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                  June 30, 2008
                               -------------------------------------------------

                                       OR

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

For the transition period from                         to
                              --------------------------------------------------

                         Commission file number 0-24751
                                                -------

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

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

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

Large  Accelerated  Filer [_] Accelerated  Filer [_]  Non-Accelerated  Filer [_]
Smaller reporting company [X]

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:

       The Company had 1,685,861 shares outstanding as of August 11, 2008.

<PAGE>

                     SALISBURY BANCORP, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS



Part I. FINANCIAL INFORMATION                                               Page



Item 1.   Financial Statements:                                               3

          Condensed Consolidated Balance Sheets -June 30, 2008 (unaudited)
                            and December 31, 2007                             4
          Condensed Consolidated Statements of Income -six and three months
                   ended June 30,2008 and 2007 (unaudited)                    5
          Condensed Consolidated Statements of Cash Flows -six months ended
                      June 30, 2008 and 2007 (unaudited)                      6
          Notes to Condensed Consolidated Financial Statements (unaudited)    7

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

Item 3.  Quantitative and Qualitative Disclosures about Market Risk          18

Item 4.  Controls and Procedures                                             19


Part II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                   19

Item 1A.  Risk Factors                                                       19

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds         19

Item 3.  Defaults Upon Senior Securities                                     19

Item 4.  Submission of Matters to a Vote of Security Holders                 19

Item 5.  Other Information                                                   19

Item 6.  Exhibits                                                            19

Signatures                                                                   19


                                       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)
                                      June 30, 2008 and December 31, 2007
                                      -----------------------------------


                                                                                   June 30,       December 31,
                                                                                     2008            2007
                                                                                     ----            ----
<S>                                                                                      <C>             <C>
ASSETS
------
(unaudited)
Cash and due from banks                                                           $      8,578    $     12,811
Interest-bearing demand deposits with other banks                                        1,083             726
Money market mutual funds                                                                1,390           1,341
Federal funds sold                                                                         200             300
                                                                                  ------------    ------------
           Cash and cash equivalents                                                    11,251          15,178
Investments in available-for-sale securities (at fair value)                           145,745         147,377
Investments in held-to-maturity securities (fair values of $69 as of
   June 30, 2008 and $71 as of December 31, 2007)                                           69              71
Federal Home Loan Bank stock, at cost                                                    5,267           5,176
Loans held-for-sale                                                                        409             120
Loans, less allowance for loan losses of $2,625 as of June 30, 2008
   and $2,475 as of December 31, 2007                                                  288,941         268,191
Investment in real estate                                                                   75              75
Premises and equipment                                                                   7,383           6,803
Goodwill                                                                                 9,829           9,829
Core deposit intangible                                                                  1,247           1,329
Accrued interest receivable                                                              2,630           2,539
Cash surrender value of life insurance policies                                          3,748           3,688
Other assets                                                                             3,111           1,584
                                                                                  ------------    ------------
           Total assets                                                           $    479,705    $    461,960
                                                                                  ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
   Noninterest-bearing                                                            $     69,227    $     69,215
   Interest-bearing                                                                    263,560         248,526
                                                                                  ------------    ------------
           Total deposits                                                              332,787         317,741
Federal Home Loan Bank advances                                                         99,246          95,011
Due to broker                                                                                0               0
Other liabilities                                                                        4,165           3,645
                                                                                  ------------    ------------
           Total liabilities                                                           436,198         416,397
                                                                                  ------------    ------------
Shareholders' equity:
   Common stock, par value $.10 per share; authorized 3,000,000 shares; issued
     and outstanding, 1,685,861 shares at June 30, 2008 and 1,685,021 shares at
        December 31, 2007                                                                  169             169
    Paid-in capital                                                                     13,158          13,130
   Retained earnings                                                                    36,421          35,583
   Accumulated other comprehensive loss                                                 (6,241)         (3,319)
                                                                                  ------------    ------------
           Total shareholders' equity                                                   43,507          45,563
                                                                                  ------------    ------------
           Total liabilities and shareholders' equity                             $    479,705    $    461,960
                                                                                  ============    ============

           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)
                                          June 30, 2008 and 2007
                                                (unaudited)

                                                            Six Months Ended         Three Months Ended
                                                                June 30,                  June 30,
                                                            2008         2007         2008         2007
                                                         ----------   ----------   ----------   ----------
<S>                                                             <C>          <C>           <C>          <C>
Interest and dividend income:
   Interest and fees on loans                            $    9,232   $    8,736   $    4,600   $    4,348
   Interest on debt securities:
     Taxable                                                  2,630        2,757        1,343        1,326
     Tax-exempt                                               1,153        1,111          579          585
   Dividends on equity securities                               130          159           52           81
   Other interest                                               114           34           17           20
                                                         ----------   ----------   ----------   ----------
           Total interest and dividend income                13,259       12,797        6,591        6,360
                                                         ----------   ----------   ----------   ----------

