SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended        September 30, 2007
                              --------------------------------------------------

                                       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 0-24751

                            Salisbury Bancorp, Inc.
-------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

         Connecticut                                      06-1514263
-------------------------------             ------------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

 5 Bissell Street Lakeville Connecticut                     06039
-------------------------------------------------------------------------------
(Address of principal executive offices)                  (Zip Code)

Registrants Telephone Number, Including Area Code   (860) 435-9801
                                                   ----------------


              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)


Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing  requirements  for the past 90 days.  Yes [X]  No [_]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer or a  non-accelerated  filer. (See definition of "accelerated
filer and large  accelerated  Filer" in Rule 12b-2 of the Exchange Act).  (Check
one):

Large Accelerated Filer [_]    Accelerated Filer [_]   Non-Accelerated Filer [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                              Yes [_]        No [X]


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

  Indicate the number of shares outstanding of each of the issuer's classes of
                common stock, as of the latest practicable date:

       As of November 13, 2007, there were 1,685,021 shares outstanding.

<page>

                     SALISBURY BANCORP, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS



Part I. FINANCIAL INFORMATION                                               Page


Item 1.  Financial Statements:                                                 3

         Condensed Consolidated Balance Sheets - September 30, 2007
              (unaudited) and December 31, 2006                                4

         Condensed Consolidated Statements of Income - nine and three
              months ended September 30, 2007 and 2006 (unaudited)             5

         Condensed Consolidated Statements of Cash Flows -
              nine months ended September 30, 2007 and 2006 (unaudited)        6

         Notes to  Condensed Consolidated Financial Statements (unaudited)     8

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                            10

Item 3.  Quantitative and Qualitative Disclosures about Market Risk           19

Item 4.  Controls and Procedures                                              19


Part II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                    20

Item 1A. Risk Factors                                                         20

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds          20

Item 3.  Defaults Upon Senior Securities                                      20

Item 4.  Submission of Matters to a Vote of Security Holders                  20

Item 5.  Other Information                                                    20

Item 6.  Exhibits                                                             20

Signatures                                                                    20


                                       2
<page>



                         Part I-- FINANCIAL INFORMATION
                          Item 1. Financial Statements




                                       3
<page>
<table>
<caption>

                                    SALISBURY BANCORP, INC. AND SUBSIDIARY
                                    --------------------------------------

                                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                    -------------------------------------
                                (amounts in thousands, except per share data)
                                   September 30, 2007 and December 31, 2006
                                   ----------------------------------------



                                                                                September 30,     December 31,
                                                                                    2007             2006
                                                                                    ----             ----
                                                                                 (unaudited)

                                                                                       <c>             <c>
ASSETS
Cash and due from banks                                                          $      6,922    $      8,988
Interest bearing demand deposits with other banks                                         149             569
Money market mutual funds                                                               1,322           1,200
Federal funds sold                                                                        547           1,000
                                                                                 ------------    ------------
           Cash and cash equivalents                                                    8,940          11,757
Investments in available-for-sale securities (at fair value)                          153,234         156,493
Investments in held-to-maturity securities (fair values of $72 as of
   September 30, 2007 and $75 as of December 31, 2006)                                     72              75
Federal Home Loan Bank stock, at cost                                                   5,159           4,664
Loans held-for-sale                                                                       115             304
Loans, less allowance for loan losses of $2,455 as of September 30, 2007
   and $2,474 as of December 31, 2006                                                 262,195         252,464
Investment in real estate                                                                  75              75
Premises and equipment                                                                  6,875           6,135
Goodwill                                                                                9,825           9,509
Core deposit intangible                                                                 1,370           1,493
Accrued interest receivable                                                             2,586           2,484
Cash surrender value of life insurance policies                                         3,646           3,555
Other assets                                                                            2,394           1,331
                                                                                 ------------    ------------
          Total assets                                                           $    456,486    $    450,339
                                                                                 ============    ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
   Noninterest-bearing
   Interest-bearing                                                              $     65,669    $     70,502
          Total deposits                                                              247,419         243,084
                                                                                 ------------    ------------
Due to broker                                                                         313,088         313,586
Federal Home Loan Bank advances                                                             0           1,580
Other liabilities                                                                      95,143          87,093
          Total liabilities                                                             4,215           3,731
                                                                                 ------------    ------------
Shareholders' equity:                                                                 412,446         405,990
                                                                                 ------------    ------------
   Common stock, par value $.10 per share; authorized 3,000,000 shares; issued
     and  outstanding, 1,685,021 shares at September 30,2007 and 1,683,341
     shares at December 31, 2006                                                          169             168
Paid-in capital                                                                        13,130          13,100
Retained earnings                                                                      35,038          33,603
Accumulated other comprehensive loss                                                   (4,297)         (2,522)
                                                                                 ------------    ------------
          Total shareholders' equity                                                   44,040          44,349
                                                                                 ------------    ------------
          Total liabilities and shareholders' equity                             $    456,486    $    450,339
                                                                                 ============    ============


           The accompanying notes are an integral part of these consolidated financial statements.



                                                      4
</table>
<page>
<table>
<caption>

                                 SALISBURY BANCORP, INC. AND SUBSIDIARY
                                 --------------------------------------

                              CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                              -------------------------------------------

                             (amounts in thousands, except per share data)
                                      September 30, 2007 and 2006
                                              (unaudited)

                                                                 Nine Months Ended   Three Months Ended
                                                                    September 30,      September 30,
                                                                   2007      2006      2007      2006
                                                                 -------   -------   -------   -------

                                                                  <c>       <c>        <c>       <c>
Interest and dividend income:                                    $13,273   $11,471   $ 4,537   $ 3,999
  Interest and fees on loans
Interest on debt securities:                                       4,094     3,967     1,337     1,405
    Taxable                                                        1,745     1,652       634       595
    Tax-exempt                                                       241       211        82        81
Dividends on equity securities                                        46        60        12        31
                                                                 -------   -------   -------   -------
Other interest
          Total interest and dividend income                      19,399    17,361     6,602     6,111
                                                                 -------   -------   -------   -------
Interest expense:
  Interest on deposits                                             6,109     4,843     2,087     1,886
  Interest on Federal Home Loan Bank advances                      3,126     2,609     1,080       868
                                                                 -------   -------   -------   -------
          Total interest expense                                   9,235     7,452     3,167     2,754
                                                                 -------   -------   -------   -------
          Net interest and dividend income                        10,164     9,909     3,435     3,357
                                                                 -------   -------   -------   -------
Provision for loan losses                                              0         0         0         0
                                                                 -------   -------   -------   -------
          Net interest and dividend income after provision for
             loan losses                                          10,164     9,909     3,435     3,357
                                                                 -------   -------   -------   -------
Noninterest income:
  Trust department income                                          1,508     1,410       475       476
  Loan commissions                                                    22        80         9        35
  Service charges on deposit accounts                                544       527       183       168
  Gain on sales of available-for-sale securities, net                222       294        42       233
  Gain on sales of loans held-for-sale                               246       290        79        60
  Other income                                                       757       638       272       241
                                                                 -------   -------   -------   -------
          Total noninterest income                                 3,299     3,239     1,060     1,213
                                                                 -------   -------   -------   -------
Noninterest expense:
  Salaries and employee benefits                                   5,763     5,262     1,931     1,852
  Occupancy expense                                                  586       538       206       186
  Equipment expense                                                  584       586       214       205
  Data processing                                                    939       869       301       259
  Insurance                                                          121        95        47        32
  Printing and stationery                                            216       183        72        54
  Professional fees                                                  500       303       161       123
  Legal expense                                                      167        94        41        31
  Amortization of core deposit intangible                            123       123        41        41
  Other expense                                                    1,026       877       387       318
                                                                 -------   -------   -------   -------
          Total noninterest expense                               10,025     8,930     3,401     3,101
                                                                 -------   -------   -------   -------
          Income before income taxes                               3,438     4,218     1,094     1,469
Income taxes                                                         638       905       177       309
                                                                 -------   -------   -------   -------
          Net income                                             $ 2,800   $ 3,313   $   917   $ 1,160
                                                                 =======   =======   =======   =======

