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BERKSHIRE HILLS BANCORP, INC.

(BHLB)
  Report
Real-time Estimate Cboe BZX  -  11:34 2022-09-28 am EDT
28.13 USD   +0.55%
09/15Berkshire Hills Bancorp Continues Growth of 44 Business Capital Division with Three Seasoned SBA Lending Professionals
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09/13Hovde Group Initiates Coverage on Berkshire Hills Bancorp With Outperform Rating, $33 Price Target
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09/12Berkshire Hills Bancorp's Chief Compliance, Regulatory Officer Resigns
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BERKSHIRE HILLS BANCORP INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/09/2022 | 01:16pm EDT
SELECTED FINANCIAL DATA
The following summary data is based in part on the consolidated financial
statements and accompanying notes and other information appearing elsewhere in
this or prior Forms 10-Q.

                                                                  At or for the                              At or for the
                                                           Three Months Ended June 30,                 Six Months Ended June 30,
                                                             2022                  2021                 2022                 2021
NOMINAL AND PER SHARE DATA
Net earnings per common share, diluted                 $        0.50           $    0.43          $       0.92           $    0.69
Adjusted earnings per common share, diluted (1)(2)              0.51                0.44                  0.94                0.75
Net income, (thousands)                                       23,115              21,636                43,311              34,667
Adjusted net income, (thousands) (1)(2)                       23,562              22,104                44,351              38,119
Total common shares outstanding, (thousands)                  45,788              50,453                45,788              50,453
Average diluted shares, (thousands)                           46,102              50,608                47,074              50,588
Total book value per common share                              22.15               23.30                 22.15               23.30
Tangible book value per common share (2)                       21.56               22.66                 21.56               22.66
Dividends per common share                                      0.12                0.12                  0.24                0.24
Full-time equivalent staff, continuing operations              1,322               1,417                 1,322               1,417

PERFORMANCE RATIOS (3)
Return on equity                                                7.82   %            7.37  %               7.31   %            5.95  %
Adjusted return on equity (1)(2)                                7.97                7.53                  7.49                6.54
Return on tangible common equity (1)(2)                         8.33                7.92                  7.81                6.46
Adjusted return on tangible common equity (1)(2)                8.48                8.08                  7.99                7.07
Return on assets                                                0.82                0.70                  0.76                0.56
Adjusted return on assets (1)(2)                                0.84                0.71                  0.78                0.61
Net interest margin, fully taxable equivalent (FTE)             3.11                2.62                  2.86                2.62
(4)(5)
Efficiency ratio (1)(2)                                        66.60               67.82                 69.48               69.60

FINANCIAL DATA (in millions, end of period)
Total assets                                           $      11,579           $  12,273          $     11,579           $  12,273
Total earning assets                                          10,849              11,571                10,849              11,571
Total loans                                                    7,803               7,233                 7,803               7,233

Total deposits                                                10,115               9,914                10,115               9,914
Loans/deposits (%)                                                77   %              73  %                 77   %              73  %

ASSET QUALITY
Allowance for credit losses, (millions)                $          99           $     119          $         99           $     119
Net charge-offs, (millions)                                        -                  (5)                   (3)                (15)
Net charge-offs (QTD annualized)/average loans                  0.02   %            0.26  %               0.08   %            0.39  %
Provision (benefit)/expense, (millions)                $           -        

$ - $ (4) $ 7


Non-accruing loans/total loans                                  0.34   %            0.66  %               0.34   %            0.66  %
Allowance for credit losses/non-accruing loans                   368                 250                   368                 250
Allowance for credit losses/total loans                         1.27                1.65                  1.27                1.65

CAPITAL RATIOS
Common equity tier 1 capital to risk-weighted assets            12.9   %            14.3  %               12.9   %            14.3  %
Tier 1 capital leverage ratio                                   10.2                 9.5                  10.2                 9.5
Tangible common shareholders' equity/tangible assets             8.5                 9.3                   8.5                 9.3
(2)


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                                                            At or for the                              At or for the
                                                     Three Months Ended June 30,                 Six Months Ended June 30,
                                                       2022                  2021                 2022                  2021
FOR THE PERIOD: (In thousands)
Net interest income                              $       81,358          $  75,393          $      150,421          $ 150,486
Non-interest income                                      16,351             22,011                  37,032             48,204
Net revenue                                              97,709             97,404                 187,453            198,690
(Benefit)/provision for credit losses                         -                  -                  (4,000)             6,500
Non-interest expense                                     68,475             68,872                 137,025            147,026
Net income                                               23,115             21,636                  43,311             34,667
Adjusted income (1)(2)                                   23,562             22,104                  44,351             38,116


____________________________________________________________________________________________

(1) Adjusted measurements are non-GAAP financial measures that are adjusted to
exclude net non-operating charges primarily related to acquisitions and
restructuring activities. Refer to "Reconciliation of Non-GAAP Financial
Measures" for additional information.
(2)   Non-GAAP financial measure. Refer to "Reconciliation of Non-GAAP Financial
Measures" for additional information.
(3) All performance ratios are annualized and are based on average balance sheet
amounts, where applicable.
(4) Fully taxable equivalent considers the impact of tax advantaged investment
securities and loans.
(5)  The effect of purchase accounting accretion for loans, time deposits, and
borrowings on the net interest margin was an increase in all periods presented.
The increase for the three months ended June 30, 2022 and 2021 was 0.03% and
0.08%, respectively. The increase for the six months ended June 30, 2022 and
2021 was 0.03% and 0.06%, respectively.
                                                                            

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AVERAGE BALANCES AND AVERAGE YIELDS/RATES
The following table presents average balances and an analysis of average rates
and yields on an annualized fully taxable equivalent basis for the periods
included:

                                                                     Three Months Ended June 30,                                                   Six Months Ended June 30,
                                                                2022                                2021                                     2022                               2021
(Dollars in millions)                               Average           Yield/Rate        Average        Yield/Rate                Average          Yield/Rate        Average        Yield/Rate
                                                    Balance          (FTE basis)        Balance       (FTE basis)                Balance         (FTE basis)        Balance       (FTE basis)
Assets
Loans:
Commercial real estate                          $       3,831                 3.79  % $  3,625                 3.46  %       $      3,741                 3.57  % $  3,628                 3.37  %
Commercial and industrial loans                         1,447                 4.46       1,605                 4.74                 1,410                 4.30       1,735                 4.68
Residential mortgages                                   1,652                 3.57       1,604                 3.79                 1,545                 3.57       1,672                 3.75
Consumer loans                                            562                 5.41         582                 3.80                   538                 4.82         608                 3.80
Total loans (1)                                         7,492                 3.99       7,416                 3.84                 7,234                 3.80       7,643                 3.78
Investment securities (2)                               2,621                 1.97       2,259                 2.17                 2,635                 1.96       2,227                 2.27
Short-term investments & loans held for sale              476                 0.57       1,750                 0.10                   837                 0.37       1,551                 0.11

