Salisbury Bancorp : Investor Presentation Q4 2019

Investor Presentation

NASDAQ: SAL

Investor Information

Richard J. Cantele, Jr.	Peter Albero	Shelly L. Humeston
President	Executive Vice President	Senior Vice President
Chief Executive Officer	Chief Financial Officer	Secretary
[e-mail]	[e-mail]	[e-mail]
860-453-3430	860-453-3440	860-453-3432

Forward Looking Statements

This presentation contains certain statements that may be considered "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results, performance or achievements of Salisbury may differ materially from those discussed in these forward-looking statements. We refer you to the documents Salisbury files from time to time with the Securities and Exchange Commission, especially the Company's last filed Form 10-K. These documents contain and identify important factors that could cause actual results to differ materially from those contained in our projections or forward- looking statements. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this presentation, and Salisbury assumes no obligation to update forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Unaudited data

All of the financial data presented herein is unaudited.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

1

Corporate Overview

• Full service community banking institution offering consumer and business banking products and services as well as trust and wealth advisory services with roots dating back to 1848
• Operating footprint includes 14 banking locations in Litchfield County, CT, Berkshire County, MA, and Dutchess County, Orange County, and Ulster County, NY ("Operating Counties")
• Franchise extends to within 50 miles of New York City
• 20 plus year history of dividend payments
• Seasoned and experienced management team

	Key Statistics			Branch Footprint
(as of December 31, 2019)
Total Assets ($000)	1,112,448
Net Loans ($000)	927,413
Total Deposits ($000)	919,506
Total Shareholder's Equity ($000)	113,655
Tangible Book Value per Common Share ($)	34.98
Wealth Assets Under Administration ($000)	777,503
Net Income - Year to date ($000)	11,136
FTEs	173
Common Stock Price ($)	45.67
Market Capitalization ($MM)	129.1
Price / Tangible Book Value (%)	130.6

2

Core Businesses Serving Individuals, Families & Businesses

Retail / Business Banking

Business Lending

• Retail / Business Deposits
• Electronic Banking Services
• • Mobile
  • Debit/Credit Card
  • Remote Capture
• Cash Management

• Investment Management
• Trust & Estate Services
• Financial Planning
• Retirement Plan Advisory
• Private Banking

• Business Loans
• Commercial Mortgages
• Lines of Credit
• Government Guaranteed Loans
• Letters of Credit

• Mortgage Loans
• Home Equity Loans
• Consumer Loans
• Construction Loans

Trust & Wealth Advisory

Retail Lending

3

Market Demographics

• Litchfield County's prestigious private and public school systems and Berkshire County's cultural offerings attract affluent individuals
• Dutchess County's median household income is 18% higher than the NY state median
• Orange County's median household income is 13% higher than the NY state median
• New Paltz, NY branch provides new opportunities in Ulster County

Deposits by County1

Ulster,

Orange, NY 5%

NY 11%

Litchfield,

Dutchess,CT 38%

NY 37%

Berkshire,

MA 9%

Deposits by State1

$451 Million	$322 Million
NY	CT
53%	38%
	MA
	9%

$79 Million

County Market Share1

County	Number of	Market
Branches	Share
Litchfield, CT	4	9%
Berkshire, MA	3	2%
Dutchess, NY	5	4%
Orange, NY	1	1%
Ulster, NY	1	1%

Source: S&P Global and Company data. 1 Excludes Broker deposits, CDARS one-ways buys and balances held in Branch Administration.

