Filed Pursuant to Rule 424(b)(3)
Registration No. 333-178603

 
[GRAPHIC MISSING]   [GRAPHIC MISSING]

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

The boards of directors of Berkshire Hills Bancorp, Inc. (“BHLB”), Berkshire Bank and The Connecticut Bank and Trust Company (“CBT”) have agreed to a merger of our companies. If the merger is completed, each share of The Connecticut Bank and Trust Company common stock, par value $1.00 per share, will be converted into the right to receive either 0.3810 of a share of Berkshire Hills Bancorp, Inc. common stock, par value $0.01 per share, or $8.25 in cash, subject to 70% of The Connecticut Bank and Trust Company’s common stock being exchanged for Berkshire Hills Bancorp, Inc.’s common stock and 30% of The Connecticut Bank and Trust Company’s common stock being exchanged for cash. Berkshire Hills Bancorp, Inc.’s shareholders will continue to own their existing shares. After completion of the merger, we expect that current Berkshire Hills Bancorp, Inc. shareholders will own approximately 95% of the combined company and The Connecticut Bank and Trust Company shareholders will own approximately 5% of the combined company based on the shares outstanding as of September 30, 2011. Berkshire Hills Bancorp, Inc. common stock is listed on the NASDAQ Global Select Market under the symbol “BHLB.” On February 17, 2012, the closing price of Berkshire Hills Bancorp, Inc. common stock was $23.40. Berkshire Hills Bancorp, Inc. is offering approximately 970,000 shares of its common stock to The Connecticut Bank and Trust Company shareholders.

We expect the merger to generally be tax-free for federal income tax purposes to holders of The Connecticut Bank and Trust Company common stock to the extent they receive Berkshire Hills Bancorp, Inc. common stock. Any cash consideration received will be taxable to The Connecticut Bank and Trust Company shareholders.

We cannot complete the merger unless we obtain the necessary government approvals and unless the shareholders of The Connecticut Bank and Trust Company approve the merger agreement. The Connecticut Bank and Trust Company is asking its shareholders to consider and vote on this merger proposal at its special meeting of shareholders in addition to considering and voting on a proposal to approve, by a non-binding, advisory vote, certain compensation arrangements for The Connecticut Bank and Trust Company’s named executive officers in connection with the merger and a proposal to adjourn the special meeting, if necessary, in order to solicit additional proxies to vote in favor of the merger agreement. Whether or not you plan to attend The Connecticut Bank and Trust Company shareholder meeting, please take the time to vote by completing and mailing the enclosed proxy card to The Connecticut Bank and Trust Company. If you sign, date and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote “FOR” the merger and the transactions contemplated by the merger agreement, the proposal regarding certain merger-related executive compensation arrangements and an adjournment of the special meeting, if necessary. If you do not return your proxy card, or if you do not instruct your broker how to vote any shares held for you in “street name,” the effect will be a vote against the merger agreement. The Connecticut Bank and Trust Company shareholders do not have dissenters’ rights under Connecticut law since CBT common stock is traded on the NASDAQ Capital Market. See “Questions and Answers About the Merger and the Special Meeting” on page 1 and “No Dissenters’ Rights” on page 31.

The Connecticut Bank and Trust Company’s board of directors has unanimously determined that the merger is advisable, fair to, and in the best interests of The Connecticut Bank and Trust Company and its shareholders and recommends that you vote FOR the approval of the merger agreement, the proposal regarding certain merger-related executive compensation arrangements and the adjournment of the special meeting, if necessary, in order to solicit additional proxies to vote in favor of the merger agreement.

The place, date and time of The Connecticut Bank and Trust Company shareholders’ meeting is as follows:

The Connecticut Bank and Trust Company
58 State House Square
Hartford, Connecticut
April 3, 2012
10:00 a.m., local time


 
 

TABLE OF CONTENTS

This document contains a more complete description of The Connecticut Bank and Trust Company shareholders’ meeting and the terms of the merger. We urge you to review this entire document carefully, including the “Risk Factors” beginning on page 10 for a discussion of the risks related to the proposed merger. You may also obtain information about Berkshire Hills Bancorp, Inc. from documents it has filed with the Securities and Exchange Commission.

 
[GRAPHIC MISSING]   [GRAPHIC MISSING]
Michael P. Daly
President and Chief Executive Officer
Berkshire Hills Bancorp, Inc.
  David A. Lentini
Chairman and Chief Executive Officer
The Connecticut Bank and Trust Company

 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the securities to be issued under this proxy statement/prospectus or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense. The securities we are offering through this document are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either of our companies, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

Proxy Statement/Prospectus dated February 21, 2012
and first mailed to shareholders on or about February 27, 2012

This document incorporates important business and financial information about Berkshire Hills Bancorp, Inc. from documents filed with the Securities and Exchange Commission that have not been included in or delivered with this document. You may read and copy these documents at the Securities and Exchange Commission’s public reference facilities. Please call the SEC at 1-800-SEC-0330 for information about these facilities. This information is also available at the Internet site the SEC maintains at http://www.sec.gov. See “Where You Can Find More Information” on page 72.

You also may request copies of these documents from Berkshire Hills Bancorp, Inc. Berkshire Hills Bancorp, Inc. will provide you with copies of these documents, without charge, upon written or oral request to:

Berkshire Hills Bancorp, Inc.
24 North Street
Pittsfield, Massachusetts 01201
Attention: Investor Relations Department
Telephone: (413) 236-3239

If you are a The Connecticut Bank and Trust Company shareholder and would like to request documents from Berkshire Hills Bancorp, Inc., please do so by March 27, 2012 to receive them before The Connecticut Bank and Trust Company special meeting.


 
 

TABLE OF CONTENTS

THE CONNECTICUT BANK AND TRUST COMPANY
58 State House Square
Hartford, Connecticut 13440

Notice of Special Meeting of Shareholders
to be held April 3, 2012

A special meeting of shareholders of The Connecticut Bank and Trust Company will be held at 10:00 a.m., local time, on April 3, 2012 at The Connecticut Bank and Trust Company, 58 State House Square, Hartford, Connecticut. Any adjournments or postponements of the special meeting will be held at the same location.

At the special meeting, you will be asked to:

1. Consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of October 25, 2011, by and between Berkshire Hills Bancorp, Inc., Berkshire Bank and The Connecticut Bank and Trust Company. A copy of the merger agreement is included as Annex A to the accompanying proxy statement/prospectus;
2. Consider and vote upon a proposal to approve, by non-binding advisory vote, certain compensation arrangements for The Connecticut Bank and Trust Company’s named executive officers in connection with the merger;
3. Consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger agreement; and
4. Transact such other business as may be properly presented at the special meeting and any adjournments or postponements of the special meeting. The enclosed proxy statement/prospectus describes the merger agreement and the proposed merger in detail. We urge you to read these materials carefully. The enclosed proxy statement/prospectus forms a part of this notice.

The board of directors of The Connecticut Bank and Trust Company unanimously recommends that The Connecticut Bank and Trust Company shareholders vote “FOR” the proposal to approve the merger agreement, “FOR” the proposal to approve, by non-binding advisory vote, certain compensation arrangements for The Connecticut Bank and Trust Company’s named executive officers in connection with the merger and “FOR” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies to vote in favor of the merger agreement.

The board of directors of The Connecticut Bank and Trust Company has fixed the close of business on February 9, 2012 as the record date for determining the shareholders entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting.

Your vote is very important.  Your proxy is being solicited by The Connecticut Bank and Trust Company board of directors. The proposal to approve the merger agreement must be approved by the affirmative vote of holders of at least two-thirds of the outstanding shares of The Connecticut Bank and Trust Company common stock entitled to vote in order for the proposed merger to be consummated. Whether or not you plan to attend the special meeting in person, we urge you to complete and mail the enclosed proxy card, in the accompanying envelope, which requires no postage if mailed in the United States. You may revoke your proxy at any time before the special meeting. If you attend the special meeting and vote in person, your proxy vote will not be used.


 
 

TABLE OF CONTENTS

The Connecticut Bank and Trust Company shareholders do not have dissenters’ rights because, under Connecticut law, appraisal rights are not available to securities listed on NASDAQ which includes The Connecticut Bank and Trust Company. See “Questions and Answers About the Merger and the Special Meeting” on page 1 and “No Dissenters’ Rights” on page 31.

 
  By Order of the Board of Directors
     [GRAPHIC MISSING]
Anson C. Hall
Secretary

Hartford, Connecticut
February 27, 2012


 
 

TABLE OF CONTENTS

TABLE OF CONTENTS

 
  Page
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING     1  
SUMMARY     5  
RISK FACTORS     10  
CAUTION ABOUT FORWARD-LOOKING STATEMENTS     13  
RECENT DEVELOPMENTS OF BERKSHIRE HILLS BANCORP, INC.     14  
RECENT DEVELOPMENTS OF THE CONNECTICUT BANK AND TRUST COMPANY     19  
SELECTED HISTORICAL FINANCIAL INFORMATION     23  
SELECTED HISTORICAL FINANCIAL AND OTHER DATA OF BERKSHIRE HILLS BANCORP, INC.     24  
SELECTED HISTORICAL FINANCIAL AND OTHER DATA OF THE CONNECTICUT BANK AND TRUST COMPANY     26  
MARKET PRICE AND DIVIDEND INFORMATION     28  
SPECIAL MEETING OF THE CONNECTICUT BANK AND TRUST COMPANY SHAREHOLDERS     29  
NO DISSENTERS’ RIGHTS     31  
DESCRIPTION OF THE MERGER (PROPOSAL 1)     31  
DESCRIPTION OF BERKSHIRE HILLS BANCORP, INC. CAPITAL STOCK     62  
COMPARISON OF RIGHTS OF SHAREHOLDERS     64  
MANAGEMENT AND OPERATIONS AFTER THE MERGER     68  
CBT STOCK OWNERSHIP     68  
MERGER-RELATED EXECUTIVE COMPENSATION ARRANGEMENTS (PROPOSAL 2)     70  
ADJOURNMENT OF THE SPECIAL MEETING (PROPOSAL 3)     71  
LEGAL MATTERS     71  
EXPERTS     71  
SHAREHOLDER PROPOSALS     71  
WHERE YOU CAN FIND MORE INFORMATION     72  
FINANCIAL AND OTHER INFORMATION ABOUT THE CONNECTICUT BANK AND TRUST COMPANY     F-1  

Annex A

Agreement and Plan of Merger

    A-1  

Annex B

Fairness Opinion of Keefe, Bruyette & Woods, Inc.

    B-1  

i


 
 

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

Q: What am I being asked to vote on? What is the proposed transaction?
A: You are being asked to vote on the approval of a merger agreement that provides for the acquisition of The Connecticut Bank and Trust Company (“CBT”) by Berkshire Hills Bancorp, Inc. (“BHLB”) and CBT’s merger into BHLB’s banking subsidiary, Berkshire Bank. A copy of the merger agreement is provided as Annex A to this document. The CBT board of directors has determined that the proposed merger is advisable and in the best interests of its shareholders, has unanimously approved the merger agreement and recommends that its shareholders vote “FOR” the approval of the merger agreement.
Q: What will CBT shareholders be entitled to receive in the merger?
A: Under the merger agreement, at the election of each CBT shareholder, each share of CBT common stock will be exchanged for either 0.3810 of a share of BHLB common stock or $8.25 in cash. Each CBT shareholder may elect either of these options or each CBT shareholder may elect to exchange some of his or her CBT shares for cash and some of his or her CBT shares for BHLB shares.

Elections will be limited by, among other things, a requirement that 70% of the total number of outstanding shares of CBT common stock be exchanged for BHLB common stock. Therefore, the form of consideration received will depend in part on the elections of other CBT shareholders.

BHLB will not issue fractional shares in the merger. Instead, each CBT shareholder will receive a cash payment, without interest, for the value of any fraction of a share of BHLB common stock that such shareholder would otherwise be entitled to receive. See “Description of the Merger — Consideration to be Received in the Merger” on page 41 and “Description of Berkshire Hills Bancorp, Inc. Capital Stock” on page 62.

Q: What dividends will be paid after the merger?
A: BHLB currently pays a quarterly dividend of $0.17 per share. Although BHLB has paid quarterly dividends on its common stock without interruption since November 2000, there is no guarantee that BHLB will continue to pay dividends on its common stock. All dividends on BHLB common stock are declared at the discretion of the BHLB board of directors.
Q: How does a CBT shareholder elect to receive cash, stock or a combination of both for his or her CBT stock?
A: For each CBT shareholder, a form for making an election will be provided under separate cover. For the election to be effective, the properly completed election form, along with the CBT stock certificates or an appropriate guarantee of delivery, must be sent to and received by Registrar and Transfer Company, the exchange agent, on or before 5:00 p.m., Eastern time, on the date specified on the election form. The election form should not be sent together with your proxy card. Instead, use the separate envelope specifically provided for the election form and your stock certificates. If a timely election is not made, you will be allocated BHLB common stock and/or cash depending on your election and the elections made by other shareholders.

If the shares you own are held in “street name” by a bank or brokerage firm, your bank or brokerage firm, as the record holder of your shares, is required to provide you with an election form. In order to make an election for your shares held in “street name,” you will need to follow the instructions your bank or brokerage firm provides to you.

Q: How does a CBT shareholder exchange his or her stock certificates?
A: If an election is made, the CBT stock certificates or an appropriate guarantee of delivery must be returned with the election form. Shortly after the merger, the exchange agent will allocate cash and BHLB common stock among CBT shareholders, consistent with their elections and the allocation and proration procedures in the merger agreement. If a CBT shareholder does not submit an election form, BHLB’s exchange agent will send instructions on how and where to surrender the CBT stock certificates after the merger is completed. Please do not send CBT stock certificates with the proxy card.

1


 
 

TABLE OF CONTENTS

Q: What are the tax consequences of the merger to CBT shareholders?
A: The tax consequence of the merger to CBT shareholders will depend on whether only cash, only BHLB common stock, or a combination of cash and BHLB common stock is received in exchange for shares of CBT common stock. If shares are exchanged solely for BHLB common stock, no gain or loss should be recognized except with respect to the cash received instead of any fractional share of BHLB common stock. If shares are exchanged solely for cash, gain or loss should be recognized on the exchange. If shares were exchanged for a combination of BHLB common stock and cash, gain should be recognized equal to the lesser of the cash received or the gain realized in the merger (that is, the fair market value of the BHLB common stock received, plus the cash received, and minus the CBT shareholder’s basis in the shareholder’s CBT common stock). No loss should be recognized. See “Description of the Merger —  Material Tax Consequences of the Merger” on page 45.