(3)

Mid-Atlantic region loans held for sale (4)                 -                    -         269                 3.96                     -                    -         282                 4.03
Total interest-earning assets                          10,589                 3.34      11,694                 2.96                10,706                 3.08      11,703                 3.01
Intangible assets                                          27                               33                                         28                               33
Other non-interest earning assets                         644                              690                                        642                              707

Total assets                                    $      11,260                         $ 12,417                               $     11,376                         $ 12,443

Liabilities and shareholders' equity
Deposits:
NOW and other                                   $       1,454                 0.12  % $  1,389                 0.07  %       $      1,455                 0.08  % $  1,357                 0.11  %
Money market                                            2,811                 0.19       2,751                 0.18                 2,841                 0.17       2,776                 0.23
Savings                                                 1,127                 0.03       1,054                 0.05                 1,122                 0.03       1,029                 0.06
Time                                                    1,460                 0.64       2,013                 0.94                 1,542                 0.67       2,140                 1.03
Total interest-bearing deposits                         6,852                 0.24       7,207                 0.35                 6,960                 0.24       7,302                 0.42
Borrowings and notes (5)                                  160                 4.61         381                 3.12                   132                 4.91         441                 2.95
Mid-Atlantic region interest-bearing deposits               -                    -         517                 0.51                     -                    -         517                 0.56

(4)

Total interest-bearing liabilities                      7,012                 0.34       8,105                 0.49                 7,092                 0.33       8,260                 0.56
Non-interest-bearing demand deposits                    2,903                            2,787                                      2,935                            2,662
Other non-interest earning liabilities                    163                              351                                        164                              355
Liabilities from discontinued operations                    -                                -                                          -                                -
Total liabilities                                      10,078                           11,243                                     10,191                           11,277

Total common shareholders' equity                       1,182                            1,174                                      1,185                            1,166
Total shareholders' equity (2)                          1,182                            1,174                                      1,185                            1,166
Total liabilities and stockholders' equity      $      11,260                         $ 12,417                               $     11,376                         $ 12,443


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                                                  Three Months Ended June 30,                                             Six Months Ended June 30,
                                              2022                             2021                                  2022                             2021
                                   Average          Yield/Rate      Average       Yield/Rate           Average Balance  Yield/Rate (FTE    Average     Yield/Rate (FTE
                                   Balance         (FTE basis)      Balance      (FTE basis)                                basis)         Balance         basis)
Net interest spread                                        3.00  %                       2.47  %                                 2.75  %                        2.45  %
Net interest margin (6)                                    3.11                          2.62                                    2.86                           2.62
Cost of funds                                              0.24                          0.36                                    0.23                           0.42
Cost of deposits                                           0.17                          0.25                                    0.17                           0.31

Supplementary data
Total deposits (In millions)   $       9,755                       $ 9,994                             $      9,895                      $   9,964
Fully taxable equivalent               1,560                         1,660                                    3,084                          3,154

income adj. (In thousands) (7)

____________________________________

(1)   The average balances of loans include nonaccrual loans and deferred fees
and costs. As of June 30, 2022, deferred fees related to PPP loans was not
considered material. As of June 30, 2021, deferred fees related to PPP loans
totaled $0.2 million.
(2)   The average balance for securities available for sale is based on
amortized cost. The average balance of equity also reflects this adjustment.
(3)   Interest income on loans held for sale is included in loan interest income
on the income statement.
(4)  The Bank sold its Mid-Atlantic branch operations and insurance operations
in the third quarter of 2021. The Mid-Atlantic region loans are not included in
the loan yields; however they are included in the total earning assets yield and
the net interest margin. The Mid-Atlantic region deposits are not included in
the deposit costs; however, they are included in the total interest-bearing
liabilities cost and the net interest margin.
(5)   The average balances of borrowings include the capital lease obligation
presented under other liabilities on the consolidated balance sheet.
(6)   Purchase accounting accretion totaled $0.7 million and $2.2 million for
the three months ended June 30, 2022 and 2021, respectively. Purchase accounting
accretion totaled $1.5 million and $3.5 million for the three months ended
June 30, 2022 and 2021, respectively.
(7)  Fully taxable equivalent considers the impact of tax advantaged investment
securities and loans. The yield on tax-exempt loans and securities is computed
on a fully tax-equivalent basis using a tax rate of 27%.
                                                                            

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NON-GAAP FINANCIAL MEASURES
This document contains certain non-GAAP financial measures in addition to
results presented in accordance with Generally Accepted Accounting Principles
("GAAP"). These non-GAAP measures are intended to provide the reader with
additional supplemental perspectives on operating results, performance trends,
and financial condition. Non-GAAP financial measures are not a substitute for
GAAP measures; they should be read and used in conjunction with the Company's
GAAP financial information. A reconciliation of non-GAAP financial measures to
GAAP measures is provided below. In all cases, it should be understood that
non-GAAP measures do not depict amounts that accrue directly to the benefit of
shareholders. An item which management excludes when computing non-GAAP adjusted
earnings can be of substantial importance to the Company's results for any
particular quarter or year. The Company's non-GAAP adjusted earnings information
set forth is not necessarily comparable to non- GAAP information which may be
presented by other companies. Each non-GAAP measure used by the Company in this
report as supplemental financial data should be considered in conjunction with
the Company's GAAP financial information.

The Company utilizes the non-GAAP measure of adjusted earnings in evaluating
operating trends, including components for operating revenue and expense. These
measures exclude amounts which the Company views as unrelated to its normalized
operations. These items primarily include securities gains/losses, merger costs,
restructuring costs, goodwill impairment, and discontinued operations. Merger
costs consist primarily of severance/benefit related expenses, contract
termination costs, systems conversion costs, variable compensation expenses, and
professional fees. Restructuring costs generally consist of costs and losses
associated with the disposition of assets and liabilities and lease
terminations, including costs related to branch sales. Restructuring costs also
include severance and consulting expenses related to the Company's strategic
review.

