SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2008
                               ------------------

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

For the transition period from _______________to_______________

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

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

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

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

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer 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:
        As of November 13, 2008, there were 1,685,861 shares outstanding.

<PAGE>

                     SALISBURY BANCORP, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                       Page
<S>                                                                                    <C>
Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:                                                            3

         Condensed Consolidated Balance Sheets -September 30, 2008 (unaudited)
            and December 31, 2007                                                         4
         Condensed Consolidated Statements of Income -nine and three months ended
            September 30, 2008 and 2007  (unaudited)                                      5
         Condensed Consolidated Statements of Cash Flows -nine months ended
            September 30, 2008 and 2007 (unaudited)                                       6
         Notes to Condensed Consolidated Financial Statements (unaudited)                 8

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
            of Operations                                                                11

Item 3.  Controls and Procedures                                                         21

Part II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                               22

Item 1A. Risk Factors                                                                    23

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                                                               23

Item 6.  Exhibits                                                                        23

Signatures                                                                               23
</TABLE>

                                        2

<PAGE>

                         Part I-- FINANCIAL INFORMATION
                          Item 1. Financial Statements

                                        3

<PAGE>

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

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      -------------------------------------
                  (amounts in thousands, except per share data)
                    September 30, 2008 and December 31, 2007
                    ----------------------------------------

<TABLE>
<CAPTION>
                                                                                 September 30,    December 31,
                                                                                      2008            2007
                                                                                 -------------    ------------
                                                                                  (unaudited)
<S>                                                                              <C>              <C>
ASSETS
------
Cash and due from banks                                                            $  6,915         $ 12,811
Interest bearing demand deposits with other banks                                     1,445              726
Money market mutual funds                                                             1,422            1,341
Federal funds sold                                                                    2,958              300
                                                                                   --------         --------
         Cash and cash equivalents                                                   12,740           15,178
Investments in available-for-sale securities (at fair value)                        144,482          147,377
Investments in held-to-maturity securities (fair values of $67 as of
   September 30, 2008 and $71 as of December 31, 2007)                                   68               71
Federal Home Loan Bank stock, at cost                                                 5,323            5,176
Loans held-for-sale                                                                     122              120
Loans, less allowance for loan losses of $3,105 as of September 30, 2008
   and $2,475 as of December 31, 2007                                               293,740          268,191
Investment in real estate                                                                75               75
Other real estate owned                                                                 205                0
Premises and equipment                                                                7,269            6,803
Goodwill                                                                              9,829            9,829
Core deposit intangible                                                               1,206            1,329
Accrued interest receivable                                                           2,395            2,539
Cash surrender value of life insurance policies                                       3,780            3,688
Other assets                                                                          4,416            1,584
                                                                                   --------         --------
         Total assets                                                              $485,650         $461,960
                                                                                   ========         ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
   Noninterest-bearing                                                             $ 69,198         $ 69,215
   Interest-bearing                                                                 275,411          248,526
                                                                                   --------         --------
         Total deposits                                                             344,609          317,741
Securities sold under agreements to repurchase                                       12,370                0
Federal Home Loan Bank advances                                                      86,490           95,011
Other liabilities                                                                     3,461            3,645
                                                                                   --------         --------
         Total liabilities                                                          446,930          416,397
                                                                                   --------         --------
Shareholders' equity:
   Common stock, par value $.10 per share; authorized 3,000,000 shares; issued
      and outstanding, 1,685,861 shares at September 30, 2008 and 1,685,021
      shares at December 31, 2007                                                       169              169
   Paid-in capital                                                                   13,158           13,130
   Retained earnings                                                                 34,037           35,583
   Accumulated other comprehensive loss                                              (8,644)          (3,319)
                                                                                   --------         --------
         Total shareholders' equity                                                  38,720           45,563
                                                                                   --------         --------
         Total liabilities and shareholders' equity                                $485,650         $461,960
                                                                                   ========         ========
</TABLE>

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

                                        4

<PAGE>

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

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   -------------------------------------------
                  (amounts in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                     Nine Months Ended     Three Months Ended
                                                                       September 30,         September 30,
                                                                     2008        2007       2008        2007
                                                                   --------    --------   --------    --------
<S>                                                                <C>         <C>        <C>         <C>
Interest and dividend income:
   Interest and fees on loans                                      $ 13,918    $ 13,273   $  4,686    $  4,537
   Interest on debt securities:
      Taxable                                                         3,988       4,094      1,358       1,337
      Tax-exempt                                                      1,775       1,745        622         634
   Dividends on equity securities                                       169         241         39          82
   Other interest                                                       121          46          7          12
                                                                   --------    --------   --------    --------
         Total interest and dividend income                          19,971      19,399      6,712       6,602
                                                                   --------    --------   --------    --------
Interest expense:
   Interest on deposits                                               5,124       6,109      1,485       2,087
   Interest on securities sold under agreements to repurchase            46           0         46           0
   Interest on Federal Home Loan Bank advances                        3,135       3,126      1,056       1,080
                                                                   --------    --------   --------    --------
         Total interest expense                                       8,305       9,235      2,587       3,167
                                                                   --------    --------   --------    --------
         Net interest and dividend income                            11,666      10,164      4,125       3,435
Provision for loan losses                                               690           0        520           0
                                                                   --------    --------   --------    --------
         Net interest and dividend income after provision for
            loan losses                                              10,976      10,164      3,605       3,435
                                                                   --------    --------   --------    --------
Noninterest income (charge):
   Trust department income                                            1,684       1,508        543         475
   Loan commissions                                                       2          22          0           9
   Service charges on deposit accounts                                  610         544        209         183
   (Write downs) gains on available-for-sale securities, net         (2,317)        222     (2,671)         42
   Gain on sales of loans held-for-sale                                 236         246         77          79
   Other income                                                       1,026         757        497         272
                                                                   --------    --------   --------    --------
         Total noninterest income (charge)                            1,241       3,299     (1,345)      1,060
                                                                   --------    --------   --------    --------
Noninterest expense:
   Salaries and employee benefits                                     6,225       5,763      2,148       1,931
   Occupancy expense                                                    721         586        258         206
   Equipment expense                                                    650         584        219         214
   Data processing                                                    1,005         939        310         301
   Insurance                                                            148         121         58          47
   Printing and stationery                                              201         216         66          72
   Professional fees                                                    651         500        218         161
   Legal expense                                                        282         167        116          41
   Amortization of core deposit intangible                              123         123         41          41
   Other expense                                                      1,176       1,026        401         387
                                                                   --------    --------   --------    --------
         Total noninterest expense                                   11,182      10,025      3,835       3,401
                                                                   --------    --------   --------    --------
         Income (loss) before income taxes                            1,035       3,438     (1,575)      1,094
Income taxes                                                            883         638        337         177
                                                                   --------    --------   --------    --------
         Net income (loss)                                         $    152    $  2,800   $ (1,912)   $    917
                                                                   ========    ========   ========    ========