Earnings per common share                                        $  1.66   $  1.97   $   .54   $   .69
                                                                 -------   -------   -------   -------
Dividends per common share                                       $   .81   $   .78   $   .27   $   .26
                                                                 -------   -------   -------   -------

        The accompanying notes are an integral part of these consolidated financial statements.

                                                   5
</table>
<page>
<table>
<caption>

                                  SALISBURY BANCORP INC. AND SUBSIDIARY
                                  -------------------------------------

                             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             -----------------------------------------------
                                          (amounts in thousands)
                              Nine months ended September 30, 2007 and 2006
                                               (unaudited)
                                                                                        2007        2006
                                                                                    --------    --------

                                                                                 <c>         <c>
Cash flows from operating activities:

    Net income                                                                      $  2,800    $  3,313
Adjustments to reconcile net income to net cash provided by operating activities:
          Amortization of securities, net                                                 70          60
          Gain on sales of available-for-sale securities, net                           (222)       (294)

          Provision for loan losses                                                        0           0
          Change in loans held-for-sale                                                  189        (150)
          Change in deferred loan costs, net                                            (101)          0
          Net decrease in mortgage servicing rights                                       89          46
          Depreciation and amortization                                                  403         406
          Amortization of core deposit intangible                                        123         123
          Accretion of fair value adjustment on deposits & borrowings                    (98)       (102)
          Amortization of fair value adjustment on loans                                  59          88
          Decrease in interest receivable                                               (112)        (52)
          Deferred tax benefit                                                        (1,085)       (195)
          Decrease in taxes receivable                                                   317         256
          Decrease (increase) in prepaid expenses                                        978        (476)
          Increase in cash surrender value of insurance policies                         (91)        (90)
          Increase in income tax payable                                                 254           0
          Decrease (increase) in other assets                                             87         (74)
          Increase (decrease) in accrued expenses                                         95        (475)
          Increase in interest payable                                                   (60)        111
          Decrease in other liabilities                                                 (130)        (35)
          Issuance of shares for Directors' fees                                          30          32
          Decrease in unearned income on loans                                             4        (102)
          Cash and cash equivalents acquired from New York Community Bank
                 net of expenses paid of $115                                            181           0
                                                                                    --------    --------

Net cash provided by operating activities                                              3,780       2,390
                                                                                    --------    --------

Cash flows from investing activities
    (Purchase) redemption of Federal Home Loan Bank stock                               (495)        860
    Purchases of available-for-sale securities                                       (52,271)    (61,650)
    Proceeds from sales of available-for-sale securities                              51,371      44,268
    Proceeds from maturities of available-for-sale securities                              0       6,797
    Proceeds from maturities of held-to-maturity securities                                3          71
    Loan originations and principal collections, net                                  (6,013)    (15,207)
    Purchase of loans                                                                 (3,733)          0
    Recoveries of loans previously charged-off                                            53          43
    Capital expenditures                                                              (1,318)       (159)
                                                                                    --------    --------

Net cash used in investing activities                                                (12,403)    (24,977)
                                                                                    --------    --------

         The accompanying notes are an integral part of these consolidated financial statements.

                                                    6
</table>
<page>
<table>
<caption>

                          SALISBURY BANCORP INC. AND SUBSIDIARY

                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (amounts in thousands)
                      Nine months ended September 30, 2007 and 2006
                                       (unaudited)
                                       (continued)
                                                                       2007         2006
                                                                  ---------    ---------

                                                                  <c>          <c>
Cash flows from financing activities:
  Net decrease in demand deposits, NOW and savings accounts          (2,312)      (6,957)
  Net increase in time deposits                                       1,319       27,598
  Federal Home Loan Bank advances                                    21,000       10,000
  Principal payments on advances from Federal Home Loan Bank        (16,404)     (10,227)
  Net change in short term advances from Federal Home Loan Bank       3,551        1,631
  Dividends paid                                                     (1,348)      (1,296)
                                                                  ---------    ---------

  Net cash provided by financing activities                           5,806       20,749
                                                                  ---------    ---------


Net decrease in cash and cash equivalents                            (2,817)      (1,838)
Cash and cash equivalents at beginning of period                     11,757       10,204
                                                                  ---------    ---------
Cash and cash equivalents at end of period                        $   8,940    $   8,366
                                                                  =========    =========

Supplemental disclosures:
  Interest paid                                                   $   9,393    $   7,500
  Income taxes paid                                                   1,152          844




New York Community Bank Acquisition:

  Cash and cash equivalents acquired                              $ 296,060

  Deposits assumed                                                  496,060
                                                                  ---------

  Net assets acquired                                              (200,000)

  Acquisition costs                                                 115,207
                                                                  ---------

  Goodwill                                                        $ 315,207


The accompanying notes are an integral part of these consolidated financial statements.

                                           7
</table>
<page>
                     SALISBURY BANCORP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

NOTE 1 - BASIS OF PRESENTATION
------------------------------

The  accompanying   condensed  consolidated  interim  financial  statements  are
unaudited and include the accounts of Salisbury  Bancorp,  Inc. (the "Company"),
its wholly owned subsidiary  Salisbury Bank and Trust Company (the "Bank"),  and
the  Bank's   subsidiaries,   S.B.T.  Realty,  Inc.  and  SBT  Mortgage  Service
Corporation  (the  "PIC")  formed  in April  2004.  The  consolidated  financial
statements have been prepared in accordance with accounting principles generally
accepted  in  the  United  States  of  America  (GAAP)  for  interim   financial
information and with the instructions to SEC Form 10-Q. Accordingly, they do not
include  all  the  information  and  footnotes  required  by GAAP  for  complete
financial  statements.  All significant  intercompany  accounts and transactions
have been eliminated in the consolidation.  These financial  statements reflect,
in the  opinion  of  Management,  all  adjustments,  consisting  of only  normal
recurring  adjustments,  necessary  for a fair  presentation  of  the  Company's
financial  position and the results of its operations and its cash flows for the
periods  presented.  Operating  results for the nine months ended  September 30,
2007 are not necessarily  indicative of the results that may be expected for the
year ending  December 31, 2007.  These  financial  statements  should be read in
conjunction  with the financial  statements  and notes  thereto  included in the
Company's 2006 Annual Report on Form 10-K.