Because the allocations of cash and BHLB common stock received will depend on the elections of other CBT shareholders, the actual tax consequences of the merger will not be known until the allocations are completed.

Q: Are CBT shareholders entitled to dissenters’ rights?
A: No. Since the common stock of CBT is traded on the Nasdaq Capital Market, Connecticut law does not provide for dissenters’ rights.
Q: Why do CBT and BHLB want to merge?
A: CBT believes that the proposed merger will provide CBT shareholders with substantial benefits, and BHLB believes that the merger will further its strategic growth plans. As a larger company, BHLB can provide the capital and resources that CBT needs to compete more effectively and to offer a broader array of products and services to better serve its banking customers. To review the reasons for the merger in more detail, see “Description of the Merger — CBT’s Reasons for the Merger” and “ — BHLB and Berkshire Bank’s Reasons for the Merger” on pages 33 and 34.
Q: What vote is required to approve the merger agreement?
A: Holders of at least two-thirds of the outstanding shares of CBT common stock entitled to vote must vote in favor of the proposal to approve the merger agreement.
Q: Why are CBT shareholders being asked to approve, on a nonbinding advisory basis, certain merger-related executive compensation arrangements?
A: The SEC has recently adopted new rules (applicable to CBT by Federal Reserve regulations) that require CBT to seek a nonbinding advisory vote with respect to certain payments that may be made to CBT’s named executive officers in connection with the merger.
Q: What will happen if CBT shareholders do not approve certain merger-related executive compensation arrangements at the special meeting?
A: Approval of merger-related executive compensation arrangements, payable under existing agreements, that certain CBT named executive officers may receive in connection with the merger is not a condition to completion of the merger. The vote with respect to the merger-related executive compensation arrangements is an advisory vote and will not be binding on CBT. Therefore, if the merger agreement is approved by CBT’s shareholders the merger-related executive compensation arrangements may still be paid to the CBT named executive officers if and to the extent required or allowed under applicable law.
Q: When and where is the CBT special meeting?
A: The special meeting of CBT shareholders is scheduled to take place at The Connecticut Bank and Trust Company, 58 State House Square, Hartford, Connecticut at 10:00 a.m., local time, on April 3, 2012.

2


 
 

TABLE OF CONTENTS

Q: Who is entitled to vote at the CBT special meeting?
A: Holders of shares of CBT common stock at the close of business on February 9, 2012, which is the record date, are entitled to vote on the proposal to adopt the merger agreement and the other proposals in this proxy statement/prospectus. As of the record date, 3,620,950 shares of CBT common stock were outstanding and entitled to vote.
Q: If I plan to attend the CBT special meeting in person, should I still return my proxy?
A: Yes. Whether or not you plan to attend the CBT special meeting, you should complete and return the enclosed proxy card. The failure of a CBT shareholder to vote in person or by proxy will have the same effect as a vote “AGAINST” the merger agreement.
Q: What do I need to do now to vote my shares of CBT common stock?
A: After you have carefully read and considered the information contained in this proxy statement/ prospectus, please complete, sign, date and mail your proxy card in the enclosed return envelope as soon as possible. This will enable your shares to be represented at the special meeting. You may also vote in person at the special meeting. If you do not return a properly executed proxy card and do not vote at the special meeting, this will have the same effect as a vote against the merger agreement. If you sign, date and send in your proxy card, but you do not indicate how you want to vote, your proxy will be voted in favor of adoption of the merger agreement, the proposal regarding certain merger-related executive compensation arrangements and an adjournment of the special meeting, if necessary. You may change your vote or revoke your proxy before the special meeting by filing with the Secretary of CBT a duly executed revocation of proxy, submitting a new proxy card with a later date, or voting in person at the special meeting.
Q: If my shares are held in “street name” by my broker, will my broker automatically vote my shares for me?
A: No. Your broker will not be able to vote your shares of CBT common stock on the proposal to adopt the merger agreement unless you provide instructions on how to vote. Please instruct your broker how to vote your shares, following the directions that your broker provides. If you do not provide instructions to your broker on the proposal to approve the merger agreement, the proposal regarding certain merger- related executive compensation arrangements or the proposal regarding adjournment, your shares will not be voted, and this will have the effect of voting against the merger agreement, the proposal regarding certain merger-related executive compensation arrangements and the proposal regarding adjournment. Please check the voting form used by your broker to see if it offers telephone or Internet voting.
Q: When is the merger expected to be completed?
A: We will try to complete the merger as soon as possible. Before that happens, the merger agreement must be approved by CBT shareholders and we must obtain the necessary regulatory approvals. Assuming holders of at least two-thirds of the outstanding shares of CBT common stock vote in favor of the merger agreement and we obtain the other necessary approvals, we expect to complete the merger early in the second calendar quarter of 2012.
Q: Is completion of the merger subject to any conditions besides shareholder approval?
A: Yes. The transaction must receive the required regulatory approvals, and there are other customary closing conditions that must be satisfied. To review the conditions of the merger in more detail, see “Description of the Merger — Conditions to Completing the Merger” on page 53.

3


 
 

TABLE OF CONTENTS

Q: Who can answer my other questions?
A: If you have more questions about the merger, or how to submit your proxy or if you need additional copies of this proxy statement/prospectus or the enclosed proxy form, CBT shareholders should contact its proxy solicitor, Phoenix Advisory Partners, LLC:

Phoenix Advisory Partners, LLC
110 Wall Street
27th Floor
New York, NY 10005
(800) 576-4314

Banks and brokers should call:
(212) 493-3910

4


 
 

TABLE OF CONTENTS

SUMMARY

This summary highlights selected information in this proxy statement/prospectus and may not contain all of the information important to you. To understand the merger more fully, you should read this entire document carefully, including the documents attached to this proxy statement/prospectus.

The Companies

Berkshire Hills Bancorp, Inc.
24 North Street
Pittsfield, Massachusetts 01201
(413) 443-5601

Berkshire Hills Bancorp, Inc., a Delaware corporation, is a savings and loan holding company headquartered in Pittsfield, Massachusetts that was incorporated and commenced operations in 2000. BHLB’s common stock is listed on The NASDAQ Global Select Market under the symbol “BHLB.” BHLB conducts its operations primarily through Berkshire Bank, a Massachusetts chartered savings bank with more than 60 full service branch offices in Massachusetts, New York and Vermont. Berkshire Bank, America’s Most Exciting Bank(SM) is one of Massachusetts’ oldest and largest independent banks and is the largest banking institution based in Western Massachusetts. Berkshire Bank provides personal and business banking, insurance, and wealth management services. Berkshire Bank provides 100% deposit insurance protection for all deposit accounts, regardless of amount, based on a combination of FDIC insurance and the Depositors Insurance Fund (“DIF”). For more information, visit www.berkshirebank.com. BHLB is also the holding company for Berkshire Insurance Group, an insurance agency in Western Massachusetts. At September 30, 2011, BHLB had total assets of $4.1 billion, total deposits of $3.0 billion and total shareholders’ equity of $546.7 million.

The Connecticut Bank and Trust Company
58 State House Square
Hartford, Connecticut 06103
(315) 336-7300

The Connecticut Bank and Trust Company, a Connecticut bank and trust company, is headquartered in Hartford, Connecticut and commenced operations in 2004. It operates eight full-service community banking offices in the Greater Hartford Connecticut area serving privately-owned business customers and individuals. CBT offers a full range of short- to medium-term commercial, consumer and real estate loans. CBT’s common stock is listed on the NASDAQ Capital Market under the symbol “CTBC.” At September 30, 2011, CBT had total assets of $284.2 million, total deposits of $222.5 million and total shareholders’ equity of $25.8 million.

Special Meeting of CBT Shareholders; Required Vote (page 29)

A special meeting of CBT shareholders is scheduled to be held at The Connecticut Bank and Trust Company, 58 State House Square, Hartford, Connecticut at 10:00 a.m., local time, on April 3, 2012. At the special meeting, you will be asked to vote on a proposal to approve the merger agreement between CBT, BHLB and Berkshire Bank and a proposal regarding certain merger-related executive compensation arrangements. You may also be asked to vote to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the meeting to approve the merger agreement.

Only CBT shareholders of record as of the close of business on February 9, 2012 are entitled to notice of, and to vote at, the CBT special meeting and any adjournments or postponements of the meeting.

Approval of the merger agreement requires the affirmative vote of holders of at least two-thirds of the outstanding shares of CBT common stock entitled to vote. Approval of the non-binding proposal regarding certain merger-related executive compensation arrangements requires the affirmative vote of the holders of a majority of the outstanding shares of CBT common stock entitled to vote on the matter. As of the record date, there were 3,620,950 shares of CBT common stock outstanding. The directors and executive officers of CBT, as a group, beneficially owned 372,219 shares of CBT common stock (not including shares that may be acquired upon the exercise of stock options), representing 10.28% of the outstanding shares of CBT common stock as of the record date and have agreed to vote their shares in favor of the merger at the special meeting.

5


 
 

TABLE OF CONTENTS

The Merger and the Merger Agreement (page 31)

BHLB’s acquisition of CBT is governed by a merger agreement. The merger agreement provides that, if all of the conditions are satisfied or waived, CBT will be merged with and into Berkshire Bank, with Berkshire Bank as the surviving entity. BHLB retains the right to hold CBT as a separate subsidiary. Berkshire Bank will consider retaining the CBT name in the surviving institution’s branches in Connecticut. We encourage you to read the merger agreement, which is included as Annex A to this proxy statement/prospectus.

What CBT Shareholders Will Receive in the Consideration to be Received in the Merger (page 41)

Under the merger agreement, at your election, each share of CBT common stock you own will be exchanged for either 0.3810 of a share of BHLB common stock or $8.25 in cash, or a combination of cash and BHLB common stock, subject to 70% of the aggregate merger consideration being exchanged for BHLB common stock.

Comparative Market Prices (page 28)

The following table shows the closing price per share of BHLB common stock and the equivalent price per share of CBT common stock, giving effect to the merger, on October 24, 2011, which is the last day on which shares of BHLB common stock traded preceding the public announcement of the proposed merger, and on February 9, 2012, the record date for CBT shareholders. The equivalent price per share of CBT common stock was computed by multiplying the price of a share of BHLB common stock by the 0.3810 exchange ratio. See “Description of the Merger — Consideration to be Received in the Merger” on page 41.

     
  BHLB
Common
Stock
  CBT
Common
Stock
  Equivalent Price
Per Share of CBT
Common Stock
October 24, 2011   $ 21.44     $ 6.16     $ 8.17  
February 9, 2012   $ 23.12     $ 8.52     $ 8.81  

Recommendation of CBT Board of Directors (page 33)

The CBT board of directors has unanimously approved the merger agreement and the proposed merger. The CBT board believes that the merger agreement, including the merger contemplated by the merger agreement, is fair to, and in the best interests of, CBT and its shareholders, and therefore unanimously recommends that CBT shareholders vote “FOR” the proposal to approve the merger agreement. In reaching this decision, CBT’s board of directors considered a variety of factors, which are described in the section captioned “Description of the Merger — CBT’s Reasons for the Merger” beginning on page 33.

The CBT board of directors unanimously recommends that CBT shareholders vote “FOR” approval of the non-binding proposal regarding certain merger-related executive compensation arrangements and “FOR” the proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger agreement.

Opinion of CBT’s Financial Advisor (page 35)

In deciding to approve the merger, one of the factors considered by CBT’s board of directors was the opinion of Keefe, Bruyette & Woods, Inc., (“KBW”) which served as financial advisor to CBT’s board of directors. KBW delivered its written opinion on October 24, 2011, that the merger consideration is fair to the holders of CBT common stock from a financial point of view. The full text of this opinion is included as Annex B to the proxy statement/prospectus. You should read the opinion carefully to understand the procedures followed, assumptions made, matters considered and limitations of the review conducted by KBW. CBT has agreed to pay KBW a fee equal to $500,000 plus $10,000 for every $0.10 per share in excess of $8.00 per share of consideration received in the merger transaction for each share of CBT common stock. KBW has received a fee of $125,000 for the rendering of its fairness opinion, which fee shall be credited against the fee referenced above if the merger is completed.

6


 
 

TABLE OF CONTENTS

Regulatory Matters Relating to the Merger (page 48)

Under the terms of the merger agreement, the merger cannot be completed unless it is first approved by the Connecticut Department of Banking, the Massachusetts Division of Banks, the Massachusetts Board of Bank Incorporation and the Federal Deposit Insurance Corporation. BHLB will file the required applications in February 2012. As of the date of this document, BHLB has not received any approvals from those regulators. While BHLB does not know of any reason why it would not be able to obtain approval in a timely manner, BHLB cannot be certain when or if it will receive regulatory approval.

Conditions to Completing the Merger (page 53)

The completion of the merger is subject to the fulfillment of a number of conditions, including:

approval of the merger agreement at the special meeting by at least two-thirds of the outstanding shares of CBT common stock entitled to vote;
approval of the transaction by the appropriate regulatory authorities;
receipt by each party of opinions from their respective legal counsel to the effect that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code;
All outstanding shares of CBT Series A Preferred Stock will be redeemed by the U.S. Department of Treasury prior to completion of the merger;
the continued accuracy of representations and warranties made on the date of the merger agreement; and
no material adverse effect on either party has occurred.

Terminating the Merger Agreement (page 59)

The merger agreement may be terminated by mutual consent of BHLB, Berkshire Bank and CBT at any time prior to the completion of the merger. Additionally, subject to conditions and circumstances described in the merger agreement, either BHLB and Berkshire Bank or CBT may terminate the merger agreement if, among other things, any of the following occur:

the merger has not been consummated by October 31, 2012;
CBT shareholders do not approve the merger agreement at the CBT special meeting;
a required regulatory approval is denied or a governmental authority blocks the merger; or
there is a breach by the other party of any representation, warranty, covenant or agreement contained in the merger agreement, which cannot be cured, or has not been cured within 30 days after the giving of written notice to such party of such breach.

