Berkshire Hills Bancorp (BHLB), Hampden Bancorp (HBNK) Enter Merger Agreement

Berkshire Hills Bancorp (NYSE: BHLB) and Hampden Bancorp, Inc. (Nasdaq: HBNK) announced that they have signed a definitive merger agreement under which Berkshire will acquire Hampden and its subsidiary, Hampden Bank, in an all-stock transaction valued at approximately $109 million.

Berkshire's total assets will increase to $7.1 billion including the $706 million in acquired Hampden assets. This in-market merger is expected to create efficiencies, strategic growth and market share benefits for the consolidated operations of the two banks in the Springfield area. Hampden operates 10 branches in the greater Springfield area and reported $508 million in net loans and $490 million in deposits as of September 30, 2014. Berkshire operates 11 branches with $627 million in deposits in this market. Berkshire will have a pro forma market cap of approximately $740 million and 100 branches serving customers and communities across New England and New York. Pro forma tangible equity to tangible assets is expected to improve to 7.4% when the merger is completed.

"We are pleased to welcome Hampden customers and employees to America's Most Exciting Bank®," said Michael P. Daly, President and CEO of Berkshire. "This in-market partnership will create a strong platform for serving our combined customers, while producing attractive returns for both our existing shareholders and the new shareholders from Hampden joining us in this transaction. We will move into the top 5 position in deposit market share and plan to use this opportunity to further capitalize on our strong product set and culture of customer engagement. This merger complements our expansion initiatives in Central Massachusetts and Hartford, a combined market area that is the second largest in New England."

"We are delighted to be joining the Berkshire franchise," commented Glenn S. Welch, President and CEO of Hampden. "Our two banks share rich histories, consistent core values and a strong commitment to customers and communities. I'm proud of our 162 years of serving customers in our markets and believe the combination created by our two companies will benefit our clients, communities and shareholders."

Michael P. Daly concluded, "This is a solid business combination with efficiency benefits. Hampden is a well run company with an attractive core deposit base and a significant presence in the community. After integration, the transaction is expected to be accretive to Berkshire's earnings per share, return on equity, and capital. We have a strong track record of execution and our collective teams are positioned to complete this integration flawlessly."

Under the terms of the merger agreement, each outstanding share of Hampden common stock will be exchanged for 0.81 shares of Berkshire Hills common stock. The merger is valued at $20.53 per share of Hampden common stock based on the $25.35 average closing price of Berkshire's stock for the five day period ending November 3, 2014. The $20.53 per share value represents 133% of Hampden's $15.49 tangible book value per share and a 6.0% premium to core deposits based on financial information as of September 30, 2014.

The transaction is intended to qualify as a reorganization for federal income tax purposes, and as a result, the shares of Hampden common stock exchanged for shares of Berkshire common stock are expected to be transferred on a tax-free basis. The definitive agreement has been approved by the unanimous votes of the Boards of Directors of both companies. Consummation of the agreement is subject to the approval of Hampden's shareholders, as well as state and federal regulatory agencies. The merger is targeted to be completed early in the second quarter of 2015. Two Hampden directors will be appointed to Berkshire's board of directors and Glenn S. Welch will be joining Berkshire as Regional President for the Pioneer Valley and Connecticut. Berkshire and Hampden have created foundations for community charitable support which will continue to provide charitable contributions underscoring their mutual commitment to serving their local communities.

Sandler O'Neill & Partners, L.P. served as the financial advisor to Berkshire, and Sterne, Agee & Leach, Inc. served as the financial advisor to Hampden. Luse Gorman Pomerenk & Schick, P.C. served as outside counsel to Berkshire, while Goodwin Procter LLP served as outside counsel to Hampden.

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