The  year-end  condensed  balance  sheet data  derived  from  audited  financial
statements does not include all disclosures required by GAAP.

NOTE 2 - COMPREHENSIVE INCOME
-----------------------------

Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting
Comprehensive  Income,"  establishes  standards for disclosure of  comprehensive
income  which  includes  net income and any  changes  in equity  from  non-owner
sources  that are not recorded in the income  statement  (such as changes in the
net  unrealized  gains  (losses)  on  securities).   The  purpose  of  reporting
comprehensive income is to report a measure of all changes in equity that result
from recognized  transactions and other economic events of the period other than
transactions  with owners in their capacity as owners.  The Company's sources of
other  comprehensive  income  are the net  unrealized  holding  gain  (loss)  on
securities and the minimum pension liability adjustment.

<table>
<caption>
Comprehensive Income
                                                    Nine months ended    Three months ended
                                                      September 30,         September 30,
                                                     2007       2006       2007      2006
                                                   -------    -------    -------   -------
                                                 (amounts in thousands) (amounts in thousands)

                                                 <c>         <c>          <c>     <c>
Net income                                         $ 2,800    $ 3,313    $   917   $ 1,160
Net change in unrealized holding (losses) or
 gains on securities and minimum pension
  liability adjustment, net of tax during period    (1,775)     1,365        967     3,112
                                                   -------    -------    -------   -------
Comprehensive income                               $ 1,025    $ 4,678    $ 1,884   $ 4,272
                                                   =======    =======    =======   =======
</table>

NOTE 3 - IMPACT OF NEW ACCOUNTING STANDARDS
-------------------------------------------

In February 2006, the Financial  Accounting  Standards  Board (FASB) issued SFAS
No. 155,  "Accounting for Certain Hybrid Instruments" (SFAS 155), which permits,
but does not require,  fair value accounting for any hybrid financial instrument
that contains an embedded derivative that would otherwise require bifurcation in
accordance  with SFAS 133. The  statement  also  subjects  beneficial  interests
issued by  securitization  vehicles to the  requirements  of SFAS No.  133.  The
statement is  effective  as of January 1, 2007.  The adoption of SFAS 155 is not
expected to have a material  impact on the  Company's  financial  condition  and
results of operations.

In March  2006,  the FASB  issued  SFAS No. 156,  Accounting  for  Servicing  of
Financial  Assets- an amendment of FASB Statement No. 140 ("SFAS No. 156"). SFAS
156 requires any entity to  recognize a servicing  asset or servicing  liability
each time it undertakes  an obligation to service a financial  asset by entering
into a servicing contract in specific  situations.  Additionally,  the servicing
asset or servicing liability shall be initially measured at fair value; however,
an  entity  may elect the  "amortization  method"  or "fair  value  method"  for
subsequent  balance  sheet  reporting  periods.  SFAS 156 is  effective as of an
entity's first fiscal year beginning  after September 15, 2006. The Company does
not expect this statement to have a material impact on its financial  condition,
results of operations or cash flows.

                                        8
<page>


In June 2006 the FASB issued  Interpretation No. 48, "Accounting for Uncertainty
in Income  Taxes - an  interpretation  of FASB  Statement  109" (FIN 48). FIN 48
prescribes a recognition  threshold and measurement  attribute for the financial
statement recognition and measurement of a tax position taken, or expected to be
taken, in a tax return and provides guidance on  derecognition,  classification,
interest  and  penalties,   accounting  in  interim   periods,   disclosure  and
transition.  FIN 48 is effective for fiscal years  beginning  after December 15,
2006.  The  adoption of FIN 48 did not have a material  impact on the  Company's
financial statements.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157).  SFAS 157 defines fair value,  establishes a framework for measuring  fair
value  under  generally  accepted  accounting  principles  (GAAP)  and  enhances
disclosures about fair value  measurements.  SFAS 157 retains the exchange price
notion and clarifies that the exchange price is the price that would be received
for an asset or paid to  transfer  a  liability  (an exit  price) in an  orderly
transaction  between market  participants on the  measurement  date. SFAS 157 is
effective  for the  Company's  consolidated  financial  statements  for the year
beginning on January 1, 2008, with earlier adoption permitted.  The Company does
not expect  the  adoption  of this  statement  to have a material  impact on its
financial condition and results of operations.

In September  2006,  the FASB issued SFAS No. 158,  "Employer's  Accounting  for
Defined  Benefit Pension and other  Postretirement  Plans - an amendment of FASB
Statements  No. 87, 88, 106 and 132 (R)" ("SFAS 158").  SFAS 158 requires 1) the
recognition of an asset or liability for the over-funded or under-funded  status
of a defined  benefit plan, 2) the recognition of actuarial gains and losses and
prior service costs and credits in other comprehensive income, 3) measurement of
plan assets and benefit  obligations  as of the  employer's  balance sheet date,
rather than at interim measurement dates as currently allowed, and 4) disclosure
of  additional  information  concerning  actuarial  gains and  losses  and prior
service  costs  and  credits  recognized  in other  comprehensive  income.  This
statement is effective for financial  statements  with fiscal years ending after
December 15, 2006.  The Company does not believe the adoption of this  Statement
will have a material  impact on the  Company's  financial  position or result of
operations.

In  September  2006,  the FASB  ratified the  consensus  reached by the Emerging
Issues  Task  force  ("EITF")  on  Issue  No.  06-4   "Accounting  for  Deferred
Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements," (EITF Issue 06-4). EITF 06-4 requires companies with an
endorsement split-dollar life insurance arrangement to recognize a liability for
future postretirement benefits. The effective date is for fiscal years beginning
after December 15, 2007, with earlier  application  permitted.  Companies should
recognize  the effects of  applying  this issue  through  either (a) a change in
accounting principle through a cumulative effect adjustment to retained earnings
or (b) a change in accounting principle through retrospective application to all
periods.  The Company is currently  evaluating  and has not yet  determined  the
impact the new EITF is expected to have on its  financial  position,  results of
operations or cash flow.

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and  Financial  Liabilities  including  an  amendment  of FASB
Statement  No. 115" (SFAS 159).  SFAS 159 permits  entities to choose to measure
many  financial  instruments  and certain other items at fair value that are not
currently  required to be measured at fair value.  The  objective  is to improve
financial  reporting  by providing  entities  with the  opportunity  to mitigate
volatility  in  reported   earnings  caused  by  measuring  related  assets  and
liabilities  differently  without  having  to  apply  complex  hedge  accounting
provisions.   This  Statement  also  establishes   presentation  and  disclosure
requirements  designed to facilitate  comparisons  between  entities that choose
different  measurement  attributes for similar types of assets and  liabilities.
The new  standard is effective at the  beginning  of the  Company's  fiscal year
beginning  January  1,  2008,  and early  application  may be elected in certain
circumstances.  The Company is currently  evaluating the impact the new standard
is expected to have on its financial position.


