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, 2009___________________

                                       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
Incorporation or Organization)              (I.R.S. Employer 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 has submitted  electronically  and
posted on its corporate website, if any, every Interactive Data File required to
be submitted  and posted  pursuant to Rule 405 of  Regulation  S-T  (ss.232.405)
during the preceding 12 months (or for such shorter  period that the  registrant
was required to submit and post such files).

                              Yes [_] 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:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date: The Company had 1,686,701 shares
outstanding as of August 14, 2009.

<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, 2009 (unaudited)
            and December 31, 2008                                              4
         Condensed Consolidated Statements of Income (Loss) - six and
            three months ended June 30, 2009 and 2008 (unaudited)              5

         Condensed Consolidated Statements of Cash Flows - six months
            ended June 30, 2009 and 2008 (unaudited)                           6

         Notes to Condensed Consolidated Financial Statements (unaudited)      7

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                                13

Item 4.  Controls and Procedures                                              22


Part II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                    22

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds          23

Item 3.  Defaults Upon Senior Securities                                      23

Item 4.  Submission of Matters to a Vote of Security Holders                  23

Item 5.  Other Information                                                    25

Item 6.  Exhibits                                                             25

Signatures                                                                    25


                                       2

<PAGE>


                         Part I-- FINANCIAL INFORMATION
                          Item 1. Financial Statements





                                       3
<PAGE>


                     SALISBURY BANCORP, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       June 30, 2009 and December 31, 2008

<TABLE>
<CAPTION>
                                                                                     June 30,       December 31,
                                                                                       2009             2008
                                                                                  ------------     -------------
                                                                                   (unaudited)
<S>                                                                                <C>              <C>
ASSETS
------
Cash and due from banks                                                           $   6,795,337    $   7,082,317
Interest-bearing demand deposits with other banks                                    34,262,986          900,487
Money market mutual funds                                                             4,601,031        1,476,999
Federal funds sold                                                                            0          200,000
                                                                                  -------------    -------------
           Cash and cash equivalents                                                 45,659,354        9,659,803
Interest-bearing time deposit with other banks                                        5,000,000                0
Investments in available-for-sale securities (at fair value)                        158,902,378      150,526,964
Investments in held-to-maturity securities (fair values of $64,257 as of
   June 30, 2009 and $66,502 as of December 31, 2008)                                    64,086           66,443
Federal Home Loan Bank stock, at cost                                                 5,742,800        5,323,000
Loans held-for-sale                                                                     211,000        2,314,250
Loans, less allowance for loan losses of $3,308,619 as of June 30, 2009
   and $2,724,024 as of December 31, 2008                                           294,364,033      297,367,434
Investment in real estate                                                                75,000           75,000
Other real estate owned                                                                 418,024          204,534
Premises and equipment                                                                8,259,290        7,123,671
Goodwill                                                                              9,828,712        9,828,712
Core deposit intangible                                                               1,082,960        1,165,068
Accrued interest receivable                                                           2,341,363        2,704,385
Cash surrender value of life insurance policies                                       3,994,980        3,824,653
Deferred taxes                                                                        4,270,185        4,196,819
Other assets                                                                          1,966,624        1,373,424
                                                                                  -------------    -------------
           Total assets                                                           $ 542,180,789    $ 495,754,160
                                                                                  =============    =============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
   Noninterest-bearing                                                            $  64,781,251    $  65,479,271
   Interest-bearing                                                                 337,251,355      279,445,961
                                                                                  -------------    -------------
           Total deposits                                                           402,032,606      344,925,232
Securities sold under agreements to repurchase                                       10,325,843       11,203,289
Federal Home Loan Bank advances                                                      77,174,189       87,913,667
Due to broker                                                                                 0        7,631,919
Other liabilities                                                                     4,653,255        5,140,721
                                                                                  -------------    -------------
           Total liabilities                                                        494,185,893      456,814,828
                                                                                  -------------    -------------

Shareholders' equity:
    Preferred stock, par value $.01 per share, authorized 25,000 shares; issued
     and outstanding 8,816 shares at June 30, 2009 and 0 shares at
     December 31, 2008.                                                                      88                0
   Common stock, par value $.10 per share; authorized 3,000,000 shares; issued
     and outstanding, 1,686,701 shares at June 30, 2009 and 1,685,861 shares at
        December 31, 2008                                                               168,670          168,586
   Unused common stock warrants outstanding                                             111,998                0
    Paid-in capital                                                                  21,883,898       13,157,883
   Retained earnings                                                                 34,864,904       34,518,331
   Accumulated other comprehensive loss                                              (9,034,662)      (8,905,468)
                                                                                  -------------    -------------
           Total shareholders' equity                                                47,994,896       38,939,332
                                                                                  -------------    -------------
           Total liabilities and shareholders' equity                             $ 542,180,789    $ 495,754,160
                                                                                  =============    =============

 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                       4
<PAGE>

<TABLE>
<CAPTION>

                     SALISBURY BANCORP, INC. AND SUBSIDIARY
               CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
                             June 30, 2009 and 2008
                                   (unaudited)

                                                                                  Six Months Ended          Three Months Ended
                                                                                      June 30,                    June 30,
                                                                                  2009        2008           2009           2008
                                                                                  ----        ----           ----           ----
<S>                                                                         <C>             <C>           <C>            <C>
Interest and dividend income:
   Interest and fees on loans                                               $  8,989,464    $ 9,231,686   $ 4,479,794    $ 4,600,100
   Interest on debt securities:
     Taxable                                                                   2,596,292      2,630,080     1,264,481      1,343,164
     Tax-exempt                                                                1,276,827      1,153,251       633,198        578,789
   Dividends on equity securities                                                      0        129,726             0         51,478
   Other interest                                                                 10,542        114,472         8,694         17,788
                                                                            ------------    -----------   -----------    -----------
           Total interest and dividend income                                 12,873,125     13,259,215     6,386,167      6,591,319
                                                                            ------------    -----------   -----------    -----------
Interest expense:
   Interest on deposits                                                        2,994,686      3,639,485     1,511,104      1,666,257
   Interest on securities sold under agreements to repurchase                     67,280              0        28,253              0
   Interest on Federal Home Loan Bank advances                                 1,530,381      2,078,343       768,864      1,043,181
                                                                            ------------    -----------   -----------    -----------
         Total interest expense                                                4,592,347      5,717,828     2,308,221      2,709,438
                                                                            ------------    -----------   -----------    -----------
         Net interest and dividend income                                      8,280,778      7,541,387     4,077,946      3,881,881
Provision for loan losses                                                        745,000        170,000       315,000        110,000
                                                                            ------------    -----------   -----------    -----------
         Net interest and dividend income
                    after provision for loan losses                            7,535,778      7,371,387     3,762,946      3,771,881
                                                                            ------------    -----------   -----------    -----------
Noninterest income:
   Trust/Wealth Advisory Services income                                         970,000      1,140,736       430,000        540,735
   Loan commissions                                                                1,548          1,543             0          1,544
   Service charges on deposit accounts                                           415,528        401,404       207,282        203,245
   Gain on sales of available-for-sale securities, net                           436,210        354,405         8,872         36,435
   Impairment loss on securities                                              (1,127,889)             0    (1,127,889)             0
   Gain on sales of loans held-for-sale                                          454,374        159,034       339,819         86,201
   Other income                                                                  751,935        528,786       338,238        285,096
                                                                            ------------    -----------   -----------    -----------
         Total noninterest income                                              1,901,706      2,585,908       196,322      1,153,256
                                                                            ------------    -----------   -----------    -----------
Noninterest expense:
   Salaries and employee benefits                                              4,547,153      4,077,370     2,282,050      2,001,197
   Occupancy expense                                                             502,082        462,702       244,963        232,175
   Equipment expense                                                             440,018        431,302       213,301        220,215
   Data processing                                                               713,600        695,154       330,164        390,539
   Insurance                                                                      55,483         69,908        32,033         34,915
   FDIC Insurance                                                                533,204         19,607       419,702         10,700
   Printing and stationery                                                       167,183        134,509       101,214         75,001
   Professional fees                                                             524,628        433,444       263,287        199,234
   Legal expense                                                                 207,953        166,236       112,594        104,809
   Amortization of core deposit intangible                                        82,107         82,108        41,054         41,054
   Other expense                                                                 851,361        774,600       450,620        387,105
                                                                            ------------    -----------   -----------    -----------
         Total noninterest expense                                             8,624,772      7,346,940     4,490,982      3,696,944
                                                                            ------------    -----------   -----------    -----------
         Income (loss) before income taxes                                       812,712      2,610,355      (531,714)     1,228,193
Income taxes                                                                     (85,103)       545,869      (348,354)       244,641
                                                                            ------------    -----------   -----------    -----------
         Net income (loss)                                                  $    897,815    $ 2,064,486   $  (183,360)   $   983,552
                                                                            ============    ===========   ===========    ===========
         Net income (loss) available to common shareholders                 $    763,061    $ 2,064,486   $  (318,114)   $   983,552
                                                                            ============    ===========   ===========    ===========
Earnings (loss) per common share                                            $        .45    $      1.23   $      (.19)   $       .58
                                                                            ============    ===========   ===========    ===========
Dividends per common share outstanding                                      $        .28(1) $       .56   $         0(1) $       .28
                                                                            ============    ===========   ============   ===========
</TABLE>


