SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended December 31, 2008
---------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED].
For the transition period from _______________ to ______________________
Commission File Number 001-51584
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Berkshire Bank 401(k) Plan
B: Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Berkshire Hills Bancorp, Inc.
24 North St.
Pittsfield, MA 01201
Berkshire Bank 401(k) Plan
Financial Statements and Supplemental Schedule
Years Ended December 31, 2008 and 2007
CONTENTS
BERKSHIRE BANK 401(k) PLAN
Financial Statements and Supplemental Schedule
Years Ended December 31, 2008 and 2007
The following financial information is submitted herewith: Page
Report of Independent Registered Public Accounting Firm 1
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-12
Schedule H, Line 4i - Schedule of Assets
(Held at End of Year) 13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee
Berkshire Hills Bancorp, Inc.
Pittsfield, Massachusetts
We have audited the accompanying statements of net assets available for benefits
of Berkshire Bank 401(k) Plan (the "Plan") as of December 31, 2008 and 2007, and
the related statements of changes in net assets available for benefits for the
years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2008 and 2007, and the changes in net assets available for benefits
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at year end) as of December 31, 2008 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements, but is
supplementary information required by the United States Department of Labor
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. This supplemental schedule is the responsibility of
the Plan's management. The supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
June 24, 2009
BERKSHIRE BANK 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
Years Ended December 31, 2008 and 2007
2008 2007
------------------ ------------------
ASSETS
Cash and cash equivalents $ 4,333,973 $ 3,385,352
Investments, at fair value 27,364,015 38,345,382
Participant loans 539,452 746,559
------------------ ------------------
32,237,440 42,477,293
------------------ ------------------
Receivables:
Employer contributions - 52,410
Participant contributions - 56,624
------------------ ------------------
- 109,034
------------------ ------------------
Net assets available for benefits $32,237,440 $42,586,327
================== ==================
See accompanying notes to financial statements.
2
BERKSHIRE BANK 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years Ended December 31, 2008 and 2007
2008 2007
------------------ ------------------
Additions to net assets attributed to:
Investment income:
Interest and dividends $ 1,167,954 $ 1,408,238
------------------ ------------------
Contributions:
Employer 1,509,073 1,314,067
Participants 1,722,006 1,535,647
Rollover 67,721 1,477,049
------------------ ------------------
3,298,800 4,326,763
------------------ ------------------
Assets transferred in from merged/terminated plans - 13,670,154
------------------ ------------------
Total additions 4,466,754 19,405,155
------------------ ------------------
Deductions from net assets attributed to:
Net depreciation in fair value of investments 10,478,563 603,821
Withdrawals and benefits paid to participants 4,321,767 3,905,463
Administrative fees 15,311 10,139
------------------ ------------------
Total deductions 14,815,641 4,519,423
------------------ ------------------
Net (decrease) increase in net assets available for benefits (10,348,887) 14,885,732
Net assets available for benefits at beginning of year 42,586,327 27,700,595
------------------ ------------------
Net assets available for benefits at end of year $32,237,440 $42,586,327
================== ==================
See accompanying notes to financial statements.
3
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007
1. DESCRIPTION OF THE PLAN
The Berkshire Bank 401(k) Plan (the "Plan") was established on April 11,
1993.
The following brief description of the Plan is provided for general
information purposes only. Participants should refer to the Plan Agreement
for a more complete description of the Plan's provisions.
General
The Plan is a defined contribution plan covering all eligible employees of
Berkshire Bank and subsidiaries (the "Bank" or the "Plan Sponsor"). The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"). Vanguard Fiduciary Trust Company serves as
the Trustee of the Plan. The Vanguard Group ("Vanguard" or the "Custodian")
is the custodian of the Plan.
In 2005, the Plan Sponsor terminated its Employee Stock Ownership Plan
("ESOP"). During 2007, active employees of the Bank were given the option
to transfer their shares of stock from the ESOP into the Plan. The value
transferred into the Plan is the value of the shares as posted on the
Nasdaq Stock Market as of the date of transfer.
On November 1, 2006, Berkshire Bank acquired five local insurance agencies.