BHLB and Berkshire Bank may also terminate the merger agreement if CBT materially breaches its agreements regarding the solicitation of other acquisition proposals and the submission of the merger agreement to shareholders or if the board of directors of CBT does not recommend approval of the merger in the proxy statement/prospectus or withdraws or revises its recommendation in a manner adverse to BHLB and Berkshire Bank and CBT shareholders do not approve the merger agreement.

Termination Fee (page 60)

Under certain circumstances described in the merger agreement, BHLB may demand from CBT a $1.44 million termination fee in connection with the termination of the merger agreement. See “Description of the Merger — Termination Fee” on page 60 for a list of the circumstances under which a termination fee is payable.

7


 
 

TABLE OF CONTENTS

Interests of Certain Persons in the Merger that are Different from Yours (page 49)

In considering the recommendation of the board of directors of CBT to adopt the merger agreement, you should be aware that officers and directors of CBT have employment and other compensation agreements or plans that give them interests in the merger that are somewhat different from, or in addition to, their interests as CBT shareholders. These interests and agreements, which provide for payments in the aggregate amount of up to approximately $1.39 million, excluding amounts already vested under the Non-Qualified Deferred Compensation Plan for Non-Employee Directors, vested stock warrants and vested equity awards under the 2005 Stock Option and Award Plan, include:

Employment agreements that provide for severance payments in connection with a termination of employment without cause or for good reason following a change in control;
Interests under a Non-Qualified Deferred Compensation Plan for Non-Employee Directors, which will be terminated in connection with the change in control, with the benefits paid to the participants in a lump sum;
BHLB and Berkshire Bank have presented an offer letter to David A. Lentini, Chief Executive Officer of CBT, which the executive accepted on October 25, 2011. The offer letter provides that Mr. Lentini will serve BHLB as Regional Leader of the Connecticut Bank Region and report directly to the President and Chief Executive Officer of Berkshire Bank;
The termination of all outstanding CBT stock options, whether or not vested; with a payment to the holder of the option of an amount of cash equal to (i) the greater of (A) the excess, if any, of the merger consideration, determined as of the day before the closing date, over the applicable per share exercise price of that option or (B) $1.00, multiplied by (ii) the number of shares of CBT common stock that the holder could have purchased with the option if the holder had exercised the option immediately prior to the effective time;
The termination of all outstanding CBT warrants (other than the CBT Treasury Warrant), whether or not vested; with a payment to the holder of the warrant of an amount of cash equal to (i) the greater of (A) the excess, if any, of the merger consideration, determined as of the day before the closing date, over the applicable per share exercise price of that warrant or (B) $1.00, multiplied by (ii) the number of shares of CBT common stock that the holder could have purchased with the warrant if the holder had exercised the warrant immediately prior to the effective time;
The acceleration of vesting of outstanding restricted stock awards;
One person who is a director of CBT, as determined by BHLB and Berkshire Bank, shall be appointed and elected to the BHLB and Berkshire Bank boards of directors and the board members of CBT who do not join the boards of BHLB or Berkshire Bank shall be appointed to a newly established advisory board of Berkshire Bank; and
Rights of CBT officers and directors to continued indemnification coverage and continued coverage under directors’ and officers’ liability insurance policies.
Due to CBT’s participation in the U.S. Department of Treasury’s Troubled Asset Relief Program Capital Purchase Program (“TARP”), if the TARP restrictions apply on the closing date of the merger, or if any other regulatory prohibitions are applicable, CBT may be prohibited from (i) making severance payments to Messrs. Lentini, Hall and Fulton and certain other officers, as applicable, (ii) making a cash payment in cancellation of such individual’s non-vested CBT stock options and CBT warrants, and (iii) accelerating the vesting of such individual’s restricted stock awards.

8


 
 

TABLE OF CONTENTS

Approval of the Non-Binding Proposal Regarding Certain Merger-Related Executive Compensation Arrangements Requires the Affirmative Vote of the Holders of a Majority of the Outstanding Shares of CBT Common Stock Entitled to Vote on the Matter (Page 70)

Approval of the non-binding proposal regarding certain merger-related executive compensation arrangements requires the affirmative vote of the holders of a majority of the outstanding shares of CBT common stock entitled to vote on the matter. Shareholders should note that the non-binding proposal regarding certain merger-related executive compensation arrangements is merely an advisory vote which will not be binding on CBT, CBT’s Board of Directors, or BHLB. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to shareholder approval. Accordingly, regardless of the outcome of the non-binding, advisory vote, if the merger is consummated, CBT’s named executive officers will be eligible to receive the various payments and benefits in accordance with the terms and conditions applicable to those arrangements.

Accounting Treatment of the Merger (page 45)

The merger will be accounted for in accordance with accounting standards for business combinations in accordance with U.S. generally accepted accounting principles.

Comparison of Rights of Shareholders (page 64)

When the merger is completed, CBT shareholders who are to receive shares of BHLB will become BHLB shareholders and their rights will be governed by Delaware law and by BHLB’s certificate of incorporation and bylaws. See “Comparison of Rights of Shareholders” beginning on page 64 for a summary of the material differences between the respective rights of CBT and BHLB shareholders.

No Dissenters’ Rights (page 31)

CBT shareholders do not have dissenters’ rights under Connecticut law since CBT common stock is traded on the Nasdaq Capital Market.

Material Tax Consequences of the Merger (page 45)

The federal tax consequences of the merger to shareholders of CBT will depend primarily on whether they exchange their CBT common stock solely for BHLB common stock, solely for cash or for a combination of BHLB common stock and cash. CBT shareholders who exchange their shares solely for BHLB common stock should not recognize gain or loss except with respect to the cash they receive instead of a fractional share. CBT shareholders who exchange their shares solely for cash should recognize gain or loss on the exchange. CBT shareholders who exchange their shares for a combination of BHLB common stock and cash should recognize gain, but not any loss, on the exchange. The actual federal income tax consequences to CBT shareholders of electing to receive cash, BHLB common stock or a combination of cash and stock will not be ascertainable at the time CBT shareholders make their election because it will not be known at that time how, or to what extent, the allocation and proration procedures will apply.

This tax treatment may not apply to all CBT shareholders. Determining the actual tax consequences of the merger to CBT shareholders can be complicated. CBT shareholders should consult their own tax advisor for a full understanding of the merger’s tax consequences that are particular to each shareholder.

To review the tax consequences of the merger to CBT shareholders in greater detail, please see the section “Description of the Merger — Material Tax Consequences of the Merger” beginning on page 45.

9


 
 

TABLE OF CONTENTS

RISK FACTORS

In addition to the other information contained in or incorporated by reference into this proxy statement/prospectus, you should consider carefully the risk factors described below, in deciding how to vote. You should keep these risk factors in mind when you read forward-looking statements in this document. Please refer to the section of this proxy statement/prospectus titled “Caution About Forward-Looking Statements” beginning on page 13.

CBT shareholders may receive a form of consideration different from what they elect.

The consideration to be received by CBT shareholders in the merger is subject to the requirement that 70% of the shares of CBT common stock be exchanged for BHLB common stock and the remaining 30% be exchanged for cash. The merger agreement contains proration and allocation methods to achieve this desired result. If you elect all cash and the available cash is oversubscribed, then you will receive a portion of the merger consideration in BHLB common stock. If you elect all stock and the available stock is oversubscribed, then you will receive a portion of the merger consideration in cash.

The price of BHLB common stock might decrease after the merger.

Following the merger, many holders of CBT common stock will become shareholders of BHLB. BHLB common stock could decline in value after the merger. For example, during the twelve-month period ending on February 17, 2012 (the most recent practicable date before the printing of this proxy statement/prospectus), the price of BHLB common stock varied from a low of $17.11 to a high of $24.49 and ended that period at $23.40. The market value of BHLB common stock fluctuates based upon general market economic conditions, BHLB’s business and prospects and other factors.

BHLB may be unable to successfully integrate CBT’s operations and retain CBT’s employees.

The merger involves the integration of two companies that have previously operated independently. The difficulties of combining the operations of the two companies include:

integrating personnel with diverse business backgrounds;
combining different corporate cultures; and
retaining key employees.

The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of the business and the loss of key personnel. The integration of the two companies will require the experience and expertise of certain key employees of CBT who are expected to be retained by BHLB. BHLB may not be successful in retaining these employees for the time period necessary to successfully integrate CBT’s operations with those of BHLB. The diversion of management’s attention and any delays or difficulties encountered in connection with the merger and the integration of the two companies’ operations could have an adverse effect on the business and results of operation of BHLB following the merger.

The termination fee and the restrictions on solicitation contained in the merger agreement may discourage other companies from trying to acquire CBT.

Until the completion of the merger, with some exceptions, CBT is prohibited from soliciting, initiating, encouraging or participating in any discussion of or otherwise considering any inquiries or proposals that may lead to an acquisition proposal, such as a merger or other business combination transaction, with any person other than BHLB. In addition, CBT has agreed to pay a termination fee to BHLB in specified circumstances. These provisions could discourage other companies from trying to acquire CBT even though those other companies might be willing to offer greater value to CBT’s shareholders than BHLB has offered in the merger. The payment of the termination fee could also have a material adverse effect on CBT’s financial condition.

10


 
 

TABLE OF CONTENTS

Certain of CBT’s officers and directors have interests that are different from, or in addition to, interests of CBT’s shareholders generally.

You should be aware that the directors and officers of CBT have interests in the merger that are different from, or in addition to, the interests of CBT shareholders generally. These include: severance payments that certain officers may receive under existing employment agreements; the payment for stock options and stock warrants; provisions in the merger agreement relating to indemnification of directors and officers and insurance for directors and officers of CBT for events occurring before the merger; the appointment of one CBT board member to the boards of BHLB and Berkshire Bank; and the establishment of an advisory board of directors comprised of CBT board members. For a more detailed discussion of these interests, see “Description of the Merger — Interests of Certain Persons in the Merger that are Different from Yours” beginning on page 49.

If you are a CBT shareholder and you make a valid cash or stock election, you will not be able to sell your shares during certain times.

If you are a CBT shareholder of record as of the record date for the special meeting, hold your shares in certificated form and want to make a valid cash or stock election, you will have to deliver a properly completed and signed form of election and your stock certificates to the exchange agent. For further details on the determination of the election deadline, see “Description of the Merger — Election Procedures; Surrender of Stock Certificates” on page 43. The election deadline will be the later of the day of the CBT special meeting and the date the parties believe to be as near as practicable to five business days before the completion of the merger. You will not be able to sell any certificated shares of CBT common stock that you have delivered as part of your election unless you revoke your election before the deadline by providing written notice to the exchange agent. If you do not revoke your election before the election deadline, you will not be able to liquidate your investment in CBT common stock for any reason until you receive cash and/or BHLB common stock following completion of the merger. Similarly, holders of book-entry shares of CBT common stock who have made a valid election and have not revoked their election prior to the election deadline will not be able to sell any shares for which they have made a valid election after the election deadline. In the time between the election deadline and the completion of the merger, the trading price of CBT or BHLB common stock may decrease, and you might otherwise want to sell your shares of CBT common stock to gain access to cash, make other investments, or reduce the potential for a decrease in the value of your investment. The date that you will receive your merger consideration depends on the completion date of the merger, which is uncertain. The completion date of the merger might be later than expected due to unforeseen events, such as delays in obtaining regulatory approvals.

Failure to complete the merger could negatively impact the stock prices and future businesses and financial results of BHLB and CBT.

If the merger is not completed, the ongoing businesses of BHLB and CBT may be adversely affected and BHLB and CBT will be subject to several risks, including the following:

BHLB and CBT will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, financial advisor and printing fees;
under the merger agreement, CBT is subject to certain restrictions on the conduct of its business prior to completing the merger, which may adversely affect its ability to execute certain of its business strategies; and
matters relating to the merger may require substantial commitments of time and resources by BHLB and CBT management, which could otherwise have been devoted to other opportunities that may have been beneficial to BHLB and CBT as independent companies, as the case may be.

In addition, if the merger is not completed, BHLB and/or CBT may experience negative reactions from the financial markets and from their respective customers and employees. BHLB and/or CBT also could be subject to litigation related to any failure to complete the merger or to enforcement proceedings commenced against BHLB or CBT to perform their respective obligations under the merger agreement. If the merger is not completed, BHLB and CBT cannot assure their shareholders that the risks described above will not materialize and will not materially affect the business, financial results and stock prices of BHLB and/or CBT.

11


 
 

TABLE OF CONTENTS

The shares of BHLB common stock to be received by CBT shareholders receiving the stock consideration as a result of the merger will have different rights from shares of CBT common stock.

Following completion of the merger, CBT shareholders who receive the stock consideration will no longer be shareholders of CBT, a Connecticut bank and trust company, but will instead be shareholders of BHLB, a Delaware corporation. There will be important differences between your current rights as a CBT shareholder and the rights to which you will be entitled as a BHLB shareholder. See “Comparison of Rights of Shareholders” beginning on page 64 for a discussion of the different rights associated with BHLB common stock and CBT common stock.

The fairness opinion obtained by CBT from its financial advisor will not reflect changes in circumstances subsequent to the date of the fairness opinion.

KBW, CBT’s financial advisor in connection with the merger, has delivered to the board of directors of CBT its opinion dated as of October 24, 2011. The opinion of KBW stated that as of such date, and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid to the holders of the outstanding shares of CBT common stock pursuant to the merger agreement was fair from a financial point of view to such holders. The opinion does not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of BHLB or CBT, changes in general market and economic conditions or regulatory or other factors. Any such changes, or changes in other factors on which the opinion is based, may materially alter or affect the relative values of BHLB and CBT.

12


 
 

TABLE OF CONTENTS

CAUTION ABOUT 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. The sections of this document which contain forward-looking statements include, but are not limited to, “Questions And Answers About the Merger and the Special Meeting,” “Summary,” “Risk Factors,” “Description of the Merger — Background of the Merger,” and “Description of the Merger — CBT’s Reasons for the Merger.” You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions and the risks and other factors set forth in the “Risk Factors” section beginning on page 10.

