Berkshire Hills receives $40m from gov't program

Berkshire Hills Bancorp of Pittsfield said today that it received $40 million as part of the federal government's $700 billion bank investment program.

The government investment, administered by the Treasury Department, is part of a broader program to invest in banks amid the ongoing credit crisis in an effort to stabilize the financial services sector and spur lending between banks and to consumers and other businesses.

Many banks have been hit hard over the past year-and-a-half by a sharp rise in mortgage defaults and a freezing of credit markets. As some financial firms collapsed in recent months, banks shied away from lending to each other and to customers for fear that losses would mount.

Berkshire Hills, the parent of regional bank Berkshire Bank, said it plans to increase its residential mortgage lending by more than 20 percent to more than $300 million in 2009 as it receives the new capital. Berkshire Hills also raised about $40 million from a common stock offering in October.

The government program calls for the Treasury Department to receive preferred stock and warrants to purchase common stock in return for the investment. The preferred stock carries an interest rate of 5 percent per year for the first five years. It then increases to 9 percent after five years if the preferred shares are not redeemed.

The warrants allow the government to purchase up to 226,330 common shares at a price of $26.51. Berkshire Hills had about 12.2 million shares of common stock outstanding as of Nov. 7.

Shares of Berkshire Hills, which has about $2.6 billion in assets, fell 60 cents, or 2.1 percent, to $27.95 in morning trading. (AP)