These insurance agencies all participated in one plan, the Alliance
Berkshire Insurance 401(k) Plan ("Alliance"). During 2007, Alliance was
merged into the Plan. Effective on the merger date, all employees of
Alliance followed the eligibility requirements of the Plan but were given
credit for hours of service with their previous employer.
On September 21, 2007, the Bank acquired Factory Point National Bank of
Manchester Center ("Factory Point"). Effective November 5, 2007, the
Factory Point National Bank 401(k) Profit Sharing Plan was merged into the
Plan. Effective on the merger date, all employees of Factory Point followed
the eligibility requirements of the Plan but were given credit for hours of
service with their previous employer.
4
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
DESCRIPTION OF THE PLAN (continued)
Contributions
Each year, participants may contribute a percent of pretax annual
compensation, excluding certain types of restricted compensation, subject
to certain limitations as defined by the Plan and the Internal Revenue Code
("IRC"). The maximum participant deferral was $15,500 for the Plan years
ended December 31, 2008 and 2007. In addition, all employees who are
eligible to make salary reductions under the Plan and who have attained age
50 before the close of the Plan year are eligible to make catch-up
contributions, as defined by the Economic Growth and Tax Relief
Reconciliation Act of 2001 ("EGTRRA"). Participants may also contribute
rollover amounts representing distributions from other qualified retirement
plans and IRAs. Participants direct the investment of their contributions
into various investment options offered by the Plan. Participants may
change their rate of contribution each pay period.
The Bank matches a portion of eligible employee contributions. During 2008
and 2007, the Bank matched 100% of eligible employee contributions up to 4%
of the participant's annual compensation.
In addition, the Bank makes a Safe Harbor non-elective contribution to the
account of each eligible employee in an amount equal to 3% of the
participant's annual compensation, excluding certain types of restricted
compensation.
Plan Eligibility
Employees of the Bank are eligible to participate in the Plan after
attaining twenty-one years of age and completing one year of service with
1,000 hours during their initial year of employment. 500 hours of service
must be exceeded each subsequent year to avoid a break in eligibility
service. Service credit is given to employees of certain predecessor
employers as described in the Plan document for participation and vesting
purposes. Employees may join the Plan on the first of the month following
the month in which eligibility requirements are satisfied.
Participant Accounts
Each participant's account is credited with the participant's
contribution and allocations of (a) the Company's matching and
additional contributions for non-highly compensated employees, if any,
and (b) the Plan's investment earnings. Allocations are based on
participant earnings or account balances, as defined by the Plan. The
benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
5
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
DESCRIPTION OF THE PLAN (continued)
Investments
Participants direct the investment of their contributions into investment
options offered by the Plan which include selected pooled separate accounts
of Vanguard and common shares of Berkshire Hills Bancorp, Inc., the parent
company of the Bank. Employer contributions are invested in each
participant's account according to the participant's selected allocation.
Participants may change or transfer their investment options at any time
via an automated telephone system or the Custodian's website.
Vesting
Participants are 100% vested in all contributions plus actual earnings
thereon.
Participant Loans
Participants may borrow from their fund accounts an amount equal to $50,000
or 50% of their vested account balance, whichever is less. In addition, the
$50,000 limit is reduced by the highest outstanding loan balance (of any
previous loans made) in the previous twelve months. The loans are secured
by the balance in the participant's accounts and bear interest at The Wall
Street Journal prime rate plus one percentage point as of the loan
application review date. Interest rates ranged from 5.00% to 9.25% as of
December 31, 2008. In general, principal and interest are paid ratably over
a period not to exceed five years through regular payroll deductions. Loans
used to finance the participant's principal residence are repaid over a
period of time, up to 20 years.
If a participant fails to make a loan repayment by its due date, the total
outstanding amount of the loan including any interest that has accrued will
be defaulted and deemed a distribution to the participant on the date of
default. Loan defaults were $21,534 and $14,263 for the years ended
December 31, 2008 and 2007, respectively.
