UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


(Mark One)

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

For the quarterly period ended September 30, 2005

                                       OR

[_]   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 0-51584

                          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)

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

                                 Not Applicable
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

      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 [_]

      Indicate by check mark whether the registrant is an accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [_]

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

      The Registrant had 8,565,596  shares of common stock,  par value $0.01 per
share, outstanding as of November 1, 2005.



                          BERKSHIRE HILLS BANCORP, INC.
                                    FORM 10-Q

                                      INDEX


                                                                            Page
                                                                            ----
PART I.      FINANCIAL INFORMATION

Item 1.      Consolidated Financial Statements (unaudited)

             Consolidated Balance Sheets as of                                 1
             September 30, 2005 and December 31, 2004

             Consolidated Statements of Income for the Three and               2
             Nine Months Ended September 30, 2005 and 2004


             Consolidated Statements of Changes in Stockholders' Equity        3
             for the Nine Months Ended September 30, 2005 and 2004


             Consolidated Statements of Cash Flows for the                     4
             Nine Months Ended September 30, 2005 and 2004


             Notes to Consolidated Financial Statements                        6


Item 2.      Management's Discussion and Analysis of Financial                14
             Condition and Results of Operations


Item 3.      Quantitative and Qualitative Disclosures About Market Risk       26

Item 4.      Controls and Procedures                                          27

PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings                                                28

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds      28

Item 3.      Defaults Upon Senior Securities                                  28

Item 4.      Submission of Matters to a Vote of Security Holders              29

Item 5.      Other Information                                                29

Item 6.      Exhibits                                                         29

Signatures                                                                    30






                                           PART I. FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS.
------------------------------------------

                                  BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS
                                                     Unaudited

                                                                                   September 30,       December 31,
                                                                                       2005                2004
                                                                                  ---------------    ---------------
                                                                                               
                                                                                            (In thousands)
Assets
Cash and due from banks                                                           $        30,335    $        15,237
Short-term investments                                                                      1,177              2,665
                                                                                  ---------------    ---------------
          Total cash and cash equivalents                                                  31,512             17,902

Securities available-for-sale, at fair value                                              398,937            384,421
Securities held-to-maturity, at amortized cost                                             26,951             29,942
Loans held for sale                                                                         1,852              1,053

Total loans                                                                             1,412,109            828,179
Less:  Allowance for loan losses                                                          (13,123)            (9,337)
                                                                                  ---------------    ---------------
         Net loans                                                                      1,398,986            818,842

Premises and equipment, net                                                                26,547             14,780
Accrued interest receivable                                                                 8,177              5,472
Goodwill                                                                                   87,791              6,782
Identifiable intangible assets                                                             11,951                472
Bank owned life insurance                                                                  18,800             18,200
Other assets                                                                               21,587             12,249
                                                                                  ---------------    ---------------
          Total assets                                                            $     2,033,091    $     1,310,115
                                                                                  ===============    ===============

Liabilities and stockholders' equity
Deposits                                                                          $     1,347,751    $       845,789
Borrowings                                                                                436,074            327,926
Accrued expenses and other liabilities                                                      3,629              4,664
                                                                                  ---------------    ---------------
               Total liabilities                                                        1,787,454          1,178,379

Commitments and contingencies (Note 8)
Stockholders' equity:
    Preferred stock ($.01 par value; 1,000,000 shares
        authorized; none issued or outstanding)                                                --                 --
    Common stock ($.01 par value; 26,000,000 shares authorized;
        10,602,553 shares issued at September 30, 2005 and 7,673,761 at
        December 31, 2004;  shares outstanding: 8,565,596 at September 30, 2005
        and 5,873,563 at December 31, 2004)                                                   106                 77
    Additional paid-in capital                                                            198,744             77,588
    Unearned compensation                                                                  (1,788)            (7,414)
    Retained earnings                                                                      95,811             94,996
    Accumulated other comprehensive income                                                    400              4,214
    Treasury stock, at cost (2,036,957 shares at September 30, 2005 and
        1,800,198 at December 31, 2004)                                                   (47,636)           (37,725)
                                                                                  ---------------    ---------------
               Total stockholders' equity                                                 245,637            131,736
                                                                                  ---------------    ---------------
               Total liabilities and stockholders' equity                         $     2,033,091    $     1,310,115
                                                                                  ===============    ===============


See accompanying notes to unaudited consolidated financial statements.

                                                            1




                       BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF INCOME
                                        Unaudited

                                                          Three Months Ended     Nine Months Ended
                                                             September 30,         September 30,
                                                         --------------------   -------------------
                                                           2005        2004       2005       2004
                                                         --------    --------   --------   --------
                                                                               
                                                            (In thousands, except per share data)
Interest and dividend income
    Loans                                                $ 21,149    $ 11,131   $ 48,282   $ 32,247
    Debt securities, taxable                                3,274       3,754      9,744     11,081
    Debt securities, tax-exempt                               791         376      1,832      1,035
    Equity securities dividends                               563         279      1,263        887
    Short-term investments                                     62           6         98         24
                                                         --------    --------   --------   --------
               Total interest and dividend income          25,839      15,546     61,219     45,274
                                                         --------    --------   --------   --------
Interest expense
    Deposits                                                5,979       3,097     13,689      9,209
    Borrowings                                              4,806       2,207     10,951      5,906
                                                         --------    --------   --------   --------
               Total interest expense                      10,785       5,304     24,640     15,115
                                                         --------    --------   --------   --------
Net interest income                                        15,054      10,242     36,579     30,159
Provision for loan losses                                     204         365        998      1,140
                                                         --------    --------   --------   --------
Net interest income, after provision for loan losses       14,850       9,877     35,581     29,019
                                                         --------    --------   --------   --------
Non-interest income
    Customer service fees                                   1,439         580      3,087      1,738
    Wealth management service fees                            680         587      2,013      1,809
    Insurance service fees                                    472          24        679         26
    Loan service fees                                         179          63        560        245
    Increase in cash surrender value of life insurance        245          93        648        443
    Gain on sales and dispositions of securities, net         832         310      2,649      1,013
    Gain on sale of loans and securitized loans, net           22          --        773         84
    Other non-interest income                                  86          69        217        208
                                                         --------    --------   --------   --------
               Total non-interest income                    3,955       1,726     10,626      5,566
                                                         --------    --------   --------   --------
Non-interest expense
    Salaries and employee benefits                          5,699       4,195     14,524     12,687
    Termination of Employee Stock Ownership Plan               --          --      8,667         --
    Occupancy and equipment                                 1,655         997      4,006      3,030
    Marketing and advertising                                 372         207        732        634
    Data processing                                           518         305      1,323      1,030
    Professional services                                     590         442      1,427      1,226
    Foreclosed real estate and repossessed assets, net        241         150        557        404
    Merger and conversion expense                             828          --      1,791         --
    Other non-interest expense                              1,697         885      4,170      2,666
                                                         --------    --------   --------   --------
               Total non-interest expense                  11,600       7,181     37,197     21,677
                                                         --------    --------   --------   --------
Income from continuing operations before income taxes       7,205       4,422      9,010     12,908
Provision for income taxes                                  2,459       1,415      5,621      4,144
                                                         --------    --------   --------   --------
Income from continuing operations                           4,746       3,007      3,389      8,764
Loss from discontinued operations                              --          --         --       (653)
Income tax benefit                                             --          --         --       (222)
                                                         --------    --------   --------   --------
Net loss from discontinued operations                          --          --         --       (431)
                                                         --------    --------   --------   --------
Net income                                               $  4,746    $  3,007   $  3,389   $  8,333
                                                         ========    ========   ========   ========

Earnings per share
    Basic                                                $   0.56    $   0.57   $   0.51   $   1.58
    Diluted                                              $   0.54    $   0.53   $   0.48   $   1.45

Weighted average shares outstanding
    Basic                                                   8,456       5,270      6,683      5,284
    Diluted                                                 8,856       5,721      7,061      5,735



See accompanying notes to unaudited consolidated financial statements.

                                                  2




                                         BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                      FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                                                          Unaudited


                                                                                               Accumulated
                                                         Additional                              other
                                               Common      paid-in     Unearned    Retained   comprehensive  Treasury
                                               stock       capital   compensation  earnings      income        stock        Total
                                             ---------    ---------  ------------  ---------    ---------    ---------    ---------
                                                                                 (In thousands)
                                                                                                    
Balance at December 31, 2004                 $      77    $  77,588   $  (7,414)   $  94,996    $   4,214    $ (37,725)   $ 131,736
                                                                                                                          ---------

Comprehensive income:
    Net income                                      --           --          --        3,389           --           --        3,389
    Change in net unrealized gain on
        securities available-for-sale, net
        of reclassification adjustments
        and tax effects                             --           --          --           --       (3,772)          --       (3,772)
    Net loss on derivative instruments              --           --          --           --          (42)          --          (42)
                                                                                                                          ---------
           Total comprehensive (loss)                                                                                          (425)

Cash dividends declared ($0.38 per share)           --           --          --       (2,508)          --           --       (2,508)
Acquisition of Woronoco Bancorp, Inc.               29      111,886          --           --           --           --      111,915
Termination of Employee Stock
      Ownership Plan                                --        8,459       5,105           --           --           --       13,564
Treasury stock purchased/transferred                --           --          --           --           --      (11,893)     (11,893)

Exercise of stock options                           --           --          --          (66)          --        1,392        1,326
Reissuance of treasury stock-other                  --          315          --           --           --          590          905
Tax benefit from stock compensation                 --          279          --           --           --           --          279

Change in unearned compensation                     --          217         521           --           --           --          738
                                             ---------    ---------   ---------    ---------    ---------    ---------    ---------

Balance at September 30, 2005                $     106    $ 198,744   $  (1,788)   $  95,811    $     400    $ (47,636)   $ 245,637
                                             =========    =========   =========    =========    =========    =========    =========

Balance at December 31, 2003                 $      77    $  75,764   $  (8,507)   $  86,276    $   5,559    $ (35,994)   $ 123,175
                                                                                                                          ---------

Comprehensive income:
    Net income                                      --           --          --        8,333           --           --        8,333
    Change in net unrealized gain on
        securities available-for-sale, net
        of reclassification adjustments
        and tax effects                             --           --          --           --       (1,214)          --       (1,214)
                                                                                                                          ---------
             Total comprehensive income                                                                                       7,119

Reversals from discontinued operations              --          142          --         (142)          --           --           --
Cash dividends declared ($0.36 per share)           --           --          --       (1,965)          --           --       (1,965)

Treasury stock purchased                            --           --          --           --           --       (2,545)      (2,545)
Treasury stock released                             --          358          --           --           --          238          596

Exercise of stock options                           --           --          --          (33)          --          576          543
Change in unearned compensation - MRP               --          219         319           --           --           --          538
Change in unearned compensation - ESOP              --          671         356           --           --           --        1,027
                                             ---------    ---------   ---------    ---------    ---------    ---------    ---------

Balance at September 30, 2004                $      77    $  77,154   $  (7,832)   $  92,469    $   4,345    $ (37,725)   $ 128,488
                                             =========    =========   =========    =========    =========    =========    =========


See accompanying notes to unaudited consolidated financial statements.