Because of these and other uncertainties, BHLB’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, BHLB’s and CBT’s past results of operations do not necessarily indicate BHLB’s and CBT’s combined future results. You should not place undue reliance on any forward-looking statements, which speak only as of the dates on which they were made. BHLB is not undertaking an obligation to update these forward-looking statements, even though its situation may change in the future, except as required under federal securities law. BHLB qualifies all of its forward-looking statements by these cautionary statements.

13


 
 

TABLE OF CONTENTS

RECENT DEVELOPMENTS OF BERKSHIRE HILLS BANCORP, INC.

The following tables set forth summarized historical financial data for BHLB for the periods and at the dates indicated. The information at December 31, 2010 and for the year ended December 31, 2010 is derived in part from the audited consolidated financial statements that are incorporated by reference into this document as restated for the correction of an immaterial error previously disclosed in the BHLB Form 10-Qs for the quarters ended June 30, 2011 and September 30, 2011. The information at December 31, 2011, for the three months ended December 31, 2010 and for the three months and year ended December 31, 2011, is unaudited.

   
  At December 31,
(In thousands, except per share data)   2011   2010
Selected Financial Data:
                 
Total assets   $ 3,982,134     $ 2,881,403  
Loans(1)     2,956,570       2,142,162  
Allowance for loan losses     (32,444 )      (31,898 ) 
Securities     533,181       405,953  
Goodwill and other intangible assets     223,937       173,079  
Total deposits     3,101,567       2,204,441  
Borrowings and subordinated debentures     237,402       260,301  
Total shareholders’ equity     554,041       388,647  

       
  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
     2011   2010   2011   2010
Selected Operating Data:
                                   
Total interest and dividend income   $ 39,028     $ 28,369     $ 138,260     $ 112,277  
Total interest expense     7,893       8,274       31,740       35,330  
Net interest income     31,135       20,095       106,520       76,947  
Service charges and fee income     8,499       7,197       33,727       29,859  
All other non-interest income (loss)     326       234       2,076       (108 ) 
Total net revenue     39,960       27,526       142,323       106,698  
Provision for loan losses     2,263       2,000       7,563       8,526  
Total non-interest expense     29,533       21,415       116,055       81,729  
Income tax expense – continuing operations     606       511       2,038       2,585  
Net income from discontinued operations     919             914        
Net income   $ 8,477     $ 3,600     $ 17,581     $ 13,858  

Note:  BHLB acquired Rome Bancorp on April 1, 2011 and Legacy Bancorp on July 21, 2011. Financial data includes acquired balances, along with the impact of equity issued as merger consideration. Operating data includes the operations of the acquired banks beginning as of the acquisition dates, as well as non-recurring income and expenses related to these merger events. Discontinued operations consist of former Legacy branches held for divestiture in the second half of 2011.

14


 
 

TABLE OF CONTENTS

       
  At or for the Three Months
Ended December 31,
  At or For the Years Ended
December 31,
     2011   2010   2011   2010
Selected Operating Ratios and Other Data:
                                   
Performance Ratios:
                                   
Return on average assets(2)     0.85 %      0.51 %      0.50 %      0.51 % 
Return on average equity(3)     6.16       3.72       3.69       3.62  
Net interest rate spread (tax equivalent)(4)     3.43       3.05       3.38       3.00  
Net interest margin (tax equivalent)(5)     3.61       3.30       3.57       3.27  
Non-interest income/total net revenue     22.08       27.00       25.16       27.88  
Non-interest expense/average assets     2.97       3.03       3.32       2.97  
Capital Ratios:
                                   
Equity/total assets     13.91       13.49       13.91       13.49  
Tier 1 capital to average assets – Berkshire Bank     8.41       8.02       8.41       8.02  
Total capital to risk-weighted assets – Berkshire Bank     11.29       10.58       11.29       10.58  
Asset Quality Ratios:
                                   
Net loans charged-off/average total loans(1)     0.27       0.37       0.27       0.42  
Allowance for loan losses as a percent of loans     1.10       1.49       1.10       1.49  
Share Data:
                                   
Basic earnings per common share   $ 0.40     $ 0.26     $ 0.98     $ 1.00  
Diluted earnings per common share     0.40       0.26       0.98       1.00  
Dividends per common share     0.17       0.16       0.65       0.64  
Book value per share     26.20       27.61       26.20       27.61  
Market price at period end     22.19       22.11       22.19       22.11  
Weighted average common shares outstanding – basic (thousands)     20,930       13,890       17,885       13,862  
Weighted average common shares outstanding – diluted (thousands)     21,043       13,934       17,952       13,896  

Note:  All performance ratios are based on average balance sheet amounts where applicable. 2011 data includes balances associated with discontinued operations.

(1) Loans do not include loans held for sale, which are not material.
(2) Net income divided by average total assets.
(3) Net income divided by average total equity.
(4) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income as a percentage of average interest-earning assets for the period. Both the net interest margin and the net interest rate spread included loans and deposits related to discontinued operations.

Note:  Generally accepted accounting principles require that acquired loans be recorded at fair value, whereas historical loans are recorded at cost. In 2011, BHLB acquired loans as a result of its acquisitions of Rome Bancorp and Legacy Bancorp. The fair value of acquired loans includes expected loan losses, and there is no loan loss allowance recorded for acquired loans at the time of acquisition. Accordingly, the ratio of the loan loss allowance to total loans is reduced as a result of the existence of acquired loans, and this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally reduced for acquired loans since these loans are recorded net of expected loan losses. Therefore, the ratio of net loan charge-offs to average loans is reduced as a result of the existence of acquired loans, and this measure is not directly comparable to prior periods. Other institutions may have acquired loans, and therefore there may be no direct comparability of these ratios between and among other institutions.

15


 
 

TABLE OF CONTENTS

Comparison of Financial Condition at December 31, 2011 and December 31, 2010

Total assets increased by $1.1 billion (38%) to $4.0 billion at year-end 2011. This growth included $1.2 billion in assets recorded as a result of the acquisitions of Rome Bancorp (on April 1, 2011) and Legacy Bancorp (on July 21, 2011). Most categories of assets and liabilities increased as a result of these acquisitions. BHLB also recorded a $143 million reduction in deposits and a $49 million reduction in assets related to the divestiture of four former Legacy branches in conjunction with the Legacy merger agreement. Additionally, BHLB recorded $5 million in assets and $55 million in liabilities related to the discontinued operations of four other former Legacy branches held for divestiture at year-end; this transaction was completed in January 2012. In accordance with accounting standards for business combinations, the acquired assets are recorded at fair value and there is no loan loss allowance recorded for acquired loans. Additionally, all acquired loans are recorded as performing regardless of their payment status.

Organic loan growth (excluding the impact of mergers and divestitures) measured 2% in 2011, with 6% organic commercial loan growth offsetting a 13% organic decline in consumer outstandings, and with no organic change in residential mortgage balances. BHLB emphasizes the origination of higher margin commercial loans and sells a significant portion of its fixed rate mortgage originations in order to maintain a modestly asset sensitive interest rate risk profile. Organic deposit growth measured 10% in 2011, primarily due to 22% organic growth in demand deposit balances and 25% organic growth in money market balances.

The overall level and trend of asset performance measures were viewed by BHLB as remaining favorable through year-end 2011. The amount of net loan charge-offs decreased to $7.0 million in 2011 from $8.4 million in the prior year, measuring 0.27% of average loans in 2011. Non-performing assets increased to $26.1 million at year-end 2011, compared to $17.1 million at the prior year-end. The year-end 2011 ratio of non-performing assets/assets measured 0.66%. Due to the accounting standards for business combinations, the ratios stated above are not directly comparable to prior periods.

Total outstanding common shares increased by 50% to 21.1 million in 2011 due to shares issued as merger consideration. Total shareholders’ equity increased by $165 million (43%) to $554 million primarily due to this share issuance. Total goodwill and other intangible assets increased by $51 million (29%) to $224 million as a result of the accounting for these business combinations. Tangible book value per share increased to $15.61 at year-end 2011. Total book value per share decreased to $26.20, reflecting current market prices assigned to new shares issued as merger consideration. The ratio of tangible equity/assets increased to 8.8% at year-end 2011 compared to 8.0% at the start of the year, and the ratio of total equity/assets increased to 13.9% from 13.5%.

Comparison of Results of Operations for the Three Months Ended December 31, 2011 and December 31, 2010

General.  Fourth quarter net income increased by $4.9 million (135%) to $8.5 million in 2011, compared to $3.6 million in 2010. Earnings per share increased by 53% to $0.40 compared to $0.26 for these periods, and included the impact of a 50% increase in outstanding shares related to the bank acquisitions. Most categories of income and expense increased as a result of these acquisitions. Total net revenue increased by $12.4 million (45%) and also included the benefit of organic growth. BHLB’s return on assets improved to 0.85% from 0.51%, and its return on equity improved to 6.2% from 3.7%.

Net Interest Income.  Net interest income increased by $11.0 million (55%) as a result of the mergers and organic growth. The net interest margin improved to 3.61% from 3.30%, reflecting the fair valued margins of acquired banks, together with the continuing benefit of disciplined pricing of loans and deposits and the benefit of organic growth in lower cost deposit balances.

Provision for Losses on Loans.  The provision for loan losses increased by $0.3 million (13%). The provision for loan losses is a charge to earnings in an amount sufficient to maintain the allowance for loan losses at a level deemed adequate by BHLB. The level of the allowance is a critical accounting estimate, which is subject to uncertainty. Due to the impact of accounting standards for business combinations, no loan loss allowance was initially recorded for acquired loans, and therefore the amount of the allowance is not directly comparable to periods prior to the bank acquisitions. Fourth quarter net interest income after the provision for loan losses totaled $28.9 million in 2011, compared to $18.1 million in 2010.

16


 
 

TABLE OF CONTENTS

Non-Interest Income.  Non-interest income increased by $1.4 million (19%). Deposit fees and wealth management fees included the benefit of acquisitions, increasing by 34% and 57% respectively. Loan and insurance fees primarily reflected organic changes, since the acquired banks had modest income in these categories. Insurance fees were flat from year-to-year, and the 24% decrease in loan related fees was due primarily to lower demand for commercial loan interest rate swaps in the current low rate environment.

Non-Interest Expense.  Non-interest expense increased by $8.1 million (38%) including the impact of the bank acquisitions. This increase included a $3.3 million increase in nonrecurring and merger related expenses, which are viewed by BHLB as part of the economic investment in completing the transactions, rather than as part of current core operations. Excluding this increase, total non-interest expense increased by $4.9 million (23%), compared to the 45% increase in net revenue. The positive operating leverage, with revenue growth outpacing expense growth, resulted in BHLB’s improved profitability and efficiency.

Income Tax Expense.  The fourth quarter income tax rate on continuing operations decreased to 7% in 2011 from 12% in 2010, including higher tax credit limited partnership benefits recorded in 2011. Fourth quarter income tax expense reflected final analysis for the determination of the full year effective tax rate, which was lower than earlier estimates due to the final impacts of merger and divestiture related items.

Net Income from Discontinued Operations.  Discontinued operations related to branches held for divestiture in the second half of 2011. Net income on discontinued operations totaled $0.9 million for the fourth quarter and the year. BHLB recorded a $4.9 million gain on the divestiture of four branches in the fourth quarter. The tax rate on discontinued operations was 80% due to the nondeductibility of goodwill for income tax purposes in determining the taxable gain on the divestiture.

Comparison of Results of Operations for the Years Ended December 31, 2011 and December 31, 2010

General.  Net income increased by $3.7 million (27%) to $17.6 million in 2011, compared to $13.9 million in 2010. Earnings per share decreased slightly to $0.98 from $1.00 due to the additional shares issued for the bank acquisitions. Results in 2011 included nine months of operations related to Rome Bancorp and approximately five and a half months of operations related to Legacy Bancorp. Total net revenue increased by $35.6 million (33%) to $142.3 million, and ended the year at an annualized run rate of approximately $160 million. BHLB’s 2011 return on assets was 0.50% and its return on equity was 3.69%; these were little changed from the prior year measures of 0.51% and 3.62%, respectively. Earnings in 2011 were reduced by merger related expenses, which are viewed by BHLB as part of the economic investment in completing the transactions, rather than as part of current core operations. Profitability improved throughout the year as the acquisitions were completed and integrated. Excluding all non-recurring and merger and divestiture related items (totaling $0.8 million after-tax), BHLB’s fourth quarter 2011 return on assets increased to 0.93% and return on equity increased to 6.7%.

Net Interest Income.  Net interest income increased by $29.6 million (38%) as a result of the mergers and organic growth. The net interest margin improved to 3.57% from 3.27%, reflecting the fair valued margins of acquired banks, together with the continuing benefit of disciplined pricing of loans and deposits and the benefit of organic growth in lower cost deposit balances.

Provision for Losses on Loans.  The provision for loan losses decreased by $1.0 million (11%) in 2011, reflecting the lower loan growth in 2011 and the decreased amount of net loan charge-offs. Net interest income after the provision for loan losses totaled $99.0 million in 2011, compared to $68.4 million in 2010.

Non-Interest Income.  Non-interest income increased by $6.1 million (20%). Total fee income increased by $3.9 million (13%) including the benefit of the acquisitions, which contributed to 25% growth in deposit fees and 31% growth in wealth management fees. Loan related fees were down 7% due to lower demand for commercial loan interest rate swaps and insurance fees were flat from year-to-year. Additionally, BHLB recorded a $2.1 million non-recurring gain in 2011 related to gains on BHLB’s investment holdings of Rome and Legacy stock.

17


 
 

TABLE OF CONTENTS

Non-Interest Expense.  Non-interest expense increased by $34.3 million (42%). In 2011, non-interest expense included $19.9 million in non-recurring and merger related expense, primarily consisting of professional fees, severance, and contract terminations related to Rome and Legacy. Excluding this expense, total non-interest expense increased by $14.8 million (18%). Total full time equivalent employees measured 770 at the end of 2011, increasing by 29% from 599 at the prior year-end. The positive operating leverage, with revenue growth outpacing expense growth, resulted in improved profitability and efficiency.