Interest expense:
   Interest on deposits                                       3,639        4,022        1,666        1,992
   Interest on Federal Home Loan Bank advances                2,079        2,046        1,044        1,005
                                                         ----------   ----------   ----------   ----------

         Total interest expense                               5,718        6,068        2,710        2,997
                                                         ----------   ----------   ----------   ----------

         Net interest and dividend income                     7,541        6,729        3,881        3,363
Provision for Loan Losses                                       170            0          110            0
                                                         ----------   ----------   ----------   ----------
              Net interest and dividend income
                    after provision for loan losses           7,371        6,729        3,771        3,363
                                                         ----------   ----------   ----------   ----------
Noninterest income:
   Trust/Wealth Advisory Services income                      1,141        1,033          541          503
   Loan commissions                                               2           13            2            9
   Service charges on deposit accounts                          401          361          203          181
   Gain on sales of available-for-sale securities, net          354          180           36           63
   Gain on sales of loans held-for-sale                         159          167           86          102
   Other income                                                 529          485          285          257
                                                         ----------   ----------   ----------   ----------

         Total noninterest income                             2,586        2,239        1,153        1,115
                                                         ----------   ----------   ----------   ----------

Noninterest expense:
   Salaries and employee benefits                             4,077        3,832        2,001        1,880
   Occupancy expense                                            463          380          232          189
   Equipment expense                                            431          370          220          179
   Data processing                                              695          638          376          301
   Insurance                                                     90           74           46           36
   Printing and stationery                                      135          144           75           80
   Professional fees                                            433          339          199          174
   Legal expense                                                166          126          105           71
   Amortization of core deposit intangible                       82           82           41           41
   Other expense                                                775          639          401          354
                                                         ----------   ----------   ----------   ----------

         Total noninterest expense                            7,347        6,624        3,696        3,305
                                                         ----------   ----------   ----------   ----------

         Income before income taxes                           2,610        2,344        1,228        1,173
Income taxes                                                    546          461          245          224
                                                         ----------   ----------   ----------   ----------

         Net income                                      $    2,064   $    1,883   $      983   $      949
                                                         ==========   ==========   ==========   ==========

Earnings per common share                                $     1.23   $     1.12   $      .58   $      .56
                                                         ==========   ==========   ==========   ==========

Dividends per common share outstanding                   $      .56   $      .54   $      .28   $      .27
                                                         ==========   ==========   ==========   ==========

         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)
                                  Six months ended June 30, 2008 and 2007
                                                (unaudited)

                                                                                       2008          2007
                                                                                    ----------    ----------
<S>                                                                                        <C>           <C>
Cash flows from operating activities:
      Net income                                                                    $    2,064    $    1,883
Adjustments to reconcile net income to net cash provided by operating activities:
        Amortization of securities, net                                                     36            46
        Gain on sales of available-for-sale securities, net                               (354)         (180)
        Provision for loan losses                                                         (170)            0
        Change in loans held-for-sale                                                     (289)          304
        Change in deferred loan costs, net                                                 (23)          (56)
        Net decrease in mortgage servicing rights                                           17            53
        Depreciation and amortization                                                      324           250
        Amortization of core deposit intangible                                             82            82
        Accretion of fair value adjustment on deposits/borrowings                          (65)          (65)
        Amortization of fair value adjustment on loans                                      24            44
        Increase in interest receivable                                                    (92)          (31)
        Deferred tax expense (benefit)                                                     188          (433)
        Decrease in taxes receivable                                                        42           317
        Decrease in prepaid expenses                                                        56            42
        Increase in cash surrender value of insurance policies                             (61)          (60)
        Increase in income tax payable                                                       0           157
        Increase in other assets                                                          (146)          (15)
        Decrease in accrued expenses                                                      (158)         (178)
        Increase in interest payable                                                        74           109
        Increase in other liabilities                                                      415           270
        Issuance of shares for Directors' fees                                              28            30
        Change in unearned income on loans                                                   6             4
                                                                                    ----------    ----------
Net cash provided by operating activities                                                1,998         2,573
                                                                                    ----------    ----------