4

Financial Overview				Assets
 Disciplined asset growth driven organically and	$1,200
through strategic acquisitions	$1,100				$1,121.6	$1,112.4
 Acquired Riverside Bank (assets $239 million) in
			$987.0
2014 to expand footprint and diversify loan	$1,000
	$935.4
portfolio		$891.2
$900
 Acquired branches in New Paltz (2017) and
$800
Fishkill, NY (2018) and relocated existing
branches in Fishkill and Newburgh, NY (2018)	$700
 Trust & Wealth Advisory business diversifies	$600
bank revenue streams	2015	2016	2017	2018	2019

		Earnings Per Share (Basic)
$4.50						$3.95
$4.00
$3.50		$3.04			$3.15
$3.00
		$2.43
$2.50			$2.25
$2.00
$1.50
$1.00
$0.50
$0.00
	2015	2016	2017	2018	2019

Source: Company SEC filings. Dividend payout ratio based on reported basic EPS.

TBVPS and Dividend Payout Ratio

$40					60%
$35			$29.39		$34.98
	$28.90	$31.45	50%
$30	$27.69
			40%
$25		46.1%	50.0%
36.8%
$20			35.6%	30%
$15					28.4%
$10					20%
				10%
$5
$0					0%
	2015	2016	2017	2018	2019
					5

Profitability Indicators

• Competition for deposits and loans continue to exert pressure on NIM
• Depositors are increasingly interest rate sensitive and we compete against mutuals and savings banks for loans
• Efficiency ratio for 2018 included non-recurring expenses of $266k; 2019 included non-recurring BOLI credit of $328k
• Improving efficiency and profitability are key strategic initiatives

Efficiency Ratio 2

75%
70%		69.1%
66.7%	66.8%
65%	63.0%	64.1%
60%

55%

50%

2015

2016

2017

2018

2019

	Net Interest Margin1
				Return on Average Assets

4.5%	NIM ex Purchase Accounting Impact		1.25%
4.0%	3.99%
	3.69%				1.00%				1.00%
		3.58%
					0.94%
3.5%				3.35%
3.66%			3.27%
	3.47%	3.45%		0.75%	0.72%		0.83%
3.0%		3.27%	3.27%
						0.50%		0.63%
2.5%
2.0%						0.25%
	2015	2016	2017	2018	2019	2015	2016	2017	2018	2019	6
Source: Company SEC filings.	1 Tax equivalent basis.	2 Excluding $328k BOLI accounting adjustment, 2019 ratio was 64.9%.

	Balance Sheet Composition
$1,200	Assets ($ Thousands)			1,121,554	1,112,448	85%
$1,000	891,192	935,366		986,984			84%
			83.4%	83%
$800
						82%
$600		81.6%		81.3%	81.1%		81%
					80%	Gross Loans / Deposits
$400
						79%
$200	78.5%						2015	93.4%
					78%
$0							77%	2016	98.4%
2015	2016		2017	2018	2019
			2017	99.1%
	Loans, Net	Securities	Other	Net Loans as % of Assets
		2018	99.0%
$1,200							96%
Liabilities ($ Thousands)					2019	101.8%
			1,018,095		94%
$1,000	94.2%	92.9%			998,793
	889,470
$800	800,618	841,359			92.1%	92%
	91.7%	91.0%	90%
$600							88%
$400							86%
						84%
$200
						82%
$0	2015	2016		2017	2018	2019	80%
	Deposits	FHLB Advances	Deposits as % of Liabilities

Source: Company SEC filings.

7

2015

Cons., HE

Land 6%

2%

C&I,
Municipal	Residential
19%	41%

$704

Million

CRE 33%

Loans ($ millions)	2015
Residential	$289.8	41.2%
CRE	229.7	32.6%
C&I, Municipality	131.0	18.6%
Land	11.8	1.7%
Cons., HE	41.3	5.9%
Gross Loans	$703.5	100.0%

Loan Portfolio Yield: 4.68%1

CRE Loans / RBC2: 117%

Loan Composition

2017

Cons., HE

Land 5%

1%

C&I,	Residential
Municipal	43%
19%

$807

Million

CRE 32%

Loans ($ millions)	2017
Residential	$346.9	43.0%
CRE	259.3	32.1%
C&I, Municipality	150.2	18.6%
Land	12.2	1.5%
Cons., HE	38.6	4.8%
Gross Loans	$807.2	100.0%