Income Tax Expense.  The income tax rate on continuing operations decreased to 11% in 2011 from 16% in 2010 primarily due to higher tax credit limited partnership benefits recorded in 2011. Before these items, the 2010 effective tax rate was 23%, primarily reflecting the benefit of tax exempt income on investment securities and bank owned life insurance policies.

Net Income from Discontinued Operations.  Discontinued operations related to branches held for divestiture in the second half of 2011. Net income on discontinued operations totaled $0.9 million for the fourth quarter and the year. BHLB recorded a $4.9 million gain on the divestiture of four branches in the fourth quarter. The tax rate on discontinued operations was 80% due to the nondeductibility of goodwill for income tax purposes in determining the taxable gain on divestiture.

18


 
 

TABLE OF CONTENTS

RECENT DEVELOPMENTS OF THE CONNECTICUT BANK AND TRUST COMPANY

The following tables set forth summarized historical financial data for CBT for the periods and at the dates indicated. The information at December 31, 2010 and for the year ended December 31, 2010 is derived in part from the audited financial statements that appear in this document. The information at December 31, 2011, for the three months ended December 31, 2010 and for the three months and year ended December 31, 2011, is unaudited.

   
  At December 31,
     2011   2010
     (in thousands)
Selected Financial Condition Data:
                 
Total assets   $ 280,513     $ 274,231  
Loans, net     223,123       220,342  
Securities available for sale     42,436       35,349  
Total cash and cash equivalents     4,832       8,725  
Total deposits     220,005       213,794  
Borrowings     35,503       34,419  
Total stockholders’ equity     23,370       24,867  
Allowance for loan losses     4,247       3,381  
Non-accrual loans     12,741       8,785  
Non-performing assets     14,931       9,467  

       
  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
     2011   2010   2011   2010
     (in thousands)
Selected Operating Data:
                                   
Interest income   $ 3,164     $ 3,291     $ 12,833     $ 13,358  
Interest expense     725       810       2,918       3,357  
Net interest income     2,439       2,481       9,915       10,001  
Provision for loan losses     2,318       135       2,980       1,031  
Net interest income after provision for
loan losses
    121       2,346       6,935       8,970  
Non-interest income:
                                   
Service charges and other income     234       206       911       694  
Net gain (loss) on securities available
for sale
                448       60  
Total non-interest income     234       206       1,359       754  
Total non-interest expense     2,904       2,362       10,456       9,162  
Income before income taxes     (2,549 )      190       (2,162 )      562  
Income tax benefit (expense)           (2 )      700       (2 ) 
Net income (loss)     (2,549 )      188       (1,462 )      560  
Dividends on preferred stock and accretion     (97 )      (97 )      (388 )      (388 ) 
Net income (loss) attributable to common shareholders   $ (2,646 )    $ 91     $ (1,850 )    $ 172  

19


 
 

TABLE OF CONTENTS

       
  At or for the Three Months
Ended December 31,
  At or for the Years Ended
December 31,
     2011   2010   2011   2010
Selected Financial Ratios and Other Data
                                   
Performance Ratios(1):
                                   
Return on average assets     (0.89 )%      0.07 %      (0.77 )%      0.21 % 
Return on average equity     (9.85 )%      0.75 %      (8.39 )%      2.24 % 
Net interest rate spread (tax equivalent)     3.17 %      3.33 %      3.36 %      3.53 % 
Net interest margin (tax equivalent)     3.51 %      3.64 %      3.67 %      3.83 % 
Non-interest expense to average assets     1.01 %      0.85 %      3.74 %      3.39 % 
Efficiency ratio(2)     108.60 %      113.76 %      92.75 %      85.68 % 
Average interest-earning assets to average interest-bearing liabilities     131.9 %      126.1 %      129.3 %      124.0 % 
Capital Ratios:
                                   
Average equity to average assets     9.0 %      9.0 %      9.2 %      9.3 % 
Equity to total assets at end of period     8.3 %      9.1 %      8.3 %      9.1 % 
Regulatory Capital Ratios:
                                   
Core capital (Tier 1 capital) to average assets     8.0 %      8.9 %      8.0 %      8.9 % 
Total risk-based capital     11.42 %      12.3 %      11.42 %      12.3 % 
Asset Quality Ratios:
                                   
Nonperforming loans as percent of loans     5.60 %      3.93 %      5.60 %      3.93 % 
Nonperforming assets as percent of total assets     5.32 %      3.45 %      5.32 %      3.87 % 
Allowance for loan losses as a percent of loans     1.87 %      1.51 %      1.87 %      1.51 % 
Allowance for loan losses as a percent of non-performing loans     28.44 %      35.71 %      28.44 %      35.71 % 
Share:
                                   
Basic earnings (loss) per share   $ (0.73 )    $ 0.03     $ (0.51 )    $ 0.05  
Diluted earnings (loss) per share   $ (0.73 )    $ 0.02     $ (0.51 )    $ 0.05  
Book value per share   $ 5.02     $ 5.47     $ 5.02     $ 5.47  
Dividends per common share   $     $     $     $  
Other Data:
                                   
Number of:
                                   
Full service offices     7       7       7       7  

(1) Performance ratios for the three months ended December 31, 2011 and 2010 have been annualized.
(2) Non-interest expense divided by the sum of net interest income, the tax equivalent adjustment on tax-exempt municipal securities and other non-interest income.

Comparison of Financial Condition at December 31, 2011 and December 31, 2010

Total assets were $280.5 million at December 31, 2011, an increase of $6.3 million over total assets of $274.2 million at December 31, 2010.

Total loans were $227.4 million, up $3.6 million from $223.7 million at December 31, 2010. The ratio of the allowance for loan losses to total loans was 1.87% at December 31, 2011 compared to 1.51% at December 31, 2010 due to an increase in the specific reserves on impaired loans and an increase in the general reserves on non-impaired loans. At December 31, 2011, the allowance was $4.2 million compared to $3.4 million at December 31, 2010. All loans are subject to internal risk ratings, which are independently reviewed on an annual basis. Internal risk ratings and delinquency status are integral components in the calculation of the allowance for loan losses. Total non-performing loans were $12.7 million, or 5.60% of total loans outstanding at December 31, 2011 compared to $8.8 million or 3.93% of total loans outstanding at

20


 
 

TABLE OF CONTENTS

December 31, 2010. Other real estate owned was $2.2 million at December 31, 2011 compared to $682,000 at December 31, 2010 primarily due to one property of $1.5 million added in 2011. The Bank has seen a migration of loans to nonaccrual status due to increased delinquency primarily from commercial customers. Management mitigates the risk of loss through sound underwriting standards, strong collateral management, diversification among industries and government guarantees from the USDA and SBA, when available.

Securities available for sale increased to $42.4 million compared to $35.3 million at December 31, 2010 as a result of purchases of certain government-sponsored residential and commercial mortgage-backed securities. Cash and cash equivalents totaled $4.8 million at December 31, 2011, down $3.9 million from $8.7 million at December 31, 2010. During the first quarter of 2011, the Bank reduced the valuation allowance against the deferred tax asset by $700,000. Total deposits increased $6.2 million to $220.0 million at December 31, 2011 from $213.8 million at December 31, 2010 primarily from higher core deposits.

Securities sold under agreements to repurchase and secured borrowings increased $2.1 million while advances from the Federal Home Loan Bank of Boston declined by $1.0 million. The Bank remains well-capitalized with stockholders’ equity of $23.4 million at December 31, 2011.

Comparison of Results of Operations for the Three Months Ended December 31, 2011 and December 31, 2010

Net interest income for the quarter ended December 31, 2011 was $2.4 million compared to $2.5 million for the same period in the prior year. The net interest margin was 3.51% for the quarter ended December 31, 2011 compared to 3.67% for the same period in 2010. Interest income decreased $127,000 as lower rates on earning assets more than offset the volume related increase attributable to growth in average earning assets, principally securities. Lower rates across all funding sources and overall lower volume of interest-bearing liabilities added $66,000 to net interest income.

The provision for loan losses was $2.3 million for the quarter ended December 31, 2011 compared to $135,000 for the same period in 2010 as a result of an increase in specific reserves on impaired loans and to the financial stress of some commercial borrowers. Net charge-offs for the quarter ended December 31, 2011 were $1.2 million compared to $1,000 for the same period in 2010, primarily due to a $1.1 million commercial loan charge-off.

Non-interest income amounted to $234,000 in the quarter, compared to $206,000 for the same period a year ago. Customer service fees totaled $132,000 for the quarter ended December 31, 2011, up $41,000 or 45% from the same period in the prior year as a result of an increase in the number of deposit accounts. Brokerage commissions were $81,000 for the quarter, up $3,000 or 4% from the same period in the prior year. Net gains from sales of loans were $21,000 and $37,000, respectively, for the quarters ended December 31, 2011 and December 31, 2010.

Operating expenses for the quarter totaled $2.9 million, an increase of $542,000 from the same period last year. Salaries and benefits, including staff additions and related payroll taxes, rose $87,000 for the three-month period ended December 31, 2011 compared to the same period in the prior year. Professional services increased $13,000 from the prior year mainly due to increased legal and consulting costs. General and administrative costs rose $548,000 from the comparable period in the prior year primarily as a result of merger related expenses, higher prices for purchased goods and services and expenses related to problem assets and other real estate owned.

Comparison of Results of Operations for the Years Ended December 31, 2011 and December 31, 2010

Net interest income for the year totaled $9.9 million, a decrease of $86,000 from $10.0 million in the prior year. The net interest margin for the year was 3.67% compared to 3.83% in the prior year. Interest income decreased $525,000 as lower rates on earning assets more than offset the volume related increase of $673,000 from growth of interest-earning assets, principally loans. Lower rates across all funding sources and overall lower volume of interest-bearing liabilities added $439,000 to net interest income.

21


 
 

TABLE OF CONTENTS

The provision for loan losses was $3.0 million for the year ended December 31, 2011 compared to $1.0 million in the prior year as a result of an increase in the specific reserves on impaired loans and an increase in the general reserves on non-impaired loans. Net charge-offs for the year ended December 31, 2011 were $2.1 million compared to $352,000 in the prior year, primarily due to $1.1 million in charge-offs on two commercial loans.

Non-interest income amounted to $1.4 million for the year ended December 31, 2011 compared to $754,000 in the prior year. Customer service fees totaled $492,000 for the year, up $152,000 or 44.7% from the prior year due to an increase in the number of deposit accounts. Brokerage commissions were $332,000 for the year, up $48,000 or 16.8% from the prior year. Gains on sales of securities were $448,000 for the year ended December 31, 2011 compared to $60,000 in the prior year. Net gains from sales of loans were $87,000 and $70,000, respectively, for the years ended December 31, 2011 and December 31, 2010.

Operating expenses for the year ended December 31, 2011 totaled $10.5 million, an increase of $1.3 million from the prior year. Salaries and benefits, including staff additions and related payroll taxes, rose $279,000 for the year ended December 31, 2011 compared to prior year. Professional services increased $258,000 to $906,000 for the year ended December 31, 2011 from the prior year mainly due to increased servicing fees on the consumer loan portfolio and increased legal and consulting costs. FDIC insurance premiums increased $35,000 chiefly related to higher premiums on insured deposits. General and administrative costs rose $789,000 for the year ended December 31, 2011 compared to the prior year primarily as a result of collection expenses on increased problem assets, other real estate owned, deferred compensation and merger related expenses.

During the first quarter of 2011, the Bank reduced the valuation allowance against the deferred tax asset by $700,000 after concluding that it was more likely than not that this portion of the deferred tax asset will be realized based upon historical taxable income for 2009 and 2010 and projected taxable income in future years.

22


 
 

TABLE OF CONTENTS

SELECTED HISTORICAL FINANCIAL INFORMATION

The following tables show summarized historical financial data for BHLB and CBT. You should read this summary financial information in connection with BHLB’s historical financial information, which is incorporated by reference into this document, and in connection with CBT’s historical financial information which is included herein.

Unaudited consolidated interim financial statements for BHLB and CBT at or for the nine months ended September 30, 2011 and 2010 include normal, recurring adjustments necessary to fairly present the data for those periods. The unaudited data is not necessarily indicative of expected results of a full year’s operation.

23


 
 

TABLE OF CONTENTS

SELECTED HISTORICAL FINANCIAL AND OTHER DATA OF
BERKSHIRE HILLS BANCORP, INC.

           
  At September 30,
2011
  At December 31,
(In thousands, except per share data)   2010   2009   2008   2007   2006
Selected Financial Data:
                                                     
Total assets   $ 4,087,200     $ 2,881,403     $ 2,700,424     $ 2,666,729     $ 2,513,432     $ 2,149,642  
Loans(1)     2,954,560       2,142,162       1,961,658       2,007,152       1,944,016       1,698,987  
Allowance for loan losses     (32,181 )      (31,898 )      (31,816 )      (22,908 )      (22,116 )      (19,370 ) 
Securities     508,457       405,953       420,966       341,516       258,497       234,174  
Goodwill and other intangible assets     224,388       173,079       176,100       178,830       182,452       121,341  
Total deposits     3,038,346       2,204,441       1,986,762       1,829,580       1,822,563       1,521,938  
Borrowings and subordinated debentures     237,460       260,301       306,668       374,621       349,938       360,469  
Total shareholders’ equity     546,693       388,647       384,581       408,425       326,837       258,161  

             
             
  For the Nine Months
Ended September 30,
  For the Years Ended December 31,
     2011   2010   2010   2009   2008   2007   2006
Selected Operating Data:
                                                              
Total interest and dividend income   $ 99,232     $ 83,908     $ 112,277     $ 115,476     $ 133,211     $ 131,944     $ 118,051  
Total interest expense     23,847       27,056       35,330       45,880       57,471       68,019       57,811  
Net interest income     75,385       56,852       76,947       69,596       75,740       63,925       60,240  
Service charges and
fee income
    25,228       22,662       29,859       28,181       30,334       26,654       13,539  
All other non-interest income (loss)     1,750       (342 )      (108 )      944       1,261       (2,011 )      (1,491 ) 
Total net revenue     102,363       79,172       106,698       98,721       107,335       88,568       72,288  
Provision for loan losses     5,300       6,526       8,526       47,730       4,580       4,300       7,860  
Total non-interest expense     86,522       60,314       81,729       78,571       71,699       65,494       48,868  
Income tax expense (benefit) – continuing operations     1,432       2,104       2,585       (11,649 )      8,812       5,239       4,668  
Net (loss) income from discontinued operations     (5 )                                    371  
Net income (loss)   $ 9,104     $ 10,228       13,858       (15,931 )      22,244       13,535       11,263  
Less: Cumulative preferred stock dividends and accretion                       1,030                    
Less: Deemed dividend from preferred stock repayment                       2,954                    
Net income (loss) available to common shareholders   $ 9,104     $ 10,228     $ 13,858     $ (19,915 )    $ 22,244     $ 13,535     $ 11,263  

Note:  BHLB acquired Rome Bancorp on April 1, 2011 and Legacy Bancorp on July 21, 2011. Financial data includes acquired balances as of September 30, 2011, along with the impact of equity issued as merger consideration. Operating data includes the operations of the acquired banks beginning as of the acquisition dates, as well as non-recurring income and expenses related to these merger events.

