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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
|X|   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2009

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


                         Commission file number 0-24751

                             SALISBURY BANCORP, INC.
             (Exact name of registrant as specified in its charter)

                   Connecticut                                06-1514263
          (State or other jurisdiction                     (I.R.S. Employer
        of incorporation or organization)                 Identification No.)

         5 Bissell Street, Lakeville, CT                         06039
    (Address of principal executive offices)                  (Zip code)

                                 (860) 435-9801
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

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

                            Yes_________ No_________

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

Large  accelerated  filer |_| Accelerated  filer |_|  Non-accelerated  filer |_|
Smaller reporting company |X|

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

                                 Yes [ ] No [X]

The number of shares of Common Stock  outstanding  as of November  16, 2009,  is
1,686,701.

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                                       1
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

                          PART I FINANCIAL INFORMATION

Item 1.          Financial Statements:

                 Consolidated Balance Sheet as of
                 September 30, 2009 and December 31, 2008....................  3

                 Consolidated Statement of Income
                 for the three month and nine month periods
                 ended September 30, 2009 and September 30, 2008.............  4

                 Consolidated Statement of Changes in
                 Shareholders' Equity for the nine month
                 periods ended September 30, 2009 and September 30, 2008.....  5

                 Consolidated Statement of Cash Flows
                 for the nine month periods ended
                 September 30, 2009 and September 30, 2008...................  6

                 Notes to Consolidated Financial Statements..................  7

Item 2.          Management's Discussion and Analysis of Financial
                 Condition and Results of Operations......................... 16

Item 3.          Quantitative and Qualitative Disclosures
                 about Market Risk........................................... 28

Item 4T.         Controls and Procedures..................................... 29

                            PART II Other Information

Item 1.          Legal Proceedings........................................... 29
Item 1A.         Risk Factors................................................ 29
Item 2.          Unregistered Sales of Equity Securities and Use of
                 Proceeds.................................................... 29
Item 3.          Defaults upon Senior Securities............................. 30
Item 4.          Submission of matters to a vote of security holders......... 30
Item 5.          Other information........................................... 30
Item 6.          Exhibits.................................................... 30

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.           FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
                                                                       September 30,     December 31,
(unaudited, dollars in thousands)                                               2009             2008
-----------------------------------------------------------------------------------------------------
<S>                                                                           <C>                 <C>
ASSETS
Cash and due from banks                                                    $   7,259        $   7,083
Interest bearing demand deposits with other banks                             23,724              900
Money market mutual funds                                                      4,319            1,477
Federal funds sold                                                                --              200
-----------------------------------------------------------------------------------------------------
   Total cash and cash equivalents                                            35,302            9,660
Interest bearing time deposit with other banks                                 5,000               --
Securities
   Available-for-sale at fair value                                          174,765          150,527
   Held-to-maturity at amortized cost
     (fair value: $63 and $67)                                                    63               66
Federal Home Loan Bank stock at cost                                           5,893            5,323
Loans held-for-sale                                                            1,173            2,314
Loans (net of allowance for loan losses: $3,429 and $2,724)                  311,251          297,367
Investment in real estate                                                         75               75
Other real estate owned                                                          418              205
Bank premises and equipment, net                                               8,890            7,124
Goodwill                                                                       9,829            9,829
Intangible assets (net of accumulated amortization: $880 and $757)             1,042            1,165
Accrued interest receivable                                                    2,467            2,704
Cash surrender value of life insurance policies                                3,636            3,825
Deferred taxes                                                                 2,046            4,197
Other assets                                                                   2,437            1,373
-----------------------------------------------------------------------------------------------------
       Total Assets                                                        $ 564,287        $ 495,754
=====================================================================================================
LIABILITIES and SHAREHOLDERS' EQUITY
Deposits
   Demand (non-interest bearing)                                           $  64,718        $  65,479
   NOW accounts                                                               35,915           24,872
   Money market                                                               65,252           57,648
   Savings and other                                                          87,804           71,405
   Certificates of deposit                                                   161,110          125,521
-----------------------------------------------------------------------------------------------------
       Total deposits                                                        414,799          344,925
Repurchase agreements                                                         15,462           11,203
Federal Home Loan Bank advances                                               76,767           87,914
Due to broker                                                                     --            7,632
Accrued interest and other liabilities                                         4,781            5,141
-----------------------------------------------------------------------------------------------------
       Total Liabilities                                                     511,809          456,815
-----------------------------------------------------------------------------------------------------
Commitments and contingencies                                                     --               --
-----------------------------------------------------------------------------------------------------
Shareholders' Equity
   Preferred stock - $.01 per share par value
     Authorized: 25,000 and 0; Shares issued: 8,816 and 0                         --               --
   Common stock - $.10 per share par value
     Authorized: 3,000,000 and 3,000,000;
     Shares issued: 1,686,701 and 1,685,861                                      169              169
   Unused common stock warrants outstanding                                      112               --
   Paid-in capital                                                            21,889           13,157
   Retained earnings                                                          34,997           34,518
   Accumulated other comprehensive loss, net                                  (4,689)          (8,905)
-----------------------------------------------------------------------------------------------------
       Total Shareholders' Equity                                             52,478           38,939
-----------------------------------------------------------------------------------------------------
       Total Liabilities and Shareholders' Equity                          $ 564,287        $ 495,754
=====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
                                                    Three months ended          Nine months ended
                                                       September 30,               September 30,
(dollars in thousands except per share amounts)      2009         2008          2009          2008
-----------------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>         <C>           <C>
Interest and dividend income
Interest and fees on loans                        $    4,642   $    4,686    $   13,633    $   13,918
Interest on debt securities:
     Taxable                                           1,369        1,358         3,965         3,988
     Tax exempt                                          635          622         1,912         1,775
 Dividends on equity securities                           --           39            --           169
 Other interest                                           57            7            67           121
-----------------------------------------------------------------------------------------------------
     Total interest and dividend income                6,703        6,712        19,577        19,971
-----------------------------------------------------------------------------------------------------
Interest expense
Deposits                                               1,433        1,485         4,428         5,124
Repurchase agreements                                     33           46           100            46
FHLB Advances                                            791        1,056         2,322         3,135
-----------------------------------------------------------------------------------------------------
     Total interest expense                            2,257        2,587         6,850         8,305
-----------------------------------------------------------------------------------------------------
Net interest and dividend income                       4,446        4,125        12,727        11,666
Provision for loan losses                                180          520           925           690
-----------------------------------------------------------------------------------------------------
Net interest and dividend income
     after provision for loan losses                   4,266        3,605        11,802        10,976
-----------------------------------------------------------------------------------------------------
Non-interest income
Trust and wealth advisory                                463          543         1,433         1,684
Service charges on deposit accounts                      225          209           641           610
Losses on available-for-sale securities                   --       (2,671)         (692)       (2,317)
Gains on sales of mortgage loans, net                    101           77           555           236
Other                                                    469          497         1,223         1,028
-----------------------------------------------------------------------------------------------------
     Total non-interest income (loss)                  1,258       (1,345)        3,160         1,241
-----------------------------------------------------------------------------------------------------
Non-interest expense
Salaries and employee benefits                         2,784        2,147         7,332         6,225
Occupancy                                                238          258           740           721
Equipment                                                265          219           705           650
Data processing                                          327          310         1,040         1,005
Insurance                                                 40           41            96           112
FDIC insurance                                           204           17           737            36
Printing and stationary                                   58           66           225           201
Postage and telecommunications                           162          145           307           278
Professional fees                                        308          218           832           651
Legal                                                     68          116           276           282
Amortization of intangibles                               41           41           123           123
Other                                                    307          257         1,014           898
-----------------------------------------------------------------------------------------------------
     Total non-interest expense                        4,802        3,835        13,427        11,182
-----------------------------------------------------------------------------------------------------
Income before income taxes                               722       (1,575)        1,535         1,035
Income tax provision                                       2          337           (83)          883
-----------------------------------------------------------------------------------------------------
Net income (loss)                                 $      720   $   (1,912)   $    1,618    $      152
=====================================================================================================
Net income (loss) available to
     common shareholders                          $      549   $   (1,912)   $    1,368    $      152
=====================================================================================================
Per common share

Diluted earnings                                  $     0.33   $    (1.13)   $     0.81    $     0.09

Cash dividends                                          0.28         0.28          0.56          0.84

</TABLE>
See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

Salisbury Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                                             Accumulated
                                                                                                              other comp-   Total
                                                                                                              rehensive     share-
                                        Common Stock       Preferred                Paid-in      Retained      (loss)      holders'
(unaudited, dollars in thousands)    Shares      Amount      stock      Warrants    capital      earnings      income       equity
-----------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>         <C>         <C>         <C>          <C>          <C>          <C>
Balances at
  December 31, 2008                1,685,861   $     169   $      --   $      --   $  13,157    $  34,518    $  (8,905)   $  38,939
Net income for period                     --          --          --          --          --        1,618           --        1,618
Other comprehensive income
  net of taxes                            --          --                      --          --           --        4,216        4,216
                                                                                                                          ---------
Total comprehensive income                                                                                                    5,834
                                                                                                                          ---------
Common stock dividends paid               --          --                      --          --         (944)          --         (944)
Issuance of preferred stock and
  warrants                                --          --          --         112       8,704           --           --        8,816
Amortization of warrants                  --          --          --          --           9           (9)          --           --
Preferred stock dividends paid            --          --          --          --          --         (186)          --         (186)
Issuance of common stock for
  Directors fees                         840          --          --          --          19           --           --           19
-----------------------------------------------------------------------------------------------------------------------------------
Balances at September 30, 2009     1,686,701   $     169   $      --   $     112   $  21,889    $  34,997    $  (4,689)   $  52,478
===================================================================================================================================
Balances at
  December 31, 2007                1,685,021   $     169   $      --   $      --   $  13,130    $  35,583    $  (3,319)   $  45,563
Net income for period                     --          --          --          --          --          152           --          152
Other comprehensive loss,
  net of taxes                            --          --          --          --          --           --       (5,325)      (5,325)
                                                                                                                          ---------
Total comprehensive loss                                                                                                     (5,173)
                                                                                                                          ---------
Common stock dividends paid               --          --          --          --          --       (1,416)          --       (1,416)
Issuance of common stock for
  Directors fees                         840          --          --          --          28           --           --           28
Cumulative effect of change in
  Accounting principles:
  Initial application of
  EITF Issue No. 06-4                     --          --          --          --          --         (283)          --         (283)
-----------------------------------------------------------------------------------------------------------------------------------
Balances at September 30, 2008     1,685,861   $     169   $      --   $      --   $  13,158    $  34,036    $  (8,644)   $  38,719
===================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       5
<PAGE>
Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                  Nine months ended
                                                                                    September 30,
(unaudited, dollars in thousands)                                                 2009         2008
-----------------------------------------------------------------------------------------------------
<S>                                                                                 <C>           <C>
Operating Activities
     Net income                                                               $   1,618    $     152
     Adjustments to reconcile net income to net
         cash provided by operating activities:
              Amortization of securities, net                                       392           57
              Gain on sales of available-for-sale securities, net                  (436)        (539)
              Write-downs of available-for-sale securities                        1,128        2,856
              Provision for loan losses                                             925          690
              Decrease (increase) in loans held-for-sale                          1,141           (2)
              Change in deferred loan costs, net                                   (112)          (2)
              Increase in mortgage servicing rights, net                           (254)          (1)
              Depreciation and amortization of bank premises and equipment          535          519
              Amortization of intangible assets                                     123          123
              Accretion of fair value adjustment on deposits and borrowings         (54)         (98)
              Amortization of fair value adjustment on loans                         36           36
              Decrease in interest receivable                                       207          144
              Deferred tax benefit                                                  (20)        (138)
              Increase in taxes receivable                                         (477)         (13)
              Increase in prepaid expenses                                         (345)         (30)
              Increase in cash surrender value of life insurance policies          (215)         (92)
              Proceeds from life insurance policies                                 404           --
              Increase in other assets                                              (19)        (159)
              Increase in accrued expenses                                          114          213
              Increase (decrease) in interest payable                                72         (164)
              Increase (decrease) in other liabilities                               11           (8)
              Issuance of shares for Directors' fees                                 19           28
              Increase (decrease) in unearned income on loans                         6           (1)
-----------------------------------------------------------------------------------------------------
                  Net cash provided by operating activities                       4,799        3,571
-----------------------------------------------------------------------------------------------------
Investing Activities
     Placement of interest-bearing time deposit with other bank                  (5,000)          --
     Purchase of Federal Home Loan Bank stock                                      (570)        (147)
     Purchases of available-for-sale securities                                 (98,738)    (102,304)
     Proceeds from sales of available-for-sale securities                        44,124       94,723
     Proceeds from maturities of available-for-sale securities                   27,991           --
     Proceeds from maturities of held-to-maturity securities                          4            3
     Loan originations, advances and principal collections, net                 (15,105)     (24,372)
     Purchase of loans                                                              (76)      (1,935)
     Recoveries of loans previously charged-off                                      25           36
     Proceeds from sale of other real estate owned                                  205           --
     Payments to improve other real estate owned                                     --         (204)
     Purchases of bank premises and equipment, net                               (2,270)        (941)
-----------------------------------------------------------------------------------------------------
                  Net cash utilized by investing activities                     (49,410)     (35,141)
-----------------------------------------------------------------------------------------------------
Financing Activities
     Net increase in demand deposits, NOW and savings accounts                   34,284       24,927
     Net increase in time deposits                                               35,590        1,940
     Net increase in securities sold under agreements to repurchase               4,259       12,370
     Federal Home Loan Bank advances                                             12,000       17,000
     Principal payments on Federal Home Loan Bank advances                       (2,215)     (16,786)
     Net change in Federal Home Loan Bank short term advances                   (20,878)      (8,637)
     Proceeds from issuance of preferred stock                                    8,824            0
     Cash dividends paid                                                         (1,611)      (1,682)
-----------------------------------------------------------------------------------------------------
                  Net cash provided by financing activities                      70,253       29,132
-----------------------------------------------------------------------------------------------------
     Increase (decrease) in cash and cash equivalents                            25,642       (2,438)
Cash and cash equivalents, beginning of period                                    9,660       15,178
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                                      $  35,302    $  12,740
=====================================================================================================
Cash paid during period
     Interest to depositors and on borrowings                                 $   6,777    $   8,567
     Income taxes                                                                   415        1,034
Non-Cash Transfers
     From Loans to OREO                                                             418          205
</TABLE>

