<PAGE>



                                  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   JUNE 30, 2000
                                ---------------

                                       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)

<TABLE>
<S>                                                <C>
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)
</TABLE>


Registrant's telephone number, including area code: (212) 791-5362
                                                    --------------

                                       N/A
                  -------------------------------------------
                  (Former name 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
                                               -----     -----

     As of August 10, 2000, there were 2,134,044 outstanding shares of the
issuers Common Stock, $.10 par value.







<PAGE>



                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES

                           FORWARD-LOOKING STATEMENTS

     Berkshire Bancorp Inc. (the "Company") may from time to time make
"forward-looking statements," including statements contained in the Company's
filings with the Securities and Exchange Commission (including its Annual Report
on Form 10-K and the Exhibits thereto), in its reports to shareholders and in
other communications by the Company, which are made in good faith by the
Company, pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.

     These forward-looking statements include statements with respect to the
Company's vision, mission, strategies, goals, beliefs, plans, objectives,
expectations, anticipations, estimates, intentions, financial condition, results
of operations, future performance and business of the Company, including: (i)
statements relating to the Company's expectations and goals with respect to (a)
growth in earnings per share; (b) return on assets; (c) return on equity; (d)
efficiency ratio; (e) tier 1 leverage ratio; (f) annualized net charge-offs and
other asset quality measures; (g) fee income as a percentage of total revenue;
(h) tangible equity to assets; (i) book value and tangible book value per share;
and (j) deposit and loan portfolio compositions, and (ii) statements preceded
by, followed by or that include words like "may", "will", "expect", "estimate",
"anticipate", "continue" or similar terms and reflect the Company's current
analysis of existing trends. Actual results could differ materially from those
expressed or implied due to: major changes in business conditions and the
economy, or the development of an adverse interest rate environment that
adversely affects the interest rate spread or other income anticipated from the
Company's operations and investments, loss of key senior management, major
disruptions in the operations of the Company's banking facilities, new
competitors or technologies, acquisition integration costs, dilution to earnings
per share from stock issuance or acquisitions, regulatory issues, litigation
costs, and other items discussed throughout this Quarterly Report on Form 10-Q.

     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.

     A wide variety of factors could cause the Company's actual results and
experiences to differ materially from the anticipated results or other
expectations expressed or implied in 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; and (v)
changes in consumer preferences.

     For these reasons, the Company cautions readers not to place undue reliance
upon any forward-looking statements. Forward-looking statements speak only as of
the date made and the Company assumes no obligation to update or revise any such
statements, whether written or oral, upon any change in applicable
circumstances.


                                      -2-







<PAGE>



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

                                      INDEX

<TABLE>
<CAPTION>
                                                                    PAGE NO.
                                                                    --------
<S>                                                                <C>
   PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

          Consolidated Balance Sheets as of
          June 30, 2000 and December 31, 1999                          4

          Consolidated Statements of Income
          For The Three and Six Months Ended
          June 30, 2000 and 1999                                       5

          Consolidated Statements of Cash Flows
          For The Six Months Ended
          June 30, 2000 and 1999                                       6

          Notes to Consolidated Financial Statements                   7

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

   PART II  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                             24

Signature                                                             25

Index of Exhibits                                                     26


                                      -3-






<PAGE>


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

</TABLE>
<TABLE>
<CAPTION>
                                                                  JUNE 30,      DECEMBER 31,
                                                                    2000            1999
                                                            --------------------------------
<S>                                                                <C>             <C>
ASSETS
Cash and due from banks                                            $  1,633       $  2,545
Interest bearing deposits                                            12,266          3,834
Federal funds sold                                                    3,250         13,500
                                                                   --------       --------
Total cash and cash equivalents                                      17,149         19,879
Investment Securities:
 Available-for-sale                                                  97,276         84,498
 Held-to-maturity                                                       927          4,999
                                                                   --------       --------
Total investment securities                                          98,203         89,497
Loans, net of unearned income                                        72,550         65,591
 Less: allowance for loan losses                                     (1,031)          (923)
                                                                   --------       --------
Net loans                                                            71,519         64,668
Accrued interest receivable                                           1,683          1,614
Premises and equipment, net                                             330            370
Prepaid expenses and other                                            2,901          4,029
Goodwill, net of amortization of
 $1,048 in 2000 and $730 in 1999                                     11,860         12,073
                                                                   --------       --------
Total assets                                                       $203,645       $192,130
                                                                   ========       ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
 Non-interest bearing                                              $ 14,545       $ 15,549
 Interest bearing                                                    80,700         88,538
                                                                   --------       --------
Total deposits                                                       95,245        104,087
Securities sold under agreements to repurchase                       21,075             --
Long term borrowings                                                  1,500          1,500
Accrued interest payable                                                342            161
Accrued other liabilities                                             1,788          1,569
Income taxes payable                                                  1,775          2,741
Deferred tax liability                                                  143          4,002
                                                                   --------       --------
Total liabilities                                                   121,868        114,060
                                                                   --------       --------
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 -- 2,566,095 shares
  Outstanding --
   June 30, 2000, 2,134,044 shares
   December 31, 1999, 2,127,265 shares                                  256            256
Additional paid-in capital                                           78,741         78,570
Accumulated other comprehensive
 (loss) income, net                                                  (1,438)         4,425
Retained earnings (accumulated deficit)                               6,929         (2,421)
Less: Common stock in treasury - at cost:
 June 30, 2000, 432,051 shares
 December 31, 1999, 438,830 shares                                   (2,711)        (2,760)
                                                                   --------       --------
Total stockholders' equity                                           81,777         78,070
                                                                   --------       --------
                                                                   $203,645       $192,130
                                                                   ========       ========
</TABLE>



