Cambridge Bancorp

2020 Annual Report

PRIVATE BANKING

WEALTH MANAGEMENT

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Financial Highlights

(Dollars in thousands, except per share data)

Selected Year-End Data

Net Income

Operating Net Income*

Total Assets

Total Loans

Total Deposits

Total Shareholder’s Equity

Assets Under Management and Administration

Per Common Share

Diluted Earnings Per Share

Operating Diluted Earnings Per Share*

Dividend Declared Per Share

Book Value Per Share

Tangible Book Value Per Share*

Financial Ratios

Return/Average Assets

Return/Average Equity 

Operating Return on Average Assets*

Operating Return on Average Tangible Common Equity*

Net Interest Margin, FTE

Adjusted Net Interest Margin, FTE* 

Asset Quality

NPAs/Assets

NCOs/Average Loans

Allowance for credit losses/total loans excluding PPP

*GAAP to Non-GAAP Reconciliation on pages 19 & 20

2020

31,959

43,870

3,949,297

3,153,648

3,403,083

401,732

4,167,903

5.03

6.90 

2.12

58.00 

50.07 

0.91%

9.09%

1.25%

14.38%

3.65%

3.36%

0.27%

(0.02%)

1.19%

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2019

 25,257

 29,156 

 2,855,563 

 2,226,728 

 2,358,878

 286,561 

3,452,852

 5.37

 6.20 

 2.04 

 53.06 

 46.66 

0.97%

11.40%

1.12%

14.80%

3.22%

3.22%

0.20%

(0.08%)

0.82%

2018

 23,881

 24,024

 2,101,384

 1,559,772 

 1,811,410

 167,026

2,876,702

 5.77 

 5.80

 1.96 

 40.67 

 40.57 

1.21%

15.35%

1.21%

15.49%

3.33%

3.33%

0.03%

0.00%

1.08%

$(cid:390)(cid:355)(cid:320)(cid:457)

OPERATING EARNINGS PER SHARE
(cid:550)(cid:550)(cid:19)(cid:564)(cid:9)(cid:3)(cid:44)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)

(cid:335)(cid:355)(cid:407)(cid:259)%

OPERATING RETURN
ON AVERAGE ASSETS

(cid:335)(cid:266)(cid:355)(cid:401)(cid:238)%

OPERATING RETURN 
ON AVERAGE TCE

Page 1

“ Despite the headwinds from the 
pandemic, financial performance 
in 2020 was strong. Reported net 
income for 2020 was $32.0 million, 
an increase of 27% compared to the 
$25.3 million for the year ending 
December 31, 2019.”

2020 Annual Report

Page 2

2020 Letter to Shareholders

In 1890, Cambridge Trust, then the Cambridge Safety Vaults Company, was

(cid:73)(cid:87)(cid:88)(cid:69)(cid:70)(cid:80)(cid:77)(cid:87)(cid:76)(cid:73)(cid:72)(cid:3)(cid:88)(cid:83)(cid:3)(cid:84)(cid:86)(cid:83)(cid:90)(cid:77)(cid:72)(cid:73)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:87)(cid:69)(cid:74)(cid:73)(cid:79)(cid:73)(cid:73)(cid:84)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:74)(cid:3)(cid:90)(cid:69)(cid:80)(cid:89)(cid:69)(cid:70)(cid:80)(cid:73)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:83)(cid:506)(cid:73)(cid:86)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:74)(cid:3)(cid:87)(cid:69)(cid:74)(cid:73)(cid:3)
deposit services. Historically, safekeeping is one of the oldest functions in
banking, having been performed by bankers who were deemed worthy 
of the public’s trust. Today, we remain steadfast to the core belief on which
we were founded: that the most important return of all is trust. It is why 
for more than 130 years, we have focused on building individual client
(cid:86)(cid:73)(cid:80)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:76)(cid:77)(cid:84)(cid:87)(cid:3)(cid:83)(cid:82)(cid:3)(cid:69)(cid:3)(cid:88)(cid:86)(cid:89)(cid:80)(cid:93)(cid:3)(cid:84)(cid:73)(cid:86)(cid:87)(cid:83)(cid:82)(cid:69)(cid:80)(cid:3)(cid:80)(cid:73)(cid:90)(cid:73)(cid:80)(cid:19)(cid:3)(cid:59)(cid:73)(cid:3)(cid:84)(cid:89)(cid:88)(cid:3)(cid:71)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:87)(cid:3)(cid:507)(cid:86)(cid:87)(cid:88)(cid:17)(cid:3)(cid:72)(cid:73)(cid:80)(cid:77)(cid:90)(cid:73)(cid:86)(cid:77)(cid:82)(cid:75)
innovative custom solutions for individuals, families, and businesses that 
create, grow, and protect their wealth. 

