10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                  

Commission File Number: 001-15781

BERKSHIRE HILLS BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	04-3510455
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
24 North Street, Pittsfield, Massachusetts	01201
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (413) 443-5601

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one)

Large Accelerated Filer o        Accelerated Filer x       Non-Accelerated Filer o     Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o  No x

The Registrant had 29,517,572 shares of common stock, par value $0.01 per share, outstanding as of May 6, 2015.

BERKSHIRE HILLS BANCORP, INC.

FORM 10-Q

INDEX

				Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014			4
	Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014			5
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014			6
	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2015 and 2014			7
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014			8
	Notes to Consolidated Financial Statements
		Note 1	Basis of Presentation	10
		Note 2	Trading Security	12
		Note 3	Securities Available for Sale and Held to Maturity	13
		Note 4	Loans	17
		Note 5	Loan Loss Allowance	28
		Note 6	Deposits	32
		Note 7	Borrowed Funds	32
		Note 8	Stockholders’ Equity	33
		Note 9	Earnings per Share	36
		Note 10	Stock-Based Compensation Plans	36
		Note 11	Operating Segments	37
		Note 12	Derivative Financial Instruments and Hedging Activities	37
		Note 13	Fair Value Measurements	43
		Note 14	Net Interest Income after Provision for Loan Losses	51
		Note 15	Subsequent Events	51
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			52
	Selected Financial Data			56
	Average Balances and Average Yields/Rates			57
	Non-GAAP Financial Measures			58
Item 3.	Quantitative and Qualitative Disclosures about Market Risk			68
Item 4.	Controls and Procedures			69

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PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	70
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	71
Signatures		73

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PART I

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
(In thousands, except share data)	2015			2014
Assets
Cash and due from banks	$	43,089		$	54,179
Short-term investments	19,125			17,575
Total cash and cash equivalents	62,214			71,754
Trading security	14,970			14,909
Securities available for sale, at fair value	1,099,656			1,091,818
Securities held to maturity (fair values of $44,744 and $44,997)	42,818			43,347
Federal Home Loan Bank stock and other restricted securities	58,734			55,720
Total securities	1,216,178			1,205,794
Loans held for sale, at fair value	29,305			19,493
Residential mortgages	1,473,239			1,496,204
Commercial real estate	1,672,099			1,611,567
Commercial and industrial loans	826,815			804,366
Consumer loans	756,510			768,463
Total loans	4,728,663			4,680,600
Less: Allowance for loan losses	(36,286		)	(35,662		)
Net loans	4,692,377			4,644,938
Premises and equipment, net	85,053			87,279
Other real estate owned	1,444			2,049
Goodwill	264,742			264,742
Other intangible assets	10,627			11,528
Cash surrender value of bank-owned life insurance policies	105,302			104,588
Deferred tax assets, net	26,828			28,776
Other assets	77,169			61,090
Total assets	$	6,571,239		$	6,502,031
Liabilities
Demand deposits	$	892,225		$	869,302
NOW deposits	436,458			426,108
Money market deposits	1,372,924			1,407,179
Savings deposits	512,607			496,344
Time deposits	1,505,469			1,455,746
Total deposits	4,719,683			4,654,679
Short-term debt	894,500			900,900
Long-term Federal Home Loan Bank advances	61,618			61,676
Subordinated borrowings	89,765			89,747
Total borrowings	1,045,883			1,052,323
Other liabilities	89,443			85,742
Total liabilities	5,855,009			5,792,744
Stockholders’ equity
Common stock ($.01 par value; 50,000,000 shares authorized and 26,525,466 shares issued and 25,252,635 shares outstanding in 2015; 26,525,466 shares issued and 25,182,566 shares outstanding in 2014)	265			265
Additional paid-in capital	585,307			587,289
Unearned compensation	(7,226		)	(6,147		)
Retained earnings	160,241			156,446
Accumulated other comprehensive income (loss)	9,068			6,579
Treasury stock, at cost (1,272,831 shares in 2015 and 1,342,900 shares in 2014)	(31,425		)	(33,145		)
Total stockholders’ equity	716,230			709,287
Total liabilities and stockholders’ equity	$	6,571,239		$	6,502,031

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended
	March 31,
(In thousands, except per share data)	2015			2014
Interest and dividend income
Loans	$	44,445		$	42,494
Securities and other	8,306			7,301
Total interest and dividend income	52,751			49,795
Interest expense
Deposits	4,949			4,721
Borrowings	2,309			2,308
Total interest expense	7,258			7,029
Net interest income	45,493			42,766
Non-interest income
Loan related income	1,283			1,248
Mortgage banking income	1,253			372
Deposit related fees	5,677			5,439
Insurance commissions and fees	2,967			3,049
Wealth management fees	2,603			2,549
Total fee income	13,783			12,657
Other	(1,255		)	524
Gain on sale of securities, net	34			34
Loss on termination of hedges	—			(8,792		)
Total non-interest income	12,562			4,423
Total net revenue	58,055			47,189
Provision for loan losses	3,851			3,396
Non-interest expense
Compensation and benefits	21,811			19,859
Occupancy and equipment	7,108			6,814
Technology and communications	3,593			3,778
Marketing and promotion	713			521
Professional services	1,272			1,152
FDIC premiums and assessments	1,129			1,009
Other real estate owned and foreclosures	251			523
Amortization of intangible assets	901			1,306
Acquisition, restructuring and conversion related expenses	4,421			6,301
Other	3,949			4,097
Total non-interest expense	45,148			45,360
Income before income taxes	9,056			(1,567		)
Income tax expense (benefit)	297			(461		)
Net income (loss)	$	8,759		$	(1,106	)
Earnings per share:
Basic	$	0.35		$	(0.04	)
Diluted	$	0.35		$	(0.04	)
Weighted average common shares outstanding:
Basic	24,803			24,698
Diluted	24,955			24,698

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended
	March 31,
(In thousands)	2015			2014
Net income (loss)	$	8,759		$	(1,106	)
Other comprehensive income, before tax:
Changes in unrealized gain on securities available-for-sale	9,337			6,021
Changes in unrealized (loss) gain on derivative hedges	(3,901		)	4,533
Changes in unrealized gain on terminated swaps	—			3,237
Changes in unrealized (loss) gain on pension	(1,531		)	—
Income taxes related to other comprehensive income:
Changes in unrealized gain on securities available-for-sale	(3,605		)	(2,221		)
Changes in unrealized (loss) gain on derivative hedges	1,572			(1,832		)
Changes in unrealized gain on terminated swaps	—			(1,312		)
Changes in unrealized (loss) gain on pension	617			—
Total other comprehensive income	2,489			8,426
Total comprehensive income	$	11,248		$	7,320

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

														Accumulated
					Additional									other
	Common stock				paid-in			Unearned			Retained			comprehensive			Treasury
(In thousands)	Shares		Amount		capital			compensation			earnings			(loss) income			stock			Total
Balance at December 31, 2013	25,036		$	265	$	587,247		$	(5,563	)	$	141,958		$	(9,057	)	$	(36,788	)	$	678,062
Comprehensive income:
Net loss	—		—		—			—			(1,106		)	—			—			(1,106		)
Other comprehensive income	—		—		—			—			—			8,426			—			8,426
Total comprehensive income																				7,320
Cash dividends declared ($0.18 per share)	—		—		—			—			(4,561		)	—			—			(4,561		)
Treasury stock purchased	(100	)	—		—			—			—			—			(2,467		)	(2,467		)
Forfeited shares	(1	)	—		1			5			—			—			(6		)	—
Exercise of stock options	61		—		—			—			(793		)	—			1,512			719
Restricted stock grants	126		—		37			(3,144		)	—			—			3,107			—
Stock-based compensation	—		—		41			891			—			—			—			932
Net tax benefit related to stock-based compensation	—		—		(1,984		)	—			—			—			—			(1,984		)
Other, net	(17	)	—		—			—			—			—			(431		)	(431		)
Balance at March 31, 2014	25,105		$	265	$	585,342		$	(7,811	)	$	135,498		$	(631	)	$	(35,073	)	$	677,590
Balance at December 31, 2014	25,183		$	265	$	585,289		$	(6,147	)	$	156,446		$	6,579		$	(33,145	)	$	709,287
Comprehensive income:
Net income	—		—		—			—			8,759			—			—			8,759
Other comprehensive income	—		—		—			—			—			2,489			—			2,489
Total comprehensive income																				11,248
Cash dividends declared ($0.19 per share)	—		—		—			—			(4,799		)	—			—			(4,799		)
Treasury stock purchased	—		—		—			—			—			—			—			—
Forfeited shares	(9	)	—		22			214			—			—			(236		)	—
Exercise of stock options	11		—		—			—			(165		)	—			281			116
Restricted stock grants	92		—		19			(2,286		)	—			—			2,267			—
Stock-based compensation	—		—		—			993			—			—			—			993
Net tax benefit related to stock-based compensation	—		—		(23		)	—			—			—			—			(23		)
Other, net	(24	)	—		—			—			—			—			(592		)	(592		)
Balance at March 31, 2015	25,253		$	265	$	585,307		$	(7,226	)	$	160,241		$	9,068		$	(31,425	)	$	716,230

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
(In thousands)	2015			2014
Cash flows from operating activities:
Net income (loss)	$	8,759		$	(1,106	)
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	3,851			3,396
Net amortization of securities	(317		)	604
Change in unamortized net loan costs and premiums	398			64
Premises and equipment depreciation and amortization expense	2,096			1,944
Stock-based compensation expense	993			932
Accretion of purchase accounting entries, net	(367		)	(1,999		)
Amortization of other intangibles	901			1,306
Write down of other real estate owned	—			125
Excess tax loss from stock-based payment arrangements	23			(89		)
Income from cash surrender value of bank-owned life insurance policies	(714		)	(813		)
Gain on sales of securities, net	(34		)	(34		)
Net (increase) decrease in loans held for sale	(9,812		)	8,171
Loss on disposition of assets	1,136			834
Loss on sale of real estate	154			208
Loss on termination of hedges	—			3,237
Amortization of interest in tax-advantaged projects	2,882			421
Net change in other	(6,145		)	(183		)
Net cash provided by operating activities	3,804			17,018
Cash flows from investing activities:
Net decrease in trading security	142			135
Proceeds from sales of securities available for sale	4,693			3,171
Proceeds from maturities, calls and prepayments of securities available for sale	40,552			25,440
Purchases of securities available for sale	(41,068		)	(291,662		)
Proceeds from maturities, calls and prepayments of securities held to maturity	729			1,762
Purchases of securities held to maturity	(200		)	—
Net change in loans	(68,671		)	(59,851		)
Purchases of bank owned life insurance	—			—
Proceeds from sale of Federal Home Loan Bank stock	103			78
Purchase of Federal Home Loan Bank stock	(3,117		)	(2,920		)
Net investment in limited partnership tax credits	—			(2,500		)
Proceeds from the sale of premises and equipment	—			—
Purchase of premises and equipment, net	(946		)	(3,130		)
Acquisitions, net of cash paid	—			423,416
Proceeds from sale of other real estate	578			483
Net cash (used in) provided by investing activities	(67,205		)	94,422
(continued)

The accompanying notes are an integral part of these consolidated financial statements.

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BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)

	Three Months Ended March 31,
(In thousands)	2015			2014
Cash flows from financing activities:
Net increase (decrease) in deposits	65,007			(70,422		)
Proceeds from Federal Home Loan Bank advances and other borrowings	2,200,000			900,018
Repayments of Federal Home Loan Bank advances and other borrowings	(2,206,440		)	(937,682		)
Purchase of treasury stock	—			(2,467		)
Exercise of stock options	116			719
Excess tax loss from stock-based payment arrangements	(23		)	89
Common stock cash dividends paid	(4,799		)	(4,561		)
Net cash provided (used) by financing activities	53,861			(114,306		)
Net change in cash and cash equivalents	(9,540		)	(2,866		)
Cash and cash equivalents at beginning of year	71,754			75,539
Cash and cash equivalents at end of year	$	62,214		$	72,673
Supplemental cash flow information:
Interest paid on deposits	$	4,902		$	4,718
Interest paid on borrowed funds	2,306			3,145
Income taxes paid, net	274			146
Acquisition of non-cash assets and liabilities:
Assets acquired	—			18,064
Liabilities assumed	—			(441,550		)
Other non-cash changes:
Other net comprehensive income	2,489			5,189
Real estate owned acquired in settlement of loans	127			476

The accompanying notes are an integral part of these consolidated financial statements.

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NOTE 1.BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and contain all adjustments, consisting solely of normal, recurring adjustments, necessary for a fair presentation of results for such periods.

In addition, these interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to U.S. GAAP have been omitted.

The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the audited financial statements and note disclosures for Berkshire Hills Bancorp, Inc. (the “Company”) previously filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation.

Recently Adopted Accounting Standards

In January 2014, the Financial Accounting Standard Board “FASB” issued Accounting Standard Updated “ASU” ASU No. 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects.” ASU No. 2014-01 permits reporting entities to make an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. This new guidance also requires new disclosures for all investors in these projects. ASU No. 2014-01 is effective for interim and annual reporting periods beginning after December 15, 2014. Upon adoption, the guidance must be applied retrospectively to all periods presented. However, entities that use the effective yield method to account for investments in these projects before adoption may continue to do so for these pre-existing investments. The Company has elected not to adopt the proportional amortization method, which had no impact on our consolidated financial statements.

Also in January 2014, the FASB issued ASU No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of this guidance is to clarify when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. ASU No. 2014-04 states that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, ASU No. 2014-04 requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. ASU No. 2014-04 is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted the provisions of ASU No. 2014-04 effective January 1, 2015, which did not have a material effect on our consolidated financial statements.  See Note 4 - Loans to the Consolidated Financial Statements for the disclosures required by ASU No. 2014-04.

In June 2014, the FASB issued ASU No. 2014-11 related to repurchase-to-maturity transactions, repurchase financing and disclosures. The pronouncement changes the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other

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repurchase agreements. The pronouncement also requires two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is not permitted. As of March 31, 2015 the Company did not have any repurchase transactions, and therefore the adoption of this pronouncement did not have an impact on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-14 related to classification of certain government-guaranteed mortgage loans upon foreclosure. The objective of this guidance is to reduce diversity in practice related to how creditors classify government-guaranteed mortgage loans, including FHA or VA guaranteed loans, upon foreclosure. Some creditors reclassify those loans to real estate consistent with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables. The amendments in this guidance require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) The loan has a government guarantee that is not separable from the loan before foreclosure; (2) At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The pronouncement is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted the provisions of ASU No. 2014-14 effective January 1, 2015, which did not have a material effect on our consolidated financial statements.

Future Application of Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09 related to the recognition of revenue from contracts with customers. The new revenue pronouncement creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. The pronouncement provides a five-step model for a company to recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The five steps are (1) identify the contract with the customer, (2) identify the separate performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when each performance obligation is satisfied. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016 using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. Early adoption is not permitted. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, “Amendments to the Consolidation Analysis.” This ASU affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU No. 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is not permitted; however, the FASB has issued a proposal to extend the effective date by one year.

In April 2015, the FASB issued ASU No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a

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cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU No. 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

NOTE 2.TRADING SECURITY

The Company holds a tax advantaged economic development bond that is being accounted for at fair value. The security had an amortized cost of $12.4 million and $12.6 million, and a fair value of $15.0 million and $14.9 million, at March 31, 2015 and December 31, 2014, respectively. As discussed further in Note 12 - Derivative Financial Instruments and Hedging Activities, the Company has entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there are no other securities in the trading portfolio at March 31, 2015.

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NOTE 3. SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

The following is a summary of securities available for sale and held to maturity:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2015
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	149,454	$	6,391	$	(395	)	$	155,450
Government-guaranteed residential mortgage-backed securities	64,456		696		(113		)	65,039
Government-sponsored residential mortgage-backed securities	750,730		13,157		(1,466		)	762,421
Corporate bonds	55,560		411		(614		)	55,357
Trust preferred securities	12,773		736		(82		)	13,427
Other bonds and obligations	3,203		—		(7		)	3,196
Total debt securities	1,036,176		21,391		(2,677		)	1,054,890
Marketable equity securities	38,150		7,536		(920		)	44,766
Total securities available for sale	1,074,326		28,927		(3,597		)	1,099,656
Securities held to maturity
Municipal bonds and obligations	4,847		—		—			4,847
Government-sponsored residential mortgage-backed securities	70		5		—			75
Tax advantaged economic development bonds	37,570		1,921		—			39,491
Other bonds and obligations	331		—		—			331
Total securities held to maturity	42,818		1,926		—			44,744
Total	$	1,117,144	$	30,853	$	(3,597	)	$	1,144,400
December 31, 2014
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	127,014	$	6,859	$	(174	)	$	133,699
Government-guaranteed residential mortgage-backed securities	68,972		702		(206		)	69,468
Government-sponsored residential mortgage-backed securities	755,893		7,421		(3,130		)	760,184
Corporate bonds	55,134		120		(1,103		)	54,151
Trust preferred securities	16,607		820		(1,212		)	16,215
Other bonds and obligations	3,211		—		(52		)	3,159
Total debt securities	1,026,831		15,922		(5,877		)	1,036,876
Marketable equity securities	48,993		7,322		(1,373		)	54,942
Total securities available for sale	1,075,824		23,244		(7,250		)	1,091,818
Securities held to maturity
Municipal bonds and obligations	4,997		—		—			4,997
Government-sponsored residential mortgage-backed securities	70		4		—			74
Tax advantaged economic development bonds	37,948		1,680		(34		)	39,594
Other bonds and obligations	332		—		—			332
Total securities held to maturity	43,347		1,684		(34		)	44,997
Total	$	1,119,171	$	24,928	$	(7,284	)	$	1,136,815

13

The amortized cost and estimated fair value of available for sale (“AFS”) and held to maturity (“HTM”) securities, segregated by contractual maturity at March 31, 2015 are presented below.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.  Mortgage-backed securities are shown in total, as their maturities are highly variable.  Equity securities have no maturity and are also shown in total.

	Available for sale				Held to maturity
	Amortized		Fair		Amortized		Fair
(In thousands)	Cost		Value		Cost		Value
Within 1 year	$	31,062	$	30,557	$	1,214	$	1,214
Over 1 year to 5 years	1,256		1,264		16,802		17,774
Over 5 years to 10 years	17,319		17,698		12,232		12,532
Over 10 years	171,353		177,911		12,500		13,149
Total bonds and obligations	220,990		227,430		42,748		44,669
Marketable equity securities	38,150		44,766		—		—
Residential mortgage-backed securities	815,186		827,460		70		75
Total	$	1,074,326	$	1,099,656	$	42,818	$	44,744

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Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:

	Less Than Twelve Months				Over Twelve Months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(In thousands)	Losses		Value		Losses		Value		Losses		Value
March 31, 2015
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	62	$	19,756	$	333	$	11,796	$	395	$	31,552
Government-guaranteed residential mortgage-backed securities	11		5,638		102		6,701		113		12,339
Government-sponsored residential mortgage-backed securities	—		—		1,466		142,786		1,466		142,786
Corporate bonds	614		33,680		—		—		614		33,680
Trust preferred securities	82		2,192		—		—		82		2,192
Other bonds and obligations	—		—		7		2,057		7		2,057
Total debt securities	769		61,266		1,908		163,340		2,677		224,606
Marketable equity securities	636		7,364		284		4,576		920		11,940
Total securities available for sale	1,405		68,630		2,192		167,916		3,597		236,546
Securities held to maturity
Tax advantaged economic development bonds	—		—		—		—		—		—
Total securities held to maturity	—		—		—		—		—		—
Total	$	1,405	$	68,630	$	2,192	$	167,916	$	3,597	$	236,546
December 31, 2014
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	8	$	1,001	$	166	$	7,206	$	174	$	8,207
Government guaranteed residential mortgage-backed securities	46		7,122		160		16,727		206		23,849
Government-sponsored residential mortgage-backed securities	236		30,672		2,894		167,473		3,130		198,145
Corporate bonds	1,103		39,571		—		—		1,103		39,571
Trust preferred securities	65		935		1,147		2,408		1,212		3,343
Other bonds and obligations	—				52		3,035		52		3,035
Total debt securities	1,458		79,301		4,419		196,849		5,877		276,150
Marketable equity securities	1,039		9,902		334		4,755		1,373		14,657
Total securities available for sale	2,497		89,203		4,753		201,604		7,250		290,807
Securities held to maturity
Tax advantaged economic development bonds	—		—		34		7,972		34		7,972
Total securities held to maturity	—		—		34		7,972		34		7,972
Total	$	2,497	$	89,203	$	4,787	$	209,576	$	7,284	$	298,779

Debt Securities

The Company expects to recover its amortized cost basis on all debt securities in its AFS and HTM portfolios. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of March 31, 2015, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low portfolio turnover. The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS and HTM portfolios were not other-than-temporarily impaired at March 31, 2015:

15

AFS municipal bonds and obligations

At March 31, 2015, 28 of the total 190 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 1.2% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market.  At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk.  There were no material underlying credit downgrades during the first quarter of 2015.  All securities are performing.

AFS residential mortgage-backed securities

At March 31, 2015, 36 out of the total 198 securities in the Company’s portfolios of AFS residential mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 1.0% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and Government National Mortgage Association (“GNMA”) guarantee the contractual cash flows of all of the Company’s residential mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during the past quarter. All securities are performing.

AFS corporate bonds

At March 31, 2015, 2 out of 6 securities in the Company’s portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 1.8% of the amortized cost of bonds in unrealized loss positions.  The Company reviews the financial strength of all of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities.  Neither bond is investment grade rated.

At March 31, 2015, $0.5 million of the total unrealized losses was attributable to a $31.1 million investment.  The Company evaluated this security, with a Level 2 fair value of $30.6 million, for potential other-than-temporary impairment (“OTTI”) at March 31, 2015 and determined that OTTI was not evident based on both the Company’s ability and intent to hold the security until the recovery of its remaining amortized cost.

AFS trust preferred securities

At March 31, 2015, 2 out of the 4 securities in the Company’s portfolio of AFS trust preferred securities were in unrealized loss positions. Aggregate unrealized losses represented 3.6% of the amortized cost of securities in unrealized loss positions. The Company’s evaluation of the present value of expected cash flows on these securities supports its conclusions about the recoverability of the securities’ amortized cost basis. Both securities are investment grade rated.  The Company reviews the financial strength of all of the single issue trust issuers and has concluded that the amortized cost remains supported by the market value of these securities and they are performing.

AFS other bonds and obligations

At March 31, 2015, 4 of the total 8 securities in the Company’s portfolio of other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 0.4% of the amortized cost of securities in unrealized loss positions. The securities are investment grade rated and there were no material underlying credit downgrades during first quarter of 2015. All securities are performing.

Marketable Equity Securities

In evaluating its marketable equity securities portfolio for OTTI, the Company considers its ability to more likely than not hold an equity security to recovery.  The Company additionally considers other various factors including the length of time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer.  Any OTTI is recognized immediately through earnings.

16

At March 31, 2015, 6 out of the total 29 securities in the Company’s portfolio of marketable equity securities were in an unrealized loss position. The unrealized loss represented 7.2% of the amortized cost of the securities. The Company has the ability and intent to hold the securities until recovery of their cost basis and does not consider the securities other-than-temporarily impaired at March 31, 2015.  As new information becomes available in future periods, changes to the Company’s assumptions may be warranted and could lead to a different conclusion regarding the OTTI of these securities.

NOTE 4. LOANS

The Company’s loan portfolio is segregated into the following segments: residential mortgage, commercial real estate, commercial and industrial, and consumer. Residential mortgage loans include classes for 1- 4 family owner occupied and construction loans.  Commercial real estate loans include construction, single and multi-family, and other commercial real estate classes.  Commercial and industrial loans include asset based lending loans, lease financing and other commercial business loan classes.  Consumer loans include home equity, direct and indirect auto and other.  These portfolio segments each have unique risk characteristics that are considered when determining the appropriate level for the allowance for loan losses.

A substantial portion of the loan portfolio is secured by real estate in western Massachusetts, southern Vermont, northeastern New York, and in the Bank’s other New England lending areas. The ability of many of the Bank’s borrowers to honor their contracts is dependent, among other things, on the specific economy and real estate markets of these areas.

Total loans include business activity loans and acquired loans. Acquired loans are those loans acquired from the acquisitions of the 20 acquired branches, Beacon Federal Bancorp, Inc., The Connecticut Bank and Trust Company, Legacy Bancorp, Inc., and Rome Bancorp, Inc. The following is a summary of total loans:

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Residential mortgages:
1-4 family	$	1,188,018	$	256,503	$	1,444,521	$	1,199,408	$	268,734	$	1,468,142
Construction	27,796		922		28,718		27,044		1,018		28,062
Total residential mortgages	1,215,814		257,425		1,473,239		1,226,452		269,752		1,496,204
Commercial real estate:
Construction	182,800		4,046		186,846		169,189		4,201		173,390
Single and multi-family	142,297		48,429		190,726		140,050		53,168		193,218
Other commercial real estate	1,086,893		207,634		1,294,527		1,030,837		214,122		1,244,959
Total commercial real estate	1,411,990		260,109		1,672,099		1,340,076		271,491		1,611,567
Commercial and industrial loans:
Asset based lending	354,106		—		354,106		341,246		—		341,246
Other commercial and industrial loans	424,565		48,144		472,709		411,945		51,175		463,120
Total commercial and industrial loans	778,671		48,144		826,815		753,191		51,175		804,366
Total commercial loans	2,190,661		308,253		2,498,914		2,093,267		322,666		2,415,933
Consumer loans:
Home equity	255,368		62,247		317,615		252,681		65,951		318,632
Auto and other	351,826		87,069		438,895		346,480		103,351		449,831
Total consumer loans	607,194		149,316		756,510		599,161		169,302		768,463
Total loans	$	4,013,669	$	714,994	$	4,728,663	$	3,918,880	$	761,720	$	4,680,600

The carrying amount of the acquired loans at March 31, 2015 totaled $715 million.  A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with

17

ASC 310-30. These purchased credit-impaired loans presently maintain a carrying value of $12.7 million (and a note balance of $23.9). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Loans that were considered not impaired at the acquisition date had a carrying amount of $702 million.

The carrying amount of the acquired loans at December 31, 2014 totaled $762 million. A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with ASC 310-30. These purchased credit-impaired loans presently maintain a carrying value of $13.8 million (and a note balance of $25.8). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Loans that were considered not impaired at the acquisition date had a carrying amount of $747.9 million.

The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Accounting for Certain Loans or Debt Securities Acquired in a Transfer.

	Three Months Ended March 31,
(In thousands)	2015			2014
Balance at beginning of period	$	2,541		$	2,559
Sales	—			—
Reclassification form nonaccretable difference for loans with improved cash flows	1,330			1,540
Accretion	(440		)	(945		)
Balance at end of period	$	3,431		$	3,154

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The following is a summary of past due loans at March 31, 2015 and December 31, 2014:

Business Activities Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
March 31, 2015
Residential mortgages:
1-4 family	$	1,888	$	888	$	4,066	$	6,842	$	1,181,176	$	1,188,018	$	1,699
Construction	—		—		414		414		27,382		27,796		414
Total	1,888		888		4,480		7,256		1,208,558		1,215,814		2,113
Commercial real estate:
Construction	—		—		758		758		182,042		182,800		—
Single and multi-family	245		247		406		898		141,399		142,297		—
Other commercial real estate	1,900		330		9,202		11,432		1,075,461		1,086,893		266
Total	2,145		577		10,366		13,088		1,398,902		1,411,990		266
Commercial and industrial loans:
Asset based lending	—		—		—		—		354,106		354,106		—
Other commercial and industrial loans	1,371		150		725		2,246		422,319		424,565		—
Total	1,371		150		725		2,246		776,425		778,671		—
Consumer loans:
Home equity	589		154		2,546		3,289		252,079		255,368		1,354
Auto and other	744		54		255		1,053		350,773		351,826		3
Total	1,333		208		2,801		4,342		602,852		607,194		1,357
Total	$	6,737	$	1,823	$	18,372	$	26,932	$	3,986,737	$	4,013,669	$	3,736

Business Activities Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
December 31, 2014
Residential mortgages:
1-4 family	$	5,580	$	146	$	4,053	$	9,779	$	1,189,629	$	1,199,408	$	1,527
Construction	666		410		—		1,076		25,968		27,044		—
Total	6,246		556		4,053		10,855		1,215,597		1,226,452		1,527
Commercial real estate:
Construction	—		2,000		720		2,720		166,469		169,189		—
Single and multi-family	178		156		458		792		139,258		140,050		—
Other commercial real estate	692		705		9,383		10,780		1,020,057		1,030,837		621
Total	870		2,861		10,561		14,292		1,325,784		1,340,076		621
Commercial and industrial loans:
Asset based lending	—		—		—		—		341,246		341,246		—
Other commercial and industrial loans	1,040		498		856		2,394		409,551		411,945		6
Total	1,040		498		856		2,394		750,797		753,191		6
Consumer loans:
Home equity	333		1,000		1,387		2,720		249,961		252,681		230
Auto and other	831		65		315		1,211		345,269		346,480		10
Total	1,164		1,065		1,702		3,931		595,230		599,161		240
Total	$	9,320	$	4,980	$	17,172	$	31,472	$	3,887,408	$	3,918,880	$	2,394

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Acquired Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Acquired Credit Impaired		Total Loans		Past Due > 90 days and Accruing
March 31, 2015
Residential mortgages:
1-4 family	$	187	$	592	$	1,930	2,709		$	361	$	256,503	$	144
Construction	—		—		—		—		—		922		—
Total	187		592		1,930		2,709		361		257,425		144
Commercial real estate:
Construction	—		—		676		676		1,281		4,046		—
Single and multi-family	323		45		2,728		3,096		4,924		48,429		2,257
Other commercial real estate	1,116		116		2,269		3,501		5,222		207,634		—
Total	1,439		161		5,673		7,273		11,427		260,109		2,257
Commercial and industrial loans:
Asset based lending	—		—		—		—		—		—		—
Other commercial and industrial loans	285		—		586		871		705		48,144		3
Total	285		—		586		871		705		48,144		3
Consumer loans:
Home equity	209		228		1,118		1,555		170		62,247		242
Auto and other	1,394		23		731		2,148		—		87,069		19
Total	1,603		251		1,849		3,703		170		149,316		261
Total	$	3,514	$	1,004	$	10,038	$	14,556	$	12,663	$	714,994	$	2,665

Acquired Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Acquired Credit Impaired		Total Loans		Past Due > 90 days and Accruing
December 31, 2014
Residential mortgages:
1-4 family	$	1,133	$	638	$	1,651	$	3,422	$	375	$	268,734	$	269
Construction	—		—		—		—		—		1,018		—
Total	1,133		638		1,651		3,422		375		269,752		269
Commercial real estate:
Construction	—		—		691		691		1,296		4,201		—
Single and multi-family	277		—		572		849		5,477		53,168		—
Other commercial real estate	—		715		2,004		2,719		5,504		214,122		329
Total	277		715		3,267		4,259		12,277		271,491		329
Commercial and industrial loans:
Asset based lending	—		—		—		—		—		—		—
Other commercial and industrial loans	202		32		855		1,089		986		51,175		—
Total	202		32		855		1,089		986		51,175		—
Consumer loans:
Home equity	176		95		1,049		1,320		171		65,951		466
Auto and other	1,170		944		1,363		3,477		—		103,351		194
Total	1,346		1,039		2,412		4,797		171		169,302		660
Total	$	2,958	$	2,424	$	8,185	$	13,567	$	13,809	$	761,720	$	1,258

20

The following is summary information pertaining to non-accrual loans at March 31, 2015 and December 31, 2014:

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans (1)		Total		Business Activities Loans		Acquired Loans (2)		Total
Residential mortgages:
1-4 family	$	2,367	$	1,786	$	4,153	$	2,526	$	1,382	$	3,908
Construction	—		—		—		—		—		—
Total	2,367		1,786		4,153		2,526		1,382		3,908
Commercial real estate:
Construction	758		—		758		720		—		720
Single and multi-family	406		471		877		458		141		599
Other commercial real estate	8,936		1,939		10,875		8,762		1,675		10,437
Total	10,100		2,410		12,510		9,940		1,816		11,756
Commercial and industrial loans:
Other commercial and industrial loans	725		569		1,294		850		811		1,661
Total	725		569		1,294		850		811		1,661
Consumer loans:
Home equity	1,192		876		2,068		1,157		583		1,740
Auto and other	252		712		964		305		1,169		1,474
Total	1,444		1,588		3,032		1,462		1,752		3,214
Total non-accrual loans	$	14,636	$	6,353	$	20,989	$	14,778	$	5,761	$	20,539

(1)At quarter end March 31, 2015, acquired credit impaired loans accounted for $1.0 million of non-accrual loans that are not presented in the above table.

(2)At year end 2014, acquired credit impaired loans accounted for $1.2 million of non-accrual loans that are not presented in the above table.

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Loans evaluated for impairment as of March 31, 2015 and December 31, 2014 were as follows:

Business Activities Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
March 31, 2015
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	3,028	$	22,342	$	262	$	448	$	26,080
Collectively evaluated	1,212,786		1,389,648		778,409		606,746		3,987,589
Total	$	1,215,814	$	1,411,990	$	778,671	$	607,194	$	4,013,669

Business Activities Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
December 31, 2014
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	3,238	$	22,015	$	743	$	452	$	26,448
Collectively evaluated for impairment	1,223,214		1,318,061		752,448		598,709		3,892,432
Total	$	1,226,452	$	1,340,076	$	753,191	$	599,161	$	3,918,880

Acquired Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
March 31, 2015
Loans receivable:
Balance at end of Period
Individually evaluated for impairment	$	1,194	$	6,203	$	47	$	546	$	7,990
Collectively evaluated	256,231		253,906		48,097		148,770		707,004
Total	$	257,425	$	260,109	$	48,144	$	149,316	$	714,994

Acquired Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
December 31, 2014
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	695	$	5,637	$	39	$	199	$	6,570
Collectively evaluated for impairment	269,057		265,854		51,136		169,103		755,150
Total	$	269,752	$	271,491	$	51,175	$	169,302	$	761,720

22

The following is a summary of impaired loans at March 31, 2015:

Business Activities Loans

	At March 31, 2015
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	3,028	$	3,028	$	—
Commercial real estate - single and multifamily	180		180		—
Other commercial real estate loans	14,380		14,380		—
Commercial real esate - construction	2,632		2,632		—
Other commercial and industrial loans	262		262		—
Consumer - home equity	334		334		—
Consumer - other	114		114		—
With an allowance recorded:
Other commercial real estate loans	$	4,064	$	5,150	$	1,086
Total
Residential mortgages	$	3,028	$	3,028	$	—
Commercial real estate	21,256		22,342		1,086
Commercial and industrial loans	262		262		—
Consumer	448		448		—
Total impaired loans	$	24,994	$	26,080	$	1,086

Acquired Loans

	At March 31, 2015
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	625	$	625	$	—
Commercial real estate - single and multifamily	2,857		2,857		—
Other commercial real estate loans	1,649		1,649		—
Other commercial and industrial loans	47		47		—
Consumer - home equity	197		197		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	517	$	569	$	52
Commercial real estate - single and multifamily	318		330		12
Other commercial real estate loans	504		691		187
Commercial real esate - construction	420		676		256
Consumer - home equity	288		349		61
Total
Residential mortgages	$	1,142	$	1,194	$	52
Commercial real estate	5,748		6,203		455
Commercial and industrial loans	47		47		—
Consumer	485		546		61
Total impaired loans	$	7,422	$	7,990	$	568

23

The following is a summary of impaired loans at December 31, 2014:

Business Activities Loans

	At December 31, 2014
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	2,528	$	2,528	$	—
Commercial real estate - construction	16,990		16,990		—
Commercial real estate - single and multifamily	—		—		—
Other commercial real estate loans	102		102		—
Other commercial and industrial loans	743		743		—
Consumer - home equity	87		87		—
Consumer - other	—		—		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	555	$	710	$	155
Commercial real estate - construction	3,511		4,431		920
Commercial real estate - single and multifamily	490		492		2
Other commercial real estate loans	—		—		—
Other commercial and industrial loans	—		—		—
Consumer - home equity	194		248		54
Consumer - other	105		117		12
Total
Residential mortgages	$	3,083	$	3,238	$	155
Commercial real estate	21,093		22,015		922
Commercial and industrial loans	743		743		—
Consumer	386		452		66
Total impaired loans	$	25,305	$	26,448	$	1,143

Acquired Loans

	At December 31, 2014
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	189	$	189	$	—
Other commercial real estate loans	5,206		5,206		—
Other commercial and industrial loans	39		39		—
Consumer - home equity	—		—		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	458	$	506	$	48
Other commercial real estate loans	383		431		48
Consumer - home equity	124		199		75
Total
Residential mortgages	$	647	$	695	$	48
Other commercial real estate loans	5,589		5,637		48
Other commercial and industrial loans	39		39		—
Consumer - home equity	124		199		75
Total impaired loans	$	6,399	$	6,570	$	171

24

The following is a summary of the average recorded investment and interest income recognized on impaired loans as of March 31, 2015 and 2014:

Business Activities Loans

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:
Residential mortgages - 1-4 family	$	3,108	$	28	$	4,142	$	23
Commercial real estate - construction	2,628		1		1,957		—
Commercial real estate - single and multifamily	180		—		—		—
Other commercial real estate loans	15,315		131		16,180		154
Commercial and industrial loans	578		3		1,337		7
Consumer - home equity	334		—		348		1
Consumer - other	115		1		124		1
With an allowance recorded:
Residential mortgages - 1-4 family	$	—	$	—	$	1,774	$	16
Commercial real estate - construction	—		—		1,013		—
Other commercial real estate loans	5,267		—		3,450		—
Commercial and industrial loans	—		—		55		1
Consumer - home equity	—		—		41		—
Total
Residential mortgages	$	3,108	$	28	$	5,916	$	39
Commercial real estate	23,390		132		22,600		154
Commercial and industrial loans	578		3		1,392		8
Consumer loans	449		1		513		2
Total impaired loans	$	27,525	$	164	$	30,421	$	203

Acquired Loans

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:
Residential mortgages - 1-4 family	$	670	$	3	$	1,303	$	5
Commercial real estate - single and multifamily	2,892		24		—		—
Other commercial real estate loans	1,662		3		4,821		25
Other commercial and industrial loans	64		3		—		—
Consumer - home equity	197		2		562		1
Consumer - other	—		—		154		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	569	$	—	$	162	$	—
Commercial real estate - single and multifamily	397		—		—		—
Other commercial real estate loans	691		—		1,577		46
Commercial real esate - construction	666		44		—		—
Consumer - home equity	349		—		—		—
Consumer - other	—		—		70		2
Total
Residential mortgages	$	1,239	$	3	$	1,465	$	5
Other commercial real estate loans	6,308		71		6,398		71
Commercial and industrial loans	64		3		632		3
Consumer loans	546		2		154		—
Total impaired loans	$	8,157	$	79	$	8,649	$	79

25

Troubled Debt Restructuring Loans

The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring (TDR), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.  TDRs are evaluated individually for impairment and may result in a specific allowance amount allocated to an individual loan.

The following tables include the recorded investment and number of modifications identified during the three months ended March 31, 2015 and for the three months ended March 31, 2014, respectively.  The table includes the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured. The modifications for the three months ending March 31, 2015 were attributable to interest rate concessions, maturity date extensions and released collateral.  The modification for the three months ending March 31, 2014 was attributable to concessions granted as ordered by bankruptcy court.

	Modifications by Class
	Three months ending March 31, 2015
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial - Construction	1	$	123	$	123
Commercial - Other	1	2,000		2,000
Commercial and industrial - Other	1	33		33
Total	3	$	2,156	$	2,156

	Modifications by Class
	Three months ending March 31, 2014
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Residential - 1-4 Family	1	$	122	$	119

The following table discloses the recorded investment and number of modifications for TDRs within the last three months where a concession has been made, that then defaulted in the respective reporting period.

	Modifications that Subsequently Defaulted
	Three months ending March 31, 2015
	Number of Contracts	Recorded Investment
Troubled Debt Restructurings
Commercial - Other	1	$	668

26

For the three months ended March 31, 2014, there were no loans that were restructured within the last twelve months that have subsequently defaulted during the period.

The following table presents the Company’s TDR activity for the three months ended March 31, 2015 and 2014:

	Three Months Ending
	March 31,
(In thousands)	2015			2014
Balance at beginning of the period	$	16,714		$	10,822
Principal payments	(484		)	(872		)
TDR status change (1)	—			(52		)
Other reductions/increases (2)	(1,182		)	95
Newly identified TDRs	2,156			119
Balance at end of the period	$	17,204		$	10,112

(1)TDR status change classification represents TDR loans with a specified interest rate equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk and  the loan was on current payment status and not impaired based on the terms specified by the restructuring agreement.

(2)Other reductions classification consists of transfer to other real estate owned and charge-offs and advances to loans.

The evaluation of certain loans individually for specific impairment includes loans that were previously classified as TDRs or continue to be classified as TDRs.

As of March 31, 2015, the Company maintained foreclosed residential real estate property with a fair value of $653 thousand. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure totaled $5.1 million. As of December 31, 2014, foreclosed residential real estate property totaled $1.3 million.

27

NOTE 5.               LOAN LOSS ALLOWANCE

Activity in the allowance for loan losses for the three months ended March 31, 2015 and 2014 was as follows:

Business Activities Loans (In thousands)	Residential mortgages			Commercial real estate		Commercial and industrial loans		Consumer			Unallocated		Total
March 31, 2015
Balance at beginning of period	$	6,836		$	14,690	$	5,206	$	5,928		$	135	$	32,795
Charged-off loans	128			1,605		223		202			—		2,158
Recoveries on charged-off loans	67			3		5		61			—		136
Provision for loan losses	(702		)	1,330		1,460		(751		)	158		1,495
Balance at end of period	$	6,073		$	14,418	$	6,448	$	5,036		$	293	$	32,268
Individually evaluated for impairment	—			1,086		—		—			—		1,086
Collectively evaluated	6,073			13,332		6,448		5,036			293		31,182
Total	$	6,073		$	14,418	$	6,448	$	5,036		$	293	$	32,268

Business Activities Loans (In thousands)	Residential mortgages			Commercial real estate		Commercial and industrial loans			Consumer		Unallocated			Total
March 31, 2014
Balance at beginning of period	$	6,937		$	13,705	$	5,173		$	3,644	$	68		$	29,527
Charged-off loans	706			660		189			429		—			1,984
Recoveries on charged-off loans	7			1		20			79		—			107
Provision for loan losses	(575		)	1,900		(185		)	836		(248		)	1,728
Balance at end of period	$	5,663		$	14,946	$	4,819		$	4,130	$	(180	)	$	29,378
Individually evaluated for impairment	397			1,558		54			9		—			2,018
Collectively evaluated	5,266			13,388		4,765			4,121		(180		)	27,360
Total	$	5,663		$	14,946	$	4,819		$	4,130	$	(180	)	$	29,378

Acquired Loans (In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans			Consumer		Unallocated		Total
March 31, 2015
Balance at beginning of period	$	615	$	790	$	1,093		$	369	$	—	$	2,867
Charged-off loans	238		405		198			433		—		1,274
Recoveries on charged-off loans	—		—		41			28		—		69
Provision for loan losses	372		1,579		(11		)	416		—		2,356
Balance at end of period	$	749	$	1,964	$	925		$	380	$	—	$	4,018
Individually evaluated for impairment	52		455					61		—		568
Collectively evaluated	697		1,509		925			319		—		3,450
Total	$	749	$	1,964	$	925		$	380	$	—	$	4,018

Acquired Loans (In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Unallocated		Total
March 31, 2014
Balance at beginning of period	$	625	$	2,339	$	597	$	235	$	—	$	3,796
Charged-off loans	429		447		52		405		—		1,333
Recoveries on charged-off loans	73		1		5		14		—		93
Provision for loan losses	401		231		548		488		—		1,668
Balance at end of period	$	670	$	2,124	$	1,098	$	332	$	—	$	4,224
Individually evaluated for impairment	30		250		21		—		—		301
Collectively evaluated	640		1,874		1,077		332		—		3,923
Total	$	670	$	2,124	$	1,098	$	332	$	—	$	4,224

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Credit Quality Information

Business Activities Loans Credit Quality Analysis

The Company monitors the credit quality of its portfolio by using internal risk ratings that are based on regulatory guidance. Loans that are given a Pass rating are not considered a problem credit. Loans that are classified as Special Mention loans are considered to have potential credit problems and are evaluated closely by management. Substandard and non-accruing loans are loans for which a definitive weakness has been identified and which may make full collection of contractual cash flows questionable. Doubtful loans are those with identified weaknesses that make full collection of contractual cash flows, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The Company assigns an internal risk rating at origination and reviews the rating annually, semiannually or quarterly depending on the risk rating. The rating is also reassessed at any point in time when management becomes aware of information that may affect the borrower’s ability to fulfill their obligations.

The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention and Substandard.  Loans that are current within 59 days are rated Pass.  Residential mortgages that are 60-89 days delinquent are rated Special Mention. Loans delinquent for 90 days or greater are rated Substandard and generally placed on non-accrual status.  Home equity loans are risk rated based on the same rating system as the Company’s residential mortgages.

Ratings for other consumer loans, including auto loans, are based on a two rating system. Loans that are current within 119 days are rated Performing while loans delinquent for 120 days or more are rated Non-performing. Other consumer loans are placed on non-accrual at such time as they become Non-performing.

Acquired Loans Credit Quality Analysis

Upon acquiring a loan portfolio, our internal loan review function assigns risk ratings to the acquired loans, utilizing the same methodology as it does with business activities loans.  This may differ from the risk rating policy of the predecessor bank.  Loans which are rated Substandard or worse according to the rating process outlined below are deemed to be credit impaired loans accounted for under ASC 310-30, regardless of whether they are classified as performing or non-performing.

The Bank utilizes an eleven grade internal loan rating system for each of its acquired commercial real estate, construction and commercial loans as outlined in the Credit Quality Information section of this Note.  The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention and Substandard.  Residential mortgages that are current within 59 days are rated Pass.  Residential mortgages that are 60 — 89 days delinquent are rated Special Mention.  Residential mortgages delinquent for 90 days or greater are rated Substandard.  Home equity loans are risk rated based on the same rating system as the Company’s residential mortgages.  Other consumer loans are rated based on a two rating system.  Other consumer loans that are current within 119 days are rated Performing while loans delinquent for 120 days or more are rated Non-performing. Non-performing other consumer loans are deemed to be credit impaired loans accounted for under ASC 310-30.

The Company subjects loans that do not meet the ASC 310-30 criteria to ASC 450-20 by collectively evaluating these loans for an allowance for loan loss.  The Company applies a methodology similar to the methodology prescribed for business activities loans, which includes the application of environmental factors to each category of loans.  The methodology to collectively evaluate the acquired loans outside the scope of ASC 310-30 includes the application of a number of environmental factors that reflect management’s best estimate of the level of incremental credit losses that might be recognized given current conditions.  This is reviewed as part of the allowance for loan loss adequacy analysis.  As the loan portfolio matures and environmental factors change, the loan portfolio will be reassessed each quarter to determine an appropriate reserve allowance.

Additionally, the Company considers the need for an additional reserve for acquired loans accounted for outside of the scope of ASC 310-30 under ASC 310-20. At acquisition date, the Bank determined a fair value mark with

29

credit and interest rate components.  Under the Company’s model, the impairment evaluation process involves comparing the carrying value of acquired loans, including the entire unamortized premium or discount, to the recorded reserve allowance. If necessary, the Company books an additional reserve to account for shortfalls identified through this calculation.  Fair value marks are not bifurcated when evaluating for impairment.

A decrease in the expected cash flows in subsequent periods requires the establishment of an allowance for loan losses at that time for ASC 310-30 loans.  At March 31, 2015, the allowance for loan losses related to acquired loans was $4.0 million using the above mentioned criteria.

The Company presented several tables within this footnote separately for business activity loans and acquired loans in order to distinguish the credit performance of the acquired loans from the business activity loans.

The following table presents the Company’s loans by risk rating at March 31, 2015 and December 31, 2014:

Business Activities Loans

Residential Mortgages

Credit Risk Profile by Internally Assigned Grade

	1-4 family				Construction				Total residential mortgages
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	1,183,064	$	1,195,209	$	27,382	$	26,634	$	1,210,446	$	1,221,843
Special mention	888		146		—		410		888		556
Substandard	4,066		4,053		414		—		4,480		4,053
Total	$	1,188,018	$	1,199,408	$	27,796	$	27,044	$	1,215,814	$	1,226,452

Commercial Real Estate

Credit Risk Profile by Creditworthiness Category

	Construction				Single and multi-family				Other				Total commercial real estate
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	179,868	$	166,295	$	140,022	$	137,533	$	1,023,304	$	959,836	$	1,343,194	$	1,263,664
Special mention	—		—		—		—		6,891		6,933		6,891		6,933
Substandard	2,932		2,894		2,275		2,517		56,625		63,995		61,832		69,406
Doubtful	—		—		—		—		73		73		73		73
Total	$	182,800	$	169,189	$	142,297	$	140,050	$	1,086,893	$	1,030,837	$	1,411,990	$	1,340,076

Commercial and Industrial Loans

Credit Risk Profile by Creditworthiness Category

	Asset based lending				Other				Total comm. and industrial loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	354,106	$	341,246	$	410,699	$	404,846	$	764,805	$	746,092
Special mention	—		—		187		560		187		560
Substandard	—		—		13,679		6,539		13,679		6,539
Total	$	354,106	$	341,246	$	424,565	$	411,945	$	778,671	$	753,191

Consumer Loans

Credit Risk Profile Based on Payment Activity

	Home equity				Auto and other				Total consumer loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Performing	$	254,176	$	251,524	$	351,574	$	346,175	$	605,750	$	597,699
Nonperforming	1,192		1,157		252		305		1,444		1,462
Total	$	255,368	$	252,681	$	351,826	$	346,480	$	607,194	$	599,161

30

Acquired Loans

Residential Mortgages

Credit Risk Profile by Internally Assigned Grade

	1-4 family				Construction				Total residential mortgages
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	253,866	$	266,445	$	922	$	1,018	$	254,788	$	267,463
Special mention	707		638		—		—		707		638
Substandard	1,930		1,651		—		—		1,930		1,651
Total	$	256,503	$	268,734	$	922	$	1,018	$	257,425	$	269,752

Commercial Real Estate

Credit Risk Profile by Creditworthiness Category

	Construction				Single and multi-family				Other				Total commercial real estate
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	2,765	$	2,904	$	41,145	$	44,497	$	192,233	$	195,681	$	236,143	$	243,082
Special mention	—		—		120		533		2,208		4,868		2,328		5,401
Substandard	1,281		1,297		7,164		8,138		13,193		13,573		21,638		23,008
Total	$	4,046	$	4,201	$	48,429	$	53,168	$	207,634	$	214,122	$	260,109	$	271,491

Commercial and Industrial Loans

Credit Risk Profile by Creditworthiness Category

	Asset based lending				Other				Total comm. and industrial loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	—	$	—	$	44,922	$	45,757	$	44,922	$	45,757
Special mention	—		—		—		1,723		—		1,723
Substandard	—		—		3,222		3,695		3,222		3,695
Total	$	—	$	—	$	48,144	$	51,175	$	48,144	$	51,175

Consumer Loans

Credit Risk Profile Based on Payment Activity

	Home equity				Auto and other				Total consumer loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Performing	$	61,371	$	65,368	$	86,356	$	102,182	$	147,727	$	167,550
Nonperforming	876		583		713		1,169		1,589		1,752
Total	$	62,247	$	65,951	$	87,069	$	103,351	$	149,316	$	169,302

The following table summarizes information about total loans rated Special Mention or lower as of March 31, 2015 and December 31, 2014.  The table below includes consumer loans that are special mention and substandard accruing that are classified in the above table as performing based on payment activity.

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Non-Accrual	$	14,636	$	7,373	$	22,009	$	14,778	$	6,927	$	21,705
Substandard Accruing	68,228		21,266		89,494		66,995		23,839		90,834
Total Classified	82,864		28,639		111,503		81,773		30,766		112,539
Special Mention	8,175		3,286		11,461		9,113		8,800		17,913
Total Criticized	$	91,039	$	31,925	$	122,964	$	90,886	$	39,566	$	130,452

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NOTE 6.               DEPOSITS

A summary of time deposits is as follows:

(In thousands)	March 31, 2015		December 31, 2014
Time less than $100,000	$	506,577	$	515,570
Time $100,000 or more	998,892		940,176
Total time deposits	$	1,505,469	$	1,455,746

Included in time deposits are brokered deposits of $478.8 million and $430.8 million at March 31, 2015 and December 31, 2014, respectively.  Included in money market deposits presented on the consolidated balance sheet are reciprocal deposits of $7.4 million and $9.4 million at March 31, 2015 and December 31, 2014, respectively.