                        SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





                                        4








<PAGE>





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

<TABLE>
<CAPTION>
                                                            FOR THE                 FOR THE
                                                      THREE MONTHS ENDED       SIX MONTHS ENDED
                                                             JUNE 30,               JUNE 30,
                                                     --------------------    ---------------------
                                                       2000        1999        2000        1999
                                                     --------    --------    --------    ---------
<S>                                                  <C>          <C>         <C>        <C>
INTEREST INCOME
Short-term interest-earning assets                   $  432       $  355      $   707    $1,534
Securities and other investments                      1,490        1,084        2,904     1,925
Loans                                                 1,614          896        3,040     1,734
                                                     ------       ------      -------    ------
Total interest income                                 3,536        2,335        6,651     5,193
                                                     ------       ------      -------    ------
INTEREST EXPENSE
Deposits                                              1,021          843        2,017     1,601
Borrowings                                              185           24          216        45
                                                     ------       ------      -------    ------
Total interest expense                                1,206          867        2,233     1,646
                                                     ------       ------      -------    ------
Net interest income                                   2,330        1,468        4,418     3,547
PROVISION FOR LOAN LOSSES                                --           10            5        25
                                                     ------       ------      -------    ------
Net interest income after
 provision for loan losses                            2,330        1,458        4,413     3,522
                                                     ------       ------      -------    ------
NON-INTEREST INCOME
Investment securities gains                              --        2,175       13,079     2,175
Other income                                            116          128          255       413
                                                     ------       ------      -------    ------
Total non-interest income                               116        2,303       13,334     2,588
                                                     ------       ------      -------    ------
NON-INTEREST EXPENSE
Salaries and employee benefits                          551          467        1,075       919
Net occupancy expense                                   109          105          217       208
Equipment expense                                        24           30           48        57
FDIC assessment                                          10           --           14         3
Data processing expense                                   5            4           10        10
Amortization of goodwill                                135          183          318       365
Other                                                   622          257          911       606
                                                     ------       ------      -------    ------
Total non-interest expense                            1,456        1,046        2,593     2,168
                                                     ------       ------      -------    ------
Income before provision for taxes                       990        2,715       15,154     3,942
Provision for income taxes                              468        1,299        5,591     1,874
                                                     ------       ------      -------    ------
Net income                                           $  522       $1,416      $ 9,563    $2,068
                                                     ======       ======      =======    ======
Net income per share:
 Basic                                               $  .24       $  .67      $  4.49    $  .97
                                                     ======       ======      =======    ======
 Diluted                                             $  .24       $  .63      $  4.36    $  .91
                                                     ======       ======      =======    ======
</TABLE>







                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






                                        5








<PAGE>





                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                               FOR THE SIX MONTHS ENDED
                                                                                       JUNE 30,
                                                                            -----------------------------
                                                                                2000           1999
                                                                               ------         ------
<S>                                                                          <C>            <C>
  Cash flows from operating activities:
Net income                                                                   $  9,563       $  2,068
Adjustments to reconcile net income to net
 cash provided by (used in) operating activities:
Gain on investment securities                                                 (13,079)        (2,175)
Depreciation and amortization and other                                           390            413
Provision for loan losses                                                           5             25
Non-cash compensation                                                             355             --
  Changes in assets and liabilities:
 (Increase) in accrued interest receivable                                        (69)          (582)
 Decrease in prepaid expenses and other                                         1,381          1,000
 Increase (decrease) in accounts payable, other accrued
  expenses, liabilities and income taxes payable                                 (566)         1,281
                                                                             --------       --------
 Net cash provided by (used in) operating activities                           (2,020)         2,030
                                                                             --------       --------
  Cash flows from investing activities:
Investment in Madison Merchant Services, Inc.                                    (285)            --
Investment in The Berkshire Bank                                                 (105)       (25,217)
Cash of entity acquired                                                            --         22,439
Proceeds from sales of investment securities                                   13,079          2,175
Investment securities available for sale
 Purchases                                                                    (49,180)       (53,739)
 Sales                                                                         30,602         28,347
Net increase in loans                                                          (6,856)        (7,315)
Acquisition of premises and equipment                                              --           (160)
                                                                             --------       --------
Net cash (used in) investing activities                                       (12,745)       (33,470)
                                                                             --------       --------
  Cash flows from financing activities:
Net (decrease) in non interest bearing deposits                                (1,004)        (5,002)
Net increase (decrease) in interest bearing deposits                           (7,838)        (1,992)
Increase in securities sold under agreements to repurchase                     21,075             --
Proceeds from exercise of common stock options                                     15             --
Dividends paid                                                                   (213)          (213)
                                                                             --------       --------
Net cash provided by (used in) financing activities                            12,035        (7,207)
                                                                             --------       --------
  Net increase (decrease) in cash                                              (2,730)       (38,647)
  Cash - beginning of period                                                   19,879         65,136
                                                                             --------       --------
  Cash - end of period                                                       $ 17,149       $ 26,489
                                                                             ========       ========
Supplemental cash flow information:
  Cash used to pay interest                                                  $  3,152       $  1,680
  Cash used to pay taxes                                                     $  5,556       $    985

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                        6







<PAGE>



                    BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999

NOTE 1. GENERAL

         In December 1998, Berkshire Bancorp Inc., a Delaware corporation (the
"Company"), received regulatory approval from the Federal Reserve Bank of New
York to become a Bank Holding Company registered under the Bank Holding Company
Act of 1956 and to acquire control of The Berkshire Bank (the "Bank"), a New
York State chartered commercial bank. (See Note 2 of Notes to Consolidated
Financial Statements). On December 10, 1999 the Board of Directors of the
Company approved a change in the Company's fiscal year from October 31 to
December 31. This change was effective December 31, 1999.

         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 and Greater American
Finance Group, Inc.

         During interim periods, the Company follows the accounting policies set
forth in its Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Readers are encouraged to refer to the Company's Form 10-K for the
fiscal year ended October 31, 1999 and the Company's Form 10-K for the
transition period from November 1, 1999 to December 31, 1999 when reviewing this
Form 10-Q. Quarterly results reported herein are not necessarily indicative of
results to be expected for other quarters.

         In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal recurring
adjustments) considered necessary to present fairly the Company's consolidated
financial position as of June 30, 2000 and December 31, 1999 and the
consolidated results of its operations for the three and six month periods ended
June 30, 2000 and 1999, and its consolidated cash flows for the six month
periods ended June 30, 2000 and 1999.