(1) The $0.28  dividend for the second  quarter was not  declared  until July 8,
2009 and will be reflected  in the  financial  statements  for the three (3) and
nine (9) month periods ended September 30, 2009.

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

                                       5

<PAGE>


                     SALISBURY BANCORP, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (amounts in thousands)
                     Six months ended June 30, 2009 and 2008
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                             2009           2008
                                                                        ------------    ------------
<S>                                                                     <C>            <C>

Cash flows from operating activities:
      Net income                                                        $    897,815    $  2,064,486
Adjustments to reconcile net income to net cash provided by
operating activities:
        Amortization of securities, net                                      268,621          35,640
        Gain on sales of available-for-sale securities, net                 (436,210)       (354,405)
        Write down of available-for-sale securities                        1,127,889               0
        Provision for loan losses                                           (745,000)       (170,000)
        Change in loans held-for-sale                                      2,103,250        (289,000)
        Change in deferred loan costs, net                                    (7,093)        (23,046)
        Net (increase) decrease in mortgage servicing rights                (237,348)         16,852
        Depreciation and amortization                                        351,232         324,320
        Amortization of core deposit intangible                               82,108          82,108
        Accretion of fair value adjustment on deposits/borrowings            (54,251)        (65,102)
        Amortization of fair value adjustment on loans                        23,809          23,809
        Decrease (increase) in interest receivable                           332,408         (91,754)
        Deferred tax expense                                                 105,390         188,299
        (Increase) decrease in income tax receivable                        (373,247)         41,901
        Decrease in prepaid expenses                                          65,654          55,628
        Increase in cash surrender value of insurance policies              (170,327)        (60,742)
        Increase in other assets                                             (58,288)       (146,271)
        Decrease in accrued expenses                                        (326,388)       (157,723)
        Increase in interest payable                                          37,670          73,677
        Increase in other liabilities                                        225,916         415,126
        Issuance of shares for Directors' fees                                    84          27,720
        Increase in unearned income on loans                                   6,230           5,896
                                                                        ------------    ------------
Net cash provided by operating activities                                  3,219,924       1,997,419
                                                                        ------------    ------------

Cash flows from investing activities:
        Purchase of interest-bearing time deposits with other banks       (5,000,000)              0
        Purchase of Federal Home Loan Bank stock                            (419,800)        (90,500)
        Purchases of available-for-sale securities                       (78,868,360)    (85,488,839)
        Proceeds from sales of available-for-sale securities              33,679,138      82,989,725
        Proceeds from maturities of available-for-sale securities         27,991,643               0
        Proceeds from maturities of held-to-maturity securities                2,343           2,074
        Loan originations and principal collections, net                   3,572,618     (18,598,708)
        Purchase of loans                                                    (76,266)     (2,009,115)
        Recoveries of loans previously charged-off                            15,613          21,796
        Capital expenditures                                              (1,476,821)       (887,190)
                                                                        ------------    ------------
Net cash used in investing activities                                    (20,579,892)    (24,060,757)
                                                                        ------------    ------------

Cash flows from financing activities:
        Net increase in demand deposits, NOW and savings accounts         28,692,783      19,522,481
        Net increase (decrease) in time deposits                          28,414,591      (4,476,559)
        Federal Home Loan Bank advances                                   12,000,000      17,000,000
        Principal payments on Federal Home Loan Bank advances             (1,807,227)    (10,327,583)
        Net changes in short term advances                               (20,878,000)     (2,372,000)
        Decrease in securities sold under agreements to repurchase          (877,446)              0
        Proceeds from issuance of preferred stock                          8,838,101               0
        Dividends paid                                                    (1,023,283)     (1,209,827)
                                                                        ------------    ------------

        Net cash provided by financing activities                         53,359,519      18,136,512
                                                                        ------------    ------------

        Net increase (decrease) in cash and cash equivalents              35,999,551      (3,926,826)
        Cash and cash equivalents at beginning of year                     9,659,803      15,178,195
                                                                        ------------    ------------
        Cash and cash equivalents at end of period                      $ 45,659,354    $ 11,251,369
                                                                        ============    ============
Supplemental disclosures:
        Interest paid                                                   $  4,554,677    $  5,644,151
        Income taxes paid                                                    182,754         316,000

</TABLE>

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

                                       6

<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 of 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,  2009 are not  necessarily
indicative of the results that may be expected for the year ending  December 31,
2009.  These  financial  statements  should  be read  in  conjunction  with  the
financial  statements  and notes thereto  included in the Company's  2008 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)
                                     Six months ended        Three months ended
                                         June 30,                 June 30,
                                      2009       2008         2009        2008
                                      ----       ----         ----        ----
                                   (amounts in thousands) (amounts in thousands)

Net income                            $ 898    $ 2,064        $  (183) $   983
Net change in unrealized (losses)
 on securities and unrecognized
 pension plan expense, net of tax
 during period                          (42)    (2,922)        (1,977)  (1,976)
                                      -----    -------        -------    ----
Comprehensive loss                    $(856)   $  (858)       $(2,160) $  (993)
                                      =====    =======        =======  =======


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

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.  The
Company 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  adopted this Issue in 2008, and it did
not have a significant impact on its financial statements.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157).  SFAS No. 157 defines fair value,  establishes  a framework  for measuring
fair value under generally  accepted  accounting  principles  (GAAP) and expands
disclosures about fair value measurements.  The FASB's FSP FAS 157-2, "Effective
Date of FASB Statement No. 157",  defers until January 1, 2009, the  application
of SFAS 157 to nonfinancial  assets and nonfinancial  liabilities not recognized
or disclosed at least annually at fair value. This includes nonfinancial assets

                                       7
<PAGE>


and  nonfinancial  liabilities  initially  measured  at fair value in a business
combination  or  other  new  basis  event,  but not  measured  at fair  value in
subsequent periods. The Company adopted this statement on January 1, 2008 and it
did not have a significant impact on its financial  statements.  See Note 5 Fair
Value Measurements.