Payment of Benefits
On termination of service due to death, disability, normal retirement, or
attaining age 59 1/2 a participant may elect to receive either a lump sum
amount equal to the value of the participant's vested interest in their
account, annual installments, or defer distribution until a later date. If
the vested portion of a participant's account balance is $1,000 or less,
this amount is paid as a lump sum distribution as soon as possible
following termination, retirement, disability, or to the beneficiary
following death.
Participants may request a benefit payment in the case of financial
hardship, subject to certain limitations as defined by the Plan.
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
DESCRIPTION OF THE PLAN (concluded)
Administrative Expenses
The Plan's administrative expenses are paid by either the Plan or the Plan
Sponsor as provided by the Plan document. Administrative expenses paid by
the Plan Sponsor were $16,130 and $15,050 for the years ended December 31,
2008 and 2007, respectively.
Plan Termination
Although it has not expressed any intent to do so, the Bank has the right
under the Plan to discontinue its contributions at any time and to
terminate the Plan, subject to the provisions of ERISA. In the event of
Plan termination, the net assets of the Plan would be allocated as
prescribed by ERISA and its related regulations.
2. SUMMARY OF ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
Basis of Accounting
The accompanying financial statements have been prepared using the accrual
method of accounting.
Use of Estimates
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Shares of registered
investment companies are valued at quoted market prices which represent the
net asset value of shares held by the Plan at year-end. Investments in
Berkshire Hills Bancorp, Inc. common stock and other equities are valued at
the closing market price as of the last trade date of the year. Fixed
income securities are valued using the last quoted bid price. Participant
loans are valued at amortized cost, which approximates fair value.
7
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
SUMMARY OF ACCOUNTING POLICIES (continued)
Investment Valuation and Income Recognition (concluded)
Purchases and sales of investments are recorded on a trade-date basis.
Investment income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Capital gain distributions are included
in dividend income.
Effective January 1, 2008, the Plan adopted Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("SFAS No. 157"),
issued by the Financial Accounting Standards Board ("FASB"). SFAS No. 157
defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date and sets out a fair value hierarchy.
The fair value hierarchy gives the highest priority to quoted prices in
active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). Inputs are broadly defined under
SFAS No. 157 as assumptions market participants would use in pricing an
asset or liability. The three levels of the fair value hierarchy under SFAS
No. 157 are described below:
Level 1 - Fair values designated as Level 1 are valued based upon
unadjusted quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.
Level 2 - Fair values designated as Level 2 are valued based upon quoted
prices for similar assets and liabilities in active markets, quoted prices
for identical or similar assets and liabilities in markets that are not
active, and inputs other than quoted prices that are observable for the
asset or liability, either directly or by correlation or other means.
Level 3 - Inputs for Level 3 fair values are unobservable for the asset or
liability and include situations where there is little, if any, market
activity for the asset or liability. Such inputs are based upon the best
information in the circumstances and may require significant management
judgment or estimation.
In certain cases, inputs used to measure fair value may fall into different
levels of the fair value hierarchy. In such cases, an investment's level
within the fair value hierarchy is based on the lowest level of input that
is significant to the fair value measurement. The Plan's assessment of the
significance of a particular input to the fair value measurement in its
entirety requires judgment and considers factors specific to the
investment.
8
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
SUMMARY OF ACCOUNTING POLICIES (concluded)
Risks and Uncertainties
The Plan invests in a variety of investment vehicles. Investment securities
are exposed to various risks, such as interest rate, market, and credit.
Due to the level of risk associated with certain investment securities, it
is at least reasonably possible that changes in the values of investment
securities will occur in the near term and that such changes could
materially affect participants' account balances and the amounts reported
in the statement of net assets available for benefits.
3. CASH AND CASH EQUIVALENTS
The following schedule presents the fair values of the Plan's cash and cash
equivalents:
December 31,
-------------------------------------
2008 2007
--------------- ---------------
Cash and cash equivalents:
* VGI Brokerage Option $ 129,711 $ -
* Vanguard Prime Money Market 4,204,262 (a) 3,385,352 (b)
--------------- ---------------
4,333,973 $ 3,385,352
=============== ===============
(a) Investment represents 5% or more of Plan net assets at December 31, 2008.