                                                                 3




                         BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           Unaudited

                                                                               Nine Months Ended
                                                                                 September 30,
                                                                             ----------------------
                                                                               2005         2004
                                                                             ---------    ---------
                                                                                    
                                                                                 (In thousands)
Cash flows from operating activities:
  Continuing operations:
    Net income                                                               $   3,389    $   8,764
    Adjustments to reconcile net income to net cash
        provided by continuing operating activities:
            Provision for loan losses                                              998        1,140
            Net amortization of securities                                       1,026          954
            Depreciation and amortization expense                                2,177        1,252
            Management awards plan expense                                       1,040          920
            Employee Stock Ownership Plan expense                                  334        1,027
            Termination of Employee Stock Ownership Plan (ESOP)                  8,667           --
            ESOP loan prepayment                                                  (900)          --
            Increase in cash surrender value of bank owned life insurance         (600)        (283)
            Gain on sales and dispositions of securities, net                   (2,649)      (1,013)
            Gain on sale of loans and securitized loans, net                      (773)         (82)
            Deferred income tax provision (benefit), net                         1,129          294
            Net increase in loans held for sale                                   (799)        (571)
                Net change in accrued interest receivable and other assets       4,682        3,986
                Net change in accrued expenses and other liabilities            (5,241)        (778)
                                                                             ---------    ---------
                      Net cash provided by continuing operating activities      12,480       15,610
                                                                             ---------    ---------

  Discontinued operations:
    Net loss                                                                        --         (653)
    Adjustments to reconcile net loss to net cash used
       by operating activities:
            Depreciation and amortization expense                                   --          188
            Amortization of other intangibles                                       --           94
            Minority interest                                                       --         (381)
                                                                             ---------    ---------
                      Net cash used by discontinued operations                      --         (752)
                                                                             ---------    ---------

                      Total net cash provided by operating activities:          12,480       14,858
                                                                             ---------    ---------

Cash flows from investing activities:
  Continuing operations:
    Activity in available-for-sale securities:
        Sales                                                                  126,653        4,159
        Maturities                                                               4,215       25,501
        Principal payments                                                      57,044       45,153
        Purchases                                                              (26,740)    (155,768)
    Activity in held-to-maturity securities:
        Maturities                                                              17,779       13,616
        Principal payments                                                       2,992       10,655
        Purchases                                                              (17,801)     (13,797)
    Purchase of FHLB stock, net                                                   (596)      (3,975)


                                                    4




                              BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (concluded)
                                                 Unaudited

                                                                                   Nine Months Ended
                                                                                     September 30,
                                                                                 ----------------------
                                                                                   2005         2004
                                                                                 ---------    ---------
                                                                                        
                                                                                    (In thousands)
    Acquisition of Woronoco Bancorp, Inc.,
        net of cash acquired                                                       (21,316)          --
    Loan originations and purchases, net of
        principal payments                                                         (58,308)     (79,103)
    Proceeds from sales of loans                                                     3,635       52,296
    Additions to premises and equipment                                             (3,464)      (2,748)
                                                                                 ---------    ---------
                   Net cash provided (used) by continuing investing activities      84,093     (104,011)
                                                                                 ---------    ---------

  Discontinued operations:
    Additions to premises and equipment                                                 --          (76)
    Proceeds from sale of interest in discontinued operations                           --        1,966
    Proceeds from sale of equipment                                                     --          621
                                                                                 ---------    ---------
                   Net cash provided by discontinued investing activities               --        2,511
                                                                                 ---------    ---------

                   Total net cash provided (used) by investing operations:          84,093     (101,500)
                                                                                 ---------    ---------

Cash flows from financing activities:
    Net increase in deposits                                                        59,431       22,871
    Proceeds from Federal Home Loan Bank advances                                  504,285      254,000
    Repayments of Federal Home Loan Bank advances                                 (654,406)    (180,634)
    Proceeds from issueance of trust preferred securities                           15,000           --
    Decrease in loans sold with recourse                                                --         (473)
    Treasury stock purchased                                                        (6,996)      (2,545)
    Proceeds from reissuance of treasury stock                                       2,231          543
    Cash dividends paid                                                             (2,508)      (1,965)
                                                                                 ---------    ---------
                  Net cash (used) provided by financing activities                 (82,963)      91,797
                                                                                 ---------    ---------

Net change in cash and cash equivalents                                             13,610        5,155

Cash and cash equivalents at beginning of period                                    17,902       17,442
                                                                                 ---------    ---------

Cash and cash equivalents at end of period                                       $  31,512    $  22,597
                                                                                 =========    =========

Supplemental cash flow information:
    Non-cash transfer of shares to treasury to pay-off ESOP loan                 $   4,897           --
    Fair value of non-cash assets acquired                                         827,122           --
    Fair value of liabilities assumed                                              701,830           --
    Fair value of common stock issued                                              108,394           --



See accompanying notes to unaudited consolidated financial statements.

                                                5


                 BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2005 and 2004
                                   (Unaudited)

1.    BASIS OF PRESENTATION
---------------------------

The accompanying  unaudited  consolidated interim financial statements set forth
the accounts of Berkshire Hills Bancorp, Inc. ("Berkshire" or the "Company") and
its wholly-owned subsidiaries,  including its principal wholly-owned subsidiary,
Berkshire Bank (the "Bank").  The consolidated  interim financial statements and
notes  thereto  have been  prepared in  conformity  with  accounting  principles
generally  accepted  in the  United  States of  America  for  interim  financial
information and with the  instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by  accounting  principles  generally  accepted in the United States of
America for complete  financial  statements.  In the opinion of management,  all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. All significant inter-company transactions
have  been  eliminated  in  consolidation.  Amounts  in prior  period  financial
statements  are  reclassified  whenever  necessary to conform to current  period
presentations.  The results of  operations  for the three and nine months  ended
September  30, 2005 are not  necessarily  indicative of the results which may be
expected for the year as a whole. The consolidated  interim financial statements
herein  presented are intended to be read in conjunction  with the  consolidated
financial  statements  presented in the  Company's  most recent  Securities  and
Exchange  Commission  Form  10-K  and  accompanying  notes  to the  Consolidated
Financial Statements filed by the Company for the year ended December 31, 2004.

The preparation of the consolidated  interim financial  statements in conformity
with accounting  principles  generally  accepted in the United States of America
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities,  and  disclosure  of  contingent  assets and
liabilities, as of the date of the consolidated interim financial statements and
the reported  amounts of revenues and  expenses for the periods  presented.  The
actual  results of the  Company  could  differ  from those  estimates.  Material
estimates that are susceptible to near-term changes include the determination of
the allowance for loan losses, goodwill and tax estimates.

On June 1, 2005,  the Company  acquired all of the  outstanding  common stock of
Woronoco  Bancorp,  Inc.  ("Woronoco"),  including  its  principal  wholly-owned
subsidiary, Woronoco Savings Bank (see Note 2). Immediately after the completion
of the acquisition, Woronoco Savings Bank was merged into the Bank.

Allowance for loan losses

The allowance for loan losses is established through a provision for loan losses
charged to  earnings to account for losses  that are  estimated  to occur.  Loan
losses  are  charged  against  the  allowance  when   management   believes  the
uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any,
are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management  and
is based upon management's periodic review of the collectibility of the loans in
light  of  historical  experience,  the  composition  and  volume  of  the  loan
portfolio,  adverse  situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral and prevailing economic conditions.
This  evaluation is  inherently  subjective  as it requires  estimates  that are
susceptible to significant revision as more information becomes available.

The allowance  consists of specific,  general and  unallocated  components.  The
specific  component  relates to loans that are  classified  as either  doubtful,
substandard  or special  mention.  For such loans  that are also  classified  as
impaired,  an  allowance  is  established  when the  discounted  cash  flows (or
collateral value or observable  market price) of the impaired loan is lower than
the carrying value of that loan.  The general  component  covers  non-classified
loans  and is based on  historical  loss  experience  adjusted  for  qualitative
factors.  An  unallocated  component is maintained to cover  uncertainties  that
could affect management's estimate of probable losses. The unallocated component
of the allowance  reflects the margin of imprecision  inherent in the underlying
assumptions  used in the  methodologies  for  estimating  allocated  and general
losses in the portfolio.

                                       6


A loan is considered  impaired when, based on current information and events, it
is probable that a creditor will be unable to collect the scheduled  payments of
principal or interest  when due according to the  contractual  terms of the loan
agreement.  Impaired  loans are generally  maintained  on a  non-accrual  basis.
Impairment  is measured  on a loan by loan basis by either the present  value of
expected future cash flows discounted at the loan's effective  interest rate, or
the  fair  value  of  the  collateral  if  the  loan  is  collateral  dependent.
Substantially all of the Bank's loans that have been identified as impaired have
been measured by the fair value of existing collateral.

Large groups of smaller balance,  homogeneous  loans are collectively  evaluated
for impairment. Accordingly, the Company does not separately identify individual
consumer loans or residential mortgage loans for impairment disclosures.

Stock Compensation Plans

Statement of Financial  Accounting  Standards ("SFAS") No. 123,  "Accounting for
Stock-Based  Compensation,"  encourages all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby compensation
cost is  measured  at the  grant  date  based on the  value of the  award and is
recognized  over the  service  period,  which is  usually  the  vesting  period.
However,  it also allows an entity to continue to measure  compensation cost for
those plans using the intrinsic  value based method of accounting  prescribed by
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees,"  whereby  compensation  cost is the excess, if any, of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee  must pay to acquire  the stock.  SFAS No. 123 was revised as
SFAS No. 123R in  December  2004.  This  revision  is  discussed  further in the
"Recent Accounting Pronouncements" section of this Note.

The Company maintains  stock-based  compensation plans, which are described more
fully in Note 15 to the financial  statements in the 2004 Annual Report filed on
Form 10-K. The Company has elected to continue with the  accounting  methodology
in APB No. 25 and, as a result, has provided pro forma disclosures of net income
and earnings per share, as if the fair value based method of accounting had been
applied.  The following table  illustrates the effect on net income and earnings
per share if the Company had applied the fair value  recognition  provisions  of
SFAS No. 123 to stock-based employee compensation.




                                                Three Months Ended       Nine Months Ended
                                                  September 30,            September 30,
                                              ---------------------   ---------------------
                                                 2005        2004        2005        2004
                                              ---------   ---------   ---------   ---------
                                                                      
                                                 (In thousands, except per share amounts)

Net income as reported                        $   4,746   $   3,007   $   3,389   $   8,333
Deduct: Total stock-based employee
     compensation expense determined
     under fair value based method for
     all awards, net of related tax effects         108         133         325         399
                                              ---------   ---------   ---------   ---------

Pro forma net income                          $   4,638   $   2,874   $   3,064   $   7,934
                                              =========   =========   =========   =========

Earnings per share
Basic - as reported                           $    0.56   $    0.57   $    0.51   $    1.58
Basic - pro forma                             $    0.55   $    0.55   $    0.46   $    1.50

Diluted - as reported                         $    0.54   $    0.53   $    0.48   $    1.45
Diluted - pro forma                           $    0.52   $    0.50   $    0.43   $    1.38



Earnings Per Common Share

Basic  earnings  per share is  determined  by dividing net income by the average
number of net  outstanding  common  shares for the period.  The net  outstanding
common  shares  equals the gross number of common  shares  issued less  treasury
stock  repurchased,  unallocated  shares of the Bank's  Employee Stock Ownership
Plan,  and  unallocated  shares of stock  awards  granted  under  the  Company's
stock-based  compensation  plans. This number is computed daily and averaged for
the period.  The Bank's Employee Stock Ownership Plan was terminated on June 30,
2005.

