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     MARCH 31, 2008
                               ----------------------

                                       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:  0-13649
                         -------

                             BERKSHIRE BANCORP INC.
                             ----------------------
             (Exact Name of Registrant as Specified in Its Charter)

DELAWARE                                                          94-2563513
----------------------------                                 -------------------
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

160 BROADWAY, NEW YORK, NEW YORK                               10038
-------------------------------------                        -------------------
(Address of Principal Executive Offices)                          (Zip Code)

Registrant's Telephone Number, Including Area Code: (212) 791-5362
                                                    ---------------

                                       N/A
--------------------------------------------------------------------------------
              (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 a large  accelerated  filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. (See
the definitions of "large accelerated  filer,"  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.) (Check one):

Large accelerated filer [ ]    Accelerated filer [ ]

Non-accelerated filer [ ]      Smaller reporting company [X]
(Do not check if a smaller
reporting company)

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

As of May 12, 2008,  there were  7,054,183  outstanding  shares of the  issuer's
Common Stock, $.10 par value.

<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES

                           FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING  STATEMENTS.  STATEMENTS IN THIS  QUARTERLY  REPORT ON FORM 10-Q
THAT ARE NOT BASED ON HISTORICAL FACT MAY BE "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF THE PRIVATE SECURITIES  LITIGATION REFORM ACT OF 1995. WORDS SUCH
AS "BELIEVE", "MAY", "WILL", "EXPECT", "ESTIMATE",  "ANTICIPATE",  "CONTINUE" OR
SIMILAR TERMS  IDENTIFY  FORWARD-LOOKING  STATEMENTS.  A WIDE VARIETY OF FACTORS
COULD CAUSE THE ACTUAL RESULTS AND  EXPERIENCES  OF BERKSHIRE  BANCORP INC. (THE
"COMPANY")  TO DIFFER  MATERIALLY  FROM THE RESULTS  EXPRESSED OR IMPLIED BY THE
COMPANY'S FORWARD-LOOKING  STATEMENTS.  SOME OF THE RISKS AND UNCERTAINTIES THAT
MAY AFFECT  OPERATIONS,  PERFORMANCE,  RESULTS OF THE  COMPANY'S  BUSINESS,  THE
INTEREST RATE SENSITIVITY OF ITS ASSETS AND LIABILITIES, AND THE ADEQUACY OF ITS
LOAN LOSS  ALLOWANCE,  INCLUDE,  BUT ARE NOT  LIMITED TO: (I)  DETERIORATION  IN
LOCAL,  REGIONAL,  NATIONAL OR GLOBAL  ECONOMIC  CONDITIONS  WHICH COULD RESULT,
AMONG OTHER THINGS, IN AN INCREASE IN LOAN DELINQUENCIES, A DECREASE IN PROPERTY
VALUES,  OR A CHANGE  IN THE  HOUSING  TURNOVER  RATE;  (II)  CHANGES  IN MARKET
INTEREST  RATES OR CHANGES IN THE SPEED AT WHICH MARKET  INTEREST  RATES CHANGE;
(III) CHANGES IN LAWS AND REGULATIONS AFFECTING THE FINANCIAL SERVICES INDUSTRY;
(IV) CHANGES IN COMPETITION;  (V) CHANGES IN CONSUMER PREFERENCES,  (VI) CHANGES
IN BANKING  TECHNOLOGY;  (VII)  ABILITY TO MAINTAIN  KEY MEMBERS OF  MANAGEMENT,
(VIII)  POSSIBLE   DISRUPTIONS  IN  THE  COMPANY'S  OPERATIONS  AT  ITS  BANKING
FACILITIES,  (IX) COST OF COMPLIANCE WITH NEW CORPORATE GOVERNANCE REQUIREMENTS,
AND OTHER  FACTORS  REFERRED TO IN THIS  QUARTERLY  REPORT AND IN ITEM 1A, "RISK
FACTORS",  OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2007.

         CERTAIN INFORMATION  CUSTOMARILY  DISCLOSED BY FINANCIAL  INSTITUTIONS,
SUCH AS ESTIMATES OF INTEREST RATE SENSITIVITY AND THE ADEQUACY OF THE LOAN LOSS
ALLOWANCE, ARE INHERENTLY  FORWARD-LOOKING  STATEMENTS BECAUSE, BY THEIR NATURE,
THEY REPRESENT ATTEMPTS TO ESTIMATE WHAT WILL OCCUR IN THE FUTURE.

         THE  COMPANY  CAUTIONS  READERS NOT TO PLACE  UNDUE  RELIANCE  UPON ANY
FORWARD-LOOKING  STATEMENT  CONTAINED IN THIS QUARTERLY REPORT.  FORWARD-LOOKING
STATEMENTS  SPEAK ONLY AS OF THE DATE THEY WERE MADE AND THE COMPANY  ASSUMES NO
OBLIGATION TO UPDATE OR REVISE ANY SUCH STATEMENTS UPON ANY CHANGE IN APPLICABLE
CIRCUMSTANCES.


                                       2
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                          QUARTERLY REPORT ON FORM 10-Q

                                      INDEX

                                                                        PAGE NO.
                                                                        --------
      PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets as of
         March 31, 2008 (unaudited) and
         December 31, 2007                                              4

         Consolidated Statements of Income
         For The Three Months Ended
         March 31, 2008 and 2007 (unaudited)                            5

         Consolidated Statements of Stockholders'
         Equity For The Three Months Ended
         March 31, 2008 and 2007 (unaudited)                            6

         Consolidated Statements of Cash Flows
         For The Three Months Ended March 31,
         2008 and 2007 (unaudited)                                      7

         Notes to Consolidated Financial Statements                     9

Item 2.  Management's Discussion and Analysis
         of Financial Condition and Results
         of Operations                                                  18

Item 3.  Quantitative and Qualitative Disclosure
         About Market Risk                                              23

Item 4T. Controls and Procedures                                        31

      PART II  OTHER INFORMATION

Item 6.  Exhibits                                                       32

Signature                                                               33

Index of Exhibits                                                       34


                                       3
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

                                                    MARCH 31,       DECEMBER 31,
                                                      2008              2007
                                                   -----------      ------------
ASSETS
Cash and due from banks                            $     7,197      $     8,614
Interest bearing deposits                                7,546            7,579
Federal funds sold                                      12,500           31,000
                                                   -----------      -----------
Total cash and cash equivalents                         27,243           47,193
Investment Securities:
 Available-for-sale                                    545,603          598,961
 Held-to-maturity, fair value of $405
  in 2008 and $405 in 2007                                 390              395
                                                   -----------      -----------
Total investment securities                            545,993          599,356
Loans, net of unearned income                          445,411          434,785
 Less: allowance for loan losses                        (4,398)          (4,183)
                                                   -----------      -----------
Net loans                                              441,013          430,602
Accrued interest receivable                              7,177            8,602
Premises and equipment, net                              9,198            9,362
Goodwill, net                                           18,549           18,549
Other assets                                            12,187            6,854
                                                   -----------      -----------
Total assets                                       $ 1,061,360      $ 1,120,518
                                                   ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
 Non-interest bearing                              $    54,686      $    53,805
 Interest bearing                                      767,821          799,410
                                                   -----------      -----------
Total deposits                                         822,507          853,215
Securities sold under agreements to repurchase          53,436           76,842
Long term borrowings                                    37,593           31,607
Subordinated debt                                       22,681           22,681
Accrued interest payable                                 5,598            9,089
Other liabilities                                        2,124            2,826
                                                   -----------      -----------
Total liabilities                                      943,939          996,260
                                                   -----------      -----------

Stockholders' equity
 Preferred stock - $.10 Par value:                          --               --
  2,000,000 shares authorized - none issued
 Common stock - $.10 par value
  Authorized  -- 10,000,000 shares
  Issued      --  7,698,285 shares
  Outstanding --
   March 31, 2008,    7,054,183 shares
   December 31, 2007, 7,054,183 shares                     770              770
Additional paid-in capital                              90,986           90,986
Retained earnings                                       45,001           42,352
Accumulated other comprehensive loss, net              (12,925)          (3,439)
Treasury Stock
 March 31, 2008,      644,102 shares
 December 31, 2007,   644,102 shares                    (6,411)          (6,411)
                                                   -----------      -----------
Total stockholders' equity                             117,421          124,258
                                                   -----------      -----------
                                                   $ 1,061,360      $ 1,120,518
                                                   ===========      ===========


         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS


                                       4
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

                                                                 FOR THE
                                                            THREE MONTHS ENDED
                                                                MARCH 31,
                                                         -----------------------
                                                           2008           2007
                                                         --------       --------
INTEREST INCOME
Loans, including related fees                            $  8,205       $  7,238
Investment securities                                       7,867          5,835
Federal funds sold and
 interest bearing deposits                                    224            686
                                                         --------       --------
Total interest income                                      16,296         13,759
                                                         --------       --------
INTEREST EXPENSE
Deposits                                                    7,733          7,444
Short-term borrowings                                         594            433
Long-term borrowings                                          806            991
                                                         --------       --------
Total interest expense                                      9,133          8,868
                                                         --------       --------
Net interest income                                         7,163          4,891
PROVISION FOR LOAN LOSSES                                     150             75
                                                         --------       --------
Net interest income after
 provision for loan losses                                  7,013          4,816
                                                         --------       --------
NON-INTEREST INCOME
Service charges on deposit accounts                           155            181
Investment securities gains                                    58            125
Other income                                                  253            209
                                                         --------       --------
Total non-interest income                                     466            515
                                                         --------       --------
NON-INTEREST EXPENSE
Salaries and employee benefits                              2,399          2,234
Net occupancy expense                                         538            476
Equipment expense                                              95            102
FDIC assessment                                               106             20
Data processing expense                                       111             96
Other                                                         661            525
                                                         --------       --------
Total non-interest expense                                  3,910          3,453
                                                         --------       --------
Income before provision for taxes                           3,569          1,878
Provision for income taxes                                    920            778
                                                         --------       --------
Net income                                               $  2,649       $  1,100
                                                         ========       ========
Net income per share:
 Basic                                                   $    .38       $    .16
                                                         ========       ========
 Diluted                                                 $    .38       $    .16
                                                         ========       ========
Number of shares used to compute
 net income per share:
 Basic                                                      7,054          6,896
                                                         ========       ========
 Diluted                                                    7,055          6,957
                                                         ========       ========


        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.


