleges~~denied in part by the court to allow all other claims by the Bank ~~breached~~to proceed. Discovery is now underway in this action. The Company wrote down the underlying credit loss in its ~~fiduciary duty~~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 ~~violated~~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 in this matter, and discussions have proceeded between the parties to find a mutually acceptable resolution. On July 28, 2021, a class action complaint was filed by the original 93A claimant against the Bank in the ~~course~~Massachusetts Superior Court for Suffolk County, pursuant to a pre-negotiated Memorandum of ~~performing~~Understanding (“MOU”) between the parties. In accordance with the MOU, the parties have filed and the court has preliminarily approved a settlement agreement, under which the Bank expects to pay damages of approximately $510,000 in exchange for the dismissal with prejudice and release of all claims that have been or could have been asserted in the filed class action lawsuit on behalf of the plaintiff and all putative settlement class members, plus certain costs for administration of the class action settlement and legal fees incurred by the named plaintiff up to the amount of $85,000. The court granted preliminary approval of the settlement on October 18, 2021 and set a hearing date for final approval. The settlement administrator issued notice to class members shortly after preliminary approval, informing them of the settlement and of the opportunity to object. No objections were received prior to the objection deadline set by the court. On February 23, 2022, the court granted final approval of the settlement agreement and dismissed this action with prejudice accordingly.

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 ~~duties~~former senior corporate officers generally alleging wrongful termination as ~~trustee.~~a result of purported whistleblower retaliation and other violations of New Jersey state employment law. The complaint ~~seeks compensatory, statutory,~~also purports to name the Bank and ~~punitive damages. Berkshire Hills~~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 ~~Berkshire~~the Bank ~~deny~~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 ~~allegations contained~~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. On June 30, 2021, the court dismissed the plaintiff’s complaint without prejudice in support of FCLS’s petition to compel arbitration. The parties are preparing for arbitration proceedings that are expected to occur in the ~~complaint and are vigorously defending this lawsuit.~~first half of 2022.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The common shares of the Company trade on the New York Stock Exchange under the symbol “BHLB”. ~~The following table sets forth the quarterly high and low sales price information and dividends declared per share of common stock in 2017 and 2016.~~

2017 High Low Dividends
Declared
First quarter $ 37.45
$ 32.90
$ 0.21
Second quarter 38.65
33.55
0.21
Third quarter 39.00
32.85
0.21
Fourth quarter 40.00
35.10
0.21

2016
First quarter $ 28.93
$ 24.71
$ 0.20
Second quarter 28.18
24.80
0.20
Third quarter 28.37
25.90
0.20
Fourth quarter 37.35
27.25
0.20

The Company had approximately ~~3,646~~3,932 holders of record of common stock at February ~~23, 2018.~~25, 2022.

Dividends

The Company intends to pay regular cash dividends to common ~~and preferred~~ shareholders; however, there is no assurance as to future dividends because they are dependent on the Company’s future earnings, capital requirements, financial condition, and regulatory environment. Dividends from the Bank have been a source of cash used by the Company to pay its dividends, and these dividends from the Bank are dependent on the Bank’s future earnings, capital requirements, and financial condition. Dividends from the Bank are currently subject to approval by the Massachusetts Division of Banks and the FDIC. Further information about dividend restrictions is disclosed in Note 1819 - Shareholders’ Equity and Earnings per Common Share of the Consolidated Financial Statements.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

The Company occasionally issues unregistered shares of common stock to vendors or as consideration in contracts for the purchase of assets, services, or operations. ~~The Company issued 30,478~~During 2021, there were no shares ~~in 2017 and 8,014~~transferred. During 2020, there were no shares ~~in 2016.~~transferred.

Purchases of Equity Securities by the Issuer and Affiliated Purchases

On ~~December 2, 2015,~~April 28, 2021, the Company announced that its Board of Directors ~~authorized~~had approved a ~~new~~ stock repurchase program pursuant to which the Company may repurchase up to ~~500 thousand~~2,500,000 shares of ~~the Company's~~its common stock ~~representing approximately 1.6% of~~through April 30, 2022. On September 13, 2021, the Company’s then outstanding shares. The timing of the purchases will depend on certain factors, including but not limited to, market conditions and prices, available funds, and alternative uses of capital. TheCompany announced that it had completed this stock repurchase ~~program may be carried out through open-market purchases, block trades, negotiated private transactions~~program. The Company repurchased 2,500,000 shares of its common stock at an aggregate price of $68.7 million, or ~~pursuant to a trading plan adopted in accordance with Rule 10b5-1 under the Securities Exchange Act~~an average price of 1934. Any repurchased shares will be recorded as treasury shares. The repurchase plan will continue until it is completed or terminated by the Board of Directors. As of year-end 2017, no shares had been purchased under this program.$27.48 per share.

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Period

Total number of

shares purchased

Average price

paid per share

Total number of shares

purchased as part of

publicly announced

plans or programs

Maximum number of

shares that may yet

be purchased under

the plans or programs

October 1-31, ~~2017~~2021

—

~~500,000~~—

November 1-30, ~~2017~~2021

—

~~500,000~~—

December 1-31, ~~2017~~2021

—

~~500,000~~—

Total

—

—$

—

~~500,000~~

—

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Common Stock Performance Graph

The performance graph compares the Company’s cumulative shareholder return on its common stock over the last five years to the cumulative return of the NYSE Composite Index and the ~~PHLX~~ KBW NASAQ Regional ~~Bank~~Banking Index. Total shareholder return is measured by dividing total dividends (assuming dividend reinvestment) for the measurement period plus share price change for a period by the share price at the beginning of the measurement period. The Company’s cumulative shareholder return over a five-year period is based on an initial investment of $100 on December 31, ~~2012.~~2016.

Information used on the graph and table was obtained from a third party provider, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information.


	Period Ending
Index	12/31/16	12/31/17	12/31/18	12/31/19	12/31/20	12/31/21
Berkshire Hills Bancorp, Inc.	100.00	101.65	76.68	96.38	52.72	89.16
NYSE Composite Index	100.00	118.73	108.10	135.68	145.16	175.17
KBW NASDAQ Regional Banking Index	100.00	101.75	83.95	103.94	94.89	129.65

Source:S&P Global Market Intelligence

ITEM 6. RESERVED

Period Ending
Index 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17
Berkshire Hills Bancorp, Inc. 100.00
117.53
118.35
132.76
173.10
175.94
NYSE Composite Index 100.00
126.06
134.62
129.40
144.72
171.66
PHLX KBW Regional Banking Index 100.00
146.30
149.67
158.62
219.27
223.02

In accordance with the rules of the SEC, this section captioned “Common Stock Performance Graph,” shall not be incorporated by reference into any of our future filings made under the Securities Exchange Act of 1934 or the Securities Act of 1933. The Common Stock Performance Graph, including its accompanying table and footnotes, is not deemed to be soliciting material or to be filed under the Exchange Act or the Securities Act.

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Company recruited Subhadeep Basu as SEVP/ Chief Financial Officer, replacing the prior CFO who resigned during the quarter. Also, during 2021, following the departure of the SEVP/Head of Consumer Banking, the Company recruited Lucy Bellomia as EVP/Head of Retail Banking and Ellen Steinfeld as EVP/Head of Consumer Lending and Payments. During 2021, Board Chair J. Williar Dunlaevy retired from the board, and Vice Chair David Brunelle was elected to the position of Board Chair. Three new directors joined the Board during the year: Nina A. Charnley, Jeffrey W. Kip, and Michael A. Zaitzeff.

~~Berkshire increased~~

In the ~~quarterly~~second quarter of 2021, the Company announced its Berkshire’s Exciting Strategic Transformation (BEST) plan. The comprehensive BEST plan is targeted to improve the customer experience, deliver profitable growth, enhance stakeholder value and strengthen Berkshire’s community impact with improved focus on long-term efficiency, its customers, and its communities. The BEST plan has five major goals over the three-year plan period:

•Return On Tangible Common Equity (ROTCE):10 - 12%

◦2021 Return on tangible common ~~dividend by 5%~~equity was 10.80%; Adjusted ROTCE was 7.74%

•Return on Assets (ROA):1.00 – 1.05%

◦2021 ROA was 0.98%; Adjusted ROA was 0.70%

•Annual Pre-tax Pre-Provision Net Revenue (PPNR):$180 - 200 million

◦2021 PPNR was $149 million; adjusted PPNR was $102 million

•Net Promoter Score (NPS) in ~~January 2017,~~top quartile among New England banks

◦NPS measures customer experience and ~~this was followed by another increase of 5% declared~~is correlated with business growth potential

◦NPS measure to be initiated in ~~January 2018.~~2022

~~Berkshire relocated its corporate headquarters to 60 State Street in Boston, which is well located~~•ESG ranking in the ~~downtown financial hub. It now~~top quartile nationally based on composite metrics tracked by the Company

◦ESG percentile ranking improved from 39th at year-end 2020 to 24th at year-end 2021

The plan has ~~four offices serving Boston~~three major pillars; optimize, digitize, and enhance, outlined below along with the Company's 2021 accomplishments:

•Optimize

◦Completed the sale of its Mid-Atlantic branch operations, sold insurance operations, and consolidated 16 branch locations.

◦Procurement programs were widely initiated throughout the company.

◦Excess real estate was identified and designated as held for sale.

◦A third-party partnership was entered into for residential mortgage servicing.

•Digitize

◦Built out Application Programming Interfaces (APIs) to core systems.

◦Data warehouse technology was enhancedand enterprise analytics were expanded.

◦A mobile deposit application was deployed to customers through a fintech partnership.

◦A third-party fintech partnership was entered into for internet and mobile consumer loan origination.

•Enhance

◦Front-line bankers were recruited across multiple business lines.

◦Socially responsible wealth management investment solutions were introduced.

◦A residential mortgage origination conduit was initiated with third-party in-market bank partners.

◦A 5% share repurchase was completed and a ~~total~~new repurchase program for additional buybacks was announced after year-end for approximately 9% of ~~19 offices~~outstanding shares.

In the third quarter, Berkshire announced its BEST Community Comeback initiative that targets to lend and invest $5 billion over three years to strengthen the economic health of its communities, an industry-leading commitment given the relative size of the program and the Bank. This initiative includes specific targets for small business lending, lending in low and moderate income neighborhoods, mortgage lending to minorities, and lending for low-

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carbon projects amongst other non-financial measures. The plan is expected to help create more businesses and jobs, assist more families in achieving the dream of homeownership and support the transition to a low-carbon economy.

Berkshire resumed commercial loan growth in the ~~Greater Boston area, including Worcester.~~fourth quarter of 2021 after a number of quarters of attrition from targeted run-off and lower demand.Growth of non-interest-bearing deposit account balances totaled 21% in 2021. The Company used excess liquidity to reduce higher cost wholesale funds and to increase the portfolio of investment securities. At year-end 2021, the Company viewed itself as having excess liquidity to support plans for resumed loan growth, further reductions in higher cost funds, and stock repurchases in the coming year.

The Company ended 2021 with cash and cash equivalents measuring 14% of total assets, contributing to strongly positive earnings sensitivity to higher interest rates.These low yielding assets reduced profitability metrics in 2021 but positioned the Company to benefit from forecast higher interest rates in 2022 and beyond.In addition to its $1.6 billion in year-end cash and equivalents, the Company also had $3.4 billion in loans with scheduled repricings within three months.

At year-end 2021, many of the Company’s asset quality and credit performance metrics had returned to pre-pandemic levels.The Company reduced the level of its credit loss allowance/loans in the fourth quarter and anticipated possible further normalization of reserve coverage if public health and economic conditions continued to support strong credit performance.

In 2021, Berkshire established a new banking region in Southern Connecticut and recruited ~~commercial~~a veteran Connecticut banking professional as SVP, Regional President & Middle Market Team Leader in Southern Connecticut, based in New Haven. The Company also opened a new Commercial Banking office in Providence, Rhode Island to complement and ~~private banking leadership for this market, along with commercial leadership for the Mid-Atlantic operations, and seasoned specialists in international and government banking. Berkshire continues to~~ expand its ~~virtual teller~~existing Rhode Island presence. The Company also hired experienced frontline bankers in its growing Commercial Banking, SBA Lending, Asset-Based Lending, Wealth Management, Private Banking, and MyBanker ~~resources to cost-effectively strengthen its sales and service channels.~~teams.

The Company ~~consolidated three~~believes that merger activities among major local competitors provide opportunity for customer and talent acquisition over the near and medium term. The Company’s strategy is to be “banker heavy and branch light” in newer markets. The Company’s goal is to produce positive operating leverage through revenue growth and disciplined expense management utilizing expanded market channels, it’s 175 year history of community focus and it’s Digitouch™ strategy which combines personal service with the convenience of user-friendly technology.

The Company reduced its total branch banking offices from 130 offices at the start of the year to 106 offices at year-end 2021, including the 8 Mid-Atlantic offices sold and ~~opened two new branches during~~ the ~~year. By year-end, full time equivalent staff totaled nearly 2,000 positions. In~~consolidation of 16 other offices. The Company is considering the further consolidation of another 5 -10 branches. Berkshire executed this plan in conjunction with the ~~federal tax reform, Berkshire announced additional investments in~~expansion of its ~~team and communities, including an increase~~MyBanker concierge style banking program. Deposit retention in the ~~minimum wage, bonuses~~consolidated branches is regarded as high in part due to the MyBanker program,

At year-end 2021, forecasts of economic and public health conditions were supportive of the prospects for ~~most employees, investments~~continued improvement in ~~training at AMEBU (America’s Most Exciting Bank University),~~the Company’s markets.While uncertainties remain about the course of public health and ~~a $2 million contribution~~government programs that have supported the economy during the pandemic, the Company views itself as positioned with excess capital and excess liquidity to Berkshire’s foundation which provides community charitable support. Berkshire crossed the $10 billion regulatory threshold for total assets with a goal that future Commerce-related earnings accretion will more than offsetsupport its strategies. Price inflation has recently reached levels not seen in four decades, and interest rate levels are expected to increase sharply after years of low interest rates.The Company’s income is targeted to benefit from higher ~~regulatory costs and will provide support for further profitability improvement.~~rates based on its asset sensitive interest rate sensitivity profile.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, ~~2017~~2021 AND ~~2016~~DECEMBER 31, 2020

Summary:~~Berkshire offers a competitive mix~~Total assets decreased to $11.6 billion from $12.8 billion during 2021. This included the $0.6 billion impact of the sale of the Mid-Atlantic branch operations, along with the impact of $0.6 billion in Paycheck Protection Program (“PPP”) loan payoffs. Cash and ~~deposit products~~cash equivalents increased to ~~serve~~14% of total assets, contributing to heightened asset sensitivity which is expected to benefit income in the ~~retail~~forecast rising rate environment. The ratio of loans to deposits decreased to 68% from 79%, and ~~commercial markets in its regions, and in certain national specialty lending markets. Net interest income~~the regulatory ratio of common equity tier 1 capital to risk-weighted assets increased to 15.0% from ~~these products is its primary revenue source; the related staff, facilities, and systems are its primary operating expenses.~~13.8%. Most major measures of asset quality strengthened as economic

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conditions improved from distressed pandemic conditions, with many measures returning to pre-pandemic levels. The Company emphasizes services and fee revenue business to deepen market and wallet share and to diversify revenues. Additionally, increasing regulatory requirements related to capital and liquidity have led to more emphasis on products and services that do not require balance sheet resources. The Company has expanded itspaid down most higher cost wholesale ~~lending and deposit practices to provide more product and balance sheet flexibility.~~

~~Berkshire~~funding which, along with ongoing repricing of maturing retail time deposits, continued to ~~extend, deepen,~~lower overall funding costs and ~~diversify its banking footprint~~support the net interest margin. Stock repurchases were resumed in ~~2017, with total assets of $11.6 billion~~2021 following a pause in 2020 and are targeted to accelerate in 2022.

Investments: Short-term investments remained elevated at ~~year-end. Total assets increased by $2.4~~$1.52 billion, or ~~26%, including $1.8 billion acquired with Commerce.~~ 14% of earning assets at year-end 2021.

These funds are available for ongoing payoffs of remaining maturing brokered deposits and are available to fund targeted net loan growth in 2022, as well as potential increases in the investment securities portfolio.Most ~~categories~~short-term investments are held at the Federal Reserve Bank of Boston. The yield on short-term investments was approximately 0.17% in the final quarter of 2021, which brought down the overall yield on earning assets and ~~liabilities increased due~~the return on assets until the planned opportunity to ~~this merger. Excluding acquired Commerce balances, organic loan growth from business activities was $0.5 billion, or 8%,~~source higher yielding loans and ~~organic deposit growth was $0.4 billion, or 6%.~~investments in 2022.

Shareholders’ equity increased by $0.4 billion, or 37%, mostly due to the stock issued in the stock offering and as merger consideration. Berkshire also benefited from strong internal capital generated from operations. There was improvement in most primary metrics related to capital, liquidity, and asset quality.

~~Investment Securities.~~ ~~Berkshire’s goal is to maintain a high quality portfolio consisting primarily of liquid investment securities with managed durations, supported primarily by wholesale funds.~~ The portfolio generates interest income and provides additional liquidity and interest rate risk management flexibility. The portfolio is managed to contribute to earnings per share and return on equity, taking into account regulatory risk classifications.

~~The Company continuously evaluates the portfolio’s size, yield, diversification, risk, and duration.~~

~~In 2017, the portfolio average yield increased despite ongoing interest rate pressures in medium term instruments. Due to its size, Berkshire created earnings synergy by restructuring the mix~~ of acquired Commerce short and long term investments - contributing to the targeted earnings accretion of that acquisition. Portfolio growth was also targeted to leverage the excess capital from the May common stock offering, reducing the near-term EPS dilution from the new shares while the Commerce acquisition was pending, and to supplement loan growth as a use of this capital.

~~Total~~ investment securities increased by ~~$270~~$325 million, or ~~17%~~15%, to ~~$1.9~~$2.55 billion in ~~2017, including a $114 million balance contributed by~~2021, with much of this growth recorded in the ~~Commerce acquisition. The portfolio increase included a $199 million increase~~fourth quarter in ~~available for sale~~order to avoid further accumulation of low yielding short-term investments.

Growth was concentrated in agency ~~collateralized mortgage obligations and a $74 million increase~~mortgage-backed securities. Approximately 53% of the net growth was in held to maturity ~~municipal bonds, as these remain the primary components of the portfolio, balancing interest rate sensitivity and yield. The Company also increased its investment~~securities in ~~available for sale corporate bonds by $55 million, with the growth concentrated in financial institution subordinated debt securities.~~

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The Company sold equity securities, producing a $20 million net reduction in these securities and realizing $13 million in total net securities gains. These gains were already included as a component of shareholders’ equity inorder to limit negative impacts on accumulated other comprehensive ~~income. This sale took advantage~~income in shareholders’ equity if rising rates lead to bond price declines which would result in charges to shareholders’ equity. The portfolio is highly liquid, with an average life of ~~strong market conditions~~4.6 years for ~~bank stocks and~~ the ~~realized capital gains contributed to the Company’s tax management objectives.~~bond portfolio at period-end. The Company’s available for sale equities portfolio totaled $45 million at year-end 2017, consisting mostly of northeast bank stocks and high yield equities. The adoption of ASU 2016-01 requires that current period unrealized gains and losses on these securities be recognized in income beginning in 2018. The Company is assessing its strategies in light of these requirements.

~~The fourth quarter~~ portfolio yield decreased ~~slightly~~ to ~~3.55%~~2.04% in the fourth quarter of 2021 from ~~3.58% from year-to-year, while~~2.69% in the ~~full year yield increased to 3.43% from 3.28%. Due to the federal tax reform, the Company estimated that the fully taxable equivalent yield~~fourth quarter of ~~the securities portfolio would decrease by approximately 0.15% in future periods. This is primarily~~2020, due to ~~the municipal bond portfolio, which continues to meet the Company’s profitability objectives despite the lower taxable equivalent yield.~~ongoing compression of asset yields.

The ~~year-end weighted average life~~portfolio of the bond portfolio decreased slightly to 5.5 years from 5.9 years. The Company estimates that the average life of the portfolio would increase to 8.7 years in the event of a 300 basis point increase in interest rates. Debtinvestment securities not meeting investment grade criteria totaled $70 million at year-end 2017 and consisted primarily of unrated bank debt securities acquired in the Commerce merger, as well as certain high yield corporate bonds. There were no impairments recorded during the year or at year-end, and all securities were performing during the year and at year-end. For securities available for sale and held to maturity, the fair value of securities with unrealized losses exceeding one year was 13% of total securities at year-end 2017, compared to 2% at the prior year-end. The total unrealized loss on these securities was 3% of fair value at year-end 2017. This generally reflected lower market prices resulting from higher market rates rather than credit changes in the portfolio. The nethad an unrealized gain ~~on investment securities decreased to $11~~of $6 million, or ~~0.6%~~0.2% of cost, at year-end 2017, compared to $20 million, or 1.3% of cost, at year-end 2016. This change primarily reflected the equity securities gains recognized on sale, as well as lower bond prices related to higher medium term interest rates at the end of 2017.

~~Loans.~~ Berkshire is expanding and deepening retail and commercial lending activities through organic growth and acquisitions, including a focus on specialized lending. The Company uses secondary markets and a growing network of financial institution partners in managing and diversifying its portfolio, as well as supporting its fee income objectives and managing its capital and liquidity.

Total loans increased by $1.75 billion, or 27%, to $8.3 billion in 2017. The Commerce acquisition added $1.24 billion in balances, including $1.09 billion in commercial loans split between commercial real estate and commercial and industrial loans. Most of the Commerce loan portfolio is located in the Eastern Massachusetts markets. The Commerce loans were preliminarily valued at a $102 million, or 7.6%, discount, which was primarily due to the Commerce portfolio of taxi medallion loans located in Boston and Cambridge and reflects the adverse conditions in this business due to ride-sharing competition. Commerce also engaged in other specialty and non-conforming commercial lending activities which contributed to the discount.

Excluding the Commerce acquisition, loans increased by $509 million, or 8% in 2017. This growth included $223 million in commercial and industrial loans, $72 million in commercial real estate, and $162 million in net growth in residential mortgages. Total commercial loans increased organically by 8% and, including the Commerce balances, commercial loans increased to 61% of total loans from 56% at the start of the year. The Company views its commercial and industrial loans and its owner occupied commercial real estate loans as an important element of its commercial relationship strategies. These loans increased by 44% to $2.35 billion in 2017 and advanced to 46% of total commercial loans at year-end 2017. Berkshire also engages in commercial loan participations and other wholesale activities as part of its balance sheet management objectives. Berkshire recruited commercial banking leadership for its expanding Greater Boston region and in its new Mid-Atlantic markets. The Company’s goal is to gain market share based on its expansion into these large and growing markets, including its positioning as the largest regional bank with corporate headquarters in Boston.

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Due to its asset management strategies in recent years, Berkshire has been positioned to support its markets while also managing well within regulatory guidelines for commercial real estate lending. Berkshire’s total non-owner occupied commercial real estate exposure measured 270% of regulatory capital at period-end, compared to ~~265%~~$68 million, or 3.2% of cost at the start of the year, due to the rise in medium term interest rates during 2021. The Company continues to evaluate possible expansion of the securities portfolio to utilize a portion of excess short-term investments, taking into consideration the outlook for interest rates, loan growth, and deposit behaviors.

Loans:Total loans decreased by $1.3 billion, or 16% in 2021, to $6.83 billion. This primarily reflected $0.6 billion in PPP loan pay-offs and $0.6 billion in run-off of residential mortgages and consumer loans.The PPP loan repayments were based on SBA loan forgiveness procedures and were anticipated. Excluding these loans, total commercial loans decreased by $74 million due to a $158 million decrease in commercial loans to COVID-sensitive industries.

Commercial loan growth turned positive in the final quarter of the year as new frontline bankers contributed to loan originations. This also contributed to a strengthening of the commercial loan pipeline at year-end.

At year-end 2021, non-owner occupied commercial real estate loans measured 223% of risk based capital, compared to the 300% federal regulatory monitoring ~~guidelines (based on regulatory definitions).~~ guideline.Construction ~~loan exposure was 40%~~loans measured 26% of ~~bank regulatory~~risk-based capital, ~~at year-end both in 2017 and 2016,~~ compared to the 100% ~~regulatory~~ guideline. ~~Berkshire monitors its~~Included in commercial ~~real estate lending risk using~~and industrial loans, the ~~enhanced processes required for banks exceeding the monitoring thresholds even though it is well margined below those thresholds.~~

~~Berkshire’s commercial specialty lending includes asset based lending, business equipment lending, and SBA lending. ABL outstandings totaled $306~~remaining balance of PPP loans was $30 million at year-end 2017. Business equipment loans, through Berkshire’s Firestone division, totaled $227 million at that date. The Bank originates SBA 7(a) loans for sale through its 44 Business Capital division (primarily in the mid-Atlantic area), as well as direct loans by its business banking teams throughout its regions. Based on the annual SBA national originations rankings as of September 30, Berkshire placed 17^th ~~nationally by SBA loan count and it placed 32~~^nd ~~nationally for total amount loaned. Most earnings related to SBA lending are included in loan fee income,~~2021, having declined from ~~the sale of guaranteed portions of SBA loans.~~

Residential mortgages increased by $210 million, or 11%, in 2017 including $48 million contributed by the Commerce acquisition. Organic growth measured 9%. Conforming mortgage originations are produced by Berkshire’s national mortgage banking operation and are generally held for sale to the secondary market. Mortgage banking income and activity are addressed in the later fee income section of this discussion. Loans held for investment are primarily jumbo loans for which there is a more limited secondary market. Residential mortgage balances were also affected by opportunistic wholesale activity of seasoned loans, with purchases totaling $125 million and sales totaling $294 million. Consumer loan growth in 2017 totaled $150 million, or 15%, including $100 million in acquired Commerce consumer loans. Berkshire produced $59 million, or 10%, growth in auto and other loans, which was concentrated in prime indirect auto loans originated by the Company’s team in its regional markets.

The average fourth quarter loan yield increased to 4.47% in 2017 from 4.00% in 2016, reflecting the benefit of short term rate increases as well as the contributions from the fair value marked First Choice and Commerce loans and the favorable shift in mix towards higher yielding commercial loans. The fourth quarter yield increased in all major loan categories. The contribution to the net interest margin from purchased loan accretion was 0.21% and 0.10% in the above two periods respectively. The repricing terms of the total loan portfolio shortened modestly in 2017, with 42% repricing in one year, 22% in one to five years, and 36% over five years. This reflects the shift in mix towards shorter duration commercial loans. As of year-end 2016, 40% of the portfolio was scheduled to reprice within one year, 20% in one to five years, and 40% over five years.

~~Asset Quality.~~ Berkshire’s Chief Risk Officer and a Risk Management and Capital Committee of the Board oversee risk management and asset quality. This includes setting loan portfolio objectives, maintaining sound underwriting, close portfolio oversight, and careful management of problem assets and potential problem assets. Additionally, merger due diligence is an integral component of maintaining asset quality. Acquired loans are recorded at fair value and are deemed performing regardless of their payment status. Therefore, some overall portfolio measures of asset quality are not comparable between years or among institutions as a result of recent business combinations. A general goal is to achieve significant resolutions of impaired loans acquired in bank mergers generally in the first two years following the acquisition date. Berkshire’s asset quality has reflected its strong credit disciplines together with the generally favorable economic environment in the extended U.S. recovery and asset values supported by the low inflation environment.

Asset quality metrics remained favorable and generally improved in 2017. Net loan charge-offs measured 0.19%. At period-end, non-performing assets were 0.21% of total assets. At year-end, the total contractual balance of purchased credit impaired loans was $209 million, with a $97 million carrying value, representing a $112 million discount, which is a 54% discount from the contractual amount. Due to the Commerce acquisition, the contractual balance more than doubled from $87$633 million at the start of the year due to payoffs from SBA loan forgiveness.Also included in commercial and industrial loans are the ~~carrying~~asset-based lending loans managed by the Company’s growing ABL team in the Northeast and MidAtlantic. At year-end 2021, total C&I loans included $440 million of ABL balances, which was a 40% increase over the prior year-end. The Company’s 44 Business Capital national SBA lending group ranked 24th nationally for the SBA year ending September 30, 2021, with a total of $293 million in gross loans approved.The Company sells the SBA guaranteed portion of these loans, with the result that 44 Business Capital is one of the Company’s largest sources of non-interest income.

Residential mortgage runoff reflected ongoing prepayments in the low interest rate environment. Berkshire is expanding its mortgage origination team and is also developing conduit relationships with in-market third-party lenders. Consumer loan runoff primarily represents targeted run-off of the indirect auto loan portfolio. The balance ~~more than doubled from $47 million. Included in~~of this ~~amount~~portfolio was $110 million at year-end ~~2017 was~~2021, compared to $222 million at year-end 2020. In the fourth quarter of 2021, the Bank initiated a ~~$12 million accretable balance including $11 million added~~relationship with a leading artificial intelligence digital (AI) lending platform designed to improve access to affordable consumer credit while reducing the ~~Commerce acquisition.~~

risk and costs of lending. The

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Company is investigating additional consumer lending channels as it pursues the strategies and goals set out in its BEST and Berkshire Community Comeback programs.

~~The Company views its problem~~At year-end 2021, 50% of total loans were scheduled to mature or reprice within three months. contributing to the modeled asset sensitivity of the Company’s interest rate risk profile.

Asset Quality and Credit Loss Allowance:Major asset quality metrics ~~as generally low~~improved in 2021, trending towards pre-pandemic levels. Total non-accruing loans decreased year-over-year and ~~benefiting from~~ended below the ~~extended period~~year-end 2019 pre-pandemic level, declining to $35 million and measuring 0.52% of ~~national economic recovery~~period-end loans. Total delinquent loans decreased year-over-year and ~~monetary stimulus following the 2008 financial crisis.~~compared to year-end 2019, totaling $78 million and measuring 1.15% of year-end 2021 loans. Net loan charge-offs ~~were 0.19%~~decreased compared to the prior two years, totaling $21 million in 2021 and measuring 0.29% of average loans in ~~2017,~~2021. Accruing troubled debt restructurings totaled $17 million at year-end 2021 compared to ~~0.21%~~$18 million at year-end 2020.Total COVID-19 loan modifications decreased to $14 million at year-end 2021 from approximately $1.5 billion in the ~~prior year. Year-end 2017 non-performing assets totaled $24~~second quarter of 2020 and $316 million ~~or 0.21%~~at year-end 2020.

Criticized loans decreased year-over-year to $242 million, measuring 3.5% of total ~~assets, compared~~year-end 2021 loans. These included classified loans which decreased to ~~$22~~$142 million, ~~or 0.24%~~measuring 2.1% of total assets, at the start of the year. For loans from business activities, net loan charge-offs measured 0.19% of average loans in 2017, while this measure was 0.17% for average loans acquired in business combinations.

~~Loan Loss Allowance~~. The determination of the allowance for loan losses is a critical accounting estimate. The Company’s methodologies for determining the loan loss allowance are discussed in Item 1 of this report, and Item 8 includes further information about the accounting policy for the loan loss allowance and the Company’s accounting for the allowance in the Consolidated Financial Statements.

year-end 2021 loans. The Company considers the allowance for loan losses appropriate to cover probable incurred losses which can be reasonably estimated and which are inherent in the loan portfolio as of the balance sheet date. Under accounting standards for business combinations, acquired loans are recorded at fair value with no loan loss allowance on the date of acquisition. The fair value of acquired loans includes the impact of estimated loan losses for the life of the portfolio, including subjective assessments of risk. A loan loss allowance is recorded by the Company for the emergence of new probable and estimable losses relating to acquired loans which were not impaired as of the acquisition date. In the first period of combined operations, the Company may also establish an environmental component of the allowance related to newly acquired loans. Because of the accounting for acquired loans, some measures of the loan loss allowance are not comparable to periods prior to the acquisition date or to other financial institutions. Due to the Commerce acquisition, loans acquired in business combinations totaled $2.2 billion, or 26% of total loans at year-end 2017, compared to $1.3 billion, or 20% of total loans at year-end 2016.

The loan loss allowance increased by $8 million, or 18%, to $52 million in 2017. Due to the addition of the Commerce loans at fair value with no allowance on the merger date, this ratio decreased to 0.62% at year-end 2017 compared to 0.67% at year-end 2016. For business activities loans, the ratio of the allowance remained unchanged at 0.75%. For acquired loans, due to the addition of Commerce at fair value, this ratio decreased to 0.27% from 0.33%, and net charge-offs totaled $3 million. The year-end allowance provided 3.9X coverage of total net charge-offs, compared to 3.5X coverage in 2016. The allowance provided 2.3X coverage of year-end non-accrual loans in 2017 compared to 2.0X in 2016.

The credit risk profile of the Company’s loan portfolio is described in Note 7 - Loan Loss Allowance of the Consolidated Financial Statements. The Company’s risk management process focuses primary attention on loans with higher than normal risk, which includes loans rated special mention and classified (substandard and lower). These loans are referred to as criticized loans. Including acquired loans, they totaled $188 million, or 1.6% of total assets at year-end 2017, compared to $129 million, or 1.4% of total assets at year-end 2016. Acquired criticized loans increased by $54 million due to the Commerce acquisition. Criticized loans from business activities increased by $5 million and there was a significant shift from substandard to special mention loans, indicating improved condition of the portfolio. The Company viewshas 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. ~~Classified loans acquired in business combinations are recorded at fair value and are~~Accruing classified ~~as performing at the time of acquisition and therefore are not generally viewed as potential problem loans. In 2017, potential problem~~ loans decreased year-over-year to ~~$37 million from $51~~$106 million at ~~the start of the year.~~year-end 2021.

As discussed in Note 1 - Summary of Significant Accounting Policies of the Consolidated Financial Statements, in June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.” The ASU requires companies to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Forward-looking information will now be used in credit loss estimates. ASU No. 2016-13 is effective for interim and annual periods beginning after December 15, 2019. Early application will be permitted for interim and annual periods beginning after December 15, 2018. The Company is evaluating the provisions of ASU No. 2016-13, and will closely monitor developments and additional guidance to determine the potential impact on the Company's consolidated financial

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statements. The Company is in the process of identifying and implementing required changes to loan loss estimation models and processes and evaluating the impact of this new accounting guidance, which at the date of adoption is expected to increase the allowance for credit losses with a resulting negative adjustment to retained earnings. It is anticipated that banks will generally carry higher loan loss allowance estimates as a result of this change and that loan loss estimates will be made at acquisition date foron loans ~~acquired in business combinations.~~

~~Other Assets.~~ ~~Short term investments increased~~decreased by ~~$116~~$21 million, due to the overnight liquidity needed for the acquired Commerce payroll processing business. Bank owned life insurance increased by $52 million due to the purchase of additional policies, together with the Commerce acquisition. Total goodwill and intangible assets increased by $135 million which was also due to Commerce. The net deferred tax asset increased by $6 million to $47 million, with the $18 million year-end provisional write-down resulting from federal tax reform mostly offsetting the increase resulting from the Commerce acquisition.

~~Deposits.~~ Berkshire views its deposit programs as central to it funding and market management goals. Retail and commercial strategies focus on transaction accounts as being key to customer relationships. Interest bearing deposit products are positioned to be competitive while offering local convenience and the safety of FDIC insurance. Due to the impacts of technology on mobile and electronic banking, preferred customer channels are shifting and the Company seeks to maximize the benefits it offers as a local provider with the scale to compete with the delivery channels of national bank and nonbank competitors. The Company has been active in shifting the number, location, and configuration of its offices and customer facing staff in order to move with its markets and to reduce overhead related to older channels that are now less favored. Current initiatives include the expansion of virtual tellers and MyBankers. The Company has also utilized brokered time deposits as an additional funds source to complement its other strategies, manage its funding costs, and to support interest rate risk management goals. With the Commerce acquisition, the Company has added a specialty payroll processing business line that processes payments for payroll service bureau customers. In 2017, Berkshire added a senior government banking professional to provide more outreach to municipal accounts in the Company’s regions. The Company has also added a senior international banking professional who is augmenting the Company’s payments related business.

~~Berkshire’s deposits increased in 2017 by $2.1 billion,~~ or ~~32%~~17%, to ~~$8.7 billion.~~$106 million during 2021. The Commerce acquisition added $1.7 billion, including $0.5 billion in demand deposits, $0.8 billion in money market balances, and $0.3 billion in time deposits. Excluding Commerce, business activities resulted in 6% organic growth totaling $0.4 billion, including $0.1 billion, or 8% organic growth in money market balances and $0.3 billion, or 12% organic growth in time deposits. Time deposit growth included a $0.3 billion increase in brokered time deposits which were used to replace $0.2 billion in short term debt. Payroll deposits totaled $0.5 billion at year-end, including $0.1 billion in demand deposits and $0.4 billion in money market accounts. These balances fluctuate daily generally within a range of $0.2 - $0.5 billion, and totaled $0.3 billion at the timeratio of the ~~Commerce acquisition.~~

~~The Commerce acquisition added 16 branches in the Greater Boston area, including Worcester. Berkshire consolidated three branch offices in 2017, while opening two more, with another two scheduled~~allowance to ~~open in the first quarter of 2018. Excluding nonreciprocal brokered balances, average deposits per branch totaled $67 million at year-end 2017,~~total loans measured 1.55%, compared to ~~$60 million~~1.58% at the start of the year. The ~~Bank~~ratio of the allowance to total loans remains higher than the 0.94% ratio following the adoption of CECL and prior to the emergence of the pandemic. The Company anticipates that the allowance ratio may decline in 2022, depending on economic and qualitative factors, and depending on the portfolio performance and mix.

The allowance is ~~deploying its virtual teller technology~~based on a methodology which considers historic loss rates for loans by collateral type and includes components for the impact of forecast economic conditions on loss rates, as well as an evaluation of qualitative factors including current period loan performance metrics and consideration of the benefit of government support in ~~new offices~~reducing possible loss rates. The economic forecast utilizes third-party base case projections and ~~targeted existing offices.~~ estimates credit loss impacts for the next seven quarters, with straight-line reversion to historical losses thereafter. The overall weighted average portfolio life was estimated at approximately 2.9 years at year-end 2021.

Deposits and Borrowings: Berkshire ~~continues~~has been pursuing a course of reducing higher cost wholesale funds by paying off brokered time deposits and FHLB borrowings as they mature, as well as prepaying most longer maturity FHLB borrowings. Total wholesale funds were reduced to ~~diversify its distribution network,~~$340 million, or 3% of total year-end 2021 assets, compared to $1.18 billion, or 9% of total assets at year-end 2020.

Total deposits decreased by $147 million, or 1%, to $10.07 billion during 2021. Excluding the $383 million decrease in brokered deposits, total deposits increased by $236 million, or 2%, in 2021. Non-interest-bearing demand deposits increased by $524 million, or 21%, including ~~expanding its MyBanker~~the benefit of federal stimulus payments in the Company’s markets, along with funds inflows from maturing retail time deposits. The Company entered the year with $1.77 billion in retail time deposits and ~~private banking teams~~repriced maturing time deposits down in the current low rate environment, with the result that retail time deposits decreased by $324 million, and ~~integrating more closely with its wealth management, investment services, small business, insurance,~~most maturing funds were transferred to demand deposits and other ~~business lines. At~~deposit products, including savings deposits. Most of the remaining $1.45 billion remaining balance of retail time deposits at year-end 2021 was scheduled to mature in 2021, and the ~~Bank had four offices operating in metro Boston, which serve the expanding regional team located at the new corporate headquarters~~Company targets additional deposit cost savings on ~~State Street.~~these maturing deposits.

The Commerce acquisition provided additional liquidity to Berkshire’s combined operations, as reflected in the loan/deposit ratio, which decreased to 95% at the end of the year from 99% at the start of the year. Berkshire uses brokered deposits flexibly in combination with short term borrowings in managing its liquidity position and earnings objectives. Brokered deposits totaled $1.2 billion at year-end 2017, measuring 14% of total deposits at the start of the year. Commercial deposits increased to 29% from 26% of deposits due to the commercial orientation of Commerce. At year-end, estimated uninsured deposits totaled $2.0 billion, or 27% of total nonbrokered deposits, compared to $1.4 billion, or 24%, at the start of the year.

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~~The~~ cost of deposits ~~increased to 0.66%~~decreased in the fourth quarter of ~~2017,~~2021 to 0.19% from 0.47% in the same quarter of 2020. This mostly reflected the growth in non-interest-bearing checking accounts and the reduction and downward repricing of time deposits, which cost 0.80% compared to ~~0.56% in~~1.35% for the ~~fourth quarter of the prior year. While all major deposit categories had increases, the~~above respective periods. The total ~~increase was primarily driven by a 0.18% increase in the~~ cost of ~~money market accounts~~funds decreased to 0.26% from 0.60% for these periods and ~~a 0.11% increase in~~included the cost of time deposit accounts. Time deposit costs benefited from the amortization of purchased deposit discount related to the Commerce acquisition. Average one month treasury rates increased by 0.77% in the fourth quarter of 2017 compared to 2016. The 10 basis point increase in deposit costs has been more modest than the Company’s models, which assume that total deposit costs will increase over time by 40% of changes in market rates. The interest sensitivity of deposits in the current environment of expected future rate increases is a significant uncertainty in the banking industry, following the years of unusually low interest rates. The Company believes that it can benefit from the ~~diverse regional conditions in which it operates,~~paydown of borrowings.

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Other Assets and ~~also continues~~Liabilities:At year-end 2020, liabilities held for sale totaling $630 million and assets held for sale totaling $317 million included deposits and loans held for sale pursuant to ~~emphasize relationship and transactions accounts to manage potential future deposit cost increases.~~

~~Borrowings and Other Liabilities~~. ~~Nearly all of Berkshire’s senior borrowings at year-end were provided by~~ the Federal Home Loan Bank of Boston under established relationship programs. The FHLBB is secured by a general pledge of assets primarily consisting of mortgage backed securities and residential mortgages. The Bank uses FHLBB borrowings to manage overnight liquidity and generally to provide fundingcontract for ~~its investment portfolio. Other components~~the sale of the Bank’s wholesale funding program include correspondent banks and brokerages, and brokered deposits. For contingency liquidity purposes, the Bank has short term credit arrangements with the Federal Reserve Bank and with certain national banks and brokerages, and the holding company maintains a line of credit. There has been no regular ongoing use of these arrangements. The Company evaluates its use of borrowings and of wholesale funds in general in managing its liquidity and strategic growth plans.Mid-Atlantic branch operations. This ~~is further discussed~~sale was completed in the ~~following section on Liquidity.~~third quarter of 2021.

Total borrowings decreased by $177 million, or 13%, in 2017, due to increased utilization of better priced brokered time deposits to provide wholesale funding. Most borrowings are short term. The weighted average rate on borrowings was 1.81%Derivative Financial Instruments: There were no material changes in the ~~fourth quarter~~portfolio of 2017, compared to 1.63% in the fourth quarter of 2016. The Company terminated its cash flow hedges in February 2017 as further described in the following section. The benefit to interest expense of this termination was more than offset by the market interest rate increases which increased the cost of borrowings during the year.