Diluted  earnings per share is  determined by dividing net income by the average
number of net outstanding common shares computed as if all options granted under
the Bank's stock-based  compensation plans were exercised. The average number of
net outstanding common shares used for the basic computation is increased by the
unallocated shares of stock awards under the Company's stock-based  compensation
plans and by the  additional  diluted  shares  calculated by the Treasury

                                       7


Stock  method.  For a period in which the result of operations is a net loss, no
dilutive share impact is calculated,  and average  diluted shares equals average
basic shares.

Income per common share has been computed based upon the following:




                                                                  Three Months Ended       Nine Months Ended
                                                                     September 30,           September 30,
                                                                 --------------------    --------------------
                                                                   2005        2004        2005        2004
                                                                 --------    --------    --------    --------
                                                                                         
                                                                     (In thousands, except per share amounts)

Net income                                                       $  4,746    $  3,007    $  3,389    $  8,333
                                                                 ========    ========    ========    ========

Average number of common shares outstanding                         8,588       5,872       7,091       5,902
Less: average number of unallocated ESOP shares                        --        (430)       (271)       (440)
Less: average number of unvested stock award shares                  (132)       (172)       (137)       (178)
                                                                 --------    --------    --------    --------
Average number of basic shares outstanding                          8,456       5,270       6,683       5,284
Plus: average number of unvested stock award shares                   132         172         137         178
Plus: average number of dilutive shares based on stock options        268         279         241         273
                                                                 --------    --------    --------    --------
Average number of diluted shares outstanding                        8,856       5,721       7,061       5,735
                                                                 ========    ========    ========    ========

Basic earnings per share                                         $   0.56    $   0.57    $   0.51    $   1.58
Diluted earnings per share                                       $   0.54    $   0.53    $   0.48    $   1.45



         Recent Accounting Pronouncements

In December 2004, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 123R,  "Share-based Payment (Revised 2004)"
("SFAS 123R"),  which establishes  standards for the accounting for transactions
in which an entity exchanges its equity instruments for goods or services.  This
statement  requires a public  entity to measure  the cost of  employee  services
received in exchange for an award of equity  instruments based on the grant-date
fair value of the  award.  SFAS 123R  eliminates  the  ability  to  account  for
share-based  compensation  transactions  using the intrinsic method and requires
that such  transactions  be accounted  for using a  fair-value-based  method and
recognized as expense in the consolidated  statement of income. SFAS 123R allows
the use of valuation  models other than the  Black-Scholes  model  prescribed in
SFAS 123.  Therefore,  the pro forma costs of stock option expense  estimated in
Note 1 using the  Black-Scholes  method may not be  representative  of the costs
recognized  by the Company upon  adoption of SFAS 123R.  The Company is still in
the process of analyzing the cost of stock options under SFAS 123R. On April 14,
2005, the Securities and Exchange Commission delayed the effective date for SFAS
123R,  which allows  companies to implement  the  statement at the  beginning of
their first fiscal year beginning after June 15, 2005, which would be January 1,
2006 for the Company.  On March 29, 2005, the SEC Staff issued Staff  Accounting
Bulletin  No.  107 ("SAB  107").  SAB 107  expresses  the views of the SEC staff
regarding the interaction of SFAS 123R and certain SEC rules and regulations and
provides the SEC staff's view  regarding  the valuation of  share-based  payment
arrangements  for public  companies.  The provisions of SFAS 123R and SAB 107 do
not have an impact on the Company's results of operations at the present time.

Statements of Position ("SOP  No.03-3"),  "Accounting  for Certain Loans or Debt
Securities Acquired in a Transfer," addresses accounting for differences between
the  contractual  cash flows of certain loans and debt  securities  and the cash
flows expected to be collected  when loans or debt  securities are acquired in a
transfer and those cash flow differences are attributable,  at least in part, to
credit quality.  As such, SOP 03-3 applies to loans and debt securities acquired
individually,  in pools or as part of a business  combination and does not apply
to originated  loans.  The  application of SOP 03-3 limits the interest  income,
including  accretion of purchase  price  discounts,  that may be recognized  for
certain  loans and debt  securities.  Additionally,  SOP 03-3 does not allow the
excess of contractual  cash flows over cash flows expected to be collected to be
recognized as an adjustment of yield, loss accrual or valuation allowance,  such
as the allowance for loan losses.  SOP 03-3 requires that  increases in expected
cash flows  subsequent to the initial  investment  be  recognized  prospectively
through  adjustment of the yield on the loan or debt security over its remaining
life.

Decreases in expected cash flows should be recognized as impairment. In the case
of loans acquired in a business combination where the loans show signs of credit
deterioration,  SOP 03-3 represents a significant  change from current  purchase
accounting  practices  whereby  the  acquirer's  allowance  for loan  losses  is
typically  added  to the  acquirer's  allowance  for loan  losses.  SOP 03-3 was
effective  for loans  and debt  securities  acquired  by the  Company  beginning
January 1,  2005.  The  adoption  of this new  standard  did not have a material
impact on the Company's consolidated

                                       8


financial  statements.  The  Company  evaluated  the loans  and debt  securities
acquired in the  acquisition of Woronoco and determined  that no material amount
of these assets fell within the scope of SOP 03-3.

2.    ACQUISITION OF WORONOCO BANCORP, INC.
-------------------------------------------

On June 1, 2005, the Company  acquired all of the  outstanding  common shares of
Woronoco Bancorp,  Inc.,  ("Woronoco") and its wholly-owned  subsidiary Woronoco
Savings Bank.  Headquartered  in  Westfield,  Massachusetts,  Woronoco  provided
banking and other financial  services through ten banking offices in the Pioneer
Valley,  including Hampden and Hampshire Counties in Western Massachusetts.  The
merger  expanded the  Company's  footprint to include new areas and provided new
opportunities  to enhance revenues and operating  efficiencies.  The acquisition
was  accounted for under the purchase  method of accounting  with the results of
operations  for Woronoco  included in the Company's  results  beginning  June 1,
2005. Under the purchase method of accounting, the assets and liabilities of the
former  Woronoco  were  recorded at their  respective  fair values as of June 1,
2005.

The Company  purchased 25% of  Woronoco's  common shares for cash, at $36.00 per
share.  The Company  purchased 75% of Woronoco's  common shares for stock,  in a
one-for-one  exchange  valued at $37.01 per share (the share  value was based on
the average  closing  share price for the  five-day  period  beginning  two days
before  the date of the  announcement  of the  acquisition).  The  Company  also
converted Woronoco's outstanding stock options into options to purchase an equal
number of shares of Berkshire  stock.  The calculation of the purchase price was
as follows:

                        (In thousands, except share data)
-------------------------------------------------------------------------------
Total shares of Berkshire common stock issued            2,928,792
Purchase price per Berkshire common share              $     37.01
                                                       -----------

Value of Berkshire common stock issued                                $ 108,394
Cash paid for Woronoco stock                                             35,146
Estimated fair value of stock options                                     3,521
                                                                      ---------

Total purchase price                                                  $ 147,061
                                                                      =========

The following condensed balance sheet of Woronoco discloses the amounts assigned
to each  major  asset and  liability  caption  at the  acquisition  date of June
1,2005.  The  allocation of the final purchase price is subject to refinement as
additional information becomes available.

                                       9


Assets
Cash and cash equivalents                                             $   21,769
Securities available-for-sale                                            182,195
Net loans                                                                526,074
Goodwill                                                                  81,009
Intangible assets                                                         11,982
Other assets                                                              25,862
                                                                      ----------
          Total assets                                                   848,891
                                                                      ----------

Liabilities
Deposits                                                                 442,673
Borrowings                                                               243,122
Other liabilities                                                         16,035
                                                                      ----------
               Total liabilities acquired                                701,830
                                                                      ----------

               Net assets acquired                                    $  147,061
                                                                      ==========

The core deposit  intangible  was estimated at $9,664,000  for the  non-maturity
deposits,  and  will  be  amortized  over  their  estimated  useful  lives  on a
straight-line  basis.  An intangible  asset of  $2,317,550  was recorded for the
value  of  certain  non-competition  agreements  and  will  be  amortized  on  a
straight-line  basis  over the  three-year  lives of these  assets.  None of the
goodwill is expected to be deductible for income tax purposes.

Included in other  liabilities  acquired  were accrued  liabilities  for general
staff severance in accordance with a Woronoco  severance plan established  prior
to the acquisition date. These liabilities exclude severance liabilities related
to directors and executive  officers.  These liabilities  totaled  approximately
$2,000,000 as of June 1, 2005 and were substantially paid out prior to September
30, 2005.  Affected staff were primarily in operations and administration  areas
and severances were scheduled  based on integration  and conversion  activities.
Terminations  and  payments  were  generally  completed in  accordance  with the
original plan.

The results of Woronoco  are included in the  historical  results of the Company
beginning on June 1, 2005.  The  following  table  presents  unaudited pro forma
information as if the acquisition of Woronoco had been consummated as of January
1,  2005.  This pro  forma  information  gives  effect to  certain  adjustments,
including  purchase  accounting  fair value  adjustments,  amortization  of core
deposit and other  intangibles  and related  income tax  effects.  The pro forma
information  is  theoretical  in nature  and does not  necessarily  reflect  the
results of operations that would have occurred had the Company acquired Woronoco
at the beginning of these periods.  In particular,  revenue  enhancements,  cost
savings and indirect merger and  integration  costs are not reflected in the pro
forma amounts.

The Company's  unaudited pro forma condensed  consolidated  statements of income
for the nine months ended  September  30, 2005 and 2004,  assuming that Woronoco
had been acquired as of January 1, 2005 and 2004, respectively, are as follows:


                                        Nine Months Ended   Nine Months Ended
                                        September 30, 2005  September 30, 2004
                                        ------------------  ------------------
                                         (In thousands, except per share data)
Net interest income                     $          45,844   $          46,572
Non-interest income                                13,359              10,218
Net income                                          5,549              12,191

Basic earnings per share                $            0.67   $            1.48

Diluted earnings per share              $            0.64   $            1.40

                                       10


3.    SECURITIES
----------------

The amortized cost and estimated fair value of securities, with gross unrealized
gains and losses, was as follows:



                                                                September 30, 2005
                                                             -----------------------

                                                             Amortized       Fair
                                                                Cost         Value
                                                             ----------   ----------
                                                                    
                                                                 (In thousands)
Securities Available-for-Sale
   U.S. Treasury and Agencies                                $    1,074   $    1,068
   Municipal bonds and obligations                               60,583       61,034
   Mortgage-backed securities                                   265,858      261,085
   Other debt securities                                         25,113       25,586
                                                             ----------   ----------
                       Total debt securities                    352,628      348,773

Marketable equity securities                                      8,061       11,259
Nonmarketable equity securities                                  38,905       38,905
                                                             ----------   ----------
                       Total securities available-for-sale   $  399,594   $  398,937
                                                             ==========   ==========

Securities Held-to-Maturity
   Municipal bonds and obligations                           $    6,856   $    6,856
   Mortgage-backed securities                                     6,693        6,603
   Other debt securities                                         13,402       13,402
                                                             ----------   ----------
                       Total securities held-to-maturity     $   26,951   $   26,861
                                                             ==========   ==========


                                                                December 31, 2004
                                                             -----------------------

                                                             Amortized       Fair
                                                                Cost         Value
                                                             ----------   ----------
                                                                    
                                                                  (In thousands)
Securities Available-for-Sale
   U.S. Treasury and Agencies                                $    1,106   $    1,113
   Municipal bonds and obligations                               19,169       19,172
   Mortgage-backed securities                                   323,956      322,585
   Other debt securities                                          9,418        9,429
                                                             ----------   ----------
                       Total debt securities                    353,649      352,299

Marketable equity securities                                      5,193       13,105
Nonmarketable equity securities                                  19,017       19,017
                                                             ----------   ----------
                       Total securities available-for-sale   $  377,859   $  384,421
                                                             ==========   ==========

Securities Held-to-Maturity
   Municipal bonds and obligations                           $   11,580   $   11,580
   Mortgage-backed securities                                     4,715        4,672
   Other debt securities                                         13,647       13,647
                                                             ----------   ----------
                       Total securities held-to-maturity     $   29,942   $   29,899
                                                             ==========   ==========


Nonmarketable  equity securities  consist primarily of stock in the Federal Home
Loan Bank of Boston and the Savings Bank Life Insurance Company, at cost.