                                       5
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

               FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    ACCUMULATED
                                                                       OTHER
                                              STOCK   ADDITIONAL   COMPREHENSIVE                                           TOTAL
                                     COMMON    PAR      PAID-IN        (LOSS)     RETAINED   TREASURY   COMPREHENSIVE  STOCKHOLDERS'
                                     SHARES   VALUE     CAPITAL         NET       EARNINGS     STOCK       INCOME         EQUITY
                                     ------   -----   ----------   -------------  --------   --------   -------------  -------------
<S>                                   <C>      <C>      <C>           <C>         <C>        <C>           <C>            <C>
BALANCE AT JANUARY 1, 2007            7,698    $770     $90,659       $(4,772)    $ 37,285   $ (8,165)                    $115,777
Adoption of FIN 48                                                                     965                                     965
                                                                                  --------                                --------
Adjusted balance at January 1, 2007                                                 38,250                                 116,742
Net income                                                                           1,100                   1,100           1,100
Exercise of stock options                                   (24)                                  277                          253
Other comprehensive (loss) net
 of reclassification adjustment
 and taxes                                                                (23)                                 (23)            (23)
                                                                                                           -------
Comprehensive income                                                                                       $ 1,077
                                                                                                           =======
                                     ------    ----     -------       -------     --------   --------                     --------
BALANCE AT MARCH 31, 2007             7,698    $770     $90,635       $(4,795)    $ 39,350   $ (7,888)                    $118,072
                                     ======    ====     =======       =======     ========   ========                     ========

BALANCE AT JANUARY 1, 2008            7,698    $770     $90,986       $(3,439)    $ 42,352   $ (6,411)                    $124,258
Net income                                                                           2,649                   2,649           2,649
Other comprehensive (loss) net
 of reclassification adjustment
 and taxes                                                             (9,486)                              (9,486)         (9,486)
                                                                                                           -------
Comprehensive (loss)                                                                                       $(6,837)
                                                                                                           =======
                                     ------    ----     -------       -------     --------   --------                     --------
BALANCE AT MARCH 31, 2008             7,698    $770     $90,986      $(12,925)    $ 45,001   $ (6,411)                    $117,421
                                     ======    ====     =======       =======     ========   ========                     ========
</TABLE>


        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.


                                       6
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

                                                      FOR THE THREE MONTHS ENDED
                                                               MARCH 31,
                                                      --------------------------
                                                           2008         2007
                                                        ---------    ---------
  Cash flows from operating activities:
Net income                                              $   2,649    $   1,100
Adjustments to reconcile net income to net
 cash (used in) provided by operating activities:
Realized gains on investment securities                       (58)        (125)
Net accretion of premiums of investment securities           (197)        (361)
Depreciation and amortization                                 173          183
Provision for loan losses                                     150           75
Decrease in accrued interest receivable                     1,425          500
(Increase) decrease in other assets                        (1,763)         181
Decrease in accrued interest payable
 and other liabilities                                     (4,193)      (1,080)
                                                        ---------    ---------
Net cash (used in) provided by operating activities        (1,814)         473
                                                        ---------    ---------

  Cash flows from investing activities:
Investment securities available for sale
 Purchases                                               (767,497)    (460,195)
 Sales, maturities and calls                              808,054      460,591
Investment securities held to maturity
 Maturities                                                     5            7
Net increase in loans                                     (10,561)      (7,226)
Acquisition of premises and equipment                          (9)         (26)
                                                        ---------    ---------
Net cash provided by (used in) investing activities        29,992       (6,849)
                                                        ---------    ---------


                                       7
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

                                                      FOR THE THREE MONTHS ENDED
                                                               MARCH 31,
                                                      --------------------------
                                                           2008         2007
                                                         --------     --------
  Cash flows from financing activities:
Net increase in non interest bearing deposits            $    881     $    230
Net (decrease) increase in interest bearing deposits      (31,589)      90,567
Decrease in securities sold under agreements
 to repurchase                                            (23,406)     (39,446)
Proceeds from long term debt                               10,000           --
Repayment of long term debt                                (4,014)      (8,850)
Proceeds from exercise of common stock options                 --          253
                                                         --------     --------
Net cash (used in) provided by financing activities       (48,128)      42,754
                                                         --------     --------

  Net (decrease) increase in cash and cash equivalents    (19,950)      36,378
  Cash and cash equivalents at beginning of period         47,193       24,311
                                                         --------     --------
  Cash and cash equivalents at end of period             $ 27,243     $ 60,689
                                                         ========     ========


Supplemental disclosures of cash flow information:
  Cash used to pay interest                              $ 12,624     $  9,622
  Cash used to pay taxes, net of refunds                 $    680     $    505


        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.


                                       8
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2008 AND 2007

NOTE 1.  GENERAL

         Berkshire  Bancorp  Inc.,  a Delaware  corporation,  is a bank  holding
company registered under the Bank Holding Company Act of 1956. References herein
to "Berkshire",  the "Company" or "we" and similar pronouns,  shall be deemed to
refer to Berkshire  Bancorp Inc. and its  consolidated  subsidiaries  unless the
context otherwise requires.  Berkshire's principal activity is the ownership and
management of its indirect  wholly-owned  subsidiary,  The  Berkshire  Bank (the
"Bank"),  a New York State chartered  commercial bank. The Bank is owned through
Berkshire's  wholly-owned  subsidiary,  Greater  American  Finance  Group,  Inc.
("GAFG").

         The  accompanying  financial  statements of Berkshire  Bancorp Inc. and
subsidiaries  includes the  accounts of the parent  company,  Berkshire  Bancorp
Inc., and its wholly-owned  subsidiaries:  The Berkshire Bank, GAFG and East 39,
LLC.

         We have prepared the accompanying  financial statements pursuant to the
rules and regulations of the Securities and Exchange  Commission (the "SEC") for
interim  financial  reporting.   These  consolidated  financial  statements  are
unaudited  and, in our opinion,  include all  adjustments,  consisting of normal
recurring  adjustments  and accruals  necessary for a fair  presentation  of our
consolidated  balance sheets,  operating results, and cash flows for the periods
presented.  Operating  results for the  periods  presented  are not  necessarily
indicative  of the results  that may be expected for the  remaining  quarters of
fiscal  2008 due to a variety  of  factors.  Certain  information  and  footnote
disclosures  normally  included in financial  statements  prepared in accordance
with accounting principles generally accepted in the United States ("GAAP") have
been omitted in  accordance  with the rules and  regulations  of the SEC.  These
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements and accompanying  notes included in our 2007
Annual Report on Form 10-K.

NOTE 2.  TRUST PREFERRED SECURITIES.

         As of May 18 2004, the Company established Berkshire Capital Trust I, a
Delaware  statutory  trust,  ("BCTI").  The Company owns all the common  capital
securities of BCTI. BCTI issued $15.0 million of preferred capital securities to
investors in a private transaction and invested the proceeds,  combined with the
proceeds  from the sale of BCTI's  common  capital  securities,  in the  Company
through the purchase of $15.464 million  aggregate  principal amount of Floating
Rate  Junior  Subordinated  Debentures  (the  "2004  Debentures")  issued by the
Company.  The 2004 Debentures,  the sole assets of BCTI, mature on July 23, 2034
and bear interest at a floating  rate,  three month LIBOR plus 2.70%,  currently
6.55%.

         On April 1, 2005, the Company established Berkshire Capital Trust II, a
Delaware  statutory  trust,  ("BCTII").  The Company owns all the common capital
securities of BCTII.  BCTII issued $7.0 million of preferred capital  securities
to investors in a private  transaction and invested the proceeds,  combined with
the proceeds from the sale of BCTII's common capital securities,  in the Company
through the purchase of $7.217 million  aggregate  principal  amount of Floating
Rate  Junior  Subordinated  Debentures  (the  "2005  Debentures")  issued by the
Company.  The 2005 Debentures,  the sole assets of BCTII, mature on May 23, 2035
and bear interest at a floating  rate,  three month LIBOR plus 1.95%,  currently
5.04%.


                                       9
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. - (CONTINUED)

         Based on current  interpretations of the banking  regulators,  the 2004
Debentures and 2005 Debentures  (collectively,  the "Debentures")  qualify under
the  risk-based  capital  guidelines  of the Federal  Reserve as Tier 1 capital,
subject to certain  limitations.  The  Debentures  are  callable by the Company,
subject to any required  regulatory  approvals,  at par, in whole or in part, at
any time after five years from the date of issuance.  The Company's  obligations
under the Debentures and related documents,  taken together,  constitute a full,
irrevocable and unconditional  guarantee on a subordinated  basis by the Company
of the obligations of BCTI and BCTII under the preferred capital securities sold
by BCTI and BCTII to investors.  FIN46(R)  precludes  consideration  of the call
option  embedded in the preferred  capital  securities  when  determining if the
Company has the right to a majority of BCTI and BCTII expected residual returns.
Accordingly,  BCTI and BCTII are not included in the consolidated  balance sheet
of the Company.

         The Federal  Reserve  has issued  guidance  on the  regulatory  capital
treatment for the trust-preferred securities issued by BCTI and BCTII. This rule
would retain the current maximum percentage of total capital permitted for Trust
Preferred  Securities  at 25%,  but  would  enact  other  changes  to the  rules
governing  Trust  Preferred  Securities  that  affect  their  use as part of the
collection of entities  known as  "restricted  core capital  elements." The rule
would  take  effect  March 31,  2009;  however,  a five year  transition  period
starting  March 31, 2004 and  leading up to that date would  allow bank  holding
companies  to  continue to count Trust  Preferred  Securities  as Tier 1 Capital
after applying FIN-46(R).  Management has evaluated the effects of this rule and
does not  anticipate a material  impact on its capital  ratios when the proposed
rule is finalized.