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,  at specified election
dates, to choose to measure certain financial instruments at fair value that are
not  currently  required to be measured at fair value.  The fair value option is
applied on an  instrument-by-instrument  basis,  is irrevocable  and can only be
applied to an entire instrument and not to specified risks, specific cash flows,
or portions of that  instrument.  Unrealized gains and losses on items for which
the fair value  option has been  elected  will be  reported  in earnings at each
subsequent reporting date and upfront fees and costs related to those items will
be  recognized  in earnings as incurred  and not  deferred.  SFAS No. 159 became
effective in fiscal years beginning after November 15, 2007. The Company adopted
SFAS 159 effective  January 1, 2008 and it did not have a significant  impact on
its financial statements. See Note 5 Fair Value Measurements

In December  2007,  the FASB issued SFAS No. 160,  "Noncontrolling  Interests in
Consolidated  Financial  Statements and Amendment of ARB No. 51" (SFAS No. 160).
The  pronouncement  requires  all entities to report  noncontrolling  (minority)
interests in subsidiaries as a component of shareholders'  equity.  SFAS No. 160
is effective for fiscal years beginning after December 15, 2008.  Early adoption
is  prohibited.  Management  anticipates  that  this  statement  will not have a
material impact on the Company's financial condition and results of operations.

In  December  2007,  the FASB  issued  SFAS No. 141  (Revised  2007),  "Business
Combinations" (SFAS 141(R)).  SFAS 141(R)  significantly  changes the accounting
for business combinations. Under SFAS 141(R), an acquiring entity is 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
noncontrolling  (minority)  interests and includes a  substantial  number of new
disclosure   requirements.   SFAS  141(R)  applies   prospectively  to  business
combinations  for which the acquisition date is on or after January 1, 2009. The
adoption  of this  statement  did not have a  material  impact on its  financial
condition and results of operations.

In February  2008, the FASB issued FSP FAS 140-3,  "Accounting  for Transfers of
Financial  Assets and  Repurchase  Financing  Transactions."  This FSP  provides
guidance on how the transferor and transferee  should  separately  account for a
transfer  of a financial  asset and a related  repurchase  financing  if certain
criteria are met. This guidance became  effective  January 1, 2009. The adoption
of this new FSP did not have a  material  effect  on the  Company's  results  of
operations or financial position.

In March  2008,  the FASB issued SFAS No.  161,  "Disclosures  about  Derivative
Instruments and Hedging Activities-an amendment of FASB Statement No. 133" (SFAS
161). SFAS 161 changes the disclosure  requirements  for derivative  instruments
and hedging  activities.  Entities are required to provide enhanced  disclosures
about (a) how and why an entity uses derivative instruments,  (b) how derivative
instruments  and related hedged 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 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
adoption  of this  statement  did not have a  material  impact on its  financial
condition and results of operations.

In April 2008, the FASB issued FSP FAS 142-3,  "Determination of the Useful Life
of Intangible  Assets." This FSP provides  guidance as to factors  considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized  intangible  asset under SFAS 142,  "Goodwill and Other  Intangible
Assets." This guidance  became  effective  January 1, 2009. The adoption of this
new FSP did not have a material effect on the Company's results of operations or
financial position.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally  Accepted
Accounting  Principles." This standard  formalizes minor changes in prioritizing
accounting  principles used in the preparation of financial  statements that are
presented in conformity with GAAP. This standard became  effective  November 15,
2008.



                                       8
<PAGE>

In April 2009,  the FASB issued FASB Staff  Position  157-4,  "Determining  Fair
Value When the  Volume and Level of  Activity  for the Asset or  Liability  Have
Significantly Decreased and Identifying  Transactions That Are Not Orderly" (FSP
FAS 157-4). FSP FAS 157-4 provides additional guidance for estimating fair value
measurements   in  accordance   with  FASB   Statement  No.  157,   "Fair  Value
Measurements,"  when the volume and level of activity for the asset or liability
have significantly  decreased. FSP FAS 157-4 is effective for interim and annual
reporting  periods ending after June 15, 2009 with early adoption  permitted for
periods ending after March 15, 2009. The Company adopted this statement on April
1, 2009, and it did not have a significant  impact on its financial  statements.
See Note 5 - Fair Value Measurements

In April  2009,  the FASB  issued  FASB  Staff  Position  107-1  and  Accounting
Principles  Board  Opinion  28-1,  "Interim  Disclosures  About  Fair  Value  of
Financial  Instruments"  (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 amends FASB
Statement No. 107,  "Disclosures About Fair Value of Financial  Instruments," to
require  entities to disclose the methods and  significant  assumptions  used to
estimate  the fair value of  financial  instruments  in both  interim and annual
financial  statements.  APB 28-1 amends APB Opinion No. 28,  "Interim  Financial
Reporting" to require those disclosures in summarized  financial  information at
interim reporting periods.  FSP FAS 107-1 and APB 28-1 are effective for interim
and annual periods ending after June 15, 2009 with early adoption  permitted for
periods  ending after March 15, 2009. An entity may early adopt this FSP only if
it also elects to early adopt FSP FAS 157-4.  The Company adopted this statement
on April 1,  2009,  and it did not have a  significant  impact on its  financial
statements. See Note 5 - Fair Value Measurements

In April 2009, the FASB issued FASB Staff Position 115-2 and 124-2, "Recognition
and  Presentation of  Other-Than-Temporary  Impairments"  (FSP FAS 115-2 and FAS
124-2). FSP FAS 115-2 and FAS 124-2 amends the  other-than-temporary  impairment
(OTTI) guidance for debt securities to make the guidance more operational and to
improve the presentation and disclosure of OTTI on debt and equity securities in
the  financial  statements.  This FSP does not amend  existing  recognition  and
measurement guidance related to OTTI of equity securities. FSP FAS 115-2 and FAS
124-2 are effective for interim and annual reporting periods after June 15, 2009
with early  adoption  permitted  for periods  ending after March 15,  2009.  The
Company   adopted  this  statement  on  April  1,  2009.  See  Note  6  -  Other
-Than-Temporary Impairment Losses for impact on its financial statements.