See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

NOTE 1 - BASIS OF PRESENTATION

The  interim  consolidated  financial  statements  of  Salisbury  Bancorp,  Inc.
("Salisbury")  include  those of  Salisbury  and its  wholly  owned  subsidiary,
Salisbury Bank and Trust Company (the "Bank"). In the opinion of management, the
interim  unaudited  consolidated  financial  statements  include all adjustments
(consisting  of normal  recurring  adjustments)  necessary to present fairly the
financial  position of Salisbury and the statements of income and  shareholder's
equity and cash flows for the interim periods presented.

The  financial  statements  have been  prepared  in  accordance  with  generally
accepted  accounting   principles.   In  preparing  the  financial   statements,
management is required to make extensive use of estimates and  assumptions  that
affect the  reported  amounts of assets  and  liabilities  as of the date of the
balance  sheet and revenues and expenses for the period.  Actual  results  could
differ   significantly  from  those  estimates.   Material  estimates  that  are
particularly  susceptible to  significant  change in the near term relate to the
determination  of the allowance for loan losses and the valuation of real estate
acquired  in  connection  with  foreclosures  or in  satisfaction  of loans.  In
connection with the determination of the allowance for loan losses and valuation
of real  estate,  management  obtains  independent  appraisals  for  significant
properties.

Certain  financial   information,   which  is  normally  included  in  financial
statements prepared in accordance with generally accepted accounting principles,
but which is not required for interim reporting purposes,  has been condensed or
omitted.  Operating results for the three and nine month periods ended September
30, 2009 are not necessarily  indicative of the results that may be expected for
the  year  ending  December  31,  2009.  The  accompanying  condensed  financial
statements should be read in conjunction with the financial statements and notes
thereto included in Salisbury's  Annual Report for the period ended December 31,
2008.

The  allowance  for  loan  losses  is a  significant  accounting  policy  and is
presented in the Notes to Consolidated  Financial Statements and in Management's
Discussion and Analysis, which provide information on how significant assets are
valued in the financial statements and how those values are determined. Based on
the valuation techniques used and the sensitivity of financial statement amounts
to the methods,  assumptions and estimates underlying those amounts,  management
has  identified  the  determination  of the  allowance for loan losses to be the
accounting area that requires the most subjective  judgments,  and as such could
be most subject to revision as new information becomes available.

Impact of New Accounting Pronouncements Issued

In June 2009, the Financial Accounting Standards Board ("FASB") issued an update
to Accounting  Standard  Codification  105-10,  "Generally  Accepted  Accounting
Principles." This standard establishes the FASB Accounting Standard Codification
("Codification" or "ASC") as the source of authoritative U.S. GAAP recognized by
the FASB for nongovernmental entities. The Codification is effective for interim
and annual  periods  ending after  September  15, 2009.  The  Codification  is a
reorganization  of existing  U.S. GAAP and does not change  existing U.S.  GAAP.
Salisbury  adopted this standard  during the third quarter of 2009. The adoption
had no impact on Salisbury's financial position or results of operations.

In June 2009,  the FASB  issued  SFAS No.  166,  "Accounting  for  Transfers  of
Financial  Assets",  and SFAS No. 167,  "Amendments to FASB  Interpretation  No.
46(R)." These standards are effective for the first interim  reporting period of
2010.  SFAS No. 166 amends the guidance in ASC 860 to eliminate the concept of a
qualifying  special-purpose entity ("QSPE") and changes some of the requirements
for  derecognizing  financial  assets.  SFAS No. 167  amends  the  consolidation
guidance in ASC 810-10.  Specifically,  the  amendments  will (a)  eliminate the
exemption for QSPEs from the new guidance,  (b) shift the determination of which
enterprise  should  consolidate a variable  interest entity ("VIE") to a current
control approach,  such that an entity that has both the power to make decisions
and right to  receive  benefits  or absorb  losses  that  could  potentially  be
significant,  will  consolidate  a VIE,  and (c) change when it is  necessary to
reassess who should  consolidate a VIE.  Salisbury is evaluating the impact that
these standards will have on its financial statements.

In August 2009, the FASB issued  Accounting  Standards  Update ("ASU")  2009-05,
"Measuring  Liabilities  at Fair Value," which  updates ASC 820-10,  "Fair Value
Measurements  and  Disclosures."  The updated  guidance  clarifies that the fair
value of a liability  can be  measured  in  relation to the quoted  price of the
liability when it trades as an asset in an active market,  without adjusting the

                                       7
<PAGE>

price for restrictions that prevent the sale of the liability.  This guidance is
effective beginning January 1, 2010. Salisbury does not expect that the guidance
will change its valuation techniques for measuring liabilities at fair value.

In May 2009, the FASB updated ASC 855,  "Subsequent Events." ASC 855 establishes
general  standards of accounting  for and  disclosure of events that occur after
the  balance  sheet  date but  before  financial  statements  are  issued or are
available  to be  issued.  Salisbury  adopted  this  guidance  during the second
quarter of 2009. In accordance with the update,  Salisbury evaluates  subsequent
events  through the date its financial  statements  are issued.  The adoption of
this  guidance  did not have an  impact on  Salisbury's  financial  position  or
results of operations.

In April  2009,  the FASB  updated ASC  320-10,  "Investments  - Debt and Equity
Securities." The guidance amends the  other-than-temporary  impairment  ("OTTI")
guidance for debt securities.  If the fair value of a debt security is less than
its amortized cost basis at the measurement  date, the updated guidance requires
Salisbury  to determine  whether it has the intent to sell the debt  security or
whether it is more likely than not it will be required to sell the debt security
before the recovery of its amortized cost basis. If either  condition is met, an
entity must recognize full  impairment.  For all other debt  securities that are
considered other-than-temporarily impaired and do not meet either condition, the
guidance  requires  that the credit loss portion of  impairment be recognized in
earnings and the temporary  impairment  related to all other factors be recorded
in other  comprehensive  income. In addition,  the guidance requires  additional
disclosures  regarding  impairments  on debt and  equity  securities.  Salisbury
adopted this guidance effective April 1, 2009. The adoption of this guidance did
not have an impact on Salisbury's financial position or results of operations.

In April  2009,  the FASB  updated  ASC 820-10,  "Fair  Value  Measurements  and
Disclosures,"  to provide guidance on determining fair value when the volume and
level of activity for the asset or liability  have  significantly  decreased and
identifying  transactions that are not orderly.  This issuance provides guidance
on  estimating  fair  value when there has been a  significant  decrease  in the
volume and level of  activity  for the asset or  liability  and for  identifying
transactions that may not be orderly. The guidance requires entities to disclose
the inputs and  valuation  techniques  used to measure fair value and to discuss
changes in valuation  techniques and related inputs, if any, in both interim and
annual periods. Salisbury adopted this guidance during 2009 and the adoption did
not have a material  impact on  Salisbury's  financial  position  and results of
operations.  The enhanced  disclosures  related to this guidance are included in
Note 5, "Fair Value Measurements," to the consolidated Financial Statements.

In April 2009, the FASB updated ASC 825-10 "Financial  Instruments." This update
amends the fair value  disclosure  guidance  in ASC  825-10-50  and  requires an
entity to  disclose  the fair  value of its  financial  instruments  in  interim
reporting  periods as well as in annual  financial  statements.  The methods and
significant assumptions used to estimate the fair value of financial instruments
and any changes in methods and assumptions  used during the reporting period are
also  required to be disclosed  both on an interim and annual  basis.  Salisbury
adopted this guidance during 2009. The required  disclosures  have been included
in Note 5, "Fair Value Measurements," to the consolidated Financial Statements.

In June 2008,  the FASB updated ASC 260-10,  "Earnings  Per Share." The guidance
concludes that unvested  share-based payment awards that contain  nonforfeitable
rights to dividends or dividend  equivalents are  participating  securities that
should be included in the earnings  allocation  in computing  earnings per share
under the two-class method.  The guidance is effective for financial  statements
issued for fiscal years  beginning  after December 15, 2008, and interim periods
within those years.  All prior period  earnings per share data presented must be
adjusted  retrospectively.  The  adoption of this update,  effective  January 1,
2009, did not have a material impact on Salisbury's financial position,  results
of operations,  and earnings per share.

In March  2008,  the FASB  updated  ASC 815,  "Derivatives  and  Hedging."  This
guidance  changes the disclosure  requirements  for derivative  instruments  and
hedging activities.  Entities are required to provide enhanced disclosures about
(a)  how and why an  entity  uses  derivative  instruments,  (b) how  derivative
instruments  and related hedged items are accounted for under  Statement 133 and
its related  interpretations,  and (c) how  derivative  instruments  and related
hedged items affect an entity's financial position,  financial performance,  and
cash flows. The guidance in ASC 815 is effective for financial statements issued
for fiscal years and interim  periods  beginning  after November 15, 2008,  with
early application  encouraged.  This guidance encourages,  but does not require,
comparative disclosures for earlier periods at initial adoption. The adoption of
this  guidance did not have a material  impact on its  financial  condition  and
results of operations.

                                       8
<PAGE>

In February 2008,  the FASB updated ASC 860,  "Transfers  and  Servicing."  This
guidance  clarifies how the transferor and transferee should separately  account
for a  transfer  of a  financial  asset and a related  repurchase  financing  if
certain  criteria are met. This guidance became  effective  January 1, 2009. The
adoption of this guidance did not have a material effect on Salisbury's  results
of operations or financial position.

In December 2007, the FASB updated ASC 810-10,  "Consolidation",  which provides
new  accounting  and reporting  standards for the  noncontrolling  interest in a
subsidiary  and for the  deconsolidation  of a subsidiary.  It clarifies  that a
noncontrolling  interest  should be  reported  as a  component  of equity in the
consolidated   financial  statements.   This  guidance  also  required  expanded
disclosures that identify and distinguish  between the interests of the parent's
owners and the interests of the noncontrolling owners of an entity. The adoption
of this  guidance  did not have a  material  impact on  Salisbury's  results  of
operations or financial position.

In December 2007, the FASB updated ASC 805, "Business Combinations." The updated
guidance significantly changes the accounting for business  combinations.  Under
ASC 805, an acquiring  entity is required to recognize  all the assets  acquired
and liabilities assumed in a transaction at the acquisition-date fair value with
limited exceptions. It also amends the accounting treatment for certain specific
items including  acquisition  costs and non controlling  minority  interests and
includes a substantial  number of new disclosure  requirements.  ASC 805 applies
prospectively  to business  combinations for which the acquisition date is on or
after  January 1, 2009.  The adoption of this  statement did not have a material
impact on Salisbury's financial condition and results of operations.