The Company also calculates adjusted earnings per share based on its measure of
adjusted earnings and diluted common shares. The Company views these amounts as
important to understanding its operating trends, particularly due to the impact
of accounting standards related to merger and acquisition activity. Analysts
also rely on these measures in estimating and evaluating the Company's
performance. Expense adjustments in 2021 were primarily related to branch
consolidations. Net losses on securities in 2022 were primarily due to
unrealized equity securities losses due to changes in market conditions.

Management believes that the computation of non-GAAP adjusted earnings and adjusted earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The following table summarizes the reconciliation of non-GAAP items recorded for
the periods indicated:
                                                                           At or for the Three Months         At or for the Six
                                                                                 Ended June 30,             Months Ended June 30,
(In thousands)                                                                 2022            2021           2022          2021
GAAP Net income                                                          $ 

23,115 $ 21,636 $ 43,311 $ 34,667 Adj: Net losses on securities (1)

                                                973              484         1,718            515

Adj: Restructuring and other expense                                              35                6            53          3,492

Adj: Income taxes                                                               (561)             (22)         (731)          (555)
Total adjusted income/(loss) (non-GAAP) (2)                          (A) $  

23,562 $ 22,104 $ 44,351 $ 38,119


GAAP Total revenue                                                       $  

97,709 $ 97,404 $ 187,453 $ 198,690 Adj: Losses on securities, net (1)

                                               973              484         1,718            515

Total operating revenue (non-GAAP) (2)                               (B) $  

98,682 $ 97,888 $ 189,171 $ 199,205


GAAP Total non-interest expense                                          $  

68,475 $ 68,872 $ 137,025 $ 147,026 Less: Total non-operating expense (see above)

                                    (35)              (6)          (53)        (3,492)

Operating non-interest expense (non-GAAP) (2)                        (C) $  

68,440 $ 68,866 $ 136,972 $ 143,534


(In millions, except per share data)
Total average assets                                                 (D) $  

11,260 $ 12,417 $ 11,376 $ 12,442 Total average shareholders' equity

                                   (E)       1,182            1,174         1,185          1,166
Total average tangible shareholders' equity                          (F)       1,155            1,141         1,157          1,133

(2)

Total average tangible common shareholders'                          (G)       1,155            1,141         1,157          1,133
equity (2)
Total tangible shareholders' equity,                                 (H)         987            1,143           987          1,143
period-end (2)(3)
Total tangible common shareholders' equity,                          (I)         987            1,143           987          1,143
period-end (2)(3)
Total tangible assets, period-end (2)(3)                             (J)      11,552           12,241        11,552         12,241
Total common shares outstanding, period-end                          (K)      45,788           50,453        45,788         50,453

(thousands)

Average diluted shares outstanding (thousands)                       (L)      46,102           50,608        47,074         50,588

Earnings per common share, diluted                                       $  

0.50 $ 0.43 $ 0.92 $ 0.69 Adjusted earnings per common share, diluted

                        (A/L)        0.51             0.44          0.94           0.75

(2)

Book value per common share, period-end                                        22.15            23.30         22.15          23.30
Tangible book value per common share,                              (I/K)       21.56            22.66         21.56          22.66
period-end (2)
Total shareholders' equity/total assets                                         8.76             9.57          8.76           9.57
Total tangible shareholder's equity/total                          (H/J)        8.54             9.34          8.54           9.34
tangible assets (2)

Performance ratios (4)
GAAP return on equity                                                           7.82    %        7.37  %       7.31   %       5.95  %
Adjusted return on equity (2)                                      (A/E)        7.97             7.53          7.49           6.54
Return on tangible common equity (2)(5)                                         8.33             7.92          7.81           6.46
Adjusted return on tangible common equity                      (A+O)/(G)        8.48             8.08          7.99           7.07
(2)(5)
GAAP return on assets                                                           0.82             0.70          0.76           0.56
Adjusted return on assets (2)                                      (A/D)        0.84             0.71          0.78           0.61
Efficiency ratio (2)                                       (C-O)/(B+M+P)       66.60            67.82         69.48          69.60


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(in thousands)
Supplementary data (In thousands)
Tax benefit on tax-credit investments (6)               (M) $      595    $        79    $   1,191    $      120
Non-interest income charge on tax-credit                (N)       (351)          (175)        (708)         (207)
investments (7)
Net income on tax-credit investments                  (M+N)        244            (96)         483           (87)

Intangible amortization                                 (O)      1,286          1,297        2,572         2,616
Fully taxable equivalent income                         (P)      1,560          1,660        3,084         3,154
adjustment


_________________________________________________________________________________________

(1)   Net securities losses for the periods ending June 30, 2022 and 2021
include the change in fair value of the Company's equity securities in
compliance with the Company's adoption of ASU 2016-01.
(2)  Non-GAAP financial measure.
(3)  Total tangible shareholders' equity is computed by taking total
shareholders' equity less the intangible assets at period-end. Total tangible
assets is computed by taking total assets less the intangible assets at
period-end.
(4)   Ratios are annualized and based on average balance sheet amounts, where
applicable.
(5)   Adjusted return on tangible common equity is computed by dividing the
total adjusted income adjusted for the tax-affected amortization of intangible
assets, assuming a 27% marginal rate, by tangible equity.
(6)   The tax benefit is the direct reduction to the income tax provision due to
tax credits and deductions generated from investments in historic rehabilitation
and low-income housing.
(7)   The non-interest income charge is the reduction to the tax-advantaged
commercial project investments, which are incurred as the tax credits are
generated.

                                                                            

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GENERAL
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company. The following discussion and analysis
should be read in conjunction with the Company's consolidated financial
statements and the notes thereto appearing in Part I, Item 1 of this document
and with the Company's consolidated financial statements and the notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the 2021 Annual Report on Form 10-K. In the following
discussion, income statement comparisons are against the same period of the
previous year and balance sheet comparisons are against the previous fiscal
year-end, unless otherwise noted. Operating results discussed herein are not
necessarily indicative of the results for the year 2022 or any future period. In
management's discussion and analysis of financial condition and results of
operations, certain reclassifications have been made to make prior periods
comparable. References to loan categories in the financial statements are based
on collateralization.