NOTE 7.               BORROWED FUNDS

Borrowed funds at March 31, 2015 and December 31, 2014 are summarized, as follows:

	March 31, 2015				December 31, 2014
			Weighted				Weighted
			Average				Average
(dollars in thousands)	Principal		Rate		Principal		Rate
Short-term borrowings:
Advances from the FHLBB	$	884,500	0.25	%	$	890,900	0.24	%
Other Borrowings	10,000		1.83		10,000		1.80
Total short-term borrowings:	894,500		0.25		900,900		0.23
Long-term borrowings:
Advances from the FHLBB	61,618		0.91		61,676		0.93
Subordinated borrowings	74,301		7.00		74,283		7.00
Junior subordinated borrowings	15,464		2.11		15,464		2.08
Total long-term borrowings:	151,383		4.02		151,423		4.03
Total	$	1,045,883	0.80	%	$	1,052,323	0.79	%

Short term debt includes Federal Home Loan Bank of Boston (“FHLBB”) advances with an original maturity of less than one year and a short-term line-of-credit drawdown through a correspondent bank.  The Bank also maintains a $3.0 million secured line of credit with the FHLBB that bears a daily adjustable rate calculated by the FHLBB. There was no outstanding balance on the FHLBB line of credit for the periods ended March 31, 2015 and December 31, 2014.

The Bank is approved to borrow on a short-term basis from the Federal Reserve Bank of Boston as a non-member bank. The Bank has pledged certain loans and securities to the Federal Reserve Bank to support this arrangement. No borrowings with the Federal Reserve Bank of Boston took place for the periods ended March 31, 2015 and December 31, 2014.

Long-term FHLBB advances consist of advances with an original maturity of more than one year.  The advances outstanding at March 31, 2015 include callable advances totaling $5.0 million, and amortizing advances totaling $5.1 million.  The advances outstanding at December 31, 2014 include callable advances totaling $5.0 million, and amortizing advances totaling $5.1 million. All FHLBB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally all residential first mortgage loans and certain securities.

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A summary of maturities of FHLBB advances as of March 31, 2015 and December 31, 2014 is as follows:

	March 31, 2015				December 31, 2014
			Weighted				Weighted
			Average				Average
(in thousands, except rates)	Principal		Rate		Principal		Rate
Fixed rate advances maturing:
2015	$	934,500	0.25	%	$	940,900	0.24	%
2016	1,503		0.03		1,519		0.88
2017	5,000		4.33		5,000		4.33
2018	—		0.00		—		0.00
2019 and beyond	5,115		3.91		5,157		3.85
Total FHLBB advances	$	946,118	0.29	%	$	952,576	0.28	%

The Company does not have variable-rate debt for the periods ended March 31, 2015 and December 31, 2014.

In September 2012, the Company issued fifteen year subordinated notes in the amount of $75.0 million at a discount of 1.15%.  The interest rate is fixed at 6.875% for the first ten years. After ten years, the notes become callable and convert to an interest rate of three-month LIBOR rate plus 511.3 basis points.

The Company holds 100% of the common stock of Berkshire Hills Capital Trust I (“Trust I”) which is included in other assets with a cost of $0.5 million.  The sole asset of Trust I is $15.5 million of the Company’s junior subordinated debentures due in 2035. These debentures bear interest at a variable rate equal to LIBOR plus 1.85% and had a rate of 2.11% and 2.08% at March 31, 2015 and December 31, 2014, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to stockholders while such interest payments on the debentures have been deferred.  The Company has not exercised this right to defer payments.  The Company has the right to redeem the debentures at par value. Trust I is considered a variable interest entity for which the Company is not the primary beneficiary.  Accordingly, Trust I is not consolidated into the Company’s financial statements.

NOTE 8.               STOCKHOLDERS’ EQUITY

The actual and required capital ratios were as follows:

		Regulatory				Regulatory
		Minimum to be				Minimum to be
	March 31, 2015	Well Capitalized		December 31, 2014		Well Capitalized
Company (consolidated)
Total capital to risk weighted assets	11.4	10.0	%	11.4	%	10.0	%
Common Equity Tier 1 Capital to risk weighted assets	9.1	6.5		N/A		N/A
Tier 1 capital to risk weighted assets	9.2	8.0		9.0		6.0
Tier 1 capital to average assets	7.1	5.0		7.0		5.0
Bank
Total capital to risk weighted assets	10.8	10.0	%	10.8	%	10.0	%
Common Equity Tier 1 Capital to risk weighted assets	9.4	6.5		N/A		N/A
Tier 1 capital to risk weighted assets	9.4	8.0		9.3		6.0
Tier 1 capital to average assets	7.3	5.0		7.2		5.0

At each date shown, the Company and the Bank met the conditions to be classified as “well capitalized” under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table above.

33

Effective January 1, 2015, the Company and the Bank became subject to the Basel III rule that requires the Company and the Bank to assess their Common Equity Tier 1 Capital to risk weighted assets and the Company and the Bank each exceed the minimum to be well capitalized.

Accumulated other comprehensive income (loss)

Components of accumulated other comprehensive income is as follows:

(In thousands)	March 31, 2015			December 31, 2014
Other accumulated comprehensive income, before tax:
Net unrealized holding gain on AFS securities	$	25,330		$	15,993
Net loss on effective cash flow hedging derivatives	(7,200		)	(3,299		)
Net unrealized holding (loss) on pension plans	(3,822		)	(2,291		)
Income taxes related to items of accumulated other comprehensive income:
Net unrealized holding gain on AFS securities	(9,682		)	(6,077		)
Net loss on effective cash flow hedging derivatives	2,902			1,330
Net unrealized holding (loss) on pension plans	1,540			923
Accumulated other comprehensive income	$	9,068		$	6,579

The following table presents the components of other comprehensive income for the three months ended March 31, 2015 and 2014:

(In thousands)	Before Tax			Tax Effect			Net of Tax
Three Months Ended March 31, 2015
Net unrealized holding gains on AFS securities:
Net unrealized gains arising during the period	$	9,371		$	(3,617	)	$	5,754
Less: reclassification adjustment for (gains) realized in net income	(34		)	12			(22		)
Net unrealized holding gain on AFS securities	9,337			(3,605		)	5,732
Net loss on cash flow hedging derivatives:
Net unrealized loss arising during the period	(3,901		)	1,572			(2,329		)
Less: reclassification adjustment for gains (losses) realized in net income	—			—			—
Net loss on cash flow hedging derivatives	(3,901		)	1,572			(2,329		)
Net unrealized holding loss on pension plans
Net unrealized loss arising during the period	(1,596		)	643			(953		)
Less: reclassification adjustment for gains (losses) realized in net income	65			(26		)	39
Net unrealized holding loss on pension plans	(1,531		)	617			(914		)
Other comprehensive income	$	3,905		$	(1,416	)	$	2,489
Three Months Ended March 31, 2014
Net unrealized holding loss on AFS securities:
Net unrealized loss arising during the period	$	6,055		$	(2,233	)	$	3,822
Less: reclassification adjustment for (gains) realized in net income	(34		)	12			(22		)
Net unrealized holding gain on AFS securities	6,021			(2,221		)	3,800
Net loss on cash flow hedging derivatives:
Net unrealized loss arising during the period	(860		)	368			(492		)
Less: reclassification adjustment for (gains) realized in net income	5,393			(2,200		)	3,193
Net gain on cash flow hedging derivatives	4,533			(1,832		)	2,701
Net gain on terminated swap:
Net unrealized loss arising during the period	—			—			—
Less: reclassification adjustment for losses realized in net income	3,237			(1,312		)	1,925
Net gain on terminated swap	3,237			(1,312		)	1,925
Other comprehensive income	$	13,791		$	(5,365	)	$	8,426

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The following table presents the changes in each component of accumulated other comprehensive income (loss), for the three months ended March 31, 2015 and 2014:

	Net unrealized			Net loss on			Net loss			Net unrealized
	holding (loss) gain			effective cash			on			holding loss
	on AFS			flow hedging			terminated			on
(in thousands)	Securities			derivatives			swap			pension plans			Total
Three Months Ended March 31, 2015
Balance at Beginning of Period	$	9,916		$	(1,969	)	$	—		$	(1,368	)	$	6,579
Other Comprehensive Gain (Loss) Before reclassifications	5,754			(2,329		)	—			(953		)	2,472
Amounts Reclassified from Accumulated other comprehensive income	(22		)	—			—			39			17
Total Other Comprehensive Income (Loss)	5,732			(2,329		)	—			(914		)	2,489
Balance at End of Period	$	15,648		$	(4,298	)	$	—		$	(2,282	)	$	9,068
Three Months Ended March 31, 2014
Balance at Beginning of Period	$	(5,776	)	$	(1,366	)	$	(1,925	)	$	(1,368	)	$	(10,435	)
Other Comprehensive Gain (Loss) Before reclassifications	3,822			(492		)	—			—			3,330
Amounts Reclassified from Accumulated other comprehensive income	(22		)	3,193			1,925			—			5,096
Total Other Comprehensive Income (Loss)	3,800			2,701			1,925			—			8,426
Balance at End of Period	$	(1,976	)	$	1,335		$	—		$	(1,368	)	$	(2,009	)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2015 and 2014:

							Affected Line Item in the
	Three Months Ended March 31,						Statement where Net Income
(in thousands)	2015			2014			is Presented
Realized (gains) on AFS securities:
	$	(34	)	$	(34	)	Non-interest income
	12			12			Tax expense
	(22		)	(22		)	Net of tax
Realized losses on cash flow hedging derivatives:
	—			5,393			Non-interest income
	—			(2,200		)	Tax expense
	—			3,193			Net of tax
Amortization of realized gains on terminated swap:
	—			3,237			Non-interest income
	—			(1,312		)	Tax expense
	—			1,925			Net of tax
Realized loss on pension plans:
	65			—			Non-interest income
	(26		)	—			Tax expense
	39			—			Net of tax
Total reclassifications for the period	$	17		$	5,096		Net of tax

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NOTE 9. EARNINGS PER SHARE

Earnings per share have been computed based on the following (average diluted shares outstanding are calculated using the treasury stock method):

	Three Months Ended March 31,
(In thousands, except per share data)	2015		2014
Net income/(loss)	$	8,759	$	(1,106	)
Average number of common shares issued	26,525		26,525
Less: average number of treasury shares	1,295		1,425
Less: average number of unvested stock award shares	427		402
Average number of basic common shares outstanding	24,803		24,698
Plus: dilutive effect of unvested stock award shares	89		—
Plus: dilutive effect of stock options outstanding	63		—
Average number of diluted common shares outstanding	24,955		24,698
Earnings per share:
Basic	$	0.35	$	(0.04	)
Diluted	$	0.35	$	(0.04	)

For the three months ended March 31, 2015, 338 thousand shares of restricted stock and 210 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.  For the three months ended March 31, 2014, 335 thousand shares of restricted stock and 321 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.

NOTE 10. STOCK-BASED COMPENSATION PLANS

A combined summary of activity in the Company’s stock award and stock option plans for the three months ended March 31, 2015 is presented in the following table:

	Non-vested Stock
	Awards Outstanding				Stock Options Outstanding
			Weighted-				Weighted-
			Average				Average
	Number of		Grant Date		Number of		Exercise
(Shares in thousands)	Shares		Fair Value		Shares		Price
Balance, December 31, 2014	424		$	24.33	282		$	20.42
Granted	92		24.90		—		—
Stock options exercised	—		—		(11	)	10.52
Stock awards vested	(82	)	24.22		—		—
Forfeited	(10	)	23.50		—		—
Expired	—		—		—		—
Balance, March 31, 2015	424		$	24.48	271		$	21.12
Exercisable options, March 31, 2015					271		$	21.12

During the three months ended March 31, 2015 and 2014, proceeds from stock option exercises totaled $116 thousand and totaled $718 thousand, respectively.  During the quarter ended March 31, 2015, there were 82 thousand

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shares issued in connection with vested stock awards.  During the three months ended March 31, 2014, there were 62 thousand shares issued in connection with vested stock awards.  All of these shares were issued from available treasury stock.  Stock-based compensation expense totaled $993 thousand and $932 thousand during the quarters ended March 31, 2015 and 2014, respectively.  Stock-based compensation expense is recognized ratably over the requisite service period for all awards.

NOTE 11. 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 Berkshire Insurance Group, Inc. (“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 March 31, 2015
Net interest income	$	46,339		$	—	$	5,154		$	(6,000	)	$	45,493
Provision for loan losses	3,851			—		—			—			3,851
Non-interest income	9,413			2,967		3,785			(3,603		)	12,562
Non-interest expense	42,494			1,939		715			—			45,148
Income before income taxes	9,407			1,028		8,224			(9,603		)	9,056
Income tax expense (benefit)	433			399		(535		)	—			297
Net income	$	8,974		$	629	$	8,759		$	(9,603	)	$	8,759
Average assets (in millions)	$	6,479		$	28	$	757		$	(767	)	$	6,497
Three months ended March 31, 2014
Net interest income (expense)	$	43,712		$	—	$	(946	)	$	—		$	42,766
Provision for loan losses	3,396			—		—			—			3,396
Non-interest income	1,374			3,049		(252		)	252			4,423
Non-interest expense	42,574			2,322		464			—			45,360
Income before income taxes	(884		)	727		(1,662		)	252			(1,567		)
Income tax expense (benefit)	(192		)	287		(556		)	—			(461		)
Net income	$	(692	)	$	440	$	(1,106	)	$	252		$	(1,106	)
Average assets (in millions)	$	5,829		$	26	$	722		$	(726	)	$	5,851

NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

As of March 31, 2015, the Company held derivatives with a total notional amount of $1.1 billion.  That amount included $300.0 million in forward starting interest rate swap derivatives that were designated as cash flow hedges for accounting purposes.  The Company also had economic hedges and non-hedging derivatives totaling $724.1 million and $68.4 million, respectively, which are not designated as hedges for accounting purposes and are therefore recorded at fair value.  Economic hedges included interest rate swaps totaling $585.6 million, risk participation agreements with dealer banks of $49.0 million, and $89.4 million in forward commitment contracts.

As part of the Company’s risk management strategy, the Company enters into interest rate swap agreements to mitigate the interest rate risk inherent in certain of the Company’s assets and liabilities. Interest rate swap

37

agreements involve the risk of dealing with both Bank customers and institutional derivative counterparties and their ability to meet contractual terms. The agreements are entered into with counterparties that meet established credit standards and contain master netting and collateral provisions protecting the at-risk party. The derivatives program is overseen by the Risk Management Committee of the Company’s Board of Directors. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not significant at March 31, 2015.

The Company pledged collateral to derivative counterparties in the form of cash totaling $5.3 million and securities with an amortized cost of $27.5 million and a fair value of $27.7 million as of March 31, 2015. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back economic hedges. However certain language is written into the International Swaps Dealers Association, Inc. (“ISDA”) and loan documents where, in default situations, the Bank is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.

Information about derivative assets and liabilities at March 31, 2015, follows:

			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Forward-starting interest rate swaps on FHLBB borrowings	$	300,000	4.0	0.00	%	2.29	%	$	(7,200	)
Total cash flow hedges	300,000							(7,200		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	12,412		14.7	0.52	%	5.09	%	(2,799		)
Interest rate swaps on loans with commercial loan customers	286,590		6.0	2.19	%	4.59	%	(15,405		)
Reverse interest rate swaps on loans with commercial loan customers	286,590		6.0	4.59	%	2.19	%	15,444
Risk Participation Agreements with Dealer Banks	49,038		15.9					(100		)
Forward sale commitments	89,432		0.2					(388		)
Total economic hedges	724,062							(3,248		)
Non-hedging derivatives:
Interest rate lock commitments	68,374		0.2					977
Total non-hedging derivatives	68,374							977
Total	$	1,092,436						$	(9,471	)

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Information about derivative assets and liabilities at December 31, 2014, follows:

			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Forward-starting interest rate swaps on FHLBB borrowings	$	300,000	4.3	0.00	%	2.29	%	$	(3,299	)
Total cash flow hedges	300,000							(3,299		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	12,554		14.9	0.52	%	5.09	%	(2,578		)
Interest rate swaps on loans with commercial loan customers	297,158		6.0	2.23	%	4.54	%	(12,183		)
Reverse interest rate swaps on loans with commercial loan customers	297,158		6.0	4.54	%	2.23	%	12,221
Risk participation agreements with dealer banks	45,842		16.6					(91		)
Forward sale commitments	42,366		0.2					(510		)
Total economic hedges	695,078							(3,141		)
Non-hedging derivatives:
Interest rate lock commitments	39,589		0.2					625
Total non-hedging derivatives	39,589							625
Total	$	1,034,667						$	(5,815	)

Cash flow hedges

The effective portion of unrealized changes in the fair value of derivatives accounted for as cash flow hedges is reported in other comprehensive income and subsequently reclassified to earnings in the same period or periods during which the hedged transaction is forecasted to affect earnings. Each quarter, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction. The ineffective portion of changes in the fair value of the derivatives is recognized directly in earnings.

The Company has entered into six forward-starting interest rate swap contracts with a combined notional value of $300.0 million as of March 31, 2015.  The six forward starting swaps will become effective in 2016.  All have durations of three years. This hedge strategy converts the one month rolling FHLBB borrowings based on the FHLBB’s one month fixed interest rate to fixed interest rates, thereby protecting the Company from floating interest rate variability.

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Amounts included in the Consolidated Statements of Income and in the other comprehensive income section of the Consolidated Statements of Comprehensive Income (related to interest rate derivatives designated as hedges of cash flows), were as follows:

	Three Months Ended March 31,
(In thousands)	2015			2014
Interest rate swaps on FHLBB borrowings:
Unrealized (loss) recognized in accumulated other comprehensive loss	$	(3,901	)	$	(785	)
Reclassification of unrealized loss from accumulated other comprehensive income to other non-interest income for termination of swaps	—			8,630
Reclassification of unrealized deferred tax benefit from accumulated other comprehensive income to tax expense for terminated swaps	—			(3,611		)
Net tax benefit on items recognized in accumulated other comprehensive income	1,572			314
Interest rate swaps on junior subordinated debentures:
Unrealized loss recognized in accumulated other comprehensive income	—			(1		)
Reclassification of unrealized loss from accumulated other comprehensive income to interest expense	—			129
Net tax expense on items recognized in accumulated other comprehensive income	—			(51		)
Other comprehensive loss recorded in accumulated other comprehensive income, net of reclassification adjustments and tax effects	$	(2,329	)	$	(3,815	)
Net interest expense recognized in interest expense on junior subordinated notes	$	—		$	129

Hedge ineffectiveness on interest rate swaps designated as cash flow hedges was immaterial to the Company’s financial statements during the three months ended March 31, 2015 and 2014.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate liabilities. During the next twelve months, the Company does not anticipate any such reclassifications.

As a result of the branch acquisition, in the first quarter of 2014, the Company initiated and subsequently terminated all of its interest rate swaps, with various institutions, associated with FHLB advances with 3-month LIBOR based floating interest rates with an aggregate notional amount of $30 million, all of its interest rate swaps associated with 90 day rolling FHLB advances issued using the FHLB’s 3-month fixed interest rate with an aggregate notional amount of $145 million and all of its forward-starting interest rate swaps associated with 90 day rolling FHLB advances issued using the FHLB’s 3-month fixed interest rate with an aggregate notional amount of $235 million. In the first quarter of 2014, the Company elected to extinguish $215 million of FHLB advances related to the terminated swaps. As a result the Company reclassified $8.6 million of losses from the effective portion of the unrealized changes in the fair value of the terminated derivatives from other comprehensive income to non-interest income as the forecasted transactions to the related FHLB advances will not occur.

Economic hedges

As of March 31, 2015, the Company has an interest rate swap with a $12.4 million notional amount to swap out the fixed rate of interest on an economic development bond bearing a fixed rate of 5.09%, currently within the Company’s trading portfolio under the fair value option, in exchange for a LIBOR-based floating rate. The intent of the economic hedge is to improve the Company’s asset sensitivity to changing interest rates in anticipation of favorable average floating rates of interest over the 21-year life of the bond.  The fair value changes of the economic development bond are mostly offset by fair value changes of the related interest rate swap.

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The Company also offers certain derivative products directly to qualified commercial borrowers.  The Company economically hedges derivative transactions executed with commercial borrowers by entering into mirror-image, offsetting derivatives with third-party financial institutions.  The transaction allows the Company’s customer to convert a variable-rate loan to a fixed rate loan. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts mostly offset each other in earnings. Credit valuation adjustments arising from the difference in credit worthiness of the commercial loan and financial institution counterparties totaled $38.6 thousand as of March 31, 2015.  The interest income and expense on these mirror image swaps exactly offset each other.

The Company has risk participation agreements with dealer banks. Risk participation agreements occur when the Company participates on a loan and a swap where another bank is the lead.  The Company gets paid a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default. Changes in fair value are recorded in current period earnings.

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

The Company uses the following types of forward sale commitments contracts:

·Best efforts loan sales,

·Mandatory delivery loan sales, and

·To Be Announced (“TBA”) mortgage-backed securities sales.

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

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

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

Non-hedging derivatives

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

41

Amounts included in the Consolidated Statements of Income related to economic hedges and non-hedging derivatives were as follows:

	Three Months Ended March 31,
(In thousands)	2015			2014
Economic hedges
Interest rate swap on industrial revenue bond:
Unrealized (loss) gain recognized in other non-interest income	$	(271	)	$	(381	)
Interest rate swaps on loans with commercial loan customers:
Unrealized (loss) gain recognized in other non-interest income	(3,114		)	187
Reverse interest rate swaps on loans with commercial loan customers:
Unrealized loss recognized in other non-interest income	3,114			(187		)
Favorable (Unfavorable) change in credit valuation adjustment recognized in other non-interest income	1			7
Risk Participation Agreements:
Unrealized loss recognized in other non-interest income	(9		)	—
Forward Commitments:
Unrealized loss recognized in other non-interest income	(388		)	(108		)
Realized loss in other non-interest income	(91		)	(164		)
Non-hedging derivatives
Interest rate lock commitments
Unrealized gain recognized in other non-interest income	$	977		$	377
Realized gain in other non-interest income	755			469

Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate Swap Agreements (“Swap Agreements”)

The Company enters into swap agreements to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated statements of condition. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral generally in the form of marketable securities is received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds.  The Company had net asset positions with its commercial banking counterparties totaling $15.4 million and $12.3 million as of March 31, 2015 and December 31, 2014, respectively.  The Company had net liability positions with its financial institution counterparties totaling $25.5 million and $18.2 million as of March 31, 2015 and December 31, 2014, respectively.  At March 31, 2015, the Company did not have a net liability position with its commercial banking counterparties, compared to a $0.1 million liability at December 31, 2014.  The collateral posted by the Company that covered liability positions was $25.5 million and $18.2 million as of March 31, 2015 and December 31, 2014, respectively.

42

The following table presents the assets and liabilities subject to an enforceable master netting arrangement as of March 31, 2015 and December 31, 2014:

Offsetting of Financial Assets and Derivative Assets

					Net Amounts
	Gross		Gross Amounts		of Assets		Gross Amounts Not Offset in
	Amounts of		Offset in the		Presented in the		the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(in thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
As of March 31, 2015
Interest Rate Swap Agreements:
Institutional counterparties	$	42	$	—	$	42	$	—	$	—	$	42
Commercial counterparties	15,444		—		15,444		—		—		15,444
Total	$	15,486	$	—	$	15,486	$	—	$	—	$	15,486

Offsetting of Financial Liabilities and Derivative Liabilities

						Net Amounts
	Gross			Gross Amounts		of Liabilities			Gross Amounts Not Offset in
	Amounts of			Offset in the		Presented in the			the Statements of Condition
	Recognized			Statements of		Statements of			Financial		Cash
(in thousands)	Liabilities			Condition		Condition			Instruments		Collateral Pledged		Net Amount
As of March 31, 2015
Interest Rate Swap Agreements:
Institutional counterparties	$	(25,546	)	$	—	$	(25,546	)	$	20,456	$	5,090	$	—
Commercial counterparties	—			—		—			—		—		—
Total	$	(25,546	)	$	—	$	(25,546	)	$	20,456	$	5,090	$	—

Offsetting of Financial Assets and Derivative Assets

					Net Amounts
	Gross		Gross Amounts		of Assets		Gross Amounts Not Offset in
	Amounts of		Offset in the		Presented in the		the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(in thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
As of December 31, 2014
Interest Rate Swap Agreements:
Institutional counterparties	$	23	$	—	$	23	$	—	$	—	$	23
Commercial counterparties	12,270		—		12,270		—		—		12,270
Total	$	12,293	$	—	$	12,293	$	—	$	—	$	12,293

Offsetting of Financial Liabilities and Derivative Liabilities

						Net Amounts
	Gross			Gross Amounts		of Liabilities			Gross Amounts Not Offset in
	Amounts of			Offset in the		Presented in the			the Statements of Condition
	Recognized			Statements of		Statements of			Financial		Cash
(in thousands)	Liabilities			Condition		Condition			Instruments		Collateral Pledged		Net Amount
As of December 31, 2014
Interest Rate Swap Agreements:
Institutional counterparties	$	(18,232	)	$	58	$	(18,174	)	$	14,984	$	3,190	$	—
Commercial counterparties	(50		)	—		(50		)	—		—		(50		)
Total	$	(18,282	)	$	58	$	(18,224	)	$	14,984	$	3,190	$	(50	)

NOTE 13. FAIR VALUE MEASUREMENTS

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities that are carried at fair value.

Recurring Fair Value Measurements

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.

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	March 31, 2015
	Level 1		Level 2		Level 3		Total
(In thousands)	Inputs		Inputs		Inputs		Fair Value
Trading security	$	—	$	—	$	14,970	$	14,970
Available-for-sale securities:
Municipal bonds and obligations	—		155,450		—		155,450
Governmentguaranteed residential mortgage-backed securities	—		65,039		—		65,039
Government-sponsored residential mortgage-backed securities	—		762,421		—		762,421
Corporate bonds	—		55,357		—		55,357
Trust preferred securities	—		13,427		—		13,427
Other bonds and obligations	—		3,196		—		3,196
Marketable equity securities	43,690		357		719		44,766
Loans held for sale	—		29,305		—		29,305
Derivative assets	—		15,444		977		16,421
Derivative liabilities	295		25,504		93		25,892

	December 31, 2014
	Level 1		Level 2		Level 3		Total
(In thousands)	Inputs		Inputs		Inputs		Fair Value
Trading security	$	—	$	—	$	14,909	$	14,909
Available-for-sale securities:
Municipal bonds and obligations	—		133,699		—		133,699
Government guaranteed residential mortgage-backed securities	—		69,468		—		69,468
Government-sponsored residential mortgage-backed securities	—		760,184		—		760,184
Corporate bonds	—		54,151		—		54,151
Trust preferred securities	—		14,667		1,548		16,215
Other bonds and obligations	—		3,159		—		3,159
Marketable equity securities	53,806		358		778		54,942
Loans Held for Sale	—		19,493		—		19,493
Derivative assets	—		12,328		625		12,953
Derivative liabilities	417		18,259		93		18,769

There were no transfers between levels during the three months ended March 31, 2015 or 2014.

Trading Security at Fair Value. The Company holds one security designated as a trading security. It is a tax advantaged economic development bond issued to the Company by a local nonprofit which provides wellness and health programs. The determination of the fair value for this security is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable and there is little to no market activity in the security; therefore, the security meets the definition of a Level 3 security.  The discount rate used in the valuation of the security is sensitive to movements in the 3-month LIBOR rate.

Securities Available for Sale. AFS securities classified as Level 1 consist of publicly-traded equity securities for which the fair values can be obtained through quoted market prices in active exchange markets. AFS securities classified as Level 2 include most of the Company’s debt securities. The pricing on Level 2 was primarily sourced from third party pricing services, overseen by management, and is based on models that consider standard input factors such as dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and condition, among other things. The Company owns one privately owned equity security classified as Level 3. The security’s fair value is determined through unobservable issuer-provided financial information and a pricing model utilizing peer data.

Loans held for sale. The Company elected the fair value option for all loans held for sale (HFS) originated on or after May 1, 2012.  Loans HFS are classified as Level 2 as the fair value is based on input factors such as quoted prices for similar loans in active markets.

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					Aggregate Fair Value
March 31, 2015	Aggregate		Aggregate		Less Aggregate
(In thousands)	Fair Value		Unpaid Principal		Unpaid Principal
Loans Held for Sale	$	29,305	$	28,483	$	822

					Aggregate Fair Value
December 31, 2014	Aggregate		Aggregate		Less Aggregate
(In thousands)	Fair Value		Unpaid Principal		Unpaid Principal
Loans Held for Sale	$	19,493	$	18,885	$	608

The changes in fair value of loans held for sale for the three months ended March 31, 2015 and December 31, 2014, were gains of $214 thousand and $409 thousand, respectively.  The changes in fair value are included in mortgage banking income in the Consolidated Statements of Income.

Derivative Assets and Liabilities.

Interest Rate Swap.  The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings.

Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.  However, as of March 31, 2015, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Interest Rate Lock Commitments. The Company enters into IRLCs for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time.  The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. However, this value is adjusted by a factor which considers the likelihood that the loan in a lock position will ultimately close, and by the non-refundable costs of originating the loan.  The closing ratio is derived from the Bank’s internal data and is adjusted using significant management judgment.  The costs to originate are primarily based on the Company’s internal commission rates that are not observable. As such, IRLCs are classified as Level 3 measurements.

Forward Sale Commitments. The Company utilizes forward sale commitments as economic hedges against potential changes in the values of the IRLCs and loans held for sale.  To Be Announced (“TBA”) mortgage-backed securities forward commitment sales are used as the hedging instrument, are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets.  The fair values of the Company’s best efforts and mandatory delivery loan sale commitments are determined similarly to the IRLCs using quoted prices in the market place that are observable.  However, costs to originate and closing ratios included in the calculation are internally generated and are based on management’s judgment and prior experience, which are considered factors that are not observable.  As such, best efforts and mandatory forward commitments are classified as Level 3 measurements.

45

The table below presents the changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis for the three months ended March 31, 2015 and 2014.

	Assets (Liabilities)
				Securities			Interest Rate
	Trading			Available			Lock			Forward
(In thousands)	Security			for Sale			Commitments			Commitments
Three Months Ended March 31, 2015
Balance as of December 31, 2014	$	14,909		$	2,326		$	625		$	(93	)
Sale of AFS Security	—			(1,327		)	—			—
Unrealized (loss) gain, net recognized in other non-interest income	203			—			1,730			—
Unrealized gain included in accumulated other comprehensive loss	—			(280		)	—			—
Paydown of trading security	(142		)	—			—			—
Transfers to held for sale loans	—			—			(1,378		)	—
Balance as of March 31, 2015	$	14,970		$	719		$	977		$	(93	)
Unrealized gains (losses) relating to instruments still held at March 31, 2015	$	2,558		$	(51	)	$	977		$	(93	)

	Assets (Liabilities)
				Securities			Interest Rate
	Trading			Available			Lock			Forward
(In thousands)	Security			for Sale			Commitments			Commitments
Three Months Ended March 31, 2014
Balance as of December 31, 2013	$	14,840		$	1,964		$	258		$	19
Purchase of Marketable Equity Security	—			—			—			—
Unrealized (loss) gain, net recognized in other non-interest income	218			—			719			(115		)
Unrealized gain included in accumulated other comprehensive loss	—			82			—			—
Paydown of trading account security	(135		)	—			—			—
Transfers to held for sale loans	—			—			(600		)	—
Balance as of March 31, 2014	$	14,923		$	2,046		$	377		$	(96	)
Unrealized gains (losses) relating to instruments still held at March 31, 2014	$	1,962		$	(1,288	)	$	377		$	(96	)

46

Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities is as follows:

	Fair Value					Significant Unobservable Input
(In thousands)	March 31, 2015			Valuation Techniques	Unobservable Inputs	Value
Assets (Liabilities)
Trading Security	$	14,970		Discounted Cash Flow	Discount Rate	2.34		%
AFS Securities	719			Pricing Model	Median Peer Price/Tangible Book Value Percentage Multiple	93.35		%
Forward Commitments	(93		)	Historical Trend	Closing Ratio	89.54		%
				Pricing Model	Origination Costs, per loan	$	2,500
Interest Rate Lock Commitment	977			Historical Trend	Closing Ratio	89.54		%
				Pricing Model	Origination Costs, per loan	$	2,500
Total	$	16,573

	Fair Value					Significant Unobservable Input
(In thousands)	December 31, 2014			Valuation Techniques	Unobservable Inputs	Value
Assets (Liabilities)
Trading Security	$	14,909		Discounted Cash Flow	Discount Rate	2.60		%
AFS Securities	2,326			Discounted Cash Flow	Discount Rate	13.74		%
					Credit Spread	11.06		%
Forward Commitments	(93		)	Historical Trend	Closing Ratio	91.07		%
				Pricing Model	Origination Costs, per loan	$	2,500
Interest Rate Lock Commitment	625			Historical Trend	Closing Ratio	91.07		%
				Pricing Model	Origination Costs, per loan	$	2,500
Total	$	17,767

Non-Recurring Fair Value Measurements

The Company is required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements. There are no liabilities measured at fair value on a non-recurring basis.

	March 31, 2015		December 31, 2014		Three months ended March 31, 2015
	Level 3		Level 3		Total
(In thousands)	Inputs		Inputs		Gains (Losses)
Assets
Impaired loans	$	6,111	$	5,820	$	292
Capitalized mortgage servicing rights	3,871		3,757		—
Other real estate owned	1,444		2,049		(155		)
Total	$	11,426	$	11,626	$	137

47

Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets is as follows:

	Fair Value
(in thousands)	March 31, 2015		Valuation Techniques	Unobservable Inputs	Range (Weighted Average) (a)
Assets
Impaired loans	$	6,111	Fair value of collateral	Loss severity	3.78% to 53.08% (23.5%)
				Appraised value	$139.5 to $1,600.0 ($981.7)
Capitalized mortgage servicing rights	3,871		Discounted cash flow	Constant prepayment rate (CPR)	8.2% to 19.85% (11.05%)
				Discount rate	10.00% to 13.00% (10.42%)
Other real estate owned	1,444		Fair value of collateral	Appraised value	$57 to $700.0 ($470.7)
Total	$	11,426

(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.

	Fair Value
(in thousands)	December 31, 2014		Valuation Techniques	Unobservable Inputs	Range (Weighted Average) (a)
Assets
Impaired loans	$	5,820	Fair value of collateral	Loss severity	0.31% to 38.7% (12.65%)
				Appraised value	$5 to $1,600.0 ($912.7)
Capitalized mortgage servicing rights	3,757		Discounted cash flow	Constant prepayment rate (CPR)	7.83% to 19.00% (9.92%)
				Discount rate	10.00% to 13.00% (10.43%)
Other real estate owned	2,049		Fair value of collateral	Appraised value	$57 to $700.0 ($462.6)
Total	$	11,626

(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.

There were no Level 1 or Level 2 nonrecurring fair value measurements for the periods ended March 31, 2015 and December 31, 2014.

Impaired Loans. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan.  Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace.  However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values.  Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data.  Therefore, nonrecurring fair value measurement adjustments that relate to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

Capitalized mortgage loan servicing rights.  A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

48

Other real estate owned (“OREO”). OREO results from the foreclosure process on residential or commercial loans issued by the Bank. Upon assuming the real estate, the Company records the property at the fair value of the asset less the estimated sales costs. Thereafter, OREO properties are recorded at the lower of cost or fair value less the estimated sales costs. OREO fair values are primarily determined based on Level 3 data including sales comparables and appraisals.

Summary of Estimated Fair Values of Financial Instruments

The estimated fair values, and related carrying amounts, of the Company’s financial instruments follow. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

	March 31, 2015
	Carrying		Fair
(In thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	62,214	$	62,214	$	62,214	$	—	$	—
Trading security	14,970		14,970		—		—		14,970
Securities available for sale	1,099,656		1,099,656		43,690		1,055,247		719
Securities held to maturity	42,818		44,744		—		—		44,744
FHLB bank stock and restricted securities	58,734		58,734		—		58,734		—
Net loans	4,692,377		4,736,177		—		—		4,736,177
Loans held for sale	29,305		29,305		—		29,305		—
Accrued interest receivable	17,786		17,786		—		17,786		—
Cash surrender value of bank-owned life insurance policies	105,302		105,302		—		105,302		—
Derivative assets	16,421		16,421		—		15,444		977
Assets held for sale	1,266		1,266		—		1,266		—
Financial Liabilities
Total deposits	$	4,719,683	$	4,720,914	—		$	4,720,914	$	—
Short-term debt	894,500		894,675		—		894,675		—
Long-term Federal Home Loan Bank advances	61,618		63,273		—		63,273		—
Subordinated borrowings	89,765		94,062		—		94,062		—
Derivative liabilities	25,892		25,892		295		25,504		93

49

	December 31, 2014
	Carrying		Fair
(In thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	71,754	$	71,754	$	71,754	$	—	$	—
Trading security	14,909		14,909		—		—		14,909
Securities available for sale	1,091,818		1,091,818		5,806		1,035,686		2,326
Securities held to maturity	43,347		44,997		—		—		44,997
FHLB bank stock and restricted securities	55,720		55,720		—		55,720		—
Net loans	4,644,938		4,695,256		—		—		4,695,256
Loans held for sale	19,493		19,493		—		19,493		—
Accrued interest receivable	17,274		17,274		—		17,274		—
Cash surrender value of bank-owned life insurance policies	104,588		104,588		—		104,588		—
Derivative assets	12,953		12,953		—		12,328		625
Assets held for sale	1,280		1,280		—		1,280		—
Financial Liabilities
Total deposits	$	4,654,679	$	4,655,234	$	—	$	4,655,234	$	—
Short-term debt	900,900		900,983		—		900,983		—
Long-term Federal Home Loan Bank advances	61,676		63,283		—		63,283		—
Subordinated borrowings	89,747		93,441		—		93,441		—
Derivative liabilities	18,769		18,769		417		18,259		93

Other than as discussed above, the following methods and assumptions were used by management to estimate the fair value of significant classes of financial instruments for which it is practicable to estimate that value.

Cash and cash equivalents. Carrying value is assumed to represent fair value for cash and cash equivalents that have original maturities of ninety days or less.

FHLB bank stock and restricted securities. Carrying value approximates fair value based on the redemption provisions of the issuers.

Cash surrender value of life insurance policies. Carrying value approximates fair value.

Loans, net. The carrying value of the loans in the loan portfolio is based on the cash flows of the loans discounted over their respective loan origination rates. The origination rates are adjusted for substandard and special mention loans to factor the impact of declines in the loan’s credit standing. The fair value of the loans is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality.

Accrued interest receivable. Carrying value approximates fair value.

Deposits. The fair value of demand, non-interest bearing checking, savings and money market deposits is determined as the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting the estimated future cash flows using market rates offered for deposits of similar remaining maturities.

Borrowed funds. The fair value of borrowed funds is estimated by discounting the future cash flows using market rates for similar borrowings.  Such funds include all categories of debt and debentures in the table above.

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Subordinated borrowings. The Company utilizes a pricing service along with internal models to estimate the valuation of its junior subordinated debentures. The junior subordinated debentures re-price every ninety days.

Off-balance-sheet financial instruments. Off-balance-sheet financial instruments include standby letters of credit and other financial guarantees and commitments considered immaterial to the Company’s financial statements.

NOTE 14. NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

Presented below is net interest income after provision for loan losses for the three months ended March 31, 2015 and 2014, respectively.

	Three Months Ended
	March 31,
(In thousands)	2015		2014
Net interest income	$	45,493	$	42,766
Provision for loan losses	3,851		3,396
Net interest income after provision for loan losses	$	41,642	$	39,370

NOTE 15. SUBSEQUENT EVENTS

On April 17, 2015, the Company acquired all of the outstanding common shares of Hampden Bancorp, Inc. (“Hampden”). Hampden Bank, the wholly owned subsidiary of Hampden, had 10 banking offices providing a range of services in the Springfield area and has merged with and into Berkshire Hills Bancorp, Inc.

Excluding Hampden shares held by Berkshire, Hampden shareholders received 4.2 million shares of the Company’s common stock. As of April 17, 2015, Hampden, on a consolidated basis, had assets with a carrying value of approximately $687.8 million, including loans outstanding with a carrying value of approximately $501.0 million, as well as deposits with a carrying value of approximately $482.1 million. The results of Hampden’s operations will be included in the Company’s Consolidated Statement of Income from the date of acquisition. The Company incurred $3.3 million of merger and acquisition expenses related to the Hampden and Hampden Bank merger for the three months ended March 31, 2015. Excluding the $3.3 million of merger and acquisition expenses, this merger agreement had no significant effect on the Company’s financial statements for the periods presented

As a result of the proximity of the closing of the merger with Hampden to the date these consolidated financial statements are available to be issued, the Company is still evaluating the estimated fair values of the assets acquired and the liabilities assumed. Accordingly, the amount of any goodwill and other intangible assets to be recognized in connection with this transaction is also yet to be determined.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company. The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in Part I, Item 1 of this document and with the Company’s consolidated financial statements and the notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2014 Annual Report on Form 10-K. In the following discussion, income statement comparisons are against the same period of the previous year and balance sheet comparisons are against the previous fiscal year-end, unless otherwise noted. Operating results discussed herein are not necessarily indicative of the results for the year 2015 or any future period. In management’s discussion and analysis of financial condition and results of operations, certain reclassifications have been made to make prior periods comparable. Tax-equivalent adjustments are the result of increasing income from tax-advantaged securities by an amount equal to the taxes that would be paid if the income were fully taxable based on a 40.5% marginal income tax rate.  In the discussion, references to earnings per share refer to diluted earnings per share unless otherwise specified.

Berkshire Hills Bancorp (“Berkshire” or “the Company”) is a Delaware corporation headquartered in Pittsfield, Massachusetts and the holding company for Berkshire Bank (“the Bank”) and Berkshire Insurance Group.  Established in 1846, the Bank operates as a commercial bank under a Massachusetts trust company charter.  The Bank is one of Massachusetts’ oldest and largest independent banks and is the largest banking institution based in Western Massachusetts.  Berkshire Bank operates under the brand America’s Most Exciting Bank®.

On April 17, 2015 Berkshire completed the acquisition of Springfield, MA. based Hampden Bancorp, Inc. (“Hampden’).  Hampden’s operations will be included with Berkshire’s results following the acquisition date.  As of March 31, 2015, Hampden had $710 million in total assets, $508 million in loans, and $501 million in deposits.  For the quarter ended March 31, 2015, Hampden’s unaudited results of operations included $5.27 million in net interest income, $0.80 million in non-interest income, and $4.17 million in operating non-interest expense.  Hampden operated ten branches in the Springfield area and it is planned that three of these branches will be consolidated with existing Berkshire branches when the systems integration is completed in the latter part of June.  On completion of these consolidations, the Company expects to have 17 total branches in the Springfield area, including existing Berkshire branches.  The Company issued approximately 4.2 million net shares as merger consideration, bringing its total shares outstanding to approximately 29.5 million shares.

Berkshire is a regional financial services company that seeks to distinguish itself over the long term based on the following attributes:

·Strong growth from organic, de novo, product, and acquisition strategies

·Solid capital, core funding, and risk management culture

·Experienced executive team focused on earnings and stockholder value

·Distinctive brand and culture as America’s Most Exciting Bank®

·Diversified integrated financial service revenues

·Positioned to be regional consolidator in attractive markets

Shown below is a profile of the Company including Hampden Bancorp, which was acquired on April 17, 2015.

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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. 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, increased competitive pressures, changes in the interest rate environment, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that Berkshire Hills Bancorp files with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and the Risk Factors in Item 1A of this report.  Because of these and other uncertainties, Berkshire’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, Berkshire’s past results of operations do not necessarily indicate Berkshire’s combined future results.  You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made.  Berkshire is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law. Berkshire qualifies all of its forward-looking statements by these cautionary statements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES, AND RECENT ACCOUNTING PRONOUNCEMENTS

The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements in this Form 10-Q and in the most recent Form 10-K.  Please see those policies in conjunction with this discussion. The accounting and reporting policies followed by the Company conform, in all material respects, to accounting principles generally accepted in the United States and to general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While the Company bases estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in future periods. Please see those policies in conjunction with this

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discussion. Management believes that the following policies would be considered critical under the SEC’s definition:

Allowance for Loan Losses. The allowance for loan losses represents probable credit losses that are inherent in the loan portfolio at the financial statement date and which may be estimated.  Management uses historical information, as well as current economic data, to assess the adequacy of the allowance for loan losses as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. Although management believes that it uses appropriate available information to establish the allowance for loan losses, future additions to the allowance may be necessary if certain future events occur that cause actual results to differ from the assumptions used in making the evaluation. Conditions in the local economy and real estate values could require the Company to increase provisions for loan losses, which would negatively impact earnings.

Acquired Loans. Loans that the Company acquired in business combinations are initially recorded at fair value with no carryover of the related allowance for credit losses. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows initially expected to be collected on the loans and discounting those cash flows at an appropriate market rate of interest. Going forward, the Company continues to evaluate reasonableness of expectations for the timing and the amount of cash to be collected. Subsequent decreases in expected cash flows may result in changes in the amortization or accretion of fair market value adjustments, and in some cases may result in the loan being considered impaired.  For collateral dependent loans with deteriorated credit quality, the Company estimates the fair value of the underlying collateral of the loans.  These values are discounted using market derived rates of return, with consideration given to the period of time and costs associated with the foreclosure and disposition of the collateral.

Income Taxes. Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. The Company uses the asset and liability method of accounting for income taxes in which deferred tax assets and liabilities are established for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The realization of the net deferred tax asset generally depends upon future levels of taxable income and the existence of prior years’ taxable income, to which “carry back” refund claims could be made. A valuation allowance is maintained for deferred tax assets that management estimates are more likely than not to be unrealizable based on available evidence at the time the estimate is made. In determining the valuation allowance, the Company uses historical and forecasted future operating results, based upon approved business plans, including a review of the eligible carry-forward periods, tax planning opportunities and other relevant considerations. These underlying assumptions can change from period to period. For example, tax law changes or variances in future projected operating performance could result in a change in the valuation allowance. Should actual factors and conditions differ materially from those considered by management, the actual realization of the net deferred tax asset could differ materially from the amounts recorded in the financial statements. If the Company is not able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset valuation allowance would be charged to income tax expense in the period such determination is made.

Goodwill and Identifiable Intangible Assets. Goodwill and identifiable intangible assets are recorded as a result of business acquisitions and combinations. These assets are evaluated for impairment annually or whenever events or changes in circumstances indicate the carrying value of these assets may not be recoverable. When these assets are evaluated for impairment, if the carrying amount exceeds fair value, an impairment charge is recorded to income. The fair value is based on observable market prices, when practicable. Other valuation techniques may be used when market prices are unavailable, including estimated discounted cash flows and analysis of market pricing multiples.  These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. In the event of future changes in fair value, the Company may be exposed to an impairment charge that could be material.

Determination of Other-Than-Temporary Impairment of Securities. The Company evaluates debt and equity securities within the Company’s available for sale and held to maturity portfolios for other-than-temporary impairment (“OTTI”), at least quarterly. If the fair value of a debt security is below the amortized cost basis of the security, OTTI is required to be recognized if any of the following are met: (1) the Company intends to sell the security; (2) it is “more likely than not” that the Company will be required to sell the security before recovery of

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its amortized cost basis; or (3) for debt securities, the present value of expected cash flows is not sufficient to recover the entire amortized cost basis. For all impaired debt securities that the Company intends to sell, or more likely than not will be required to sell, the full amount of the loss is recognized as OTTI through earnings. Credit-related OTTI for all other impaired debt securities is recognized through earnings. Noncredit related OTTI for such debt securities is recognized in other comprehensive income, net of applicable taxes. In evaluating its marketable equity securities portfolios for OTTI, the Company considers its intent and ability to hold an equity security to recovery of its cost basis in addition to various other factors, including the length of time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer.  Any OTTI on marketable equity securities is recognized immediately through earnings. Should actual factors and conditions differ materially from those expected by management, the actual realization of gains or losses on investment securities could differ materially from the amounts recorded in the financial statements.

Fair Value of Financial Instruments. The Company uses fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures. Trading assets, securities available for sale, and derivative instruments are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, or to establish a loss allowance or write-down based on the fair value of impaired assets. Further, the notes to financial statements include information about the extent to which fair value is used to measure assets and liabilities, the valuation methodologies used and its impact to earnings.  For financial instruments not recorded at fair value, the notes to financial statements disclose the estimate of their fair value. Due to the judgments and uncertainties involved in the estimation process, the estimates could result in materially different results under different assumptions and conditions.

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SELECTED FINANCIAL DATA

The following summary data is based in part on the consolidated financial statements and accompanying notes and other information appearing elsewhere in this or prior Form 10-Qs.

	At or for the Three
	Months Ended March 31,
	2015			2014
PER COMMON SHARE DATA
Net earnings, diluted	$	0.35		$	(0.04	)
Adjusted earnings, diluted (1)	0.50			0.42
Total common book value	28.36			26.99
Dividends	0.19			0.18
Common stock price:
High	27.92			27.28
Low	24.27			23.95
Close	27.70			25.88
PERFORMANCE RATIOS (2)
Return on average assets	0.54		%	(0.08		)%
Return on average common equity	5.00			(0.64		)
Net interest margin, fully taxable equivalent	3.18			3.35
Fee income/Net interest and fee income	23.25			22.84
ASSET QUALITY RATIOS (3)
Net charge-offs (period annualized)/average loans	0.28		%	0.30		%
Allowance for loan losses/total loans	0.77			0.79
CONDITION RATIOS
Stockholders’ equity to total assets	10.90		%	11.27		%
Investments to total assets	18.51			19.05
Loans/deposits	100			101
FINANCIAL DATA: (In millions)
Total assets	$	6,571		$	6,010
Total earning assets	5,993			5,408
Total investments	1,216			1,145
Total loans	4,729			4,243
Allowance for loan losses	36			34
Total intangible assets	275			280
Total deposits	4,720			4,219
Total borrowings	1,046			1,026
Total common stockholders’ equity	716			678
FOR THE PERIOD: (In thousands)
Net interest income	$	45,493		$	42,766
Non-interest income	12,562			4,423
Provision for loan losses	3,851			3,396
Non-interest expense	45,148			45,360
Net income (loss)	8,759			(1,106		)
Adjusted income (1)	12,374			10,412

(1)Adjusted income and adjusted earnings are non-GAAP financial measures that the Company believes provide investors with information that is useful in understanding our financial performance and condition.

(2)All performance ratios are annualized and are based on average balance sheet amounts, where applicable.

(3)Generally accepted accounting principles require that loans acquired in a business combination be recorded at fair value, whereas loans from business activities are recorded at cost. The fair value of loans acquired in a business combination includes expected loan losses, and there is no loan loss allowance recorded for these 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 such loans, and this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally reduced for loans acquired in a business combination 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 such loans, and this measure is not directly comparable to prior periods. Other institutions may have loans acquired in a business combination, and therefore there may be no direct comparability of these ratios between and among other institutions.

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AVERAGE BALANCES AND AVERAGE YIELDS/RATES

The following table presents average balances and an analysis of average rates and yields on an annualized fully taxable equivalent basis for the periods included.

	Three Months Ended March 31,
	2015				2014
($ In millions)	Average Balance		Yield/Rate (FTE basis)		Average Balance		Yield/Rate (FTE basis)
Assets
Loans:
Residential mortgages	$	1,470	3.94	%	$	1,379	4.12	%
Commercial real estate	1,647		4.12		1,420		4.44
Commercial and industrial loans	807		3.70		685		3.97
Consumer loans	765		3.23		700		3.56
Total loans (1)	4,689		3.86		4,184		4.13
Investment securities (2)	1,177		3.10		1,048		3.04
Short term investments and loans held for sale (3)	55		1.40		28		1.51
Total interest-earning assets	5,921		3.67		5,260		3.89
Intangible assets	276				278
Other non-interest earning assets	300				313
Total assets	$	6,497			$	5,851
Liabilities and stockholders’ equity
Deposits:
NOW	$	423	0.14	%	$	410	0.15	%
Money market	1,409		0.40		1,490		0.37
Savings	502		0.15		464		0.16
Time	1,420		0.92		1,070		1.15
Total interest-bearing deposits	3,754		0.53		3,434		0.56
Borrowings and notes (4)	1,107		0.85		912		1.03
Total interest-bearing liabilities	4,861		0.61		4,346		0.66
Non-interest-bearing demand deposits	870				750
Other non-interest earning liabilities	65				63
Total liabilities	5,796				5,159
Total stockholders’ equity (2)	701				692
Total liabilities and stockholders’ equity	$	6,497			$	5,851
Net interest spread			3.06	%			3.23	%
Net interest margin (5)			3.18				3.35
Cost of funds			0.51				0.56
Cost of deposits			0.43				0.46
Supplementary data
Total deposits (In millions)	$	4,624			$	4,184
Fully taxable equivalent income adj. (In thousands)	889				718

(1) The average balances of loans include nonaccrual loans and deferred fees and costs.

