Financial information

BERKSHIRE HILLS BANCORP INC MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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 September 30,             Nine Months Ended September 30,
                                                              2022                   2021                  2022                   2021
NOMINAL AND PER SHARE DATA
Net earnings per common share, diluted                 $          0.42           $    1.31          $          1.34           $    1.97
Adjusted earnings per common share, diluted (1)(2)                0.62                0.53                     1.56                1.28
Net income, (thousands)                                         18,717              63,749                   62,028              98,416
Adjusted net income, (thousands) (1)(2)                         27,928              25,695                   72,279              63,814
Total common shares outstanding, (thousands)                    45,040              48,657                   45,040              48,657
Average diluted shares, (thousands)                             45,034              48,744                   46,396              49,963
Total book value per common share                                20.93               24.21                    20.93               24.21
Tangible book value per common share (2)                         20.36               23.58                    20.36               23.58
Dividends per common share                                        0.12                0.12                     0.36                0.36
Full-time equivalent staff, continuing operations                1,300               1,333                    1,300               1,333

PERFORMANCE RATIOS (3)
Return on equity                                                  6.30   %           22.18  %                  6.97   %           11.30  %
Adjusted return on equity (1)(2)                                  9.40                8.94                     8.12                7.33
Return on tangible common equity (1)(2)                           6.76               23.14                     7.46               11.97
Adjusted return on tangible common equity (1)(2)                  9.92                9.53                     8.64                7.88
Return on assets                                                  0.66                2.14                     0.73                1.07
Adjusted return on assets (1)(2)                                  0.99                0.86                     0.85                0.69
Net interest margin, fully taxable equivalent (FTE)               3.48                2.56                     3.05                2.60
(4)(5)
Efficiency ratio (1)(2)                                          62.01               68.76                    66.75               69.32

FINANCIAL DATA (in millions, end of period)
Total assets                                           $        11,317           $  11,846          $        11,317           $  11,846
Total earning assets                                            10,604              11,145                   10,604              11,145
Total loans                                                      7,943               6,836                    7,943               6,836

Total deposits                                                   9,988              10,365                    9,988              10,365
Loans/deposits (%)                                                  80   %              66  %                    80   %              66  %

ASSET QUALITY
Allowance for credit losses, (millions)                $            96           $     113          $            96           $     113
Net charge-offs, (millions)                                         (6)                 (2)                      (9)                (17)
Net charge-offs (QTD annualized)/average loans                    0.30   %            0.12  %                  0.16   %            0.30  %
Provision expense/(benefit), (millions)                $             3           $      (4)         $            (1)          $       3

Non-accruing loans/total loans                                    0.48   %            0.54  %                  0.48   %            0.54  %
Allowance for credit losses/non-accruing loans                     254                 304                      254                 304
Allowance for credit losses/total loans                           1.21                1.65                     1.21                1.65

CAPITAL RATIOS
Common equity tier 1 capital to risk-weighted assets              12.7   %            15.3  %                  12.7   %            15.3  %
Tier 1 capital leverage ratio                                     10.1                 9.9                     10.1                 9.9
Tangible common shareholders' equity/tangible assets               8.1                 9.7                      8.1                 9.7
(2)


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Contents

                                                          At or for the                          At or for the
                                                 Three Months Ended September 30,       Nine Months Ended September 30,
                                                     2022                2021               2022                2021
FOR THE PERIOD: (In thousands)
Net interest income                              $   92,084          $  71,368          $  242,505          $ 221,854
Non-interest income                                  16,251             73,635              53,283            121,839
Net revenue                                         108,335            145,003             295,788            343,693
Provision/(benefit) for credit losses                 3,000             (4,000)             (1,000)             2,500
Non-interest expense                                 81,677             69,460             218,702            216,486
Net income                                           18,717             63,749              62,028             98,416
Adjusted income (1)(2)                               27,928             25,695              72,279             63,814

______________________________________________________________________________________________

(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 September 30, 2022 and 2021 was 0.01%
and 0.06%, respectively. The increase for the nine months ended September 30,
2022 and 2021 was 0.01% 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 September 30,                                         Nine Months Ended September 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                          $   3,926                 4.53  % $  3,577                 3.40  %       $   3,802                 3.89  % $  3,611                 3.38  %
Commercial and industrial loans                     1,449                 5.21       1,370                 4.78              1,423                 4.60       1,612                 4.71
Residential mortgages                               1,926                 3.53       1,499                 3.65              1,671                 3.55       1,613                 3.72
Consumer loans                                        587                 6.24         545                 3.95                554                 5.30         587                 3.85
Total loans (1)                                     7,888                 4.54       6,991                 3.77              7,450                 4.05       7,423                 3.78
Investment securities (2)                           2,400                 2.13       2,312                 2.09              2,557                 2.02       2,255                 2.21
Short-term investments & loans held for sale          342                 1.96       1,762                 0.17                673                 0.90       1,623                 0.13

(3)

Mid-Atlantic region loans held for sale (4)             -                    -         155                 3.82                  -                    -         239                 3.96
Total interest-earning assets                      10,630                 3.91      11,220                 2.86             10,680                 3.36      11,540                 2.96
Intangible assets                                      26                       x       31                                      27                               33
Other non-interest earning assets                     659                       x      674                                     648                              696