                                       11


4.    LOANS
-----------

A summary of balances at September 30, 2005 and December 31, 2004 follows:




                                            At September 30, 2005      At December 31, 2004
                                           -----------------------    -----------------------
                                                         Percent                    Percent
                                            Balance      of total      Balance      of total
                                           ----------   ----------    ----------   ----------
                                                                               
                                                        (Dollars in thousands)

Residential real estate loans:
     Residential one- to four-family       $  516,878           37%   $  217,159           26%
     Residential land development
           and construction                    34,653            2        18,091            2
                                           ----------   ----------    ----------   ----------
     Total residential real estate loans      551,531           39       235,250           28
Commercial real estate loans:
     Commercial one-to four-family             20,764            1        15,964            2
     Commercial land development
           and construction                    50,653            4        20,611            2
     Multi-family                              46,932            3        16,380            2
     Other commercial real estate             284,190           20       207,619           25
                                           ----------   ----------    ----------   ----------
     Total commercial real estate loans       402,539           28       260,574           31

Commercial and industrial loans               156,510           11       150,879           18

Consumer loans:
     Automobile                               149,693           11       123,027           15
     Home equity and other loans              151,836           11        58,449            8
                                           ----------   ----------    ----------   ----------
     Total consumer loans                     301,529           22       181,476           23
                                           ----------   ----------    ----------   ----------

Total loans                                $1,412,109          100%   $  828,179          100%
                                           ==========   ==========    ==========   ==========


5.    LOAN LOSS ALLOWANCE AND NON-ACCRUAL LOANS
-----------------------------------------------

An analysis of the allowance for loan losses for the nine months ended September
30, 2005 and 2004 follows:



                                                      Nine Months Ended
                                          ----------------------------------------
                                          September 30, 2005    September 30, 2004
                                          ------------------    ------------------
                                                          
                                                       (In thousands)

Balance at beginning of period            $            9,337    $            8,969
Provision for loan losses                                998                 1,140
Allowance attributed to acquired loans                 3,321                    --
Loans charged-off                                     (1,003)               (1,465)
Recoveries                                               470                   748
                                          ------------------    ------------------

Balance at end of period                  $           13,123    $            9,392
                                          ==================    ==================


                                       12


The following is a summary of information pertaining to impaired and non-accrual
loans at September 30, 2005 and December 31, 2004:



                                                              September 30, 2005     December 31, 2004
                                                              -------------------   -------------------
                                                                              
                                                                           (In thousands)

Impaired loans with no valuation allowance                    $             1,547   $               787
Impaired loans with a valuation allowance                                   2,794                   393
                                                              -------------------   -------------------
       Total impaired loans                                   $             4,341   $             1,180
                                                              ===================   ===================

Specific valuation allowance allocated to impaired loans      $               822   $               230

Total non-accrual loans                                       $             1,560   $             1,152

Total loans past due ninety days or more and still accruing   $                 2   $                65



6.    DEPOSITS
--------------

A summary of deposit balances, by type, is as follows:




                                         September 30, 2005              December 31, 2004
                                     ---------------------------    ---------------------------
                                                      Percent                        Percent
                                       Balance      of deposits        Balance     of deposits
                                     ------------   ------------    ------------   ------------
                                                                                 
                                                        (Dollars in thousands)

Demand deposits                      $    177,948             13%   $    110,129             13%
NOW accounts                              144,858             11         100,709             12
Money market accounts                     241,375             18         156,412             19
Savings accounts                          230,883             17         163,264             19
                                     ------------   ------------    ------------   ------------
  Total core accounts                     795,064             59         530,514             63
Certificates of Deposit - regular         487,154             36         315,275             37
Certificates of Deposit - brokered         65,533              5              --             --
                                     ------------   ------------    ------------   ------------
  Total certificates of deposit           552,687             41         315,275             37
                                     ------------   ------------    ------------   ------------
     Total deposits                  $  1,347,751            100%   $    845,789            100%
                                     ============   ============    ============   ============


7.    BORROWINGS
----------------

On  June  30,  2005  Berkshire  Hills  Capital  Trust  I  (the  "Trust")  issued
$15,000,000  of trust  preferred  securities and invested the proceeds from this
offering into an equivalent amount of junior  subordinated  debentures issued by
the Company. The debentures are the sole asset of the Trust.  Proceeds were used
by the Company to provide  additional  equity to the Bank.  The trust  preferred
securities pay interest  quarterly at a variable rate equal to LIBOR plus 1.85%,
are  mandatorily  redeemable on August 23, 2035 and may be redeemed by the Trust
at par any  time on or  after  August  23,  2010.  The  Company  has  fully  and
unconditionally guaranteed the trust preferred securities issued by the Trust.

8.    STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
-------------------------------------------------

                                       13


At September 30, 2005,  stockholders' equity totaled  $245,637,000,  or 12.1% of
total assets,  compared to $131,736,000,  or 10.1% of total assets,  at December
31, 2004.  The various  regulatory  capital ratios for the Bank at September 30,
2005 and December 31, 2004 were as follows:



                                                                                                   FDIC Minimums
                                           September 30, 2005         December 31, 2004        to be Well-Capitalized
                                         -----------------------     ---------------------     ----------------------
                                                                                               
Total capital to risk-weighted assets:             10.89%                    12.69%                     10.00%

Tier 1 capital to risk-weighted assets:             9.90                     11.31                       6.00

Tier 1 capital to average assets:                   7.25                      8.08                       5.00



As of September 30, 2005,  Berkshire 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.  The Company
paid a cash  dividend of $0.14 per share on common stock during the three months
ended September 30, 2005 and the Company paid a cash dividend of $0.38 per share
on common stock during the nine months ended September 30, 2005.

9.    COMMITMENTS
-----------------

At September 30, 2005,  the Bank had  outstanding  commitments  to originate new
residential and commercial loans totaling  $87,286,000,  which are not reflected
on the consolidated balance sheet. In addition,  unadvanced funds on home equity
lines totaled $137,733,000 and unadvanced commercial lines, including unadvanced
construction loan funds, totaled $178,421,000. The Bank anticipates it will have
sufficient  funds  to  meet  these   commitments.   These  commitments   totaled
$403,440,000  at September  30,  2005,  compared to a total of  $165,523,000  at
December 31, 2004.  Total  commitments  increased  primarily due to the Woronoco
acquisition, as well as, to higher loan commitment origination volumes.

During the first quarter of 2005, the Bank entered into a subscription agreement
to purchase $8,000,000 in interests in a to-be-formed  limited liability company
("LLC"),  which will invest in qualified community  development entities for the
purpose of funding loans to qualified,  active low-income community  businesses.
The Bank paid $160,000 as an initial  subscription amount, which was included in
other assets.  It is anticipated that the LLC will be formed by the end of 2005.
Capital contributions will be payable in 2006 and 2007.


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

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  analysis discusses changes
in the  financial  condition  and results of operations at and for the three and
nine months ended September 30, 2005 and 2004, and 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.  This  discussion  and  analysis
updates,  and should be read in conjunction  with,  Management's  Discussion and
Analysis  included  in the 2004  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.

Forward-Looking Statements
--------------------------

This report  contains  forward-looking  statements that are based on assumptions
and may describe  future plans,  strategies and  expectations of the Company and
the Bank. These  forward-looking  statements are generally  identified by use of
the words "believe," "expect," "intend," "anticipate,"  "estimate," "project" or
similar  expressions.  The Company and the Bank's ability to predict  results or
the actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material  adverse  effect on the  operations of Berkshire and
its  subsidiaries  include,  but are not limited to, changes in interest  rates,
national and regional economic  conditions,  legislative and regulatory changes,
monetary and fiscal policies of the U.S.  Government,  including policies of the
U.S.  Treasury and the Federal Reserve Board, the quality and composition of the
loan  or  investment  portfolios,  demand  for  loan  products,  deposit  flows,
competition, demand for

                                       14


financial  services in Berkshire  Hills' and the Bank's market area,  changes in
real estate market  values in the  Berkshire  Hills' and the Bank's market area,
and changes in relevant accounting principles and guidelines.  Additionally,  on
June 1, 2005,  the Company  completed  the  acquisition  of Woronoco.  Risks and
uncertainties  related to the acquisition include the achievement of anticipated
future earnings benefits.  These risks and uncertainties should be considered in
evaluating forward looking statements and undue reliance should not be placed on
such statements.  Except as required by applicable law or regulation,  Berkshire
does not  undertake,  and  specifically  disclaims  any  obligation,  to release
publicly the result of any revisions,  which may be made to any  forward-looking
statements to reflect events or  circumstances  after the date of the statements
or to reflect the occurrence of anticipated or unanticipated events.

General
-------

Berkshire Hills Bancorp,  Inc. is a Delaware corporation and the holding company
for Berkshire Bank. Established in 1846, Berkshire Bank is one of Massachusetts'
oldest and  largest  independent  banks and is the largest  banking  institution
based  in  Western  Massachusetts.  The  Bank is  headquartered  in  Pittsfield,
Massachusetts  with  branch  offices  serving  communities   throughout  Western
Massachusetts and Northeastern New York. The Bank also operates a representative
office  and a special  purpose  commercial  bank  which  accepts  deposits  from
municipalities  and  other  governmental  entities  in New  York.  The  Bank  is
committed  to  operating  as an  independent  super-community  bank,  delivering
exceptional  customer service and a broad array of  competitively  priced retail
and commercial products to its customers.

Critical Accounting Policies
----------------------------

The  Company has  established  various  accounting  policies,  which  govern the
application of generally  accepted  accounting  principles in the preparation of
the  financial  statements.  Certain  accounting  policies  involve  significant
judgments  and  assumptions  by  management  that have a material  impact on the
carrying  value of certain  assets and  liabilities.  Management  considers such
accounting  policies to be  critical  accounting  policies.  The  judgments  and
assumptions  used by  management  are based on historical  experience  and other
factors, which are believed to be reasonable under the circumstances. Because of
the nature of the judgments and assumptions  made by management,  actual results
could  differ  from these  judgments  and  estimates  that could have a material
impact on the  carrying  values of assets  and  liabilities  and the  results of
operations  of  the  Company.  The  Company  believes  that  its  most  critical
accounting policies upon which its financial condition and results of operations
depend, and which involve the most complex  subjective  decisions or assessment,
are as follows.  Additional  information about the Company's accounting policies
is included in Note 1 of the Consolidated Financial Statements in Part I Item 1;
and in the 2004 Annual Report to Shareholders on Form 10-K in Item 1 and Item 8.

Allowance for Loan Losses

Arriving at an  appropriate  level of allowance for loan losses  involves a high
degree of judgment.  The allowance for loan losses  provides for probable losses
based  upon  evaluations  of known  and  inherent  risks in the loan  portfolio.
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 we believe  that we use the
appropriate  information  available 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.  For example,  a down turn in the local  economy could cause an
increase in non-performing loans. Additionally,  a decline in real estate values
could cause some of our loans to become inadequately  collateralized.  In either
case,  this may require us to increase our  provisions  for loan  losses,  which
would negatively impact earnings.