                                        9
<page>

NOTE 4 - DEFINED BENEFIT PENSION PLAN
-------------------------------------

The following  summarizes the net periodic  benefit cost for the nine months and
three months ended September 30:

<table>
<caption>
                                             Nine Months Ended         Three Months Ended
                                                September 30,             September 30,
                                           2007              2006    2007              2006
                                           ----------------------    ----------------------

                                          <c>          <c>           <c>          <c>
Components of net periodic benefit cost:
   Service cost                            $ 328,305    $ 322,526    $ 109,435    $  79,661
   Interest cost                             256,517      238,733       85,506       75,237
   Expected return on plan assets           (276,707)    (221,699)     (92,236)     (78,866)
   Amortization of:
      Prior service cost                         670          670          223          223
      Actuarial loss                          51,177       66,896       17,059       18,633
                                           ---------    ---------    ---------    ---------
   Net periodic benefit cost               $ 359,962    $ 407,126    $ 119,987    $  94,888
                                           =========    =========    =========    =========
</table>

The following  actuarial  weighted average  assumptions were used in calculating
net periodic benefit cost:

<table>
<caption>

                                        <c>            <c>              <c>             <c>
   Discount rate                           6.00%          6.00%            6.00%           6.00%
   Average wage increase           Graded table*   Graded table*   Graded table*   Graded table*
   Expected return on plan assets          7.50%           7.25%           7.50%           7.25%
</table>

*5% at age 20  grading  down  to 3% at age  60  and  beyond  (roughly  3.25%  on
average).


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

Business
--------

The following  provides  Management's  comments on the  financial  condition and
results of operations of Salisbury Bancorp, Inc. (the "Company"),  a Connecticut
corporation  that is the holding  company for  Salisbury  Bank and Trust Company
(the "Bank").  The Company's sole subsidiary is the Bank, which includes a Trust
and Investment  Services  Division,  and operates eight (8) full service offices
located in the towns of Canaan,  Lakeville,  Salisbury and Sharon,  Connecticut,
Sheffield and South  Egremont,  Massachusetts  and Dover Plains,  New York.  The
Company and Bank were formed in 1998 and 1848, respectively. In order to provide
a strong foundation for building shareholder value and servicing customers,  the
Company remains  committed to investing in the technological and human resources
necessary for providing  personalized  financial products and services to better
serve  customers  in the  tri-state  area.  This  discussion  should  be read in
conjunction  with Salisbury  Bancorp,  Inc.'s Annual Report on Form 10-K for the
year ended December 31, 2006.


RESULTS OF OPERATIONS
---------------------

Overview
--------

The  Company's  net income for the nine  months  ended  September  30,  2007 was
$2,800,000. This compares to earnings of $3,313,000 for the same period in 2006.
Earnings per share for the nine months ended  September  30, 2007 totaled  $1.66
per share,  which compared to earnings per share of $1.97 for the  corresponding
period in 2006.  The  decrease  in  earnings  is  primarily  attributable  to an
increase  in  interest  expense and  additional  staff to support new  marketing
strategies,  our growth and expansion into New York State.  The Company's assets
at  September  30,  2007  totaled  $456,486,000  compared  to  total  assets  of
$450,339,000  at December  31,  2006.  Deposits at  September  30, 2007  totaled
$313,088,000 as compared to total deposits of $313,586,000 at December 31, 2006.
The Bank and the Company are "well capitalized".  The Company's total risk based
capital  ratio was 15.23%;  the Tier 1 capital

                                       10
<page>

ratio was  14.27%  and the  leverage  ratio was  8.37%.  The Board of  Directors
declared a third quarter cash dividend of $.27 per common share,  which was paid
on October 31, 2007 to  shareholders  of record as of September  28, 2007.  This
compared to a cash dividend of $.26 per common share that was paid for the third
quarter of 2006.  Year-to-date dividends total $.81 per common share outstanding
for this year. This compares to total year-to-date  dividends of $.78 per common
share one year ago.

Critical Accounting Estimates

In preparing the Company's financial statements,  management selects and applies
numerous accounting policies.  In applying these policies,  management must make
estimates and  assumptions.  The accounting  policy that is most  susceptible to
critical  estimates  and  assumptions  is the  allowance  for loan  losses.  The
determination  of an  appropriate  provision  is based on an  estimation  of the
probable amount of credit losses in the loan portfolio.  Many factors  influence
the  amount  of   estimated   loan   losses,   relating  to  both  the  specific
characteristics of the loan portfolio and general economic conditions nationally
and locally.  While management  carefully considers these factors in determining
the amount of the allowance for loan losses, future adjustments may be necessary
due to  changed  conditions,  which  could have an  adverse  impact on  reported
earnings in the future. See "Provisions and Allowance for Loan Losses."

                      NINE MONTHS ENDED SEPTEMBER 30, 2007
               AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2006

Net Interest and Dividend Income

The Company's  earnings are primarily  dependent  upon net interest and dividend
income,  and to a lesser extent  non-interest  income. Net interest and dividend
income is the difference  between  interest and dividends earned on the loan and
securities portfolio and interest paid on deposits and advances from the Federal
Home Loan Bank.  Non-interest  income is  primarily  derived  from the trust and
investment services division,  service charges and other fees related to deposit
and loan  accounts  and income from gains in  securities  transactions.  For the
following  discussion,  net interest and dividend income is presented on a fully
taxable-equivalent ("FTE") basis. FTE interest income restates reported interest
income on tax exempt  securities as if such interest were taxed at the Company's
federal tax rate of 34% for all periods presented.

(amounts in thousands)
Nine Months Ended September 30,           2007      2006
                                       -------   -------
Total Interest and Dividend Income
(financial statements)                 $19,399   $17,361
Tax Equivalent Adjustment                  898       851
                                       -------   -------

Total Interest and Dividend Income
      (on an FTE basis)                 20,297    18,212
Total Interest Expense                   9,235     7,452
                                       -------   -------
Net Interest and Dividend Income-FTE   $11,062   $10,760
                                       =======   =======

Total  interest  and  dividend  income on a FTE basis for the nine months  ended
September  30,  2007,  when  compared  to the same  period  in  2006,  increased
$2,085,000  or 11.45%.  The increase  was  primarily  attributable  to generally
higher interest rates during the first nine months of 2007.

Interest  expense  on  deposits  for the  first  nine  months  of  2007  totaled
$6,109,000,  an increase of $1,266,000 or 26.14%,  which  compared to $4,843,000
for the same period in 2006. This increase  reflects  generally  higher interest
rates  during the first nine months of 2007 and an increase in interest  bearing
deposits.  During the  nine-month  period ended  September  30,  2007,  interest
expense on  Federal  Home Loan Bank  advances  increased  $517,000  or 19.82% to
$3,126,000.  This increase in interest expense is primarily  attributable to the
increased  balance of Federal Home Loan Bank advances  throughout the first nine
months of 2007.  Total interest  expense for the nine months ended September 30,
2007 was  $9,235,000,  an increase of  $1,783,000 or 23.93% when compared to the
same period in 2006.

                                       11
<page>

Overall,  net interest and dividend income (on an FTE basis) increased  $302,000
or 2.81% to  $11,062,000  for the nine  months  ended  September  30,  2007 when
compared to the same period in 2006.