Pending Acquisition

On August 25, 2009, Salisbury announced the Bank had entered into a purchase and
assumption  agreement  (the  "Agreement")  to purchase  the Canaan,  Connecticut
branch of Webster Bank. The Agreement  provides that,  subject to the receipt of
regulatory approvals and the satisfaction of normal closing conditions, the Bank
will assume certain  deposits,  fixed assets,  and certain loans.  The Bank also
agreed to retain all branch-based employees of the Webster Canaan Branch as part
of the transaction.

In the aggregate, the transaction includes approximately $17 million in deposits
and  approximately  $4 million in loans.  Under the terms of the Agreement,  the
acquisition is expected to be completed in the fourth quarter of 2009.

NOTE 2 - COMPREHENSIVE INCOME (LOSS)

Disclosure of comprehensive income includes net income and any changes in equity
from non-owner  sources that are not recorded in the income  statement  (such as
changes in the net  unrealized  gains  (losses) on  securities).  The purpose of
reporting  comprehensive  income (loss) 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.
Salisbury's sources of other comprehensive  income (loss) are the net changes in
unrealized  holding  (losses)  or  gains on  securities  and the net  change  in
unrecognized pension plan expense.

The components of comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
                                                Three months ended     Nine months ended
                                                   September 30,         September 30,
(in thousands)                                    2009       2008       2009       2008
----------------------------------------------------------------------------------------
<S>                                             <C>        <C>        <C>        <C>
Net income (loss)                               $   720    $(1,912)   $ 1,618    $   152
Other comprehensive income (loss), before tax
   Net change in unrealized (losses) gains
     on securities available-for-sale and net
     change in unrecognized pension plan
     expense                                      6,554     (3,644)     9,924     (9,250)
   Income tax (expense) benefit                  (2,208)     1,241     (5,708)     3,925
----------------------------------------------------------------------------------------
Other comprehensive income (loss)                 4,346     (2,403)     4,216     (5,325)
----------------------------------------------------------------------------------------
Comprehensive income (loss)                     $ 5,066    $(4,315)   $ 5,834    $(5,173)
----------------------------------------------------------------------------------------
</TABLE>

                                       9
<PAGE>

NOTE 3 - SECURITIES

Securities  classified  as  available-for-sale  (carried  at fair value) were as
follows:

<TABLE>
<CAPTION>
                                                                Gross        Gross
                                                 Amortized    unrealized   unrealized       Fair
(in thousands)                                      cost        gains        losses         value
---------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>          <C>       <C>
September 30, 2009
U.S. Treasury bills
   Within 1 year                                 $    3,248   $        1   $       --    $    3,249
U.S. Government Agency notes
   Within 1 year                                     23,289          126           (6)       23,409
   After 1 year but within 5 years                   14,947           84           (8)       15,023
   After 5 years but within 10 years                  3,539           51          (29)        3,561
   After 10 years but within 15 years                 3,000           --          (16)        2,984
Municipal bonds
   Within 1 year                                        555           --           --           555
   After 1 year but within 5 years                    3,996           31           (8)        4,019
   After 5 years but within 10 years                 26,105          348         (683)       25,770
   After 10 years but within 15 years                11,211           25         (740)       10,496
   After 15 years                                    15,987           33       (1,701)       14,319
U.S. Government Agency mortgage backed
   securities                                        36,926          580         (163)       37,343
Non-agency collateralized mortgage obligations       28,201          474       (2,811)       25,864
SBA bonds                                             6,921           22          (32)        6,911
Corporate bonds
   After 1 year but within 5 years                    1,076           34           --         1,110
   After 15 years                                        20          132           --           152
---------------------------------------------------------------------------------------------------
   Total securities available-for-sale           $  179,021   $    1,941   $   (6,197)   $  174,765
===================================================================================================
<CAPTION>
                                                                Gross        Gross
                                                 Amortized    unrealized   unrealized       Fair
(in thousands)                                      cost        gains        losses         value
---------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>          <C>       <C>
December 31, 2008
U.S. Government Agency notes
   Within 1 year                                 $   35,472   $       48   $     (298)   $   35,222
   After 1 year but within 5 years                    5,987           62           --         6,049
Municipal bonds
   After 1 year but within 5 years                    2,201           --          (73)        2,128
   After 5 years but within 10 years                  9,524           90         (380)        9,234
   After 10 years but within 15 years                18,907           33       (2,290)       16,650
   After 15 years                                    32,883           11       (5,210)       27,684
U.S. Government Agency mortgage backed
   securities                                        28,651          137         (178)       28,610
Non-agency collateralized mortgage obligations       24,901          307       (2,873)       22,335
Agency collateralized mortgage obligations            2,538           57           --         2,595
   After 15 years                                        20           --           --            20
Preferred Stock                                         119           --           --            --
---------------------------------------------------------------------------------------------------
   Total securities available-for-sale           $  161,084   $      745   $  (11,302)   $  150,527
===================================================================================================
</TABLE>

                                       10
<PAGE>

Securities  classified as  held-to-maturity  (carried at amortized cost) were as
follows:

                                                Gross        Gross
                                 Amortized   unrealized    unrealized   Fair
(in thousands)                     cost         gains        losses     value
--------------------------------------------------------------------------------
September 30, 2009

Mortgage backed security            $63          $ --         $ --       $63
================================================================================
December 31, 2008

Mortgage backed securities          $66          $  1         $ --       $67
================================================================================

The  following  table  summarizes,  for all  securities  in an  unrealized  loss
position at September 30, 2009, the aggregate fair value, gross unrealized loss,
and number of  securities  that have been  continuously  in an  unrealized  loss
position for less than and greater than twelve months:

<TABLE>
<CAPTION>
                                              Less than 12 Months      12 Months or Longer        Total
----------------------------------------------------------------------------------------------------------
September 30, 2009                          Fair     Unrealized     Fair    Unrealized   Fair   Unrealized
(in thousands)                              value      losses       value     losses     value    losses
----------------------------------------------------------------------------------------------------------
<S>                                        <C>         <C>        <C>        <C>        <C>       <C>
Municipal Bonds                            $ 8,610     $    90    $     --   $     --   $ 8,610   $   90
Mortgage backed securities                  10,054       1,002      23,029      2,128    33,083    3,130
Collateralized mortgage
   backed securities                        11,620         590      10,855      2,377    22,476    2,967
----------------------------------------------------------------------------------------------------------
   Total Temporarily impaired securities   $30,284     $ 1,682    $ 33,884   $  4,505   $64,169   $6,187
==========================================================================================================
</TABLE>

Salisbury    adopted    ASC    320-10-65,     Investments-Debt     and    Equity
Securities/Transition  and Open Effective Date Information,  (previously FSP FAS
No.   115-2   and   FAS   No.   124-2,    Recognition   and    Presentation   of
Other-Than-Temporary  Impairments),  effective April 1, 2009. ASC 320-10-65 (FSP
FAS No. 115-2 and FAS No.  124-2)  requires an  assessment  of OTTI whenever the
fair value of a security  is less than its  amortized  cost basis at the balance
sheet date.  Amortized  cost basis  includes  adjustments  made to the cost of a
security for  accretion,  amortization,  collection  of cash and  previous  OTTI
recognized into earnings.

Salisbury evaluates its individual available for sale investment  securities for
OTTI on at least a quarterly basis. As part of this process, Salisbury considers
its intent to sell each debt  security  and  whether it is more  likely than not
that it will be required to sell the security before its  anticipated  recovery.
If either of these  conditions  is met,  Salisbury  recognizes an OTTI charge to
earnings equal to the entire  difference  between the security's  amortized cost
basis and its fair value at the balance  sheet date.  For  securities  that meet
neither of these  conditions,  an analysis is  performed  to determine if any of
these  securities  are at risk for OTTI.

Salisbury  believes  that  principal  and interest on U.S  Treasury  securities,
mortgage-backed  securities or securities backed by a U.S. government  sponsored
entity  and  the  Small  Business  Administration  and  bank  qualified  insured
municipal securities are deemed recoverable.

As of September 30, 2009,  Salisbury  performed a detailed cash flow analysis of
its non-agency Collateralized Mortgage Obligations ("CMO") to assess whether any
of the securities  were OTTI.  Salisbury uses a third party provider to generate
cash  flow  forecasts  of each  security  based on a variety  of  market  driven
assumptions and securitization  terms,  including  prepayment speed,  default or
delinquency  rate, and default  severity for losses  including  interest,  legal
fees, property repairs,  expenses and realtor fees, that, together with the loan
amount are subtracted from collateral sales proceeds to determine severity.

For the quarter ended June 30, 2009 Salisbury  determined  that five  non-agency
CMO securities  reflected OTTI and  recognized  credit losses of $1,128,000.  No
additional  OTTI was determined for the quarter ended September 30, 2009 and all
other CMO securities  were judged not to be OTTI as of September 30, 2009. It is
possible that future loss assumptions  could change and cause future OTTI credit
losses in these  securities.

Salisbury does not intend to sell the securities  which it has judged to be OTTI
and it is not  more  likely  than  not that it will be  required  to sell  these
securities  before  its  anticipated   recovery  of  each  security's  remaining
amortized cost basis. For the remainder of Salisbury's securities portfolio that
have  experienced  decreases in the fair value,  the decline is considered to be

                                       11
<PAGE>

temporary as Salisbury expects to recover the entire amortized cost basis on the
securities  and neither  intends to sell these  securities nor is it more likely
than not that it will be required to sell these securities.

The  following  table  presents the  non-agency  CMOs for which an OTTI has been
recognized based on Salisbury's impairment analysis of its securities portfolio:

                                                                   September 30,
(in thousands)                                                         2009
--------------------------------------------------------------------------------
Amortized cost (net of credit related OTTI write-down)                $5,758
Unrealized losses                                                     (1,671)
--------------------------------------------------------------------------------
Fair value                                                            $4,087
================================================================================

The following table presents  activity related to credit losses  recognized into
earnings on the non-agency CMOs held by Salisbury for which a portion of an OTTI
charge was recognized in accumulated other comprehensive income:

                                   Three months ended     Nine months ended
                                      September 30,         September 30,
(in thousands)                       2009       2008       2009       2008
-----------------------------------------------------------------------------
Balance, beginning of period       $  1,128   $     --   $     --   $     --
Credit losses for which OTTI
   was not previously recognized         --         --      1,128         --
-----------------------------------------------------------------------------
Balance, end of period             $  1,128   $     --   $  1,128   $     --
=============================================================================

NOTE 4 - PLEDGED ASSETS

At September 30, 2009 and December 31, 2008,  certain  securities and loans were
pledged to secure  public and trust  deposits,  assets sold under  agreements to
repurchase, other borrowings and credit facilities available.

                                                    September 30,   December 31,
(in thousands)                                          2009            2008
--------------------------------------------------------------------------------
Securities available-for-sale                         $ 66,876        $ 91,120
Loans and Leases                                       100,742          99,619
--------------------------------------------------------------------------------
     Total pledged assets                             $167,618        $190,739
================================================================================

NOTE 5 - LOANS

The composition of the loan portfolio is as follows:

                                                    September 30,   December 31,
(in thousands)                                          2009           2008
--------------------------------------------------------------------------------
Real estate mortgages:
   Residential                                        $155,607       $151,441
   Commercial                                           67,220         62,796
   Construction, land & land development                30,228         33,343
   Home equity credit                                   30,995         25,608
--------------------------------------------------------------------------------
     Total mortgage loans                              284,050        273,188
Commercial and industrial                               24,514         20,784
Consumer and other                                       5,611          5,726
--------------------------------------------------------------------------------
   Total loans, gross                                  314,175        299,698
Deferred loan origination fees and costs, net              505            393
Allowance for loan losses                               (3,429)        (2,724)
--------------------------------------------------------------------------------
     Total loans, net                                 $311,251       $297,367
================================================================================

                                       12
<PAGE>

Impaired loans
                                                  September 30,    December 31,
(in thousands)                                        2009            2008
-------------------------------------------------------------------------------
With no valuation allowance                         $  8,636        $  3,709
With valuation allowance                               2,164             797
-------------------------------------------------------------------------------
     Total impaired loans                           $ 10,800        $  4,506
-------------------------------------------------------------------------------
Valuation allowance                                 $    144        $     83

Salisbury's  loans consist  primarily of residential  and commercial real estate
loans located principally in western Connecticut and proximate areas of New York
State and Massachusetts,  which constitute  Salisbury's service area.  Salisbury
offers a broad range of loan and credit  facilities  to borrowers in its service
area,  including  residential  mortgage  loans,  commercial  real estate  loans,
construction  loans,  working capital loans,  equipment  loans, and a variety of
consumer  loans,  including  home equity lines of credit,  and  installment  and
collateral   loans.   All   residential   and  commercial   mortgage  loans  are
collateralized  by first or second  mortgages  on real  estate.  The ability and
willingness  of borrowers to satisfy  their loan  obligations  are  dependent in
large part upon the status of the  regional  economy  and  regional  real estate
market. Accordingly, the ultimate collectability of a substantial portion of the
Salisbury's  loan  portfolio and the recovery of a substantial  portion of Other
Real Estate Owned  ("OREO")  are  susceptible  to changes in market  conditions.