Income Taxes

Management considers accounting for income taxes as a critical accounting policy
due to the  subjective  nature of certain  estimates  that are  involved  in the
calculation,  and  evaluation  of the timing and  recognition  of resulting  tax
liabilities and assets. Management uses the asset 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.  Management  must  assess the
realizability  of the  deferred  tax  asset,  including  the carry  forward of a
portion  of the  charitable  contribution,  and to the  extent  that  management
believes that recovery is not likely,

                                       15


a valuation  allowance is  established.  Adjustments to increase or decrease the
valuation allowance are generally charged or credited,  respectively,  to income
tax expense.

Goodwill and Identifiable Intangible Assets

For acquisitions accounted for under purchase accounting the Company is required
to follow SFAS No.  141"Business  Combinations"  and SFAS No. 142  "Goodwill and
Other  Intangible  Assets."  SFAS No. 141 requires us to record as assets on our
financial  statements both goodwill,  an intangible  asset which is equal to the
excess of the purchase price which we pay for another company over the estimated
fair value of the net assets acquired,  and identifiable  intangible assets such
as core deposit  intangibles  and  non-compete  agreements.  Under SFAS No. 142,
goodwill  must be regularly  evaluated for  impairment,  in which case we may be
required to reduce its carrying value through a charge to earnings. Core deposit
and other  identifiable  intangible  assets are  amortized to expense over their
estimated  useful  lives and are  reviewed  for  impairment  whenever  events or
changes in circumstances  indicate that the carrying amount of the asset may not
have future  economic  benefit.  The valuation  techniques used by management to
determine the carrying value of tangible and intangible  assets  acquired in the
acquisitions and the estimated lives of identifiable  intangible  assets involve
estimates  for  discount  rates,  projected  future  cash flows and time  period
calculations,  all of which  are  susceptible  to  change  based on  changes  in
economic  conditions  and  other  factors.  Future  events  or  changes  in  the
estimates,  which were used to  determine  the  carrying  value of goodwill  and
identifiable  intangible assets or which otherwise adversely affects their value
or estimated  lives could have a material  adverse  impact on future  results of
operations.

Impact of New Account Pronouncements
------------------------------------

Please refer to the note on Recent  Accounting  Pronouncements  in Note 1 to the
financial  statements of this report for a detailed discussion of new accounting
pronouncements.

Recent Developments
-------------------

o     Completed successful  integration of Woronoco  operations,  achieving cost
      savings of 36%, exceeding 30% original target.

o     Completed  conversion  of Woronoco  core  banking  information  systems in
      August.

o     Opened new full  service  office in Clifton  Park,  New York and  obtained
      regulatory  approvals to open a new full service office in East Greenbush,
      New York.

o     Increased total  transaction  account deposit  balances at a 9% annualized
      rate during the third quarter

o     Repurchased  54,600  shares of the  Company's  common  stock at an average
      price of $32.93 per share during the third quarter.

o     Changed common stock trading to NASDAQ national market with trading symbol
      "BHLB".

o     On October 26, 2005,  acquired the MacDonald & Johnson  (East  Longmeadow)
      and Onofrey (Springfield) insurance agencies.

Summary
-------

The Company completed its acquisition of Woronoco Bancorp, Inc. on June 1, 2005.
Second quarter 2005 results  included one month's  contribution  from Woronoco's
operations,  and the third  quarter  was the first  full  quarter  for the newly
combined  entity.  Most major  categories  in the  Statements  of Income and the
Balance  Sheets  increased in relation to  comparable  data due to the impact of
this  acquisition,  for both the third  quarter and for the first nine months of
2005.  Most major  categories  in these  statements  also  increased  due to the
organic growth of Berkshire's business lines, as well as expansion into New York
State and to acquisitions of fee producing businesses over the last year.

The Company  reported total net income of $4.75 million for the third quarter of
2005,  increasing  by 58% compared to total net income of $3.01  million for the
third quarter of 2004.  The Company  reported  total net income of $3.39 million
for the first nine months of 2005, compared to total net income of $8.33 million

                                       16


for the first nine  months of 2004.  Nine month 2005  results  included an $8.67
million  non-cash  charge for the  termination  of the Company's  Employee Stock
Ownership Plan ("ESOP") on June 30, 2005.

The tables on the following pages display  Selected  Financial Data, and Average
Balance Sheets and Interest Rates.

Selected Financial Data (Unaudited)
-----------------------------------

The  following  summary  data is  based  in part on the  consolidated  financial
statements and accompanying notes, and other information  appearing elsewhere in
this Form 10-Q.  Historical data is also based in part on, and should be read in
conjunction  with,  the Company's  prior filings with the SEC. Data includes the
impact of the  acquisition  of  Woronoco  Bancorp,  Inc. on June 1, 2005 and the
termination of the Employee Stock Ownership Plan on June 30, 2005.

                                       17



                                                       At or for the              At or for the
                                                     Three Months Ended          Nine Months Ended
                                                        September 30               September 30
                                                  ------------------------    ------------------------
                                                     2005          2004          2005          2004
                                                  ----------    ----------    ----------    ----------
                                                                                
For the Period: (in thousands)
     Net interest income                          $   15,054    $   10,242    $   36,579    $   30,159
     Provision for loan losses                           204           365           998         1,140
     Non-interest income                               3,955         1,726        10,626         5,566
     Non-interest expense                             11,600         7,181        37,197        21,677
     Net income                                        4,746         3,007         3,389         8,333

Per Share:
     Earnings - basic                             $     0.56    $     0.57    $     0.51    $     1.58
     Earnings - diluted                                 0.54          0.53          0.48          1.45
     Dividends declared                                 0.14          0.12          0.38          0.36
     Book value                                        28.68         21.87         28.68         21.87
     Tangible book value                               17.03         20.89         17.03         20.89
     Common stock price:
     High                                              35.20         39.14         37.64         39.14
     Low                                               31.90         35.01         30.97         32.69
     Close                                             34.00         36.95         34.00         36.95

At Period End:  (in millions)
     Total assets                                 $    2,033    $    1,311    $    2,033    $    1,311
     Total loans                                       1,412           818         1,412           818
     Other earning assets                                429           440           429           440
     Deposits                                          1,348           853         1,348           853
     Borrowings                                          436           325           436           325
     Shareholders' equity                                246           128           246           128

Operating Ratios:
     Return on average assets                           0.92%         0.92%         0.27%         0.87%
     Return on average equity                           7.90          9.71          2.47          8.83
     Return on average tangible equity                 13.45         10.18          3.35          9.37
     Net interest margin                                3.31          3.36          3.31          3.38
     Efficiency ratio                                  55.32         60.44         57.13         60.99
     Equity/total assets                               12.08          9.81         12.08          9.81
     Tangible equity/tangible assets                    7.55          9.41          7.55          9.41

Loan Related Ratios:
     Net charge-offs/average loans (annualized)         0.04%         0.12%         0.06%         0.12%
     Loan loss allowance/loans                          0.93          1.15          0.93          1.15
     Nonperforming assets/total assets                  0.08          0.21          0.08          0.21


---------------------------------------------------
(1)   The  efficiency  ratio is  non-interest  expense,  divided by the total of
      fully taxable equivalent net interest income and non-interest income, less
      security   gains.   The  efficiency   ratio  also  excludes   discontinued
      operations,  expense of the  termination of the Employee  Stock  Ownership
      Plan, and merger and conversion expense. Tax equivalency is based on a 35%
      federal  effective  tax rate.  Return,  margin and  charge-off  ratios are
      annualized.

                                       18


Average Balance Sheets and Interest Rates - Fully-Taxable Equivalent (FTE)
--------------------------------------------------------------------------

The following  table  presents  certain  information  for the periods  indicated
regarding  average  daily  balances  of assets and  liabilities,  as well as the
average  yields and costs.  The yields and costs for the periods  indicated  are
derived by dividing income or expense by the average daily balances of assets or
liabilities,  respectively,  for the  periods  presented.  The  yields and rates
include fees which are considered adjustments to yields. The average balances of
loans  include  nonaccrual  loans,  loans held for sale,  and deferred  fees and
costs. The average balance of investment  securities is based on amortized cost.
Securities  income is stated on a fully-taxable  equivalent  basis,  using a 35%
federal  tax  rate.  Average  balances  include  the  balances  related  to  the
acquisition of Woronoco on June 1, 2005.

                                       19




                                                         Unaudited                                    Unaudited
                                              Three Months Ended September 30               Nine Months Ended September 30
                                          -----------------------------------------   -----------------------------------------
                                                 2005                  2004                   2005                 2004
                                          -----------------------------------------   -----------------------------------------
                                           Average  Yield/Rate   Average  Yield/Rate   Average  Yield/Rate  Average  Yield/Rate
                                           Balance  (FTE basis)  Balance (FTE basis)   Balance  (FTE basis) Balance (FTE basis)
                                          -----------------------------------------   -----------------------------------------
                                                                                                  
                                                    (Dollars in thousands)                    (Dollars in thousands)

Earning assets
Loans
  Residential mortgage                    $  561,048   5.06%   $  225,198   5.10%     $  384,892   5.06%   $  224,454   5.01%
  Commercial real estate                     396,212   6.68       250,323   5.80         328,155   6.39       236,014   5.79
  Commercial                                 165,414   6.92       160,129   5.51         155,662   6.54       160,869   5.44
  Automobile                                 146,138   6.17       118,029   6.14         135,095   6.01       112,716   6.22
  Home equity and other                      154,209   5.70        53,715   4.59         101,878   5.66        52,521   4.47
                                          ----------           ----------             ----------           ----------
    Total loans                            1,423,021   5.91       807,394   5.51       1,105,682   5.83       786,574   5.46
Securities                                   435,853   4.69       436,372   4.30         411,183              426,315   4.31
Short-term investments                         7,028   3.50         2,192   1.09           3,396   3.74         3,177   0.96
                                          ----------           ----------             ----------           ----------
    Total earning assets                   1,865,902   5.60     1,245,958   5.10       1,520,261   5.48     1,216,066   5.07
Other assets                                 199,349               57,551                133,470               65,342
                                          ----------           ----------             ----------           ----------
    Total assets                          $2,065,251           $1,303,509             $1,653,731           $1,281,408
                                          ==========           ==========             ==========           ==========

Funding liabilities
Deposits
  NOW                                     $  135,638   0.42    $   98,158   0.08      $  111,830   0.28    $   97,210   0.09
  Money market                               241,088   2.07       159,046   1.26         195,972   1.91       158,074   1.28
  Savings                                    240,396   0.86       168,358   0.77         198,160   0.96       168,774   0.76
  Certificates of deposit                    515,120   3.12       326,411   2.77         407,131   2.62       322,338   2.77
                                          ----------           ----------             ----------           ----------
    Total interest bearing deposits        1,132,242   2.10       751,973   1.65         913,093   2.00       746,396   1.65
Borrowings                                   499,877   3.81       318,870   2.77         407,049   3.60       301,286   2.61
                                          ----------           ----------             ----------           ----------
    Total interest bearing liabilities     1,632,119   2.62     1,070,843   1.98       1,320,142   2.50     1,047,682   1.92
Non-interest-bearing demand deposits         185,183              105,257                144,132              102,034
Other liabilities and minority interest        6,409                3,540                  5,877                5,832
                                          ----------           ----------             ----------           ----------
    Total liabilities                      1,823,711            1,179,640              1,470,151            1,155,548
Stockholders' equity                         241,540              123,869                183,580              125,860
                                          ----------           ----------             ----------           ----------
    Total liabilities and  equity         $2,065,251           $1,303,509             $1,653,731           $1,281,408
                                          ==========           ==========             ==========           ==========

Interest rate spread                                   2.98                 3.12                   2.98                 3.14

Net interest margin                                    3.31                 3.36                   3.31                 3.38

Supplementary Data                                                               
    Cost of deposits and borrowings                    2.35                 1.79                   2.25                 1.75
    Total core deposits                   $  802,305           $  530,819             $  650,094           $  526,091
    Total deposits                         1,317,425              857,230              1,057,225              848,429
    Total deposits and borrowings          1,817,302            1,176,100              1,464,274            1,149,716



Note: Average  balances  for the second  quarter  of 2005  include  one  month's
      balances related to the acquisition of Woronoco  Bancorp,  Inc. on June 1,
      2004. Average balances for the third quarter of 2005 include three months'
      balances  related to the  acquisition of Woronoco  Bancorp,  Inc.  Average
      balances  and  yields  for  securities  available-for-sale  are  based  on
      amortized  costs.  Securities  yields are  calculated  on a  fully-taxable
      equivalent basis. Cost of funds includes all deposits and borrowings.