NOTE 2. -  ACQUISITIONS

         MADISON MERCHANT SERVICES, INC. On February 7, 2000, the Company
completed the acquisition of 24.9% of the issued and outstanding shares of the
common stock of Madison Merchant Services, Inc., a privately held New York State
corporation ("Madison"), for a cash purchase price of $285,000. In addition, the
Company received an option to purchase up to an additional 26.1% of the
presently outstanding shares of Madison common stock during the period from
November 1, 2001 and February 1, 2003. Madison currently provides merchant
credit card processing services for restaurants, other retail establishments and
a variety of other merchants.

         THE BERKSHIRE BANK. On January 4, 1999, the Company, through its wholly
owned subsidiary, Greater American Finance Group, Inc. ("GAFG"), purchased
2,396,600 shares, or approximately 99%, of the outstanding shares of Common
Stock (the "Shares") of the Bank, a privately-owned New York State chartered
commercial bank. The Shares were acquired for a purchase price of $10.50 per
share, net to the seller in cash, upon the terms and conditions set forth in an
Offer to Purchase dated August 6, 1998, and in the related Letter of Transmittal
(collectively, the "Offer"). The total amount of funds required by GAFG to
purchase the Shares was approximately $25.2 million. On March 31, 1999 and June
16, 2000, GAFG purchased an additional 5,000 shares and 10,000 shares,
respectively, for a cash purchase price of $10.50 per share, or approximately
$158,000. All such funds were obtained by GAFG from the Company's cash on hand.
The purchase of the Shares pursuant to the Offer was subject to receipt of the
approval of the New York State Banking Board and the approval of the Federal


                                       7





<PAGE>



                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999

NOTE 2. (CONTINUED)

Reserve Board. The acquisition was accounted for as a purchase and, accordingly,
the results of operations of the Bank have been included in the consolidated
statements of income from the date of acquisition. In connection with the
acquisition, the Company acquired assets with an aggregate fair value of
$119,429,000 and assumed deposits and other liabilities of $108,760,000.

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 JUNE 30, 2000
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                ---------------------------------------------------------------
                                                       Income                Shares               Per share
                                                     (numerator)          (denominator)            amount
                                                 -------------------   --------------------    ----------------
<S>                                                      <C>                    <C>                   <C>
Basic earnings per share
 Net income available to
  common stockholders                                     $ 522                2,134               $  .24
Effect of dilutive securities
 Options                                                    --                     1                  .--
                                                          -----                -----               ------
Diluted earnings per share
 Net income available to
  common stockholders plus
  assumed conversions                                     $ 522                2,135               $  .24
                                                          =====               ======               ======
</TABLE>

<TABLE>
<CAPTION>
                                                             FOR THE SIX MONTHS ENDED JUNE 30, 2000
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                -------------------------------------------------------------------
                                                       Income                Shares               Per share
                                                     (numerator)          (denominator)            amount
                                                 -------------------   --------------------    ----------------
<S>                                                      <C>                    <C>                   <C>
Basic earnings per share
 Net income available to
  common stockholders                                     $9,563                2,131                $ 4.49
Effect of dilutive securities
 Options                                                    --                     61                  (.13)
                                                          ------               ------                ------
Diluted earnings per share
 Net income available to
  common stockholders plus
  assumed conversions                                     $9,563                2,192                $ 4.36
                                                          ======               ======                ======
</TABLE>


                                          8








<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999

NOTE 3. (CONTINUED)

         Options to purchase 44,875 shares of common stock for $38.00 per share
were outstanding during the three and six month periods ended June 30, 2000.
These options were not included in the computation of diluted earnings per share
because the option exercise price was greater than the average market price for
the Company's common stock during this period.

<TABLE>
<CAPTION>
                                                             FOR THE THREE MONTHS ENDED JUNE 30, 1999
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                -------------------------------------------------------------------
                                                       Income                Shares               Per share
                                                     (numerator)          (denominator)            amount
                                                 -------------------   --------------------    ----------------
<S>                                                      <C>                    <C>                   <C>
Basic earnings per share
 Net income available to
  common stockholders                                    $1,416                 2,126                 $   .67
Effect of dilutive securities
 Options                                                     --                   138                    (.04)
                                                         ------                ------                 -------
Diluted earnings per share
 Net income available to
  common stockholders plus
  assumed conversions                                    $1,416                 2,264                 $   .63
                                                         ======                ======                 =======

</TABLE>




<TABLE>
<CAPTION>
                                                             FOR THE SIX MONTHS ENDED JUNE 30, 1999
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                -------------------------------------------------------------------
                                                       Income                Shares               Per share
                                                     (numerator)          (denominator)            amount
                                                 -------------------   --------------------    ----------------
<S>                                                      <C>                    <C>                   <C>
Basic earnings per share
 Net income available to
  common stockholders                                     $2,068                2,126               $   .97
Effect of dilutive securities
 Options                                                    --                    135                  (.06)
                                                          ------               ------               -------
Diluted earnings per share
 Net income available to
  common stockholders plus
  assumed conversions                                     $2,068                2,261               $   .91
                                                          ======               ======               =======
</TABLE>



                                       9










<PAGE>






                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999

NOTE 4. INVESTMENT SECURITIES

         The following tables summarize held to maturity and available-for-sale
investment securities as of June 30, 2000 and December 31, 1999:

<TABLE>
<CAPTION>


                                                                   JUNE 30, 2000
                                       ----------------------------------------------------------------------
                                                                GROSS               GROSS
                                         AMORTIZED COST       UNREALIZED         UNREALIZED            FAIR
                                                                GAINS              LOSSES             VALUE
                                         ---------------   -----------------   ----------------    ----------
                                                                     (In thousands)
<S>                                       <C>               <C>                  <C>               <C>
HELD TO MATURITY
INVESTMENT SECURITIES
U.S. Government Agencies                          $ 429                $ --              $ (2)            $ 427
Corporate notes                                     498                  --                (1)              497
                                                   ----                ----              ----             -----
 Totals                                           $ 927                $ --              $ (3)            $ 924
                                                  =====                ====              ====             =====
</TABLE>