Tax-equivalent adjustments are the result of increasing income from
tax-advantaged loans and securities by an amount equal to the taxes that would
be paid if the income were fully taxable based on a 27% marginal rate (including
state income taxes net of federal benefit). In the discussion, unless otherwise
specified, references to earnings per share and "EPS" refer to diluted earnings
per common share.

Berkshire Hills Bancorp, Inc. ("Berkshire" or "the Company") is a Delaware
corporation headquartered in Boston and the holding company for Berkshire Bank
("the Bank"). Established in 1846, the Bank operates as a commercial bank under
a Massachusetts trust company charter. The Bank seeks to transform what it means
to bank its neighbors socially, humanly, and digitally to empower the financial
potential of people, families, and businesses in its communities as it pursues
its vision of being a leading socially responsible omni-channel community bank
in New England and beyond. Berkshire Bank provides business and consumer
banking, mortgage, wealth management, and investment services. Headquartered in
Boston, Berkshire has approximately $11.6 billion in assets and operates 105
branch offices in New England and New York.

FORWARD-LOOKING STATEMENTS


Certain statements contained in this document that are not historical facts may
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (referred to as the Securities Act), and
Section 21E of the Securities Exchange Act of 1934, as amended (referred to as
the Securities Exchange Act), and are intended to be covered by the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, including
statements regarding our outlook for earnings, net interest margin, fees,
expenses, tax rates, capital and liquidity levels and other matters regarding or
affecting Berkshire and its future business or operations. You can identify
these statements from the use of the words "may," "will," "should," "could,"
"would," "outlook," "plan," "potential," "estimate," "project," "believe,"
"intend," "anticipate," "expect," "target" and similar expressions. Such
statements further include statements about expectations regarding inflation and
interest rates, economic activity, supply chains, the Russian invasion of
Ukraine, market conditions, and stock repurchases.

These forward-looking statements are subject to significant risks, assumptions
and uncertainties, including among other things, changes in general economic and
business conditions, increased competitive pressures, inflation and changes in
the interest rate environment that reduce our margins and yields, reduce the
fair value of financial instruments or reduce our volume of loan originations,
or increase the level of defaults, losses and prepayments on loans we have made
and make whether held in portfolio or sold in the secondary market, legislative
and regulatory change, changes in the financial markets, the effects of the
COVID-19 pandemic, including impacts on the Company, its customers, and the
communities where it operates, international conflict in Europe and elsewhere,
and other risks and uncertainties disclosed from time to time in documents that
Berkshire Hills Bancorp files with the Securities and Exchange Commission,
including the Risk Factors included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2021, as updated by subsequent Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K.

In addition, Berkshire's past results of operations do not necessarily indicate
Berkshire's combined future results. You should not place undue reliance on any
of the forward-looking statements, which speak only as of the dates on which
they were made. Berkshire is not undertaking an obligation to update
forward-looking statements, even though its situation may change in the future,
except as required under federal securities law. Berkshire qualifies all of its
forward-looking statements by these cautionary statements.
                                                                            

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SUMMARY


Berkshire's revenue and earnings advanced in the most recent quarter as the
Company has begun to generate improved growth and profitability under its BEST
strategic plan which was initiated at midyear 2021. Results have also benefited
from a strong credit environment and from market interest rate increases which
began after the start of 2022. The Company's interest rate risk profile is
positioned to benefit earnings from further interest rate increases expected by
the markets through the rest of the year.

The BEST plan targeted getting better before getting bigger, and this was a
primary focus in the second half of 2021 as various expense and profitability
initiatives were undertaken and less strategic operations were ended, including
the sale of Mid-Atlantic branch operations and insurance operations in the third
quarter of 2021. The refocus on core markets and operations and the reinvestment
of resources into frontline bankers and technology contributed to the resumption
of loan growth in 2022. Share repurchases over the last year to return excess
capital to shareholders produced a 9% decrease in outstanding shares over the
last twelve months, which has further supported growth in per share earnings and
return on equity.

Earnings per share (on a diluted basis) increased year-over-year by 16% to $0.50
in the second quarter and by 33% to $0.92 in the first half of the year. The key
profitability metrics tracked by the Company under its BEST plan improved
year-over-year in the second quarter. Second quarter 2022 return on assets
measured 0.82% and return on tangible common equity measured 8.3%. The measure
of pre-tax pre-provision net revenue increased year-over-year by 2% and totaled
$117 million on an annualized basis in the most recent quarter.

Second quarter 2022 financial highlights are shown below. Comparisons are year-over-year unless otherwise noted:


•16% increase in EPS
•Broad-based increase in total loans since year-end 2021 based on both
end-of-period and average balances
•3.11% net interest margin, increased from 2.62%
•8% increase in net interest income
•1% decrease in non-interest expense (generally stable over last five quarters)
•0.02% net charge-offs/average loans
•0.25% non-performing assets/assets - sixth sequential quarterly improvement
•$100 million investment grade subordinated debt issuance - first Sustainability
Bond issued by a public U.S. community bank
•9% reduction in period-end shares outstanding year-over-year reflecting stock
buybacks

Credit metrics remained strong and improving, and earnings benefited from a
release of the credit loss allowance in the first quarter of 2022, and no
provision expense in the most recent quarter. The allowance continues to provide
comparatively strong coverage of the loan portfolio. The Company's balance sheet
positioning includes:

•Significant liquidity available through short and long term investments and
off-balance sheet sources. Loans/deposits measured 77% at midyear
•Positive asset sensitivity to rising interest rates, with a 4% modeled benefit
to first year net interest income compared to a static scenario in the event of
a 100 basis point upward shock to net interest income
•Stock repurchase plan approved for up to $140 million in repurchases, with $84
million completed in the first half of 2022
•Strong regulatory capital metrics, with a 12.9% period-end common equity tier 1
capital ratio

During the second quarter of 2022, Moody's Investors Service assigned first time
issuer ratings with an investment grade rating of Baa3 to Berkshire Hills
Bancorp and Berkshire Bank, with a positive outlook. Moody's assigned an A3
long-term deposit rating to the Bank. Also, in the second quarter, KBRA (Kroll
Bond Rating Agency) affirmed senior unsecured investment grade ratings of BBB
for Berkshire Hills Bancorp and BBB+ for Berkshire Bank, with a stable outlook.
KBRA affirmed a BBB+ deposit rating for the Bank. In conjunction with the
issuance of its subordinated Sustainability Bond, the Company implemented its
Sustainable Financing Framework, which received a favorable rating from
Sustainalytics, a leading ESG ratings firm.