(b) Investment represents 5% or more of Plan net assets at December 31, 2007.
* Represents a party-in-interest under ERISA.
9
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
4. INVESTMENTS, AT FAIR VALUE
The following schedule presents the fair values of the Plan's investments:
December 31,
-----------------------------------------
2008 2007
------------------ -----------------
Mutual funds:
* Royce Low Priced Stock $ 341,569 $ 503,808
* Vanguard 500 Index Inv. 3,774,309 (a) 7,158,236 (b)
* Vanguard IT Treasury Inv. 3,547,986 (a) 2,746,411 (b)
* Vanguard International Growth Fund 1,802,055 (a) 3,506,924 (b)
* Vanguard Mid-Cap Index Fund 795,103 1,713,087
* Vanguard Morgan Growth Inv. 388,514 488,827
* Vanguard Selected Value 444,311 616,392
* Vanguard Small-Cap Growth Index 1,184,596 2,081,181
* Vanguard TGT Retirement 2010 67,076 -
* Vanguard TGT Retirement 2015 3,209,859 (a) 4,174,760 (b)
* Vanguard TGT Retirement 2020 122,621 -
* Vanguard TGT Retirement 2025 814,461 1,274,355
* Vanguard TGT Retirement 2030 1,791 -
* Vanguard TGT Retirement 2035 398,964 483,020
* Vanguard TGT Retirement 2040 15,167 -
* Vanguard TGT Retirement 2045 481,538 602,980
* Vanguard TGT Retirement 2050 3,024 -
* Vanguard Target Retirement Inc. 1,257,681 1,009,957
* Vanguard Total Stock Market Inv. 3,404,548 (a) 5,647,432 (b)
* Vanguard Windsor II Fund Inv. 744,732 1,095,670
Common stock:
* VGI Brokerage Option Company Stock 82,365 44,904
* Berkshire Hills Bancorp, Inc. Common Stock 4,481,745 (a) 5,197,438 (b)
------------------ -----------------
$27,364,015 $38,345,382
================== =================
(a) Investment represents 5% or more of Plan net assets at December 31, 2008.
(b) Investment represents 5% or more of Plan net assets at December 31, 2007.
* Represents a party-in-interest under ERISA.
10
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
INVESTMENTS, AT FAIR VALUE (concluded)
During 2008 and 2007, the Plan's investments (including investments bought,
sold, and held during the year) appreciated (depreciated) in value as
follows:
December 31,
----------------------------------------
2008 2007
------------------- ------------------
Mutual funds $(11,227,509) $ 429,995
Common stock 748,946 (1,033,816)
------------------- ------------------
$(10,478,563) $ (603,821)
=================== ==================
The following table summarizes the valuation of the Plan's investments by
the SFAS 157 fair value hierarchy levels as of December 31, 2008:
Level 1 Level 2 Level 3 Fair Value
------------------- ----------------- ----------------- -------------------
Cash and cash equivalents $ 4,333,973 $ - $ - $ 4,333,973
Mutual funds 22,799,905 - - 22,799,905
Common stock 4,564,110 - - 4,564,110
Loans to participants - 539,452 - 539,452
------------------- ----------------- ----------------- -------------------
Total assets $31,697,988 $ 539,452 $ - $32,237,440
=================== ================= ================= ===================
5. TAX STATUS
The Bank adopted a Prototype Plan whose most recent determination letter
from the Internal Revenue Service, dated August 22, 2001, stated that the
Plan and related Trust were designed in accordance with applicable sections
of the IRC. The Plan has been amended since receiving this letter; however,
the Plan Administrator believes the Plan is currently operated in
compliance with the applicable requirements of the IRC.
6. ADMINISTRATION OF PLAN ASSETS
The Plan assets are held by Vanguard Fiduciary Trust Company, the Trustee
of the Plan.
Bank contributions, participant elective deferrals, and participant
accounts are held and administered by Vanguard, who invests cash received
in accordance with participants instructions and makes distributions to
participants.
Certain administrative functions are performed by officers or employees of
the Bank. No such officers or employees receive compensation for such
functions from the Plan.