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
                                                  June 30,                    June 30,
                                             2009          2008          2009          2008
                                             ----          ----          ----          ----
<S>                                         <C>         <C>            <C>       <C>
Components of net periodic benefit cost:
     Service cost                          $ 214,000    $ 201,904      107,000    $  88,154
     Interest cost                           201,500      183,475      100,750       88,475
     Expected return on plan assets         (179,500)    (213,496)     (89,750)    (107,746)

Amortization of:
     Prior service costs                           0          446            0          223
     Actuarial loss                           65,000       22,431       32,500        6,681
                                           ---------    ---------    ---------    ---------
Net periodic benefit cost                  $ 301,000    $ 194,760    $ 150,500    $  75,787
                                           =========    =========    =========    =========
</TABLE>


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

<TABLE>
<S>                                         <C>         <C>            <C>       <C>
   Discount rate                             6.00%       6.00%        6.00%        6.00%
   Average wage increase                    Graded       Graded      Graded        Graded
                                             table*       table*      table*       table*
   Return on plan assets                     7.50%        7.50%        7.50%       7.50%

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

                                       9
<PAGE>


NOTE 5 - FAIR VALUE MEASUREMENTS
--------------------------------

                                Fair Value Measurements at Reporting Date using:
                                       Quoted
                                     Prices in
                                       Active     Significant
                                     Markets for    Other        Significant
                                      Identical   Observable     Unobservable
                                       Assets       Inputs          Inputs
Description              6/30/2009   (Level 1)   (Level 2)       (Level 3)
                         ---------    ---------   ---------       ---------
Securities
available-for sale      $158,902,378   $41,650   $157,684,925    $1,175,803
                        ------------   -------   ------------    ----------
Impaired loans             7,879,645         0      7,879,645             0
                        ------------   -------   ------------    ----------
  Total                 $166,782,023   $41,650   $165,564,570    $1,175,803
                        ============   =======   ============    ==========

<TABLE>
<CAPTION>

                                                                            Fair Value Measurements
                                                                     Using Significant Unobservable Inputs
                                                `                                     Level 3
                                                                     -------------------------------------
                                                                     Available-for-sale
                                                                         Securities             Total
                                                                     -------------------     -----------
<S>                                                                 <C>                      <C>
Beginning balance March 31, 2009                                     $     413,432           $   413,432
       Total gains or losses (realized/unrealized)
           Included in earnings (or changes in net assets)
           Included in other comprehensive income                          740,421               740,421
       Amortization of securities, net                                       2,694                 2,694
       Transfers in and/or out of Level 3                                   19,256                19,256
                                                                     -------------           -----------
       Ending balance, June 30, 2009                                 $   1,175,803           $ 1,175,803
                                                                     =============           ===========

The amount of total gains or losses for the period included in
       earnings (or changes in net assets) attributable to the
       change in unrealized gains or losses relating to assets
       still held at the reporting date                              $           0           $         0
                                                                     =============           ===========

                                                                            Fair Value Measurements
                                                                     Using Significant Unobservable Inputs
                                                                                      Level 3
                                                                     -------------------------------------
                                                                     Available-for-Sale
                                                                         Securities              Total
                                                                     -------------------     -----------
Beginning balance January 1, 2009                                    $   2,172,737           $ 2,172,737
       Total gains or losses (realized/unrealized)
           Included in earnings (or changes in net assets)
           Included in other comprehensive income                       (1,034,889)           (1,034,889)
       Amortization of securities, net                                       5,138                 5,138
       Transfers in and/or out of Level 3                                   32,817                32,817
                                                                     -------------           -----------
       Ending balance, June 30, 2009                                 $   1,175,803           $ 1,175,803
                                                                     =============           ===========

The amount of total gains or losses for the period included in
       earnings (or changes in net assets) attributable to the
       change in unrealized gains or losses relating to assets
       still held at the reporting date                              $           0           $         0
                                                                      ============           ===========

</TABLE>


                                       10
<PAGE>


The estimated fair values of the Bank's financials instruments, all of which are
held or issued for purposes  other than  trading,  are as follows as of June 30,
2009 and December 31, 2008:

<TABLE>
<CAPTION>
                                                   6/30/2009                    12/31/2008
                                         ---------------------------   ---------------------------
                                           Carrying        Fair           Carrying        Fair
                                            Amount         Value           Amount         Value
                                         ------------   ------------   ------------   ------------
<S>                                      <C>            <C>            <C>            <C>

Financial assets:
      Cash and cash equivalents          $ 45,659,354   $ 45,659,354   $  9,659,803   $  9,659,803
      Available-for-sale securities       158,902,378    158,902,378    150,526,964    150,526,964
      Held-to-maturity securities              64,086         64,257         66,443         66,502
      Federal Home Loan Bank stock          5,742,800      5,742,800      5,323,000      5,323,000
      Loans held-for-sale                     211,000        211,000      2,314,250      2,314,250
      Loans, net                          294,364,033    286,117,908    297,367,434    287,062,745
      Accrued interest receivable           2,341,363      2,341,363      2,704,385      2,704,385

Financial liabilities:
      Deposits                            402,032,606    402,473,442    344,925,232    346,035,072
      FHLB advances                        77,174,189     80,435,465     87,913,667     90,205,661
      Securities sold under agreements
      to repurchase                        10,325,843     10,325,843     11,203,289     11,203,289

      Due to broker                                --             --      7,631,919      7,631,919
</TABLE>

      The carrying amounts of financial instruments shown in the above table are
      included in the consolidated  balance sheets under the indicated captions.
      Accounting policies related to financial instruments are described in Note
      2.

      NOTE 6 - OTHER-THAN-TEMPORARY IMPAIRMENT LOSSES
      -----------------------------------------------

      The aggregate  fair value and  unrealized  losses of securities  that have
      been in a continuous  unrealized loss position for less than twelve months
      and for  twelve  months  or more,  and are  temporarily  impaired,  are as
      follows as of June 30:

<TABLE>
<CAPTION>
                                                                                June 30, 2009
                                          -----------------------------------------------------------------------------------
                                             Less than 12 Months         12 Months or Longer                 Total
                                          -------------------------  --------------------------   ---------------------------
                                             Fair       Unrealized      Fair        Unrealized        Fair       Unrealized
                                            Value         Losses        Value          Losses        Value          Losses
                                          -----------   -----------  ------------   -----------   -----------    ------------
<S>                                       <C>           <C>           <C>           <C>           <C>            <C>
Debt securities issued by the U.S.
   Treasury and other U. S. government
   corporations and agencies              $22,687,703   $   516,713   $         0   $         0   $ 22,687,703   $    516,713
Debt securities issued by states of the
   United States and political
   subdivisions of the states              18,028,319     2,410,225    30,415,488     4,653,565     48,443,807      7,063,790
Mortgage-backed securities                 18,037,536       987,913    11,930,243     2,990,894     29,967,779      3,978,807
Total temporarily impaired securities     $58,753,558   $ 3,914,851   $42,345,731   $ 7,644,459   $101,099,289   $ 11,559,310
                                          ===========   ===========   ===========   ===========   ============   ============
</TABLE>


Securities  exhibiting  unrealized  losses are  analyzed to  determine  that the
impairments  are not  other-than-temporary  and  the  following  information  is
considered.  U.S. Government  securities are backed by the full faith and credit
of the United States and therefore bear no credit risk. U.S.  Government  agency
securities,  which have a significant impact in financial markets,  have minimal
credit risk. The unrealized  losses at June 30, 2009 are mainly  attributable to
changes in market interest rates and current market  inefficiencies.  As Company
management  has the  ability  and intent to hold  securities  until  anticipated
recovery  to cost  basis  occurs,  no  declines  are  deemed  to be  other  than
temporary.


                                       11
<PAGE>


As of June 30, 2009 the Company adopted FSP FAS 115-2 and FAS 124-2 "Recognition
and Presentation of Other-Than-Temporary Impairments". For those debt securities
for which the fair value of the security is less than its amortized cost and the
Company  does not intend to sell such  security  and it is more  likely than not
that it will not be  required  to sell such  security  prior to  recovery of its
amortized  cost  basis  less any  credit  losses,  FSP FAS  115-2  and FAS 124-2
requires that the credit  component of the OTTI losses be recognized in earnings
while the non credit component is recognized in other comprehensive loss, net of
related taxes.