Changes in the allowance for loan losses are as follows:

                                      Three months ended      Nine months ended
                                        September 30,           September 30,
(in thousands)                        2009         2008       2009        2008
--------------------------------------------------------------------------------
Balance, beginning of period         $3,309       $2,625     $2,724      $2,475
Provision for loan losses               180          520        925         690
Charge-offs                             (69)         (54)      (245)        (96)
Recoveries                                9           14         25          36
--------------------------------------------------------------------------------
Balance, end of period               $3,429       $3,105     $3,429      $3,105
--------------------------------------------------------------------------------


NOTE 6 - NON-PERFORMING ASSETS

The components of non-performing assets are as follows:

                                                   September 30,   December 31,
  (in thousands)                                       2009            2008
------------------------------------------------------------------------------
  Non-accruing loans                                 $ 6,240         $ 5,075
  Accruing loans past due 90 days or more                160             100
  Accruing restructured loans                            350              --
------------------------------------------------------------------------------
       Total non-performing loans                      6,750           5,175
  Real estate acquired in settlement of loans            418             205
------------------------------------------------------------------------------
       Total non-performing assets                    $7,168          $5,380
==============================================================================

Real estate  acquired in  settlement of loans  consists of  collateral  acquired
through foreclosure, forgiveness of debt or otherwise in lieu of debt.

                                       13
<PAGE>

NOTE 7 - INCOME TAXES

The components of the income tax provision are as follows:

<TABLE>
<CAPTION>
                                      Three months ended          Nine months ended
                                         September 30,              September 30,
(in thousands)                        2009          2008          2009          2008
---------------------------------------------------------------------------------------
<S>                                <C>           <C>           <C>           <C>
Federal                            $       (8)   $      653    $     (219)   $      987
State                                      10            10            31            33
---------------------------------------------------------------------------------------
         Total Current provision            2           663          (188)        1,020
---------------------------------------------------------------------------------------
Federal                                    --          (326)          (21)         (138)
State                                      --            --            --            --
---------------------------------------------------------------------------------------
         Total Deferred benefit            --          (326)          (21)         (138)
---------------------------------------------------------------------------------------
         Income tax provision      $        2    $      337    $      (83)   $      883
=======================================================================================
</TABLE>

Connecticut  tax legislation  permits banks to shelter  certain  mortgage income
from the  Connecticut  corporation  business  tax  through  the use of a special
purpose entity called a passive investment  company ("PIC").  In accordance with
this legislation,  in 2004 Salisbury formed a PIC,  Salisbury  Mortgage Company.
Salisbury's  income tax  provision  reflects the full impact of the  Connecticut
legislation.  Salisbury  does not expect to pay other than minimum  state income
tax in the  foreseeable  future  unless  there  is a  change  in  the  State  of
Connecticut corporate tax law.

NOTE 8 - SHAREHOLDERS' EQUITY

Capital Requirements
--------------------

Salisbury and the Bank are subject to various  regulatory  capital  requirements
administered  by the federal  banking  agencies.  The Bank was classified at its
most  recent  notification  as  "well  capitalized".  Salisbury  and the  Bank's
regulatory capital ratios at September 30, 2009 are as follows:

                                    Well Capitalized      Salisbury     Bank
------------------------------------------------------------------------------
      Leverage ratio                       5.00%             8.57%       6.78%
      Tier 1 risk-based ratio              6.00             12.29        9.74
      Total risk-based ratio              10.00             13.22       10.68

Restrictions on Cash Dividends to Common Shareholders
-----------------------------------------------------

Salisbury's  ability to pay cash dividends is dependent on the Bank's ability to
pay cash dividends to Salisbury.  There are certain  restrictions on the payment
of cash dividends and other payments by the Bank to Salisbury. Under Connecticut
law the Bank cannot declare a cash dividend except from net profits,  defined as
the  remainder of all earnings  from current  operations.  The total of all cash
dividends  declared  by  the  Bank  in  any  calendar  year  shall  not,  unless
specifically  approved by the  Commissioner of Banking,  exceed the total of its
net profits of that year combined with its retained net profits of the preceding
two years.

Federal  Reserve  Board  Supervisory  Letter SR 09-4,  February 24, 2009 revised
March 27, 2009 notes that, as a general matter, the board of directors of a bank
holding company ("BHC") should inform the Federal Reserve and should  eliminate,
defer,  or  significantly  reduce  dividends  if (1)  net  income  available  to
shareholders for the past four quarters, net of dividends previously paid during
that period, is not sufficient to fully fund the dividends;  (2) the prospective
rate of earnings  retention is not  consistent  with  capital  needs and overall
current and prospective financial condition; or (3) the BHC will not meet, or is
in danger of not  meeting,  its  minimum  regulatory  capital  adequacy  ratios.
Moreover,  a BHC should  inform the  Federal  Reserve  reasonably  in advance of
declaring  or paying a dividend  that  exceeds  earnings  for the period  (e.g.,
quarter) for which the dividend is being paid or that could result in a material
adverse  change  to the BHC  capital  structure.

Further restrictions on cash dividends are imposed on Salisbury Capital Purchase
Program  because of Salisbury's  participation  in the United States  Treasury's
Troubled Asset Relief Program,  Capital  Purchase Program ("TARP,  CPP").  These
preclude  the payment of any common  stock cash  dividends  if  Salisbury is not
paying the preferred stock dividend. Additionally, the common stock dividend may
not be increased  without  prior  approval from the Treasury for the first three
years  Salisbury  is a TARP  participant  unless all TARP  preferred  shares are
redeemed or transferred to third parties.

                                       14
<PAGE>

NOTE 9 - RETIREMENT PLANS

Salisbury  has  retirement  plans,  which  are  described  more  fully in Note 9
(Employee Benefits) to the Consolidated Financial Statements in Salisbury's 2008
Form 10-K.  Salisbury has a  non-contributory  defined benefit pension plan (the
"Pension Plan") covering all eligible  employees.  In 2006, the Pension Plan was
amended, effective September 1, 2006, to provide that employees hired or rehired
on or after  September 1, 2006 are not eligible to  participate in the plan. The
following are components of net periodic benefit expense for Salisbury's Pension
Plan:

<TABLE>
<CAPTION>
                                                 Three months ended        Nine months ended
(in thousands)                                    2009         2008         2009         2008
-----------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>         <C>          <C>
Components of net periodic expense:
    Service cost                                $     69     $    101     $    284     $    303
    Interest cost                                     79           92          280          275
    Expected return on plan assets                   (85)        (107)        (265)        (320)
    Amortization of prior service cost                --           --           --           --
    Amortization of unrecognized net loss             21           11           86           34
    Amortization of net transition obligation        437           --          437           --
-----------------------------------------------------------------------------------------------
       Net periodic benefit expense             $    521     $     97     $    822     $    292
===============================================================================================
Actuarial assumptions:

    Discount rate                                   6.00%        6.00%        6.00%        6.00%
    Average wage increase                         Note 1       Note 1       Note 1       Note 1
    Expected return on plan assets                  7.50         7.25         7.50         7.25
</TABLE>

Note 1. 5% at age 20 grading down to 3% at age 60 and beyond  (roughly  3.25% on
average).

NOTE 10 - FAIR VALUE OF ASSETS AND LIABILITIES

Salisbury uses fair value  measurements  to state certain assets and liabilities
at fair value and to support fair value  disclosures.  Securities  available for
sale and  impaired  loans  are  recorded  at fair  value on a  recurring  basis.
Additionally,  from time to time,  Salisbury  may be  required  to record  other
financial assets at fair value on a nonrecurring  basis,  such as loans held for
sale. These nonrecurring fair value adjustments typically involve application of
lower-of-cost-or-market  accounting or  write-downs of individual  assets.

Fair Value  Hierarchy

Under ASC 820-10 (SFAS No. 157),  Salisbury groups its assets and liabilities at
fair  value in three  levels,  based on the  markets  in which  the  assets  and
liabilities are traded and the reliability of the assumptions  used to determine
fair value. These levels are:

         Level 1 --  Valuation  is  based  upon  unadjusted  quoted  prices  for
         identical instruments traded in active markets.
         Level  2  --  Valuation  is  based  upon  quoted   prices  for  similar
         instruments in active  markets,  quoted prices for identical or similar
         instruments in markets that are not active,  and model-based  valuation
         techniques for which all significant  assumptions are observable in the
         market,  or are derived  principally from or corroborated by observable
         market data, by correlation or by other means.
         Level 3 -- Valuation is generated from model-based  techniques that use
         significant   assumptions   not   observable   in  the  market.   These
         unobservable  assumptions reflect Salisbury's  estimates of assumptions
         that market  participants  would use in pricing the asset or liability.
         Valuation  techniques include use of option pricing models,  discounted
         cash flow models and similar techniques.

Assets  and  liabilities  measured  at fair value on a  recurring  basis were as
follows:

September 30, 2009 (in thousands)       Total    Level 1     Level 2    Level 3
--------------------------------------------------------------------------------
Securities available-for sale         $174,765      $151    $174,614      $ --
Impaired loans                          10,800        --      10,800        --
--------------------------------------------------------------------------------
Total                                 $185,565      $151    $185,414      $ --
================================================================================

                                       15
<PAGE>

Changes  in  Level 3 of  assets  and  liabilities  measured  at fair  value on a
recurring basis were as follows:

<TABLE>
<CAPTION>
                                                                    Available-for-sale Securities
------------------------------------------------------------------------------------------------------
                                                            Three months ended,      Nine months ended
  (in thousands)                                            September 30, 2009       September 30, 2009
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                      <C>
  Balance, beginning of period                                  $        1               $        2
  Total gains or losses (realized/unrealized)
     Included in earnings (or changes in net assets)                    --                       (1)
     Included in other comprehensive income                             --                       --
  Amortization of securities, net                                       --                       --
  Transfers in and/or out of Level 3                                    (1)                      (1)
------------------------------------------------------------------------------------------------------
  Balance, end of period                                        $       --               $       --
======================================================================================================

  Amount of total gains or losses for the period included
     in earnings (or changes in net assets) attributable
     to the change in unrealized  gains or losses relating to
     assets still held at the reporting date                    $       --               $       --
======================================================================================================
</TABLE>

The estimated fair values of the Bank's financial instruments,  all of which are
held or issued for purposes other than trading, were as follows:

<TABLE>
<CAPTION>
                                              September 39, 2009           December 31, 2008
---------------------------------------------------------------------------------------------
                                              Carrying      Fair         Carrying     Fair
(in thousands)                                 Amount       Value         Amount      Value
---------------------------------------------------------------------------------------------
<S>                                            <C>         <C>            <C>         <C>
Financial assets
     Cash and cash equivalents                $ 35,302    $ 35,302      $   9,660   $   9,660
     Available-for-sale securities             174,766     174,766        150,527     150,527
     Held-to-maturity securities                    63          63             66          67
     Federal Home Loan Bank stock                5,893       5,893          5,323       5,323
     Loans held-for-sale                         1,173       1,744          2,314       2,314
     Loans, net                                311,251     301,139        297,367     287,063
     Accrued interest receivable                 2,467       2,467          2,704       2,704
Financial liabilities
     Deposits                                  414,799     414,832        344,925     346,035
     FHLB advances                              76,766      81,710         87,914      90,206
     Securities sold under agreements
         to repurchase                          15,462      15,462         11,203      11,203
     Due to broker                                  --          --          7,632       7,632
</TABLE>

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

                                       16
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Management's  discussion  and  analysis of  financial  condition  and results of
operations of Salisbury and its subsidiary  should be read in  conjunction  with
Salisbury's Annual Report on Form 10-K for the period ended December 31, 2008.