11
BERKSHIRE BANK 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS (Concluded)
7. RELATED PARTY TRANSACTIONS
The Bank contributed $1,509,073 and $1,314,067 to the Plan for the years
ended December 31, 2008 and 2007, of which $0 and $52,410 was owed to the
Plan at December 31, 2008 and 2007, respectively. In addition, the Bank
paid expenses in connection with the administrations of the Plan, totaling
$16,130 and $15,050 for the years ended December 31, 2008 and 2007,
respectively.
The Plan has investments in common stock of Berkshire Hills Bancorp, Inc.,
the parent company of the Bank. In addition, certain of the investment
options are managed by Vanguard. Transactions in such investments qualify
as party-in-interest transactions.
8. ASSETS TRANSFERRED IN FROM MERGED/TERMINATED PLANS
The assets transferred in from merged plans during 2007 were as follows:
ESOP $ 1,943,781
Alliance 2,650,583
Factory Point 7,064,422
Adjustment to Berkshire Hills, Inc. common stock
transferred in from cost value to market value 2,011,368
------------------
$ 13,670,154
==================
12
BERKSHIRE BANK 401(k) PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS
(HELD AT END OF YEAR)
December 31, 2008
-------- ------------------------------------------------- ------------------------- ----------------
Identity of Issuer, Borrower, Lessor or
Similary Party and Description of Number Current
Investment of units/shares value (1)
-------------------------------------------------------------------------------------------------
Cash and cash equivalents:
* Vanguard Prime Money Market 4,204,262.180 $ 4,204,262
* Vanguard Brokerage Option 129,711.080 129,711
Mutual funds:
* Royce Low Priced Stock 37,289.169 341,569
* Vanguard 500 Index Inv. 45,424.348 3,774,309
* Vanguard IT Treasury Inv. 293,221.971 3,547,986
* Vanguard International Growth Fund 147,709.457 1,802,055
* Vanguard Mid-Cap Index Fund 67,381.597 795,103
* Vanguard Morgan Growth Inv. 34,381.726 388,514
* Vanguard Selected Value 37,399.934 444,311
* Vanguard Small-Cap Growth Index 99,545.922 1,184,596
* Vanguard TGT Retirement 2010 3,808.951 67,076
* Vanguard TGT Retirement 2015 336,110.845 3,209,859
* Vanguard TGT Retirement 2020 7,400.163 122,621
* Vanguard TGT Retirement 2025 87,859.878 814,461
* Vanguard TGT Retirement 2030 115.238 1,791
* Vanguard TGT Retirement 2035 43,131.258 398,964
* Vanguard TGT Retirement 2040 1,002.434 15,167
* Vanguard TGT Retirement 2045 50,317.448 481,538
* Vanguard TGT Retirement 2050 199.190 3,024
* Vanguard Target Retirement Inc. 132,109.394 1,257,681
* Vanguard Total Stock Market Inv. 156,171.911 3,404,548
* Vanguard Windsor II Fund Inv. 39,970.808 744,732
Common Stock:
* VGI Brokerage Option Company Stock 82,365.490 82,365
* Berkshire Hills Bancorp, Inc. Common Stock 145,228.305 4,481,745
Loan Fund:
Participant loans 5.00% - 9.25% 539,452
-----------
$32,237,440
===========
(1) As allowed by ERISA, cost information may be omitted with respect to
participant or beneficiary directed investments under an individual account
plan.
* Represents a party-in-interest as defined by ERISA.
See report of independent registered public accounting firm.
13
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
BERKSHIRE BANK 401(k) PLAN
Date June 25, 2009 By: /s/ Linda A. Johnston
------------------------------------
Name: Linda A. Johnston
Title: Senior Vice President Human Resources
Berkshire Bank
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement of
Berkshire Hills Bancorp, Inc. on Form S-8 (SEC File No. 333-146604) of our
report dated June 24, 2009, appearing in this Annual Report on Form 11-K of the
Berkshire Bank 401(k) Plan for the year ended December 31, 2008.
/s/ Wolf & Company, P.C.
Wolf & Company, P.C.
Boston, Massachusetts
June 24, 2009