The following table summarizes OTTI losses on securities for the quarter ended
June 30, 2009:

                                                    Private Label Collateralized
                                                        Mortgage Obligations

Total other-than-temporary impairment losses                $  4,699,158
Less: unrealized other-than-temporary losses
         recognized in other comprehensive loss(1)             3,571,269
                                                            ------------
see impairment losses recognized in earnings(2)             $  1,127,889
                                                            ============

(1) Represents the noncredit component of the other-than-temporary impairment on
securities
(2) Represents the credit  component of the  other-than-temporary  impairment on
securities

Activity  related  to the  credit  component  recognized  in  earnings  on  debt
securities  held by the  Company  for  which a portion  of  other-than-temporary
impairment  was recognized in other  comprehensive  loss periods ending June 30,
2009 is as follows:

                                            Three Months Ended  Six Months Ended
                                                    June 30,          June 30,
                                                     2009              2009
                                                     ----              ----
Beginning Balance                                  $        0       $         0
Additions for the credit component on debt
     securities in which other-than-temporary
     impairment was not previously recognized       1,127,889         1,127,889
                                                   ----------       -----------
Ending Balance                                     $1,127,889       $ 1,127,889
                                                   ==========       ===========





                                       12
<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  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 the Company's
Annual Report on Form 10-K for the year ended December 31, 2008.

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

Overview
--------

The  Company's  net income for the six months ended June 30, 2009 was  $898,000.
This  compares to earnings of $2,064,000  for the same period in 2008.  Earnings
per share calculated on net income available to common  shareholders for the six
months ended June 30, 2009 totaled  $.45 per share,  which  compared to earnings
per share of $1.23 for the  corresponding  period in 2008.  The  decrease can be
attributed  primarily  to  accounting  adjustments  involving a few  investments
within  the  Bank's  investment   portfolio  to  reflect  Other  Than  Temporary
Impairment  (OTTI),  as well as an increased  provision  for loan loss,  and the
special assessment  imposed by the Federal Deposit Insurance  Corporation (FDIC)
upon the banking industry.  The additional  expenses related to these items were
$1,127,889,  $745,000 and  $244,000,  respectively.  The Company  increased  its
capital by  $8,816,000  in March,  2009,  by the  issuance  of  preferred  stock
pursuant to the U.S.  Treasury's  Capital  Purchase  Program  under the Troubled
Asset Relief  Program  ("TARP CPP").  While such capital  provides an additional
cushion  against  potential  unforeseen  economic   uncertainties  during  these
unprecedented  economic times,  the cost of such preferred stock reduced the net
income available to common shareholders by $134,754 during the three (3) and six
(6)  month  periods  ended  June 30,  2009.  Such  reduction  to the net  income
available to common shareholders is considered to be warranted by the additional
capital strength,  which such preferred stock brings to the Company,  and by the
ability of the Company to  prudently  leverage  such  capital and  increase  the
Company's base of earning assets.

The  Company's  assets at June 30, 2009 totaled  $542,181,000  compared to total
assets of  $495,754,000  at December  31,  2008.  During the first six months of
2009,  net  loans  outstanding,  not  including  loans  held-for-sale  decreased
$3,003,000  or  1.01%  to  $294,364,000.   This  compares  to  total  net  loans
outstanding,  not including loans  held-for-sale of $297,367,000 at December 31,
2008.  This decrease is primarily  attributable  to decreased loan demand during
the period. Non-performing loans totaled $6,707,000 at June 30, 2009 or 2.25% of
total  loans  outstanding.   This  compares  to  non-performing  loans  totaling
$5,091,000  at December 31, 2008 or 1.68% 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, 2009 totaled $402,033,000 as compared to total
deposits of $344,925,000 at December 31, 2008.

The Company is "well capitalized".  The Company's total risk based capital ratio
was  14.27%;  the Tier 1 capital  ratio was  13.30% and the  leverage  ratio was
9.02%. On July 8, 2009, the Board of Directors  declared a cash dividend of $.28
per common share,  which was paid on August 5, 2009 to shareholders of record as
of July 22, 2009. This compared to a cash dividend of $.28 per common share that
was  declared  during the  second  quarter  of 2008.  As a result,  year-to-date
dividends as of June 30, 2009 total $.28 per common share  outstanding  for this
year. This compares to total year-to-date dividends of $.56 per common share one
year ago. The $.28 dividend for the second quarter, which was not declared until
July 8, 2009,  will be reflected in the financial  statements  for the three (3)
and nine (9) month periods  ending  September 30, 2009.  Future  dividends  will
depend upon the  condition  and  earnings of the Company as well as its need for
capital to support continued growth as well as to provide for the



                                       13
<PAGE>

eventual  repayment of the U.S.  Treasury TARP CPP preferred  stock. The Company
anticipates  redeeming  the  preferred  stock as soon as it is  practicable  and
warranted by prevailing local and national economic conditions.

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  changing  conditions,  which  could have an adverse  impact on  reported
earnings in the future. See "Provisions and Allowance for Loan Losses."

                         SIX MONTHS ENDED JUNE 30, 2009
                  AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2008

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

The Company's  earnings are primarily  dependent  upon net interest and dividend
income,  and to a lesser extent  noninterest  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.  Noninterest  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
                                                             2009           2008
                                                          -------        -------
Total Interest and Dividend Income
(financial statements)                                    $12,873        $13,259
Tax Equivalent Adjustment                                     658            594
                                                          -------        -------
Total Interest and Dividend Income
      (on an FTE basis)                                    13,531         13,853
Total Interest Expense                                      4,592          5,718
                                                          -------        -------
Net Interest and Dividend Income-FTE                      $ 8,939        $ 8,135
                                                          =======        =======

Total interest and dividend  income on a FTE basis for the six months ended June
30, 2009, when compared to the same period in 2008, decreased $322,000 or 2.32%.
The decrease was  primarily  attributable  to an economic  environment  of lower
interest rates.

Interest  expense  on  deposits  for  the  first  six  months  of  2009  totaled
$2,995,000,  a decrease of $644,000 or 17.70% which  compared to $3,639,000  for
the same period in 2008.  The Bank's  volume of Federal Home Loan Bank  advances
outstanding  at June 30, 2009  decreased  12.22% when compared to total advances
outstanding  at December 31, 2008,  resulting in a decrease of interest  expense
totaling  $548,000.  During the fourth  quarter of 2008,  the Bank prepaid a $19
million  advance from the Federal Home Loan Bank of Boston at a cost of $674,000
net of tax.  The Bank took such  action as part of a program  to  restructure  a
portion of the Bank's borrowings.  The restructuring decreased borrowing expense
in 2009.  Total  interest  expense  for the six months  ended June 30,  2009 was
$4,592,000,  a decrease of $1,126,000 or 19.69% when compared to the same period
in 2008. This decrease is a result of an economic environment of generally lower
interest  rates  combined with lower volumes of funds  borrowed from the Federal
Home Loan Bank.

Overall,  net interest and dividend income (on an FTE basis) increased  $804,000
or 9.88% to  $8,939,000  for the period ended June 30, 2009 when compared to the
same period in 2008.