                                                                            

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In accordance with its BEST plan, Berkshire continued recruiting front line
bankers and developing technology initiatives in the first half of 2022. The
Company continues to promote employees from within the organization and to bring
on board knowledgeable bankers to deepen long-term relationships with its
customers. Berkshire Bank recently announced an expanded partnership with
fintech Narmi to create a best-in-class digital banking experience for consumers
and small businesses, which is targeted for implementation in 2023. For more
information about the BEST plan, please see Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's most
recent report on Form 10-K.

Since year-end 2021, inflation has continued to accelerate, reaching 9.1% for
the twelve months ended June 2022. In response, the Federal Reserve Bank has
embarked on monetary tightening policies, resulting in increased interest rates.
The Federal Reserve has indicated that further tightening is anticipated.

As of July 28, 2022, GDP was reported as declining for the first two quarters of
2022. Business conditions remained relatively favorable through midyear 2022 in
the Company's markets. The Company is pursuing its plans for growth under its
BEST plan based on its favorable niche in a consolidating regional market and
its distinctive strategy based on its DigitouchSM approach to customer
engagement and its community service message that where you bank matters.


                                                                            

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COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2022 AND DECEMBER 31, 2021

Summary: Total assets were unchanged at $11.6 billion at midyear 2022, compared
to year-end 2021. A $1.0 billion increase in loans was funded by a $0.8 billion
reduction in cash and equivalents and a $0.2 billion reduction in investment
securities. Cash and cash equivalents decreased to 8% of assets from 14%. Major
measures of asset quality continued to strengthen and generally were improved
over pre-pandemic levels.

Total deposits were stable and the loan/deposit ratio increased to 77% from 68%.


Berkshire issued an investment grade rate $100 million subordinated note
offering which was the first public community bank Sustainability Bond issued in
the U.S. Shareholders' equity decreased by $168 million including the impact of
$120 million in after-tax unrealized bond losses and $84 million in common stock
repurchases. The ratio of tangible common equity to tangible assets decreased to
8.5% from 10.0%. The ratio of common equity tier one capital to risk weighted
assets decreased to 12.9% from 15.0%. The Company views its liquidity and
capital, including the contribution of retained earnings, as well positioned to
support ongoing organic growth and shareholder distributions.

Sustainability Bond Issuance: On June 30, 2022, Berkshire completed the sale at
par of $100 million in subordinated notes bearing interest at a fixed rate of
5.5% for the first five years. The notes will then reset quarterly to a floating
rate per annum equal to a benchmark rate which is expected to be the Three-Month
Term SOFR, plus 249 basis points. The notes have a ten year final maturity and
generally may be called at par after five years. The Company has $75 million in
existing subordinated notes bearing interest at 6.875% which are callable at par
on September 28, 2022, which the Company intends to call.

Berkshire is the first public U.S. community bank holding company with under
$150 billion in total assets to issue a Sustainability Bond. The Company intends
to use an amount equal to the net proceeds of its sustainability bond issuance
to finance or refinance new or existing social and environmental projects
consistent with its Sustainable Financing Framework. Sustainalytics, a
Morningstar Company, and the global leader in high-quality ESG research,
ratings, and data, has independently verified that Berkshire's Sustainable
Financing Framework" is credible and impactful and in alignment with"
International Capital Market Association (ICMA) guidelines and principles.

Investments: The portfolio of investment securities decreased by $219 million,
or 9%, to $2.33 billion during the first half of the year primarily due to the
decrease in the fair value of available for sale securities resulting from
interest rate increases in the first half of 2022. The unrealized loss on
securities available for sale increased from $4 million, or 0.2% of book value,
at year-end 2021 to $165 million, or 8.9% of book value, at midyear 2022. The
average life of the bond portfolio increased to 6.5 years from 4.6 years due
primarily to slower prepayments of mortgage related securities in the rising
rate environment. The investment portfolio is viewed as a significant source of
liquidity for the Bank, as 93% of the $1.7 billion available for sale portfolio
consists of Agency mortgage related products and Treasury notes. The investment
portfolio yield was 1.97% in the second quarter of 2022, which was down from
2.04% in the fourth quarter of 2021, including the impact of treasury securities
held pending planned loan growth.

Loans: Total loans increased by $978 million, or 14%, to $7.8 billion in the
first half of 2022, including 7% growth in each of the two quarters. This
increase offset attrition in the second half of 2021, with the result that
second quarter average loans increased by 1% year-over-year. Loans increased in
all major categories as a result of the Company's BEST initiatives in the second
half of 2021 which included stronger production from frontline bankers, talent
recruitment, and channel expansion. Prepayments slowed in the rising rate
environment. The Company anticipates that loan growth may moderate in the second
half of the year compared to the first half.

Commercial real estate loans increased in the first half by $322 million, or 9%,
including a $116 million increase in multifamily loans and a $171 million
increase in non-owner occupied property loans. Commercial and industrial loans
grew by $141 million, or 11%, which was driven by increased asset-based lending
which reflected both account growth and higher line usage. The Company continues
to maintain its commercial underwriting standards and growth is managed within a
detailed system of hold limits based on industry and loan type. Variable rate
loan underwriting includes a test of debt service coverage for up to a 300 basis
point upward interest rate shock, and many commercial borrowers use interest
rate swaps to reduce the risk of rising interest rates. After the end of the
most recent quarter, the Company announced that it will cease originating new
loans in its Firestone Financial
                                                                            

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specialty lending operation and allow the portfolio to run-off. This was a
strategic decision in the context of Berkshire's BEST plan to focus on core
markets and products. The Firestone portfolio stood at $165 million at midyear
2022 and continues to have strong credit performance in line with its long
history.

Residential mortgage loans increased by $427 million, or 31%, in the first half
of the year. In accordance with its BEST initiative, Berkshire invested in
expanding its retail originations team and its correspondent platform. The
Company also purchased residential mortgages from area lenders. Most mortgage
originations were held for investment; the Company targets to expand the retail
origination of loans held for sale in the second half of the year.

Consumer loans increased by $87 million, or 17%, in the first half of the year.
Growth was driven by consumer unsecured loans originated through the Company's
partnership with the fintech Upstart. This portfolio totaled $152 million at
midyear, and most of these loans were originated during the first half of the
year and were generally subject to the Company's prime underwriting standards.
In July 2022 the Company announced that, due to the prevailing economic
uncertainty, it will cease new originations through this partnership. Credit
performance of this portfolio has exceeded the Company's expectations.