Noninterest Income
------------------

Noninterest  income totaled  $3,299,000 for the nine months ended  September 30,
2007. This is an increase of $60,000 or 1.85% compared to noninterest  income of
$3,239,000  for the nine months  ended  September  30,  2006.  Gains on sales of
available-for-sale securities, net totaled $222,000 for the first nine months of
2007 which  compares  to $294,000  for the  corresponding  period in 2006.  This
decrease is  primarily  the result of the  movement of market  rates  during the
quarter.  Continuing  growth  of the  trust  and  investment  services  division
resulted in an increase in trust  income of $98,000 or 6.95% to  $1,508,000  for
the first nine months of 2007,  which compares to $1,410,000 for the same period
in 2006. This increase is primarily  attributable to an increase in assets under
management.  Other income  increased by $119,000  when  comparing the first nine
months of 2007 to the same period in 2006.  This  category  of income  primarily
consists of fees  associated  with  transaction  accounts,  fees  related to the
origination  and  servicing of mortgage  loans and gains  related to the sale of
mortgage loans.

Noninterest Expense
-------------------

Noninterest  expense  increased  12.26%  for the  first  nine  months of 2007 as
compared  to the same  period  in 2006.  Although  there are some  increases  in
noninterest  expenses that are attributable to normal volumes of business,  much
of the overall  increases in the noninterest  expenses listed in the table below
reflect  expenses  associated  with the Bank's entry into New York State through
the establishment of a branch office in Dover Plains, New York, which opened its
doors for business on August 1, 2007. The components of noninterest  expense and
the changes in the period were as follows (amounts in thousands):


                                            2007      2006    Change%    Change
-------------------------------------------------------------------------------
Salaries and employee benefits           $ 5,763   $ 5,262   $   501       9.52
Occupancy expense                            586       538        48       8.92
Equipment expense                            584       586        (2)      (.34)
Data processing                              939       869        70       8.06
Insurance                                    121        95        26      27.37
Printing and stationery                      216       183        33      18.03
Professional fees                            500       303       197      65.02
Legal expense                                167        94        73      77.66
Amortization of core deposit intangible      123       123         0          0
Other expense                              1,026       877       149      16.99
                                         -------   -------   -------    -------
      Total noninterest expense          $10,025   $ 8,930   $ 1,095      12.62
                                         =======   =======   =======    =======

Income Taxes
------------

The income tax provision  for the first nine months of 2007 totaled  $638,000 in
comparison to $905,000 for the same nine-month  period in 2006. Pretax income in
2007 was $3,438,000 and included tax-exempt income totaling  $1,745,000.  Pretax
income  in  2006  was  $4,218,000  and  included   tax-exempt   income  totaling
$1,652,000.  The decrease in the income tax provision is primarily  attributable
to a decrease in taxable income.

Net Income
----------

Overall,  net income totaled  $2,800,000 for the nine months ended September 30,
2007 and  represents  earnings  of $1.66 per  average  share  outstanding.  This
compares to net income of $3,313,000 or $1.97 per average share  outstanding for
the same period in 2006.


                                       12
<page>


                      THREE MONTHS ENDED SEPTEMBER 30, 2007
              AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2006

Net Interest and Dividend Income
--------------------------------

For the following discussion, net interest and dividend income is presented on a
fully  taxable-equivalent  ("FTE") basis. FTE interest income restates  reported
interest  income on  tax-exempt  loans and  securities  as if such interest were
taxed at the Company's federal tax rate of 34% for all periods presented.

(amounts in thousands)
Three Months Ended September 30                               2007     2006
                                                            ------   ------
Total Interest and Dividend Income
(financial statements)                                      $6,602   $6,111
Tax Equivalent Adjustment                                      327      307
                                                            ------   ------
     Total Interest and Dividend Income (on an FTE basis)    6,929    6,418
Total Interest Expense                                       3,167    2,754
                                                            ------   ------
Net Interest and Dividend Income-FTE                        $3,762   $3,664
                                                            ======   ======

Total  interest and  dividend  income on an FTE basis for the three months ended
September 30, 2007  increased  $511,000 or 7.96%  compared to the same period in
2006. The increase was primarily  attributable to an economic  environment  with
generally higher interest rates. Interest expense on deposits increased $201,000
or 10.66% for the  quarter to  $2,087,000  compared to  $1,886,000  for the same
quarter  in  2006.  This  increase  is  primarily  the  result  of  an  economic
environment  of higher  interest  rates  coupled  with an  increase  in interest
bearing  deposits.  The Bank's  volume of Federal  Home Loan Bank  advances  has
increased  during the three month period ended  September 30, 2007 when compared
to the  corresponding  period in 2006.  Interest  expense on these advances have
increased  $212,000 or 24.42% and totaled  $1,080,000 for the three months ended
September  30, 2007 compared to $868,000 for the  corresponding  period in 2006.
Total  interest  expense  for the three  months  ending  September  30, 2007 was
$3,167,000  compared  to total  interest  expense for the same period in 2006 of
$2,754,000,  an increase of $413,000 or 15.00%. This increase is a reflection of
an economic  environment  of higher  interest  rates and the result of increased
advances  from the Federal  Home Loan Bank.  Overall,  net interest and dividend
income  (on a FTE  basis)  increased  $98,000  or  2.67% to  $3,762,000  for the
three-month  period ended September 30, 2007 when compared to the  corresponding
period in 2006.

Noninterest Income
------------------

Noninterest  income totaled  $1,060,000 for the three months ended September 30,
2007 as compared to  $1,213,000  for the three months ended  September 30, 2006.
This  decrease  of  $153,000  or  12.61%  is  primarily  attributable  to  fewer
opportunities to generate income from gains in securities and loan transactions.
Income from the trust and investment  services  division remained stable for the
third  quarter of 2007  compared to the same  period in 2006.  Gains on sales of
available-for-sale  securities,  net totaled  $42,000  for the third  quarter of
2007.  This  compares  to gains on sales  of  available-for-sale  securities  of
$233,000 for the  corresponding  period in 2006.  This decrease is primarily the
result of the movement of market rates  during the quarter.  Other  non-interest
income is primarily  related to fees  associated with  transaction  accounts and
fees  related to the  origination  and  servicing  of  mortgage  loans and gains
related to the sale of  mortgage  loans.  The volume of these  transactions  are
driven primarily by consumer demand,  which results in variances from quarter to
quarter.

Noninterest Expense
-------------------

Non  interest  expense  totaled  $3,401,000  for the three  month  period  ended
September  30, 2007 as compared to  $3,101,000  for the same quarter in 2006, an
increase of $300,000 or 9.67%.  Although there are some increases in noninterest
expenses  that are  attributable  to normal  volumes of  business,  as mentioned
previously,  increases in the noninterest expenses listed in the table below are
primarily  attributable  to  additional  staffing,  and expenses  related to the
establishment of a new branch in New York State,  which commenced  operations on
August 1, 2007.  The components of  non-interest  expense and the changes in the
quarter were as follows (amounts in thousands):

                                       13
<page>

                                            2007     2006   Change%  Change
----------------------------------------------------------------------------
Salaries and employee benefits            $1,931   $1,852   $   79     4.27
Occupancy expense                            206      186       20    10.75
Equipment expense                            214      205        9     4.39
Data processing                              301      259       42    16.22
Insurance                                     47       32       15    46.88
Printing and stationery                       72       54       18    33.33
Professional fees                            161      123       38    30.89
Legal expense                                 41       31       10    32.26
Amortization of core deposit intangible       41       41        0        0
Other expense                                387      318       69    21.70
                                          ------   ------   ------   ------
      Total non-interest expense          $3,401   $3,101   $  300     9.67
                                          ======   ======   ======   ======

Income Taxes
------------

The income tax provision  for the  three-month  period ended  September 30, 2007
totaled  $177,000 in comparison to $309,000 for the same  three-month  period in
2006. The decrease in the income tax provision is  attributable to a decrease in
taxable income.