                                       14
<PAGE>

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

Noninterest  income  totaled  $1,902,000 for the six months ended June 30, 2009.
This is a decrease  of  $684,000 or 26.45%  compared  to  noninterest  income of
$2,586,000  for the six months  ended June 30,  2008.  A  declining  movement of
market rates resulted in decreased income of the Trust/Wealth  Advisory Services
Division of $171,000 or 14.99% to $970,000  for the period  ended June 30, 2009.
This compares to income  totaling  $1,141,000  for the  corresponding  period in
2008. Gains on sales of  available-for-sale  securities totaled $436,000 for the
first six months of 2009  compared to a gain of $354,000  for the same period in
2008.  The  Company's  investment  portfolio  is analyzed  for  impairment  on a
quarterly  basis. At June 30, 2009,  Management  determined that five securities
exhibited  varying  levels  of  impairment,   which  in  the  aggregate  totaled
$1,128,000.  This determination  necessitated an impairment loss of that amount,
which after taxes  represented a loss of  approximately  $740,000.  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  $532,000 or 48.76% to  $1,623,000  from
$1,091,000 during the period ended June 30, 2009.

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

Noninterest  expense  increased  17.39%  for the  first  six  months  of 2009 as
compared to the same period in 2008. This increase is primarily  attributable to
an increase in FDIC insurance  rates and the special  assessment  imposed by the
FDIC upon the banking industry.  The additional  expenses related to these items
are $270,000  and  $244,000,  respectively.  Other  increases  in the  described
noninterest  expenses in the table below generally  reflect  business volume and
related  growth.  The components of  noninterest  expense and the changes in the
period were as follows:

<TABLE>
<CAPTION>
                                                2009           2008         Change       % Change
-------------------------------------        ----------     ----------    ----------     ---------
<S>                                          <C>            <C>             <C>          <C>
Salaries and employee benefits               $4,547,153     $4,077,370      $469,783        11.52%
Occupancy expense                               502,082        462,702        39,380         8.51
Equipment expense                               440,018        431,302         8,716         2.02
Data Processing                                 713,600        695,154        18,446         2.65
Insurance                                        55,483         69,908       (14,425)      (20.63)
FDIC Insurance                                  533,204         19,607       513,597     2,619.46
Printing and stationery                         167,183        134,509        32,674        24.29
Professional fees                               524,628        433,444        91,184        21.04
Legal expense                                   207,953        166,236        41,717        25.10
Amortization of core deposit intangible          82,107         82,108            (1)        0.00
Other expense                                   851,361        774,600        76,761         9.91
                                             ----------     ----------    ----------
        Total noninterest expense            $8,624,772     $7,346,940    $1,277,832        17.39%
                                             ==========     ==========    ==========
</TABLE>

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

The income tax  provision  for the first six months of 2009  totaled a credit of
$85,000 in comparison to a provision of $546,000 for the same  six-month  period
in 2008.  Pretax  income in 2009 was  $813,000 and  included  tax-exempt  income
totaling  $1,277,000.   Pretax  income  in  2008  was  $2,610,000  and  included
tax-exempt income totaling $1,153,000.  The decrease in the income tax provision
is primarily attributable to a decrease in taxable income.

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

Overall, net income totaled $898,000 for the six months ended June 30, 2009. Net
income  available to shareholders  totaled $763,000 for the six (6) months ended
June 30, 2009 and  represents  earnings of $.45 per average  share  outstanding.
This compares to net income of 2,064,000 or $1.23 per average share  outstanding
for the same  period  in 2008.  The  costs of the  preferred  stock  represented
$134,754 of the total  decrease of $1,301,425 in net income  available to common
shareholders during the six (6) month period ended June 30, 2009.



                                       15
<PAGE>


                        THREE MONTHS ENDED JUNE 30, 2009
                 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2008


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
                                                            2009         2008
                                                            -------    -------
 Total Interest and Dividend Income
(financial statements)                                      $ 6,386    $ 6,591
Tax Equivalent Adjustment                                       326        298
                                                            -------    -------
     Total Interest and Dividend Income (on an FTE basis)     6,712      6,889
Total Interest (Expense)                                     (2,308)    (2,710)
                                                            -------    -------
Net Interest and Dividend Income-FTE                        $ 4,404    $ 4,179
                                                            =======    =======

Total  interest and  dividend  income on an FTE basis for the three months ended
June 30, 2009  decreased  $177,000 or 2.57% compared to the same period in 2008.
The  decrease  was  primarily  attributable  to a decrease  in  interest  rates.
Interest  expense on  deposits  decreased  $155,000  or 9.30% for the quarter to
$1,511,000 compared to $1,666,000 for the same quarter in 2008. 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 decreased during the
three-month period ended June 30, 2009 when compared to the corresponding period
in 2008.  Interest  expense on these advances  decreased  $274,000 or 26.27% and
totaled $769,000 for the three months ended June 30, 2009 compared to $1,043,000
for the  corresponding  period in 2008.  During the fourth  quarter of 2008, the
Bank prepaid a $19 million  advance from the Federal Home Loan Bank of Boston at
a cost of $674,000 net of tax. The Bank took such action as part of a program to
restructure  a portion of the Bank's  borrowings.  The  restructuring  decreased
borrowing  expense in 2009.  Total interest  expense for the three months ending
June 30, 2009 was  $2,308,000  compared to total  interest  expense for the same
period in 2008 of  $2,710,000,  a decrease of $402,000 or 14.83%.  Overall,  net
interest and  dividend  income (on a FTE basis)  increased  $225,000 or 5.38% to
$4,404,000 for the  three-month  period ended June 30, 2009 when compared to the
corresponding period in 2008.

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

Noninterest  income totaled $196,000 for the three months ended June 30, 2009 as
compared to  $1,153,000  for the three months  ended June 30,  2008.  The second
quarter performance is attributed primarily to accounting  adjustments involving
investments  within  the  Bank's  investment  portfolio  to  reflect  Other Than
Temporary Impairment (OTTI) totaling $1,128,000 as previously discussed.

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

Noninterest expense totaled $4,491,000 for the three month period ended June 30,
2009 as  compared  to  $3,697,000  for the same  period in 2008,  an increase of
$794,000 or 21.48%.  Although there are 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 an
increase in FDIC insurance rates and the special  assessment imposed by the FDIC
upon the banking  industry.  The additional  expenses related to these items are
$165,000 and $244,000  respectively.  The components of noninterest  expense and
the changes in the period were as follows:



                                       16
<PAGE>
<TABLE>
<CAPTION>
                                             2009         2008        Change      % Change
------------------------------------------------------------------------------------------
<S>                                       <C>          <C>          <C>          <C>
Salaries and employee benefits            $2,282,050   $2,001,197   $ 280,853       14.03%
Occupancy expense                            244,963      232,175      12,788        5.51
Equipment expense                            213,301      220,215      (6,914)      (3.14)
Data Processing                              330,164      390,539     (60,375)     (15.46)
Insurance                                     32,033       34,915      (2,882)      (8.25)
FDIC Insurance                               419,702       10,700     409,002    3,822.45
Printing and stationery                      101,214       75,001      26,213       34.95
Professional fees                            263,287      199,234      64,053       32.15
Legal expense                                112,594      104,809       7,785        7.43
Amortization of core deposit intangible       41,054       41,054           0        0.00
Other expense                                450,620      387,105      63,515       16.41
                                          ----------   ----------   ---------   ---------
        Total noninterest expense         $4,490,982   $3,696,944   $ 794,038       21.48%
                                          ==========   ==========   =========
</TABLE>

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

The income tax provision for the three-month  period ended June 30, 2009 totaled
$(348,000)  in  comparison  to $245,000 for the same three month period in 2008.
The  decrease  in the income tax  provision  is  attributable  to a decrease  in
taxable income.