2020 was a historically unsettled year. The global COVID-19 pandemic 
(cid:69)(cid:506)(cid:73)(cid:71)(cid:88)(cid:73)(cid:72)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:76)(cid:73)(cid:69)(cid:80)(cid:88)(cid:76)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:91)(cid:73)(cid:80)(cid:80)(cid:18)(cid:70)(cid:73)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:74)(cid:3)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:87)(cid:3)(cid:80)(cid:77)(cid:79)(cid:73)(cid:3)(cid:74)(cid:73)(cid:91)(cid:3)(cid:83)(cid:88)(cid:76)(cid:73)(cid:86)(cid:3)(cid:71)(cid:86)(cid:77)(cid:87)(cid:73)(cid:87)(cid:3)(cid:77)(cid:82)(cid:3)(cid:76)(cid:77)(cid:87)(cid:88)(cid:83)(cid:86)(cid:93)(cid:19)
Economic instability and record employment losses, combined with a 
reckoning around social injustices and a deeply divided electorate, tested 
the resilience of every citizen and every business. In times like these, trust 
has never been more important.

Page 3

2020 Annual Report

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solid capital and liquidity levels, and the successful integration of Wellesley
Bank into our organization to provide expanded private banking and wealth
management capabilities and strengthen our team of private bankers, 
advisors, and senior management.

While reported 2020 earnings performance included much noise due to
the adoption of a new accounting standard for loan losses and merger
accounting, operating earnings per share increased by 11% in 2020 as 
compared to 2019. Since 2015, using the same measure of performance,
operating earnings per share has increased by 76%.

When I look back on 2020, above all else, I see my colleagues’ commitment 
(cid:88)(cid:83)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:90)(cid:69)(cid:80)(cid:89)(cid:73)(cid:87)(cid:436)(cid:84)(cid:89)(cid:88)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:71)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:87)(cid:438)(cid:3)(cid:82)(cid:73)(cid:73)(cid:72)(cid:87)(cid:3)(cid:507)(cid:86)(cid:87)(cid:88)(cid:436)(cid:69)(cid:82)(cid:72)(cid:3)(cid:88)(cid:76)(cid:73)(cid:77)(cid:86)(cid:3)(cid:73)(cid:92)(cid:88)(cid:86)(cid:69)(cid:83)(cid:86)(cid:72)(cid:77)(cid:82)(cid:69)(cid:86)(cid:93)(cid:3)
dedication during the pandemic. I am proud of how we responded during
these most challenging and unusual times, and I am grateful to every one on 
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“When I look back on 2020, above all else,  
I see my colleagues’ commitment to our  
values—putting our clients’ needs first—and their 
extraordinary dedication during the pandemic.”

Page 4

“

Having one person that knows us and our 
business, and is able to get any information or 
answers, for us has made all of the difference.

— Chris Lee & Ryan Crowley, (cid:40)(cid:53)(cid:38)(cid:3)(cid:53)(cid:69)(cid:86)(cid:88)(cid:82)(cid:73)(cid:86)(cid:87)(cid:17) (cid:49)(cid:73)(cid:73)(cid:3)(cid:11)(cid:3)(cid:40)(cid:86)(cid:83)(cid:91)(cid:80)(cid:73)(cid:93)(cid:3)(cid:38)(cid:71)(cid:71)(cid:83)(cid:89)(cid:82)(cid:88)(cid:69)(cid:82)(cid:88)(cid:87)(cid:17)(cid:3)(cid:39)(cid:83)(cid:87)(cid:88)(cid:83)(cid:82)(cid:17)(cid:3)(cid:50)(cid:38)

”

COVID-19 Response & Community Support

Within the opening weeks of 2020, it became clear that the emergence of 
(cid:40)(cid:52)(cid:58)(cid:46)(cid:41)(cid:18)(cid:22)(cid:30)(cid:3)(cid:91)(cid:83)(cid:89)(cid:80)(cid:72)(cid:3)(cid:76)(cid:69)(cid:90)(cid:73)(cid:3)(cid:69)(cid:3)(cid:87)(cid:77)(cid:75)(cid:82)(cid:77)(cid:507)(cid:71)(cid:69)(cid:82)(cid:88)(cid:3)(cid:86)(cid:83)(cid:80)(cid:73)(cid:3)(cid:77)(cid:82)(cid:3)(cid:87)(cid:76)(cid:69)(cid:84)(cid:77)(cid:82)(cid:75)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:93)(cid:73)(cid:69)(cid:86)(cid:3)(cid:69)(cid:76)(cid:73)(cid:69)(cid:72)(cid:19)(cid:3)(cid:38)(cid:87)(cid:3)(cid:91)(cid:73)(cid:3)
realized the scale of this challenge, our immediate priority was to protect the
safety and health of our employees, our clients, and our communities. 

