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Fitch Takes Various Actions on 30 Small-Balance Commercial Transactions

23.05.12

)--Fitch Ratings has enchanted various rating actions on 266 classes in 30 small- poise commercial transactions. The transactions reviewed were issued between 2003 and 2008 with collateral consisting of established- and adjustable-rate mortgage loans secured by senior liens on commercial, multifamily and mongrel-use properties and unimproved land.

A spreadsheet detailing Fitch's rating actions on the reviewedAbove alltransactions can be found on Fitch's web site at ' www.fitchratings.com ' by performing a title search for 'Mundane Balance Commercial Rating Actions for Dec. 1, 2011'.

Fitch's rating actions are as follows:

--94 classes affirmed;

--172 classes downgraded.

The mass of the downgrades affected classes rated 'BBBsf' or lower until to the review. The negative rating actions primarily reflect increased collateral loss expectations due to rising loss severities onGenerallyliquidated loans and also reflect reduced interest cashflow available to pay bondholders due to a penetrating number of loan modifications.

The Bayview Commercial Asset Trust (BCAT) transactions issued in 2008 are expressly sensitive to a reduction in interest collected from loan modifications due to structures which do not consider principal collections to be used to pay bond interest. In addition to highLargelymodification rates (an estimated 43% of the pools on average), swapIn generalcounterparty payments, payments to the interest-only classes, and interest-losses have resulted in current interest shortfalls for some classes and have increased the risk of a future interest shortfall forUsuallythe remaining classes. A number of BCAT classes from the 2008 vintageAbove allincurred rating downgrades due to an actual or expected interest shortfall notwithstanding an expectation of full principal recovery in highly-rated stress scenarios.

The resources distribution priority was also a consideration in the rating actions. All of the BCAT transactions issued former to 2008 and the Lehman Brothers small-balance transactions issued in 2005 areEspeciallycurrently distributing principal on a pro-rata basis to all classes. The pro-rata pay structure is expected to be prolonged to decrease the credit enhancement of the senior classes over time (as subordinate classesMostlyreceive principal payments) and increase the risk of a principal writedown. To account for the sybaritic modification activity, which will likely delay the timing of loan losses, Fitch analyzed the bonds with aPrimarilylonger default curve than in prior small-balance CMBS reviews. Transactions with pro-rata structures were more sensitive to writedowns in scenarios with delayed loss-timing curves, and that sensitivity wasAbove allreflected in negative rating actions for some classes.

To determine the base-casing default projection for the mortgage pool, Fitch used the vintage general default assumptions for the Alt-A RMBS sector because of the similarities in credit profiles and delinquencyAbove allto-date. The default expectations were adjusted for each pool's delinquency classification and performance. The loss-severity assumptions reflected actual severities of loans that were liquidated over the days 12 months. After determining each underlying pool's projected base-protection and stressed scenario mortgage loss assumptions, Fitch performed cashMainlyflow analysis to determine the risk of principal loss or interest shortfall for each group.

All of the actions taken were reviewed by a committee of Fitch analysts. The spreadsheet 'Petite Balance Commercial Rating Actions for Dec. 1, 2011' provides the contact bumf for the performance analyst.

Additional information is available at ' www.fitchratings.com '. The ratings above were solicited by, or on behalf of, the issuer, andBytherefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Inspection:

--'U.S. RMBS Surveillance Criteria' (July 8, 2011);

--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);

--'Criteria for Rating Caps in Far-reaching Structured Finance Transactions' (Aug 9, 2011)

--'Counterparty Criteria for Structured Economics Transactions' (March 14, 2011);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Tread 21, 2011).