<TABLE>
<CAPTION>


                                                                 DECEMBER 31, 1999
                                       ----------------------------------------------------------------------
                                                                GROSS               GROSS
                                         AMORTIZED COST       UNREALIZED         UNREALIZED            FAIR
                                                                GAINS              LOSSES             VALUE
                                         ---------------   -----------------   ----------------    ----------
                                                                     (In thousands)
<S>                                    <C>                  <C>                  <C>                <C>

HELD TO MATURITY
INVESTMENT SECURITIES
U.S. Government Agencies                $   522                $ --              $ --            $  522
Corporate notes                           4,477                  --                (1)            4,476
                                        -------                ----              ----            ------
 Totals                                 $ 4,999                $ --              $ (1)           $4,998
                                        =======                ====              ====            ======

</TABLE>


<TABLE>
<CAPTION>


                                                                 JUNE 30, 2000
                                     ----------------------------------------------------------------------
                                                               GROSS               GROSS
                                       AMORTIZED COST       UNREALIZED          UNREALIZED            FAIR
                                                               GAINS              LOSSES             VALUE
                                      -----------------   ----------------    ----------------   -----------
                                                                    (In thousands)
<S>                                    <C>                 <C>                  <C>               <C>

AVAILABLE-FOR-SALE INVESTMENT
SECURITIES
U.S. Treasury and U.S.
 Government Agencies                         $88,566         $  --             $(1,184)           $87,382

Mortgage-backed
 Securities                                    3,773            --                 (88)             3,685

Marketable equity
 securities and other                          6,287           364                (442)             6,209
                                            --------         -----             -------           --------
 Totals                                     $ 98,626         $ 364             $(1,714)          $ 97,276
                                            ========         =====             =======           ========


</TABLE>

                                       10









<PAGE>



                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999

NOTE 4. (CONTINUED)

<TABLE>
<CAPTION>
                                                               DECEMBER 31, 1999
                                     ----------------------------------------------------------------------
                                                                  GROSS               GROSS
                                           AMORTIZED COST      UNREALIZED          UNREALIZED          FAIR
                                                                  GAINS              LOSSES            VALUE
                                           ---------------   ----------------    ----------------   ------------
                                                                       (In thousands)
<S>                                              <C>                    <C>             <C>            <C>
AVAILABLE-FOR-SALE INVESTMENT
SECURITIES
U.S. Treasury and
 U.S. Government Agencies                        $ 65,907            $    --            $(1,161)       $ 64,746
Mortgage-backed
 securities                                         4,571                 --                (75)          4,496
Marketable equity
 securities and other                               6,060              9,745               (549)         15,256
                                                 --------            -------            -------        --------
 Totals                                          $ 76,538            $ 9,745            $(1,785)       $ 84,498
                                                 ========            =======            =======        ========
</TABLE>

COMMON STOCK OF ELOTTERY, INC. (FORMERLY EXECUTONE INFORMATION SYSTEMS, INC.)

         As more fully discussed in the Company's 1999 10-K, in December 1995,
the Company sold its minority equity interest in Unistar Gaming Corp. ("UGC") to
Elottery, Inc. (formerly Executone Information Systems, Inc., a Virginia
corporation whose common stock trades on the NASDAQ National Market System,
("Elottery") (the "Elottery Common Stock"). The Company's investment in UGC was
approximately $5.2 million.

         In exchange for its interest in UGC, the Company received shares of
Elottery Common Stock, all of which were sold in open market transactions during
1998, and shares of Elottery Series A and Series B Preferred Stock (the
"Elottery Preferred Stock"). In 1997, the Company fully reserved the carrying
value, approximately $2.1 million, of its shares of Elottery Preferred Stock and
recorded a deferred tax asset of $925,000.

         In March 1999, Elottery exercised its right to redeem and convert the
Elottery Preferred Stock into Elottery Common Stock and on April 6, 1999, in
exchange for its shares of Elottery Preferred Stock, the Company received
4,193,204 shares of Elottery Common Stock with a market value of approximately
$17.7 million.

         At June 30, 2000, the Company owned 190,000 shares of Elottery Common
Stock which have been classified as available-for-sale securities. The
unrealized gain of approximately $214,000, net of deferred taxes of
approximately $143,000 has been recorded as a component of other accumulated
comprehensive income.



                                       11









<PAGE>





                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999


NOTE 5. LOAN PORTFOLIO

         The following tables set forth information concerning the Company's
loan portfolio by type of loan at the dates indicated (dollars in thousands):

<TABLE>
<CAPTION>

                                                 JUNE 30, 2000                    DECEMBER 31, 1999
                                         ------------------------------      ----------------------------
                                                                % OF                           % OF
                                                      AMOUNT    TOTAL                AMOUNT    TOTAL
                                                      -----     -----                ------    -----
<S>                                           <C>              <C>                  <C>        <C>

Commercial and professional loans                    $ 8,972     12.4%              $ 5,358      8.2%
Secured by real estate                                63,058     86.9                57,652     87.9
Personal                                                 275      0.4                 2,345      3.6
Other                                                    245      0.3                   236      0.3
                                                     -------    -----               -------    -----
Total loans                                           72,550    100.0%               65,591    100.0%
                                                                =====                          =====
Less:
 Allowance for loan
 losses                                               (1,031)                          (923)
                                                     -------                        -------
Loans, net                                           $71,519                        $64,668
                                                     =======                        =======
</TABLE>




NOTE 6. DEPOSITS

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

<TABLE>
<CAPTION>


                                      JUNE 30, 2000               DECEMBER 31, 1999 (1)
                                  -----------------------     ----------------------------
                                    AVERAGE    AVERAGE            AVERAGE     AVERAGE
                                     AMOUNT     YIELD              AMOUNT      YIELD
                                     ------    ------              ------      -----
                                                   (Dollars in thousands)
<S>                                  <C>       <C>               <C>          <C>

Demand deposits                     $ 15,763      --              $ 17,485        --
NOW and money market                  53,826    4.17%               48,515      3.19%
Savings deposits                       4,629    3.31                 4,721      2.58
Time deposits                         30,109    5.39                21,714      5.55
                                    --------    ----              --------      ----
Total deposits                      $104,327    3.85%             $ 92,435      3.11%
                                    ========    ====              ========      ====
</TABLE>


(1)  Interest expense was annualized to calculate average yield for
     the two months ended December 31, 1999.