Total assets                                    $  11,315                         $ 11,925                               $  11,355                         $ 12,269

Liabilities and shareholders' equity
Deposits:
NOW and other                                   $   1,362                 0.48  % $  1,316                 0.05  %       $   1,424                 0.22  % $  1,343                 0.09  %
Money market                                        2,737                 0.46       2,716                 0.16              2,806                 0.27       2,756                 0.20
Savings                                             1,129                 0.03       1,112                 0.04              1,124                 0.03       1,056                 0.06
Time                                                1,528                 0.85       1,893                 0.86              1,537                 0.73       2,056                 0.97
Total interest-bearing deposits                     6,756                 0.48       7,037                 0.35              6,891                 0.32       7,211                 0.38
Borrowings and notes (5)                              251                 5.46         253                 3.89                178                 5.09         377                 3.26
Mid-Atlantic region interest-bearing deposits           -                    -         306                 0.51                  -                    -         447                 0.54

(4)

Total interest-bearing liabilities                  7,007                 0.66       7,596                 0.43              7,069                 0.44       8,035                 0.52
Non-interest-bearing demand deposits                2,913                       x    2,901                                   2,928                      

2,742

Other non-interest earning liabilities                206                              279                                     171                      

331

Liabilities from discontinued operations                -                                -                                       -                                -
Total liabilities                                  10,126                           10,776                                  10,168                           11,108

Total common shareholders' equity                   1,189                            1,149                                   1,187                      

1,161

Total shareholders' equity (2)                      1,189                            1,149                                   1,187                      

1,161

Total liabilities and stockholders' equity      $  11,315                         $ 11,925                               $  11,355                         $ 12,269


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                                             Three Months Ended September 30,                                   Nine Months Ended September 30,
                                            2022                          2021                                2022                           2021
                                 Average       Yield/Rate      Average       Yield/Rate             Average    Yield/Rate (FTE    Average     Yield/Rate (FTE
                                 Balance      (FTE basis)      Balance      (FTE basis)             Balance        basis)         Balance         basis)
Net interest spread                                   3.25  %                       2.43  %                             2.92  %                        2.44  %
Net interest margin (6)                               3.48                          2.56                                3.05                           2.60
Cost of funds                                         0.46                          0.31                                0.31                           0.38
Cost of deposits                                      0.33                          0.22                                0.22                           0.28

Supplementary data
Total deposits (In millions)   $  9,669                       $ 9,938                             $  9,819                      $   9,953
Fully taxable equivalent          1,715                         1,586                                4,799                          4,739

adj. income (In thousands) (7)

____________________________________

(1)   The average balances of loans include nonaccrual loans and deferred fees
and costs. As of September 30, 2022, deferred fees related to PPP loans was not
considered material. As of September 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 $0.3 million and $1.7 million for
the three months ended September 30, 2022 and 2021, respectively. Purchase
accounting accretion totaled $1.5 million and $5.0 million for the nine months
ended September 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 2022 and 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 calculation of non-GAAP adjusted earnings and adjusted earnings per share may facilitate the Company’s comparison with 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.

In 2021, the Company recorded a third quarter net gain of $52 million on the
sale of the operations of the insurance subsidiary and the Mid-Atlantic branch
operations. Expense adjustments in the first quarter 2021 were primarily related
to branch consolidations. Third quarter 2021 adjustments included Federal Home
Loan Bank borrowings prepayment costs. They also included other restructuring
charges for efficiency initiatives in operations areas including write-downs on
real estate moved to held for sale and severance related to staff reductions.
The fourth quarter 2021 revenue adjustment was primarily related to trailing
revenue on a previously reported sale, and the expense adjustment was due
primarily to branch restructuring costs. Net losses on securities in both years
were primarily due to unrealized equity securities losses due to changes in
market conditions. The adjustment to expense in 2022 is primarily related to the
consolidation of branches in 2022, along with the disposition of other unused
premises and costs related to the change in business operations in the Firestone
business line.
                                                                            

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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 Nine Months Ended
                                                                           Ended September 30,                September 30,
(In thousands)                                                             2022            2021            2022            2021
GAAP Net income                                                      $   

18,717 $63,749 $62,028 $98,416
Adjusted: Net losses on securities (1)

                                            476              166          2,194              681

Adj: Net (gains) on sale of business                                           -          (51,885)             -          (51,885)

operations and assets

Adj: Restructuring and other expense                                      11,473            1,425         11,526            4,917

Adj: Income taxes                                                         

(2,738) 12,240 (3,469) 11,685 Total adjusted income (non-GAAP) (2)

                      (A) $    

27,928 $25,695 $72,279 $63,814

GAAP Total revenue                                                   $   

108,335 $145,003 $295,788 $343,693
Adj: Losses on securities, net (1)

                                           476              166          2,194              681
Adj: Net (gains) on sale of business                                           -          (51,885)             -          (51,885)
operations and assets
Total operating revenue (non-GAAP) (2)                           (B) $   

108,811 $93,284 $297,982 $292,489

GAAP Total non-interest expense                                      $    

81,677 $69,460 $218,702 $216,486
Minus: total non-operating expenses (see above)