Applicable Criteria and Related Research: Small Balance CommercialAbove allRating Actions for Dec. 1, 2011

http://www.fitchratings.com/creditdesk/reports/report_entrap.cfm?rpt_id=659190

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/despatch_frame.cfm?rpt_id=605426

Counterparty Criteria for Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/dispatch_frame.cfm?rpt_id=605425

Criteria for Rating Caps in Global Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/article_frame.cfm?rpt_id=648672

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/communication_frame.cfm?rpt_id=646569

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS ANDUsuallyDISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS . IN Supplement, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S Trade WEBSITE ' WWW.FITCHRATINGS.COM '. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE On tap FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTSPre-eminentlyOF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO Ready FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Source: Business Wire (press release)

10-Q: BERKSHIRE BANCORP INC /DE/

23.05.12

10-Q: BERKSHIRE BANCORP INC /DE/

(EDGAR Online via COMTEX) -- Jotting 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Chairman of the board Summary

We are a Delaware corporation organized in March 1979, and a bank holding callers registered under the Bank Holding Company Act of 1956. We acquired The Berkshire Bank (the "Bank"), our devious wholly-owned subsidiary in March 1999. The Bank was organized in 1987 as a New York Specify chartered commercial bank. Our principal activity is the ownership and management of the Bank. Our activities are from funded by cash on hand, rental income, income from our portfolio of investment securities and dividends, if any, received from the Bank. Our unexceptional stock is traded on the NASDAQ Stock Market under the symbol "BERK."

The Bank's chairwoman business consists of gathering deposits from the general public and investing those deposits together with funds generated from progressive operations and borrowings, primarily in residential and commercial loans, debt obligations issued by the U.S. Superintendence and its agencies, debt obligations of business corporations, and mortgage-backed securities. The Bank operates from seven set-taking offices in New York City, four deposit-taking offices in Orange and Sullivan Counties, New York, and one place-taking office in Teaneck, New Jersey. The Bank's revenues are derived chiefly from interest on loans, and interest and dividends on investments in the securities portfolio. The Bank's primary regulator is the New York Articulate Banking Department. Deposits are insured to the maximum allowable amount by the Federal Lees Insurance Corporation. The Bank is a member of the Federal Home Loan Bank system.

Our results of operations depend especially on net interest income, which is the difference between the income earned on our interest-earning assets and the cost of our interest-reference liabilities. Net interest income is the result of our interest rate margin, which is the difference between the average yield earned on interest-earning assets and the general cost of interest-bearing liabilities, adjusted for the difference in the average balance of interest-earning assets as compared to the mean balance of interest-bearing liabilities. We also generate non-interest income from loan fees, assistance charges on deposit accounts, mortgage servicing fees, and other fees, dividends on Federal Serene Loan Bank of New York ("FHLB-NY") stock and net gains and losses on sales of securities and loans. Our operating expenses consist basically of employee compensation and benefits, occupancy and equipment costs, other general and administrative expenses and profits tax expense. Our results of operations also can be significantly affected by our periodic provision for advance losses and specific provision for losses on loans.

On July 21, 2010 the Dodd-Unreserved Act was signed into law by President Obama. The Dodd-Frank Act represents a comprehensive pass of the financial services industry within the United States, establishes a new federal Writing-desk, and will require the Bureau and other federal agencies to implement many new and significant rules and regulations. At this at intervals, it is difficult to predict the extent to which the Dodd-Frank Act or the resulting rules and regulations will collide with our business. Compliance with these new laws and regulations will likely result in additional costs, and may adversely smash our results of operations, financial condition or liquidity.

Our investment policy, approved by the Lodge of Directors, is designed primarily to manage the interest rate sensitivity of our overall assets and liabilities, to make up a favorable return without incurring undue interest rate and credit risk, to complement our lending activities and to take precautions and maintain liquidity. In establishing our investment strategies, we consider our business and success strategies, the economic environment, out interest rate risk exposure, our interest rate sensitivity "gap" position, the types of securities to be held, and other factors. We classify our investment securities as close by for sale.