NOTE 3.  EARNINGS PER SHARE

         Basic earnings per share is calculated by dividing income  available to
common stockholders by the weighted average common shares outstanding, excluding
stock options from the calculation.  In calculating  diluted earnings per share,
the dilutive  effect of stock  options is  calculated  using the average  market
price for the  Company's  common stock during the period.  The  following  table
presents the calculation of earnings per share for the periods indicated:

<TABLE>
<CAPTION>
                                                                     FOR THE THREE MONTHS ENDED
                                         ----------------------------------------------------------------------------------
                                                      MARCH 31, 2008                            MARCH 31, 2007
                                         ---------------------------------------   ----------------------------------------
                                                                          Per                                         Per
                                            Income        Shares         share          Income        Shares         share
                                         (numerator)   (denominator)     amount      (numerator)   (denominator)     amount
                                            ------        ------         ------         ------        ------         ------
                                                                (In thousands, except per share data)

<S>                                         <C>            <C>           <C>            <C>            <C>           <C>
Basic earnings per share
 Net income available to
  common stockholders                       $2,649         7,054         $  .38         $1,100         6,896         $  .16
Effect of dilutive securities
 Options                                        --             1            .--             --            61            .--
                                            ------        ------         ------         ------        ------         ------
Diluted earnings per share
 Net income available to
  common stockholders plus
  assumed conversions                       $2,649         7,055         $  .38         $1,100         6,957         $  .16
                                            ======        ======         ======         ======        ======         ======
</TABLE>


                                       10
<PAGE>



                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4.  LOAN PORTFOLIO

         The following  table sets forth  information  concerning  the Company's
loan portfolio by type of loan at the dates indicated:

<TABLE>
<CAPTION>
                                           MARCH 31, 2008           DECEMBER 31, 2007
                                      ------------------------  -------------------------
                                                       % OF                      % OF
                                         AMOUNT       TOTAL        AMOUNT        TOTAL
                                         ------       -----        ------        -----
                                                            2008
                                                    (Dollars in thousands)

<S>                                     <C>            <C>        <C>             <C>
Commercial and professional loans       $ 67,275       15.1%      $ 76,132        17.4%
Secured by real estate
  1-4 family                             139,259       31.2        142,140        32.6
  Multi family                             3,394        0.7          3,506         0.8
  Non-residential (commercial)           235,508       52.7        212,850        48.8
Consumer                                   1,361        0.3          1,691         0.4
                                        --------      -----       --------       -----
Total loans                              446,797      100.0%       436,319       100.0%
                                                      =====                      =====
Deferred loan fees                        (1,386)                   (1,534)
Allowance for loan losses                 (4,398)                   (4,183)
                                        --------                  --------
Loans, net                              $441,013                  $430,602
                                        ========                  ========
</TABLE>

         As of March 31,  2008,  nonaccrual  and  nonperforming  loans  totalled
$146,000  compared to $153,000 as of December  31,  2007.  At March 31, 2008 and
December 31, 2007, total loans  contractually past due 90 days or more but still
accruing interest were zero and $314,000, respectively.

NOTE 5.  DEPOSITS

         The following table  summarizes the composition of the average balances
of major deposit categories:

                            THREE MONTHS ENDED       TWELVE MONTHS ENDED
                              MARCH 31, 2008          DECEMBER 31, 2007
                         -----------------------   -----------------------
                            AVERAGE      AVERAGE      AVERAGE      AVERAGE
                            AMOUNT       YIELD        AMOUNT       YIELD
                            ------       -----        ------       -----
                                       (Dollars in thousands)

Demand deposits            $ 53,819         --       $ 50,647         --
NOW and money market         43,003       1.89%        29,984       0.76%
Savings deposits            279,708       3.51        261,065       3.83
Time deposits               447,907       4.54        449,754       4.83
                           --------       ----       --------       ----
Total deposits             $824,437       3.76%      $791,450       4.04%
                           ========       ====       ========       ====


                                       11
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6.  COMPREHENSIVE INCOME (LOSS)

         The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting  Comprehensive Income" which includes net
income as well as certain  other items which result in a change to equity during
the period. The following table presents the components of comprehensive income,
based on the provisions of SFAS No. 130.:

<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS ENDED
                              -----------------------------------------------------------------------------------------
                                            MARCH 31, 2008                                  MARCH 31, 2007
                              -----------------------------------------       -----------------------------------------
                                                 TAX                                             TAX
                              BEFORE TAX      (EXPENSE)      NET OF TAX       BEFORE TAX      (EXPENSE)      NET OF TAX
                                AMOUNT         BENEFIT         AMOUNT           AMOUNT         BENEFIT         AMOUNT
                              ----------      ---------      ----------       ----------      ---------      ----------
                                                                        (In thousands)
<S>                            <C>             <C>             <C>             <C>             <C>             <C>
Unrealized (losses)
gains on investment
securities:

 Unrealized holding           $(15,893)        $ 6,357         $(9,536)        $    39         $    (3)        $    36
 gains (losses) arising
 during period

 Less reclassification
 adjustment for gains
 realized in net income             58             (23)             35             125             (50)             75
                               -------         -------         -------         -------         -------         -------
Unrealized loss on
investment securities          (15,835)          6,334          (9,501)            (86)             47             (39)

Change in minimum
pension liability                   15              --              15              16              --              16
                               -------         -------         -------         -------         -------         -------
Other comprehensive
 loss, net                    $(15,820)        $ 6,334         $(9,486)        $   (70)        $    47         $   (23)
                               =======         =======         =======         =======         =======         =======
</TABLE>

NOTE 7.  ACCOUNTING FOR STOCK BASED COMPENSATION

         At  March  31,  2008,   the  Company  has  one   stock-based   employee
compensation plan. The Company accounts for the plan in accordance with SFAS No.
123(R),  "Share Based Payment".  Under the fair value recognition  provisions of
SFAS 123R, share-based  compensation cost is measured at the grant date based on
the fair  value of the award  and is  recognized  as  expense  over the  vesting
period.  Determining  the fair  value of  share-based  awards at the grant  date
requires judgement,  including  estimating the Company's stock price volatility,
employee stock option exercise  behaviors and employee option  forfeiture rates.

         The Company did not grant stock options, nor did any stock options vest
during the  three-month  periods  ended March 31, 2008 and 2007,  as a result of
which,  no stock  based  compensation  expense  was  recorded in either of those
periods.


                                       12
<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8.  EMPLOYEE BENEFIT PLANS

         The   Company  has  a   Retirement   Income   Plan  (the   "Plan"),   a
noncontributory  defined  benefit plan  covering  substantially  all  full-time,
non-union United States employees of the Company.  The following  interim-period
information is being provided in accordance with FASB Statement 132(R) based
upon the most recent actuarial valuation dated December 31, 2007.

                                              FOR THE
                                         THREE MONTHS ENDED
                                             MARCH 31,
                                     -------------------------
                                        2008            2007
                                     ---------       ---------

Service cost                         $ 105,250         $90,750
Interest cost                           54,750          43,500
Expected return on plan assets         (62,250)        (46,000)
Amortization and Deferral:
 Prior service cost                      4,500           4,500
 Loss                                   10,750          11,750
                                     ---------       ---------
Net periodic pension cost            $ 113,000       $ 104,500
                                     =========       =========

        The  Pension  Protection  Act  of 2006 (the  "PPA")  changes the funding
rules for defined benefit pension plans, beginning in 2008. A key element of the
PPA is the  introduction of benefit  restrictions on plans that are funded below
80% of the plan's  target  liabilities.  In order to avoid  these  restrictions,
during the  fiscal  year  ending  December  31,  2008,  we expect to  contribute
approximately  $869,000 to the Plan. On March 27, 2008, we contributed  $577,500
to the  Plan.  We did not  make  any  contributions  to the  Plan,  required  or
otherwise, during the three months ended March 31, 2007.

NOTE 9 - FAIR VALUE MEASUREMENTS

        Effective January 1, 2008, the Company adopted SFAS No. 157, "Fair Value
Measurements."  SFAS  157  defines  fair  value,  establishes  a  framework  for
measuring fair value, and expands  disclosure about fair value. SFAS 157 defines
fair  value as the  price  that  would be  received  to sell an asset or paid to
transfer a liability (an exit price) in an orderly  transaction  between  market
participants  on the measurement  date.  SFAS 157 also  establishes a fair value
hierarchy which requires an entity to maximize the use of observable  inputs and
minimize the use of unobservable  inputs when measuring fair value. The standard
describes  three  levels of inputs  that may be used to measure  fair  value.  A
financial  instrument's  level  within the fair value  hierarchy is based on the
lowest level of input significant to the fair value measurement. There have been
no material changes in valuation  techniques as a result of the adoption of SFAS
No. 157.

Level 1 - Quoted prices  (unadjusted) in active markets for identical  assets or
liabilities that the Company has the ability to access at the measurement date.

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities in active  markets;  quoted prices in markets that
are not active for identical or similar assets or  liabilities;  or other inputs
that  are  observable  or can be  corroborated  by  observable  market  data for
substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity
and  significant  to the  fair  value  of the  assets  or  liabilities  that are
developed using the reporting entities' estimates and assumptions, which reflect
those that market participants would use.

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS

        A description  of  the  valuation   methodologies   used  for  financial
instruments  measured  at  fair  value  on a  recurring  basis,  as  well as the
classification of the instruments  pursuant to the valuation  hierarchy,  are as
follows:

SECURITIES AVAILABLE FOR SALE

        Securities classified as available for sale are reported  using Level 1,
Level 2 and  Level  3  inputs.  Level  1  securities  generally  include  equity
securities  valued  based on quoted  market  prices in active  markets.  Level 2
instruments  include U.S.  government  agency  obligations,  state and municipal
bonds,  mortgage-backed  securities,  collateralized  mortgage  obligations  and
corporate  bonds.  For  these   securities,   the  Company  obtains  fair  value
measurements from an independent  pricing service.  The fair value  measurements
consider  observable data that may include dealer quotes,  market spreads,  cash
flows, the U.S. Treasury yield curve, live trading levels, trade execution data,
market consensus prepayment speeds,  credit information and the bond's terms and
conditions, among other things. Level 3 securities available for sale consist of
instruments  that are not readily  marketable  and may only be redeemed with the
issuer at par such as Federal  Home Loan Bank and  Federal  Reserve  Bank stock.
These securities are stated at par value.

        Assets measured at fair value on a recurring basis are summarized below.
<TABLE>
<CAPTION>
                                                            Fair Value Measurement Using
                                                 --------------------------------------------------  ----------
                                                 Quoted Prices in     Significant
                                                   Active Markets         Other       Significant
                                                   for Identical      Observable      Unobservable     Balance
                                                 Assets/Liabilities      Inputs          Inputs       March 31,
(Dollars in thousands)                                (Level 1)        (Level 2)       (Level 3)        2008
                                                 ------------------   -----------     ------------    ---------
<S>                                                  <C>                <C>            <C>            <C>
ASSETS

Investment securities available for sale             $ 10,071           $ 352,743      $ 182,789      $ 545,603
                                                     --------           ---------      ---------      ---------
    Total assets                                     $ 10,071           $ 352,743      $ 182,789      $ 545,603
                                                     ========           =========      =========      =========
</TABLE>

ASSETS  AND  LIABILITIES  MEASURED  AT FAIR  VALUE ON A  RECURRING  BASIS  USING
SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)

       The table below  presents a  reconciliation  for assets  measured at fair
value on a recurring  basis for which the  Corporate  has  utilized  significant
unobservable inputs (Level 3).

