At year-end 2021, the Company held derivatives with a total notional amount of $3.7 billion. The Company had economic hedges and non-hedging derivatives totaling $3.7 billion and $8.2 million, respectively, which are not designated as hedges for accounting purposes and are therefore recorded at fair value with changes in fair value recorded directly through earnings. Economic hedges included interest rate swaps totaling $3.4 billion, risk participation agreements with dealer banks of $321.0 million, and $6.4 million in forward commitment contracts.

As part of the Company’s risk management strategy, the Company enters into interest rate swap agreements to mitigate the interest rate risk inherent in certain of the Company’s assets and liabilities. Interest rate swap agreements involve the risk of dealing with both Bank customers and institutional derivative counterparties and their ability to meet contractual terms. The agreements are entered into with counterparties that meet established credit standards and contain master netting and collateral provisions protecting the at-risk party. The derivatives program is overseen by the Risk Management Committee of the Company’s Board of Directors. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not significant at December 31, 2021.

The Company pledged collateral to derivative counterparties in the form of cash totaling $43.7 million and securities with an amortized cost of $34.8 million and a fair value of $34.9 million at year-end 2021. At December 31, 2020, the Company pledged cash collateral of $75.1 million and securities with an amortized cost of $37.5 million and a fair value of $37.8 million. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back economic hedges. However certain language is written into the International Swaps Dealers Association, Inc. (“ISDA”) and loan documents where, in default situations, the Bank is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.


	Notional Amount		Weighted Average Maturity	Weighted Average Rate				Estimated Fair Value Asset (Liability)
December 31, 2021				Received		Contract pay rate
	(In thousands)		(In years)					(In thousands)





Economic hedges:
Interest rate swap on tax advantaged economic development bond	$	7,879	7.9	0.47	%	5.09	%	$	(1,158)
Interest rate swaps on loans with commercial loan customers	1,684,238		5.8	3.99	%	1.91	%	74,348
Reverse interest rate swaps on loans with commercial loan customers (1)	1,684,238		5.8	1.91	%	3.99	%	(30,454)
Risk participation agreements with dealer banks	320,981		5.8					432
Forward sale commitments	6,377		0.2					134
Total economic hedges	3,703,713							43,302

Non-hedging derivatives:
Commitments to lend	8,192		0.2					124
Total non-hedging derivatives	8,192							124

Total	$	3,711,905						$	43,426


	Notional Amount		Weighted Average Maturity	Weighted Average Rate				Estimated Fair Value Asset (Liability)
December 31, 2020				Received		Contract pay rate
	(In thousands)		(In years)					(In thousands)




Economic hedges:
Interest rate swap on tax advantaged economic development bond	$	8,654	8.9	0.52	%	5.09	%	$	(1,778)
Interest rate swaps on loans with commercial loan customers	1,734,978		6.1	4.15	%	1.95	%	159,016
Reverse interest rate swaps on loans with commercial loan customers (1)	1,734,978		6.1	1.95	%	4.15	%	(64,645)
Risk participation agreements with dealer banks	326,862		8.0					665
Forward sale commitments	11,544		0.2					320
Total economic hedges	3,817,016							93,578

Non-hedging derivatives:
Commitments to lend	40,099		0.2					735
Total non-hedging derivatives	40,099							735

Total	$	3,857,115						$	94,313

As of December 31, 2021 the Company has an interest rate swap with a $7.9 million notional amount to swap out the fixed rate of interest on an economic development bond bearing a fixed rate of 5.09%, currently within the Company’s trading portfolio under the fair value option, in exchange for a LIBOR-based floating rate. The intent of the economic hedge is to improve the Company’s asset sensitivity to changing interest rates in anticipation of favorable average floating rates of interest over the 21-year life of the bond. The fair value changes of the economic development bond are mostly offset by fair value changes of the related interest rate swap.

The Company also offers certain derivative products directly to qualified commercial borrowers. The Company economically hedges derivative transactions executed with commercial borrowers by entering into mirror-image, offsetting derivatives with third-party financial institutions. The transaction allows the Company’s customer to convert a variable-rate loan to a fixed rate loan. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts mostly offset each other in earnings. Credit valuation loss adjustments arising from the difference in credit worthiness of the commercial loan and financial institution counterparties totaled $0.9 million at year-end 2021. The interest income and expense on these mirror image swaps exactly offset each other.

The Company has risk participation agreements with dealer banks. Risk participation agreements occur when the Company participates on a loan and a swap where another bank is the lead. The Company earns a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default.

The Company utilizes forward sale commitments to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans held for sale. The forward sale commitments are accounted for as derivatives with changes in fair value recorded in current period earnings. Forward sale commitments are

A best efforts contract refers to a loan sales agreement where the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. The Company may enter into a best efforts contract once the price is known, which is shortly after the potential borrower’s interest rate is locked.