24


 
 

TABLE OF CONTENTS

             
             
  At or for the Nine Months
Ended September 30,
  At or For the Years Ended December 31,
     2011   2010   2010   2009   2008   2007   2006
Selected Operating Ratios and Other Data:
                                                              
Performance Ratios:
                                                              
Return on average assets(2)     0.36 %      0.50 %      0.50 %      (0.60 )%      0.87 %      0.60 %      0.53 % 
Return on average equity(3)     2.62       3.49       3.54       (3.90 )      6.47       4.69       4.40  
Net interest rate spread (tax equivalent)(4)     3.32       2.97       3.00       2.61       3.06       2.79       2.81  
Net interest margin (tax equivalent)(5)     3.52       3.26       3.27       3.00       3.44       3.26       3.24  
Non-interest income/total net revenue     26.36       28.19       28.82       29.41       29.44       27.82       16.67  
Non-interest expense/average assets     3.47       2.95       2.97       2.93       2.81       2.90       2.31  
Capital Ratios:
                                                              
Equity/total assets     13.38       13.68       13.47       14.24       15.32       13.00       12.01  
Tier 1 capital to average
assets – Berkshire Bank
    8.27       8.07       8.02       7.86       9.34       7.97       7.69  
Total capital to risk-weighted
assets – Berkshire Bank
    10.64       10.75       10.58       10.71       12.28       10.40       10.27  
Asset Quality Ratios:
                                                              
Net loans charged-off/average total loans(1)     0.27       0.43       0.42       1.96       0.19       0.34       0.07  
Allowance for loan losses as a percent
of loans
    1.29       1.55       1.49       1.62       1.14       1.14       1.14  
Share Data:
                                                              
Basic earnings (loss) per common share   $ 0.54     $ 0.74     $ 1.00     $ (1.51 )    $ 2.08     $ 1.47     $ 1.32  
Diluted earnings (loss) per common share     0.54       0.74       1.00       (1.51 )      2.06       1.44       1.29  
Dividends per common share     0.48       0.48       0.64       0.64       0.63       0.58       0.56  
Book value per share     25.87       27.28       27.56       27.64       30.33       31.15       29.63  
Market price at period end     18.47       18.96       22.11       20.68       30.86       26.00       33.46  
Weighted average common shares
outstanding – basic (thousands)
    16,863       13,852       13,862       13,189       10,700       9,223       8,538  
Weighted average common shares
outstanding – diluted (thousands)
    16,915       13,883       13,896       13,189       10,791       9,370       8,730  

Note:  All performance ratios are based on average balance sheet amounts where applicable. 2011 data includes balances associated with discontinued operations.

(1) Loans do not include loans held for sale, which are not material.
(2) Net income (loss) divided by average total assets.
(3) Net income (loss) divided by average total equity.
(4) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income as a percentage of average interest-earning assets for the period.

Note:  Generally accepted accounting principles require that acquired loans be recorded at fair value, whereas historical loans are recorded at cost. In 2011, BHLB acquired loans as a result of its acquisitions of Rome Bancorp and Legacy Bancorp. The fair value of acquired loans includes expected loan losses, and there is no loan loss allowance recorded for acquired loans at the time of acquisition. Accordingly, the ratio of the loan loss allowance to total loans is reduced as a result of the existence of acquired loans, and this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally reduced for acquired loans since these loans are recorded net of expected loan losses. Therefore, the ratio of net loan charge-offs to average loans is reduced as a result of the existence of acquired loans, and this measure is not directly comparable to prior periods. Other institutions may have acquired loans, and therefore there may be no direct comparability of these ratios between and among other institutions.

25


 
 

TABLE OF CONTENTS

SELECTED HISTORICAL FINANCIAL AND OTHER DATA OF
THE CONNECTICUT BANK AND TRUST COMPANY

           
  At September 30,
2011
  At December 31,
     2010   2009   2008   2007   2006
     (in thousands)
Selected Financial Condition Data:
                                                     
Total assets   $ 284,183     $ 274,231     $ 260,254     $ 225,078     $ 178,739     $ 136,434  
Loans, net     218,277       220,342       198,078       179,091       140,993       105,526  
Securities available for sale     42,576       35,349       27,431       32,461       19,894       20,738  
Total cash and cash equivalents     13,192       8,725       27,117       6,774       11,491       5,064  
Total deposits     222,544       213,794       200,772       162,934       137,800       99,745  
Borrowings     34,711       34,419       34,438       37,971       19,705       13,903  
Total stockholders’ equity     25,787       24,867       24,053       23,539       20,441       22,085  
Allowance for loan losses     3,099       3,381       2,702       2,681       1,693       1,384  
Non-accrual loans     12,879       8,785       2,061       2,127       599       597  
Non-performing assets     14,589       9,467       2,061       2,127       599       597  

             
  For the Nine Months
Ended September 30,
  For the Years Ended December 31,
     2011   2010   2010   2009   2008   2007   2006
     (in thousands)
Selected Operating Data:
                                                              
Interest income   $ 9,669     $ 10,067     $ 13,358     $ 12,629     $ 12,038     $ 10,823     $ 7,150  
Interest expense     2,193       2,547       3,357       3,990       5,366       5,283       3,053  
Net interest income     7,476       7,520       10,001       8,639       6,672       5,540       4,097  
Provision for loan losses     662       896       1,031       677       1,662       308       516  
Net interest income after provision for loan losses     6,814       6,624       8,970       7,962       5,010       5,232       3,581  
Non-interest income:
                                                              
Service charges and other income     677       484       694       564       596       436       193  
Net gain (loss) on securities available
for sale
    448       60       60       197             (41 )      (17 ) 
Total non-interest income     1,125       544       754       761       596       395       176  
Total non-interest expense     7,552       6,796       9,162       8,366       8,082       7,775       6,995  
Income before income taxes     387       372       562       357       (2,476 )      (2,148 )      (3,238 ) 
Income tax benefit (expense)     700             (2 )                         
Net income (loss)     1,087       372       560       357       (2,476 )      (2,148 )      (3,238 ) 
Dividends on preferred stock and accretion     (291 )      (291 )      (388 )      (183 )                   
Net income (loss) attributable to common shareholders   $ 796     $ 81     $ 172     $ 174     $ (2,476 )    $ (2,148 )    $ (3,238 ) 

26


 
 

TABLE OF CONTENTS

             
             
  At or For the Nine Months
Ended September 30,
  At or for the Years Ended December 31,
     2011   2010   2010   2009   2008   2007   2006
Selected Financial Ratios and Other Data
                                                              
Performance Ratios(1):
                                                              
Return on average assets     0.52 %      0.19 %      0.21 %      0.15 %      (1.22 )%      (1.33 )%      (2.91 )% 
Return on average equity     5.64 %      1.99 %      2.24 %      1.49 %      (12.21 )%      (10.18 )%      (13.87 )% 
Net interest rate spread (tax equivalent)     3.42 %      3.54 %      3.53 %      3.55 %      2.73 %      2.53 %      2.65 % 
Net interest margin (tax equivalent)     3.73 %      3.86 %      3.83 %      3.94 %      3.41 %      3.59 %      3.85 % 
Non-interest expense to average assets     3.63 %      3.39 %      3.39 %      3.57 %      3.99 %      4.83 %      6.29 % 
Efficiency ratio(2)     92.63 %      84.91 %      85.68 %      90.91 %      112.45 %      130.10 %      163.05 % 
Average interest earning assets to average interest-bearing liabilities     128.5 %      124.3 %      124.0 %      121.6 %      124.9 %      131.0 %      141.8 % 
Capital Ratios:
                                                              
Average equity to average assets     9.3 %      9.4 %      9.3 %      10.2 %      9.4 %      13.0 %      21.0 % 
Equity to total assets at end of period     9.1 %      9.1 %      9.1 %      9.2 %      10.5 %      11.4 %      16.2 % 
Regulatory Capital Ratios:
                                                              
Core capital (Tier 1 capital) to average assets     9.0 %      9.1 %      8.9 %      9.6 %      11.0 %      11.1 %      20.2 % 
Total risk-based capital     12.7 %      12.3 %      12.3 %      12.8 %      13.9 %      14.8 %      21.3 % 
Asset Quality Ratios:
                                                              
Nonperforming loans as percent of loans     5.82 %      2.03 %      4.44 %      1.08 %      1.17 %      1.64 %      0.56 % 
Nonperforming assets as percent of
total assets
    5.13 %      1.71 %      3.45 %      0.79 %      0.95 %      0.34 %      0.44 % 
Allowance for loan losses as a percent
of loans
    1.40 %      1.48 %      1.51 %      1.35 %      1.47 %      1.19 %      1.30 % 
Allowance for loan losses as a percent
of non-performing loans
    20.99 %      69.66 %      35.71 %      131.10 %      126.05 %      282.64 %      N/A  
Share:
                                                              
Basic earnings (loss) per share   $ 0.22     $ 0.02     $ 0.05     $ 0.05     $ (0.69 )    $ (0.61 )    $ (0.91 ) 
Diluted earnings (loss) per share   $ 0.22     $ 0.02     $ 0.05     $ 0.05     $ (0.69 )    $ (0.61 )    $ (0.91 ) 
Book value per share   $ 5.70     $ 5.48     $ 5.47     $ 5.36     $ 5.23     $ 5.72     $ 6.19  
Dividends per common share   $     $     $     $     $     $     $  
Other Data:
                                                              
Number of:
                                                              
Full service offices     8       8       7       7       7       7       5  

(1) Performance ratios for the nine months ended September 30, 2011 and 2010 have been annualized.
(2) Non-interest expense divided by the sum of net interest income, the tax equivalent adjustment on tax-exempt municipal securities and other non-interest income.

27


 
 

TABLE OF CONTENTS

MARKET PRICE AND DIVIDEND INFORMATION

BHLB common stock is listed on the NASDAQ Global Select Market under the symbol “BHLB.” CBT common stock is listed on the NASDAQ Capital Market under the symbol “CTBC.” The following table lists the high and low prices per share for BHLB common stock and CBT common stock and the cash dividends declared by BHLB for the periods indicated. CBT does not pay a cash dividend on its common stock.

         
  BHLB
Common Stock
  CBT
Common Stock
     High   Low   Dividends   High   Low
Quarter Ended
                                            
March 31, 2012
(through February 17, 2012)
  $ 24.49     $ 21.75     $ 0.17     $ 8.74     $ 7.91  
December 31, 2011   $ 22.50     $ 17.56     $ 0.17     $ 8.00     $ 5.79  
September 30, 2011   $ 24.14     $ 17.11     $ 0.16     $ 7.00     $ 5.40  
June 30, 2011   $ 22.85     $ 20.45     $ 0.16     $ 7.43     $ 6.00  
March 31, 2011   $ 22.92     $ 20.68     $ 0.16     $ 7.72     $ 5.50  
December 31, 2010   $ 22.49     $ 17.90     $ 0.16     $ 6.19     $ 4.71  
September 30, 2010   $ 20.94     $ 17.08     $ 0.16     $ 6.26     $ 3.62  
June 30, 2010   $ 22.84     $ 16.81     $ 0.16     $ 6.61     $ 4.50  
March 31, 2010   $ 20.99     $ 16.20     $ 0.16     $ 5.15     $ 3.95  

You should obtain current market quotations for BHLB common stock, as the market price of BHLB common stock will fluctuate between the date of this document and the date on which the merger is completed, and thereafter. You can get these quotations from a newspaper, on the Internet or by calling your broker.

As of February 9, 2012, there were approximately 3,240 holders of record of BHLB common stock. As of February 9, 2012, there were approximately 230 holders of record of CBT common stock. These numbers do not reflect the number of persons or entities who may hold their stock in nominee or “street name” through brokerage firms.

Following the merger, the declaration of dividends will be at the discretion of BHLB’s board of directors and will be determined after consideration of various factors, including earnings, cash requirements, the financial condition of BHLB, applicable state law and government regulations and other factors deemed relevant by BHLB’s board of directors.

28


 
 

TABLE OF CONTENTS

SPECIAL MEETING OF THE CONNECTICUT BANK AND
TRUST COMPANY SHAREHOLDERS

Date, Place, Time and Purpose

CBT’s board of directors is sending you this document to request that you allow your shares of CBT to be represented at the special meeting by the persons named in the enclosed proxy card. At the special meeting, the CBT board of directors will ask you to vote on a proposal to approve the merger agreement and a proposal regarding certain merger-related executive compensation arrangements. You may also be asked to vote to adjourn the special meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the meeting to approve the merger agreement. The special meeting will be held at The Connecticut Bank and Trust Company, 58 State House Square, Hartford, Connecticut at 10:00 a.m., local time, on April 3, 2012.

Who Can Vote at the Meeting

You are entitled to vote if the records of CBT showed that you held shares of CBT common stock as of the close of business on February 9, 2012. As of the close of business on that date, a total of 3,620,950 shares of CBT common stock were outstanding. Each share of common stock has one vote. If you are a beneficial owner of shares of CBT common stock held by a broker, bank or other nominee (i.e., in “street name”) and you want to vote your shares in person at the meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.