(2) The average balance for securities available for sale is based on amortized cost. The average balance of equity also reflects this adjustment.

(3) Interest income on loans held for sale is included in loan interest income on the income statement.

(4) The average balances of borrowings includes the capital lease obligation presented under other liabilities on the consolidated balance sheet.

(5) Purchased loan accretion totaled $320 thousand and $2.8 million for the three months ended March 31, 2015 and 2014, respectively.

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NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”).  These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition.  Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information.  A reconciliation of non-GAAP financial measures to GAAP measures is provided below.  In all cases, it should be understood that non-GAAP operating measures do not depict amounts that accrue directly to the benefit of shareholders.  An item which management deems to be non-operating and excludes when computing non-GAAP operating earnings can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP earnings information set forth is not necessarily comparable to non-GAAP information which may be presented by other companies.  Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company’s GAAP financial information.

The Company utilizes the non-GAAP measure of adjusted earnings in evaluating operating trends, including components for operating revenue and expense.  These measures exclude amounts which the Company views as unrelated to its normalized operations, including securities gains/losses, losses recorded for hedge terminations, merger costs, restructuring costs, systems conversion costs, and out-of-period adjustments.  Non-operating adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to operating income.

Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, and professional fees.  Systems conversion costs relate primarily to the Company’s operating systems conversion and related systems conversions costs.   Restructuring costs primarily consist of costs and losses associated with the consolidation of branches and other operating facilities of the Company.  Out-of-period accounting adjustments for interest income on acquired loans were recorded following systems conversions and merger related accounting activity and were deemed non-operating.  Non-operating expenses include variable rate compensation related to non-operating items.

The Company also calculates adjusted earnings per share based on its measure of earnings from ongoing operations.  The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to merger and acquisition activity.  Analysts also rely on these measures in estimating and evaluating the Company’s operating performance.  Management also believes that the computation of non-GAAP adjusted earnings and adjusted earnings per share may facilitate the comparison of the Company to other companies in the financial services industry.  The Company adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

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The following table summarizes the reconciliation of non-GAAP items recorded for the time periods and dates indicated:

BERKSHIRE HILLS BANCORP, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - UNAUDITED - (F-9)

			At or for the Quarters Ended
			Mar 31,			Mar. 31,
(in thousands)			2015			2014
Net income (loss) (GAAP)			$	8,759		$	(1,106	)
Adj: Gain on sale of securities, net			(34		)	(34		)
Adj: Loss on termination of hedges			—			8,792
Adj: Merger and acquisition expense			3,275			3,637
Adj: Restructuring and conversion expense			1,146			2,665
Adj: Out-of-period adjustment (1)			—			1,381
Adj: Income taxes			(772		)	(4,923		)
Total adjusted income (non-GAAP)	(A)		$	12,374		$	10,412
Total revenue (GAAP)			$	58,055		$	47,189
Adj: Gain on sale of securities, net			(34		)	(34		)
Adj: Loss on termination of hedges			—			8,792
Adj: Out-of-period adjustment (1)			—			1,381
Total operating revenue (non-GAAP)	(B)		$	58,021		$	57,328
Total non-interest expense (GAAP)			$	45,148		$	45,360
Less: Total non-operating expense (see above)			(4,421		)	(6,302		)
Operating non-interest expense (non-GAAP)	(C)		$	40,727		$	39,058
(in millions, except per share data)
Total average assets	(D)		$	6,497		$	5,851
Total average stockholders’ equity	(E)		701			692
Total average tangible stockholders’ equity	(F)		426			413
Total tangible stockholders’ equity, period-end (2)	(G)		441			398
Total common shares outstanding, period-end (thousands)	(H)		25,253			25,105
Average diluted shares outstanding (thousands) (3)	(I)		24,955			24,833
Adjusted earnings per share, diluted	(A/I)		$	0.50		$	0.42
Tangible book value per share, period-end	(G/H)		$	17.46		$	15.84
Performance ratios (4)
Adjusted return on assets	(A/D)		0.76		%	0.71		%
Adjsuted return on equity	(A/E)		7.06			6.02
Adjusted return on tangible equity (5)	(A/F)		12.14			10.84
Efficiency ratio	(C-L)/(B+J+M)		63.27			64.42
Supplementary data (in thousands)
Tax benefit - tax-advantaged commercial project investments (6)	(J)		$	4,034		$	555
Non-interest income charge - tax-advantaged commercial project investments (7)	(K)		(2,851		)	(417		)
Net income on tax-advantaged commercial project investments	(J+K	)	1,183			138
Intangible amortization	(L)		901			1,306
Fully taxable equivalent income adjustment	(M)		889			718

(1) The out of period adjustment shown above relates to interest income earned on loans acquired in bank acquisitions.

(2) Total tangible stockholders’ equity is computed by taking total stockholders’ equity less the intangible assets at period-end.

(3) Average diluted shares computed for adjusted earnings per share differ from GAAP average diluted shares, in the first quarter of 2014, due to the GAAP net loss compared to adjusted net income for the period.

(4) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.

(5) Adjusted return on tangible equity is computed by dividing the total adjusted income adjusted for the tax-affected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.

(6) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy projects.

(7) The non-interest income charge is the reduction to the tax-advantaged commercial project investments, which are incurred as the tax credits are generated.

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SUMMARY

Berkshire recorded first quarter 2015 earnings of $8.8 million, or $0.35 per share.  First quarter results included $3.6 million in net charges related primarily to the acquisition of Hampden Bancorp and restructuring charges. The company views these charges as non-operating.  The Company’s adjusted earnings were $12.4 million, or $0.50 per share before non-operating items.  Adjusted earnings is a non-GAAP financial measure intended to measure the performance of ongoing operations.  This measure is further described and reconciled to GAAP results in the previous section on non-GAAP financial measures.  Adjusted earnings per share increased by 19% over the first quarter of 2014 due to the expansion of business operations.  Adjusted earnings per share increased by 4% over the fourth quarter of 2014 including the benefits of growth in loans, mortgage originations, and income on tax-advantaged commercial development projects.  Berkshire recorded a loss of $1.1 million, or $0.04 per share, in the first quarter of 2014 due to $11.5 million in net non-operating charges primarily for the acquisition of 20 New York branches and the related loss on the termination of hedges.  Before net non-operating charges, Berkshire’s adjusted earnings in this period totaled $10.4 million, or $0.42 per share.

During the most recent quarter, Berkshire’s Board of Directors increased the quarterly dividend to shareholders by 6% to $0.19 per share from $0.18 per share which was in effect throughout 2014.  This dividend equates to a 2.9% annualized yield based on the $26.18 average closing price of Berkshire’s common stock during the first quarter.

First quarter 2015 financial highlights included:

·14% annualized increase in commercial loans

·6% annualized increase in deposits

·11% annualized increase in demand deposits

·9% increase in fee income (year-over-year)

·0.36% non-performing assets/assets

·0.28% annualized net loan charge-offs/average loans

Berkshire continued its momentum of sequential and year-over-year growth in adjusted EPS in the most recent quarter.  The Company also maintained double digit annualized expansion in its focus areas of commercial loans and demand deposits, where it continued to capitalize on the strength of its regional bank franchise.  This contributed to an increase in the net interest margin before purchased loan accretion.  Most categories of fee income also increased year over year as the Company further developed revenue synergies and deepened its market and wallet share.  The Company is maintaining its focus on expense disciplines and efficiency while improving its overall franchise positioning and talent redeployment to better serve its customers.  Berkshire’s goal is to continue to generate positive core operating leverage from revenue synergies and expense management to further improve operating earnings and profitability.

In the most recent quarter, Berkshire announced the recruitment of leadership talent for its Hartford commercial banking team and for its Albany private banking and wealth teams.  Hockey legend Ray Bourque and left wing Milan Lucic joined Berkshire as spokespersons and the Company completed a second successful season in its partnership with NESN (New England Sports Network) as the Official Bank of Boston Bruins coverage on the network, garnering widespread brand recognition and significant business leads.

Berkshire’s acquisition of Springfield-based Hampden Bancorp was completed on April 17, 2015 on schedule.  The Hampden acquisition boosted total assets by approximately 11% to $7.3 billion and total shares outstanding increased to approximately 29.5 million shares.  Berkshire’s goal is that the transaction will be accretive to earnings per share, accretive to return on assets, and accretive to equity and tangible equity after merger efficiencies are fully achieved.  Berkshire is also targeting strategic benefits from its new position in the top five for deposit market share in the Springfield MSA and increases in its overall business volume in the Hartford/Springfield market which is the second largest economic area in New England.  Operationally, Berkshire

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will target efficiencies and long run revenue synergies from the product set and capabilities that it can provide to the individuals and businesses in this market.

Hampden operated ten branch offices and the Company plans to consolidate three of these offices with existing offices in the Springfield market, resulting in a net addition of seven offices.  The Company also announced the consolidation of two other offices in the first quarter bringing the total branch count to 96 offices net of these planned consolidations.  The Company continues to review its branch locations with the goal of improving profitability while improving its overall franchise positioning and talent deployment to better serve its customers.  Additional branch consolidations or sales are anticipated during the second quarter.  These changes reflect changing patterns of retail banking customer interaction.  Berkshire has a multichannel strategy to further penetrate and service the retail market.  The Company announced its plan to implement the Apple Pay service for its customers in the second quarter.  The expansion of its small business banking team resulted in Berkshire’s designation as the SBA Lender of the Quarter for being one of the most active SBA lenders in the Commonwealth of Massachusetts.

During the first quarter, Berkshire expanded its board of directors with the appointment to the board of Paul Bossidy, former President and CEO of GE Capital Solutions.  Pursuant to the Hampden merger agreement, Berkshire recently appointed two former Hampden directors to its board:  Thomas Burton (a former Hampden President and CEO) and Richard Suski (a certified public accountant with a career serving financing institutions in Connecticut and Massachusetts).  Glenn Welch, the Hampden President and CEO, joined Berkshire’s team as an Executive Vice President and will be developing the Company’s business initiatives with other financial institutions in its region.   Additionally, on April 23, 2015, the Board of Directors established two new board committees: the Capital/Risk Management Committee (combining two existing committees) and the Compliance/Regulatory Committee. Following the restructuring, the five standing Board committees include Audit, Capital/Risk Management, Corporate Governance/Nominating, Compensation, and the Compliance/Regulatory Committees.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2015 AND DECEMBER 31, 2014

Summary:  Total assets increased at a 4% annualized rate to $6.6 billion in the first quarter due primarily to a 4% annualized increase in total loans funded by a 6% annualized increase in total deposits.  Capital and liquidity ratios remained solid and did not change significantly. Tangible book value per share increased at a 6% annualized rate to $17.46 and total book value per share increased at a 3% annualized rate to $28.36.  With the completion of the Hampden Bancorp merger on April 17, 2015, total assets increased by approximately 11% to $7.3 billion.

Securities:  Total investment securities were unchanged at $1.2 billion during the quarter.  Investments in bank capital instruments were reduced as a result of new risk based capital requirements that became effective during the quarter that increased the required support for these investments.  The Company reduced its investment in equity securities and trust preferred securities by $15 million and increased its investment in available for sale municipal bonds by $22 million.  The Company realized $1.4 million in net losses on the sale of bonds which was primarily related to the sale of a pooled trust preferred security which was reported with a $1.0 million unrealized loss at year-end 2014.  The bond losses were offset by $1.4 million in net gains realized on the sale of equity securities.  Due to the decrease in medium and long term interest rates during the quarter, the Company recorded a net unrealized securities gain of $9.3 million in other comprehensive income, and the portfolio had a net unrealized gain of $27 million at (2.4% of cost) quarter-end compared to $18 million (1.6% of cost) at the start of the quarter.  The overall portfolio yield increased to 3.10% in the first quarter of 2015 from 3.00% in the linked quarter and 3.04% in the first quarter of 2014.  During the most recent quarter, measures of yield, duration, and extension risk were little changed except for a modest shortening in the portfolio life due to higher projected prepayment speeds following the dip in interest rates after year-end.  Except for securities in the Company’s higher yielding mutual fund, all other available for sale debt securities were investment grade rated throughout the

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quarter.  The mutual fund invests in U.S. corporate bonds targeted for upgrades and is reported with the Company’s corporate bonds.  The Company’s held to maturity securities are generally unrated local securities, all of which are performing and none of which is deemed criticized according to the Company’s internal ratings systems.

Loans.   Berkshire continued to generate strong double digit commercial loan growth, which measured 14% annualized in the first quarter of 2015, including 11% annualized growth in commercial and industrial loan balances.  Managed reductions in other loans resulted in 4% annualized growth in total loans to $4.73 billion during the quarter.  Residential mortgage loans decreased as most first quarter mortgage originations were sold into the secondary market following a decrease in interest rates at the start of the year.  The decrease in consumer loans was due to a change in the auto loan portfolio strategy initiated in the final quarter of 2014 to de-emphasize originations of lower coupon super-prime auto loans.

The $48 million increase in total loans during the quarter was due to the $83 million increase in commercial loans.  Approximately $60 million of this increase was attributable to commercial real estate loans.  The remaining growth was primarily split between asset based loans and other commercial and industrial loans.   Commercial loan growth included wholesale acquisitions and is net of targeted reductions in lower yielding commercial relationships managed with a goal of supporting the net interest margin.  The commercial pipeline at quarter-end was up from the start of the year and line of credit usage improved slightly to 62%.

The yield on the total portfolio decreased to 3.86% in the most recent quarter compared to 3.96% in the linked quarter due to lower purchased loan accretion.  Before this accretion, the yield measured 3.83% compared to 3.82% for the above periods, respectively.  At quarter-end, loans with contractual pricing adjustments within one year decreased to 35% of total loans from 37% at the start of the year.  Loans repricing in one to five years increased to 26% from 24% of total loans, and loans repricing over five years remained unchanged at 39% of total loans.

At the end of the period, the remaining carrying balance of purchased credit impaired loans was $13 million and the contractual amount owed on these loans was $24 million.  The balance of accretable yield on these loans was $3.4 million which increased from $2.5 million at the start of the quarter due to loans with improved cash flows.

Asset Quality.   Asset quality metrics remained favorable and continued to improve in the first quarter of 2015.  Annualized net loan charge-offs measured 0.28% of average loans for the quarter.   Annualized net charge-0ffs were 0.20% of average loans from business activities and 0.65% of average loans acquired in business combinations.  Quarter-end non-performing assets decreased to 0.36% of total assets and accruing delinquent loans decreased to 0.43% of total loans.  The loan loss allowance increased to 0.77% of total loans; approximately 15% of quarter-end loans were balances recorded at fair value in prior year bank acquisitions.  Acquired loans are recorded at fair value and are categorized as performing regardless of their payment status.  Therefore, some overall portfolio measures of asset performance are not comparable between periods or among institutions as a result of recent business combinations.  Loans which became non-accruing totaled $5 million in the most recent quarter, which was within the range of $4 - 9 million experienced in the past several quarters.  The balance of loans identified as troubled debt restructurings increased to $17.2 million from $16.7 million during the quarter.

Loan Loss Allowance. The determination of the allowance for loan losses is a critical accounting estimate.  The Company considers the allowance for loan losses appropriate to cover probable losses which can be reasonably estimated in the loan portfolio as of the balance sheet date. Under accounting standards for business combinations, acquired loans are recorded at fair value with no loan loss allowance on the date of acquisition. A loan loss allowance is recorded by the Company for the emergence of new probable and estimable losses on acquired loans which were not impaired as of the acquisition date. Because of the accounting for acquired loans, some measures of the loan loss allowance are not comparable to periods prior to the acquisition date.

The total amount of the loan loss allowance increased by $0.6 million to $36.3 million in the first quarter of 2015 due to growth in the loan portfolio.  The ratio of the allowance to total loans increased to 0.77% from 0.76% during the quarter.  For loans from business activities, this ratio decreased to 0.80% from 0.84% during the

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quarter, while the allowance on loans acquired in business combinations increased to 0.56% from 0.38%.  At period-end, the total allowance provided 2.8X coverage of annualized net charge-offs and 165% coverage of period-end non-accrual loans.  For business activities loans, these ratios measured 4.0X and 220% respectively, and for loans acquired in business combinations, these ratios measured 0.8X and 63%.

The credit risk profile of the Company’s loan portfolio is described in the Loan Loss Allowance note in the consolidated financial statements. The Company’s risk management process focuses primary attention on loans with higher than normal risk, which includes loans rated special mention and classified (substandard and lower). These loans are referred to as criticized loans. Criticized loans were reduced to $123 million (1.9% of assets) from $130 million (2.0% of assets) at the start of the year.  The Company views its potential problem loans as those loans from business activities which are rated as classified and continue to accrue interest.  These loans have a possibility of loss if weaknesses are not corrected. Classified loans acquired in business combinations are recorded at fair value and are classified as performing at the time of acquisition and therefore have not generally been viewed as potential problem loans. Potential problem loans increased slightly to $68 million from $67 million during the quarter.  The balance of accruing classified acquired loans decreased to $21 million from $24 million during the quarter.   There were no significant changes in the composition of non-accruing and potential problem assets during the quarter.  The Company’s evaluation of its credit risk profile also compares the amount of criticized assets to the total of the Bank’s Tier 1 Capital plus the loan loss allowance. This ratio declined to 25% from 28% during the quarter.

Deposits.   Total deposits increased by $65 million, or 6% annualized, to $4.72 billion in the first quarter of 2015.  Growth included increases in most major categories and was concentrated primarily in relationship oriented transaction accounts, which increased by $33 million, and in brokered time deposits, which increased by $48 million.  Berkshire expanded its personal relationship deposit bundles which require the utilization of a demand deposit account, and demand deposit balances increased at an 11% annualized rate during the quarter.  The Company does not expect that its branch consolidations will have any material impact on its deposit balances.  The Company ended its participation in the Massachusetts Depositors Insurance Fund (“DIF”) at mid-year 2014 and the one year transitional coverage of existing balances expires at mid-year in 2015.  Hampden Bank’s participation in this fund terminated with no transitional coverage as of the Hampden merger date.  Normal FDIC insurance coverage remains in place for the Bank’s deposits.  The Company has initiated limited offerings of reciprocal deposit money market accounts and collateralized deposit accounts for certain institutional customers and is targeting to maintain positive overall organic deposit balance growth in 2015 while transitioning from the DIF program. Including the benefit of demand deposit growth, the cost of deposits decreased to 0.43% in the most recent quarter compared to 0.44% in the linked quarter.  New federal regulatory liquidity coverage ratios for the largest banks became effective in 2015, with the potential of increasing competition for retail deposits and reducing competition for large corporate deposits.  Additionally, some institutions have offered higher time deposit account rates in anticipation of the initiation of interest rate increases by the Federal Reserve Bank after several years of near-zero short term rates.  The Company believes that it may have competitive advantage in the event of interest rate increases due to the comparative stability of some of its more rural deposit markets.  The ratio of loans/deposits was 100% at quarter-end, compared to 101% at the start of the quarter.

Borrowings, Derivative Financial Instruments and Hedging Activities.  There were no significant changes in the Company’s borrowing and hedging activities in the first quarter of 2015.  Total borrowings were unchanged at $1.05 billion.  In the second half of 2014, the Company removed some of its securities from the Federal Home Loan Bank collateral pool, but it resumed pledging these securities to the collateral pool in 2015.  The Company generally pledges most of its eligible collateral to the FHLBB to maximize its borrowings availability, and the Company is also expecting to improve its collateral data in 2015 to increase the eligibility and liquidity of the related assets.   Berkshire’s unused borrowing capacity with the FHLBB was $587 million at quarter-end, compared to $246 million at the start of the quarter.  The notional amount of derivatives increased by $58 million to $1.09 billion during the quarter primarily due to a $76 million increase related to mortgage banking as a result of the higher market demand for mortgage originations following the decrease in long term rates.  As a result of this decrease, the unrealized fair value liability of derivatives increased to $9.5 million from $5.8 million due to the higher unrealized loss on outstanding fixed payment interest rate swaps.  The amount of this loss has varied significantly due to the unusually high volatility of long term interest rates in recent periods reflecting uncertainty about domestic and foreign monetary policy.

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Stockholders’ Equity.  Stockholders’ equity increased by $7 million including the contribution of $9 million in earnings and $2 million of other comprehensive income less $5 million in dividends.  Total shares outstanding increased to 25.3 million including 92 thousand shares issued in the annual grant of restricted stock in January.  Including the new shares issued for Hampden Bancorp merger consideration, total shares outstanding increased to approximately 29.5 million as of April 17, 2015.

The ratio of tangible equity/assets increased to 7.00% from 6.96% during the quarter.  This ratio is a non-GAAP financial measure commonly used by investors and it excludes goodwill and other intangible assets from equity and assets.  The Company generally targets to maintain this measurement within a range of 7-8% and also considers its return on tangible equity as a source of capital strength for improving its condition and supporting its growth.  The ratio of equity/assets was little changed at 10.90% at quarter-end.

The Company’s risk based capital ratio measured 11.4% at quarter-end and was little changed from the start of the quarter.  New regulatory capital calculations came into effect during the quarter and as previously discussed, the Company reduced its investment in bank capital instruments, which carry a higher risk allocation.  At quarter-end, the regulatory capital metrics for the Company and the Bank were not significantly changed from year-end 2014.  Tier 1 capital for the Company measured 9.2% of risk weighted assets and 7.1% of average assets.  The new measure of Common Equity Tier 1 capital to risk weighted assets measured 9.1% and the Company and Bank continued to meet all requirements for the Well Capitalized designation.  The merger with Hampden Bancorp is expected to be accretive to most of the Company’s capital measures.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014.

Summary.  First quarter 2015 adjusted EPS increased by $0.02 per share, or 4%, over the linked quarter and by $0.08 per share, or 19%, on a year-over-year basis due to growth in loans and fee revenues.  Net non-operating charges totaled $0.15 per share during the most recent quarter, including $0.11 related primarily to the Hampden merger and $0.04 in restructuring charges.  First quarter adjusted earnings totaled $12.4 million in 2015 and $10.4 million in 2014.  First quarter GAAP earnings were $8.8 million in 2015 and a loss of $1.1 million in 2014.  Results last year included net non-operating charges related primarily to the acquisition of the New York branches.

The first quarter 2015 adjusted return on equity improved to 7.1% and the adjusted return on tangible equity improved to 12.1%.  The Hampden acquisition is targeted to be accretive to earnings per share and to most profitability measures, as well as to most capital measures, when merger integration is fully completed.  The GAAP return on equity measured 5.0% during the most recent quarter including the impact of net non-operating charges.

Due to the seasoning of acquired impaired loans, the contribution to first quarter earnings from purchased loan accretion decreased by approximately $2.5 million, or $1.5 million on an after-tax basis in 2015 compared to 2014.  This decrease was partially offset by a $1.0 million increase in the net after-tax benefit of income from tax-advantaged commercial development projects, which resulted in a lower effective tax rate in 2015.  As a result of volume growth in loans and fee revenues, Berkshire produced growth in adjusted earnings despite the negative impact of accretion and the continuing pressure on the net interest margin resulting from the ongoing low interest rate environment.

Revenue.  Total first quarter net revenue increased by 23% to $58 million in 2015 compared to 2014.  On an operating basis, net revenue increased by 1% and the increase measured 10% before the aforementioned impacts of purchased loan accretion and tax advantaged-investments.  In the first quarter of 2015, Hampden recorded $6 million in revenue and these acquired operations will be included in Berkshire’s results subsequent to the merger date on April 17, 2015.  Berkshire’s goal is to produce positive operating leverage from revenue growth as it develops revenue synergies in its expanded footprint and from integrated product sales that improve wallet share.  Annualized first quarter revenue totaled $9.31 per share in the most recent quarter.

Net Interest Income.  First quarter net interest income increased by $2.7 million, or 6%, in 2015 compared to 2014.  Measured before the aforementioned decrease in purchased loan accretion, net interest income increased by 12% for these periods.  This included the benefit of a 13% increase in average earning assets including a 12%

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increase in average loans.  Measured on this basis, first quarter 2015 net interest income increased by 0.2% compared to the linked quarter.

The net interest margin in the most recent quarter decreased to 3.18% from 3.23% in the linked quarter and from 3.35% in the first quarter of 2014.  Measured before accretion, the margin increased to 3.15% from 3.12% in the linked quarter and decreased from 3.24% in the prior year first quarter.  The year-over-year decrease was due to the ongoing compression related to the continuing low interest rate environment.  The increase compared to the linked quarter included the benefit of a 0.03% increase in the commercial loan yield before accretion.  This reflected the strategy initiated in the second half of 2014 to replace lower yielding relationships with higher yielding loans.  The Company has also reduced its originations of lower yielding super prime auto loans while maintaining the double digit annualized growth rate of commercial loans.  The improvement over the linked quarter also included the benefit of a 0.01% reduction in the cost of deposits including the benefit of growth in demand deposit balances.

Non-Interest Income.  Total fee income increased by $1.1 million, or 9% year-over-year, with increases in most major categories.  Fee income was up $0.8 million, or 6%, compared to the linked quarter.  Seasonal increases in insurance and wealth management revenues mostly offset seasonal and weather related decreases in loan and deposit fees.  Mortgage banking fees increased due to increased refinancing demand spurred by lower interest rates.

Loan fee income was down from recent quarters primarily due to lower commercial interest rate swap fees.  The annualized ratio of deposit fees to average deposits decreased to 0.49% in the most recent quarter compared to 0.53% in the linked quarter and 0.52% in the first quarter of 2014.  The increase in mortgage banking fees was primarily due to higher origination volume as well as higher gain on sale margins as a result of strong refinancing demand.  The seasonal increase in insurance income was due to annual contingency revenues which are received in the first quarter of each year based on policy performance in the prior year; this revenue decreased from year to year.  The seasonal increase in wealth management fees was due to annual tax preparation fees.

Other non-interest income includes income on bank owned life insurance as well as capital gains distributions from investments in the two most recent quarters.  Non-interest income is stated net of charges to reduce the carrying value of tax-advantaged investments in commercial redevelopment projects.  These charges are further discussed in the following section on income tax expense.  Income in the most recent quarter included $1.4 million in gains on the sale of equity securities which offset $1.4 million in losses on the sale of bonds which was related to the reduction of investments in bank capital securities instruments which was previously discussed.  In the first quarter of 2014, non-interest income also included charges for the termination of hedges following the New York branch acquisition.

Loan Loss Provision.  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 the Company as an estimate of the probable and estimable loan losses in the portfolio as of period-end.  The level of the allowance is a critical accounting estimate, which is subject to uncertainty.  The level of the allowance was included in the discussion of financial condition.  The first quarter provision increased by $0.5 million year over year due primarily to an increase in the allowance coverage of loans acquired in business combinations.

Non-Interest Expense.  Including seasonal and weather related factors, first quarter operating non-interest expense increased to $40.7 million from $39.9 million in the linked quarter and $39.1 million in the prior year first quarter.  In comparison to average assets, operating non-interest expense measured 2.51%, 2.49%, and 2.67% in these periods respectively.  The increase over the linked quarter included seasonal factors.  The year-to-year decrease reflected the benefit of business expansion and restructuring activities to reduce branch costs and other overhead.  Seasonal factors in the most recent quarter included a $0.9 million increase in payroll tax expense over the prior quarter and higher occupancy costs including the impacts of the severe winter weather.  Full-time equivalent staff was not significantly changed and totaled 1,091 at quarter-end.  The efficiency ratio increased to 63.3% in the most recent quarter due to seasonality and lower revenue from purchased loan accretion.  This ratio is expected to improve due to planned revenue growth and efficiencies related to the Hampden acquisition and the branch restructuring.

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Total first quarter non-interest expense decreased slightly to $45.1 million in 2015 compared to $45.4 million in the prior year.  This expense included merger, restructuring, and conversion expense which the Company views as non-operating.  This expense totaled $4.4 million in 2015 and $6.3 million in 2014.  The expense in 2015 included $3.3 million related to the Hampden Bancorp merger and $1.1 million for restructuring expense.  The Company is consolidating three of the ten Hampden Bank branches.  This will be completed when the systems integration is completed in the latter part of June 2015.  The costs for these branch consolidations are being included in the Hampden merger charges.  The Company expects the bulk of the merger charges to be recorded in the second quarter of 2015.  Restructuring charges of $1.1 million included costs related to two existing branch consolidations which were announced in the most recent quarter and which are expected to be completed in the second quarter of this year.  Berkshire continues to evaluate additional branches for consolidation or sale and expects to record additional non-operating charges in the second quarter related to these consolidations.

Income Tax Expense.  Berkshire’s increased financing of tax-advantaged commercial development projects contributed $0.05 in EPS in the first quarter of 2015, which was a $0.04 increase over the linked quarter and over the first quarter of the prior year.  As previously noted, there were decreases in EPS related to purchased loan accretion which the Company viewed in part as offsetting factors in evaluating overall changes in EPS.

Due to its regional reach and resources, the Company has expanded its tax-advantaged investments in redevelopment projects with commercial relationship partners in its communities.  This financing resulted in a charge to non-interest income which was more than offset by the tax benefits which are a component of income tax expense.  The charges to non-interest income represent a reduction in the carrying value of the Company’s project investments; these charges are recorded as tax benefits are recognized and totaled $2.9 million in 2015 and $0.4 million in the linked quarter and in the first quarter of the prior year.  The tax benefits include tax credits which are approximately equal to the amount of the non-interest income charges, along with a tax deduction on the amount of the charge.  The charge itself is deductible in arriving at taxable income and therefore provides a benefit which was approximately $1.1 million in the most recent quarter.  The total tax benefit recognized for these projects was $4.0 million in the most recent quarter and $0.6 million in the linked quarter and in the first quarter of the prior year.

The Company’s effective income tax rate was 3% in the first quarter of 2015, compared to 26% in the fiscal year 2014 and a 29% benefit in the first quarter of 2014.  The low rate in 2015 primarily reflects the higher tax credit benefit from tax-advantaged commercial projects.  The tax rate on the Company’s adjusted earnings in the most recent quarter was approximately 8% and this rate was approximately 29% before these tax credits.  For fiscal 2014, the effective tax rate on operating income was approximately 30% and measured approximately 32% before the $1.7 million tax credit benefit recognized in that year.

Results of Segment and Parent Operations. Berkshire Hills Bancorp (“the Parent”) has two subsidiary operating segments — banking and insurance. Results in the banking segment generally followed the levels and trends of consolidated results, which have been previously discussed.  In the insurance segment, first quarter income increased to $0.6 million in 2015 from $0.4 million in the prior year due to reductions in operating expenses.  For the Parent, operating results primarily reflected changes in the operations of its bank subsidiary.

Total Comprehensive Income. Total comprehensive income includes net income together with other comprehensive income.  For the first quarter, total comprehensive income increased to $11.2 million in 2015 compared to $7.3 million in 2014.  This reflected the improvement in operating income along with the increase in unrealized securities gains in 2015 as a result of the drop in interest rates.  Other comprehensive income totaled $2.5 million and $8.4 million in these respective periods.  For 2014, this amount included the benefit of the hedge termination which was recorded as a charge to net income and resulted in a credit to the net unrealized fair value of derivative hedges.

Liquidity and Cash Flows.  During the first quarter of 2015, increased deposits were the primary source of funds and net loan growth was the primary use of funds.  Berkshire generally plans that over the medium term, deposit growth will be the primary source of funds and loan growth will be the primary use of funds. The Bank is diversifying its deposit sources including institutional and wholesale sources as part of the expansion of its liquidity management program and to provide additional options for managing its funds costs and asset/liability objectives.  In select cases for large institutional accounts, the Bank may offer collateralized deposits or insured

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reciprocal deposits to supplement its deposit insurance protection in place of its previous participation in the Depositors Insurance Program.

The Bank is also expanding its use of short term institutional borrowings and FHLBB borrowings will continue to be a significant source of liquidity for daily operations and borrowings targeted for specific asset/liability purposes.  The Company also uses interest rate swaps in managing its funds sources and uses.  As of March 31, 2015, the Bank had approximately $587 million in borrowing availability with the Federal Home Loan Bank.  This was increased from $246 million at the start of the year due to additional collateral that was pledged to the FHLBB.

Berkshire Hills Bancorp had a cash balance totaling $31 million as of March 31, 2015 which was on deposit with Berkshire Bank.  The primary long run routine sources of funds for the Parent are expected to be dividends from Berkshire Bank and Berkshire Insurance Group, as well as cash from the exercise of stock options.  The Bank paid a $6 million dividend to the Parent in the most recent quarter.  The Parent also has a $10 million revolving line of credit provided by a correspondent bank.  The primary long run uses of funds by the Parent include the payment of cash dividends on common stock and debt service.

Capital Resources. Please see the “Stockholders’ Equity” section of the Comparison of Financial Condition for a discussion of stockholders’ equity together with the “Stockholders’ Equity” note to the consolidated financial statements.  At March 31, 2015, the Bank and the Company continued to be classified as “Well Capitalized.” Additional information about regulatory capital is contained in the notes to the consolidated financial statements and in the 2014 Form 10-K.

Berkshire views its earnings and related internal capital generation as a primary source of capital to support dividends and growth of the franchise. Additionally, the Company generally uses the issuance of common stock as the primary source of consideration for bank acquisitions, and such acquisitions may result in net increases or decreases in its capital ratios. Berkshire’s long term objective is to generate a double digit annual return on equity, and the Company evaluates lending, investment, and acquisition decisions with this objective as a benchmark. The Capital/Risk Management Committee of Berkshire’s Board of Directors is responsible for assisting the Board in planning for future capital needs and for ensuring compliance with regulations pertaining to capital structure and levels. The Company believes that the market for its stock is an additional capital resource over the long run. Additionally, the Company continues to monitor market conditions for other forms of regulatory capital such as preferred stock or subordinated debt, which are additional potential future capital resources to the Company and/or the Bank.

The Company issued approximately 4.2 million net shares as merger consideration for the acquisition of Hampden Bancorp on April 17, 2015 in accordance with the terms of the merger agreement.  The Company expects that most of its measures of capital will improve as a result of this acquisition.

Off-Balance Sheet Arrangements and Contractual Obligations. In the normal course of operations, Berkshire engages in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in the Company’s financial statements.  These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. Further information about the Company’s off-balance sheet arrangements is contained in the Company’s 2014 Form 10-K and information relating to payments due under contractual obligations is presented in the 2014 form 10-K.  Changes in the fair value of derivative financial instruments and hedging activities are included on the balance sheet and information related to these matters is reported in the related footnote to the consolidated financial statements, and was included in management’s discussion of changes in financial condition.  Aside from the completion of the Hampden Bancorp acquisition on April 17, 2015, there have been no significant changes in off-balance sheet arrangements and contractual obligations since year-end 2014.  Berkshire expects to modify certain Hampden off-balance sheet arrangements and contractual obligations as a result of the merger.

Fair Value Measurements. The Company records fair value measurements of certain assets and liabilities, as described in the related note in the financial statements. There were no significant changes in the fair value measurement methodologies at March 31, 2015 compared to December 31, 2014.  The Company compares the

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carrying value to fair value for major categories of financial assets and liabilities.  The biggest difference relates to loans, which had an estimated fair value premium of $44 million (0.9% of loans) at quarter-end.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes to the way that the Company measures market risk in the first quarter of 2015.  For further discussion about the Company’s Quantitative and Qualitative Aspects of Market Risk, please review Item 7A of the Report 10-K filed for the fiscal year ended December 31, 2014.  Berkshire’s objective is to maintain an asset sensitive interest rate risk profile, as measured by the sensitivity of net interest income to market interest rate changes.  The Company measures this sensitivity primarily by evaluating the impact of ramped interest rate changes on net interest income in the 12 month and 24 month time horizons.  The main focus is on a two year scenario where interest rates ramp up by 200 basis points in the first year.  The Bank also evaluates its equity at risk from interest rate changes through discounted cash flow analysis.  This measure assesses the present value changes to equity based on long term impacts of rate changes beyond the time horizons evaluated for net interest income at risk.

As of March 31, 2015, there were no significant changes in the Company’s methodologies for measuring the sensitivity of net interest income to changes in market interest rates.  The Company’s sensitivity in a ramped 200 basis point change continues to be close to neutral until around mid-year 2016.  The Company’s position tends to be more asset sensitive if the ramp is shorter and steeper than the modeled scenario as prime and LIBOR indexed loans are expected to react quickly to rate changes while modeled deposit rate changes are expected to react less quickly.  After the Company’s interest rate swaps become effective by the third quarter of 2016, the Company is expected to be significantly more asset sensitive.  Including preliminary estimates for Hampden, the Company believes that net interest income would increase approximately 5% in the second year of a 200 basis point upward ramp in interest rates after the swaps are effective.  The benefit of this sensitivity is expected to more than offset the increased interest cost associated with the fixed payment interest rate swaps when they become effective.  If interest rates remain unchanged or if the yield curve flattens due to higher short term rates, the Company’s net interest income could be negatively impacted in the initial effective period of the swaps due to the contracted fixed payments, together with the ongoing effects of asset yield compression which have pressured industry margins in recent years.  Through its pricing disciplines and mix of business, Berkshire’s goal is to manage its balance sheet to support the net interest margin in the event that interest rates do not rise as anticipated by management during the effective period of the swaps.

In addition to modeling market risk in relation to net interest income, the Company also models net income at risk in various interest rate scenarios.  Various sources of fee income, including interest rate swap income and mortgage banking revenue, are sensitive to interest rates.  Other components of revenue and expense are also considered and net income estimates include the impact of income taxes on modeled changes.  Management considers the risks to net income in evaluating its overall asset liability management and strategies.

The Company also estimates the sensitivity of the economic value of its equity to interest rate shocks. The Company seeks to avoid having excess long term earnings at risk when interest rates rise in the future, as anticipated.  At March 31, 2015, the Company estimated that the economic value of equity, including estimates related to Hampden, would decrease by approximately 8% in the event of a 200 basis point upward interest rate shock, which was within the Company’s policy limits. This reflected the impact of fixed rate assets on medium and long term modeled net interest income if interest rates increase. This estimate is subject to numerous assumptions and uncertainties and is not intended as a projection of future operating results. This sensitivity was approximately 2% lower than the modeled sensitivity at the end of 2014 due to the increase in modeled asset prepayment speeds resulting from the recent dip in interest rates.

In a prolonged low rate environment, Berkshire has a number of business strategies to support its net interest income and margin objectives. These include changes in volumes and mix of interest bearing assets and liabilities, some of which are discussed above. The Company also evaluates its pricing strategies on an ongoing basis, and considers its investment, borrowings, and derivatives strategies in managing its income and risk profile. Due to the limitations and uncertainties relating to model assumptions, the modeled computations should not be relied on

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as projections of income. Further, the computations do not reflect any actions that management may undertake in response to changes in interest rates.

ITEM 4.CONTROLS AND PROCEDURES

a)  Disclosure controls and procedures.

The principal executive officers, including the principal financial officer, based on their evaluation of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that the Company’s disclosure controls and procedures were effective.

b)  Changes in internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

ITEM 1.LEGAL PROCEEDINGS

As of March 31, 2015, neither the Company nor the Bank was involved in any pending legal proceedings believed by management to be material to the Company’s financial condition or results of operations. Periodically, there have been various claims and lawsuits involving the Bank, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Bank’s business. However, neither the Company nor the Bank is a party to any pending legal proceedings that it believes, in the aggregate, would have a material adverse effect on the financial condition or operations of the Company.

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition or future results.  The risks described in these forms are not the only risks that we face.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.  As a result of the closing of the Hampden Bancorp acquisition on April 17, 2015, the risks related to the failure to complete that acquisition are no longer relevant.  There have been no other material changes in the Company’s Risk Factors during the first quarter of 2015.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)No Company unregistered securities were sold during the quarter ended March 31, 2015.

(b)Not applicable.

(c)The following table provides certain information with regard to shares repurchased by the Company in the first quarter of 2015

				Total number of shares	Maximum number of
				purchased as part of	shares that may yet
	Total number of	Average price		publicly announced	be purchased under
Period	shares purchased	paid per share		plans or programs	the plans or programs
January 1-31, 2015	—	$	—	—	18,113
February 1-28, 2015	—	—		—	18,113
March 1-31, 2015	—	—		—	18,113
Total	—	$	—	—	18,113

On March 26, 2013, the Company announced that its Board of Directors authorized a new stock repurchase program, pursuant to which the Company may repurchase up to 500,000 shares of the Company’s common stock, which represents approximately 2.0% of the Company’s issued and outstanding shares. The timing of the purchases will depend on certain factors, including but not limited to, market conditions and prices, available funds, and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. Any repurchased shares will be recorded as treasury shares. The program will continue until it is completed or terminated by the Board of Directors.  The Company has no intentions to terminate this program or to cease any future potential purchases.

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ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

2.1	Agreement and Plan of Merger, dated as of November 3, 2014, by and between Berkshire Hills Bancorp, Inc. and Hampden Bancorp, Inc. (1)
3.1	Certificate of Incorporation of Berkshire Hills Bancorp, Inc. (2)
3.2	Amended and Restated Bylaws of Berkshire Hills Bancorp, Inc.(3)
4.1	Form of Common Stock Certificate of Berkshire Hills Bancorp, Inc. (2)
4.2	Note Subscription Agreement by and among Berkshire Hills Bancorp, Inc. and certain subscribers dated September 20, 2012 (4)
10.1	Amended and Restated Employment Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc. and Michael P. Daly (5)
10.2	Amended and Restated Supplemental Executive Retirement Agreement between Berkshire Bank and Michael P. Daly (6)
10.3	Three Year Executive Change in Control Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc. and George F. Bacigalupo (7)
10.4	Three-Year Executive Change in Control Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc. and Josephine Iannelli (7)
10.5	Amended and Restated Three Year Change in Control Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc. and Richard M. Marotta (8)
10.6	Amended and Restated Three Year Change in Control Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc. and Sean A. Gray (9)
10.7	Form of Split Dollar Agreement entered into with Michael P. Daly, Sean A. Gray, and Richard M. Marotta (10)
10.8	Berkshire Hills Bancorp, Inc. 2011 Equity Incentive Plan (11)
10.9	Berkshire Hills Bancorp, Inc. 2013 Equity Incentive Plan (12)
10.10	Legacy Bancorp, Inc. Amended and Restated 2006 Equity Incentive Plan (13)
10.11	Berkshire Bank 2014 Executive Short Term Incentive Plan (14)
10.12	Form of Amended and Restated Director Retirement Agreement between Berkshire Bank (as successor to Hampden Bank) and Richard Suski
11.0	Statement re: Computation of Per Share Earnings is incorporated herein by reference to Part II, Item 8, “Financial Statements and Supplementary Data”
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive data files pursuant to Rule 405 of Regulation S-T:  (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v)

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the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements tagged as blocks of text and in detail

(1)Incorporated by reference from the Exhibits to the Form 8-K filed on November 4, 2014.

(2)Incorporated herein by reference from the Exhibits to Form S-1, Registration Statement and amendments thereto, initially filed on March 10, 2000, Registration No. 333-32146.

(3)Incorporated herein by reference from the Exhibits to the Form 8-K as filed on April 28, 2015.

(4)Incorporated by reference from the Exhibits to the Form 8-K as filed on September 26, 2012.

(5)Incorporated herein by reference from the Exhibits to the Form 8-K as filed on January 6, 2009.

(6)Incorporated herein by reference from the Exhibits to Form 10-K as filed on March 16, 2009.

(7)Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 17, 2014.

(8)Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 16, 2010.

(9)Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 16, 2011.

(10)Incorporated herein by reference from the Exhibit to the Form 8-K as filed on January 19, 2011.

(11)Incorporated herein by reference from the Appendix to the Proxy Statement as filed on March 24, 2011.

(12)Incorporated herein by reference from the Appendix to the Proxy Statement as filed on April 2, 2013.

(13)Incorporated herein by reference from the Exhibits to the Form 8-K filed by Legacy Bancorp, Inc. on December 22, 2010.

(14)Incorporated herein by reference from Exhibits to the Form 10-K as filed on March 16, 2015.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BERKSHIRE HILLS BANCORP, INC.
Dated: May 11, 2015	By:	/s/ Michael P. Daly
	Michael P. Daly
	President and Chief Executive Officer
Dated: May 11, 2015	By:	/s/ Josephine Iannelli
	Josephine Iannelli
	Executive Vice President, Chief Financial Officer

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EX-10.12

Exhibit 10.12

HAMPDEN BANK

AMENDED AND RESTATED DIRECTOR RETIREMENT AGREEMENT

This AMENDED & RESTATED DIRECTOR RETIREMENT AGREEMENT (this “Agreement”) is adopted this 29th day of July, 2008 by and between HAMPDEN BANK, a state- savings bank located in Springfield, Massachusetts (the “Bank”), and Richard Suski (the “Director”). This Agreement amends and restates the prior Amended and Restated Director Supplemental Retirement Plan Agreement between the Bank and the Director dated January 1, 2008 (the “Prior Agreement”). The parties intend this amended and restated Agreement to be a material modification of the Prior Agreement such that all amounts earned and vested prior to December 31, 2004 shall be subject to the provisions of Code Section 409A.

The purpose of this Agreement is to provide specified benefits to the Director who contributes materially to the continued growth, development and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1“Accrual Balance” means the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied.

1.2“Beneficiary” means each designated person or entity, or the estate of the deceased Director, entitled to any benefits upon the death of the Director pursuant to Article 4.

1.3“Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Director completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

1.4“Board” means the Board of Directors of the Bank as from time to time constituted.

1.5“Change in Control” means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Code Section 409A and regulations thereunder.

1.6“Code” means the Internal Revenue Code of 1986, as amended, and all regulations and guidance thereunder, including such regulations and guidance as may be promulgated after the Effective Date.

1.7“Disability” means the Director: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for

a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees or directors of the Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of disability insurance covering employees or directors of the Bank provided that the definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan Administrator, the Director must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.

1.8“Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six percent (6%). However, the Plan Administrator, in its discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP and/or applicable bank regulatory guidance.

1.9“Early Termination” means Separation from Service before attainment of Normal Retirement Age for reasons other than death or Termination for Cause.

1.10“Fees” means the total fees payable to the Director during for the Plan Year prior to Separation from Service.

1.11“Effective Date” means January 1, 2008.

1.12“Normal Retirement Age” means age 70.

1.13“Plan Administrator” means the Board or such committee or person as the Board shall appoint

1.14“Plan Year” means each twelve (12) month period commencing on January 1 and ending on December 31 of each year.

1.15“Projected Fees” means Fees increased by three percent (3%), annually from Change in Control until Normal Retirement Age.

1.16“Separation from Service” means termination of the Director’s service with the Bank for reasons other than death or Disability. Whether a Separation from Service has occurred is determined in accordance with the requirements of Code Section 409A based on whether the facts and circumstances indicate that the Bank and Director reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Director would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Bank if the Director has been providing services to the Bank less than thirty-six (36) months).

1.17“Specified Employee” means an employee who at the time of Separation from Service is a key employee of the Bank, if any stock of the Bank is publicly traded on an established securities market or otherwise. For purposes of this Agreement, a person is a key employee if the person meets the requirements of Code Section 416(i)(l)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the twelve (12) month period ending on December 31 (the “identification period”). If the person is a key employee during an identification period,

the person is treated as a key employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of April following the close of the identification period.

1.18“Termination for Cause” shall mean any of the following that result in an adverse effect on the Bank; (i) the Director’s gross negligence or gross neglect; (ii) the Director’s commission of a felony or gross misdemeanor involving moral turpitude, fraud, or dishonesty; (iii) the Director’s willful violation of any law, rule, or regulation (other than a traffic violation or similar offense); (iv) the Director’s intentional failure to perform stated duties; or (v) the Director’s breach of fiduciary duty involving personal profit. If a dispute arises as to discharge “for cause,” such dispute shall be resolved by arbitration as set forth in this Agreement.

Article 2

Distributions During Lifetime

2.1Normal Retirement Benefit Upon Separation from Service after attaining Normal Retirement Age, the Bank shall distribute to the Director the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1Amount of Benefit. The annual benefit under this Section 2.1 is fifty percent (50%) of Fees.

2.1.2Distribution of Benefit. The Bank shall distribute the annual benefit to the Director in twelve (12) equal monthly installments commencing thirty (30) days following Separation from Service. The annual benefit shall be distributed to the Director for ten (10)

2.2Early Termination Benefit. If Early Termination occurs, the Bank shall distribute to the Director the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1Amount of Benefit. This benefit under this Section 2.2 is the Accrual Balance as of the end of the Plan Year prior to Separation from Service subject to the vesting schedule below:

Date on Which Separation from Service Occurs	Vesting Percentage
Prior to 1/1/2009	50	%
1/1/2009 — 12/31/2009	60	%
1/1/2010 — 12/31/2010	70	%
1/1/2011 — 12/31/2011	80	%
1/1/2012 — 12/31/2012	90	%
After 1/1/2013	100	%

2.2.2Distribution of Benefit. The Bank shall distribute the benefit to the Director in one hundred twenty (120) equal monthly installments commencing thirty (30) days following Normal Retirement Age.

2.3Disability Benefit If the Director experiences a Disability prior to Normal Retirement Age, the Bank shall distribute to the Director the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

2.3.1Amount of Benefit The annual benefit under this Section 2.3 is fifty percent (50%) of Fees.

2.3.2Distribution of Benefit. The Bank shall distribute the annual benefit to the Director in twelve (12) equal monthly installments commencing thirty (30) days following Normal Retirement Age. The annual benefit shall be distributed to the Director for ten (10) years.

2.4Change in Control Benefit. Upon a Change in Control, prior to Normal Retirement Age, the Bank shall distribute to the Director the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

2.4.1Amount of Benefit The annual benefit under this Section 2.4 is fifty percent (50%) of Projected Fees.

2.4.2Distribution of Benefit. The Bank shall distribute the annual benefit to the Director in twelve (12) equal monthly installments commencing thirty (30) days following Normal Retirement Age. The annual benefit shall be distributed to the Director for ten (10) years.

2.5Restriction on Commencement of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Director is considered a Specified Employee, the provisions of this Section 2.5 shall govern all distributions hereunder. If benefit distributions which would otherwise be made to the Director due to Separation from Service are limited because the Director is a Specified Employee, then such distributions shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Director during such period shall be accumulated and paid to the Director in a lump sum on the first day of the seventh month following Separation from Service. All subsequent distributions shall be paid in the manner specified,

2.6Distributions Upon Taxation of Amounts Deferred. If, pursuant to Code Section 409A, the Federal Insurance Contributions Act or other state, local or foreign tax, the Director becomes subject to tax on the amounts deferred hereunder, then die Bank may make a limited distribution to the Director in a manner that conforms to the requirements of Code section 409A. Any such distribution will decrease the Director’s benefits distributable under this Agreement.

2.7Permissible Acceleration Provision. Under Treasury Regulation Section 1.409A-3(j)(4), a payment of deferred compensation may not be accelerated except as provided in regulations by the Internal Revenue Code. This Agreement allows ail permissible payment accelerations under l,409A-3(j)(4) includes but not limited to payments necessary to comply with a domestic relations order, payments necessary to comply with certain conflict of interest rules, payments intended to pay employment taxes and other permissible payments as permitted by statute or regulation.

2.8Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Director and the Bank may, subject to the terms of Section 8.1, amend this Agreement to delay the timing or change the form of distributions. Any such amendment;

(a)may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

(b)must, for benefits distributable under Sections 2.2, 2.3 and 2.4, be made at

least twelve (12) months prior to the first scheduled distribution;

(c)must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d)must take effect not less than twelve (12) months after the amendment is made.

Article 3

Distribution at Death

3.1Death During Active Service. If the Director dies prior to Separation from Service, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of any benefit under Article 2.

3.1.1Amount of Benefit. The benefit under this Section 3.1 is the Accrual Balance determined as of end Plan Year prior to the Director’s death.