~~Derivative Financial Instruments and Hedging Activities.~~ ~~Berkshire utilizes~~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 $43 million at period-end, which decreased from $94 million at year-end 2020 due to ~~manage~~ the impact of rising medium term interest rates on the value of outstanding commercial loan interest rate ~~risk of its borrowings, to offer these instruments to commercial loan customers for similar purposes, and~~swaps.

Shareholders' Equity: Total shareholders’ equity was unchanged at $1.18 billion in 2021, as ~~part of its residential mortgage banking activities. The instruments sold to commercial and residential mortgage customers are an important source of fee~~the contribution from net income ~~and generally represent fixed rate contracts purchased by customers which are sold or~~was offset by shareholder distributions in the ~~Company~~form of dividends and stock repurchases, along with ~~national counterparties. Derivatives~~a charge to accumulated other comprehensive net income due to lower debt investment security valuations related to ~~mortgage banking vary seasonally and were not significantly changed~~higher medium interest rates at ~~year-end 2017 compared~~year-end. Due to the ~~start of~~decline in assets, capital metrics improved year-over-year, with the ~~year.~~

~~The notional balance of derivative financial instruments increased~~common equity tier 1 capital ratio strengthening further to ~~$2.5 billion at year-end 2017, compared to $2.2 billion~~15.0% from 13.8% at the start of the year. The ~~increase in economic hedges related~~Company’s BEST plan targets reducing this ratio to ~~commercial~~around 11% over time through loan ~~interest rate swaps was partially offset by~~growth and shareholder distributions of excess capital.

During the ~~termination~~second quarter, Berkshire announced board authorization for the repurchase of ~~$300~~2.5 million in cash flow hedges which were fixing the cost of variable rate borrowings. The commercial loan interest rate swap derivatives include back to back hedges with national bank counterparties, along with risk participation agreements with dealer banks. This represents a 43% increase related to strong customer demand during the year.

~~The cash flow hedges were terminated in early February in conjunction with the integration~~shares, or approximately 5% of the ~~acquired First Choice balance sheet, including excess deposits.~~then outstanding shares. The Company ~~retired~~completed this repurchase in the ~~one month rolling FHLB loans that were hedged by~~third quarter, paying an average price of $27.48 per share, totaling $69 million, for the ~~terminated fixed payment interest rate swaps.~~repurchase of the 2.5 million shares. After year-end, the Company announced the approval of another repurchase authorization through 2022 totaling $140 million, equating to approximately 9% of outstanding shares. The Company recorded a $7 million loss on this termination; this loss was already a component of shareholders’ equity in accumulated other comprehensive income. The swaps had a fixed pay rate of 2.3% with a remaining maturity of 2.3 years at the start of the year.

The net fair value of derivatives improved from a $3 million liability at year-end 2016 to a $3 million premium at year-end 2017. This was primarily due to the realization of the $7 million loss on the termination of the cash flow

maintained its $0.12 per share quarterly dividend through 2021.

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hedges. The $3 million premium at year-end 2017 included a $5 million premium in the mortgage pipeline (most of which has already been recognized in revenues), offset by a $2 million liability on the interest rate swap related to the economic development bond.

~~Stockholders’ Equity.~~Berkshire pursues a balance of capital to maintain financial soundness while using common equity efficiently with the goal to produce a strong return on equity and a strong return on tangible equity to support opportunities for franchise growth. Long run growth in dividends and in both book value and tangible book value per share are also viewed as elements for shareholder value creation. A sound capital structure reduces risk and enhances shareholder return and access to capital markets to support the Company’s banking activities and the markets that it serves. In its payment of dividends, management of treasury shares, issuance of equity compensation, and balancing of capital sources, the Company strives to achieve a capital structure that is attractive to the investment community and which satisfies the policy and supervision purposes of the Company’s regulators. When Berkshire negotiates business combinations, it generally targets to use its common shares as a significant component of merger consideration and to balance the mix of cash and stock to arrive at targeted capital metrics based on the characteristics of the combined banks. The Company’s common stock is listed on the New York Stock Exchange. Its preferred shares are non-voting conditionally convertible stock owned by one individual who is also the Company’s largest holder of common stock as a result of the Commerce acquisition. These holdings are restricted pursuant to an agreement filed with the SEC.

In May 2017, Berkshire completed its first public common stock offering since 2009, in the amount of $153 million (net of offering costs). This offering was for general corporate purposes and was conducted under the Company’s universal shelf registration statement with the SEC. The offering resulted in the issuance of 4.64 million shares at $34.50 per share ($32.98 per share net of costs). Also, in October, the Company completed the acquisition of Commerce Bancshares for total consideration of $229 million in a stock for stock exchange. The Company issued 4.84 million common shares and 522 thousand shares of a new Series B non-voting conditionally convertible preferred stock in this exchange, and the consideration was valued based on the $38.95 closing price of Berkshire common stock on October 13, 2017. During 2017, the Company reinvested $100 million of the stock offering proceeds in Berkshire Bank as additional paid-in capital, with the remainder held in cash at the holding company at the end of 2017. The Company considered the equity-down streamed to the bank as offsetting most of the tangible equity dilution from the Commerce merger due to the $135 million increase in goodwill and intangible assets. The Company considered the equity retained at the holding company as providing an additional capital buffer and as a source of investment in the bank to support future growth as appropriate.

Total shareholders’ equity increased by $403 million, or 37%, to $1.5 billion in 2017. This included the benefit of the $382 million in stock issuances discussed above, together with retained earnings. Total common shares outstanding increased by 9.6 million shares, or 27%, to 45.3 million shares. Preferred stock was issued in the form of 522,000 shares, which are conditionally convertible into 1,044,000 common shares and bearing a dividend as preferred shares equal to twice the per share common dividend.

Berkshire’s return on equity decreased to 4.5% in 2017 due primarily to the provisional write-down of the deferred tax asset as a result of tax reform. The non-GAAP measure of adjusted return on tangible common equity decreased to 11.8% from 12.5% primarily due to the excess equity during the year between the May stock offering and the completion of the Commerce acquisition in October. The Company focuses on its internal generation of tangible equity to support growth and dividends, as well as to support merger and other non-operating charges.

Berkshire’s capital metrics increased during the year due to the excess capital from the stock offering. The ratio of equity to assets increased to 12.9% from 11.9%, while the non-GAAP measure of tangible equity to assets increased to 8.5% from 7.7%. The Company generally targets to operate with this ratio in the 7-8% range. The consolidated risk based capital ratio increased to 12.4% from 11.9% including the excess cash held at the holding company. The Bank’s risk based capital ratio remained unchanged at 11.2%. Book value per common share increased by 5% to $32.14 and tangible book value also increased by 5% to $19.83 per common share.

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One of the requirements of the $10 billion Dodd Frank threshold is increased capital stress testing processes. The Company has invested in staff and resources to develop these processes. Based on its most recent internal modeling of financial condition as of year-end 2016, the Company expected to remain well capitalized under the most severe stress test assumptions based on its capital and dividend structure at that date. The Company plans to informally submit to regulators a stress test based on year-end 2017 data during the year 2018. The Company’s first formal submission of a stress test is planned for 2019.

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COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, ~~2017~~2021 AND ~~2016~~2020

Summary:~~Berkshire’s results in 2017 included growth from acquisitions and a significant amount~~Berkshire reported net income of ~~charges, viewed as non-operating, which depressed GAAP results. Based on its adjusted measures, discussed further below, Berkshire produced improvement in its earnings~~$119 million, or $2.39 per share, ~~and ROA measures, which are its primary strategic focus.~~

~~Berkshire’s 2017 results include~~in 2021, compared to a loss of $533 million, or $10.60 per share, in 2020. The loss in 2020 was primarily due to pandemic impacts leading to a $554 million pre-tax charge to write-off goodwill. The Company also recorded a $27 million pre-tax charge in 2020 as it completed the ~~First Choice operations acquired in December 2016, including the targeted efficiencies which resulted~~exit from ~~the integration of these operations in 2017. Results also included the Commerce operations acquired in October 2017, and~~discontinued national mortgage banking operations. In 2021, the Company ~~is targeting efficiencies in 2018 from~~recorded a pre-tax gain of $53 million on the ~~planned integration~~sale of ~~those~~its Mid-Atlantic branch operations and its insurance operations. ~~Due to these business combinations, most measures of revenue, expense, income, and average balances increased in 2017 compared to 2016. Additionally, per share measures were affected by~~

The Company uses the issuance of shares as merger consideration, together with the stock offering in May 2017 which was simultaneous with the Commerce announcement. All acquisitions were targeted to be accretive to earnings and earnings per share when fully integrated, and to provide a long term double digit return on equity.

~~As noted previously, Berkshire uses a~~ non-GAAP measure of adjusted ~~net~~ income to ~~supplement~~assess its ~~evaluation~~performance, with component measures of ~~its operating results. Adjusted net income excludes certain amounts~~adjusted revenue and adjusted expense. These measures exclude items not viewed as related to ~~normalized~~ongoing operations. ~~These~~In addition to the above items, ~~are primarily~~the Company excludes securities gains and losses, other sale related gains and losses, and restructuring and other expense, together with related tax impacts, as discussed in the previous section on non-GAAP financial measures. Adjusted income totaled $84 million, or $1.69 per share, in 2021, compared to ~~acquisition expenses. Berkshire views its net acquisition related costs as part~~$30 million, or $0.60 per share, in 2020. Earnings in 2020 were depressed by $76 million in credit loss provision expense based on future loan loss expectations following the emergence of the ~~economic investment for~~pandemic.

Berkshire entered into an agreement to sell the operations of its ~~acquisitions. These investments are intended to contribute to long term earnings growth~~eight mid-Atlantic branches in 2020 and ~~franchise value. Other significant charges excluded~~completed the sale in ~~2017 from~~ the ~~adjusted earnings measure included contract termination costs for premises restructuring~~third quarter of 2021.During that quarter, the Company also announced and ~~the termination of hedges. These were mostly offset by the realization of gains on~~completed the sale of ~~equity securities. The Company also recorded an $18 million charge for~~ the ~~provisional write-down~~operations of its ~~net deferred tax asset following the enactment of federal tax reform near year-end. This reform is believed to contribute positively to shareholder value due~~insurance subsidiary. These operations were not viewed as central to the ~~reduction~~Company’s strategy.The sales produced $53 million in pre-tax gains which are planned to be returned to shareholders through the ~~federal statutory tax rate beginning~~announced share buyback program.The operating expenses related to these sold operations are being reinvested in ~~2018. Berkshire also makes references~~bankers and technology contributing to ~~adjusted~~Berkshire’s BEST plan with a goal of replacing and expanding on the revenues and adjusted expenses in its discussion of operating results. Please see the Non-GAAP reconciliation section of this report for more discussion and information about adjusted net income and other non-GAAP financial measures discussed in this report.previously related to these sold operations.

Net income decreased in 2017 by 6% to $55 million, while adjusted net income increased by 33% to $91 million. On a per share basis, net income decreased by 26% to $1.39, while adjusted net income increased by 4% to $2.29. The Company targets ongoing improvement in this measure to benefit from its investments in organic growth and acquisitions, and to improve profitability. Return on assets decreased by 24% to 0.56%, while adjusted return on assets increased by 8% to 0.93% as the Company moved closer to its target of 1.00% or higher. The federal tax reform and efficiencies from the Commerce integration are targeted to support further improvement in this measure in 2018.

~~The return on equity decreased by 31% to 4.5% while the adjusted return on equity decreased by 3% to 7.3% due to the excess equity on hand in 2017 while the Commerce merger was pending.~~ The return on tangible common equity ~~decreased by 5%~~measured 10.80% in 2021 and the non-GAAP measure of adjusted return on tangible common equity measured 7.74%. The Company’s BEST plan targets improving this measure to ~~11.8%~~the 10 -12% range. Return on assets measured 0.98% in 2020, while the adjusted return on assets measured 0.70%. The Company’s BEST plan targets improving this measure to the 1.00 – 1.05% range.

Revenue:Total net revenue increased 13% year-over-year due to the ~~excess equity but continued to be important as a source~~gains on sales of ~~internal capital generation to support organic growth and dividends.~~ operations.The efficiency ratio increased by 3% to 60.0% due to the first full year including the acquired First Choice mortgage banking operations, which operate with narrower margins common to this business. Berkshire estimated that the efficiency of operations excluding mortgage banking improved to approximately 56%. This reflected the benefit of ongoing scale efficiencies and was achieved despite the higher regulatory cost burden as the Company crossed the $10 billion regulatory asset threshold.

~~Total Net Revenue.~~ ~~Berkshire evaluates its top line with the~~non-GAAP measure of ~~net~~adjusted revenue ~~which is the sum of net interest income~~excluding sale gains and non-interest income. The Company also measures adjusted net revenue and adjusted net revenue per share in evaluating its growth strategies, operations, and strategies for generating positive operating leverage.

~~Total net revenue increased in 2017~~losses, decreased year-over-year by ~~$122~~$7 million, or ~~41%~~2%, to $420 million. On a pro-forma basis, as set forth in the consolidated financial statements, total 2017 revenue including the Commerce operations reached $480 million, with non-interest income providing 28% of total revenue. Revenue growth in 2017 included a 27% increase in net interest income and a 79% increase in fee income. Total revenue per share increased by 11% to $10.59, and on a pro forma basis with Commerce this measure increased to $10.81. These changes indicate the combined impact of the Commerce and First Choice acquisitions on Berkshire’s scale and business mix.

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~~Net Interest Income.~~ Net interest income is the primary contributor to revenue. Berkshire targets growth in net interest income based on increased business volumes related to market share gains in its markets. Pricing disciplines for loans and deposits target a balance of market share and profitability objectives, while taking into account credit, liquidity, and interest rate sensitivity objectives. The Company also borrows to fund an investment portfolio to contribute to income and profitability, together with other balance sheet objectives. Assets and liabilities acquired in business combinations are marked to market for carrying value and yield, and balance sheet adjustments are often made at or following the acquisition date to integrate the acquired balance sheet with the Company’s balance sheet. Net interest income includes significant components related to the amortization of purchase accounting adjustments and deferred items. The most significant component is purchased loan accretion related to recoveries on the resolution of acquired impaired assets, where Berkshire has regularly posted significant gains that are included in net interest income. These gains are difficult to forecast and are highly variable from quarter to quarter, and generally reflect the Company’s strong asset management capabilities and continued demand for higher yielding assets in the ongoing low rate environment. The chief focus of the Company’s market risk assessment in the sensitivity of interest income to changes in interest rates.

~~Annual net interest income increased by $63 million, or 27%, in 2017. As noted in the pro-forma statements in the Company’s SEC filings, the business combinations in 2016 were estimated to add $36~~$382 million in net interest income in the first year of combined operations based on the assumptions set forth therein. The Commerce pro forma estimated that it would add up to $20 million per quarter in revenue in the first year; the Company owned Commerce operations for most of the fourth quarter of 2017. Interest income also increased as a result of 8% organic increase in loans, funded primarily by the 6% organic increase in deposits. The 27% increase2021. A decrease in net interest income was ~~attributable~~partially offset by higher fee income. Contributing to this decrease were the four months of operating revenues related to the ~~23%~~branch and insurance operations that were sold at the start of September.The Company targets to increase these revenues in 2022 based on expanded frontline bankers, increased business activity, and improved margins in the forecast environment of higher interest rates.

Net Interest Income:Net interest income decreased year-over-year by $26 million, or 8%.The Company recorded a $612 million, or 5%, decrease in average earning assets and ~~the 3% increase~~a 4% decrease in the net interest ~~margin.~~margin to 2.60% in 2021 compared to 2.72% in 2020.The decrease in average earning assets was due to the use of funds from loan runoff to reduce wholesale funding, along with the impact of the sale of branch operations.

The net interest margin ~~increased throughout 2017 from 3.21%~~was generally stable over the last five quarters, ranging between 2.56% and 2.62% on a quarterly basis, and ending the year at 2.60 % in the fourth quarter of ~~2016~~2021. The full year decrease compared to ~~3.50%~~2020 was primarily due to the sharp contraction in the margin in the second quarter of 2020 as a result of the near-zero interest rate monetary policy.The margin in the first three quarters of 2021 included an average 9 basis point benefit from PPP loans due to elevated recognition of deferred PPP income at the time of loan repayment. There was no benefit in the fourth quarter ~~of 2017. The margin for the year improved to 3.40% in 2017 from 3.31% in 2016. Factors that contributed~~due to the ~~improvement~~reduced PPP loan balance. The fourth quarter margin benefited from ongoing reduction in funding costs, along with higher investment securities balances. As discussed in the ~~margin~~later section on interest rate sensitivity, the Company’s models indicate that the Company’s net interest income is positively sensitive to higher interest rates, based on conditions and model assumptions at year-end 2021. The Company also targets to benefit from maturing higher rate time deposits in 2022.

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Non-Interest Income: Total fee income increased year-over-year by $14 million, or 21%, due primarily toan $18 million increase in loan fees and revenue. This included a $9 million increase in revenue related to SBA loan originations, which totaled a record $21 million in 2021 after recovering from pandemic impacts on business volume in 2020. Fee revenue benefited from a decrease in fair value charges related to mortgage servicing rights and interest rate swaps which were elevated in 2020 after the ~~mix shift towards higher yielding commercial loans, the increase~~plunge in interest rates resulting from federal monetary policy actions. Loan fees benefited by $2 million in 2021 from PPP loan referral fees recorded mostly in the ~~termination~~first quarter of the ~~fixed payment cash flow hedges, generally low deposit betas (indicating low sensitivity~~year in relation to ~~interest rate changes), and~~ the ~~benefit~~second round of ~~purchase accounting initially related~~PPP loan support which the Company referred to ~~First Choice and then to Commerce. The yield on earning assets increased for the year to 4.16%~~a third-party.

Fee income also benefited in 2021 from ~~3.93%, while there was~~ a ~~smaller~~$2 million, or 7%, increase in deposit related fees and a $1 million, or 13%, increase in wealth management related revenue. This was offset by a $4 million reduction in insurance fee revenue due to the ~~cost~~sale of funds to 0.77% from 0.69%. Berkshire’s sensitivity to interest rates is discussed in Item 7A. Generally, its loan assets tied to LIBOR and prime adjust quickly to interest rate increases, as do short term borrowings, while deposit rates move in line with market forces which have been slower to react than expected. Lending spreads in some areas were pressured by slower demand in 2017. The Company will be monitoring the impact of the tax reform for any competitive impacts on loan yields or deposit costs that might affect the marginthese operations in the ~~future.~~

~~The Company measures the impact of purchased loan accretion on the net interest margin. This accretion totaled $15~~third quarter. Mortgage banking revenue decreased by $3 million, ~~and contributed 0.17% to the margin~~or 60%, as origination activity was reduced in ~~2017, compared to $8 million and 0.11% in 2016. The recognition of accretion depends on strategies for managing purchased credit impaired loans which have significantly benefited net interest~~2021. Other non-interest income ~~but which are uncertain and may vary from quarter to quarter. The Company has~~ also benefited from ~~the amortization of discount on purchased time deposits, which is mostly recognized in the first year or two following a merger.~~

~~Non-Interest Income. Most of Berkshire’s non-interest income is fee income, including various revenue sources~~an improvement related to fair valued loans resulting from charges in 2020 and recoveries in 2021.

The Company is actively expanding its operations. As previously discussed, Berkshire focuses on fee income to build more enduring customer relationships and to diversify away from potential volatility in net interest income. Fee income is the primary revenue source for two of the Company’s nationalSBA lending, ~~businesses -~~ mortgage banking, and ~~specialty equipment lending. Many~~wealth management teams as part of its strategy to build revenues and earnings and reduce reliance on net interest income.The Company is evaluating potential changes in industry practice related to overdraft fees which could reduce future deposit related fee income. Net overdraft fee income ~~sources do not require as much investment~~totaled $8 million in ~~assets and consequently do not require as much support from regulatory capital. These revenues therefore have the potential~~2021.

Securities losses in 2020 were due primarily to ~~increase the Company’s return on assets and return~~pandemic related impacts on equity ~~towards its long-term goals.~~

Fee income increased by $54 million, or 79% in 2017, and totaled $123 million for the year. Mortgage banking fees increased by $47 million to $54 million, representing the first full year of the acquired First Choice national

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mortgage banking operations. The First Choice mortgage banking business ranks among the top 50 U.S. mortgage banking originators. Berkshire originated $2.4 billion in total held for sale mortgages in 2017. Revenue recognition is based on interest rate lock commitments which generally are entered into before mortgages are originated. The Company targets approximately a 0.3% pre-tax profit margin measured as a percentage of total originations volume. The mortgage banking unit operates with a high percentage of variable costs, to support earnings during periods when volume declines. Direct costs of originations are netted against the total fee revenue reported.

~~Loan fees increased by $5 million to $21 million. Loan fees in 2017 included $9 million in SBA loan sale gains, $5 million in commercial loan interest rate swap fees, $3 million in gains~~securities values. Gains on the sale of ~~seasoned mortgages,~~operations in 2021 were related to the previously described sales of branch operations and $2insurance operations.

Credit Loss Provision Expense: The Company recorded a $500 thousand credit to provision expense in 2021, compared to a $76 million charge in 2020. The elevated charge in 2020 was due to the provision for estimated credit losses projected to arise from the pandemic. In 2021, the credit to the provision resulted from a $21 million release of the credit loss allowance net of $21 million in ~~asset based lending fees.~~net loan charge-offs. The ~~increase~~allowance release was primarily due to ~~higher SBA~~the reduction in loan ~~volumes, and included increased cross-sale activities among~~balances during the ~~lending groups. Deposit related fees increased~~year.

Non-Interest Expense:Non-interest expense decreased year-over-year by $2$554 million or 9%, to $27 million including the First Choice and Commerce contributions. Deposit related fees decreased to 0.38% of average deposits in 2017, compared to 0.43% in the prior year. This reflected the lower fee penetration of the acquired banks as well as the shift in mix towards commercial balances. Deposit fees in 2017 included $8 million in overdraft fees, $9 million in bank card fees, and $7 million in other service charge income. The Company expects that its card fee income will be reduced by $5-6 million per year based on the Durbin amendmentdue to the ~~Dodd Frank Act, as a result of crossing the $10 billion asset threshold. This reduction will begin in the second half of 2018.~~

~~Non-interest income in 2017 included $13 million in securities gains, a $7~~$554 million charge for the ~~loss on~~write-down of goodwill in 2020. Non-interest expense was flat before the ~~termination~~impact of ~~hedges,~~this charge and ~~$3 million~~benefited from the third quarter sale of branch and insurance operations.Modest increases in ~~other net charges. The securities gains~~compensation and technology expense were partially offset by lower occupancy expense. Lower salary expense was offset by higher performance-based compensation, which had been reduced in 2020 due to the equity securities sales described previously in the investment securities section. The loss on the termination of hedges was described previously in the derivative securities section. The $3 million in other net charges was due to a $9 million charge for the amortization of tax credit investments, which was more than offset by benefits to income taxpandemic.Professional services expense ~~as further discussed below. This charge was partially offset by $4 million in accrued income on bank owned life insurance contracts.~~

~~Provision for Loan Losses.~~ The provision for loan losses is a charge to earnings in an amount sufficient to maintain the allowance for loan losses at a level deemed adequate by the Company. The level of the allowance is a critical accounting estimate, which is subject to uncertainty. The level of the allowance was included in the discussion of financial condition. The provision for loan losses increased by $4 million, ~~or 21%, to $21~~including $3 million ~~in 2017. The provision for loan losses exceeded net loan charge-offs and resulted in an increase~~accrued in the ~~loan loss allowance due to portfolio growth.~~

~~Non-Interest Expense.~~ ~~Berkshire’s goal is to generate positive operating leverage, growing revenues through business expansion~~first quarter for legal, consulting, and ~~maintaining expense management disciplines. Non-interest expense increases have generally been~~other advisory services related to ~~the Company’s growth,~~board and management matters. The category of all other expense decreased including the impact of ~~acquisitions.~~ higher lending and workout related charges in 2020. Procurement initiatives have been deployed across the company, contributing to lower expenses for occupancy and professional services towards the end of the year.

The Company ~~also invests~~completed the consolidation of 16 branch offices in ~~building~~2021. Including the 8 Mid-Atlantic branches sold, total branch offices declined from 130 to 106, as the Company pursues its ~~infrastructure~~“branch light, banker heavy” strategy for front-line bankers in managing expansion and ~~adding to its~~ market ~~teams, with~~positioning. This includes a focus on ~~fee generating business lines, as part of~~ its ~~long term strategy~~MyBankers who provide dedicated relationship support to occupy a leading position as a regional provider in its footprint. Additionally, the Company has invested in the increased compliance and risk management resources required for banks at the $10 billion threshold established in the Dodd Frank Act.customers with committed banking relationships.

Non-interest expense includes amounts viewed by the Company as not related to recurring operations. These expenses are excluded from the Company’s non-GAAP measure of adjusted expense. The primary component of these expenses is merger related expense, which totaled $25 million in 2017 and $14 million in 2016. These expenses related mostly to the Commerce and First Choice acquisitions. Most First Choice merger related expenses have been recorded. The Company has targeted $32 million in Commerce merger related expenses, of which $21 million was recorded in 2017 and the remainder is expected to be recorded in 2018. The Company recorded restructuring and other expense totaling $7 million in 2017 and $2 million in 2016, which was primarily related to premises lease terminations as the Company has right sized its facilities. In 2017, the Company recorded $3 million in employee and community investment expense for initiatives undertaken due to the federal tax reform. Total expenses excluded from the measure of adjusted expenses totaled $35 million in 2017 compared to $16 million in 2016.

Total non-interest expense increased by $96 million, or 47%, to $300 million in 2017. Adjusted expense, excluding items discussed above, increased by $77 million, or 41%, to $265 million. The largest expense growth was in

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compensation (46%), premises and technology (30%), and marketing (276%). The compensation and marketing expense changes were affected by the mortgage banking expense structure, which has higher variable compensation expense and marketing payments related to designated business channels. Expenses benefited from the First Choice integration, which was targeted to result in $15 million in annualized cost savings on completion of integration. The Commerce integration in 2018 is targeted to result in $8 million in such annualized savings. Expenses in 2017 also benefited from the restructuring initiatives early in the year which reduced ongoing overhead costs.

The efficiency ratio increased to 59.97% in 2017 from 58.27% in 2016. The acquired mortgage banking business operates with lower margins and therefore a higher efficiency ratio. The Company estimates that it operated with an efficiency ratio of approximately 56% in 2017 excluding mortgage banking. This demonstrates the ongoing benefit of the Company’s growth strategies. Berkshire had full time equivalent staff totaling 1,992 at year-end 2017, including the Commerce positions which were reported at 226 as of September 30, 2017. Berkshire reported 1,788 full time equivalent staff as of that date. Full time equivalent staff totaled ~~1,731~~1,319 positions at year-end 2021, compared to 1,505 positions at the start of the year. This decrease included 79 positions which were transferred in conjunction with the sale of insurance and branch operations. The Company designated a number of real estate properties as held for sale in the third quarter as it pursues its efficiency strategies for reducing overhead and evolving a hybrid work environment. Due to the revenue contraction, the efficiency ratio increased year-over-year to 69.96% from 68.53%.

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Income Tax ~~Expense.~~ Expense:Income taxes are discussed in a note to the ~~consolidated~~ financial statements; this note is important to an understanding of ~~this discussion.~~the results of operations. The Company recorded an effective income tax rate of 20% on income from continuing operations in 2021. The Company recorded a benefit to income tax expense in 2020 due to loss carrybacks resulting from the 2020 loss.

The 2021 effective tax rate included a 2.3% benefit from tax exemptions on investment securities. The effective tax rate increased to 45% in 2017 from 24% in 2016. This included the $18 million charge to write-down the net deferred tax assets as a result of the federal income tax reform near year-end. Before this charge, the effective tax rate in 2017 was ~~26%.~~

~~The Company~~ also measures its effective tax rate on adjusted income as a non-GAAP measure. The Company excluded the $18 million deferred tax provisional write-down from its tax expense in this analysis. The adjusted effective tax rate on adjusted pre-tax income measured 29% in 2017. This adjusted rate exceeded the 26% GAAP rate before the deferred tax charge due to the total net adjustments to GAAP income, primarily from merger charges. These charges resulted in lower GAAP pre-tax income, compared to adjusted pre-tax income. As a result, the GAAP tax rate (before the deferred tax charge) had a higher proportionate benefit from tax advantaged revenues, and therefore was lower than the adjusted rate. This is a normal occurrence for the Company due to its record of acquisitions which result in merger costs that reduce GAAP earnings.

The 29% adjusted income tax rate on adjusted income in 2017 increased from 26% in 2016. This increase primarily reflects the increase in pre-tax adjusted income and the proportionately lower benefit of slower growing tax advantaged sources and a decrease in the benefit from investment tax credit programs. As the Company has grown, ongoing earnings growth has been a normal contributor to changes in the tax rate.

The 29% adjusted effective tax rate on adjusted income in 2017 was 6% lower than the 35% federal statutory rate due to the benefit of items listed in the effective tax rate table in the consolidated financial statements. Federal tax reform reduced the future federal statutory tax rate to 21%, and also adjusted certain other deductions and benefits that impact the overall effective tax rate. The Company estimates that federal tax reform results in a projected effective tax rate of 22-24%, taking into account anticipated changes in earnings and revenue/expense mix. As previously noted, the Company expects to record Commerce merger expenses in 2018 and therefore anticipates that GAAP income may be lower than adjusted income and the GAAP tax rate may be lower than the adjusted tax rate. The actual rates recognized will depend on business, market, and tax developments in 2018.

The Company’s report on Form 10-K in 2016 commented on potential tax reform, and the actual reform and its impacts were consistent with the Company’s analysis when this reform was under discussion at the start of the year.

The Company had accumulated a net deferred tax asset totaling $41 million at the start of the year. This tax asset was further increased due to the Commerce acquisition. This asset represented the benefit of future tax deductions resulting from differences between GAAP and tax accounting based on an assumption about future earnings levels. Because tax reform reduced the future statutory tax rate, the benefit of these future deductions was reduced, and necessitated a 28% write-down of the net tax asset at year-end. As noted in the consolidated financial statement, this asset was primarily composed of itemsby 2.3% related to the ~~allowance~~Company’s tax credit investment projects for ~~loan losses~~historic rehabilitation and ~~purchase accounting adjustments,~~low income housing. The Company reported $0.02 per share in net income benefit in both 2021 and was net of liabilities consisting primarily of intangible amortization. The $18 million net write-down was the result of the tax reform impacts on these and other component items of the net deferred tax asset. Many banks reported write-downs due to the accumulation of tax assets with similar components.

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~~The deferred tax asset at year-end 2017 includes a $7 million balance~~2020 related to ~~unrealized capital losses on~~investments in tax credit investments. The realization of these assets depends on the Company’s ability to generate future capital gains. The Company generated capital gain income from the sale of equity securities in 2017 which will be available to significantly offset these losses when they are realized in the future. The company expects to generate additional future capital gain income from a variety of sources, and has established a small $200 thousand state tax reserve on this component of the deferred tax asset.

The benefit to the overall effective rate from tax credit related investments decreased to 5% in 2017 from 8% in 2016 and 15% in 2015. The market benefit of these investments decreased in July 2016 based on updated IRS guidance, and investment supply was lower in 2017. Netprojects, net of amortization charges recorded ~~as a component of~~to non-interest ~~income, these investments contributed $0.04 to EPS in 2017, compared to $0.07 in 2016 and $0.17 in 2015.~~income. The Company ~~anticipates that~~actively pursues tax credit investment projects in its markets to provide financial support to community development projects as part of its overall banking services while also generating an appropriate return on the ~~supply~~Bank’s investment.

Discontinued Operations: In the fourth quarter of ~~these investments may continue to decrease as~~2020, the ~~overall marginal corporate tax rate declines~~Company completed the exit of its national mortgage banking operations. These operations generated a net loss of $20 million in 2020.These operations are excluded from the ~~country.~~Company’s measures of adjusted net income.

Total Comprehensive ~~Income.~~ Income: Total comprehensive income includes net income together with other comprehensive ~~income. Comprehensive~~ income, ~~totaled $50~~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 ~~2017 compared to $72 million in the prior year. This $22 million decrease was mainly due to the $19 million change in~~ other net after-tax comprehensive income ~~to a loss of $6 million~~and the increase in 2017 from income of $13 million in 2016. The $6 million loss is due to the realization in net income of the prior unrealized equity securities gains which were partially offset by the prior unrealized loss on cash flow hedges. In 2016, other comprehensive income of $13 million resulted from the impact of lower longmedium term interest rates ~~increasing the unrealized securities gain and decreasing the unrealized loss on derivative hedges.~~

~~Commerce Acquisition.~~ At the close of business on October 13, 2017, the Company completed the acquisition of Commerce Bancshares Corp. and the merger of Commerce Bank and Trust into Berkshire Bank. With this acquisition, Berkshire gained the leading deposit market share in Worcester, the second largest city in New England. This business combination was the catalyst for Berkshire’s corporate headquarters relocation to Boston and it filled in the Company’s Massachusetts footprint west of Boston. This merger allowed Berkshire to strategically cross the $10 billion asset threshold with the goal of absorbing the additional regulatory burden with offsets from the accretive earnings benefits of the acquisition. The Commerce acquisition included deposit balances which supplemented Berkshire’s liquidity. At the time of the merger announcement, the Company also conducted a public stock offering which had the effect of offsetting the goodwill and costs of the merger when completed, as well as providing additional capital to support future growth including targeted expansion in Greater Boston.

The consideration for the Commerce acquisition was $229 million and deal costs were estimated at $20 million after-tax ($32 million pre-tax). The stock consideration included 4.842 million common shares valued at $188 million and 522 thousand preferred shares valued at $41 million, based on the $38.95 closing price of Berkshire common stock at the closing date. The preferred stock is non-voting and convertible under certain conditions into two common shares for each preferred share. It was issued to one shareholder interest, who also acquired common shares in the merger totaling 9.9% of total Berkshire common shares outstanding at the merger date.

~~The merger was announced in May and closed in October. Systems integration is targeted for March 2018.~~

Berkshire acquired net tangible assets with a fair value of $91 million as of the merger date, including a $35 million net deferred tax asset which was subsequently written down due to federal tax reform. The Company recorded $116 million in goodwill and $22 million in intangible assets, consisting primarily of the core deposit intangible asset.

The Company included $100 million of the equity from the common stock offering in its analysis of the Commerce acquisition. This analysis also assumed that the preferred stock would be converted to common stock and assumed that transaction costs were an initial adjustment to equity. The Company filed a Form 8-K/A with the SEC on December 29, 2017 which included a combined pro forma balance sheet, and purchase accounting adjustments in Note 2 of the Consolidated Financial Statements were not materially changed from this filing. Including the above stated assumptions, the pro forma total dilution to tangible book value per share related to the Commerce acquisition was estimated at less than 1%. The Company targeted a double digit return on equity for this acquisition based on its analysis. The actual acquisition cost was higher than original estimates due to a higher stock price on

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Berkshire shares at closing. The acquisition was analyzed based on the existing tax code, and the year-end federal tax reform is expected to benefit the future earnings stream targeted to payback the higher deal cost.

~~Pro Forma Acquisition Analysis.~~ Note 2 - Acquisitions of the Consolidated Financial Statements includes pro forma summary financial information assuming that the Commerce acquisition had been completed as of January 1, 2016. Pursuant to accounting principles, this pro forma financial information is based on the actual financial information of Berkshire and the acquired entity, and it includes purchase accounting adjustments but does not include targeted expense reductions or actual deal costs recorded.

The pro forma increase in revenue in 2016, the first year of acquisition, was $81 million, or 27%. The pro forma increase in net income available to common shareholders was $20 million, or 34%, while the pro forma increase in earnings per common share was $0.27, or 14%. This analysis did not include the $8 million, or 20%, in annual Commerce cost savings originally targeted on completion of integration. It also did not include the 3.03 million common shares representing the $100 million portion of the public stock offering that the Company analyzed in conjunction with the acquisition. These two factors were generally offsetting in their impact on pro forma earnings per share. This analysis did not include the future benefit of the year-end federal tax reform or revenue synergies from changes in balance sheet management that Berkshire began undertaking subsequent to the acquisition. It also did not project a lower provision for loan losses on Commerce operations due to the fair value accounting recorded on the merger date. The $0.27 pro forma EPS accretion did not include incremental operating cost and revenue impacts of crossing the Dodd Frank threshold. The pro forma analysis for 2017, the second year of acquisition, also indicated increases in revenue, earnings, and earnings per share.

~~Quarterly Results.~~ ~~Quarterly results for 2017 and 2016 are presented~~2021 resulted in a note to the consolidated financial statements. Results for all of these periods have been discussed in previous SEC Forms 10-Q and 10-K, except for operations in the fourth quarter of 2017. The first quarter of 2017 was the first full quarter including the First Choice operations acquired in December 2016. Berkshire produced steady growth in earnings and earnings per share through the first nine months of the year, including the benefits from the integration of First Choice operations which were completed during this period. First quarter results included several items that were viewed as not related to ongoing operations including realized equity gains which largely offset charges for terminating hedging and premises contracts, as well as merger costs. Revenues in the second and third quarter included seasonally higher mortgage banking revenue. A loss was recorded in the fourth quarter due to the $18$34 million charge for the deferred tax asset write-down resulting from federal tax reform and related charges for investment in employees and community giving. The fourth quarter also had elevated merger costs due to the Commerce acquisition. The Company viewed all of the above fourth quarter items as not related to ongoing operations, and its measure of adjusted earnings per share was generally stable through the final three quarters of the year. Per share results were impacted by the common stock offering in May which was dilutive to per share earnings until these shares, as well as the shares issued for Commerce merger consideration, obtained the benefit of Commerce operations acquired in October.other net after-tax comprehensive loss.

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COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, ~~2016~~2020 AND ~~2015~~2019

Summary: ~~Berkshire’s 2016 results~~Revenue and expense included the ~~44 Business Capital~~SI Financial operations acquired ~~in April~~on May 17, 2019. Additionally, due to the COVID-19 pandemic Berkshire reported charges of $554 million for goodwill impairment and $76 million for the ~~First Choice Bank operations acquired in December. Berkshire’s 2015 results included the Hampden operations acquired in April and the Firestone operations acquired in August.~~provision for credit losses. As a result, ~~most measures~~many categories of revenue and expense ~~income, and average balances increased~~are not directly comparable year-over-year.For the year 2020, the Company recorded a loss of $533 million, or $10.60 per share. In 2019, the Company recorded earnings for the year of $97 million, or $1.97 per share.

Revenue:Revenue was adversely impacted by the pandemic in ~~2016 compared to 2015 --~~2020, including the impact of ~~acquired operations in both years. Additionally, per share measures were affected~~lower business volumes, fee waivers, and tighter margins. Net revenue decreased by the issuance of common shares as merger consideration. All acquisitions were targeted to be accretive to earnings and earnings per share when fully integrated, and to provide a long term double digit return on equity.

Results in 2016 continued the trend of improving profitability and further demonstrated a rebound from lower profitability in 2014. The GAAP return on assets increased by 9% to 74 basis points and the adjusted return on assets increased by 5% to 86 basis points. This was driven by the improvement in the efficiency ratio to 58.3% from 60.9%, which more than offset compression in the net interest margin and lower net tax credit benefits. The efficiency improvement resulted from positive operating leverage driven by revenue growth in conjunction with disciplined expense management. The improved return on assets contributed to higher return on equity. Internal capital generation was viewed as providing support for the dividend payout and organic business growth as well as contributing to improvement in capital metrics. In 2016, the return on equity measured 6.4% and the adjusted return on tangible equity measured 12.5%.

~~Total Net Revenue.~~ ~~Total net revenue increased by $30~~$66 million, or ~~11%~~15%, to ~~$298~~$383 million in ~~2016, reaching $304 million annualized~~2020. Revenue in ~~the fourth quarter including the new First Choice operations. Revenue growth~~2020 included a ~~9% increase~~full year of revenue from SI Financial operations acquired in May 2019. The full year decrease included a $48 million decrease in net interest income, a $7 million decrease in fee income, and a ~~19% increase~~$12 million adverse swing in ~~fee income. Fourth quarter fee income increased to 26% of total revenue including First Choice mortgage banking revenues. Total revenue per share increased by 2% to $9.57 for the year 2016.~~net securities gains/losses.

Net Interest ~~Income.~~ ~~Annual net~~Income:Net interest income ~~increased~~decreased by ~~$18~~$48 million, or ~~9%,~~13% in ~~2016.~~2020. This ~~included~~was the ~~benefit~~result of a ~~10% increase in average earnings asset from business expansion and was partially offset by a 1%~~14% decrease in the net interest margin to ~~3.31%~~2.72% from ~~3.34%~~3.17%. The ~~decrease in~~fourth quarter 2020 net interest margin ~~during 2016 primarily reflected an increase~~was 2.61%. Quarterly net interest income peaked at $97 million in the ~~cost of funds during the year to 0.73% in the final~~third quarter of ~~2016~~2019, including the first full quarter of benefit from ~~0.56%~~the acquired SI Financial operations. Net interest income decreased to $91 million in the fourth quarter of ~~2015. This included the fixed rate interest rate swaps that became active~~2019 and then decreased sequentially in 2020 to $76 million in the ~~first half of~~final quarter. The margin was under pressure coming into 2020 due to the year, the impact of higher short term interest rates on wholesale funding, the lengthening of time deposit maturities, and the higher cost of acquired First Choice deposits. The fourth quarter yield on earning assets was unchanged in 2016 compared to 2015. Loan yield compression was offset by higher securities yields and the benefit of the First Choice mortgage loans held for sale. The contributionanticipated loss of purchased loan accretion income, including the impact of the CECL accounting standard. The Company’s interest rate risk profile was asset sensitive and was structurally sensitive both to the decrease in interest rates and to the low and relatively flat yield curve. The approximate 1.50% decrease in short-term interest rates resulting from the Federal Reserve Bank’s near zero interest rate policy response to the pandemic was adverse to the Company’s net interest ~~income was $8 million~~margin. Additionally, the Company took on higher cost funds at the start of the pandemic to further strengthen liquidity in ~~both 2016 and 2015.~~the national emergency as part of its risk management protocol. Also, the decline in higher yielding loans reduced this yield as the primary source of interest revenue.

Non-Interest ~~Income~~. Income: Fee income ~~increased by $11~~decreased year-over-year $7 million, or ~~19%,~~9% due to pandemic impacts on deposit and loan fees. The decrease in ~~2016~~deposit fees was due to pandemic impacts which resulted in less consumer spending and ~~totaled $69 million. Loan~~higher household liquidity. Additionally, overdraft fees and other deposit fees reflected increased fee waivers,

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which were granted programmatically by the Company as part of its support to its communities during initial lockdowns. The decrease in loan related income grew by $8 million, or 101%, and mortgage banking income by $3 million, or 83%. These revenues benefited from the ongoing low interest rate environment through much of the year. Loan related incomefees included ~~SBA loan sale gains of $3 million, interest rate~~a reduction in commercial swap fee income ~~of $5 million, and portfolio loan sale gains of $5 million. SBA loan sales increased~~ due ~~primarily~~to lower demand, along with impacts from market value adjustments to the ~~contribution~~carrying value of ~~the new 44 Business Capital team.~~

~~The increase~~commercial loan swaps. Other pandemic related market value adjustments affecting 2020 results related to charges against mortgage servicing rights and fair valued loans. Securities losses in ~~mortgage banking income was~~2020 were primarily due to the ~~inclusion~~impact of ~~First Choice mortgage banking operations~~the pandemic related stock market selloff on the carrying value of equity securities.