                                                               Investment
                                                               Securities
                                                                Available
(Dollars in thousands)                                          for Sale
                                                               ----------

Balance, January 1, 2008                                        $ 184,597
Total gains/losses (realized/unrealized)
  Included in earnings (or changes in net assets)                      --
  Included in other comprehensive income                           (8,924)
Purchases, Sales, Issuances, and Settlements                        7,116
Redemptions                                                            --
Interest                                                               --
Capital deductions for operating expenses                              --
                                                                ---------
Balance, March 31, 2008                                         $ 182,789
                                                                =========

The amount of total gains or losses for the period
included in earnings (or changes in net assets)
attributable to the change in unrealized gains or losses
relating to assets still held at March 31, 2008                 $      --

NOTE 10.  NEW ACCOUNTING PRONOUNCEMENTS

ACCOUNTING FOR FAIR VALUE MEASUREMENT

         In  September  2006,  the  Financial  Accounting  Standards  Board (the
"FASB") issued SFAS No. 157, "Fair Value  Measurements"  ("SFAS No. 157").  SFAS
No. 157 is  effective  for all  financial  statements  issued  for fiscal  years
beginning  after  November 15, 2007,  or January 1, 2008 as to the Company.  The
Statement  defines  fair value as the price that  would be  received  to sell an
asset or paid to transfer a liability in an orderly  transaction  between market
participants at the measurement date, establishes a framework for measuring fair
value, and expands  disclosures about fair value  measurements.  The adoption of
SFAS  No.  157 did not  have a  material  impact  on the  Company's  results  of
operations or financial condition, but required expanded disclosures (Note 9).

FAIR VALUE OPTION FOR FINANCIAL ASSETS AND LIABILITIES

         In February 2007, the FASB issued Statement 159, "The Fair Value Option
for Financial Assets and Financial  Liabilities" ("SFAS No. 159"). The objective
of SFAS No.  159 is to  provide  companies  with the  option to  recognize  most
financial  assets  and  liabilities  and  certain  other  items  at fair  value.
Statement 159 allows companies the opportunity to mitigate  earnings  volatility
caused by measuring related assets and liabilities differently without having to
apply complex hedge  accounting.  Unrealized gains and losses on items for which
the fair value option has been elected should be reported in earnings.  The fair
value option election is applied on an instrument by instrument basis (with some
exceptions),  is  irrevocable,  and is  applied  to an  entire  instrument.  The
election may be made as of the date of initial  adoption  for existing  eligible
items.

                                       13

<PAGE>

                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10. - (CONTINUED)

Subsequent to initial  adoption,  the Company may elect the fair value option at
initial  recognition  of  eligible  items or on entering  into an eligible  firm
commitment.  The  Company  can only elect the fair value  option  after  initial
recognition in limited circumstances.

         SFAS No. 159  requires  similar  assets and  liabilities  for which the
Company  has elected the fair value  option to be  displayed  on the face of the
balance  sheet either (a) together with  financial  instruments  measured  using
other  measurement  attributes  with  parenthetical  disclosure  of  the  amount
measured at fair value or (b) in separate line items. In addition,  SFAS No. 159
requires  additional  disclosures to allow financial  statement users to compare
similar assets and liabilities  measured differently either within the financial
statements  of  the  Company  or  between  financial   statements  of  different
companies.

         SFAS No. 159 was adopted by the Company on January 1, 2008,  concurrent
with the  adoption  of SFAS No.  157.  At March 31,  2008,  the  Company has not
elected the fair value measurement option for any of its assets or liabilities.

ACCOUNTING FOR BUSINESS COMBINATIONS

         In December 2007, the FASB issued SFAS 141(R), "Accounting for Business
Combinations."  This  Statement  replaces  FASB  Statement  No.  141,  "Business
Combinations"  and is effective as of the beginning of the fiscal year beginning
on or after December 15, 2008, or January 1, 2009 as to the Company. SFAS 141(R)
establishes  principles and  requirements for how the acquirer of a business (i)
recognizes  and measures in its financial  statements  the  identifiable  assets
acquired,  the  liabilities  assumed,  and any  noncontrolling  interest  in the
acquiree,  (ii)  recognizes  and measures the goodwill  acquired in the business
combination  or a  gain  from a  bargain  purchase,  and  (iii)  determines  the
information to disclose in its financial  statements  with respect to the nature
and financial effects of the business  combination.  The adoption of SFAS 141(R)
is not expected to have a material impact on the Company's results of operations
or financial condition.

         In March 2008, FASB issued SFAS No. 161,  "Disclosures about Derivative
Instruments and Hedging  Activities." SFAS 161 requires enhanced  disclosures to
enable  investors to better  understand  their effects on an entity's  financial
position,  financial performance and cash flows. Specifically,  it requires that
objectives for using derivatives instruments be disclosed in terms of underlying
risk and  accounting  designation,  disclosing  the fair  values  of  derivative
instruments  and their gains and losses in a tabular  format,  disclosure  about
credit-risk-related   contingent  features  and  cross-referencing   within  the
footnotes.  It is effective for financial statements issued for fiscal years and
interim periods  beginning after November 15, 2008, or January 1, 2009 as to the
Company, with early application  encouraged.  The Company is currently assessing
the  impact  of the  adoption  of  this  statement  on its  financial  statement
disclosures.

                                       14
<PAGE>

INTERNAL CONTROL OVER FINANCIAL REPORTING

         The objective of the Company's Internal Control Program is to allow the
Bank and management to comply with Part 363 of the FDIC's regulations ("FDICIA")
and to allow the Company to comply with Section 302 of the Sarbanes-Oxley Act of
2002 (the "Act"). In November 2005, the FDIC amended Part 363 of its regulations
by raising the asset-size threshold from $500 million to $1 billion for internal
control  assessments  by management  and external  auditors.  The final rule was
effective December 28, 2005.

          Section  302 of the Act  requires  the CEOs and CFOs of the Company to
(i) certify that the annual and quarterly  reports filed with the Securities and
Exchange  Commission are accurate and (ii) acknowledge that they are responsible
for establishing,  maintaining and periodically  evaluating the effectiveness of
the  disclosure  controls  and  procedures.  Section  404  of the  Act  requires
management  to (i) report on internal  control over  financial  reporting,  (ii)
assess the effectiveness of such internal controls, and (iii) obtain an external
auditor's report on management's assessment of its internal control. The Company
is not an accelerated filer as defined in Rule 12b-2 of the Securities  Exchange
Act of 1934.  Therefore,  the Company was first  required to comply with Section
404 for the fiscal year ended December 31, 2007.

         The Committee of Sponsoring  Organizations  (COSO)  methodology  may be
used to document and test the internal  controls  pertaining  to the accuracy of
Company issued  financial  statements and related  disclosures.  COSO requires a
review of the control  environment  (including  anti-fraud  and audit  committee
effectiveness),   risk   assessment,   control   activities,   information   and
communication, and ongoing monitoring.


                                       15
<PAGE>

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

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

         The  accompanying  financial  statements of Berkshire  Bancorp Inc. and
subsidiaries  includes the  accounts of the parent  company,  Berkshire  Bancorp
Inc., and its wholly-owned  subsidiaries:  The Berkshire Bank,  Greater American
Finance Group, Inc. and East 39, LLC.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

         The  accounting  and  reporting  policies of the Company  conform  with
accounting  principles  generally  accepted in the United  States of America and
general  practices within the financial  services  industry.  The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America  requires  management to make  estimates and the
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.

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

         With the  adoption  of  Statement  of  Financial  Accounting  Standards
("SFAS") No. 142 ("SFAS No. 142") on January 1, 2002,  the Company  discontinued
the  amortization  of  goodwill  resulting  from  acquisitions.  Goodwill is now
subject to impairment testing at least annually to determine whether write-downs
of the recorded  balances are necessary.  The Company tests for impairment based
on the  goodwill  maintained  at the Bank. A fair value is  determined  for each
reporting  unit  based  on at  least  one  of  three  various  market  valuation
methodologies.  If the fair  values of the  reporting  units  exceed  their book
values,  no write-down of recorded  goodwill is necessary.  If the fair value of
the reporting unit is less, an expense may be required on the Company's books to
write down the related goodwill to the proper carrying value. As of December 31,
2007,  the  Company  completed  its annual  testing,  which  determined  that no
impairment charge was necessary.

         The Company  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 subject to management's judgment based
upon  available  evidence  that future  realization  is more likely than not. If
management  determines  that the Company may be unable to realize all or part of
net deferred tax assets in the future, 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.


                                       16
<PAGE>

         The following table presents the total dollar amount of interest income
from average  interest-earning  assets and the resultant  yields, as well as the
interest  expense on average  interest-bearing  liabilities,  expressed  in both
dollars and rates.

<TABLE>
<CAPTION>
                                                                FOR THE THREE MONTHS ENDED MARCH 31,
                                          --------------------------------------------------------------------------------
                                                           2008                                       2007
                                          -------------------------------------      -------------------------------------
                                                         INTEREST                                   INTEREST
                                          AVERAGE          AND         AVERAGE       AVERAGE          AND         AVERAGE
                                          BALANCE       DIVIDENDS    YIELD/RATE      BALANCE       DIVIDENDS    YIELD/RATE
                                          -------       ---------    ----------      -------       ---------    ----------
                                                                       (Dollars in Thousands)

<S>   <C>                                <C>            <C>               <C>       <C>            <C>              <C>
INTEREST-EARNING ASSETS:
Loans (1)                                $  447,020     $   8,205         7.34%     $  376,914     $  7,238         7.68%
Investment securities                       557,554         7,867         5.64         507,614        5,835         4.60
Other (2)(5)                                 25,887           224         3.46          54,382          686         5.05
                                         ----------     ---------     --------      ----------     --------      -------
Total interest-earning assets             1,030,461        16,296         6.33         938,910       13,759         5.86
                                                                      --------                                   -------
Noninterest-earning assets                   44,637                                     45,240
                                         ----------                                 ----------
Total Assets                             $1,075,098                                 $  984,150
                                         ==========                                 ==========

INTEREST-BEARING LIABILITIES:
Interest bearing deposits                   322,711         2,649         3.28%        273,132        2,321         3.40%
Time deposits                               447,907         5,084         4.54         424,970        5,123         4.82
Other borrowings                            114,432         1,400         4.89         106,668        1,424         5.34
                                         ----------     ---------     --------      ----------     --------      -------
Total interest-bearing
 liabilities                                885,050         9,133         4.13         804,770        8,868         4.41
                                                        ---------     --------                     --------      -------

Demand deposits                              53,819                                     48,266
Noninterest-bearing liabilities              11,069                                     13,482
Stockholders' equity (5)                    125,160                                    117,632
                                         ----------                                 ----------

Total liabilities and
 stockholders' equity                    $1,075,098                                 $  984,150
                                         ==========                                 ==========

Net interest income                                     $   7,163                                  $  4,891
                                                        =========                                  ========

Interest-rate spread (3)                                                  2.20%                                     1.45%
                                                                      ========                                   =======

Net interest margin (4)                                                   2.78%                                     2.08%
                                                                      ========                                   =======

Ratio of average interest-earning
assets to average interest bearing
liabilities                                    1.16                                       1.17
                                         ==========                                 ==========
</TABLE>

----------------------
(1)      Includes nonaccrual loans.
(2)      Includes interest-bearing  deposits,  federal funds sold and securities
         purchased under agreements to resell.
(3)      Interest-rate  spread  represents  the  difference  between the average
         yield on  interest-earning  assets  and the  average  cost of  interest
         bearing liabilities.
(4)      Net interest  margin is net interest  income as a percentage of average
         interest-earning assets.
(5)      Average  balances  are daily  average  balances  except  for the parent
         company which have been calculated on a monthly basis.