Quorum; Vote Required

The special meeting will conduct business only if a majority of the outstanding shares of CBT common stock entitled to vote is represented in person or by proxy at the meeting. If you return valid proxy instructions or attend the meeting in person, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting. Broker non-votes also will be counted for purposes of determining the existence of a quorum. A broker non-vote occurs when a broker, bank or other nominee holding shares of CBT common stock for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

Proposal 1: Approval of the merger agreement.  Approval of the merger agreement will require the affirmative vote of two-thirds of the outstanding shares of CBT common stock entitled to vote at the meeting. Failure to return a properly executed proxy card or to vote in person will have the same effect as a vote against the merger agreement. Broker non-votes and abstentions from voting will have the same effect as voting against the merger agreement.

Proposal 2: Approval, on an advisory, non-binding basis, of certain merger-related executive compensation arrangements.  Approval of certain merger-related executive compensation arrangements will require the affirmative vote of a majority of the outstanding shares of CBT common stock entitled to vote at the meeting. Failure to return a properly executed proxy card or to vote in person will have the same effect as a vote against the merger-related executive compensation arrangements. Broker non-votes and abstentions from voting will have the same effect as voting against the merger-related executive compensation arrangements.

Proposal 3: Adjourn the special meeting if necessary to permit further solicitation of proxies.  Approval of the proposal to adjourn the special meeting if necessary to permit further solicitation of proxies on the proposal to approve the merger agreement will require the affirmative vote of a majority of the outstanding shares of CBT common stock entitled to vote at the meeting. Failure to return a properly executed proxy card or to vote in person will have the same effect as a vote against the adjournment. Broker non-votes and abstentions from voting will have the same effect as voting against the adjournment.

29


 
 

TABLE OF CONTENTS

Shares Held by CBT Officers and Directors and by BHLB

As of February 9, 2012, directors and executive officers of CBT beneficially owned 372,219 shares of CBT common stock, not including shares that may be acquired upon the exercise of stock options and warrants. This equals 10.28% of the outstanding shares of CBT common stock. The directors and executive officers of CBT have agreed to vote their shares in favor of the merger at the special meeting. As of the same date, none of BHLB, its subsidiaries or its directors and executive officers owned any shares of CBT common stock.

Voting and Revocability of Proxies

You may vote in person at the special meeting or by proxy. To ensure your representation at the special meeting, CBT recommends that you vote by proxy even if you plan to attend the special meeting. You can always change your vote at the special meeting.

CBT shareholders whose shares are held in “street name” by their broker, bank or other nominee must follow the instructions provided by their broker, bank or other nominee to vote their shares. Your broker or bank may allow you to deliver your voting instructions via the telephone or the Internet.

Voting instructions are included on your proxy form. If you properly complete and timely submit your proxy, your shares will be voted as you have directed. You may vote for, against, or abstain with respect to the approval of the merger agreement, the approval, by a non-binding advisory vote, of certain compensation arrangements for CBT’s named executive officers in connection with the merger and the proposal to adjourn the meeting. If you are the record holder of your shares of CBT common stock and submit your proxy without specifying a voting instruction, your shares of CBT common stock will be voted “FOR” the proposal to adopt the merger agreement, “FOR” the non-binding proposal regarding certain merger-related executive compensation arrangements and “FOR” the proposal to adjourn the meeting if necessary to permit further solicitation of proxies on the proposal to approve the merger agreement. CBT’s board of directors recommends a vote “FOR” approval of the merger agreement, “FOR” the non-binding proposal regarding certain merger-related executive compensation arrangements and “FOR” approval of the proposal to adjourn the meeting if necessary to permit further solicitation of proxies on the proposal to approve the merger agreement.

You may revoke your proxy before it is voted by:

filing with the Secretary of CBT a duly executed revocation of proxy;
submitting a new proxy with a later date; or
voting in person at the special meeting.

Attendance at the special meeting will not, in and of itself, constitute a revocation of a proxy. All written notices of revocation and other communication with respect to the revocation of proxies should be addressed to:

The Connecticut Bank and Trust Company
Anson C. Hall, President and Secretary
58 State House Square
Hartford, Connecticut 06103

If any matters not described in this document are properly presented at the special meeting, the persons named in the proxy card will use their own judgment to determine how to vote your shares. CBT does not know of any other matters to be presented at the meeting.

Solicitation of Proxies

CBT will pay for this proxy solicitation. In addition to soliciting proxies by mail, Phoenix Advisory Partners, LLC, a proxy solicitation firm, will assist CBT in soliciting proxies for the special meeting. CBT will pay $6,000 for these services. CBT will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. Additionally, directors, officers and employees of CBT may solicit proxies personally and by telephone. None of these persons will receive additional or special compensation for soliciting proxies.

30


 
 

TABLE OF CONTENTS

NO DISSENTERS’ RIGHTS

Under Connecticut law, holders of CBT common stock do not have dissenters’ rights since the common stock of CBT is traded on the Nasdaq Capital Market.

DESCRIPTION OF THE MERGER (PROPOSAL 1)

The following summary of the merger agreement is qualified by reference to the complete text of the merger agreement. A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus and is incorporated by reference into this proxy statement/prospectus. You should read the merger agreement completely and carefully as it, rather than this description, is the legal document that governs the merger.

General

The merger agreement provides for the merger of CBT with and into Berkshire Bank, with Berkshire Bank as the surviving entity.

Background of the Merger

As part of its ongoing oversight of CBT, management and the board of directors of CBT regularly review CBT’s strategic and financial prospects. Management and the board of directors regularly have considered CBT’s prospects as an independent entity versus the alternative of merging with another institution.

In the summer of 2011, management of CBT was approached by several institutions expressing an interest in a possible combination with CBT. Specific terms of any possible combination were not discussed. Management reported on these approaches to the board of directors of CBT. The board of directors considered these approaches and determined to meet with Keefe, Bruyette & Woods (“KBW”) to further discuss and review these approaches, CBT previously had retained KBW in 2005 to assist it in raising capital. Additionally, KBW had met with the board of directors in the past to review the bank’s strategic and financial prospects.

Thereafter, on July 27, 2011, KBW met with CBT’s board of directors to discuss the risks and benefits of remaining independent as well as possible merger partners and potential prices that might be achieved in a sale of control. The board of directors discussed the process of approaching potential interested institutions and authorized KBW to approach six identified institutions to determine if they would be interested in a possible combination with CBT. These institutions included those who had previously approached the bank and were selected based on their size and geographic location, likelihood of possible interest in a combination with CBT, and ability to effectuate a combination with CBT. The terms of an engagement letter with KBW were discussed but not determined at that time.

Between July 27 and 28, 2011, KBW contacted the six identified institutions regarding a potential business combination with CBT.

On August 5, 2011, KBW sent bid instructions to the six institutions and provided access to the Round 1 virtual data room to the five institutions that entered into a confidentiality agreement with CBT.

On August 8, 2011, CBT entered into a confidentiality agreement with the sixth institution and authorized KBW to provide this party with access to the Round 1 virtual data room.

On August 26, 2011, CBT entered into a written engagement letter with KBW to act as its financial adviser for a potential sale of the company. The decision to retain KBW was made by the board of directors after reviewing the qualifications of KBW and other potential advisors, KBW’s prior experience with CBT, KBW’s expertise and reputation in similar recent transactions, and the fee negotiated with KBW.

On August 29, 2011, Berkshire Hills Bancorp, Inc. (“BHLB”) submitted a preliminary indication of interest to CBT, indicating a willingness to pay $8.00 per CBT share. Between August 29 and 30, 2011, five other institutions submitted preliminary indications to CBT within a range of $5.00 – $10.00.

31


 
 

TABLE OF CONTENTS

On August 31, 2011, KBW met with CBT’s board of directors to discuss the nonbinding indications of interest from BHLB and the five other institutions. KBW presented an overview of the six parties and a financial analysis of the proposed offers. CBT’s board of directors voted to allow one party, Party A, the institution that had submitted the highest indicated price among the initial indications of interest, to be given access to the Round 2 virtual data room and conduct additional and on-site due diligence. Because of the confidential and sensitive nature of the data in the Round 2 virtual data room and the disruption and visibility of on-site due diligence, the CBT board of directors determined to proceed at that time only with Party A, the institution with the highest price indication.

After being contacted by KBW, Party A conducted on-site due diligence on CBT between September 7 and 10, 2011.

On September 13, 2011, an institution that previously had submitted an indication of interest, Party B, submitted a revised indication of interest enhancing its proposal to acquire CBT and increasing the amount of proposed merger consideration it would be willing to pay.

On September 16, 2011, Party A communicated verbally to KBW that, based on its additional due diligence, it no longer was interested in a business combination with CBT. CBT’s board of directors then determined to allow Party B, the institution with the then highest price indication, to conduct additional and on-site due diligence and authorized KBW to provide Party B with access to the Round 2 virtual data room.

After being contacted by KBW, Party B conducted on-site due diligence on CBT between September 20 and 22, 2011.

On September 29, 2011, Party B sent a letter to KBW in which it revised its indication of interest again and reduced the amount of the proposed merger consideration it would be willing to pay to an amount below the price indication from BHLB.

On October 3, 2011, CBT reviewed with KBW the indications from BHLB and Party C, which had indicated a price of $8.00 and $8.30, respectively, and authorized KBW to provide BHLB with access to the Round 2 virtual data room. While Party C had indicated a somewhat higher price than BHLB at $8.30, some concern was expressed by CBT’s board of directors about Party C’s ability to pay a price of $8.30 due to the significant dilution to Party C’s existing shareholders at that price and the possible negative response of the market to that level of dilution. Also, CBT’s board of directors noted that BHLB, as a larger institution than Party C, was more likely to obtain all necessary regulatory approvals, that BHLB had a track record of recent successful acquisitions while Party C did not, and that there was greater liquidity in the stock of BHLB than Party C.

After being contacted by KBW, BHLB conducted on-site due diligence on CBT on October 4 and 5, 2011.

On October 4, 2011, CBT’s board of directors authorized KBW to provide Party C, with access to the Round 2 virtual data room.

After being contacted by KBW, Party C conducted on-site due diligence on CBT on October 6 and 7, 2011.

On October 12, 2011, BHLB submitted a revised indication of interest to KBW, indicating its willingness to acquire all of the outstanding shares of common stock of CBT through one of three alternatives, to be selected at the discretion of CBT’s board. Alternative 1 indicated a willingness to pay $8.25 per CBT share with 100% of the consideration paid in cash. Alternative 2 indicated a willingness to pay a mixed consideration of 25% cash and 75% stock with $8.25 per share for the cash consideration and a fixed exchange ratio of 0.3810x for the stock consideration. Alternative 3 indicated a willingness to pay a mixed consideration of 25% cash and 75% stock with $8.25 per share for the cash consideration and the following exchange ratio for the stock consideration: (1) If BHLB’s stock price is between $18.50 and $22.50, the exchange ratio will float such that the value is fixed at $8.00 per share, (2) if BHLB’s stock price is below $18.50, the exchange ratio will be fixed at 0.4324 and (3) if BHLB’s stock price is above $22.50, the exchange ratio will be fixed at 0.3556. Based on BHLB’s stock price of $20.10 on October 11, 2011, the value of Alternative 1, 2 and 3 to CBT shareholders was $8.25, $7.81 and $8.06, respectively.

32


 
 

TABLE OF CONTENTS

On October 12, 2011, Party C submitted a revised indication of interest to KBW at a price lower than the price indication of BHLB.

On the mornings of October 17, 2011, KBW met with CBT’s board of directors to discuss the revised indications of interest from BHLB and Party C and presented updated overview materials about the competing parties, including an analysis of the financial condition of BHLB and Party C, the recent acquisition history and successful track record of BHLB and the strength of BHLB’s currency. After consideration of such information and the ability of the potential acquirors to consummate a merger transaction and successfully integrate a merger, CBT’s board voted to proceed with a transaction with BHLB under Alternative 1. Following the meeting, and at the direction of the Board of Directors, CBT’s chief executive officer communicated this decision to the chief executive officer of BHLB.

During the afternoon of October 17, 2011, BHLB verbally communicated a final indication of interest to CBT, indicating a willingness only to pay a mixed consideration of 30% cash and 70% stock with $8.25 per share for the cash consideration and a fixed exchange ratio of 0.3810x for the stock consideration. The previous Alternatives 1 and 3 were withdrawn from consideration by BHLB. Based on BHLB’s closing stock price of $19.68 on October 17, 2011, the value of the merger consideration offered by BHLB was $7.72 for each share of CBT stock. This price was more favorable than any other price then being offered to CBT considering the strength of BHLB’s stock, the post-merger prospects of BHLB versus the other parties, and the amount of the other offers. The CBT Board of Directors considered the fixed exchange pricing and the ability of CBT stockholders to participate in any upside appreciation in BHLB stock prior to the closing of a transaction. The Board of Directors also considered the risks and prospects of CBT remaining independent against the benefits of combining with a larger successful institution. Based on all of these considerations, CBT’s board of directors voted to proceed with negotiations with BHLB.

On October 17, 18 and 20, 2011 CBT conducted reverse due diligence on BHLB.

From October 14 to October 23, 2011, CBT and its advisors received, reviewed and negotiated the terms of the Agreement and Plan of Merger and related documents with BHLB and its advisors.

On October 24, 2011, the CBT board of directors met to review presentations by its legal counsel, Day Pitney LLP, and by KBW, which included, among other matters, commercial, financial and corporate information on BHLB and CBT, each entity’s historical stock price and performance, and valuation methodologies and analyses of the consideration offered by BHLB. Following the presentations, the board of directors engaged in discussions about the proposed transaction, the proposed merger agreement and other transaction documents and the effect of the transaction on the customers and employees of CBT. Members of the board of directors asked questions of CBT’s outside legal and financial advisors about the proposed transaction and their fiduciary duties to shareholders. After further reviewing the consideration per share offered by BHLB and after giving consideration to the other factors described under “— CBT’s Reasons for the Merger,” the members of the board of directors of CBT unanimously voted to approve the merger agreement.

The transaction was announced after the close of the stock markets on the afternoon of October 25, 2011.

See “— Opinion of CBT’s Financial Advisor” for a description of the fees KBW will receive for its services to CBT in connection with the merger.