Provision for Credit Losses: In adopting the CECL accounting model on January 1, 2020, the Company moved from an incurred loss methodology to an expected loss methodology. Additionally, due to the emergence of the pandemic in ~~December. Deposit related fees were flat at $25~~March 2020, the Company recorded expected pandemic-related losses as provision expense against current period operations. Accordingly, provision expense increased year-over-year to $76 million ~~and decreased to 0.43% of average deposit balances~~from $35 million. The provision in ~~2016 compared to 0.49% in the prior year. Deposit fees in 2016 included $7 million in consumer overdraft income, $8 million in card related fees, and $10 million in service charges and other income.~~

~~Non-interest income in 2016~~2019 included a ~~$1 million net gain on~~component recognizing the ~~sale of business operations. Berkshire recorded a charge of $3 million for all other non-interest income in 2016, compared~~incurred expense related to a ~~charge of $5~~$16 million charge-off in ~~the prior year. This was due to charges for the amortization of tax credit~~a fraud related investments, which were more than offset by benefits to income tax expense, as further discussed below. This amortization charge totaled $9 million in 2016 and $11 million in 2015. This charge was partly offset by income accrued on bank owned life insurance, which totaled $4 million both in 2016 and in 2015.commercial loan situation.

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~~Provision for Loan Losses.~~ The provision for loan losses totaled $17 million in both 2016 and 2015. The provision for loan losses exceeded net loan charge-offs in both years, and resulted in an increase in the allowance for loan losses related primarily to growth in the loan portfolio during the year.

Non-Interest ~~Expense.~~ Expense: Total non-interest expense increased by $6$550 million or 3%, in 2016. Excluding merger and restructuring costs, adjusted expenses increased by $8 million, or 5%. In comparison, total revenue increased by $30 million, or 11% and adjusted revenue increased by $32 million, or 12%. The resulting positive operating leverage improved the efficiency ratio to 58.3% in 2016 from 60.9% in 2015. This in turn led to the increases in return on assets and return on equity previously discussed. Expense growth in 2016 was mostly in the primary operating expense components of compensation, and technology due to the ~~acquisitions and growth~~$554 million second quarter write-off of goodwill.Expenses in ~~business activities.~~ 2020 included a full year of the acquired SI Financial operations.Full time equivalent staff ~~increased by 510 positions to 1,731 positions~~in continuing operations at year-end ~~2016 from 1,221~~2020 totaled 1,505, compared to 1,550 positions at the start of the year. ~~Staff growth included 505 positions which were added with the First Choice acquisition in December.~~

~~Expense results also include merger and restructuring costs which the Company excludes from its measure of adjusted earnings.~~Income Tax Expense: The Company ~~views merger related costs as part of the economic investment in acquired businesses. Merger related costs totaled $14~~recorded a $20 million in 2016, including $12 million related to the First Choice acquisition. Merger related costs totaled $13 million in 2015, including $11 million related to the Hampden acquisition. Merger related costs primarily consist of severance costs, contract termination charges, professional fees, and variable compensation costs. Restructuring costs have included the write-off of uneconomic contracted costs, as well as restructuring costs to optimize the branch network in light of market changes for branch services based on the emergence of mobile banking as well as changes in customer access patterns. Restructuring and other expense totaled $2 million in 2016 and $4 million in 2015.

~~Income Tax Expense~~. ~~The effective~~ income tax ~~rate increased to 24% in 2016 from 9% in 2015. This 15% increase in the tax rate included 7% less~~benefit on 2020 continuing operations, including a benefit from ~~tax credits, 4% higher state income tax net impacts, and 4% all other changes, which primarily were due to~~ the ~~higher pretax income in 2016.~~

~~The benefit to~~deductible portion of goodwill related impairment expense. In 2019, the overall effective rate from tax credit related investments decreased to 8% in 2016 from 15% in the prior year. In July, 2016 the IRS provided updated guidance that reduced the benefits of certain entity structures related primarily to commercial historic rehabilitation projects. For 2016, the Company netted $0.07 in benefit to earnings per share from these programs, as compared to $0.17 per share in 2015 (net of amortization charges recorded in non-interest income).

The impact on the overall effective rate from net state income taxes was 2% in 2016 compared to (2%) in 2015. Normally state income taxes increase the overall effective income tax rate. The impact in 2015 was a decrease due to the mix of items affecting New York state taxes; this is not expected to reoccur. The increase in the overallCompany’s effective tax rate ~~due to higher pretax~~was 18% on pre-tax income ~~reflected the lower proportionate benefit~~ from ~~tax-exempt securities and bank owned life insurance income. These benefits increased by only 10% in 2016, compared to the 42% increase in total pretax income.~~continuing operations.

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LIQUIDITY AND CASH FLOWS

~~Liquidity is~~Short-Term Liquidity: In 2021, the ~~ability~~primary sources of cash were the decrease in total loans and the increase in demand deposits. The primary uses of cash were the reduction of wholesale funds, the settlement of the branch sale, and increases in short and long-term investments.

The Company viewed itself as having excess short-term liquidity at year-end 2021, with cash and equivalents totaling $1.6 billion, or 14% of total assets. The Company targets to use its excess liquidity in 2022 to fund growth in loans and investment securities, and to paydown higher cost funds sources. The Company also anticipates using liquidity to fund share repurchases under its $140 million stock repurchase program. Based on contractual obligations and ongoing operations, the Corporation's sources of liquidity are sufficient to meet ~~cash needs at all times with available~~present and future liquidity needs. Contractual obligations are viewed as normal in the context of banking operations, and consist primarily of payment schedules of financial instruments and off balance sheet commitments as discussed in the consolidated financial statements.

In addition to its cash and ~~established external~~cash equivalents, the primary sources of the Company’s on balance sheet liquidity are its portfolio of high-quality marketable securities and the pledgeable loans in its loan portfolio. In addition to its on-balance sheet liquidity, the Bank has access to brokered deposits and to short-term credit availability. At year-end 2021, unused borrowing capacity at the FHLBB was $1.5 billion, and borrowing availability at the Fed discount window was $0.5 billion.

The Bank monitors a series of liquidity indicators and maintains monthly and quarterly forecasts of liquidity and cash flow, with primary focus on on-balance sheet cash equivalents and high-quality liquid investment securities in relation to scheduled debt and time deposit maturities. The Company views its liquidity as strong based on its high level of cash and equivalents and reduced use of wholesale funding.

The Company maintains a contingency funding plan based on its assessment of the liquidity stress environment. Primary liquidity data is reported on daily, and thirty-day stress analytics are maintained on an updated basis. A one year forward liquidity stress test evaluates stress across a variety of stress scenarios, including severe adverse loan loss scenarios due to the pandemic. The Company has defined strategic options which allow it to meet funding needs in all stress scenarios.

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Long-Term Liquidity: Over the long term, the Company expects to generate organic deposit growth that will fund organic loan growth. Operating earnings are expected to fund routine cash operating costs and capital expenditures. As a depository institution, the Bank maintains a high-quality liquid securities portfolio as a source of liquidity to service unexpected customer demand for loan advances or deposit withdrawals. Additionally, the aforementioned FHLBB and Federal Reserve Bank secured borrowing arrangements are maintained, and the Company and Bank have investment grade debt ratings from a Nationally Recognized Statistical Rating Organization (KBRA – Kroll Bond Rating Agency) to support access to public and institutional debt markets. The Company also is active in secondary markets for residential mortgages and SBA guaranteed loans, which support its organic growth without relying on internal liquidity and capital resources. The Company is monitoring for potential shifts in deposit sources oras customer usage of traditional banking channels is also impacted by ~~conversion~~the spread of ~~other assets~~fintech alternatives. The Company’s strategy is to actively partner with fintechs to pursue a strong position in the evolving financial marketplace, while evolving its own technology to support these partnerships. The Company is also monitoring potential shifts in deposit demand if interest rates and inflation rise rapidly and pandemic related customer liquidity declines.

Parent Company Liquidity: Total cash held by the holding company was $109 million at ~~a reasonable price and in a timely manner. Berkshire evaluates liquidity~~year-end 2021. The Company targets to use cash at the holding company ~~and on a consolidated basis, which is primarily a function of the Bank’s liquidity.~~

The primary liquidity need at the holding company is to support its capital structure, including shareholder dividends and debt service. Additionally, the holding company uses cash to support certain organizational expenses, stock purchases and buybacks, merger related costs, and limited business functions that cannot be performed at the Bank or the insurance subsidiary. The holding company primarily relies ontogether with dividends from the Bank to ~~meet its ongoing~~fund holding company cash ~~needs.~~uses including modest operating expenditures, debt service, purchases of investments, shareholder dividends, and stock repurchases. A $50 million cash dividend was paid from the Bank to the parent company after year-end as an additional source of funds for stock repurchases. The holding company generally expects to maintain cash on hand equivalent to normal cash uses, including common stock dividends, for at least a one year period. ~~Sources and uses of cash at the parent are reported~~Beginning in the ~~condensed statements~~third quarter of 2020, the ~~parent company included~~Company cut its cash dividend to shareholders in half, reducing the ~~notes~~quarterly cash dividend requirement from $12 million to ~~the Consolidated Financial Statements. There are certain restrictions on the payment of dividends by the~~$6 million. Bank as discussed in Note 18 - Shareholders' Equity and Earnings Per Common Share of the Consolidated Financial Statements. As of year-end 2017, the state statutory limit on future dividend payments by the Bank totaled $53 million. This amount is based on retained earnings of the Bank and is expected to be supplemented by future bank earnings in accordance with the statutory formula. Dividends by the holding company require notice and non-objection from the Federal Reserve Bank in the event that earnings are not sufficient to cover the dividend. There was no objection to the dividend declared on fourth quarter operations which resulted in a loss due to the charge recorded due to federal tax reform.

At year-end 2017, the holding company had $83 million in cash and equivalents, compared to $43 million at the start of the year. The Parent’s cash is held on deposit in the Bank. The Parent raised $153 million in a public stock offering in May and invested $100 million into the Bank in conjunction with the Commerce acquisition in October, with the remaining cash supplementing regular liquidity held at the Parent. The Bank paid $39 million in dividends to the holding company ~~in 2017, which was an increase from $33 million in 2016.~~presently require approval by the FDIC and the Massachusetts Division of Banks. The holding ~~company has a $5 million unsecured line of~~company’s goal is to maintain access to private and public credit which was unused at year-end 2017 and which was reduced from $15 million during the year after the stock raise. The holding company manages a portfolio of equity securities in support of the consolidated strategy for investments and asset liability management. In 2017, the Company acquired Commerce, and all merger consideration was stock, so there was no impact on holding company liquidity, and the Commerce parent had no significant liquidity. Most merger and integration related costs are being incurred at the Bank level.

The Bank’s primary ongoing source of liquidity is customer deposits and the main use of liquidity is the funding of loans and lending commitments. Additional routine sources are borrowings, repayments of loans and investment securities, and the sale of investment securities. The Bank targetsmarkets to ~~grow customer deposits by increasing its market share among its regions in order~~provide access to sustain loan growth as a primary component of its strategy. Deposit strategies also consider relative deposit costs as well as relationship and market share objectives. The Bank’s acquisition strategy is also targeted to supplement business activities including bank acquisitions and acquisitions of branches. The Commerce acquisition provided additional liquidity as demonstrated by a decrease in Berkshire’s loans/deposits ratio to 95% at year-end 2017 from a quarter-end high of 102% during the year. The First Choice acquisition in December 2016 also improved liquidity at year-end 2016 compared to earlier levels during that year. Additionally, the Bank utilizes wholesale funding sources including borrowings and brokered time deposits. Around year-end 2017, the Bank recruited government banking and international banking professionals who will be pursuing opportunities to develop municipal, institutional, and commercial deposit sources in the future.

~~The Company monitors the loans/deposits ratio in assessing directional changes in its liquidity, and in the past has allowed this metric to reach levels near 110%~~ depending on the timing of business activity. The Company also monitors the levels of its wholesale funding in relationship to total assets. Brokered deposits can be more volatile than customer deposits depending on Company and economic events. FHLBB borrowings are in the context of standard, long-term FHLB programs but overall availability is constrained by collateral tests.conditions.

The Company also monitors the liquidity of investment securities and portfolio loans and has increased its active management of the loan portfolio to accomplish Company objectives, including liquidity goals. The Bank relies on its borrowings availability with the FHLBB for routine operating liquidity, and has other overnight borrowing relationships for contingency liquidity purposes. The Bank has improved its collateral management to improve its

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credit availability with the FHLBB and the Federal Reserve Bank of Boston. The Bank has also expanded its interest rate swaps with national counterparties to provide fixed interest instruments to large commercial borrowers. The Company has strengthened its liquidity planning and management processes in conjunction with its overall growth and regulatory expectations.

In 2017, the Bank’s primary use of funds was loan growth and the primary source of funds was deposit growth. The Bank’s balance sheet management in 2017 included the integration of the $1.8 billion Commerce balance sheet, which resulted in changes in certain asset management and funding strategies compared to the history of those operations. The Bank’s total FHLBB unused borrowing availability was $1.11 billion at year-end 2017 compared to $559 million at year-end 2016. The Bank is also expanding its list of approved correspondent banks and the availability of federal funds lines to the Company, although there has been no regular use of those lines historically or contemplated.

In acquiring Commerce, the Bank acquired their payroll deposit and transfer service, which works with payroll service bureau clients to accept their deposits and process ACH payments to their commercial customer employee accounts. The balances in this business fluctuate daily based on payroll cycles. As a result, the Bank’s daily cash management has expanded and it maintains additional focus on overnight liquidity and the management of daily cash clearing activity. During the fourth quarter, these payroll deposits averaged $242 million, with a high of $620 million and a low of $81 million.

The Bank utilizes the mortgage secondary market as a source of funds for residential mortgages which are sold into that market. Secondary market counterparties include federal mortgage agencies and selected U.S. financial institutions. The Bank works with third parties in hedging interest rate locks with to-be-announced mortgage backed securities and arranging commitments for the sale of individual loans to approved secondary market investors. Most sales are on a servicing released basis. Mortgage loans originated for sale in 2017 totaled $2.4 billion.

Berkshire has additionally developed financial institution banking relationships in and around its regions for the wholesale purchase and sale of seasoned loans. Berkshire’s financial institution banking has also expanded wholesale transactions of commercial loans, including purchases and sales of whole loans and participations in syndicated loan transactions.

The greatest sources of uncertainty affecting liquidity are deposit withdrawals and usage of loan commitments, which are influenced by interest rates, economic conditions, and competition. Due to the unusual and prolonged low interest rate environment, there is uncertainty about the behavior of deposits if interest rates increase at some future time as is anticipated. The Company believes that its market positioning and relationship focus will generally enhance the stability of its deposits, and it also models various scenarios for the purpose of contingency liquidity planning. The Bank manages the concentration of deposits from customers and in various regions and product types. The Bank relies on competitive rates, customer service, and long-standing relationships with customers to manage deposit and loan liquidity. Based on its historical experience, management believes that it has adequately provided for deposit and loan liquidity needs. Both liquidity and capital resources are managed according to policies approved by the Board of Directors and executive management and the Board reviews liquidity metrics and contingency plans on a regular basis. The Bank actively manages all aspects of its balance sheet to achieve its objectives for earnings, liquidity, asset quality, interest rate risk, and capital.

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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.

The Company views its regulatory capital measures as providing it with a cushion of excess capital in relation to its operating condition, risk profile, and strategic plans, and compared to peers. The Company’s priorities for uses of its capital are based on maintaining strong capital, supporting organic growth and its BEST strategic plan, paying a dividend yield that in the ~~Bank target to maintain sufficient~~long run is competitive and targets a 30-40% payout ratio, and distributing excess capital to qualify for the “Well Capitalized” designation by federal regulators. Berkshire’s long term goal is to use capital efficiently to achieve its objective to become a higher performance company with a targeted return on equity exceeding 10%. A double digit return on equity is used to benchmark all lending and investment programs, together with all acquisition analyses. shareholders through stock repurchases.

The Company ~~seeks~~repurchased approximately 5% of its shares in 2021 and has approved an additional repurchase program for approximately 9% of its shares up to $140 million in 2022. The Company repurchased shares in 2019 but allowed a repurchase authorization to expire unused in 2020 due to the onset of the pandemic. In large measure, these repurchases represented a return of capital that became excess as a result of the reduction of certain business activities and loans, including targeted runoff of selected portfolios.

The Company’s long-term goal is to maintain a competitive capital stack and to provide a return in excess of the cost of its common equity capital.The Company’s tier 2 capital includes a $75 million subordinated note which converts to a floating rate and ~~capital structure.~~becomes callable as of September 2022. The Company ~~generally targets to maintain a ratio of tangible equity/tangible assets in the range of 7-8%. This ratio increased in 2017 due primarily to the benefit of the common stock offerings.~~

~~Berkshire views its internal return on tangible~~will monitor capital ~~as the primary capital resource of the Company. The return on tangible equity averaged over 12%~~markets conditions while assessing future plans for the three years 2015-2017. The Company focuses on internal capital generation to support shareholder dividends and targeted organic growth and also to support non-operating charges and/or improvement in its capital ratios. this capital.The Company maintains a universal shelf registration of capital securities with the SEC. The ~~shelf was used~~Company and Bank are investment grade rated by the KBRA bond rating service. The Company’s stock is traded on the New York Stock Exchange and the Company views itself as having good access to ~~support the $153 million public offering of common stock in May 2017.~~ current capital markets.

The Company ~~sometimes uses issuances of unregistered stock~~performs capital stress testing at least annually and has a general goal to remain qualifying for ~~targeted small contractual payments.~~the “well capitalized” designation in the severely stressed scenario. The Company ~~has an approved stock repurchase program for 500,000 shares. There have been no recent repurchases under this program~~views its current stressed capital position as sound and ~~no specific repurchases are presently contemplated. The Company normally uses common stock~~conforming to its objectives.

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In acting as a ~~significant component consideration~~source of strength for ~~business combinations. The resulting stock issuances have meaningfully increased~~ the ~~float~~Bank, the Company relies in the long term on capital distributions from the Bank in order to provide operating and ~~market capitalization of~~capital service for the Company, which ~~exceeded $1.5 billion for the first time~~ in ~~2017.~~

~~Due~~turn can access national financial markets to provide financial support to the stock issuances in 2017, the Company has utilized most of its authorized common and preferred shares. Shareholder approval to amend the Certificate of Incorporation is required to increase authorized shares. The Company is assessing potential future actions to increase its authorized shares to support its potential future strategic growth.

The Company regularly evaluates the markets for capital instruments and views itself as well positioned to access additional capital in various ways if appropriate based on future changes in conditions. Additional discussion of the Company’s capital management is contained in the Shareholders’ Equity section of the discussion of Changes in Financial Condition in this report.

~~AVERAGE BALANCES, INTEREST, AVERAGE YIELDS/COST AND RATE/VOLUME ANALYSIS~~

~~Tables with the above information are presented in Item 6 of this report.~~

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~~CONTRACTUAL OBLIGATIONS~~

~~The year-end 2017 contractual obligations were as follows:~~

~~Item 7-7A - Table 1 - Contractual Obligations~~

(In thousands) Total
Less than One
Year

One to Three
Years

Three to Five
Years

After Five
Years
FHLBB borrowings (1) $ 1,047,736
$ 836,115
$ 204,183
$ 7,438
$ —
Subordinated notes 89,339
—
—
—
89,339
Operating lease obligations (2) 96,356
12,830
20,080
15,859
47,587
Purchase obligations (3) 102,002
16,321
31,086
27,507
27,088
Total Contractual Obligations $ 1,335,433
$ 865,266
$ 255,349
$ 50,804
$ 164,014

~~Acquisition related obligations are not included.~~

~~(1) Consists of borrowings~~Bank.Capital distributions from the ~~Federal Home Loan Bank. The maturities extend through 2027~~Bank to the parent company presently require approval by the FDIC and the ~~rates vary by borrowing.~~Massachusetts Division of Banking.

~~(2) Consists of leases, bank branches, and ATMs through 2039.~~

~~(3) Consists of obligations with multiple vendors to purchase a broad range of services.~~

Further information about borrowings and lease obligations is disclosed in Note 12 - Borrowed Funds and Note 17 - Other Commitments, Contingencies, and Off-Balance Sheet Activities of the Consolidated Financial Statements.

~~OFF-BALANCE SHEET ARRANGEMENTS~~

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. The Company views these transactions as ordinary to its business activities and its assessment is that there are no material changes in these arrangements at year-end 2017 compared to year-end 2016. Contractual obligations totaled $1.3 billion at year-end 2017, compared to $1.5 billion at year-end 2016. This decrease was primarily due to the lower balance of FHLBB borrowings at year-end 2017. As previously reported in the discussion of changes in financial condition, Berkshire has outstanding derivative financial instruments and engages in hedging activities, and the fair value of these contracts is recorded on the balance sheet.

~~FAIR VALUE MEASUREMENTS~~

The most significant fair value measurements recorded by the Company are those related to assets and liabilities acquired in business combinations. These measurements are discussed further in the mergers and acquisitions note to the financial statements. The premium or discount value of acquired loans has historically been the most significant element of this presentation.

Berkshire provides a summary of estimated fair values of financial instruments at each period-end. The premium or discount value of loans has historically been the most significant element of this presentation. This discount is a Level 3 estimate and reflects management’s subjective judgments. At year-end 2017, the premium value of the loan portfolio was $175 million, or 2.1% of carrying value, compared to $27 million, or 0.4% of carrying value at year-end 2016. This increase included the impact of tighter lending spreads at year-end 2017 reflecting competitive factors, along with ongoing improvements in overall asset quality.

The Company makes further measurements of fair value of certain assets and liabilities, as described in the related note in the financial statements. The most significant measurements of recurring fair values of financial instruments primarily relate to securities available for sale and derivative instruments. These measurements were included in the previous discussion of changes in financial condition, and were generally based on Level 2 market based inputs. Non-recurring fair value measurements primarily relate to impaired loans, capitalized mortgage servicing rights, and other real estate owned. When measurement is required, these measures are generally based on Level 3 inputs.

Financial instruments comprise the majority of the Company assets and liabilities. The net combined fair value of those instruments contributes to the economic value of the Company’s equity. The net premium value of financial instruments increased in 2017, reflecting the benefit of the common stock offering plus the contribution of retained

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earnings, together with the growth in the premium value of loans as discussed above. Instruments acquired in business combinations were recorded at fair value at acquisition date. These measures do not take into account the non-interest income generated by these customer relationships or the long term intangible value of the Company’s franchise in its markets.

~~IMPACT OF INFLATION AND CHANGING PRICES~~

The financial statements and related financial data presented in this Form 10-K have been prepared in conformity with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike many industrial companies, substantially all of the assets and liabilities of the Bank are monetary in nature. As a result, interest rates have a more significant impact on the Bank’s performance than the general level of inflation. Interest rates may be affected by inflation, but the direction and magnitude of the impact may vary. A sudden change in inflation (or expectations about inflation), with a related change in interest rates, would have a significant impact on our operations.

~~IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS~~

Please refer to the notes on Recently Adopted Accounting Principles and Future Application of Accounting Pronouncements in Note 1 - Summary of Significant Accounting Policies of the Consolidated Financial Statements.

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APPLICATION OF CRITICAL ACCOUNTING POLICIES ~~AND ACCOUNTING ESTIMATES~~

The Company’s significant accounting policies and modifications to significant accounting policies made during the year are described in Note 1 ~~- Summary of Significant Accounting Policies~~to the financial statements. The preparation of the ~~Consolidated Financial Statements. Please see those policies~~financial statements is in ~~conjunction~~accordance with ~~this discussion. The accounting~~GAAP and ~~reporting policies followed by the Company conform, in all material respects, to accounting principles generally accepted in the United States and to~~ general practices ~~within~~applicable to the financial services industry. ~~The~~This preparation ~~of financial statements in conformity with accounting principles generally accepted in the United States~~ requires management to make estimates, assumptions, and ~~assumptions~~judgements that affect the amounts reported in the financial statements and accompanying notes. ~~While the Company bases estimates on~~The judgment and assumptions made are based upon historical experience, ~~current information and~~future forecasts, or other factors ~~deemed~~that management believes to be ~~relevant, actual~~reasonable under the circumstances. Actual results could differ from those ~~estimates.~~estimates, assumptions, and judgements.

~~The SEC defines “critical~~Not all significant accounting ~~policies” as those that~~policies require ~~application of management’s most~~management to make difficult, subjective or complex judgments. Certain estimates inherently have a greater reliance on the use of assumptions and judgments ~~often~~and, as such, have a greater possibility of producing results that could be materially different than originally reported. The following 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.

Allowance for Credit Losses for Loans

The allowance for credit losses for loans (“ACLL”) represents management’s estimate of expected credit losses over the expected contractual life of our loan portfolio. Determining the appropriateness of the ACLL is complex and requires judgment by management about the effect of matters that are inherently ~~uncertain and~~uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may ~~change~~result in ~~future periods. Please see those policies in conjunction with this discussion. Management believes that the following policies would be considered critical under the SEC’s definition:~~

~~Allowance for Loan Losses.~~ ~~The allowance for loan losses represents probable credit losses that are inherent~~significant changes in the ~~loan portfolio at the financial statement date and which may be estimated. Management uses historical information, as well as current economic data, to assess the adequacy~~ACLL in those future periods.

The appropriateness of the ~~allowance for loan losses as it is affected by changing~~ACLL could change significantly because current economic conditions and ~~various external~~forecasts can change and future events are inherently difficult to predict. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors ~~which may impact the portfolio~~and inputs are considered in ~~ways currently unforeseen. Although management believes that it uses appropriate available information to establish~~estimating the allowance for loan losses, future additions to the allowance may be necessary if certain future events occur that cause actual results to differ from the assumptions used in making the evaluation. Conditions in the local economy and ~~real estate values could require the Company to increase provisions for loan losses, which would negatively impact earnings.~~

~~Acquired Loans.~~ Loans that the Company acquired in business combinations are initially recorded at fair value with no carryover of the related allowance for credit losses. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows initially expected to be collected on the loans and discounting those cash flows at an appropriate market rate of interest. Going forward, the Company continues to evaluate reasonableness of expectations for the timing and the amount of cash to be collected. Subsequent decreases in expected cash flows may result in changes in ~~the amortization or accretion of fair market value adjustments,~~those factors and ~~in some cases~~inputs considered may result in the loan being considered impaired. For collateral dependent loans with deteriorated credit quality, the Company estimates the fair value of the underlying collateral of the loans. These values are discounted using market derived rates of return, with consideration given to the period of time and costs associated with the foreclosure and disposition of the collateral.

~~Income Taxes.~~ Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. The Company uses the asset and liability method of accounting for income taxes in which deferred tax assets and liabilities are established for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. The realization of the net deferred tax asset generally depends upon future levels of taxable ordinary income, taxable capital gain income, and the existence of prior years' taxable income, to which "carry back" refund claims could be made. A valuation allowance is maintained for deferred tax assets that management estimates are more likely than not ~~to be unrealizable based on available evidence~~occur at the ~~time the estimate is made. In determining the valuation allowance, the Company uses historical~~same rate and forecasted future operating results, including a review of the eligible carry-forward periods, tax planning opportunities and other relevant considerations. In particular, income tax benefits and deferred tax assets generated from tax-advantaged commercial development projects are based on management's assessment and interpretation of applicable tax law as it currently stands. These underlying assumptions can change from period to period. For example, tax law changes or variances in projected taxable ordinary income or taxable capital gain income could result in a change in the deferred tax asset or the valuation allowance. Should actual factors and conditions differ materially from those considered by management, the actual realization of the net deferred tax asset could differ materially from the amounts recorded in the financial statements. If the Company is not able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset in excess of the valuation allowance would be charged to income tax expense in the period such determination is made.

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~~Goodwill and Identifiable Intangible Assets.~~ Goodwill and identifiable intangible assets are recorded as a result of business acquisitions and combinations. These assets are evaluated for impairment annually or whenever events or changes in circumstances indicate the carrying value of these assets may not be recoverable. When these assets are evaluated for impairment, if the carrying amount exceeds fair value, an impairment charge is recorded to income. The fair value is based on observable market prices, when practicable. Other valuation techniquesconsistent across all product types. Additionally, changes in factors and inputs may be ~~used when market prices are unavailable,~~directionally inconsistent, such that improvement in one factor may offset deterioration in others. While management utilizes its best judgment and information available, the ultimate adequacy of our ACLL is dependent upon a variety of factors beyond our control, including ~~estimated discounted cash flows~~the performance of our portfolios, the economy, and analysis of market pricing multiples. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. In the event of future changes in ~~fair value,~~interest rates. For detailed information on the ~~Company may be exposed to an impairment charge that could be material.~~ACLL see Note 1- Summary of Significant Accounting Policies and Note 7 – Loans and Allowance for Credit Losses.

~~Determination of Other-Than-Temporary Impairment of Securities.~~ The Company evaluates debt and equity securities within the Company's available for sale and held to maturity portfolios for other-than-temporary impairment ("OTTI"), at least quarterly. If the fair value of a debt security is below the amortized cost basis of the security, OTTI is required to be recognized if any of the following are met: (1) the Company intends to sell the security; (2) it is "more likely than not" that the Company will be required to sell the security before recovery of its amortized cost basis; or (3) for debt securities, the present value of expected cash flows is not sufficient to recover the entire amortized cost basis. For all impaired debt securities that the Company intends to sell, or more likely than not will be required to sell, the full amount of the loss is recognized as OTTI through earnings. Credit-related OTTI for all other impaired debt securities is recognized through earnings. Noncredit related OTTI for such debt securities is recognized in other comprehensive income, net of applicable taxes. In evaluating its marketable equity securities portfolios for OTTI, the Company considers its intent and ability to hold an equity security to recovery of its cost basis in addition to various other factors, including the length of time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer. Any OTTI on marketable equity securities is recognized immediately through earnings. Should actual factors and conditions differ materially from those expected by management, the actual realization of gains or losses on investment securities could differ materially from the amounts recorded in the financial statements.

Fair Value ~~of Financial Instruments.~~Measurements

The Company uses fair value measurements to determine fair value disclosures and to record fair value adjustments to certain ~~financial instruments~~assets and ~~to determine fair value disclosures. Trading assets,~~liabilities, such as interest rate swaps, impaired loans, securities available for sale, and ~~derivative instruments~~derivatives. Our fair values are ~~recorded~~based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at ~~fair value on a recurring basis.~~the measurement date. Additionally, from time to time, the Company may be required to record certain assets at fair value ~~other assets~~ on a ~~nonrecurring~~non-recurring basis, ~~or to establish a loss allowance or write-down based on the~~such as certain impaired loans held for investment and capitalized servicing rights. These non-recurring fair value adjustments typically involve write-downs of ~~impaired assets. Further,~~individual assets due to application of lower-of-cost or market accounting or other accounting standards.

Management has established and documented a process for determining fair value. The use of observable inputs is maximized and the ~~notes to financial statements include information about the extent to which~~use of unobservable inputs is minimized when developing fair value is used to measure assets and liabilities, the valuation methodologies used and its impact to earnings. For financial instruments not recorded at fair value, the notes to financial statements disclose the estimate of their fair value. Due to the judgments and uncertainties involved in the estimation process, the estimates could result in materially different results under different assumptions and conditions.

measurements. Whenever

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there is no readily available market data, management uses its best estimate and assumptions in determining fair value, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if other assumptions had been used, our recorded earnings or disclosures could have been materially different from those reflected in these financial statements. For detailed information on our use of fair value measurements and our related valuation methodologies, see Note 1 – Summary of Significant Accounting Policies and Note 21 – Fair Value Measurements for more information.

ENTERPRISE RISK MANAGEMENT

Other sections of this report on Form 10-K 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. For all material business risks, residual risk was viewed as medium/low to medium due to mitigating controls functioning in the Company.

LIBOR TRANSITION

The Company’s use of LIBOR based instruments and the industry-wide transition program off of LIBOR are discussed in Item 1 (“Business”) and Item 1-A (“Risk Factors”) of this report. The Company has in excess of $5 billion in notional balances of LIBOR based instruments related primarily to its commercial banking operations. These include loans priced off of LIBOR, as well as interest rate swap contacts including customer, dealer, and risk participation agreements.

The Financial Conduct Authority (“FCA”) presently intends to continue publishing most LIBOR indices through June 2023 for use with legacy instruments contracted in 2021 or before. The Company continues to develop and execute plans to transition instruments associated with LIBOR to alternative reference rates. The Company has approved the use of Term SOFR as the lead base case index to replace LIBOR for pricing of new contracts starting in 2022, with Daily Simple SOFR as an alternate. The Company continues to monitor additional index rates as they become available or are requested by customers or other counterparties.

CORPORATE RESPONSIBILITY UPDATE

Our Commitment to Environmental, Social, Governance (ESG) & Corporate Responsibility

Berkshire is committed to purpose-driven, community-centered banking that enhances value for all stakeholders as it pursues its vision of being a high performing, leading socially responsible community bank in New England and beyond. We’re a bank with a purpose: to empower the financial potential of individuals, families and businesses in our communities. We provide an ecosystem of socially responsible financial solutions, actively engage with our communities, and harness the power of our entire business to fuel the economy, promote thriving neighborhoods, foster financial access and success, and invest in a low-carbon future.

At Berkshire, our most important investment for 175 years has been the one we make in each other. We know that where you bank matters and building stronger communities requires a better approach to banking. As such, ESG factors are central to our vision, mission, risk management practices, and Berkshire’s Exciting Strategic Transformation (BEST).

BEST Community Comeback

We believe every community deserves a comeback. That’s why we launched the BEST Community Comeback in 2021, a transformational commitment to empower our stakeholders’ financial potential. The plan focuses on four key areas: fueling small businesses; community financing and philanthropy; financial access and empowerment; and funding environmental sustainability. Through this far-reaching initiative, Berkshire aims to help create more

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businesses and jobs, help more families achieve the dream of owning a home, and aid communities in becoming more environmentally efficient and eco-friendly.

Ongoing Pandemic Support

As 2021 continued to present new challenges, we remained committed to serving our customers and communities.We’re guided by our Be FIRST Values of Belonging, Focusing, Inclusion, Respect, Service, and Teamwork. These values fueled our efforts to navigate the pandemic with the goal of supporting the health and economic resiliency of all our stakeholders. During the height of the pandemic, Berkshire created the You FIRST employee assistance fund to help staff impacted by unexpected financial hardships, provided additional paid sick time, flexible work schedules for remote staff, and maintained full pay for those with reduced schedules as a result of the pandemic. Small businesses and consumers were helped with loan forbearances and government assistance programs. We also launched a fund to assist businesses in the LGBTQIA+ and Black, Indigenous and People of Color (BIPOC) communities.

ESG Program & Business Integration

We’re committed to integrating social, environmental and reputational considerations into all business decision making through our strong foundation of governance systems, including our Environmental, Social and Governance (ESG) Management Committee, Corporate Responsibility & Culture Committee of our Board of Directors, Diversity Equity & Inclusion Committee, Responsible & Sustainable Business Policy, and a strong collection of Social & Environmental risk management practices. Berkshire engages directly with its stakeholders to share information about the progress we’ve made in our ESG performance, including through our Corporate Responsibility website, corporate annual report, and proxy statement. Additionally, our annual Corporate Responsibility Report, which is aligned with Sustainability Accounting Standards Board (“SASB”) commercial bank disclosure topics, details the Company's ESG efforts and programs.

Ratings, Awards & Recognition

We’re proud to be recognized for our performance with local, regional, national, and international awards as well as leading third party ESG ratings* including:

•MSCI ESG- BBB

•ISS ESG Quality Score - Environment: 3, Social: 1, Governance: 2

•Bloomberg ESG Disclosure- 47.81

•The Company is also rated by Sustainalytics

•Banking Northeast Community Champion Award

•Communitas Award for Leadership in Corporate Social Responsibility

•Bloomberg Gender-Equality Index

•Human Rights Campaign Corporate Equality Index Best Place to Work for LGBTQ+ equality- 100% Score

*As of December 31, 2021

Climate Change

Climate Change poses unprecedented risks and opportunities to the world, including Berkshire, its customers and communities. The impacts which can occur from climate change can directly and/or indirectly impact the Company and its stakeholders. As the transition to a low-carbon economy accelerates, new policy emerges, and market dynamics shift, Berkshire expects that its efforts to manage its environmental footprint, mitigate the risks associated with climate change, and support the transition will allow it to strengthen its positioning as a high performing, leading socially responsible community bank. The Company continues to evolve its practices to reflect its community bank mission as well as the size, scope, and complexity of its operations.

Berkshire is actively managing climate related risks and opportunities at board, management and employee levels. The Company’s Board of Directors Corporate Responsibility & Culture Committee provides oversight to environmental sustainability and Climate Change. All business risks are also integrated into our Enterprise Risk Management program and discussed by other applicable Board Committees including the Risk Management & Capital Committee. Both Committees report into the full board. Berkshire enhanced its governance over material

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environmental matters in 2021 by formalizing an Environmental, Social and Governance management committee and completing a formal climate change risk assessment to evaluate the bank’s operations and lending activities for potential exposure to transition and physical risks resulting from climate change.

The results of the risk assessment guide Berkshire’s forward climate management and environmental sustainability strategies to ensure its actively managing these risks and opportunities. It has set targets to help finance the green transition, reduce its Greenhouse Gas (GHG) emissions and source 100% of its electricity from renewable sources by the end of 2024. As the Company moves further along in its climate journey, it expects to continue to enhance its plans, disclosures, programs and initiatives to reduce its emissions as well as capitalize on the many business opportunities arising from the transition to a lower-carbon economy. Further details on Berkshire’s Climate Change governance, risk management, strategy, metrics & targets and next steps can be found in its most recent Corporate Responsibility Report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MANAGEMENT OF INTEREST RATE RISK AND MARKET RISK ANALYSIS

Qualitative Aspects of Market Risk. ~~The Company’s most significant form of market risk is interest rate risk.~~ The Company seeks to ~~avoid fluctuations in its~~provide sustainable net interest income (NII) under varying economic conditions, while protecting the economic value of assets and ~~to maximize net interest income within acceptable levels~~liabilities from adverse effects of ~~risk through periods of changing~~changes in market interest rates. ~~The Company also seeks to manage~~While a number of market factors affect the ~~risk~~level of ~~interest rate changes to its net income~~NII and the economic value of ~~equity. Further, where prudent,~~our assets and liabilities, changes in interest rates is the most significant aspect of our market risk. As such, the Company ~~seeks to be positioned to benefit from expected interest rate changes, within its risk parameters.~~

~~The Company~~ maintains ~~an Enterprise Risk Management/Asset-Liability Committee (ERM/ALCO) that is responsible~~a regular cadence for ~~reviewing~~review and oversight of its asset-liability policies and interest rate risk ~~position. This Committee meets regularly,~~positioning with oversight from senior management and ~~the Chief Financial Officer and Treasurer report trends and interest rate risk position to the Risk Management and Capital Committee of~~ the Board of ~~Directors on a quarterly basis.~~Directors. The manner and extent of the movement of interest rates is an uncertainty that could have a positive or negative impact on the Company’s ~~net interest income and~~ earnings.

The Company manages its interest rate risk by analyzing the ~~sensitivities~~sensitivity and ~~adjusting the~~ mix of its assets and liabilities, including derivative financial instruments. The Company also uses secondary markets, brokerages, and counterparties to accommodate customer demand for ~~long term~~long-term fixed rate loans and to provide it with flexibility in managing its balance sheet positions. When the Company enters into business combinations, it considers interest rate risk as part of its merger analysis and it integrates existing and acquired operations as appropriate to achieve its objectives for the combined businesses.

Quantitative Aspects of Market Risk. ~~Berkshire has~~ The Company quantifies its NII sensitivity using an earnings simulation model that compares a ~~targeted position to maintain~~baseline view of NII over 12 and 24 month horizons, based on a ~~neutral or asset sensitive interest rate risk profile, as measured by~~static view of the ~~sensitivity of net interest income to~~balance sheet and market interest rates, to a wide range of parallel and non-parallel rate ~~changes. The~~shocks and ramps. In addition, the Company ~~measures this sensitivity primarily by evaluating models of~~analyzes net ~~interest~~ income ~~over one year, two years,~~at risk and ~~three year time horizons~~. The Company models a base case assuming no changes in interest rates or balance sheet composition and then assuming various scenarios of ramped interest rate changes, shocked interest rate changes, changes predicted by the forward yield curve, and changes involving twists in the yield curve. The primary focus is on a two-year scenario where interest rates ramp up by 200 basis points in the first year. The Bank also evaluates its equity at risk from interest rate changes through discounted cash flow analysis. ~~This measure assesses the present value of changes to equity based on long term impacts of rate changes beyond the time horizons evaluated for net interest income at risk.~~

~~The Company uses a simulation model to measure the changes in net interest income.~~ The chart below shows ~~the~~an analysis of ~~the ramped change described above, assuming~~a scenario where interest rates ramp in a parallel ~~shift in the yield curve. Loans, deposits,~~manner over a period of 12 months compared to a base case of flat interest rates. Modeled assets and ~~borrowings were expected~~liabilities are assumed to reprice at ~~the~~respective repricing or maturity ~~date.~~dates. Pricing caps and floors are included in the ~~simulation model.~~results, where applicable. The Company uses prepayment ~~guidelines~~expectations set forth by market sources as well as Company generated data where applicable. ~~Cash~~Generally, cash flows from loans and securities are assumed to be reinvested to maintain a static balance sheet. Other assumptions about balance sheet mix are generally held constant. There were no material changes to the way that the Company measures market risk in ~~2017.~~2021.

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Item 7-7A - Table 2 - Qualitative Aspects of Market Risk


Change in Interest Rates-Basis Points (Rate Ramp)
	1- 12 Months		13- 24 Months
	$ Change	% Change	$ Change	% Change
(In thousands)
At December 31, 2021

+200	17,815	6.82	39,059	14.83
+100	7,294	2.79	15,282	5.80
-100	1,227	0.47	(1,356)	(0.51)

At December 31, 2020

+200	(108)	(0.03)	12,199	4.01
+100	(3,090)	(0.99)	(943)	(0.31)
-100	5,408	1.73	6,769	2.22

Change in
Interest Rates-Basis
Points (Rate Ramp)

1- 12 Months 13- 24 Months
$ Change % Change $ Change % Change
(In thousands)
At December 31, 2017

+300 $ 9,806
2.95 % $ 11,193
3.40 %
+200 7,940
2.39
9,374
2.85
+100 4,683
1.41
5,890
1.79
-100 (6,424 ) (1.93 ) (12,532 ) (3.81 )

At December 31, 2016

+300 $ 9,904
3.96 % $ 7,659
3.07 %
+200 7,497
3.00
6,527
2.62
+100 4,632
1.85
4,448
1.78
-100 (5,853 ) (2.34 ) (10,100 ) (4.05 )

~~There were no significant~~At year-end 2021, a 200 basis point parallel upward interest rate increase results in approximately a 7% increase in modeled NII compared to the static baseline view in the first year, and approximately a 15% increase in the second-year horizon. The Company has shifted towards asset sensitive positioning throughout 2021, and remains well-positioned for the forecast rate cycle ahead. Asset sensitivity is driven by elevated cash balances from loan payoffs, a predominantly floating-rate loan portfolio, and modeled assumptions for deposit pricing and beta. For purposes of NII sensitivity reporting, a weighted average deposit beta of 35-45% is assumed in asset-liability modeling. Our positioning to downward changes in market rates remains limited due to a smaller effective shock for assets and liabilities to reprice lower from the current rate environment. In addition to parallel shocks and ramps, the Company analyzes the impact of non-parallel shocks (i.e., yield curve twist scenarios). At this time, the primary driver of asset sensitivity is on the short-end of the yield curve, though upward changes in the long-end are also expected to be accretive to NII.