(11,473) (1,425) (11,526) (4,917) Less: Good will deficiency

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

70 204 $68,035 $207,176 $211,569

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

11,315 $11,925 $11,355 $12,268
Total average equity

                               (E)       1,189            1,150          1,187            1,161
Total average tangible shareholders' equity                      (F)       1,164            1,118          1,159            1,128

(2)

Total average tangible common shareholders'                      (G)       1,164            1,118          1,159            1,128
equity (2)
Total tangible shareholders' equity,                             (H)         917            1,147            917            1,147
period-end (2)(3)
Total tangible common shareholders' equity,                      (I)         917            1,147            917            1,147
period-end (2)(3)
Total tangible assets, period-end (2)(3)                         (J)      11,291           11,815         11,291           11,815
Total common shares outstanding, period-end                      (K)      45,040           48,657         45,040           48,657

(thousands)

Average diluted shares outstanding (thousands)                   (L)      45,034           48,744         46,396           49,963

Earnings per common share, diluted                                   $      

0.42 $1.31 $1.34 $1.97
Adjusted earnings per common share, diluted

                    (A/L)        0.62             0.53           1.56             1.28

(2)

Book value per common share, period-end                                    20.93            24.21          20.93            24.21
Tangible book value per common share,                          (I/K)       20.36            23.58          20.36            23.58
period-end (2)
Total shareholders' equity/total assets                                     8.33             9.95           8.33             9.95
Total tangible shareholder's equity/total                      (H/J)        8.12             9.71           8.12             9.71
tangible assets (2)
                                                                                    x
Performance ratios (4)                                                              x
GAAP return on equity                                                       6.30    %       22.18  %        6.97    %       11.30  %
Adjusted return on equity (2)                                  (A/E)        9.40             8.94           8.12             7.33
Return on tangible common equity (2)(5)                                     6.76            23.14           7.46            11.97
Adjusted return on tangible common equity                  (A+O)/(G)        9.92             9.53           8.64             7.88
(2)(5)
GAAP return on assets                                                       0.66             2.14           0.73             1.07


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Adjusted return on assets (2)                            (A/D)       0.99         0.86         0.85        69.00
Efficiency ratio (2)                             (C-O)/(B+M+P)      62.01        68.76        66.75        69.32
(in thousands)
Supplementary data (In thousands)                                         

xx

Tax benefit on tax-credit investments                      (M) $      620    $   2,195    $   1,811    $   2,315
(6)
Non-interest income charge on tax-credit                   (N)       (445)      (1,789)      (1,153)      (1,996)
investments (7)
Net income on tax-credit investments                     (M+N)        175   

406 658 319

Intangible amortization                                    (O)      1,285        1,296        3,857        3,912
Fully taxable equivalent income                            (P)      1,715        1,586        4,799        4,739
adjustment


_________________________________________________________________________________________

(1)   Net securities losses for the periods ending September 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 $11.3 billion in assets and operates 100
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 quarterly revenue and operating earnings advanced in 2022 compared
to the fourth quarter of 2021, reflecting growth and profitability under its
BEST strategic plan which was initiated near 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 7% decrease in outstanding shares over the
last twelve months, which has further supported growth in per share earnings and
return on equity.

The sale of operations in the third quarter of 2021 inflated revenue and
earnings in the third quarter and first nine months of 2021. As a result, GAAP
revenue and earnings declined in 2022 compared to these periods. Adjusted
measures of revenue and earnings, which do not include these sale gains,
advanced in 2022 compared to 2021 in both the third quarter and first nine
months of the year. Third quarter earnings per share decreased year-over-year by
68% to $0.42, while adjusted earnings per share increased by 18% to $0.62. Total
third quarter net revenue decreased by 25%, while adjusted revenue increased by
17%.

The Company's BEST plan sets goals for certain non-GAAP adjusted profitability
measures. The Company advanced strongly in 2022 towards the target ranges for
adjusted return on assets, adjusted return on tangible equity, and adjusted
pre-tax pre-provision net revenue.

Third quarter 2022 financial highlights are shown below. Comparisons are
year-over-year unless otherwise noted:
•6.8% return on tangible common equity and 9.9% adjusted return on tangible
common equity
•11% increase quarter-over-quarter in total net revenue; 10% increase in
adjusted net revenue
•3.48% net interest margin, increased from 3.11% in 2Q22 and 2.56% in 3Q21
•62% efficiency ratio, improved from 67% in 2Q22 and 69% in 3Q21
•2% end-of-period loan growth quarter-over-quarter; 16% growth year-over-year
•0.74% delinquent and non-accrual loans/loans
•7% reduction in period-end shares outstanding year-over-year reflecting stock
buybacks
•Prepayment of $75 million in subordinated debt in September 2022

Credit metrics remained strong in 2022 and earnings benefited from a year-to-date credit loss provision release. The allowance continues to provide relatively strong coverage of the loan portfolio. The positioning of the Company’s balance sheet includes:

•Significant liquidity available through short and long term investments and
off-balance sheet sources. Loans/deposits measured 80% at period-end
•Positive asset sensitivity to rising interest rates, with a 2.4% modeled
benefit to first year net interest income compared to a static scenario in the
event of a 100 basis point upward interest rate shock
•Stock repurchase plan approved for up to $140 million in repurchases, with $105
million completed in the first nine months of 2022
•Strong regulatory capital metrics, with a 12.7% 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 $100 million in subordinated notes, an amount equal to the net
proceeds of which will be used to finance or refinance new
                                                                            

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or existing social and environmental projects (a "Sustainability Bond"),, the
Company implemented its Sustainable Financing Framework, which received a
favorable rating from Sustainalytics, a leading ESG ratings firm. This was the
first Sustainability Bond issued by a U.S. community bank with assets under $150
billion.