A mandatory delivery contract is a loan sales agreement where the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, the Company may enter into mandatory delivery contracts shortly after the loan closes with a customer.

The Company may sell to-be-announced mortgage-backed securities to hedge the changes in fair value of interest rate lock commitments and held for sale loans, which do not have corresponding best efforts or mandatory delivery contracts. These security sales transactions are closed once mandatory contracts are written. On the closing date the price of the security is locked-in, and the sale is paired-off with a purchase of the same security. Settlement of the security purchase/sale transaction is done with cash on a net-basis.

The Company enters into commitments to lend for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. Commitments that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding commitments expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The commitments are free-standing derivatives which are carried at fair value with changes recorded in non-interest income in the Company’s Consolidated Statements of Operations. Changes in the fair value of commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. Commitments to lend are included in discontinued operations.


	Years Ended December 31,
(In thousands)	2021		2020		2019

Economic hedges
Interest rate swap on industrial revenue bond:
Unrealized gain/(loss) recognized in other non-interest income	$	619	$	(289)	$	(248)

Interest rate swaps on loans with commercial loan customers:
Unrealized (loss)/gain recognized in other non-interest income	(86,099)		85,206		65,098
Favorable/(unfavorable) change in credit valuation adjustment recognized in other non-interest income	1,431		(1,516)		(1,214)
Reverse interest rate swaps on loans with commercial loan customers:
Unrealized gain/(loss) recognized in other non-interest income	86,099		(85,206)		(65,098)


Risk Participation Agreements:

Unrealized (loss)/gain recognized in other non-interest income	(233)		345		83

Forward Commitments:

Unrealized (loss)/gain recognized in discontinued operations	(186)		547		507
Realized (loss) in discontinued operations	—		(8,205)		(9,195)



Non-hedging derivatives
Commitments to lend:
Unrealized (loss)/gain recognized in discontinued operations	$	(611)	$	(1,893)	$	(1,299)
Realized gain in discontinued operations	—		15,672		57,699
Realized gain in other non-interest income	2,854		—		—

The Company enters into swap agreements to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s Consolidated Balance Sheets. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral generally in the form of marketable securities is received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds.

The Company had net asset positions with its financial institution counterparties totaling $2.2 million and $1.0 million as of December 31, 2021 and December 31, 2020, respectively. The Company had net asset positions with its commercial banking counterparties totaling $76.8 million and $159.0 million as of December 31, 2021 and December 31, 2020, respectively.

The Company had net liability positions with its financial institution counterparties totaling $33.3 million and $66.8 million as of December 31, 2021 and December 31, 2020, respectively. The Company had net liability positions with its commercial banking counterparties totaling $2.5 million as of December 31, 2021. The Company had no net liability positions with its commercial banking counterparties as of December 31, 2020. The Company has collateral pledged to cover this liability.


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statements of Condition
							Financial Instruments		Cash Collateral Received
(in thousands)											Net Amount
As of December 31, 2021
Interest Rate Swap Agreements:
Institutional counterparties	$	2,223	$	(75)	$	2,148	$	—	$	—	$	2,148
Commercial counterparties	76,809		—		76,809		—		—		76,809
Total	$	79,032	$	(75)	$	78,957	$	—	$	—	$	78,957


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statement of Condition		Gross Amounts Not Offset in the Statements of Condition
							Financial Instruments		Cash Collateral Received
(in thousands)											Net Amount
As of December 31, 2021
Interest Rate Swap Agreements:
Institutional counterparties	$	(78,146)	$	44,814	$	(33,332)	$	34,896	$	43,694	$	45,258
Commercial counterparties	(2,461)		—		(2,461)		—		—		(2,461)
Total	$	(80,607)	$	44,814	$	(35,793)	$	34,896	$	43,694	$	42,797


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statements of Condition
							Financial Instruments		Cash Collateral Received
(in thousands)											Net Amount
As of December 31, 2020
Interest Rate Swap Agreements:
Institutional counterparties	$	1,124	$	(78)	$	1,046	$	—	$	—	$	1,046
Commercial counterparties	159,016		—		159,016		—		—		159,016
Total	$	160,140	$	(78)	$	160,062	$	—	$	—	$	160,062


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statement of Condition		Gross Amounts Not Offset in the Statements of Condition
							Financial Instruments		Cash Collateral Received
(in thousands)											Net Amount
As of December 31, 2020
Interest Rate Swap Agreements:
Institutional counterparties	$	(164,543)	$	97,740	$	(66,803)	$	37,815	$	75,070	$	46,082
Commercial counterparties	—		—		—		—		—		—
Total	$	(164,543)	$	97,740	$	(66,803)	$	37,815	$	75,070	$	46,082