Business

The following provides Management's comments on the financial condition and results of operations of Salisbury Bancorp, Inc. (the "Company"), a Connecticut corporation that is the holding company for Salisbury Bank and Trust Company
(the "Bank"). The Company's sole subsidiary is the Bank, which has seven (7)
full service offices including a Trust Wealth Services Division. Such offices are located in the towns of Canaan, Lakeville, Salisbury and Sharon, Connecticut, Sheffield and South Egremont, Massachusetts, and Dover Plains, New York. In addition, the bank has received regulatory approvals to open a full-service branch in Millerton, New York. The Company and Bank were formed in 1998 and 1848, respectively. In order to provide a strong foundation for building shareholder value and servicing customers, the Company remains committed to investing in the technological and human resources necessary to developing new personalized financial products and services to meet the needs of customers. This discussion should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

RESULTS OF OPERATIONS

Overview

The Company's assets at March 31, 2009 totaled $506,139,980 compared to total assets of $495,754,160 at December 31, 2008. During the first three months of 2009, net loans outstanding, not including loans held-for-sale, increased $965,808 or 0.33% to $298,333,242. This compares to total net loans outstanding, not including loans held-for-sale, of $297,367,434 at December 31, 2008. This small increase is primarily attributable to strategic efforts directed at new business development as loan demand has decreased due to the current economic recession. Non-performing assets totaled $6,693,269 at March 31, 2009 which included one OREO property at a value of $418,024. This compares to non-performing assets totaling $5,379,135 at December 31, 2008 which included one OREO property valued at $204,534. The Bank continues to monitor the quality of the loan portfolio to ensure that loan quality will not be sacrificed for growth or otherwise compromise the Company's objectives. Strong risk management policies and procedures relating to the loan portfolio have always been maintained by the Bank. However, the economy is in a deep recession which is significantly impacting the Bank's market area. Deposits at March 31, 2009 totaled $366,763,527 as compared to total deposits of $344,925,232 at December 31, 2008. This increase is attributable to new business development efforts that are being implemented and the desire of consumers to use the safety of FDIC insured Bank funds to protect assets.

The Company's earnings for the three months ended March 31, 2009 was $1,081,175 or $.64 per average share outstanding. This is virtually unchanged from earnings of $1,080,934 or $.64 per share for the same period in 2008.

The capital levels of the Company as well as the Bank, remain above the highest regulatory capital level requirements as measured by the Regulatory Agencies. Capital levels at March 31, 2009 compared to Regulatory Capital Ratios are as follows:

                             Salisbury Bank    Consolidated    Well Capitalized
                             --------------    ------------    ----------------

Total risk based capital        11.72%             14.55%          > 10.00%
                                                                   -
Tier 1 risk based capital       10.82%             13.66%          >  6.00%
                                                                   -
Leverage ratio                   7.52%              9.54%          >  5.00%
                                                                   -

As previously disclosed, on March 27, 2009, the Board of Directors declared a first quarter cash dividend of $.28 per common share, which was paid on April 30, 2009 to shareholders of record as of April 16, 2009. This compared to a cash dividend of $.28 per common share that was paid for the first quarter of 2008.

Critical Accounting Estimates

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

Net Interest and Dividend Income

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