Economic value of equity is modeled to increase by 4.5% in the event of a 200 basis point upward parallel shock in interest rates. Based on market expectations for higher interest rates in 2022 and beyond, and on commentary from monetary authorities about easing monetary stimulus, it is anticipated that the Company’s positive sensitivity to rising rates may contribute to its BEST goals for improved profitability.

A critical component of modeling this scenario is the assumption of deposit interest rate sensitivity, which the Company continues to model at a 40% beta level after an initial low beta for the first 50 basis points of rising rates. Due to the low level of interest rates, the modeled sensitivity of ~~net~~a downward shift in interest ~~income at year-end 2017, compared~~rates is affected by assumptions related to market influences on spreads and floors. Prime, mortgage rates, and deposits are floored. All other rates are zero bound.

Modeled interest rate sensitivity depends on other material assumptions. Market risk exposure is affected by the ~~start~~level and shape of ~~the year. The Company is positioned to modestly benefit from parallel upward shifts in~~ the yield curve in ~~a ramped scenario.~~markets for financial instruments including U.S. Treasury obligations, forward interest rate derivatives, the U.S. prime interest rate, and LIBOR rates. Also, the economic impact on customer and market behaviors of the COVID-19 pandemic remains uncertain and may cause actual events to differ from assumptions. The ~~acquisition~~behavior of ~~Commerce, with its commercial loans~~markets under the historically unusual conditions currently prevailing may be different from modeling assumptions, and ~~deposits, was estimated to be positive for Berkshire’s asset sensitivity. This offsets the liability sensitivity introduced by the termination of Berkshire’s cash flow hedges.~~

~~In a flat rate scenario,~~ the Company ~~anticipates that there would be modest margin pressure on~~continues to monitor the ~~year-end balance sheet, compared to fourth quarter results including Commerce. This is due to some asset repricings~~markets and the ~~lagged nature of deposit repricings, along with anticipated decreases~~assumptions in ~~the accretive benefits of purchase accounting. The interest sensitivity analyses are in comparison to this flat rate base case. The Company also analyzes~~ its interest sensitivity based on the forward yield curve. At year-end 2017, the markets expected short term rates to increase more than long term rates in 2018, pushing the yield curve up and flattening it. In this scenario, asset sensitivity remains positive, but closer to neutral due to the more modest increase in long term interest rates implied by the forward curve.model.

The Company also evaluates net income at risk, taking into account primarily changes in fee income that may result from interest rate changes. In dollar terms, the asset sensitivity of the Company’s net income is less than its interest income, due to the negative impact of higher rates on fee income. In percentage terms, the net income sensitivity is greater since net income is a lower base compared to net interest income. Generally, fee income is viewed as negatively correlated with changes in interest rates. Higher rates can depress demand for fixed rate products that are the chief source of loan sale gains in mortgage banking and SBA lending, as well as interest rate swap income. Higher rates also are related to higher earnings credit rates on commercial transactions accounts, which reduces deposit service charges.

The Company’s equity at risk is normally liability sensitive due to the overall shorter duration of its funds sources compared to its loans and investments. The Company estimated that the economic value of its equity was 5% negatively impacted by a modeled 200 basis point interest rate shock at year-end 2017, which was not significantly different from the 4% risk estimated at the start of the year. The Company believes that the Commerce acquisition was beneficial to its equity at risk due to the shorter duration of its earning assets and the higher concentration of transactions accounts. This benefit was offset by a change in the modeling of the Company’s deposit decay timing, with no change in modeled deposit average lives. This change was facilitated by recent systems enhancements.

A key sensitivity of the Company’s interest rate risk analysis is the behavior of deposit costs as short term rates increase. The numerous assumptions about the sensitivity of deposits result in an estimated deposit beta of about 40%, which means that a 100 basis point increase in interest rates will translate into a 40 basis point increase in deposit costs after the lagging response is fully realized. The Company estimates that the deposit beta of interest bearing deposits was 47% at year-end 2017. The Company believes that its experience in 2017 was less sensitive



			~~Michael P. Daly.~~Nitin J. Mhatre. Age ~~56.~~ 51. Mr. ~~Daly has served as~~Mhatre was appointed to the role of President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank ~~since October 2002. Before these appointments, he served as Executive Vice President and Senior Loan Officer of the Bank.~~ in January 2021.He ~~has been an employee since 1986. He has served~~was also appointed as a Director of the Company and the Bank. Prior to joining the Company, Mr. Mhatre was Executive Vice President, Community Banking, at Webster Bank, ~~since 2002.~~where he led consumer and business banking businesses. Before joining Webster in 2009, Mr. Mhatre spent 13 years at Citi Group in various leadership roles across consumer-related businesses globally.



	~~Richard M. Marotta.~~Sean A. Gray. Age ~~59.~~ 45. Mr. ~~Marotta~~Gray was ~~promoted~~appointed to the role of Senior Executive Vice President and Chief Operating Officer of the Company and President of the Bank in ~~September 2015, having previously served as Executive Vice President, Chief Risk Officer since January 2010, as well as Chief Administrative Officer since July 2013.~~November 2018. He ~~is responsible for overall risk management, compliance, human resources, information technology, legal, and strategic services, and oversees audit, which reports to the Board. Mr. Marotta~~ was previously ~~Executive Vice President and Group Head, Asset Recovery at KeyBank.~~

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	~~Sean A. Gray. Age 42. Mr. Gray was promoted to~~ Senior Executive Vice President of the Company and Chief Operating Officer of the Bank ~~in September 2015, having previously served as Executive Vice President, Retail Banking~~ since 2010 and as a Senior Vice President since April 2008. Mr. Gray is responsible for the operating teams of the bank, including retail banking, commercial banking, specialty lending, mortgage banking, wealth management, insurance, and marketing.2015. Mr. Gray joined the Company in ~~January~~retail banking in 2007 ~~as First~~and attained the position of Executive Vice President, Retail Banking. ~~Prior to joining the Bank, Mr. Gray~~Previously, he was Vice President and Consumer Market Manager at Bank of America, in Waltham, Massachusetts.

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			~~James M. Moses.~~Subhadeep Basu, Age ~~41.~~51. Mr. ~~Moses is~~Basu joined the Company in March 2021 as Senior Executive Vice President, Chief Financial ~~Officer of the Company and the Bank, since joining the Bank in July 2016.~~Officer. He is responsible for the accounting, treasury, tax, investor relations, procurement/facilities, and capital markets functions. Prior to joining Berkshire, Mr. ~~Moses previously~~Basu served ~~at Webster Bank~~ as Senior Vice President ~~and Asset/Liability Manager. Mr. Moses joined Webster Bank in 2011 from M&T Bank where~~of Global Institutional Services at State Street. Before joining State Street, he spent ~~four~~more than 15 years at Citigroup, Bank of America, and Ally Financial in various leadership roles ~~including head mortgage trader, deposit products pricing manager~~across Finance, Treasury, Risk, and ~~consumer credit card product manager.~~Consumer and Commercial Banking.



	George F. Bacigalupo. Age ~~63.~~ 67. Mr. Bacigalupo was promoted to Senior Executive Vice President, Head of Commercial Banking, Berkshire Bank in September 2015, having previously served as an Executive Vice President since October 2013 and Senior Vice President, Chief Credit Officer since 2011. ~~Mr. Bacigalupo is responsible for commercial banking, including the middle-market, business banking and asset based lending teams in Eastern and Central Massachusetts and Connecticut.~~ Previously, Mr. Bacigalupo was EVP of Specialty Lending at TD Banknorth, where he established the ABL and other middle-market lending groups. Subsequently, at TD Bank, he was the Senior Lender for New England.



	~~Michael~~Gregory D. ~~Carroll.~~Lindenmuth. Age ~~56.~~ 54. Mr. ~~Carroll~~Lindenmuth is Senior Executive Vice President, ~~Commercial Banking and Specialty Lending~~Chief Risk Officer of ~~Berkshire~~the Bank, a position he was promoted to in October ~~2017.~~2018. Mr. Carroll has previously held the positions of EVP, Chief Risk Officer and SVP, Chief Credit Officer managing the risk and credit departments of the Bank. In his role as EVP, Commercial Banking and Specialty Lending he is responsible for Firestone Financial (equipment leasing) and 44 Business Capital (SBA Lending) and is the executive leader of the regional commercial teams in Berkshire County, Vermont, Albany, Syracuse, and the Mid-Atlantic region. He joined the company in 2009 as SVP, New York Regional Commercial Leader. Previously, Mr. Carroll was Senior Vice President, Middle Market banking at KeyBank.



	~~Tami F. Gunsch. Age 55.~~ Ms. Gunsch is Executive Vice President & Director of Relationship Banking, a position she was promoted to in January 2018. In this role, Ms. Gunsch will develop and lead the relationship banking strategy across all lines of business. She is further responsible for all aspects of the retail banking consumer experience, including branch operations, consumer lending, call center, and electronic/mobile banking. Ms. Gunsch has previously held the positions of EVP, Retail Banking and Senior Vice President since October 2011. Ms. GunschLindenmuth joined Berkshire in 2016 from ~~Citizens Bank in 2009 as First VP of Retail Banking.~~

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	~~Gregory D. Lindenmuth. Age 50.~~ ~~Mr. Lindenmuth is~~ the ~~Executive Vice President, Chief Risk Officer of Berkshire Bank. Mr. Lindenmuth is responsible~~FDIC where he was employed for ~~Credit, credit/risk administration,~~24 years and ~~loan workout. Mr. Lindenmuth previously served as~~held multiple positions including Senior Risk Examiner for the Division of Risk Management Supervision ~~with~~and Acting Regional Manager for the ~~FDIC, where he was employed for 24 years.~~Division of Insurance and Research. With the FDIC, Mr. Lindenmuth was also a Capital Markets, Mortgage Banking, and Fraud ~~Specialist and a member of the National Examination Procedures Committee.~~Specialist.
			Deborah A. Stephenson. Age 51. Ms. Stephenson is Senior Executive Vice President, Compliance and Regulatory of Berkshire Bank, a position she was promoted to in 2018. Ms. Stephenson joined the Company in 2014. She was previously Senior Vice President at Country Bank where she managed retail banking and human resources. She started her career at the FDIC as a Safety and Soundness and Compliance Examiner. Subsequently, she has held various leadership roles in Compliance, CRA, BSA/AML, Retail Sales/Branch Administration, Human Resources and Training.



	~~Allison P. O’Rourke.~~Lucia “Lucy” Bellomia, Age ~~42.~~ 56.Ms. ~~O’Rourke~~Bellomia is Executive Vice President ~~Finance & Investor Relations,~~and Head of Retail Banking. She oversees the retail branch network, branch training, the MyBanker program, Call Center, Branch Operations, Retail Sales and Service Delivery. Prior to joining Berkshire in September 2021, she served as the Executive SVP, PM, Community Banking, Northeast Region, for Bank of America. She previously held positions at the Police and Fire Credit Union in Philadelphia, Santander Bank, PNC Bank, Sun National Bank, and Pioneer Savings and Loans.
			Jennifer M. Carmichael, Age 44. Ms. Carmichael was promoted to Executive Vice President, Chief Internal Audit Officer of Berkshire Bank in November 2020. She reports to the Audit Committee of the Board and administratively to the CEO. Ms. Carmichael previously served as Senior Vice President and Audit Manager. She joined the Bank in 2016 from Accume Partners where she served as Senior Audit Manager to several clients in the New York and New England regions, including Berkshire.

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			Jacqueline Courtwright, Age 58. Ms. Courtwright was promoted in September 2020 to Executive Vice President, Chief Human Resources and Culture Officer at Berkshire Bank.She had been appointed as Senior Vice President, Chief Human Resources Officer in July 2019.Prior to joining Berkshire in 2012, Ms. Courtwright was VP, Human Resources Business Partner at Citizen Bank and also held senior human resource roles during her 20 years at KeyBank.
			Georgia Melas. Age 58. Ms. Melas is Executive Vice President, Chief Credit Officer of Berkshire Bank, a position she ~~assumed~~was promoted to in ~~January 2017, having~~October 2018. Ms. Melas joined Berkshire as Senior Vice President, Chief Credit Officer in 2015 from Key Bank where she held multiple positions including Senior Credit Officer, Commercial Banking.
			Wm. Gordon Prescott, Age 60. Mr. Prescott is Executive Vice President, General Counsel and Corporate Secretary of the Bank, a position he was promoted to in October 2018. Mr. Prescott joined Berkshire in 2008 as VP, General Counsel and Corporate Secretary. Mr. Prescott has 30 plus years of experience in the legal profession, including extensive experience as in-house corporate counsel, most recently with KB Toys Inc. prior to joining the Bank.
			Ellen Steinfeld, Age 60.Ms. Steinfeld is Executive Vice President and Head of Consumer Lending & Payments. She is responsible for Mortgage Banking sales and operations, Home Equity, Consumer Lending and Payments. Prior to joining Berkshire in September 2021, she was President of Innovative Lending Strategic Solutions LLC. Before her consulting role, she was Managing Director and US Consumer Lending Executive for TIAA-CREF, where she managed Mortgage Lending, Small Business Lending, Consumer Lending. She has also held management positions at Hudson City Savings, Citizens Bank, RBC Wealth Management, and E*TRADE Financial. (Note:Ms. Steinfeld’s stock ownership reports to the SEC are filed under her legal name of Ellen Tulchiner).
			Jason T. White, Age 46.Mr. White was promoted to Executive Vice President, Chief Information Officer of Berkshire Bank in November 2020.He previously served as ~~Executive~~Senior Vice President, ~~Investor Relations~~Chief Technology Officer ~~and Financial Institutions Banking. She joined the Company in 2013 and is responsible for investor relations, financial institutions banking, and financial planning and analysis. Ms. O’Rourke~~since May 2019 when he joined the Bank following the acquisition of Savings Institute Bank & Trust, where he served as ~~Vice President in 2013 from the NYSE Euronext~~Chief Information Officer and ~~previously worked in securities brokerage with Goldman Sachs and Speer Leeds and Kellogg.~~Information Security Officer.

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Reference is made to the cover page of this report and to the section captioned ~~“Other~~“Additional Information - Other Information Relating to Directors and Executive Officers - Delinquent Section 16(a) ~~Beneficial Ownership Reporting Compliance”~~Reports” in the Proxy Statement for information regarding compliance with Section 16(a) of the Exchange Act. For information concerning the audit committee and the audit committee financial expert, reference is made to the section captioned ~~“Corporate~~“Proposal 1 - Election of Directors for a One-Year Term", "Proposal 1 - Election of Directors for One Year Term - Corporate Governance - Committees of the Board of Directors”, and ~~“Corporate Governance~~“Proposal 1 - ~~Audit Committee”~~Election of Directors for a One Year Term - Board Committees and Responsibilities" in the Proxy Statement.

For information concerning the Company’s code of ethics, the information contained under the section captioned ~~“Corporate~~“Proposal 1 - Election of Directors for a One Year Term - Corporate Governance - Code of Business Conduct and Anonymous Reporting Line Policy” in the Proxy Statement is incorporated herein by reference.

A copy of the Company’s code of ethics is available to stockholders on the Company’s website atat:

~~http://ir.berkshirebank.com~~.berkshirebank.com under the Investor Relations tab.

ITEM 11. EXECUTIVE COMPENSATION

For information regarding executive compensation, the sections captioned ~~“Director Compensation”~~“Proposal 1 - Election of Directors for a One-Year Term”, ~~“Compensation Discussion~~“Proposal 1 - Election of Directors of a One Year Term - Corporate Governance - Committees of the Board of Directors”, and ~~Analysis,”~~“Proposal 1 - Election of Directors for a One Year Term - Board Committees and ~~“Executive Compensation”~~Responsibilities” in the Proxy Statement are incorporated herein by reference.

For information regarding the Compensation Committee Report, the section captioned “Compensation ~~Committee Report”~~Discussion and Analysis” in the Proxy Statement is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

(a)Security Ownership of Certain Beneficial Owners

Information required by this item is incorporated herein by reference to the section captioned ~~“Stock~~“Additional Information - Stock Ownership” in the Proxy Statement.

(b)Security Ownership of Management

Information required by this item is incorporated herein by reference to the section captioned ~~“Stock~~“Additional Information - Stock Ownership” in the Proxy Statement.

(c)Changes in Control

Management of Berkshire knows of no arrangements, including any pledge by any person of securities of Berkshire, the operation of which may at a subsequent date result in a change in control of the registrant.

(d)Equity Compensation Plan Information

The following table sets forth information, as of December 31, ~~2017,~~2021, about Company common stock that may be issued upon exercise of options under stock-based benefit plans maintained by the Company, as well as the number of securities available for issuance under equity compensation plans:


Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders	80,400	$	25.21	536,469
Equity compensation plans not approved by security holders	—	—		—

Total	80,400	$	25.21	536,469

Plan category
Number of securities
to be issued upon
exercise of
outstanding options, warrants and rights

Weighted-average
exercise price of
outstanding options, warrants and rights

Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities reflected in the first column)
Equity compensation plans approved by security holders 75,589
$ 13.59
389,536
Equity compensation plans not approved by security holders —
—
—
Total 75,589
$ 13.59
389,536

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference to the sections captioned ~~“Other~~“Additional Information - Other Information Relating to Directors and Executive Officers —- Transactions with Related ~~Persons”~~Persons" and ~~“Procedures~~“Additional Information - Other Information Relating to Directors and Executive Officers - Procedures Governing Related Persons Transactions” in the Proxy Statement. Information regarding director independence is incorporated herein by reference to the section ~~“Proposals to be Voted on by Shareholders — Proposal~~“Proposal 1 —- Election of ~~Directors”~~Directors for a One Year Term” in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated herein by reference to the section captioned ~~“Proposals to be Voted on by Shareholders — Proposal 6~~“Proposal 3 — Ratification of the Appointment of the Independent Registered Public Accounting Firm” in the Proxy Statement.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

~~(a)~~

~~[1]~~ ~~Consolidated Financial Statements~~

(a) [1] Consolidated Financial Statements

•Report of Independent Registered Public Accounting Firm

•Consolidated Balance Sheets as of December 31, 2021 and 2020

•Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019

•Consolidated Statements of Comprehensive Income/(Loss) for the Years Ended December 31, 2021, 2020, and 2019

•Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2021, 2020, and 2019

•Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020, and 2019

•Notes to Consolidated Financial Statements


•	~~Report of Independent Registered Public Accounting Firm~~


•	~~Consolidated Balance Sheets as of December 31, 2017 and 2016~~


•	~~Consolidated Statements of Income for the Years Ended December 31, 2017, 2016, and 2015~~


•	~~Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016, and 2015~~


•	~~Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2017, 2016, and 2015~~


•	~~Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015~~


•	~~Notes to Consolidated Financial Statements~~

The Consolidated Financial Statements required to be filed in our Annual Report on Form 10-K are included in Part II, Item 8 hereof.


~~[2]~~	~~Financial Statement Schedules~~

[2] Financial Statement Schedules

All financial statement schedules are omitted because the required information is either included or is not applicable.

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[3] Exhibits


~~[3]~~	~~Exhibits~~



3.1		Certificate of Incorporation of Berkshire Hills Bancorp, Inc. (1)
3.2		Amended and Restated Bylaws of Berkshire Hills Bancorp, Inc. (2)
3.3		Certificate of Amendment to the Certificate of Incorporation of Berkshire Hills Bancorp, Inc. (3)
3.4		Certificate of Designations of the Series B Non-Voting Preferred Stock (4)
4.1		Form of Common Stock Certificate of Berkshire Hills Bancorp, Inc. (1)
4.2		Note Subscription Agreement by and among Berkshire Hills Bancorp, Inc. and certain subscribers dated September 20, 2012 (5)
~~10.1~~4.3		~~Amended and Restated~~Description of Berkshire Hills Bancorp, Inc. Securities (6)
10.1		Three-Year Employment Agreement by and among Berkshire ~~Bank, Berkshire~~ Hills Bancorp, Inc., Berkshire Bank and ~~Michael P. Daly (6)~~Nitin J. Mhatre (7 )
10.2		Berkshire Bank Supplemental Executive Retirement Agreement entered into with Nitin J. Mhatre (8 )
10.3		Amended and Restated Three Year Change in Control Agreement by and among Berkshire Hills Bancorp, Inc., Berkshire Bank and Sean A. Gray (9)
10.4		Supplemental Executive Retirement Agreement between Berkshire Bank and ~~Michael P. Daly (7)~~Sean A. Gray (10 )
~~10.3~~10.5		Three Year Executive Change in Control Agreement by and among Berkshire ~~Bank, Berkshire~~ Hills Bancorp, Inc., Berkshire Bank and George F. Bacigalupo ~~(8)~~(11)
~~10.4~~10.6		~~Three-Year Executive~~Berkshire Bank Enhanced Change in Control ~~Agreement by~~Severance Plan (Gregory D. Lindenmuth and ~~among Berkshire Bank, Berkshire Hills Bancorp, Inc., and James M. Moses (9)~~Deborah Stephenson) (12)
~~10.5~~10.7		~~Three Year Change in Control Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc. and Richard M. Marotta (10)~~
~~10.6~~	~~Supplemental Executive Retirement Agreement between Berkshire Bank and Richard M. Marotta (11)~~
~~10.7~~	~~Amended and Restated Three Year Change in Control Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc., and Sean A. Gray (12)~~
~~10.8~~	Form of Split Dollar Agreement entered into with ~~Michael P. Daly,~~ Sean A. Gray ~~and Richard M. Marotta~~ (13)
~~10.9~~10.8		~~Endorsement Agreement by and among Berkshire Hills Bancorp, Inc. and Geno Auriemma dated as of May 14, 2012 (14)~~
~~10.10~~	~~Berkshire Hills Bancorp, Inc. 2011 Equity Incentive Plan (15)~~
~~10.11~~	~~Berkshire Hills Bancorp, Inc. 2013 Equity Incentive Plan (16)~~
~~10.12~~	Berkshire Bank Executive Long-Term Care Insurance Plan ~~(17)~~(14)
~~10.13~~10.9		Berkshire ~~Bank 2017~~Hills Bancorp, Inc. 2018 Equity Incentive Plan (15)
10.10		Senior Executive Short Term Incentive Plan (16)
~~11.0~~21.0		~~Statement re: Computation of Per Share Earnings is incorporated herein by reference to Part II, Item 8, “Consolidated Financial Statements and Supplementary Data”~~Subsidiary Information
~~21.0~~23.1		~~Subsidiary Information~~
~~23.1~~	Consent of Crowe ~~Horwath~~ LLP
~~23.2~~31.1		~~Consent of PricewaterhouseCoopers LLP~~
~~31.1~~	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Interactive data files pursuant to Rule 405 of Regulation S-T: (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 in detail

8074

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(1)
~~(1)~~	Incorporated herein by reference from the Exhibits to Form S-1, Registration Statement and amendments thereto, initially filed on March 10, 2000, Registration No. 333-32146.
(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 10-Q as filed on November 9, 2017.
(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 the Exhibits to the Form 8-K as filed on September 26, 2012.
(6)		Incorporated herein by reference from ~~the Exhibits~~Exhibit 4.3 to the ~~Form 8-K as filed on January 6, 2009.~~
~~(7)~~	~~Incorporated herein by reference from the Exhibits to~~ Form 10-K as filed on ~~March 16, 2009.~~February 28, 2020.
~~(8)~~(7)		Incorporated herein by reference from the Exhibit to the Form ~~10-K~~8-K as filed on ~~March 17, 2014.~~January 26, 2021.
~~(9)~~(8)		Incorporated herein by reference from the ~~Exhibits~~Exhibit to the Form 8-K as filed on ~~September 23, 2016.~~April 2, 2021.
~~(10)~~(9)		~~Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 16, 2010.~~
~~(11)~~	~~Incorporated herein by reference from the Exhibits to the Form 8-K as filed on June 29, 2016.~~
~~(12)~~	Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 16, 2011.
~~(13)~~(10)		Incorporated herein by reference from the Exhibits to the Form 8-K as filed on February 22, 2019.
(11)		Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 17, 2014.
(12)		Incorporated herein by reference from the Exhibits to the Form 10-K as filed on February 28, 2020.
(13)		Incorporated herein by reference from the Exhibit to the Form 8-K as filed on January 19, 2011.
(14)		~~Incorporated by reference from Exhibit 10.16 to the Form 10-Q as filed on August 9, 2012.~~
~~(15)~~	~~Incorporated herein by reference from the Appendix to the Proxy Statement as filed on March 24, 2011.~~
~~(16)~~	~~Incorporated herein by reference from the Appendix to the Proxy Statement as filed on April 2, 2013.~~
~~(17)~~	Incorporated herein by reference from the Exhibits to the Form 8-K as filed on January 23, 2015.
(15)		Incorporated herein by reference from the Appendix to the Proxy Statement as filed on April 6, 2018.
(16)		Incorporated herein by reference from the Exhibits to the Form 10-Q as filed on May 10, 2019.

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 1, ~~2018~~2022	By:	/s/ ~~Michael P. Daly~~Nitin J. Mhatre
		~~Michael P. Daly~~Nitin J. Mhatre
		President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ ~~Michael P. Daly~~Nitin J. Mhatre

Director, President, & Chief Executive Officer

March 1, ~~2018~~2022

~~Michael P. Daly~~Nitin J. Mhatre

(principal executive officer)

/s/ ~~James M. Moses~~Subhadeep Basu

Senior Executive Vice President, Chief Financial Officer

March 1, ~~2018~~2022

~~James M. Moses~~Subhadeep Basu

(principal financial and accounting officer)

~~/s/ William J. Ryan~~

~~Non-Executive Chairman~~

~~March 1, 2018~~

~~William J. Ryan~~

~~/s/ Paul T. Bossidy~~

~~Director~~

~~March 1, 2018~~

~~Paul T. Bossidy~~

/s/ David M. Brunelle

~~Director~~Chairperson

March 1, ~~2018~~2022

David M. Brunelle

/s/ Baye Adofo-Wilson

Director

March 1, 2022

Baye Adofo-Wilson

/s/ ~~Robert M. Curley~~Rheo A. Brouillard

Director

March 1, ~~2018~~2022

~~Robert M. Curley~~Rheo A. Brouillard

/s/ Nina A. Charnley

Director

March 1, 2022

Nina A. Charnley

/s/ John B. Davies

Director

March 1, ~~2018~~2022

John B. Davies

/s/ William H. Hughes, III

Director

March 1, 2022

William H. Hughes, III

/s/ ~~J. Williar Dunlaevy~~Jeffrey W. Kip

Director

March 1, ~~2018~~2022

~~J. Williar Dunlaevy~~Jeffrey W. Kip

/s/ Sylvia Maxfield

Director

March 1, 2022

~~/s/ Cornelius D. Mahoney~~Sylvia Maxfield

~~Director~~

~~March 1, 2018~~

~~Cornelius D. Mahoney~~

~~/s/ Pamela A. Massad~~

~~Director~~

~~March 1, 2018~~

~~Pamela A. Massad~~

/s/ Laurie Norton Moffatt

Director

March 1, ~~2018~~2022

Laurie Norton Moffatt

/s/ Jonathan I. Shulman

Director

March 1, 2022

Jonathan I. Shulman

/s/ ~~Richard J. Murphy~~Michael A. Zaitzeff

Director

March 1, ~~2018~~2022

~~Richard J. Murphy~~Michael A. Zaitzeff

~~/s/ Patrick J. Sheehan~~

~~Director~~

~~March 1, 2018~~

~~Patrick J. Sheehan~~

~~/s/ D. Jeffrey Templeton~~

~~Director~~

~~March 1, 2018~~

~~D. Jeffrey Templeton~~

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s Consolidated Financial Statements for external reporting purposes in accordance with generally accepted accounting principles.

As of December 31, ~~2017,~~2021, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework issued in 2013, by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, ~~2017~~2021 was effective.

Management has excluded Commerce Bancshares Corp. and subsidiaries ("Commerce") from its assessment of internal control over financial reporting as of December 31, 2017 because this entity was acquired in a business combination in 2017. Commerce represents 17% of total assets and less than 1% of total revenue, respectively, of the related Consolidated Financial Statement amounts as of and for the year ended December 31, 2017.

The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

The effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2017~~2021 has been audited by Crowe ~~Horwath~~ LLP, an independent registered public accounting firm, as stated in their report, which follows. This report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2017.~~2021.



/s/ ~~Michael P. Daly~~Nitin J. Mhatre						/s/ ~~James M. Moses~~Subhadeep Basu
~~Michael P. Daly~~Nitin J. Mhatre						~~James M. Moses~~Subhadeep Basu
President & Chief Executive Officer						Senior Executive Vice President & Chief Financial Officer
March 1, ~~2018~~2022						March 1, ~~2018~~2022

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of

of Berkshire Hills Bancorp, Inc.

Boston, Massachusetts

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance ~~sheet~~sheets of Berkshire Hills Bancorp, Inc. (the "Company") as of December 31, ~~2017,~~2021 and 2020, the related consolidated statements of ~~income,~~operations, comprehensive ~~income,~~income/(loss), changes in shareholders’ equity, and cash flows for each of the ~~year~~years in the three-year period ended December 31, ~~2017,~~2021, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, ~~2017,~~2021, based on criteria established in Internal Control -– Integrated ~~Framework~~Framework: (2013) issued ~~in 2013~~ by the Committee of Sponsoring Organizations of the Treadway Commission ~~(“COSO”)~~(COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017,~~2021 and 2020, and the results of its operations and its cash flows for each of the ~~year~~years in the three-year period ended December 31, ~~2017~~2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2017,~~2021, based on criteria established in Internal Control -– Integrated ~~Framework~~Framework: (2013) issued ~~in 2013~~ by COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 326, Financial Instruments – Credit Losses (“ASC 326”). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material

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misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our ~~audit~~audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our ~~audit~~audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

As permitted, the Company has excluded the operations of Commerce Bancshares Corp. and subsidiaries (“Commerce”), acquired during 2017 and which is described in Note 2 of the financial statements, from the scope of management’s report on internal control over financial reporting. As such, Commerce has also been excluded from the scope of our audit of internal control over financial reporting.

Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

~~F-2~~

~~Table of Contents~~

Definition and Limitations of Internal Control ~~over~~Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

~~/s/~~

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses for loans

The estimate of expected credit losses is based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts. In order to estimate the expected credit losses for loans evaluated on a pooled basis, the Company utilizes a static pool migration methodology which calculates a historical loss rate for each of the identified loan segments. The historical loss rates are then adjusted for current and asset specific characteristics (also referred to as qualitative adjustments) and for expected changes to current conditions over the reasonable and supportable forecast period (also referred to as forecast). Each of these key components of the allowance for credit loss calculation is complex and requires a high volume of data input.

Auditing the allowance for credit losses was especially challenging and identified by us as a critical audit matter given the high volume of data inputs and judgements made by management.Auditing the allowance for credit loss calculation involved significant audit effort, including the involvement of experienced audit personnel.

The primary procedures we performed to address this critical audit matter included:

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Table of Contents

Testing the effectiveness of internal controls over management’s allowance for credit loss calculation including the design and operating effectiveness to address:

•Completeness and accuracy of the reports utilized within the allowance for credit loss calculation.

•The mathematical accuracy of the allowance for credit loss calculation.

•The accuracy of application of information within the allowance for credit loss calculation.

•Significant assumptions and judgements applied within the allowance for credit loss calculation.

Substantively testing management’s process to estimate the allowance for credit loss calculation included:

•Testing the completeness and accuracy of the underlying internal data utilized to prepare the calculation.

•Evaluating the relevance and reliability of the underlying external data utilized to prepare the calculation.

•Testing the mathematical accuracy, including the application of data and assumptions, of the allowance for credit loss calculation.

•The reasonableness of the significant judgements and assumptions utilized within the allowance for credit loss calculation.

/s/Crowe ~~Horwath~~ LLP

We have served as the Company's auditor since ~~2017~~2017.

New York, New York

March 1, ~~2018~~2022

~~F-3~~

F-4

Table of Contents

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and Shareholders of~~

~~Berkshire Hills Bancorp, Inc.~~

In our opinion, the consolidated balance sheet as of December 31, 2016 and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2016 present fairly, in all material respects, the financial position of Berkshire Hills Bancorp, Inc. and its subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~/s/ PricewaterhouseCoopers LLP~~

~~Boston, Massachusetts~~

~~March 1, 2017~~

~~F-4~~

~~Table of Contents~~

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS


	December 31,							December 31,
(In thousands, except share data)	2017			2016			(In thousands, except share data)	2021		2020
Assets							Assets
Cash and due from banks	$	91,122		$	71,494		Cash and due from banks	$	109,350	$	91,219
Short-term investments	157,641			41,581			Short-term investments	1,518,457		1,466,656
Total cash and cash equivalents	248,763			113,075			Total cash and cash equivalents	1,627,807		1,557,875

Trading security	12,277			13,229			Trading security	8,354		9,708
Marketable equity securities, at fair value							Marketable equity securities, at fair value	15,453		18,513
Securities available for sale, at fair value	1,426,099			1,209,537			Securities available for sale, at fair value	1,877,585		1,695,232
Securities held to maturity (fair values of 405,276 in 2017 and $337,680 in 2016)	397,103			334,368
Securities held to maturity (fair values of $647,236 in 2021 and $491,855 in 2020)							Securities held to maturity (fair values of $647,236 in 2021 and $491,855 in 2020)	636,503		465,091
Federal Home Loan Bank stock and other restricted securities	63,085			71,112			Federal Home Loan Bank stock and other restricted securities	10,800		34,873
Total securities	1,898,564			1,628,246			Total securities	2,548,695		2,223,417
Less: Allowance for credit losses on investment							Less: Allowance for credit losses on investment	(105)		(104)
Net Securities							Net Securities	2,548,590		2,223,313

Loans held for sale, at fair value	153,620			120,673
Loans held for sale							Loans held for sale	6,110		17,748

Commercial real estate	3,264,742			2,616,438
Commercial and industrial loans	1,803,939			1,062,038
Residential mortgages	2,102,807			1,893,131
Consumer loans	1,127,850			978,180

Total loans	8,299,338			6,549,787			Total loans	6,825,847		8,081,519
Less: Allowance for loan losses	(51,834		)	(43,998		)
Less: Allowance for credit losses on loans							Less: Allowance for credit losses on loans	(106,094)		(127,302)
Net loans	8,247,504			6,505,789			Net loans	6,719,753		7,954,217

Premises and equipment, net	109,352			93,215			Premises and equipment, net	94,383		112,663
Other real estate owned	—			151			Other real estate owned	—		149
Goodwill	519,287			403,106

Other intangible assets	38,296			19,445			Other intangible assets	29,619		34,819
Cash surrender value of bank-owned life insurance	191,221			139,257			Cash surrender value of bank-owned life insurance	235,690		232,695
Deferred tax assets, net	47,061			41,128

Other assets	117,083			98,457			Other assets	288,384		387,230
Assets held for sale							Assets held for sale	4,577		317,304

Total assets	$	11,570,751		$	9,162,542		Total assets	$	11,554,913	$	12,838,013

Liabilities							Liabilities
Demand deposits	$	1,667,323		$	1,278,875		Demand deposits	$	3,008,461	$	2,484,249
NOW deposits	673,891			570,583
NOW and other deposits							NOW and other deposits	976,401		1,003,005
Money market deposits	2,776,157			1,781,605			Money market deposits	3,293,526		3,371,353
Savings deposits	741,954			657,486			Savings deposits	1,111,625		972,116
Time deposits	2,890,205			2,333,543			Time deposits	1,678,940		2,385,085
Total deposits	8,749,530			6,622,092			Total deposits	10,068,953		10,215,808
Short-term debt	667,300			1,082,044			Short-term debt	—		40,000
Long-term Federal Home Loan Bank advances	380,436			142,792			Long-term Federal Home Loan Bank advances	13,331		434,357
Subordinated notes	89,339			89,161			Subordinated notes	97,513		97,280
Total borrowings	1,137,075			1,313,997			Total borrowings	110,844		571,637
Other liabilities	187,882			133,155			Other liabilities	192,681		232,730
Liabilities held for sale							Liabilities held for sale	—		630,065

Total liabilities	10,074,487			8,069,244			Total liabilities	10,372,478		11,650,240

(continued)


								December 31,
(In thousands, except share data)							(In thousands, except share data)	2021		2020
Shareholders’ equity							Shareholders’ equity
Preferred Stock (Series B non-voting convertible preferred stock - $0.01 par value; 1,000,000 shares authorized, 521,607 shares issued and outstanding in 2017; 1,000,000 shares authorized, no shares issued and outstanding in 2016)	40,633			—
Common stock ($.01 par value; 50,000,000 shares authorized, 46,211,894 shares issued, and 45,290,433 shares outstanding in 2017; 50,000,000 shares authorized, 36,732,129 shares issued, and 35,672,817 shares outstanding in 2016)	460			366

Common stock ($0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 48,667,110 shares outstanding in 2021; 100,000,000 shares authorized; 51,903,190 shares issued, and 50,833,087 shares outstanding in 2020)							Common stock ($0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 48,667,110 shares outstanding in 2021; 100,000,000 shares authorized; 51,903,190 shares issued, and 50,833,087 shares outstanding in 2020)	$	528	$	528
Additional paid-in capital - common stock	1,242,487			898,989			Additional paid-in capital - common stock	1,423,445		1,427,239
Unearned compensation	(6,531		)	(6,374		)	Unearned compensation	(9,056)		(6,245)
Retained earnings	239,179			217,494
Accumulated other comprehensive income (loss)	4,161			9,766
Treasury stock, at cost (921,461 shares in 2017 and 1,059,312 shares in 2016)	(24,125		)	(26,943		)
Retained (deficit)							Retained (deficit)	(139,383)		(233,344)
Accumulated other comprehensive income/(loss)							Accumulated other comprehensive income/(loss)	(3,243)		30,871
Treasury stock, at cost (3,236,080 shares in 2021 and 1,070,103 shares in 2020)							Treasury stock, at cost (3,236,080 shares in 2021 and 1,070,103 shares in 2020)	(89,856)		(31,276)
Total shareholders’ equity	1,496,264			1,093,298			Total shareholders’ equity	1,182,435		1,187,773
Total liabilities and shareholders’ equity	$	11,570,751		$	9,162,542		Total liabilities and shareholders’ equity	$	11,554,913	$	12,838,013

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

Years Ended December 31,
(In thousands) 2017 2016 2015
Interest and dividend income

Loans $ 308,099
$ 242,600
$ 211,347
Securities and other 52,159
37,839
35,683
Total interest and dividend income 360,258
280,439
247,030
Interest expense

Deposits 43,855
30,883
22,948
Borrowings and subordinated notes 21,608
17,289
10,233
Total interest expense 65,463
48,172
33,181
Net interest income 294,795
232,267
213,849
Non-interest income

Mortgage banking income 54,251
7,555
4,133
Loan related income 21,401
16,694
8,310
Deposit related fees 27,165
24,963
25,084
Insurance commissions and fees 10,589
10,477
10,251
Wealth management fees 9,395
8,917
9,702
Total fee income 122,801
68,606
57,480
Other (3,377 ) (3,289 ) (5,302 )
Gain (Loss) on securities, net 12,598
(551 ) 2,110
Gain on sale of business operations, net 296
1,085
—
Loss on termination of hedges (6,629 ) —
—
Total non-interest income 125,689
65,851
54,288
Total net revenue 420,484
298,118
268,137
Provision for loan losses 21,025
17,362
16,726
Non-interest expense

Compensation and benefits 152,979
104,600
97,370
Occupancy and equipment 35,422
27,220
28,486
Technology and communications 25,900
19,883
16,881
Marketing and promotion 11,877
3,161
3,306
Professional services 9,165
6,199
5,172
FDIC premiums and assessments 6,457
5,066
4,649
Other real estate owned and foreclosures 44
691
833
Amortization of intangible assets 3,493
2,927
3,563
Merger, restructuring and conversion related expenses 31,558
15,461
17,611
Other 22,815
18,094
18,958
Total non-interest expense 299,710
203,302
196,829
Income from continuing operations before income taxes 99,749
77,454
54,582
Income tax expense 44,502
18,784
5,064
Net income $ 55,247
$ 58,670
$ 49,518
Preferred stock dividend 219
—
—
Income available to common shareholders $ 55,028
$ 58,670
$ 49,518

Earnings per common share:
Basic $ 1.40
$ 1.89
$ 1.74
Diluted $ 1.39
$ 1.88
$ 1.73
Weighted average common shares outstanding:

Basic 39,456
30,988
28,393
Diluted 39,695
31,167
28,564

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~F-6~~

~~Table of Contenets~~

~~BERKSHIRE HILLS BANCORP, INC.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

Years Ended December 31,
(In thousands) 2017 2016 2015
Net income $ 55,247
$ 58,670
$ 49,518
Other comprehensive income (loss), before tax:

Changes in unrealized gains and losses on securities available-for-sale (15,142 ) 18,859
(9,677 )
Changes in unrealized gains and losses on derivative hedges 6,573
1,959
(5,232 )
Changes in unrealized gains and losses on pension (94 ) 515
(1,177 )
Total other comprehensive income (loss), before tax (8,663 ) 21,333
(16,086 )
Income taxes related to other comprehensive income (loss):

Changes in unrealized gains and losses on securities available-for-sale 5,610
(7,199 ) 3,640
Changes in unrealized gains and losses on derivative hedges (2,589 ) (835 ) 2,094
Changes in unrealized gains and losses on pension 37
(228 ) 468
Total income tax (expense) benefit related to other comprehensive income (loss) 3,058
(8,262 ) 6,202
Total other comprehensive income (loss) (5,605 ) 13,071
(9,884 )
Total comprehensive income $ 49,642
$ 71,741
$ 39,634