Earnings (loss) per common share                                   $    .09    $   1.66   $  (1.13)   $    .54
                                                                   --------    --------   --------    --------
Dividends per common share                                         $    .84    $    .81   $    .28    $    .27
                                                                   --------    --------   --------    --------
</TABLE>

   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)
                  Nine months ended September 30, 2008 and 2007
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                      2008        2007
                                                                                    ---------   ---------
<S>                                                                                 <C>         <C>
Cash flows from operating activities:
   Net income                                                                       $     152   $   2,800
Adjustments to reconcile net income to net cash provided by operating activities:
      Amortization of securities, net                                                      57          70
      Gain on sales of available-for-sale securities, net                                (539)       (222)
      Write-downs of available-for-sale securities                                      2,856           0
      Provision for loan losses                                                           690           0
      Change in loans held-for-sale                                                        (2)        189
      Change in deferred loan costs, net                                                   (2)       (101)
      Net (increase) decrease in mortgage servicing rights                                 (1)         89
      Depreciation and amortization                                                       519         403
      Amortization of core deposit intangible                                             123         123
      Accretion of fair value adjustment on deposits & borrowings                         (98)        (98)
      Amortization of fair value adjustment on loans                                       36          59
      Decrease (increase) in interest receivable                                          144        (112)
      Deferred tax benefit                                                               (138)     (1,085)
      (Increase) decrease in taxes receivable                                             (13)        317
      (Increase) decrease in prepaid expenses                                             (30)        978
      Increase in cash surrender value of insurance policies                              (92)        (91)
      Increase in income tax payable                                                        0         254
      (Increase) decrease in other assets                                                (159)         87
      Increase in accrued expenses                                                        213          95
      Decrease in interest payable                                                       (164)        (60)
      Decrease in other liabilities                                                        (8)       (130)
      Issuance of shares for Directors' fees                                               28          30
      (Decrease) increase in unearned income on loans                                      (1)          4
      Cash and cash equivalents acquired from New York Community Bank
         net of expenses paid of $115                                                       0         181
                                                                                    ---------   ---------

Net cash provided by operating activities                                               3,571       3,780
                                                                                    ---------   ---------
Cash flows from investing activities
   Purchase of Federal Home Loan Bank stock                                              (147)       (495)
   Purchases of available-for-sale securities                                        (102,304)    (52,271)
   Proceeds from sales of available-for-sale securities                                94,723      51,371
   Proceeds from maturities of held-to-maturity securities                                  3           3
   Loan originations and principal collections, net                                   (24,372)     (6,013)
   Purchase of loans                                                                   (1,935)     (3,733)
   Recoveries of loans previously charged-off                                              36          53
   Other real estate owned - expenditures capitalized                                    (204)          0
   Capital expenditures                                                                  (941)     (1,318)
                                                                                    ---------   ---------

Net cash used in investing activities                                                 (35,141)    (12,403)
                                                                                    ---------   ---------
</TABLE>

                                        6

<PAGE>

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

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                             (amounts in thousands)
                  Nine months ended September 30, 2008 and 2007
                                   (unaudited)
                                   (continued)

<TABLE>
<CAPTION>
                                                                                      2008        2007
                                                                                    ---------   ---------
<S>                                                                                 <C>         <C>
Cash flows from financing activities:

   Net increase (decrease) in demand deposits, NOW and savings accounts                24,927      (2,312)
   Net increase in time deposits                                                        1,940       1,319
   Federal Home Loan Bank advances                                                     17,000      21,000
   Principal payments on advances from Federal Home Loan Bank                         (16,786)    (16,404)
   Net change in short term advances from Federal Home Loan Bank                       (8,637)      3,551
   Net increase in securities sold under agreements to repurchase                      12,370           0
   Dividends paid                                                                      (1,682)     (1,348)
                                                                                    ---------   ---------

   Net cash provided by financing activities                                           29,132       5,806
                                                                                    ---------   ---------

   Net decrease in cash and cash equivalents                                           (2,438)     (2,817)
   Cash and cash equivalents at beginning of period                                    15,178      11,757
                                                                                    ---------   ---------
   Cash and cash equivalents at end of period                                       $  12,740   $   8,940
                                                                                    =========   =========

   Supplemental disclosures:
      Interest paid                                                                 $   8,567   $   9,393
      Income taxes paid                                                                 1,034       1,152

   New York Community Bank Branch Acquisition:
      Cash and cash equivalents acquired                                                        $ 296,060
      Deposits assumed                                                                            496,060
                                                                                                ---------
      Net liabilities assumed                                                                    (200,000)
      Acquisition costs                                                                           115,207
                                                                                                ---------
      Goodwill                                                                                  $ 315,207
                                                                                                =========
</TABLE>