Net Income (Loss)
-----------------

Overall,  the Company  incurred a net loss of  $(183,000)  for the three  months
ended June 30, 2009,  and net income  (loss)  available  to common  shareholders
totaled  $(318,000),  which  represents  a loss of $(.19) per  average  share of
common stock  outstanding.  This compares to net income of $984,000 for the same
period in 2008, a decrease of  $1,167,000  and compares to earnings per share of
$.58 for the 2008 period. The costs of the preferred stock represented  $134,754
of  the  total  decrease  of  $1,301,666  in  net  income  available  to  common
shareholders during the three (3) month period ended June 30, 2009.

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

Total  assets at June 30, 2009 were  $542,181,000  compared to  $495,754,000  at
December 31, 2008,  an increase of 9.36%.  The asset growth is primarily in cash
and cash equivalents,  which enhance the Company's  liquidity.  Such increase is
primarily attributable to the result of the Company's participation in TARP CPP,
which was closed on March 13, 2009 in the amount of $8,816,000, which funds were
deployed by the Company in short-term liquid assets.  Liabilities also increased
due to the inflow of  interest-bearing  deposits,  reflecting  the preference of
customers  for the  safety of  deposits  versus  the  uncertainty  in the equity
markets,  an  increase  in the savings  rate from a consumer  standpoint,  and a
concerted  effort by the  Bank's  staff to  expand  deposit  relationships  with
customers.

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, 2009, the securities  portfolio,  including
Federal Home Loan Bank stock, increased $8,793,000 or 5.64% to $164,709,000 from
$155,916,000 at December 31, 2008.

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, 2009, the unrealized loss net of tax was $7,140,000.  This
compares to an  unrealized  loss net of tax of  $6,968,000 at December 31, 2008.
The unrealized  losses in these securities are attributable to changes in market
interest  rates.  A review and analysis of the securities



                                       17
<PAGE>

portfolio   determined  that  there  had  been  credit   deterioration  in  five
investments,  which in the  aggregate  totaled  $1,127,889.  This  determination
necessitated an impairment loss of that amount,  which after taxes netted out to
approximately  $740,000.  Management  deems the  remaining  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 increase in the portfolio is a reflection of securities  being  purchased in
order to deploy excess funds available due to the influx of deposits.

Lending
-------

Net loans outstanding (not including loans  held-for-sale)  totaled $294,364,000
at June  30,  2009  compared  to net  loans  outstanding  (not  including  loans
held-for-sale) of $297,367,000 at December 31, 2008, a decrease of $3,003,000 or
1.01%. The current economic environment has resulted in decreased loan demand.

The following table  represents the composition of the loan portfolio  comparing
June 30, 2009 to December 31, 2008:

                                                June 30, 2009  December 31, 2008
                                                -------------  -----------------

Commercial, financial and agricultural          $  24,128,516     $  20,784,842
Real estate-construction and land
      development                                  27,371,138        33,342,610
Real estate-residential                           171,730,965       177,048,233
Real estate-commercial                             68,057,340        62,796,469
Consumer                                            5,050,462         5,551,172
Other                                                 916,218           174,965
                                                -------------     -------------
                                                  297,254,639       299,698,291
Deferred costs, net                                   418,017           393,228
Unearned income                                            (5)              (61)
Allowance for loan losses                          (2,724,024)       (3,308,619)
--------------------------------------------    -------------     -------------
Net Loans                                       $ 294,364,032     $ 297,367,434
                                                =============     =============

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 2009 totaled  $745,000,  compared to $170,000
provision expense for loan losses for the comparable period in 2008.

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, 2009. 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 may be considered impaired due
to any of the following circumstances:



                                       18
<PAGE>


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.

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,  and OREO
properties are closely monitored by Management.  At June 30, 2009, nonperforming
loans totaled  $6,707,000 or 2.25% of total loans  outstanding of  $297,673,000.
The  allowance  for  loan  losses  totaled  $3,309,000  representing  49.33%  of
nonperforming  loans.  Nonperforming  loans totaled $5,174,601 or 1.73% of total
loans outstanding,  (which does not include loans held-for-sale) of $299,698,291
at December  31, 2008.  The  allowance  for loan losses  totaled  $2,724,024  at
December 31, 2008 and  represented  52.64% of  nonperforming  loans.  A total of
$176,000 of loans was  charged-off  by the Bank during the six months ended June
30, 2009. These charged-off loans consisted  primarily of commercial loans. This
compares to loans charged-off during the six-month period ended June 30, 2008 of
$42,000. A total of $16,000 of previously charged-off loans was recovered during
the six month period ended June 30, 2009. Recoveries for the same period in 2008
totaled $22,000. 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. At June 30,
2009,  the Bank had other real estate  owned  (OREO) in the amount of  $418,000,
which is one commercial property.

Deposits
--------

The Company offers a variety of deposit  accounts with a range of interest rates
and terms.  Total deposits  increased  16.56% from December 31, 2008 to June 30,
2009. The following table illustrates the composition of the Company's  deposits
at June 30, 2009 and December 31, 2008:

                                               June 30, 2009   December 31, 2008
                                               ------------   -----------------
Demand                                         $ 64,781,251   $      65,479,271
NOW                                              33,296,274          26,097,175
Money Market                                     68,445,264          57,648,106
Savings                                          81,575,387          70,180,841
Time                                            153,934,430         125,519,839
                                               ------------   -----------------
  Total Deposits                               $402,032,606   $     344,925,232
                                               ============   =================

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,  2009,  the  Company  had  $77,174,000  in
outstanding  advances from the Federal Home Loan Bank compared to



                                       19
<PAGE>

$87,914,000  at  December  31,  2008.  With  the  large  increase  in  deposits,
Management  has not had to  supplement  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, 2009:

<TABLE>
<CAPTION>
June 30, 2009
(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        $2,136    $    0      $    4      $34,198      $36,338
     Commercial related                      1,995     4,378       2,197       10,235       18,805
     Consumer related                                                                        1,313
     Standby letters of credit                             3                                     3
--------------------------------------------------------------------------------------------------
     Total                                  $4,131    $4,381      $2,201      $45,746      $56,459
--------------------------------------------------------------------------------------------------
</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 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,
2009, 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 positive gap would result in a
decrease in interest  income.  The level of interest  rate risk at June 30, 2009
was within the limits approved by the Board of Directors.



                                       20
<PAGE>

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, 2009,  the Company had
approximately  $56,459,000 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,  2009,  the Company had  $47,995,000  in  shareholders'  equity,  an
increase of 23.26%  when  compared to  December  31, 2008  shareholders'  equity
totaling $38,939,000. While most of such increase reflects an increase resulting
from the issuance of 8,816,000 in preferred stock pursuant to the U.S.  Treasury
TARP CPP in March,  2009,  several other  components  contributed  to the change
since December 31, 2008.  Earnings for the six-month  period ended June 30, 2009
totaled   $898,000.   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, 2009  resulted  in a net change in other  comprehensive  loss  totaling
$172,000. The Company's capital was increased by $8,816,000 in March 2009 by the
issuance of  preferred  stock  pursuant  to the U.S.  Treasury's  TARP CPP.  The
application  of  SFAS  No.  158,  as  described  in  Note 3  resulted  in  other
comprehensive  income net of tax of $43,000 for the six-month  period ended June
30, 2009. The Company declared a quarterly dividend to shareholders resulting in
a decrease in capital of $472,000. The Company paid a dividend of $76,000 to the
U.S.  Treasury's  TARP CPP.  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 $19,000.