	Years Ended December 31,
(In thousands)	2021		2020		2019
Interest and dividend income
Loans	$	282,164	$	358,015	$	448,927
Securities and other	46,901		51,767		60,586
Total interest and dividend income	329,065		409,782		509,513
Interest expense
Deposits	27,236		72,715		115,193
Borrowings and subordinated notes	10,663		20,285		29,062
Total interest expense	37,899		93,000		144,255
Net interest income	291,166		316,782		365,258
Non-interest income
Deposit related fees	29,813		27,905		31,352
Loan fees and revenue	35,060		16,840		24,374
Insurance commissions and fees	7,003		10,770		10,957
Wealth management fees	10,530		9,285		9,353
Mortgage banking income	2,056		5,190		788
Total fee income	84,462		69,990		76,824
Other	6,631		2,597		1,438
(Loss)/gain on securities, net	(787)		(7,520)		4,389
Gain on sale of business operations and assets, net	52,942		1,240		1,351

Total non-interest income	143,248		66,307		84,002
Total net revenue	434,414		383,089		449,260
Provision (benefit) for credit losses	(500)		75,878		35,419
Non-interest expense
Compensation and benefits	150,589		147,840		140,906
Occupancy and equipment	41,782		43,359		39,586
Technology and communications	33,803		32,364		26,523
Marketing and promotion	2,749		3,703		4,474
Professional services	15,860		11,907		10,798
FDIC premiums and assessments	3,759		5,876		3,861
Other real estate owned and foreclosures	17		125		154
Amortization of intangible assets	5,200		6,181		5,783
Goodwill impairment	—		553,762		—
Merger, restructuring and conversion related expenses	5,781		5,839		28,046
Other	26,353		29,283		29,726
Total non-interest expense	285,893		840,239		289,857
Income/(loss) from continuing operations before income taxes	149,021		(533,028)		123,984
Income tax expense/(benefit) from continuing operations	30,357		(19,853)		22,463
Net income/(loss) from continuing operations	118,664		(513,175)		101,521

(Loss) from discontinued operations before income taxes	—		(26,855)		(5,539)
Income tax (benefit) from discontinued operations	—		(7,013)		(1,468)
Net (loss) from discontinued operations	—		(19,842)		(4,071)

Net income/(loss)	$	118,664	$	(533,017)	$	97,450
Preferred stock dividend	—		313		960
Income/(loss) available to common shareholders	$	118,664	$	(533,330)	$	96,490

	Years Ended December 31,
(in thousands, except per share data)	2021		2020		2019
Basic earnings/(loss) per share:
Continuing Operations	$	2.41	$	(10.21)	$	2.06
Discontinued operations	—		(0.39)		(0.08)
Total basic earnings/(loss) per share	$	2.41	$	(10.60)	$	1.98

Diluted earnings/(loss) per share:
Continuing Operations	$	2.39	$	(10.21)	$	2.05
Discontinued operations	—		(0.39)		(0.08)
Total diluted earnings/(loss) per share	$	2.39	$	(10.60)	$	1.97

Weighted average common shares outstanding:
Basic	49,240		50,270		49,263
Diluted	49,554		50,270		49,421

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Table of Contenets

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)


	Years Ended December 31,
(In thousands)	2021		2020		2019
Net income/(loss)	$	118,664	$	(533,017)	$	97,450
Other comprehensive (loss)/income, before tax:
Changes in unrealized gains and losses on securities available-for-sale	(46,794)		25,726		34,530


Changes in unrealized gains and losses on pension	993		(489)		(270)
Total other comprehensive (loss)/income, before tax	(45,801)		25,237		34,260
Income taxes related to other comprehensive (loss)/income:
Changes in unrealized gains and losses on securities available-for-sale	11,937		(6,471)		(8,873)


Changes in unrealized gains and losses on pension	(250)		112		76
Total income tax benefit/(expense) related to other comprehensive income (loss)	11,687		(6,359)		(8,797)
Total other comprehensive (loss)/income	(34,114)		18,878		25,463
Total comprehensive income/(loss)	$	84,550	$	(514,139)	$	122,913

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Preferred Stock Common Stock Additional paid-in Unearned Retained Accumulated other comprehensive Treasury
(In thousands, except per share data) Shares Amount Shares Amount capital compensation earnings (loss) income stock Total
Balance at January 1, 2015 —
—
25,183
$ 265
$ 585,289
$ (6,147 ) $ 156,446
$ 6,579
$ (33,145 ) $ 709,287
Comprehensive income:

Net income —
—
—
—
—
—
49,518
—
—
49,518
Other net comprehensive (loss) —
—
—
—
—
—
—
(9,884 ) —
(9,884 )
Total comprehensive income =sum(J5:J6)
=sum(J5:J6)
=sum(J5:J6)
=sum(J5:J6)
=sum(J5:J6)
=sum(J5:J6)
49,518
(9,884 ) —
39,634
Acquisition of Hampden Bancorp, Inc —
—
4,186
42
114,562
—
—
—
—
114,604
Acquisition of Firestone Financial —
—
1,442
15
42,092
—
—
—
—
42,107
Cash dividends declared on common shares ($0.76 per share) —
—
—
—
—
—
(21,903 ) —
—
(21,903 )
Treasury stock purchased —
—
(18 ) —
—
—
—
—
(550 ) (550 )
Forfeited shares —
—
(20 ) —
47
509
—
—
(556 ) —
Exercise of stock options —
—
16
—
—
—
(176 ) —
415
239
Restricted stock grants —
—
226
—
440
(6,029 ) —
—
5,589
—
Stock-based compensation —
—
—
—
—
4,670
—
—
—
4,670
Net tax benefit related to stock-based compensation —
—
—
—
167
—
—
—
—
167
Other, net —
—
(41 ) —
22
—
—
—
(1,088 ) (1,066 )
Balance at December 31, 2015 —
—
30,974
$ 322
$ 742,619
$ (6,997 ) $ 183,885
$ (3,305 ) $ (29,335 ) $ 887,189
Comprehensive income: 0

Net income —
—
—
—
—
—
58,670
—
—
58,670
Other net comprehensive income —
—
—
—
—
—
—
13,071
—
13,071
Total comprehensive income —
—
—
—
—
—
58,670
13,071
—
71,741
Acquisition of 44 Business Capital —
—
45
—
—
—
—
—
1,217
1,217
Acquisition of First Choice Bank —
—
4,410
44
151,004
—
—
—
—
151,048
Cash dividends declared on common shares ($0.80 per share) —
—
—
—
—
—
(24,916 ) —
—
(24,916 )
Treasury stock adjustment (1) —
—
—
—
4,632
—
—
—
(4,632 ) —
Forfeited shares —
—
(70 ) —
148
1,789
—
—
(1,937 ) —
Exercise of stock options —
—
151
—
—
—
(145 ) —
3,857
3,712
Restricted stock grants —
—
211
—
575
(5,787 ) —
—
5,212
—
Stock-based compensation —
—
—
—
—
4,621
—
—
—
4,621
Net tax benefit related to stock-based compensation —
—
—
—
(1 ) —
—
—
—
(1 )
Other, net —
—
(48 ) —
12
—
—
—
(1,325 ) (1,313 )
Balance at December 31, 2016 —
—
35,673
$ 366
$ 898,989
$ (6,374 ) $ 217,494
$ 9,766
$ (26,943 ) $ 1,093,298
Comprehensive income:

Net income —
—
—
—
—
—
55,247
—
—
55,247
Other net comprehensive (loss) —
—
—
—
—
—
—
(5,605 ) —
(5,605 )
Total comprehensive income —
—
—
—
—
—
55,247
(5,605 ) —
49,642
Acquisition of Commerce Bank 522
40,633
4,842
48
188,552
—
—
—
—
229,233
Common stock issued, net of $7.1 million offering costs —
—
4,638
46
152,938
—
—
—
—
152,984
Cash dividends declared on common shares ($0.84 per share) —
—
—
—
—
—
(33,022 ) —
—
(33,022 )
Cash dividends declared on preferred shares ($0.42 per share) —
—
—
—
—
—
(219 ) —
—
(219 )
Forfeited shares —
—
(17 ) —
102
516
—
—
(618 ) —
Exercise of stock options —
—
19
—
—
—
(158 ) —
487
329
Restricted stock grants —
—
161
—
1,650
(5,775 ) —
—
4,125
—
Stock-based compensation —
—
—
—
—
5,102
—
—
—
5,102
Other, net —
—
(26 ) —
256
—
(163 ) —
(1,176 ) (1,083 )
Balance at December 31, 2017 522
40,633
45,290
$ 460
$ 1,242,487
$ (6,531 ) $ 239,179
$ 4,161
$ (24,125 ) $ 1,496,264

~~(1)Treasury stock adjustment represents the extinguishment of 168,931 shares of Berkshire Hills Bancorp stock held by the Company's subsidiary.~~


	Preferred Stock			Common Stock			Additional paid-in		Unearned		Retained (deficit)		Accumulated other comprehensive		Treasury
(In thousands, except per share data)	Shares	Amount		Shares	Amount		capital		compensation		earnings		(loss) income		stock		Total
Balance at January 1, 2019	522	$	40,633	45,417	$	460	$	1,245,013	$	(6,594)	$	308,839	$	(13,470)	$	(21,963)	$	1,552,918

Comprehensive income:
Net income	—	—		—	—		—		—		97,450		—		—		97,450
Other net comprehensive (loss)	—	—		—	—		—		—		—		25,463		—		25,463
Total comprehensive income	—	—		—	—		—		—		97,450		25,463		—		122,913
Acquisition of SI Financial Group, Inc.	—	—		5,691	57		176,655		—		—		—		—		176,712
Cash dividends declared on common shares ($0.92 per share)	—	—		—	—		—		—		(44,147)		—		—		(44,147)
Cash dividends declared on preferred shares ($1.84 per share)	—	—		—	—		—		—		(960)		—		—		(960)
Treasury stock purchased	—	—		(1,726)	—		—		—		—		—		(52,746)		(52,746)
Forfeited shares	—	—		(65)	—		(251)		2,160		—		—		(1,909)		—
Exercise of stock options	—	—		11	—		—		—		(100)		—		288		188
Restricted stock grants	—	—		299	—		932		(8,843)		—		—		7,911		—
Stock-based compensation	—	—		—	—		—		4,812		—		—		—		4,812

Other, net	—	—		(42)	—		92		—		—		—		(1,218)		(1,126)
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:		0
Net (loss)	—	—		—	—		—		—		(533,017)		—		—		(533,017)
Other net comprehensive income	—	—		—	—		—		—		—		18,878		—		18,878
Total comprehensive (loss)	—	—		—	—		—		—		(533,017)		18,878		—		(514,139)
Impact of ASC 326 Adoption	—	—		—	—		—		—		(24,380)		—		—		(24,380)
Conversion of preferred stock to common stock	(522)	(40,633)		1,043	11		10,395		—		—		—		30,227		—
Cash dividends declared on common shares ($0.72 per share)	—	—		—	—		—		—		(36,251)		—		—		(36,251)
Cash dividends declared on preferred shares ($1.20 per share)	—	—		—	—		—		—		(313)		—		—		(313)
Treasury stock purchased	—	—		(14)	—		—		—		—		—		(473)		(473)
Forfeited shares	—	—		(91)	—		(1,570)		2,727		—		—		(1,157)		—
Exercise of stock options	—	—		37	—		—		—		(465)		—		1,129		664
Restricted stock grants	—	—		314	—		(4,121)		(5,234)		—		—		9,355		—
Stock-based compensation	—	—		—	—		—		4,727		—		—		—		4,727
Other, net	—	—		(41)	—		94		—		—		—		(720)		(626)
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	—	—		—	—		—		—		118,664		—		—		118,664
Other net comprehensive (loss)	—	—		—	—		—		—		—		(34,114)		—		(34,114)
Total comprehensive income	—	—		—	—		—		—		118,664		(34,114)		—		84,550


Cash dividends declared common shares ($0.48 per share)	—	—		—	—		—		—		(24,553)		—		—		(24,553)

Treasury stock purchased	—	—		(2,500)	—		—		—		—		—		(68,712)		(68,712)
Forfeited shares	—	—		(113)	—		90		2,644		—		—		(2,734)		—
Exercise of stock options	—	—		20	—		—		—		(150)		—		567		417
Restricted stock grants	—	—		476	—		(3,898)		(9,625)		—		—		13,523		—
Stock-based compensation	—	—		—	—		—		4,170		—		—		—		4,170
Other, net	—	—		(49)	—		14		—		—		—		(1,224)		(1,210)
Balance at December 31, 2021	—	$	—	48,667	$	528	$	1,423,445	$	(9,056)	$	(139,383)	$	(3,243)	$	(89,856)	$	1,182,435

The accompanying notes are an integral part of these consolidated financial statements.

F-8

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended December 31,
(In thousands)	2021		2020		2019
Cash flows from operating activities:
Net income/(loss) from continuing operations	118,664		(513,175)		101,521
Net (loss) from discontinued operations	—		(19,842)		(4,071)
Net income/(loss)	$	118,664	$	(533,017)	$	97,450
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (benefit) for credit losses	(500)		75,878		35,419
Net amortization of securities	1,939		2,513		2,407
Change in unamortized net loan origination costs and premiums	(1,918)		21,856		12,759
Premises and equipment depreciation and amortization expense	11,035		11,919		10,921
Stock-based compensation expense	4,170		4,727		4,812
Accretion of purchase accounting entries, net	(6,577)		(10,377)		(14,813)
Amortization of other intangibles	5,200		6,181		5,783

Income from cash surrender value of bank-owned life insurance policies	(5,561)		(5,354)		(5,349)
Securities losses/(gains), net	787		7,576		(4,389)
Net change in loans held-for-sale	5,775		(4,267)		(5,137)


Loss on disposition of assets	2,811		327		3,443
Loss on sale of real estate	6		13		5
Amortization of interest in tax-advantaged projects	3,444		3,645		6,455

Goodwill impairment	—		553,762		—
Gain on sale of business operations and other assets	(52,942)		—		—
Prepayment penalties on repayment of Federal Home Loan Bank advances	862		—		—
Net change in other	18,282		(31,247)		(23,418)
Net cash provided by operating activities of continuing operations	105,477		123,977		130,419
Net cash provided/(used) by operating activities of discontinued operations	—		103,664		(18,894)
Net cash provided by operating activities	105,477		227,641		111,525

Cash flows from investing activities:
Net decrease in trading security	776		734		701
Purchases of marketable equity securities	—		(17,631)		(23,841)
Proceeds from sales of marketable equity securities	2,880		33,928		43,075
Purchases of securities available for sale	(804,616)		(885,182)		(119,671)
Proceeds from sales of securities available for sale	—		69,337		136,229
Proceeds from maturities, calls, and prepayments of securities available for sale	575,538		457,586		240,586
Purchases of securities held to maturity	(219,470)		(144,651)		(7,260)
Proceeds from maturities, calls, and prepayments of securities held to maturity	46,061		35,331		21,602
Net change in loans	1,262,521		1,054,029		694,657
Net change in Mid-Atlantic region loans held for sale	50,914		—		—
Acquisitions, net of cash paid	—		—		110,774
Proceeds from surrender of bank-owned life insurance	2,566		553		2,451

Purchase of Federal Home Loan Bank stock	—		(6,741)		(112,208)
Proceeds from sales of Federal Home Loan Bank stock	24,078		19,887		149,455
Net investment in limited partnership tax credits	(2,878)		(7,280)		(4,387)
Purchase of premises and equipment, net	(1,606)		(7,208)		(10,565)
(Continued)

Years Ended December 31,
(In thousands) 2017 2016 2015
Cash flows from operating activities:

Net income $ 55,247
$ 58,670
$ 49,518
Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses 21,025
17,362
16,726
Net amortization of securities 1,678
4,052
3,010
Net change in unamortized loan origination costs and premium 2,232
(4,138 ) (961 )
Premises and equipment depreciation and amortization expense 9,916
8,393
8,594
Stock-based compensation expense 5,102
4,621
4,686
Accretion of purchase accounting entries, net (18,189 ) (9,407 ) (10,074 )
Amortization of other intangibles 3,493
2,927
3,563
Write down of other real estate owned 10
395
480
Excess tax loss from stock-based payment arrangements —
(105 ) (167 )
Income from cash surrender value of bank-owned life insurance policies (3,615 ) (3,913 ) (3,356 )
(Loss) gain on sales of securities, net (12,598 ) 551
(2,110 )
Net (increase) decrease in loans held for sale (32,947 ) 5,185
(3,212 )
Loss on disposition of assets 912
1,318
3,514
(Gain) loss on sale of real estate (51 ) 40
191
Amortization of tax credits 8,477
8,882
11,428
Remeasurement of deferred tax asset 18,145
—
—
Net change in other 19,254
3,309
4,458
Net cash provided by operating activities 78,091
98,142
86,288

Cash flows from investing activities:

Net decrease in trading security 632
599
570
Proceeds from sales of securities available for sale 188,921
421,843
41,169
Proceeds from maturities, calls and prepayments of securities available for sale 206,648
166,736
184,753
Purchases of securities available for sale (498,646 ) (400,053 ) (285,637 )
Proceeds from maturities, calls and prepayments of securities held to maturity 12,600
7,734
8,534
Purchases of securities held to maturity (77,208 ) (7,115 ) (62,274 )
Net change in loans (468,331 ) (334,347 ) (388,091 )
Acquisitions, net of cash paid 374,611
(48,180 ) 74,324
Net cash used for branch sale —
—
(11,715 )
Proceeds from surrender of bank-owned life insurance 310
258
554
Purchase of bank-owned life insurance (20,000 ) —
—
Proceeds from sale of Federal Home Loan Bank stock 96,378
19,461
2,357
Purchase of Federal Home Loan Bank stock (88,351 ) (19,555 ) (10,706 )
Proceeds from premises and equipment —
226
2,261
Purchase of premises and equipment, net (12,528 ) (9,101 ) (7,340 )
Net investment in limited partnership tax credits (5,102 ) (7,616 ) (5,105 )
Payment to terminate cash flow hedges 6,573
—
—
Proceeds from sale of other real estate 590
1,515
1,854
Net cash used in investing activities (282,903 ) (207,595 ) (454,492 )

~~(continued)~~

F-9

Table of Contents

At year-end 2017, 6 out of the total 260 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 2.3% 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 that the bonds in this portfolio carry minimal risk of default and that the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during 2017. All securities are performing.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AFS collateralized mortgage obligations

At year-end ~~2017, 179~~2021, 45 out of ~~the total 234~~250 securities in the Company’s portfolio of AFS collateralized mortgage obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~1.2%~~2.7% 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 residential mortgage obligations. The securities are investment grade rated and there were no material underlying credit downgrades during ~~2017.~~2021. All securities are performing.

AFS commercial and residential mortgage-backed securities

At year-end ~~2017, 58~~2021, 28 out of ~~the total 103~~133 securities in the Company’s portfolio of AFS mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented ~~1.8%~~2.0% 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 ~~2017.~~2021. All securities are performing.

AFS corporate bonds

At year-end ~~2017, 1~~2021, 5 out of ~~the total 20~~15 securities in the Company’s portfolio of AFS corporate bonds were in unrealized loss positions. The aggregate unrealized loss represents ~~1.5%~~1.0% of the amortized cost of bonds in unrealized loss positions. The Company reviews the financial strength 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 year-end ~~2017, 6~~2021, 2 out of ~~the total 9~~6 securities in the Company’s portfolio of other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~1.0%~~1.1% 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 ~~2017.~~2021. All securities are performing.

HTM ~~Municipal~~municipal bonds and obligations

At year-end ~~2017, 12~~2021, 26 out of ~~the total 231~~209 securities in the Company’s portfolio of HTM municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~0.7%~~1.8% 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 ~~that~~ the bonds in this portfolio carry minimal risk of default and ~~that~~ the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during ~~2017.~~the quarter. All securities are performing.

~~F-31~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

HTM collateralized mortgage obligations

At year-end ~~2017, 1~~2021, 6 out of ~~the total 9~~14 securities in the Company’s portfolio of HTM collateralized mortgage obligations ~~was~~were in an unrealized loss ~~positions.~~position. Aggregate unrealized losses represented ~~3.6%~~4.0% of the amortized cost of ~~securities~~the security in an unrealized loss ~~positions.~~position. 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 ~~2017.~~2021. All securities are performing.

HTM commercial and residential mortgage-backed securities

At year-end ~~2017, 2~~2021, 15 out of ~~the total 2~~17 securities in the Company’s portfolio of HTM mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented ~~2.4%~~2.5% of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA ~~guarantees~~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 ~~2017.~~2021. All securities are performing.

HTM tax-advantaged economic development bonds

At year-end ~~2017,~~2021, 1 out of ~~the total 7~~3 securities in the Company’s portfolio of ~~tax advantaged~~tax-advantaged economic development

bonds were in an unrealized loss position. Aggregate unrealized losses represented ~~13.4%~~1.2% of the amortized cost of the

security in an unrealized loss position. ~~The above mentioned tax advantaged economic bond was downgraded to special mention during the year.~~ The Company believes that more likely than not all the principal outstanding

will be collected. All securities are performing.

F-28

~~Marketable Equity Securities~~

In evaluating its marketable equity securities portfolio for OTTI, the Company considers its ability to more likely than not hold an equity security to recovery. The Company additionally considers other various factors including the length of time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer. Any OTTI is recognized immediately through earnings.

At year-end 2017, 2 out of the total 20 securities in the Company’s portfolio of marketable equity securities were in unrealized loss positions. The unrealized loss represented 11.3% of the amortized cost of the securities. The Company has the ability and intent to hold the securities until a recovery of their cost basis and does not consider the securities other-than-temporarily impaired at year-end 2017. As new information becomes available in future periods, changes to the Company’s assumptions may be warranted and could lead to a different conclusion regarding the OTTI of these securities.

~~F-32~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6.7. LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

The Company’s loan portfolio is segregated into the following segments: commercial real estate, commercial and industrial, residential mortgage, and consumer. Commercial real estate loans include construction, single and multi-family, and other commercial real estate classes. Residential mortgage loans include classes for 1-4 family owner occupied and construction loans. Consumer loans include home equity, direct and indirect auto, and other consumer loan classes. These portfolio segments each have unique risk characteristics that are considered when determining the appropriate level for the allowance for loan losses.

A substantial portion of the loan portfolio is secured by real estate in Massachusetts, southern Vermont, northeastern New York, New Jersey, and in the Bank’s other New England lending areas. The ability of many of the Bank’s borrowers to honor their contracts is dependent, among other things, on the specific economy and real estate markets of these areas.

Total loans include business activity loans and acquired loans. Acquired loans are those loans acquired from Commerce Bank, First Choice Bank, Parke Bank, Firestone Financial Corp., Hampden Bancorp, Inc., the New York branch acquisition, Beacon Federal Bancorp, Inc., The Connecticut Bank and Trust Company, Legacy Bancorp, Inc., and Rome Bancorp, Inc. Once the full integration of the acquired entity is complete, acquired and business activity loans are serviced, managed, and accounted for under the Company's same control environment. The following is a summary of total ~~loans:~~loans by regulatory call report code with sub-segmentation based on underlying collateral for certain loan types:


(In thousands)	December 31, 2021		December 31, 2020
Construction	$	324,282	$	454,513
Commercial multifamily	515,817		483,350
Commercial real estate owner occupied	606,477		552,413
Commercial real estate non-owner occupied	2,156,929		2,119,263
Commercial and industrial	1,284,429		1,943,164

Residential real estate	1,489,248		1,931,681
Home equity	252,366		293,981
Consumer other	196,299		303,154
Total loans	$	6,825,847	$	8,081,519

Allowance for credit losses	106,094		127,302
Net loans	$	6,719,753	$	7,954,217

December 31, 2017 December 31, 2016
(In thousands) Business Activities Loans Acquired Loans Total Business Activities Loans Acquired Loans Total
Commercial real estate:

Construction $ 181,371
$ 84,965
$ 266,336
$ 253,302
$ 34,207
$ 287,509
Single and multi-family 217,083
206,082
423,165
191,819
125,672
317,491
Other commercial real estate 1,819,253
755,988
2,575,241
1,481,223
530,215
2,011,438
Total commercial real estate 2,217,707
1,047,035
3,264,742
1,926,344
690,094
2,616,438

Commercial and industrial loans 1,182,569
621,370
1,803,939
908,102
153,936
1,062,038

Total commercial loans 3,400,276
1,668,405
5,068,681
2,834,446
844,030
3,678,476

Residential mortgages:

1-4 family 1,808,024
289,373
2,097,397
1,583,794
297,355
1,881,149
Construction 5,177
233
5,410
11,178
804
11,982
Total residential mortgages 1,813,201
289,606
2,102,807
1,594,972
298,159
1,893,131

Consumer loans:

Home equity 294,954
115,227
410,181
313,521
80,279
393,800
Auto and other 603,767
113,902
717,669
478,368
106,012
584,380
Total consumer loans 898,721
229,129
1,127,850
791,889
186,291
978,180

Total loans $ 6,112,198
$ 2,187,140
$ 8,299,338
$ 5,221,307
$ 1,328,480
$ 6,549,787

~~F-33~~

~~Table~~As of ~~Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Total unamortized net costs~~December 31, 2021 and ~~premiums~~2020, outstanding loans originated under the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") totaled $29.9 million and $633.3 million, respectively. 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 ~~the year-end total loans for business activity loans were the following:~~commercial and industrial.

(In thousands) December 31, 2017 December 31, 2016
Unamortized net loan origination costs $ 24,669
$ 21,972
Unamortized net premium on purchased loans 4,311
4,849
Total unamortized net costs and premiums $ 28,980
$ 26,821

The Company occasionally transfers a portion of its originated commercial loans to participating lending partners. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying consolidated balance sheets. The Company and its lending partners share proportionally in any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. The Company continues to service the loans, collects cash payments from the borrowers, remits payments (net of servicing fees), and disburses required escrow funds to relevant parties. At year-end 2017 and 2016, the Company was servicing loans for participants totaling $1.8 billion and $0.5 billion, respectively.

In ~~2017,~~2021, the Company purchased loans aggregating ~~$500.9~~$211 million and sold loans aggregating ~~$514.5~~$560 million. In ~~2016,~~2020, the Company purchased loans aggregating ~~$190.8~~$98 million and sold loans aggregating ~~$307.7~~$415 million. Net gains ~~(losses)~~ on sales of loans were ~~$11.7~~$20.7 million, ~~$8.0~~$10.6 million, and ~~$6.0~~$12.0 million for the years ~~2017, 2016,~~2021, 2020, and ~~2015,~~2019, respectively. These amounts are included in Loan Related Income on the Consolidated ~~Statement~~Statements of ~~Income.~~Operations.

Most of the Company’s lending activity occurs within its primary markets in Massachusetts, Southern Vermont, and Northeastern New York. Most of the loan portfolio is secured by real estate, including residential mortgages, commercial mortgages, and home equity loans. Year-end loans to operators of non-residential buildings totaled ~~$1.3~~$1.6 billion, or ~~15.8%~~24.0%, and ~~$1.1~~$1.5 billion, or ~~16.8%~~19.0% of total loans in ~~2017~~2021 and ~~2016,~~2020, respectively. There were no other concentrations of loans related to any single industry in excess of 10% of total loans at year-end ~~2017~~2021 or ~~2016.~~2020.

As of December 31, 2021, the Company had no foreclosed residential real estate property. As of December 31, 2020, the Company maintained foreclosed residential real estate property with fair value of $149 thousand. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of December 31, 2021 and December 31, 2020 totaled $1.4 million and $3.3 million, respectively, including sold loans serviced by the Company.

At year-end ~~2017,~~2021, the Company had pledged loans totaling ~~$350.7 million~~$0.7 billion to the Federal Reserve Bank of Boston as collateral for certain borrowing arrangements. Also, residential first mortgage loans are subject to a blanket lien for FHLBB advances. See Note 12 - Borrowed Funds.

At year-end ~~2017~~2021 and ~~2016,~~2020, the Company’s commitments outstanding to related parties totaled ~~$50.8~~$1.7 million and ~~$38.7~~$2.0 million, respectively, and the loans outstanding against these commitments totaled ~~$44.1~~$1.0 million and ~~$25.6~~$1.1 million, respectively. Related parties include directors and executive officers of the Company and its subsidiaries, as well as their respective affiliates in which they have a controlling interest and immediate family members. For the years ~~2017~~2021 and ~~2016,~~2020, all related party loans were performing.

The carrying amount of the acquired loans at December 31, 2017 totaled $2.2 billion. A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with ASC 310-30. These purchased credit-impaired loans presently maintain a carrying value of $97.3 million. These loans are evaluated for impairment through the quarterly reforecasting of expected cash flows. Of the $97.3 million, $53.3 million are Commercial Real Estate, $34.6 million are Commercial and Industrial loans, $7.0 million are Residential Mortgages, and $2.4 million are Consumer loans.

The carrying amount of the acquired loans at December 31, 2016 totaled $1.3 billion. A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with ASC 310-30. These purchased credit-impaired loans maintained a carrying value of $46.8 million. Of the $46.8 million, $34.8 million were Commercial Real Estate, $3.4 million were Commercial and Industrial loans, $7.3 million were Residential Mortgages, and $1.3 million were Consumer loans.

~~F-34~~

F-29

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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 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).

F-30

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s activity in the allowance for credit losses for loans for the years ended December 31, 2021 and December 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
Year ended December 31, 2021
Construction	$	5,111	$	—	$	5,111	$	—	$	—	$	(1,905)	$	3,206
Commercial multifamily	5,916		—		5,916		(404)		157		451		6,120
Commercial real estate owner occupied	12,380		—		12,380		(1,640)		204		1,808		12,752
Commercial real estate non-owner occupied	35,850		—		35,850		(14,557)		2,522		8,291		32,106
Commercial and industrial	25,013		—		25,013		(10,841)		4,565		3,847		22,584

Residential real estate	28,491		—		28,491		(1,664)		1,767		(6,188)		22,406
Home equity	6,482		—		6,482		(334)		335		(2,477)		4,006
Consumer other	8,059		—		8,059		(1,578)		761		(4,328)		2,914
Total allowance for credit losses	$	127,302	$	—	$	127,302	$	(31,018)	$	10,311	$	(501)	$	106,094


(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
Year ended December 31, 2020
Construction	$	2,713	$	(342)	$	2,371	$	(834)	$	—	$	3,574	$	5,111
Commercial multifamily	4,413		(1,842)		2,571		(100)		100		3,345		5,916
Commercial real estate owner occupied	4,880		6,062		10,942		(8,686)		1,053		9,071		12,380
Commercial real estate non-owner occupied	16,344		11,201		27,545		(11,653)		307		19,651		35,850
Commercial and industrial	20,099		(2,189)		17,910		(19,328)		4,285		22,146		25,013

Residential real estate	9,970		6,799		16,769		(2,285)		1,359		12,648		28,491
Home equity	1,470		4,884		6,354		(347)		292		183		6,482
Consumer other	3,686		861		4,547		(2,562)		609		5,465		8,059
Total allowance for credit losses	$	63,575	$	25,434	$	89,009	$	(45,795)	$	8,005	$	76,083	$	127,302

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 Statements of Operations. The Company’s activity in the allowance for credit losses on unfunded commitments for the years ended December 31, 2021 and December 31, 2020 was as follows:


(In thousands)	Total
Balance at December 31, 2020	$	7,629
Impact of adopting ASC 326	—
Sub-Total	7,629
Release of expense for credit losses	(586)
Balance at December 31, 2021	$	7,043

F-31

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In thousands)	Total
Balance at December 31, 2019	$	100
Impact of adopting ASC 326	7,993
Sub-Total	8,093
Release of expense for credit losses	(464)
Balance at December 31, 2020	$	7,629

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 annually, 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.

F-32

Table of Contents

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 December 31, 2021
Construction
Risk rating
Pass	$	71,784	$	52,725	$	117,784	$	66,950	$	3,839	$	1,721	$	50	$	—	$	314,853
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		9,429		—		—		—		—		9,429
Total	$	71,784	$	52,725	$	117,784	$	76,379	$	3,839	$	1,721	$	50	$	—	$	324,282

Commercial multifamily:
Risk rating
Pass	$	63,630	$	28,172	$	98,455	$	59,720	$	76,699	$	176,020	$	457	$	—	$	503,153
Special Mention	—		2,700		—		5,598		—		—		—		—		8,298
Substandard	—		—		—		—		—		4,230		136		—		4,366
Total	$	63,630	$	30,872	$	98,455	$	65,318	$	76,699	$	180,250	$	593	$	—	$	515,817

Commercial real estate owner occupied:
Risk rating
Pass	$	154,434	$	50,236	$	85,687	$	91,316	$	45,995	$	157,346	$	3,206	$	—	$	588,220
Special Mention	—		525		869		1,668		1,405		1,157		—		—		5,624
Substandard	—		—		2,113		1,593		838		8,089		—		—		12,633
Total	$	154,434	$	50,761	$	88,669	$	94,577	$	48,238	$	166,592	$	3,206	$	—	$	606,477

Commercial real estate non-owner occupied:
Risk rating
Pass	$	426,086	$	176,172	$	296,985	$	349,947	$	204,043	$	585,044	$	19,511	$	—	$	2,057,788
Special Mention	—		221		3,472		7,632		2,302		27,268		—		—		40,895
Substandard	—		7,588		—		2,784		33,472		14,303		99		—		58,246
Total	$	426,086	$	183,981	$	300,457	$	360,363	$	239,817	$	626,615	$	19,610	$	—	$	2,156,929

Commercial and industrial:
Risk rating
Pass	$	187,257	$	130,520	$	114,153	$	156,443	$	54,190	$	136,837	$	424,393	$	—	$	1,203,793
Special Mention	661		1,691		10,824		5,092		1,433		488		22,468		—		42,657
Substandard	211		2,494		9,609		3,145		2,020		2,330		17,935		—		37,744
Doubtful	—		—		—		—		—		15		220		—		235
Total	$	188,129	$	134,705	$	134,586	$	164,680	$	57,643	$	139,670	$	465,016	$	—	$	1,284,429









Residential real estate
Risk rating
Pass	$	214,306	$	114,536	$	86,997	$	169,537	$	189,980	$	697,401	$	293	$	—	$	1,473,050
Special Mention	—		—		—		120		502		1,557		—		—		2,179
Substandard	1,239		—		142		1,849		2,161		8,628		—		—		14,019
Total	$	215,545	$	114,536	$	87,139	$	171,506	$	192,643	$	707,586	$	293	$	—	$	1,489,248

F-33

Table of Contents

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		9		—		12,025
Total	$	151,958	$	146,181	$	273,556	$	322,716	$	333,576	$	700,404	$	3,290	$	—	$	1,931,681

F-34

Table of Contents

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 December 31, 2021
Home equity:
Payment performance
Performing	$	125	$	469	$	—	$	—	$	—	$	24	$	249,590	$	—	$	250,208
Nonperforming	—		—		—		—		—		—		2,158		—		2,158
Total	$	125	$	469	$	—	$	—	$	—	$	24	$	251,748	$	—	$	252,366

Consumer other:
Payment performance
Performing	$	37,994	$	11,189	$	21,548	$	55,577	$	30,632	$	28,797	$	7,505	$	—	$	193,242
Nonperforming	8		46		290		797		746		1,139		31		—		3,057
Total	$	38,002	$	11,235	$	21,838	$	56,374	$	31,378	$	29,936	$	7,536	$	—	$	196,299


	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	—		—		1		—		—		—		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		4		—		5,461
Total	$	15,232	$	35,633	$	103,241	$	70,965	$	37,006	$	31,734	$	9,343	$	—	$	303,154

F-35

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes ~~activity in the accretable yield for the acquired loan portfolio~~information about total loans rated Special Mention or lower at December 31, 2021 and December 31, 2020. The table below includes consumer loans that ~~falls under the purview of ASC 310-30,~~ ~~Loans~~are Special Mention and ~~Debt Securities Acquired with Deteriorated Credit Quality~~:Substandard accruing that are classified as performing based on payment activity.


(In thousands)	December 31, 2021		December 31, 2020
Non-Accrual	$	35,326	$	64,948
Substandard Accruing	106,560		185,207
Total Classified	141,886		250,155
Special Mention	100,071		109,299
Total Criticized	$	241,957	$	359,454

(In thousands) 2017 2016 2015
Balance at beginning of period $ 8,738
$ 6,925
$ 2,541
Acquisitions 10,815
6,125
4,777
Reclassification from nonaccretable difference for loans with improved cash flows (23 ) 2,488
3,640
Changes in expected cash flows that do not affect nonaccretable difference (2,380 ) (3,018 ) —
Reclassification to TDR —
(185 ) —
Accretion (5,589 ) (3,597 ) (4,033 )
Balance at end of period $ 11,561
$ 8,738
$ 6,925

The following is a summary of loans by past due ~~loans~~status at December 31, ~~2017~~2021 and ~~2016:~~December 31, 2020:

~~Business Activities Loans~~


(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, 2021
Construction	$	—	$	—	$	—	$	—	$	324,282	$	324,282
Commercial multifamily	82		306		187		575		515,242		515,817
Commercial real estate owner occupied	—		400		4,221		4,621		601,856		606,477
Commercial real estate non-owner occupied	25,420		653		9,049		35,122		2,121,807		2,156,929
Commercial and industrial	2,700		709		6,836		10,245		1,274,184		1,284,429

Residential real estate	5,529		2,015		13,264		20,808		1,468,440		1,489,248
Home equity	258		108		2,158		2,524		249,842		252,366
Consumer other	1,363		320		2,882		4,565		191,734		196,299
Total	$	35,352	$	4,511	$	38,597	$	78,460	$	6,747,387	$	6,825,847

F-36

(in thousands) 30-59 Days
Past Due 60-89 Days
Past Due >90 Days Past Due Total Past
Due Current Total Loans Past Due >
90 days and
Accruing
December 31, 2017

Commercial real estate:

Construction $ —
$ —
$ —
$ —
$ 181,371
$ 181,371
$ —
Single and multi-family —
—
451
451
216,632
217,083
—
Commercial real estate 1,925
48
5,023
6,996
1,812,257
1,819,253
457
Total 1,925
48
5,474
7,447
2,210,260
2,217,707
457
Commercial and industrial loans

Total 4,031
1,912
6,023
11,966
1,170,603
1,182,569
128
Residential mortgages:

1-4 family 2,412
242
2,186
4,840
1,803,184
1,808,024
520
Construction —
—
—
—
5,177
5,177
—
Total 2,412
242
2,186
4,840
1,808,361
1,813,201
520
Consumer loans:

Home equity 444
1,235
1,747
3,426
291,528
294,954
120
Auto and other 3,389
599
1,597
5,585
598,182
603,767
143
Total 3,833
1,834
3,344
9,011
889,710
898,721
263
Total $ 12,201
$ 4,036
$ 17,027
$ 33,264
$ 6,078,934
$ 6,112,198
$ 1,368

~~F-35~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Business Activities Loans~~

(in thousands) 30-59 Days
Past Due 60-89 Days
Past Due >90 Days Past Due Total Past
Due Current Total Loans Past Due >
90 days and
Accruing
December 31, 2016

Commercial real estate:

Construction $ —
$ —
$ —
$ —
$ 253,302
$ 253,302
$ —
Single and multi-family 618
110
624
1,352
190,467
191,819
155
Commercial real estate 481
2,243
4,212
6,936
1,474,287
1,481,223
—
Total 1,099
2,353
4,836
8,288
1,918,056
1,926,344
155
Commercial and industrial loans

Total 3,090
1,301
6,290
10,681
897,421
908,102
5
Residential mortgages:

1-4 family 1,393
701
4,179
6,273
1,577,521
1,583,794
1,956
Construction 10
—
—
10
11,168
11,178
—
Total 1,403
701
4,179
6,283
1,588,689
1,594,972
1,956
Consumer loans:

Home equity 99
—
2,981
3,080
310,441
313,521
306
Auto and other 2,483
494
968
3,945
474,423
478,368
16
Total 2,582
494
3,949
7,025
784,864
791,889
322
Total $ 8,174
$ 4,849
$ 19,254
$ 32,277
$ 5,189,030
$ 5,221,307
$ 2,438

~~Acquired Loans~~

(in thousands) 30-59 Days
Past Due 60-89 Days
Past Due >90 Days Past Due Total Past
Due Acquired
Credit
Impaired Total Loans Past Due >
90 days and
Accruing
December 31, 2017

Commercial real estate:

Construction $ —
$ —
$ —
$ —
$ 7,655
$ 84,965
$ —
Single and multi-family 671
—
203
874
2,846
206,082
—
Commercial real estate 816
1,875
2,156
4,847
42,801
755,988
109
Total 1,487
1,875
2,359
5,721
53,302
1,047,035
109
Commercial and industrial loans

Total 1,252
268
1,439
2,959
34,629
621,370
23
Residential mortgages:

1-4 family 957
2,581
1,247
4,785
6,974
289,373
30
Construction —
—
—
—
—
233
—
Total 957
2,581
1,247
4,785
6,974
289,606
30
Consumer loans:

Home equity 286
40
1,965
2,291
1,956
115,227
—
Auto and other 346
135
430
911
483
113,902
38
Total 632
175
2,395
3,202
2,439
229,129
38
Total $ 4,328
$ 4,899
$ 7,440
$ 16,667
$ 97,344
$ 2,187,140
$ 200


(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

~~F-36~~

F-37

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Acquired Loans~~

(in thousands) 30-59 Days
Past Due 60-89 Days
Past Due >90 Days Past Due Total Past
Due Acquired
Credit
Impaired Total Loans Past Due >
90 days and
Accruing
December 31, 2016

Commercial real estate:

Construction $ —
$ —
$ —
$ —
$ 47
$ 34,207
$ —
Single and multi-family 2
—
437
439
4,726
125,672
—
Commercial real estate 1,555
—
765
2,320
30,047
530,215
—
Total 1,557
—
1,202
2,759
34,820
690,094
—
Commercial and industrial loans:

Total 1,850
15
1,262
3,127
3,369
153,936
24
Residential mortgages:

1-4 family 321
343
2,015
2,679
7,283
297,355
443
Construction —
—
—
—
—
804
—
Total 321
343
2,015
2,679
7,283
298,159
443
Consumer loans:

Home equity 753
—
870
1,623
957
80,279
353
Auto and other 542
314
1,686
2,542
387
106,012
791
Total 1,295
314
2,556
4,165
1,344
186,291
1,144
Total $ 5,023
$ 672
$ 7,035
$ 12,730
$ 46,816
$ 1,328,480
$ 1,611

The following is a summary ~~information pertaining to non-accrual loans at year-end 2017 and 2016:~~

December 31, 2017 December 31, 2016
(In thousands) Business Activities
Loans Acquired Loans (1) Total Business Activities
Loans Acquired Loans (2) Total
Commercial real estate:

Construction —
—
—
—
—
—
Single and multi-family 451
203
654
469
437
906
Other commercial real estate 4,566
2,047
6,613
4,212
765
4,977
Total 5,017
2,250
7,267
4,681
1,202
5,883
Commercial and industrial loans:

Total 5,895
1,333
7,228
6,285
1,155
7,440

Residential mortgages:

1-4 family $ 1,666
$ 1,217
$ 2,883
$ 2,223
$ 1,572
$ 3,795
Construction —
—
—
—
—
—
Total 1,666
1,217
2,883
2,223
1,572
3,795
Consumer loans:

Home equity 1,627
1,965
3,592
2,675
517
3,192
Auto and other 1,454
392
1,846
952
895
1,847
Total 3,081
2,357
5,438
3,627
1,412
5,039

Total non-accrual loans $ 15,659
$ 7,157
$ 22,816
$ 16,816
$ 5,341
$ 22,157

~~(1) At year-end 2017, acquired credit impaired loans account for $83 thousand~~ of loans ~~greater than~~on nonaccrual status and loans past due 90 days ~~past due that are not presented in the above table.~~or more and still accruing as of December 31, 2021 and December 31, 2020:

~~(2) At year-end 2016, acquired credit impaired~~


	December 31, 2021
(In thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual
Construction	$	—	$	—	$	—	$	—
Commercial multifamily	187		187		—		—
Commercial real estate owner occupied	4,221		2,413		—		—
Commercial real estate non-owner occupied	8,877		8,412		172		—
Commercial and industrial	6,747		1,506		89		—

Residential real estate	10,698		6,511		2,566		—
Home equity	1,901		141		257		—
Consumer other	2,695		4		187		—
Total	$	35,326	$	19,174	$	3,271	$	—

The commercial and industrial loans ~~account for $83 thousand~~nonaccrual amortized cost as of December 31, 2021 included medallion loans ~~greater than 90 days past due that are not presented in the above table.~~with a fair value of $1.2 million and a contractual balance of $31.4 million.