CBT’s Reasons for the Merger

In reaching its decision to approve the merger agreement and recommend their approval to shareholders, the Board of Directors of CBT consulted with senior management, its legal counsel, Day Pitney LLP, its financial advisor, KBW, and considered a number of factors, including, among others, the following, which are not presented in order of priority:

the business strategy and strategic plan of CBT, its prospects for the future, projected financial results, and expectations relating to the proposed merger, based on discussions with management of CBT;

33


 
 

TABLE OF CONTENTS

a review of the risks and prospects of CBT remaining independent, including the challenges to maintaining a small community bank in the prevailing financial and regulatory climate versus aligning CBT with a well capitalized, well run larger organization;
a review of the historical financial statements and condition of CBT and certain other internal information, primarily financial in nature, relating to the respective businesses, earnings and balance sheets of CBT;
the form and amount of the merger consideration;
the merger consideration which could reasonably be expected from other potential acquirers with apparent ability to consummate the acquisition of CBT, including depository institutions that had expressed an interest in acquiring a depository institution such as CBT;
the relative financial strength of BHLB as a merger partner compared to other potential acquirers based on BHLB’s historical revenues and revenue expectations over the near and long term;
the ability of BHLB to pay the merger consideration and the strength and recent performance of the BHLB’s currency;
the ability of CBT shareholders to benefit from BHLB’s potential growth and stock appreciation since it is more likely that the combined entity will have superior future earnings and prospects compared to CBT’s earnings and prospects on an independent basis;
the ability of BHLB to execute a merger transaction from a financial and regulatory perspective and its recent history of being able to successfully integrate merged institutions into its existing franchise;
the geographic fit and increased customer convenience of the branch networks of CBT;
the anticipated effect of the acquisition on CBT’s employees (including the fact that BHLB anticipates offering employment to many of the employees of CBT, following the consummation of the merger);
the effect on CBT’s customers and the communities served by CBT;
the terms of the merger agreement, including the representations and warranties of the parties, the covenants, the consideration, the benefits to CBT’s employees, the circumstances under which the CBT board of directors may consider a superior proposal, and the absence of burdensome contingencies in the merger agreement;
the increased legal lending limit available to borrowers by reason of the merger;
the likelihood of expeditiously obtaining the necessary regulatory approvals without unusual or burdensome conditions; and
the long-term and short term interests of CBT and its shareholders, the interests of the employees, customers, creditors and suppliers of CBT, and community and societal considerations including those of the communities in which CBT maintains offices.

Based on the factors described above, the board of directors of CBT determined that the merger with BHLB would be advisable and in the best interests of CBT shareholders and other constituencies and unanimously approved the merger agreement.

BHLB and Berkshire Bank’s Reasons for the Merger

In reaching their decision to approve the merger agreement, the Boards of Directors of BHLB and Berkshire Bank consulted with senior management and its legal and financial advisors, and considered a number of factors, including, among others, the following, which are not presented in order of priority:

CBT is a contiguous expansion of the growing Berkshire Bank franchise, with a size that can be readily assimilated;

34


 
 

TABLE OF CONTENTS

The eight CBT branches will combine with the 12 Berkshire Bank Springfield, Massachusetts area branches, resulting in 20 branches in the Hartford/Springfield economic area — the second largest economic area in New England;
Berkshire Bank’s successful integration track record and strong de novo growth record demonstrate the potential for significant future growth in the Greater Hartford market following the merger;
CBT is accretive to Berkshire Bank’s demographic profile, reflecting the comparatively high income and population densities in the Greater Hartford market;
Economies of scale and improved efficiencies are expected to result in solid earnings accretion. Opportunities for cross-sales and account acquisition are also expected based on the enhanced platform and capital base; and
Improved Berkshire Bank financial profile, geographic footprint, stock liquidity and market capitalization enhance positioning for organic growth and future acquisitions.

Based on the factors described above, the Boards of Directors of BHLB and Berkshire Bank determined that the merger with CBT would be advisable and in the best interests of BHLB shareholders and other constituencies and unanimously approved the merger agreement.

Opinion of CBT’s Financial Advisor

In July 2011, CBT engaged KBW to render financial advisory and investment banking services to CBT. KBW agreed to assist CBT in assessing the fairness, from a financial point of view, of the merger consideration in the proposed merger with BHLB, to the shareholders of CBT. CBT selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger and is familiar with CBT and its business. As part of its investment banking business, KBW is continually engaged in the valuation of financial services companies and their securities in connection with mergers and acquisitions.

As part of its engagement, a representative of KBW attended the meeting of the CBT board held on October 24, 2011, at which the CBT board evaluated the proposed merger with BHLB. At this meeting, KBW reviewed the financial aspects of the proposed merger and rendered an opinion that, as of such date, the merger consideration offered to CBT shareholders in the merger was fair, from a financial point of view. The CBT board approved the merger agreement at this meeting.

The full text of KBW’s written opinion is attached as Annex B to this document and is incorporated herein by reference. CBT shareholders are urged to read the opinion in its entirety for a description of the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW. The description of the opinion set forth herein is qualified in its entirety by reference to the full text of such opinion.

KBW’s opinion speaks only as of the date of the opinion. The opinion is directed to the CBT board and addresses only the fairness, from a financial point of view, of the consideration offered to the CBT shareholders. It does not address the underlying business decision to proceed with the merger and does not constitute a recommendation to any CBT shareholder as to how the shareholder should vote at the CBT special meeting on the merger or any related matter.

In rendering its opinion, KBW:

reviewed, among other things,
the merger agreement;
Annual Reports to Shareholders and Annual Reports on Form 10-K for the three years ending December 31, 2010 of CBT and BHLB;

35


 
 

TABLE OF CONTENTS

certain interim reports to shareholders and Quarterly Reports on Form 10-Q of CBT and BHLB and certain other communications from CBT and BHLB to their respective shareholders; and
other financial information concerning the businesses and operations of CBT and BHLB furnished to KBW by CBT and BHLB for purposes of KBW’s analysis.

In addition, KBW held discussions with members of senior management of CBT and BHLB regarding past and current business operations, regulatory relations, financial condition, future prospects of their respective companies, and other matters KBW deemed relevant, including the pro forma impact on BHLB of the recently completed acquisition of Legacy Bancorp, Inc. by BHLB.

In addition, KBW compared certain financial and stock market information for CBT and BHLB with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the banking industry, and performed other studies and analyses that it considered appropriate.

In conducting its review and arriving at our opinion, KBW relied upon the accuracy and completeness of all of the financial and other information provided to them or otherwise publicly available. KBW did not independently verify the accuracy or completeness of any such information or assume any responsibility for such verification or accuracy. KBW relied upon the management of CBT and BHLB as to the reasonableness and achievability of the financial and operating forecasts and projections (and the assumptions and bases therefore) provided to KBW and assumed that such forecasts and projections reflected the best currently available estimates and judgments of such managements and that such forecasts and projections will be realized in the amounts and in the time periods estimated by such managements. KBW relied upon the assessments of CBT and its legal, tax and accounting advisors with respect to such matters. KBW assumed, without independent verification, that the aggregate allowance for loan and lease losses for CBT and BHLB are adequate to cover those losses. KBW did not make or obtain any evaluations or appraisals of the property, assets or liabilities of CBT or BHLB, nor did it examine any individual credit files.

The projections furnished to KBW and used by it in certain of its analyses were prepared by CBT’s and BHLB’s senior management teams. CBT and BHLB do not publicly disclose internal management projections of the type provided to KBW in connection with its review of the merger. As a result, such projections were not prepared with a view towards public disclosure. The projections were based on numerous variables and assumptions, which are inherently uncertain, including factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in the projections.

For purposes of rendering its opinion, KBW assumed that, in all respects material to its analyses:

the merger will be completed substantially in accordance with the terms set forth in the merger agreement with no additional payments or adjustments to the merger consideration;
the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement are true and correct;
each party to the merger agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents;
all conditions to the completion of the merger will be satisfied without any waivers; and
in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, will be imposed that will have a material adverse effect on the future results of operations or financial condition of the combined entity or the contemplated benefits of the merger, including the cost savings, revenue enhancements and related expenses expected to result from the merger.

KBW further assumed that the merger will be accounted for using the acquisition method under generally accepted accounting principles, and that the merger will qualify as a tax-free reorganization for United States federal income tax purposes. KBW’s opinion is not an expression of an opinion as to the prices at which shares of CBT common stock or shares of BHLB common stock will trade following the announcement of the

36


 
 

TABLE OF CONTENTS

merger or the actual value of the shares of common stock of the combined company when issued pursuant to the merger, or the prices at which the shares of common stock of the combined company will trade following the completion of the merger.

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW, CBT and BHLB. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the CBT board in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the CBT board with respect to the fairness of the consideration.

The following is a summary of the material analyses presented by KBW to the CBT board on October 24, 2011, in connection with its fairness opinion. The summary is not a complete description of the analyses underlying the KBW opinion or the presentation made by KBW to the CBT board, but summarizes the material analyses performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include information presented in tabular format. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion. The tables alone do not constitute a complete description of the financial analyses.

Summary of Proposal.  Pursuant to the terms of the Agreement, each outstanding share of common stock, no par value per share, of CBT not owned by CBT or BHLB or by any of their respective wholly-owned subsidiaries other than shares owned in a fiduciary capacity or as a result of debts previously contracted, will be converted into the right to receive either 0.3810 shares of common stock, par value $0.01 per share, of BHLB or $8.25 in cash. Based on BHLB’s closing price on October 21, 2011, of $20.59, the merger consideration represented a price of $7.97 per share to CBT’s shareholders.

Selected Companies Analysis.  Using publicly available information, KBW compared the financial performance, financial condition and market performance of CBT to the following publicly traded banks headquartered in New England with total assets between $100 million and $750 million. Companies included in this group were:

 
Centrix Bank & Trust   Hampshire First Bank
New England Bancshares, Inc.   Middlebury National Corporation
Patriot National Bancorp, Inc.   Connecticut River Bancorp, Inc.
Northeast Bancorp   Grand Bank Corporation
Salisbury Bancorp, Inc.   Peoples Trust Company of St. Albans
Katahdin Bankshares Corporation   First Suffield Financial, Inc.
Union Bankshares, Inc.   Rockport National Bancorp, Inc.
Community Bancorp.   Central Financial Corporation
BNC Financial Group, Inc.   Southern Connecticut Bancorp, Inc.
Ledyard Financial Group, Inc.   Damariscotta Bankshares, Inc.
SBT Bancorp, Inc.   Island Bancorp, Inc.
Citizens National Bancorp     

37


 
 

TABLE OF CONTENTS

Using publicly available information, KBW compared the financial performance, financial condition, and market performance of BHLB to the following publicly traded banks and thrifts headquartered in New England and Upstate New York with total assets between $2.0 billion and $8.0 billion. Companies included in this group were:

 
Community Bank System, Inc.
Boston Private Financial Holdings, Inc.
NBT Bancorp Inc.
Independent Bank Corp.
TrustCo Bank Corp NY
Tompkins Financial Corporation
  Brookline Bancorp, Inc.
Washington Trust Bancorp, Inc.
Century Bancorp, Inc.
Camden National Corporation
Financial Institutions, Inc.

To perform this analysis, KBW used financial information as of the three month period ended September 30, 2011 or the three month period ended June 30, 2011 based on the most recent available. Market price information was as of October 21, 2011. Earnings estimates for 2012 and 2013 were taken from a nationally recognized earnings estimate consolidator for selected companies. Certain financial data prepared by KBW, and as referenced in the tables presented below, may not correspond to the data presented in CBT’s and BHLB’s historical financial statements as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.

KBW’s analysis showed the following concerning CBT’s and BHLB’s financial condition:

     
  CBT   CBT Group
Minimum
  CBT Group
Maximum
Core Return on Average Assets(1)     0.12 %      (3.08 )%      1.11 % 
Core Return on Average Equity(1)     1.30 %      (36.90 )%      14.00 % 
Net Interest Margin     3.73 %      3.16 %      4.58 % 
Efficiency Ratio     93.60 %      56.80 %      133.50 % 

     
  BHLB   BHLB Group
Minimum
  BHLB Group
Maximum
Core Return on Average Assets(1)     0.66 %      0.61 %      1.29 % 
Core Return on Average Equity(1)     4.70 %      5.80 %      13.20 % 
Net Interest Margin     3.51 %      2.17 %      4.12 % 
Efficiency Ratio     65.40 %      51.3 %      72.40 % 

     
  CBT   CBT Group
Minimum
  CBT Group
Maximum
Tangible Common Equity / Tangible Assets     7.31 %      4.83 %      13.33 % 
Total Capital Ratio     12.70 %      11.97 %      23.15 % 
Loan Loss Reserve / Loans     1.53 %      0.14 %      2.82 % 
Nonperforming Assets / Loans + OREO     5.02 %      0.31 %      9.95 % 
Net Charge-Offs / Average Loans     0.16 %      (0.05 )%      1.94 % 

     
  BHLB   BHLB Group
Minimum
  BHLB Group
Maximum
Tangible Common Equity / Tangible Assets     8.32 %(2)      5.66 %      14.66 % 
Total Capital Ratio     11.25 %(3)      12.52 %      17.88 % 
Loan Loss Reserve / Loans     1.30 %      1.19 %      2.24 % 
Nonperforming Assets / Loans + OREO     0.68 %      0.63 %      2.55 % 
Net Charge-Offs / Average Loans     0.24 %      (0.06 )%      0.60 % 

(1) Core income defined as net income after taxes and before extraordinary items, less net income attributable to noncontrolling interest, the after-tax portion of income from investment securities and nonrecurring items.

38


 
 

TABLE OF CONTENTS

(2) 8.27% pro forma for Legacy Bancorp, Inc. transaction
(3) 11.00% pro forma for Legacy Bancorp, Inc. transaction

KBW’s analysis showed the following concerning CBT’s and BHLB’s market performance:

     
  CBT   CBT Group
Minimum
  CBT Group
Maximum
Stock Price / Book Value per Share     1.08x       0.38x       2.02x  
Stock Price / Tangible Book Value per Share     1.08x       0.38x       2.27x  
Stock Price / Last Twelve Months EPS     38.6x       2.68x       25.00x  
Dividend Yield     0.0 %      0.0 %      5.9 % 
Last Twelve Months Dividend Payout Ratio     0.0 %      0.0 %      91.7 % 

     
  BHLB