Cash flows from investing activities:
        Purchase of Federal Home Loan Bank stock                                           (91)         (419)
        Purchases of available-for-sale securities                                     (85,489)      (37,394)
        Proceeds from sales of available-for-sale securities                            82,990        37,414
        Proceeds from maturities of held-to-maturity securities                              2             2
        Loan originations and principal collections, net                               (18,599)        2,831
        Purchase of loans                                                               (2,009)       (1,886)
        Recoveries of loans previously charged-off                                          22            41
        Capital expenditures                                                              (887)         (739)
                                                                                    ----------    ----------
Net cash used in investing activities                                                  (24,061)         (150)
                                                                                    ----------    ----------

Cash flows from financing activities:
        Net increase (decrease) in demand deposits, NOW and savings accounts            19,523        (5,073)
        Net (decrease) increase in time deposits                                        (4,477)           40
        Federal Home Loan Bank advances                                                 17,000        10,000
        Principal payments on advances from Federal Home Loan Bank                     (10,328)      (11,208)
        Net change in short term advances from Federal Home Loan Bank                   (2,372)        1,397
        Dividends paid                                                                  (1,210)         (893)
                                                                                    ----------    ----------

        Net cash provided by (used in) financing activities                             18,136        (5,737)
                                                                                    ----------    ----------

        Net decrease in cash and cash equivalents                                       (3,927)       (3,314)
        Cash and cash equivalents at beginning of year                                  15,178        11,757
                                                                                    ----------    ----------
        Cash and cash equivalents at end of period                                  $   11,251    $    8,443
                                                                                    ==========    ==========

Supplemental disclosures:
        Interest paid                                                               $    5,644    $    5,798
        Income taxes paid                                                                  316           420


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

                                                    6
</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").  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 six months  ended June 30,  2008 are not  necessarily
indicative of the results that may be expected for the year ending  December 31,
2008.  These  financial  statements  should  be read  in  conjunction  with  the
financial  statements  and notes thereto  included in the Company's  2007 Annual
Report on Form 10-K.

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

NOTE 2 - COMPREHENSIVE INCOME (LOSS)
------------------------------------

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  primary
source of other  comprehensive  income (loss) is the net unrealized holding gain
(loss) on securities.

Comprehensive income (loss)
<TABLE>
<CAPTION>
                                                    Six months ended      Three months ended
                                                         June 30,             June 30,
                                                     2008       2007       2008       2007
                                                   -------    -------    -------    -------
                                                 (amounts in thousands) (amounts in thousands)
<S>                                                 <C>        <C>        <C>        <C>
Net income                                         $ 2,064    $ 1,883    $   983    $   949
Net change in unrealized (losses)
 on securities and minimum pension
 liability adjustment, net of tax during period.    (2,922)    (2,742)    (1,976)    (2,356)
                                                   -------    -------    -------    -------
Comprehensive loss                                 $  (858)   $  (859)   $  (993)   $(1,407)
                                                   =======    =======    =======    =======
</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 No. 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 No.  133.  The  statement  also  subjects
beneficial  interests issued by  securitization  vehicles to the requirements of
SFAS No. 133. The statement was effective as of January 1, 2007. The adoption of
SFAS No. 155 did not have an 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
No.  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.  The adoption of this
statement did not have a material impact on the Company's  financial  condition,
results of operations or cash flows.

                                       7
<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 was 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 No. 157").  SFAS No. 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 No. 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 No. 157 was effective for the Company's  consolidated  financial statements
for the year  beginning on January 1, 2008.  The adoption of this  statement did
not have a material impact on its financial condition and results 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 was for fiscal years
beginning after December 15, 2007, with earlier application permitted. Companies
may 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 adoption of EITF Issue 06-4 did not have a material  impact on the
Company's financial statements.

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 No. 159").  SFAS No. 159 permits entities to choose to
measure many  financial  instruments  and certain other items at fair value that
were not previously  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 was  effective at the  beginning of the  Company's  fiscal year
beginning  January  1,  2008,  and early  application  may be elected in certain
circumstances.  The adoption of this statement did not have a material impact on
its financial condition and results of operations.

In  December  2007,  the FASB  issued  SFAS No. 141  (Revised  2008),  "Business
Combinations" ("SFAS No. 141(R)"). SFAS No. 141(R) will significantly change the
accounting for business  combinations.  Under SFAS 141(R),  an acquiring  entity
will be required to recognize all the assets acquired and liabilities assumed in
a transaction at the  acquisition-date  fair value with limited  exceptions.  It
also amends the  accounting  treatment  for  certain  specific  items  including
acquisition  costs  and  non  controlling  minority  interests  and  includes  a
substantial  number of new  disclosure  requirements.  SFAS No.  141(R)  applies
prospectively  to business  combinations for which the acquisition date is on or
after  January 1,  2009.  The  Company  does not  expect  the  adoption  of this
statement to have a material  impact on its  financial  condition and results of
operations.