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

                                        7

<PAGE>

                     SALISBURY BANCORP, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

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

The  accompanying   condensed  consolidated  interim  financial  statements  are
unaudited and include the accounts of Salisbury  Bancorp,  Inc. (the "Company"),
its wholly owned subsidiary  Salisbury Bank and Trust Company (the "Bank"),  and
the  Bank's   subsidiaries,   S.B.T.  Realty,  Inc.  and  SBT  Mortgage  Service
Corporation  (the  "PIC")  formed  in April  2004.  The  consolidated  financial
statements have been prepared in accordance with accounting principles generally
accepted  in  the  United  States  of  America  (GAAP)  for  interim   financial
information and with the instructions to SEC Form 10-Q. Accordingly, they do not
include  all  the  information  and  footnotes  required  by GAAP  for  complete
financial  statements.  All significant  intercompany  accounts and transactions
have been eliminated in the consolidation.  These financial  statements reflect,
in the  opinion  of  Management,  all  adjustments,  consisting  of only  normal
recurring  adjustments,  necessary  for a fair  presentation  of  the  Company's
financial  position and the results of its operations and its cash flows for the
periods  presented.  Operating  results for the nine months ended  September 30,
2008 are not necessarily  indicative of the results that may be expected for the
year ending  December 31, 2008.  These  financial  statements  should be read in
conjunction  with the financial  statements  and notes  thereto  included in the
Company's 2007 Annual Report on Form 10-K.

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

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

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

Comprehensive (Loss) Income

<TABLE>
<CAPTION>
                                                     Nine months ended        Three months ended
                                                       September 30,             September 30,
                                                      2008          2007      2008         2007
                                                    --------      -------    -------    ----------
                                                    (amounts in thousands)   (amounts in thousands)
<S>                                                 <C>           <C>        <C>        <C>
Net income                                           $   152      $ 2,800    $(1,912)   $      917
Net change in unrealized holding (losses) or
gains on securities and net change in
unrecognized pension plan expense,
net of tax during period                              (5,325)      (1,775)    (2,403)          967
                                                     -------      -------    -------    ----------
Comprehensive (loss) income                          $(5,173)     $ 1,025    $(4,315)   $    1,884
                                                     =======      =======    =======    ==========
</TABLE>

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

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

In March  2006,  the FASB  issued  SFAS No. 156,  Accounting  for  Servicing  of
Financial  Assets- an amendment of FASB Statement No. 140 ("SFAS No. 156"). SFAS
156 requires any entity to  recognize a servicing  asset or servicing  liability
each time it undertakes  an obligation to service a financial  asset by entering
into a servicing contract in specific  situations.  Additionally,  the servicing
asset or servicing liability shall be initially measured at fair value; however,
an  entity  may elect the  "amortization  method"  or "fair  value  method"  for
subsequent balance

                                        8

<PAGE>

sheet reporting periods.  The adoption of this statement did not have a material
impact on the  Company's  financial  condition,  results of  operations  or cash
flows.

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

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157).  SFAS 157 defines fair value,  establishes a framework for measuring  fair
value  under  generally  accepted  accounting  principles  (GAAP)  and  enhances
disclosures about fair value  measurements.  SFAS 157 retains the exchange price
notion and clarifies that the exchange price is the price that would be received
for an asset or paid to  transfer  a  liability  (an exit  price) in an  orderly
transaction  between market  participants on the  measurement  date. SFAS 157 is
effective  for the  Company's  consolidated  financial  statements  for the year
beginning on January 1, 2008, with earlier adoption  permitted.  The adoption of
this  statement did not have a material  impact on its  financial  condition and
results of operations. See Note 5.

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

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

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

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

                                        9

<PAGE>

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

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

<TABLE>
<CAPTION>
                                                          Nine Months Ended       Three Months Ended
                                                            September 30,            September 30,
                                                          2008        2007        2008        2007
                                                        ---------------------   ---------------------
<S>                                                     <C>         <C>         <C>         <C>
Components of net periodic benefit cost:
   Service cost                                         $ 302,856   $ 328,305   $ 100,952   $ 109,435
   Interest cost                                          275,213     256,517      91,738      85,506
   Expected return on plan assets                        (320,244)   (276,707)   (106,748)    (92,236)
   Amortization of:
      Prior service cost                                      669         670         223         223
      Actuarial loss                                       33,646      51,177      11,215      17,059
                                                        ---------   ---------   ---------   ---------
   Net periodic benefit cost                            $ 292,140   $ 359,962   $  97,380   $ 119,987
                                                        =========   =========   =========   =========
</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 table*   Graded table*   Graded table*   Graded table*
   Expected return on plan assets                        7.50%           7.25%           7.50%           7.25%
</TABLE>

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

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

The fair value hierarchy  established by SFAS No. 157 is based on observable and
unobservable  inputs  participants use to price an asset or liability.  SFAS No.
157 has prioritized these inputs into the following value hierarchy:

      Level 1 Inputs - Unadjusted  quoted prices in active markets for identical
      assets or liabilities that are available at the measurement date.

      Level 2 Inputs - Inputs other than quoted prices  included  within Level 1
      that  are  observable  for the  asset or  liability,  either  directly  or
      indirectly.  These  might  include  quoted  prices for  similar  assets or
      liabilities  in active  markets,  quoted  prices for  identical or similar
      assets or  liabilities  in markets that are not active,  inputs other than
      quoted  prices that are  observable  for the asset or  liability  (such as
      interest rates,  volatilities,  prepayment speeds,  credit risks, etc.) or
      inputs that are derived  principally from a corroborated by market data by
      correlation or other means.

      Level 3 Inputs - Unobservable inputs for determining the fair value of the
      asset or liability and are based on the entity's own assumption  about the
      assumptions  that  market  participants  would  use to price  the asset or
      liability.

A description of the valuation  methodologies  used for instruments  measured at
fair value, as well as the general clarification of such instruments pursuant to
the valuation  hierarchy is set forth below. These valuation  methodologies were
applied to all of the Company's financial assets and liabilities carried at fair
value effective January 1, 2008.