The yield on the loan portfolio increased to 3.99% in the second quarter of 2022
from 3.76% in the fourth quarter of 2021 due primarily to the impact of rising
interest rates on prime and LIBOR indexed loans. Loans repricing within three
months totaled $3.3 billion, or 42% of total loans at midyear 2022. The Company
anticipates that further increases in market interest rates will lead to higher
loan yields in future periods.

Asset Quality and Credit Loss Allowance: Major asset quality metrics improved in
the first half of 2022, with many metrics improving to better levels than
pre-pandemic. Non-accruing loans decreased to 0.34% of total loans at midyear,
totaling $27 million, of which $8 million was added in the first half of the
year. Annualized net loan charge-offs declined to 0.02% of average loans in the
most recent quarter. Accruing delinquent loans measured 0.55% of total loans at
midyear, compared to 0.63% at year-end 2021. At midyear, accruing troubled debt
restructurings totaled $9 million and accruing loans over 90 days delinquent
totaled $7 million. Total criticized loans decreased to 2.7% of loans from 3.5%
of loans, including classified loans which decreased to 2.0% of loans from 2.1%
of loans. Classified loans include accruing substandard loans, which are
regarded as potential problem loans and which remained unchanged at 1.6% of
total loans.

The allowance for credit losses on loans decreased in the first half of 2022 to
$99 million from $106 million. The ratio of the allowance to total loans
decreased to 1.27% from 1.55%. This decline was primarily due to improvements in
the qualitative factors of the allowance methodology mainly as a result of
improved asset quality metrics. It also reflected a reduction in the potential
losses from economic and social disruptions related to COVID-19 conditions.
Considering loan and allowance balances, the magnitude of the improvement was
most reflected in the allowances related to residential mortgages, commercial
non-owner occupied property loans, multifamily loans, and construction loans.
This was partially offset by higher consumer reserves related to the consumer
unsecured lending during the period.

                                                                            

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Deposits and Borrowings: Total deposits of $10.1 billion were unchanged at
midyear 2022 compared to year-end 2021. A mix shift between NOW and money market
balances was primarily due to the timing of payroll cycles as they affect the
Company's payroll deposit business. Payroll deposits totaled $1.3 billion at
midyear 2022 compared to $1.0 billion at year-end 2021. The Company has been
reducing its brokered deposits, which decreased to $113 million from $228
million on these respective dates. The Company evaluates its total deposits
adjusted to exclude payroll and brokered deposits in evaluating its market
activities. These adjusted deposits totaled $8.7 billion at midyear 2022, which
was a 1% decrease from $8.8 billion at year-end 2021. This includes the impact
of increased customer spending rates as well as market competition from higher
yielding investment instruments in the rising interest rate environment. The
cost of deposits decreased to 0.17% in the second quarter of 2022 from 0.19% in
the fourth quarter of 2021. This included the benefit of maturing higher cost
time deposits, including brokered deposits. The Company anticipates that further
increases in market interest rates will lead to higher deposit costs in future
periods. Borrowings increased primarily due to the subordinated note offering
previously described. This offering was completed on June 30, 2022, and the
proceeds were held in cash and cash equivalents at that date. The Company has a
$75 million subordinated debt obligation bearing interest at 6.875% which
becomes callable in September 2022. The Company expects to call this instrument
at par after it becomes callable.

Derivative Financial Instruments: There were no material changes in the
portfolio of outstanding derivative financial instruments, which totaled $3.8
billion in notional amount at period-end. The estimated fair value of these
instruments was a liability of $18 million at period-end, which decreased from
an asset of $43 million at year-end 2021 due to the impact of changes in
interest rates on the value of outstanding commercial loan interest rate swaps.

Please see the Company's most recent report on Form 10-K for additional information regarding the LIBOR transition.


Shareholders' Equity: Total shareholders' equity decreased by $168 million, or
14%, to $1.01 billion during the first half of 2022. This included the impact of
$84 million in stock repurchases pursuant to the Company's $140 million
authorized repurchase program, leaving $56 million in remaining repurchases
authorized by year-end 2022.

Shareholders' equity also decreased due to the impact of fair market value
discounts on the available for sale securities portfolio as previously
described. The after-tax impact of these charges totaled $120 million for the
first six months of 2022, which was recorded to the accumulated other
comprehensive loss component of shareholders' equity. Of note, the charge for
bond discounts is accreted back into equity as the related securities amortize
over the 6.5 year average life of the related securities.

The Company's 7.3% return on equity in the first half of 2022 partially offset the reductions described above, net of $0.12 per share in quarterly common dividends, which represented a 25% payout of first half earnings.


The 2022 first half decrease to 8.5% from 10.0% in the ratio of tangible common
equity to tangible assets reflected the reduction in equity compared to stable
assets. The charge to equity related to bond value discounts is not included as
a component of the calculation of regulatory equity, which is the Company's
primary focus in capital management. The increase in loans in 2022 had an impact
of increasing the regulatory measure of risk weighted assets. Including this
impact, together with stock repurchase impact, the ratio of common equity tier
one capital to risk weighted assets decreased to 12.9% from 15.0%. The Company
monitors the impacts of rising rates, credit stress scenarios, and organic
growth in assessing its capital adequacy and plans. The Company's capital ratios
were viewed by management as strong at midyear 2022. At that date, book value
per share totaled $22.15 and tangible book value per share totaled $21.56.

                                                                            

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COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
AND JUNE 30, 2021

Summary: Berkshire's second quarter net income increased year-over-year by 7% to
$23 million. Net interest income increased by 8% year-over-year reflecting the
Company's BEST strategy to reinvest resources into balance sheet growth which
has also benefited from the rising interest rate environment.

First half net income increased year-over-year by 25% to $43 million due
primarily to a $7 million year-over-year improvement in first quarter results.
This reflected a benefit recorded to the first quarter 2022 credit loss
provision as well as a decline in non-interest expense from elevated costs in
the first quarter of 2021.

On a per share basis, second quarter net income increased by 16% to $0.50. First
half per share results increased by 33% to $0.92 per diluted share. Per share
earnings benefited from share repurchases over these periods, with average
diluted shares decreasing year-over-year by 9% in the second quarter and by 7%
for the first half of the year.