                                       12









<PAGE>


                     BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999


NOTE 7. COMPREHENSIVE INCOME

         The following table presents the components of comprehensive income,
based on the provisions of SFAS No. 130.:

<TABLE>
<CAPTION>
                                                              FOR THE SIX MONTHS ENDED
                                                                   JUNE 30, 2000
                                                -----------------------------------------------------
                                                                           Tax
                                                    Before tax          (expense)         Net of tax
                                                      amount             benefit            Amount
                                                 -----------------    ---------------   --------------
<S>                                             <C>                  <C>                <C>
                                                                     (In thousands)
Unrealized gains on investment securities:
  Unrealized holding losses
   arising during period                                $(15,476)           $6,191          $ (9,285)
  Less reclassification
   adjustment for gains
   realized in net income                                 13,079            (5,232)            7,847
                                                        --------            ------          --------
Other comprehensive
   loss, net                                            $ (2,397)           $  959          $ (1,438)
                                                        ========            ======          ========

</TABLE>

<TABLE>
<CAPTION>

                                                              FOR THE SIX MONTHS ENDED
                                                                   JUNE 30, 1999
                                                -----------------------------------------------------
                                                                         Tax
                                                   Before tax         (expense)         Net of tax
                                                     amount            benefit            Amount
                                                 ---------------    ---------------   ----------------
                                                                    (In thousands)

<S>                                            <C>                 <C>                 <C>
Unrealized gains on investment securities:
  Unrealized holding gains
   arising during period                             $ 16,783          $ (6,713)           $ 10,070
Less reclassification
 adjustment for gains
 realized in net income                                 2,175               870               1,305
                                                     --------          --------            --------
Other comprehensive
 income, net                                         $ 14,608          $ (5,843)           $  8,765
                                                     ========          ========            ========

</TABLE>

                                       13









<PAGE>


                    BERKSHIRE BANCORP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2000 AND 1999

NOTE 8. SUBSEQUENT EVENTS

         The Company is a party to a tax sharing agreement, as amended, (the
"Tax Sharing Agreement") with The Cooper Companies, Inc. ("TCC") and Cooper
Development Company ("CDC") related to the Cooper Labs, Inc. ("CLI") liquidation
on June 27, 1985. The above companies have agreed that: (i) in the event that
the amount of tax liability, including interest and penalties, shall be
ultimately determined to be greater or less than $10,000,000, then such excess
or deficiency shall be shared 50%, 25%, and 25% by TCC, CDC, and the Company,
respectively, and (ii) they are jointly and severally liable. TCC is
coordinating the defenses for these tax examinations. Since 1985, the Company
has adjusted its accrual for interest charges related to potential assessments.

         On July 18, 2000, the Company was notified that all remaining issues
covered by the Tax Sharing Agreement have been resolved. Based upon the
information available, the Company believes that the amounts reserved for these
matters will be sufficient.



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. and subsidiaries (the "Company"). References to the
Company herein shall be deemed to refer to the Company and its consolidated
subsidiaries unless the context otherwise requires. References to Notes herein
are references to the "Notes to Consolidated Financial Statements" of the
Company located in Item 1 herein.

         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. Average balances, are daily average balances except for the
parent company which have been calculated on a monthly basis.



                                       14








<PAGE>




<TABLE>
<CAPTION>
                                                                    FOR THE THREE MONTHS ENDED JUNE 30,
                                            -------------------------------------------------------------------------------------
                                                             2000                                        1999
                                            ----------------------------------------   ------------------------------------------
                                                          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>
INTEREST-EARNING ASSETS:
Loans (1)                                   $ 68,515      $  1,614             9.42%   $ 44,768      $    896          8.01%
Investment securities                         89,354         1,490             6.67      76,499         1,084          5.67
Other (2)(5)                                  29,841           432             5.79      30,699           355          4.62
                                            -----------   -----------   ------------   -----------   -----------   --------------
Total interest-earning assets                187,710         3,536             7.54     151,966         2,335          6.15
                                                                        ------------                               --------------
Noninterest-earning assets                    18,631                                     66,988
                                            -----------                                -----------
Total Assets                                 206,341                                    218,954
                                            ===========                                ===========

INTEREST-BEARING LIABILITIES:
Interest bearing deposits                     63,110           610             3.87%     57,537           460          3.20%
Time deposits                                 29,480           411             5.59      28,581           384          5.37
Other borrowings                              12,916           185             5.70       1,555            23          5.92
                                            -----------   -----------   ------------   -----------   -----------   --------------
Total interest-bearing
 liabilities                                 105,506         1,206             4.57      87,673           867          3.96
                                                          -----------   ------------                 -----------   --------------

Demand deposits                               15,329                                     13,755
Noninterest-bearing liabilities                5,480                                     12,305
Stockholders' equity (5)                      80,026                                    105,221
                                            -----------                                -----------

Total liabilities and
 stockholders' equity                        206,341                                    218,954
                                            ===========                                ===========

Net interest income                                          2,330                                      1,468
                                                          ===========                                ===========

Interest-rate spread (3)                                                       2.97                                    2.19
                                                                        ============                               ==============

Net interest margin (4)                                                        4.97%                                   3.86%
                                                                        ============                               ==============

Ratio of average interest-earning
 assets to average interest
 bearing liabilities                            1.78                                       1.73
                                            ===========                                ===========
</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.