                                       17
<PAGE>

RESULTS OF OPERATIONS

RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2008 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2007.

GENERAL.  Berkshire  Bancorp Inc., a bank holding company  registered  under the
Bank Holding Company Act of 1956, has one wholly-owned  banking subsidiary,  The
Berkshire  Bank,  a New  York  State  chartered  commercial  bank.  The  Bank is
headquartered  in Manhattan and has twelve branch  locations;  seven branches in
New York City,  four branches in Orange and Sullivan  counties New York, and one
branch in Ridgefield, New Jersey.

NET INCOME. Net income for the three-month period ended March 31, 2008 increased
by $1.55 million to $2.65 million,  or $.38 per share,  from $1.10  million,  or
$.16 per share, for the three-month period ended March 31, 2007.

         The Company's net income is largely  dependent on interest rate levels,
the  demand for the  Company's  loan and  deposit  products  and the  strategies
employed to manage the  interest  rate and other  risks  inherent in the banking
business.

NET INTEREST  INCOME.  The Company's  primary  source of revenue is net interest
income, or the difference between interest income earned on earning assets, such
as loans and investment  securities,  and interest  expense on  interest-bearing
liabilities  such as deposits and  borrowings.  The amount of interest income is
dependent upon many factors including: (i) the amount of interest-earning assets
that the Company can maintain based upon its funding sources;  (ii) the relative
amounts of  interest-earning  assets versus  interest-bearing  liabilities;  and
(iii) the  difference  between the yields  earned on those  assets and the rates
paid on those  liabilities.  Non-performing  loans adversely affect net interest
income because they must still be funded by  interest-bearing  liabilities,  but
they do not provide interest income. Furthermore,  when we designate an asset as
non- performing,  all interest which has been accrued but not actually  received
is deducted from current period income, further reducing net interest income.

         For the quarter ended March 31, 2008, net interest income  increased by
$2.27  million to $7.16  million from $4.89  million for the quarter ended March
31,  2007.  The quarter over  quarter  increase in net  interest  income was the
result  of the 47 basis  point  increase  in the  average  yields  earned on the
average amounts of  interest-earning  assets to 6.33% in 2008 from 5.86% in 2007
and the the 28 basis point  decrease  in the  average  rates paid on the average
amounts of interest-bearing liabilities to 4.13% in 2008 from 4.41% in 2007.

         The Company's  interest-rate spread, the difference between the average
yield  on  interest-earning  assets  and the  average  cost of  interest-bearing
liabilities,  grew by 75 basis points to 2.20% in the 2008 quarter from 1.45% in
the 2007 quarter.

NET INTEREST MARGIN. Net interest margin, or annualized net interest income as a
percentage of average  interest-earning  assets, increased by 70 basis points to
2.78% in the first  quarter of fiscal  2008 from  2.08% in the first  quarter of
fiscal 2007. We seek to secure and retain  customer  deposits  with  competitive
products and rates,  while making strategic use of the prevailing  interest rate
environment to borrow funds at what we believe to be attractive rates. We invest
such deposits and borrowed funds in a prudent mix of fixed and  adjustable  rate
loans,  investment  securities  and  short-term   interest-earning  assets.  The
increase in net interest margin is primarily due to the increase in net interest
income,  and by the increase in the average amount of higher yielding loans as a
percentage of our total mix of interest-earning assets.

         The  average  amount  of loans in our  portfolio  increased  by  $70.11
million to $447.02  million in the quarter  ended  March 31,  2008 from  $376.91
million in the quarter  ended March 31, 2007.  The average  amount of investment
securities


                                       18
<PAGE>

increased by $49.94 million,  to $557.55 million in the three months ended March
31, 2008 from $507.61  million in the three  months ended March 31, 2007,  while
the average yield on  investment  securities  improved by 104 basis  points,  to
5.64% in 2008 from 4.60% in 2007.

INTEREST  INCOME.  Total  interest  income for the quarter  ended March 31, 2008
increased by $2.54 million to $16.30 million from $13.76 million for the quarter
ended March 31, 2007. The increase in total interest income was primarily due to
the increase in the average  yields  earned on  interest-earning  assets and the
increase in the average amount of such assets as discussed above.

         The following table shows the composition of interest income.

                            ---------------------------------------------
                                     THREE MONTHS ENDED MARCH 31,
                            ---------------------------------------------
                                    2008                     2007
                            --------------------     --------------------
                            INTEREST     % OF        INTEREST     % OF
                             INCOME      TOTAL        INCOME      TOTAL
                                  (In thousands, except percentages)
Loans                       $ 8,205      50.35%      $ 7,238      52.60%
Investment Securities         7,867      48.28         5,835      42.41
Other                           224       1.37           686       4.99
                            -------     ------       -------     ------
Total Interest Income       $16,296     100.00%      $13,759     100.00%

         Loans, which are inherently risky and therefore command a higher return
than our portfolio of investment securities and other  interest-earning  assets,
increased  to 43.38% of our total  amount  of  average  interest-earning  assets
during the three  months  ended March 31, 2008 from 40.14% of our total  average
interest-earning assets during the three months ended March 31, 2007. Investment
securities   remained   relatively   flat  at   54.11%   and   54.06%  of  total
interest-earning   assets   in  2008   and   2007,   respectively,   and   other
interest-earning  assets declined to 2.51% in 2008 from 5.79% in 2007.  While we
actively  seek to  originate  new loans with  qualified  borrowers  who meet the
Bank's  underwriting  standards,   our  strategy  has  been  to  maintain  those
standards, sacrificing some current income to avoid possible large future losses
in the loan portfolio.

         At March 31, 2008,  our  portfolio of  investment  securities  included
approximately $182.8 million of auction rate securities.  These investments have
high credit quality ratings of AA or AAA and are fully  collateralized  by bonds
and other financial instruments. Auction rate securities are generally long-term
debt  instruments  that provide  liquidity  through a Dutch auction process that
resets  the  applicable  interest  rate at  pre-determined  calendar  intervals,
generally every 90 days for the securities in our portfolio.

         Recent uncertainties in the credit markets have negatively impacted our
ability to  liquidate,  if  necessary,  investments  in auction rate  securities
because,  in recent  auctions,  the amount of securities  submitted for sale has
exceeded  the  amount of  purchase  orders.  We are not  certain  as to when the
liquidity issues relating to these investments will improve.  As a result of the
timing of the recent auction failures beginning in February 2008, we recorded an
unrealized  loss net of tax in  accordance  with  SFAS No.  115  "Accounting for
Certain Debt and Equities Securities" totalling approximately $8.9 million as of
March 31, 2008.  Based on the fair market  value of the auction rate  securities
and an analysis of other-than-temporary  impairment factors,  including, but not
limited  to,  whether  the  credit  ratings  of  the  issuers  or  the  insurers
deteriorate,  or the  collateral of the securities  deteriorates,  we determined
that none of the auction rate securities are other-than-temporarily impaired.


                                       19
<PAGE>

         Based on our expected  operating  cash flows,  and our other sources of
cash, we do not expect the potential  lack of liquidity in these  investments to
affect our capital, liquidity or ability to execute our current business plan.

INTEREST EXPENSE.  Total interest expense for the quarter ended March 31, 2008
increased by $265,000 to $9.13  million from $8.87 million for the quarter ended
March 31,  2007.  The  increase in interest  expense  was due  primarily  to the
quarter  over  quarter  increase  in  the  average  amount  of  interest-bearing
liabilities,   to  $885.05  million  in  2008  from  $804.77  million  in  2007,
substantially  offset by the  decrease  in rates paid on the  average  amount of
interest-bearing  liabilities,  4.13% in the 2008 quarter from 4.41% in the 2007
quarter.

         The following table shows the composition of interest expense.

                            ---------------------------------------------
                                     THREE MONTHS ENDED MARCH 31,
                            ---------------------------------------------
                                    2008                     2007
                            --------------------     --------------------
                            INTEREST     % OF        INTEREST     % OF
                            EXPENSE      TOTAL       EXPENSE      TOTAL
                                  (In thousands, except percentages)
Interest-Bearing Deposits   $ 2,649      29.00%      $ 2,321      26.17%
Time Deposits                 5,084      55.67         5,123      57.77
Other Borrowings              1,400      15.33         1,424      16.06
                            -------     ------       -------     ------
Total Interest Expense      $ 9,133     100.00%      $ 8,868     100.00%


NON-INTEREST INCOME. Non-interest income consists primarily of realized gains on
sales of  marketable  securities  and service fee income.  For the three  months
ended March 31,  2008,  total  non-interest  income  decreased  by  $49,000,  to
$466,000 from  $515,000 for the three months ended March 31, 2007.  The decrease
was  primarily  attributable  to a decrease  of  $26,000  in service  charges on
deposit  accounts  and a $67,000  decrease  in gains on  investment  securities,
partially offset by an increase of $44,000 in other income.

NON-INTEREST  EXPENSE.  Non-interest  expense  includes  salaries  and  employee
benefits,  occupancy and equipment  expenses,  legal and  professional  fees and
other  operating  expenses  associated  with the  day-to-day  operations  of the
Company.  Total  non-interest  expense for the three months ended March 31, 2008
increased by $457,000 to $3.91  million from $3.45  million for the three months
ended  March  31,  2007.  The  largest   component  of   non-interest   expense,
approximately  61% of the  total,  are  salaries  and  employee  benefits  which
increased by $165,000 to $2.40 million in the 2008 quarter from $2.23 million in
the 2007  quarter.  The  increase  is due to the  addition of  personnel  in our
internal  control and  compliance  departments,  and the staff at our Washington
Heights branch which opened in May 2007.


                                       20
<PAGE>

         The following table shows the components of non-interest expense.