                                       10

<PAGE>

($ in 000s)                     Fair Value Measurements at Reporting using
                             Quoted Prices
                               in Active
                              Markets for    Significant Other    Significant
                               Identical         Observable      Unobservable
                                Assets            Inputs            Inputs
Description       9/30/08     (Level 1)         (Level 2)          (Level 3)
                 ---------   -------------   -----------------   ------------
AFS securities   $ 144,482        $0              $144,482            $0
                 ---------        --              --------            --
   Total         $ 144,482        $0              $144,482            $0
                 =========        ==              ========            ==

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

Business
--------

The following  provides  Management's  comments on the  financial  condition and
results of operations of Salisbury Bancorp, Inc. (the "Company"),  a Connecticut
corporation  that is the holding  company for  Salisbury  Bank and Trust Company
(the "Bank").  The Company's  sole  subsidiary is the Bank,  which has seven (7)
full service offices including a Trust/Wealth  Services  Division.  Such offices
are  located in the towns of North  Canaan,  Lakeville,  Salisbury  and  Sharon,
Connecticut,  Sheffield and South Egremont, Massachusetts, and Dover Plains, New
York.  In  addition,  the  bank  has  received  regulatory  approvals  to open a
full-service branch in Millerton,  New York. The Company and Bank were formed in
1998 and  1848,  respectively.  In  order to  provide  a strong  foundation  for
building  shareholder  value  and  servicing  customers,   the  Company  remains
committed to investing in the  technological  and human  resources  necessary to
developing new personalized financial products and services to meet the needs of
customers. This discussion should be read in conjunction with Salisbury Bancorp,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 2007.

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

Overview
--------

The  Company's  assets at September  30, 2008 totaled  $485,650,000  compared to
total assets of $461,960,000 at December 31, 2007.  During the first nine months
of 2008, net loans  outstanding,  not including loans  held-for-sale,  increased
$25,549,000  or  9.53%  to  $293,740,000.  This  compares  to  total  net  loans
outstanding, not including loans held-for-sale,  of $268,191,000 at December 31,
2007.  This increase is primarily  attributable  to increased loan demand during
the period that was generated as the result of new business development efforts.
The growth was funded by an increase in deposits.  Non-performing assets totaled
$1,796,000 at September  30, 2008.  Non-performing  loans totaled  $1,591,000 at
September  30,  2008 or 0.54% of total loans  outstanding  and Other Real Estate
Owned  totaled  $205,000.   This  compares  to  non-performing   loans  totaling
$1,824,000 at December 31, 2007 or 0.68% of total loans outstanding.  There were
no other  non-performing  assets at December  31,  2007.  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  September  30,  2008  totaled  $344,609,000  as  compared to total
deposits of  $317,741,000  at December 31, 2007.  This increase is primarily the
result of new business development efforts.

The Company's earnings for the nine months ended September 30, 2008 was $152,000
or $.09 per average share  outstanding.  This compares to earnings of $2,800,000
or $1.66 per share for the same  period in 2007.  The  Company  reported a third
quarter loss of $1,912,000 or $1.13 per average  share  outstanding  compared to
earnings of $917,000 or $.54 per average share outstanding, in the third quarter

                                       11

<PAGE>

of 2007.  Earnings for the respective  periods were impacted by a pre-tax charge
of $2,856,000  as a result of the U.S.  Government  placing FHLMC  (Freddie Mac)
into  conservatorship,  which  necessitated  the Company to take a write-down of
Freddie Mac preferred  stock during the quarter ended September 30, 2008. No tax
benefit  was  recognized  as a  result  of this  charge  for the  quarter  ended
September  30,  2008,  because  applicable  law at  the  time  forced  financial
institutions  to treat the loss as a capital  loss.  On  October  3,  2008,  the
Emergency  Economic  Stabilization  Act of 2008 was  enacted,  which  includes a
provision  permitting  banks to  recognize  losses  relating  to the Freddie Mac
preferred stock as an ordinary loss, thereby allowing a tax benefit for both tax
and financial reporting purposes. If the legislation  permitting this action had
been effective in the third quarter rather than the fourth quarter, the positive
impact of the tax charge that would have been  recorded  would have  resulted in
September 30, 2008 year-to-date earnings of $1,123,000 or $.67 per average share
outstanding.  The Company will  recognize the  additional  tax benefit  totaling
approximately  $971,000 or $.58 per average  share  outstanding  relating to the
write-down of the Freddie Mac preferred stock in the quarter ending December 31,
2008.  Earnings,  not including the Freddie Mac preferred stock write-down,  for
the first nine months of 2008 would have totaled $3,008,000 or $1.78 per average
share outstanding.

The Bank remains  "well  capitalized"  pursuant to the  standards of the Federal
Deposit  Insurance  Corporation.  The Bank's total risk based  capital ratio was
13.15%; the Tier 1 capital ratio was 12.08% and the leverage ratio was 7.54%. As
previously  disclosed,  on September  2, 2008 the Board of Directors  declared a
third quarter cash dividend of $.28 per common share,  which was paid on October
31, 2008 to  shareholders of record as of September 30, 2008. This compared to a
cash  dividend of $.27 per common  share that was paid for the third  quarter of
2007.  Year-to-date  dividends total $.84 per common share  outstanding for this
year. This compares to total year-to-date dividends of $.81 per common share one
year ago.

Critical Accounting Estimates
-----------------------------

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

                      NINE MONTHS ENDED SEPTEMBER 30, 2008
               AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2007

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

The Company's  earnings are primarily  dependent  upon net interest and dividend
income,  and to a lesser extent  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,  securities  sold
under  agreements  to  repurchase  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.

                                       12

<PAGE>

(amounts in thousands)
Nine Months Ended September 30,                               2008       2007
                                                             ------      ----
Total Interest and Dividend Income
(financial statements)                                      $ 19,971   $ 19,399
Tax Equivalent Adjustment                                        914        898
                                                            --------   --------
Total Interest and Dividend Income (on a FTE basis)           20,885     20,297
Total Interest Expense                                         8,305      9,235
                                                            --------   --------
Net Interest and Dividend Income-FTE                        $ 12,580   $ 11,062
                                                            ========   ========

Total  interest  and  dividend  income on a FTE basis for the nine months  ended
September 30, 2008, when compared to the same period in 2007, increased $588,000
or 2.90%.  The increase  was  primarily  attributable  to an increase in earning
assets.