3.1.2Distribution of Benefit. The Bank shall distribute the benefit to the Beneficiary in a lump sum on the first day of the second month following the Director’s death.

3.2Death During Distribution of a Benefit. If the Director dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts they would have been distributed to the Director had the Director survived.

3.3Death Before Benefit Distributions Commence. If the Director is entitled to benefit distributions under this Agreement but dies prior to the date that commencement of said benefit distributions are scheduled to be made under this Agreement, the Bank shall distribute to the Beneficiary the same benefits to which the Director was entitled prior to death, except that the benefit distributions shall commence on the first day of the second month following the Director’s death.

Article 4

Beneficiaries

4.1In General. The Director shall have the right, at any time, to designate a Beneficiary to receive any benefit distributions under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designated under any other plan of the Bank in which the Director participates.

4.2Designation. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent If the Director names someone other than the Director’s spouse as a Beneficiary, the Plan Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Plan Administrator, executed by the Director’s spouse and returned to the Plan Administrator. The Directors beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures. Upon the acceptance by the Plan Administrator of a new Beneficial Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and

accepted by the Plan Administrator prior to the Director’s death.

4.3Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director’s spouse shall be the designated Beneficiary. If the Director has no surviving spouse, any benefit shall be paid to the Director’s estate.

4.5Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Director and the Beneficiary, as the case may be, and shall completely discharge any liability under this Agreement for such distribution amount.

Article 5

General Limitations

5.1Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Director’s service on the Board is terminated by the Bank or an applicable regulator due to a Termination for Cause.

5.2Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Director is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

5.3Regulatory Restrictions. Notwithstanding anything herein to the contrary, any payments made to the Director pursuant to this Agreement, or otherwise, shall be subject to and conditioned upon compliance with 12 U.S.C. 1828 and FDIC Regulation 12 CFR Part 359, Golden Parachute Indemnification Payments and any other regulations or guidance promulgated thereunder.

Article 6

Administration of Agreement

6.1Plan Administrator Duties. The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with this Agreement to the extent the exercise of such discretion and authority does not conflict with Code Section 409A.

6.2Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as the Plan Administrator sees fit, including acting through a duly appointed representative, and may from time to time

consult with counsel who may be counsel to the Bank.

6.3Binding Effect of Decisions. Any decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in this Agreement.

6.4Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator.

6.5Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the Director’s death. Disability or Separation from Service, and such other pertinent information as the Plan Administrator may reasonably require.

6.6Annual Statement. The Plan Administrator shall provide to the Director, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.

Article 7

Claims And Review Procedures

7.1Claims Procedure. A Director or Beneficiary (“claimant”) who has not received benefits under this Agreement that he or she believes should be distributed than make a claim for such benefits as follows:

7.1.1Initiation - Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant.

7.1.2Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within ninety (90) days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional ninety (90) days by notifying the claimant in writing, prior to the end of the initial ninety (90) day period that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

7.1.3Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant The notification shall set forth:

(a)The specific reasons for the denial;

(b)A reference to the specific provisions of this Agreement on which the

denial is based;

(c)A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed; and

(d)An explanation of this Agreement’s review procedures and the time limits applicable to such procedures.

7.2Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial as follows:

7.2.1Initiation - Written Request. To initiate the review, the claimant, within sixty (60) days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

7.2.2Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

7.2.3Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

7.2.4Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within sixty (60) days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional sixty (60) days by notifying the claimant in writing, prior to the end of the initial sixty (60) day period that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

7.2.5Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth;

(a)The specific reasons for the denial;

(b)A reference to the specific provisions of this Agreement on which the denial is based; and

(c)A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

7.3Arbitration. If claimants continue to dispute the benefit denial based upon completed performance of this Agreement or the meaning and effect of the terms and conditions thereof, then claimants may submit the dispute to an arbitrator for final arbitration. The arbitrator shall be selected by mutual agreement of the Bank and the claimants. The arbitrator shall operate under any generally recognized set of arbitration rules. The parties hereto agree that they and their heirs, personal representatives, successors, and assigns

shall be bound by the decision of such arbitrator with respect to any controversy properly submitted to it for determination.

Where a dispute arises as to the Bank’s discharge of the Director “for cause,” such dispute shall likewise be submitted to arbitration as above described and the parties hereto agree to be bound by the decision thereunder.

Article 8

Amendments and Termination

8.1Amendments. This Agreement may be amended only by a written agreement signed by the Bank and the Director. However, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative changes or tax law, including without limitation Code Section 409A.

8.2Plan Termination Generally. Prior to a Change in Control, this Agreement may be terminated by the Bank with written notice to the Director. After a Change in Control, this Agreement may be terminated by a written agreement signed by the Bank and the Director. The benefit shall be the Accrual Balance as of the date this Agreement is terminated. Except as provided in Section 8.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

8.3Plan Terminations Under Code Section 409A. Notwithstanding anything to the contrary in Section 8.2, if the Bank terminates this Agreement in the following circumstances:

(a)Within thirty (30) days before or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of this Agreement and further provided that all the Bank’s arrangements which are substantially similar to this Agreement are terminated so the Director and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of such termination;

(b)Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under this Agreement are included in the Director’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

(c)Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations Section 1.409A-1(c) if the Director participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) all termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement; the Bank may distribute the Accrual Balance, determined as of the date of the termination of this Agreement, to the Director in a lump sum subject to the above terms.

Article 9

Miscellaneous

9.1Binding Effect. This Agreement shall bind the Director and the Bank and their beneficiaries, survivors, executors, administrators and transferees.

9.2No Guarantee of Service. This Agreement is not a contract for service. It does not give the Director the right to remain a member of the Board, nor interfere with the Bank’s right to discharge the Director. It does not require the Director to remain a director nor interfere with the Director’s right to terminate service at any time.

9.3Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Code Section 409A from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authorities. The Bank shall satisfy all applicable reporting requirements, including those under Code Section 409A.

9.5Applicable Law. This Agreement and all rights hereunder shall be governed by the laws of the Commonwealth of Massachusetts, except to the extent preempted by the laws of the United States of America.

9.6Unfunded Arrangement. The Director and the Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors. Any insurance on the Director’s life or other informal funding asset is a general asset of the Bank to which the Director and Beneficiary have no preferred or secured claim. If the Bank elects to invest in a life insurance, disability or annuity policy upon the life of the Director, then the Director shall assist the Bank by freely submitting to a physical exam and supplying such additional information necessary to obtain such insurance or annuities.

9.7Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm or person unless such succeeding or continuing bank, firm or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such an event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor entity.

9.8Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

9.9Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

9.10Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Bank or Plan Administrator may perform such alternative act as most

nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank, provided that such alternative act does not violate Code Section 409A.

9.11Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any provision herein.

9.12Validity. If any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein.

9.13Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the address below:

Hampden Bank

19 Harrison Ave

Springfield, MA 01103

Attn: Robert A. Massey CFO

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Director under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Director.

9.14Deduction Limitation on Benefit Payments. If the Bank reasonably anticipates that the Bank’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Bank to ensure that the entire amount of any distribution from this Agreement is deductible, the Bank may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Director (or the Beneficiary in the event of the Director’s death) at the earliest date the Bank reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).

9.15Opportunity to Consult with Independent Advisors. The Director acknowledges that he has been afforded the opportunity to consult with independent advisors of his choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him under the terms of this Agreement and the: (i) terms and conditions which may affect the Director’s right to these benefits; and (ii) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, Section 409A of the Code and guidance or regulations thereunder, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Director acknowledges and agrees shall be the sole responsibility of the Director notwithstanding any other term or provision of this Agreement. The Director further acknowledges and agrees that the Bank shall have no liability whatsoever related to any such personal tax effects or other personal costs, expenses, or liabilities applicable to the Director and further specifically waives any right for himself or herself, and his or her heirs, beneficiaries, legal representative, agents, successor and assign to claim or assert liability on the part of the Bank related to the matters described above in this Section 9.15. The Director further acknowledges that he has read, understands and consents to all of the terms and conditions of this Agreement, and that he enters into this Agreement with a full

understanding of its terms and conditions.

9.16Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Code Section 409A.

IN WITNESS WHEREOF, the Director and a duly authorized representative of the Bank have signed this Agreement.

DIRECTOR	HAMPDEN BANK
/s/ Richard Suski	By:	/s/ Robert A. Massey
Richard Suski		Robert A. Massey
	Title: CFO and Treasurer

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael P. Daly, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Berkshire Hills Bancorp, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 11, 2015	/s/ Michael P. Daly
	Michael P. Daly
	President and Chief Executive Officer

1

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Josephine Iannelli, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Berkshire Hills Bancorp, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 11, 2015	/s/ Josephine Iannelli
	Josephine Iannelli
	Executive Vice President, Chief Financial Officer

1

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Berkshire Hills Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2015, as filed with the Securities and Exchange Commission (the “Report”), I, Michael P. Daly, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

May 11, 2015	/s/ Michael P. Daly
	Michael P. Daly
	President and Chief Executive Officer

1

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Berkshire Hills Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2015, as filed with the Securities and Exchange Commission (the “Report”), I, Josephine Iannelli, Executive Vice President, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

May 11, 2015	/s/ Josephine Iannelli
	Josephine Iannelli
	Executive Vice President, Chief Financial Officer

1

XML

SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Available for sale, Amortized Cost
Within 1 year	$ 31,062
Over 1 year to 5 years	1,256
Over 5 years to 10 years	17,319
Over 10 years	171,353
Total bonds and obligations	220,990
Marketable equity securities	38,150
Residential mortgage-backed securities	815,186
Amortized Cost	1,074,326	1,075,824
Available for sale, Fair Value
Within 1 year	30,557
Over 1 year to 5 years	1,264
Over 5 years to 10 years	17,698
Over 10 years	177,911
Total bonds and obligations	227,430
Marketable equity securities	44,766
Residential mortgage-backed securities	827,460
Fair Value	1,099,656	1,091,818
Held to maturity, Amortized Cost
Within 1 year	1,214
Over 1 year to 5 years	16,802
Over 5 years to 10 years	12,232
Over 10 years	12,500
Total bonds and obligations	42,748
Residential mortgage-backed securities	70
Amortized Cost	42,818	43,347
Held to maturity, Fair Value
Within 1 year	1,214
Over 1 year to 5 years	17,774
Over 5 years to 10 years	12,532
Over 10 years	13,149
Total bonds and obligations	44,669
Residential mortgage-backed securities	75
Fair Value	$ 44,744	$ 44,997

XML

STOCKHOLDERS' EQUITY (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Dec. 31, 2013
Accumulated other comprehensive loss	$ 9,068	$ 6,579	$ (2,009)	$ (10,435)
Net unrealized holding loss (gain) on AFS securities:
Other accumulated comprehensive income (loss), before tax:	25,330	15,993
Income taxes related to items of accumulated other comprehensive income:	(9,682)	(6,077)
Accumulated other comprehensive loss	15,648	9,916	(1,976)	(5,776)
Net loss on effective cash flow hedging derivatives
Other accumulated comprehensive income (loss), before tax:	(7,200)	(3,299)
Income taxes related to items of accumulated other comprehensive income:	2,902	1,330
Accumulated other comprehensive loss	(4,298)	(1,969)	1,335	(1,366)
Net unrealized holding loss on pension plans
Other accumulated comprehensive income (loss), before tax:	(3,822)	(2,291)
Income taxes related to items of accumulated other comprehensive income:	1,540	923
Accumulated other comprehensive loss	$ (2,282)	$ (1,368)	$ (1,368)	$ (1,368)

XML

LOAN LOSS ALLOWANCE (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Credit quality information
Loans	4,728,663,000	$ 4,680,600,000
Business Activity
Credit quality information
Loans	4,013,669,000	3,918,880,000
Acquired Loans
Credit quality information
Number of grades in internal loan rating system	11
Allowance for losses on acquired loans under Subtopic ASC 310-30	4,000,000
Loans	714,994,000	761,720,000
Residential | Mortgages
Credit quality information
Number of grades in internal loan rating system	3
Loans	1,473,239,000	1,496,204,000
Residential | Mortgages | Business Activity
Credit quality information
Loans	1,215,814,000	1,226,452,000
Residential | Mortgages | Acquired Loans
Credit quality information
Loans	257,425,000	269,752,000
Residential | Mortgages | 1-4 family
Credit quality information
Loans	1,444,521,000	1,468,142,000
Residential | Mortgages | 1-4 family | Business Activity
Credit quality information
Loans	1,188,018,000	1,199,408,000
Residential | Mortgages | 1-4 family | Acquired Loans
Credit quality information
Loans	256,503,000	268,734,000
Residential | Mortgages | Construction
Credit quality information
Loans	28,718,000	28,062,000
Residential | Mortgages | Construction | Business Activity
Credit quality information
Loans	27,796,000	27,044,000
Residential | Mortgages | Construction | Acquired Loans
Credit quality information
Loans	922,000	1,018,000
Commercial real estate
Credit quality information
Loans	1,672,099,000	1,611,567,000
Commercial real estate | Business Activity
Credit quality information
Loans	1,411,990,000	1,340,076,000
Commercial real estate | Acquired Loans
Credit quality information
Loans	260,109,000	271,491,000
Commercial real estate | Other commercial and industrial loans
Credit quality information
Loans	1,294,527,000	1,244,959,000
Commercial real estate | Other commercial and industrial loans | Business Activity
Credit quality information
Loans	1,086,893,000	1,030,837,000
Commercial real estate | Other commercial and industrial loans | Acquired Loans
Credit quality information
Loans	207,634,000	214,122,000
Commercial real estate | Construction
Credit quality information
Loans	186,846,000	173,390,000
Commercial real estate | Construction | Business Activity
Credit quality information
Loans	182,800,000	169,189,000
Commercial real estate | Construction | Acquired Loans
Credit quality information
Loans	4,046,000	4,201,000
Commercial real estate | Single and multi-family
Credit quality information
Loans	190,726,000	193,218,000
Commercial real estate | Single and multi-family | Business Activity
Credit quality information
Loans	142,297,000	140,050,000
Commercial real estate | Single and multi-family | Acquired Loans
Credit quality information
Loans	48,429,000	53,168,000
Commercial real estate | Other commercial real estate | Business Activity
Credit quality information
Loans	1,086,893,000	1,030,837,000
Commercial real estate | Other commercial real estate | Acquired Loans
Credit quality information
Loans	207,634,000	214,122,000
Commercial real estate | Business loans
Credit quality information
Loans	826,815,000	804,366,000
Commercial real estate | Business loans | Business Activity
Credit quality information
Loans	778,671,000	753,191,000
Commercial real estate | Business loans | Acquired Loans
Credit quality information
Loans	48,144,000	51,175,000
Commercial real estate | Business loans | Asset based lending
Credit quality information
Loans	354,106,000	341,246,000
Commercial real estate | Business loans | Asset based lending | Business Activity
Credit quality information
Loans	354,106,000	341,246,000
Commercial real estate | Business loans | Other commercial and industrial loans
Credit quality information
Loans	472,709,000	463,120,000
Commercial real estate | Business loans | Other commercial and industrial loans | Business Activity
Credit quality information
Loans	424,565,000	411,945,000
Commercial real estate | Business loans | Other commercial and industrial loans | Acquired Loans
Credit quality information
Loans	48,144,000	51,175,000
Consumer
Credit quality information
Loans	756,510,000	768,463,000
Consumer | Business Activity
Credit quality information
Loans	607,194,000	599,161,000
Consumer | Acquired Loans
Credit quality information
Loans	149,316,000	169,302,000
Consumer | Home equity
Credit quality information
Loans	317,615,000	318,632,000
Consumer | Home equity | Business Activity
Credit quality information
Loans	255,368,000	252,681,000
Consumer | Home equity | Acquired Loans
Credit quality information
Loans	62,247,000	65,951,000
Consumer | Auto and other
Credit quality information
Loans	438,895,000	449,831,000
Consumer | Auto and other | Business Activity
Credit quality information
Loans	351,826,000	346,480,000
Consumer | Auto and other | Acquired Loans
Credit quality information
Loans	87,069,000	103,351,000
Consumer | Other
Credit quality information
Number of grades in internal loan rating system	2
Commercial
Credit quality information
Loans	2,498,914,000	2,415,933,000
Commercial | Business Activity
Credit quality information
Loans	2,190,661,000	2,093,267,000
Commercial | Acquired Loans
Credit quality information
Loans	308,253,000	322,666,000
Pass | Residential | Mortgages | Maximum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	59 days
Pass | Residential | Mortgages | Business Activity
Credit quality information
Loans	1,210,446,000	1,221,843,000
Pass | Residential | Mortgages | Acquired Loans
Credit quality information
Loans	254,788,000	267,463,000
Pass | Residential | Mortgages | Acquired Loans | Maximum
Credit quality information
Period within which loans are current, based on which risk rating is assigned	59 days
Pass | Residential | Mortgages | 1-4 family | Business Activity
Credit quality information
Loans	1,183,064,000	1,195,209,000
Pass | Residential | Mortgages | 1-4 family | Acquired Loans
Credit quality information
Loans	253,866,000	266,445,000
Pass | Residential | Mortgages | Construction | Business Activity
Credit quality information
Loans	27,382,000	26,634,000
Pass | Residential | Mortgages | Construction | Acquired Loans
Credit quality information
Loans	922,000	1,018,000
Pass | Commercial real estate | Business Activity
Credit quality information
Loans	1,343,194,000	1,263,664,000
Pass | Commercial real estate | Acquired Loans
Credit quality information
Loans	236,143,000	243,082,000
Pass | Commercial real estate | Construction | Business Activity
Credit quality information
Loans	179,868,000	166,295,000
Pass | Commercial real estate | Construction | Acquired Loans
Credit quality information
Loans	2,765,000	2,904,000
Pass | Commercial real estate | Single and multi-family | Business Activity
Credit quality information
Loans	140,022,000	137,533,000
Pass | Commercial real estate | Single and multi-family | Acquired Loans
Credit quality information
Loans	41,145,000	44,497,000
Pass | Commercial real estate | Other commercial real estate | Business Activity
Credit quality information
Loans	1,023,304,000	959,836,000
Pass | Commercial real estate | Other commercial real estate | Acquired Loans
Credit quality information
Loans	192,233,000	195,681,000
Pass | Commercial real estate | Business loans | Business Activity
Credit quality information
Loans	764,805,000	746,092,000
Pass | Commercial real estate | Business loans | Acquired Loans
Credit quality information
Loans	44,922,000	45,757,000
Pass | Commercial real estate | Business loans | Asset based lending | Business Activity
Credit quality information
Loans	354,106,000	341,246,000
Pass | Commercial real estate | Business loans | Other commercial and industrial loans | Business Activity
Credit quality information
Loans	410,699,000	404,846,000
Pass | Commercial real estate | Business loans | Other commercial and industrial loans | Acquired Loans
Credit quality information
Loans	44,922,000	45,757,000
Special mention
Credit quality information
Loans	11,461,000	17,913,000
Special mention | Business Activity
Credit quality information
Loans	8,175,000	9,113,000
Special mention | Acquired Loans
Credit quality information
Loans	3,286,000	8,800,000
Special mention | Residential | Mortgages | Minimum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	60 days
Special mention | Residential | Mortgages | Maximum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	89 days
Special mention | Residential | Mortgages | Business Activity
Credit quality information
Loans	888,000	556,000
Special mention | Residential | Mortgages | Acquired Loans
Credit quality information
Loans	707,000	638,000
Special mention | Residential | Mortgages | Acquired Loans | Minimum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	60 days
Special mention | Residential | Mortgages | Acquired Loans | Maximum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	89 days
Special mention | Residential | Mortgages | 1-4 family | Business Activity
Credit quality information
Loans	888,000	146,000
Special mention | Residential | Mortgages | 1-4 family | Acquired Loans
Credit quality information
Loans	707,000	638,000
Special mention | Residential | Mortgages | Construction | Business Activity
Credit quality information
Loans		410,000
Special mention | Commercial real estate | Business Activity
Credit quality information
Loans	6,891,000	6,933,000
Special mention | Commercial real estate | Acquired Loans
Credit quality information
Loans	2,328,000	5,401,000
Special mention | Commercial real estate | Single and multi-family | Acquired Loans
Credit quality information
Loans	120,000	533,000
Special mention | Commercial real estate | Other commercial real estate | Business Activity
Credit quality information
Loans	6,891,000	6,933,000
Special mention | Commercial real estate | Other commercial real estate | Acquired Loans
Credit quality information
Loans	2,208,000	4,868,000
Special mention | Commercial real estate | Business loans | Business Activity
Credit quality information
Loans	187,000	560,000
Special mention | Commercial real estate | Business loans | Acquired Loans
Credit quality information
Loans		1,723,000
Special mention | Commercial real estate | Business loans | Other commercial and industrial loans | Business Activity
Credit quality information
Loans	187,000	560,000
Special mention | Commercial real estate | Business loans | Other commercial and industrial loans | Acquired Loans
Credit quality information
Loans		1,723,000
Substandard
Credit quality information
Loans	89,494,000	90,834,000
Substandard | Business Activity
Credit quality information
Loans	68,228,000	66,995,000
Substandard | Acquired Loans
Credit quality information
Loans	21,266,000	23,839,000
Substandard | Residential | Mortgages | Minimum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	90 days
Substandard | Residential | Mortgages | Business Activity
Credit quality information
Loans	4,480,000	4,053,000
Substandard | Residential | Mortgages | Acquired Loans
Credit quality information
Loans	1,930,000	1,651,000
Substandard | Residential | Mortgages | Acquired Loans | Minimum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	90 days
Substandard | Residential | Mortgages | 1-4 family | Business Activity
Credit quality information
Loans	4,066,000	4,053,000
Substandard | Residential | Mortgages | 1-4 family | Acquired Loans
Credit quality information
Loans	1,930,000	1,651,000
Substandard | Residential | Mortgages | Construction | Business Activity
Credit quality information
Loans	414,000
Substandard | Commercial real estate | Business Activity
Credit quality information
Loans	61,832,000	69,406,000
Substandard | Commercial real estate | Acquired Loans
Credit quality information
Loans	21,638,000	23,008,000
Substandard | Commercial real estate | Construction | Business Activity
Credit quality information
Loans	2,932,000	2,894,000
Substandard | Commercial real estate | Construction | Acquired Loans
Credit quality information
Loans	1,281,000	1,297,000
Substandard | Commercial real estate | Single and multi-family | Business Activity
Credit quality information
Loans	2,275,000	2,517,000
Substandard | Commercial real estate | Single and multi-family | Acquired Loans
Credit quality information
Loans	7,164,000	8,138,000
Substandard | Commercial real estate | Other commercial real estate | Business Activity
Credit quality information
Loans	56,625,000	63,995,000
Substandard | Commercial real estate | Other commercial real estate | Acquired Loans
Credit quality information
Loans	13,193,000	13,573,000
Substandard | Commercial real estate | Business loans | Business Activity
Credit quality information
Loans	13,679,000	6,539,000
Substandard | Commercial real estate | Business loans | Acquired Loans
Credit quality information
Loans	3,222,000	3,695,000
Substandard | Commercial real estate | Business loans | Other commercial and industrial loans | Business Activity
Credit quality information
Loans	13,679,000	6,539,000
Substandard | Commercial real estate | Business loans | Other commercial and industrial loans | Acquired Loans
Credit quality information
Loans	3,222,000	3,695,000
Doubtful | Commercial real estate | Business Activity
Credit quality information
Loans	73,000	73,000
Doubtful | Commercial real estate | Other commercial real estate | Business Activity
Credit quality information
Loans	73,000	73,000
Performing | Consumer | Business Activity
Credit quality information
Loans	605,750,000	597,699,000
Performing | Consumer | Acquired Loans
Credit quality information
Loans	147,727,000	167,550,000
Performing | Consumer | Home equity | Business Activity
Credit quality information
Loans	254,176,000	251,524,000
Performing | Consumer | Home equity | Acquired Loans
Credit quality information
Loans	61,371,000	65,368,000
Performing | Consumer | Auto and other | Business Activity
Credit quality information
Loans	351,574,000	346,175,000
Performing | Consumer | Auto and other | Acquired Loans
Credit quality information
Loans	86,356,000	102,182,000
Performing | Consumer | Other | Maximum
Credit quality information
Period within which loans are current, based on which risk rating is assigned	119 days
Performing | Consumer | Other | Acquired Loans | Maximum
Credit quality information
Period within which loans are current, based on which risk rating is assigned	119 days
Nonperforming | Consumer | Business Activity
Credit quality information
Loans	1,444,000	1,462,000
Nonperforming | Consumer | Acquired Loans
Credit quality information
Loans	1,589,000	1,752,000
Nonperforming | Consumer | Home equity | Business Activity
Credit quality information
Loans	1,192,000	1,157,000
Nonperforming | Consumer | Home equity | Acquired Loans
Credit quality information
Loans	876,000	583,000
Nonperforming | Consumer | Auto and other | Business Activity
Credit quality information
Loans	252,000	305,000
Nonperforming | Consumer | Auto and other | Acquired Loans
Credit quality information
Loans	713,000	1,169,000
Nonperforming | Consumer | Other | Minimum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	120 days
Nonperforming | Consumer | Other | Acquired Loans | Maximum
Credit quality information
Delinquency period of loans based on which risk rating is assigned to loans	120 days
Non-Accrual
Credit quality information
Loans	22,009,000	21,705,000
Non-Accrual | Business Activity
Credit quality information
Loans	14,636,000	14,778,000
Non-Accrual | Acquired Loans
Credit quality information
Loans	7,373,000	6,927,000
Classified
Credit quality information
Loans	111,503,000	112,539,000
Classified | Business Activity
Credit quality information
Loans	82,864,000	81,773,000
Classified | Acquired Loans
Credit quality information
Loans	28,639,000	30,766,000
Criticized
Credit quality information
Loans	122,964,000	130,452,000
Criticized | Business Activity
Credit quality information
Loans	91,039,000	90,886,000
Criticized | Acquired Loans
Credit quality information
Loans	31,925,000	$ 39,566,000

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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net interest income	$ 45,493	$ 42,766
Provision for loan losses	3,851	3,396
Net interest income after provision for loan losses	$ 41,642	$ 39,370

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STOCKHOLDERS' EQUITY (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net unrealized gain (loss) arising during the period
Net of Tax	$ 2,472	$ 3,330
Less: reclassification adjustment for losses realized in net income
Net of Tax	17	5,096
Other Comprehensive Income
Before Tax	3,905	13,791
Tax Effect	(1,416)	(5,365)
Total other comprehensive income	2,489	8,426
Net unrealized holding loss (gain) on AFS securities:
Net unrealized gain (loss) arising during the period
Before Tax	9,371	6,055
Tax Effect	(3,617)	(2,233)
Net of Tax	5,754	3,822
Less: reclassification adjustment for losses realized in net income
Before Tax	(34)	(34)
Tax Effect	12	12
Net of Tax	(22)	(22)
Other Comprehensive Income
Before Tax	9,337	6,021
Tax Effect	(3,605)	(2,221)
Total other comprehensive income	5,732	3,800
Net loss on effective cash flow hedging derivatives
Net unrealized gain (loss) arising during the period
Before Tax	(3,901)	(860)
Tax Effect	1,572	368
Net of Tax	(2,329)	(492)
Less: reclassification adjustment for losses realized in net income
Before Tax		5,393
Tax Effect		(2,200)
Net of Tax		3,193
Other Comprehensive Income
Before Tax	(3,901)	4,533
Tax Effect	1,572	(1,832)
Total other comprehensive income	(2,329)	2,701
Net loss on terminated swap
Less: reclassification adjustment for losses realized in net income
Before Tax		3,237
Tax Effect		(1,312)
Net of Tax		1,925
Other Comprehensive Income
Before Tax		3,237
Tax Effect		(1,312)
Total other comprehensive income		1,925
Net unrealized holding loss on pension plans
Net unrealized gain (loss) arising during the period
Before Tax	(1,596)
Tax Effect	643
Net of Tax	(953)
Less: reclassification adjustment for losses realized in net income
Before Tax	65
Tax Effect	(26)
Net of Tax	39
Other Comprehensive Income
Before Tax	(1,531)
Tax Effect	617
Total other comprehensive income	$ (914)

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LOANS (Details 6) (USD $)	3 Months Ended
	Mar. 31, 2015 item loan	Mar. 31, 2014 loan	Dec. 31, 2014
Troubled Debt Restructuring
Borrower's sustained repayment performance period	6 months
Number of Modifications	3
Pre-Modification Outstanding Recorded Investment	$ 2,156,000
Post-Modification Outstanding Recorded Investment	2,156,000
Number of loans restructured within the last twelve months, which subsequently defaulted	0	0
TDR activity
Balance at beginning of the period	16,714,000	10,822,000
Principal payments	(484,000)	(872,000)
TDR status change		(52,000)
Other reductions/increases	(1,182,000)	95,000
Newly identified TDRs	2,156,000	119,000
Balance at end of the period	17,204,000	10,112,000
Residential
TDR activity
Foreclosed property	653,000		1,300,000
Residential | Mortgages
TDR activity
Process of foreclosure	5,100,000
Residential | Mortgages | 1-4 family
Troubled Debt Restructuring
Number of Modifications		1
Pre-Modification Outstanding Recorded Investment		122,000
Post-Modification Outstanding Recorded Investment		119,000
Commercial real estate | Other
Troubled Debt Restructuring
Number of Modifications	1
Pre-Modification Outstanding Recorded Investment	2,000,000
Post-Modification Outstanding Recorded Investment	2,000,000
Commercial real estate | Other commercial real estate
Troubled Debt Restructuring
Number of Modifications	1
Pre-Modification Outstanding Recorded Investment	33,000
Post-Modification Outstanding Recorded Investment	33,000
Commercial | Construction
Troubled Debt Restructuring
Number of Modifications	1
Pre-Modification Outstanding Recorded Investment	123,000
Post-Modification Outstanding Recorded Investment	123,000
Commercial | Other commercial real estate
Modifications that subsequently defaulted
Number of Contracts	1
Recorded Investment	$ 668,000

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OPERATING SEGMENTS (Tables)

3 Months Ended

Mar. 31, 2015

OPERATING SEGMENTS

Summary of the operating segments

(In thousands)	Banking			Insurance		Parent			Eliminations			Total Consolidated
Three months ended March 31, 2015
Net interest income	$	46,339		$	—	$	5,154		$	(6,000	)	$	45,493
Provision for loan losses	3,851			—		—			—			3,851
Non-interest income	9,413			2,967		3,785			(3,603		)	12,562
Non-interest expense	42,494			1,939		715			—			45,148
Income before income taxes	9,407			1,028		8,224			(9,603		)	9,056
Income tax expense (benefit)	433			399		(535		)	—			297
Net income	$	8,974		$	629	$	8,759		$	(9,603	)	$	8,759
Average assets (in millions)	$	6,479		$	28	$	757		$	(767	)	$	6,497
Three months ended March 31, 2014
Net interest income (expense)	$	43,712		$	—	$	(946	)	$	—		$	42,766
Provision for loan losses	3,396			—		—			—			3,396
Non-interest income	1,374			3,049		(252		)	252			4,423
Non-interest expense	42,574			2,322		464			—			45,360
Income before income taxes	(884		)	727		(1,662		)	252			(1,567		)
Income tax expense (benefit)	(192		)	287		(556		)	—			(461		)
Net income	$	(692	)	$	440	$	(1,106	)	$	252		$	(1,106	)
Average assets (in millions)	$	5,829		$	26	$	722		$	(726	)	$	5,851

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STOCKHOLDERS' EQUITY (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Amounts reclassified out of each component of accumulated other comprehensive income
Non-interest income	$ 12,562	$ 4,423
Tax expense	(297)	461
Net income (loss)	8,759	(1,106)
Amount Reclassified From Accumulated Other Comprehensive Income (loss)
Amounts reclassified out of each component of accumulated other comprehensive income
Net income (loss)	17	5,096
Net unrealized holding loss (gain) on AFS securities: | Amount Reclassified From Accumulated Other Comprehensive Income (loss)
Amounts reclassified out of each component of accumulated other comprehensive income
Non-interest income	(34)	(34)
Tax expense	12	12
Net income (loss)	(22)	(22)
Net loss on effective cash flow hedging derivatives | Amount Reclassified From Accumulated Other Comprehensive Income (loss)
Amounts reclassified out of each component of accumulated other comprehensive income
Non-interest income		5,393
Tax expense		(2,200)
Net income (loss)		3,193
Net loss on terminated swap | Amount Reclassified From Accumulated Other Comprehensive Income (loss)
Amounts reclassified out of each component of accumulated other comprehensive income
Non-interest income		3,237
Tax expense		(1,312)
Net income (loss)		1,925
Net unrealized holding loss on pension plans | Amount Reclassified From Accumulated Other Comprehensive Income (loss)
Amounts reclassified out of each component of accumulated other comprehensive income
Non-interest income	65
Tax expense	(26)
Net income (loss)	$ 39

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SUBSEQUENT EVENTS (Details) (USD $) Share data in Millions, unless otherwise specified	0 Months Ended
	Apr. 17, 2015	Mar. 31, 2015	Dec. 31, 2014
SUBSEQUENT EVENTS
Total Assets		$ 6,571,239,000	$ 6,502,031,000
Deposits		4,719,683,000	4,654,679,000
Hampden
SUBSEQUENT EVENTS
Merger and acquisition expenses		3,300,000
Hampden | Subsequent event
SUBSEQUENT EVENTS
Number of banking offices operated	10
Number of shares received by shareholders	4.2
Hampden
SUBSEQUENT EVENTS
Total Assets	687,800,000
Loans outstanding	501,000,000
Deposits	482,100,000

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SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY (Tables)

3 Months Ended

Mar. 31, 2015

SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

Summary of securities available for sale ("AFS") and held to maturity

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2015
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	149,454	$	6,391	$	(395	)	$	155,450
Government-guaranteed residential mortgage-backed securities	64,456		696		(113		)	65,039
Government-sponsored residential mortgage-backed securities	750,730		13,157		(1,466		)	762,421
Corporate bonds	55,560		411		(614		)	55,357
Trust preferred securities	12,773		736		(82		)	13,427
Other bonds and obligations	3,203		—		(7		)	3,196
Total debt securities	1,036,176		21,391		(2,677		)	1,054,890
Marketable equity securities	38,150		7,536		(920		)	44,766
Total securities available for sale	1,074,326		28,927		(3,597		)	1,099,656
Securities held to maturity
Municipal bonds and obligations	4,847		—		—			4,847
Government-sponsored residential mortgage-backed securities	70		5		—			75
Tax advantaged economic development bonds	37,570		1,921		—			39,491
Other bonds and obligations	331		—		—			331
Total securities held to maturity	42,818		1,926		—			44,744
Total	$	1,117,144	$	30,853	$	(3,597	)	$	1,144,400
December 31, 2014
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	127,014	$	6,859	$	(174	)	$	133,699
Government-guaranteed residential mortgage-backed securities	68,972		702		(206		)	69,468
Government-sponsored residential mortgage-backed securities	755,893		7,421		(3,130		)	760,184
Corporate bonds	55,134		120		(1,103		)	54,151
Trust preferred securities	16,607		820		(1,212		)	16,215
Other bonds and obligations	3,211		—		(52		)	3,159
Total debt securities	1,026,831		15,922		(5,877		)	1,036,876
Marketable equity securities	48,993		7,322		(1,373		)	54,942
Total securities available for sale	1,075,824		23,244		(7,250		)	1,091,818
Securities held to maturity
Municipal bonds and obligations	4,997		—		—			4,997
Government-sponsored residential mortgage-backed securities	70		4		—			74
Tax advantaged economic development bonds	37,948		1,680		(34		)	39,594
Other bonds and obligations	332		—		—			332
Total securities held to maturity	43,347		1,684		(34		)	44,997
Total	$	1,119,171	$	24,928	$	(7,284	)	$	1,136,815

Schedule of amortized cost and estimated fair value of available for sale (AFS) and held to maturity (HTM) securities, segregated by contractual maturity

	Available for sale				Held to maturity
	Amortized		Fair		Amortized		Fair
(In thousands)	Cost		Value		Cost		Value
Within 1 year	$	31,062	$	30,557	$	1,214	$	1,214
Over 1 year to 5 years	1,256		1,264		16,802		17,774
Over 5 years to 10 years	17,319		17,698		12,232		12,532
Over 10 years	171,353		177,911		12,500		13,149
Total bonds and obligations	220,990		227,430		42,748		44,669
Marketable equity securities	38,150		44,766		—		—
Residential mortgage-backed securities	815,186		827,460		70		75
Total	$	1,074,326	$	1,099,656	$	42,818	$	44,744

Schedule of securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions

	Less Than Twelve Months				Over Twelve Months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(In thousands)	Losses		Value		Losses		Value		Losses		Value
March 31, 2015
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	62	$	19,756	$	333	$	11,796	$	395	$	31,552
Government-guaranteed residential mortgage-backed securities	11		5,638		102		6,701		113		12,339
Government-sponsored residential mortgage-backed securities	—		—		1,466		142,786		1,466		142,786
Corporate bonds	614		33,680		—		—		614		33,680
Trust preferred securities	82		2,192		—		—		82		2,192
Other bonds and obligations	—		—		7		2,057		7		2,057
Total debt securities	769		61,266		1,908		163,340		2,677		224,606
Marketable equity securities	636		7,364		284		4,576		920		11,940
Total securities available for sale	1,405		68,630		2,192		167,916		3,597		236,546
Securities held to maturity
Tax advantaged economic development bonds	—		—		—		—		—		—
Total securities held to maturity	—		—		—		—		—		—
Total	$	1,405	$	68,630	$	2,192	$	167,916	$	3,597	$	236,546
December 31, 2014
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	8	$	1,001	$	166	$	7,206	$	174	$	8,207
Government guaranteed residential mortgage-backed securities	46		7,122		160		16,727		206		23,849
Government-sponsored residential mortgage-backed securities	236		30,672		2,894		167,473		3,130		198,145
Corporate bonds	1,103		39,571		—		—		1,103		39,571
Trust preferred securities	65		935		1,147		2,408		1,212		3,343
Other bonds and obligations	—				52		3,035		52		3,035
Total debt securities	1,458		79,301		4,419		196,849		5,877		276,150
Marketable equity securities	1,039		9,902		334		4,755		1,373		14,657
Total securities available for sale	2,497		89,203		4,753		201,604		7,250		290,807
Securities held to maturity
Tax advantaged economic development bonds	—		—		34		7,972		34		7,972
Total securities held to maturity	—		—		34		7,972		34		7,972
Total	$	2,497	$	89,203	$	4,787	$	209,576	$	7,284	$	298,779

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BORROWED FUNDS (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Borrowings and junior subordinated debentures
Short-term borrowings	$ 894,500,000	$ 900,900,000
Long-term borrowings	151,383,000	151,423,000
Total borrowings	1,045,883,000	1,052,323,000
Weighted average rate on short-term borrowings (as a percent)	0.25%	0.23%
Weighted average rate on long-term borrowings (as a percent)	4.02%	4.03%
Weighted Average Rate (as a percent)	0.80%	0.79%
Secured line of credit	3,000,000
Advances from the FHLB
Borrowings and junior subordinated debentures
Short-term borrowings	884,500,000	890,900,000
Long-term borrowings	61,618,000	61,676,000
Weighted average rate on short-term borrowings (as a percent)	0.25%	0.24%
Weighted average rate on long-term borrowings (as a percent)	0.91%	0.93%
Outstanding balance on FHLBB line of credit	0	0
Advances from the FHLB, callable advances
Borrowings and junior subordinated debentures
Long-term borrowings	5,000,000	5,000,000
Advances from the FHLB, amortizing advances
Borrowings and junior subordinated debentures
Long-term borrowings	5,100,000	5,100,000
Federal Reserve Bank Advances
Borrowings and junior subordinated debentures
Short-term borrowings	0	0
Notes
Borrowings and junior subordinated debentures
Long-term borrowings	74,301,000	74,283,000
Weighted average rate on long-term borrowings (as a percent)	7.00%	7.00%
Junior subordinated debentures
Borrowings and junior subordinated debentures
Long-term borrowings	15,464,000	15,464,000
Weighted average rate on long-term borrowings (as a percent)	2.11%	2.08%
Other borrowings
Borrowings and junior subordinated debentures
Short-term borrowings	$ 10,000,000	$ 10,000,000
Weighted average rate on short-term borrowings (as a percent)	1.83%	1.80%

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LOANS (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Past due loans
Total loans	$ 4,728,663	$ 4,680,600
Business Activity
Past due loans
30-59 Days Past Due	6,737	9,320
60-89 Days Past Due	1,823	4,980
Greater Than 90 Days Past Due	18,372	17,172
Total Past Due	26,932	31,472
Current	3,986,737	3,887,408
Total loans	4,013,669	3,918,880
Past Due > 90 days and Accruing	3,736	2,394
Acquired Loans
Past due loans
30-59 Days Past Due	3,514	2,958
60-89 Days Past Due	1,004	2,424
Greater Than 90 Days Past Due	10,038	8,185
Total Past Due	14,556	13,567
Current	12,663	13,809
Acquired Credit Impaired	12,700	13,800
Total loans	714,994	761,720
Past Due > 90 days and Accruing	2,665	1,258
Residential | Mortgages
Past due loans
Total loans	1,473,239	1,496,204
Residential | Mortgages | Business Activity
Past due loans
30-59 Days Past Due	1,888	6,246
60-89 Days Past Due	888	556
Greater Than 90 Days Past Due	4,480	4,053
Total Past Due	7,256	10,855
Current	1,208,558	1,215,597
Total loans	1,215,814	1,226,452
Past Due > 90 days and Accruing	2,113	1,527
Residential | Mortgages | Acquired Loans
Past due loans
30-59 Days Past Due	187	1,133
60-89 Days Past Due	592	638
Greater Than 90 Days Past Due	1,930	1,651
Total Past Due	2,709	3,422
Acquired Credit Impaired	361	375
Total loans	257,425	269,752
Past Due > 90 days and Accruing	144	269
Residential | Mortgages | 1-4 family
Past due loans
Total loans	1,444,521	1,468,142
Residential | Mortgages | 1-4 family | Business Activity
Past due loans
30-59 Days Past Due	1,888	5,580
60-89 Days Past Due	888	146
Greater Than 90 Days Past Due	4,066	4,053
Total Past Due	6,842	9,779
Current	1,181,176	1,189,629
Total loans	1,188,018	1,199,408
Past Due > 90 days and Accruing	1,699	1,527
Residential | Mortgages | 1-4 family | Acquired Loans
Past due loans
30-59 Days Past Due	187	1,133
60-89 Days Past Due	592	638
Greater Than 90 Days Past Due	1,930	1,651
Total Past Due	2,709	3,422
Acquired Credit Impaired	361	375
Total loans	256,503	268,734
Past Due > 90 days and Accruing	144	269
Residential | Mortgages | Construction
Past due loans
Total loans	28,718	28,062
Residential | Mortgages | Construction | Business Activity
Past due loans
30-59 Days Past Due		666
60-89 Days Past Due		410
Greater Than 90 Days Past Due	414
Total Past Due	414	1,076
Current	27,382	25,968
Total loans	27,796	27,044
Past Due > 90 days and Accruing	414
Residential | Mortgages | Construction | Acquired Loans
Past due loans
Total loans	922	1,018
Commercial real estate
Past due loans
Total loans	1,672,099	1,611,567
Commercial real estate | Business Activity
Past due loans
30-59 Days Past Due	2,145	870
60-89 Days Past Due	577	2,861
Greater Than 90 Days Past Due	10,366	10,561
Total Past Due	13,088	14,292
Current	1,398,902	1,325,784
Total loans	1,411,990	1,340,076
Past Due > 90 days and Accruing	266	621
Commercial real estate | Acquired Loans
Past due loans
30-59 Days Past Due	1,439	277
60-89 Days Past Due	161	715
Greater Than 90 Days Past Due	5,673	3,267
Total Past Due	7,273	4,259
Acquired Credit Impaired	11,427	12,277
Total loans	260,109	271,491
Past Due > 90 days and Accruing	2,257	329
Commercial real estate | Other commercial and industrial loans
Past due loans
Total loans	1,294,527	1,244,959
Commercial real estate | Other commercial and industrial loans | Business Activity
Past due loans
Total loans	1,086,893	1,030,837
Commercial real estate | Other commercial and industrial loans | Acquired Loans
Past due loans
Total loans	207,634	214,122
Commercial real estate | Construction
Past due loans
Total loans	186,846	173,390
Commercial real estate | Construction | Business Activity
Past due loans
60-89 Days Past Due		2,000
Greater Than 90 Days Past Due	758	720
Total Past Due	758	2,720
Current	182,042	166,469
Total loans	182,800	169,189
Commercial real estate | Construction | Acquired Loans
Past due loans
Greater Than 90 Days Past Due	676	691
Total Past Due	676	691
Acquired Credit Impaired	1,281	1,296
Total loans	4,046	4,201
Commercial real estate | Single and multi-family
Past due loans
Total loans	190,726	193,218
Commercial real estate | Single and multi-family | Business Activity
Past due loans
30-59 Days Past Due	245	178
60-89 Days Past Due	247	156
Greater Than 90 Days Past Due	406	458
Total Past Due	898	792
Current	141,399	139,258
Total loans	142,297	140,050
Commercial real estate | Single and multi-family | Acquired Loans
Past due loans
30-59 Days Past Due	323	277
60-89 Days Past Due	45
Greater Than 90 Days Past Due	2,728	572
Total Past Due	3,096	849
Acquired Credit Impaired	4,924	5,477
Total loans	48,429	53,168
Past Due > 90 days and Accruing	2,257
Commercial real estate | Other commercial real estate | Business Activity
Past due loans
30-59 Days Past Due	1,900	692
60-89 Days Past Due	330	705
Greater Than 90 Days Past Due	9,202	9,383
Total Past Due	11,432	10,780
Current	1,075,461	1,020,057
Total loans	1,086,893	1,030,837
Past Due > 90 days and Accruing	266	621
Commercial real estate | Other commercial real estate | Acquired Loans
Past due loans
30-59 Days Past Due	1,116
60-89 Days Past Due	116	715
Greater Than 90 Days Past Due	2,269	2,004
Total Past Due	3,501	2,719
Acquired Credit Impaired	5,222	5,504
Total loans	207,634	214,122
Past Due > 90 days and Accruing		329
Commercial real estate | Business loans
Past due loans
Total loans	826,815	804,366
Commercial real estate | Business loans | Business Activity
Past due loans
30-59 Days Past Due	1,371	1,040
60-89 Days Past Due	150	498
Greater Than 90 Days Past Due	725	856
Total Past Due	2,246	2,394
Current	776,425	750,797
Total loans	778,671	753,191
Past Due > 90 days and Accruing		6
Commercial real estate | Business loans | Acquired Loans
Past due loans
30-59 Days Past Due	285	202
60-89 Days Past Due		32
Greater Than 90 Days Past Due	586	855
Total Past Due	871	1,089
Acquired Credit Impaired	705	986
Total loans	48,144	51,175
Past Due > 90 days and Accruing	3
Commercial real estate | Business loans | Asset based lending
Past due loans
Total loans	354,106	341,246
Commercial real estate | Business loans | Asset based lending | Business Activity
Past due loans
Current	354,106	341,246
Total loans	354,106	341,246
Commercial real estate | Business loans | Other commercial and industrial loans
Past due loans
Total loans	472,709	463,120
Commercial real estate | Business loans | Other commercial and industrial loans | Business Activity
Past due loans
30-59 Days Past Due	1,371	1,040
60-89 Days Past Due	150	498
Greater Than 90 Days Past Due	725	856
Total Past Due	2,246	2,394
Current	422,319	409,551
Total loans	424,565	411,945
Past Due > 90 days and Accruing		6
Commercial real estate | Business loans | Other commercial and industrial loans | Acquired Loans
Past due loans
30-59 Days Past Due	285	202
60-89 Days Past Due		32
Greater Than 90 Days Past Due	586	855
Total Past Due	871	1,089
Acquired Credit Impaired	705	986
Total loans	48,144	51,175
Past Due > 90 days and Accruing	3
Commercial
Past due loans
Total loans	2,498,914	2,415,933
Commercial | Business Activity
Past due loans
Total loans	2,190,661	2,093,267
Commercial | Acquired Loans
Past due loans
Total loans	308,253	322,666
Consumer
Past due loans
Total loans	756,510	768,463
Consumer | Business Activity
Past due loans
30-59 Days Past Due	1,333	1,164
60-89 Days Past Due	208	1,065
Greater Than 90 Days Past Due	2,801	1,702
Total Past Due	4,342	3,931
Current	602,852	595,230
Total loans	607,194	599,161
Past Due > 90 days and Accruing	1,357	240
Consumer | Acquired Loans
Past due loans
30-59 Days Past Due	1,603	1,346
60-89 Days Past Due	251	1,039
Greater Than 90 Days Past Due	1,849	2,412
Total Past Due	3,703	4,797
Acquired Credit Impaired	170	171
Total loans	149,316	169,302
Past Due > 90 days and Accruing	261	660
Consumer | Home equity
Past due loans
Total loans	317,615	318,632
Consumer | Home equity | Business Activity
Past due loans
30-59 Days Past Due	589	333
60-89 Days Past Due	154	1,000
Greater Than 90 Days Past Due	2,546	1,387
Total Past Due	3,289	2,720
Current	252,079	249,961
Total loans	255,368	252,681
Past Due > 90 days and Accruing	1,354	230
Consumer | Home equity | Acquired Loans
Past due loans
30-59 Days Past Due	209	176
60-89 Days Past Due	228	95
Greater Than 90 Days Past Due	1,118	1,049
Total Past Due	1,555	1,320
Acquired Credit Impaired	170	171
Total loans	62,247	65,951
Past Due > 90 days and Accruing	242	466
Consumer | Auto and other
Past due loans
Total loans	438,895	449,831
Consumer | Auto and other | Business Activity
Past due loans
30-59 Days Past Due	744	831
60-89 Days Past Due	54	65
Greater Than 90 Days Past Due	255	315
Total Past Due	1,053	1,211
Current	350,773	345,269
Total loans	351,826	346,480
Past Due > 90 days and Accruing	3	10
Consumer | Auto and other | Acquired Loans
Past due loans
30-59 Days Past Due	1,394	1,170
60-89 Days Past Due	23	944
Greater Than 90 Days Past Due	731	1,363
Total Past Due	2,148	3,477
Total loans	87,069	103,351
Past Due > 90 days and Accruing	$ 19	$ 194

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TRADING SECURITY (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
TRADING SECURITY.
Amortized cost	$ 12,400,000	$ 12,600,000
Fair value	14,970,000	14,909,000
Amount of other securities in the trading portfolio	$ 0

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BORROWED FUNDS (Details 3) (USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended
	Sep. 30, 2012	Mar. 31, 2015	Dec. 31, 2014
Notes
Borrowings and junior subordinated debentures
Maturity period	15 years
Principal amount of debt issued	$ 75.0
Fixed interest rate (as a percent)	6.875%
Maturity period with fixed interest rate	10 years
Discount rate (as a percent)	1.15%
Notes | Three-month LIBOR rate
Borrowings and junior subordinated debentures
Interest rate margin (as a percent)	511.30%
Junior subordinated debentures | Trust I
Borrowings and junior subordinated debentures
Common stock of trust (as a percent)		100.00%
Common stock of trust included in other asset		0.5
Sole asset of trust in form of debt		15.5
Variable interest rate (as a percent)		2.11%	2.08%
Junior subordinated debentures | Trust I | Maximum
Borrowings and junior subordinated debentures
Period up to which interest payments can be deferred		5 years
Junior subordinated debentures | LIBOR | Trust I
Borrowings and junior subordinated debentures
Interest rate margin (as a percent)		1.85%

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FAIR VALUE MEASUREMENTS (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Changes in Level 3 assets that were measured at fair value on a recurring basis
Paydown of trading security	$ (317)	$ 604
Forward Commitments.
Changes in Level 3 assets that were measured at fair value on a recurring basis
Unrealized gains (losses) relating to instruments still held at the end of the period	(93)	(96)
Liabilities
Balance at the beginning of the period		(19)	93
Unrealized (loss) gain recognized in other non-interest income		(115)
Balance at the end of the period	93	96	93
Trading Security
Changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis
Number of securities in the portfolio	1
Changes in Level 3 assets that were measured at fair value on a recurring basis
Balance at the beginning of the period	14,909	14,840
Unrealized (loss) gain, net recognized in other non-interest income	203	218
Paydown of trading security	(142)	(135)
Balance at the end of the period	14,970	14,923
Unrealized gains (losses) relating to instruments still held at the end of the period	2,558	1,962
Securities Available for Sale
Changes in Level 3 assets that were measured at fair value on a recurring basis
Balance at the beginning of the period	2,326	1,964
Sale AFS Security	(1,327)
Unrealized gain included in accumulated other comprehensive loss	(280)	82
Balance at the end of the period	719	2,046
Unrealized gains (losses) relating to instruments still held at the end of the period	(51)	(1,288)
Securities Available for Sale | Privately owned equity security
Changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis
Number of securities in the portfolio	1
Interest rate lock commitments
Changes in Level 3 assets that were measured at fair value on a recurring basis
Balance at the beginning of the period	625	258
Unrealized (loss) gain, net recognized in other non-interest income	1,730	719
Transfers to held for sale loans	(1,378)	(600)
Balance at the end of the period	977	377
Unrealized gains (losses) relating to instruments still held at the end of the period	$ 977	$ 377

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OPERATING SEGMENTS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 segment	Mar. 31, 2014
Operating segments
Number of reportable operating segments	2
Net interest income	$ 45,493	$ 42,766
Provision for loan losses	3,851	3,396
Non-interest income	12,562	4,423
Non-interest expense	45,148	45,360
Income before income taxes	9,056	(1,567)
Income tax expense (benefit)	297	(461)
Net income (loss)	8,759	(1,106)
Average assets (in millions)	6,497	5,851
Operating segment | Banking
Operating segments
Net interest income	46,339	43,712
Provision for loan losses	3,851	3,396
Non-interest income	9,413	1,374
Non-interest expense	42,494	42,574
Income before income taxes	9,407	(884)
Income tax expense (benefit)	433	(192)
Net income (loss)	8,974	(692)
Average assets (in millions)	6,479	5,829
Operating segment | Insurance
Operating segments
Non-interest income	2,967	3,049
Non-interest expense	1,939	2,322
Income before income taxes	1,028	727
Income tax expense (benefit)	399	287
Net income (loss)	629	440
Average assets (in millions)	28	26
Reportable legal entity | Berkshire Hills Bancorp
Operating segments
Net interest income	5,154	(946)
Non-interest income	3,785	(252)
Non-interest expense	715	464
Income before income taxes	8,224	(1,662)
Income tax expense (benefit)	(535)	(556)
Net income (loss)	8,759	(1,106)
Average assets (in millions)	757	722
Eliminations
Operating segments
Net interest income	(6,000)
Non-interest income	(3,603)	252
Income before income taxes	(9,603)	252
Net income (loss)	(9,603)	252
Average assets (in millions)	$ (767)	$ (726)

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LOAN LOSS ALLOWANCE (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Activity in the allowance for loan losses
Balance at beginning of period	$ 35,662
Provision for loan losses	3,851	3,396
Balance at end of period	36,286
Allowance For Loan Losses
Total	36,286
Business Activity
Activity in the allowance for loan losses
Balance at beginning of period	32,795	29,527
Charged-off loans	2,158	1,984
Recoveries on charged-off loans	136	107
Provision for loan losses	1,495	1,728
Balance at end of period	32,268	29,378
Allowance For Loan Losses
Individually evaluated for impairment	1,086	2,018
Collectively evaluated	31,182	27,360
Total	32,268	29,378
Acquired Loans
Activity in the allowance for loan losses
Balance at beginning of period	2,867	3,796
Charged-off loans	1,274	1,333
Recoveries on charged-off loans	69	93
Provision for loan losses	2,356	1,668
Balance at end of period	4,018	4,224
Allowance For Loan Losses
Individually evaluated for impairment	568	301
Collectively evaluated	3,450	3,923
Total	4,018	4,224
Residential | Mortgages | Business Activity
Activity in the allowance for loan losses
Balance at beginning of period	6,836	6,937
Charged-off loans	128	706
Recoveries on charged-off loans	67	7
Provision for loan losses	(702)	(575)
Balance at end of period	6,073	5,663
Allowance For Loan Losses
Individually evaluated for impairment		397
Collectively evaluated	6,073	5,266
Total	6,073	5,663
Residential | Mortgages | Acquired Loans
Activity in the allowance for loan losses
Balance at beginning of period	615	625
Charged-off loans	238	429
Recoveries on charged-off loans		73
Provision for loan losses	372	401
Balance at end of period	749	670
Allowance For Loan Losses
Individually evaluated for impairment	52	30
Collectively evaluated	697	640
Total	749	670
Commercial real estate | Business Activity
Activity in the allowance for loan losses
Balance at beginning of period	14,690	13,705
Charged-off loans	1,605	660
Recoveries on charged-off loans	3	1
Provision for loan losses	1,330	1,900
Balance at end of period	14,418	14,946
Allowance For Loan Losses
Individually evaluated for impairment	1,086	1,558
Collectively evaluated	13,332	13,388
Total	14,418	14,946
Commercial real estate | Acquired Loans
Activity in the allowance for loan losses
Balance at beginning of period	790	2,339
Charged-off loans	405	447
Recoveries on charged-off loans		1
Provision for loan losses	1,579	231
Balance at end of period	1,964	2,124
Allowance For Loan Losses
Individually evaluated for impairment	455	250
Collectively evaluated	1,509	1,874
Total	1,964	2,124
Commercial real estate | Business loans | Business Activity
Activity in the allowance for loan losses
Balance at beginning of period	5,206	5,173
Charged-off loans	223	189
Recoveries on charged-off loans	5	20
Provision for loan losses	1,460	(185)
Balance at end of period	6,448	4,819
Allowance For Loan Losses
Individually evaluated for impairment		54
Collectively evaluated	6,448	4,765
Total	6,448	4,819
Commercial real estate | Business loans | Acquired Loans
Activity in the allowance for loan losses
Balance at beginning of period	1,093	597
Charged-off loans	198	52
Recoveries on charged-off loans	41	5
Provision for loan losses	(11)	548
Balance at end of period	925	1,098
Allowance For Loan Losses
Individually evaluated for impairment		21
Collectively evaluated	925	1,077
Total	925	1,098
Consumer | Business Activity
Activity in the allowance for loan losses
Balance at beginning of period	5,928	3,644
Charged-off loans	202	429
Recoveries on charged-off loans	61	79
Provision for loan losses	(751)	836
Balance at end of period	5,036	4,130
Allowance For Loan Losses
Individually evaluated for impairment		9
Collectively evaluated	5,036	4,121
Total	5,036	4,130
Consumer | Acquired Loans
Activity in the allowance for loan losses
Balance at beginning of period	369	235
Charged-off loans	433	405
Recoveries on charged-off loans	28	14
Provision for loan losses	416	488
Balance at end of period	380	332
Allowance For Loan Losses
Individually evaluated for impairment	61
Collectively evaluated	319	332
Total	380	332
Unallocated | Business Activity
Activity in the allowance for loan losses
Balance at beginning of period	135	68
Provision for loan losses	158	(248)
Balance at end of period	293	(180)
Allowance For Loan Losses
Collectively evaluated	293	(180)
Total	$ 293	$ (180)

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BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2015

BASIS OF PRESENTATION

BASIS OF PRESENTATION

NOTE 1.BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and contain all adjustments, consisting solely of normal, recurring adjustments, necessary for a fair presentation of results for such periods.