                                       15








<PAGE>





<TABLE>
<CAPTION>
                                                                     FOR THE SIX MONTHS ENDED JUNE 30,
                                            -------------------------------------------------------------------------------------
                                                             2000                                        1999
                                            ----------------------------------------   ------------------------------------------
                                                          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>
INTEREST-EARNING ASSETS:
Loans (1)                                   $ 67,243      $  3,040             9.04%   $ 42,750      $  1,734          8.11%
Investment securities                         84,841         2,904             6.85      67,183         1,925          5.73
Other (2)(5)                                  32,285           707             4.38      33,434         1,534          9.17
                                            -----------   -----------   ------------   -----------   -----------   --------------
Total interest-earning assets                184,369         6,651             7.21     143,367         5,193          7.24
                                                                        ------------                               --------------
Noninterest-earning assets                    18,770                                     55,681
                                            -----------                                -----------
Total Assets                                 203,139                                    199,048
                                            ===========                                ===========

INTEREST-BEARING LIABILITIES:
Interest bearing deposits                     61,967         1,205             3.89%     55,254           867          3.14%
Time deposits                                 30,109           812             5.39      20,361           734          7.21
Other borrowings                               7,531           216             5.74       1,519            45          5.92
                                            -----------   -----------   ------------   -----------   -----------   --------------
Total interest-bearing
 liabilities                                  99,607         2,233             4.48      77,134         1,646          4.27
                                                          -----------   ------------                 -----------   --------------

Demand deposits                               15,763                                     16,744
Noninterest-bearing liabilities                7,661                                      6,704
Stockholders' equity (5)                      80,108                                     98,466
                                            -----------                                -----------

Total liabilities and
 stockholders' equity                        203,139                                    199,048
                                            ===========                                ===========

Net interest income                                          4,418                                      3,547
                                                          ===========                                ===========

Interest-rate spread (3)                                                       2.73                                    2.97
                                                                        ============                               ==============

Net interest margin (4)                                                        4.79%                                   4.95%
                                                                        ============                               ==============

Ratio of average interest-earning
 assets to average interest
 bearing liabilities                            1.85                                       1.86
                                            ===========                                ===========
</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.


                                       16






<PAGE>


RESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED
TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1999.

GENERAL

         On January 4, 1999, the Company, through its wholly owned subsidiary,
Greater American Finance Group, Inc. ("GAFG"), acquired approximately 99% of the
outstanding shares of the common stock of The Berkshire Bank (the "Berkshire
Bank" or the "Bank") for $25.2 million (see Note 2). At the date of the
acquisition, the Bank had total assets of $119.4 million. The acquisition was
accounted for as a purchase and, accordingly, the results of operations for the
three and six months ended June 30, 2000 and 1999 include operations of the
Berkshire Bank.

NET INCOME. Net income for the three-month period ended June 30, 2000 was
$522,000, or $.24 per diluted share, as compared to $1.42 million, or $.63 per
diluted share, for the three-month period ended June 30, 1999. Net income in the
1999 period was favorably impacted by the pretax gain of $2.17 million on sales
of the common stock of Elottery, Inc. (see Note 4). Net income for the six-month
period ended June 30, 2000 was $9.56 million, or $4.36 per diluted share, as
compared to $2.07 million, or $.91 per diluted share, in the same period in
1999. Net income in the 2000 period was favorably impacted by the pretax gain of
$13.08 million on sales of the common stock of Elottery, Inc.

NET INTEREST INCOME. The Company's primary source of revenue is net interest
income, or the difference between interest income on earning assets and interest
expense on interest-bearing liabilities. Net interest income for the quarter
ended June 30, 2000 increased by $862,000, or 58.7%, to $2.33 million from $1.47
million for the quarter ended June 30, 1999. Net interest income for the six
months ended June 30, 2000 increased by $871,000, or 24.6%, to $4.42 million
from $3.55 million for the six months ended June 30, 1999.

INTEREST INCOME. Interest income for the quarter ended June 30, 2000 increased
by $1.20 million, or 51.4%, to $3.54 million from $2.34 million for the quarter
ended June 30, 1999. Interest income for the six months ended June 30, 2000
increased by $1.46 million, or 28.1%, to $6.65 million from $5.19 million for
the six month ended June 30, 1999.

INTEREST EXPENSE. Interest expense for the quarter ended June 30, 2000 increased
by $339,000, or 39.1%, to $1.21 million from $867,000 for the quarter ended June
30, 1999. Interest expense for the six months ended June 30, 2000 increased by
$587,000, or 35.7%, to $2.23 million from $1.65 million for the six months ended
June 30, 1999.

NET INTEREST MARGIN. Net interest margin, or annualized net interest income as a
percentage of average interest-earning assets, improved to 4.97% for the quarter
ended June 30, 2000 from 3.86% for the quarter ended June 30, 1999. Net interest
margin declined to 4.79% for the six months ended June 30, 2000 from 4.95% for
the six months ended June 30, 1999.

AVERAGE BALANCES, YIELDS AND RATES. Average interest-earning assets totaled
$187.7 million and $184.4 for the three and six months ended June 30, 2000,
respectively, compared to $151.9 million and $143.4 million, respectively, for
the same periods in 1999. The increase in average interest-earning assets in
2000 is due primarily to the increase in the average balances of loans to $67.2
million from $42.8 million in 1999, and the increase in the average balances of
investment securities to $84.8 million from $67.2 million in 1999.


                                       17







<PAGE>




The average yield on earning assets was 7.54% and 7.21% for the second quarter
and six months of fiscal 2000, respectively, as compared to 6.15% and 7.24%,
respectively, for the same periods in fiscal 1999.

Average interest-bearing liabilities increased to $105.5 million and $99.6
million for the second quarter and six months of fiscal 2000, respectively, from
$87.7 million and $77.1 million, respectively, for the same periods in 1999.
Average yields on interest-bearing liabilities increased to 4.57% and 4.48% for
the second quarter and six months of fiscal 2000, respectively, from 3.96% and
4.27%, respectively, for the same periods in 1999.

NON-INTEREST INCOME. Non-interest income consists primarily of realized gains on
sales of marketable securities and service fee income. For the three and six
months ended June 30, 2000, service fee income was $116,000 and $255,000,
respectively, as compared to $128,000 and $413,000, respectively, for the same
periods in 1999. Realized gains on sales of marketable securities were $13.08
for the first six months of fiscal 2000 as compared to $2.2 million in 1999.