In accordance with its BEST plan, Berkshire continued recruiting front line
bankers and developing technology initiatives in the first nine months 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 accelerated, with the consumer price index
increasing 8.2% year-over-year in September 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. The average federal funds target rate increased from
0.25% in the third quarter of 2021 to 2.37% in the third quarter of 2022,
reaching 4.00% as of November 7, 2022. The average ten year treasury increased
from 1.53% to 3.10% for these periods, reaching 4.21% as of November 7, 2022.
The possibility of a recession induced by monetary policy is an increasing
market concern for 2023, although business conditions remained solid in the
Company's markets through period-end. 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.

On October 13, 2022 the Company and the Bank announced that Subhadeep Basu,
Chief Financial Officer of the Company and the Bank, resigned effective October
7, 2022, for personal reasons and to subsequently pursue other career interests.
Mr. Basu agreed to be available as an advisor to the Company to assist with
transition matters through December 31, 2022. The Company and Berkshire Bank
appointed Senior Vice President and Chief Accounting Officer Brett Brbovic, age
42, as Interim Chief Financial Officer, effective October 7, 2022, and is in the
process of searching for a new Chief Financial Officer through an executive
search process. Mr. Brbovic first joined the Company and Berkshire Bank from
KPMG LLP in 2012 as Vice President and Controller and has served as Senior Vice
President and Chief Accounting Officer since 2015.

On November 4, 2022, the Company announced that it had increased its quarterly
dividend to shareholder by 50% to $0.18 per share. This reflected growth in
earnings since the announcement of the BEST strategic transformation plan in May
2021. The $0.18 dividend represents a yield of approximately 2.6% based on
Berkshire's closing share price of $27.44 on November 3, 2022 and is equivalent
to a 29% payout compared to third quarter 2022 adjusted earnings.
                                                                            

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Table of contents COMPARISON OF THE FINANCIAL SITUATION AT SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

Summary: Total assets decreased by $0.3 billion to $11.3 billion due primarily
to lower values of available for sale securities. A $0.9 billion reduction in
excess cash was the primary funding source for loan growth totaling $1.1
billion. Cash and equivalents decreased to 6% of total assets from 14%. Most
asset quality metrics remained at relatively favorable levels. Total deposits
decreased by 1%, and the ratio of loans/deposits increased to 80% from 68%. The
book value of equity decreased primarily due to the unrealized bond losses,
which are not applied against regulatory capital. The regulatory measure of
common equity tier one capital decreased to 12.7% from 15.0% due primarily to
the loan portfolio growth. The Company views its liquidity and capital,
including the contribution of retained earnings, as well positioned to support
ongoing organic growth and shareholder distributions.

Investments: The portfolio of investment securities decreased by $458 million,
or 18%, to $2.09 billion during the first nine months of 2022. This decrease was
primarily due to the unrealized loss on securities available for sale, which
resulted from interest rate increases in the first nine months 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 $248 million, or 14.4% of book value, at
period-end. Additionally, proceeds from securities maturities and amortization
contributed funding for the growth of the loan portfolio. Proceeds from
maturities, calls, and prepayments of investments securities totaled $483
million for the first nine months of 2022. The average life of the bond
portfolio increased to 6.9 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 $1.5 billion available for sale portfolio consists of Agency
mortgage related products and Treasury notes. The investment portfolio yield was
2.13% in the third quarter of 2022, compared to 2.04% in the fourth quarter of
2021.

Loans: Total loans increased by $1.12 billion, or 16%, to $7.94 billion in the
first nine months of 2022. Loan growth of 14% in the first half was followed by
2% growth in the third quarter. Growth was concentrated in a $641 million, or
46%, increase in residential mortgages and a $409 million, or 8%, increase in
commercial loans. Loans increased in all major categories as a result of the
Company's BEST initiatives which included stronger production from frontline
bankers, talent recruitment, and channel expansion. Prepayments slowed in the
rising rate environment. Loan demand moderated in the third quarter reflecting
the impact of higher interest rates and potential prospects for a future
recession.

Overall loan yields increased from the fourth quarter of 2021 due mainly to
increases in market interest rates, primarily in relation to loans repricing
within three months. These loans totaled $2.96 billion, or 38% of total loans
and loan yields were expected to benefit further in the fourth quarter based on
market expectations for additional interest rate increases. The Company measures
its loan beta, which is the ratio of the change in loan yields to a market
index. Compared to the average federal funds target rate, the beta for the total
loan portfolio measured 36% comparing the third quarter of 2022 to the fourth
quarter of 2021. Comparing the most recent quarter to the linked quarter, the
loan beta was 38%. The magnitude and consistency of these betas primarily
reflects the large volume of loans contractually repricing based on Prime.
LIBOR, or SOFR based indices.

