The Bank has 93 full-service banking offices in its New England and upstate
New York footprint, which extends along Interstate 90 from Boston to Syracuse,
and along Interstate 91 from Hartford into Vermont. The Bank also has commercial
and retail lending offices located in Eastern Massachusetts. The Company’s
operations include those acquired as a result of four bank mergers in 2011 through
2012, a mortgage banking company acquisition in 2012, the acquisition of 20
New York branches in 2014, and the acquisition of Hampden Bancorp, Inc. (“Hampden”)
The Bank originates loans in the four basic portfolio categories discussed
below. Lending activities are limited by federal and state laws and regulations.
Loan interest rates and other key loan terms are affected principally by the
Bank’s credit policy, asset/liability strategy, loan demand, competition,
and the supply of money available for lending purposes. These factors, in turn,
are affected by general and economic conditions, monetary policies of the federal
government, including the Federal Reserve, legislative tax policies, and governmental
budgetary matters. Most of the Bank’s loans are made in its market areas
and are secured by real estate located in its market areas. Lending is therefore
affected by activity in these real estate markets. The Bank does not engage
in subprime lending activities. The Bank monitors and manages the amount of
long-term fixed-rate lending volume. Adjustable-rate loan products generally
reduce interest rate risk but may produce higher loan losses in the event of
sustained rate increases. The Bank retains most of the loans it originates,
although the Bank generally sells its originations of conforming fixed rate
residential mortgages. The Bank also conducts wholesale purchases and sales
of loans and loan participations generally with other banks doing business in
its markets. The Bank’s loan portfolio includes loans acquired in recent
business combinations and such loans generally conform to the loans from the
Bank’s business activities.
To augment its commercial lending operations, the Company acquired all of the
outstanding equity of Firestone Financial Corp. (“Firestone”), which
now operates as a subsidiary of Berkshire Bank. Firestone is a commercial specialty
finance company providing secured installment loan equipment financing for small
and medium-sized businesses. Firestone originates commercial and industrial
loans to a national customer base in several niche industries.
The Bank offers fixed-rate and adjustable-rate residential mortgage loans with
maturities of up to 30 years that are fully amortizing with monthly loan payments.
Berkshire’s loan products are available through FNMA, FHLMC, government
insured, and state programs. In addition, the Bank offers a suite of portfolio
products through Berkshire Bank. Berkshire Bank is an in-house Direct Endorsed
Lender for FHA. It also offers VA, USDA, FHA Reverse, State Housing, Home Path,
HARP, and other government sponsored mortgage programs. The Company targets
that its programs and pricing are highly competitive in the marketplace as it
pursues opportunities to expand market share in its footprint.
Residential mortgages are generally underwritten according to the Federal National
Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage
Association (“Freddie Mac”) guidelines for loans they designate
as “A” or “A-” (these are referred to as “conforming
loans”). Private mortgage insurance is generally required for loans with
loan-to-value ratios in excess of 80%. The Bank also originates loans above
conforming loan amount limits, referred to as “jumbo loans,” which
are generally conforming to secondary market guidelines for these loans. The
Bank does not offer subprime mortgage lending programs.
The Bank originates commercial real estate loans on properties used for business
purposes such as small office buildings, industrial, healthcare, lodging, recreation,
or retail facilities. This portfolio also includes commercial 1-4 family and
multifamily properties. Loans may generally be made with amortizations of up
to 25 years and with interest rates that adjust periodically (primarily from
short-term to five years). Most commercial real estate loans are originated
with final maturities of 10 years or less. As part of its business activities,
the Bank also enters into commercial loan participations with regional and national
banks and purchases and sells commercial loans in its footprint.
The Bank offers secured commercial term loans with repayment terms which are
normally limited to the expected useful life of the asset being financed, and
generally not exceeding ten years. The Bank also offers revolving loans, lines
of credit, letters of credit, time notes and Small Business Administration guaranteed
loans. Business lines of credit have adjustable rates of interest and are payable
on demand, subject to annual review and renewal. Commercial and industrial loans
are generally secured by a variety of collateral such as accounts receivable,
inventory and equipment, and are generally supported by personal guarantees.
Loan-to-value ratios depend on the collateral type and generally do not exceed
80 percent of orderly liquidation value. Some commercial loans may also be secured
by liens on real estate. The Bank generally does not make unsecured commercial
loans. Commercial loans are of higher risk and are made primarily on the basis
of the borrower’s ability to make repayment from the cash flows of its
business. Further, any collateral securing such loans may depreciate over time,
may be difficult to monitor and appraise and may fluctuate in value. The Bank
gives additional consideration to the borrower’s credit history and the
guarantor’s capacity to help mitigate these risks. Additionally, the Bank
uses loan structures including shorter terms, amortizations, and advance rate
limitations to additionally mitigate credit risk.
The Bank’s consumer loans consist principally of home equity lines of
credit and indirect automobile loans, together with second mortgage loans and
other consumer loans. The Bank’s home equity lines of credit are typically
secured by first or second mortgages on borrowers’ residences. Home equity
lines have an initial revolving period up to 15 years, followed by an amortizing
term up to 20 years.
.