Non-GAAP financial measures are discussed above in the section of "Non-GAAP Financial Measures". Quarterly adjusted EPS was $0.01 higher than GAAP results in 2021 and 2022 except for the first quarter of 2021, which had elevated restructuring charges. First half adjusted EPS increased by 25% to $0.94 in 2022.


Total second quarter net revenue was unchanged year-over-year at approximately
$97.5 million, and second quarter non-interest expense decreased by 1% to $68.5
million. For the first half of the year, total revenue decreased by 6%, to $187
million and non-interest expense decreased by 7% to $137 million. Year-over-year
changes in revenue and expense include the impact of insurance and branch
operations sold near the end of the third quarter of 2021. The second quarter
efficiency ratio in 2022 measured 66.6%, compared to 67.8% in 2021. The
Company's overall strategy is to reinvest expense savings into bankers and
technology to support higher future revenue in the context of its BEST plan.

Net Interest Income: Second quarter net interest income increased year-over-year
by 8%, to $81 million. First half net interest income was unchanged at $150
million in both years. Due primarily to loan runoff, this income decreased
sequentially in the quarters following the second quarter of 2021, declining to
$69 million in the first quarter of 2022 before rebounding in the most recent
quarter due primarily to 2022 loan growth and market interest rate increases.

The net interest margin increased to 3.11% in the second quarter of 2022,
compared to 2.62% in the second quarter of 2021. This reflected a 38 basis point
improvement in the earning asset yield and a 12 basis point reduction in the
cost of funds. The earning asset yield improvement reflected a 15 basis point
improvement in the loan yield due primarily to rising interest rates, as well as
the reduction in low yielding short-term investments. The cost of funds
improvement was primarily due to reductions of higher cost wholesale funds,
along with a shift in retail deposits from higher cost time accounts into other
lower cost deposit accounts.

Second quarter 2022 net interest income increased by 18% over the linked
quarter, mirroring the 19% quarter-over-quarter change in the net interest
margin to 3.11% from 2.61%. Net interest income responded rapidly to the market
rate increases, while also benefiting from stable deposit costs and from loan
growth. At midyear 2022, the Company remained asset sensitive and was positioned
to benefit from further increases in market interest rates in 2022 based on
market forecasts. This is discussed below in Item 3 "Quantitative and
Qualitative Disclosures About Market Risk".

Non-Interest Income: Non-interest income decreased year-over-year by 26% to $16
million in the second quarter and by 23% to $37 million for the year-to-date.
This decrease included the elimination of insurance revenue in 2022 following
the sale of these operations in the third quarter of 2021. The decrease was also
impacted by a decline in loan fees and revenues from elevated levels in 2021.
Higher loan related revenues in 2021 included elevated SBA related income which
benefited from pandemic related SBA program changes. 2021 first quarter results
also benefited from PPP referral fees earned during the second round of the PPP
loan program that operated in the first half of last year.

                                                                            

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Despite the sale of the Mid-Atlantic branch operations in the third quarter of
2021, first half deposit related fees advanced year-over-year by 5%, and wealth
management fees grew by 2%. Mortgage banking revenue declined as 2022
originations were mostly held for investment. Higher securities losses in 2022
primarily related to fair market value discounts on bond instruments held in
mutual funds.

Provision for Credit Losses on Loans: There was no provision for credit losses
on loans recorded in the second quarter of 2022 and 2021. As a result of first
quarter activity, for six months the provision was a benefit of $4 million in
2022 and an expense of $6 million in 2021. The year-over-year improvement
reflects the improved credit performance and outlook as previously discussed
regarding the allowance for credit losses on loans. If
significant recession conditions emerge, under the current expected credit
losses methodology, the potential emergent future losses could be reflected in
future provision expense.

Non-Interest Expense and Tax Expense: Non-interest expense decreased
year-over-year by 1% to $68.5 million in the second quarter and by 7% to $137
million in the first half. First quarter 2021 expenses included $3 million in
non-operating related restructuring charges, and $3 million in elevated
professional services expense for legal, financial, and other advisory services
related to management and board matters in that period. Excluding the above
items, first half non-interest expense decreased by 2% year-over-year.

Expense spending in 2022 has benefited from branch consolidations and
restructuring activities, as well as the sale of the Mid-Atlantic branch
operations and insurance operations in the third quarter of 2021. Second quarter
spending changes illustrate disciplined growth in compensation and technology
expense which was offset by lower occupancy expense. This is in alignment with
the BEST plan to reinvest savings from efficiency initiatives into bankers and
technology. The Company is in the process of consolidating 5 of the current 105
branch offices during the second half of 2022, and is moving forward with plans
to reduce other real estate properties as part of its hybrid workforce
initiative to reduce occupancy costs in conjunction with its work from home
initiatives.

Full-time equivalent staff totaled 1,322 positions at period-end, compared to
1,319 positions at the start of the 2022 and 1,505 positions at the start of
2021.

The first half effective tax rate was 20% in 2022 compared to 23% in 2021 and
compared to 20% for the full year 2021. The higher rate in the first half of
2021 reflected a delay in the initiation of tax credit investments which
benefited the tax rate in the second half of the year. The full year rate in
2021 included the impact of the pre-tax income from the sale of business
operations in the third quarter. In 2022, higher pre-tax income in the first
half relates to organic growth in earnings.

Total Comprehensive Income: Total comprehensive income includes net income
together with other comprehensive income, which primarily consists of unrealized
gains/losses on debt securities available for sale, after tax. Total first half
comprehensive income was a loss of $76 million in 2022, compared to income of
$19 million in 2021, reflecting the impact in both periods of rising medium term
interest rates on the bond portfolio.

Liquidity and Cash Flows: Please see ""Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Cash
Flows" in the most recent report on Form10-K for a more expansive discussion of
these topics.

For the first half of 2022, loan growth was the primary use of cash, which was
primarily sourced from short-term investments and investment securities. The
ratio of cash and cash equivalents decreased to 8% from 14% over this period.
Cash included $100 million raised through the subordinated note offering at
period-end. The Company expects to call its preexisting $75 million subordinated
notes at par after they become callable.

Brokered deposits were reduced by $115 million in the first half, and had a $113
million remaining balance at midyear. The Company borrowed $50 million in FHLBB
advances near the end of the period. Unused FHLBB borrowing availability stood
at $1.3 billion at midyear. Cash at the parent company stood at $173 million at
midyear 2022.