As part of its BEST program, Berkshire has invested in expanding its retail
originations team and its correspondent platform. The Company also purchased
residential mortgages from area lenders. Most mortgage bookings were jumbo
mortgages held for investment. New loan volumes were predominantly fixed rate
early in the year and gradually transitioned to primarily 7/1 hybrid
adjustable-rate mortgages in the third quarter. The mortgage portfolio expanded
from 20% of total loans at the start of the year to 26% at period-end. The
portfolio yield decreased from 3.82% in the fourth quarter of 2021 to 3.53% in
the most recent quarter, including the impact of the shorter duration adjustable
rate mortgages added in 2022. Portfolio growth was substantially funded through
the reinvestment of excess short-term investments accumulated from loan run-off
in 2021.

Commercial real estate and commercial and industrial loans increased by 8% and
9% respectively in the first nine months of the year. Total commercial loans
decreased by 1% in the third quarter, including outplacements of targeted
credits, as well as seasonal impacts on loan closings in the third quarter. The
Company's commercial loan pipeline at period-end increased compared to the
midyear pipeline. The $295 million nine month increase in commercial real estate
loans was concentrated in a $97 million, or 19%, increase in multifamily loans
and a $129
                                                                            

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million, or 6%, increase in loans to commercial real estate non-owner occupied
properties. The $111 million increase in commercial and industrial loans was
driven by growth in asset-based lending related loans due to both customer
growth and increased line utilization.

The average yield on commercial real estate loans increased by 1.04% to 4.53% in
the most recent quarter compared to the fourth quarter of 2021. For these
periods, the average yield on commercial and industrial loans increased by 0.83%
to 5.21%. Many of the commercial loans are indexed to prime, LIBOR, or SOFR
which have responded quickly to changes in market interest rates. The impact of
these increases on borrowers has been more muted due to the benefit of interest
rate swaps with fix customer payments. The notional amount of borrower interest
rate swaps totaled approximately $1.7 billion at period-end, measuring
approximately 32% of the commercial portfolio. 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.

After midyear, the Company announced that it would cease originating new loans
in its Firestone Financial 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
$153 million at period-end and continues to have strong credit performance in
line with its long history.

Consumer loans increased by $67 million, or 13%, in the first nine months 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 period-end, 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 was ceasing new originations through this partnership.
Credit performance of this portfolio has exceeded the Company's expectations.
The yield on the consumer portfolio increased by 2.28% to 6.24% in the first
nine months of 2022, reflecting the higher coupon consumer unsecured loans added
in the first half of the year, along with the benefit of higher interest rates
on prime-indexed home equity loans.

Asset Quality and Credit Loss Allowance: Major asset quality metrics remained
solid as of third quarter-end, with many metrics at better levels than
pre-pandemic. Non-accruing loans measured 0.48% of total loans, compared to
0.52% at year-end 2021. Annualized net loan charge-offs measured 0.16% of
average loans for the first nine months of the 2022, compared to 0.29% in fiscal
year 2021. Accruing delinquent loans measured a relatively low 0.26% of total
loans, compared to 0.63% at year-end 2021. This included loans 30-89 days past
due measuring 0.18% of loans. Period-end non-accruing loans totaling $38 million
included $21 million in commercial and industrial loans which was concentrated
in one manufacturing credit with operational challenges which were episodic
rather than systemic in nature. This credit accounted for $4 million of the $6
million in net charge-offs in the quarter. Non-accruing commercial real estate
loans decreased to a low $3 million from $8 million, including the benefit of
the $11 million sale of certain problem and potential problem loans to
proactively take advantage of attractive market conditions during the period. At
period-end, accruing troubled debt restructurings totaled $7 million and
accruing loans over 90 days delinquent totaled $6 million. Total criticized
loans decreased to 2.5% of loans from 3.5% of loans, including classified loans
which decreased to 1.6% of loans from 2.1% of loans. Classified loans include
accruing substandard loans, which are regarded as potential problem loans and
which declined to 1.1% of loans from 1.6% over the nine month period.

The allowance for credit losses on loans decreased in the first nine months of
2022 to $96 million from $106 million. The ratio of the allowance to total loans
decreased to 1.21% from 1.55%. This decline was primarily due to improved asset
quality metrics and a reduction in the potential losses from economic and social
disruptions related to COVID-19 conditions, while including a qualitative
assessment of risks related to market and inflation conditions and future
possible recession conditions. The allowance covers all current expected credit
losses for all loans. In relation to outstanding loans, the allowance for most
of the loan categories decreased.
                                                                            

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Deposits and Borrowings: Total deposits decreased by $81 million, or 1%, to
$9.99 billion during the first nine months of 2022. This decrease included a $73
million reduction in brokered deposits, and total other total deposits were
essentially unchanged for the period. Non-interest-bearing demand deposit
accounts decreased by $112 million or 4%. This decrease was more than offset by
NOW deposit growth of $70 million, or 7%, and money market deposit growth of $95
million, or 3%. Payroll deposits, which fluctuate daily, totaled $1.05 billion
at period-end. Deposit activity included 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 increased to 0.33% in the third quarter of 2022, compared
to 0.19% in the fourth quarter of 2021. Increases were concentrated in a 0.44%
increase to 0.48% in the cost of NOW and related deposits and a 0.30% increase
to 0.46% in the cost of money market deposit accounts. Deposit costs increased
in most major account categories due to the impact of sharply rising market
interest rates during the period.