In addition, these interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to U.S. GAAP have been omitted.

The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the audited financial statements and note disclosures for Berkshire Hills Bancorp, Inc. (the “Company”) previously filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation.

Recently Adopted Accounting Standards

In January 2014, the Financial Accounting Standard Board “FASB” issued Accounting Standard Updated “ASU” ASU No. 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects.” ASU No. 2014-01 permits reporting entities to make an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. This new guidance also requires new disclosures for all investors in these projects. ASU No. 2014-01 is effective for interim and annual reporting periods beginning after December 15, 2014. Upon adoption, the guidance must be applied retrospectively to all periods presented. However, entities that use the effective yield method to account for investments in these projects before adoption may continue to do so for these pre-existing investments. The Company has elected not to adopt the proportional amortization method, which had no impact on our consolidated financial statements.

Also in January 2014, the FASB issued ASU No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of this guidance is to clarify when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. ASU No. 2014-04 states that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, ASU No. 2014-04 requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. ASU No. 2014-04 is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted the provisions of ASU No. 2014-04 effective January 1, 2015, which did not have a material effect on our consolidated financial statements.  See Note 4 - Loans to the Consolidated Financial Statements for the disclosures required by ASU No. 2014-04.

In June 2014, the FASB issued ASU No. 2014-11 related to repurchase-to-maturity transactions, repurchase financing and disclosures. The pronouncement changes the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The pronouncement also requires two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is not permitted. As of March 31, 2015 the Company did not have any repurchase transactions, and therefore the adoption of this pronouncement did not have an impact on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-14 related to classification of certain government-guaranteed mortgage loans upon foreclosure. The objective of this guidance is to reduce diversity in practice related to how creditors classify government-guaranteed mortgage loans, including FHA or VA guaranteed loans, upon foreclosure. Some creditors reclassify those loans to real estate consistent with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables. The amendments in this guidance require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) The loan has a government guarantee that is not separable from the loan before foreclosure; (2) At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The pronouncement is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted the provisions of ASU No. 2014-14 effective January 1, 2015, which did not have a material effect on our consolidated financial statements.

Future Application of Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09 related to the recognition of revenue from contracts with customers. The new revenue pronouncement creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. The pronouncement provides a five-step model for a company to recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The five steps are (1) identify the contract with the customer, (2) identify the separate performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when each performance obligation is satisfied. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016 using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. Early adoption is not permitted. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, “Amendments to the Consolidation Analysis.” This ASU affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU No. 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is not permitted; however, the FASB has issued a proposal to extend the effective date by one year.

In April 2015, the FASB issued ASU No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU No. 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Derivative instruments and hedging activities
Cash pledged as collateral to derivative counterparties	$ 5,300,000
Amortized cost of securities pledged as collateral to derivative counterparties	27,500,000
Fair value of securities as pledged collateral to derivative counterparties	27,700,000
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	1,092,436,000		1,034,667,000
Estimated Fair Value Asset (Liability)	(9,471,000)		(5,815,000)
Interest rate swaps
Reclassification of unrealized loss from accumulated other comprehensive income to interest expense	7,258,000	7,029,000
Net interest expense recognized in interest expense	2,309,000	2,308,000
FHLBB borrowings
Interest rate swaps
Extinguishment of FHLB advances		215,000,000
Loss reclassified from the effective portion of the unrealized changes in the fair value of the derivatives		8,600,000
Cash flow hedges
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	300,000,000		300,000,000
Estimated Fair Value Asset (Liability)	(7,200,000)		(3,299,000)
Economic hedges
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	724,062,000		695,078,000
Estimated Fair Value Asset (Liability)	(3,248,000)		(3,141,000)
Interest rate swaps
Credit valuation adjustments	38,600
Economic hedges | Tax advantaged economic development bonds
Interest rate swaps
Fixed rate of interest (as a percent)	5.09%
Life of the bond	21 years
Non-hedging derivatives
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	68,374,000		39,589,000
Estimated Fair Value Asset (Liability)	977,000		625,000
Interest rate swaps | FHLBB borrowings
Interest rate swaps
Notional amount of derivative contract terminated		30,000,000
Interest rate swaps | 90 day rolling FHLB advances
Interest rate swaps
Notional amount of derivative contract terminated		145,000,000
Interest rate swaps | Cash flow hedges
Interest rate swaps
Other comprehensive income recorded in accumulated other comprehensive income, net of reclassification adjustments and tax effects	(2,329,000)	(3,815,000)
Interest rate swaps | Cash flow hedges | FHLBB borrowings
Cash flow hedges:
Maturity period with fixed interest rate	1 month
Period of rolling advances	1 month
Interest rate swaps
Unrealized (loss) recognized in accumulated other comprehensive loss	(3,901,000)	(785,000)
Reclassification of unrealized loss from accumulated other comprehensive income to other non-interest expense for termination of swaps		8,630,000
Reclassification of unrealized deferred tax (benefit) from accumulated other comprehensive income to tax expense for terminated swaps		(3,611,000)
Net tax benefit on items recognized in accumulated other comprehensive income	1,572,000	314,000
Interest rate swaps | Cash flow hedges | Junior subordinated debentures
Interest rate swaps
Unrealized (loss) recognized in accumulated other comprehensive loss		(1,000)
Reclassification of unrealized loss from accumulated other comprehensive income to interest expense		129,000
Net tax benefit on items recognized in accumulated other comprehensive income		(51,000)
Net interest expense recognized in interest expense		129,000
Interest rate swaps | Economic hedges
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	585,600,000
Interest rate swaps | Economic hedges | Tax advantaged economic development bonds
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	12,412,000		12,554,000
Weighted Average Rate, Received (as a percent)	0.52%		0.52%
Weighted Average Rate, Contract pay rate (as a percent)	5.09%		5.09%
Estimated Fair Value Asset (Liability)	(2,799,000)		(2,578,000)
Interest rate swaps | Economic hedges | Tax advantaged economic development bonds | Weighted Average
Interest rate swap agreements and non-hedging derivative assets and liabilities
Weighted Average Maturity	14 years 8 months 12 days		14 years 10 months 24 days
Interest rate swaps | Economic hedges | Loans with commercial loan customers
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	286,590,000		297,158,000
Weighted Average Rate, Received (as a percent)	2.19%		2.23%
Weighted Average Rate, Contract pay rate (as a percent)	4.59%		4.54%
Estimated Fair Value Asset (Liability)	(15,405,000)		(12,183,000)
Economic hedges and non-hedging derivatives
Unrealized (loss) gain recognized in other non-interest income	(3,114,000)	187,000
Favorable change in credit valuation adjustment recognized in other non-interest income	1,000	7,000
Interest rate swaps | Economic hedges | Loans with commercial loan customers | Weighted Average
Interest rate swap agreements and non-hedging derivative assets and liabilities
Weighted Average Maturity	6 years		6 years
Interest rate swaps | Economic hedges | Industrial revenue bond
Economic hedges and non-hedging derivatives
Unrealized (loss) gain recognized in other non-interest income	(271,000)	(381,000)
Forward-starting interest rate swaps | 90 day rolling FHLB advances
Interest rate swaps
Notional amount of derivative contract terminated		235,000,000
Forward-starting interest rate swaps | Cash flow hedges
Cash flow hedges:
Number of instruments	6
Durations of derivative instruments	3 months
Forward-starting interest rate swaps | Cash flow hedges | FHLBB borrowings
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	300,000,000		300,000,000
Weighted Average Rate, Received (as a percent)	0.00%		0.00%
Weighted Average Rate, Contract pay rate (as a percent)	2.29%		2.29%
Estimated Fair Value Asset (Liability)	(7,200,000)		(3,299,000)
Forward-starting interest rate swaps | Cash flow hedges | FHLBB borrowings | Weighted Average
Interest rate swap agreements and non-hedging derivative assets and liabilities
Weighted Average Maturity	4 years		4 years 3 months 18 days
Reverse interest rate swaps | Economic hedges | Loans with commercial loan customers
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	286,590,000		297,158,000
Weighted Average Rate, Received (as a percent)	4.59%		4.54%
Weighted Average Rate, Contract pay rate (as a percent)	2.19%		2.23%
Estimated Fair Value Asset (Liability)	15,444,000		12,221,000
Economic hedges and non-hedging derivatives
Unrealized (loss) gain recognized in other non-interest income	3,114,000	(187,000)
Reverse interest rate swaps | Economic hedges | Loans with commercial loan customers | Weighted Average
Interest rate swap agreements and non-hedging derivative assets and liabilities
Weighted Average Maturity	6 years		6 years
Risk participation agreements | Economic hedges
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	49,038,000		45,842,000
Estimated Fair Value Asset (Liability)	(100,000)		(91,000)
Economic hedges and non-hedging derivatives
Unrealized (loss) gain recognized in other non-interest income	(9,000)
Risk participation agreements | Economic hedges | Weighted Average
Interest rate swap agreements and non-hedging derivative assets and liabilities
Weighted Average Maturity	15 years 10 months 24 days		16 years 7 months 6 days
Interest rate lock commitments | Non-hedging derivatives
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	68,374,000		39,589,000
Estimated Fair Value Asset (Liability)	977,000		625,000
Economic hedges and non-hedging derivatives
Unrealized (loss) gain recognized in other non-interest income	977,000	377,000
Realized gain (loss) in other non-interest income	755,000	469,000
Interest rate lock commitments | Non-hedging derivatives | Weighted Average
Interest rate swap agreements and non-hedging derivative assets and liabilities
Weighted Average Maturity	2 months 12 days		2 months 12 days
Forward sale commitments | Economic hedges
Interest rate swap agreements and non-hedging derivative assets and liabilities
Notional Amount	89,432,000		42,366,000
Estimated Fair Value Asset (Liability)	(388,000)		(510,000)
Economic hedges and non-hedging derivatives
Unrealized (loss) gain recognized in other non-interest income	(388,000)	(108,000)
Realized gain (loss) in other non-interest income	$ (91,000)	$ (164,000)
Forward sale commitments | Economic hedges | Weighted Average
Interest rate swap agreements and non-hedging derivative assets and liabilities
Weighted Average Maturity	2 months 12 days		2 months 12 days

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LOANS (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Non-accrual loans
Non-accrual loans	$ 20,989	$ 20,539
Business Activity
Non-accrual loans
Non-accrual loans	14,636	14,778
Acquired Loans
Non-accrual loans
Non-accrual loans	6,353	5,761
Acquired credit impaired loans
Non-accrual loans
Non-accrual loans	1,000	1,200
Residential | Mortgages
Non-accrual loans
Non-accrual loans	4,153	3,908
Residential | Mortgages | Business Activity
Non-accrual loans
Non-accrual loans	2,367	2,526
Residential | Mortgages | Acquired Loans
Non-accrual loans
Non-accrual loans	1,786	1,382
Residential | Mortgages | 1-4 family
Non-accrual loans
Non-accrual loans	4,153	3,908
Residential | Mortgages | 1-4 family | Business Activity
Non-accrual loans
Non-accrual loans	2,367	2,526
Residential | Mortgages | 1-4 family | Acquired Loans
Non-accrual loans
Non-accrual loans	1,786	1,382
Commercial real estate
Non-accrual loans
Non-accrual loans	12,510	11,756
Commercial real estate | Business Activity
Non-accrual loans
Non-accrual loans	10,100	9,940
Commercial real estate | Acquired Loans
Non-accrual loans
Non-accrual loans	2,410	1,816
Commercial real estate | Construction
Non-accrual loans
Non-accrual loans	758	720
Commercial real estate | Construction | Business Activity
Non-accrual loans
Non-accrual loans	758	720
Commercial real estate | Single and multi-family
Non-accrual loans
Non-accrual loans	877	599
Commercial real estate | Single and multi-family | Business Activity
Non-accrual loans
Non-accrual loans	406	458
Commercial real estate | Single and multi-family | Acquired Loans
Non-accrual loans
Non-accrual loans	471	141
Commercial real estate | Other commercial real estate
Non-accrual loans
Non-accrual loans	10,875	10,437
Commercial real estate | Other commercial real estate | Business Activity
Non-accrual loans
Non-accrual loans	8,936	8,762
Commercial real estate | Other commercial real estate | Acquired Loans
Non-accrual loans
Non-accrual loans	1,939	1,675
Commercial real estate | Business loans
Non-accrual loans
Non-accrual loans	1,294	1,661
Commercial real estate | Business loans | Business Activity
Non-accrual loans
Non-accrual loans	725	850
Commercial real estate | Business loans | Acquired Loans
Non-accrual loans
Non-accrual loans	569	811
Commercial real estate | Business loans | Other commercial and industrial loans
Non-accrual loans
Non-accrual loans	1,294	1,661
Commercial real estate | Business loans | Other commercial and industrial loans | Business Activity
Non-accrual loans
Non-accrual loans	725	850
Commercial real estate | Business loans | Other commercial and industrial loans | Acquired Loans
Non-accrual loans
Non-accrual loans	569	811
Consumer
Non-accrual loans
Non-accrual loans	3,032	3,214
Consumer | Business Activity
Non-accrual loans
Non-accrual loans	1,444	1,462
Consumer | Acquired Loans
Non-accrual loans
Non-accrual loans	1,588	1,752
Consumer | Home equity
Non-accrual loans
Non-accrual loans	2,068	1,740
Consumer | Home equity | Business Activity
Non-accrual loans
Non-accrual loans	1,192	1,157
Consumer | Home equity | Acquired Loans
Non-accrual loans
Non-accrual loans	876	583
Consumer | Auto and other
Non-accrual loans
Non-accrual loans	964	1,474
Consumer | Auto and other | Business Activity
Non-accrual loans
Non-accrual loans	252	305
Consumer | Auto and other | Acquired Loans
Non-accrual loans
Non-accrual loans	$ 712	$ 1,169

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BORROWED FUNDS (Tables)

3 Months Ended

Mar. 31, 2015

BORROWED FUNDS

Schedule of borrowed funds

	March 31, 2015				December 31, 2014
			Weighted				Weighted
			Average				Average
(dollars in thousands)	Principal		Rate		Principal		Rate
Short-term borrowings:
Advances from the FHLBB	$	884,500	0.25	%	$	890,900	0.24	%
Other Borrowings	10,000		1.83		10,000		1.80
Total short-term borrowings:	894,500		0.25		900,900		0.23
Long-term borrowings:
Advances from the FHLBB	61,618		0.91		61,676		0.93
Subordinated borrowings	74,301		7.00		74,283		7.00
Junior subordinated borrowings	15,464		2.11		15,464		2.08
Total long-term borrowings:	151,383		4.02		151,423		4.03
Total	$	1,045,883	0.80	%	$	1,052,323	0.79	%

Summary of maturities of FHLBB advances

	March 31, 2015				December 31, 2014
			Weighted				Weighted
			Average				Average
(in thousands, except rates)	Principal		Rate		Principal		Rate
Fixed rate advances maturing:
2015	$	934,500	0.25	%	$	940,900	0.24	%
2016	1,503		0.03		1,519		0.88
2017	5,000		4.33		5,000		4.33
2018	—		0.00		—		0.00
2019 and beyond	5,115		3.91		5,157		3.85
Total FHLBB advances	$	946,118	0.29	%	$	952,576	0.28	%

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DEPOSITS (Tables)

3 Months Ended

Mar. 31, 2015

DEPOSITS

Summary of time deposits

(In thousands)	March 31, 2015		December 31, 2014
Time less than $100,000	$	506,577	$	515,570
Time $100,000 or more	998,892		940,176
Total time deposits	$	1,505,469	$	1,455,746

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STOCKHOLDERS' EQUITY (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2013
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at the beginning of the period	$ 6,579	$ (10,435)
Reclassification from accumulated other comprehensive income, net of tax
Other Comprehensive Loss before	2,472	3,330
Amounts Reclassified from Accumulated other comprehensive income	17	5,096
Total other comprehensive income	2,489	8,426
Balance at the end of the period	9,068	(2,009)
Net unrealized holding loss (gain) on AFS securities:
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at the beginning of the period	9,916	(5,776)
Reclassification from accumulated other comprehensive income, net of tax
Other Comprehensive Loss before	5,754	3,822
Amounts Reclassified from Accumulated other comprehensive income	(22)	(22)
Total other comprehensive income	5,732	3,800
Balance at the end of the period	15,648	(1,976)
Net loss on effective cash flow hedging derivatives
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at the beginning of the period	(1,969)	(1,366)
Reclassification from accumulated other comprehensive income, net of tax
Other Comprehensive Loss before	(2,329)	(492)
Amounts Reclassified from Accumulated other comprehensive income		3,193
Total other comprehensive income	(2,329)	2,701
Balance at the end of the period	(4,298)	1,335
Net loss on terminated swap
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at the beginning of the period		(1,925)
Reclassification from accumulated other comprehensive income, net of tax
Amounts Reclassified from Accumulated other comprehensive income		1,925
Total other comprehensive income		1,925
Net unrealized holding loss on pension plans
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at the beginning of the period	(1,368)		(1,368)
Reclassification from accumulated other comprehensive income, net of tax
Other Comprehensive Loss before	(953)
Amounts Reclassified from Accumulated other comprehensive income	39
Total other comprehensive income	(914)
Balance at the end of the period	$ (2,282)	$ (1,368)	$ (1,368)

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LOANS (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Loans receivable: balance at end of period
Total loans	$ 4,728,663	$ 4,680,600
Business Activity
Loans receivable: balance at end of period
Individually evaluated for impairment	26,080	26,448
Collectively evaluated	3,987,589	3,892,432
Total loans	4,013,669	3,918,880
Acquired Loans
Loans receivable: balance at end of period
Individually evaluated for impairment	7,990	6,570
Collectively evaluated	707,004	755,150
Total loans	714,994	761,720
Residential | Mortgages
Loans receivable: balance at end of period
Total loans	1,473,239	1,496,204
Residential | Mortgages | Business Activity
Loans receivable: balance at end of period
Individually evaluated for impairment	3,028	3,238
Collectively evaluated	1,212,786	1,223,214
Total loans	1,215,814	1,226,452
Residential | Mortgages | Acquired Loans
Loans receivable: balance at end of period
Individually evaluated for impairment	1,194	695
Collectively evaluated	256,231	269,057
Total loans	257,425	269,752
Commercial real estate
Loans receivable: balance at end of period
Total loans	1,672,099	1,611,567
Commercial real estate | Business Activity
Loans receivable: balance at end of period
Individually evaluated for impairment	22,342	22,015
Collectively evaluated	1,389,648	1,318,061
Total loans	1,411,990	1,340,076
Commercial real estate | Acquired Loans
Loans receivable: balance at end of period
Individually evaluated for impairment	6,203	5,637
Collectively evaluated	253,906	265,854
Total loans	260,109	271,491
Commercial real estate | Business loans
Loans receivable: balance at end of period
Total loans	826,815	804,366
Commercial real estate | Business loans | Business Activity
Loans receivable: balance at end of period
Individually evaluated for impairment	262	743
Collectively evaluated	778,409	752,448
Total loans	778,671	753,191
Commercial real estate | Business loans | Acquired Loans
Loans receivable: balance at end of period
Individually evaluated for impairment	47	39
Collectively evaluated	48,097	51,136
Total loans	48,144	51,175
Consumer
Loans receivable: balance at end of period
Total loans	756,510	768,463
Consumer | Business Activity
Loans receivable: balance at end of period
Individually evaluated for impairment	448	452
Collectively evaluated	606,746	598,709
Total loans	607,194	599,161
Consumer | Acquired Loans
Loans receivable: balance at end of period
Individually evaluated for impairment	546	199
Collectively evaluated	148,770	169,103
Total loans	149,316	169,302
Commercial
Loans receivable: balance at end of period
Total loans	2,498,914	2,415,933
Commercial | Business Activity
Loans receivable: balance at end of period
Total loans	2,190,661	2,093,267
Commercial | Acquired Loans
Loans receivable: balance at end of period
Total loans	$ 308,253	$ 322,666

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STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2015

STOCKHOLDERS' EQUITY

Schedule of actual and required capital ratios

		Regulatory				Regulatory
		Minimum to be				Minimum to be
	March 31, 2015	Well Capitalized		December 31, 2014		Well Capitalized
Company (consolidated)
Total capital to risk weighted assets	11.4	10.0	%	11.4	%	10.0	%
Common Equity Tier 1 Capital to risk weighted assets	9.1	6.5		N/A		N/A
Tier 1 capital to risk weighted assets	9.2	8.0		9.0		6.0
Tier 1 capital to average assets	7.1	5.0		7.0		5.0
Bank
Total capital to risk weighted assets	10.8	10.0	%	10.8	%	10.0	%
Common Equity Tier 1 Capital to risk weighted assets	9.4	6.5		N/A		N/A
Tier 1 capital to risk weighted assets	9.4	8.0		9.3		6.0
Tier 1 capital to average assets	7.3	5.0		7.2		5.0

Schedule of components of accumulated other comprehensive income

(In thousands)	March 31, 2015			December 31, 2014
Other accumulated comprehensive income, before tax:
Net unrealized holding gain on AFS securities	$	25,330		$	15,993
Net loss on effective cash flow hedging derivatives	(7,200		)	(3,299		)
Net unrealized holding (loss) on pension plans	(3,822		)	(2,291		)
Income taxes related to items of accumulated other comprehensive income:
Net unrealized holding gain on AFS securities	(9,682		)	(6,077		)
Net loss on effective cash flow hedging derivatives	2,902			1,330
Net unrealized holding (loss) on pension plans	1,540			923
Accumulated other comprehensive income	$	9,068		$	6,579

Schedule of components of other comprehensive income

(In thousands)	Before Tax			Tax Effect			Net of Tax
Three Months Ended March 31, 2015
Net unrealized holding gains on AFS securities:
Net unrealized gains arising during the period	$	9,371		$	(3,617	)	$	5,754
Less: reclassification adjustment for (gains) realized in net income	(34		)	12			(22		)
Net unrealized holding gain on AFS securities	9,337			(3,605		)	5,732
Net loss on cash flow hedging derivatives:
Net unrealized loss arising during the period	(3,901		)	1,572			(2,329		)
Less: reclassification adjustment for gains (losses) realized in net income	—			—			—
Net loss on cash flow hedging derivatives	(3,901		)	1,572			(2,329		)
Net unrealized holding loss on pension plans
Net unrealized loss arising during the period	(1,596		)	643			(953		)
Less: reclassification adjustment for gains (losses) realized in net income	65			(26		)	39
Net unrealized holding loss on pension plans	(1,531		)	617			(914		)
Other comprehensive income	$	3,905		$	(1,416	)	$	2,489
Three Months Ended March 31, 2014
Net unrealized holding loss on AFS securities:
Net unrealized loss arising during the period	$	6,055		$	(2,233	)	$	3,822
Less: reclassification adjustment for (gains) realized in net income	(34		)	12			(22		)
Net unrealized holding gain on AFS securities	6,021			(2,221		)	3,800
Net loss on cash flow hedging derivatives:
Net unrealized loss arising during the period	(860		)	368			(492		)
Less: reclassification adjustment for (gains) realized in net income	5,393			(2,200		)	3,193
Net gain on cash flow hedging derivatives	4,533			(1,832		)	2,701
Net gain on terminated swap:
Net unrealized loss arising during the period	—			—			—
Less: reclassification adjustment for losses realized in net income	3,237			(1,312		)	1,925
Net gain on terminated swap	3,237			(1,312		)	1,925
Other comprehensive income	$	13,791		$	(5,365	)	$	8,426

Schedule of gross changes in each component of accumulated other comprehensive income

	Net unrealized			Net loss on			Net loss			Net unrealized
	holding (loss) gain			effective cash			on			holding loss
	on AFS			flow hedging			terminated			on
(in thousands)	Securities			derivatives			swap			pension plans			Total
Three Months Ended March 31, 2015
Balance at Beginning of Period	$	9,916		$	(1,969	)	$	—		$	(1,368	)	$	6,579
Other Comprehensive Gain (Loss) Before reclassifications	5,754			(2,329		)	—			(953		)	2,472
Amounts Reclassified from Accumulated other comprehensive income	(22		)	—			—			39			17
Total Other Comprehensive Income (Loss)	5,732			(2,329		)	—			(914		)	2,489
Balance at End of Period	$	15,648		$	(4,298	)	$	—		$	(2,282	)	$	9,068
Three Months Ended March 31, 2014
Balance at Beginning of Period	$	(5,776	)	$	(1,366	)	$	(1,925	)	$	(1,368	)	$	(10,435	)
Other Comprehensive Gain (Loss) Before reclassifications	3,822			(492		)	—			—			3,330
Amounts Reclassified from Accumulated other comprehensive income	(22		)	3,193			1,925			—			5,096
Total Other Comprehensive Income (Loss)	3,800			2,701			1,925			—			8,426
Balance at End of Period	$	(1,976	)	$	1,335		$	—		$	(1,368	)	$	(2,009	)

Schedule of amounts reclassified out of each component of accumulated other comprehensive income

							Affected Line Item in the
	Three Months Ended March 31,						Statement where Net Income
(in thousands)	2015			2014			is Presented
Realized (gains) on AFS securities:
	$	(34	)	$	(34	)	Non-interest income
	12			12			Tax expense
	(22		)	(22		)	Net of tax
Realized losses on cash flow hedging derivatives:
	—			5,393			Non-interest income
	—			(2,200		)	Tax expense
	—			3,193			Net of tax
Amortization of realized gains on terminated swap:
	—			3,237			Non-interest income
	—			(1,312		)	Tax expense
	—			1,925			Net of tax
Realized loss on pension plans:
	65			—			Non-interest income
	(26		)	—			Tax expense
	39			—			Net of tax
Total reclassifications for the period	$	17		$	5,096		Net of tax

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2015

EARNINGS PER SHARE

Schedule of earnings per share

	Three Months Ended March 31,
(In thousands, except per share data)	2015		2014
Net income/(loss)	$	8,759	$	(1,106	)
Average number of common shares issued	26,525		26,525
Less: average number of treasury shares	1,295		1,425
Less: average number of unvested stock award shares	427		402
Average number of basic common shares outstanding	24,803		24,698
Plus: dilutive effect of unvested stock award shares	89		—
Plus: dilutive effect of stock options outstanding	63		—
Average number of diluted common shares outstanding	24,955		24,698
Earnings per share:
Basic	$	0.35	$	(0.04	)
Diluted	$	0.35	$	(0.04	)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net income (loss)	$ 8,759	$ (1,106)
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	3,851	3,396
Net amortization of securities	(317)	604
Change in unamortized net loan costs and premiums	398	64
Premises and equipment depreciation and amortization expense	2,096	1,944
Stock-based compensation expense	993	932
Accretion of purchase accounting entries, net	(367)	(1,999)
Amortization of other intangibles	901	1,306
Write down of other real estate owned		125
Excess tax loss from stock-based payment arrangements	23	(89)
Income from cash surrender value of bank-owned life insurance policies	(714)	(813)
Gain on sales of securities, net	(34)	(34)
Net (increase) decrease in loans held for sale	(9,812)	8,171
Loss on disposition of assets	1,136	834
Loss on sale of real estate	154	208
Loss on termination of hedges		3,237
Amortization of interest in tax-advantaged projects	2,882	421
Net change in other	(6,145)	(183)
Net cash provided by operating activities	3,804	17,018
Cash flows from investing activities:
Net decrease in trading security	142	135
Proceeds from sales of securities available for sale	4,693	3,171
Proceeds from maturities, calls and prepayments of securities available for sale	40,552	25,440
Purchases of securities available for sale	(41,068)	(291,662)
Proceeds from maturities, calls and prepayments of securities held to maturity	729	1,762
Purchases of securities held to maturity	(200)
Net change in loans	(68,671)	(59,851)
Proceeds from sale of Federal Home Loan Bank stock	103	78
Purchase of Federal Home Loan Bank stock	(3,117)	(2,920)
Net investment in limited partnership tax credits		(2,500)
Purchase of premises and equipment, net	(946)	(3,130)
Acquisitions, net of cash paid		423,416
Proceeds from sale of other real estate	578	483
Net cash (used in) provided by investing activities	(67,205)	94,422
Cash flows from financing activities:
Net increase (decrease) in deposits	65,007	(70,422)
Proceeds from Federal Home Loan Bank advances and other borrowings	2,200,000	900,018
Repayments of Federal Home Loan Bank advances and other borrowings	(2,206,440)	(937,682)
Purchase of treasury stock		(2,467)
Exercise of stock options	116	719
Excess tax loss from stock-based payment arrangements	(23)	89
Common stock cash dividends paid	(4,799)	(4,561)
Net cash provided (used) by financing activities	53,861	(114,306)
Net change in cash and cash equivalents	(9,540)	(2,866)
Cash and cash equivalents at beginning of year	71,754	75,539
Cash and cash equivalents at end of year	62,214	72,673
Supplemental cash flow information:
Interest paid on deposits	4,902	4,718
Interest paid on borrowed funds	2,306	3,145
Income taxes (refunded) paid, net	274	146
Acquisition of non-cash assets and liabilities:
Assets acquired		18,064
Liabilities assumed		(441,550)
Other non-cash changes:
Other net comprehensive income	2,489	5,189
Real estate owned acquired in settlement of loans	$ 127	$ 476

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STOCK-BASED COMPENSATION PLANS (Tables)

3 Months Ended

Mar. 31, 2015

STOCK-BASED COMPENSATION PLANS

Summary of activity in the stock award and stock option plans

	Non-vested Stock
	Awards Outstanding				Stock Options Outstanding
			Weighted-				Weighted-
			Average				Average
	Number of		Grant Date		Number of		Exercise
(Shares in thousands)	Shares		Fair Value		Shares		Price
Balance, December 31, 2014	424		$	24.33	282		$	20.42
Granted	92		24.90		—		—
Stock options exercised	—		—		(11	)	10.52
Stock awards vested	(82	)	24.22		—		—
Forfeited	(10	)	23.50		—		—
Expired	—		—		—		—
Balance, March 31, 2015	424		$	24.48	271		$	21.12
Exercisable options, March 31, 2015					271		$	21.12

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SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 security	Dec. 31, 2014
Securities available for sale
Less Than Twelve Months, Gross Unrealized Losses	$ 1,405	$ 2,497
Less Than Twelve Months, Fair Value	68,630	89,203
Over Twelve Months, Gross Unrealized Losses	2,192	4,753
Over Twelve Months, Fair Value	167,916	201,604
Total Gross Unrealized Losses	3,597	7,250
Total Fair Value	236,546	290,807
Securities held to maturity
Over Twelve Months, Gross Unrealized Losses		34
Over Twelve Months, Fair Value		7,972
Total Gross Unrealized Losses		34
Total Fair Value		7,972
Securities available for sale and held to maturity
Less Than Twelve Months, Gross Unrealized Losses	1,405	2,497
Less Than Twelve Months, Fair Value	68,630	89,203
Over Twelve Months, Gross Unrealized Losses	2,192	4,787
Over Twelve Months, Fair Value	167,916	209,576
Total Gross Unrealized Losses	3,597	7,284
Total Fair Value	236,546	298,779
Debt Securities
Total unrealized losses	3,597	7,250
Fair value of investment	1,099,656	1,091,818
Level 2
Debt Securities
Fair value of investment	1,055,247	1,035,686
Level 3
Debt Securities
Fair value of investment	719	2,326
Corporate bonds | One investment | Level 2
Debt Securities
Fair value of investment	30,600
Debt securities
Securities available for sale
Less Than Twelve Months, Gross Unrealized Losses	769	1,458
Less Than Twelve Months, Fair Value	61,266	79,301
Over Twelve Months, Gross Unrealized Losses	1,908	4,419
Over Twelve Months, Fair Value	163,340	196,849
Total Gross Unrealized Losses	2,677	5,877
Total Fair Value	224,606	276,150
Debt Securities
Total unrealized losses	2,677	5,877
Fair value of investment	1,054,890	1,036,876
Debt securities | Municipal bonds and obligations
Securities available for sale
Less Than Twelve Months, Gross Unrealized Losses	62	8
Less Than Twelve Months, Fair Value	19,756	1,001
Over Twelve Months, Gross Unrealized Losses	333	166
Over Twelve Months, Fair Value	11,796	7,206
Total Gross Unrealized Losses	395	174
Total Fair Value	31,552	8,207
Debt Securities
Number of securities in the portfolio of AFS	190
Number of AFS investment securities in unrealized loss positions	28
Aggregate unrealized losses as a percentage of the amortized cost of the securities in unrealized loss positions	1.20%
Total unrealized losses	395	174
Fair value of investment	155,450	133,699
Debt securities | Government guaranteed residential mortgage-backed securities
Securities available for sale
Less Than Twelve Months, Gross Unrealized Losses	11	46
Less Than Twelve Months, Fair Value	5,638	7,122
Over Twelve Months, Gross Unrealized Losses	102	160
Over Twelve Months, Fair Value	6,701	16,727
Total Gross Unrealized Losses	113	206
Total Fair Value	12,339	23,849
Debt Securities
Total unrealized losses	113	206
Fair value of investment	65,039	69,468
Debt securities | Government-sponsored residential mortgage-backed securities
Securities available for sale
Less Than Twelve Months, Gross Unrealized Losses		236
Less Than Twelve Months, Fair Value		30,672
Over Twelve Months, Gross Unrealized Losses	1,466	2,894
Over Twelve Months, Fair Value	142,786	167,473
Total Gross Unrealized Losses	1,466	3,130
Total Fair Value	142,786	198,145
Debt Securities
Total unrealized losses	1,466	3,130
Fair value of investment	762,421	760,184
Debt securities | Corporate bonds
Securities available for sale
Less Than Twelve Months, Gross Unrealized Losses	614	1,103
Less Than Twelve Months, Fair Value	33,680	39,571
Total Gross Unrealized Losses	614	1,103
Total Fair Value	33,680	39,571
Debt Securities
Number of securities in the portfolio of AFS	6
Number of AFS investment securities in unrealized loss positions	2
Aggregate unrealized losses as a percentage of the amortized cost of the securities in unrealized loss positions	1.80%
Total unrealized losses	614	1,103
Fair value of investment	55,357	54,151
Debt securities | Corporate bonds | One investment
Debt Securities
Total unrealized losses	500
Fair value of investment	31,100
Debt securities | Trust preferred securities
Securities available for sale
Less Than Twelve Months, Gross Unrealized Losses	82	65
Less Than Twelve Months, Fair Value	2,192	935
Over Twelve Months, Gross Unrealized Losses		1,147
Over Twelve Months, Fair Value		2,408
Total Gross Unrealized Losses	82	1,212
Total Fair Value	2,192	3,343
Debt Securities
Number of securities in the portfolio of AFS	4
Number of AFS investment securities in unrealized loss positions	2
Aggregate unrealized losses as a percentage of the amortized cost of the securities in unrealized loss positions	3.60%
Total unrealized losses	82	1,212
Fair value of investment	13,427	16,215
Debt securities | Other bonds and obligations
Securities available for sale
Over Twelve Months, Gross Unrealized Losses	7	52
Over Twelve Months, Fair Value	2,057	3,035
Total Gross Unrealized Losses	7	52
Total Fair Value	2,057	3,035
Debt Securities
Number of securities in the portfolio of AFS	8
Number of AFS investment securities in unrealized loss positions	4
Aggregate unrealized losses as a percentage of the amortized cost of the securities in unrealized loss positions	0.40%
Total unrealized losses	7	52
Fair value of investment	3,196	3,159
Debt securities | Tax advantaged economic development bonds
Securities held to maturity
Over Twelve Months, Gross Unrealized Losses		34
Over Twelve Months, Fair Value		7,972
Total Gross Unrealized Losses		34
Total Fair Value		7,972
Debt securities | Residential mortgage-backed securities
Debt Securities
Number of securities in the portfolio of AFS	198
Number of AFS investment securities in unrealized loss positions	36
Aggregate unrealized losses as a percentage of the amortized cost of the securities in unrealized loss positions	1.00%
Marketable equity securities
Securities available for sale
Less Than Twelve Months, Gross Unrealized Losses	636	1,039
Less Than Twelve Months, Fair Value	7,364	9,902
Over Twelve Months, Gross Unrealized Losses	284	334
Over Twelve Months, Fair Value	4,576	4,755
Total Gross Unrealized Losses	920	1,373
Total Fair Value	11,940	14,657
Debt Securities
Number of securities in the portfolio of AFS	29
Number of AFS investment securities in unrealized loss positions	6
Aggregate unrealized losses as a percentage of the amortized cost of the securities in unrealized loss positions	7.20%
Total unrealized losses	920	1,373
Fair value of investment	$ 44,766	$ 54,942

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STOCKHOLDERS' EQUITY (Details)	Mar. 31, 2015	Dec. 31, 2014
Tier 1 capital to risk-weighted assets
Total capital to risk weighted assets (as a percent)	11.40%	11.40%
Common Equity Tier 1 Capital to risk weighted assets (as a percent)	9.10%
Tier 1 capital to risk weighted assets (as a percent)	9.20%	9.00%
Tier 1 capital to average assets (as a percent)	7.10%	7.00%
Regulatory Minimum to be Well Capitalized, Total capital to risk weighted assets (as a percent)	10.00%	10.00%
Regulatory Minimum to be Well Capitalized, Common Equity Tier 1 Capital to risk weighted assets (as a percent)	6.50%
Regulatory Minimum to be Well Capitalized, Tier 1 capital to risk weighted assets (as a percent)	8.00%	6.00%
Regulatory Minimum to be Well Capitalized, Tier 1 capital to average assets (as a percent)	5.00%	5.00%
Bank
Tier 1 capital to risk-weighted assets
Total capital to risk weighted assets (as a percent)	10.80%	10.80%
Common Equity Tier 1 Capital to risk weighted assets (as a percent)	9.40%
Tier 1 capital to risk weighted assets (as a percent)	9.40%	9.30%
Tier 1 capital to average assets (as a percent)	7.30%	7.20%
Regulatory Minimum to be Well Capitalized, Total capital to risk weighted assets (as a percent)	10.00%	10.00%
Regulatory Minimum to be Well Capitalized, Common Equity Tier 1 Capital to risk weighted assets (as a percent)	6.50%
Regulatory Minimum to be Well Capitalized, Tier 1 capital to risk weighted assets (as a percent)	8.00%	6.00%
Regulatory Minimum to be Well Capitalized, Tier 1 capital to average assets (as a percent)	5.00%	5.00%

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 43,089	$ 54,179
Short-term investments	19,125	17,575
Total cash and cash equivalents	62,214	71,754
Trading security	14,970	14,909
Securities available for sale, at fair value	1,099,656	1,091,818
Securities held to maturity (fair values of $44,744 and $44,997)	42,818	43,347
Federal Home Loan Bank stock and other restricted securities	58,734	55,720
Total securities	1,216,178	1,205,794
Loans held for sale, at fair value	29,305	19,493
Residential mortgages	1,473,239	1,496,204
Commercial real estate	1,672,099	1,611,567
Commercial and industrial loans	826,815	804,366
Consumer loans	756,510	768,463
Total loans	4,728,663	4,680,600
Less: Allowance for loan losses	36,286	35,662
Net loans	4,692,377	4,644,938
Premises and equipment, net	85,053	87,279
Other real estate owned	1,444	2,049
Goodwill	264,742	264,742
Other intangible assets	10,627	11,528
Cash surrender value of bank-owned life insurance policies	105,302	104,588
Deferred tax assets, net	26,828	28,776
Other assets	77,169	61,090
Total assets	6,571,239	6,502,031
Liabilities
Demand deposits	892,225	869,302
NOW deposits	436,458	426,108
Money market deposits	1,372,924	1,407,179
Savings deposits	512,607	496,344
Time deposits	1,505,469	1,455,746
Total deposits	4,719,683	4,654,679
Short-term debt	894,500	900,900
Long-term Federal Home Loan Bank advances	61,618	61,676
Subordinated notes	89,765	89,747
Total borrowings	1,045,883	1,052,323
Other liabilities	89,443	85,742
Total liabilities	5,855,009	5,792,744
Stockholders' equity
Common stock ($.01 par value; 50,000,000 shares authorized and 26,525,466 shares issued and 25,252,635 shares outstanding in 2015; 26,525,466 shares issued and 25,182,566 shares outstanding in 2014)	265	265
Additional paid-in capital	585,307	587,289
Unearned compensation	(7,226)	(6,147)
Retained earnings	160,241	156,446
Accumulated other comprehensive loss	9,068	6,579
Treasury stock, at cost (1,272,831 shares in 2015 and 1,342,900 shares in 2014)	(31,425)	(33,145)
Total stockholders' equity	716,230	709,287
Total liabilities and stockholders' equity	$ 6,571,239	$ 6,502,031

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LOANS (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Business Activity
Recorded Investment
Total	$ 24,994		$ 25,305
Unpaid Principal Balance
Total	26,080		26,448
Related Allowance
With an allowance recorded	1,086		1,143
Average Recorded Investment
Total	27,525	30,421
Cash Basis Interest Income Recognized
Total	164	203
Acquired Loans
Recorded Investment
Total	7,422		6,399
Unpaid Principal Balance
Total	7,990		6,570
Related Allowance
With an allowance recorded	568		171
Average Recorded Investment
Total	8,157	8,649
Cash Basis Interest Income Recognized
Total	79	79
Residential | Mortgages | Business Activity
Recorded Investment
Total	3,028		3,083
Unpaid Principal Balance
Total	3,028		3,238
Related Allowance
With an allowance recorded			155
Average Recorded Investment
Total	3,108	5,916
Cash Basis Interest Income Recognized
Total	28	39
Residential | Mortgages | Acquired Loans
Recorded Investment
Total	1,142		647
Unpaid Principal Balance
Total	1,194		695
Related Allowance
With an allowance recorded	52		48
Average Recorded Investment
Total	1,239	1,465
Cash Basis Interest Income Recognized
Total	3	5
Residential | Mortgages | 1-4 family | Business Activity
Recorded Investment
With no related allowance	3,028		2,528
With an allowance recorded			555
Unpaid Principal Balance
With no related allowance	3,028		2,528
With an allowance recorded			710
Related Allowance
With an allowance recorded			155
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	3,028		2,528
Average Recorded Investment
With no related allowance	3,108	4,142
With an allowance recorded		1,774
Cash Basis Interest Income Recognized
With no related allowance	28	23
With an allowance recorded		16
Residential | Mortgages | 1-4 family | Acquired Loans
Recorded Investment
With no related allowance	625		189
With an allowance recorded	517		458
Unpaid Principal Balance
With no related allowance	625		189
With an allowance recorded	569		506
Related Allowance
With an allowance recorded	52		48
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	625		189
Average Recorded Investment
With no related allowance	670	1,303
With an allowance recorded	569	162
Cash Basis Interest Income Recognized
With no related allowance	3	5
Commercial real estate | Business Activity
Recorded Investment
Total	21,256		21,093
Unpaid Principal Balance
Total	22,342		22,015
Related Allowance
With an allowance recorded	1,086		922
Average Recorded Investment
Total	23,390	22,600
Cash Basis Interest Income Recognized
Total	132	154
Commercial real estate | Acquired Loans
Recorded Investment
Total	5,748		5,589
Unpaid Principal Balance
Total	6,203		5,637
Related Allowance
With an allowance recorded	455		48
Commercial real estate | Construction | Business Activity
Recorded Investment
With no related allowance	2,632		16,990
With an allowance recorded			3,511
Unpaid Principal Balance
With no related allowance	2,632		16,990
With an allowance recorded			4,431
Related Allowance
With an allowance recorded			920
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,632		16,990
Average Recorded Investment
With no related allowance	2,628	1,957
With an allowance recorded		1,013
Cash Basis Interest Income Recognized
With no related allowance	1
Commercial real estate | Construction | Acquired Loans
Recorded Investment
With an allowance recorded	420
Unpaid Principal Balance
With an allowance recorded	676
Related Allowance
With an allowance recorded	256
Commercial real estate | Single and multi-family | Business Activity
Recorded Investment
With no related allowance	180
With an allowance recorded			490
Unpaid Principal Balance
With no related allowance	180
With an allowance recorded			492
Related Allowance
With an allowance recorded			2
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	180
Average Recorded Investment
With no related allowance	180
Commercial real estate | Single and multi-family | Acquired Loans
Recorded Investment
With no related allowance	2,857
With an allowance recorded	318
Unpaid Principal Balance
With no related allowance	2,857
With an allowance recorded	330
Related Allowance
With an allowance recorded	12
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,857
Average Recorded Investment
With no related allowance	2,892
With an allowance recorded	397
Cash Basis Interest Income Recognized
With no related allowance	24
Commercial real estate | Other commercial real estate | Business Activity
Recorded Investment
With no related allowance	14,380		102
With an allowance recorded	4,064
Unpaid Principal Balance
With no related allowance	14,380		102
With an allowance recorded	5,150
Related Allowance
With an allowance recorded	1,086
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	14,380		102
Average Recorded Investment
With no related allowance	15,315	16,180
With an allowance recorded	5,267	3,450
Cash Basis Interest Income Recognized
With no related allowance	131	154
Commercial real estate | Other commercial real estate | Acquired Loans
Recorded Investment
With no related allowance	1,649		5,206
With an allowance recorded	504		383
Unpaid Principal Balance
With no related allowance	1,649		5,206
With an allowance recorded	691		431
Related Allowance
With an allowance recorded	187		48
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,649		5,206
Average Recorded Investment
With no related allowance	1,662	4,821
With an allowance recorded	691	1,577
Total	6,308	6,398
Cash Basis Interest Income Recognized
With no related allowance	3	25
With an allowance recorded		46
Total	71	71
Commercial real estate | Business loans | Business Activity
Recorded Investment
Total	262		743
Unpaid Principal Balance
Total	262		743
Average Recorded Investment
With no related allowance	578	1,337
With an allowance recorded		55
Total	578	1,392
Cash Basis Interest Income Recognized
With no related allowance	3	7
With an allowance recorded		1
Total	3	8
Commercial real estate | Business loans | Acquired Loans
Average Recorded Investment
With no related allowance	64
Total	64	632
Cash Basis Interest Income Recognized
With no related allowance	3
Total	3	3
Commercial real estate | Business loans | Other commercial and industrial loans | Business Activity
Recorded Investment
With no related allowance	262		743
Unpaid Principal Balance
With no related allowance	262		743
Related Allowance
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	262		743
Commercial real estate | Business loans | Other commercial and industrial loans | Acquired Loans
Recorded Investment
With no related allowance	47		39
Total	47		39
Unpaid Principal Balance
With no related allowance	47		39
Total	47		39
Related Allowance
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	47		39
Commercial real estate | Business loans | Construction | Acquired Loans
Average Recorded Investment
With an allowance recorded	666
Cash Basis Interest Income Recognized
With an allowance recorded	44
Consumer | Business Activity
Recorded Investment
Total	448		386
Unpaid Principal Balance
Total	448		452
Related Allowance
With an allowance recorded			66
Average Recorded Investment
Total	449	513
Cash Basis Interest Income Recognized
Total	1	2
Consumer | Acquired Loans
Average Recorded Investment
Total	546	154
Cash Basis Interest Income Recognized
Total	2
Consumer | Home equity | Business Activity
Recorded Investment
With no related allowance	334		87
With an allowance recorded			194
Unpaid Principal Balance
With no related allowance	334		87
With an allowance recorded			248
Related Allowance
With an allowance recorded			54
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	334		87
Average Recorded Investment
With no related allowance	334	348
With an allowance recorded		41
Cash Basis Interest Income Recognized
With no related allowance		1
Consumer | Home equity | Acquired Loans
Recorded Investment
With no related allowance	197
With an allowance recorded	288		124
Total			124
Unpaid Principal Balance
With an allowance recorded	349		199
Total			199
Related Allowance
With an allowance recorded	61		75
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	197
Average Recorded Investment
With no related allowance	197	562
With an allowance recorded	349
Cash Basis Interest Income Recognized
With no related allowance	2	1
Consumer | Other | Business Activity
Recorded Investment
With no related allowance	114
With an allowance recorded			105
Unpaid Principal Balance
With no related allowance	114
With an allowance recorded			117
Related Allowance
With an allowance recorded			12
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	114
Average Recorded Investment
With no related allowance	115	124
Cash Basis Interest Income Recognized
With no related allowance	1	1
Consumer | Other | Acquired Loans
Average Recorded Investment
With no related allowance		154
With an allowance recorded		70
Cash Basis Interest Income Recognized
With an allowance recorded		2
Consumer | Business loans | Home equity | Acquired Loans
Recorded Investment
Total	485
Unpaid Principal Balance
Total	546
Related Allowance
With an allowance recorded	$ 61