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
lower  federal  deposit  insurance  premiums than those banks that are not "well
capitalized". 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 June 30, 2009,
the Company had a total risk-based capital ratio of 14.27% compared to 11.59% at
December 31, 2008.  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.

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:


                                       21
<PAGE>


(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 affect 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  environments  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 4. Controls and Procedures.

The  Company's  Chief  Executive  Officer and Interim  Chief  Financial  Officer
concluded  that,  based upon an  evaluation  as of June 30, 2009,  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 Interim Chief Financial  Officer,  as
appropriate, to allow timely decisions regarding required disclosures.

During  the  fiscal  quarter  ended  June 30,  2009 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.

      The Bank is a party defendant,  both in its capacity as Salisbury Bank and
      Trust  Company and in its previous  capacity as a Trustee of the Erling C.
      Christophersen  Revocable  Trust, in litigation  currently  pending in the
      Connecticut  Superior  Court within the Judicial  District of  Bridgeport,
      John R. Christophersen v Erling C. Christophersen et. al., which commenced
      May 29, 2008. The other parties to the litigation are the Plaintiff,  John
      R.  Christophersen of Norwalk,  Connecticut and the Defendants,  Erling C.
      Christophersen,   of  Westport,   Connecticut;  Bonnie  Christophersen  of
      Westport,  Connecticut,  Elena Dreiske of Wanetka,  Illinois, and People's
      United  Bank  with  its  principal   place  of  business  in   Bridgeport,
      Connecticut.

      The  litigation  involves the ownership of certain real  property  located
      within Westport,  Connecticut, which was conveyed by the Defendant, Erling
      C.  Christophersen,  to the Erling C.  Christophersen  Trust, of which the
      Bank was a  co-Trustee.  Subsequent  to this  conveyance,  the Bank loaned
      $3,386,609,  to the Erling


                                       22
<PAGE>

      Christophersen Trust, which was secured by an open-end commercial mortgage
      in favor of the Bank on the Westport real estate referenced above.

      The  claim  of the  Plaintiff  John  R.  Christophersen  is that he had an
      interest in the real property of which he was wrongfully divested.  He has
      brought this action seeking restoration of his allegedly divested interest
      as well as money damages.

      In addition  to his  efforts to restore  his alleged  interest in the real
      property,  the Plaintiff has made two  additional  claims  directed at the
      Bank. The Plaintiff has alleged that the Bank failed to utilize reasonable
      diligence in extending financing to the Co-Defendant, Erling, and that had
      it engaged in  reasonable  diligence  it would  have  discovered  that the
      Plaintiff had an interest in the  above-referenced  property.  He has also
      alleged an implied trust against the Bank alleging that it acquired  title
      to the property  adverse to the Plaintiff's  interest and in contravention
      of the Plaintiff's  entitlements,  and,  therefore,  holds the property in
      trust for Plaintiff.

      The Bank  disputes  the claims  made by the  Plaintiff  and is  vigorously
      defending  the case.  At the  inception of this loan,  the Bank obtained a
      Lenders  Title  insurance  policy  from the  Chicago  Title and  Insurance
      Company.  Additionally, at the time of this financing, the appraised value
      of the aforementioned  real estate was significantly in excess of the loan
      amount. Given current economic  conditions,  the Bank continues to monitor
      the value of its collateral position,  which remains well in excess of the
      outstanding loan balance. The underlying loan is currently non-performing.
      Until  the  litigation  is  resolved,  the  liquidity  of the real  estate
      collateral that secures the loan will remain significantly impaired.

Item 2. -Unregistered Sales of Equity Securities and Use of Proceeds. On May 29,
2009,  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.  The Annual
Meeting of  Shareholders  of the Company,  was held on Wednesday,  May 27, 2009.
Shareholders  voted  on the  election  of  directors,  the  ratification  of the
appointment of  independent  auditors and the  non-binding  advisory vote on the
compensation of named executive officers.

The results of the votes of  shareholders  regarding each proposal are set forth
below:

                                   PROPOSAL 1
                              ELECTION OF DIRECTORS

Each of the three  nominees  received in excess of a plurality of the votes cast
at the  meeting  and were  elected to serve  until  their term  expires or their
successors are elected and qualified.

The vote for electing nominees as directors was as follows:

                                                                     Withholding
                                                For                   Authority

John R. H. Blum    Number of shares         1,313,082                  37,956
                   Percentage of
                   Shares Voted:              97.2%                     2.8%
                   Percentage of Shares
                   Entitled to Vote:          77.8%                     2.3%



                                       23
<PAGE>


                                                                     Withholding
                                                For                   Authority

Holly J. Nelson    Number of shares         1,320,229                  30,809
                   Percentage of
                   Shares Voted:              97.7%                     2.3%
                   Percentage of Shares
                   Entitled to Vote:          78.3%                     1.8%

                                                                     Withholding
                                                For                   Authority

John F. Perotti    Number of shares         1,318,547                  32,491
                   Percentage of
                   Shares Voted:              97.6%                     2.4%
                   Percentage of Shares
                   Entitled to Vote:          78.2%                     1.9%

                                   PROPOSAL 2
             RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS

The appointment of Shatswell,  MacLeod & Company,  P.C. as independent  auditors
for the Company for the year ending  December 31, 2009 was approved  because the
votes for such appointment exceeded the votes against such appointment.

The vote to ratify the  appointment  of  Shatswell,  MacLeod & Company,  P.C. as
independent  auditors for the Company for the year ending  December 31, 2009 was
as follows:

                                            For            Against       Abstain

Number of Shares:                         1,345,599         1,815         3,624
Percentage of Shares Voted:                  99.6%           .1%           .3%
Percentage of Shares
Entitled to Vote:                            79.8%           .1%           .2%

                                   PROPOSAL 3
                  NON-BINDING ADVISORY VOTE ON THE COMPENSATION
                           OF NAMED EXECUTIVE OFFICERS

The vote to approve the non-binding  advisory vote on the  compensation of named
executive officers was as follows:

                                            For            Against       Abstain

Number of Shares:                         1,225,678         56,220       69,143
Percentage of Shares Voted:                  90.7%           4.2%         5.1%
Percentage of Shares
Entitled to Vote:                            72.7%           3.3%         4.1%


Item 5. - Other Information.  None

Item 6. - Exhibits

            11     Computation of Earnings (Loss) 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 Interim CFO.

            32- Section 1350 Certifications of CEO and Interim CFO.




                                       24
<PAGE>


                             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 14, 2009                 by: /s/ Richard J. Cantele, Jr.
      ---------------                     --------------------------------------
                                           Richard J. Cantele, Jr.
                                           President and Chief Executive Officer

Date: August 14, 2009                 by: /s/ Richard J. Cantele, Jr.
      ---------------                     --------------------------------------
                                           Richard J. Cantele, Jr.
                                           Interim Chief Financial Officer






                                       25