The Company measures its deposit beta, which is the ratio of the change in
deposit costs to a market index. Compared to the average federal funds target
rate, the deposit beta measured 6% for the above periods, rising to 12% for the
change in costs in the most recent quarter compared to the linked quarter.
Deposit rates were relatively unchanged through the first half of the year, and
began increasing in the most recent quarter. The Company anticipates that
further increases in market interest rates will lead to higher deposit costs in
future periods, including higher rates paid as well as shifts in balances from
lower cost accounts to higher cost accounts.

The Company’s wholesale funds consist of deposits and traded loans. Wholesale funds decreased by $49 millioni.e. 15%, to $289 million over the first nine months of the year.

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. 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.

On September 28, 2022, the Company prepaid the balance of its existing $75
million in subordinated debt bearing interest at 6.875% which became callable
for the first time on that date since the original issuance ten years ago. Third
quarter 2022 interest expense included the additional cost of carrying these two
subordinated debt obligations for one quarter.

Derivative Financial Instruments: During September 2022, the Company added $400
million of receive fix/pay SOFR interest rate swaps through a combination of
immediate and forward-settling cash flow hedges which were intended to reduce
the earnings exposure to downward rate movements. This was in response to the
increased sensitivity to a downward interest rate shock following the rapid rise
in market interest rates during the year. Except for these swaps, there were no
material changes during the first nine months in the portfolio of outstanding
derivative financial instruments. The estimated fair value of these instruments
was a liability of $49 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.

Shareholders' Equity: Total shareholders' equity decreased by $240 million, or
20% to $943 million in the first nine months of 2022. This decrease was
primarily due to a $185 million net other comprehensive loss resulting mostly
from the previously discussed $245 million unrealized loss on debt securities
available for sale as a result of the increase in market interest rates.
Additionally, the Company repurchased $105 million in common shares during this
period, representing approximately 8% of shares outstanding at year-end 2021.

                                                                            

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The unrealized securities losses are not counted against regulatory equity. As a
result, the decrease in regulatory capital was more modest. Including the impact
of the loan growth, the common equity tier one capital remained relatively
strong, decreasing from 15.0% to 12.7% in the first nine months of 2022.
Similarly, the relatively strong risk based capital ratio decreased to 15.0%
from 17.3%.

Across the banking industry, the unrealized losses on available for sale
investment securities have led to significant compression of book value and the
non-GAAP financial measure of tangible book value. The Company's
book value per share decreased by 14% to $20.93 and period-end equity/assets
decreased from 10.2% to 8.3%. Tangible book value per share decreased by 14% to
$20.36, and the period-end ratio of tangible common equity/tangible assets
decreased from 10.0% to 8.1%.

During the first nine months of 2022, the Company continued the quarterly
shareholder dividend at $0.12 per share level it was reduced to as a result of
the pandemic beginning in the third quarter of 2020. On November 4, 2022, the
Company announced that it had increased its quarterly dividend to shareholders
by 50% to $0.18 per share. This reflected growth in earnings since the
announcement of the BEST strategic transformation plan in May 2021. The $0.18
dividend represents a yield of approximately 2.6% based on Berkshire's closing
share price of $27.44 on November 3, 2022 and is equivalent to a 29% payout
compared to third quarter 2022 adjusted earnings.


                                                                            

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COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2022 AND SEPTEMBER 30, 2021

Summary: Berkshire's third quarter net income decreased by 71% to $19 million.
Results in 2021 included $52 million in gains on the sale of insurance and
branch operations. The non-GAAP measure of adjusted income, which excludes
non-operating items and sale gains, increased by 9% to $28 million. The benefit
of a 29% increase in net interest income was partially offset by lower
non-interest income and higher credit loss provision expense.

Third quarter 2022 GAAP earnings per share totaled $0.42 and adjusted earnings
per share totaled $0.62, which was the highest quarterly adjusted EPS since
2019. This included the benefit of share repurchases, which reduced outstanding
shares by 7% year-over-year. GAAP EPS decreased by 68%, while adjusted EPS
increased by 18%.

Berkshire's nine month net income decreased by 37% to $62 million. Adjusted net
income improved by 13% to $72 million. In addition to adjusting for sale gains,
the major adjustments to adjusted earnings related to restructuring expenses
primarily consisting of branch consolidations. Nine month 2022 earnings per
share totaled $1.34 and adjusted earnings per share totaled $1.56.

In the most recent quarter, the return on assets measured 0.66% and the adjusted
return on assets measured 0.99%. The return on tangible equity measured 6.76%
and the adjusted return on tangible equity measured 9.92%. By growing operating
revenue and maintaining disciplined operating expenses, Berkshire has been
achieving positive operating leverage. The third quarter efficiency ratio
improved to 62% in 2022 compared to 69% in 2021.

Net Interest Income: Third quarter net interest income increased by 29% to $92
million. Nine month net interest income increased by 9% to $243 million. These
increases were driven by increases of 36% and 17%, respectively, in the net
interest margin. This reflected the benefit of rising interest rates in 2022 as
well as the use of excess cash accumulated in 2021 and used reinvesting
primarily in residential mortgage growth in 2022.