BUSINESS

Salisbury Bancorp,  Inc.  ("Salisbury"),  a Connecticut  corporation,  formed in
1998, is a bank holding company for Salisbury Bank and Trust Company ("Bank"), a
Connecticut-chartered  and Federal Deposit  Insurance  Corporation  (the "FDIC")
insured  commercial bank  headquartered in Lakeville,  Connecticut.  Salisbury's
principal  business  consists of the business of the Bank.  The Bank,  formed in
1848, is engaged in customary  banking  activities,  including  general  deposit
taking and lending activities to both retail and commercial  markets,  and trust
and wealth advisory services.  The Bank conducts its banking business from seven
full-service  offices in the towns of Canaan,  Lakeville,  Salisbury and Sharon,
Connecticut, South Egremont and Sheffield,  Massachusetts, and Dover Plains, New
York,  and its trust and wealth  advisory  services  from offices in  Lakeville,
Connecticut.  In addition,  the Bank has received regulatory approvals to open a
full-service branch in Millerton, NY.

Pending Acquisition
-------------------

On August 25, 2009 Salisbury  announced the Bank had entered into a purchase and
assumption  agreement  (the  "Agreement")  to purchase  the Canaan,  Connecticut
branch of Webster Bank. The Agreement  provides that,  subject to the receipt of
regulatory approvals and the satisfaction of normal closing conditions, the Bank
will assume certain  deposits,  fixed assets,  and certain loans.  The Bank also
agreed to retain all branch-based employees of the Webster Canaan Branch as part
of the transaction.

In the aggregate, the transaction includes approximately $17 million in deposits
and  approximately  $4 million in loans.  Under the terms of the Agreement,  the
acquisition is expected to be completed in the fourth quarter of 2009.

Application of Critical Accounting Policies
-------------------------------------------

Salisbury's consolidated financial statements are prepared in accordance with US
GAAP and follow  general  practices  within  the  banking  industry  in which it
operates. Application of these principles requires management to make estimates,
assumptions  and  judgments  that affect the amounts  reported in the  financial
statements. These estimates,  assumptions and judgments are based on information
available  as of the  date of the  financial  statements;  accordingly,  as this
information changes, the financial statements could reflect different estimates,
assumptions  and judgments and as such have a greater  possibility  of producing
results that could be materially different than originally reported.  Estimates,
assumptions and judgments are necessary when assets and liabilities are required
to be  recorded  at fair  value,  when a  decline  in the  value of an asset not
carried at fair value warrants an impairment  write-down or valuation reserve to
be established,  or when an asset or liability  needs to be recorded  contingent
upon a future event.

Salisbury's  significant accounting policies are presented in Note 1 of Notes to
Consolidated  Financial Statements.  These policies,  along with the disclosures
presented in Notes to  Consolidated  Financial  Statements  and in  Management's
Discussion  and Analysis,  provide  information  on how  significant  assets are
valued in the financial statements and how those values are determined. Based on
the valuation techniques used and the sensitivity of financial statement amounts
to the methods,  assumptions and estimates underlying those amounts,  management
has  identified  the  determination  of the  allowance for loan losses to be the
accounting area that requires the most subjective  judgments,  and as such could
be most subject to revision as new information becomes available.

The allowance for loan losses represents  management's estimate of credit losses
in the loan  portfolio.  Determining the amount of the allowance for loan losses
is considered a critical  accounting  estimate  because it requires  significant
judgment and the use of  estimates  related to the amount and timing of expected
future cash flows on impaired  loans,  estimated  losses on pools of homogeneous
loans based on historical loss experience, and consideration of current economic

                                       17
<PAGE>

trends and  conditions,  all of which may be susceptible to significant  change.
The loan portfolio also  represents the largest asset type on the balance sheet.
Note 1 describes  the  methodology  used to  determine  the  allowance  for loan
losses.  A  discussion  of the  factors  driving  changes  in the  amount of the
allowance for loan losses is included in the  "Provision  and Allowance For Loan
Losses" section of Management's Discussion and Analysis.

RESULTS OF OPERATIONS

For the three-month periods ended September 30, 2009 and 2008

Overview
--------

Net income  available to common  shareholders  was $549,000,  or $.33 per common
share, for the third quarter ended September 30, 2009, compared to a net loss of
$(1,912,000),  or  $(1.13)  per  common  share,  for the third  quarter of 2008.
Annualized return on average common shareholder's equity was 5.40% for the third
quarter of 2009  compared  with  -18.03%  for the third  quarter of 2008.  Third
quarter  2008  included  a  securities  loss  arising  from  a  $2,856,000  OTTI
write-down of Federal Home Loan Mortgage  Corporation  ("FHLMC") preferred stock
following the U.S. Government placing FHLMC into conservatorship.

Net  interest  and  dividend  income  for the  quarter  increased  $321,000  due
primarily to a $78.6 million increase in average earning assets, which more than
offset a 33 basis point decrease in the net interest margin to 3.52%.  Excluding
securities losses,  all other non-interest  income decreased $68,000 as a result
of a decrease in credit card fees,  attributable  to the sale of the credit card
portfolio in 2008, and lower  Trust/Wealth  Advisory Services income,  offset in
part by a $130,000 one-time life insurance benefit and increased banking service
fees.  Non-interest  expense  increased  $967,000  due  primarily  to a $637,000
increase in compensation  expense and $330,000 in all other operating  expenses.
The increase in compensation  expense  included  $378,000 in additional  pension
expense.  The  increase  in all other  operating  expense  included  $187,000 in
additional FDIC deposit insurance premiums due to an increase in assessments and
deposit growth.

Analysis of net interest  and dividend  income  Fully-Taxable  Equivalent  Basis
--------------------------------------------------------------------------------
("FTE")
-------

Salisbury's net interest  margin was 3.52% for the quarter  compared to 3.43% in
the  second  quarter  of 2009  and  3.85% in the  third  quarter  of  2008.  The
compression  in the net  interest  margin was mostly due to the decline in short
term rates and the prolonged  flatness of the yield curve, which has reduced the
gap between short- and  intermediate-term  interest rates and the spread between
what banks earn on loans and securities and pay on deposits and borrowings. Also
contributing  to the  year-over-year  decrease in the net  interest  margin were
reduced  spreads  on new  loans  and  securities  as a  result  of an  intensely
competitive  market,  an increase in low yielding cash and cash  equivalents  in
relation  to total  earning  assets,  the  absence of Federal  Home Loan Bank of
Boston  ("FHLBB")  dividend  income for the quarter,  and, to a lesser extent to
other changes in the mix of earning  assets and funding  liabilities,  asset and
liability growth, and the impact of asset and liability  re-pricing.  During the
last twelve-months the Federal Funds Target Rate has fallen by 175 basis points,
while the yield on the 5-year US  Treasury  Note has fallen by 67 basis  points.
During the last  twenty-four  months the Federal Funds Target Rate has fallen by
450 basis  points  while the yield on the 5-year US Treasury  Note has fallen by
194 basis points.

Salisbury  seeks to grow earning assets and during the current  quarter  average
earning  assets  increased  $27.8 million,  or 5.5%,  over the second quarter of
2009, and $78.6 million, or 17.2%, over the third quarter of 2008. Fully taxable
equivalent  ("FTE") net interest and dividend income increased  $320,000 for the
quarter ended September 30, 2009 as compared with the prior year period. Average
interest bearing deposits increased $83.0 million,  or 31.3% over the prior year
period.

The following  table sets forth the components of  Salisbury's  FTE net interest
income and FTE yields on average  interest-earning  assets and  interest-bearing
funds.

                                       18
<PAGE>
<TABLE>
<CAPTION>
Three months ended September 30,               Average                     Income/                 Average
                                               Balance                     Expense               Yield/Rate
(in thousands)                             2009        2008           2009         2008         2009    2008
---------------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>             <C>          <C>           <C>        <C>
Loans (a)                               $309,756    $292,111        $ 4,637      $ 4,678       5.99%      6.41%
Short term funds (b)                      44,786       2,643             56            6       0.50       0.91
MBS and CMO securities (c)                64,270      48,191            889          637       5.53       5.29
Other securities (c)(d)                  117,530     114,841          1,410        1,681       4.80       5.86
----------------------------------------------------------------------------------------
    Total earning assets                 536,342     457,786          6,992        7,002       5.21       6.12
                                                                    --------------------
Other assets                              25,122      22,903
------------------------------------------------------------
    Total assets                        $561,464    $480,689
============================================================

NOW accounts                            $ 38,802    $ 26,186             85           14       0.87       0.21
Money market accounts                     66,262      62,624            102          276       0.62       1.76
Savings & other                           84,801      64,973            158          228       0.74       1.40
Certificates of deposit                  158,502     111,613          1,088          967       2.75       3.47
----------------------------------------------------------------------------------------
Total interest-bearing deposits          348,367     265,396          1,433        1,485       1.65       2.24
Repurchase agreements                     14,242       7,912             33           46       0.93       2.33
FHLB advances                             76,910      92,566            791        1,056       4.11       4.56
----------------------------------------------------------------------------------------
    Total interest-bearing funds         439,519     365,874          2,257        2,587       2.05       2.83
                                                                    --------------------
Demand deposits                           68,238      69,735
Other liabilities                          4,499       2,923
Shareholders' equity                      49,208      42,157
------------------------------------------------------------
Total liabilities &

 shareholders' equity                   $561,464    $480,689
============================================================

Net interest income                                                 $ 4,735      $ 4,415
                                                                    ====================
Spread on interest-bearing funds                                                               3.16       3.29
Net interest margin (e)                                                                        3.52       3.85
</TABLE>

(a)   Includes non-accrual loans.
(b)   Includes  interest-bearing deposits in other banks and federal funds sold.
(c)   Average balances of securities are based on historical cost.
(d)   Includes tax benefits of $289,000 and $290,000,  respectively  for periods
      2009 and  2008 on  tax-exempt  securities  whose  income  and  yields  are
      calculated on an FTE basis.
(e)   FTE net interest income divided by average interest-earning assets.

The  following  table sets forth the changes in FTE  interest  due to volume and
rate.

Three months ended September 30,        2009 versus 2008
(in thousands)                     Change in interest due to
----------------------------------------------------------------
                                Volume (1)   Rate (1)     Net
----------------------------------------------------------------
Interest-earning assets:
   Loans                        $    283    $   (324)   $    (41)
   Short term funds                  101         (51)         50
   MBS and CMO securities            212          40         252
   Other securities                   39        (310)       (271)
----------------------------------------------------------------
     Total                           635        (645)        (10)
----------------------------------------------------------------
Interest-bearing liabilities:
Deposits                             499        (551)        (52)
   FHLB advances & other            (142)       (136)       (278)
   Long term debt                     --          --          --
----------------------------------------------------------------
     Total                           357        (687)       (330)
----------------------------------------------------------------
Net change to interest income   $    278    $     42    $    320
================================================================

(1) Changes  attributable to rate/volume are allocated  proportionately  to both
rate and volume.

                                       19
<PAGE>

Interest income (FTE)
---------------------

Total  interest and dividend  income changed at $6,992,000 for the quarter ended
September 30, 2009, as compared with  $7,002,000 for the same period a year ago.
Loan  income  decreased  slightly,  by $41,000,  primarily  as a result of lower
yields offset in part by higher volume during the period.  Average loans grew by
$17.6 million,  or 6.0%.  The decrease in the average loan yield,  down 42 basis
points,  resulted  from lower  interest  rates in 2009 and their  effect on loan
re-pricing and loan re-financing activity.

Investment income increased slightly, by $31,000, over the prior year period, as
a result of  higher  average  volume  offset by lower  yields  due to  portfolio
re-pricing,  the  discontinuation  of FHLBB  dividend  income  for the  quarter,
compared  with  $53,000 for the prior year  period,  and a change in mix arising
from the  increase in short term funds  relative to total  investments.  Average
securities grew by $18.8 million,  or 11.5%, while short term funds increased by
$42.1 million from $2.6 million for the prior year period.

Interest expense
----------------

Interest expense for the quarter ended September 30, 2009 decreased $330,000, or
12.7%,  as  compared  with the prior  year  period as a result of  decreases  in
interest rates paid offset by higher average interest bearing balances.

Deposit expense decreased  $52,000,  or 3.5%, as a result of lower deposit rates
and changes in deposit mix offset by a significant  increase in average  deposit
levels. Average interest bearing deposits increased $83.0 million, or 31.3%. The
average cost of  interest-bearing  deposits  decreased 59 basis points to 1.65%.

Interest expense on FHLB advances and other borrowings  decreased  $278,000,  or
25.2%,  primarily due to lower average FHLB advances,  down $15.7 million, and a
decrease in borrowing rates, down 45 basis points to 4.11%, over the period.