Interest  expense  on  deposits  for the  first  nine  months  of  2008  totaled
$5,124,000, a decrease of $985,000 or 16.12% when compared to $6,109,000 for the
same period in 2007. This decrease reflects an economic environment of generally
lower  interest  rates.  The Bank's  volume of Federal  Home Loan Bank  advances
outstanding  at  September  30,  2008  decreased  9.00% when  compared  to total
advances  outstanding at December 31, 2007, however overnight borrowings through
out the year resulted in an increase of interest expense totaling $9,000.  Total
interest expense for the nine months ended September 30, 2008 was $8,305,000,  a
decrease of $930,000 or 10.07% when compared to the same period in 2007.

Overall,  net interest and dividend income (on a FTE basis) increased $1,518,000
or 13.72% to $12,580,000  for the period ended  September 30, 2008 when compared
to the same period in 2007.

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

Noninterest  income,  not  including the  write-downs  and net gains on sales of
available-for-sale  securities,  totaled  $3,558,000  for the nine months  ended
September  30,  2008.  This is an increase  of  $481,000  or 15.63%  compared to
noninterest  income,  not  including  gains  on  available-for-sale   securities
transactions,  of  $3,077,000  for the nine months  ended  September  30,  2007.
Continuing growth of the Trust/Wealth Advisory Services Division has resulted in
increased  income of  $176,000  or 11.67% to  $1,684,000  for the  period  ended
September 30, 2008 compared to income totaling  $1,508,000 for the corresponding
period in 2007. Write-downs on available-for-sale  securities totaled $2,856,000
for the period ended  September  30,  2008.  As  described  previously,  this is
primarily the result of the U.S.  Governments  actions  relating to Freddie Mac.
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  $305,000 or 19.44% to
$1,874,000  for the nine months ended  September 30, 2008 compared to $1,569,000
for the nine months ended September 30, 2007.

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

Noninterest expense increased  $1,157,000 or 11.54% for the first nine months of
2008 as compared  to the same period in 2007.  Although  some  increases  in the
described  noninterest  expenses in the table below are  attributable  to normal
volumes of business,  the increase  also  reflects  additional  staffing and the
additional  costs  associated  with the daily operation of our new Dover Plains,
New York branch,  which opened in August of 2007.  The increase in  professional
fees is  primarily  attributable  to the  Trust  and  Wealth  Advisory  Services
Division  working  with  Bradley  Foster  and  Sargent,   Inc.,  an  independent
investment  advisory  firm that assists in  providing a broader  scope of highly
personalized professional investment services to clients. In addition,  internal
audit expense increased which is the result of additional  services required due
to  compliance  requirements  of  the  Sarbanes-Oxley  Act.  The  components  of
noninterest  expense and the  changes in the period were as follows  (amounts in
thousands):

                                       13

<PAGE>

<TABLE>
<CAPTION>
                                            2008       2007     Change    % Change
----------------------------------------------------------------------------------
<S>                                       <C>        <C>        <C>       <C>
Salaries and employee benefits            $  6,225   $  5,763   $   462      8.01%
Occupancy expense                              721        586       135     23.03
Equipment expense                              650        584        66     11.30
Data processing                              1,005        939        66      7.02
Insurance                                      148        121        27     22.31
Printing and stationery                        201        216       (15)    (6.94)
Professional fees                              651        500       151     30.20
Legal expense                                  282        167       115     68.86
Amortization of core deposit intangible        123        123         0         0
Other expense                                1,176      1,026       150     14.61
                                          --------   --------   -------
      Total noninterest expense           $ 11,182   $ 10,025   $ 1,157     11.54
                                          ========   ========   =======
</TABLE>

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

The income tax provision  for the first nine months of 2008 totaled  $883,000 in
comparison  to $638,000  for the same  nine-month  period in 2007.  As mentioned
previously,  the Emergency Economic  Stabilization Act (EESA) enacted in October
2008  will  permit  a  fourth   quarter   tax   benefit  of  $971,000   for  the
other-than-temporary  impairment  recorded in the quarter  ended  September  30,
2008.

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

The Company's pre tax income, not including  write-downs and gains on securities
transactions,  for the nine month  period  ended  September  30, 2008 would have
totaled $3,352,000.  This is an increase of $136,000 or approximately 4.23% when
compared to pre tax income, not including gains on securities transactions,  for
the period  ended  September  30, 2007 that totaled  $3,216,000.  Net income was
$152,000  or $.09  per  average  share  outstanding  for the nine  months  ended
September  30,  2008.  Net income for the  corresponding  period in 2007 totaled
$2,800,000 or $1.66 per average share outstanding.

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

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

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

(amounts in thousands)
Three Months Ended September 30                                2008      2007
                                                             -------   --------
Total Interest and Dividend Income
(financial statements)                                       $ 6,712   $  6,602
Tax Equivalent Adjustment                                        320        327
                                                             -------   --------
   Total Interest and Dividend Income (on a FTE basis)         7,032      6,929
Total Interest (Expense)                                      (2,587)    (3,167)
                                                             -------   --------
Net Interest and Dividend Income-FTE                         $ 4,445   $  3,762
                                                             =======   ========

Total  interest  and  dividend  income on a FTE basis for the three months ended
September 30, 2008  increased  $103,000 or 1.49%  compared to the same period in
2007. The increase was primarily  attributable to an increase in earning assets.
Interest  expense on  deposits  decreased  $602,000 or 28.85% for the quarter to
$1,485,000 compared to $2,087,000 for the same quarter in 2007. This decrease is
primarily  the result of an economic  environment  of generally  lower  interest
rates. The Bank's volume of Federal Home Loan Bank advances decreased during the
three month period ended  September 30, 2008 when compared to the  corresponding
period in 2007.  Interest expense on these advances  decreased  $24,000 or 2.22%
and totaled $1,056,000 for the three months ended September 30, 2008 compared to
$1,080,000 for the corresponding  period in 2007. Total interest expense for the
three months ending

                                       14

<PAGE>

September 30, 2008 was  $2,587,000  compared to total  interest  expense for the
same  period in 2007 of  $3,167,000,  a decrease  of  $580,000  or 18.31%.  This
decrease is a reflection of an economic  environment of generally lower interest
rates and a reduction  of FHLB  borrowings.  Overall,  net interest and dividend
income (on a FTE  basis)  increased  $683,000  or 18.16% to  $4,445,000  for the
three-month  period ended September 30, 2008 when compared to the  corresponding
period in 2007.