Net Income
----------

Overall,  net income totaled  $917,000 for the three months ended  September 30,
2007  and  represents  earnings  of $.54 per  average  share  outstanding.  This
compares to net income of $1,160,000 for the same quarter in 2006, a decrease of
$243,000 or 20.95% and compares to earnings  per average  share  outstanding  of
$.69 for the same quarter in 2006.

FINANCIAL CONDITION
-------------------

Total assets at September 30, 2007 were  $456,486,000,  compared to $450,339,000
at December 31, 2006, an increase of 1.36%. The increase is primarily the result
of an increase in earning assets during the period.

Investment Securities
---------------------

The make up of the  investment  portfolio is diversified  among U.S.  Government
sponsored agencies,  mortgage-backed  securities and securities issued by states
of the United States and  political  subdivisions  of the states.  The portfolio
does not include  securities  collateralized  by pools of  sub-prime  mortgages.
During the nine months ended  September  30,  2007,  the  investment  portfolio,
including  Federal  Home  Loan  Bank  stock,  decreased  $2,767,000  or 1.72% to
$158,465,000 from $161,232,000 at December 31, 2006.

Securities   are   classified   in   the   portfolio   as   either    securities
available-for-sale or securities held-to-maturity.  Almost all securities in the
portfolio  are  classified as  available-for-sale.  The  securities  reported as
available-for-sale  are stated at fair value in the financial  statements of the
Company.  Unrealized holding gains and losses on  available-for-sale  securities
(accumulated other comprehensive  income/loss) are not included in earnings, but
are  reported as a net amount  (less  expected  tax) in a separate  component of
capital until  realized.  At September 30, 2007, the unrealized  loss net of tax
was $2,999,000.  This compares to an unrealized loss net of tax of $1,190,000 at
December 31, 2006. The unrealized losses in these securities are attributable to
changes in market  interest  rates.  Management  deems the  securities  that are
currently in an unrealized loss position as not other than temporarily impaired.
The securities reported as securities  held-to-maturity  are stated at amortized
cost.

The decrease in the portfolio is also a reflection of securities  being sold and
called  during the period with the  proceeds  being used to fund loan demand and
seasonal cash flow of transaction accounts.

Lending
-------

Total loans  outstanding of $264,381,000 at September 30, 2007 compares to total
loans  outstanding  of  $254,773,000  at December  31,  2006.  This  increase of
$9,608,000  or 3.77%  includes a January 2007  maturity of  $12,000,000  in Term
Federal  Funds.  Excluding  this  maturity,  there  is an  increase  in loans of
$21,608,000  or 8.90%.  Competition  for loans remains  aggressive in the Bank's
market area, however,  new business development coupled with an increase in loan
demand resulted in the increase.

                                       14
<page>

The following table  represents the composition of the loan portfolio  comparing
September 30, 2007 to December 31, 2006:

                                         September 30, 2007   December 31, 2006
                                         ------------------   -----------------
                                                 (amounts in thousands)
Commercial, financial and agricultural      $     18,722       $     16,465
Real estate-construction and land
     development                                  29,273             21,169
Real estate-residential                          155,239            145,395
Real estate-commercial                            51,617             50,859
Consumer                                           8,441              8,816
Term federal funds                                     0             12,000
Other                                              1,089                 69
                                            ------------       ------------
                                                 264,381            254,773
Deferred costs, net                                  270                168
Unearned income                                       (1)                (3)
Allowance for loan losses                         (2,455)            (2,474)
                                            ------------       ------------
Net Loans                                   $    262,195       $    252,464
                                            ============       ============

Provisions and Allowance for Loan Losses
----------------------------------------

Credit risk is inherent in the business of extending  loans.  The Bank  monitors
the quality of the  portfolio to ensure that loan quality will not be sacrificed
for growth or otherwise  compromise the Bank's objectives.  Because of this risk
associated with extending  loans, the Bank maintains an allowance or reserve for
loan and lease losses through charges to earnings. No provisions for loan losses
for the first  nine-month  period of 2007 or the comparable  period in 2006 were
warranted.

The Bank  evaluates the adequacy of the allowance no less  frequently  than on a
quarterly basis. No material changes have been made in the estimation methods or
assumptions  that the Bank uses in making this  determination  during the period
ended  September 30, 2007.  Such  evaluations are based on assessments of credit
quality and "risk  rating" of loans by senior  management,  which is reviewed by
the Bank's Loan  Committee on a regular  basis.  Loans are initially  risk rated
when originated.  If there is  deterioration  in the credit,  the risk rating is
adjusted accordingly.

The allowance also includes a component  resulting  from the  application of the
measurement  criteria of Statements of Financial  Accounting  Standards No. 114,
Accounting by Creditors for  Impairment of a Loan ("SFAS 114").  Impaired  loans
receive  individual  evaluation of the allowance  necessary on a monthly  basis.
Loans to be considered  for  impairment are defined in the Bank's Loan Policy as
commercial  loans with balances  outstanding of $100,000 or more and residential
real  estate  mortgages  with  balances  of  $300,000  or more.  Such  loans are
considered  impaired  when it is  probable  that  the  Bank  will not be able to
collect all principal and interest due according to the terms of the note.

Any such commercial loan and/or residential mortgage will be considered impaired
under any of the following circumstances:

         1.       Non-accrual status;
         2.       Loans over 90 days delinquent;
         3.       Troubled  debt  restructures  consummated  after  December 31,
                  1994;
         4.       Loans  classified  as  "doubtful",   meaning  that  they  have
                  weaknesses,  which make  collection  or  liquidation  in full,
                  based on currently  existing  facts,  conditions,  and values,
                  highly questionable and improbable.

The  individual  allowance for any impaired loan is based upon the present value
of expected future cash flows discounted at the loan's  effective  interest rate
or the  fair  value  of the  collateral  if the  loan is  collateral  dependent.
Specifically  identifiable and quantifiable  losses are immediately  charged off
against the allowance.

In addition, a risk of loss factor is applied in evaluating  categories of loans
generally as part of the  periodic  analysis of the  Allowance  for Loan Losses.
This  analysis  reviews the  allocations  of the  different  categories of loans
within the portfolio  and it considers  historical  loan losses and  delinquency
figures as well as any recent delinquency trends.

                                       15
<page>

Credit card loans are separately  evaluated and given a special loan loss factor
because   management   recognizes  the  higher  risk  involved  in  such  loans.
Concentrations  of credit and local  economic  factors are also  evaluated  on a
periodic basis.  Historical average net losses by loan type are examined as well
as trends by type. The Bank's loan mix over the same period is also analyzed.  A
loan loss  allocation  is made for each type of loan  multiplied by the loan mix
percentage for each loan type to produce a weighted average factor.