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Common stock	Additional paid-in capital	Unearned compensation	Retained earnings	Accumulated other comprehensive (loss) income	Treasury stock	Total
Balance at Dec. 31, 2013	$ 265	$ 587,247	$ (5,563)	$ 141,958	$ (9,057)	$ (36,788)	$ 678,062
Balance (in shares) at Dec. 31, 2013	25,036
Comprehensive income:
Net loss				(1,106)			(1,106)
Other comprehensive income					8,426		8,426
Total comprehensive income							7,320
Cash dividends declared ($0.18 and $0.19 per share)				(4,561)			(4,561)
Treasury stock purchased						(2,467)	(2,467)
Treasury stock purchased (in shares)	(100)
Forfeited shares		1	5			(6)
Forfeited shares (in shares)	(1)
Exercise of stock options				(793)		1,512	719
Exercise of stock options (in shares)	61
Restricted stock grants		37	(3,144)			3,107
Restricted stock grants (in shares)	126
Stock-based compensation		41	891				932
Net tax benefit related to stock-based compensation		(1,984)					(1,984)
Other, net						(431)	(431)
Other, net (in shares)	(17)
Balance at Mar. 31, 2014	265	585,342	(7,811)	135,498	(631)	(35,073)	677,590
Balance (in shares) at Mar. 31, 2014	25,105
Balance at Dec. 31, 2014	265	585,289	(6,147)	156,446	6,579	(33,145)	709,287
Balance (in shares) at Dec. 31, 2014	25,183
Comprehensive income:
Net loss				8,759			8,759
Other comprehensive income					2,489		2,489
Total comprehensive income							11,248
Cash dividends declared ($0.18 and $0.19 per share)				(4,799)			(4,799)
Forfeited shares		22	214			(236)
Forfeited shares (in shares)	(9)
Exercise of stock options				(165)		281	116
Exercise of stock options (in shares)	11
Restricted stock grants		19	(2,286)			2,267
Restricted stock grants (in shares)	92
Stock-based compensation			993				993
Net tax benefit related to stock-based compensation		(23)					(23)
Other, net						(592)	(592)
Other, net (in shares)	(24)
Balance at Mar. 31, 2015	$ 265	$ 585,307	$ (7,226)	$ 160,241	$ 9,068	$ (31,425)	$ 716,230
Balance (in shares) at Mar. 31, 2015	25,253

XML

EARNINGS PER SHARE (Details 2) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Unvested Stock Award shares
Anti-dilutive securities
Securities excluded from the earnings per share calculations (in shares)	338	335
Options
Anti-dilutive securities
Securities excluded from the earnings per share calculations (in shares)	210	321

XML

FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2015

Quantitative information about the significant unobservable inputs within Level 3

Summary of financial assets and financial liabilities measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value

	March 31, 2015
	Level 1		Level 2		Level 3		Total
(In thousands)	Inputs		Inputs		Inputs		Fair Value
Trading security	$	—	$	—	$	14,970	$	14,970
Available-for-sale securities:
Municipal bonds and obligations	—		155,450		—		155,450
Governmentguaranteed residential mortgage-backed securities	—		65,039		—		65,039
Government-sponsored residential mortgage-backed securities	—		762,421		—		762,421
Corporate bonds	—		55,357		—		55,357
Trust preferred securities	—		13,427		—		13,427
Other bonds and obligations	—		3,196		—		3,196
Marketable equity securities	43,690		357		719		44,766
Loans held for sale	—		29,305		—		29,305
Derivative assets	—		15,444		977		16,421
Derivative liabilities	295		25,504		93		25,892

	December 31, 2014
	Level 1		Level 2		Level 3		Total
(In thousands)	Inputs		Inputs		Inputs		Fair Value
Trading security	$	—	$	—	$	14,909	$	14,909
Available-for-sale securities:
Municipal bonds and obligations	—		133,699		—		133,699
Government guaranteed residential mortgage-backed securities	—		69,468		—		69,468
Government-sponsored residential mortgage-backed securities	—		760,184		—		760,184
Corporate bonds	—		54,151		—		54,151
Trust preferred securities	—		14,667		1,548		16,215
Other bonds and obligations	—		3,159		—		3,159
Marketable equity securities	53,806		358		778		54,942
Loans Held for Sale	—		19,493		—		19,493
Derivative assets	—		12,328		625		12,953
Derivative liabilities	417		18,259		93		18,769

Schedule of loans held for sale

					Aggregate Fair Value
March 31, 2015	Aggregate		Aggregate		Less Aggregate
(In thousands)	Fair Value		Unpaid Principal		Unpaid Principal
Loans Held for Sale	$	29,305	$	28,483	$	822

					Aggregate Fair Value
December 31, 2014	Aggregate		Aggregate		Less Aggregate
(In thousands)	Fair Value		Unpaid Principal		Unpaid Principal
Loans Held for Sale	$	19,493	$	18,885	$	608

Schedule of changes in level 3 assets and liabilities that were measured at fair value on a recurring basis

	Assets (Liabilities)
				Securities			Interest Rate
	Trading			Available			Lock			Forward
(In thousands)	Security			for Sale			Commitments			Commitments
Three Months Ended March 31, 2015
Balance as of December 31, 2014	$	14,909		$	2,326		$	625		$	(93	)
Sale of AFS Security	—			(1,327		)	—			—
Unrealized (loss) gain, net recognized in other non-interest income	203			—			1,730			—
Unrealized gain included in accumulated other comprehensive loss	—			(280		)	—			—
Paydown of trading security	(142		)	—			—			—
Transfers to held for sale loans	—			—			(1,378		)	—
Balance as of March 31, 2015	$	14,970		$	719		$	977		$	(93	)
Unrealized gains (losses) relating to instruments still held at March 31, 2015	$	2,558		$	(51	)	$	977		$	(93	)

	Assets (Liabilities)
				Securities			Interest Rate
	Trading			Available			Lock			Forward
(In thousands)	Security			for Sale			Commitments			Commitments
Three Months Ended March 31, 2014
Balance as of December 31, 2013	$	14,840		$	1,964		$	258		$	19
Purchase of Marketable Equity Security	—			—			—			—
Unrealized (loss) gain, net recognized in other non-interest income	218			—			719			(115		)
Unrealized gain included in accumulated other comprehensive loss	—			82			—			—
Paydown of trading account security	(135		)	—			—			—
Transfers to held for sale loans	—			—			(600		)	—
Balance as of March 31, 2014	$	14,923		$	2,046		$	377		$	(96	)
Unrealized gains (losses) relating to instruments still held at March 31, 2014	$	1,962		$	(1,288	)	$	377		$	(96	)

Summary of applicable non-recurring fair value measurements

	Fair Value
(in thousands)	March 31, 2015		Valuation Techniques	Unobservable Inputs	Range (Weighted Average) (a)
Assets
Impaired loans	$	6,111	Fair value of collateral	Loss severity	3.78% to 53.08% (23.5%)
				Appraised value	$139.5 to $1,600.0 ($981.7)
Capitalized mortgage servicing rights	3,871		Discounted cash flow	Constant prepayment rate (CPR)	8.2% to 19.85% (11.05%)
				Discount rate	10.00% to 13.00% (10.42%)
Other real estate owned	1,444		Fair value of collateral	Appraised value	$57 to $700.0 ($470.7)
Total	$	11,426

(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.

	Fair Value
(in thousands)	December 31, 2014		Valuation Techniques	Unobservable Inputs	Range (Weighted Average) (a)
Assets
Impaired loans	$	5,820	Fair value of collateral	Loss severity	0.31% to 38.7% (12.65%)
				Appraised value	$5 to $1,600.0 ($912.7)
Capitalized mortgage servicing rights	3,757		Discounted cash flow	Constant prepayment rate (CPR)	7.83% to 19.00% (9.92%)
				Discount rate	10.00% to 13.00% (10.43%)
Other real estate owned	2,049		Fair value of collateral	Appraised value	$57 to $700.0 ($462.6)
Total	$	11,626

(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.

Summary of estimated fair values, and related carrying amounts, of financial instruments

	March 31, 2015
	Carrying		Fair
(In thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	62,214	$	62,214	$	62,214	$	—	$	—
Trading security	14,970		14,970		—		—		14,970
Securities available for sale	1,099,656		1,099,656		43,690		1,055,247		719
Securities held to maturity	42,818		44,744		—		—		44,744
FHLB bank stock and restricted securities	58,734		58,734		—		58,734		—
Net loans	4,692,377		4,736,177		—		—		4,736,177
Loans held for sale	29,305		29,305		—		29,305		—
Accrued interest receivable	17,786		17,786		—		17,786		—
Cash surrender value of bank-owned life insurance policies	105,302		105,302		—		105,302		—
Derivative assets	16,421		16,421		—		15,444		977
Assets held for sale	1,266		1,266		—		1,266		—
Financial Liabilities
Total deposits	$	4,719,683	$	4,720,914	—		$	4,720,914	$	—
Short-term debt	894,500		894,675		—		894,675		—
Long-term Federal Home Loan Bank advances	61,618		63,273		—		63,273		—
Subordinated borrowings	89,765		94,062		—		94,062		—
Derivative liabilities	25,892		25,892		295		25,504		93

	December 31, 2014
	Carrying		Fair
(In thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	71,754	$	71,754	$	71,754	$	—	$	—
Trading security	14,909		14,909		—		—		14,909
Securities available for sale	1,091,818		1,091,818		5,806		1,035,686		2,326
Securities held to maturity	43,347		44,997		—		—		44,997
FHLB bank stock and restricted securities	55,720		55,720		—		55,720		—
Net loans	4,644,938		4,695,256		—		—		4,695,256
Loans held for sale	19,493		19,493		—		19,493		—
Accrued interest receivable	17,274		17,274		—		17,274		—
Cash surrender value of bank-owned life insurance policies	104,588		104,588		—		104,588		—
Derivative assets	12,953		12,953		—		12,328		625
Assets held for sale	1,280		1,280		—		1,280		—
Financial Liabilities
Total deposits	$	4,654,679	$	4,655,234	$	—	$	4,655,234	$	—
Short-term debt	900,900		900,983		—		900,983		—
Long-term Federal Home Loan Bank advances	61,676		63,283		—		63,283		—
Subordinated borrowings	89,747		93,441		—		93,441		—
Derivative liabilities	18,769		18,769		417		18,259		93

Recurring

Quantitative information about the significant unobservable inputs within Level 3

Schedule of quantitative information about the significant unobservable inputs within Level 3

	Fair Value					Significant Unobservable Input
(In thousands)	March 31, 2015			Valuation Techniques	Unobservable Inputs	Value
Assets (Liabilities)
Trading Security	$	14,970		Discounted Cash Flow	Discount Rate	2.34		%
AFS Securities	719			Pricing Model	Median Peer Price/Tangible Book Value Percentage Multiple	93.35		%
Forward Commitments	(93		)	Historical Trend	Closing Ratio	89.54		%
				Pricing Model	Origination Costs, per loan	$	2,500
Interest Rate Lock Commitment	977			Historical Trend	Closing Ratio	89.54		%
				Pricing Model	Origination Costs, per loan	$	2,500
Total	$	16,573

	Fair Value					Significant Unobservable Input
(In thousands)	December 31, 2014			Valuation Techniques	Unobservable Inputs	Value
Assets (Liabilities)
Trading Security	$	14,909		Discounted Cash Flow	Discount Rate	2.60		%
AFS Securities	2,326			Discounted Cash Flow	Discount Rate	13.74		%
					Credit Spread	11.06		%
Forward Commitments	(93		)	Historical Trend	Closing Ratio	91.07		%
				Pricing Model	Origination Costs, per loan	$	2,500
Interest Rate Lock Commitment	625			Historical Trend	Closing Ratio	91.07		%
				Pricing Model	Origination Costs, per loan	$	2,500
Total	$	17,767

Non-recurring

Quantitative information about the significant unobservable inputs within Level 3

Schedule of quantitative information about the significant unobservable inputs within Level 3

	March 31, 2015		December 31, 2014		Three months ended March 31, 2015
	Level 3		Level 3		Total
(In thousands)	Inputs		Inputs		Gains (Losses)
Assets
Impaired loans	$	6,111	$	5,820	$	292
Capitalized mortgage servicing rights	3,871		3,757		—
Other real estate owned	1,444		2,049		(155		)
Total	$	11,426	$	11,626	$	137

XML

FAIR VALUE MEASUREMENTS (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Assets and financial liabilities measured at fair value on a recurring basis
Trading security	$ 14,970	$ 14,909
Available-for-sale securities	1,099,656	1,091,818
Derivative liabilities	25,546	18,282
Debt securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	1,054,890	1,036,876
Debt securities | Municipal bonds and obligations
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	155,450	133,699
Debt securities | Government guaranteed residential mortgage-backed securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	65,039	69,468
Debt securities | Government-sponsored residential mortgage-backed securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	762,421	760,184
Debt securities | Corporate bonds
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	55,357	54,151
Debt securities | Trust preferred securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	13,427	16,215
Debt securities | Other bonds and obligations
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	3,196	3,159
Marketable equity securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	44,766	54,942
Total Fair Value
Assets and financial liabilities measured at fair value on a recurring basis
Trading security	14,970	14,909
Available-for-sale securities	1,099,656	1,091,818
Loans held for sale	29,305	19,493
Derivative assets	16,421	12,953
Derivative liabilities	25,892	18,769
Level 1
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	43,690	5,806
Derivative liabilities	295	417
Level 2
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	1,055,247	1,035,686
Loans held for sale	29,305	19,493
Derivative assets	15,444	12,328
Derivative liabilities	25,504	18,259
Level 3
Assets and financial liabilities measured at fair value on a recurring basis
Trading security	14,970	14,909
Available-for-sale securities	719	2,326
Derivative assets	977	625
Derivative liabilities	93	93
Recurring
Assets and financial liabilities measured at fair value on a recurring basis
Transfers between Level 1, 2, and 3	0	0
Recurring | Total Fair Value
Assets and financial liabilities measured at fair value on a recurring basis
Trading security	14,970	14,909
Loans held for sale	29,305	19,493
Derivative assets	16,421	12,953
Derivative liabilities	25,892	18,769
Recurring | Total Fair Value | Debt securities | Municipal bonds and obligations
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	155,450	133,699
Recurring | Total Fair Value | Debt securities | Government guaranteed residential mortgage-backed securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	65,039	69,468
Recurring | Total Fair Value | Debt securities | Government-sponsored residential mortgage-backed securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	762,421	760,184
Recurring | Total Fair Value | Debt securities | Corporate bonds
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	55,357	54,151
Recurring | Total Fair Value | Debt securities | Trust preferred securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	13,427	16,215
Recurring | Total Fair Value | Debt securities | Other bonds and obligations
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	3,196	3,159
Recurring | Total Fair Value | Marketable equity securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	44,766	54,942
Recurring | Level 1
Assets and financial liabilities measured at fair value on a recurring basis
Derivative liabilities	295	417
Recurring | Level 1 | Marketable equity securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	43,690	53,806
Recurring | Level 2
Assets and financial liabilities measured at fair value on a recurring basis
Loans held for sale	29,305	19,493
Derivative assets	15,444	12,328
Derivative liabilities	25,504	18,259
Recurring | Level 2 | Debt securities | Municipal bonds and obligations
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	155,450	133,699
Recurring | Level 2 | Debt securities | Government guaranteed residential mortgage-backed securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	65,039	69,468
Recurring | Level 2 | Debt securities | Government-sponsored residential mortgage-backed securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	762,421	760,184
Recurring | Level 2 | Debt securities | Corporate bonds
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	55,357	54,151
Recurring | Level 2 | Debt securities | Trust preferred securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	13,427	14,667
Recurring | Level 2 | Debt securities | Other bonds and obligations
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	3,196	3,159
Recurring | Level 2 | Marketable equity securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	357	358
Recurring | Level 3
Assets and financial liabilities measured at fair value on a recurring basis
Trading security	14,970	14,909
Derivative assets	977	625
Derivative liabilities	93	93
Recurring | Level 3 | Debt securities | Trust preferred securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities		1,548
Recurring | Level 3 | Marketable equity securities
Assets and financial liabilities measured at fair value on a recurring basis
Available-for-sale securities	$ 719	$ 778

XML

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

3 Months Ended

Mar. 31, 2015

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

NOTE 14. NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

Presented below is net interest income after provision for loan losses for the three months ended March 31, 2015 and 2014, respectively.

	Three Months Ended
	March 31,
(In thousands)	2015		2014
Net interest income	$	45,493	$	42,766
Provision for loan losses	3,851		3,396
Net interest income after provision for loan losses	$	41,642	$	39,370

XML

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES (Tables)

3 Months Ended

Mar. 31, 2015

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

Schedule of net interest income after provision for loan losses

	Three Months Ended
	March 31,
(In thousands)	2015		2014
Net interest income	$	45,493	$	42,766
Provision for loan losses	3,851		3,396
Net interest income after provision for loan losses	$	41,642	$	39,370

XML

BASIS OF PRESENTATION (Policies)

3 Months Ended

Mar. 31, 2015

BASIS OF PRESENTATION

Basis of Presentation

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and contain all adjustments, consisting solely of normal, recurring adjustments, necessary for a fair presentation of results for such periods.

In addition, these interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to U.S. GAAP have been omitted.

The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the audited financial statements and note disclosures for Berkshire Hills Bancorp, Inc. (the “Company”) previously filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Reclassifications

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation.

Recent Adopted Accounting Principles

Recently Adopted Accounting Standards

In January 2014, the Financial Accounting Standard Board “FASB” issued Accounting Standard Updated “ASU” ASU No. 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects.” ASU No. 2014-01 permits reporting entities to make an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. This new guidance also requires new disclosures for all investors in these projects. ASU No. 2014-01 is effective for interim and annual reporting periods beginning after December 15, 2014. Upon adoption, the guidance must be applied retrospectively to all periods presented. However, entities that use the effective yield method to account for investments in these projects before adoption may continue to do so for these pre-existing investments. The Company has elected not to adopt the proportional amortization method, which had no impact on our consolidated financial statements.

Also in January 2014, the FASB issued ASU No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The objective of this guidance is to clarify when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. ASU No. 2014-04 states that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, ASU No. 2014-04 requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. ASU No. 2014-04 is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted the provisions of ASU No. 2014-04 effective January 1, 2015, which did not have a material effect on our consolidated financial statements.  See Note 4 - Loans to the Consolidated Financial Statements for the disclosures required by ASU No. 2014-04.

In June 2014, the FASB issued ASU No. 2014-11 related to repurchase-to-maturity transactions, repurchase financing and disclosures. The pronouncement changes the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The pronouncement also requires two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is not permitted. As of March 31, 2015 the Company did not have any repurchase transactions, and therefore the adoption of this pronouncement did not have an impact on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-14 related to classification of certain government-guaranteed mortgage loans upon foreclosure. The objective of this guidance is to reduce diversity in practice related to how creditors classify government-guaranteed mortgage loans, including FHA or VA guaranteed loans, upon foreclosure. Some creditors reclassify those loans to real estate consistent with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables. The amendments in this guidance require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) The loan has a government guarantee that is not separable from the loan before foreclosure; (2) At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The pronouncement is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted the provisions of ASU No. 2014-14 effective January 1, 2015, which did not have a material effect on our consolidated financial statements.

Future Application of Accounting Pronouncements

Future Application of Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09 related to the recognition of revenue from contracts with customers. The new revenue pronouncement creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. The pronouncement provides a five-step model for a company to recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The five steps are (1) identify the contract with the customer, (2) identify the separate performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when each performance obligation is satisfied. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016 using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. Early adoption is not permitted. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, “Amendments to the Consolidation Analysis.” This ASU affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU No. 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is not permitted; however, the FASB has issued a proposal to extend the effective date by one year.

In April 2015, the FASB issued ASU No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU No. 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

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FAIR VALUE MEASUREMENTS (Details 4) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Quantitative information about the significant unobservable inputs within Level 3
Other real estate owned	$ 1,444,000	$ 2,049,000
Liabilities measured on non-recurring basis	0	0
Recurring
Quantitative information about the significant unobservable inputs within Level 3
Fair Value Instruments Transfers between Levels	0	0
Non-recurring
Quantitative information about the significant unobservable inputs within Level 3
Fair Value Instruments Transfers between Levels	0	0
Non-recurring | Total Gains (Losses)
Quantitative information about the significant unobservable inputs within Level 3
Impaired loans	292,000
Other real estate owned	(155,000)
Total	137,000
Level 3 | Recurring
Quantitative information about the significant unobservable inputs within Level 3
Assets measured on recurring basis	16,573,000	17,767,000
Level 3 | Recurring | Trading Security | Discounted Cash Flow
Quantitative information about the significant unobservable inputs within Level 3
Assets measured on recurring basis	14,970,000	14,909,000
Discount Rate (as percent)	2.34%	2.60%
Level 3 | Recurring | Securities Available for Sale | Discounted Cash Flow
Quantitative information about the significant unobservable inputs within Level 3
Assets measured on recurring basis		2,326,000
Discount Rate (as percent)		13.74%
Credit Spread (as a percent)		11.06%
Level 3 | Recurring | Securities Available for Sale | Pricing Model
Quantitative information about the significant unobservable inputs within Level 3
Assets measured on recurring basis	719,000
Median Peer Price / Tangible Book Value Percentage Multiple (as a percent)	93.35%
Level 3 | Recurring | Forward Commitments | Historical Trend
Quantitative information about the significant unobservable inputs within Level 3
Liabilities measured at fair value	(93,000)	(93,000)
Closing Ratio (as percent)	89.54%	91.07%
Level 3 | Recurring | Forward Commitments | Pricing Model
Quantitative information about the significant unobservable inputs within Level 3
Origination Costs	2,500,000	2,500,000
Level 3 | Recurring | Interest rate lock commitments | Historical Trend
Quantitative information about the significant unobservable inputs within Level 3
Assets measured on recurring basis	977,000	625,000
Closing Ratio (as percent)	89.54%	91.07%
Level 3 | Recurring | Interest rate lock commitments | Pricing Model
Quantitative information about the significant unobservable inputs within Level 3
Origination Costs	2,500,000	2,500,000
Level 3 | Non-recurring
Quantitative information about the significant unobservable inputs within Level 3
Impaired loans	6,111,000	5,820,000
Capitalized mortgage servicing rights	3,871,000	3,757,000
Other real estate owned	1,444,000	2,049,000
Total	11,426,000	11,626,000
Level 3 | Non-recurring | Minimum | Impaired loans
Quantitative information about the significant unobservable inputs within Level 3
Loss severity (as percent)		0.31%
Level 3 | Non-recurring | Minimum | Impaired loans | Fair value of collateral
Quantitative information about the significant unobservable inputs within Level 3
Loss severity (as percent)	3.78%	5.00%
Appraised value	139,500
Level 3 | Non-recurring | Minimum | Capitalized mortgage servicing rights
Quantitative information about the significant unobservable inputs within Level 3
Constant prepayment rate (CPR) (as percent)		7.83%
Level 3 | Non-recurring | Minimum | Capitalized mortgage servicing rights | Discounted Cash Flow
Quantitative information about the significant unobservable inputs within Level 3
Discount Rate (as percent)	10.00%
Constant prepayment rate (CPR) (as percent)	8.20%	10.00%
Level 3 | Non-recurring | Minimum | Other real estate owned
Quantitative information about the significant unobservable inputs within Level 3
Appraised value		57,000
Level 3 | Non-recurring | Minimum | Other real estate owned | Fair value of collateral
Quantitative information about the significant unobservable inputs within Level 3
Appraised value	57,000
Level 3 | Non-recurring | Maximum | Impaired loans
Quantitative information about the significant unobservable inputs within Level 3
Loss severity (as percent)		38.70%
Level 3 | Non-recurring | Maximum | Impaired loans | Fair value of collateral
Quantitative information about the significant unobservable inputs within Level 3
Loss severity (as percent)	53.08%	1600.00%
Appraised value	1,600,000
Level 3 | Non-recurring | Maximum | Capitalized mortgage servicing rights
Quantitative information about the significant unobservable inputs within Level 3
Constant prepayment rate (CPR) (as percent)		19.00%
Level 3 | Non-recurring | Maximum | Capitalized mortgage servicing rights | Discounted Cash Flow
Quantitative information about the significant unobservable inputs within Level 3
Discount Rate (as percent)	13.00%
Constant prepayment rate (CPR) (as percent)	19.85%	13.00%
Level 3 | Non-recurring | Maximum | Other real estate owned
Quantitative information about the significant unobservable inputs within Level 3
Appraised value		700,000
Level 3 | Non-recurring | Maximum | Other real estate owned | Fair value of collateral
Quantitative information about the significant unobservable inputs within Level 3
Appraised value	700,000
Level 3 | Non-recurring | Weighted Average | Impaired loans
Quantitative information about the significant unobservable inputs within Level 3
Loss severity (as percent)		12.65%
Level 3 | Non-recurring | Weighted Average | Impaired loans | Fair value of collateral
Quantitative information about the significant unobservable inputs within Level 3
Loss severity (as percent)	23.50%	912.70%
Appraised value	981,700
Level 3 | Non-recurring | Weighted Average | Capitalized mortgage servicing rights
Quantitative information about the significant unobservable inputs within Level 3
Constant prepayment rate (CPR) (as percent)		9.92%
Level 3 | Non-recurring | Weighted Average | Capitalized mortgage servicing rights | Discounted Cash Flow
Quantitative information about the significant unobservable inputs within Level 3
Discount Rate (as percent)	10.42%
Constant prepayment rate (CPR) (as percent)	11.05%	10.43%
Level 3 | Non-recurring | Weighted Average | Other real estate owned
Quantitative information about the significant unobservable inputs within Level 3
Appraised value		462,600
Level 3 | Non-recurring | Weighted Average | Other real estate owned | Fair value of collateral
Quantitative information about the significant unobservable inputs within Level 3
Appraised value	$ 470,700

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Cash dividends declared, per share	$ 0.19	$ 0.18

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
CONSOLIDATED BALANCE SHEETS
Securities held to maturity, fair values (in dollars)	$ 44,744	$ 44,997
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	26,525,466	26,525,466
Common stock, shares outstanding	25,252,635	25,182,566
Treasury stock, shares	1,272,831	1,342,900

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2015

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 9. EARNINGS PER SHARE

Earnings per share have been computed based on the following (average diluted shares outstanding are calculated using the treasury stock method):

	Three Months Ended March 31,
(In thousands, except per share data)	2015		2014
Net income/(loss)	$	8,759	$	(1,106	)
Average number of common shares issued	26,525		26,525
Less: average number of treasury shares	1,295		1,425
Less: average number of unvested stock award shares	427		402
Average number of basic common shares outstanding	24,803		24,698
Plus: dilutive effect of unvested stock award shares	89		—
Plus: dilutive effect of stock options outstanding	63		—
Average number of diluted common shares outstanding	24,955		24,698
Earnings per share:
Basic	$	0.35	$	(0.04	)
Diluted	$	0.35	$	(0.04	)

For the three months ended March 31, 2015, 338 thousand shares of restricted stock and 210 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.  For the three months ended March 31, 2014, 335 thousand shares of restricted stock and 321 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015	May 06, 2015
Document and Entity Information
Entity Registrant Name	BERKSHIRE HILLS BANCORP INC
Entity Central Index Key	0001108134
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		29,517,572
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

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STOCK-BASED COMPENSATION PLANS

3 Months Ended

Mar. 31, 2015

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS

NOTE 10. STOCK-BASED COMPENSATION PLANS

A combined summary of activity in the Company’s stock award and stock option plans for the three months ended March 31, 2015 is presented in the following table:

	Non-vested Stock
	Awards Outstanding				Stock Options Outstanding
			Weighted-				Weighted-
			Average				Average
	Number of		Grant Date		Number of		Exercise
(Shares in thousands)	Shares		Fair Value		Shares		Price
Balance, December 31, 2014	424		$	24.33	282		$	20.42
Granted	92		24.90		—		—
Stock options exercised	—		—		(11	)	10.52
Stock awards vested	(82	)	24.22		—		—
Forfeited	(10	)	23.50		—		—
Expired	—		—		—		—
Balance, March 31, 2015	424		$	24.48	271		$	21.12
Exercisable options, March 31, 2015					271		$	21.12

During the three months ended March 31, 2015 and 2014, proceeds from stock option exercises totaled $116 thousand and totaled $718 thousand, respectively.  During the quarter ended March 31, 2015, there were 82 thousand shares issued in connection with vested stock awards.  During the three months ended March 31, 2014, there were 62 thousand shares issued in connection with vested stock awards.  All of these shares were issued from available treasury stock.  Stock-based compensation expense totaled $993 thousand and $932 thousand during the quarters ended March 31, 2015 and 2014, respectively.  Stock-based compensation expense is recognized ratably over the requisite service period for all awards.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Interest and dividend income
Loans	$ 44,445	$ 42,494
Securities and other	8,306	7,301
Total interest and dividend income	52,751	49,795
Interest expense
Deposits	4,949	4,721
Borrowings	2,309	2,308
Total interest expense	7,258	7,029
Net interest income	45,493	42,766
Non-interest income
Loan related income	1,283	1,248
Mortgage banking income	1,253	372
Deposit related fees	5,677	5,439
Insurance commissions and fees	2,967	3,049
Wealth management fees	2,603	2,549
Total fee income	13,783	12,657
Other	(1,255)	524
Gain on sale of securities, net	34	34
Loss on termination of hedges		(8,792)
Total non-interest income	12,562	4,423
Total net revenue	58,055	47,189
Provision for loan losses	3,851	3,396
Non-interest expense
Compensation and benefits	21,811	19,859
Occupancy and equipment	7,108	6,814
Technology and communications	3,593	3,778
Marketing and promotion	713	521
Professional services	1,272	1,152
FDIC premiums and assessments	1,129	1,009
Other real estate owned and foreclosures	251	523
Amortization of intangible assets	901	1,306
Acquisition, restructuring and conversion related expenses	4,421	6,301
Other	3,949	4,097
Total non-interest expense	45,148	45,360
Income before income taxes	9,056	(1,567)
Income tax expense (benefit)	297	(461)
Net income (loss)	$ 8,759	$ (1,106)
Earnings per share:
Total basic earning per share (in dollars per share)	$ 0.35	$ (0.04)
Total diluted earnings per share (in dollars per share)	$ 0.35	$ (0.04)
Weighted average common shares outstanding:
Basic (in shares)	24,803	24,698
Diluted (in shares)	24,955	24,698

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LOANS

3 Months Ended

Mar. 31, 2015

LOANS

LOANS

NOTE 4. LOANS

The Company’s loan portfolio is segregated into the following segments: residential mortgage, commercial real estate, commercial and industrial, and consumer. Residential mortgage loans include classes for 1- 4 family owner occupied and construction loans.  Commercial real estate loans include construction, single and multi-family, and other commercial real estate classes.  Commercial and industrial loans include asset based lending loans, lease financing and other commercial business loan classes.  Consumer loans include home equity, direct and indirect auto and other.  These portfolio segments each have unique risk characteristics that are considered when determining the appropriate level for the allowance for loan losses.

A substantial portion of the loan portfolio is secured by real estate in western Massachusetts, southern Vermont, northeastern New York, and in the Bank’s other New England lending areas. The ability of many of the Bank’s borrowers to honor their contracts is dependent, among other things, on the specific economy and real estate markets of these areas.

Total loans include business activity loans and acquired loans. Acquired loans are those loans acquired from the acquisitions of the 20 acquired branches, Beacon Federal Bancorp, Inc., The Connecticut Bank and Trust Company, Legacy Bancorp, Inc., and Rome Bancorp, Inc. The following is a summary of total loans:

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Residential mortgages:
1-4 family	$	1,188,018	$	256,503	$	1,444,521	$	1,199,408	$	268,734	$	1,468,142
Construction	27,796		922		28,718		27,044		1,018		28,062
Total residential mortgages	1,215,814		257,425		1,473,239		1,226,452		269,752		1,496,204
Commercial real estate:
Construction	182,800		4,046		186,846		169,189		4,201		173,390
Single and multi-family	142,297		48,429		190,726		140,050		53,168		193,218
Other commercial real estate	1,086,893		207,634		1,294,527		1,030,837		214,122		1,244,959
Total commercial real estate	1,411,990		260,109		1,672,099		1,340,076		271,491		1,611,567
Commercial and industrial loans:
Asset based lending	354,106		—		354,106		341,246		—		341,246
Other commercial and industrial loans	424,565		48,144		472,709		411,945		51,175		463,120
Total commercial and industrial loans	778,671		48,144		826,815		753,191		51,175		804,366
Total commercial loans	2,190,661		308,253		2,498,914		2,093,267		322,666		2,415,933
Consumer loans:
Home equity	255,368		62,247		317,615		252,681		65,951		318,632
Auto and other	351,826		87,069		438,895		346,480		103,351		449,831
Total consumer loans	607,194		149,316		756,510		599,161		169,302		768,463
Total loans	$	4,013,669	$	714,994	$	4,728,663	$	3,918,880	$	761,720	$	4,680,600

The carrying amount of the acquired loans at March 31, 2015 totaled $715 million.  A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with ASC 310-30. These purchased credit-impaired loans presently maintain a carrying value of $12.7 million (and a note balance of $23.9). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Loans that were considered not impaired at the acquisition date had a carrying amount of $702 million.

The carrying amount of the acquired loans at December 31, 2014 totaled $762 million. A subset of these loans was determined to have evidence of credit deterioration at acquisition date, which is accounted for in accordance with ASC 310-30. These purchased credit-impaired loans presently maintain a carrying value of $13.8 million (and a note balance of $25.8). These loans are evaluated for impairment through the periodic reforecasting of expected cash flows. Loans that were considered not impaired at the acquisition date had a carrying amount of $747.9 million.

The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Accounting for Certain Loans or Debt Securities Acquired in a Transfer.

	Three Months Ended March 31,
(In thousands)	2015			2014
Balance at beginning of period	$	2,541		$	2,559
Sales	—			—
Reclassification form nonaccretable difference for loans with improved cash flows	1,330			1,540
Accretion	(440		)	(945		)
Balance at end of period	$	3,431		$	3,154

The following is a summary of past due loans at March 31, 2015 and December 31, 2014:

Business Activities Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
March 31, 2015
Residential mortgages:
1-4 family	$	1,888	$	888	$	4,066	$	6,842	$	1,181,176	$	1,188,018	$	1,699
Construction	—		—		414		414		27,382		27,796		414
Total	1,888		888		4,480		7,256		1,208,558		1,215,814		2,113
Commercial real estate:
Construction	—		—		758		758		182,042		182,800		—
Single and multi-family	245		247		406		898		141,399		142,297		—
Other commercial real estate	1,900		330		9,202		11,432		1,075,461		1,086,893		266
Total	2,145		577		10,366		13,088		1,398,902		1,411,990		266
Commercial and industrial loans:
Asset based lending	—		—		—		—		354,106		354,106		—
Other commercial and industrial loans	1,371		150		725		2,246		422,319		424,565		—
Total	1,371		150		725		2,246		776,425		778,671		—
Consumer loans:
Home equity	589		154		2,546		3,289		252,079		255,368		1,354
Auto and other	744		54		255		1,053		350,773		351,826		3
Total	1,333		208		2,801		4,342		602,852		607,194		1,357
Total	$	6,737	$	1,823	$	18,372	$	26,932	$	3,986,737	$	4,013,669	$	3,736

Business Activities Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
December 31, 2014
Residential mortgages:
1-4 family	$	5,580	$	146	$	4,053	$	9,779	$	1,189,629	$	1,199,408	$	1,527
Construction	666		410		—		1,076		25,968		27,044		—
Total	6,246		556		4,053		10,855		1,215,597		1,226,452		1,527
Commercial real estate:
Construction	—		2,000		720		2,720		166,469		169,189		—
Single and multi-family	178		156		458		792		139,258		140,050		—
Other commercial real estate	692		705		9,383		10,780		1,020,057		1,030,837		621
Total	870		2,861		10,561		14,292		1,325,784		1,340,076		621
Commercial and industrial loans:
Asset based lending	—		—		—		—		341,246		341,246		—
Other commercial and industrial loans	1,040		498		856		2,394		409,551		411,945		6
Total	1,040		498		856		2,394		750,797		753,191		6
Consumer loans:
Home equity	333		1,000		1,387		2,720		249,961		252,681		230
Auto and other	831		65		315		1,211		345,269		346,480		10
Total	1,164		1,065		1,702		3,931		595,230		599,161		240
Total	$	9,320	$	4,980	$	17,172	$	31,472	$	3,887,408	$	3,918,880	$	2,394

Acquired Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Acquired Credit Impaired		Total Loans		Past Due > 90 days and Accruing
March 31, 2015
Residential mortgages:
1-4 family	$	187	$	592	$	1,930	2,709		$	361	$	256,503	$	144
Construction	—		—		—		—		—		922		—
Total	187		592		1,930		2,709		361		257,425		144
Commercial real estate:
Construction	—		—		676		676		1,281		4,046		—
Single and multi-family	323		45		2,728		3,096		4,924		48,429		2,257
Other commercial real estate	1,116		116		2,269		3,501		5,222		207,634		—
Total	1,439		161		5,673		7,273		11,427		260,109		2,257
Commercial and industrial loans:
Asset based lending	—		—		—		—		—		—		—
Other commercial and industrial loans	285		—		586		871		705		48,144		3
Total	285		—		586		871		705		48,144		3
Consumer loans:
Home equity	209		228		1,118		1,555		170		62,247		242
Auto and other	1,394		23		731		2,148		—		87,069		19
Total	1,603		251		1,849		3,703		170		149,316		261
Total	$	3,514	$	1,004	$	10,038	$	14,556	$	12,663	$	714,994	$	2,665

Acquired Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Acquired Credit Impaired		Total Loans		Past Due > 90 days and Accruing
December 31, 2014
Residential mortgages:
1-4 family	$	1,133	$	638	$	1,651	$	3,422	$	375	$	268,734	$	269
Construction	—		—		—		—		—		1,018		—
Total	1,133		638		1,651		3,422		375		269,752		269
Commercial real estate:
Construction	—		—		691		691		1,296		4,201		—
Single and multi-family	277		—		572		849		5,477		53,168		—
Other commercial real estate	—		715		2,004		2,719		5,504		214,122		329
Total	277		715		3,267		4,259		12,277		271,491		329
Commercial and industrial loans:
Asset based lending	—		—		—		—		—		—		—
Other commercial and industrial loans	202		32		855		1,089		986		51,175		—
Total	202		32		855		1,089		986		51,175		—
Consumer loans:
Home equity	176		95		1,049		1,320		171		65,951		466
Auto and other	1,170		944		1,363		3,477		—		103,351		194
Total	1,346		1,039		2,412		4,797		171		169,302		660
Total	$	2,958	$	2,424	$	8,185	$	13,567	$	13,809	$	761,720	$	1,258

The following is summary information pertaining to non-accrual loans at March 31, 2015 and December 31, 2014:

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans (1)		Total		Business Activities Loans		Acquired Loans (2)		Total
Residential mortgages:
1-4 family	$	2,367	$	1,786	$	4,153	$	2,526	$	1,382	$	3,908
Construction	—		—		—		—		—		—
Total	2,367		1,786		4,153		2,526		1,382		3,908
Commercial real estate:
Construction	758		—		758		720		—		720
Single and multi-family	406		471		877		458		141		599
Other commercial real estate	8,936		1,939		10,875		8,762		1,675		10,437
Total	10,100		2,410		12,510		9,940		1,816		11,756
Commercial and industrial loans:
Other commercial and industrial loans	725		569		1,294		850		811		1,661
Total	725		569		1,294		850		811		1,661
Consumer loans:
Home equity	1,192		876		2,068		1,157		583		1,740
Auto and other	252		712		964		305		1,169		1,474
Total	1,444		1,588		3,032		1,462		1,752		3,214
Total non-accrual loans	$	14,636	$	6,353	$	20,989	$	14,778	$	5,761	$	20,539

(1) At quarter end March 31, 2015, acquired credit impaired loans accounted for $1.0 million of non-accrual loans that are not presented in the above table.

(2) At year end 2014, acquired credit impaired loans accounted for $1.2 million of non-accrual loans that are not presented in the above table.

Loans evaluated for impairment as of March 31, 2015 and December 31, 2014 were as follows:

Business Activities Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
March 31, 2015
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	3,028	$	22,342	$	262	$	448	$	26,080
Collectively evaluated	1,212,786		1,389,648		778,409		606,746		3,987,589
Total	$	1,215,814	$	1,411,990	$	778,671	$	607,194	$	4,013,669

Business Activities Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
December 31, 2014
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	3,238	$	22,015	$	743	$	452	$	26,448
Collectively evaluated for impairment	1,223,214		1,318,061		752,448		598,709		3,892,432
Total	$	1,226,452	$	1,340,076	$	753,191	$	599,161	$	3,918,880

Acquired Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
March 31, 2015
Loans receivable:
Balance at end of Period
Individually evaluated for impairment	$	1,194	$	6,203	$	47	$	546	$	7,990
Collectively evaluated	256,231		253,906		48,097		148,770		707,004
Total	$	257,425	$	260,109	$	48,144	$	149,316	$	714,994

Acquired Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
December 31, 2014
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	695	$	5,637	$	39	$	199	$	6,570
Collectively evaluated for impairment	269,057		265,854		51,136		169,103		755,150
Total	$	269,752	$	271,491	$	51,175	$	169,302	$	761,720

The following is a summary of impaired loans at March 31, 2015:

Business Activities Loans

	At March 31, 2015
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	3,028	$	3,028	$	—
Commercial real estate - single and multifamily	180		180		—
Other commercial real estate loans	14,380		14,380		—
Commercial real esate - construction	2,632		2,632		—
Other commercial and industrial loans	262		262		—
Consumer - home equity	334		334		—
Consumer - other	114		114		—
With an allowance recorded:
Other commercial real estate loans	$	4,064	$	5,150	$	1,086
Total
Residential mortgages	$	3,028	$	3,028	$	—
Commercial real estate	21,256		22,342		1,086
Commercial and industrial loans	262		262		—
Consumer	448		448		—
Total impaired loans	$	24,994	$	26,080	$	1,086

Acquired Loans

	At March 31, 2015
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	625	$	625	$	—
Commercial real estate - single and multifamily	2,857		2,857		—
Other commercial real estate loans	1,649		1,649		—
Other commercial and industrial loans	47		47		—
Consumer - home equity	197		197		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	517	$	569	$	52
Commercial real estate - single and multifamily	318		330		12
Other commercial real estate loans	504		691		187
Commercial real esate - construction	420		676		256
Consumer - home equity	288		349		61
Total
Residential mortgages	$	1,142	$	1,194	$	52
Commercial real estate	5,748		6,203		455
Commercial and industrial loans	47		47		—
Consumer	485		546		61
Total impaired loans	$	7,422	$	7,990	$	568

The following is a summary of impaired loans at December 31, 2014:

Business Activities Loans

	At December 31, 2014
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	2,528	$	2,528	$	—
Commercial real estate - construction	16,990		16,990		—
Commercial real estate - single and multifamily	—		—		—
Other commercial real estate loans	102		102		—
Other commercial and industrial loans	743		743		—
Consumer - home equity	87		87		—
Consumer - other	—		—		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	555	$	710	$	155
Commercial real estate - construction	3,511		4,431		920
Commercial real estate - single and multifamily	490		492		2
Other commercial real estate loans	—		—		—
Other commercial and industrial loans	—		—		—
Consumer - home equity	194		248		54
Consumer - other	105		117		12
Total
Residential mortgages	$	3,083	$	3,238	$	155
Commercial real estate	21,093		22,015		922
Commercial and industrial loans	743		743		—
Consumer	386		452		66
Total impaired loans	$	25,305	$	26,448	$	1,143

Acquired Loans

	At December 31, 2014
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	189	$	189	$	—
Other commercial real estate loans	5,206		5,206		—
Other commercial and industrial loans	39		39		—
Consumer - home equity	—		—		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	458	$	506	$	48
Other commercial real estate loans	383		431		48
Consumer - home equity	124		199		75
Total
Residential mortgages	$	647	$	695	$	48
Other commercial real estate loans	5,589		5,637		48
Other commercial and industrial loans	39		39		—
Consumer - home equity	124		199		75
Total impaired loans	$	6,399	$	6,570	$	171

The following is a summary of the average recorded investment and interest income recognized on impaired loans as of March 31, 2015 and 2014:

Business Activities Loans

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:
Residential mortgages - 1-4 family	$	3,108	$	28	$	4,142	$	23
Commercial real estate - construction	2,628		1		1,957		—
Commercial real estate - single and multifamily	180		—		—		—
Other commercial real estate loans	15,315		131		16,180		154
Commercial and industrial loans	578		3		1,337		7
Consumer - home equity	334		—		348		1
Consumer - other	115		1		124		1
With an allowance recorded:
Residential mortgages - 1-4 family	$	—	$	—	$	1,774	$	16
Commercial real estate - construction	—		—		1,013		—
Other commercial real estate loans	5,267		—		3,450		—
Commercial and industrial loans	—		—		55		1
Consumer - home equity	—		—		41		—
Total
Residential mortgages	$	3,108	$	28	$	5,916	$	39
Commercial real estate	23,390		132		22,600		154
Commercial and industrial loans	578		3		1,392		8
Consumer loans	449		1		513		2
Total impaired loans	$	27,525	$	164	$	30,421	$	203

Acquired Loans

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:
Residential mortgages - 1-4 family	$	670	$	3	$	1,303	$	5
Commercial real estate - single and multifamily	2,892		24		—		—
Other commercial real estate loans	1,662		3		4,821		25
Other commercial and industrial loans	64		3		—		—
Consumer - home equity	197		2		562		1
Consumer - other	—		—		154		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	569	$	—	$	162	$	—
Commercial real estate - single and multifamily	397		—		—		—
Other commercial real estate loans	691		—		1,577		46
Commercial real esate - construction	666		44		—		—
Consumer - home equity	349		—		—		—
Consumer - other	—		—		70		2
Total
Residential mortgages	$	1,239	$	3	$	1,465	$	5
Other commercial real estate loans	6,308		71		6,398		71
Commercial and industrial loans	64		3		632		3
Consumer loans	546		2		154		—
Total impaired loans	$	8,157	$	79	$	8,649	$	79

Troubled Debt Restructuring Loans

The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring (TDR), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.  TDRs are evaluated individually for impairment and may result in a specific allowance amount allocated to an individual loan.

The following tables include the recorded investment and number of modifications identified during the three months ended March 31, 2015 and for the three months ended March 31, 2014, respectively.  The table includes the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured. The modifications for the three months ending March 31, 2015 were attributable to interest rate concessions, maturity date extensions and released collateral.  The modification for the three months ending March 31, 2014 was attributable to concessions granted as ordered by bankruptcy court.

	Modifications by Class
	Three months ending March 31, 2015
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial - Construction	1	$	123	$	123
Commercial - Other	1	2,000		2,000
Commercial and industrial - Other	1	33		33
Total	3	$	2,156	$	2,156

	Modifications by Class
	Three months ending March 31, 2014
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Residential - 1-4 Family	1	$	122	$	119

The following table discloses the recorded investment and number of modifications for TDRs within the last three months where a concession has been made, that then defaulted in the respective reporting period.

	Modifications that Subsequently Defaulted
	Three months ending March 31, 2015
	Number of Contracts	Recorded Investment
Troubled Debt Restructurings
Commercial - Other	1	$	668

For the three months ended March 31, 2014, there were no loans that were restructured within the last twelve months that have subsequently defaulted during the period.

The following table presents the Company’s TDR activity for the three months ended March 31, 2015 and 2014:

	Three Months Ending
	March 31,
(In thousands)	2015			2014
Balance at beginning of the period	$	16,714		$	10,822
Principal payments	(484		)	(872		)
TDR status change (1)	—			(52		)
Other reductions/increases (2)	(1,182		)	95
Newly identified TDRs	2,156			119
Balance at end of the period	$	17,204		$	10,112

(1) TDR status change classification represents TDR loans with a specified interest rate equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk and  the loan was on current payment status and not impaired based on the terms specified by the restructuring agreement.

(2) Other reductions classification consists of transfer to other real estate owned and charge-offs and advances to loans.

The evaluation of certain loans individually for specific impairment includes loans that were previously classified as TDRs or continue to be classified as TDRs.

As of March 31, 2015, the Company maintained foreclosed residential real estate property with a fair value of $653 thousand. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure totaled $5.1 million. As of December 31, 2014, foreclosed residential real estate property totaled $1.3 million.

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SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

3 Months Ended

Mar. 31, 2015

SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

NOTE 3. SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

The following is a summary of securities available for sale and held to maturity:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2015
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	149,454	$	6,391	$	(395	)	$	155,450
Government-guaranteed residential mortgage-backed securities	64,456		696		(113		)	65,039
Government-sponsored residential mortgage-backed securities	750,730		13,157		(1,466		)	762,421
Corporate bonds	55,560		411		(614		)	55,357
Trust preferred securities	12,773		736		(82		)	13,427
Other bonds and obligations	3,203		—		(7		)	3,196
Total debt securities	1,036,176		21,391		(2,677		)	1,054,890
Marketable equity securities	38,150		7,536		(920		)	44,766
Total securities available for sale	1,074,326		28,927		(3,597		)	1,099,656
Securities held to maturity
Municipal bonds and obligations	4,847		—		—			4,847
Government-sponsored residential mortgage-backed securities	70		5		—			75
Tax advantaged economic development bonds	37,570		1,921		—			39,491
Other bonds and obligations	331		—		—			331
Total securities held to maturity	42,818		1,926		—			44,744
Total	$	1,117,144	$	30,853	$	(3,597	)	$	1,144,400
December 31, 2014
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	127,014	$	6,859	$	(174	)	$	133,699
Government-guaranteed residential mortgage-backed securities	68,972		702		(206		)	69,468
Government-sponsored residential mortgage-backed securities	755,893		7,421		(3,130		)	760,184
Corporate bonds	55,134		120		(1,103		)	54,151
Trust preferred securities	16,607		820		(1,212		)	16,215
Other bonds and obligations	3,211		—		(52		)	3,159
Total debt securities	1,026,831		15,922		(5,877		)	1,036,876
Marketable equity securities	48,993		7,322		(1,373		)	54,942
Total securities available for sale	1,075,824		23,244		(7,250		)	1,091,818
Securities held to maturity
Municipal bonds and obligations	4,997		—		—			4,997
Government-sponsored residential mortgage-backed securities	70		4		—			74
Tax advantaged economic development bonds	37,948		1,680		(34		)	39,594
Other bonds and obligations	332		—		—			332
Total securities held to maturity	43,347		1,684		(34		)	44,997
Total	$	1,119,171	$	24,928	$	(7,284	)	$	1,136,815

The amortized cost and estimated fair value of available for sale (“AFS”) and held to maturity (“HTM”) securities, segregated by contractual maturity at March 31, 2015 are presented below.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.  Mortgage-backed securities are shown in total, as their maturities are highly variable.  Equity securities have no maturity and are also shown in total.