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

The  provision  for loan  losses for the  quarter  ended  September  30, 2009 of
$180,000  compares  with  $315,000  for the second  quarter and $520,000 for the
third quarter of 2008.  The  following  table sets forth key data and ratios for
the periods presented.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
At or for the three months ended,    September 30,   June 30     December 31,  September 30,
(dollars in thousands)                   2009          2009          2008          2008
---------------------------------------------------------------------------------------------
<S>                                   <C>           <C>           <C>           <C>
Provision for loan losses             $      180    $      315    $      589    $      520
Charge offs, net of recoveries                60           160         1,029            40
Allowance for loan losses                  3,429         3,309         2,724         3,105
Non-performing loans                       6,750         6,707         5,175         1,591
Ratio of allowance for loan losses:
   to gross loans                           1.10%         1.11%         0.92%         1.05%
   to non-performing loans                 50.80         52.62         54.81        195.16
Ratio of non-performing loans
   to gross loans                           2.15          2.11          1.73          0.54
Ratio of past-due loans
   to gross loans                           3.51          3.44          3.15          2.86
</TABLE>

As of  September  30,  2009,  reserve  coverage,  as  measured  by the  ratio of
allowance for loan losses to gross loans was substantially unchanged as compared
with last quarter.  Similarly,  the level of past-due  loans and  non-performing
loans were also  substantially  unchanged.  For  additional  discussion  on loan
quality see "Non-Performing Assets".

Salisbury  determines  its allowance and provisions for loan losses based upon a
detailed  evaluation of the loan  portfolio  through a process  which  considers
numerous  factors,  including  estimated  credit  losses based upon internal and
external  portfolio  reviews,  delinquency  levels and trends,  estimates of the
current value of underlying  collateral,  concentrations,  portfolio  volume and
mix, changes in lending policy,  current economic conditions and historical loan
loss experience  over a 10-to-15 year economic  cycle.  Determining the level of
the   allowance  at  any  given  period  is   difficult,   particularly   during
deteriorating or uncertain  economic periods,  and therefore  management takes a
relatively long view of loan loss asset quality  measures.  Management must make

                                       20
<PAGE>

estimates  using  assumptions  and  information  that are often  subjective  and
changing rapidly.  The review of the loan portfolio is a continuing event in the
light of a changing  economy and the  dynamics  of the  banking  and  regulatory
environment.  In management's  judgment,  Salisbury remains adequately  reserved
both against total loans and non-performing loans at September 30, 2009.

Should the economic climate deteriorate,  borrowers could experience  difficulty
and the level of non-performing loans,  charge-offs and delinquencies could rise
and require increased provisions.  The allowance for loan losses is reviewed and
approved by the Bank's Board of Directors on a quarterly  basis.  The  allowance
for loan losses is computed by  segregating  the  portfolio  into  various  risk
rating and product categories. Some loans have been further segregated and carry
specific  reserve  amounts.  All other loans that do not have specific  reserves
assigned are reserved  based on a loss  percentage  assigned to the  outstanding
balance.  The percentage applied to the outstanding  balance varies depending on
the  loan's  risk  rating and  product  category,  as well as  present  economic
conditions,  which have or may adversely  affect the financial  capacity  and/or
collateral values supporting the loan.

In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically review the Bank's allowance for loan losses.
Such  agencies  could  require the Bank to recognize  additions to the allowance
based on their  judgments of information  available to them at the time of their
examination.  The Bank was last examined by the FDIC in February 2009 and by the
State of Connecticut's  Department of Banking in August 2007 and no additions to
the allowance  were  warranted as a result of these  examinations.

Non-interest income
-------------------

The following table details the principal categories of non-interest income.

Three months ended September 30,

(in thousands)                         2009        2008             Change
-------------------------------------------------------------------------------
Losses on securities, net            $     --   $ (2,671)   $  2,671      100.0%
Trust and wealth advisory                 463        543         (80)     (14.7)
Service charges                           268        237          31       13.1
Gains on sales of mortgage loans           63         50          13       26.0
Mortgage servicing                         65         58           7       12.1
Other                                     399        438         (39)      (8.9)
-------------------------------------------------------------------------------
   Total non-interest income (loss)  $  1,258   $ (1,345)   $  2,603      193.5%
================================================================================

The increase in non-interest  income for the quarter ended September 30, 2009 as
compared to the prior year period  principally  resulted  from the  inclusion in
2008  of a  securities  loss  arising  from a  $2,856,000  write-down  of  FHLMC
preferred   stock   following   the   U.S.   Government   placing   FHLMC   into
conservatorship.  Excluding  securities losses,  all other  non-interest  income
decreased $68,000 as a result of a decrease in credit card fees, attributable to
the sale of the credit card portfolio in 2008, and lower  Trust/Wealth  Advisory
Services fees, due to the decline in asset values,  offset in part by a $130,000
one-time life insurance benefit and increased banking service fees.

                                       21
<PAGE>

Non-interest expense
--------------------

The following table details the principal categories of non-interest expense.

Three months ended September 30,
 (in thousands)                     2009         2008              Change
-------------------------------------------------------------------------------
Salaries and employee benefits   $    2,784   $    2,147   $    637        29.7%
Occupancy                               238          258        (20)       (7.8)
Equipment                               265          219         46        21.0
Data processing                         327          310         17         5.5
Insurance                                40           41         (1)        2.4
FDIC insurance                          204           17        187      1100.0
Printing and stationery                  58           66         (8)      (12.1)
Postage and telecommunications          162          145         17        11.7
Professional services                   308          218         90        41.3
Legal                                    68          116        (48)      (41.4)
Amortization of intangibles              41           41         --         0.0
Other                                   307          257         50        19.5
-------------------------------------------------------------------------------
   Total operating expenses      $    4,802   $    3,835   $    967        25.2%
===============================================================================

Non-interest  expense increased $967,000 due primarily to a $637,000 increase in
compensation  expense and a $187,000  increase in FDIC insurance  premiums.  The
increase in  compensation  expense  included  additional  pension  expense.  The
increase in FDIC insurance  premiums was due to an increase in  assessments  and
deposit growth.

Income taxes
------------

Net  income  for  the  quarter  included  an  income  tax  provision  of  $2,000
representing a 0.14% effective rate, due to tax-exempt  income, as compared with
a provision of $337,000 a year ago against a pre-tax net loss of $1,575,000.

The third quarter 2008 results are distorted by a timing difference arising from
the inclusion in the third quarter of the $2,856,000  FHLMC preferred stock OTTI
loss while the  corresponding tax benefit of $971,000 was included in the fourth
quarter  following  the enactment of the Emergency  Economic  Stabilization  Act
(EESA) in October 2008 that permitted Salisbury to record the tax benefit.

Salisbury's  effective tax rate is generally less than the 34% federal statutory
rate  due to  holdings  of  tax-exempt  municipal  bonds  and  bank  owned  life
insurance.

RESULTS OF OPERATIONS

For the nine month periods ended September 30, 2009 and 2008

Overview
--------

For the  nine-month  period  ended  September  30, 2009 net income  available to
common  shareholders  was  $1,368,000,  or $.81 per common  share,  compared  to
$152,000,  or $.09 per common share,  for the nine month period ended  September
30, 2008. Annualized return on average common shareholder's equity was 4.59% for
the 2009  period  compared  with 0.55% for the 2008  period.  Net  interest  and
dividend income  increased  $1,061,000 due primarily to a $58.1 million increase
in average earning  assets,  which more than offset a 14 basis point decrease in
the net  interest  margin to 3.58%.  Securities  losses for 2009  result  from a
$1,128,000 write-down for other than temporary impairment on five non-agency CMO
securities in June 2009, offset in part by securities  gains.  Securities losses
for 2008 result from the aforementioned $2,856,000 write-down of FHLMC preferred
stock.  Excluding  securities losses,  all other  non-interest  income increased
$293,000 due to increases in gains on mortgage sales, mortgage servicing income,
banking  service fees and other income,  including the  aforementioned  $130,000
one-time life insurance death benefit,  offset in part by a $251,000 decrease in
Trust/Wealth  Advisory Services income due to the decline in the market value of
assets under management, and a decrease in credit card fees, attributable to the
sale of the  credit  card  portfolio  in 2008.  Non-interest  expense  increased
$2,245,000  due  primarily to a  $1,107,000  increase in  compensation  expense,
$701,000 in FDIC  insurance  premiums,  $181,000 in  professional  services  and
$256,000 in all other operating expenses.  The increase in compensation  expense
included  $530,000 in pension expense and $477,000 in salaries.  The increase in

                                       22
<PAGE>

FDIC deposit  insurance was due to the 2009 special  assessment,  deposit growth
and an increase in premiums.

Analysis of net interest and dividend income (FTE)
--------------------------------------------

Net interest and dividend  income  decreased  $377,000 for the nine months ended
September 30, 2009 as compared  with the prior year period.  The decrease in net
interest  income  resulted  primarily from a decrease in the net interest margin
offset somewhat by the growth in average earning assets. The net interest margin
decreased 14 basis points to 3.58% from 3.72% over the prior period.  The change
in the net interest  margin was due to the changes in the mix of earning  assets
and funding liabilities,  asset and liability growth, changes in market interest
rates, the  discontinuation  of the FHLB dividend income in 2009, and the impact
of asset and  liability  re-pricing.  Average  earning  assets  increased  $58.1
million,  or 13.0%,  over the prior year period.  Average total interest bearing
deposits  increased  $57.1 million,  or 21.5%,  over the prior year period.  The
following table sets forth the components of Salisbury's net interest income and
yields on average interest-earning assets and interest-bearing funds. Income and
yields on tax-exempt  securities  are  presented on a fully  taxable  equivalent
basis.

<TABLE>
<CAPTION>
Nine months ended September 30,                Average                    Income/                  Average
                                               Balance                    Expense                Yield/Rate
(in thousands)                            2009        2008           2009         2008         2009    2008
---------------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>             <C>          <C>           <C>        <C>
Loans (a)                               $303,448    $283,484        $13,633      $13,918       5.99%      6.54%
Short term funds (b)                      29,877       6,892             67          121       0.30       2.34
MBS and CMO securities (c)                65,402      48,331          2,610        1,870       5.32       5.16
Other securities (c)(d)                  108,181     110,066          4,153        4,931       5.12       5.97
----------------------------------------------------------------------------------------
    Total earning assets                 506,908     448,773         20,463       20,840       5.38       6.19
                                                                    --------------------
Other assets                              24,278      24,595
------------------------------------------------------------
    Total assets                        $531,186    $473,368
============================================================
NOW accounts                            $ 30,977    $ 24,675            149           40       0.64       0.22
Money market accounts                     65,964      65,990            469          999       0.95       2.02
Savings & other                           79,648      60,419            551          677       0.93       1.49
Certificates of deposit                  146,492     114,913          3,259        3,408       2.97       3.95
----------------------------------------------------------------------------------------
Total interest-bearing deposits          323,081     265,997          4,428        5,124       1.83       2.57
Repurchase agreements                     11,120       2,657            100           46       1.20       2.32
FHLB advances                             78,590      89,537          2,322        3,135       3.90       4.60
----------------------------------------------------------------------------------------
    Total interest-bearing funds         412,791     358,191          6,850        8,305       2.21       3.08
                                                                    --------------------
Demand deposits                           66,189      67,916
Other liabilities                          5,508       3,142
Shareholders' equity                      46,698      44,119
------------------------------------------------------------
Total liabilities &
 shareholders' equity                   $531,186    $473,368
============================================================

Net interest income                                                 $13,613      $12,535
                                                                    ====================
Spread on interest-bearing funds                                                               3.17       3.11
Net interest margin (e)                                                                        3.58       3.72
</TABLE>

(a)   Includes non-accrual loans.
(b)   Includes interest-bearing deposits in other banks and federal funds sold.
(c)   Average balances of securities are based on historical cost.
(d)   Includes tax benefits of $886,000 and $869,000,  respectively  for periods
      2009 and  2008 on  tax-exempt  securities  whose  income  and  yields  are
      calculated on an FTE basis.
(e)   FTE net interest income divided by average interest-earning assets.

                                       23
<PAGE>

The  following  table sets forth the changes in FTE  interest  due to volume and
rate.