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

Noninterest  income  not  including  write-downs  on and net  gains  on sales of
available-for-sale  securities  totaled  $1,326,000  for the three  months ended
September  30,  2008 as  compared  to  $1,018,000  for the  three  months  ended
September 30, 2007.  This  represents an increase of $308,000 or 30.26%.  Income
from the Trust/Wealth  Advisory Services Division increased $68,000 or 14.32% to
$543,000  for the  third  quarter  of 2008.  This is  primarily  the  result  of
continued  growth  in assets  under  management.  Other  income  which  consists
primarily of fees  associated  with  transaction  accounts,  fees related to the
origination  and servicing of loans and a non  recurring  premium on the sale of
the Bank's  credit card  portfolio  of $183,000  totaled  $783,000 for the third
quarter  of 2008.  As  previously  mentioned,  the  write-down  of  Freddie  Mac
preferred  stock  following  it  being  put  into  conservatorship  by the  U.S.
Government, for the quarter ended September 30, 2008 was $2,856,000.  Overall, a
charge of  $1,345,000  was recorded for  noninterest  income for the three month
period  ended  September  30,  2008.  This  compares  to  noninterest  income of
$1,060,000 for the corresponding period in 2007.

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

Noninterest  expense  totaled  $3,835,000  for  the  three  month  period  ended
September  30, 2008 as compared to  $3,401,000  for the same period in 2007,  an
increase of $434,000 or 12.76%.  Although some increases in noninterest  expense
are attributable to normal volumes of business,  much of the overall increase in
the noninterest  expense listed in the table below is primarily  attributable to
additional  staffing,  and expenses related to the establishment of a new branch
in New York State, which commenced  operations in August 2007. The components of
noninterest  expense and the  changes in the period were as follows  (amounts in
thousands):

                                             2008      2007    Change   % Change
--------------------------------------------------------------------------------
Salaries and employee benefits             $ 2,148   $ 1,931    $ 217     11.24%
Occupancy expense                              258       206       52     25.24
Equipment expense                              219       214        5      2.34
Data processing                                310       301        9      2.99
Insurance                                       58        47       11     23.40
Printing and stationery                         66        72       (6)    (8.33)
Professional fees                              218       161       57     35.40
Legal expense                                  116        41       75    182.93
Amortization of core deposit intangible         41        41        0         0
      Other expense                            401       387       14      3.62
                                           -------   -------    -----
   Total non-interest expense              $ 3,835   $ 3,401    $ 434     12.76
                                           =======   =======    =====

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

The income tax provision  for the  three-month  period ended  September 30, 2008
totaled  $337,000 in  comparison  to $177,000 for the same three month period in
2007. As mentioned  previously,  the EESA  enactment in October 2008 will permit
the Company to record a fourth quarter tax benefit of approximately $971,000 for
the other-than-temporary  impairment recorded in the quarter ended September 30,
2008.

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

The Company's pre tax income,  not including  write-downs  and gains on sales of
securities,  for the three  month  period  ended  September  30, 2008 would have
totaled  $1,096,000.  This is an  increase of $44,000  when  compared to pre tax
income,  not including gains on securities  transactions  for the  corresponding
three month period ended September 30, 2007, that totaled  $1,052,000.  Overall,
the Company  reported a net loss totaling  $1,912,000 or $1.13 per average share
outstanding for the three months ended September

                                       15

<PAGE>

30, 2008. Net income for the  corresponding  period in 2007 totaled  $917,000 or
$0.54 per average share outstanding.

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

Total assets at September 30, 2008 were  $485,650,000,  compared to $461,960,000
at December 31, 2007, an increase of 5.13%. The increase is primarily the result
of an increase in earning assets during the period that were funded by growth in
deposits.

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

The make up of the  investment  portfolio is diversified  among U.S.  Government
sponsored agencies,  mortgage-backed  securities and securities issued by states
of the United States and  political  subdivisions  of the states.  The portfolio
does not include  securities  collateralized  by pools of  sub-prime  mortgages.
During the nine months ended  September  30,  2008,  the  investment  portfolio,
including  Federal  Home  Loan  Bank  stock,  decreased  $2,751,000  or 1.80% to
$149,873,000 from $152,624,000 at December 31, 2007.

Securities   are   classified   in   the   portfolio   as   either    securities
available-for-sale or securities held-to-maturity.  Almost all securities in the
portfolio  are  classified as  available-for-sale.  The  securities  reported as
available-for-sale  are stated at fair value in the financial  statements of the
Company.  Unrealized holding gains and losses on  available-for-sale  securities
(accumulated other comprehensive  income/loss) are not included in earnings, but
are  reported as a net amount  (less  expected  tax) in a separate  component of
capital until  realized.  At September 30, 2008, the unrealized  loss net of tax
was $7,620,000.  This compares to an unrealized loss net of tax of $2,273,000 at
December 31, 2007. As previously discussed,  the U.S. Government placing Freddie
Mac into  conservatorship  necessitated  the write-down of Freddie Mac preferred
stock during the quarter.  The amortized cost basis of the investment  which was
made in 2003 was $2,975,000.  This represented  approximately  1.8% of the total
investment  securities  portfolio.  Management deems the remaining securities in
the portfolio  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.

Lending
-------

Net loans  outstanding (not including loans held for sale) totaled  $293,740,000
at September 30, 2008 compared to net loans  outstanding  (not  including  loans
held for sale) of  $268,191,000 at December 31, 2007. This is an increase in net
loans of $25,549,000 or 9.53%.  Competition for loans remains  aggressive in the
Bank's market area, however,  new business  development coupled with an increase
in loan demand resulted in the increase.