In March  2008,  the FASB issued SFAS No.  161,  "Disclosures  about  Derivative
Instruments  and Hedging  Activities-an  amendment  of FASB  Statement  No. 133"
("SFAS  No.  161").  SFAS  No.  161  changes  the  disclosure  requirements  for
derivative  instruments  and hedging  activities.  Entities  will be required to
provide  enhanced  disclosures  about (a) how and why an entity uses  derivative
instruments,  (b)  how  derivative  instruments  and  related  hedge  items  are
accounted for under Statement 133 and its related  interpretations,  and (c) how
derivative  instruments  and related  hedged items affect an entity's  financial
position, financial performance, and cash flows. The guidance in SFAS No. 161 is
effective for financial  statements  issued for fiscal years and interim periods
beginning  after  November 15, 2008,  with early  application  encouraged.  This
statement encourages, but does not require,  comparative disclosures for earlier
periods at initial  adoption.  The Company  does not expect the adoption of this
statement to have a material  impact on its  financial  condition and results of
operations.

                                       8
<PAGE>

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

The  following  summarizes  the net periodic  benefit cost for the six and three
months ended June 30:

<TABLE>
<CAPTION>
                                              Six Months Ended         Three Months Ended
                                                   June30,                  June 30,
                                             2008          2007         2008         2007
                                           ---------    ---------    ---------    ---------
<S>                                          <C>          <C>           <C>          <C>
Components of net periodic benefit cost:
   Service cost                            $ 201,904    $ 218,870    $  88,154    $ 104,780
   Interest cost                             183,475      171,011       88,475       82,034
   Expected return on plan assets           (213,496)    (184,471)    (107,746)    (107,307)
   Amortization of:
      Prior service costs                        446          447          223          224
      Actuarial loss                          22,431       34,118        6,681       12,945
                                           ---------    ---------    ---------    ---------

   Net periodic benefit cost               $ 194,760    $ 239,975    $  75,787    $  92,676
                                           =========    =========    =========    =========
</TABLE>

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

<TABLE>
<CAPTION>
<S>                                <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*
Return on plan assets              7.50%              7.50%              7.50%              7.50%
</TABLE>

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

NOTE 5 - ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS
-----------------------------------------------------------

<TABLE>
<CAPTION>

($ in 000s)                              Fair Value Measurements at Reporting using
                                    Quoted Prices in
                                     Active Markets   Significant Other   Significant
                                     for Identical       Observable       Unobservable
                                         Assets           Inputs            Inputs
Description           6/30/08          (Level 1)         (Level 2)         (Level 3)
                      -------          ---------         ---------         ---------
<S>               <C>               <C>               <C>               <C>
                  $       145,745   $           126   $       145,619   $             0
                  ---------------   ---------------   ---------------   ---------------
Total             $       145,745   $           126   $       145,619   $             0
                  ===============   ===============   ===============   ===============
</TABLE>

                                       9
<PAGE>

                  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 has seven (7)
full service offices including a Trust/Wealth  Services  Division.  Such offices
are  located in the towns of North  Canaan,  Lakeville,  Salisbury  and  Sharon,
Connecticut,  Sheffield and South Egremont, Massachusetts, and Dover Plains, New
York.  In  addition,  the  bank  has  received  regulatory  approvals  to open a
full-service branch in Millerton,  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 to
developing new personalized financial products and services to meet the needs of
customers. This discussion should be read in conjunction with Salisbury Bancorp,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 2007.

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

Overview
--------

The Company's net income for the six months ended June 30, 2008 was  $2,064,000.
This  compares to earnings of $1,883,000  for the same period in 2007.  Earnings
per share for the six months ended June 30, 2008  totaled  $1.23 per share which
compared to earnings  per share of $1.12 for the  corresponding  period in 2007.
The  increase in earnings is  primarily  attributable  to an increase in earning
assets,  which has resulted in an increase in interest  income,  and movement in
the markets,  which has created  opportunities  to generate  gains in securities
transactions during the period, which contributed to the increase in noninterest
income.