Nine months ended September 30,                     2009 versus 2008
(in thousands)                                 Change in interest due to
------------------------------------------------------------------------------
                                        Volume (1)      Rate (1)       Net
------------------------------------------------------------------------------
Interest-earning assets:
   Loans                                $      980    $   (1,265)   $     (285)
   Short term funds                            401          (455)          (54)
   MBS and CMO securities                      660            80           740
   Other securities                            (84)         (694)         (778)
------------------------------------------------------------------------------
     Total                                   1,957        (2,334)         (377)
------------------------------------------------------------------------------
Interest-bearing liabilities:
Deposits                                     1,160        (1,856)         (696)
   FHLB advances & other                      (236)         (523)         (759)
------------------------------------------------------------------------------
     Total                                     924        (2,379)       (1,455)
------------------------------------------------------------------------------
Net change to interest income           $    1,033    $       45    $    1,078
==============================================================================

(1) Changes  attributable to rate/volume are allocated  proportionately  to both
rate and volume.

Interest income (FTE)
---------------------

Total interest and dividend income  decreased  $377,000 to $20.5 million for the
nine months ended  September  30, 2009,  as compared  with $20.8 million for the
same period a year ago. Loan income decreased $285,000,  or 2.0%, primarily as a
result of lower yields  offset in part by an increase in average  loans of $20.0
million,  or 7.0%. The decrease in the average loan yield, down 55 basis points,
was caused by lower interest  rates in 2009 and their effect on loan  re-pricing
and loan re-financing activity.

Investment  income  increased  $1.7  million,  or  30.1%,  as a result of higher
average  volume  and by  higher  yields  due to  portfolio  re-pricing.  Average
securities increased $71.4 million, or 29.3%.

Interest expense
----------------

Interest  expense  for the  nine  months  ended  September  30,  2009  decreased
$1,455,000,  or 17.5%,  as  compared  with the prior year  period as a result of
decreases in interest  rates paid and lower average FHLB  borrowings,  offset by
higher average  interest  bearing  deposits and repurchase  agreements.  Deposit
expense decreased $696,000, or 13.6%, as a result of lower deposit rates, offset
in part by higher average  deposit  balances,  up $57.1 million,  or 21.5%,  and
changes in deposit mix. The average cost of interest-bearing  deposits decreased
74 basis points to 1.83%.

Repurchase agreements,  whose average balance increased $8.5 million, or 318.5%,
over the  period  represent  collateralized  obligations  to  retail  customers.

Interest expense on FHLB advances decreased $813,000, or 25.9%, primarily due to
lower average balances,  down $10.9 million,  and lower average borrowing rates,
down 70 basis points, over the period.

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

The  provision  for loan losses for the nine months ended  September 30, 2009 of
$925,000  compares with $690,000 for the prior year period.  The increase in the
provision is attributable to the year-over-year increases in loan delinquencies,
non-performing  loans and net  charge-offs.  Net charge offs were  $220,000  and
$59,000, respectively, for the 2009 and 2008 periods.

For  additional  discussion  on  Salisbury's  allowance for loan losses refer to
"Results of  Operations-For  the Three months ended September 30, 2009 and 2008"
above.

                                       24
<PAGE>

Non-interest income
-------------------

The following table details the principal categories of non-interest income.

Nine months ended September 30,
 (in thousands)                              2009      2008          Change
-------------------------------------------------------------------------------
Losses on securities, net                  $( 692)   $(2,317)   $1,625    70.1%
Trust and wealth advisory                   1,433      1,684      (251)  (14.9)
Service charges                               641        610        31     5.1
Gains on sales of mortgage loans              312        161      (249)   26.0
Mortgage servicing                            391        110         7    12.1
Other                                       1,075        933       (39)    8.9
-------------------------------------------------------------------------------
   Total non-interest income               $3,160     $1,241    $1,919   154.6%
===============================================================================

Securities  losses for 2009 result from a  $1,128,000  OTTI  write-down  on five
non-agency  CMO  securities in June 2009,  offset in part by  securities  gains.
Securities  losses  for 2008  result  from the  aforementioned  $2,856,000  OTTI
write-down of FHLMC preferred  stock.  Excluding  securities  losses,  all other
non-interest  income  increased  $293,000  due to increases in gains on mortgage
sales,  mortgage  servicing  income,  banking  service  fees and  other  income,
including the  aforementioned  $130,000  one-time life insurance  death benefit,
offset in part by a $251,000  decrease in Trust/Wealth  Advisory Services income
due to the  decline  in the  market  value of  assets  under  management,  and a
decrease  in credit  card  fees,  attributable  to the sale of the  credit  card
portfolio  in  2008.

Non-interest expense
--------------------

The following table details the principal categories of non-interest expense.

Nine months ended September 30,

 (in thousands)                    2009        2008               Change
-------------------------------------------------------------------------------
Salaries and employee benefits  $    7,332  $    6,225  $    1,107         17.8%
Occupancy                              740         721          19          2.6
Equipment                              705         650          55          8.5
Data processing                      1,040       1,005          35          3.5
Insurance                               96         112         (16)       (14.3)
FDIC insurance                         737          36         701       1947.2
Printing and stationary                225         201          24         11.9
Postage and telecommunications         307         278          29         10.4
Professional services                  832         651         181         27.8
Legal                                  276         282          (6)        (2.1)
Amortization of intangibles            123         123          --          0.0
Other                                1,014         898         116         12.9
-------------------------------------------------------------------------------
   Total operating expenses     $   13,427  $   11,182  $    2,245         20.1%
===============================================================================

Non-interest expense increased $2,245,000 due primarily to a $1,107,000 increase
in  compensation  expense,  $701,000  in FDIC  insurance  premiums,  $181,000 in
professional services and $256,000 in all other operating expenses. The increase
in  compensation  expense  included  $530,000  in pension  expense,  $477,000 in
salaries  and  $100,000 in  benefits  and payroll  taxes.  The  increase in FDIC
deposit  insurance  premiums  was due to the 2009  special  assessment,  deposit
growth and an increase in premiums.  Other changes in expenses  relate to normal
fluctuations in operating expenses.

Income taxes
------------

Net income for the nine month period ended September 30, 2009 included an income
tax benefit of $83,000, as compared with a provision of $883,000 a year ago. The
2008 results are distorted by a timing difference  arising from the inclusion in
the third quarter of the FHLMC preferred stock OTTI loss while the corresponding
tax  benefit of  $971,000  was  included  in the fourth  quarter  following  the
enactment of the  Emergency  Economic  Stabilization  Act (EESA) in October 2008
that permitted  Salisbury to record the tax benefit.  Salisbury's  effective tax
rate is generally  less than the 34% federal  statutory  rate due to holdings of

                                       25
<PAGE>

tax-exempt municipal bonds and bank owned life insurance.

FINANCIAL CONDITION

Overview
--------

Total assets increased to $564 million,  up $69 million since December 31, 2008.
Total net loans,  including  loans held for sale, were $312 million at September
30, 2009  reflecting an increase of $13 million,  or 4.25%,  since  December 31,
2008.  Non-performing  assets  increased $0.5 million during the quarter to $7.2
million at September  30, 2009 from $6.7  million at June 30, 2009,  and compare
with $5.1 million at December 31, 2008. A single loan relationship  accounts for
$3.4 million of the 2009 increase. Reserve coverage, as measured by the ratio of
the  allowance  for loan losses to gross loans,  increased  slightly to 1.10% at
September  30,  2009  compared  with  0.92% at  December  31,  2008 and 1.05% at
September 30, 2008.

Deposits increased $70 million to $415 million from $345 million at December 31,
2008. This significant growth in deposits stems from customer preference for the
safety of  insured  deposits  versus  market  risk in the equity  markets  and a
concerted  effort by the  Bank's  staff to  expand  deposit  relationships  with
customers.

At September 30, 2009,  book value per common share was $25.89.  Tier 1 leverage
and total  risk-based  capital ratios were 8.57% and 13.22%,  respectively,  and
Salisbury was "well capitalized" as defined by the Federal Reserve Board.

Securities and Short Term Funds
-------------------------------

Salisbury's  debt  securities  include  U.S.  Treasury  bills,  U.S.  Government
sponsored  agency bonds and agency  mortgage  backed  securities  ("MBS"),  bank
qualified  municipal  bonds,  non-agency   collateralized  mortgage  obligations
("CMO") and Small Business  Administration  ("SBA") pools. During the nine-month
period ended September 30, 2009 total debt securities increased $24.2 million to
$174.8  million.  During this period  Salisbury  purchased $98.7 million of debt
securities,  primarily U.S.  Treasury bills,  U.S.  Government  sponsored agency
bonds and agency mortgage backed  securities,  non-agency CMO and Small Business
Administration  ("SBA")  pools.  At September  30,  2009,  the  portfolio  had a
projected  weighted  average  life  of 8.9  years,  based  on  median  projected
prepayment  speeds  for  MBS and  CMO,  and  likelihood  of  call  for  callable
securities,  at current interest rates. At September 30, 2009, substantially all
securities were classified as available-for-sale.

For the quarter ended June 30, 2009 Salisbury  determined  that five  non-agency
CMO  securities  reflected  OTTI and  recognized  credit losses of $1,128,000 by
writing down the carrying value of such securities. Salisbury does not intend to
sell the  securities  which it has  judged to be OTTI and it is not more  likely
than  not  that  it  will  be  required  to sell  these  securities  before  its
anticipated  recovery of each  security's  remaining  amortized  cost basis.  No
additional  OTTI was determined for the quarter ended September 30, 2009 and all
other  non-agency CMO securities  were judged not to be OTTI as of September 30,
2009. It is possible that future loss assumptions  could change and cause future
OTTI credit losses in these securities.

Salisbury  believes that  principal  and interest on all other debt  securities,
principally U.S Treasury securities,  mortgage-backed  securities and securities
backed by U.S.  government  sponsored  entities  and the SBA and bank  qualified
insured  municipal   securities  are  deemed   recoverable.   Accumulated  other
comprehensive  income at  September  30, 2009  included net  unrealized  holding
losses,  net of  tax,  of  $2.9  million  that  management  deems  as  temporary
impairment.

                                       26
<PAGE>

Loans
-----

During the nine-month  period ended September 30, 2009 net loans increased $13.9
million,  or 4.7%.  The  ratio  of net  loans to  assets  decreased  to 55.2% at
September  30, 2009,  compared  with 60.0% at December 31, 2008,  as loan demand
remains soft and competition for loans remains  aggressive in Salisbury's market
area. Major loan classifications, excluding loans held-for-sale, are as follows:

                                                     September 30,  December 31,
(in thousands)                                          2009           2008
--------------------------------------------------------------------------------
Real estate mortgages:

   Residential                                         $155,607       $151,441
   Commercial                                            67,220         62,796
   Construction, land & land development                 30,228         33,343
   Home equity credit                                    30,995         25,608
--------------------------------------------------------------------------------
     Total mortgage loans                               284,050        273,188
Commercial and industrial                                24,514         20,784
Consumer and other                                        5,611          5,726
--------------------------------------------------------------------------------
   Total loans, gross                                   314,175        299,698
Deferred loan origination fees and costs, net               505            393
Allowance for loan losses                                (3,429)        (2,724)
--------------------------------------------------------------------------------
     Total loans, net                                  $311,251       $297,367
================================================================================

The Commercial Lending  department  specializes in lending to small and mid-size
companies  and  businesses  and provides  short-term  and  long-term  financing,
construction  loans,  commercial  mortgages,   equipment,  working  capital  and
property improvement loans. The department also works with both the SBA and USDA
Government   Guaranteed  Lending  Programs.   However  total  loans  outstanding
represent a very small  percent of the  Commercial  Portfolio.  The  Residential
Mortgage department,  in addition to traditional  portfolio lending,  originates
loans  for  sale  to  the  secondary   market  enabling  the  Bank  to  offer  a
comprehensive mortgage product line. The Consumer Lending department also offers
home  equity  loans  and  lines  of  credit  and  consumer   installment  loans.

Non-performing assets
---------------------

The composition of non-performing assets is as follows:

                                                    September 30,   December 31,
(in thousands)                                          2009            2008
-------------------------------------------------------------------------------
Non-accruing loans                                    $ 6,240         $ 5,075
Accruing loans past due 90 days or more                   160             100
Accruing restructured loans                               350              --
-------------------------------------------------------------------------------
     Total non-performing loans                         6,750           5,175
Real estate acquired in settlement of loans               418             205
-------------------------------------------------------------------------------
     Total non-performing assets                       $7,168          $5,380
===============================================================================
Percent of non-performing loans to gross loans          2.15%            1.70%
Percent of non-performing assets to total assets        1.27%            1.07%

During the  nine-month  period ended  September 30, 2009  non-performing  assets
increased  $1.9 million to $7.2 million.  Non-performing  assets,  although at a
historical  high for Salisbury,  are relatively low for the industry at 1.27% of
total assets at September 30, 2009, and at 1.07% at December 31, 2008. The level
of non-performing assets reflects Salisbury's prudent credit policy and rigorous
ongoing credit management process.  Non-performing  loans include a $3.0 million
loan which is the subject of litigation. (See Legal Proceedings.)