                                       20


Comparison of Financial Condition at September 30, 2005 and December 31, 2004
-----------------------------------------------------------------------------

Woronoco Acquisition.  On June 1, 2005, the Company completed the acquisition of
Woronoco.  This acquisition is described in Note 2 to the financial  statements,
and this  discussion  should be read in conjunction  with that note. The Company
recorded  $849 million in assets and $702 million in  liabilities  in connection
with this acquisition,  and most categories of assets and liabilities  increased
primarily due to this event. The financial  statements include the operations of
Woronoco beginning on June 1, 2005.

Total Assets. Total assets were $2.0 billion at September 30, 2005, up from $1.3
billion at year-end 2004. The increase  included  approximately  $849 million in
assets  related to the Woronoco  acquisition,  and is net of a reduction of $243
million  in  loans  and  securities  under  a  de-leveraging  plan  executed  in
conjunction  with the  acquisition.  Most  categories of assets and  liabilities
increased primarily due to the acquisition of Woronoco.

Loans.  Loans totaled  $1.41  billion at September 30, 2005,  increasing by $584
million (71%) from year-end 2004.  Loan growth  included $526 million related to
the Woronoco  acquisition.  Loans added through this  acquisition were primarily
concentrated in residential mortgages and home equity line borrowings. Excluding
the impact of the loans acquired through the Woronoco acquisition and $4 million
in third  quarter  loan  sales,  total  loans  increased  by $61 million for the
year-to-date,  growing at a 10%  annualized  rate.  Growth was spread  among all
major loan categories and in all major markets. Loan originations have benefited
from the  Bank's  expansion  into  New York  State.  The loan to  deposit  ratio
increased to 105% at September 30, 2005, compared to 98% at year-end 2004.

While  total  loans  declined  by 1% during the most  recent  quarter,  the loan
origination  commitment  pipeline  grew to a record $87 million at September 30,
2005. In the third quarter,  total  commercial loan commitments to originate new
loans  increased  nearly 24% to $68  million.  During the  quarter,  the Company
closed a record number of commercial  loans that will be disbursed over the next
several months.  Additionally,  during the quarter, the indirect automobile loan
portfolio  increased at an annualized rate of 22%. The quality of these loans is
underscored  by an  average  FICO  score  in  excess  of 730  for  the  quarter,
representing the fifth consecutive quarterly improvement in that number.

Problem  Loans.  Asset  quality  indicators  remained  favorable and were stable
during the last quarter.  The loans added through the Woronoco  acquisition were
primarily  concentrated in comparatively low risk residential  mortgage and home
equity loans.  Through the first nine months,  the  annualized  rate of net loan
charge-offs  remained  comparatively  low at 0.06%.  Additionally,  the ratio of
non-performing  assets to total assets  declined during the nine months to 0.08%
from 0.09% at year-end 2004.

The  allowance  for loan losses  totaled  $13.1  million at September  30, 2005,
compared to $9.3 million at year-end  2004,  including a $3.3 million  allowance
related to loans  acquired in  connection  with the  Woronoco  acquisition.  The
allowance  for loan losses  declined to 0.93% of total loans from 1.13% of total
loans due to the addition of the low risk  residential  mortgage and home equity
loans from Woronoco. The ratio of the allowance to non-performing loans remained
strong  at 841% at the  end of the  most  recent  quarter,  compared  to 811% at
year-end  2004.  Total  impaired  loans were $4.3 million at September 30, 2005,
compared to $1.2  million at  year-end  2004,  and the  valuation  allowance  on
impaired  loans  increased to $822,000 from  $230,000.  This increase was in the
first  quarter  and  was  primarily  due  to  a  $2.1  million  commercial  loan
relationship  which remained  current through  September 30, 2005. There were no
other impaired loans exceeding $300,000 that were delinquent at that date.

Investment Securities.  Investment securities totaled $426 million at the end of
the third  quarter,  increasing  by $12 million (3%) compared to $414 million at
year-end 2004. This increase was due to securities acquired through the Woronoco
acquisition,  net of sales and maturities  under the  de-leveraging  plan, along
with the sale of $46 million in securities by the Bank in the second  quarter to
provide  funds for the  acquisition.  Securities  sold by Berkshire in the first
nine months of 2005 totaled $127  million,  primarily  due to the  de-leveraging
program  and  providing  funds  used  in the  Woronoco  acquisition.  Securities
acquired from Woronoco  totaled $182 million.  The primary impact of the changes
resulting  from  securities  transactions  was to increase the percentage of the
portfolio in municipal and trust preferred securities to 16% of the portfolio at
September 30, 2005,  compared to 7% at year-end 2004. At September 30, 2005, the
net unrealized loss on securities available-for-sale was $657,000, compared to a
net unrealized gain of $6.6 million at

                                       21


year-end  2004.  This  decrease  was due to a $4.8  million  unrealized  loss on
mortgage   backed   securities  due  to  higher  interest  rates  at  the  third
quarter-end,  together with the impact of $2.6 million in net  securities  gains
recorded  during  the first nine  months of 2005.  These  gains  were  primarily
recorded on the sale of equity  securities  reflecting  decisions  to reduce the
company's  exposure to equity price risk. The net unrealized  loss on securities
available for sale was 0.2% of the amortized  cost of the portfolio at the third
quarter-end,  compared to a net  unrealized  gain of 1.7% at year-end  2004. The
securities  portfolio  was reduced to 21% of total assets at September 30, 2005,
compared to 32% of total  assets at December 31,  2004.  At  September  30, 2005
equity securities included $5.3 million in short term bond mutual funds acquired
from Woronoco.

Deposits and Borrowings.  Deposits totaled $1.35 billion at the end of the third
quarter,  increasing by $502 million (59%) from year-end  2004.  Deposit  growth
included  $443  million  related to the  Woronoco  acquisition.  Total  deposits
increased  at a 13%  annualized  rate during the most recent  quarter.  Low cost
transaction  account  balances  increased  at a 9%  annualized  rate  during the
quarter.  This  growth  was  aided  by  relationship  time  account  promotions,
contributing  to a $45 million (10%)  increase in regular time account  balances
during the  quarter.  Excluding  the impact of the acquired  Woronoco  deposits,
total deposits  increased by $59 million for the  year-to-date,  growing at a 9%
annualized  rate.  Included in deposits  acquired  from  Woronoco  were brokered
deposits  totaling $70 million;  the Company  expects to allow this portfolio to
run-off as it matures.  At September 30, 2005, the Albany branch (open for three
months) had $12.5 million in total  deposits,  and the Clifton Park branch (open
for one month) had $9.0 million in total deposits.

Borrowings  totaled  $436  million at September  30,  2005,  increasing  by $108
million (33%) from $328 million at year-end  2004.  This increase  included $243
million  in  borrowings   acquired  with  Woronoco,   partially  offset  by  the
deleveraging program, under which the proceeds of loan and securities sales were
used to repay borrowings.  Additionally,  borrowings were reduced by $68 million
in the third quarter of 2005 with proceeds  from deposit  growth and  securities
sales.  Borrowings  included  $15 million of trust  preferred  securities  which
Berkshire  issued in June to supplement  regulatory  capital.  Total  borrowings
decreased  to 21% of total  assets at  September  30,  2005,  compared to 25% at
year-end 2004.

Equity.  Stockholders'  equity  totaled  $246  million  at the end of the  third
quarter,  increasing by $114 million, or 86%, from year-end 2004.  Consideration
for the  Woronoco  acquisition  included the issuance of 2.93 million new common
shares  valued at $108 million,  with an additional $4 million  credit to equity
for the value of outstanding Woronoco stock options. The ESOP termination had no
negative impact on  stockholders'  equity because the related charge to earnings
was offset by credits to unearned  compensation  and additional paid in capital.
These  credits  also  offset the $5 million  impact of the  transfer  of 146,971
shares to treasury stock,  which  represented full payment of the ESOP loan. The
contribution  of core  earnings  was  mostly  offset  by  dividends,  additional
treasury  stock  purchases  of $5.0  million,  and a $3.8  million  decrease  in
accumulated  other  comprehensive  income due to lower  securities  prices.  The
Company  announced an increase in the quarterly cash dividend to $0.14 per share
in August, representing a 17% increase from $0.12 per share in recent quarters.

Goodwill  increased to $88 million and identifiable  intangible assets increased
to $12 million at  September  30,  2005 due to the  Woronoco  acquisition.  As a
result,  tangible  book  value per share was $17.03 at that  date,  compared  to
$21.19 at  year-end  2004.  The ratio of  stockholders'  equity to total  assets
measured 12.1% at September 30, 2005,  compared to 10.1% at the prior  year-end,
due to the issuance of new common shares and the de-leveraging  program executed
in conjunction  with the Woronoco  acquisition.  The ratio of tangible equity to
tangible  assets  measured  7.6% at September  30, 2005, a decrease from 9.6% at
year-end  2004,  reflecting  the impact of the higher  goodwill  and  intangible
assets resulting from the acquisition.

Under its repurchase plans, the Company  repurchased 54,600 shares of its common
stock at an average  price of $32.93 per share  during the  quarter.  During the
second  quarter,  the Company  completed the repurchase of 300,000 shares of its
common stock under its sixth  repurchase  program and  announced a seventh stock
repurchase program, authorizing the purchase of up to 150,000 shares. Under this
program,  57,600 shares  remained  available for  repurchase as of September 30,
2005.

Derivative  Instruments.  Woronoco used on-balance sheet derivative  instruments
primarily for asset/liability  management. The Company assumed these instruments
through the  Woronoco  acquisition,  including a $5 million  interest  rate swap
agreement to hedge variable rate home equity line  borrowings and $20 million in
outstanding interest rate swaps used to hedge brokered  certificates of deposit.
These  instruments  are  described  more  fully  in the  notes  to  consolidated
financial  statements  in the Form 10-K  filed by  Woronoco  for the year  ended
December 31,  2004.  There have been no material  changes in these  arrangements
since December 31, 2004.