The  Company's  assets at June 30, 2008 totaled  $479,705,000  compared to total
assets of  $461,960,000  at December  31,  2007.  During the first six months of
2008,  net  loans  outstanding,  not  including  loans  held-for-sale  increased
$20,750,000  or  7.73%  to  $288,941,000.  This  compares  to  total  net  loans
outstanding,  not including loans  held-for-sale of $268,191,000 at December 31,
2007.  This increase is primarily  attributable  to increased loan demand during
the period.  Non-performing loans totaled $2,265,000 at June 30, 2008 or .78% of
total  loans  outstanding.   This  compares  to  non-performing  loans  totaling
$1,008,000  at December  31, 2007 or .37% of total loans  outstanding.  The Bank
continues  to monitor  the  quality of the loan  portfolio  to ensure  that loan
quality will not be sacrificed for growth or otherwise  compromise the Company's
objectives.  Deposits at June 30, 2008 totaled $332,787,000 as compared to total
deposits of $317,741,000 at December 31, 2007.

The Bank is "well capitalized"  pursuant to the standards of the Federal Deposit
Insurance Corporation. The Bank's total risk based capital ratio was 14.14%; the
Tier 1 capital ratio was 13.21% and the leverage  ratio was 8.21%.  The Board of
Directors  declared a second  quarter  cash  dividend of $.28 per common  share,
which was paid on July 31, 2008 to  shareholders  of record as of June 30, 2008.
This  compared to a cash dividend of $.27 per common share that was paid for the
second  quarter of 2007.  Year-to-date  dividends  total  $.56 per common  share
outstanding for this year. This compares to total year-to-date dividends of $.54
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."

                                       10
<PAGE>

                         SIX MONTHS ENDED JUNE 30, 2008
                         ------------------------------
                  AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2007

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 primarily on the
loan and  securities  portfolios and interest paid on deposits and advances from
the Federal Home Loan Bank.  Non-interest  income is primarily  derived from the
Trust/Wealth Advisory 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)
Six Months Ended June 30,                 2008      2007
                                          ----      ----
Total Interest and Dividend Income
(financial statements)                 $13,259   $12,797
Tax Equivalent Adjustment                  594
                                       -------   -------
                                                     572
Total Interest and Dividend Income
      (on an FTE basis)                 13,853    13,369
Total Interest Expense                   5,718     6,068
                                       -------   -------
Net Interest and Dividend Income-FTE   $ 8,135   $ 7,301
                                       =======   =======

Total interest and dividend  income on a FTE basis for the six months ended June
30, 2008, when compared to the same period in 2007, increased $484,000 or 3.62%.
The increase was primarily attributable to an increase of earning assets.

Interest  expense  on  deposits  for  the  first  six  months  of  2008  totaled
$3,639,000, a decrease of $383,000 or 9.52% which compared to $4,022,000 for the
same period in 2007. This decrease reflects an economic environment of generally
lower  interest  rates.  The Bank's  volume of Federal  Home Loan Bank  advances
outstanding  at June 30, 2008  increased  4.46% when compared to total  advances
outstanding at December 31, 2007,  resulting in an increase of interest  expense
totaling $33,000.  Total interest expense for the six months ended June 30, 2008
was $5,718,000, a decrease of $350,000 or 5.77% when compared to the same period
in 2007.

Overall,  net interest and dividend income (on an FTE basis) increased  $834,000
or 11.42% to $8,135,000  for the period ended June 30, 2008 when compared to the
same period in 2007.

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

Noninterest  income  totaled  $2,586,000 for the six months ended June 30, 2008.
This is an  increase of $347,000  or 15.50%  compared to  noninterest  income of
$2,239,000  for the six months  ended June 30,  2007.  Continuing  growth of the
Trust/Wealth  Advisory  Services  Division has  resulted in increased  income of
$108,000  or 10.45% to  $1,141,000  for the  period  ended June 30,  2008.  This
compares to income  totaling  $1,033,000 for the  corresponding  period in 2007.
Gains on sales of available-for-sale securities increased 96.67% to $354,000 for
the first six months of 2008 compared to the same period in 2007.  This increase
is primarily  the result of the movement of market rates during the quarter that
resulted in  opportunities to generate gains in securities  transactions.  Other
income which 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  increased  $65,000 or 6.34% to $1,091,000
from $1,026,000 during the period ended June 30, 2008.

                                       11
<PAGE>

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

Noninterest  expense  increased  10.91%  for the  first  six  months  of 2008 as
compared to the same period in 2007. This increase is primarily  attributable to
the Trust and Wealth Advisory  Services Division working with Bradley Foster and
Sargent,  Inc., an investment  advisory firm that assists in providing a broader
scope of highly  personalized  professional  investment  services to clients. In
addition,  internal  audit expense  increased.  Although  some  increases in the
described  noninterest  expenses in the table below are  attributable  to normal
volumes of business,  the increase  also  reflects  additional  staffing and the
additional  costs  associated  with the daily operation of our new Dover Plains,
New York branch,  which opened in August of 2007.  The components of noninterest
expense and the changes in the period were as follows (amounts in thousands):