	Available for sale				Held to maturity
	Amortized		Fair		Amortized		Fair
(In thousands)	Cost		Value		Cost		Value
Within 1 year	$	31,062	$	30,557	$	1,214	$	1,214
Over 1 year to 5 years	1,256		1,264		16,802		17,774
Over 5 years to 10 years	17,319		17,698		12,232		12,532
Over 10 years	171,353		177,911		12,500		13,149
Total bonds and obligations	220,990		227,430		42,748		44,669
Marketable equity securities	38,150		44,766		—		—
Residential mortgage-backed securities	815,186		827,460		70		75
Total	$	1,074,326	$	1,099,656	$	42,818	$	44,744

Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:

	Less Than Twelve Months				Over Twelve Months				Total
	Gross				Gross				Gross
	Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(In thousands)	Losses		Value		Losses		Value		Losses		Value
March 31, 2015
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	62	$	19,756	$	333	$	11,796	$	395	$	31,552
Government-guaranteed residential mortgage-backed securities	11		5,638		102		6,701		113		12,339
Government-sponsored residential mortgage-backed securities	—		—		1,466		142,786		1,466		142,786
Corporate bonds	614		33,680		—		—		614		33,680
Trust preferred securities	82		2,192		—		—		82		2,192
Other bonds and obligations	—		—		7		2,057		7		2,057
Total debt securities	769		61,266		1,908		163,340		2,677		224,606
Marketable equity securities	636		7,364		284		4,576		920		11,940
Total securities available for sale	1,405		68,630		2,192		167,916		3,597		236,546
Securities held to maturity
Tax advantaged economic development bonds	—		—		—		—		—		—
Total securities held to maturity	—		—		—		—		—		—
Total	$	1,405	$	68,630	$	2,192	$	167,916	$	3,597	$	236,546
December 31, 2014
Securities available for sale
Debt securities:
Municipal bonds and obligations	$	8	$	1,001	$	166	$	7,206	$	174	$	8,207
Government guaranteed residential mortgage-backed securities	46		7,122		160		16,727		206		23,849
Government-sponsored residential mortgage-backed securities	236		30,672		2,894		167,473		3,130		198,145
Corporate bonds	1,103		39,571		—		—		1,103		39,571
Trust preferred securities	65		935		1,147		2,408		1,212		3,343
Other bonds and obligations	—				52		3,035		52		3,035
Total debt securities	1,458		79,301		4,419		196,849		5,877		276,150
Marketable equity securities	1,039		9,902		334		4,755		1,373		14,657
Total securities available for sale	2,497		89,203		4,753		201,604		7,250		290,807
Securities held to maturity
Tax advantaged economic development bonds	—		—		34		7,972		34		7,972
Total securities held to maturity	—		—		34		7,972		34		7,972
Total	$	2,497	$	89,203	$	4,787	$	209,576	$	7,284	$	298,779

Debt Securities

The Company expects to recover its amortized cost basis on all debt securities in its AFS and HTM portfolios. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of March 31, 2015, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low portfolio turnover. The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS and HTM portfolios were not other-than-temporarily impaired at March 31, 2015:

AFS municipal bonds and obligations

At March 31, 2015, 28 of the total 190 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 1.2% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market.  At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk.  There were no material underlying credit downgrades during the first quarter of 2015.  All securities are performing.

AFS residential mortgage-backed securities

At March 31, 2015, 36 out of the total 198 securities in the Company’s portfolios of AFS residential mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 1.0% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and Government National Mortgage Association (“GNMA”) guarantee the contractual cash flows of all of the Company’s residential mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during the past quarter. All securities are performing.

AFS corporate bonds

At March 31, 2015, 2 out of 6 securities in the Company’s portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 1.8% of the amortized cost of bonds in unrealized loss positions.  The Company reviews the financial strength of all of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities.  Neither bond is investment grade rated.

At March 31, 2015, $0.5 million of the total unrealized losses was attributable to a $31.1 million investment.  The Company evaluated this security, with a Level 2 fair value of $30.6 million, for potential other-than-temporary impairment (“OTTI”) at March 31, 2015 and determined that OTTI was not evident based on both the Company’s ability and intent to hold the security until the recovery of its remaining amortized cost.

AFS trust preferred securities

At March 31, 2015, 2 out of the 4 securities in the Company’s portfolio of AFS trust preferred securities were in unrealized loss positions. Aggregate unrealized losses represented 3.6% of the amortized cost of securities in unrealized loss positions. The Company’s evaluation of the present value of expected cash flows on these securities supports its conclusions about the recoverability of the securities’ amortized cost basis. Both securities are investment grade rated.  The Company reviews the financial strength of all of the single issue trust issuers and has concluded that the amortized cost remains supported by the market value of these securities and they are performing.

AFS other bonds and obligations

At March 31, 2015, 4 of the total 8 securities in the Company’s portfolio of other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 0.4% of the amortized cost of securities in unrealized loss positions. The securities are investment grade rated and there were no material underlying credit downgrades during first quarter of 2015. All securities are performing.

Marketable Equity Securities

In evaluating its marketable equity securities portfolio for OTTI, the Company considers its ability to more likely than not hold an equity security to recovery.  The Company additionally considers other various factors including the length of time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer.  Any OTTI is recognized immediately through earnings.

At March 31, 2015, 6 out of the total 29 securities in the Company’s portfolio of marketable equity securities were in an unrealized loss position. The unrealized loss represented 7.2% of the amortized cost of the securities. The Company has the ability and intent to hold the securities until recovery of their cost basis and does not consider the securities other-than-temporarily impaired at March 31, 2015.  As new information becomes available in future periods, changes to the Company’s assumptions may be warranted and could lead to a different conclusion regarding the OTTI of these securities.

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2015

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 15. SUBSEQUENT EVENTS

On April 17, 2015, the Company acquired all of the outstanding common shares of Hampden Bancorp, Inc. (“Hampden”). Hampden Bank, the wholly owned subsidiary of Hampden, had 10 banking offices providing a range of services in the Springfield area and has merged with and into Berkshire Hills Bancorp, Inc.

Excluding Hampden shares held by Berkshire, Hampden shareholders received 4.2 million shares of the Company’s common stock. As of April 17, 2015, Hampden, on a consolidated basis, had assets with a carrying value of approximately $687.8 million, including loans outstanding with a carrying value of approximately $501.0 million, as well as deposits with a carrying value of approximately $482.1 million. The results of Hampden’s operations will be included in the Company’s Consolidated Statement of Income from the date of acquisition. The Company incurred $3.3 million of merger and acquisition expenses related to the Hampden and Hampden Bank merger for the three months ended March 31, 2015. Excluding the $3.3 million of merger and acquisition expenses, this merger agreement had no significant effect on the Company’s financial statements for the periods presented

As a result of the proximity of the closing of the merger with Hampden to the date these consolidated financial statements are available to be issued, the Company is still evaluating the estimated fair values of the assets acquired and the liabilities assumed. Accordingly, the amount of any goodwill and other intangible assets to be recognized in connection with this transaction is also yet to be determined.

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OPERATING SEGMENTS

3 Months Ended

Mar. 31, 2015

OPERATING SEGMENTS

OPERATING SEGMENTS

NOTE 11. 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 Berkshire Insurance Group, Inc. (“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 March 31, 2015
Net interest income	$	46,339		$	—	$	5,154		$	(6,000	)	$	45,493
Provision for loan losses	3,851			—		—			—			3,851
Non-interest income	9,413			2,967		3,785			(3,603		)	12,562
Non-interest expense	42,494			1,939		715			—			45,148
Income before income taxes	9,407			1,028		8,224			(9,603		)	9,056
Income tax expense (benefit)	433			399		(535		)	—			297
Net income	$	8,974		$	629	$	8,759		$	(9,603	)	$	8,759
Average assets (in millions)	$	6,479		$	28	$	757		$	(767	)	$	6,497
Three months ended March 31, 2014
Net interest income (expense)	$	43,712		$	—	$	(946	)	$	—		$	42,766
Provision for loan losses	3,396			—		—			—			3,396
Non-interest income	1,374			3,049		(252		)	252			4,423
Non-interest expense	42,574			2,322		464			—			45,360
Income before income taxes	(884		)	727		(1,662		)	252			(1,567		)
Income tax expense (benefit)	(192		)	287		(556		)	—			(461		)
Net income	$	(692	)	$	440	$	(1,106	)	$	252		$	(1,106	)
Average assets (in millions)	$	5,829		$	26	$	722		$	(726	)	$	5,851

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BORROWED FUNDS

3 Months Ended

Mar. 31, 2015

BORROWED FUNDS

BORROWED FUNDS

NOTE 7.BORROWED FUNDS

Borrowed funds at March 31, 2015 and December 31, 2014 are summarized, as follows:

	March 31, 2015				December 31, 2014
			Weighted				Weighted
			Average				Average
(dollars in thousands)	Principal		Rate		Principal		Rate
Short-term borrowings:
Advances from the FHLBB	$	884,500	0.25	%	$	890,900	0.24	%
Other Borrowings	10,000		1.83		10,000		1.80
Total short-term borrowings:	894,500		0.25		900,900		0.23
Long-term borrowings:
Advances from the FHLBB	61,618		0.91		61,676		0.93
Subordinated borrowings	74,301		7.00		74,283		7.00
Junior subordinated borrowings	15,464		2.11		15,464		2.08
Total long-term borrowings:	151,383		4.02		151,423		4.03
Total	$	1,045,883	0.80	%	$	1,052,323	0.79	%

Short term debt includes Federal Home Loan Bank of Boston (“FHLBB”) advances with an original maturity of less than one year and a short-term line-of-credit drawdown through a correspondent bank.  The Bank also maintains a $3.0 million secured line of credit with the FHLBB that bears a daily adjustable rate calculated by the FHLBB. There was no outstanding balance on the FHLBB line of credit for the periods ended March 31, 2015 and December 31, 2014.

The Bank is approved to borrow on a short-term basis from the Federal Reserve Bank of Boston as a non-member bank. The Bank has pledged certain loans and securities to the Federal Reserve Bank to support this arrangement. No borrowings with the Federal Reserve Bank of Boston took place for the periods ended March 31, 2015 and December 31, 2014.

Long-term FHLBB advances consist of advances with an original maturity of more than one year.  The advances outstanding at March 31, 2015 include callable advances totaling $5.0 million, and amortizing advances totaling $5.1 million.  The advances outstanding at December 31, 2014 include callable advances totaling $5.0 million, and amortizing advances totaling $5.1 million. All FHLBB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally all residential first mortgage loans and certain securities.

A summary of maturities of FHLBB advances as of March 31, 2015 and December 31, 2014 is as follows:

	March 31, 2015				December 31, 2014
			Weighted				Weighted
			Average				Average
(in thousands, except rates)	Principal		Rate		Principal		Rate
Fixed rate advances maturing:
2015	$	934,500	0.25	%	$	940,900	0.24	%
2016	1,503		0.03		1,519		0.88
2017	5,000		4.33		5,000		4.33
2018	—		0.00		—		0.00
2019 and beyond	5,115		3.91		5,157		3.85
Total FHLBB advances	$	946,118	0.29	%	$	952,576	0.28	%

The Company does not have variable-rate debt for the periods ended March 31, 2015 and December 31, 2014.

In September 2012, the Company issued fifteen year subordinated notes in the amount of $75.0 million at a discount of 1.15%.  The interest rate is fixed at 6.875% for the first ten years. After ten years, the notes become callable and convert to an interest rate of three-month LIBOR rate plus 511.3 basis points.

The Company holds 100% of the common stock of Berkshire Hills Capital Trust I (“Trust I”) which is included in other assets with a cost of $0.5 million.  The sole asset of Trust I is $15.5 million of the Company’s junior subordinated debentures due in 2035. These debentures bear interest at a variable rate equal to LIBOR plus 1.85% and had a rate of 2.11% and 2.08% at March 31, 2015 and December 31, 2014, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to stockholders while such interest payments on the debentures have been deferred.  The Company has not exercised this right to defer payments.  The Company has the right to redeem the debentures at par value. Trust I is considered a variable interest entity for which the Company is not the primary beneficiary.  Accordingly, Trust I is not consolidated into the Company’s financial statements.

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STOCK-BASED COMPENSATION PLANS (Details) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Stock-based compensation plans
Total compensation cost	$ 993,000,000	$ 932,000,000
Unvested Stock Award shares
Non-vested Stock Awards Outstanding, Number of Shares
Balance at the beginning of the period (in shares)	424
Granted (in shares)	92
Stock awards vested (in shares)	(82)	(62)
Forfeited (in shares)	(10)
Balance at the end of the period (in shares)	424
Non-vested Stock Awards Outstanding, Weighted-Average Grant Date Fair Value
Balance at the beginning of the period (in dollars per share)	$ 24.33
Granted (in dollars per share)	$ 24.90
Stock awards vested (in dollars per share)	$ 24.22
Forfeited (in dollars per share)	$ 23.50
Balance at the end of the period (in dollars per share)	$ 24.48
Options
Stock Options Outstanding, Number of Shares
Balance at the beginning of the period (in shares)	282
Stock options exercised (in shares)	(11)
Balance at the end of the period (in shares)	271
Exercisable options at the end of the period (in shares)	271
Stock Options Outstanding, Weighted-Average Exercise Price
Balance at the beginning of the period (in dollars per share)	$ 20.42
Stock options exercised (in dollars per share)	$ 10.52
Balance at the end of the period (in dollars per share)	$ 21.12
Exercisable options at the end of the period (in dollars per share)	$ 21.12
Stock-based compensation plans
Proceeds from stock option exercises	$ 116,000	$ 718,000,000

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LOAN LOSS ALLOWANCE

3 Months Ended

Mar. 31, 2015

LOAN LOSS ALLOWANCE

LOAN LOSS ALLOWANCE

NOTE 5.LOAN LOSS ALLOWANCE

Activity in the allowance for loan losses for the three months ended March 31, 2015 and 2014 was as follows:

Business Activities Loans (In thousands)	Residential mortgages			Commercial real estate		Commercial and industrial loans		Consumer			Unallocated		Total
March 31, 2015
Balance at beginning of period	$	6,836		$	14,690	$	5,206	$	5,928		$	135	$	32,795
Charged-off loans	128			1,605		223		202			—		2,158
Recoveries on charged-off loans	67			3		5		61			—		136
Provision for loan losses	(702		)	1,330		1,460		(751		)	158		1,495
Balance at end of period	$	6,073		$	14,418	$	6,448	$	5,036		$	293	$	32,268
Individually evaluated for impairment	—			1,086		—		—			—		1,086
Collectively evaluated	6,073			13,332		6,448		5,036			293		31,182
Total	$	6,073		$	14,418	$	6,448	$	5,036		$	293	$	32,268

Business Activities Loans (In thousands)	Residential mortgages			Commercial real estate		Commercial and industrial loans			Consumer		Unallocated			Total
March 31, 2014
Balance at beginning of period	$	6,937		$	13,705	$	5,173		$	3,644	$	68		$	29,527
Charged-off loans	706			660		189			429		—			1,984
Recoveries on charged-off loans	7			1		20			79		—			107
Provision for loan losses	(575		)	1,900		(185		)	836		(248		)	1,728
Balance at end of period	$	5,663		$	14,946	$	4,819		$	4,130	$	(180	)	$	29,378
Individually evaluated for impairment	397			1,558		54			9		—			2,018
Collectively evaluated	5,266			13,388		4,765			4,121		(180		)	27,360
Total	$	5,663		$	14,946	$	4,819		$	4,130	$	(180	)	$	29,378

Acquired Loans (In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans			Consumer		Unallocated		Total
March 31, 2015
Balance at beginning of period	$	615	$	790	$	1,093		$	369	$	—	$	2,867
Charged-off loans	238		405		198			433		—		1,274
Recoveries on charged-off loans	—		—		41			28		—		69
Provision for loan losses	372		1,579		(11		)	416		—		2,356
Balance at end of period	$	749	$	1,964	$	925		$	380	$	—	$	4,018
Individually evaluated for impairment	52		455					61		—		568
Collectively evaluated	697		1,509		925			319		—		3,450
Total	$	749	$	1,964	$	925		$	380	$	—	$	4,018

Acquired Loans (In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Unallocated		Total
March 31, 2014
Balance at beginning of period	$	625	$	2,339	$	597	$	235	$	—	$	3,796
Charged-off loans	429		447		52		405		—		1,333
Recoveries on charged-off loans	73		1		5		14		—		93
Provision for loan losses	401		231		548		488		—		1,668
Balance at end of period	$	670	$	2,124	$	1,098	$	332	$	—	$	4,224
Individually evaluated for impairment	30		250		21		—		—		301
Collectively evaluated	640		1,874		1,077		332		—		3,923
Total	$	670	$	2,124	$	1,098	$	332	$	—	$	4,224

Credit Quality Information

Business Activities Loans Credit Quality Analysis

The Company monitors the credit quality of its portfolio by using internal risk ratings that are based on regulatory guidance. Loans that are given a Pass rating are not considered a problem credit. Loans that are classified as Special Mention loans are considered to have potential credit problems and are evaluated closely by management. Substandard and non-accruing loans are loans for which a definitive weakness has been identified and which may make full collection of contractual cash flows questionable. Doubtful loans are those with identified weaknesses that make full collection of contractual cash flows, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The Company assigns an internal risk rating at origination and reviews the rating annually, semiannually or quarterly depending on the risk rating. The rating is also reassessed at any point in time when management becomes aware of information that may affect the borrower’s ability to fulfill their obligations.

The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention and Substandard.  Loans that are current within 59 days are rated Pass.  Residential mortgages that are 60-89 days delinquent are rated Special Mention. Loans delinquent for 90 days or greater are rated Substandard and generally placed on non-accrual status.  Home equity loans are risk rated based on the same rating system as the Company’s residential mortgages.

Ratings for other consumer loans, including auto loans, are based on a two rating system. Loans that are current within 119 days are rated Performing while loans delinquent for 120 days or more are rated Non-performing. Other consumer loans are placed on non-accrual at such time as they become Non-performing.

Acquired Loans Credit Quality Analysis

Upon acquiring a loan portfolio, our internal loan review function assigns risk ratings to the acquired loans, utilizing the same methodology as it does with business activities loans.  This may differ from the risk rating policy of the predecessor bank.  Loans which are rated Substandard or worse according to the rating process outlined below are deemed to be credit impaired loans accounted for under ASC 310-30, regardless of whether they are classified as performing or non-performing.

The Bank utilizes an eleven grade internal loan rating system for each of its acquired commercial real estate, construction and commercial loans as outlined in the Credit Quality Information section of this Note.  The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention and Substandard.  Residential mortgages that are current within 59 days are rated Pass.  Residential mortgages that are 60 — 89 days delinquent are rated Special Mention.  Residential mortgages delinquent for 90 days or greater are rated Substandard.  Home equity loans are risk rated based on the same rating system as the Company’s residential mortgages.  Other consumer loans are rated based on a two rating system.  Other consumer loans that are current within 119 days are rated Performing while loans delinquent for 120 days or more are rated Non-performing. Non-performing other consumer loans are deemed to be credit impaired loans accounted for under ASC 310-30.

The Company subjects loans that do not meet the ASC 310-30 criteria to ASC 450-20 by collectively evaluating these loans for an allowance for loan loss.  The Company applies a methodology similar to the methodology prescribed for business activities loans, which includes the application of environmental factors to each category of loans.  The methodology to collectively evaluate the acquired loans outside the scope of ASC 310-30 includes the application of a number of environmental factors that reflect management’s best estimate of the level of incremental credit losses that might be recognized given current conditions.  This is reviewed as part of the allowance for loan loss adequacy analysis.  As the loan portfolio matures and environmental factors change, the loan portfolio will be reassessed each quarter to determine an appropriate reserve allowance.

Additionally, the Company considers the need for an additional reserve for acquired loans accounted for outside of the scope of ASC 310-30 under ASC 310-20. At acquisition date, the Bank determined a fair value mark with credit and interest rate components.  Under the Company’s model, the impairment evaluation process involves comparing the carrying value of acquired loans, including the entire unamortized premium or discount, to the recorded reserve allowance. If necessary, the Company books an additional reserve to account for shortfalls identified through this calculation.  Fair value marks are not bifurcated when evaluating for impairment.

A decrease in the expected cash flows in subsequent periods requires the establishment of an allowance for loan losses at that time for ASC 310-30 loans.  At March 31, 2015, the allowance for loan losses related to acquired loans was $4.0 million using the above mentioned criteria.

The Company presented several tables within this footnote separately for business activity loans and acquired loans in order to distinguish the credit performance of the acquired loans from the business activity loans.

The following table presents the Company’s loans by risk rating at March 31, 2015 and December 31, 2014:

Business Activities Loans

Residential Mortgages

Credit Risk Profile by Internally Assigned Grade

	1-4 family				Construction				Total residential mortgages
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	1,183,064	$	1,195,209	$	27,382	$	26,634	$	1,210,446	$	1,221,843
Special mention	888		146		—		410		888		556
Substandard	4,066		4,053		414		—		4,480		4,053
Total	$	1,188,018	$	1,199,408	$	27,796	$	27,044	$	1,215,814	$	1,226,452

Commercial Real Estate

Credit Risk Profile by Creditworthiness Category

	Construction				Single and multi-family				Other				Total commercial real estate
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	179,868	$	166,295	$	140,022	$	137,533	$	1,023,304	$	959,836	$	1,343,194	$	1,263,664
Special mention	—		—		—		—		6,891		6,933		6,891		6,933
Substandard	2,932		2,894		2,275		2,517		56,625		63,995		61,832		69,406
Doubtful	—		—		—		—		73		73		73		73
Total	$	182,800	$	169,189	$	142,297	$	140,050	$	1,086,893	$	1,030,837	$	1,411,990	$	1,340,076

Commercial and Industrial Loans

Credit Risk Profile by Creditworthiness Category

	Asset based lending				Other				Total comm. and industrial loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	354,106	$	341,246	$	410,699	$	404,846	$	764,805	$	746,092
Special mention	—		—		187		560		187		560
Substandard	—		—		13,679		6,539		13,679		6,539
Total	$	354,106	$	341,246	$	424,565	$	411,945	$	778,671	$	753,191

Consumer Loans

Credit Risk Profile Based on Payment Activity

	Home equity				Auto and other				Total consumer loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Performing	$	254,176	$	251,524	$	351,574	$	346,175	$	605,750	$	597,699
Nonperforming	1,192		1,157		252		305		1,444		1,462
Total	$	255,368	$	252,681	$	351,826	$	346,480	$	607,194	$	599,161

Acquired Loans

Residential Mortgages

Credit Risk Profile by Internally Assigned Grade

	1-4 family				Construction				Total residential mortgages
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	253,866	$	266,445	$	922	$	1,018	$	254,788	$	267,463
Special mention	707		638		—		—		707		638
Substandard	1,930		1,651		—		—		1,930		1,651
Total	$	256,503	$	268,734	$	922	$	1,018	$	257,425	$	269,752

Commercial Real Estate

Credit Risk Profile by Creditworthiness Category

	Construction				Single and multi-family				Other				Total commercial real estate
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	2,765	$	2,904	$	41,145	$	44,497	$	192,233	$	195,681	$	236,143	$	243,082
Special mention	—		—		120		533		2,208		4,868		2,328		5,401
Substandard	1,281		1,297		7,164		8,138		13,193		13,573		21,638		23,008
Total	$	4,046	$	4,201	$	48,429	$	53,168	$	207,634	$	214,122	$	260,109	$	271,491

Commercial and Industrial Loans

Credit Risk Profile by Creditworthiness Category

	Asset based lending				Other				Total comm. and industrial loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	—	$	—	$	44,922	$	45,757	$	44,922	$	45,757
Special mention	—		—		—		1,723		—		1,723
Substandard	—		—		3,222		3,695		3,222		3,695
Total	$	—	$	—	$	48,144	$	51,175	$	48,144	$	51,175

Consumer Loans

Credit Risk Profile Based on Payment Activity

	Home equity				Auto and other				Total consumer loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Performing	$	61,371	$	65,368	$	86,356	$	102,182	$	147,727	$	167,550
Nonperforming	876		583		713		1,169		1,589		1,752
Total	$	62,247	$	65,951	$	87,069	$	103,351	$	149,316	$	169,302

The following table summarizes information about total loans rated Special Mention or lower as of March 31, 2015 and December 31, 2014.  The table below includes consumer loans that are special mention and substandard accruing that are classified in the above table as performing based on payment activity.

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Non-Accrual	$	14,636	$	7,373	$	22,009	$	14,778	$	6,927	$	21,705
Substandard Accruing	68,228		21,266		89,494		66,995		23,839		90,834
Total Classified	82,864		28,639		111,503		81,773		30,766		112,539
Special Mention	8,175		3,286		11,461		9,113		8,800		17,913
Total Criticized	$	91,039	$	31,925	$	122,964	$	90,886	$	39,566	$	130,452

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DEPOSITS

3 Months Ended

Mar. 31, 2015

DEPOSITS

DEPOSITS

NOTE 6.DEPOSITS

A summary of time deposits is as follows:

(In thousands)	March 31, 2015		December 31, 2014
Time less than $100,000	$	506,577	$	515,570
Time $100,000 or more	998,892		940,176
Total time deposits	$	1,505,469	$	1,455,746

Included in time deposits are brokered deposits of $478.8 million and $430.8 million at March 31, 2015 and December 31, 2014, respectively.  Included in money market deposits presented on the consolidated balance sheet are reciprocal deposits of $7.4 million and $9.4 million at March 31, 2015 and December 31, 2014, respectively.

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2015

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 8.STOCKHOLDERS’ EQUITY

The actual and required capital ratios were as follows:

		Regulatory				Regulatory
		Minimum to be				Minimum to be
	March 31, 2015	Well Capitalized		December 31, 2014		Well Capitalized
Company (consolidated)
Total capital to risk weighted assets	11.4	10.0	%	11.4	%	10.0	%
Common Equity Tier 1 Capital to risk weighted assets	9.1	6.5		N/A		N/A
Tier 1 capital to risk weighted assets	9.2	8.0		9.0		6.0
Tier 1 capital to average assets	7.1	5.0		7.0		5.0
Bank
Total capital to risk weighted assets	10.8	10.0	%	10.8	%	10.0	%
Common Equity Tier 1 Capital to risk weighted assets	9.4	6.5		N/A		N/A
Tier 1 capital to risk weighted assets	9.4	8.0		9.3		6.0
Tier 1 capital to average assets	7.3	5.0		7.2		5.0

At each date shown, the Company and the Bank met the conditions to be classified as “well capitalized” under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table above.

Effective January 1, 2015, the Company and the Bank became subject to the Basel III rule that requires the Company and the Bank to assess their Common Equity Tier 1 Capital to risk weighted assets and the Company and the Bank each exceed the minimum to be well capitalized.

Accumulated other comprehensive income (loss)

Components of accumulated other comprehensive income is as follows:

(In thousands)	March 31, 2015			December 31, 2014
Other accumulated comprehensive income, before tax:
Net unrealized holding gain on AFS securities	$	25,330		$	15,993
Net loss on effective cash flow hedging derivatives	(7,200		)	(3,299		)
Net unrealized holding (loss) on pension plans	(3,822		)	(2,291		)
Income taxes related to items of accumulated other comprehensive income:
Net unrealized holding gain on AFS securities	(9,682		)	(6,077		)
Net loss on effective cash flow hedging derivatives	2,902			1,330
Net unrealized holding (loss) on pension plans	1,540			923
Accumulated other comprehensive income	$	9,068		$	6,579

The following table presents the components of other comprehensive income for the three months ended March 31, 2015 and 2014:

(In thousands)	Before Tax			Tax Effect			Net of Tax
Three Months Ended March 31, 2015
Net unrealized holding gains on AFS securities:
Net unrealized gains arising during the period	$	9,371		$	(3,617	)	$	5,754
Less: reclassification adjustment for (gains) realized in net income	(34		)	12			(22		)
Net unrealized holding gain on AFS securities	9,337			(3,605		)	5,732
Net loss on cash flow hedging derivatives:
Net unrealized loss arising during the period	(3,901		)	1,572			(2,329		)
Less: reclassification adjustment for gains (losses) realized in net income	—			—			—
Net loss on cash flow hedging derivatives	(3,901		)	1,572			(2,329		)
Net unrealized holding loss on pension plans
Net unrealized loss arising during the period	(1,596		)	643			(953		)
Less: reclassification adjustment for gains (losses) realized in net income	65			(26		)	39
Net unrealized holding loss on pension plans	(1,531		)	617			(914		)
Other comprehensive income	$	3,905		$	(1,416	)	$	2,489
Three Months Ended March 31, 2014
Net unrealized holding loss on AFS securities:
Net unrealized loss arising during the period	$	6,055		$	(2,233	)	$	3,822
Less: reclassification adjustment for (gains) realized in net income	(34		)	12			(22		)
Net unrealized holding gain on AFS securities	6,021			(2,221		)	3,800
Net loss on cash flow hedging derivatives:
Net unrealized loss arising during the period	(860		)	368			(492		)
Less: reclassification adjustment for (gains) realized in net income	5,393			(2,200		)	3,193
Net gain on cash flow hedging derivatives	4,533			(1,832		)	2,701
Net gain on terminated swap:
Net unrealized loss arising during the period	—			—			—
Less: reclassification adjustment for losses realized in net income	3,237			(1,312		)	1,925
Net gain on terminated swap	3,237			(1,312		)	1,925
Other comprehensive income	$	13,791		$	(5,365	)	$	8,426

The following table presents the changes in each component of accumulated other comprehensive income (loss), for the three months ended March 31, 2015 and 2014:

	Net unrealized			Net loss on			Net loss			Net unrealized
	holding (loss) gain			effective cash			on			holding loss
	on AFS			flow hedging			terminated			on
(in thousands)	Securities			derivatives			swap			pension plans			Total
Three Months Ended March 31, 2015
Balance at Beginning of Period	$	9,916		$	(1,969	)	$	—		$	(1,368	)	$	6,579
Other Comprehensive Gain (Loss) Before reclassifications	5,754			(2,329		)	—			(953		)	2,472
Amounts Reclassified from Accumulated other comprehensive income	(22		)	—			—			39			17
Total Other Comprehensive Income (Loss)	5,732			(2,329		)	—			(914		)	2,489
Balance at End of Period	$	15,648		$	(4,298	)	$	—		$	(2,282	)	$	9,068
Three Months Ended March 31, 2014
Balance at Beginning of Period	$	(5,776	)	$	(1,366	)	$	(1,925	)	$	(1,368	)	$	(10,435	)
Other Comprehensive Gain (Loss) Before reclassifications	3,822			(492		)	—			—			3,330
Amounts Reclassified from Accumulated other comprehensive income	(22		)	3,193			1,925			—			5,096
Total Other Comprehensive Income (Loss)	3,800			2,701			1,925			—			8,426
Balance at End of Period	$	(1,976	)	$	1,335		$	—		$	(1,368	)	$	(2,009	)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2015 and 2014:

							Affected Line Item in the
	Three Months Ended March 31,						Statement where Net Income
(in thousands)	2015			2014			is Presented
Realized (gains) on AFS securities:
	$	(34	)	$	(34	)	Non-interest income
	12			12			Tax expense
	(22		)	(22		)	Net of tax
Realized losses on cash flow hedging derivatives:
	—			5,393			Non-interest income
	—			(2,200		)	Tax expense
	—			3,193			Net of tax
Amortization of realized gains on terminated swap:
	—			3,237			Non-interest income
	—			(1,312		)	Tax expense
	—			1,925			Net of tax
Realized loss on pension plans:
	65			—			Non-interest income
	(26		)	—			Tax expense
	39			—			Net of tax
Total reclassifications for the period	$	17		$	5,096		Net of tax

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Details 3) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amounts of Recognized Liabilities	$ (25,546,000)	$ (18,282,000)
Gross Amounts Offset in the Statements of Condition		58,000
Net Amounts of Liabilities Presented in the Statements of Condition	(25,546,000)	(18,224,000)
Gross Amounts Not Offset in the Statements of Condition
Financial instruments	20,456,000	14,984,000
Securities and Cash Collateral Pledged	5,090,000	3,190,000
Net Amount		(50,000)
Interest rate swaps
Interest Rate Swap Agreements ("Swap Agreements")
Amount of collateral posted for the net liability positions	25,500,000	18,200,000
Institutional counterparties
Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amounts of Recognized Liabilities	(25,546,000)	(18,232,000)
Gross Amounts Offset in the Statements of Condition		58,000
Net Amounts of Liabilities Presented in the Statements of Condition	(25,546,000)	(18,174,000)
Gross Amounts Not Offset in the Statements of Condition
Financial instruments	20,456,000	14,984,000
Securities and Cash Collateral Pledged	5,090,000	3,190,000
Commercial counterparties
Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amounts of Recognized Liabilities		(50,000)
Net Amounts of Liabilities Presented in the Statements of Condition		(50,000)
Gross Amounts Not Offset in the Statements of Condition
Net Amount		$ (50,000)

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FAIR VALUE MEASUREMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Level 2
Loans Held for Sale
Aggregate Fair Value	$ 29,305	$ 19,493
Aggregate Unpaid Principal	1,266	1,280
Loans Held for Sale
Loans Held for Sale
Gains in fair value of loans held for sale included in earnings	214
Losses in fair value of loans held for sale included in earnings	409
Recurring | Level 2
Loans Held for Sale
Aggregate Fair Value	29,305	19,493
Recurring | Loans Held for Sale | Level 2
Loans Held for Sale
Aggregate Fair Value	29,305	19,493
Aggregate Unpaid Principal	28,483	18,885
Aggregate Fair Value Less Aggregate Unpaid Principal	$ 822	$ 608

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Offsetting of Financial Assets and Derivative Assets
Gross Amounts of Recognized Assets	$ 15,486	$ 12,293
Net Amounts of Assets Presented in the Statements of Condition	15,486	12,293
Net Amount	15,486	12,293
Institutional counterparties
Offsetting of Financial Assets and Derivative Assets
Gross Amounts of Recognized Assets	42	23
Net Amounts of Assets Presented in the Statements of Condition	42	23
Net Amount	42	23
Commercial counterparties
Offsetting of Financial Assets and Derivative Assets
Gross Amounts of Recognized Assets	15,444	12,270
Net Amounts of Assets Presented in the Statements of Condition	15,444	12,270
Net Amount	$ 15,444	$ 12,270

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DERIVATIVE FINANCIAKL INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

3 Months Ended

Mar. 31, 2015

DERIVATIVE FINACIAL INSTRUMENTS AND HEDGING ACTIVITIES

Schedule of interest rate swap agreements and non-hedging derivative assets and liabilities

Information about derivative assets and liabilities at March 31, 2015, follows:

			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Forward-starting interest rate swaps on FHLBB borrowings	$	300,000	4.0	0.00	%	2.29	%	$	(7,200	)
Total cash flow hedges	300,000							(7,200		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	12,412		14.7	0.52	%	5.09	%	(2,799		)
Interest rate swaps on loans with commercial loan customers	286,590		6.0	2.19	%	4.59	%	(15,405		)
Reverse interest rate swaps on loans with commercial loan customers	286,590		6.0	4.59	%	2.19	%	15,444
Risk Participation Agreements with Dealer Banks	49,038		15.9					(100		)
Forward sale commitments	89,432		0.2					(388		)
Total economic hedges	724,062							(3,248		)
Non-hedging derivatives:
Interest rate lock commitments	68,374		0.2					977
Total non-hedging derivatives	68,374							977
Total	$	1,092,436						$	(9,471	)

Information about derivative assets and liabilities at December 31, 2014, follows:

			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Forward-starting interest rate swaps on FHLBB borrowings	$	300,000	4.3	0.00	%	2.29	%	$	(3,299	)
Total cash flow hedges	300,000							(3,299		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	12,554		14.9	0.52	%	5.09	%	(2,578		)
Interest rate swaps on loans with commercial loan customers	297,158		6.0	2.23	%	4.54	%	(12,183		)
Reverse interest rate swaps on loans with commercial loan customers	297,158		6.0	4.54	%	2.23	%	12,221
Risk participation agreements with dealer banks	45,842		16.6					(91		)
Forward sale commitments	42,366		0.2					(510		)
Total economic hedges	695,078							(3,141		)
Non-hedging derivatives:
Interest rate lock commitments	39,589		0.2					625
Total non-hedging derivatives	39,589							625
Total	$	1,034,667						$	(5,815	)

Schedule of amounts included in the consolidated statements of income and in the other comprehensive income section of the consolidated statements of comprehensive income

	Three Months Ended March 31,
(In thousands)	2015			2014
Interest rate swaps on FHLBB borrowings:
Unrealized (loss) recognized in accumulated other comprehensive loss	$	(3,901	)	$	(785	)
Reclassification of unrealized loss from accumulated other comprehensive income to other non-interest income for termination of swaps	—			8,630
Reclassification of unrealized deferred tax benefit from accumulated other comprehensive income to tax expense for terminated swaps	—			(3,611		)
Net tax benefit on items recognized in accumulated other comprehensive income	1,572			314
Interest rate swaps on junior subordinated debentures:
Unrealized loss recognized in accumulated other comprehensive income	—			(1		)
Reclassification of unrealized loss from accumulated other comprehensive income to interest expense	—			129
Net tax expense on items recognized in accumulated other comprehensive income	—			(51		)
Other comprehensive loss recorded in accumulated other comprehensive income, net of reclassification adjustments and tax effects	$	(2,329	)	$	(3,815	)
Net interest expense recognized in interest expense on junior subordinated notes	$	—		$	129

Schedule of amounts included in the consolidated statements of income related to economic hedges and non-hedging derivatives

	Three Months Ended March 31,
(In thousands)	2015			2014
Economic hedges
Interest rate swap on industrial revenue bond:
Unrealized (loss) gain recognized in other non-interest income	$	(271	)	$	(381	)
Interest rate swaps on loans with commercial loan customers:
Unrealized (loss) gain recognized in other non-interest income	(3,114		)	187
Reverse interest rate swaps on loans with commercial loan customers:
Unrealized loss recognized in other non-interest income	3,114			(187		)
Favorable (Unfavorable) change in credit valuation adjustment recognized in other non-interest income	1			7
Risk Participation Agreements:
Unrealized loss recognized in other non-interest income	(9		)	—
Forward Commitments:
Unrealized loss recognized in other non-interest income	(388		)	(108		)
Realized loss in other non-interest income	(91		)	(164		)
Non-hedging derivatives
Interest rate lock commitments
Unrealized gain recognized in other non-interest income	$	977		$	377
Realized gain in other non-interest income	755			469

Schedule of assets subject to an enforceable master netting arrangement

					Net Amounts
	Gross		Gross Amounts		of Assets		Gross Amounts Not Offset in
	Amounts of		Offset in the		Presented in the		the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(in thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
As of March 31, 2015
Interest Rate Swap Agreements:
Institutional counterparties	$	42	$	—	$	42	$	—	$	—	$	42
Commercial counterparties	15,444		—		15,444		—		—		15,444
Total	$	15,486	$	—	$	15,486	$	—	$	—	$	15,486

					Net Amounts
	Gross		Gross Amounts		of Assets		Gross Amounts Not Offset in
	Amounts of		Offset in the		Presented in the		the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(in thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
As of December 31, 2014
Interest Rate Swap Agreements:
Institutional counterparties	$	23	$	—	$	23	$	—	$	—	$	23
Commercial counterparties	12,270		—		12,270		—		—		12,270
Total	$	12,293	$	—	$	12,293	$	—	$	—	$	12,293

Schedule of liabilities subject to an enforceable master netting arrangement

						Net Amounts
	Gross			Gross Amounts		of Liabilities			Gross Amounts Not Offset in
	Amounts of			Offset in the		Presented in the			the Statements of Condition
	Recognized			Statements of		Statements of			Financial		Cash
(in thousands)	Liabilities			Condition		Condition			Instruments		Collateral Pledged		Net Amount
As of March 31, 2015
Interest Rate Swap Agreements:
Institutional counterparties	$	(25,546	)	$	—	$	(25,546	)	$	20,456	$	5,090	$	—
Commercial counterparties	—			—		—			—		—		—
Total	$	(25,546	)	$	—	$	(25,546	)	$	20,456	$	5,090	$	—

						Net Amounts
	Gross			Gross Amounts		of Liabilities			Gross Amounts Not Offset in
	Amounts of			Offset in the		Presented in the			the Statements of Condition
	Recognized			Statements of		Statements of			Financial		Cash
(in thousands)	Liabilities			Condition		Condition			Instruments		Collateral Pledged		Net Amount
As of December 31, 2014
Interest Rate Swap Agreements:
Institutional counterparties	$	(18,232	)	$	58	$	(18,174	)	$	14,984	$	3,190	$	—
Commercial counterparties	(50		)	—		(50		)	—		—		(50		)
Total	$	(18,282	)	$	58	$	(18,224	)	$	14,984	$	3,190	$	(50	)

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BORROWED FUNDS (Details 2) (Fixed rate advances, USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Fixed rate advances
Principal
2015	$ 934,500	$ 940,900
2016	1,503	1,519
2017	5,000	5,000
2019 and beyond	5,115	5,157
Total	$ 946,118	$ 952,576
Weighted Average Rate (as a percent)
2015	0.25%	0.24%
2016	0.03%	0.88%
2017	4.33%	4.33%
2018	0.00%	0.00%
2019 and beyond	3.91%	3.85%
Total	0.29%	0.28%

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FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2015

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 13. FAIR VALUE MEASUREMENTS

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities that are carried at fair value.

Recurring Fair Value Measurements

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.

	March 31, 2015
	Level 1		Level 2		Level 3		Total
(In thousands)	Inputs		Inputs		Inputs		Fair Value
Trading security	$	—	$	—	$	14,970	$	14,970
Available-for-sale securities:
Municipal bonds and obligations	—		155,450		—		155,450
Governmentguaranteed residential mortgage-backed securities	—		65,039		—		65,039
Government-sponsored residential mortgage-backed securities	—		762,421		—		762,421
Corporate bonds	—		55,357		—		55,357
Trust preferred securities	—		13,427		—		13,427
Other bonds and obligations	—		3,196		—		3,196
Marketable equity securities	43,690		357		719		44,766
Loans held for sale	—		29,305		—		29,305
Derivative assets	—		15,444		977		16,421
Derivative liabilities	295		25,504		93		25,892

	December 31, 2014
	Level 1		Level 2		Level 3		Total
(In thousands)	Inputs		Inputs		Inputs		Fair Value
Trading security	$	—	$	—	$	14,909	$	14,909
Available-for-sale securities:
Municipal bonds and obligations	—		133,699		—		133,699
Government guaranteed residential mortgage-backed securities	—		69,468		—		69,468
Government-sponsored residential mortgage-backed securities	—		760,184		—		760,184
Corporate bonds	—		54,151		—		54,151
Trust preferred securities	—		14,667		1,548		16,215
Other bonds and obligations	—		3,159		—		3,159
Marketable equity securities	53,806		358		778		54,942
Loans Held for Sale	—		19,493		—		19,493
Derivative assets	—		12,328		625		12,953
Derivative liabilities	417		18,259		93		18,769

There were no transfers between levels during the three months ended March 31, 2015 or 2014.

Trading Security at Fair Value. The Company holds one security designated as a trading security. It is a tax advantaged economic development bond issued to the Company by a local nonprofit which provides wellness and health programs. The determination of the fair value for this security is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable and there is little to no market activity in the security; therefore, the security meets the definition of a Level 3 security.  The discount rate used in the valuation of the security is sensitive to movements in the 3-month LIBOR rate.

Securities Available for Sale. AFS securities classified as Level 1 consist of publicly-traded equity securities for which the fair values can be obtained through quoted market prices in active exchange markets. AFS securities classified as Level 2 include most of the Company’s debt securities. The pricing on Level 2 was primarily sourced from third party pricing services, overseen by management, and is based on models that consider standard input factors such as dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and condition, among other things. The Company owns one privately owned equity security classified as Level 3. The security’s fair value is determined through unobservable issuer-provided financial information and a pricing model utilizing peer data.

Loans held for sale. The Company elected the fair value option for all loans held for sale (HFS) originated on or after May 1, 2012.  Loans HFS are classified as Level 2 as the fair value is based on input factors such as quoted prices for similar loans in active markets.

					Aggregate Fair Value
March 31, 2015	Aggregate		Aggregate		Less Aggregate
(In thousands)	Fair Value		Unpaid Principal		Unpaid Principal
Loans Held for Sale	$	29,305	$	28,483	$	822

					Aggregate Fair Value
December 31, 2014	Aggregate		Aggregate		Less Aggregate
(In thousands)	Fair Value		Unpaid Principal		Unpaid Principal
Loans Held for Sale	$	19,493	$	18,885	$	608

The changes in fair value of loans held for sale for the three months ended March 31, 2015 and December 31, 2014, were gains of $214 thousand and $409 thousand, respectively.  The changes in fair value are included in mortgage banking income in the Consolidated Statements of Income.

Derivative Assets and Liabilities.

Interest Rate Swap.  The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.  In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings.

Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.  However, as of March 31, 2015, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Interest Rate Lock Commitments. The Company enters into IRLCs for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time.  The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. However, this value is adjusted by a factor which considers the likelihood that the loan in a lock position will ultimately close, and by the non-refundable costs of originating the loan.  The closing ratio is derived from the Bank’s internal data and is adjusted using significant management judgment.  The costs to originate are primarily based on the Company’s internal commission rates that are not observable. As such, IRLCs are classified as Level 3 measurements.

Forward Sale Commitments. The Company utilizes forward sale commitments as economic hedges against potential changes in the values of the IRLCs and loans held for sale.  To Be Announced (“TBA”) mortgage-backed securities forward commitment sales are used as the hedging instrument, are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets.  The fair values of the Company’s best efforts and mandatory delivery loan sale commitments are determined similarly to the IRLCs using quoted prices in the market place that are observable.  However, costs to originate and closing ratios included in the calculation are internally generated and are based on management’s judgment and prior experience, which are considered factors that are not observable.  As such, best efforts and mandatory forward commitments are classified as Level 3 measurements.

The table below presents the changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis for the three months ended March 31, 2015 and 2014.

	Assets (Liabilities)
				Securities			Interest Rate
	Trading			Available			Lock			Forward
(In thousands)	Security			for Sale			Commitments			Commitments
Three Months Ended March 31, 2015
Balance as of December 31, 2014	$	14,909		$	2,326		$	625		$	(93	)
Sale of AFS Security	—			(1,327		)	—			—
Unrealized (loss) gain, net recognized in other non-interest income	203			—			1,730			—
Unrealized gain included in accumulated other comprehensive loss	—			(280		)	—			—
Paydown of trading security	(142		)	—			—			—
Transfers to held for sale loans	—			—			(1,378		)	—
Balance as of March 31, 2015	$	14,970		$	719		$	977		$	(93	)
Unrealized gains (losses) relating to instruments still held at March 31, 2015	$	2,558		$	(51	)	$	977		$	(93	)

	Assets (Liabilities)
				Securities			Interest Rate
	Trading			Available			Lock			Forward
(In thousands)	Security			for Sale			Commitments			Commitments
Three Months Ended March 31, 2014
Balance as of December 31, 2013	$	14,840		$	1,964		$	258		$	19
Purchase of Marketable Equity Security	—			—			—			—
Unrealized (loss) gain, net recognized in other non-interest income	218			—			719			(115		)
Unrealized gain included in accumulated other comprehensive loss	—			82			—			—
Paydown of trading account security	(135		)	—			—			—
Transfers to held for sale loans	—			—			(600		)	—
Balance as of March 31, 2014	$	14,923		$	2,046		$	377		$	(96	)
Unrealized gains (losses) relating to instruments still held at March 31, 2014	$	1,962		$	(1,288	)	$	377		$	(96	)

Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities is as follows:

	Fair Value					Significant Unobservable Input
(In thousands)	March 31, 2015			Valuation Techniques	Unobservable Inputs	Value
Assets (Liabilities)
Trading Security	$	14,970		Discounted Cash Flow	Discount Rate	2.34		%
AFS Securities	719			Pricing Model	Median Peer Price/Tangible Book Value Percentage Multiple	93.35		%
Forward Commitments	(93		)	Historical Trend	Closing Ratio	89.54		%
				Pricing Model	Origination Costs, per loan	$	2,500
Interest Rate Lock Commitment	977			Historical Trend	Closing Ratio	89.54		%
				Pricing Model	Origination Costs, per loan	$	2,500
Total	$	16,573

	Fair Value					Significant Unobservable Input
(In thousands)	December 31, 2014			Valuation Techniques	Unobservable Inputs	Value
Assets (Liabilities)
Trading Security	$	14,909		Discounted Cash Flow	Discount Rate	2.60		%
AFS Securities	2,326			Discounted Cash Flow	Discount Rate	13.74		%
					Credit Spread	11.06		%
Forward Commitments	(93		)	Historical Trend	Closing Ratio	91.07		%
				Pricing Model	Origination Costs, per loan	$	2,500
Interest Rate Lock Commitment	625			Historical Trend	Closing Ratio	91.07		%
				Pricing Model	Origination Costs, per loan	$	2,500
Total	$	17,767

Non-Recurring Fair Value Measurements

The Company is required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements. There are no liabilities measured at fair value on a non-recurring basis.

	March 31, 2015		December 31, 2014		Three months ended March 31, 2015
	Level 3		Level 3		Total
(In thousands)	Inputs		Inputs		Gains (Losses)
Assets
Impaired loans	$	6,111	$	5,820	$	292
Capitalized mortgage servicing rights	3,871		3,757		—
Other real estate owned	1,444		2,049		(155		)
Total	$	11,426	$	11,626	$	137

Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets is as follows:

	Fair Value
(in thousands)	March 31, 2015		Valuation Techniques	Unobservable Inputs	Range (Weighted Average) (a)
Assets
Impaired loans	$	6,111	Fair value of collateral	Loss severity	3.78% to 53.08% (23.5%)
				Appraised value	$139.5 to $1,600.0 ($981.7)
Capitalized mortgage servicing rights	3,871		Discounted cash flow	Constant prepayment rate (CPR)	8.2% to 19.85% (11.05%)
				Discount rate	10.00% to 13.00% (10.42%)
Other real estate owned	1,444		Fair value of collateral	Appraised value	$57 to $700.0 ($470.7)
Total	$	11,426

(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.

	Fair Value
(in thousands)	December 31, 2014		Valuation Techniques	Unobservable Inputs	Range (Weighted Average) (a)
Assets
Impaired loans	$	5,820	Fair value of collateral	Loss severity	0.31% to 38.7% (12.65%)
				Appraised value	$5 to $1,600.0 ($912.7)
Capitalized mortgage servicing rights	3,757		Discounted cash flow	Constant prepayment rate (CPR)	7.83% to 19.00% (9.92%)
				Discount rate	10.00% to 13.00% (10.43%)
Other real estate owned	2,049		Fair value of collateral	Appraised value	$57 to $700.0 ($462.6)
Total	$	11,626

(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.

There were no Level 1 or Level 2 nonrecurring fair value measurements for the periods ended March 31, 2015 and December 31, 2014.

Impaired Loans. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan.  Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace.  However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values.  Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data.  Therefore, nonrecurring fair value measurement adjustments that relate to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generallybased on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

Capitalized mortgage loan servicing rights.  A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

Other real estate owned (“OREO”). OREO results from the foreclosure process on residential or commercial loans issued by the Bank. Upon assuming the real estate, the Company records the property at the fair value of the asset less the estimated sales costs. Thereafter, OREO properties are recorded at the lower of cost or fair value less the estimated sales costs. OREO fair values are primarily determined based on Level 3 data including sales comparables and appraisals.