	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
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		2		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.

~~F-37~~

F-38

Table of Contents

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:

~~Loans evaluated for impairment as of December 31, 2017 and 2016 were as follows:~~


	Type of Collateral
(In thousands)	Real Estate		Investment Securities/Cash		Other
December 31, 2021
Construction	$	9,429	$	—	$	—
Commercial multifamily	188		—		—
Commercial real estate owner occupied	4,466		—		—
Commercial real estate non-owner occupied	9,501		—		—
Commercial and industrial	526		—		1,040

Residential real estate	7,035		—		—
Home equity	262		—		—
Consumer other	2		—		—
Total loans	$	31,409	$	—	$	1,040

~~Business Activities Loans~~


	Type of Collateral
(In thousands)	Real Estate		Investment Securities/Cash		Other
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

F-39

(In thousands)
2017 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Loans receivable:

Balance at end of year

Individually evaluated for impairment $ 33,732
$ 5,761
$ 3,872
$ —
$ 43,365
Collectively evaluated 2,183,975
1,176,808
1,809,329
898,721
6,068,833
Total $ 2,217,707
$ 1,182,569
$ 1,813,201
$ 898,721
$ 6,112,198

~~Business Activities Loans~~

(In thousands)
2016 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Loans receivable:

Balance at end of year

Individually evaluated for impairment $ 25,549
$ 5,705
$ 2,775
$ 2,703
$ 36,732
Collectively evaluated 1,900,795
902,397
1,592,197
789,186
5,184,575
Total $ 1,926,344
$ 908,102
$ 1,594,972
$ 791,889
$ 5,221,307

~~Acquired Loans~~

(In thousands)
2017 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Loans receivable:

Balance at end of year

Individually evaluated for impairment $ 4,244
$ 421
$ 2,617
$ 27
$ 7,309
Purchased credit-impaired loans 53,302
34,629
6,974
2,439
97,344
Collectively evaluated 989,489
586,320
280,015
226,663
2,082,487
Total $ 1,047,035
$ 621,370
$ 289,606
$ 229,129
$ 2,187,140

~~Acquired Loans~~

(In thousands)
2016 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Loans receivable:

Balance at end of year

Individually evaluated for impairment $ 4,256
$ 635
$ 308
$ 406
$ 5,605
Purchased credit-impaired loans 34,820
3,369
7,283
1,344
46,816
Collectively evaluated 651,018
149,932
290,568
184,541
1,276,059
Total $ 690,094
$ 153,936
$ 298,159
$ 186,291
$ 1,328,480

~~F-38~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~The following is a summary of impaired loans at year-end 2017 and 2016 and for the years then ended:~~

~~Business Activities Loans~~

At December 31, 2017
(In thousands) Recorded Investment (1) Unpaid Principal
Balance (2) Related Allowance
With no related allowance:

Commercial real estate - construction $ —
$ —
$ —
Commercial real estate - single and multifamily 1,077
3,607
—
Other commercial real estate 18,285
18,611
—
Other commercial and industrial loans 2,060
2,629
—
Residential mortgages - 1-4 family 660
1,075
—
Consumer - home equity 867
1,504
—
With an allowance recorded:

Commercial real estate - construction $ 159
$ 159
$ 1
Commercial real estate - single and multifamily 159
171
1
Other commercial real estate 14,321
15,235
227
Other commercial and industrial loans 3,716
4,249
66
Residential mortgages - 1-4 family 1,344
1,446
130
Consumer - home equity 1,014
999
34
Consumer - other 17
17
1

Total

Commercial real estate $ 34,001
$ 37,783
$ 229
Commercial and industrial 5,776
6,878
66
Residential mortgages 2,004
2,521
130
Consumer 1,898
2,520
35
Total impaired loans $ 43,679
$ 49,702
$ 460

(1) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on the Consolidated Balance Sheet.

~~(2) The Unpaid Principal Balance represents the customer's legal obligation to the Company.~~

~~F-39~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Business Activities Loans~~

At December 31, 2016
(In thousands) Recorded Investment (1) Unpaid Principal
Balance (2) Related Allowance
With no related allowance:

Other commercial real estate $ 18,905
$ 18,905
$ —
Other commercial and industrial loans 382
382
—
Residential mortgages - 1-4 family 2,101
2,101
—
Consumer - home equity 1,605
1,605
—
With an allowance recorded:

Commercial real estate - single and multifamily $ 179
$ 181
$ 2
Other commercial real estate 6,306
6,462
156
Other commercial and industrial loans 5,060
5,324
264
Residential mortgages - 1-4 family 538
674
136
Consumer - home equity 942
1,098
156
Total

Commercial real estate $ 25,390
$ 25,548
$ 158
Commercial and industrial 5,442
5,706
264
Residential mortgages 2,639
2,775
136
Consumer 2,547
2,703
156
Total impaired loans $ 36,018
$ 36,732
$ 714

~~(2) The Unpaid Principal Balance represents the customer's legal obligation to the Company.~~

~~F-40~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

At December 31, 2017
(In thousands) Recorded Investment (1) Unpaid Principal
Balance (2) Related Allowance
With no related allowance:

Commercial real estate - single and multifamily $ 204
$ 290
$ —
Other commercial real estate loans 1,123
2,794
—
Other commercial and industrial loans 255
310
—
Residential mortgages - 1-4 family 658
671
—
Consumer - home equity 1,374
1,654
—
Consumer - other 27
27
—

With an allowance recorded:

Commercial real estate - single and multifamily $ 887
$ 880
$ 18
Other commercial real estate loans 2,043
1,661
38
Other commercial and industrial loans 165
166
1
Residential mortgages - 1-4 family 166
185
9
Consumer - home equity 433
540
45

Total

Commercial real estate $ 4,257
$ 5,625
$ 56
Commercial and industrial 420
476
1
Residential mortgages 824
856
9
Consumer 1,834
2,221
45
Total impaired loans $ 7,335
$ 9,178
$ 111

~~(2) The Unpaid Principal Balance represents the customer's legal obligation to the Company.~~

~~F-41~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

December 31, 2016
(In thousands) Recorded Investment (1) Unpaid Principal
Balance (2) Related Allowance
With no related allowance:

Other commercial real estate loans $ 547
$ 547
$ —
Residential mortgages - 1-4 family 208
208
—
Consumer - home equity —
—
—
Consumer - other —
—
—

With an allowance recorded:

Commercial real estate - single and multifamily $ 1,250
$ 1,358
$ 108
Other commercial real estate loans 2,209
2,351
142
Other Commercial and industrial loans 576
635
59
Residential mortgages - 1-4 family 89
100
11
Consumer - home equity 292
406
114

Total

Commercial real estate $ 4,006
$ 4,256
$ 250
Commercial and industrial 576
635
59
Residential mortgages 297
308
11
Consumer 292
406
114
Total impaired loans $ 5,171
$ 5,605
$ 434

~~(2) The Unpaid Principal Balance represents the customer's legal obligation to the Company.~~

~~F-42~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~The following is a summary of the average recorded investment and interest income recognized on impaired loans as of December 31, 2017, 2016 and 2015:~~

~~Business Activities Loans~~

December 31, 2017 December 31, 2016 December 31, 2015
(in thousands) Average Recorded
Investment Cash Basis Interest
Income Recognized Average Recorded
Investment Cash Basis Interest
Income Recognized Average Recorded
Investment Cash Basis Interest
Income Recognized
With no related allowance:

Commercial real estate - construction $ —
$ —
$ —
$ —
$ 2,245
$ 92
Commercial real estate - single and multifamily 341
214
36
1
60
—
Other commercial real estate 20,867
1,123
6,463
1,155
12,487
302
Other commercial and industrial 4,437
265
3,349
131
3,870
177
Residential mortgages - 1-4 family 1,128
31
2,403
91
1,353
38
Consumer-home equity 1,291
30
612
5
442
13
Consumer-other 72
3
2
—
—
—

With an allowance recorded:

Commercial mortgages - construction $ 41
$ 3
$ —
$ —
$ —
$ —
Commercial real estate - single and multifamily 169
12
15
6
—
—
Other commercial real estate 11,372
520
7,576
349
3,214
132
Other commercial and industrial 3,251
267
2,002
225
810
37
Residential mortgages - 1-4 family 1,289
59
682
26
1,704
72
Consumer-home equity 1,007
29
999
35
83
—
Consumer - other 4
1
103
4
112
4

Total

Commercial real estate $ 32,790
$ 1,872
$ 14,090
$ 1,511
$ 18,006
$ 526
Commercial and industrial 7,688
532
5,351
356
4,680
214
Residential mortgages 2,417
90
3,085
117
3,057
110
Consumer loans 2,374
63
1,716
44
637
17
Total impaired loans $ 45,269
$ 2,557
$ 24,242
$ 2,028
$ 26,380
$ 867

~~F-43~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

December 31, 2017 December 31, 2016 December 31, 2015
(in thousands) Average Recorded
Investment Cash Basis Interest
Income Recognized Average Recorded
Investment Cash Basis Interest
Income Recognized Average Recorded
Investment Cash Basis Interest
Income Recognized
With no related allowance:

Commercial real estate - construction $ —
$ —
$ —
$ —
$ 445
$ 60
Commercial real estate - single and multifamily 342
82
—
—
2,014
57
Other commercial real estate 487
239
521
20
1,721
37
Other commercial and industrial 581
43
492
9
—
—
Residential mortgages - 1-4 family 390
28
293
12
463
6
Consumer - home equity 773
22
—
—
152
5
Consumer - other 7
1
105
1
59
5

With an allowance recorded:

Commercial real estate - construction $ —
$ —
$ —
$ —
$ —
$ —
Commercial real estate - single and multifamily 903
47
1,064
115
623
33
Other commercial real estate 1,719
91
2,618
165
1,384
96
Other commercial and industrial 47
13
369
17
31
3
Residential mortgages - 1-4 family 173
9
214
25
304
9
Consumer - home equity 400
21
—
—
195
7

Total

Commercial real estate $ 3,451
$ 459
$ 4,203
$ 300
$ 6,187
$ 283
Commercial and industrial 628
56
861
26
31
3
Residential mortgages 563
37
507
37
767
15
Consumer loans 1,180
44
105
1
406
17
Total impaired loans $ 5,822
$ 596
$ 5,676
$ 364
$ 7,391
$ 318

~~No additional funds are committed to be advanced in connection with impaired loans.~~

~~F-44~~

~~Table of Contents~~

~~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)~~("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 ~~tables include~~table presents activity in TDRs for the ~~recorded investment and number of modifications for modified loans identified during the years-ended~~years ended December 31, ~~2017, 2016,~~2021 and 2015 respectively. The tables include the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured. The modifications for the year-ended December 31, 2017 were attributable to interest rate concessions, principal concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity. The modifications for the year-ended December 31, 2016 were attributable to interest rate concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity.2020:


(In thousands)	Balance at Beginning of Period		Principal Payments		TDR Status Change		Other Additions/(Reductions)		Newly Identified TDRs		Balance at End of Period
Year ended December 31, 2021
Construction	$	—	$	—	$	—	$	—	$	9,429	$	9,429
Commercial multifamily	754		(51)		—		—		—		703
Commercial real estate owner occupied	1,731		(96)		—		(168)		1,266		2,733
Commercial real estate non-owner occupied	13,684		(14,562)		—		(791)		10,979		9,310
Commercial and industrial	2,686		(3,916)		—		(199)		5,085		3,656

Residential real estate	1,524		(233)		—		(174)		—		1,117
Home equity	133		(12)		—		—		—		121
Consumer other	36		(8)		—		5		—		33
Total	$	20,548	$	(18,878)	$	—	$	(1,327)	$	26,759	$	27,102


(In thousands)	Balance at Beginning of Period		Principal Payments		TDR Status Change		Other Additions/(Reductions)		Newly Identified TDRs		Balance at End of Period
Year ended December 31, 2020
Construction	$	—	$	—	$	—	$	—	$	—	$	—
Commercial multifamily	793		(39)		—		—		—		754
Commercial real estate owner occupied	13,331		(5,734)		—		(5,884)		18		1,731
Commercial real estate non-owner occupied	1,373		(1)		—		1,719		10,593		13,684
Commercial and industrial	1,449		(289)		—		(60)		1,586		2,686

Residential real estate	2,045		(160)		—		(361)		—		1,524
Home equity	277		(22)		—		(122)		—		133
Consumer other	48		(12)		—		—		—		36
Total	$	19,316	$	(6,257)	$	—	$	(4,708)	$	12,197	$	20,548

F-40

Modifications by Class
For the twelve months ending December 31, 2017
Number of
Modifications Pre-Modification
Outstanding Recorded
Investment (In thousands) Post-Modification
Outstanding Recorded
Investment
Troubled Debt Restructurings

Commercial - Single and multifamily 1
$ 235
$ 235
Commercial - Other 15
13,445
11,718
Commercial and industrial - Other 12
3,507
3,507
Residential - 1-4 Family 4
331
314
Consumer - Home Equity 3
122
122
35
$ 17,640
$ 15,896

Modifications by Class
For the twelve months ending December 31, 2016
Number of
Modifications Pre-Modification
Outstanding Recorded
Investment (In thousands) Post-Modification
Outstanding Recorded
Investment
Troubled Debt Restructurings

Commercial - Single and multifamily 5
$ 437
$ 437
Commercial - Other 5
16,651
16,651
Commercial and industrial - Other 4
555
555
Residential - 1-4 Family 2
5
5
Consumer - Home Equity 1
117
117
17
$ 17,765
$ 17,765

Modifications by Class
For the twelve months ending December 31, 2015
Number of
Modifications Pre-Modification
Outstanding Recorded
Investment (In thousands) Post-Modification
Outstanding Recorded
Investment
Troubled Debt Restructurings

Commercial - Construction 1
$ 123
$ 123
Commercial - Single and multifamily 2
307
307
Commercial - Other 4
8,577
7,274
Commercial and industrial - Other 6
9,041
8,904
Consumer - Other 1
999
999
14
$ 19,047
$ 17,607

~~F-45~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents loans modified as TDRs that occurred during the years ended December 31, 2021, 2020, and 2019:


(dollars in thousands)	Total
Year ended December 31, 2021
TDR:
Number of loans	18
Pre-modification outstanding recorded investment	$	26,759
Post-modification outstanding recorded investment	$	26,759

Year ended December 31, 2020
TDR:
Number of loans	16
Pre-modification outstanding recorded investment	$	12,197
Post-modification outstanding recorded investment	$	12,197

Year ended December 31, 2019
TDR:
Number of loans	13
Pre-modification outstanding recorded investment	$	2,063
Post-modification outstanding recorded investment	$	2,063

The following ~~tables disclose~~table discloses the ~~recorded investment and number of~~ modifications for TDRs ~~for the prior years~~ where a concession ~~was~~has been made ~~and~~within the ~~borrower subsequently~~previous 12 months, that then defaulted in the respective reporting period. For the year ended ~~2017,~~2021, there were ~~three~~4 loans ~~that were~~ restructured that had subsequently defaulted during the reporting period. There were no TDRs for which there was a payment default within twelve months following the modification during the year ended 2020. For the ~~period~~ year

ended ~~2016,~~2019, there ~~were no loans~~was one loan that ~~were~~was restructured that had subsequently defaulted during the reporting period. ~~For~~


(dollars in thousands)	Number of Loans	Recorded Investment
Year ended December 31, 2021
Commercial real estate non-owner occupied	2	$	18,746
Commercial and industrial	2	$	71
Total	4	$	18,817


(dollars in thousands)	Number of Loans	Recorded Investment
Year ended December 31, 2019	0	0
Commercial and industrial	1	$	195
Total	1	$	195

Beginning in March 2020, the ~~year ended 2015, there~~Company has offered three-month payment deferrals for customers with a current payment status who were ~~eight loans that were restructured that had subsequently defaulted during~~negatively impacted by economic disruption caused by the ~~period.~~COVID-19 pandemic. Refer to Note 18 - Other Commitments, Contingencies, and Off-Balance Sheet Activities for more information regarding these modifications.

F-41

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Modifications that subsequently defaulted
for the twelve months ending December 31, 2017
Number of Contracts Recorded Investment
Troubled Debt Restructurings

Commercial - Single and multifamily —
$ —
Commercial - Other 1
113
Commercial and industrial - Other 2
492
Residential - 1-4 Family —
—
3
$ 605
Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated allowance for loan losses using incurred losses methodology. The following tables are disclosures related to year end 2019.

The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality:


(In thousands)	2019
Balance at beginning of period	$	2,840
Acquisitions	4,200
Accretion	(9,619)
Net reclassification from nonaccretable difference	7,430
Payments received, net	(837)
Reclassification to TDR	9
Disposals	—
Balance at end of period	4,023

The following is a summary of the average recorded investment and interest income recognized on impaired loans

as of December 31, 2019:

Business Activities Loans


	December 31, 2019
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:


Other commercial real estate	$	19,805	$	586
Other commercial and industrial	3,165		523
Residential mortgages - 1-4 family	185		17
Consumer-home equity	148		3
Consumer-other	—		—

With an allowance recorded:


Other commercial real estate	$	374	$	107
Other commercial and industrial	2,533		793
Residential mortgages - 1-4 family	2,427		150
Consumer-home equity	349		32
Consumer - other	11		1

Total
Commercial real estate	$	20,179	$	693
Commercial and industrial	5,698		1,316
Residential mortgages	2,612		167
Consumer loans	508		36
Total impaired loans	$	28,997	$	2,212

F-42

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Modifications that subsequently defaulted
for the twelve months ending December 31, 2015
Number of Contracts Recorded Investment
Troubled Debt Restructurings

Commercial - Single and multifamily 1
$ —
Commercial - Other 1
373
Commercial and industrial - Other 4
6,579
Residential - 1-4 Family 2
169
8
$ 7,121
Acquired Loans


	December 31, 2019
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:


Other commercial real estate	$	1,603	$	117
Other commercial and industrial	441		51
Residential mortgages - 1-4 family	241		11
Consumer - home equity	475		23
Consumer - other	—		—

With an allowance recorded:


Other commercial real estate	$	1,005	$	59
Other commercial and industrial	29		2
Residential mortgages - 1-4 family	88		7
Consumer - home equity	68		6
Consumer - other	41		2

Total
Commercial real estate	$	2,608	$	176
Commercial and industrial	470		53
Residential mortgages	329		18
Consumer loans	584		31
Total impaired loans	$	3,991	$	278

No additional funds are committed to be advanced in connection with impaired loans.

The following table presents the Company’s TDR activity in ~~2017 and 2016:~~2019:

(In thousands) 2017 2016 2015
Balance at beginning of year $ 33,829
$ 22,048
$ 16,714
Principal payments (3,213 ) (5,870 ) (5,460 )
TDR status change (1) —
2,235
—
Other reductions (2) (4,522 ) (2,349 ) (3,160 )
Newly identified TDRs 15,896
17,765
13,954
Balance at end of year $ 41,990
$ 33,829
$ 22,048

~~________________________________~~


~~(1)~~(In thousands)	2019
Balance at beginning of year	$	27,415
Principal payments	(6,086)
TDR status change ~~classification represents TDR loans with a specified interest rate equal to or greater than the rate that the Company was willing to accept~~(1)	—
Other reductions (2)	(4,076)
Newly identified TDRs	2,063
Balance at ~~the time~~end of ~~the restructuring for a new loan with comparable risk and the loan was on current payment status and not impaired based on the terms specified by the restructuring agreement.~~year	$	19,316

_____________________

(1) TDR status change classification represents TDR loans with a specified interest rate equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk and the loan was on current payment status and not impaired based on the terms specified by the restructuring agreement.

(2) Other reductions classification consists of transfer to other real estate owned, charge-offs to loans, and other loan sale payoffs.

~~The evaluation of certain loans individually for specific impairment includes loans that were previously classified as TDRs or continue to be classified as TDRs.~~

As of December 31, 2017, the Company maintained no foreclosed residential real estate property. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of December 31, 2017 and December 31, 2016 totaled $4.9 million and $4.8 million, respectively. As of December 31, 2016, foreclosed residential real estate property totaled $151 thousand.

~~F-46~~

F-43

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Allowance for Loan Losses

~~NOTE 7. LOAN LOSS ALLOWANCE~~Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated allowance for loan losses using incurred losses methodology. The following tables are disclosures related to the allowance for loan losses for year end 2019.

Activity in the allowance for loan losses for ~~2017, 2016, and 2015~~2019 was as follows:


Business Activities Loans
(In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Balance at beginning of period	$	21,732	$	16,504	$	10,535	$	7,368	$	56,139
Charged-off loans	6,577		23,799		635		3,322		34,333
Recoveries on charged-off loans	570		1,012		57		253		1,892
Provision/(releases) for loan losses	9,033		25,404		(1,417)		458		33,478
Balance at end of period	$	24,758	$	19,121	$	8,540	$	4,757	$	57,176

Individually evaluated for impairment	20		122		109		43		294
Collectively evaluated	24,738		18,999		8,431		4,714		56,882
Total	$	24,758	$	19,121	$	8,540	$	4,757	$	57,176

~~Business Activities Loans~~


Acquired Loans
(In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Balance at beginning of period	$	3,153	$	1,064	$	630	$	483	$	5,330
Charged-off loans	830		571		263		557		2,221
Recoveries on charged-off loans	672		438		116		123		1,349
Provision/(releases) for loan losses	1,111		126		365		339		1,941
Balance at end of period	$	4,106	$	1,057	$	848	$	388	$	6,399

Individually evaluated for impairment	97		1		8		12		118
Collectively evaluated	4,009		1,056		840		376		6,281
Total	$	4,106	$	1,057	$	848	$	388	$	6,399

(In thousands)
2017 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Balance at beginning of year $ 16,498
$ 9,447
$ 7,805
$ 5,479
$ 39,229
Charged-off loans 3,875
3,373
806
3,470
11,524
Recoveries on charged-off loans 170
179
270
270
889
Provision for loan losses 4,050
7,597
2,151
3,528
17,326
Balance at end of year $ 16,843
$ 13,850
$ 9,420
$ 5,807
$ 45,920
Individually evaluated for impairment 229
66
130
35
460
Collectively evaluated 16,614
13,784
9,290
5,772
45,460
Total $ 16,843
$ 13,850
$ 9,420
$ 5,807
$ 45,920

~~Business Activities Loans~~

(In thousands)
2016 Commercial real estate Commercial
and industrial Residential
mortgages Consumer Total
Balance at beginning of year $ 14,591
$ 7,385
$ 7,613
$ 4,985
$ 34,574
Charged-off loans 2,127
4,620
2,036
1,722
10,505
Recoveries on charged-off loans 243
123
159
267
792
Provision for loan losses 3,791
6,559
2,069
1,949
14,368
Balance at end of year $ 16,498
$ 9,447
$ 7,805
$ 5,479
$ 39,229
Individually evaluated for impairment 158
264
136
156
714
Collectively evaluated 16,340
9,183
7,669
5,323
38,515
Total $ 16,498
$ 9,447
$ 7,805
$ 5,479
$ 39,229

~~Business Activities Loans~~

(In thousands)
2015 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Balance at beginning of year $ 14,740
$ 5,246
$ 6,864
$ 5,945
$ 32,795
Charged-off loans 6,865
2,358
1,215
1,183
11,621
Recoveries on charged-off loans 164
169
141
285
759
Provision for loan losses 6,552
4,328
1,823
(62 ) 12,641
Balance at end of year $ 14,591
$ 7,385
$ 7,613
$ 4,985
$ 34,574
Individually evaluated for impairment 149
21
153
103
426
Collectively evaluated 14,442
7,364
7,460
4,882
34,148
Total $ 14,591
$ 7,385
$ 7,613
$ 4,985
$ 34,574

~~F-47~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

(In thousands)
2017 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Balance at beginning of year $ 2,303
$ 1,164
$ 766
$ 536
$ 4,769
Charged-off loans 771
844
797
648
3,060
Recoveries on charged-off loans 65
245
43
153
506
Provision for loan losses 2,259
560
586
294
3,699
Balance at end of year $ 3,856
$ 1,125
$ 598
$ 335
$ 5,914
Individually evaluated for impairment 56
1
9
45
111
Collectively evaluated 3,800
1,124
589
290
5,803
Total $ 3,856
$ 1,125
$ 598
$ 335
$ 5,914

~~Acquired Loans~~

(In thousands)
2016 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Balance at beginning of year $ 1,903
$ 1,330
$ 976
$ 525
$ 4,734
Charged-off loans 977
1,095
829
620
3,521
Recoveries on charged-off loans 61
266
144
91
562
Provision for loan losses 1,316
663
475
540
2,994
Balance at end of year $ 2,303
$ 1,164
$ 766
$ 536
$ 4,769
Individually evaluated for impairment 250
59
11
114
434
Collectively evaluated 2,053
1,105
755
422
4,335
Total $ 2,303
$ 1,164
$ 766
$ 536
$ 4,769

~~Acquired Loans~~

(In thousands)
2015 Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Balance at beginning of year $ 790
$ 1,093
$ 615
$ 369
$ 2,867
Charged-off loans 681
752
642
992
3,067
Recoveries on charged-off loans 418
289
64
78
849
Provision for loan losses 1,376
700
939
1,070
4,085
Balance at end of year $ 1,903
$ 1,330
$ 976
$ 525
$ 4,734
Individually evaluated for impairment 43
—
30
25
98
Purchased credit-impaired loans 42
—
—
—
42
Collectively evaluated 1,818
1,330
946
500
4,594
Total $ 1,903
$ 1,330
$ 976
$ 525
$ 4,734

~~F-48~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Credit Quality Information~~

~~Business Activities Loans Credit Quality Analysis~~

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 and 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.

Ratings for other consumer loans, including auto loans, are based on a two rating system. Loans that are current within 119 days are rated Performing while loans delinquent for 120 days or more are rated Non-performing. Other consumer loans are placed on non-accrual at such time as they become Non-performing.

~~Acquired Loans Credit Quality Analysis~~

Upon acquiring a loan portfolio, our internal loan review function assigns risk ratings to the acquired loans, utilizing the same methodology as it does with business activities loans. This may differ from the risk rating policy of the predecessor bank. Loans which are rated Substandard or worse according to the rating process outlined below are deemed to be credit impaired loans accounted for under ASC 310-30, regardless of whether they are classified as performing or non-performing.

The Bank utilizes a loan risk rating system for acquired loans consistent with loans originated from business activities, as outlined in the Credit Quality Information section of this Note. The ratings system is similar to loans originated through business activities. The Company presented several tables within this footnote separately for business activity loans and acquired loans in order to distinguish the credit performance of the acquired loans from the business activity loans.

~~F-49~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~The following tables present the Company’s loans by risk rating at year-end 2017 and 2016:~~

~~Business Activities Loans~~

~~Commercial Real Estate~~

~~Credit Risk Profile by Creditworthiness Category~~

Construction Single and multi-family Real Estate Total commercial real estate
(In thousands) 2017 2016 2017 2016 2017 2016 2017 2016
Grade:

Pass $ 181,371
$ 253,302
$ 214,289
$ 189,310
$ 1,775,091
$ 1,434,762
$ 2,170,751
$ 1,877,374
Special mention —
—
504
334
12,999
5,827
13,503
6,161
Substandard —
—
2,290
2,175
31,163
40,598
33,453
42,773
Doubtful —
—
—
—
—
36
—
36
Total $ 181,371
$ 253,302
$ 217,083
$ 191,819
$ 1,819,253
$ 1,481,223
$ 2,217,707
$ 1,926,344

~~Commercial and Industrial Loans~~

~~Credit Risk Profile by Creditworthiness Category~~

Total comm. and industrial
(In thousands) 2017 2016
Grade:

Pass $ 1,156,240
$ 890,974
Special mention 12,806
123
Substandard 11,123
13,825
Doubtful 2,400
3,180
Total $ 1,182,569
$ 908,102

~~Residential Mortgages~~

~~Credit Risk Profile by Internally Assigned Grade~~

1-4 family Construction Total residential mortgages
(In thousands) 2017 2016 2017 2016 2017 2016
Grade:

Pass $ 1,805,596
$ 1,578,913
$ 5,177
$ 11,178
$ 1,810,773
$ 1,590,091
Special mention 242
701
—
—
242
701
Substandard 2,186
4,179
—
—
2,186
4,179
Total $ 1,808,024
$ 1,583,793
$ 5,177
$ 11,178
$ 1,813,201
$ 1,594,971

~~Consumer Loans~~

~~Credit Risk Profile Based on Payment Activity~~

Home equity Auto and other Total consumer
(In thousands) 2017 2016 2017 2016 2017 2016
Performing $ 293,327
$ 310,846
$ 602,313
$ 477,416
$ 895,640
$ 788,262
Nonperforming 1,627
2,675
1,454
952
3,081
3,627
Total $ 294,954
$ 313,521
$ 603,767
$ 478,368
$ 898,721
$ 791,889

~~F-50~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

~~Commercial Real Estate~~

~~Credit Risk Profile by Creditworthiness Category~~

Construction Single and multi-family Real Estate Total commercial real estate
(In thousands) 2017 2016 2017 2016 2017 2016 2017 2016
Grade:

Pass $ 76,611
$ 33,461
$ 203,624
$ 119,414
$ 684,846
$ 496,562
$ 965,081
$ 649,437
Special mention —
—
603
907
22,070
1,622
22,673
2,529
Substandard 8,354
746
1,855
5,351
49,072
32,031
59,281
38,128
Total $ 84,965
$ 34,207
$ 206,082
$ 125,672
$ 755,988
$ 530,215
$ 1,047,035
$ 690,094

~~Commercial and Industrial Loans~~

~~Credit Risk Profile by Creditworthiness Category~~

Total comm. and industrial
(In thousands) 2017 2016
Grade:

Pass $ 606,922
$ 147,102
Special mention 1,241
1,260
Substandard 13,207
5,574
Total $ 621,370
$ 153,936

~~Residential Mortgages~~

~~Credit Risk Profile by Internally Assigned Grade~~

1-4 family Construction Total residential mortgages
(In thousands) 2017 2016 2017 2016 2017 2016
Grade:

Pass $ 281,160
$ 294,983
$ 233
$ 804
$ 281,393
$ 295,787
Special mention 2,704
343
—
—
2,704
343
Substandard 5,509
2,029
—
—
5,509
2,029
Total $ 289,373
$ 297,355
$ 233
$ 804
$ 289,606
$ 298,159

~~Consumer Loans~~

~~Credit Risk Profile Based on Payment Activity~~

Home equity Auto and other Total consumer
(In thousands) 2017 2016 2017 2016 2017 2016
Performing $ 113,262
$ 79,762
$ 113,510
$ 105,117
$ 226,772
$ 184,879
Nonperforming 1,965
517
392
895
2,357
1,412
Total $ 115,227
$ 80,279
$ 113,902
$ 106,012
$ 229,129
$ 186,291

~~F-51~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The following table summarizes information about total loans rated Special Mention or lower. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified in the above table as performing based on payment activity.

December 31, 2017 December 31, 2016
(In thousands) Business
Activities Loans Acquired Loans Total Business
Activities Loans Acquired Loans Total
Non-Accrual $ 15,659
$ 7,240
$ 22,899
$ 16,816
$ 5,424
$ 22,240
Substandard Accruing 36,846
73,412
110,258
51,125
44,177
95,302
Total Classified 52,505
80,652
133,157
67,941
49,601
117,542
Special Mention 28,387
26,802
55,189
7,479
4,323
11,802
Total Criticized $ 80,892
$ 107,454
$ 188,346
$ 75,420
$ 53,924
$ 129,344

NOTE 8. PREMISES AND EQUIPMENT

Year-end premises and equipment are summarized as follows:


(In thousands)	2017			2016			Estimated Useful Life	(In thousands)	2021		2020		Estimated Useful Life
Land	$	14,177		$	10,563		N/A	Land	$	15,786	$	17,716	N/A
Buildings and improvements	99,821			85,319			5 - 39 years	Buildings and improvements	104,327		113,853		5 - 39 years
Furniture and equipment	49,600			42,693			3 - 7 years	Furniture and equipment	62,420		63,590		3 - 7 years
Construction in process	5,177			4,084				Construction in process	703		4,035
Premises and equipment, gross	168,775			142,659				Premises and equipment, gross	183,236		199,194
Accumulated depreciation and amortization	(59,423		)	(49,444		)		Accumulated depreciation and amortization	(88,853)		(86,531)

Premises and equipment, net	$	109,352		$	93,215			Premises and equipment, net	$	94,383	$	112,663

Depreciation and amortization expense including discontinued operations for the years ~~2017, 2016,~~2021, 2020, and ~~2015~~2019 amounted to ~~$9.9~~$11.0 million, ~~$8.4~~$12.5 million,, and ~~$8.6~~$11.8 million, respectively.

~~F-52~~

F-44

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. GOODWILL AND OTHER INTANGIBLES

Goodwill and other intangible assets are presented in the tables below. The Company ~~completed one~~had no acquisition during ~~2017 which resulted in the capitalization of goodwill and other intangibles.~~2021 or 2020. In accordance with applicable accounting guidance, the Company allocated the amount paid to the fair value of the net assets acquired, with any excess amounts recorded as goodwill. ~~There were three acquisitions during 2016.~~ The goodwill balance is allocated to the consolidated Company. The activity impacting goodwill in ~~2017~~2021 and ~~2016~~2020 is as follows:

(In thousands) 2017 2016
Balance, beginning of the period $ 403,106
$ 323,943
Goodwill acquired and adjusted:
Commerce Bank 116,181
—
44 Business Capital —
15,892
Ronald N. Lazzaro, PC —
5,492
First Choice Bank —
58,036
Adjustments (1) —
(257 )
Balance, end of the period $ 519,287
$ 403,106


(In thousands)	2021		2020
Balance, beginning of the period	$	—	$	553,762
Goodwill acquired and adjusted:






Impairment	—		(553,762)
Balance, end of the period	$	—	$	—


~~(1)~~	~~In 2016, goodwill related to the Hampden and Firestone acquisitions was adjusted since acquisition dates to reflect new information available during the one-year measurement period.~~

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is assessed annually for impairment and more frequently if events or changes in circumstances indicate that there may be an impairment. The Company tests goodwill impairment annually as of ~~September~~June 30 ~~2017~~ using ~~third~~second quarter data.

The ~~results~~Company compares the fair value of the ~~qualitative assessment indicated it is more likely than not that the~~ reporting ~~unit's fair value exceeds~~unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The fair value of the reporting unit was determined using the guideline public company method. As a result of the assessment, the Company recognized a full goodwill impairment during the year ended December 31, 2020.

The primary causes of the goodwill impairment were economic and ~~accordingly,~~industry conditions resulting from the ~~two-step impairment test was not performed. If events or~~COVID-19 pandemic that caused volatility and reductions in the market capitalization of the Company and its peer banks, increased loan provision estimates, increased discount rates and other changes in ~~circumstances indicate~~variables driven by the uncertain macro-environment that ~~impairment is possible,~~resulted in the ~~Company will perform additional reviews. No impairment was recorded on goodwill for 2017, 2016 and 2015.~~estimated fair value of the reporting unit being less than the reporting unit’s carrying value.

F-45

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of other intangible assets are as follows:


(In thousands)	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
December 31, 2021
Non-maturity deposits (core deposit intangible)	$	77,213	$	(49,963)	$	27,250
Insurance contracts	7,558		(7,558)		—
All other intangible assets	7,866		(5,497)		2,369
Total	$	92,637	$	(63,018)	$	29,619

December 31, 2020
Non-maturity deposits (core deposit intangible) (1)	$	77,213	$	(45,257)	$	31,956
Insurance contracts	7,558		(7,558)		—
All other intangible assets	7,866		(5,003)		2,863
Total	$	92,637	$	(57,818)	$	34,819

(In thousands)
Gross Intangible
Assets

Accumulated
Amortization

Net Intangible
Assets
December 31, 2017

Non-maturity deposits (core deposit intangible) $ 66,923
$ (33,024 ) $ 33,899
Insurance contracts 7,558
(7,526 ) 32
All other intangible assets 7,810
(3,445 ) 4,365
Total $ 82,291
$ (43,995 ) $ 38,296
December 31, 2016

Non-maturity deposits (core deposit intangible) $ 44,523
$ (30,099 ) $ 14,424
Insurance contracts 7,558
(7,504 ) 54
All other intangible assets 7,866
(2,899 ) 4,967
Total $ 59,947
$ (40,502 ) $ 19,445
(1)As of December 31, 2020, the Company reclassified $4.6 million of net core deposit intangible to held-for-sale related to the assets and liabilities associated with the Mid-Atlantic branch sale.

Other intangible assets are amortized on a straight-line or accelerated basis over their estimated lives, which range from four to fifteen ~~years.~~years. Amortization expense related to intangibles totaled ~~$3.5~~$5.2 million in ~~2017, $2.9~~2021, $6.2 million in ~~2016,~~2020, and ~~$3.6~~$5.8 million in ~~2015.~~2019.

The estimated aggregate future amortization expense for intangible assets remaining at year-end ~~2017~~2021 is as follows: ~~2018- $4.9~~2022- $5.1 million; ~~2019- $4.7~~2023- $4.8 million; ~~2020- $4.4~~2024- $4.6 million; ~~2021- $4.2~~2025- $4.5 million; ~~2022- $4.1~~2026- $4.5 million; and thereafter- ~~$16.0~~$6.0 million. For the years ~~2017, 2016,~~2021, 2020, and ~~2015,~~2019, no impairment charges were identified for the Company’s intangible assets.

F-46

~~F-53~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. OTHER ASSETS

Year-end other assets are summarized as follows:


(In thousands)	2021		2020
Capitalized servicing rights	$	16,022	$	16,348
Accrued interest receivable	33,534		46,919
Accrued federal and state tax receivable	30,614		40,751
Right-of-use assets	52,180		60,018
Derivative assets	79,528		160,071

Deferred tax asset	52,620		46,370
Other	23,886		16,753
Total other assets	$	288,384	$	387,230

(In thousands) 2017 2016
Capitalized servicing rights $ 16,361
$ 11,524
Accrued interest receivable 33,739
26,113
Accrued federal and state tax receivable (1) 33,101
19,076
Derivative assets 19,308
21,617
Assets held for sale 1,392
—
Other 13,182
20,127
Total other assets $ 117,083
$ 98,457


~~(1)~~	Accrued federal and state tax receivable as of December 31, 2017 includes $4.3 million of New York State refundable tax credits from investment in historical tax credit partnerships in New York State. This balance was $5.9 million at year-end 2016.

The Bank sells loans in the secondary market and retains the ~~ability~~right to service many of these loans. The Bank earns fees for the servicing provided. ~~Loans~~At year end 2021, loans sold and serviced for others amounted to ~~$1.8 billion, $1.3~~$1.6 billion. For years ended 2020 and 2019, loans sold and serviced for others from continuing operations amounted to $1.5 billion, and ~~$0.8~~$1.7 billion, ~~at year-end 2017, 2016,~~respectively. For years ended 2020 and ~~2015,~~2019, loans sold and serviced for others from discontinued operations amounted to $0.6 billion, and $1.4 billion, respectively. Loans serviced for others are not included in the accompanying ~~consolidated balance sheets.~~Consolidated Balance Sheets. The risks inherent in servicing assets relate primarily to changes in prepayments that result from shifts in interest rates. ~~Contractually~~For the year 2021, contractually specified servicing fees were ~~$4.6 million, $3.2~~$8.0 million and ~~$1.7 million for the years 2017, 2016, and 2015, respectively, and~~are included as a component of loan related fees within non-interest income. ~~The~~For the years 2020 and 2019, contractually specified servicing fees from continuing operations were $5.5 million and $5.6 million, respectively and are included as a component of loan related fees within non-interest income. For the years 2020 and 2019, contractually specified servicing fees from discontinued operations were $2.1 million and $1.9 million, respectively, and are included as a component of other income in Note 2 - Discontinued Operations. Refer to Note 21 - Fair Value Measurements for significant assumptions and inputs used in the valuation at year-end ~~2017 included a weighted average discount rate of 10.4% and pre-payment speed assumptions ranging from 7.78% to 12.78%.~~2021.

Servicing rights activity was as follows:


(In thousands)	2021		2020
Balance at beginning of year	$	16,348	$	26,451


Additions	4,568		3,875
Amortization	(4,921)		(3,761)
Change in fair value	(723)		(9,266)
Allowance adjustment	750		(951)
Balance at end of year	$	16,022	$	16,348

(1)As of December 31, 2021 and December 31, 2020, the servicing rights included in the total balance accounted for at fair value were $2.0 million and $3.0 million, respectively.

At December 31, 2021, the fair value of servicing rights was $16.6 million. At December 31, 2020, the fair value of servicing rights was $16.0 million.

F-47

(In thousands) 2017 2016
Balance at beginning of year $ 11,524
$ 5,187
Acquired from 44 Business Capital —
3,489
Acquired from First Choice Bank (1) —
696
Additions 7,604
4,116
Amortization (2,446 ) (1,964 )
Change in fair value (221 ) —
Allowance adjustment (100 ) —
Balance at end of year $ 16,361
$ 11,524


~~(1)~~	~~Amounts acquired from First Choice Bank are accounted for at fair value. The balance as of December 31, 2017 and December 31, 2016 were $3.8 million and $0.8 million, respectively.~~

~~F-54~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. DEPOSITS

A summary of year-end time deposits is as follows:


(In thousands)	2017		2016		(In thousands)	2021		2020
Maturity date:					Maturity date:
Within 1 year	$	1,790,056	$	1,316,973	Within 1 year	$	1,228,874	$	1,582,492
Over 1 year to 2 years	546,381		582,764		Over 1 year to 2 years	280,403		545,100
Over 2 years to 3 years	268,897		142,160		Over 2 years to 3 years	81,391		171,810
Over 3 years to 4 years	161,314		150,388		Over 3 years to 4 years	52,000		32,358
Over 4 years to 5 years	121,400		137,845		Over 4 years to 5 years	34,605		51,073
Over 5 years	2,157		3,413		Over 5 years	1,667		2,252
Total	$	2,890,205	$	2,333,543	Total	$	1,678,940	$	2,385,085
Account balances:					Account balances:
Less than $100,000	$	733,785	$	656,055	Less than $100,000	$	676,979	$	663,324
$100,000 or more	2,156,420		1,677,488
$100,000 through $250,000					$100,000 through $250,000	610,174		1,219,210
$250,000 or more					$250,000 or more	391,787		502,551
Total	$	2,890,205	$	2,333,543	Total	$	1,678,940	$	2,385,085

Included in total deposits on the Consolidated Balance Sheets are brokered deposits of ~~$1.2 billion~~$228.1 million and ~~$0.9 billion~~$610.6 million at December 31, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively. ~~Included~~Also included in total ~~brokered~~ deposits are reciprocal deposits of ~~$99.8~~$89.2 million and ~~$113.4~~$119.0 million at December 31, ~~2017~~2021 and December 31, ~~2016, respectively. Included in total deposits are~~2020, respectively, as well as related party deposits of ~~$36.0~~$146.4 million and ~~$17.2~~$177.2 million at December 31, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively.

