BERKSHIRE HILLS BANCORP INC

DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS

Deposits are the major source of funds for the Bank’s lending and investment activities. The Bank serves personal, commercial, non-profit, and municipal deposit customers. The Bank offers a wide variety of deposit accounts with a range of interest rates and terms. The Bank may also periodically offer promotional interest rates and terms for limited periods of time. The Bank’s deposit accounts consist of demand deposits (non-interest-bearing checking), NOW (interest-bearing checking), regular savings, money market savings, and time certificates of deposit. Additionally, the Bank offers a variety of retirement deposit accounts to personal and business customers.

The Bank emphasizes its transaction deposits – checking and NOW accounts – for personal accounts and checking accounts promoted to businesses. These accounts have the lowest marginal cost to the Bank and are also often a core account for a customer relationship. The Bank offers a courtesy overdraft program to improve customer service, and also provides debit cards and other electronic fee producing payment services to transaction account customers. The Bank offers targeted online and mobile deposit account opening capabilities for personal accounts. The Bank promotes remote deposit capture devices so that commercial accounts can make deposits from their place of business.

Deposit related fees include overdraft fees, interchange fees related to debit card usage, service charges, and other miscellaneous transactions and convenience services sold to customers through the branch system as part of an overall service relationship. The Bank offers compensating balance arrangements for larger business customers as an alternative to fees charged for checking account services.

In addition to providing service through its branches, Berkshire provides services to deposit customers through its private bankers, MyBankers, commercial/small business relationship managers, and call center representatives. Commercial cash management services are an important commercial service offered to commercial and governmental depositors and a fee income source to the bank. The Bank also operates a commercial payment processing business that serves regional and national payroll service bureau customers. These payroll deposits often fluctuate daily by hundreds of millions of dollars depending on payroll cycles.

Online banking and mobile banking functionality is increasingly important as a component of deposit account access and service delivery. The Bank has partnered with a third party fintech company to provide enhanced online deposit account opening services and new online and mobile banking platform developed in partnership with this provider as an important milestone in its Digitouch SM strategy. The Company also is monitoring the development of payment services which are growing in their importance in the personal and commercial deposit markets.