                                          2008       2007      Change%   Change
-------------------------------------------------------------------------------
Salaries and employee benefits          $  4,077   $  3,832   $    245     6.39%
Occupancy expense                            463        380         83    21.84
Equipment expense                            431        370         61    16.48
Data processing                              695        638         57     8.93
Insurance                                     90         74         16    21.62
Printing and stationery                      135        144         (9)   (6.25)
Professional fees                            433        339         94    27.72
Legal expense                                166        126         40    31.74
Amortization of core deposit intangible       82         82          0        0
Other expense                                775        639        136    21.28
                                        --------   --------   --------  -------

      Total noninterest expense         $  7,347   $  6,624   $    723    10.91
                                        ========   ========   ========  =======

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

The income tax  provision  for the first six months of 2008 totaled  $546,000 in
comparison to $461,000 for the same six-month  period in 2007.  Pretax income in
2008 was $2,610,000 and included tax-exempt income totaling  $1,153,000.  Pretax
income  in  2007  was  $2,344,000  and  included   tax-exempt   income  totaling
$1,111,000.  The increase in the income tax provision is primarily  attributable
to an increase in taxable income.

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

Overall,  net income  totaled  $2,064,000 for the six months ended June 30, 2008
and represents earnings of $1.23 per average share outstanding. This compares to
net income of  1,883,000  or $1.12 per average  share  outstanding  for the same
period in 2007.

                        THREE MONTHS ENDED JUNE 30, 2008
                 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2007

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 June 30                                   2008        2007
                                                            -------    -------
 Total Interest and Dividend Income
(financial statements)                                      $ 6,591    $ 6,360
Tax Equivalent Adjustment                                       298        301
                                                            -------    -------
     Total Interest and Dividend Income (on an FTE basis)     6,889      6,661
Total Interest (Expense)                                     (2,710)    (2,997)
                                                            -------    -------
Net Interest and Dividend Income-FTE                        $ 4,179    $ 3,664
                                                            =======    =======

                                       12
<PAGE>

Total  interest and  dividend  income on an FTE basis for the three months ended
June 30, 2008  increased  $228,000 or 3.42% compared to the same period in 2007.
The  increase  was  primarily  attributable  to an increase  in earning  assets.
Interest  expense on  deposits  decreased  $326,000 or 16.37% for the quarter to
$1666,000  compared to $1,992,000 for the same quarter in 2007. This decrease is
primarily  the result of an economic  environment  of generally  lower  interest
rates. The Bank's volume of Federal Home Loan Bank advances has increased during
the three month  period ended June 30, 2008 when  compared to the  corresponding
period in 2007.  Interest expense on these advances  increased  $39,000 or 3.88%
and totaled  $1,044,000  for the three  months  ended June 30, 2008  compared to
$1,005,000 for the corresponding  period in 2007. Total interest expense for the
three  months  ending June 30, 2008 was  $2,710,000  compared to total  interest
expense  for the same  period in 2007 of  $2,997,000,  a decrease of $287,000 or
9.58%.  This  decrease is a reflection of an economic  environment  of generally
lower interest rates. Overall, net interest and dividend income (on a FTE basis)
increased $515,000 or 14.06% to $4,179,000 for the three-month period ended June
30, 2008 when compared to the corresponding period in 2007.

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

Noninterest  income totaled  $1,153,000 for the three months ended June 30, 2008
as  compared  to  $1,115,000  for the three  months  ended June 30,  2007.  This
increase  of $38,000 or 3.40% is  primarily  attributable  to  increased  income
generated  by an  increase  in income from the  Trust/Wealth  Advisory  Services
Division of $38,000 or 7.56% to $541,000 for the second quarter of 2008 compared
to the same period in 2007. This is primarily the result of continued  growth in
assets under management.

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

Noninterest expense totaled $3,696,000 for the three month period ended June 30,
2008 as  compared  to  $3,305,000  for the same  period in 2007,  an increase of
$391,000 or 11.83%.  Although there are some  increases in noninterest  expenses
that are  attributable  to  normal  volumes  of  business,  much of the  overall
increase in the  noninterest  expenses listed in the table below is 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 noninterest  expense and the changes in the period were as follows
(amounts in thousands):

                                           2008      2007     Change   % Change
-------------------------------------------------------------------------------
Salaries and employee benefits           $  2,001  $  1,880  $    121      6.44%
Occupancy expense                             232       189        43     22.75
Equipment expense                             220       179        41     22.91
Data processing                               376       301        75     24.91
Insurance                                      46        36        10     27.77
Printing and stationery                        75        80        (5)    (6.25)
Professional fees                             199       174        25     14.37
Legal expense                                 105        71        34     47.88
Amortization of core deposit intangible        41        41         0         0
Other expense                                 401       354        47     13.28
                                         --------  --------  --------  --------
      Total non-interest expense         $  3,696  $  3,305  $    391     11.83
                                         ========  ========  ========  ========

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

The income tax provision for the three-month  period ended June 30, 2008 totaled
$245,000 in comparison to $224,000 for the same three month period in 2007.  The
increase in the income tax provision is  attributable  to an increase in taxable
income.