Loan Portfolio Yield: 4.33%1

CRE Loans / RBC2: 136%

	2019
Land	Cons., HE
1%	4%

C&I, Municipal
20%	Residential
	42%

$936

Million

CRE 33%

Loans ($ millions)	2019
Residential	$393.6	42.0%
CRE	299.6	32.0%
C&I, Municipality	191.3	20.4%
Land	11.5	1.2%
Cons., HE	40.2	4.4%
Gross Loans	$936.3	100%

Loan Portfolio Yield: 4.34%

CRE Loans / RBC2: 165%

2015 - 2019 Loan CAGR: 7%

Source: Company SEC filings and S&P Global. 1 Yield reflected purchase accounting adjustments related to Riverside acquisition. 2 Risk-Based Capital.

8

Credit Quality

• Continued improvements in credit quality with significant reduction in NPAs since 2015
• NCOs continue to trend lower, while coverage ratio has increased since 2016
• Loans past due 30 days or more 0.47% of gross loans at 12/31/19, down from 1.13% at 12/31/17

NCOs / Average Loans

0.250%

2.0%

1.5%

1.0%

0.5%

0.0%

1.00%

NPAs / Assets

1.82%

1.34%

0.74% 0.74%

0.35%

2015

2016

2017

2018

2019

Loan Loss Reserves / Gross Loans

0.200%0.19%

0.150%

0.100%	0.08%
	0.05%	0.05%
0.050%	0.04%
0.000%

0.95%

0.90%

0.85%

0.80%

0.75%

0.81%

0.95%

0.85%

0.84%

0.80%

2015

2016

2017

2018

2019

Source: S&P Global and Company data and SEC filings.

2015

2016

2017

2018

2019 9

2015
	Jumbo Time
8%	NIB
Retail Time	27%
8%
$755
	Million
IB Demand,
Savings &
MMDA
57%
Deposits ($ millions)	2015
NIB	$201.3	26.7%
IB Demand, Savings & MMDA	428.9	56.8%
Retail Time (< $100k)	60.2	8.0%
Jumbo Time (> $ 100k)	64.2	8.5%
Total	$754.5	100%

Core Deposits: 83.5%

Cost of Deposits: 0.33%

Deposit Composition

2017

Jumbo Time

8%

Retail Time	NIB
7%
27%

$816

Million

IB Demand,

Savings &

MMDA

59%

Deposits ($ millions)	2017
NIB	$220.5	27.0%
IB Demand, Savings & MMDA	478.1	58.6%
Retail Time (< $100k)	53.2	6.5%
Jumbo Time (> $ 100k)	63.6	7.8%
Total	$815.5	100%

Core Deposits: 85.7%

Cost of Deposits: 0.42%

2019

Jumbo Time

10%

Retail Time

6%NIB

26%

$920

Million

IB Demand,

Savings &

MMDA

58%

Deposits ($ millions)	2019
NIB	$237.9	25.9%
IB Demand, Savings & MMDA	553.9	60.2%
Retail Time (< $100k)	53.3	5.8%
Jumbo Time (> $ 100k)	74.4	8.1%
Total	$919.5	100.0%

Core Deposits: 86.1%

Cost of Deposits: 1.03%

2015 - 2019 Deposit CAGR: 5%

Source: Company SEC filings and Company data.

10

AFS Securities Portfolio (2019)

Corp. Sub Debt

5%

SBA 20%

Municipal

30%

CMO

28%

US Gov't

Agency

3%

MBS 14%

Highlights

• Book value of $90.1 million or 8.1% of total assets
• Primarily collateralizes deposits and provides liquidity
• Average Yield: 3.06%
• Duration: 3.6 years

11

Source: Company SEC filings and Company data.