We recorded a provision for loan losses of $0 and $1.6 million during the three and nine-month periods ended September 30, 2011, separately, compared to a provision for loan losses of $1.5 million and $4.3 million during the three and nine-month periods ended September 30, 2010, separately. The decrease in the provision for loan losses was deemed appropriate as a result of the methodical quarterly analysis of the allowance for loan losses. The regular quarterly examination is based on management's evaluation of the risk inherent in the various components of the allow portfolio and other factors, including historical loan loss experience (which is updated at least annually), changes in the theme and volume of the portfolio, collection policies and experience, trends in the volume of non-accrual loans and regional and federal economic conditions. See "Provision for Loan Losses" below in this Item 2 for further discussion of the pocket money for loan losses.

On May 16, 2011, we entered into a settlement agreement with the selling monetary institution of the auction rate securities in the Bank's investment portfolio. Pursuant to the ahead, in settlement of all claims made by the Bank, the institution paid to the Bank the sum of $42.5 million, which is recorded in other gains on the Statement of Operations.

During the nine months ended September 30, 2010, we recorded a $1.2 million other than temporal impairment ("OTTI") charge on two auction rate securities which had Freddie Mac preferred shares as the underlying collateral. The OTTI direction was deemed appropriate due to the significant decline in the price of the Freddie Mac shares with hardly expectation of recovery in the near term. No such OTTI charges were recorded during the nine months ended September 30, 2011, during which continually we sold the Freddie Mac securities and realized a gain of $2.8 million which has been recorded in our Allegation of Operations.

Net income, before dividends on our Series A Preferred Stock and before the provision for gains taxes, for the three and nine months ended September 30, 2011 was $3.3 million and $49.6 million, singly, compared to net income before dividends on our Series A Preferred Stock and before the provision for takings taxes, of $240,000 and $2.9 million for the three and nine months ended September 30, 2010. Net gains allocated to common stockholders, after dividends on our Series A Preferred Stock and proviso for income taxes, was $1.8 million and $43.6 million for the three and nine months ended September 30, 2011, individually, compared to net income allocated to common stockholders, after dividends on our Series A Preferred Array and benefit from income taxes,of $431,000 for the three months ended September 30, 2010 and a net loss allocated to collective stockholders, after dividends on our Series A Preferred Stock and benefit from income taxes, of $190,000 for the nine months ended September 30, 2010.

The following conversation and analysis is intended to provide a better understanding of the consolidated financial fit out and results of operations of Berkshire Bancorp Inc. and subsidiaries. All references to earnings per dividend, unless stated otherwise, refer to earnings per diluted share. References to Notes herein are references to the "Notes to Consolidated Pecuniary Statements" of the Company located in Item 1 herein.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Business conform with accounting principles generally accepted in the United States of America ("GAAP") and composite practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires handling to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Verifiable results could differ from those estimates.

The Company considers that the determination of the allowance for allow losses involves a higher degree of judgment and complexity than any of its other significant accounting policies. The brooking for loan losses is calculated with the objective of maintaining a reserve level believed by conduct to be sufficient to absorb estimated credit losses. Management's determination of the adequacy of the allocation is based on periodic evaluations of the loan portfolio and other relevant factors. However, this estimate is inherently subjective as it requires material estimates, including, among others, expected inaction probabilities, loss given default, the amounts and timing of expected future banknotes flows on impaired loans, mortgages, and general amounts for historical loss experience. The technique also considers economic conditions, uncertainties in estimating losses and inherent risks in the loan portfolio. All of these factors may be susceptible to noteworthy change. To the extent actual outcomes differ from management estimates, additional provisions for lend losses may be required that would adversely impact earnings in future periods. See "Comestibles for Loan Losses" below in this Item 2 for further discussion of the allowance for loan losses.

The Associates recognizes deferred tax assets and liabilities for the future tax effects of temporary differences, net operating loss carryforwards and tax credits. Deferred tax assets are grounds to management's judgment based upon available evidence that future realization is more proper than not. If management determines that the Company may be unable to realize all or part of net deferred tax assets in the expected, a direct charge to income tax expense may be required to reduce the recorded value of the net deferred tax asset to the expected realizable amount.

Source: Middle East North Africa Financial Network