The third quarter net interest margin increased year-over-year by 91 basis
points to 3.48% from 2.56%. This was the highest quarterly net interest margin
reported by the Company in four years. This primarily reflects the benefit of
the 36% loan beta compared to the 6% deposit beta in the environment of rapidly
rising market interest rates since the fourth quarter of 2021. Most loans
repricing within three months are indexed to Prime, LIBOR, or SOFR which change
rapidly as market interest rates change. Deposit cost changes depend on market
factors and typically operate with a lag, which has been pronounced in the
current environment of rapid market rate increases.

At period-end, 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". Expected market interest rate increases in the
fourth quarter may provide further benefit to the net interest income. Based on
the Company's interest rate risk modeling, the deposit beta increase over time,
and the cost of wholesale funds may also affect the cost of interest bearing
liabilities, depending on market and competitive conditions and the Company's
asset and liability management strategies. The structure of deposits, including
the percentage of non-interest-bearing deposits (which was 29% of total deposits
at period-end) may also affect the margin depending on future economic and
monetary conditions.

Non-Interest Income: Total fee income decreased year-over-year by 29% to $15
million, and for nine months year-to-date fee income decreased by 26% to $48
million. Excluding insurance commissions and fees from insurance operations sold
at the end of September 2021, the decreases in this income measured 24% and 17%
for the above respective periods. This was mostly due to decreases in loan fees
totaling $5 million and $9 million for the above periods. This was primarily due
to decreases of $3 million and $6 million, for the above respective periods, in
SBA originations related income reflecting lower market volumes and premiums as
a result of the increase in market interest rates. Berkshire continued to rank
high in national SBA loan originations, placing in the 22nd position nationally
based on SBA 7(a) loan approval data for the SBA fiscal year ending September
30, 2022. Income from commercial loan swap fees and fair value changes also
decreased for the three and nine month periods. Deposit related fees increased
by 9% and 6% respectively for these periods despite the sale of branch
operations in 2021, reflecting increased consumer transaction activity
year-over-year.
                                                                            

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Provision for Credit Losses on Loans: The third quarter provision was a $3
million expense in 2022 compared to a $4 million benefit in 2021. For the first
nine months, the provision was a $1 million benefit in 2022 compared to a $2
million expense in 2021. The Company has steadily reduced the coverage of its
allowance for credit losses on loans based on improvements in asset quality and
forecast conditions. Charge-offs have remained at relatively favorable levels.
These improvements have generally offset the impact of loan portfolio growth and
increased consumer lending which would otherwise require additional provision
expense. The most recent quarter was the first quarter with a provision expense
since the first quarter of 2021.

Non-Interest Expense and Tax Expense: Total non-interest expense increased
year-over-year by 18% for the third quarter and by 1% for the first nine months.
The non-GAAP financial measure of adjusted non-interest expense increased by 3%
for the third quarter and decreased by 2% for the first nine months. Expense in
2022 benefited from the sale of operations and restructuring actions in 2021.
Cost saves from these initiatives were targeted towards increased spending for
bankers and technology. The Company generally targets operating expenses in the
range of $68 - $70 million on a quarterly basis. Adjustments to nine month
expense totaled $5 million in 2021 and $12 million in 2022 and were primarily
related to branch consolidations and the sale of operations in 2021 and branch
consolidations in 2022. The total branch count decreased from 130 branches at
the start of 2021 to 106 branches at year-end 2021 and 100 branches at third
quarter-end in 2022. Full time equivalent staff decreased from 1,505 positions
at the start of 2021 to 1,319 positions at year-end 2021 and 1,300 positions at
September 30, 2022.

The effective income tax rate was 21% for the first nine months of 2021 and 22.
The tax rate benefit from lower pre-tax income in 2022 was offset in part by
lower benefits on investment tax credit investments due to slower construction
activity in 2022 and longer schedules for recognizing the benefits in income.

Total Comprehensive Income: Total comprehensive income includes net income
together with other comprehensive income, which primarily consists of unrealized
gains/losses on debt securities available for sale, after tax. Total
comprehensive income for the first nine months of the year was a loss of $123
million in 2022, compared to income of $75 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 nine months of 2022, loan growth was the primary use of cash,
which was mainly sourced from short-term investments and investment securities.
The ratio of cash and cash equivalents to total assets decreased to 6% from 14%
over this period. Investment securities and wholesale funding are sources of
cash to support future loan growth. Unused FHLBB borrowing availability stood at
$1.2 billion at period-end. Cash at the parent company stood at $119 million at
period-end

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 in 2022, including the A3 long-term
bank deposit rating, support Berkshire's liquidity profile. The relative
stability of deposit costs during 2022 has also been positive as an indicator of
core funding stability in the Company's markets.

The ratio of loans to deposits measured 80% at period-end, compared to 68% at
the start of the year. A number of metrics are utilized in establishing optimal
and minimal liquidity targets and the Company is generally well positioned
across these metrics.