F-48

~~F-55~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. BORROWED FUNDS

Borrowed funds at December 31, ~~2017~~2021 and ~~2016~~2020 are summarized, as follows:


	2017				2016					2021				2020
(in thousands, except rates)	Principal		Weighted Average Rate		Principal		Weighted Average Rate		(in thousands, except rates)	Principal		Weighted Average Rate		Principal		Weighted Average Rate
Short-term borrowings:									Short-term borrowings:
Advances from the FHLBB	$	667,300	1.48	%	$	1,072,044	0.71	%	Advances from the FHLBB	$	—	—	%	$	40,000	1.05	%
Other Borrowings	—		—		10,000		2.42

Total short-term borrowings:	667,300		1.48		1,082,044		0.72		Total short-term borrowings:	—		—		40,000		1.05
Long-term borrowings:									Long-term borrowings:
Advances from the FHLBB	380,436		1.54		142,792		1.53		Advances from the FHLBB	13,331		1.75		434,357		1.89
Paycheck Protection Program Liquidity Facility ("PPPLF")									Paycheck Protection Program Liquidity Facility ("PPPLF")	—		—		—		—
Subordinated notes	73,875		7.00		73,697		7.00		Subordinated notes	74,590		7.00		74,411		7.00
Junior subordinated notes	15,464		3.30		15,464		2.77
Junior subordinated borrowing - Trust I									Junior subordinated borrowing - Trust I	15,464		2.01		15,464		2.06
Junior subordinated borrowing - Trust II									Junior subordinated borrowing - Trust II	7,459		1.90		7,405		1.92
Total long-term borrowings:	469,775		2.46		231,953		3.35		Total long-term borrowings:	110,844		5.33		531,637		2.61
Total	$	1,137,075	1.88	%	$	1,313,997	1.19	%	Total	$	110,844	5.33	%	$	571,637	2.50	%

F-75

(In thousands) Before Tax Tax Effect Net of Tax
Year Ended December 31, 2017

Net unrealized holding gain on AFS securities:

Net unrealized (loss) arising during the period $ (2,544 ) $ 1,075
$ (1,469 )
Less: reclassification adjustment for gains realized in net income 12,598
(4,535 ) 8,063
Net unrealized holding (loss) on AFS securities (15,142 ) 5,610
(9,532 )

Net loss on cash flow hedging derivatives:

Net unrealized (loss) arising during the period (449 ) 180
(269 )
Less: reclassification adjustment for (losses) realized in net income (7,022 ) 2,769
(4,253 )
Net gain on cash flow hedging derivatives 6,573
(2,589 ) 3,984

Net unrealized holding (loss) on pension plans

Net unrealized (loss) arising during the period (311 ) 124
(187 )
Less: reclassification adjustment for losses realized in net income (217 ) 87
(130 )
Net unrealized holding (loss) on pension plans (94 ) 37
(57 )
Other Comprehensive Income(Loss) $ (8,663 ) $ 3,058
$ (5,605 )

(In thousands) Before Tax Tax Effect Net of Tax
Year Ended December 31, 2016

Net unrealized holding gain on AFS securities:

Net unrealized gain arising during the period $ 18,308
$ (6,979 ) $ 11,329
Less: reclassification adjustment for (losses) realized in net income (551 ) 220
(331 )
Net unrealized holding gain on AFS securities 18,859
(7,199 ) 11,660

Net (loss) on cash flow hedging derivatives:

Net unrealized (loss) arising during the period (2,022 ) 754
(1,268 )
Less: reclassification adjustment for (losses) realized in net income (3,981 ) 1,589
(2,392 )
Net gain on cash flow hedging derivatives 1,959
(835 ) 1,124

Net unrealized holding gain on pension plans

Net unrealized gain arising during the period 351
(155 ) 196
Less: reclassification adjustment for (losses) realized in net income (164 ) 73
(91 )
Net unrealized holding gain on pension plans 515
(228 ) 287
Other Comprehensive Income $ 21,333
$ (8,262 ) $ 13,071

~~F-80~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) Before Tax Tax Effect Net of Tax
Year Ended December 31, 2015

Net unrealized holding gain on AFS securities:

Net unrealized loss arising during the period $ (7,567 ) $ 2,793
$ (4,774 )
Less: reclassification adjustment for gains realized in net income 2,110
(847 ) 1,263
Net unrealized holding loss on AFS securities (9,677 ) 3,640
(6,037 )

Net (loss) on cash flow hedging derivatives:

Net unrealized (loss) arising during the period (5,232 ) 2,094
(3,138 )
Less: reclassification adjustment for (losses) realized in net income —
—
—
Net (loss) on cash flow hedging derivatives (5,232 ) 2,094
(3,138 )

Net unrealized holding (loss) on pension plans

Net unrealized (loss) arising during the period (1,436 ) 572
(864 )
Less: reclassification adjustment for (losses) realized in net income (259 ) 104
(155 )
Net unrealized holding (loss) on pension plans (1,177 ) 468
(709 )
Other Comprehensive Loss $ (16,086 ) $ 6,202
$ (9,884 )

~~F-81~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The following table presents the changes in each component of accumulated other comprehensive ~~income (loss)~~/income(loss), for the years ended December 31, ~~2017, 2016,~~2021, 2020, and ~~2015:~~2019:


(in thousands)	Net unrealized holding gain (loss) on AFS Securities		Net unrealized holding gain (loss) on pension plans		Total
Year Ended December 31, 2021
Balance at Beginning of Year	$	33,459	$	(2,588)	$	30,871
Other comprehensive (loss)/income before reclassifications	(34,857)		743		(34,114)
Amounts reclassified from accumulated other comprehensive income	—		—		—
Total other comprehensive (loss)/income	(34,857)		743		(34,114)
Balance at End of Period	$	(1,398)	$	(1,845)	$	(3,243)

Year Ended December 31, 2020
Balance at Beginning of Year	$	14,204	$	(2,211)	$	11,993
Other comprehensive income/(loss) before reclassifications	19,251		(377)		18,874
Amounts reclassified from accumulated other comprehensive income	(4)		—		(4)
Total other comprehensive income/(loss)	19,255		(377)		18,878
Balance at End of Period	$	33,459	$	(2,588)	$	30,871

Year Ended December 31, 2019
Balance at Beginning of Year	$	(11,453)	$	(2,017)	$	(13,470)
Other comprehensive income/(loss) before reclassifications	25,701		(194)		25,507
Amounts reclassified from accumulated other comprehensive income	44		—		44
Total other comprehensive income/(loss)	25,657		(194)		25,463

Balance at End of Period	$	14,204	$	(2,211)	$	11,993

F-76

(in thousands) Net unrealized holding gain (loss) on AFS Securities Net loss on effective cash flow hedging derivatives Net unrealized holding gain (loss) on pension plans Total
Year Ended December 31, 2017

Balance at Beginning of Year $ 15,540
$ (3,984 ) $ (1,790 ) $ 9,766
Other comprehensive gain (loss) before reclassifications (1,469 ) (269 ) (187 ) (1,925 )
Amounts reclassified from accumulated other comprehensive income 8,063
(4,253 ) (130 ) 3,680
Total Other Comprehensive (Loss) Income (9,532 ) 3,984
(57 ) (5,605 )
Balance at End of Period $ 6,008
$ —
$ (1,847 ) $ 4,161

Year Ended December 31, 2016

Balance at Beginning of Year $ 3,880
$ (5,108 ) $ (2,077 ) $ (3,305 )
Other comprehensive gain (loss) before reclassifications 11,329
(1,268 ) 196
10,257
Amounts reclassified from accumulated other comprehensive income (331 ) (2,392 ) (91 ) (2,814 )
Total Other Comprehensive Income 11,660
1,124
287
13,071
Balance at End of Period $ 15,540
$ (3,984 ) $ (1,790 ) $ 9,766

Year Ended December 31, 2015

Balance at Beginning of Year $ 9,916
$ (1,969 ) $ (1,368 ) $ 6,579
Other comprehensive gain (loss) Before reclassifications (4,774 ) (3,138 ) (864 ) (8,776 )
Amounts reclassified from accumulated other comprehensive income 1,263
—
(155 ) 1,108
Total Other Comprehensive (Loss) (6,037 ) (3,138 ) (709 ) (9,884 )
Balance at End of Period $ 3,880
$ (5,108 ) $ (2,077 ) $ (3,305 )

~~F-82~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the amounts reclassified out of each component of accumulated other comprehensive (loss)/income ~~(loss)~~ for the years ended December 31, ~~2017, 2016,~~2021, 2020, and ~~2015:~~2019:


							Affected Line Item in the Statement Where Net Income Is Presented
	Years Ended December 31,
(in thousands)	2021		2020		2019
Realized (losses)/gains on AFS securities:
	$	—	$	(5)	$	61	Non-interest income
	—		1		(17)		Tax expense
	—		(4)		44













Realized (losses) on pension plans
	—		—		—		Non-interest expense
	—		—		—		Tax expense
	—		—		—
Total reclassifications for the period	$	—	$	(4)	$	44

F-77

Affected Line Item in the
Statement Where Net Income
Is Presented
Years Ended December 31,
(in thousands) 2017 2016 2015
Realized (losses) gains on AFS securities:
$ 12,598
$ (551 ) $ 2,110
Non-interest income
(4,535 ) 220
(847 ) Tax expense
8,063
(331 ) 1,263

Realized (losses) on cash flow hedging derivatives:
(393 ) —
—
Interest expense
(6,629 ) —
—
Non-interest income
—
(3,981 ) —
Non-interest expense
2,769
1,589
—
Tax benefit
(4,253 ) (2,392 ) —

Realized (losses) on pension plans
(217 ) (164 ) (259 ) Non-interest expense
87
73
104
Tax expense
(130 ) (91 ) (155 )
Total reclassifications for the period $ 3,680
$ (2,814 ) $ 1,108

~~F-83~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Earnings~~Earnings/(Loss) Per Common Share

Basic ~~earnings~~earnings/(loss) per common share (“EPS”) excludes dilution and is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method.

~~Earnings~~Earnings/(loss) per common share has been computed based on the following (average diluted shares outstanding is calculated using the treasury stock method):


	Years Ended December 31,							Years Ended December 31,
(In thousands, except per share data)	2017		2016		2015		(In thousands, except per share data)	2021		2020		2019
Net income	$	55,247	$	58,670	$	49,518
Net income/(loss) from continuing operations							Net income/(loss) from continuing operations	$	118,664	$	(513,175)	$	101,521
Net (loss) from discontinued operations							Net (loss) from discontinued operations	—		(19,842)		(4,071)
Net income/(loss)							Net income/(loss)	$	118,664	$	(533,017)	$	97,450

Average number of common shares issued	40,627		32,604		30,074		Average number of common shares issued	51,903		51,903		49,782
Less: average number of treasury shares	963		1,116		1,215		Less: average number of treasury shares	1,951		1,569		1,142
Less: average number of unvested stock award shares	437		500		466		Less: average number of unvested stock award shares	712		505		420
Plus: average participating preferred shares	229		—		—		Plus: average participating preferred shares	—		441		1,043
Average number of basic common shares outstanding	39,456		30,988		28,393		Average number of basic common shares outstanding	49,240		50,270		49,263
Plus: dilutive effect of unvested stock award shares	202		122		106		Plus: dilutive effect of unvested stock award shares	309		—		122
Plus: dilutive effect of stock options outstanding	37		57		65		Plus: dilutive effect of stock options outstanding	5		—		36
Average number of diluted common shares outstanding	39,695		31,167		28,564		Average number of diluted common shares outstanding	49,554		50,270		49,421

Basic earning per common share	$	1.40	$	1.89	$	1.74
Basic earnings/(loss) per share:							Basic earnings/(loss) per share:
Continuing Operations							Continuing Operations	$	2.41	$	(10.21)	$	2.06
Discontinued operations							Discontinued operations	—		(0.39)		(0.08)
Basic earnings/(loss) per common share							Basic earnings/(loss) per common share	$	2.41	$	(10.60)	$	1.98

Diluted earnings per common share	$	1.39	$	1.88	$	1.73
Diluted earnings/(loss) per share:							Diluted earnings/(loss) per share:
Continuing Operations							Continuing Operations	$	2.39	$	(10.21)	$	2.05
Discontinued operations							Discontinued operations	—		(0.39)		(0.08)
Diluted earnings/(loss) per common share							Diluted earnings/(loss) per common share	$	2.39	$	(10.60)	$	1.97

For the year ended ~~2017, 55~~2021, 88 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. Due to the net loss in 2020, all unvested restricted stock and options were considered anti-dilutive and therefore excluded from the earnings per share calculations. For the year ended ~~2016, 52 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. For the year ended 2015, 200~~2019, 61 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.

F-78

~~F-84~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE ~~19.~~20. STOCK-BASED COMPENSATION PLANS

The ~~2013~~2018 Equity Incentive Plan (the ~~“2013~~“2018 Plan”) permits the granting of a combination of Restricted Stock awards and incentive and non-qualified stock options (“Stock Options”) to employees and directors. A total of 1.0 million shares was authorized under the Plan. Awards may be granted as either Restricted Stock or Stock Options provided that any shares that are granted as Restricted Stock are counted against the share limit set forth as (1) ~~three~~1 for every one share of Restricted Stock granted and (2) ~~one~~1 for every one share of Stock Option granted. As of the 2018 Plan's effective date, all expired, canceled, and forfeited shares under the 2013 Plan are included in the 2018 Plan's available shares. As of year-end ~~2017,~~2021, the Company had the ability to grant approximately ~~383 thousand~~0.5 million shares under this plan.

The 2011 Equity Incentive Plan (the “2011 Plan”) permits the granting of a combination of Restricted Stock awards and incentive and non-qualified stock options to employees and directors. A total of 1.4 million shares was authorized under the Plan. Awards may be granted as either Restricted Stock or Stock Options provided that any shares that are granted as Restricted Stock are counted against the share limit set forth as (1) three for every one share of Restricted Stock granted and (2) one for every one share of Stock Option granted. As of year-end 2017, the Company had the ability to grant approximately 6 thousand shares under this plan.

A summary of activity in the Company’s stock compensation plans is shown below:


	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
Balance, December 31, 2020	517	$	28.35	112	$	22.95
Granted	476	20.22		—	—
Acquired	—	—		—	—
Stock options exercised	—	—		(20)	20.66
Stock awards vested	(170)	24.75		—	—
Forfeited	(113)	23.48		(2)	24.71
Expired	—	—		(10)	17.46
Balance, December 31, 2021	710	$	20.16	80	$	25.21

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
Balance, December 31, 2016 448
$ 26.28
109
$ 15.72
Granted 161
35.84
—
—
Stock options exercised —
—
(19 ) 17.74
Stock awards vested (174 ) 25.68
—
—
Forfeited (17 ) 30.04
—
—
Expired —
—
(14 ) 29.35
Balance, December 31, 2017 418
$ 29.68
76
$ 13.59

Stock Awards

The total compensation cost for stock awards recognized as expense was ~~$5.3~~$4.2 million, ~~$4.6~~$4.7 million, and ~~$4.7~~$4.8 million, in the years ~~2017, 2016,~~2021, 2020, and ~~2015,~~2019, respectively. The total recognized tax benefit associated with this compensation cost was ~~$2.0~~$1.0 million, ~~$1.8~~$1.2 million, and ~~$1.9~~$1.3 million, respectively.

The weighted average fair value of stock awards granted was ~~$35.84, $26.81,~~$20.22, $16.69, and ~~$26.66~~$29.47 in ~~2017, 2016,~~2021, 2020, and ~~2015,~~2019, respectively. Stock awards vest over periods up to five years and are valued at the closing price of the stock on the grant date. Certain awards vest based on the Company's performance over established measurement periods. The total fair value of stock awards vested during ~~2017, 2016,~~2021, 2020, and ~~2015~~2019 was ~~$4.4~~$4.3 million, ~~$4.4~~$5.2 million, and ~~$3.4~~$4.8 million respectively. The unrecognized stock-based compensation expense related to unvested stock awards was ~~$6.5~~$9.1 million as of year-end ~~2017.~~2021. This amount is expected to be recognized over a weighted average period of two years.

~~F-85~~F-79

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Option Awards

Option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant, and vest over periods up to five years. The options grant the holder the right to acquire a share of the Company’s common stock for each option held, and have a contractual life of ten years. As of year-end ~~2017,~~2021, the weighted average remaining contractual term for options outstanding is ~~two~~three years.

The Company generally issues shares from treasury stock as options are exercised. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The expected dividend yield and expected term are based on management estimates. The expected volatility is based on historical volatility. The risk-free interest rates for the expected term are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company did not grant options during 2021 and 2020. The Company acquired options in the ~~Beacon~~SI Financial Group transaction in ~~2012,~~2019, but did not grant additional options ~~in 2017, 2016, or 2015.~~during 2019.

The total intrinsic value of options exercised was ~~$362.7~~$102 thousand, ~~$879.6~~$246 thousand, and ~~$210.0~~$149 thousand for the years ~~2017, 2016,~~2021, 2020, and ~~2014,~~2019, respectively. ~~There was no~~The expense pertaining to options vesting ~~in 2017, 2016 or 2015. There~~ was no$14 thousand, $96 thousand, and $93 thousand for the years 2021, 2020, and 2019, respectively. The tax benefit associated with stock option expense ~~in 2017, 2016 or 2015. There~~for 2021 was no$4 thousand. The tax benefit associated with stock option expense for both 2020 and 2019 was $25 thousand. The unrecognized stock-based compensation expense related to unvested stock options as of ~~year-ends 2017, 2016,~~year-end 2021, 2020 and ~~2015.~~

2019 was $14 thousand, $27 thousand, and $124 thousand, respectively.

~~F-86~~

F-80

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE ~~20.~~21. FAIR VALUE MEASUREMENTS

A description of the valuation methodologies used for instruments 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.~~value, including assets classified as discontinued operations on the consolidated balance sheets.

Recurring Fair Value Measurements of Financial Instruments

The following table summarizes assets and liabilities measured at fair value on a recurring basis as of year-end ~~2017~~2021 and ~~2016~~2020 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


	December 31, 2021
(In thousands)	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

Trading security	$	—	$	—	$	8,354	$	8,354
Available-for-sale securities:
Municipal bonds and obligations	—		77,177		—		77,177
Agency collateralized mortgage obligations	—		688,336		—		688,336
Agency residential mortgage-backed securities	—		705,859		—		705,859
Agency commercial mortgage-backed securities	—		282,334		—		282,334
Corporate bonds	—		41,630		4,030		45,660

Other bonds and obligations	—		78,219		—		78,219
Marketable equity securities	14,798		655		—		15,453
Loans held for investment	—		—		1,200		1,200
Loans held for sale	—		6,110		—		6,110
Derivative assets	—		79,270		258		79,528
Capitalized servicing rights	—		—		1,966		1,966
Derivative liabilities	—		35,194		—		35,194


	December 31, 2020
(In thousands)	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

Trading security	$	—	$	—	$	9,708	$	9,708
Available-for-sale securities:
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	—		—		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

F-81

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017
(In thousands) Level 1
Inputs Level 2
Inputs Level 3
Inputs Total
Fair Value
Trading security $ —
$ —
$ 12,277
$ 12,277
Available-for-sale securities:

Municipal bonds and obligations —
118,233
—
118,233
Agency collateralized mortgage obligations —
851,158
—
851,158
Agency residential mortgage-backed securities —
216,940
—
216,940
Agency commercial mortgage-backed securities —
62,305
—
62,305
Corporate bonds —
110,721
—
110,721
Trust preferred securities —
11,677
—
11,677
Other bonds and obligations —
9,880
—
9,880
Marketable equity securities 44,851
334
—
45,185
Loans held for sale —
153,620
—
153,620
Derivative assets —
14,049
5,259
19,308
Other assets —
—
3,834
3,834
Derivative liabilities 104
15,715
19
15,838

December 31, 2016
(In thousands) Level 1
Inputs Level 2
Inputs Level 3
Inputs Total
Fair Value
Trading security $ —
$ —
$ 13,229
$ 13,229
Available-for-sale securities:

Municipal bonds and obligations —
119,816
—
119,816
Agency collateralized mortgage obligations —
651,911
—
651,911
Agency residential mortgage-backed securities —
228,684
—
228,684
Agency commercial mortgage-backed securities —
64,534
—
64,534
Corporate bonds —
56,006
—
56,006
Trust preferred securities —
11,887
—
11,887
Other bonds and obligations —
11,158
—
11,158
Marketable equity securities 62,284
3,257
—
65,541
Loans held for sale —
120,673
—
120,673
Derivative assets 622
16,157
4,838
21,617
Other assets —
—
798
798
Derivative liabilities —
24,420
—
24,420

~~There~~During the year ended December 31, 2021, the Company had 1 transfer totaling $4.0 million in corporate bonds from Level 2 to Level 3 based on recent inactivity in the market related to pricing information for similar bonds. During the year ended December 31, 2020, there were no transfers between Level 1, 2 and ~~3 during the year ended December 31, 2017.~~3. During the year ended December 31, ~~2016,~~2019, the Company had ~~one transfer of $708 thousand~~4 transfers totaling $44.0 million in ~~marketable equity securities~~corporate bonds from Level 32 to

~~F-87~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Level 23 based on ~~a change~~recent inactivity in ~~valuation technique driven by~~ the ~~availability of~~ market ~~data. There were no transfers between Level 1, 2, and 3 during the year ended December 31, 2015.~~related to pricing information for similar bonds.

Trading Security at Fair Value. The Company holds ~~one~~1 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 determination of the fair value for 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. ~~AFS~~ 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 a $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 December 31, 2021.

Aggregate Fair Value

December 31, 2021

Aggregate

Less Aggregate

(In thousands)

Fair Value

Unpaid Principal

Loans held for investment at fair value

1,200

31,430

(30,230)

Aggregate Fair Value

December 31, 2020

Aggregate

Less Aggregate

(In thousands)

Fair Value

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 mortgage loans originated for sale (HFS) that were 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		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
December 31, 2021 (In thousands)
Loans held for sale	$	6,110	$	5,926	$	184


	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
December 31, 2020 (In thousands)
Loans held for sale	$	12,992	$	12,639	$	353

F-82

Aggregate
Fair Value Aggregate
Unpaid Principal Aggregate Fair Value
Less Aggregate
Unpaid Principal
December 31, 2017 (In thousands)
Loans Held for Sale $ 153,620
$ 149,022
$ 4,598

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Aggregate
Fair Value Aggregate
Unpaid Principal Aggregate Fair Value
Less Aggregate
Unpaid Principal
December 31, 2016 (In thousands)
Loans Held for Sale $ 120,673
$ 118,178
$ 2,495

The changes in fair value of loans held for sale for ~~years~~the year ended December 31, ~~2017 and 2016~~2021 were ~~gains~~losses of ~~$2.1 million and $2.2 million, respectively.~~$169 thousand. The changes in fair value ~~are included in mortgage banking income in~~of loans held for sale for the ~~Consolidated Statements~~year ended December 31, 2020 were gains of ~~Income. In 2017,~~$97 thousand from continuing operations and losses of $138 thousand from discontinued operations. During 2021, originations of loans held for sale totaled ~~$2.4~~$104 million and sales of loans originated for sale totaled $108 million. During 2020, originations of loans held for sale from continuing operations totaled $150 million and sales of loans originated for sale from continuing operations totaled $141 million. During 2020, originations of loans held for sale from discontinued operations totaled $624.0 billion and sales of loans originated ~~as held~~ for sale from discontinued operations totaled ~~$2.3~~$755.0 billion.

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 year-end ~~2017,~~2021, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has 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 certain interest rate and within a

~~F-88~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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 commitment 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 to lend are classified as Level 3 measurements. Commitments to lend are included in discontinued operations.

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 hedging instruments, 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 sale commitments are classified as Level 3 measurements. Forward sale commitments are included in discontinued operations.

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

F-83

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

~~F-89~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The table below presents the changes in Level 3 assets that were measured at fair value on a recurring basis at year-end ~~2017~~2021 and ~~2016:~~2020:


	Assets (Liabilities)
(In thousands)	Trading Security		Securities Available for Sale		Loans Held for Investment		Commitments to Lend (1)		Forward Commitments (1)		Capitalized Servicing Rights (1)

Balance as of December 31, 2019	$	10,769	$	42,966	$	—	$	2,628	$	—	$	12,299
Adoption of ASC 326	—		—		7,660		—		—		—
Maturities, calls, and prepayments of AFS Security	—		(30,000)		—		—		—		—
Unrealized (loss) gain, net recognized in other non-interest income	(327)		—		(1,283)		—		—		(822)
Unrealized gain/(loss), net recognized in discontinued operations	—		—		—		16,565		320		(8,444)
Unrealized (loss) included in accumulated other comprehensive loss	—		2,034		—		—		—		—
Transfers to Level 3	—		—		—		—		—		—
Paydown of asset	(734)		—		(4,112)		—		—		—
Transfers to loans held for sale	—		—		—		(18,458)		—		—
Additions to servicing rights	—		—		—		—		—		—
Balance as of 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	(578)		—		1,645		1,995		(186)		(1,067)

Unrealized gain included in accumulated other comprehensive loss	—		30		—		—		—		—
Transfers to Level 3	—		4,000		—		—		—		—
Paydown of asset	(776)		—		(2,710)		—		—		—
Transfers to loans held for sale	—		—				(2,606)		—		—
Additions to servicing rights	—		—				—		—		—
Balance as of December 31, 2021	$	8,354	$	4,030	$	1,200	$	124	$	134	$	1,966

Unrealized gains/(losses) relating to instruments still held at December 31, 2021	$	475	$	30	$	—	$	124	$	134	$	—
Unrealized gains/(losses) relating to instruments still held at December 31, 2020	$	1,053	$	287	$	—	$	735	$	320	$	—

(1) For 2019, these assets were classified as assets from discontinued operations on the consolidated balance sheets.

F-84

Assets (Liabilities)
(In thousands) Trading
Security Securities Available for Sale Commitments to Lend Forward
Commitments Capitalized Servicing Rights
Balance as of December 31, 2015 $ 14,189
$ 708
$ 323
$ 9
$ —
Amounts acquired from First Choice Bank —
—
3,900
—
696
Unrealized (loss) gain, net recognized in other non-interest income (362 ) —
13,563
91
102
Unrealized gain included in accumulated other comprehensive loss —
—
—
—
—
Transfers to Level 2 —
(708 ) —
—
—
Paydown of trading security (598 ) —
—
—
—
Transfers to loans held for sale —
—
(13,048 ) —
—
Balance as of December 31, 2016 $ 13,229
$ —
$ 4,738
$ 100
$ 798
Unrealized (loss) gain, net recognized in other non-interest income (320 ) —
63,894
(81 ) (221 )
Unrealized gain included in accumulated other comprehensive loss —
—
—
—
—
Transfers to Level 2 —
—
—
—
—
Paydown of trading security (632 ) —
—
—
—
Transfers to loans held for sale —
—
(63,373 ) —
—
Additions to servicing rights —
—
—
—
3,257
Balance as of December 31, 2017 $ 12,277
$ —
$ 5,259
$ 19
$ 3,834

Unrealized gains (losses) relating to instruments still held at December 31, 2017 $ 1,522
$ —
$ 5,259
$ 19
$ (221 )
Unrealized gains relating to instruments still held at December 31, 2016 $ 1,843
$ —
$ 4,738
$ 100
$ 102

~~F-90~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Quantitative information about the significant unobservable inputs within Level 3 recurring assets/(liabilities) as of December 31, ~~2017~~2021 and ~~2016~~2020 are as follows:


	Fair Value				Significant Unobservable Input Value
(In thousands)	December 31, 2021		Valuation Techniques	Unobservable Inputs
Assets
Trading Security	$	8,354	Discounted Cash Flow	Discount Rate	3.35		%
Securities Available for Sale	4,030		Indication from Market Maker	Price	101.00		%
Loans held for investment	1,200		Discounted Cash Flow	Discount Rate	25.00		%
				Collateral Value	$6.3 - $19.8
Commitments to Lend	124		Historical Trend	Closing Ratio	82.09		%
			Pricing Model	Origination Costs, per loan	$	3
Forward Commitments	134		Historical Trend	Closing Ratio	82.09		%
			Pricing Model	Origination Costs, per loan	$	3
Capitalized Servicing Rights	1,966		Discounted cash flow	Constant prepayment rate (CPR)	19.41		%
				Discount rate	9.50		%
Total	$	15,808

Fair Value Significant Unobservable Input Value
(In thousands) December 31, 2017 Valuation Techniques Unobservable Inputs
Assets

Trading Security $ 12,277
Discounted Cash Flow Discount Rate 2.74 %
Forward Commitments 19
Historical Trend Closing Ratio 81.53 %
Pricing Model Origination Costs, per loan $ 3,692
Commitments to Lend 5,259
Historical Trend Closing Ratio 81.53 %
Pricing Model Origination Costs, per loan $ 3,692
Capitalized Servicing Rights 3,834
Discounted cash flow Constant prepayment rate (CPR) 10.00 %
Discount rate 10.95 %
Total $ 21,389


	Fair Value				Significant Unobservable Input Value
(In thousands)	December 31, 2020		Valuation Techniques	Unobservable Inputs
Assets
Trading Security	$	9,708	Discounted Cash Flow	Discount Rate	2.72		%
Securities Available for Sale	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	$	3
Forward Commitments	320		Historical Trend	Closing Ratio	74.54		%
			Pricing Model	Origination Costs, per loan	$	3
Capitalized Servicing Rights	3,033		Discounted cash flow	Constant prepayment rate (CPR)	26.52		%
				Discount rate	10.00		%

Total	$	31,061

F-85

Fair Value Significant
Unobservable Input
Value
(In thousands) December 31, 2016 Valuation Techniques Unobservable Inputs
Assets

Trading Security $ 13,229
Discounted Cash Flow Discount Rate 2.62 %
Forward Commitments 100
Historical Trend Closing Ratio 80.36 %
Commitments to Lend 4,738
Pricing Model Origination Costs, per loan $ 3.692
Historical Trend Closing Ratio 80.36 %
Capitalized Servicing Rights 798
Pricing Model Origination Costs, per loan $ 3.692
Discounted cash flow Constant prepayment rate (CPR) 10.40 %
Discount rate 11.00 %
Total $ 18,865

~~F-91~~

Table of Contents

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 on a non-recurring basis.

December 31, 2021

Fair Value Measurements as of December 31, 2021

(In thousands)

Level 3
Inputs

Assets

Individually evaluated loans

12,482

December 2021

Capitalized servicing rights

14,056

December 2021

Other real estate owned

—

December 2021

Total

26,538

December 31, 2017 Fair Value Measurements as of December 31, 2017
(In thousands) Level 3
Inputs
Level 3
Inputs
Assets

Impaired loans $ 23,853
December 2017
Capitalized servicing rights 12,527
December 2017
Other real estate owned —
—
Total $ 36,380

December 31, 2020

Fair Value Measurements as of December 31, 2020

(In thousands)

Level 3
Inputs

Assets

Individually evaluated loans

28,028

December 2020

Capitalized servicing rights

13,315

December 2020

Other real estate owned

149

December 2020

Total

41,492

December 31, 2016 Fair Value Measurements as of December 31, 2016
(In thousands) Level 3
Inputs Level 3
Inputs
Assets

Impaired loans $ 17,761
December 2016
Capitalized servicing rights 10,726
December 2016
Other real estate owned 151
Feb. 2016 - July 2016
Total $ 28,638

Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets as of December 31, ~~2017~~2021 and ~~2016~~2020 are as follows:

(in thousands) December 31, 2017 Valuation Techniques Unobservable Inputs Range (Weighted Average) (a)
Assets

Impaired loans $ 23,853
Fair value of collateral Loss severity 38.72% to 0.21% (3.40%)

Appraised value $10.9 to $5967 ($2,197)
Capitalized servicing rights 12,527
Discounted cash flow Constant prepayment rate (CPR) 7.78% to 12.78% (10.38%)

Discount rate 10.00% to 13.28% (11.72%)
Other real estate owned —
Fair value of collateral Appraised value —
Total Assets $ 36,380

(in thousands)

December 31, 2021

Valuation Techniques

Unobservable Inputs

Range (Weighted Average) (a)

Assets

Individually evaluated loans

12,482

Fair value of collateral

Loss severity

(35.96)% to 133.09% (49.14%)

Appraised value

$0 to $405 ($256)

Capitalized servicing rights

14,056

Discounted cash flow

Constant prepayment rate (CPR)

6.24% to 17.73% (13.29%)

Discount rate

9.59% to 13.11% (11.97%)

Total Assets

26,538

(a) 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~~individual properties.

~~F-92~~F-86

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands) December 31, 2016 Valuation Techniques Unobservable Inputs Range (Weighted Average) (a)
Assets

Impaired loans $ 17,761
Fair value of collateral Loss severity 0% to 88.70% (9.73%)

Appraised value $0 to $2,192 ($1,026)
Capitalized servicing rights 10,726
Discounted cash flow Constant prepayment rate (CPR) 7.35% to 14.28% (10.44%)

Discount rate 10.00% to 14.00% (11.77%)
Other real estate owned 151
Fair value of collateral Appraised value $101 to $129 ($122)
Total Assets $ 28,638

(in thousands)

December 31, 2020

Valuation Techniques

Unobservable Inputs

Range (Weighted Average) (a)

Assets

Individually evaluated loans

28,028

Fair value of collateral

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 Assets

41,492

There were no Level 1 or Level 2 nonrecurring fair value measurements for year-end ~~2017~~2021 and ~~2016.~~2020.

~~Impaired Loans.~~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 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, real estate collateral related nonrecurring fair value measurement adjustments 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 rights. 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. 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.

~~Other real estate owned (“OREO”).~~ OREO results from the foreclosure process on residential or commercial loans issued by the Bank. Upon assuming the real estate, the Company records the property at the fair value of the asset less the estimated sales costs. Thereafter, OREO properties are recorded at the lower of cost or fair value less the estimated sales costs. OREO fair values are primarily determined based on Level 3 data including sales comparables and appraisals.

~~F-93~~

F-87

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Estimated Fair Values of Financial Instruments

The following tables summarize the estimated fair values, which represent exit price, and related carrying amounts, of the Company’s financial ~~instruments follow.~~instruments. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

December 31, 2017
Carrying
Amount Fair
Value
(In thousands) Level 1 Level 2 Level 3
Financial Assets

Cash and cash equivalents $ 248,763
$ 248,763
$ 248,763
$ —
$ —
Trading security 12,277
12,277
—
—
12,277
Securities available for sale 1,426,099
1,426,099
44,850
1,381,249
—
Securities held to maturity 397,103
405,276
—
371,458
33,818
FHLB stock and restricted equity securities 63,085
N/A
—
N/A
—
Net loans 8,247,504
8,422,034
—
—
8,422,034
Loans held for sale 153,620
153,620
—
153,620
—
Accrued interest receivable 33,739
33,739
—
33,739
—
Derivative assets 19,308
19,308
—
14,049
5,259
Assets held for sale 1,392
1,392
—
1,392
—

Financial Liabilities

Total deposits 8,749,530
8,731,527
—
8,731,527
—
Short-term debt 667,300
667,246
—
667,246
—
Long-term FHLB advances 380,436
378,766
—
378,766
—
Subordinated notes 89,339
97,414
—
97,414
—
Derivative liabilities 15,838
15,838
104
15,715
19

December 31, 2016
Carrying
Amount Fair
Value
(In thousands) Level 1 Level 2 Level 3
Financial Assets

Cash and cash equivalents $ 113,075
$ 113,075
$ 113,075
$ —
$ —
Trading security 13,229
13,229
—
—
13,229
Securities available for sale 1,209,537
1,209,537
62,284
1,147,253
—
Securities held to maturity 334,368
337,680
—
300,806
36,874
FHLB stock and restricted equity securities 71,112
N/A
—
N/A
—
Net loans 6,505,789
6,532,745
—
—
6,532,745
Loans held for sale 120,673
120,673
—
120,673
—
Accrued interest receivable 26,113
26,113
—
26,113
—
Derivative assets 21,617
21,617
622
16,157
4,838
Assets held for sale 322
322
—
322
—

Financial Liabilities

Total deposits 6,622,092
6,624,108
—
6,624,108
—
Short-term debt 1,082,044
1,081,996
—
1,081,996
—
Long-term FHLB advances 142,792
143,151
—
143,151
—
Subordinated notes 89,161
96,973
—
96,973
—
Derivative liabilities 24,420
24,420
—
24,420
—

~~Other than as discussed above,~~ Certain assets and liabilities in the following ~~methods and assumptions were used by management to estimate the fair value of significant classes of financial instruments for which it is practicable to estimate that value.~~disclosures include balances classified as discontinued operations.


	December 31, 2021
	Carrying Amount		Fair Value
(In thousands)					Level 1		Level 2		Level 3
Financial Assets

Cash and cash equivalents	$	1,627,807	$	1,627,807	$	1,627,807	$	—	$	—
Trading security	8,354		8,354		—		—		8,354
Marketable equity securities	15,453		15,453		14,798		655		—
Securities available for sale	1,877,585		1,877,585		—		1,873,555		4,030
Securities held to maturity	636,503		647,236		—		644,497		2,739
FHLB stock and restricted equity securities	10,800		N/A		N/A		N/A		N/A
Net loans	6,719,753		6,850,975		—		—		6,850,975
Loans held for sale	6,110		6,110		—		6,110		—
Accrued interest receivable	33,534		33,534		—		33,534		—

Derivative assets	79,528		79,528		—		79,270		258


Financial Liabilities

Total deposits	10,068,953		10,073,217		—		10,073,217		—
Short-term debt	—		—		—		—		—
Long-term FHLB advances	13,331		13,053		—		13,053		—
Subordinated notes	97,513		95,006		—		95,006		—
Derivative liabilities	35,194		35,194		—		35,194		—


	December 31, 2020
	Carrying Amount		Fair Value
(In thousands)					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	1,695,232		1,695,232		—		1,680,232		15,000
Securities held to maturity	465,091		491,855		—		488,393		3,462
FHLB stock and restricted equity 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 FHLB advances	434,357		438,064		—		438,064		—
Subordinated notes	97,280		95,178		—		95,178		—
Derivative liabilities	65,758		65,758		—		65,758		—
Liabilities held for sale	630,065		631,268		—		631,268		—

~~F-94~~

F-88

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Cash and cash equivalents.~~ ~~Carrying value is assumed to represent fair value for cash and cash equivalents that have original maturities of ninety days or less.~~

~~FHLB stock and restricted equity securities.~~ ~~It is not practical to determine fair value due to the restricted nature of the security.~~

~~Loans, net.~~ The carrying value of the loans in the loan portfolio is based on cash flows discounted over their respective loan origination rates. The origination rates are adjusted for substandard and special mention loans to factor the impact of declines in the loan’s credit standing. The fair value of the loans is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality. The methodology utilized to determine fair value does not represent exit price.

~~Accrued interest receivable.~~ ~~Carrying value approximates fair value.~~

~~Deposits.~~ The fair value of demand, non-interest bearing checking, savings and money market deposits is determined as the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting the estimated future cash flows using market rates offered for deposits of similar remaining maturities.

~~Borrowed funds.~~ The fair value of borrowed funds is estimated by discounting the future cash flows using market rates for similar borrowings. Such funds include all categories of debt and debentures in the table above.