NON-INTEREST EXPENSE. Non-interest expense includes salaries and employee
benefits, occupancy and equipment expenses, legal and professional fees,
amortization of goodwill and other operating expenses associated with the
day-to-day operations of the Company. Total non-interest expense for the
three-month period ended June 30, 2000 was $1.46 million, of which $355,000 was
a non-cash compensation charge in connection with the exercise of stock options,
and $2.6 million for the six months of 2000. For the three and six months ended
June 30, 1999, non-interest expense was $1.05 million and $2.17 million,
respectively.

PROVISION FOR INCOME TAX. The Company recorded income tax expense of $468,000
and $5.6 million, respectively, for the three and six months of fiscal 2000,
compared to $1.3 million and $1.9 million, respectively, for the same periods in
fiscal 1999. The tax provisions for federal, state and local taxes recorded for
the six months of fiscal 2000 and 1999 represent effective tax rates of 36.9%
and 47.5%, respectively. Effective tax rates are attributable to the level of
net income adjusted for certain tax-preference items.

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 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 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.



                                       18







<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 JUNE 30, 2000
                                                       (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                         $   3,250          $      --          $      --          $      --          $    3,250
                                 (Rate)         5.87%                --                 --                 --                5.87%
                                           ---------          ---------          ---------          ---------          ----------
Interest bearing deposits                     12,266                 --                 --                 --              12,266
 in banks                        (Rate)         5.96%                --                 --                 --                5.96%
                                           ---------          ---------          ---------          ---------          ----------
Loans (1)(2)
Adjustable rate loans                         27,832              9,952              4,013              6,232              48,029
                                 (Rate)        10.90%              8.69%              8.91%              8.87%
Fixed rate loans                                  --                598              1,800             22,123              24,521
                                 (Rate)           --%              7.79%              8.53%              8.24%               8.25%
                                           ---------          ---------          ---------          ---------          ----------
Total loans                                   27,832             10,550              5,813             28,355              72,550
Investments (3)(4)                             6,445             25,097             36,605             29,218              97,365
                                 (Rate)         5.47%              6.37%              6.18%              6.16%               6.11%
                                           ---------          ---------          ---------          ---------          ----------
Total rate-sensitive assets                   49,793             35,647             42,418             57,573             185,431
                                           ---------          ---------          ---------          ---------          ----------

Deposit accounts (5)
Savings and NOW                               10,301                 --                 --                 --              10,301
                                 (Rate)         1.78%                                                                        1.78%
Money market                                  34,663                 --                 --                 --              34,663
                                 (Rate)         4.92%                --                 --                 --                4.92%
Time Deposits                                 19,609             14,404              1,723                 --              35,736
                                 (Rate)         5.30%              6.34%              6.70%              0.00%               5.70%
                                           ---------          ---------          ---------          ---------          ----------
Total deposit accounts                        64,573             14,404              1,723                 --              80,700
Repurchase agreements                         21,075                 --                 --                 --              21,075
                                 (Rate)         5.92%                --                 --                 --                5.92%
Other borrowings                                  --                 --                500              1,000               1,500
                                 (Rate)           --                 --               6.04%              5.90%               5.95%
                                           ---------          ---------          ---------          ---------          ----------
Total rate-sensitive liabilities              85,648             14,404              2,223              1,000             103,275
                                           ---------          ---------          ---------          ---------          ----------
Gap (repricing differences)                  (35,855)            21,243             40,195             56,573              82,156
                                           =========          =========          =========          =========          ==========
Cumulative Gap                               (35,855)           (14,612)            25,583             82,156
                                           =========          =========          =========          =========
Cumulative Gap to Total Rate
Sensitive Assets                              (19.33)%            (7.88)%            13.80%             44.32%
                                           =========          =========          =========          =========
</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
         amongst maturity/repricing periods based upon The Berkshire Bank's
         historical experience. All other time accounts are scheduled according
         to their respective maturity dates.



                                       19







<PAGE>



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

<TABLE>
<CAPTION>

                                                                THREE MONTHS ENDED JUNE 30,
                                                               -----------------------------
                                                                  2000             1999
                                                                  ----             ----
<S>                                                             <C>             <C>
Average loans outstanding                                       $ 68,515        $ 44,768
                                                                ========        ========
Allowance at beginning of period                                   1,018             848
Charge-offs:
 Commercial and other loans                                           --              --
 Real estate loans                                                    --              --
                                                                --------        --------
  Total loans charged-off                                             --              --
                                                                --------        --------
Recoveries:
 Commercial and other loans                                           13              16
 Real estate loans                                                    --              --
                                                                --------        --------
  Total loans recovered                                               13              16
                                                                --------        --------
  Net (charge-offs) recoveries                                        13              16
                                                                --------        --------
Provision for loan losses
 charged to operating expenses                                        --              10
                                                                --------        --------

Allowance at end of period                                         1,031             874
                                                                --------        --------
Ratio of net recoveries (charge-offs)
 to average loans outstanding                                        .02%            .04%
                                                                ========        ========
Allowance as a percent of total loans                               1.42%           1.85%
                                                                ========        ========
Total loans at end of period                                    $ 72,550        $ 47,235
                                                                ========        ========
</TABLE>


                                       20







<PAGE>


<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED JUNE 30,
                                                                --------------------------
                                                                  2000             1999
                                                                  ----             ----
<S>                                                             <C>             <C>
Average loans outstanding                                       $ 67,243        $ 42,750
                                                                ========        ========
Allowance at beginning of period                                     923             791
Charge-offs:
 Commercial and other loans                                           --               5
 Real estate loans                                                    --              --
                                                                --------        --------
  Total loans charged-off                                             --               5
                                                                --------        --------
Recoveries:
 Commercial and other loans                                          103              63
 Real estate loans                                                    --              --
                                                                --------        --------
  Total loans recovered                                              103              63
                                                                --------        --------
  Net (charge-offs) recoveries                                       103              58
                                                                --------        --------
Provision for loan losses
 charged to operating expenses                                         5              25
                                                                --------        --------

Allowance at end of period                                         1,031             874
                                                                --------        --------
Ratio of net recoveries (charge-offs)
 to average loans outstanding                                        .15%            .14%
                                                                ========        ========

Allowance as a percent of total loans                               1.42%           1.85%
                                                                ========        ========
Total loans at end of period                                    $ 72,550        $ 47,235
                                                                ========        ========
</TABLE>

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 June 30, 2000, the Company had total loans of $72.6 million and an
allowance for loan losses of approximately $1.03 million. From time to time, the
Bank may originate residential mortgage loans and then sell them on the
secondary market, normally recognizing fee income in connection with the sale.

