OPERATING SEGMENTS

9 Months Ended

Sep. 30, 2012

OPERATING SEGMENTS

OPERATING SEGMENTS

NOTE 12. OPERATING SEGMENTS

The Company has two reportable operating segments, Banking and Insurance, which are delineated by the consolidated subsidiaries of Berkshire Hills Bancorp, Inc.  Banking includes the activities of the Bank and its subsidiaries, which provide retail and commercial banking, along with wealth management and investment services.  Insurance includes the activities of BIG, which provides retail and commercial insurance services.  The only other consolidated financial activity of the Company is the Parent, which consists of the transactions of Berkshire Hills Bancorp, Inc. Management fees for corporate services provided by the Bank to BIG and the Parent are eliminated.

The accounting policies of each reportable segment are the same as those of the Company.  The Insurance segment and the Parent reimburse the Bank for administrative services provided to them.  Income tax expense for the individual segments is calculated based on the activity of the segments, and the Parent records the tax expense or benefit necessary to reconcile to the consolidated total.  The Parent does not allocate capital costs.  Average assets include securities available-for-sale based on amortized cost.

A summary of the Company’s operating segments was as follows:

(In thousands)	Banking			Insurance		Parent			Eliminations			Total Consolidated
Three months ended September 30, 2012
Net interest income (expense)	$	35,505		$	—	$	(280	)	$	—		$	35,225
Provision for loan losses	2,500			—		—			—			2,500
Non-interest income	11,571			2,742		10,294			(10,294		)	14,313
Non-interest expense	29,608			2,021		533			—			32,162
Income (loss) before income taxes	14,968			721		9,481			(10,294		)	14,876
Income tax expense (benefit)	5,105			290		(548		)	—			4,847
Net income	$	9,863		$	431	$	10,029		$	(10,294	)	$	10,029
Average assets (in millions)	$	4,409		$	29	$	501		$	(368	)	$	4,572
Three months ended September 30, 2011
Net interest income (expense)	$	31,253		$	—	$	(215	)	$	—		$	31,038
Provision for loan losses	2,200			—		—			—			2,200
Non-interest income	8,248			2,426		3,570			(3,570		)	10,674
Non-interest expense	34,163			2,148		(1,602		)	1			34,710
Income (loss) before income taxes	3,138			278		4,957			(3,571		)	4,802
Income tax expense (benefit)	(272		)	114		569			(1		)	410
Net income	$	3,410		$	164	$	4,388		$	(3,570	)	$	4,392
Average assets (in millions)	$	3,827		$	30	$	479		$	(475	)	$	3,861
Nine months ended September 30, 2012
Net interest income (expense)	$	102,095		$	—	$	(672	)	$	—		$	101,423
Provision for loan losses	6,750			—		—			—			6,750
Non-interest income	28,147			8,256		25,546			(25,546		)	36,403
Non-interest expense	88,061			6,329		2,150			—			96,540
Income (loss) before income taxes	35,431			1,927		22,724			(25,546		)	34,536
Income tax expense (benefit)	10,400			775		(1,135		)	—			10,040
Net income	$	25,031		$	1,152	$	23,859		$	(25,546	)	$	24,496
Income from discontinued operations berofre income taxes (including gain on disposal of $63)	(261		)	—		—			—			(261		)
Income tax expense	376			—		—			—			376
Net loss from discontinued operations	$	(637	)	$	—	$	—		$	—		$	(637	)
Net income	$	24,394		$	1,152	$	23,859		$	(25,546	)	$	23,859
Average assets (in millions)	$	4,185		$	30	$	492		$	(405	)	$	4,302
Nine months ended September 30, 2011
Net interest income (expense)	$	76,017		$	—	$	(631	)	$	(1	)	$	75,385
Provision for loan losses	5,300			—		—			—			5,300
Non-interest income	18,035			8,938		7,068			(7,068		)	26,973
Non-interest expense	76,893			6,598		3,031			—			86,522
Income before income taxes	11,859			2,340		3,406			(7,069		)	10,536
Income tax expense (benefit)	1,968			958		(1,494		)	—			1,432
Net income	9,891			1,382		4,900			(7,069		)	9,104
Average assets (in millions)	$	3,281		$	32	$	413		$	(411	)	$	3,315