~~Subordinated borrowings.~~ ~~The Company utilizes a pricing service along with internal models to estimate the valuation of its junior subordinated debentures. The junior subordinated debentures re-price every ninety days.~~

~~Off-balance-sheet financial instruments.~~ ~~Off-balance-sheet financial instruments include standby letters of credit and other financial guarantees and commitments considered immaterial to the Company’s financial statements.~~

~~F-95~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

NOTE ~~21.~~22. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

Condensed financial information pertaining only to the Parent, Berkshire Hills Bancorp, is as follows. ~~Investment in subsidiaries at December 31, 2017 includes $35 million of intercompany subordinated notes.~~

CONDENSED BALANCE SHEETS


	December 31,					December 31,
(In thousands)	2017		2016		(In thousands)	2021		2020
Assets					Assets
Cash due from Berkshire Bank	$	83,380	$	43,018	Cash due from Berkshire Bank	$	108,946	$	83,510
Investment in subsidiaries	1,470,859		1,127,706		Investment in subsidiaries	1,172,439		1,202,755
Securities available for sale, at fair value	21,827		23,651
Marketable equity securities, at fair value					Marketable equity securities, at fair value	—		158
Other assets	12,138		1,372		Other assets	213		188
Total assets	$	1,588,204	$	1,195,747	Total assets	$	1,281,598	$	1,286,611

Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Short term debt	$	—	$	10,000

Subordinated notes	89,339		89,161		Subordinated notes	$	97,513	$	97,280
Accrued expenses	2,601		3,288		Accrued expenses	1,650		1,558
Shareholders’ equity	1,496,264		1,093,298		Shareholders’ equity	1,182,435		1,187,773
Total liabilities and shareholders’ equity	$	1,588,204	$	1,195,747	Total liabilities and shareholders’ equity	$	1,281,598	$	1,286,611

CONDENSED STATEMENTS OF ~~INCOME~~OPERATIONS


	Years Ended December 31,
(In thousands)	2021		2020		2019
Income:
Dividends from subsidiaries	$	118,000	$	46,300	$	104,700
Other	31		(2,185)		1,258
Total income	118,031		44,115		105,958
Interest expense	5,393		5,335		5,335
Non-interest expenses	2,719		2,866		4,129
Total expense	8,112		8,201		9,464
Income before income taxes and equity in undistributed income of subsidiaries	109,919		35,914		96,494
Income tax (benefit)	(2,136)		(2,719)		(2,054)
Income before equity in undistributed income of subsidiaries	112,055		38,633		98,548
Equity in undistributed results of operations of subsidiaries	6,609		(571,650)		(1,098)

Net income/(loss)	118,664		(533,017)		97,450
Preferred stock dividend	—		313		960
Income/(loss) available to common shareholders	$	118,664	$	(533,330)	$	96,490

Comprehensive income/(loss)	$	84,550	$	(514,139)	$	122,912

Years Ended December 31,
(In thousands) 2017 2016 2015
Income:

Dividends from subsidiaries $ 39,000
$ 33,000
$ 34,000
Other 5,864
4,072
2,763
Total income 44,864
37,072
36,763
Interest expense 5,338
5,743
5,674
Non-interest expenses 6,042
3,740
3,670
Total expense 11,380
9,483
9,344
Income before income taxes and equity in undistributed income of subsidiaries 33,484
27,589
27,419
Income tax benefit (1,783 ) (2,123 ) (2,518 )
Income before equity in undistributed income of subsidiaries 35,267
29,712
29,937
Equity in undistributed income of subsidiaries 19,980
28,958
19,581
Net income 55,247
58,670
49,518
Preferred stock dividend 219
—
—
Income available to common shareholders $ 55,028
$ 58,670
$ 49,518

F-89

~~F-96~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF CASH FLOWS


	Years Ended December 31,
(In thousands)	2021		2020		2019
Cash flows from operating activities:
Net income/(loss)	$	118,664	$	(533,017)	$	97,450
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Equity in undistributed results of operations of subsidiaries	(6,609)		571,650		1,098
Other, net	5,816		2,603		(4,457)
Net cash provided by operating activities	117,871		41,236		94,091

Cash flows from investing activities:
Advances to subsidiaries	—		—		—

Purchase of securities	—		(489)		—
Sale of securities	167		4,658		6,989
Other, net	—		—		987
Net cash provided by investing activities	167		4,169		7,976

Cash flows from financing activities:
Proceed from issuance of short term debt	232		231		431
Proceed from repayment of long term debt	—		—		—

Net proceeds from common stock	—		—		—


Payment to repurchase common stock	(68,712)		(473)		(52,746)
Common stock cash dividends paid	(24,553)		(36,251)		(44,147)
Preferred stock cash dividends paid	—		(313)		(960)
Other, net	431		758		188
Net cash (used) in financing activities	(92,602)		(36,048)		(97,234)

Net change in cash and cash equivalents	25,436		9,357		4,833

Cash and cash equivalents at beginning of year	83,510		74,153		69,320

Cash and cash equivalents at end of year	$	108,946	$	83,510	$	74,153

F-90

Years Ended December 31,
(In thousands) 2017 2016 2015
Cash flows from operating activities:

Net income $ 55,247
$ 58,670
$ 49,518
Adjustments to reconcile net income to net cash (used) provided by operating activities:

Equity in undistributed income of subsidiaries (19,980 ) (28,958 ) (19,581 )
Other, net (7,964 ) 1,988
10,904
Net cash provided by operating activities 27,303
31,700
40,841

Cash flows from investing activities:

Advances to subsidiaries (100,000 ) —
—
Acquisitions, net of cash paid —
—
(3,293 )
Purchase of securities (1,057 ) (18,016 ) (18 )
Sale of securities 2,101
—
—
Other, net 1,508
9,728
—
Net cash (used) in investing activities (97,448 ) (8,288 ) (3,311 )

Cash flows from financing activities:

Proceed from issuance of short term debt —
9,349
—
Repayment of short term debt (9,822 ) —
(9,935 )
Net proceeds from common stock 153,313
3,712
—
Net proceeds from preferred stock —
—
—
Net proceeds from reissuance of treasury stock —
—
240
Payment to repurchase common stock —
(4,632 ) (550 )
Common stock cash dividends paid (33,022 ) (24,916 ) (21,903 )
Preferred stock cash dividends paid (219 ) —
—
Other, net 257
11
167
Net cash provided provided/(used) by financing activities 110,507
(16,476 ) (31,981 )

Net change in cash and cash equivalents 40,362
6,936
5,549

Cash and cash equivalents at beginning of year 43,018
36,082
30,533

Cash and cash equivalents at end of year $ 83,380
$ 43,018
$ 36,082

~~F-97~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE ~~22.~~23. QUARTERLY DATA (UNAUDITED)

Quarterly results of operations were as follows:


	2021								2020
(In thousands, except per share data)	Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Interest and dividend income	$	75,860	$	79,688	$	85,364	$	88,153	$	92,131	$	97,768	$	103,688	$	116,195
Interest expense	6,548		8,320		9,971		13,060		16,422		20,713		26,098		29,767
Net interest income	69,312		71,368		75,393		75,093		75,709		77,055		77,590		86,428
Non-interest income	21,409		73,635		22,011		26,193		23,327		19,963		17,381		5,636
Total revenue	90,721		145,003		97,404		101,286		99,036		97,018		94,971		92,064
Provision (benefit) for credit losses	(3,000)		(4,000)		—		6,500		10,000		1,200		29,871		34,807
Non-interest expense	69,407		69,460		68,872		78,154		71,796		72,843		624,275		71,325
Income/(loss) from continuing operations before income taxes	24,314		79,543		28,532		16,632		17,240		22,975		(559,175)		(14,068)
Income tax expense/(benefit)	4,066		15,794		6,896		3,601		(1,659)		(68)		(16,130)		(1,996)
Net income/(loss) from continuing operations	20,248		63,749		21,636		13,031		18,899		23,043		(543,045)		(12,072)
(Loss)/income from discontinued operations, net of tax	—		—		—		—		(3,890)		(1,818)		(6,336)		(7,798)
Net income/(loss)	$	20,248	$	63,749	$	21,636	$	13,031	$	15,009	$	21,225	$	(549,381)	$	(19,870)

Basic earnings/(loss) per share:
Continuing operations	$	0.42	$	1.32	$	0.43	$	0.26	$	0.38	$	0.46	$	(10.80)	$	(0.24)
Discontinued operations	—		—		—		—		(0.08)		(0.04)		(0.13)		(0.16)
Basic earnings/(loss) per common share	$	0.42	$	1.32	$	0.43	$	0.26	$	0.30	$	0.42	$	(10.93)	$	(0.40)

Diluted earnings/(loss) per share:
Continuing operations	$	0.42	$	1.31	$	0.43	$	0.26	$	0.38	$	0.46	$	(10.80)	$	(0.24)
Discontinued operations	—		—		—		—		(0.08)		(0.04)		(0.13)		(0.16)
Diluted earnings/(loss) per share	$	0.42	$	1.31	$	0.43	$	0.26	$	0.30	$	0.42	$	(10.93)	$	(0.40)

Weighted average common shares outstanding:
Basic	47,958		48,395		50,321		50,330		50,308		50,329		50,246		50,204
Diluted	48,340		48,744		50,608		50,565		50,355		50,329		50,246		50,204

F-91

2017 2016
(In thousands, except per share data) Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
Interest and dividend income $ 105,823
$ 89,060
$ 84,666
$ 80,709
$ 72,434
$ 70,511
$ 69,018
$ 68,476
Interest expense 19,457
17,062
15,121
13,823
13,276
12,540
11,577
10,779
Net interest income 86,366
71,998
69,545
66,886
59,158
57,971
57,441
57,697
Non-interest income 29,298
28,836
32,798
34,757
16,725
18,941
14,555
15,630
Total revenue 115,664
100,834
102,343
101,643
75,883
76,912
71,996
73,327
Provision for loan losses 6,141
4,900
4,889
5,095
4,100
4,734
4,522
4,006
Non-interest expense 90,041
65,820
69,523
74,326
61,090
48,844
46,268
47,100
Income before income taxes 19,482
30,114
27,931
22,222
10,693
23,334
21,206
22,221
Income tax expense (1) 22,292
7,211
8,237
6,762
362
6,953
5,249
6,220
Net (loss)/income $ (2,810 ) $ 22,903
$ 19,694
$ 15,460
$ 10,331
$ 16,381
$ 15,957
$ 16,001

Basic (loss)/earnings per common share $ (0.06 ) $ 0.57
$ 0.53
$ 0.44
$ 0.32
$ 0.53
$ 0.52
$ 0.52

Diluted (loss)/earnings per share $ (0.06 ) $ 0.57
$ 0.53
$ 0.44
$ 0.32
$ 0.53
$ 0.52
$ 0.52

Weighted average common shares outstanding:

Basic 45,122
39,984
37,324
35,280
32,185
30,621
30,605
30,511
Diluted 45,122
40,145
37,474
35,452
32,381
30,811
30,765
30,688


~~(1)~~	2017 income tax expense includes $18.1 million charge to re-measure the net deferred tax asset at December 31, 2017 pursuant to the reduction in the corporate income tax rate from 35% to 21%, effective January 1, 2018, per the Tax Cuts and Jobs Act enacted on December 22, 2017.

~~F-98~~

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE ~~23.~~24. NET INTEREST INCOME AFTER PROVISION FOR ~~LOAN~~CREDIT LOSSES

Presented below is net interest income after provision for ~~loan~~credit losses for the three years ended ~~2017, 2016,~~2021, 2020, and ~~2015,~~2019, respectively:


	Years Ended December 31,
(In thousands)	2021		2020		2019
Net interest income	$	291,166	$	316,782	$	365,258
Provision (benefit) for credit losses	(500)		75,878		35,419
Net interest income after provision for credit losses	291,666		240,904		329,839
Total non-interest income	143,248		66,307		84,002
Total non-interest expense	285,893		840,239		289,857
Income/(loss) from continuing operations before income taxes	149,021		(533,028)		123,984
Income tax expense/(benefit)	30,357		(19,853)		22,463
Net income/(loss) from continuing operations	118,664		(513,175)		101,521
(Loss) from discontinued operations before income taxes	—		(26,855)		(5,539)
Income tax (benefit)	—		(7,013)		(1,468)
Net (loss) from discontinued operations	—		(19,842)		(4,071)
Net income/(loss)	$	118,664	$	(533,017)	$	97,450

F-92

Years Ended December 31,
(In thousands) 2017 2016 2015
Net interest income $ 294,795
$ 232,267
$ 213,849
Provision for loan losses 21,025
17,362
16,726
Net interest income after provision for loan losses 273,770
214,905
197,123
Total non-interest income 125,689
65,851
54,288
Total non-interest expense 299,710
203,302
196,829
Income from continuing operations before income taxes 99,749
77,454
54,582
Income tax expense 44,502
18,784
5,064
Net income $ 55,247
$ 58,670
$ 49,518

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 25. REVENUE

Revenue from contracts with customers in the scope of Topic 606 is recognized within noninterest income. The Company does not have any material significant payment terms as payment is received at or shortly after the satisfaction of the performance obligation. The value of unsatisfied performance obligations for contracts with an original expected length of one year or less are not disclosed. The Company recognizes incremental costs of obtaining contracts as an expense when incurred for contracts with a term of one year or less.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain non-interest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of Topic 606. Topic 606 is applicable to non-interest revenue streams such as wealth management fees, insurance commissions and fees, administrative services for customer deposit accounts, interchange fees, and sale of owned real estate properties.

The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended 2021, 2020, and 2019, respectively.


	Years Ended December 31,
(In thousands)	2021		2020		2019
Non-interest income
In-scope of Topic 606:
Service charges on deposit accounts	$	20,249	$	19,239	$	23,122
Insurance commissions and fees	7,003		10,770		10,957
Wealth management fees	10,530		9,285		9,353
Interchange income	8,321		7,559		6,266
Non-interest income (in-scope of Topic 606)	$	46,103	$	46,853	$	49,698
Non-interest income (out-of-scope of Topic 606)	97,145		19,454		34,304
Total non-interest income from continuing operations	$	143,248	$	66,307	$	84,002

Non-interest income streams in-scope of Topic 606 are discussed below.

Service Charges on Deposit Accounts.Service charges on deposit accounts consist of monthly service fees (i.e. business analysis fees and consumer service charges) and other deposit account related fees. The Company's performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees are largely transactional based, and therefore, the Company's performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. The Company may, from time to time, waive certain fees (e.g., NSF fee) for customers but generally do not reduce the transaction price to reflect variability for future reversals due to the insignificance of the amounts. Waiver of fees reduces the revenue in the period the waiver is granted to the customer.

Insurance Commissions and Fees. Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later, net of return commissions related to policy cancellations. Policy cancellation is a variable consideration that is not deemed significant and thus, does not impact the amount of revenue recognized.

In addition, the Company may receive additional performance commissions based on achieving certain sales and loss experience measures. Such commissions are recognized when determinable, which is generally when such commissions are received or when the Company receives data from the insurance companies that allows the reasonable estimation of these amounts.

~~F-99~~

F-93

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Wealth Management Fees.Wealth management fees are primarily comprised of fees earned from consultative investment management, trust administration, tax return preparation, and financial planning. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based on the daily accrual of the market value of the investment accounts and the applicable fee rate.

Interchange Fees.Interchange fees are transaction fees paid to the card-issuing bank to cover handling costs, fraud and bad debt costs, and the risk involved in approving the payment. Due to the day-to-day nature of these fees they are settled on a daily basis and are accounted for as they are received.

Gains/Losses on Sales of OREO. The sale of OREO and other nonfinancial assets are accounted for with the derecognition of the asset in question once a contract exists and control of the asset has been transferred to the buyer. The gain or loss on the sale is calculated as the difference between the carrying value of the asset and the transaction price.

F-94



Delaware						04-3510455
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



ITEM 14.			PRINCIPAL ACCOUNTING FEES AND SERVICES	7872

PART IV				7973

ITEM 15.			EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	7973

ITEM 16.			FORM 10-K SUMMARY	8175

SIGNATURES				8276


TABLE INDEX

PART I				4

ITEM 1.				4

		ITEM 1 TABLE 1 — LOAN PORTFOLIO ANALYSIS		95

		ITEM 1 TABLE 2 — MATURITY AND SENSITIVITY OF LOAN PORTFOLIO		128

		ITEM 1 TABLE 3 — ~~PROBLEM ASSETS AND ACCRUING TDR~~CREDIT QUALITY RATIOS		1411

		ITEM 1 TABLE 4 ~~— ALLOWANCE FOR LOAN LOSS~~		15

	~~ITEM 1 TABLE 5~~ — ALLOCATION OF ALLOWANCE BY LOAN CATEGORY	1612

		ITEM 1 TABLE ~~6 — AMORTIZED COST AND FAIR VALUE OF SECURITIES~~		17

	~~ITEM 1 TABLE 7~~5 — WEIGHTED AVERAGE YIELD ON SECURITIES	1813

		ITEM 1 TABLE 86 — AVERAGE BALANCE AND WEIGHTED AVERAGE RATES FOR DEPOSITS		1814

		ITEM 1 TABLE 97 — MATURITY OF DEPOSITS > ~~$100,000~~$250,000		1914

PART II				38

~~ITEM 6~~ITEMS 7-7A.				40

		ITEM 67 TABLE 31 — AVERAGE BALANCES, INTEREST AND AVERAGE YIELD COSTS		4243

		ITEM 67 TABLE 4 2 — RATE VOLUME ANALYSIS		44

~~ITEMS 7~~-7A.		45

	ITEM 7 — 7A TABLE ~~1 — CONTRACTUAL OBLIGATIONS~~	653

	~~ITEM 7 — 7A TABLE 2~~ — QUALITATIVE ASPECTS OF MARKET RISK	7065



	At or For the Years Ended December 31,
(In thousands, except per share data)	2017			2016			2015			2014			2013
Per Common Share Data:
Net earnings, diluted	$	1.39		$	1.88		$	1.74		$	1.36		$	1.65
Total book value per common share	32.14			30.65			28.64			28.17			27.08
Dividends	0.84			0.80			0.76			0.72			0.72
Common stock price:
High	40.00			37.35			30.40			27.28			29.38
Low	32.85			24.71			24.32			22.06			23.38
Close	36.60			36.85			29.11			26.66			27.27
Performance Ratios: (1)
Return on assets	0.56		%	0.74		%	0.68		%	0.55		%	0.78		%
Return on equity	4.45			6.44			6.14			4.87			6.09
Net interest margin, fully taxable equivalent (FTE) (2)	3.40			3.31			3.34			3.30			3.67
Fee income/Net interest and fee income	29.41			22.80			21.18			23.02			23.04
Growth Ratios:
Total commercial loans	37.79%			18.39		%	28.65		%	14.80		%	4.51		%
Total loans	26.71			14.41			22.32			11.96			4.81
Total deposits	32.13			18.48			20.08			20.95			(6.14		)
Total net revenues, (compared to prior year)	41.05			11.18			18.40			(0.23		)	14.96
Earnings per share, (compared to prior year)	(26.06		)	8.62			27.21			(17.58		)	10.74
Selected Financial Data:
Total assets	$	11,570,751		$	9,162,542		$	7,831,086		$	6,501,079		$	5,671,724
Total earning assets	10,509,163			8,340,287			7,140,387			5,923,462			5,085,152
Securities	1,898,564			1,628,246			1,371,316			1,205,794			870,091
Total loans	8,299,338			6,549,787			5,725,236			4,680,600			4,180,523
Allowance for loan losses	(51,834		)	(43,998		)	(39,308		)	(35,662		)	(33,323		)
Total intangible assets	557,583			422,551			334,607			276,270			270,662
Total deposits	8,749,530			6,622,092			5,589,135			4,654,679			3,848,529
Total borrowings	1,137,075			1,313,997			1,263,318			1,051,371			1,063,032
Total shareholders’ equity	1,496,264			1,093,298			887,189			709,287			678,062



	2017						2016						2015
(Dollars in millions)	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
Assets
Loans: (1)
Commercial real estate	$	2,789.8	$	130.0	4.66	%	$	2,239.6	$	95.8	4.28	%	$	1,881.2	$	81.1	4.31	%
Commercial and industrial loans	1,259.9		65.7		5.21		1,019.7		51.2		5.02		932.4		41.8		4.48
Residential loans	1,962.4		71.5		3.64		1,808.8		66.1		3.66		1,622.8		62.6		3.86
Consumer loans	1,032.6		39.4		3.82		873.3		29.9		3.42		802.5		26.1		3.25
Total loans	7,044.7		306.6		4.35		5,941.4		243.0		4.09		5,238.9		211.6		4.04
Investment securities (2)	1,757.3		60.3		3.43		1,260.5		41.4		3.28		1,300.9		38.9		2.99
Short-term investments and loans held for sale	134.5		4.6		3.38		51.6		0.9		1.70		62.2		0.7		1.10
Total interest-earning assets	8,936.5		371.5		4.16		7,253.5		285.3		3.93		6,602.0		251.2		3.81
Intangible assets	449.7		0				347.7						311.5
Other non-interest earning assets	428.4		0				357.9						341.0
Total assets	$	9,814.6					$	7,959.1					$	7,254.5

Liabilities and shareholders' equity
Deposits:
NOW	$	591.0	$	1.5	0.25	%	$	487.8	$	0.7	0.14	%	$	462.9	$	0.7	0.15	%
Money market	1,935.8		11.2		0.58		1,470.3		7.0		0.48		1,444.1		5.9		0.41
Savings	680.1		0.9		0.14		610.8		0.7		0.12		582.4		0.9		0.15
Certificates of deposit	2,581.1		30.3		1.17		2,094.8		22.5		1.07		1,684.8		15.5		0.92
Total interest-bearing deposits	5,788.0		43.9		0.76		4,663.7		30.9		0.66		4,174.2		23.0		0.55
Borrowings and notes (3)	1,373.8		21.6		1.57		1,218.2		17.3		1.42		1,212.5		10.2		0.84
Total interest-bearing liabilities	7,161.8		65.5		0.91		5,881.9		48.2		0.82		5,386.7		33.2		0.62
Non-interest-bearing demand deposits	1,296.4						1,081.0						972.6
Other non-interest-bearing liabilities	112.6						85.2						89.1
Total liabilities	8,570.8						7,048.1						6,448.4
Total shareholders' equity	1,243.8						911.0						806.1
Total liabilities and equity	$	9,814.6					$	7,959.1					$	7,254.5
Net interest-earning assets	$	1,774.7					$	1,371.6					$	1,215.3
Net interest income			$	306.0					$	237.1					$	218.0



	2017 Compared with 2016							2016 Compared with 2015
	(Decrease) Increase Due to							(Decrease) Increase Due to
(In thousands)	Rate			Volume		Net		Rate			Volume			Net
Interest income:
Commercial real estate	$	9,145		$	25,080	$	34,225	$	(591	)	$	15,335		$	14,744
Commercial and industrial loans	1,999			12,457		14,456		5,294			4,120			9,414
Residential loans	(259		)	5,595		5,336		(3,427		)	6,920			3,493
Consumer loans	3,698			5,839		9,537		1,416			2,379			3,795
Total loans	14,583			48,971		63,554		2,692			28,754			31,446
Investment securities	1,985			16,978		18,963		3,667			(1,238		)	2,429
Short-term investments and loans held for sale	1,405			2,271		3,676		324			(132		)	192
Total interest income	$	17,973		$	68,220	$	86,193	$	6,683		$	27,384		$	34,067

Interest expense:
NOW accounts	$	627		$	165	$	792	$	(39	)	$	35		$	(4	)
Money market accounts	1,698			2,506		4,204		1,000			109			1,109
Savings accounts	122			88		210		(212		)	42			(170		)
Certificates of deposit	2,205			5,561		7,766		2,861			4,140			7,001
Total deposits	4,652			8,320		12,972		3,610			4,326			7,936
Borrowings	1,981			2,338		4,319		7,008			48			7,056
Total interest expense	$	6,633		$	10,658	$	17,291	$	10,618		$	4,374		$	14,992
Change in net interest income	$	11,340		$	57,562	$	68,902	$	(3,935	)	$	23,010		$	19,075



PART I		4

ITEM 1.	BUSINESS	4

ITEM 1A.	RISK FACTORS	2926

ITEM 1B.	UNRESOLVED STAFF COMMENTS	36

ITEM 2.	PROPERTIES	36

ITEM 3.	LEGAL PROCEEDINGS	37

ITEM 4.	MINE SAFETY DISCLOSURES	37

PART II		38

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	38

ITEM 6.	[~~SELECTED FINANCIAL DATA~~RESERVED]	4039

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4540

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	6964

ITEM 8.	CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	7266

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	7366

ITEM 9A.	CONTROLS AND PROCEDURES	7366

ITEM 9B.	OTHER INFORMATION	7466

ITEM 9 C .	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	66

PART III		7567

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	7568

ITEM 11.	EXECUTIVE COMPENSATION	7771

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	7871


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	7872



2017	High		Low		Dividends Declared
First quarter	$	37.45	$	32.90	$	0.21
Second quarter	38.65		33.55		0.21
Third quarter	39.00		32.85		0.21
Fourth quarter	40.00		35.10		0.21



2016
First quarter	$	28.93	$	24.71	$	0.20
Second quarter	28.18		24.80		0.20
Third quarter	28.37		25.90		0.20
Fourth quarter	37.35		27.25		0.20



	Period Ending
Index	12/31/12	12/31/13	12/31/14	12/31/15	12/31/16	12/31/17
Berkshire Hills Bancorp, Inc.	100.00	117.53	118.35	132.76	173.10	175.94
NYSE Composite Index	100.00	126.06	134.62	129.40	144.72	171.66
PHLX KBW Regional Banking Index	100.00	146.30	149.67	158.62	219.27	223.02



	At or For the Years Ended
(Dollars in thousands)	December 31, 2017			December 31, 2016			December 31, 2015
GAAP Net income	$	55,247		$	58,670		$	49,518
Non-GAAP measures
Adj: Gain on sale of securities, net	(12,598		)	551			(2,110		)
Adj: Net gains on sale of business operations	(296		)	(1,085		)	—
Adj: Loss on termination of hedges	6,629			—			—
Adj: Acquisition, restructuring, conversion, and other related expenses (1)	31,558			15,761			17,611
Adj: Employee and Community Investment	3,400			—			—
Adj: Deferred tax asset impairment	18,145			—			—
Adj: Income taxes	(11,277		)	(5,455		)	(5,409		)
Net non-operating charges	35,561			9,772			10,092
Total adjusted net income (non-GAAP)	$	90,808		$	68,442		$	59,610
GAAP Total revenue	$	420,484		$	298,118		$	268,137
Adj: Gain on sale of securities, net	(12,598		)	551			(2,110		)
Adj: Net gains on sale of business operations	(296		)	(1,085		)	—
Adj: Loss on termination of hedges	6,629			—			—
Total adjusted operating revenue (non-GAAP)	$	414,219		$	297,584		$	266,027
GAAP Total non-interest expense	$	299,710		$	203,302		$	196,830
Less: Total non-operating expense (see above)	(31,558		)	(15,761		)	(17,611		)
Less: Employee and Community Reinvestment	(3,400		)	—			—
Adjusted operating non-interest expense (non-GAAP)	$	264,752		$	187,541		$	179,219
(in millions, except per share data)
Total average assets	$	9,815		$	7,958		$	7,249
Total average shareholders' equity	1,244			911			805
Total average tangible shareholders equity	793			563			494
Total average tangible common shareholders equity	784			563			494
Total tangible shareholders’ equity, period-end	939			671			553
Total tangible common shareholders’ equity, period-end	898			671			553
Total tangible assets, period-end	11,013			8,740			7,496
Total common shares outstanding, period-end (thousands)	45,290			35,673			30,974
Average diluted shares outstanding (thousands)	39,695			31,167			28,564
Earnings per share, diluted	$	1.39		$	1.88		$	1.73
Plus: Net adjustments per share, diluted	0.90			0.32			0.36
Adjusted earnings per share, diluted	2.29			2.20			2.09
Book value per common share, period-end	32.14			30.65			28.64
Tangible book value per common share, period-end	19.83			18.81			17.84
Total shareholders' equity/total assets	12.93			11.93			11.33
Total tangible shareholders' equity/total tangible assets	8.52			7.68			7.37
Average operating diluted shares outstanding (thousands)	39,695			31,167			28,564
Performance Ratios
GAAP return on assets	0.56			0.74			0.68
Adjusted return on assets	0.93			0.86			0.82
GAAP return on equity	4.45			6.44			6.15
Adjusted return on equity	7.31			7.51			7.40
Adjusted return on tangible common equity	11.82			12.47			12.49
Efficiency ratio	59.97			58.27			60.88
Supplementary Data (in thousands)
Tax benefit on tax-credit investments	10,182			11,134			16,127
Non-interest income charge on tax-credit investments	(8,693		)	(8,993		)	(11,406		)
Net income on tax-credit investments	1,489			2,143			4,721
Intangible amortization	3,493			2,927			3,563
Fully taxable equivalent income adjustment	11,227			8,098			6,354


	2021 Compared with 2020						2020 Compared with 2019
	(Decrease) Increase Due to						(Decrease) Increase Due to
(In thousands)	Rate		Volume		Net		Rate		Volume		Net

Interest income:
Commercial real estate	$	(14,027)	$	(13,071)	$	(27,098)	$	(45,193)	$	8,096	$	(37,097)
Commercial and industrial loans	7,962		(23,913)		(15,951)		(27,008)		3,561		(23,447)
Residential loans	(762)		(28,622)		(29,384)		2,017		(14,907)		(12,890)
Consumer loans	704		(10,014)		(9,310)		(6,575)		(8,592)		(15,167)
Total loans	(6,123)		(75,620)		(81,743)		(76,759)		(11,842)		(88,601)
Investment securities	(16,598)		11,341		(5,257)		(7,945)		(57)		(8,002)
Short-term investments and loans held for sale (1)	(5,508)		2,980		(2,528)		(16,924)		8,297		(8,627)
Mid-Atlantic region loans held for sale	(1,480)		8,600		$	7,120	—		—		—
Total interest income	$	(29,709)	$	(52,699)	$	(82,408)	$	(101,628)	$	(3,602)	$	(105,230)

Interest expense:
NOW accounts	$	(2,832)	$	327	$	(2,505)	$	(3,835)	$	882	$	(2,953)
Money market accounts	(10,259)		201		(10,058)		(18,043)		1,985		(16,058)
Savings accounts	(536)		137		(399)		(409)		156		(253)
Certificates of deposit	(18,740)		(15,233)		(33,973)		(11,486)		(12,093)		(23,579)
Total deposits	(32,367)		(14,568)		(46,935)		(33,773)		(9,070)		(42,843)
Borrowings	5,691		(15,702)		(10,011)		(4,553)		(7,206)		(11,759)
Mid-Atlantic region interest-bearing deposits	814		1,005		$	1,819	—		—		—
Total interest expense	$	(26,676)	$	(30,270)	$	(55,127)	$	(38,326)	$	(16,276)	$	(54,602)
Change in net interest income	$	(3,033)	$	(22,429)	$	(27,281)	$	(63,302)	$	12,674	$	(50,628)



(In thousands)	Total		Less than One Year		One to Three Years		Three to Five Years		After Five Years
FHLBB borrowings (1)	$	1,047,736	$	836,115	$	204,183	$	7,438	$	—
Subordinated notes	89,339		—		—		—		89,339
Operating lease obligations (2)	96,356		12,830		20,080		15,859		47,587
Purchase obligations (3)	102,002		16,321		31,086		27,507		27,088
Total Contractual Obligations	$	1,335,433	$	865,266	$	255,349	$	50,804	$	164,014



Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID 173)
Consolidated Balance Sheets as of December 31, ~~2017~~2021 and ~~2016~~2020
Consolidated Statements of ~~Income~~Operations for the years ended December 31, ~~2017, 2016,~~2021, 2020, and ~~2015~~2019
Consolidated Statements of Comprehensive ~~Income~~Income/(Loss) for the years ended December 31, ~~2017, 2016,~~2021, 2020, and ~~2015~~2019
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, ~~2017, 2016,~~2021, 2020, and ~~2015~~2019
Consolidated Statements of Cash Flows for the years ended December 31, ~~2017, 2016,~~2021, 2020, and ~~2015~~2019
Notes to Consolidated Financial Statements



Name			Age		Position
~~Michael P. Daly~~Nitin J. Mhatre			5651		President and Chief Executive Officer of the Company; Chief Executive Officer - Berkshire Bank; Director of Berkshire Hills Bancorp and Berkshire Bank
~~Richard M. Marotta~~Sean A. Gray			5945		Senior Executive Vice President of the Company; President - Berkshire Bank
~~Sean A. Gray~~Subhadeep Basu			4251		~~Senior Executive Vice President of the Company; Chief Operating Officer - Berkshire Bank~~
~~James M. Moses~~	41	Senior Executive Vice President, Chief Financial Officer of the ~~Company; Chief Financial Officer - Berkshire~~Company and the Bank
George F. Bacigalupo			6367		Senior Executive Vice President, Head of Commercial Banking - Berkshire Bank
~~Michael D. Carroll~~			56	~~Executive Vice President, Commercial Banking and Specialty Lending - Berkshire Bank~~
~~Tami F. Gunsch~~	55	~~Executive Vice President & Director of Relationship Banking - Berkshire Bank~~
Gregory D. Lindenmuth	5054			Senior Executive Vice President, Chief Risk Officer – Berkshire Bank
Deborah A. Stephenson			51		Senior Executive Vice President, Regulatory & Compliance- -Berkshire Bank
Lucia “Lucy” Bellomia			56		Executive Vice President, Head of Retail Banking – Berkshire Bank
Jennifer M. Carmichael			44		Executive Vice President, Chief Internal Audit Officer - Berkshire Bank
~~Allison P. O'Rourke~~Jacqueline Courtwright			4258		Executive Vice President, Chief Human Resources and Culture Officer – Berkshire Bank
Georgia Melas			58		Executive Vice President, Chief Credit Officer – Berkshire Bank
Wm. Gordon Prescott			60		Executive Vice President, ~~Finance & Investor Relations~~General Counsel and Corporate Secretary - Berkshire Bank; Corporate Secretary – Berkshire Hills Bancorp
Ellen Steinfeld			60		Executive Vice President, Head of Consumer Lending & Payments
Jason T. White			46		Executive Vice President , Chief Information Officer – Berkshire Bank


~~��~~	~~ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting~~



				Fair Value				As Recorded by
(in thousands)	As Acquired			Adjustments				the Company
Consideration Paid:
Company common stock issued to Commerce common shareholders								$	188,599
Company preferred stock issued to certain Commerce shareholders								40,633
Cash in lieu paid to Commerce shareholders								1
Total consideration paid								$	229,233
Recognized amounts of identifiable assets acquired and (liabilities) assumed, at fair value:
Cash and short-term investments	$	374,611		$	—			$	374,611
Investment securities	115,274			(1,427		)	(a)	113,847
Loans, net	1,327,256			(86,505		)	(b)	1,240,751
Premises and equipment	8,931			5,346			(c)	14,277
Core deposit intangibles	—			22,400			(d)	22,400
Deferred tax assets, net	7,956			26,580			(e)	34,536
Goodwill and other intangibles	11,233			(11,233		)	(f)	—
Other assets	52,709			(3,664		)	(g)	49,045
Deposits	(1,710,872		)	(1,180		)	(h)	(1,712,052		)
Borrowings	(19,542		)	—				(19,542		)
Other liabilities	(5,086		)	265				(4,821		)
Total identifiable net assets	$	162,470		$	(49,418	)		$	113,052

Goodwill								$	116,181

Assets
~~(b)~~Loans			The adjustment represents the write-off of $15.0 million in allowance for loan and lease losses and the write down of the book value of loans to their estimated fair value based on interest rates and expected cash flows as of the acquisition date, which includes an estimate of expected loan loss inherent in the portfolio. The valuation of the loans is provisional. Loans with evidence of credit deterioration at acquisition are accounted for under ASC 310-30 and had a book value of $163.1 million and had a fair value of $71.1 million. Non-impaired loans accounted for under ASC 310-20 had a book value of $1.18 billion and have a fair value of $1.17 billion. ASC 310-30 loans have a $10.8 million fair value adjustment that is accretable in earnings. ASC 310-20 loans have a $4.0 million fair value adjustment premium that is amortized over the remaining term of the loans using the effective interest method, or a straight-line method if the loan is a revolving credit facility.			$	—					$	300,599

Other assets		—	16,705

~~(c)~~	The adjustment represents an increased fair value based on the appraised value of Commerce’s owned branches and headquarters comprised of $5.7 million for buildings and $0.7 million for land. This was offset by a $1.0 million reduction of the book value of furniture, fixtures, and equipment, to their estimated fair value and the immediate expensing of equipment not meeting the thresholds for capitalization in accordance with Company policy. The adjustments will be depreciated over the remaining estimated economic lives of the assets.


~~(d)~~			The adjustment represents the value of the core deposit base assumed in the acquisition. The core deposit asset was recorded as an identifiable intangible asset and will be amortized over the estimated useful life of the deposit base (10 years).


~~(e)~~Total assets			~~Represents net deferred tax assets resulting from the fair value adjustments related to the acquired assets and liabilities, identifiable intangibles, and other purchase accounting adjustments.~~			$	—					$	317,304

$	—					$	617,377
~~(g)~~Other liabilities			~~The adjustment includes a $3.5 million write-down of repossessed assets based on market report data.~~

—						12,688
~~(h)~~Total liabilities			The adjustment is necessary because the weighted average interest rate of time deposits exceeded the cost of similar funding at the time of acquisition. The amount will be amortized over the estimated useful life of nine months.			$	—					$	630,065



	ASC 310-30 Loans
Gross contractual receivable amounts at acquisition	$	163,125
Contractual cash flows not expected to be collected (nonaccretable discount)	(81,205		)
Expected cash flows at acquisition	81,920
Interest component of expected cash flows (accretable discount)	(10,815		)
Fair value of acquired loans	$	71,105



	Pro Forma (unaudited) Years ended December 31,
	2017		2016
Net interest income	$	344,797	$	302,012
Non-interest income	134,818		77,192
Income available to common shareholders	77,340		78,859


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance
December 31, 2021
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	71,822	$	5,355	$	—	$	77,177	$	—
Agency collateralized mortgage obligations	693,782		5,566		(11,012)		688,336		—
Agency mortgage-backed securities	711,154		2,347		(7,642)		705,859		—
Agency commercial mortgage-backed securities	282,958		2,996		(3,620)		282,334		—
Corporate bonds	44,824		950		(114)		45,660		—

Other bonds and obligations	77,273		954		(8)		78,219		—
Total securities available for sale	1,881,813		18,168		(22,396)		1,877,585		—
Securities held to maturity
Municipal bonds and obligations	281,515		16,151		(693)		296,973		70
Agency collateralized mortgage obligations	149,195		3,203		(3,513)		148,885		—
Agency mortgage-backed securities	57,327		95		(1,498)		55,924		—
Agency commercial mortgage-backed securities	145,573		266		(3,289)		142,550		—
Tax advantaged economic development bonds	2,728		26		(15)		2,739		35
Other bonds and obligations	165		—		—		165		—
Total securities held to maturity	636,503		19,741		(9,008)		647,236		105

Marketable equity securities	15,689		67		(303)		15,453		—
Total	$	2,534,005	$	37,976	$	(31,707)	$	2,540,274	$	105

December 31, 2020
Securities available for sale
Debt securities:
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-backed securities	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


	Available for sale				Held to maturity
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	$	61,424	$	61,435	$	1,623	$	1,625
Over 1 year to 5 years	4,085		4,146		3,101		3,129
Over 5 years to 10 years	52,374		53,644		24,196		24,961
Over 10 years	76,036		81,831		255,488		270,162
Total bonds and obligations	193,919		201,056		284,408		299,877
Mortgage-backed securities	1,687,894		1,676,529		352,095		347,359
Total	$	1,881,813	$	1,877,585	$	636,503	$	647,236


	Less Than Twelve Months				Over Twelve Months				Total
(In thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
December 31, 2021

Securities available for sale
Debt securities:

Agency collateralized mortgage obligations	$	9,626	$	375,132	$	1,386	$	27,025	$	11,012	$	402,157
Agency mortgage-backed securities	3,179		222,887		4,463		175,941		7,642		398,828
Agency commercial mortgage-back securities	1,609		103,354		2,011		48,619		3,620		151,973
Corporate bonds	114		11,115		—		—		114		11,115

Other bonds and obligations	—		—		8		694		8		694


Total securities available for sale	$	14,528	$	712,488	$	7,868	$	252,279	$	22,396	$	964,767

Securities held to maturity
Municipal bonds and obligations	693		36,981		—		—		693		36,981
Agency collateralized mortgage obligations	1,808		49,308		1,705		36,212		3,513		85,520
Agency mortgage-backed securities	839		26,656		659		26,025		1,498		52,681
Agency commercial mortgage-back securities	1,255		80,406		2,034		51,654		3,289		132,060
Tax advantaged economic development bonds	15		1,255		—		—		15		1,255
Total securities held to maturity	4,610		194,606		4,398		113,891		9,008		308,497

Total	$	19,138	$	907,094	$	12,266	$	366,170	$	31,404	$	1,273,264

December 31, 2020
Securities available for sale
Debt securities:

Agency collateralized mortgage obligations	$	235	$	77,898	$	—	$	—	$	235	$	77,898
Agency mortgage-backed securities	131		39,939		2		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	—		—		8		1,030		8		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-back 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



(in thousands)	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
December 31, 2017
Commercial real estate:
Construction	$	—	$	—	$	—	$	—	$	181,371	$	181,371	$	—
Single and multi-family	—		—		451		451		216,632		217,083		—
Commercial real estate	1,925		48		5,023		6,996		1,812,257		1,819,253		457
Total	1,925		48		5,474		7,447		2,210,260		2,217,707		457
Commercial and industrial loans
Total	4,031		1,912		6,023		11,966		1,170,603		1,182,569		128
Residential mortgages:
1-4 family	2,412		242		2,186		4,840		1,803,184		1,808,024		520
Construction	—		—		—		—		5,177		5,177		—
Total	2,412		242		2,186		4,840		1,808,361		1,813,201		520
Consumer loans:
Home equity	444		1,235		1,747		3,426		291,528		294,954		120
Auto and other	3,389		599		1,597		5,585		598,182		603,767		143
Total	3,833		1,834		3,344		9,011		889,710		898,721		263
Total	$	12,201	$	4,036	$	17,027	$	33,264	$	6,078,934	$	6,112,198	$	1,368



(In thousands) 2017	Commercial real estate		Commercial and industrial		Residential mortgages		Consumer		Total
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	33,732	$	5,761	$	3,872	$	—	$	43,365
Collectively evaluated	2,183,975		1,176,808		1,809,329		898,721		6,068,833
Total	$	2,217,707	$	1,182,569	$	1,813,201	$	898,721	$	6,112,198



(In thousands) 2016	Commercial real estate		Commercial and industrial		Residential mortgages		Consumer		Total
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	25,549	$	5,705	$	2,775	$	2,703	$	36,732
Collectively evaluated	1,900,795		902,397		1,592,197		789,186		5,184,575
Total	$	1,926,344	$	908,102	$	1,594,972	$	791,889	$	5,221,307



	At December 31, 2017
(In thousands)	Recorded Investment (1)		Unpaid Principal Balance (2)		Related Allowance
With no related allowance:
Commercial real estate - construction	$	—	$	—	$	—
Commercial real estate - single and multifamily	1,077		3,607		—
Other commercial real estate	18,285		18,611		—
Other commercial and industrial loans	2,060		2,629		—
Residential mortgages - 1-4 family	660		1,075		—
Consumer - home equity	867		1,504		—
With an allowance recorded:
Commercial real estate - construction	$	159	$	159	$	1
Commercial real estate - single and multifamily	159		171		1
Other commercial real estate	14,321		15,235		227
Other commercial and industrial loans	3,716		4,249		66
Residential mortgages - 1-4 family	1,344		1,446		130
Consumer - home equity	1,014		999		34
Consumer - other	17		17		1

Total
Commercial real estate	$	34,001	$	37,783	$	229
Commercial and industrial	5,776		6,878		66
Residential mortgages	2,004		2,521		130
Consumer	1,898		2,520		35
Total impaired loans	$	43,679	$	49,702	$	460



	At December 31, 2016
(In thousands)	Recorded Investment (1)		Unpaid Principal Balance (2)		Related Allowance
With no related allowance:
Other commercial real estate	$	18,905	$	18,905	$	—
Other commercial and industrial loans	382		382		—
Residential mortgages - 1-4 family	2,101		2,101		—
Consumer - home equity	1,605		1,605		—
With an allowance recorded:
Commercial real estate - single and multifamily	$	179	$	181	$	2
Other commercial real estate	6,306		6,462		156
Other commercial and industrial loans	5,060		5,324		264
Residential mortgages - 1-4 family	538		674		136
Consumer - home equity	942		1,098		156
Total
Commercial real estate	$	25,390	$	25,548	$	158
Commercial and industrial	5,442		5,706		264
Residential mortgages	2,639		2,775		136
Consumer	2,547		2,703		156
Total impaired loans	$	36,018	$	36,732	$	714



	Modifications by Class For the twelve months ending December 31, 2017
	Number of Modifications	Pre-Modification Outstanding Recorded Investment (In thousands)		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial - Single and multifamily	1	$	235	$	235
Commercial - Other	15	13,445		11,718
Commercial and industrial - Other	12	3,507		3,507
Residential - 1-4 Family	4	331		314
Consumer - Home Equity	3	122		122
	35	$	17,640	$	15,896



	Modifications that subsequently defaulted for the twelve months ending December 31, 2017
	Number of Contracts	Recorded Investment
Troubled Debt Restructurings
Commercial - Single and multifamily	—	$	—
Commercial - Other	1	113
Commercial and industrial - Other	2	492
Residential - 1-4 Family	—	—
	3	$	605