Nonperforming  loans,  which  include all loans that are on a nonaccrual  status
along  with  loans  that are 90 days or more  past due and still  accruing,  are
closely  monitored by  management.  At September 30, 2007,  nonperforming  loans
totaled  $1,103,000 or 0.42% of total loans  outstanding  of  $264,381,000.  The
allowance  for  loan  losses   totaled   $2,455,000   representing   222.57%  of
nonperforming  loans.  Nonperforming  loans  totaled  $964,000 or 0.38% of total
loans  outstanding of  $254,773,000 at December 31, 2006. The allowance for loan
losses  totaled  $2,474,000  at  December  31, 2006 and  represented  256.64% of
nonperforming  loans.  A total of $72,000 of loans were  charged off by the Bank
during the nine  months  ended  September  30,  2007.  These  charged-off  loans
consisted primarily of consumer loans. This compares to loans charged off during
the nine-month period ended September 30, 2006 that totaled $89,000.  A total of
$53,000 of  previously  charged-off  loans was  recovered  during the nine month
period ended September 30, 2007.  Recoveries for the same period in 2006 totaled
$43,000.  While  management  estimates  loan  losses  using  the best  available
information,  no assurances can be given that future  additions to the allowance
will not be  necessary  based on  changes in  economic  and real  estate  market
conditions, further information obtained regarding problem loans, identification
of additional problem loans or other factors. Additionally,  future additions to
the allowance may be necessary to maintain adequate coverage ratios.

Deposits
--------

The Company offers a variety of deposit  accounts with a range of interest rates
and terms.  The following  table  illustrates  the  composition of the Company's
deposits at September 30, 2007 and December 31, 2006:


                      September 30, 2007    December 31, 2006
                      ------------------    -----------------
                               (amounts in thousands)

Demand                   $     65,669         $     70,502
NOW                            23,207               21,461
Money Market                   54,297               57,015
Savings                        48,234               44,246
Time                          121,681              120,362
                         ------------         ------------
  Total Deposits         $    313,088         $    313,586
                         ============         ============

Deposits constitute the principal funding source of the Company's assets.

Borrowings
----------

The Company  utilizes  advances  from the Federal  Home Loan Bank as part of its
operating  strategy to supplement  deposit  growth and fund its asset growth,  a
strategy that is designed to increase  interest income.  These advances are made
pursuant to various credit programs, each of which has its own interest rate and
range of  maturities.  At September  30, 2007,  the Company had  $95,143,000  in
outstanding  advances from the Federal Home Loan Bank compared to $87,093,000 at
December 31, 2006.  Management  expects that it will  continue  this strategy of
supplementing deposit growth with advances from the Federal Home Loan Bank.

Off-Balance Sheet Arrangements

In the normal course of business,  the Company enters into certain relationships
characterized as lending related off-balance sheet  arrangements.  These lending
commitments  have various  terms and are designed to  accommodate  the financial
needs  of  consumers,   businesses  and  other  entities.  Many  of  these  loan
commitments  have fixed expiration  dates or other  termination  clauses and may
require payment of a fee. Since many of these commitments are expected to expire
without being funded, the total commitment amounts do not necessarily  represent
future liquidity requirements.

Loan  commitments  have credit  risk  essentially  the same as that  involved in
extending  loans to  customers.  They are  subject  to  normal  credit  approval
procedures and policies. Collateral is obtained based on management's assessment

                                       16
<page>

of the customer's  credit.  The accompanying  table summarizes the Company's off
balance sheet  lending-related  financial  instruments by remaining  maturity at
September 30, 2007:

(amounts in thousands)
<table>
<caption>
 By remaining maturity              Less than 1 year   1-3 years     4-5 years     After 5 years     Total
--------------------------------------------------------------------------------------------------------------

                                          <c>              <c>          <c>            <c>           <c>
Off balance sheet lending-related
Financial Instruments
    Residential real estate related   $      6,196   $        402   $              $     24,870   $     31,468
    Commercial related                       3,649            696          3,529          7,493         15,367
    Consumer related                                                                      9,559          9,559
    Standby letters of credit                                  13                                           13
--------------------------------------------------------------------------------------------------------------

    Total                             $      9,845   $      1,111   $      3,529   $     41,922   $     56,407
--------------------------------------------------------------------------------------------------------------
</table>

Interest Rate Risk
------------------

Interest rate risk is the most  significant  market risk  affecting the Company.
Interest  rate risk is defined as an exposure  to a movement  in interest  rates
that could have an adverse effect on net interest income. Net interest income is
sensitive to interest rate risk to the degree that interest-bearing  liabilities
mature or reprice on a different  basis than  earning  assets.  In an attempt to
manage its  exposure  to  changes  in  interest  rates,  the  Bank's  assets and
liabilities are managed in accordance with policies  established and reviewed by
the Bank's Board of Directors.  The Bank's Asset/Liability  Management Committee
monitors asset and deposit  levels,  developments  and trends in interest rates,
liquidity  and capital.  One of the primary  financial  objectives  is to manage
interest  rate risk and  control  the  sensitivity  of  earnings  to  changes in
interest rates in order to prudently  improve net interest income and manage the
maturities and interest rate sensitivities of assets and liabilities.

To  quantify  the extent of these  risks,  both in its current  position  and in
actions it might take in the future,  interest rate risk is monitored  using gap
analysis which identifies the differences  between assets and liabilities  which
mature or reprice during specific time frames and model simulation which is used
to "rate shock" the Company's assets and liability  balances to measure how much
of the Company's net interest income is "at risk" from sudden rate changes.

An interest rate sensitivity gap is defined as the difference between the amount
of interest-earning  assets maturing or repricing within a specific time and the
amount of  interest-bearing  liabilities  maturing or repricing within that same
period. A gap is considered  positive when the amount of interest rate sensitive
assets  exceeds  the amount of interest  rate  sensitive  liabilities.  A gap is
considered  negative  when the amount of  interest  rate  sensitive  liabilities
exceeds the amount of interest rate sensitive assets. At September 30, 2007, the
Company  maintains a liability  sensitive  (negative gap)  position.  This would
suggest that during a period of declining  interest rates,  the Company would be
in a better position to increase net interest income. To the contrary,  during a
period of rising  interest  rates,  a negative gap would result in a decrease in
interest income. The level of interest rate risk at September 30, 2007 is within
the limits approved by the Board of Directors.

Liquidity
---------

Liquidity is the ability to raise funds on a timely basis at an acceptable  cost
in  order  to meet  cash  needs.  Adequate  liquidity  is  necessary  to  handle
fluctuations in deposit levels,  to provide for customers'  credit needs, and to
take advantage of investment  opportunities  as they are presented.  The Company
manages  liquidity  primarily  with readily  marketable  investment  securities,
deposits and loan repayments. The Company's subsidiary, the Bank, is a member of
the Federal Home Loan Bank of Boston.  This enhances the  liquidity  position by
providing a source of available  borrowings.  At September 30, 2007, the Company
had  approximately  $55,365,000  in  loan  commitments  outstanding.  Management
believes  that the current  level of  liquidity  is ample to meet the  Company's
needs for both the present and foreseeable future.