                                       22


Comparison  of Operating  Results for the Three and Nine Months Ended  September
--------------------------------------------------------------------------------
30, 2005 and 2004
-----------------

Net Income. The Company reported total net income of $4.75 million for the third
quarter of 2005, increasing by 58% compared to total net income of $3.01 million
for the third quarter of 2004.  Earnings per share growth was less than earnings
growth, primarily due to the issuance of shares for the acquisition.  Net income
per diluted share measured $0.54 in the third quarter of 2005, compared to $0.53
per diluted share in the third quarter of 2004. In 2005,  third quarter expenses
included $828,000 in charges related to the merger and system conversion.  Also,
third quarter net income included net securities sale gains of $832,000 in 2005,
compared to $310,000  in 2004.  Excluding  the above items of income and expense
(after tax),  earnings per diluted share  measured $0.54 in the third quarter of
2005,  compared  to $0.49  per  diluted  share  in the  third  quarter  of 2004,
representing a 10% increase.

The Company reported total net income of $3.39 million for the first nine months
of 2005, compared to total net income of $8.33 million for the first nine months
of 2004.  Net income per diluted share  measured $0.48 compared to $1.45 for the
same periods,  respectively. In 2005, expenses included $1.79 million in charges
related to the merger and system conversion.  Also, 2005 net income included net
securities  gains  of  $2.65  million,   compared  to  $1.01  million  in  2004.
Additionally,  2005 results  included an $8.67 million  non-cash  charge for the
termination of the Bank's Employee Stock Ownership Plan (ESOP) on June 30, 2005.
Excluding  the above  items of income and  expense  (after  tax),  earnings  per
diluted share measured $1.59 in the first nine months of 2005, compared to $1.41
per diluted share in the first nine months of 2004, representing a 13% increase.

The  efficiency  ratio  improved to a record 55.3% in the third quarter of 2005,
compared to 60.4% in the third  quarter of 2004.  The return on assets was 0.92%
in both of these periods.  Berkshire produced a 13.5% return on average tangible
equity in the third  quarter of 2005,  compared to 10.2% in the third quarter of
2004.  The  acquisition  of Woronoco has increased  the Company's  market scope,
resulting in improved volume and efficiency which have benefited  earnings.  The
Woronoco  integration  was  substantially  completed  as of the end of the  most
recent  quarter,  and the Company  achieved its  objectives for cost savings and
core account  retention.  Third quarter earnings gains were achieved despite the
effort required for the successful  integration of the Woronoco operations,  the
cost of opening a third New York branch, and obtaining approval for a fourth New
York branch.

Net Interest Income.  Net interest income increased by $4.8 million (47%) in the
third  quarter  and by $6.4  million  (21%)  for the first  nine  months of 2005
compared to 2004.  Average earning assets increased by $620 million (50%) and by
$304  million  (25%) for  these  same  periods,  respectively.  Berkshire's  net
interest  margin  decreased to 3.31% in the third  quarter of 2005,  compared to
3.36% in the third quarter of 2004. The nine month net interest margin decreased
to 3.31% in 2005,  compared to 3.38% in 2004. These margin  decreases  partially
offset the benefit to interest income from the growth in average earning assets.

The increase in average  assets was primarily  due to the Woronoco  acquisition,
along with organic loan growth.  The growth was primarily in average loans, with
growth  recorded in all major  categories.  Liability  growth was split  between
deposits and borrowings,  with increases recorded in all major categories.  Both
asset yields and liability costs increased  during the last twelve months due to
increases in short term interest rates in the markets. Liability costs rose more
quickly due to the sensitivity of short term borrowings costs.  Higher growth in
average  non-interest bearing demand deposits helped restrain growth in the cost
of funds,  with the result that the net interest  margin  declined less than the
net interest spread.

Woronoco had a lower net interest  margin,  reflecting  its lower yielding asset
mix concentrated in residential  mortgages and its higher  utilization of higher
cost borrowings and time deposits. These factors also contributed to the decline
in the net interest  margin in 2005.  Growth in average demand deposit  balances
helped to mitigate this decline.  Berkshire's net interest  margin  increased to
3.31% in the third quarter of 2005,  compared to 3.26% in the second  quarter of
2005,  benefiting from the Bank's positive sensitivity to higher interest rates,
its deposit and loan pricing strategies, and the de-leveraging program.

Berkshire's  interest rate risk model  indicated that the Company's net interest
margin was  positively  sensitive to increases in interest  rates.  Net interest
income has benefited from regular  increases in the prime interest rate over the
last year.  However,  long-term interest rates have not increased as much as the
prime  interest  rate,  with  the  result  that  there  has  been a  significant
flattening of the yield curve. Additionally,  deposit pricing margins have moved
unfavorably  due to market  reactions to the  increases  in interest  rates from
recent record lows. These factors have contributed to the decrease in

                                       23


the net interest  spread.  To counter these effects,  the Company has emphasized
loan growth and growth of  relationship-oriented  transaction  account balances.
The Company  has also  maintained  a focus on  lower-yielding  shorter  duration
earning assets to better position the Company for potential  future increases in
interest rates.

Provision for Loan Losses. 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.  The  level of the  allowance  is a  critical
accounting estimate, which is subject to uncertainty. The level of the allowance
at September 30, 2005 was discussed in the previous  section on Asset Quality in
the  discussion of financial  condition at September 30, 2005. The provision for
loan losses has exceeded the modest level of net loan charge-offs in all periods
shown in this report,  and therefore has  contributed to growth in the allowance
as the loan  portfolio has also grown.  The provision for loan losses  decreased
for the periods shown in 2005 compared to 2004  primarily due to the lower level
of net loan charge-offs in those periods.

Non-Interest Income. Non-interest income increased by $2.2 million (129%) and by
$5.1  million  (91%) in the third  quarter and for the first nine months of 2005
compared to 2004,  respectively.  Quarterly  non-interest  income was about $1.6
million at Woronoco  before the  acquisition,  and the third quarter of 2005 was
the first full quarter including Woronoco operations.

Excluding  the Woronoco  contribution,  growth in  non-interest  income has been
primarily due to higher net gains on the sale of securities,  which increased by
$522,000 in the third  quarter  and by $1.6  million in the first nine months of
2005  compared  to  2004.  These  gains  were  related  to the  sale  of  equity
securities, reducing equity price risk in the investment portfolio. Non-interest
income also  benefited  from gains on the sale of loans and  securitized  loans,
which  increased by $689,000 in the first nine months of 2005  compared to 2004.
These  gains  followed  steps  taken by the  Company in 2003 and 2004 to improve
liquidity by securitizing residential mortgages.

Total service fee income includes fees for customer service,  wealth management,
insurance,  and loan services. Total service fee income was $2.8 million for the
third quarter of 2005,  increasing by $1.5 million (121%)  compared to the third
quarter of 2004.  For the first nine  months,  service fee income  totaled  $6.3
million,  increasing by $2.5 million (66%)  compared to the same period of 2004.
The  largest  increase  was  in  customer  service  fees  due  to  the  Woronoco
contribution,  as well as to organic  growth in  traditional  markets.  Customer
service fees benefited from growth in the ATM network,  new overdraft protection
products, and fees associated with transaction account growth. Insurance service
fees increased significantly due to the insurance operations acquired as part of
Woronoco.  Wealth  management  fee  increases  reflected  growth in assets under
management,  which increased for the 2005  year-to-date at an annualized rate of
16% to $400 million,  primarily due to organic growth. Service fee income growth
continues to be a significant  element of the  Company's  growth  strategy.  The
ratio of non-interest income,  excluding securities gains, to average assets was
0.60% in the  third  quarter  of 2005  quarter,  compared  to 0.44% in the third
quarter of 2004,  reflecting  this  strategic  emphasis.  The  Company  has also
benefited  from  higher  income  related  to bank owned  life  insurance  due to
purchases made in 2004.

Non-Interest  Expense.  Non-interest  expense increased by $4.4 million (62%) in
the third  quarter and by $15.5  million (72%) for the first nine months of 2005
compared to 2004.  For the nine months,  the increase  included the $8.7 million
non-cash  charge related to the ESOP  termination.  Excluding  this charge,  the
increase for the nine months was $6.9 million (32%).  The primary reason for the
remaining  increase  in  expense  was the  impact of the  Woronoco  acquisition.
Woronoco's quarterly non-interest expense, excluding merger related charges, was
about $4.8 million  prior to the  acquisition.  The most recent  quarter was the
first full quarter  including  the acquired  Woronoco  operations.  Non-interest
expense also increased due to the merger and conversion  related charges,  which
totaled $828,000 and $1.8 million for the third quarter and first nine months of
2005, respectively.

The merger and system conversion charges included indirect costs of the Woronoco
acquisition,  together  with costs of  converting  the  Company's  core  banking
systems and of converting  the acquired  Woronoco  systems and  integrating  the
Woronoco  operations.  Also included in these charges were interim  staffing and
systems costs of Woronoco operations in the third quarter through the conversion
in August.  Expenses in the most recent quarter  included  $190,000 in operating
costs of new branches and intangible asset amortization expense of $470,000.

The ratio of  non-interest  expense  to  average  assets  was 2.25% in the third
quarter of 2005,  compared to 2.20% in the third quarter of 2004.  Excluding the
ESOP termination charges and merger and conversion expense, this ratio decreased
to 2.09% in the third  quarter  of 2005.  This was the  primary  reason  for the
improvement in the efficiency  ratio to 55.3% from 60.4% for these periods,  and
reflects a strategic efficiency objective of the Woronoco  acquisition,  as well
as other expense

                                       24


management  initiatives.  The  Company  estimated  that total cost  savings  and
integration  efficiencies  related to the Woronoco  acquisition equated to about
36% of Woronoco's first quarter non-interest expense,  excluding  merger-related
charges.  These cost savings  exceeded the Company's  original 30% objective for
cost savings.

Income Tax Expense and  Discontinued  Operations.  The effective income tax rate
measured 34.1% in the third quarter and 33.4% for the first nine months of 2005,
excluding  the ESOP  termination  charge  and a related  $288,000  benefit.  The
effective income tax rate measured 32.0% and 32.1% for the same periods in 2004.
The  increase  for  the  first  nine  months  in  2005  was  due   primarily  to
proportionately  fewer tax advantaged  securities in 2005.  Results in 2004 also
included  net  losses of  $431,000  in the first six  months,  representing  the
after-tax loss on discontinued operations of EastPoint Technologies,  LLC, which
was sold in June 2004.

Comprehensive Income. Comprehensive income includes changes in accumulated other
comprehensive  income,  which consist of changes  (after-tax)  in the unrealized
market  gains and losses of  investment  securities  available  for sale and net
gain/(loss)  on  derivative   instruments.   The  Company  recorded  a  $425,000
comprehensive  loss in the first nine months of 2005,  compared to comprehensive
income  of $7.1  million  in the  first  nine  months  of 2004.  Net  unrealized
securities  losses were  recorded in both  periods due to changes in bond prices
primarily related to interest rate changes.

Liquidity and Cash Flows
------------------------

The Company's  primary use of funds in the first nine months of 2005 was related
to the  acquisition of Woronoco,  including the reduction of borrowings  through
de-leveraging and the cash paid for the acquisition of the Woronoco common stock
and expenditures  for the direct cost of the acquisition.  The primary source of
funds was the sale of investment securities.  Securities  available-for-sale and
borrowings  provide  additional future liquidity  sources.  Berkshire  Bancorp's
primary routine source of funds is dividends from  subsidiaries  and its primary
routine use of funds is dividends to shareholders  and treasury stock purchases.
The Company also receives cash from the exercise of stock options. For the first
nine months of 2005, the de-leveraging  program also had a significant impact on
cash flows,  with proceeds from  securities  sales used to pay down Federal Home
Loan Bank  borrowings.  These proceeds were also used to fund loan growth during
this period. Additional discussion about the Company's liquidity is contained in
the Company's 2004 Annual Report on Form 10-K in Item 7.