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

Overall,  net income  totaled  $983,000 for the three months ended June 30, 2008
and represents earnings of $.58 per average share outstanding.  This compares to
net income of $949,000  for the same  period in 2007,  an increase of $34,000 or
3.58% and compares to earnings per share of $.56 for the 2007 period.


                                       13
<PAGE>

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

Total  assets at June 30, 2008 were  $479,705,000  compared to  $461,960,000  at
December 31, 2007, an increase of 3.84%. The increase is primarily the result of
an increase in earning assets during the period, specifically loans.

Securities
----------

The make up of the  securities  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.  None of the
securities  owned in the portfolio are  collateralized  by sub-prime  mortgages.
During the six months ended June 30, 2008, the securities  portfolio,  including
Federal Home Loan Bank stock, decreased $1,543,000 or 1.01% to $151,081,000 from
$152,624,000 at December 31, 2007.

Securities   are   classified   in   the   portfolio   as   either    securities
available-for-sale  or securities  held-to-maturity.  Almost all  securities 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
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 June 30, 2008, the unrealized loss net of tax was $5,209,000.  This
compares to an  unrealized  loss net of tax of  $2,273,000 at December 31, 2007.
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 net loans  outstanding of  $291,237,000 at June 30, 2008 compares to total
loans  outstanding  of  $270,361,000  at  December  31,  2007,  an  increase  of
$20,876,000 or 7.72%.  Although  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.

The following table  represents the composition of the loan portfolio  comparing
June 30, 2008 to December 31, 2007:

                                        June 30, 2008     December 31, 2007
                                        -------------     -----------------
                                               (amounts in thousands)
Commercial, financial and agricultural   $     19,793       $     20,629
Real estate-construction and land
     development                               31,870             28,928
Real estate-residential                       171,972            158,600
Real estate-commercial                         59,205             53,823
Consumer                                        8,266              8,005
Other                                             131                376
                                         ------------       ------------
                                              291,237            270,361
Deferred costs, net                               329                306
Unearned income                                     0                 (1)
Allowance for loan losses                      (2,625)            (2,475)
                                         ------------       ------------
Net Loans                                $    288,941       $    268,191
                                         ============       ============


                                       14
<PAGE>

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 for loan losses
through  charges to earnings.  The  provision  expense for  allowances  for loan
losses for the first six months of 2008 totaled $170,000. There was no provision
expense for loan losses for the comparable period in 2007.

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 June 30, 2008. 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 No. 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 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,  on the  basis of  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.

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 of time 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 non-accrual  status
along  with  loans  that are 90 days or more  past due and still  accruing,  are
closely monitored by Management.  At June 30, 2008,  nonperforming loans totaled
$2,265,000 or 0.77% of total loans  outstanding of  $291,237,000.  The allowance
for loan losses totaled $2,625,000  representing 115.89% of nonperforming loans.
Nonperforming  loans totaled  $1,008,000 or 0.37% of total loans  outstanding of
$270,361,000  at December  31,  2007.  The  allowance  for loan  losses  totaled
$2,475,000 at December 31, 2007 and represented 245.53% of nonperforming  loans.
A total of $42,000 of loans were  charged  off by the Bank during the six months
ended June 30, 2008.  These  charged-off  loans consisted  primarily of consumer
loans. This compares to loans charged off during the six month period ended June
30,  2007 of $63,000.  A total of $22,000 of  previously  charged-off  loans was
recovered during the six month period ended June 30, 2008.