<TABLE>
<CAPTION>
                                    -------------------------------------------------------
                                                  THREE MONTHS ENDED MARCH 31,
                                    -------------------------------------------------------
                                               2008                          2007
                                    -------------------------     -------------------------
                                    NON-INTEREST      % OF        NON-INTEREST      % OF
                                      EXPENSE        TOTAL          EXPENSE        TOTAL
                                               (In thousands, except percentages)
<S>                                   <C>           <C>             <C>           <C>
Salaries and Employee Benefits        $ 2,399        61.36%         $ 2,234        64.70%
Net Occupancy Expense                     538        13.76              476        13.79
Equipment Expense                          95         2.43              102         2.95
FDIC Assessment                           106         2.71               20         0.58
Data Processing Expense                   111         2.84               96         2.78
Other                                     661        16.90              525        15.20
                                      -------       ------          -------       ------
Total Non-Interest Expense            $ 3,910       100.00%         $ 3,453       100.00%
</TABLE>

PROVISION FOR INCOME TAX.  During the  three-month  periods ended March 31, 2008
and 2007, we recorded income tax expense of $920,000 and $778,000, respectively.
The tax provisions for federal,  state and local taxes recorded for the 2008 and
2007 periods represent  effective tax rates of 25.78% and 41.43%,  respectively.
The decrease in the effective  tax rate in the 2008 period  compared to the 2007
period is primarily due to the tax-free  income earned on certain of the auction
rate securities in our investment portfolio.

ISSUER PURCHASES OF EQUITY SECURITIES

         On May 15,  2003,  The  Company's  Board of  Directors  authorized  the
purchase of up to an additional  450,000  shares of its Common Stock in the open
market, from time to time, depending upon prevailing market conditions,  thereby
increasing  the maximum  number of shares  which may be purchased by the Company
from 1,950,000 shares of Common Stock to 2,400,000 shares of Common Stock. Since
1990  through  March 31,  2008,  the Company has  purchased a total of 1,898,909
shares of its Common Stock. We did not repurchase shares of the Company's Common
Stock during the first  quarter of 2008.  At March 31, 2008,  there were 501,091
shares of Common  Stock which may yet be  purchased  under our stock  repurchase
plan.


                                       21
<PAGE>

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

INTEREST RATE RISK.  Fluctuations  in market  interest rates can have a material
effect on the Company's net interest  income  because the yields earned on loans
and  investments  may not  adjust  to  market  rates of  interest  with the same
frequency,  or with  the  same  speed,  as the  rates  paid  by the  Bank on its
deposits.

         Most of the Bank's deposits are either interest-bearing demand deposits
or short term certificates of deposit and other  interest-bearing  deposits with
interest  rates that  fluctuate as market rates  change.  Management of the Bank
seeks to reduce the risk of interest rate fluctuations by concentrating on loans
and  securities  investments  with  either  short  terms  to  maturity  or  with
adjustable  rates or other  features  that  cause  yields to adjust  based  upon
interest rate fluctuations. In addition, to cushion itself against the potential
adverse  effects of a  substantial  and  sustained  increase in market  interest
rates,  the Bank has from time to time purchased off balance sheet interest rate
cap contracts which generally  provide that the Bank will be entitled to receive
payments from the other party to the contract if interest rates exceed specified
levels.  These  contracts,  when written,  are entered into with major financial
institutions.

         The  Company  seeks to  maximize  its net  interest  margin  within  an
acceptable level of interest rate risk. Interest rate risk can be defined as the
amount of the forecasted  net interest  income that may be gained or lost due to
favorable or  unfavorable  movements in interest  rates.  Interest rate risk, or
sensitivity,  arises when the  maturity or repricing  characteristics  of assets
differ   significantly  from  the  maturity  or  repricing   characteristics  of
liabilities.


                                       22
<PAGE>

         In the  banking  industry,  a  traditional  measure  of  interest  rate
sensitivity  is  known  as  "gap"   analysis,   which  measures  the  cumulative
differences between the amounts of assets and liabilities  maturing or repricing
at various time intervals. The following table sets forth the Company's interest
rate repricing gaps for selected maturity periods:

<TABLE>
<CAPTION>
                                                                             BERKSHIRE BANCORP INC.
                                                                INTEREST RATE SENSITIVITY GAP AT MARCH 31, 2008
                                                                     (IN THOUSANDS, EXCEPT FOR PERCENTAGES)
                                          ------------------------------------------------------------------------------------------
                                             3 MONTHS           3 THROUGH          1 THROUGH            OVER
                                              OR LESS           12 MONTHS           3 YEARS            3 YEARS            TOTAL
                                          ----------------   ----------------   ----------------   ----------------   --------------
<S>                                         <C>               <C>                <C>                 <C>               <C>
Federal funds sold                           12,500                 --                 --                 --              12,500
                                  (Rate)       2.25%                                                                        2.25%
Interest bearing deposits in banks            7,546                 --                 --                 --               7,546
                                  (Rate)       2.13%                                                                        2.13%
Loans (1)(2)
Adjustable rate loans                       121,172             15,627             28,666             44,085             209,550
                                  (Rate)       6.86%              6.91%              6.75%              7.19%               6.92%
Fixed rate loans                             13,645             19,857             40,471            163,274             237,247
                                  (Rate)       8.41%              6.51%              7.98%              6.34%               6.75%
                                          ---------          ---------          ---------          ---------          ----------
Total loans                                 134,817             35,484             69,137            207,359             446,797
Investments (3)(4)                          288,891             28,244             50,207            198,676             566,018
                                  (Rate)       5.78%              5.11%              4.93%              6.71%               6.00%
                                          ---------          ---------          ---------          ---------          ----------
Total rate-sensitive assets                 443,754             63,728            119,344            406,035           1,032,861
                                          ---------          ---------          ---------          ---------          ----------

Deposit accounts (5)
Savings and NOW                             282,586                 --                 --                 --             282,586
                                  (Rate)       3.14%                                                                        3.63%
Money market                                 33,162                 --                 --                 --              33,162
                                  (Rate)       2.03%                                                                        2.03%
Time Deposits                               210,449            241,310                313                 --             452,072
                                  (Rate)       4.38%              3.99%              3.31%                  %               4.17%
                                          ---------          ---------          ---------          ---------          ----------
Total deposit accounts                      526,197            241,310                313               0.00             767,820
Repurchase Agreements                        11,436                 --                 --             42,000              53,436
                                  (Rate)       2.88%                                                    4.12%               3.85%
Other borrowings                                295              6,954             21,596             31,429              60,274
                                  (Rate)       4.18%              2.78%              5.49%              5.51%               5.18%
                                          ---------          ---------          ---------          ---------          ----------
Total rate-sensitive liabilities            537,928            248,264             21,909             73,429             881,530
                                          ---------          ---------          ---------          ---------          ----------

Interest rate caps                           40,000                 --                --             (40,000)                 --
Gap (repricing differences)                (134,174)          (184,536)            97,435            372,606             151,331
                                          =========          =========          =========          =========          ==========

Cumulative Gap                             (134,174)          (318,710)          (221,275)           151,331
                                          =========          =========          =========          =========
Cumulative Gap to Total Rate
Sensitive Assets                             (12.99)%           (30.86)%           (21.42)%            14.65%
                                          =========          =========          =========          =========
</TABLE>

----------------------
(1)      Adjustable-rate  loans are included in the period in which the interest
         rates are next  scheduled to adjust  rather than in the period in which
         the loans mature.  Fixed-rate  loans are  scheduled  according to their
         maturity dates.
(2)      Includes nonaccrual loans.
(3)      Investments  are  scheduled  according  to their  respective  repricing
         (variable rate loans) and maturity (fixed rate securities) dates.
(4)      Investments are stated at book value.
(5)      NOW  accounts and savings  accounts are regarded as readily  accessible
         withdrawal accounts.  The balances in such accounts have been allocated
         among  maturity/repricing  periods  based  upon  The  Berkshire  Bank's
         historical experience.  All other time accounts are scheduled according
         to their respective maturity dates.


                                       23
<PAGE>

PROVISION FOR LOAN LOSSES. The allowance for loan losses is the estimated amount
considered  necessary to cover credit losses  inherent in the loan  portfolio at
the balance sheet date. The allowance is  established  through the provision for
loan losses that is charged  against  income.  In determining  the allowance for
loan losses, management makes significant estimates and therefore has identified
the allowance as a critical  accounting  policy. The methodology for determining
the  allowance  for loan losses is  considered a critical  accounting  policy by
management due to the high degree of judgment involved,  the subjectivity of the
assumptions utilized,  and the potential for changes in the economic environment
that could  result in changes to the amount of the recorded  allowance  for loan
losses.

         The  allowance for loan losses has been  determined in accordance  with
accounting  principles  generally  accepted  in the  United  States of  America,
principally  "SFAS" No. 5,  "Accounting  for  Contingencies"  and SFAS No.  114,
"Accounting  by  Creditors  for  Impairment  of a  Loan,  an  amendment  to FASB
Statements No. 5 and 15," as amended. Under the above accounting principles,  we
are required to maintain an allowance  for probable  losses at the balance sheet
date. We are responsible for the timely and periodic determination of the amount
of the  allowance  required.  Management  believes  that the  allowance for loan
losses  is  adequate  to  cover  specifically  identifiable  losses,  as well as
estimated losses inherent in our portfolio for which certain losses are probable
but not specifically identifiable.

         Management  performs a  quarterly  evaluation  of the  adequacy  of the
allowance for loan losses. The analysis of the allowance for loan losses has two
components: specific and general allocations.  Specific allocations are made for
loans  determined  to be impaired.  Impairment  is measured by  determining  the
present  value of expected  future cash flows or, as a practical  expedient  for
collateral-dependent loans, the fair value of the collateral adjusted for market
conditions  and  selling   expenses.   The  Bank  considers  its  investment  in
one-to-four  family real estate loans and consumer  loans to be smaller  balance
homogeneous  loans and  therefore  excluded  from  separate  identification  for
evaluation  of  impairment.  These  homogeneous  loan groups are  evaluated  for
impairment   on  a  collective   basis  under  SFAS  No.  5,   "Accounting   for
Contingencies".

         The general allocation is determined by segregating the remaining loans
by type of loan, risk weighting (if applicable) and payment history.  Management
also analyzes historical loss experience,  delinquency trends,  general economic
conditions,  geographic concentrations,  and industry and peer comparisons. This
analysis  establishes factors that are applied to the loan segments to determine
the amount of the general allocations.  This evaluation is inherently subjective
as it  requires  material  estimates  that  may be  susceptible  to  significant
revisions  based upon  changes in economic  and real estate  market  conditions.
Actual loan losses may be significantly  more than the allowance for loan losses
management has  established  which could have a material  negative effect on the
Company's financial results.

         On a  quarterly  basis,  the Bank's  management  committee  reviews the
current  status of various  loan assets in order to evaluate the adequacy of the
allowance  for loan  losses.  In this  evaluation  process,  specific  loans are
analyzed to determine their  potential risk of loss.  This process  includes all
loans,  concentrating on non-accrual and classified  loans.  Each non-accrual or
classified loan is evaluated for potential loss exposure.  Any shortfall results
in a  recommendation  of a  specific  allowance  if the  likelihood  of  loss is
evaluated as probable.  To determine  the adequacy of collateral on a particular
loan,  an estimate of the fair market  value of the  collateral  is based on the
most current appraised value available.  This appraised value is then reduced to
reflect estimated liquidation expenses.