                                       16

<PAGE>

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

                                         September 30, 2008   December 31, 2007
                                         ------------------   -----------------
                                                 (amounts in thousands)
Commercial, financial and agricultural       $  19,239            $  20,629
Real estate-construction and land
   development                                  35,690               28,928
Real estate-residential                        174,250              158,600
Real estate-commercial                          60,966               53,823
Consumer                                         5,935                8,005
Other                                              457                  376
                                             ---------            ---------
                                               296,537              270,361
Deferred costs, net                                308                  306
Unearned income                                      0                   (1)
Allowance for loan losses                       (3,105)              (2,475)
                                             ---------            ---------
Net Loans                                    $ 293,740            $ 268,191
                                             =========            =========

Provision and Allowance for Loan Losses
---------------------------------------

Credit risk is inherent in the business of extending  loans.  The Bank  monitors
the quality of the  portfolio to ensure that loan quality will not be sacrificed
for growth or otherwise  compromise the Bank's objectives.  Because of this risk
associated with extending  loans, the Bank maintains an allowance or reserve for
loan and lease  losses  through  charges to earnings.  For the first  nine-month
period  of 2008,  the  provision  for loan  losses  was  $690,000.  There was no
provision for loan losses in the comparable period in 2007.

The Bank  evaluates the adequacy of the allowance no less  frequently  than on a
quarterly basis. No material changes have been made in the estimation methods or
assumptions  that the Bank uses in making this  determination  during the period
ended  September 30, 2008.  Such  evaluations are based on assessments of credit
quality and "risk  rating" of loans by senior  management,  which is reviewed by
the Bank's Loan  Committee on a regular  basis.  Loans are initially  risk rated
when originated.  If there is  deterioration  in the credit,  the risk rating is
adjusted accordingly.

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

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

      1.    Non-accrual status;

      2.    Loans over 90 days delinquent;

      3.    Troubled debt restructures consummated after December 31, 1994;

      4.    Loans  classified as "doubtful",  meaning that they have weaknesses,
            which make  collection or  liquidation  in full,  based on currently
            existing facts,  conditions,  and values,  highly  questionable  and
            improbable.

The  individual  allowance for any impaired loan is based upon the present value
of expected future cash flows discounted at the loan's  effective  interest rate
or the  fair  value  of the  collateral  if the  loan is

                                       17

<PAGE>

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 is also analyzed.  A
loan loss  allocation  is made for each type of loan  multiplied by the loan mix
percentage for each loan type to produce a weighted average factor.

Nonperforming  loans,  which  include all loans that are on a nonaccrual  status
along  with  loans  that are 90 days or more  past due and still  accruing,  are
closely  monitored by  management.  At September 30, 2008,  nonperforming  loans
totaled  $1,591,000 or 0.54% of total loans  outstanding of $296,537,000,  which
does not include loans held for sale. In addition,  while  currently  performing
and secured, the Company has concerns relating to the timely repayment of a loan
in the  amount of  $3,400,000  which is the  subject of  litigation.  (See Legal
Proceedings.)  The allowance  for loan losses  totaled  $3,105,000  representing
195.16% of nonperforming loans.  Nonperforming loans totaled $1,824,000 or 0.67%
of total loans  outstanding,  (which  does not  include  loans held for sale) of
$270,361,000  at December  31,  2007.  The  allowance  for loan  losses  totaled
$2,475,000 at December 31, 2007 and represented 135.69% of nonperforming  loans.
A total of $95,000 of loans were  charged off by the Bank during the nine months
ended  September  30,  2008.  These  charged-off  loans  consisted  primarily of
consumer loans.  This compares to loans charged off during the nine-month period
ended September 30, 2007 that totaled $72,000.  A total of $36,000 of previously
charged-off loans was recovered during the nine month period ended September 30,
2008.  Recoveries for the same period in 2007 totaled $53,000.  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 September 30, 2008, the Bank had other
real  estate  owned  ("OREO")  in the  amount of  $205,000.

Deposits
--------

The Company offers a variety of deposit  accounts with a range of interest rates
and terms.  The following  table  illustrates  the  composition of the Company's
deposits at September 30, 2008 and December 31, 2007:

                                         September 30, 2008   December 31, 2007
                                                  (amounts in thousands)

Demand                                        $ 69,198             $ 69,215
NOW                                             27,121               23,652
Money Market                                    60,578               56,210
Savings                                         69,724               52,616
Time                                           117,988              116,048
                                              --------             --------
   Total Deposits                             $344,609             $317,741
                                              ========             ========

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

                                       18

<PAGE>

Borrowings
----------

The Company  utilizes  advances  from the Federal  Home Loan Bank as part of its
operating  strategy to supplement  deposit  growth and fund its asset growth,  a
strategy that is designed to increase  interest income.  These advances are made
pursuant to various credit programs, each of which has its own interest rate and
range of  maturities.  At September  30, 2008,  the Company had  $86,490,000  in
outstanding  advances from the Federal Home Loan Bank compared to $95,011,000 at
December 31, 2007. In addition, the Company began offering securities sold under
agreements to repurchase  as part of its  operating  strategy.  At September 30,
2008 they totaled  $12,370,000.  Management  expects that it will continue these
strategies of supplementing deposit growth.

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
September 30, 2008:

(amounts in thousands)

<TABLE>
<CAPTION>
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           $ 2,196        $            $   3        $ 28,059     $ 30,258
   Commercial related                          3,650          5,502         77          14,973       24,202
   Consumer related                                                                      1,302        1,302

   Standby letters of credit                      29                                                     29
                                             --------------------------------------------------------------

   Total                                     $ 5,875        $ 5,502      $  80        $ 44,334     $ 55,791
                                             ==============================================================
</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,

                                       19

<PAGE>
interest  rate  risk is  monitored  using  gap  analysis  which  identifies  the
differences  between  assets and  liabilities  which  mature or  reprice  during
specific  time  frames and model  simulation  which is used to "rate  shock" the
Company's assets and liability balances to measure how much of the Company's net
interest income is "at risk" from sudden rate changes.