Our team provided clients uninterrupted service for their banking and wealth 
(cid:81)(cid:69)(cid:82)(cid:69)(cid:75)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:82)(cid:73)(cid:73)(cid:72)(cid:87)(cid:19)(cid:3)(cid:59)(cid:76)(cid:73)(cid:88)(cid:76)(cid:73)(cid:86)(cid:3)(cid:77)(cid:82)(cid:3)(cid:84)(cid:73)(cid:86)(cid:87)(cid:83)(cid:82)(cid:3)(cid:69)(cid:88)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:70)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:509)(cid:71)(cid:73)(cid:87)(cid:3)(cid:83)(cid:86)(cid:3)(cid:70)(cid:93)(cid:3)(cid:90)(cid:77)(cid:72)(cid:73)(cid:83)(cid:17)
email, or regular phone calls, clients could trust that we were there for them
(cid:88)(cid:76)(cid:86)(cid:83)(cid:89)(cid:75)(cid:76)(cid:3)(cid:72)(cid:77)(cid:509)(cid:71)(cid:89)(cid:80)(cid:88)(cid:3)(cid:88)(cid:77)(cid:81)(cid:73)(cid:87)(cid:19)(cid:3)

Page 5

2020 Annual Report

The pandemic’s unprecedented economic impact meant that many clients 
(cid:82)(cid:73)(cid:73)(cid:72)(cid:73)(cid:72)(cid:3)(cid:77)(cid:81)(cid:81)(cid:73)(cid:72)(cid:77)(cid:69)(cid:88)(cid:73)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:87)(cid:89)(cid:84)(cid:84)(cid:83)(cid:86)(cid:88)(cid:19)(cid:3)(cid:38)(cid:87)(cid:3)(cid:69)(cid:3)(cid:8)(cid:81)(cid:69)(cid:80)(cid:80)(cid:3)(cid:39)(cid:89)(cid:87)(cid:77)(cid:82)(cid:73)(cid:87)(cid:87)(cid:3)(cid:38)(cid:72)(cid:81)(cid:77)(cid:82)(cid:77)(cid:87)(cid:88)(cid:86)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)
Preferred Lender, we were able to stand up for business clients in this time
of need. We participated in the Paycheck Protection Program (PPP) to secure 
(cid:69)(cid:84)(cid:84)(cid:86)(cid:83)(cid:92)(cid:77)(cid:81)(cid:69)(cid:88)(cid:73)(cid:80)(cid:93)(cid:3)(cid:7)(cid:23)(cid:21)(cid:21)(cid:3)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:3)(cid:77)(cid:82)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:82)(cid:75)(cid:3)(cid:70)(cid:73)(cid:82)(cid:73)(cid:507)(cid:88)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:69)(cid:82)(cid:3)(cid:73)(cid:87)(cid:88)(cid:77)(cid:81)(cid:69)(cid:88)(cid:73)(cid:72)(cid:3)(cid:22)(cid:28)(cid:17)(cid:21)(cid:21)(cid:21)(cid:3)(cid:80)(cid:83)(cid:71)(cid:69)(cid:80)(cid:3)
jobs. In addition, we provided loan payment deferrals to clients who were
(cid:69)(cid:506)(cid:73)(cid:71)(cid:88)(cid:73)(cid:72)(cid:3)(cid:70)(cid:93)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:84)(cid:69)(cid:82)(cid:72)(cid:73)(cid:81)(cid:77)(cid:71)(cid:19)

“We participated in the Paycheck Protection Program 
(PPP) to secure approximately $200 million in 
financing benefitting an estimated 17,000 local jobs.”