                                       24
<PAGE>

         The Company's  primary  lending  emphasis has been the  origination  of
commercial and residential mortgages and commercial and consumer loans and lines
of credit.  The bank also  originates home equity loans and home equity lines of
credit.  These  activities  resulted in a loan  concentration  in commercial and
residential  mortgages.  As a  substantial  amount  of  our  loan  portfolio  is
collateralized  by real estate,  appraisals of the underlying  value of property
securing loans are critical in determining the amount of the allowance  required
for specific  loans.  Assumptions for appraisal  valuations are  instrumental in
determining the value of properties.  Overly optimistic  assumptions or negative
changes to assumptions  could  significantly  impact the valuation of a property
securing a loan and the related allowance determined. The assumptions supporting
such  appraisals  are carefully  reviewed by  management  to determine  that the
resulting  values  reasonably  reflect amounts  realizable on the related loans.
Based on the composition of our loan portfolio,  management believes the primary
risks are increases in interest rates, a decline in the economy,  generally, and
a decline in real estate market values in the New York  metropolitan  area.  Any
one or  combination  of these  events may  adversely  affect our loan  portfolio
resulting in increased delinquencies, loan losses and future levels of loan loss
provisions.  Management  believes  the  allowance  for loan losses  reflects the
inherent credit risk in our portfolio, the level of our non-performing loans and
our charge-off experience.

         Although  management  believes that we have  established and maintained
the allowance for loan losses at adequate levels,  additions may be necessary if
future  economic  and other  conditions  differ  substantially  from the current
operating environment.  Although management uses the best information available,
the level of the allowance  for loan losses  remains an estimate that is subject
to significant judgment and short-term change. In addition,  the Federal Deposit
Insurance Corporation,  New York State Banking Department,  and other regulatory
bodies,  as an integral part of their  examination  process,  will  periodically
review our allowance for loan losses.  Such agencies may require us to recognize
adjustments to the allowance based on its judgments about information  available
to them at the time of their examination.

         The following table sets forth  information with respect to activity in
the  Company's  allowance  for loan  losses  during the  periods  indicated  (in
thousands, except percentages):

                                                           THREE MONTHS ENDED
                                                                MARCH 31,
                                                        -----------------------
                                                          2008           2007
                                                        --------       --------

Average loans outstanding                               $447,020       $376,914
                                                        ========       ========
Allowance at beginning of period                           4,183          3,771
Charge-offs:
 Commercial and other loans                                    1             --
                                                        --------       --------
  Total loans charged-off                                      1             --
                                                        --------       --------
Recoveries:
 Commercial and other loans                                   66              2
                                                        --------       --------
  Total loans recovered                                       66              2
                                                        --------       --------
  Net (charge-offs) recoveries                                65              2
                                                        --------       --------
Provision for loan losses
 charged to operating expenses                               150             75
                                                        --------       --------
Allowance at end of period                              $  4,398       $  3,848
                                                        --------       --------
Ratio of net recoveries (charge-offs)
 to average loans outstanding                               0.01%          0.00%
                                                        ========       ========
Allowance as a percent of total loans                       0.98%          1.01%
                                                        ========       ========
Total loans at end of period                            $446,797       $379,313
                                                        ========       ========


                                       25
<PAGE>

LOAN PORTFOLIO.

         LOAN PORTFOLIO  COMPOSITION.  The Company's loans consist  primarily of
mortgage loans secured by residential and non-residential  properties as well as
commercial  loans which are either  unsecured  or secured by  personal  property
collateral.  Most of the  Company's  loans are  either  made to  individuals  or
personally  guaranteed  by the  principals  of the business to which the loan is
made.  At March 31, 2008 and December 31,  2007,  the Company had loans,  net of
unearned  income,  of $445.41  million and $434.79  million,  respectively,  and
allowances  for loan losses of $4.40  million and $4.18  million,  respectively.
From time to time, the Bank may originate  residential mortgage loans, sell them
on the secondary market,  normally recognizing fee income in connection with the
sale.

         Interest  rates on loans are  affected  by the demand  for  loans,  the
supply of money  available  for  lending,  credit  risks,  the rates  offered by
competitors and other  conditions.  These factors are in turn affected by, among
other things, economic conditions,  monetary policies of the federal government,
and legislative tax policies.

         In order to manage  interest rate risk, the Bank focuses its efforts on
loans with  interest  rates that adjust  based upon changes in the prime rate or
changes in United States Treasury or similar indices. Generally, credit risks on
adjustable-rate  loans are somewhat  greater than on fixed-rate  loans primarily
because,  as interest  rates rise, so do  borrowers'  payments,  increasing  the
potential for default.  The Bank seeks to impose  appropriate loan  underwriting
standards  in order to protect  against  these and other  credit  related  risks
associated with its lending operations.

         In addition to analyzing  the income and assets of its  borrowers  when
underwriting  a loan,  the Bank obtains  independent  appraisals on all material
real estate in which the Bank takes a mortgage. The Bank generally obtains title
insurance in order to protect against title defects on mortgaged property.

         COMMERCIAL AND MORTGAGE LOANS. The Bank originates  commercial mortgage
loans  secured  by  office  buildings,   retail   establishments,   multi-family
residential  real estate and other types of commercial  property.  Substantially
all of the properties are located in the New York City metropolitan area.

         The Bank generally makes  commercial  mortgage loans with loan to value
ratios not to exceed 75% and with terms to maturity that do not exceed 15 years.
Loans secured by commercial  properties  generally  involve a greater  degree of
risk than one- to four-family  residential  mortgage loans.  Because payments on
such loans are often  dependent on  successful  operation or  management  of the
properties, repayment may be subject, to a greater extent, to adverse conditions
in the real estate market or the economy. The Bank seeks to minimize these risks
through its underwriting  policies.  The Bank evaluates the  qualifications  and
financial condition of the borrower, including credit history, profitability and
expertise,  as well as the value and condition of the underlying  property.  The
factors  considered by the Bank include net operating income;  the debt coverage
ratio  (the  ratio of cash net  income to debt  service);  and the loan to value
ratio. When evaluating the borrower,  the Bank considers the financial resources
and  income  level of the  borrower,  the  borrower's  experience  in  owning or
managing similar  property and the Bank's lending  experience with the borrower.
The Bank's policy requires borrowers to present evidence of the ability to repay
the loan without  having to resort to the sale of the  mortgaged  property.  The
Bank also seeks to focus its  commercial  mortgage  loans on loans to  companies
with operating businesses, rather than passive real estate investors.


                                       26
<PAGE>

         COMMERCIAL  LOANS.  The Bank makes  commercial  loans to businesses for
inventory  financing,   working  capital,  machinery  and  equipment  purchases,
expansion, and other business purposes. These loans generally have higher yields
than mortgages  loans,  with maturities of one year,  after which the borrower's
financial  condition  and the terms of the loan are  re-evaluated.  At March 31,
2008 and 2007, approximately $67.28 million and $64.38 million, respectively, or
15.06% and 16.97%, respectively, of the Company's total loan portfolio consisted
of such loans.

         Commercial  loans tend to present  greater  risks than  mortgage  loans
because the collateral,  if any, tends to be rapidly  depreciable,  difficult to
sell at full  value and is often  easier  to  conceal.  In order to limit  these
risks, the Bank evaluates these loans based upon the borrower's ability to repay
the loan from ongoing operations. The Bank considers the business history of the
borrower and  perceived  stability  of the  business as  important  factors when
considering  applications for such loans.  Occasionally,  the borrower  provides
commercial or residential  real estate  collateral for such loans, in which case
the value of the  collateral  may be a  significant  factor in the loan approval
process.

         RESIDENTIAL  MORTGAGE  LOANS (1 TO 4  FAMILY  LOANS).  The  Bank  makes
residential  mortgage  loans  secured  by  first  liens  on  one-to-four  family
owner-occupied  or rental  residential real estate.  At March 31, 2008 and 2007,
approximately $139.26 million and $138.16 million,  respectively,  or 31.17% and
36.42%,  respectively,  of the Company's total loan portfolio  consisted of such
loans.  The Bank offers both adjustable  rate mortgages  ("ARMS") and fixed-rate
mortgage  loans.  The  relative  proportion  of  fixed-rate  loans  versus  ARMs
originated by the Bank depends  principally  upon current  customer  preference,
which is  generally  driven by economic  and interest  rate  conditions  and the
pricing  offered  by the  Bank's  competitors.  At  March  31,  2008  and  2007,
approximately 12.50% and 17.74%, respectively, of the Bank's residential one-to-
four family  owner-occupied first mortgage portfolio were ARMs and approximately
87.50%  and  82.26%,   respectively,   were  fixed-rate  loans.  The  percentage
represented by fixed-rate loans tends to increase during periods of low interest
rates.  The ARMs generally carry annual caps and  life-of-loan  ceilings,  which
limit interest rate adjustments.

         The  Bank's  residential  loan  underwriting   criteria  are  generally
comparable  to those  required  by the  Federal  National  Mortgage  Association
("FNMA") and other major secondary market loan purchasers. Generally, ARM credit
risks are somewhat greater than fixed-rate loans primarily because,  as interest
rates rise, the borrowers' payments rise,  increasing the potential for default.
The Bank's teaser rate ARMs (ARMs with low initial  interest  rates that are not
based upon the index plus the margin for  determining  future rate  adjustments)
were underwritten based on the payment due at the fully-indexed rate.

         In  addition  to  verifying  income and assets of  borrowers,  the Bank
obtains independent appraisals on all residential first mortgage loans and title
insurance is required at closing.  Private mortgage insurance is required on all
loans with a  loan-to-value  ratio in excess of 80% and the Bank  requires  real
estate tax escrows on such loans.  Real  estate tax  escrows  are  voluntary  on
residential mortgage loans with loan-to-value ratios of 80% or less.

         Fixed-rate  residential  mortgage loans are generally originated by the
Bank for terms of 15 to 30 years. Although 30 year fixed-rate mortgage loans may
adversely  affect our net interest  income in periods of rising  interest rates,
the Bank  originates  such  loans to  satisfy  customer  demand.  Such loans are
generally  originated at initial  interest  rates which exceed the fully indexed
rate on ARMs offered at the same time.  Fixed-rate  residential  mortgage  loans
originated by the Bank generally include due-on-sale  clauses,  which permit the
Bank to demand  payment in full if the borrower  sells the property  without the
Bank's consent.


                                       27
<PAGE>

         Due-on-sale  clauses are an important  means of adjusting  the rates on
the Bank's  fixed-rate  mortgage  loan  portfolio,  and the Bank will  generally
exercise its rights under these clauses if necessary to maintain market yields.