The Company continues to view itself as having sufficient liquidity with a high
quality and liquid securities portfolio and well-positioned wholesale funding
sources. The new Moody's ratings introduced during the quarter, including the A3
long-term bank deposit rating, support Berkshire's liquidity profile. The
stability of deposit costs
                                                                            

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during the first half of the year has also been positive as an indicator of core
funding stability in the Company's markets.

Capital Resources: Please see the "Shareholders' Equity" section of the
Comparison of Financial Condition for a discussion of shareholders' equity
together with Note 10 - Capital Ratios and Shareholders' Equity in the notes to
the consolidated financial statements. Additional information about capital
resources and regulatory capital is contained in the notes to the consolidated
financial statements and in the Company's most recent Form 10-K.

The Company's BEST plan includes the optimization of capital, including reducing
excess capital through organic growth and capital returns to shareholders. The
operation of this plan was evidenced in the first half of the year through the
14% loan growth and $84 million in share repurchases. Capital optimization was
also supported through the subordinated debt issuance, reducing the coupon
compared to the present debt which is planned to be repaid later in 2022.

The Company primarily focuses on regulatory capital measures in assessing
capital, including the common equity Tier 1 capital ratio. This ratio stood at
12.9% at midyear, compared to the general 11% target established in the BEST
plan. Including its improved profitability, the Company continues to pursue its
capital management goals within its BEST strategy. This also includes ongoing
assessment of the shareholder cash dividend in relationship to earnings and to
competitive practices.

In acting as a source of strength for the Bank, the Company relies in the long
term on capital distributions from the Bank in order to provide operating and
capital service for the Company, which in turn can access national financial
markets to provide financial support to the Bank. Capital distributions from the
Bank to the parent company presently require approval by the FDIC and the
Massachusetts Division of Banking. Increased distributions from the Company to
shareholders require notice to and nonobjection from the Federal Reserve Bank.

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. Berkshire provides an ecosystem of socially responsible financial
solutions, actively engages with its communities, and harnesses the power of its
business to support the economy, empower financial access and success, and
invest in a low-carbon future.

ESG factors are integral to our vision, mission, risk management practices, and
Berkshire's Exciting Strategic Transformation (BEST). Because our vision is to
be a high-performing, leading socially responsible community bank in New England
and beyond, we were one of the first banks in the country to establish a
dedicated committee of our Board of Directors to oversee ESG matters and the a
leader among community banks in integrating ESG standards into our business
strategy and operations.

We continue to engage directly with our 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.

Climate Change & Sustainability


Climate change poses unprecedented risks and opportunities to the world.
Berkshire expects that its efforts to manage its environmental footprint,
mitigate the risks and impacts associated with climate change, and finance 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.

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Key ESG & Corporate Responsibility Quarterly Developments


•Sustainability Bond: Berkshire completed the public offering and sale of its
inaugural $100 million Sustainability Bond becoming the first U.S. community
bank holding company with under $150 billion in assets to issue a Sustainability
Bond. The Company intends to use an amount equal to the amount of the offering
to finance or refinance projects consistent with the Company's Sustainable
Financing Framework including renewable electricity generation; green buildings;
renewable energy technology, storage and manufacturing; energy efficiency in
commercial, residential and public buildings; affordable housing; workforce
housing; and financial inclusion and access activities.

•BEST Community Comeback & Comeback Tour: Company executives completed visits to
each of its markets across five states including every branch meeting with
stakeholders to highlight its "BEST Community Comeback" commitment. The
multi-year plan focuses on four key areas: fueling small businesses, community
financing and philanthropy, financial access and empowerment, and funding
environmental sustainability. As a result of the collective efforts of its
employees, Berkshire is making steady progress towards the achievement of its
goals. Additional information can be found at berkshirebank.com/comeback.

•Launch of the Center for Women, Wellness and Wealth: Berkshire launched the
Center for Women, Wellness, and Wealth (CWWW) to provide tools that instill
greater confidence and create a future for women enriched with financial
stability, balance and growth. The Center, through partnerships with community
organizations, specialized experts and thought leaders, will offer events on
wellness and financial planning, philanthropic coaching and development support,
and complimentary portfolio reviews through Berkshire Bank Wealth Management.

•Xtraordinary Day: The Company completed its signature Xtraordinary Day of
service on June 8 during which the Bank closed its offices for the afternoon to
give back to the community. This year, Berkshire Bank partnered with 39
non-profit organizations and over 1,000 Berkshire Bankers, 80% of the Company,
invested the afternoon volunteering for 46 community projects across MA, NY, CT,
RI, and VT. In total, employees contributed over 5,000 hours of service.

•Current ESG Performance: The Company maintained its top 22% performance in
leading ESG indexes in the U.S. for its Environmental, Social and Governance
(ESG) ratings. As of June 30, 2022 the Company has ratings of: MSCI ESG- BBB;
ISS ESG Quality Score - Environment: 2, Social: 1, Governance: 2; and Bloomberg
ESG Disclosure- 59.62. The Company is also rated by Sustainalytics. Berkshire's
increased score from Bloomberg moved it into the top ranking for U.S. banks.


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APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company's significant accounting policies are described in Note 1 to the
consolidated financial statements
included in its most recent Annual Report on Form 10-K. Modifications to
significant accounting policies made during the year are described in Note 1 to
the consolidated financial statements included in Item 1 of this report. The
preparation of the consolidated financial statements in accordance with GAAP and
practices generally applicable to the financial services industry requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues, and expenses, and to disclose contingent assets
and liabilities. Actual results could differ from those estimates.

Management has identified the Company's most critical accounting policies as related to:

• Allowance for Credit Losses on Loans

• Fair Value Measurements


These policies are considered most critical in that they are important to the
Company's financial condition and results, and they require management's
subjective and complex judgment as a result of the need to make estimates about
the effects of matters that are inherently uncertain. Both of these policies
were significant in determining income and financial condition in the financial
statements. There is further discussion of the application of these policies in
the Form 10-K.


ENTERPRISE RISK MANAGEMENT
Following sections of this report on Form 10-Q include discussion of market risk
and risk factors. Risk management is overseen by the Company's Chief Risk
Officer, who reports directly to the CEO. This position oversees risk
management policy, credit, loan review, 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, Capital, and Compliance Committee. The high level
corporate risk assessment includes 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.


                                                                            

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07/29Berkshire Hills Bancorp : Announces Quarterly Shareholder Dividend - Form 8-K
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