                                       15
<PAGE>

Recoveries  for the  same  period  in 2007  totaled  $41,000.  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.  Total  deposits  increased  4.73% from December 31, 2007 to June 30,
2008. The following table illustrates the composition of the Company's  deposits
at June 30, 2008 and December 31, 2007:

                             June 30, 2008             December 31, 2007
                             -------------             -----------------
                                      (amounts in thousands)

Demand                      $        69,227            $        69,215
NOW                                  27,235                     23,652
Money Market                         61,351                     56,210
Savings                              63,402                     52,616
Time                                111,572                    116,048
                            ---------------            ---------------
  Total Deposits            $       332,787            $       317,741
                            ===============            ===============

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  June  30,  2008,  the  Company  had  $99,246,000  in
outstanding  advances from the Federal Home Loan Bank compared to $95,011,000 at
December 31, 2007.  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
of the  customer's  credit.  The  accompanying  table  summarizes  the Company's
off-balance sheet lending-related financial instruments by remaining maturity at
June 30, 2008:

<TABLE>
<CAPTION>
June 30, 2008
(amounts in thousands)

 By remaining maturity             Less than 1 year    1-3 years      4-5 years    After 5 years      Total
--------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>            <C>           <C>            <C>
Off- balance sheet lending-related
Financial Instruments
    Residential real estate related   $      2,147   $          0   $          3   $     26,299   $     28,449
    Commercial related                         573          2,554          1,756         17,637         22,520
    Consumer related                                                                      7,320          7,320
    Standby letters of credit                                   3                                            3
--------------------------------------------------------------------------------------------------------------

    Total                             $      2,720   $      2,557   $      1,759   $     51,256   $     58,292
--------------------------------------------------------------------------------------------------------------
</TABLE>

                                       16
<PAGE>

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 period
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 June 30,
2008, the Company  maintains an asset  sensitive  (positive gap) position.  This
would suggest that during a period of  increasing  interest  rates,  the Company
would be in a better position to increase net interest income.  To the contrary,
during a period of declining  interest  rates,  a negative gap would result in a
decrease in interest  income.  The level of interest  rate risk at June 30, 2008
was 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 June 30, 2008 the Company had
approximately  $58,292,000 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 June 30,  2008,  the Company  had  $43,507,000  in  shareholders'  equity,  a
decrease  of 4.51% when  compared  to December  31,  2007  shareholders'  equity
totaling  $45,563,000.  Several  components  contributed  to  the  change  since
December 31, 2007. Earnings for the six-month period ended June 30, 2008 totaled
$2,064,000.    Securities   in   the   portfolio    that   are   classified   as
available-for-sale  are adjusted to fair value monthly and the unrealized 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
June  30,  2008  resulted  in  other  comprehensive  loss  net of  tax  totaling
$5,209,000.  The application of SFAS No. 158, as described in Note 3 resulted in
other comprehensive  income net of tax of $15,000 for the six month period ended
June 30, 2008.

A review and analysis of the securities  portfolio 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 $945,000.  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
$28,000.  Under  current  regulatory  definitions,  the Bank is 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

                                       17
<PAGE>

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 June 30,  2008,  the Bank had a total  risk based  capital  ratio of
14.14%  compared to 15.00% at December 31, 2007.  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 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  which  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;
(b)      changes in the legislative and regulatory  environment  that negatively
         impact 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.

Not applicable to smaller reporting companies.

                                       18
<PAGE>

                        Item 4. Controls and Procedures.

The Company's Chief  Executive  Officer and Chief  Financial  Officer  concluded
that,  based upon an  evaluation as of June 30, 2008,  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 and that such
information  is  accumulated  and  communicated  to  the  Company's   management
including  its  Chief  Executive  Officer  and  Chief  Financial   Officer,   as
appropriate, to allow timely decisions regarding required disclosures.

During  the  fiscal  quarter  ended  June 30,  2008 there were no changes in the
Company's  internal  control  over  financial  reporting  that  have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

                           Part II - OTHER INFORMATION

Item 1. - Legal Proceedings.  None

Item 1A.  Risk Factors.  Not applicable to smaller reporting companies.

Item 2. -Unregistered Sales of Equity Securities and Use of Proceeds. On May 14,
2008,  the Company  issued 840 shares of common stock to members of its Board of
Directors  under the terms of the Director  Stock Retainer Plan. The shares were
issued in a private transaction in reliance upon the exemption from registration
provided by Section  4(2) of the  Securities  Act of 1933,  as amended.  No cash
consideration was received upon issuance of the shares.

Item 3. - Defaults Upon Senior Securities.  None

Item 4. - Submission of Matters to a Vote of Security  Holders.  Incorporated by
reference from Form 8-K filed May 16, 2008.

Item 5. - Other Information.  None

Item 6. - Exhibits

              11   Computation of Earnings per Share.

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

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

              32-  Section 1350 Certifications of CEO and CFO.

                             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: August 11, 2008                       by: /s/ John F. Perotti
               ----------------                          --------------------
                                                         John F. Perotti
                                                         Chief Executive Officer

         Date: August 11, 2008                       by: /s/ John F. Foley
               ----------------                          -----------------
                                                         John F. Foley
                                                         Chief Financial Officer

                                       19