				Tier 1 Capital Ratio 1														Total Capital Ratio 2
14%		12.2%	12.1%	11.6%			11.8%				14%			13.1%		12.9%	12.5%	12.1%	12.8%
12%			11.2%				12%
10%														10%
8%														8%
6%														6%
4%														4%
2%														2%
0%														0%
2015	2016	2017		2018	2019							2015		2016	2017	2018	2019
											Bank				Well Capitalized
										Leverage Ratio 3
					12%
					10%	9.4%	9.5%			9.3%			8.8%		9.6%

8%

6%

4%

2%

0%

	2015	2016	2017	2018	2019	12
Source: Company SEC filings.	1 Tier 1 Capital / Risk Weighted Assets	2 Total Capital / Risk Weighted Assets	3 Tier 1 Capital / Average Assets

Trust & Wealth Advisory

• Trust & Wealth Advisory provides a source of diversified revenues (~ 9% of Bank revenue)
• This business differentiates us from our community banking peers
• Services include Trust and Estate Administration, Asset Management, 401k Advisory and Financial Planning
• Expansion into Hudson Valley continued with Trust office opening in Newburgh, NY

Gross Revenues

$4,500	Thousands
	$3,995
$3,750		$3,700
	$3,477
	$3,265	$3,338
$3,000

$2,250

$1,500

2015

2016

2017

2018

2019

Source: Company SEC filings.

		Assets Under Administration
$900	Millions
$800	$777.5
$700	$648.0
	$610.2

$600

$516.4

$500

$400 $371.0

$300

$200

2015

2016

2017

2018

2019

13

Common Stock Price: NASDAQ: SAL

$50									$44.65		$45.67
$45
							$37.50
$40							$33.48		$36.18
$35
$30		$25.22	$23.35	$23.34	$26.89	$27.34
$25	$21.75
$20
$15
$10
$5
$0
2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019

	Period Ending	2015	2016	2017	2018	2019
	Tangible BV per common share ($)	27.69	28.90	29.39	31.45	34.98
	Price/Book (%)	101.0	110.0	127.5	98.2	113.6
	Market capitalization ($ in millions)	91.5	103.4	124.4	101.0	129.1
	Common shares outstanding (000s)	2,734	2,758	2,785	2,807	2,826
	Insider Ownership (%)	18.7	19.1	12.08 1	12.12	10.17
	Institutional Ownership (%)	9.12	8.68	11.33	10.62	11.09
	Annual Highs /	33.70 /	38.15 /	48.35 /	49.85 /	47.05 /
	Lows ($)	26.60	29.51	37.30	38.25	35.25		14
Source: S&P Global and Company SEC filings. 1 In April 2017, Salisbury Director Rudolph P. Russo passed away. Mr. Russo held approximately 6% of Salisbury's shares.

Relative Stock Price Performance

60%	NASDAQ:SAL: 27.40 %	SNL U.S. Bank and Thrift: 31.68 %		S&P 500: 38.84 %
50%
40%
30%
20%
10%
0%
10/1/2016	4/1/2017	10/1/2017	4/1/2018	10/1/2018	4/1/2019

Highlights:

• 20 + years of dividend payments
• Dividend yield of 2.45% at 12/31/19
• Quarterly dividend increased to $0.29 per common share in January 2020

Source: S&P Global and Company data.

15

Strategic Priorities:

• Organic growth and strategic acquisitions
• • Wealth advisory
  • Branches
  • Whole bank
• Enhance efficiency and profitability
• Deepen penetration of existing markets
• Establish new client relationships

16

Why invest in Salisbury Bank…..

1

2

3

4

Steady Performance

Salisbury has delivered stable earnings, consistently paid a dividend and is well- capitalized.

Experienced Management

Salisbury's management team has extensive banking and financial services experience as well as in-depth local market knowledge.

Growth Potential

Salisbury has a proven track record for growing organically and through strategic acquisitions. Salisbury also has consolidated new and existing branches to realize efficiencies and savings.

Strong Governance

Salisbury's Board of Directors is actively engaged, experienced and holds management accountable.

17

Investor Presentation

NASDAQ: SAL