         ARMs  originated  in recent  years  have  interest  rates  that  adjust
annually based upon the movement of the one year treasury bill constant maturity
index,  plus a margin of 2.00% to 2.75%.  These loans  generally  have a maximum
interest rate adjustment of 2% per year, with a lifetime  maximum  interest rate
adjustment, measured from the initial interest rate, of 5.5% or 6.0%.

         The Bank offers a variety of other loan products including  residential
single  family  construction  loans to persons who intend to occupy the property
upon completion of  construction,  home equity loans secured by junior mortgages
on one-to-four  family  owner-occupied  residences,  and  short-term  fixed-rate
consumer  loans  either  unsecured  or secured by  monetary  assets such as bank
deposits and marketable  securities or personal property.  At March 31, 2008 and
2007, the Company's loan portfolio was comprised of $240.26  million and $176.77
million,  respectively,  or  53.17%  and  46.60%,  respectively,  of other  loan
products.

CAPITAL ADEQUACY

         Quantitative  measures  established  by  regulations  to ensure capital
adequacy  require the Bank to maintain  minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the  regulations) to
risk-  weighted  assets,  and of Tier I capital  to average  assets.  Management
believes  that,  as of March  31,  2008,  the Bank  meets all  capital  adequacy
requirements to which it is subject.

         As of March 31,  2008,  the Bank met all  regulatory  requirements  for
classification  as well  capitalized  under the regulatory  framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain
minimum total  risk-based,  Tier I risk-based and Tier I leverage  ratios as set
forth in the following table.  There are no conditions or events since that date
that management believes have changed the Bank's category.

          The  following  table set forth the  actual  and  required  regulatory
capital  amounts and ratios of the  Company  and the Bank as of March 31,  2008.
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                        TO BE WELL
                                                                                                    CAPITALIZED UNDER
                                                                              FOR CAPITAL           PROMPT CORRECTIVE
                                                          ACTUAL           ADEQUACY PURPOSES        ACTION PROVISIONS
                                                          ------           -----------------        -----------------
                                                          AMOUNT      RATIO      AMOUNT     RATIO    AMOUNT  RATIO
                                                          ------      -----      ------     -----    ------  -----

<S>                                                      <C>          <C>       <C>         <C>      <C>     <C>
MARCH 31, 2008
Total Capital (to Risk-Weighted Assets)
  Company                                                $138,876     17.9%     $61,937     >8.0%         --  N/A
                                                                                            -
  Bank                                                    106,464     14.1%      60,356     >8.0%    $75,445 >10.0%
                                                                                            -                -
Tier I Capital (to Risk-Weighted Assets)
  Company                                                 134,478     17.4%      30,968     >4.0%         --  N/A
                                                                                            -
  Bank                                                    102,066     13.5%      30,178     >4.0%     45,267 >6.0%
                                                                                            -                -
Tier I Capital (to Average Assets)
  Company                                                 134,478     12.5%      43,004     >4.0%         --  N/A
                                                                                            -
  Bank                                                    102,066      9.9%      41,208     >4.0%     51,510 >5.0%
                                                                                            -                -
</TABLE>


                                       28
<PAGE>

LIQUIDITY

         The  management  of the  Company's  liquidity  focuses on ensuring that
sufficient  funds are  available to meet loan funding  commitments,  withdrawals
from deposit  accounts,  the repayment of borrowed funds,  and ensuring that the
Bank and the Company comply with regulatory  liquidity  requirements.  Liquidity
needs of the Bank have historically been met by deposits, investments in federal
funds  sold,  principal  and  interest  payments  on loans,  and  maturities  of
investment securities.

         At March 31, 2008,  our  portfolio of  investment  securities  included
approximately $182.8 million of auction rate securities.  These investments have
high credit quality ratings of AA or AAA and are fully  collateralized  by bonds
and other financial instruments. Auction rate securities are generally long-term
debt  instruments  that provide  liquidity  through a Dutch auction process that
resets  the  applicable  interest  rate at  pre-determined  calendar  intervals,
generally every 90 days for the securities in our portfolio.

         Recent uncertainties in the credit markets have negatively impacted our
ability to  liquidate,  if  necessary,  investments  in auction rate  securities
because,  in recent  auctions,  the amount of securities  submitted for sale has
exceeded  the  amount of  purchase  orders.  We are not  certain  as to when the
liquidity issues relating to these  investments will improve;  however,  we have
the  ability  to  hold  these   available  for  sale   securities  to  maturity,
(predominately  greater than 19 years after March 31, 2008)  thereby  recovering
our investment. We  have  collected  all  income  due  us  from the auction rate
securities.

         Based on our expected  operating  cash flows,  and our other sources of
cash, we do not expect the potential  lack of liquidity in these  investments to
affect our  capital,  liquidity  or our ability to execute our current  business
plan.

         For the parent company,  Berkshire Bancorp Inc., liquidity means having
cash available to fund operating expenses and to pay stockholder dividends, when
and if declared by the Company's Board of Directors.  The ability of the Company
to meet all of its  obligations,  including  the  payment of  dividends,  is not
dependent  upon the receipt of dividends  from the Bank. At March 31, 2008,  the
Company had cash of approximately $11.8 million and investment securities with a
fair market value of $9.6 million.

         The Bank maintains financial instruments with off-balance sheet risk in
the normal  course of business  to meet the  financing  needs of its  customers.
These  financial  instruments,  approximately  $50.5  million at March 31, 2008,
include  commitments  to extend  credit,  stand-by  letters  of credit  and loan
commitments.  The Bank also had  interest  rate caps with a  notional  amount of
$40.0 million.

         At  March  31,  2008,   the  Bank  had   outstanding   commitments   of
approximately $494.16 million; including $37.59 million of long-term debt, $4.50
million  of  operating  leases,  and  $452.07  million of time  deposits.  These
commitments include $459.97 million that mature or renew within one year, $32.36
million  that  mature or renew  after one year and  within  three  years,  $1.29
million  that  mature or renew  after  three  years and  within  five  years and
$544,000 that mature or renew after five years.


                                       29
<PAGE>

IMPACT OF INFLATION AND CHANGING PRICES

         The  Company's  financial  statements  measure  financial  position and
operating results in terms of historical dollars without considering the changes
in the relative purchasing power of money over time due to inflation. The impact
of inflation is reflected in the  increasing  cost of the Company's  operations.
The assets and  liabilities  of the Company are largely  monetary.  As a result,
interest  rates have a greater impact on the Company's  performance  than do the
effects of general  levels of  inflation.  In  addition,  interest  rates do not
necessarily move in the direction,  or to the same extent, as the price of goods
and services.  However,  in general,  high  inflation  rates are  accompanied by
higher interest rates, and vice versa.

ITEM 4T - CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES.

As of the end of the period covered by this  Quarterly  Report on Form 10-Q, the
Company  evaluated  the  effectiveness  of  the  design  and  operation  of  its
"disclosure  controls  and  procedures"  as  defined  in Rule  13a-15(e)  of the
Securities  Exchange  Act  of  1934  ("Disclosure  Controls").  This  evaluation
("Controls   Evaluation")   was  done  under  the   supervision   and  with  the
participation of the Company's management, including the Chief Executive Officer
("CEO"),  who is also  the  Chief  Financial  Officer  ("CFO").  Based  upon the
Controls Evaluation,  the CEO/CFO has concluded that the Disclosure Controls are
effective in reaching a reasonable level of assurance that information  required
to be disclosed by the Company is recorded,  processed,  summarized and reported
within the time period  specified in the  Securities  and Exchange  Commission's
rules and forms and that any  material  information  relating  to the Company is
accumulated  and   communicated   with   management,   including  its  principal
executive/financial   officer  to  allow  timely  decisions  regarding  required
disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.

In accordance  with SEC  requirements,  the CEO/CFO notes that during the fiscal
quarter ended March 31, 2008, no changes in the Company's  Internal Control have
occurred that have  materially  affected or are reasonably  likely to materially
affect the Company's Internal Control.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS.

The  Company's  management,  including  the  CEO/CFO,  does not expect  that its
Disclosure  Controls and/or its "internal  control over financial  reporting" as
defined in Rule  13(a)-15(f) of the Securities  Exchange Act of 1934  ("Internal
Control") will prevent all error and all fraud. A control system,  no matter how
well  conceived  and  operated,  can  provide  only  reasonable,  not  absolute,
assurance that the objectives of the control system are met. Further, the design
of a control  system must reflect the fact that there are resource  constraints,
and the benefits of controls must be considered relative to their costs.

Because of the inherent  limitations  in all control  systems,  no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making  can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally,  controls
can be circumvented by the individual acts of some persons,  by collusion of two
or more people,  or by  management  override of the  control.  The design of any
system of  controls  also is based in part upon  certain  assumptions  about the
likelihood of future events,  and there can be no assurance that any design will
succeed in achieving  its stated goals under all  potential  future  conditions;
over time,  control may become inadequate  because of changes in conditions,  or
the degree of  compliance  with the  policies  or  procedures  may  deteriorate.
Because  of  the  inherent  limitations  in  a  cost-effective  control  system,
misstatements due to error or fraud may occur and not be detected.


                                       30
<PAGE>

PART II.  OTHER INFORMATION

ITEM 6.  EXHIBITS

         Exhibit
         Number     Description
         --------   -----------

         10.1       Amendment No.3 to Employment Agreement,
                    dated January 1, 2001, by and between
                    The Berkshire Bank and David Lukens. +

         31         Certification of Principal Executive
                    and Financial Officer pursuant to
                    Section 302 Of The Sarbanes-Oxley Act
                    of 2002.

         32         Certification of Principal Executive
                    and Financial Officer pursuant to
                    Section 906 Of The Sarbanes-Oxley Act
                    of 2002.


                                       31
<PAGE>

                                   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 BANCORP INC.
                                              ----------------------
                                                   (REGISTRANT)



Date:   May 12, 2008                    By:   /s/ Steven Rosenberg
       ------------------                     -----------------------
                                              STEVEN ROSENBERG
                                              PRESIDENT AND CHIEF
                                              FINANCIAL OFFICER


                                       32
<PAGE>

                                  EXHIBIT INDEX

Exhibit
Number     Description
------     -----------

10.1       Amendment No.3 to Employment Agreement,
           dated January 1, 2001, by and between
           The Berkshire Bank and David Lukens. +

31         Certification of Principal Executive
           and Financial Officer pursuant to
           Section 302 Of The Sarbanes-Oxley Act
           of 2002.

32         Certification of Principal Executive
           and Financial Officer pursuant to
           Section 906 Of The Sarbanes-Oxley Act
           of 2002.

--------------------
+ Denotes a management compensation plan or arrangement.


                                       33