In addition to non-performing  assets, at September 30, 2009 Salisbury had $13.7
million of performing  classified  loans that are considered  potential  problem
loans.  Although not impaired,  performing  classified  loans, in the opinion of
management,  exhibit a higher than normal degree of risk and warrant  monitoring
due to  various  considerations,  including  (i)  the  degree  of  documentation
supporting the borrower's current

                                       27
<PAGE>

financial  position,  (ii)  potential  weaknesses in the  borrowers'  ability to
service the loan,  (iii) possible  collateral value  deficiency,  and (iv) other
risk factors such as geographic location, industry focus and negatively trending
financial results.  These deficiencies create some uncertainty,  but not serious
doubt,  as to the borrowers'  ability to comply with the loan repayment terms in
the future. Management believes that reserves for these loans are adequate.

Salisbury   pursues  the  resolution  of  all   non-performing   assets  through
restructurings,  credit enhancements or collections.  When collection procedures
do not bring a loan into performing or restructured status,  Salisbury generally
initiates  action to foreclose  the property or to acquire it by deed in lieu of
foreclosure. Salisbury actively markets all OREO property.

Deposits and Borrowings
-----------------------

During the  nine-month  period  ended  September  30, 2009  deposits  grew $69.9
million, or 20.3%, to $414.8 million, and retail repurchase agreements grew $4.3
million to $15.5  million.  The  significant  deposit  growth is  attributed  to
customer  preference  for the safety of insured bank  deposits  over market risk
during this period of considerable market volatility.

During this period Salisbury  reduced its Federal Home Loan Bank (FHLB) advances
by $11.1  million.  Remaining  advances  consist of term loans having an average
remaining maturity of 4.7 years.

LIQUIDITY

Salisbury  manages its  liquidity  position  to ensure that there is  sufficient
funding  availability at all times to meet both  anticipated  and  unanticipated
deposit  withdrawals,  loan originations and advances,  securities purchases and
other  operating cash  outflows.  Salisbury's  primary  sources of liquidity are
principal payments and maturities of securities and loans, short-term borrowings
through repurchase  agreements and Federal Home Loan Bank advances,  net deposit
growth and funds provided by operations.  Liquidity can also be provided through
sales of loans and available-for-sale securities.

Operating activities for the nine-month period ended September 30, 2009 provided
net  cash of $4.8  million.  Investing  activities  utilized  net  cash of $49.4
million, principally for $98.7 million of securities purchases and $15.1 million
of net loan advances, offset in part by $72.1 million of security repayments and
maturities. Financing activities provided net cash of $70.3 million, principally
from $74.1 of net deposit  inflows and  repurchase  agreements  and $8.8 million
from the issuance of preferred  stock pursuant to the U.S.  Treasury's TARP CPP,
offset in part by $11.1 million of FHLB advance  repayments  and  maturities and
$1.6 million of cash dividends paid.

At September 30, 2009,  Salisbury's  liquidity  ratio,  as  represented by cash,
short term  available-for-sale  securities and marketable assets to net deposits
and short term unsecured liabilities, was 37.3% and exceeded Salisbury's minimum
guideline of 30%.

At September 30, 2009,  Salisbury had  outstanding  commitments to fund new loan
originations of $3.5 million,  construction mortgage commitments of $3.6 million
and  unused  lines of credit of $46.2  million.  Salisbury  believes  that these
commitments can be met in the normal course of business. Salisbury believes that
its  liquidity  sources will continue to provide  funding  sufficient to support
operating   activities,   loan   originations  and   commitments,   and  deposit
withdrawals.

CAPITAL RESOURCES

During the  nine-month  period ended  September  30, 2009  shareholders'  equity
increased  $13.5  million,  or 34.8%,  to $52.5 million and book value per share
increased  $2.79 to  $25.10.  In  March  2009  Salisbury  issued  $8,816,000  of
preferred stock to the U.S.  Treasury  pursuant to the Treasury's TARP CPP. Also
contributing to the increase was net income of $1.6 million, or $0.81 per common
share,  and a decrease in  accumulated  other  comprehensive  loss,  net of $4.2
million,  principally  from a net  decrease  in  unrealized  holding  losses  on
securities  available-for-sale,  net of taxes. Reducing shareholders' equity was
$1.6 million of dividends declared and paid.

Capital requirements
--------------------

Salisbury and the Bank are subject to various  regulatory  capital  requirements
administered  by  the  federal  banking  agencies.   Under  current   regulatory

                                       28
<PAGE>

definitions,  Salisbury 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."  Salisbury
and the Bank's regulatory capital ratios at September 30, 2009 are as follows:

                              Well      September 30, 2009    December 31, 2008
                           capitalized  Salisbury     Bank    Salisbury    Bank
--------------------------------------------------------------------------------
  Leverage ratio               5.00%       8.57%      6.78%      7.74%     7.52%
  Tier I risk-based ratio      6.00       12.29       9.74      10.78     10.53
  Total risk-based ratio      10.00       13.22      10.68      11.59     11.34

A well  capitalized  institution,  which is the highest capital  category for an
institution as defined by the Prompt Corrective  regulations  issued by the FDIC
and the Federal Reserve Board ("FRB"), is one which maintains a Total Risk-Based
ratio of 10% or above,  a Tier I Risk-Based  ratio of 6% or above and a Leverage
ratio  of 5% or  above,  and  is  not  subject  to any  written  order,  written
agreement,  capital directive, or prompt corrective action directive to meet and
maintain a specific  capital level.  Maintaining  strong capital is essential to
Salisbury and the 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.

Dividends
---------

During the nine  month  period  ended  September  30,  2009  Salisbury  has paid
$186,000 in  preferred  stock  dividends  to the U.S.  Treasury's  TARP CPP, and
$1,416,000 in common stock dividends.

The Board of Directors of Salisbury declared a common stock dividend of $.28 per
common share  payable on November 6, 2009 to  shareholders  of record on October
23,  2009.  Salisbury is changing  the timing of future  common  stock  dividend
announcements to coincide with quarterly  earnings  announcements.  Common stock
dividends,  when  declared,  will  generally  be paid the last  business  day of
February,  May, August and November,  although Salisbury is not obligated to pay
dividends on those dates or at any other time.

Salisbury's  ability to pay cash dividends is dependent on the Bank's ability to
pay cash dividends to Salisbury.  There are certain  restrictions on the payment
of cash dividends and other payments by the Bank to Salisbury. Under Connecticut
law the Bank cannot declare a cash dividend except from net profits,  defined as
the  remainder of all earnings  from current  operations.  The total of all cash
dividends  declared  by  the  Bank  in  any  calendar  year  shall  not,  unless
specifically  approved by the  Commissioner of Banking,  exceed the total of its
net profits of that year combined with its retained net profits of the preceding
two years.

Federal  Reserve  Board  Supervisory  Letter SR 09-4,  February 24, 2009 revised
March 27, 2009 notes that, as a general matter, the board of directors of a bank
holding company ("BHC") should inform the Federal Reserve and should  eliminate,
defer,  or  significantly  reduce  dividends  if (1)  net  income  available  to
shareholders for the past four quarters, net of dividends previously paid during
that period, is not sufficient to fully fund the dividends;  (2) the prospective
rate of earnings  retention is not  consistent  with  capital  needs and overall
current and prospective financial condition; or (3) the BHC will not meet, or is
in danger of not  meeting,  its  minimum  regulatory  capital  adequacy  ratios.
Moreover,  a BHC should  inform the  Federal  Reserve  reasonably  in advance of
declaring  or paying a dividend  that  exceeds  earnings  for the period  (e.g.,
quarter) for which the dividend is being paid or that could result in a material
adverse  change  to the BHC  capital  structure.

Further  restrictions  on cash  dividends  are imposed on  Salisbury  because of
Salisbury's  participation in the TARP, CPP program.  These preclude the payment
of any common stock cash  dividends  if  Salisbury  is not paying the  preferred
stock  dividend.  Additionally,  the common stock  dividend may not be increased
without prior approval from the Treasury for the first three years  Salisbury is
a TARP participant  unless all TARP preferred shares are redeemed or transferred
to third parties.

Salisbury   believes  that  the  payment  of  common  stock  cash  dividends  is
appropriate,  provided that such payment  considers  Salisbury's  capital needs,
asset quality, and overall financial condition and does not adversely affect the
financial  stability of Salisbury or the Bank.  The continued  payment of common
stock cash dividends by Salisbury  will be dependent on Salisbury's  future core
earnings,  financial condition and capital needs, regulatory  restrictions,  and

                                       29
<PAGE>

other factors deemed relevant by the Board of Directors of Salisbury.

IMPACT OF INFLATION AND CHANGING PRICES

Salisbury'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 Salisbury  are monetary and as a result,  interest  rates have a
greater impact on Salisbury'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  Salisbury  with the  Securities  and
Exchange Commission,  as well as other filings,  reports and press releases made
or issued by  Salisbury  and the Bank,  and oral  statements  made by  executive
officers  of  Salisbury  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

(b)   general and on the markets in which  Salisbury  and the Bank do  business;
      and expectations for revenues and earnings for Salisbury 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,  Salisbury  claims the  protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Act of
1995.

Salisbury  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 Salisbury'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 Salisbury 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 Salisbury's  filings with the
         Securities and Exchange Commission.

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

Item 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

Not applicable

Item 4T.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
------------------------------------------------

Salisbury's  management,   including  its  Chief  Executive  Officer  and  Chief
Financial  Officer,  has evaluated the effectiveness of the design and operation
of the disclosure controls as of September 30, 2009. Based upon that evaluation,
the Chief  Executive  Officer and Chief  Financial  Officer  concluded  that the
disclosure controls and procedures are effective.

Disclosure  controls and procedures are controls and other  procedures  that are
designed to ensure that the  information  required  to be  disclosed  in reports

                                       30
<PAGE>

filed or submitted  under the  Securities  Exchange  Act of 1934 (the  "Exchange
Act") is recorded,  processed,  summarized and reported  within the time periods
specified  in  the  Securities  and  Exchange   Commission's  rules  and  forms.
Disclosure  controls and procedures include,  without  limitation,  controls and
procedures designed to ensure that information required to be disclosed by us in
our reports  filed under the Exchange Act is  accumulated  and  communicated  to
management,  including the principle  executive officer and principle  financial
officer, as appropriate to allow timely decisions regarding required disclosure.

In addition,  based on an  evaluation of its internal  controls  over  financial
reporting,  no change in Salisbury's  internal control over financial  reporting
occurred  during  the  quarter  ended  September  30,  2009 that has  materially
affected,  or is reasonably likely to materially  affect,  Salisbury's  internal
control over financial reporting.

PART II.    OTHER INFORMATION

Item 1.     LEGAL PROCEEDINGS

The Bank is a party defendant,  both in its capacity as Salisbury Bank and Trust
Company   and  in  its  former   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. The other
parties to the litigation are the Plaintiff,  John R. Christophersen of Norwalk,
Connecticut and 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 was 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,  which was
appraised at a value significantly greater than the loan amount.

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.  He has
alleged that by financing the property, and holding it as a co-Trustee, the Bank
participated  in  "stealing"  the  value  of  the  Plaintiff's  interest  in the
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, at the time of the financing referenced above,
acquired a lender's  title  insurance  policy from the Chicago Title & Insurance
Company.  The Bank has resigned as a trustee and is actively defending the case.
The validity of the conveyance to Erling Christophersen is also the subject of a
probate  proceeding  in New York State.  This  Connecticut  proceeding  has been
stayed until the New York Court litigation is resolved. Prior to the resolution,
the  liquidity  of  the  real  estate  collateral  which  secures  the  loan  is
diminished.

Item 1A.    RISK FACTORS

Not applicable.

Item 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

            None

Item 3.     DEFAULTS UPON SENIOR SECURITIES

            None

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            None

                                       31
<PAGE>

Item 5.     OTHER INFORMATION

            None

Item 6.     EXHIBITS

11.1        Statement regarding Computation of Net Income Per Common 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


                                   SIGNATURES

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

                             SALISBURY BANCORP, INC.

November 16, 2009                           by    /s/ Richard J. Cantele, Jr.
                                              -------------------------------
                                            Richard J. Cantele, Jr.,
                                            Chief Executive Officer



November 16, 2009                           by    /s/ B. Ian McMahon
                                              -------------------------------
                                            B. Ian McMahon,
                                            Chief Financial Officer

                                       32