An interest rate sensitivity gap is defined as the difference between the amount
of interest-earning  assets maturing or repricing within a specific time and the
amount of  interest-bearing  liabilities  maturing or repricing within that same
period. A gap is considered  positive when the amount of interest rate sensitive
assets  exceeds  the amount of interest  rate  sensitive  liabilities.  A gap is
considered  negative  when the amount of  interest  rate  sensitive  liabilities
exceeds the amount of interest rate sensitive assets. At September 30, 2008, the
Company  maintains a liability  sensitive  (negative gap)  position.  This would
suggest that during a period of declining  interest rates,  the Company would be
in a better position to increase net interest income. To the contrary,  during a
period of rising  interest  rates,  a negative gap would result in a decrease in
interest income. The level of interest rate risk at September 30, 2008 is within
the limits approved by the Board of Directors.

Liquidity
---------

Liquidity is the ability to raise funds on a timely basis at an acceptable  cost
in  order  to meet  cash  needs.  Adequate  liquidity  is  necessary  to  handle
fluctuations in deposit levels,  to provide for customers'  credit needs, and to
take advantage of investment  opportunities  as they are presented.  The Company
manages  liquidity  primarily  with readily  marketable  investment  securities,
deposits and loan repayments. The Company's subsidiary, the Bank, is a member of
the Federal Home Loan Bank of Boston.  This enhances the  liquidity  position by
providing a source of available  borrowings.  At September 30, 2008, the Company
had  approximately  $55,791,000  in  loan  commitments  outstanding.  Management
believes  that the current  level of  liquidity  is ample to meet the  Company's
needs for both the present and foreseeable future.

Capital
-------

At September 30, 2008, the Company had $38,720,000 in  shareholders'  equity,  a
decrease of 15.02%  when  compared to  December  31, 2007  shareholders'  equity
totaling  $45,563,000.  Several  components  contributed  to  the  change  since
December 31, 2007.  Earnings for the nine-month  period ended September 30, 2008
totaled $152,000.  Securities in the investment 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
September 30, 2008 resulted in accumulated other  comprehensive  loss net of tax
totaling  $7,620,000.  Changes in unrecognized pension plan expense per SFAS No.
158, resulted in accumulated other  comprehensive  loss net of tax of $1,024,000
for the nine month period ended September 30, 2008.

A review and analysis of  securities  determined  that,  as a result of the U.S.
Government placing FHLMC (Freddie Mac) into conservatorship,  the Company needed
to take a write-down  of Freddie Mac  preferred  stock during the quarter  ended
September 30, 2008.  Earnings for the period were impacted by pre-tax charges of
$2,856,000.  No other credit  deterioration was revealed and the unrealized loss
on  securities   available-for-sale   is  due  to  the  current   interest  rate
environment,  and management deems the remaining securities to be not other than
temporarily  impaired.  The  Company  has  declared  three  quarterly  dividends
resulting  in a decrease in capital of  $1,890,000.  The Company  issued 840 new
shares of common stock under the terms of the Director  Stock Retainer Plan that
resulted  in an  increase  in  capital  of  $28,000.  Under  current  regulatory
definitions,  the 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

                                       20

<PAGE>

purposes is based on the ratio of risk-based  capital to  risk-weighted  assets.
This  method  of  measuring   capital   adequacy  helps  to  establish   capital
requirements  that are more sensitive to the differences in risk associated with
various assets.  It takes into account  off-balance  sheet exposure in assessing
capital  adequacy and it minimizes  disincentives  to holding  liquid,  low-risk
assets.  At September 30, 2008, the Company had a total risk based capital ratio
of 13.15% compared to 15.00% at December 31, 2007. Maintaining strong capital is
essential to Bank safety and  soundness.  However,  the effective  management of
capital  resources  requires  generating  attractive  returns on equity to build
value for shareholders  while maintaining  appropriate levels of capital to fund
growth,  meet regulatory  requirements  and be consistent with prudent  industry
practices.

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

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

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

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

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

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

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

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

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

(b)   changes in the  legislative  and regulatory  environment  that  negatively
      impacts the Company and Bank through increased operating expenses;

(c)   increased competition from other financial and non-financial institutions;

(d)   the impact of technological advances; and

(e)   other risks  detailed from time to time in the Company's  filings with the
      Securities and Exchange Commission.

                                       21

<PAGE>

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

                        Item 3. Controls and Procedures.

The Company's Chief  Executive  Officer and Chief  Financial  Officer  concluded
that,  based  upon  an  evaluation  as of  September  30,  2008,  the  Company's
disclosure  controls and  procedures  are  effective to ensure that  information
required  to be  disclosed  by the  Company in reports  that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported  within the time periods  specified in the SEC rules and forms.  During
the quarter  ended  September  30,  2008 there were no changes in the  Company's
internal  control over financial  reporting  that  materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                           Part II - OTHER INFORMATION

Item 1. - Legal Proceedings.

      The Bank is a party  defendant,  both in its capacity as Salisbury  Bank &
      Trust  Company  and in  its  capacity  as the  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. 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
      Christophersen, to the Erling Christophersen Trust, of which the Bank is a
      co-Trustee.  Subsequent to this conveyance, the Bank loaned $3,386,609, to
      the  Erling   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  Salisbury   failed  to  utilize
      reasonable  diligence in extending financing to the Co-Defendant,  Erling,
      and that had it engaged in  reasonable  diligence  it would've  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  Plaintiffs  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
      Lender's  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.   While  the  underlying  loan  is  currently
      performing,  until the  litigation is resolved,  the liquidity of the real
      estate collateral which secures the loan is diminished.

                                       22

<PAGE>

Item 1A.  Risk Factors. Not applicable

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

Item 3. - Defaults Upon Senior Securities. Not applicable

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

Item 5. - Other Information. Not applicable

Item 6. - Exhibits

            11 Computation of Earnings per Share.

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

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

            32- Section 1350 Certifications

                             SALISBURY BANCORP, INC.

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.

                                                    Salisbury Bancorp, Inc.

         Date: November 13, 2008                    by: /s/ John F. Perotti
               -----------------                        --------------------
                                                        John F. Perotti
                                                        Chief Executive Officer

         Date: November 13, 2008                    by: /s/ John F. Foley
               -----------------                        --------------------
                                                        John F. Foley
                                                        Chief Financial Officer

                                       23