Summary of Estimated Fair Values of Financial Instruments

The estimated fair values, and related carrying amounts, of the Company’s financial instruments follow. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

	March 31, 2015
	Carrying		Fair
(In thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	62,214	$	62,214	$	62,214	$	—	$	—
Trading security	14,970		14,970		—		—		14,970
Securities available for sale	1,099,656		1,099,656		43,690		1,055,247		719
Securities held to maturity	42,818		44,744		—		—		44,744
FHLB bank stock and restricted securities	58,734		58,734		—		58,734		—
Net loans	4,692,377		4,736,177		—		—		4,736,177
Loans held for sale	29,305		29,305		—		29,305		—
Accrued interest receivable	17,786		17,786		—		17,786		—
Cash surrender value of bank-owned life insurance policies	105,302		105,302		—		105,302		—
Derivative assets	16,421		16,421		—		15,444		977
Assets held for sale	1,266		1,266		—		1,266		—
Financial Liabilities
Total deposits	$	4,719,683	$	4,720,914	—		$	4,720,914	$	—
Short-term debt	894,500		894,675		—		894,675		—
Long-term Federal Home Loan Bank advances	61,618		63,273		—		63,273		—
Subordinated borrowings	89,765		94,062		—		94,062		—
Derivative liabilities	25,892		25,892		295		25,504		93

	December 31, 2014
	Carrying		Fair
(In thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	71,754	$	71,754	$	71,754	$	—	$	—
Trading security	14,909		14,909		—		—		14,909
Securities available for sale	1,091,818		1,091,818		5,806		1,035,686		2,326
Securities held to maturity	43,347		44,997		—		—		44,997
FHLB bank stock and restricted securities	55,720		55,720		—		55,720		—
Net loans	4,644,938		4,695,256		—		—		4,695,256
Loans held for sale	19,493		19,493		—		19,493		—
Accrued interest receivable	17,274		17,274		—		17,274		—
Cash surrender value of bank-owned life insurance policies	104,588		104,588		—		104,588		—
Derivative assets	12,953		12,953		—		12,328		625
Assets held for sale	1,280		1,280		—		1,280		—
Financial Liabilities
Total deposits	$	4,654,679	$	4,655,234	$	—	$	4,655,234	$	—
Short-term debt	900,900		900,983		—		900,983		—
Long-term Federal Home Loan Bank advances	61,676		63,283		—		63,283		—
Subordinated borrowings	89,747		93,441		—		93,441		—
Derivative liabilities	18,769		18,769		417		18,259		93

Other than as discussed above, the following methods and assumptions were used by management to estimate the fair value of significant classes of financial instruments for which it is practicable to estimate that value.

Cash and cash equivalents. Carrying value is assumed to represent fair value for cash and cash equivalents that have original maturities of ninety days or less.

FHLB bank stock and restricted securities. Carrying value approximates fair value based on the redemption provisions of the issuers.

Cash surrender value of life insurance policies. Carrying value approximates fair value.

Loans, net. The carrying value of the loans in the loan portfolio is based on the cash flows of the loans discounted over their respective loan origination rates. The origination rates are adjusted for substandard and special mention loans to factor the impact of declines in the loan’s credit standing. The fair value of the loans is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality.

Accrued interest receivable. Carrying value approximates fair value.

Deposits. The fair value of demand, non-interest bearing checking, savings and money market deposits is determined as the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting the estimated future cash flows using market rates offered for deposits of similar remaining maturities.

Borrowed funds. The fair value of borrowed funds is estimated by discounting the future cash flows using market rates for similar borrowings.  Such funds include all categories of debt and debentures in the table above.

Subordinated borrowings. The Company utilizes a pricing service along with internal models to estimate the valuation of its junior subordinated debentures. The junior subordinated debentures re-price every ninety days.

Off-balance-sheet financial instruments. Off-balance-sheet financial instruments include standby letters of credit and other financial guarantees and commitments considered immaterial to the Company’s financial statements.

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LOANS (Tables)

3 Months Ended

Mar. 31, 2015

LOANS

Schedule of loans

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Residential mortgages:
1-4 family	$	1,188,018	$	256,503	$	1,444,521	$	1,199,408	$	268,734	$	1,468,142
Construction	27,796		922		28,718		27,044		1,018		28,062
Total residential mortgages	1,215,814		257,425		1,473,239		1,226,452		269,752		1,496,204
Commercial real estate:
Construction	182,800		4,046		186,846		169,189		4,201		173,390
Single and multi-family	142,297		48,429		190,726		140,050		53,168		193,218
Other commercial real estate	1,086,893		207,634		1,294,527		1,030,837		214,122		1,244,959
Total commercial real estate	1,411,990		260,109		1,672,099		1,340,076		271,491		1,611,567
Commercial and industrial loans:
Asset based lending	354,106		—		354,106		341,246		—		341,246
Other commercial and industrial loans	424,565		48,144		472,709		411,945		51,175		463,120
Total commercial and industrial loans	778,671		48,144		826,815		753,191		51,175		804,366
Total commercial loans	2,190,661		308,253		2,498,914		2,093,267		322,666		2,415,933
Consumer loans:
Home equity	255,368		62,247		317,615		252,681		65,951		318,632
Auto and other	351,826		87,069		438,895		346,480		103,351		449,831
Total consumer loans	607,194		149,316		756,510		599,161		169,302		768,463
Total loans	$	4,013,669	$	714,994	$	4,728,663	$	3,918,880	$	761,720	$	4,680,600

Schedule of activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Accounting for Certain Loans or Debt Securities Acquired in a Transfer

	Three Months Ended March 31,
(In thousands)	2015			2014
Balance at beginning of period	$	2,541		$	2,559
Sales	—			—
Reclassification form nonaccretable difference for loans with improved cash flows	1,330			1,540
Accretion	(440		)	(945		)
Balance at end of period	$	3,431		$	3,154

Summary of past due loans

Business Activities Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
March 31, 2015
Residential mortgages:
1-4 family	$	1,888	$	888	$	4,066	$	6,842	$	1,181,176	$	1,188,018	$	1,699
Construction	—		—		414		414		27,382		27,796		414
Total	1,888		888		4,480		7,256		1,208,558		1,215,814		2,113
Commercial real estate:
Construction	—		—		758		758		182,042		182,800		—
Single and multi-family	245		247		406		898		141,399		142,297		—
Other commercial real estate	1,900		330		9,202		11,432		1,075,461		1,086,893		266
Total	2,145		577		10,366		13,088		1,398,902		1,411,990		266
Commercial and industrial loans:
Asset based lending	—		—		—		—		354,106		354,106		—
Other commercial and industrial loans	1,371		150		725		2,246		422,319		424,565		—
Total	1,371		150		725		2,246		776,425		778,671		—
Consumer loans:
Home equity	589		154		2,546		3,289		252,079		255,368		1,354
Auto and other	744		54		255		1,053		350,773		351,826		3
Total	1,333		208		2,801		4,342		602,852		607,194		1,357
Total	$	6,737	$	1,823	$	18,372	$	26,932	$	3,986,737	$	4,013,669	$	3,736

Business Activities Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
December 31, 2014
Residential mortgages:
1-4 family	$	5,580	$	146	$	4,053	$	9,779	$	1,189,629	$	1,199,408	$	1,527
Construction	666		410		—		1,076		25,968		27,044		—
Total	6,246		556		4,053		10,855		1,215,597		1,226,452		1,527
Commercial real estate:
Construction	—		2,000		720		2,720		166,469		169,189		—
Single and multi-family	178		156		458		792		139,258		140,050		—
Other commercial real estate	692		705		9,383		10,780		1,020,057		1,030,837		621
Total	870		2,861		10,561		14,292		1,325,784		1,340,076		621
Commercial and industrial loans:
Asset based lending	—		—		—		—		341,246		341,246		—
Other commercial and industrial loans	1,040		498		856		2,394		409,551		411,945		6
Total	1,040		498		856		2,394		750,797		753,191		6
Consumer loans:
Home equity	333		1,000		1,387		2,720		249,961		252,681		230
Auto and other	831		65		315		1,211		345,269		346,480		10
Total	1,164		1,065		1,702		3,931		595,230		599,161		240
Total	$	9,320	$	4,980	$	17,172	$	31,472	$	3,887,408	$	3,918,880	$	2,394

Acquired Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Acquired Credit Impaired		Total Loans		Past Due > 90 days and Accruing
March 31, 2015
Residential mortgages:
1-4 family	$	187	$	592	$	1,930	2,709		$	361	$	256,503	$	144
Construction	—		—		—		—		—		922		—
Total	187		592		1,930		2,709		361		257,425		144
Commercial real estate:
Construction	—		—		676		676		1,281		4,046		—
Single and multi-family	323		45		2,728		3,096		4,924		48,429		2,257
Other commercial real estate	1,116		116		2,269		3,501		5,222		207,634		—
Total	1,439		161		5,673		7,273		11,427		260,109		2,257
Commercial and industrial loans:
Asset based lending	—		—		—		—		—		—		—
Other commercial and industrial loans	285		—		586		871		705		48,144		3
Total	285		—		586		871		705		48,144		3
Consumer loans:
Home equity	209		228		1,118		1,555		170		62,247		242
Auto and other	1,394		23		731		2,148		—		87,069		19
Total	1,603		251		1,849		3,703		170		149,316		261
Total	$	3,514	$	1,004	$	10,038	$	14,556	$	12,663	$	714,994	$	2,665

Acquired Loans

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Acquired Credit Impaired		Total Loans		Past Due > 90 days and Accruing
December 31, 2014
Residential mortgages:
1-4 family	$	1,133	$	638	$	1,651	$	3,422	$	375	$	268,734	$	269
Construction	—		—		—		—		—		1,018		—
Total	1,133		638		1,651		3,422		375		269,752		269
Commercial real estate:
Construction	—		—		691		691		1,296		4,201		—
Single and multi-family	277		—		572		849		5,477		53,168		—
Other commercial real estate	—		715		2,004		2,719		5,504		214,122		329
Total	277		715		3,267		4,259		12,277		271,491		329
Commercial and industrial loans:
Asset based lending	—		—		—		—		—		—		—
Other commercial and industrial loans	202		32		855		1,089		986		51,175		—
Total	202		32		855		1,089		986		51,175		—
Consumer loans:
Home equity	176		95		1,049		1,320		171		65,951		466
Auto and other	1,170		944		1,363		3,477		—		103,351		194
Total	1,346		1,039		2,412		4,797		171		169,302		660
Total	$	2,958	$	2,424	$	8,185	$	13,567	$	13,809	$	761,720	$	1,258

Summary of information pertaining to non-accrual loans

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans (1)		Total		Business Activities Loans		Acquired Loans (2)		Total
Residential mortgages:
1-4 family	$	2,367	$	1,786	$	4,153	$	2,526	$	1,382	$	3,908
Construction	—		—		—		—		—		—
Total	2,367		1,786		4,153		2,526		1,382		3,908
Commercial real estate:
Construction	758		—		758		720		—		720
Single and multi-family	406		471		877		458		141		599
Other commercial real estate	8,936		1,939		10,875		8,762		1,675		10,437
Total	10,100		2,410		12,510		9,940		1,816		11,756
Commercial and industrial loans:
Other commercial and industrial loans	725		569		1,294		850		811		1,661
Total	725		569		1,294		850		811		1,661
Consumer loans:
Home equity	1,192		876		2,068		1,157		583		1,740
Auto and other	252		712		964		305		1,169		1,474
Total	1,444		1,588		3,032		1,462		1,752		3,214
Total non-accrual loans	$	14,636	$	6,353	$	20,989	$	14,778	$	5,761	$	20,539

(1) At quarter end March 31, 2015, acquired credit impaired loans accounted for $1.0 million of non-accrual loans that are not presented in the above table.

(2) At year end 2014, acquired credit impaired loans accounted for $1.2 million of non-accrual loans that are not presented in the above table.

Schedule of loans evaluated for impairment

Business Activities Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
March 31, 2015
Loans receivable:
Balance at end of period
Individually evaluated for impairment	$	3,028	$	22,342	$	262	$	448	$	26,080
Collectively evaluated	1,212,786		1,389,648		778,409		606,746		3,987,589
Total	$	1,215,814	$	1,411,990	$	778,671	$	607,194	$	4,013,669

Business Activities Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
December 31, 2014
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	3,238	$	22,015	$	743	$	452	$	26,448
Collectively evaluated for impairment	1,223,214		1,318,061		752,448		598,709		3,892,432
Total	$	1,226,452	$	1,340,076	$	753,191	$	599,161	$	3,918,880

Acquired Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
March 31, 2015
Loans receivable:
Balance at end of Period
Individually evaluated for impairment	$	1,194	$	6,203	$	47	$	546	$	7,990
Collectively evaluated	256,231		253,906		48,097		148,770		707,004
Total	$	257,425	$	260,109	$	48,144	$	149,316	$	714,994

Acquired Loans

(In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Total
December 31, 2014
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	695	$	5,637	$	39	$	199	$	6,570
Collectively evaluated for impairment	269,057		265,854		51,136		169,103		755,150
Total	$	269,752	$	271,491	$	51,175	$	169,302	$	761,720

Summary of impaired loans

Business Activities Loans

	At March 31, 2015
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	3,028	$	3,028	$	—
Commercial real estate - single and multifamily	180		180		—
Other commercial real estate loans	14,380		14,380		—
Commercial real esate - construction	2,632		2,632		—
Other commercial and industrial loans	262		262		—
Consumer - home equity	334		334		—
Consumer - other	114		114		—
With an allowance recorded:
Other commercial real estate loans	$	4,064	$	5,150	$	1,086
Total
Residential mortgages	$	3,028	$	3,028	$	—
Commercial real estate	21,256		22,342		1,086
Commercial and industrial loans	262		262		—
Consumer	448		448		—
Total impaired loans	$	24,994	$	26,080	$	1,086

Acquired Loans

	At March 31, 2015
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	625	$	625	$	—
Commercial real estate - single and multifamily	2,857		2,857		—
Other commercial real estate loans	1,649		1,649		—
Other commercial and industrial loans	47		47		—
Consumer - home equity	197		197		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	517	$	569	$	52
Commercial real estate - single and multifamily	318		330		12
Other commercial real estate loans	504		691		187
Commercial real esate - construction	420		676		256
Consumer - home equity	288		349		61
Total
Residential mortgages	$	1,142	$	1,194	$	52
Commercial real estate	5,748		6,203		455
Commercial and industrial loans	47		47		—
Consumer	485		546		61
Total impaired loans	$	7,422	$	7,990	$	568

Business Activities Loans

	At December 31, 2014
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	2,528	$	2,528	$	—
Commercial real estate - construction	16,990		16,990		—
Commercial real estate - single and multifamily	—		—		—
Other commercial real estate loans	102		102		—
Other commercial and industrial loans	743		743		—
Consumer - home equity	87		87		—
Consumer - other	—		—		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	555	$	710	$	155
Commercial real estate - construction	3,511		4,431		920
Commercial real estate - single and multifamily	490		492		2
Other commercial real estate loans	—		—		—
Other commercial and industrial loans	—		—		—
Consumer - home equity	194		248		54
Consumer - other	105		117		12
Total
Residential mortgages	$	3,083	$	3,238	$	155
Commercial real estate	21,093		22,015		922
Commercial and industrial loans	743		743		—
Consumer	386		452		66
Total impaired loans	$	25,305	$	26,448	$	1,143

Acquired Loans

	At December 31, 2014
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance:
Residential mortgages - 1-4 family	$	189	$	189	$	—
Other commercial real estate loans	5,206		5,206		—
Other commercial and industrial loans	39		39		—
Consumer - home equity	—		—		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	458	$	506	$	48
Other commercial real estate loans	383		431		48
Consumer - home equity	124		199		75
Total
Residential mortgages	$	647	$	695	$	48
Other commercial real estate loans	5,589		5,637		48
Other commercial and industrial loans	39		39		—
Consumer - home equity	124		199		75
Total impaired loans	$	6,399	$	6,570	$	171

Summary of the average recorded investment and interest income recognized on impaired loans

Business Activities Loans

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:
Residential mortgages - 1-4 family	$	3,108	$	28	$	4,142	$	23
Commercial real estate - construction	2,628		1		1,957		—
Commercial real estate - single and multifamily	180		—		—		—
Other commercial real estate loans	15,315		131		16,180		154
Commercial and industrial loans	578		3		1,337		7
Consumer - home equity	334		—		348		1
Consumer - other	115		1		124		1
With an allowance recorded:
Residential mortgages - 1-4 family	$	—	$	—	$	1,774	$	16
Commercial real estate - construction	—		—		1,013		—
Other commercial real estate loans	5,267		—		3,450		—
Commercial and industrial loans	—		—		55		1
Consumer - home equity	—		—		41		—
Total
Residential mortgages	$	3,108	$	28	$	5,916	$	39
Commercial real estate	23,390		132		22,600		154
Commercial and industrial loans	578		3		1,392		8
Consumer loans	449		1		513		2
Total impaired loans	$	27,525	$	164	$	30,421	$	203

Acquired Loans

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:
Residential mortgages - 1-4 family	$	670	$	3	$	1,303	$	5
Commercial real estate - single and multifamily	2,892		24		—		—
Other commercial real estate loans	1,662		3		4,821		25
Other commercial and industrial loans	64		3		—		—
Consumer - home equity	197		2		562		1
Consumer - other	—		—		154		—
With an allowance recorded:
Residential mortgages - 1-4 family	$	569	$	—	$	162	$	—
Commercial real estate - single and multifamily	397		—		—		—
Other commercial real estate loans	691		—		1,577		46
Commercial real esate - construction	666		44		—		—
Consumer - home equity	349		—		—		—
Consumer - other	—		—		70		2
Total
Residential mortgages	$	1,239	$	3	$	1,465	$	5
Other commercial real estate loans	6,308		71		6,398		71
Commercial and industrial loans	64		3		632		3
Consumer loans	546		2		154		—
Total impaired loans	$	8,157	$	79	$	8,649	$	79

Schedule of recorded investment and number of modifications for TDRs identified during the period

	Modifications by Class
	Three months ending March 31, 2015
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial - Construction	1	$	123	$	123
Commercial - Other	1	2,000		2,000
Commercial and industrial - Other	1	33		33
Total	3	$	2,156	$	2,156

	Modifications by Class
	Three months ending March 31, 2014
(Dollars in thousands)	Number of Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Residential - 1-4 Family	1	$	122	$	119

	Modifications that Subsequently Defaulted
	Three months ending March 31, 2015
	Number of Contracts	Recorded Investment
Troubled Debt Restructurings
Commercial - Other	1	$	668

Schedule of TDR activity

	Three Months Ending
	March 31,
(In thousands)	2015			2014
Balance at beginning of the period	$	16,714		$	10,822
Principal payments	(484		)	(872		)
TDR status change (1)	—			(52		)
Other reductions/increases (2)	(1,182		)	95
Newly identified TDRs	2,156			119
Balance at end of the period	$	17,204		$	10,112

(1) TDR status change classification represents TDR loans with a specified interest rate equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk and  the loan was on current payment status and not impaired based on the terms specified by the restructuring agreement.

(2) Other reductions classification consists of transfer to other real estate owned and charge-offs and advances to loans.

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DEPOSITS (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Account balances
less than $100,000	$ 506,577,000	$ 515,570,000
$100,000 or more	998,892,000	940,176,000
Total	1,505,469,000	1,455,746,000
Brokered Time Deposits	478,800,000	430,800,000
Reciprocal deposits	$ 7,400,000	$ 9,400,000

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LOANS (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Loans
Loans	$ 4,728,663,000		$ 4,680,600,000
Activity in the accretable yield for the acquired loan portfolio
Balance at beginning of period	2,541,000	2,559,000
Reclassification from nonaccretable difference for loans with improved cash flows	1,330,000	1,540,000
Accretion	(440,000)	(945,000)
Balance at end of period	3,431,000	3,154,000
Business Activity
Loans
Loans	4,013,669,000		3,918,880,000
Acquired Loans
Loans
Number of branches	20
Loans	714,994,000		761,720,000
Carrying amount of loans considered impaired at the acquisition date	12,700,000		13,800,000
Note balance of loans considered impaired at the acquisition date	23,900,000		25,800,000
Carrying amount of loans not considered impaired at the acquisition date	702,000,000		747,900,000
Residential | Mortgages
Loans
Loans	1,473,239,000		1,496,204,000
Residential | Mortgages | Business Activity
Loans
Loans	1,215,814,000		1,226,452,000
Residential | Mortgages | Acquired Loans
Loans
Loans	257,425,000		269,752,000
Carrying amount of loans considered impaired at the acquisition date	361,000		375,000
Residential | Mortgages | 1-4 family
Loans
Loans	1,444,521,000		1,468,142,000
Residential | Mortgages | 1-4 family | Business Activity
Loans
Loans	1,188,018,000		1,199,408,000
Residential | Mortgages | 1-4 family | Acquired Loans
Loans
Loans	256,503,000		268,734,000
Carrying amount of loans considered impaired at the acquisition date	361,000		375,000
Residential | Mortgages | Construction
Loans
Loans	28,718,000		28,062,000
Residential | Mortgages | Construction | Business Activity
Loans
Loans	27,796,000		27,044,000
Residential | Mortgages | Construction | Acquired Loans
Loans
Loans	922,000		1,018,000
Commercial real estate
Loans
Loans	1,672,099,000		1,611,567,000
Commercial real estate | Business Activity
Loans
Loans	1,411,990,000		1,340,076,000
Commercial real estate | Acquired Loans
Loans
Loans	260,109,000		271,491,000
Carrying amount of loans considered impaired at the acquisition date	11,427,000		12,277,000
Commercial real estate | Other commercial and industrial loans
Loans
Loans	1,294,527,000		1,244,959,000
Commercial real estate | Other commercial and industrial loans | Business Activity
Loans
Loans	1,086,893,000		1,030,837,000
Commercial real estate | Other commercial and industrial loans | Acquired Loans
Loans
Loans	207,634,000		214,122,000
Commercial real estate | Construction
Loans
Loans	186,846,000		173,390,000
Commercial real estate | Construction | Business Activity
Loans
Loans	182,800,000		169,189,000
Commercial real estate | Construction | Acquired Loans
Loans
Loans	4,046,000		4,201,000
Carrying amount of loans considered impaired at the acquisition date	1,281,000		1,296,000
Commercial real estate | Single and multi-family
Loans
Loans	190,726,000		193,218,000
Commercial real estate | Single and multi-family | Business Activity
Loans
Loans	142,297,000		140,050,000
Commercial real estate | Single and multi-family | Acquired Loans
Loans
Loans	48,429,000		53,168,000
Carrying amount of loans considered impaired at the acquisition date	4,924,000		5,477,000
Commercial real estate | Other commercial real estate | Business Activity
Loans
Loans	1,086,893,000		1,030,837,000
Commercial real estate | Other commercial real estate | Acquired Loans
Loans
Loans	207,634,000		214,122,000
Carrying amount of loans considered impaired at the acquisition date	5,222,000		5,504,000
Commercial real estate | Business loans
Loans
Loans	826,815,000		804,366,000
Commercial real estate | Business loans | Business Activity
Loans
Loans	778,671,000		753,191,000
Commercial real estate | Business loans | Acquired Loans
Loans
Loans	48,144,000		51,175,000
Carrying amount of loans considered impaired at the acquisition date	705,000		986,000
Commercial real estate | Business loans | Asset based lending
Loans
Loans	354,106,000		341,246,000
Commercial real estate | Business loans | Asset based lending | Business Activity
Loans
Loans	354,106,000		341,246,000
Commercial real estate | Business loans | Other commercial and industrial loans
Loans
Loans	472,709,000		463,120,000
Commercial real estate | Business loans | Other commercial and industrial loans | Business Activity
Loans
Loans	424,565,000		411,945,000
Commercial real estate | Business loans | Other commercial and industrial loans | Acquired Loans
Loans
Loans	48,144,000		51,175,000
Carrying amount of loans considered impaired at the acquisition date	705,000		986,000
Consumer
Loans
Loans	756,510,000		768,463,000
Consumer | Business Activity
Loans
Loans	607,194,000		599,161,000
Consumer | Acquired Loans
Loans
Loans	149,316,000		169,302,000
Carrying amount of loans considered impaired at the acquisition date	170,000		171,000
Consumer | Home equity
Loans
Loans	317,615,000		318,632,000
Consumer | Home equity | Business Activity
Loans
Loans	255,368,000		252,681,000
Consumer | Home equity | Acquired Loans
Loans
Loans	62,247,000		65,951,000
Carrying amount of loans considered impaired at the acquisition date	170,000		171,000
Consumer | Auto and other
Loans
Loans	438,895,000		449,831,000
Consumer | Auto and other | Business Activity
Loans
Loans	351,826,000		346,480,000
Consumer | Auto and other | Acquired Loans
Loans
Loans	87,069,000		103,351,000
Commercial
Loans
Loans	2,498,914,000		2,415,933,000
Commercial | Business Activity
Loans
Loans	2,190,661,000		2,093,267,000
Commercial | Acquired Loans
Loans
Loans	$ 308,253,000		$ 322,666,000

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income (loss)	$ 8,759	$ (1,106)
Other comprehensive income, before tax
Changes in unrealized gain on securities available-for-sale	9,337	6,021
Changes in unrealized (loss) gain on derivative hedges	(3,901)	4,533
Changes in unrealized gain on terminated swaps		3,237
Changes in unrealized (loss) gains on pension	(1,531)
Income taxes related to other comprehensive income:
Changes in unrealized gain on securities available-for-sale	(3,605)	(2,221)
Changes in unrealized (loss) gains on derivative hedges	1,572	(1,832)
Changes in unrealized gains and losses on terminated swaps		(1,312)
Changes in unrealized (loss) gains on pension	617
Total other comprehensive income	2,489	8,426
Total comprehensive income	$ 11,248	$ 7,320

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TRADING SECURITY

3 Months Ended

Mar. 31, 2015

TRADING SECURITY.

TRADING SECURITY

NOTE 2.TRADING SECURITY

The Company holds a tax advantaged economic development bond that is being accounted for at fair value. The security had an amortized cost of $12.4 million and $12.6 million, and a fair value of $15.0 million and $14.9 million, at March 31, 2015 and December 31, 2014, respectively. As discussed further in Note 12 - Derivative Financial Instruments and Hedging Activities, the Company has entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there are no other securities in the trading portfolio at March 31, 2015.

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EARNINGS PER SHARE (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Earnings per share
Net income (loss)	$ 8,759	$ (1,106)
Average number of common shares issued	26,525	26,525
Less: average number of treasury shares	1,295	1,425
Less: average number of unvested stock award shares	427	402
Average number of basic common shares outstanding	24,803	24,698
Average number of diluted common shares outstanding	24,955	24,698
Earnings per share:
Total basic earning per share (in dollars per share)	$ 0.35	$ (0.04)
Total diluted earnings per share (in dollars per share)	$ 0.35	$ (0.04)
Unvested Stock Award shares
Earnings per share
Plus: dilutive effect of share-based payment arrangements (in shares)	89
Options
Earnings per share
Plus: dilutive effect of share-based payment arrangements (in shares)	63

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FAIR VALUE MEASUREMENTS (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Financial Assets
Trading security	$ 14,970	$ 14,909
Securities available for sale	1,099,656	1,091,818
Securities held to maturity	44,744	44,997
FHLB bank stock and restricted securities	58,734	55,720
Financial Liabilities
Derivative liabilities	25,546	18,282
Methods and assumptions used to estimate the fair value of significant classes of financial instruments
Junior subordinated debentures re-price period	90 days
Level 1
Financial Assets
Cash and cash equivalents	62,214	71,754
Securities available for sale	43,690	5,806
Financial Liabilities
Derivative liabilities	295	417
Level 2
Financial Assets
Securities available for sale	1,055,247	1,035,686
FHLB bank stock and restricted securities	58,734	55,720
Loans held for sale	29,305	19,493
Accrued interest receivable	17,786	17,274
Cash surrender value of bank-owned life insurance policies	105,302	104,588
Derivative assets	15,444	12,328
Assets held for sale	1,266	1,280
Financial Liabilities
Total deposits	4,720,914	4,655,234
Short-term debt	894,675	900,983
Long-term Federal Home Loan Bank advances	63,273	63,283
Subordinated borrowings	94,062	93,441
Derivative liabilities	25,504	18,259
Level 3
Financial Assets
Trading security	14,970	14,909
Securities available for sale	719	2,326
Securities held to maturity	44,744	44,997
Net loans	4,736,177	4,695,256
Derivative assets	977	625
Financial Liabilities
Derivative liabilities	93	93
Carrying Amount
Financial Assets
Cash and cash equivalents	62,214	71,754
Trading security	14,970	14,909
Securities available for sale	1,099,656	1,091,818
Securities held to maturity	42,818	43,347
FHLB bank stock and restricted securities	58,734	55,720
Net loans	4,692,377	4,644,938
Loans held for sale	29,305	19,493
Accrued interest receivable	17,786	17,274
Cash surrender value of bank-owned life insurance policies	105,302	104,588
Derivative assets	16,421	12,953
Assets held for sale	1,266	1,280
Financial Liabilities
Total deposits	4,719,683	4,654,679
Short-term debt	894,500	900,900
Long-term Federal Home Loan Bank advances	61,618	61,676
Subordinated borrowings	89,765	89,747
Derivative liabilities	25,892	18,769
Total Fair Value
Financial Assets
Cash and cash equivalents	62,214	71,754
Trading security	14,970	14,909
Securities available for sale	1,099,656	1,091,818
Securities held to maturity	44,744	44,997
FHLB bank stock and restricted securities	58,734	55,720
Net loans	4,736,177	4,695,256
Loans held for sale	29,305	19,493
Accrued interest receivable	17,786	17,274
Cash surrender value of bank-owned life insurance policies	105,302	104,588
Derivative assets	16,421	12,953
Assets held for sale	1,266	1,280
Financial Liabilities
Total deposits	4,720,914	4,655,234
Short-term debt	894,675	900,983
Long-term Federal Home Loan Bank advances	63,273	63,283
Subordinated borrowings	94,062	93,441
Derivative liabilities	$ 25,892	$ 18,769

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LOAN LOSS ALLOWANCE (Tables)

3 Months Ended

Mar. 31, 2015

LOAN LOSS ALLOWANCE

Schedule of activity in the allowance for loan losses

Business Activities Loans (In thousands)	Residential mortgages			Commercial real estate		Commercial and industrial loans		Consumer			Unallocated		Total
March 31, 2015
Balance at beginning of period	$	6,836		$	14,690	$	5,206	$	5,928		$	135	$	32,795
Charged-off loans	128			1,605		223		202			—		2,158
Recoveries on charged-off loans	67			3		5		61			—		136
Provision for loan losses	(702		)	1,330		1,460		(751		)	158		1,495
Balance at end of period	$	6,073		$	14,418	$	6,448	$	5,036		$	293	$	32,268
Individually evaluated for impairment	—			1,086		—		—			—		1,086
Collectively evaluated	6,073			13,332		6,448		5,036			293		31,182
Total	$	6,073		$	14,418	$	6,448	$	5,036		$	293	$	32,268

Business Activities Loans (In thousands)	Residential mortgages			Commercial real estate		Commercial and industrial loans			Consumer		Unallocated			Total
March 31, 2014
Balance at beginning of period	$	6,937		$	13,705	$	5,173		$	3,644	$	68		$	29,527
Charged-off loans	706			660		189			429		—			1,984
Recoveries on charged-off loans	7			1		20			79		—			107
Provision for loan losses	(575		)	1,900		(185		)	836		(248		)	1,728
Balance at end of period	$	5,663		$	14,946	$	4,819		$	4,130	$	(180	)	$	29,378
Individually evaluated for impairment	397			1,558		54			9		—			2,018
Collectively evaluated	5,266			13,388		4,765			4,121		(180		)	27,360
Total	$	5,663		$	14,946	$	4,819		$	4,130	$	(180	)	$	29,378

Acquired Loans (In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans			Consumer		Unallocated		Total
March 31, 2015
Balance at beginning of period	$	615	$	790	$	1,093		$	369	$	—	$	2,867
Charged-off loans	238		405		198			433		—		1,274
Recoveries on charged-off loans	—		—		41			28		—		69
Provision for loan losses	372		1,579		(11		)	416		—		2,356
Balance at end of period	$	749	$	1,964	$	925		$	380	$	—	$	4,018
Individually evaluated for impairment	52		455					61		—		568
Collectively evaluated	697		1,509		925			319		—		3,450
Total	$	749	$	1,964	$	925		$	380	$	—	$	4,018

Acquired Loans (In thousands)	Residential mortgages		Commercial real estate		Commercial and industrial loans		Consumer		Unallocated		Total
March 31, 2014
Balance at beginning of period	$	625	$	2,339	$	597	$	235	$	—	$	3,796
Charged-off loans	429		447		52		405		—		1,333
Recoveries on charged-off loans	73		1		5		14		—		93
Provision for loan losses	401		231		548		488		—		1,668
Balance at end of period	$	670	$	2,124	$	1,098	$	332	$	—	$	4,224
Individually evaluated for impairment	30		250		21		—		—		301
Collectively evaluated	640		1,874		1,077		332		—		3,923
Total	$	670	$	2,124	$	1,098	$	332	$	—	$	4,224

Schedule of loans by risk rating

Business Activities Loans

Residential Mortgages

Credit Risk Profile by Internally Assigned Grade

	1-4 family				Construction				Total residential mortgages
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	1,183,064	$	1,195,209	$	27,382	$	26,634	$	1,210,446	$	1,221,843
Special mention	888		146		—		410		888		556
Substandard	4,066		4,053		414		—		4,480		4,053
Total	$	1,188,018	$	1,199,408	$	27,796	$	27,044	$	1,215,814	$	1,226,452

Commercial Real Estate

Credit Risk Profile by Creditworthiness Category

	Construction				Single and multi-family				Other				Total commercial real estate
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	179,868	$	166,295	$	140,022	$	137,533	$	1,023,304	$	959,836	$	1,343,194	$	1,263,664
Special mention	—		—		—		—		6,891		6,933		6,891		6,933
Substandard	2,932		2,894		2,275		2,517		56,625		63,995		61,832		69,406
Doubtful	—		—		—		—		73		73		73		73
Total	$	182,800	$	169,189	$	142,297	$	140,050	$	1,086,893	$	1,030,837	$	1,411,990	$	1,340,076

Commercial and Industrial Loans

Credit Risk Profile by Creditworthiness Category

	Asset based lending				Other				Total comm. and industrial loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	354,106	$	341,246	$	410,699	$	404,846	$	764,805	$	746,092
Special mention	—		—		187		560		187		560
Substandard	—		—		13,679		6,539		13,679		6,539
Total	$	354,106	$	341,246	$	424,565	$	411,945	$	778,671	$	753,191

Consumer Loans

Credit Risk Profile Based on Payment Activity

	Home equity				Auto and other				Total consumer loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Performing	$	254,176	$	251,524	$	351,574	$	346,175	$	605,750	$	597,699
Nonperforming	1,192		1,157		252		305		1,444		1,462
Total	$	255,368	$	252,681	$	351,826	$	346,480	$	607,194	$	599,161

Acquired Loans

Residential Mortgages

Credit Risk Profile by Internally Assigned Grade

	1-4 family				Construction				Total residential mortgages
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	253,866	$	266,445	$	922	$	1,018	$	254,788	$	267,463
Special mention	707		638		—		—		707		638
Substandard	1,930		1,651		—		—		1,930		1,651
Total	$	256,503	$	268,734	$	922	$	1,018	$	257,425	$	269,752

Commercial Real Estate

Credit Risk Profile by Creditworthiness Category

	Construction				Single and multi-family				Other				Total commercial real estate
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	2,765	$	2,904	$	41,145	$	44,497	$	192,233	$	195,681	$	236,143	$	243,082
Special mention	—		—		120		533		2,208		4,868		2,328		5,401
Substandard	1,281		1,297		7,164		8,138		13,193		13,573		21,638		23,008
Total	$	4,046	$	4,201	$	48,429	$	53,168	$	207,634	$	214,122	$	260,109	$	271,491

Commercial and Industrial Loans

Credit Risk Profile by Creditworthiness Category

	Asset based lending				Other				Total comm. and industrial loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Grade:
Pass	$	—	$	—	$	44,922	$	45,757	$	44,922	$	45,757
Special mention	—		—		—		1,723		—		1,723
Substandard	—		—		3,222		3,695		3,222		3,695
Total	$	—	$	—	$	48,144	$	51,175	$	48,144	$	51,175

Consumer Loans

Credit Risk Profile Based on Payment Activity

	Home equity				Auto and other				Total consumer loans
(In thousands)	Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014		Mar. 31, 2015		Dec. 31, 2014
Performing	$	61,371	$	65,368	$	86,356	$	102,182	$	147,727	$	167,550
Nonperforming	876		583		713		1,169		1,589		1,752
Total	$	62,247	$	65,951	$	87,069	$	103,351	$	149,316	$	169,302

Summary of information about total loans rated special mention or lower

	March 31, 2015						December 31, 2014
(In thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Non-Accrual	$	14,636	$	7,373	$	22,009	$	14,778	$	6,927	$	21,705
Substandard Accruing	68,228		21,266		89,494		66,995		23,839		90,834
Total Classified	82,864		28,639		111,503		81,773		30,766		112,539
Special Mention	8,175		3,286		11,461		9,113		8,800		17,913
Total Criticized	$	91,039	$	31,925	$	122,964	$	90,886	$	39,566	$	130,452

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SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Securities available for sale:
Amortized Cost	$ 1,074,326	$ 1,075,824
Gross Unrealized Gains	28,927	23,244
Gross Unrealized Losses	(3,597)	(7,250)
Fair Value	1,099,656	1,091,818
Securities held to maturity
Amortized Cost	42,818	43,347
Gross Unrealized Gains	1,926	1,684
Gross Unrealized Losses		(34)
Fair Value	44,744	44,997
Securities
Total Amortized Cost	1,117,144	1,119,171
Total Gross Unrealized Gains	30,853	24,928
Total Gross Unrealized Losses	(3,597)	(7,284)
Total Fair Value	1,144,400	1,136,815
Debt securities
Securities available for sale:
Amortized Cost	1,036,176	1,026,831
Gross Unrealized Gains	21,391	15,922
Gross Unrealized Losses	(2,677)	(5,877)
Fair Value	1,054,890	1,036,876
Debt securities | Municipal bonds and obligations
Securities available for sale:
Amortized Cost	149,454	127,014
Gross Unrealized Gains	6,391	6,859
Gross Unrealized Losses	(395)	(174)
Fair Value	155,450	133,699
Securities held to maturity
Amortized Cost	4,847	4,997
Fair Value	4,847	4,997
Debt securities | Government guaranteed residential mortgage-backed securities
Securities available for sale:
Amortized Cost	64,456	68,972
Gross Unrealized Gains	696	702
Gross Unrealized Losses	(113)	(206)
Fair Value	65,039	69,468
Debt securities | Government-sponsored residential mortgage-backed securities
Securities available for sale:
Amortized Cost	750,730	755,893
Gross Unrealized Gains	13,157	7,421
Gross Unrealized Losses	(1,466)	(3,130)
Fair Value	762,421	760,184
Securities held to maturity
Amortized Cost	70	70
Gross Unrealized Gains	5	4
Fair Value	75	74
Debt securities | Corporate bonds
Securities available for sale:
Amortized Cost	55,560	55,134
Gross Unrealized Gains	411	120
Gross Unrealized Losses	(614)	(1,103)
Fair Value	55,357	54,151
Debt securities | Trust preferred securities
Securities available for sale:
Amortized Cost	12,773	16,607
Gross Unrealized Gains	736	820
Gross Unrealized Losses	(82)	(1,212)
Fair Value	13,427	16,215
Debt securities | Tax advantaged economic development bonds
Securities held to maturity
Amortized Cost	37,570	37,948
Gross Unrealized Gains	1,921	1,680
Gross Unrealized Losses		(34)
Fair Value	39,491	39,594
Debt securities | Other bonds and obligations
Securities available for sale:
Amortized Cost	3,203	3,211
Gross Unrealized Losses	(7)	(52)
Fair Value	3,196	3,159
Securities held to maturity
Amortized Cost	331	332
Fair Value	331	332
Marketable equity securities
Securities available for sale:
Amortized Cost	38,150	48,993
Gross Unrealized Gains	7,536	7,322
Gross Unrealized Losses	(920)	(1,373)
Fair Value	$ 44,766	$ 54,942

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2015

DERIVATIVE FINACIAL INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

As of March 31, 2015, the Company held derivatives with a total notional amount of $1.1 billion.  That amount included $300.0 million in forward starting interest rate swap derivatives that were designated as cash flow hedges for accounting purposes.  The Company also had economic hedges and non-hedging derivatives totaling $724.1 million and $68.4 million, respectively, which are not designated as hedges for accounting purposes and are therefore recorded at fair value.  Economic hedges included interest rate swaps totaling $585.6 million, risk participation agreements with dealer banks of $49.0 million, and $89.4 million in forward commitment contracts.

As part of the Company’s risk management strategy, the Company enters into interest rate swap agreements to mitigate the interest rate risk inherent in certain of the Company’s assets and liabilities. Interest rate swap agreements involve the risk of dealing with both Bank customers and institutional derivative counterparties and their ability to meet contractual terms. The agreements are entered into with counterparties that meet established credit standards and contain master netting and collateral provisions protecting the at-risk party. The derivatives program is overseen by the Risk Management Committee of the Company’s Board of Directors. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not significant at March 31, 2015.

The Company pledged collateral to derivative counterparties in the form of cash totaling $5.3 million and securities with an amortized cost of $27.5 million and a fair value of $27.7 million as of March 31, 2015. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back economic hedges. However certain language is written into the International Swaps Dealers Association, Inc. (“ISDA”) and loan documents where, in default situations, the Bank is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.

Information about derivative assets and liabilities at March 31, 2015, follows:

			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Forward-starting interest rate swaps on FHLBB borrowings	$	300,000	4.0	0.00	%	2.29	%	$	(7,200	)
Total cash flow hedges	300,000							(7,200		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	12,412		14.7	0.52	%	5.09	%	(2,799		)
Interest rate swaps on loans with commercial loan customers	286,590		6.0	2.19	%	4.59	%	(15,405		)
Reverse interest rate swaps on loans with commercial loan customers	286,590		6.0	4.59	%	2.19	%	15,444
Risk Participation Agreements with Dealer Banks	49,038		15.9					(100		)
Forward sale commitments	89,432		0.2					(388		)
Total economic hedges	724,062							(3,248		)
Non-hedging derivatives:
Interest rate lock commitments	68,374		0.2					977
Total non-hedging derivatives	68,374							977
Total	$	1,092,436						$	(9,471	)

Information about derivative assets and liabilities at December 31, 2014, follows:

			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Forward-starting interest rate swaps on FHLBB borrowings	$	300,000	4.3	0.00	%	2.29	%	$	(3,299	)
Total cash flow hedges	300,000							(3,299		)
Economic hedges:
Interest rate swap on tax advantaged economic development bond	12,554		14.9	0.52	%	5.09	%	(2,578		)
Interest rate swaps on loans with commercial loan customers	297,158		6.0	2.23	%	4.54	%	(12,183		)
Reverse interest rate swaps on loans with commercial loan customers	297,158		6.0	4.54	%	2.23	%	12,221
Risk participation agreements with dealer banks	45,842		16.6					(91		)
Forward sale commitments	42,366		0.2					(510		)
Total economic hedges	695,078							(3,141		)
Non-hedging derivatives:
Interest rate lock commitments	39,589		0.2					625
Total non-hedging derivatives	39,589							625
Total	$	1,034,667						$	(5,815	)

Cash flow hedges

The effective portion of unrealized changes in the fair value of derivatives accounted for as cash flow hedges is reported in other comprehensive income and subsequently reclassified to earnings in the same period or periods during which the hedged transaction is forecasted to affect earnings. Each quarter, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction. The ineffective portion of changes in the fair value of the derivatives is recognized directly in earnings.

The Company has entered into six forward-starting interest rate swap contracts with a combined notional value of $300.0 million as of March 31, 2015.  The six forward starting swaps will become effective in 2016.  All have durations of three years. This hedge strategy converts the one month rolling FHLBB borrowings based on the FHLBB’s one month fixed interest rate to fixed interest rates, thereby protecting the Company from floating interest rate variability.

Amounts included in the Consolidated Statements of Income and in the other comprehensive income section of the Consolidated Statements of Comprehensive Income (related to interest rate derivatives designated as hedges of cash flows), were as follows:

	Three Months Ended March 31,
(In thousands)	2015			2014
Interest rate swaps on FHLBB borrowings:
Unrealized (loss) recognized in accumulated other comprehensive loss	$	(3,901	)	$	(785	)
Reclassification of unrealized loss from accumulated other comprehensive income to other non-interest income for termination of swaps	—			8,630
Reclassification of unrealized deferred tax benefit from accumulated other comprehensive income to tax expense for terminated swaps	—			(3,611		)
Net tax benefit on items recognized in accumulated other comprehensive income	1,572			314
Interest rate swaps on junior subordinated debentures:
Unrealized loss recognized in accumulated other comprehensive income	—			(1		)
Reclassification of unrealized loss from accumulated other comprehensive income to interest expense	—			129
Net tax expense on items recognized in accumulated other comprehensive income	—			(51		)
Other comprehensive loss recorded in accumulated other comprehensive income, net of reclassification adjustments and tax effects	$	(2,329	)	$	(3,815	)
Net interest expense recognized in interest expense on junior subordinated notes	$	—		$	129

Hedge ineffectiveness on interest rate swaps designated as cash flow hedges was immaterial to the Company’s financial statements during the three months ended March 31, 2015 and 2014.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate liabilities. During the next twelve months, the Company does not anticipate any such reclassifications.

As a result of the branch acquisition, in the first quarter of 2014, the Company initiated and subsequently terminated all of its interest rate swaps, with various institutions, associated with FHLB advances with 3-month LIBOR based floating interest rates with an aggregate notional amount of $30 million, all of its interest rate swaps associated with 90 day rolling FHLB advances issued using the FHLB’s 3-month fixed interest rate with an aggregate notional amount of $145 million and all of its forward-starting interest rate swaps associated with 90 day rolling FHLB advances issued using the FHLB’s 3-month fixed interest rate with an aggregate notional amount of $235 million. In the first quarter of 2014, the Company elected to extinguish $215 million of FHLB advances related to the terminated swaps. As a result the Company reclassified $8.6 million of losses from the effective portion of the unrealized changes in the fair value of the terminated derivatives from other comprehensive income to non-interest income as the forecasted transactions to the related FHLB advances will not occur.

Economic hedges

As of March 31, 2015, the Company has an interest rate swap with a $12.4 million notional amount to swap out the fixed rate of interest on an economic development bond bearing a fixed rate of 5.09%, currently within the Company’s trading portfolio under the fair value option, in exchange for a LIBOR-based floating rate. The intent of the economic hedge is to improve the Company’s asset sensitivity to changing interest rates in anticipation of favorable average floating rates of interest over the 21-year life of the bond.  The fair value changes of the economic development bond are mostly offset by fair value changes of the related interest rate swap.

The Company also offers certain derivative products directly to qualified commercial borrowers.  The Company economically hedges derivative transactions executed with commercial borrowers by entering into mirror-image, offsetting derivatives with third-party financial institutions.  The transaction allows the Company’s customer to convert a variable-rate loan to a fixed rate loan. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts mostly offset each other in earnings. Credit valuation adjustments arising from the difference in credit worthiness of the commercial loan and financial institution counterparties totaled $38.6 thousand as of March 31, 2015.  The interest income and expense on these mirror image swaps exactly offset each other.

The Company has risk participation agreements with dealer banks. Risk participation agreements occur when the Company participates on a loan and a swap where another bank is the lead.  The Company gets paid a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default. Changes in fair value are recorded in current period earnings.

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

The Company uses the following types of forward sale commitments contracts:

· Best efforts loan sales,

· Mandatory delivery loan sales, and

· To Be Announced (“TBA”) mortgage-backed securities sales.

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

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

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

Non-hedging derivatives

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

Amounts included in the Consolidated Statements of Income related to economic hedges and non-hedging derivatives were as follows:

	Three Months Ended March 31,
(In thousands)	2015			2014
Economic hedges
Interest rate swap on industrial revenue bond:
Unrealized (loss) gain recognized in other non-interest income	$	(271	)	$	(381	)
Interest rate swaps on loans with commercial loan customers:
Unrealized (loss) gain recognized in other non-interest income	(3,114		)	187
Reverse interest rate swaps on loans with commercial loan customers:
Unrealized loss recognized in other non-interest income	3,114			(187		)
Favorable (Unfavorable) change in credit valuation adjustment recognized in other non-interest income	1			7
Risk Participation Agreements:
Unrealized loss recognized in other non-interest income	(9		)	—
Forward Commitments:
Unrealized loss recognized in other non-interest income	(388		)	(108		)
Realized loss in other non-interest income	(91		)	(164		)
Non-hedging derivatives
Interest rate lock commitments
Unrealized gain recognized in other non-interest income	$	977		$	377
Realized gain in other non-interest income	755			469

Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate Swap Agreements (“Swap Agreements”)

The Company enters into swap agreements to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated statements of condition. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral generally in the form of marketable securities is received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds.  The Company had net asset positions with its commercial banking counterparties totaling $15.4 million and $12.3 million as of March 31, 2015 and December 31, 2014, respectively.  The Company had net liability positions with its financial institution counterparties totaling $25.5 million and $18.2 million as of March 31, 2015 and December 31, 2014, respectively.  At March 31, 2015, the Company did not have a net liability position with its commercial banking counterparties, compared to a $0.1 million liability at December 31, 2014.  The collateral posted by the Company that covered liability positions was $25.5 million and $18.2 million as of March 31, 2015 and December 31, 2014, respectively.

The following table presents the assets and liabilities subject to an enforceable master netting arrangement as of March 31, 2015 and December 31, 2014:

Offsetting of Financial Assets and Derivative Assets

					Net Amounts
	Gross		Gross Amounts		of Assets		Gross Amounts Not Offset in
	Amounts of		Offset in the		Presented in the		the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(in thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
As of March 31, 2015
Interest Rate Swap Agreements:
Institutional counterparties	$	42	$	—	$	42	$	—	$	—	$	42
Commercial counterparties	15,444		—		15,444		—		—		15,444
Total	$	15,486	$	—	$	15,486	$	—	$	—	$	15,486

Offsetting of Financial Liabilities and Derivative Liabilities

						Net Amounts
	Gross			Gross Amounts		of Liabilities			Gross Amounts Not Offset in
	Amounts of			Offset in the		Presented in the			the Statements of Condition
	Recognized			Statements of		Statements of			Financial		Cash
(in thousands)	Liabilities			Condition		Condition			Instruments		Collateral Pledged		Net Amount
As of March 31, 2015
Interest Rate Swap Agreements:
Institutional counterparties	$	(25,546	)	$	—	$	(25,546	)	$	20,456	$	5,090	$	—
Commercial counterparties	—			—		—			—		—		—
Total	$	(25,546	)	$	—	$	(25,546	)	$	20,456	$	5,090	$	—

Offsetting of Financial Assets and Derivative Assets

					Net Amounts
	Gross		Gross Amounts		of Assets		Gross Amounts Not Offset in
	Amounts of		Offset in the		Presented in the		the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(in thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
As of December 31, 2014
Interest Rate Swap Agreements:
Institutional counterparties	$	23	$	—	$	23	$	—	$	—	$	23
Commercial counterparties	12,270		—		12,270		—		—		12,270
Total	$	12,293	$	—	$	12,293	$	—	$	—	$	12,293

Offsetting of Financial Liabilities and Derivative Liabilities

						Net Amounts
	Gross			Gross Amounts		of Liabilities			Gross Amounts Not Offset in
	Amounts of			Offset in the		Presented in the			the Statements of Condition
	Recognized			Statements of		Statements of			Financial		Cash
(in thousands)	Liabilities			Condition		Condition			Instruments		Collateral Pledged		Net Amount
As of December 31, 2014
Interest Rate Swap Agreements:
Institutional counterparties	$	(18,232	)	$	58	$	(18,174	)	$	14,984	$	3,190	$	—
Commercial counterparties	(50		)	—		(50		)	—		—		(50		)
Total	$	(18,282	)	$	58	$	(18,224	)	$	14,984	$	3,190	$	(50	)