Capital Resources
-----------------

Please see the "Equity"  section of the Comparison of Financial  Condition for a
discussion  of  Stockholders'  Equity.  At September  30, 2005,  Berkshire  Bank
continued to be classified as "well capitalized".  Additional  information about
capital is contained in Note 7 to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements
------------------------------

In the  normal  course of  operations,  the  Company  engages  in a  variety  of
financial  transactions that, in accordance with generally  accepted  accounting
principles,  are not  recorded in the  Company's  financial  instruments.  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.
A further  presentation  of the  Company's  off-balance  sheet  arrangements  is
presented in the  Company's  Form 10-K for the year.  For the three months ended
September  30,  2005,  the  Company  did not  engage  in any  off-balance  sheet
transactions  reasonably  likely  to have a  material  effect  on the  Company's
financial  condition,  results of operations or cash flows. The Company acquired
certain  off-balance  sheet  arrangements  as a  result  of the  acquisition  of
Woronoco.   These  included  credit  related  financial  instruments  and  lease
commitments which were not materially different from those presented in the Form
10-K filed by Woronoco for the year ended December 31, 2004.  Additionally,  the
Company acquired certain derivative  financial  instruments which were discussed
in the Comparison of Financial  Condition  section of this report, as well as in
the Form 10-K filed by Woronoco for the year ended December 31, 2004.

Contractual Obligations
-----------------------

Information relating to payments due under contractual  obligations is presented
in the Securities and Exchange Commission Form 10-K filed by the Company for the
year ended  December 31, 2004.  There were no material  changes in the Company's
payments due under contractual  obligations during the first nine months of 2005
except for certain  contractual  commitments  as a result of the  acquisition of
Woronoco.  These included  operating lease obligations which

                                       25


were not  materially  different  from those  presented in the Form 10-K filed by
Woronoco  for the year  ended  December  31,  2004.  Additionally,  the  Company
acquired long-term debt consisting of FHLB advances with an original maturity of
greater  than one year.  Certain  advances  are callable in 2005 and 2006 at the
option of the  FHLB.  The  long-term  debt due to the FHLB had been  reduced  in
connection with the  deleveraging  program  implemented in conjunction  with the
acquisition. The balance of long-term borrowings acquired from Woronoco was $183
million at September 30, 2005. The contractual  maturities of these  obligations
were $61 million for the final quarter of 2005, $60 million in total for the two
years 2006 and 2007,  $38 million in total for the two years 2008 and 2009,  and
$24 million for subsequent years.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

Please  see  the  discussion  and  analysis  of  quantitative   and  qualitative
disclosures  about market risk provided in the  Company's  Annual Report on Form
10-K for the year  ended  December  31,  2004 for a  general  discussion  of the
qualitative  aspects of market risk and discussion of the simulation  model used
by the Company to measure its interest rate risk.  The Company has  incorporated
into its model the assets and liabilities purchased from Woronoco.  Woronoco had
a negative one year  interest  rate gap,  with  interest  sensitive  liabilities
exceeding interest sensitive assets. Accordingly,  projected changes in interest
income moved  inversely to the direction of interest rate changes.  This was the
opposite of the  Company's  recent  sensitivity  in a rising  rate  environment.
Woronoco also had a higher amount of optionality  in its profile,  primarily due
to the higher  concentration  of  residential  mortgages  which have  prepayment
speeds that are more sensitive to interest rate changes.  The sensitivities were
partially  mitigated due to  de-leveraging  through the sale of longer  duration
mortgage related assets and the related reduction of borrowings.  The net effect
of the  Woronoco  acquisition  has been to reduce  the  Bank's  modest  positive
sensitivity to rising interest rates in the near term.

The most significant  model assumption  relates to expectations for the interest
sensitivity of non-maturity  deposit accounts in a rising rate environment.  The
model  assumes  that  deposit  rate   sensitivity  in  a  rising  interest  rate
environment  will be a percentage of the market interest rate change as follows:
NOW accounts  ranging  between 0 and 40%  depending  on the type:,  money market
accounts  -  ranging  between  50 and 75%  depending  on the type,  and  savings
accounts  50%. In a downward rate  environment,  it is assumed that deposit rate
changes will be 100% of the  interest  rate  change,  subject to assumed  market
floors for each type of account.

The following  table sets forth, as of September 30, 2005 and December 31, 2004,
estimated  net interest  income and the  estimated  changes in the Company's net
interest  income  for the  next  twelve-month  period,  which  may  result  from
instantaneous  increases or decreases  in market  interest  rates of 100 and 200
basis points (rate shocks).



  
  Increase/(decrease)                  At September 30, 2005                           At December 31, 2004
  in market interest          -----------------------------------------    ------------------------------------------
 rates in basis points                         Dollar         Percent                        Dollar         Percent
      (rate shock)               Amount        Change         change          Amount         Change         change
-------------------------    -------------  -------------  ------------    -------------  -------------  ------------
                                                                                             
  (Dollars in millions)
          200                    $ 61.3        $  0.3           0.5%          $ 41.4          $ 1.0           2.5 %
          100                      61.0            --            --             40.7            0.3           0.7
         Static                    61.0            --            --             40.4             --            --
         (100)                     61.6           0.6           0.9             40.4            0.1           0.1
         (200)                     57.5          (3.5)         (5.7)            36.5           (3.9)         (9.7)


The table  shows  that there is little  projected  sensitivity  of net  interest
income to the modeled 100 and 200 basis point rate shocks  except in the case of
a 200 basis point downward shock.  This is viewed as unlikely based on the level
and trend of interest rates. This downward  sensitivity reflects the accelerated
potential prepayment of loans and securities in a very low rate environment. The
Company  believes  that it has  benefited  from  recent rate  increases  because
savings  rates have been less  sensitive  than the model  assumes.  The  Company
believes that there has been a negative impact from the flattening  yield curve.
The model assumes that the shape of the curve remains constant.

For the Bank,  market risk also includes  price risk,  primarily  security price
risk. The  available-for-sale  securities portfolio had unrealized losses before
taxes of $657,000 at September 30, 2005.  Changes in this figure are  reflected,
net of taxes, in accumulated other comprehensive  income as a separate component
of Berkshires' stockholders' equity. The available-for-sale securities portfolio
had a net  unrealized  gain of $6.6 million at December 31, 2004.  The change is
primarily due to unrealized  losses on pass through  mortgage-backed  securities
because of higher  interest  rates at September 30, 2005. It also reflects gains
recorded on the sale of securities and  securitized  loans,  which decreased the
net unrealized gains remaining in the portfolio.  Unfavorable  market conditions
or other factors could cause price  declines in the  securities  portfolio.  The
Bank is gradually reducing its exposure to equity securities to reduce the price
risk in this sector. The equity portfolio had a $3.1 million net unrealized gain
as of September 30, 2005.

                                       26


ITEM 4.  CONTROLS AND PROCEDURES
--------------------------------

The Company's  management,  including the Company's  principal executive officer
and  principal  financial  officer,  have  evaluated  the  effectiveness  of the
Company's  "disclosure controls and procedures," as such term is defined in Rule
13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").  Based upon their evaluation,  the principal  executive officer
and  principal  financial  officer  concluded  that, as of the end of the period
covered by this report,  the Company's  disclosure  controls and procedures were
effective  for the  purpose of  ensuring  that the  information  required  to be
disclosed  in the reports that the Company  files or submits  under the Exchange
Act with the  Securities  and Exchange  Commission  (the "SEC") (1) is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's rules and forms,  and (2) is accumulated and communicated to the Company's
management,  including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.

During the first nine  months of 2005,  the  Company  implemented  changes  that
materially affected its internal controls over financial reporting.  The Company
converted its core banking systems,  which record all loan and deposit activity,
to a different system provided by a different vendor. This change was previously
announced following the sale by the Company of its data processing subsidiary in
2004.  Along with the core  systems  conversion,  the  Company  converted  other
systems,  including  its general  ledger  system,  to new systems with  enhanced
capabilities.  Also,  following the Company's  acquisition of Woronoco  Bancorp,
Inc.  on June 1, 2005,  the Company  implemented  interim  accounting  processes
related to the Woronoco operations followed by a conversion of the Woronoco core
banking and other  accounting  systems to the Company's  systems in August 2005.
The above changes were made in accordance  with the Company's  ongoing review of
its  internal  control  over  financial  reporting  and  not in  response  to an
identified significant deficiency or material weakness.

                                       27


                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS
--------------------------

The Company is not involved in any legal  proceedings  other than routine  legal
proceedings   occurring  in  the  normal   course  of  business.   Such  routine
proceedings,  in the  aggregate,  are believed by management to be immaterial to
the Company's financial condition or results of operations.

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

The  following  table  provides  certain   information  with  regard  to  shares
repurchased by the Company in the third quarter of 2005.



-----------------------------------------------------------------------------------------------------------

                                                                        (c)
                                                                  Total Number of                (d)
                                                                      Shares               Maximum Number
                                   (a)              (b)          Purchased as Part            of Shares
                               Total Number    Average Price        of Publicly            that May Yet Be
                                of Shares         Paid per        Announced Plans        Purchased under the
          Period                Purchased          Share            or Programs           Plans or Programs
-----------------------------------------------------------------------------------------------------------
                                                                                  
July 1-
July 31, 2005                          --             --                      --                   112,200
-----------------------------------------------------------------------------------------------------------
August 1-
August 31, 2005                    25,600        $ 32.80                  25,600                    86,600
-----------------------------------------------------------------------------------------------------------
September 1-
September 30, 2005                 29,000        $ 33.05                  29,000                    57,600
-----------------------------------------------------------------------------------------------------------
Total                              54,600        $ 32.93                  54,600                    57,600
-----------------------------------------------------------------------------------------------------------



On May 25, 2005, the Company  authorized  the purchase of up to 150,000  shares,
from  time to time,  subject  to market  conditions.  The  repurchase  plan will
continue until it is completed or terminated by the Board of Directors. No plans
expired  during the three months ended  September  30, 2005.  The Company has no
plans that it has elected to  terminate  prior to  expiration  or under which it
does not intend to make further purchases.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
----------------------------------------

None.

                                       28


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

None

ITEM 5.  OTHER INFORMATION
--------------------------

None.

ITEM 6.  EXHIBITS
-----------------

         3.1      Certificate  of  Incorporation  of  Berkshire  Hills  Bancorp,
                  Inc.(1)

         3.2      Bylaws of Berkshire Hills Bancorp, Inc. (2)

         4.0      Specimen Stock Certificate of Berkshire Hills Bancorp, Inc.(1)

         31.1     Rule 13a-14(a) Certification of Chief Executive Officer

         31.2     Rule 13a-14(a) Certification of Chief Financial Officer

         32.1     Section 1350 Certification of Chief Executive Officer

         32.2     Section 1350 Certification of Chief Financial Officer
                  -------------------------------------------
         (1)      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.
         (2)      Incorporated herein by reference from the Exhibits to the Form
                  10-K as filed on March 11, 2004.


                                       29


                                   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: November 8, 2005         By: /s/ Michael P. Daly
                                    -----------------------------------
                                    Michael P. Daly
                                    President, Chief Executive Officer
                                    and Director
                                    (principal executive officer)

Dated: November 8, 2005         By: /s/ Wayne F. Patenaude
                                    -------------------------------------
                                    Wayne F. Patenaude
                                    Senior Vice President,
                                    Chief Financial Officer and Treasurer
                                    (principal financial and accounting officer)


                                       30