Capital
-------

At September 30, 2007, the Company had $44,040,000 in  shareholders'  equity,  a
decrease  of 0.70% when  compared  to December  31,  2006  shareholders'  equity
totaling  $44,349,000.  Several  components  contributed  to  the  change  since
December 31, 2006.  Earnings for the nine-month  period ended September 30, 2007
totaled $2,800,000.  Securities in the investment  portfolio that are classified
as  available-for-sale  are  adjusted to fair value  monthly and the  unrealized

                                       17
<page>

losses or gains are not included in  earnings,  but are reported as a net amount
(less expected tax) as a separate  component of capital until  realized.  Market
fluctuations  of fair value of the  securities  portfolio  for the period ending
September  30, 2007  resulted in other  comprehensive  loss net of tax  totaling
$2,999,000.  The  application of SFAS No. 158, as defined in Note 3, resulted in
comprehensive  income net of tax of  $1,298,000  for the nine month period ended
September 30, 2007.

A review and analysis of securities has determined that there has been no credit
deterioration and that the unrealized loss on securities  available-for-sale  is
due  to  the  current  interest  rate  environment,  and  management  deems  the
securities to be not other than temporarily  impaired.  The Company has declared
two quarterly  dividends  resulting in a decrease in capital of $1,440,000.  The
Company  issued 840 new shares of common  stock under the terms of the  Director
Stock  Retainer Plan that  resulted in an increase in capital of $30,000.  Under
current  regulatory  definitions,  the Company and the Bank are considered to be
"well capitalized" for capital adequacy purposes. As a result, the Bank pays the
lowest federal  deposit  insurance  premiums  possible.  One primary  measure of
capital  adequacy for  regulatory  purposes is based on the ratio of  risk-based
capital to risk-weighted assets. This method of measuring capital adequacy helps
to establish capital  requirements that are more sensitive to the differences in
risk  associated with various assets.  It takes into account  off-balance  sheet
exposure in assessing capital adequacy and it minimizes disincentives to holding
liquid,  low-risk  assets.  At September 30, 2007,  the Company had a total risk
based  capital  ratio of  15.23%  compared  to  15.53%  at  December  31,  2006.
Maintaining  strong capital is essential to Bank safety and soundness.  However,
the effective  management of capital resources  requires  generating  attractive
returns on equity to build value for shareholders while maintaining  appropriate
levels of capital to fund growth, meet regulatory requirements and be consistent
with prudent industry practices.  Management believes that the capital levels of
the Company and Bank are  adequate to continue to meet the  foreseeable  capital
needs of the institutions.

Impact of Inflation and Changing Prices
---------------------------------------

The Company's  consolidated financial statements are prepared in conformity with
generally  accepted  accounting  principles  that  require  the  measurement  of
financial condition and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money, over time, due to
inflation.  Unlike most  industrial  companies,  virtually all of the assets and
liabilities  of the Company are monetary and as a result,  interest rates have a
greater  impact on the  Company's  performance  than do the  effects  of general
levels of inflation, although interest rates do not necessarily move in the same
direction  or with the same  magnitude  as the  prices  of goods  and  services.
Although not a material factor in recent years,  inflation could impact earnings
in future periods.

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

This Form 10-Q and future  filings made by the Company with the  Securities  and
Exchange Commission,  as well as other filings,  reports and press releases made
or issued by the Company and the Bank,  and oral  statements  made by  executive
officers  of the Company and the Bank,  may include  forward-looking  statements
relating to such matters as:

(a)      assumptions  concerning  future  economic and business  conditions  and
         their  effect on the economy in general and on the markets in which the
         Company and the Bank do business; and

(b)      expectations for revenues and earnings for the Company and Bank.

Such forward-looking  statements are based on assumptions rather than historical
or current facts and, therefore,  are inherently  uncertain and subject to risk.
For those  statements,  the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Act of
1995.

The Company  notes that a variety of factors  could cause the actual  results or
experience  to  differ   materially  from  the  anticipated   results  or  other
expectations described or implied by such forward-looking  statements. The risks
and uncertainties  that may effect the operation,  performance,  development and
results of the Company's and Bank's business include the following:

(a)      the risk of  adverse  changes in  business  conditions  in the  banking
         industry  generally  and in the  specific  markets  in  which  the Bank
         operates;

                                       18
<page>

(b)      changes in the legislative and regulatory  environment  that negatively
         impacts the Company and Bank through increased operating expenses;
(c)      increased   competition   from  other   financial   and   non-financial
         institutions;
(d)      the impact of technological advances; and
(e)      other risks  detailed from time to time in the  Company's  filings with
         the Securities and Exchange Commission.

Such  developments  could have an adverse impact on the Company's and the Bank's
financial position and results of operations.

       Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The main  components  of market risk for the Company are interest  rate risk and
liquidity  risk.  The Company  manages  interest  rate risk and  liquidity  risk
through an ALCO Committee  comprised of outside Directors and senior management.
The committee monitors compliance with the Bank's Asset/Liability  Policy, which
provides  guidelines  to analyze and manage the interest rate  sensitivity  gap,
which is the  difference  between  the  amount  of  assets  and the  amounts  of
liabilities,  which mature or reprice during specific periods.  Model simulation
is used to measure  earnings  volatility  under both  rising  and  falling  rate
scenarios.  Please refer to Interest Rate Risk and  Liquidity  under Item 2. The
Company's interest rate risk and liquidity position as of September 30, 2007 has
not significantly changed from year-end 2006.


                        Item 4. Controls and Procedures.

The Company's Chief  Executive  Officer and Chief  Financial  Officer  concluded
that,  based  upon  an  evaluation  as of  September  30,  2007,  the  Company's
disclosure  controls and  procedures  are  effective to ensure that  information
required  to be  disclosed  by the  Company in reports  that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported  within the time periods  specified in the SEC rules and forms.  During
the quarter  ended  September  30,  2007 there were no changes in the  Company's
internal  control over financial  reporting  that  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.


                                       19
<page>


                           Part II - OTHER INFORMATION

Item 1. - Legal Proceedings.  Not applicable

Item 1A.  Risk Factors.  Not applicable

Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds.
          Not applicable

Item 3. - Defaults Upon Senior Securities.  Not applicable

Item 4. - Submission of Matters to a Vote of Security Holders. Not applicable

Item 5. - Other Information.  Not applicable

Item 6. - Exhibits


              11 Computation of Earnings per Share.

              31.1- Rule 13a-14(a)/15d-14(a) Certification.

              31.2- Rule 13a-14(a)/15d-14(a) Certification.

                32 - Section 1350 Certifications




                             SALISBURY BANCORP, INC.

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.

                                                 Salisbury Bancorp, Inc.

         Date: November 13, 2007                 by:  /s/ John F. Perotti
               -----------------                      --------------------
                                                      John F. Perotti
                                                      Chief Executive Officer

         Date: November 13, 2007                 by: /s/ John F. Foley
               -----------------                     ------------------
                                                     John F. Foley
                                                     Chief Financial Officer




                                       20