The rising rate environment potentially constrains industry deposit demand
growth. Additionally, the rising rates have contributed to the extension of the
investment portfolio average life and the unrealized bond losses are a potential
constraint on some options for the use of investments to support overall
liquidity. The unrealized losses would affect capital if they were realized
through the sale of the related securities, which could then impact the
                                                                            

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management of capital. The excess liquidity which has been widespread throughout
the financial system during the pandemic may constrain funding sources if
systemwide liquidity is reduced. The Company is monitoring various scenarios as
it continues to pursue organic growth and market share gains in the context of
its BEST strategic plan.

The parent relies over the long term on dividends from the Bank to fund its debt
obligations and capital returns to shareholders. The Bank requires regulatory
approval from the FDIC and the Massachusetts Division of Banks to provide
dividends to the parent

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
monitors the impacts of rising rates, credit stress scenarios, and organic
growth in assessing its capital adequacy and plans.

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 nine months of the year
through the 16% loan growth and $105 million in share repurchases. Additionally,
shareholder dividends paid totaled $16 million for this period. Capital
optimization was also supported through the subordinated debt issuance, reducing
the coupon compared to the existing debt which was later prepaid.

The Company primarily focuses on regulatory capital measures in assessing
capital, including the common equity Tier 1 capital ratio. This ratio stood at
12.7% at period-end. This also includes ongoing assessment of the shareholder
cash dividend in relationship to earnings and to competitive practices. The
Company announced a 50% increase in the quarterly shareholder dividend from
$0.12 per share to $0.18 per share on November 4, 2022.

The unrealized available sale securities losses reduce the book value of equity.
These losses are expected to accrete back into equity as the securities season
to maturity. These losses are not deducted from regulatory capital which is the
primary focus of the Company's capital management. The measure of tangible book
value is a focus of bank investors, together with the ratio of tangible equity
to tangible assets and the measure of tangible book value per share. The
tangible equity to tangible assets ratio decreased to 8.1% from 10.0% during the
first nine months of the year, and tangible book value per share decreased by
14% to $20.36 from $23.69. The Company is monitoring its tangible book value
related metrics and it believes that its condition at period-end was within a
general range for peers at that date. Further decreases in these metrics were
anticipated for the remainder of 2022 based on market expectations for further
rate increases.

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.
For the first nine months of 2022, the Bank paid $108 million in dividends to
the parent company.

LIBOR Transition: Please see the Company's most recent Annual Report on Form
10-K for additional information regarding the LIBOR transition. In addition to
the commercial loan interest rate swaps and back-to-back counterparty offsetting
swaps, the Company's primary exposure in managing the transition relates to
LIBOR based commercial and mortgage loans. The Company introduced new loan
documentation switching from LIBOR to one month term SOFR for new commercial
loans originated beginning in 2022. As of September 30, 2022, the Company had
approximately $2.0 billion in LIBOR based commercial loans, including $1.8
billion maturing after the LIBOR cessation date at midyear 2023. The Company is
focused on converting the majority of these loans to one month term SOFR in the
next six months, working with customers, counsel, and its core loan servicing
provider. The Company had converted $258 million in outstanding loans through
period-end.

CORPORATE RESPONSIBILITY UPDATE

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Our Commitment to Environmental, Social, Governance (ESG) and 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,
sustainable finance activities and Berkshire's Exciting Strategic Transformation
(BEST). Berkshire focuses its strategy on material topics impacting its business
and stakeholders including leadership & governance, human capital management,
equity & inclusion, responsible banking & cybersecurity, financial access &
affordability, environmental sustainability & climate change and community
investment. 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, were the first U.S. community bank holding
company with under $150 billion in assets to issue a Sustainability Bond and are
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 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 along with the Task Force for Climate Related Financial Disclosures
(TCFD), details the Company's ESG efforts and programs.

Climate change and 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 to a low-carbon future 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,
expected regulatory requirements, sustainable finance opportunities as well as
the size, scope, and complexity of its operations.


                                                                            

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Key ESG & Corporate Responsibility Quarterly Developments

•BEST Community Comeback: As a result of the collective efforts of its
employees, Berkshire is making steady progress towards the achievement of its
"BEST Community Comeback" goals. The multi-year plan focuses on four key areas:
fueling small businesses, community financing and philanthropy, financial access
and empowerment, and funding environmental sustainability.
•Current ESG Performance: The Company remained within its BEST ESG goal with a
top 23% composite performance in leading ESG indexes in the U.S. for its
Environmental, Social and Governance (ESG) ratings. As of September 30, 2022 the
Company has ratings of: MSCI ESG- BBB; ISS ESG Quality Score - Environment: 2,
Social: 1, Governance: 2; and Bloomberg ESG Disclosure- 62.81. The Company also
receives a rating by Sustainalytics. Berkshire continues to rank among the top
1% of all U.S. Banks for ESG in Bloomberg this year.
•Recognition & Continued Community Impact: The Boston Business Journal named
Berkshire one of Massachusetts' Top Corporate Charitable Contributors for the
tenth consecutive year. The honor further demonstrates Berkshire's deep
commitment to lifting-up its communities which includes recent announcements of
$100,000 in scholarships to forty (40) students continuing in their pursuit of
an undergraduate degree from an accredited non-profit college or technical
school and more than $600,000 in third quarter philanthropic contributions
through Berkshire's Foundation to support projects enhancing the quality of life
and economic vibrancy in communities where the bank operates.

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 with respect 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, 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, 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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