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

<TABLE>
<CAPTION>
                                                           JUNE 30,             DECEMBER 31,
                                                             2000                   1999
                                                      -------------------    -------------------
                                                           AMOUNT                 AMOUNT
                                                           ------                 ------
                                                                   (in thousands)
<S>                                                       <C>                     <C>
Commercial and professional loans                        $  8,972               $  5,358
Secured by real estate                                     63,058                 57,652
Personal                                                      275                  2,345
Other                                                         245                    236
                                                         --------               --------
Total loans                                                72,550                 65,591
Less:
 Allowance for loan losses                                 (1,031)                  (923)
                                                         --------               --------
Loans, net                                               $ 71,519               $ 64,668
                                                         ========               ========
</TABLE>

                                       21







<PAGE>



         It is the Bank's policy to discontinue accruing interest on a loan when
it is 90 days past due or if management believes that continued interest
accruals are unjustified. The Bank may continue interest accruals if a loan is
more than 90 days past due if the Bank determines that the nature of the
delinquency and the collateral are such that collection of the principal and
interest on the loan in full is reasonably assured. When the accrual of interest
is discontinued, all accrued but unpaid interest is charged against current
period income. Once the accrual of interest is discontinued, the Bank records
interest as and when received until the loan is restored to accruing status. If
the Bank determines that collection of the loan in full is in reasonable doubt,
then amounts received are recorded as a reduction of principal until the loan is
returned to accruing status.

         At June 30, 2000 and 1999, the Company did not have any non accrual or
non performing loans. Loans past due more than 90 days and still accruing
interest amounted to $0 and $0 at June 30, 2000 and 1999, respectively.

         Quantitative measures established by regulation to ensure capital
adequacy require the Company and The Berkshire Bank to maintain minimum amounts
and ratios of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and Tier I capital (as defined) to average
assets (as defined). As of June 30, 2000, the most recent notification from the
FDIC categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
maintain certain Total risk-based, Tier I risk-based, and Tier I leverage
ratios. There are no conditions or events since the notification that management
believes have changed the Bank's category.

          The following tables set forth the actual and required regulatory
capital amounts and ratios of the Company and The Berkshire Bank as of June 30,
2000 and December 31, 1999 (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>
JUNE 30, 2000
Total Capital (to Risk-Weighted Assets)
  Company                                              71,920     70.5%         8,157   >8.0%           --      N/A
                                                                                        -
  Bank                                                 15,528     17.6%         7,050   >8.0%        8,112     >10.0%
                                                                                        -                      -
Tier I Capital (to Risk-Weighted Assets)
  Company                                              71,355     69.7%         4,078   >4.0%           --      N/A
                                                                                        -
  Bank                                                 14,497     16.4%         3,245   >4.0%        4,867      >6.0%
                                                                                        -                       -
Tier I Capital (to Average Assets)
  Company                                              71,355     40.2%         7,094   >4.0%           --      N/A
                                                                                        -
  Bank                                                 14,497      8.7%         6,693   >4.0%        8,367      >5.0%
                                                                                        -                       -
</TABLE>

                                       22







<PAGE>




<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>
DECEMBER 31, 1999
Total Capital (to Risk-Weighted Assets)
  Company                                              60,336     59.8%        8,072     >8.0%           --       N/A
                                                                                         -
  Bank                                                 13,745     16.5%        6,668     >8.0%        8,335    >10.0%
                                                                                         -                     -
Tier I Capital (to Risk-Weighted Assets)
  Company                                              59,413     58.9%        4,036     >4.0%           --       N/A
                                                                                         -
  Bank                                                 12,822     15.4%        3,334     >4.0%        5,001     >6.0%
                                                                                         -                      -
Tier I Capital (to Average Assets)
  Company                                              59,413     33.7%        7,019     >4.0%           --       N/A
                                                                                         -
  Bank                                                 12,822      8.8%        5,842     >4.0%        7,302      >5.0%
                                                                                         -                       -

</TABLE>

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 Berkshire Bank have historically been met by deposits, investments
in federal funds sold, principal and interest payments on loans, and maturities
of investment securities.

         For the parent company, Berkshire Bancorp Inc. ("Berkshire"), liquidity
means having cash available to fund operating expenses and to pay shareholder
dividends, when and if declared by Berkshire's Board of Directors. The ability
of Berkshire to fund its operations and to pay dividends is not dependent upon
the receipt of dividends from The Berkshire Bank. At June 30, 2000, Berkshire
had cash of $44.1 million and marketable securities of $4.3 million.

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.

IMPACT OF THE YEAR 2000 ("Y2K")

         In 1999, the Bank completed an in-depth compliance program to minimize
the effect of potential Y2K issues. To date, the Bank has experienced no
difficulties related to Y2K.




                                       23









<PAGE>


PART II.  OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a.     Exhibits

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

       27             Financial Data Schedule.

b.     There were no reports on Form 8-K filed by the Company during the quarter
for which this report on Form 10-Q is filed.



                                       24







<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:  August 11, 2000              By:      /s/ Steven Rosenberg
       ---------------                      ---------------------
                                                 STEVEN ROSENBERG
                                                 PRESIDENT AND CHIEF
                                                 FINANCIAL OFFICER



                                       25







<PAGE>



                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit                                                       Sequential
Number           Description                                  Page Number
------           -----------                                  -----------
<S>              <C>                                           <C>
27               Financial Data Schedule                           22
</TABLE>


                                   26


                            STATEMENT OF DIFFERENCES

         The greater-than or equal-to sign shall be expressed as .............>
                                                                              -