Pandemic or not, we continued, and even expanded, our community
support in 2020. Our contributions supported approximately 280 
organizations, and we increased giving by 91%. In particular, we targeted 
(cid:7)(cid:23)(cid:26)(cid:21)(cid:17)(cid:21)(cid:21)(cid:21)(cid:3)(cid:88)(cid:83)(cid:3)(cid:83)(cid:86)(cid:75)(cid:69)(cid:82)(cid:77)(cid:94)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:3)(cid:84)(cid:86)(cid:83)(cid:90)(cid:77)(cid:72)(cid:77)(cid:82)(cid:75)(cid:3)(cid:86)(cid:73)(cid:80)(cid:77)(cid:73)(cid:74)(cid:3)(cid:88)(cid:83)(cid:3)(cid:88)(cid:76)(cid:83)(cid:87)(cid:73)(cid:3)(cid:72)(cid:77)(cid:86)(cid:73)(cid:71)(cid:88)(cid:80)(cid:93)(cid:3)(cid:69)(cid:506)(cid:73)(cid:71)(cid:88)(cid:73)(cid:72)(cid:3)(cid:70)(cid:93)(cid:3)
the COVID-19 pandemic and $175,000 to organizations addressing racial 
inequity and social injustice.

(cid:40)(cid:83)(cid:81)(cid:84)(cid:80)(cid:73)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:52)(cid:89)(cid:86)(cid:3)(cid:50)(cid:73)(cid:86)(cid:75)(cid:73)(cid:86)(cid:3)(cid:91)(cid:77)(cid:88)(cid:76)(cid:3)(cid:59)(cid:73)(cid:80)(cid:80)(cid:73)(cid:87)(cid:80)(cid:73)(cid:93)(cid:3)(cid:39)(cid:69)(cid:82)(cid:79)

In late 2019, we announced our merger with Wellesley Bank, and I am 
pleased to report that the merger was legally closed on June 1, 2020. Our
clients joining us from Wellesley Bank continue to enjoy access to their local 
teams of private bankers, including the former CEO Thomas Fontaine, whom 
(cid:46)(cid:3)(cid:69)(cid:81)(cid:3)(cid:75)(cid:80)(cid:69)(cid:72)(cid:3)(cid:88)(cid:83)(cid:3)(cid:71)(cid:69)(cid:80)(cid:80)(cid:3)(cid:81)(cid:93)(cid:3)(cid:71)(cid:83)(cid:80)(cid:80)(cid:73)(cid:69)(cid:75)(cid:89)(cid:73)(cid:3)(cid:69)(cid:87)(cid:3)(cid:40)(cid:76)(cid:77)(cid:73)(cid:74)(cid:3)(cid:39)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:3)(cid:52)(cid:509)(cid:71)(cid:73)(cid:86)(cid:3)(cid:69)(cid:88)(cid:3)(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:3)(cid:56)(cid:86)(cid:89)(cid:87)(cid:88)(cid:19)(cid:3)

The merger with Wellesley Bank has expanded our wealth management 
capabilities, and our business clients can take advantage of our larger lending
(cid:71)(cid:69)(cid:84)(cid:69)(cid:71)(cid:77)(cid:88)(cid:93)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:87)(cid:83)(cid:84)(cid:76)(cid:77)(cid:87)(cid:88)(cid:77)(cid:71)(cid:69)(cid:88)(cid:73)(cid:72)(cid:3)(cid:88)(cid:86)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:93)(cid:3)(cid:81)(cid:69)(cid:82)(cid:69)(cid:75)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:87)(cid:73)(cid:86)(cid:90)(cid:77)(cid:71)(cid:73)(cid:87)(cid:19)(cid:3)(cid:38)(cid:80)(cid:80)(cid:3)(cid:71)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:87)(cid:3)(cid:71)(cid:69)(cid:82)(cid:3)(cid:80)(cid:83)(cid:83)(cid:79)
(cid:74)(cid:83)(cid:86)(cid:91)(cid:69)(cid:86)(cid:72)(cid:3)(cid:88)(cid:83)(cid:3)(cid:75)(cid:86)(cid:73)(cid:69)(cid:88)(cid:73)(cid:86)(cid:3)(cid:69)(cid:71)(cid:71)(cid:73)(cid:87)(cid:87)(cid:3)(cid:88)(cid:83)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:87)(cid:73)(cid:86)(cid:90)(cid:77)(cid:71)(cid:73)(cid:87)(cid:3)(cid:91)(cid:77)(cid:88)(cid:76)(cid:3)(cid:69)(cid:72)(cid:72)(cid:77)(cid:88)(cid:77)(cid:83)(cid:82)(cid:69)(cid:80)(cid:3)(cid:70)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:509)(cid:71)(cid:73)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)
(cid:38)(cid:56)(cid:50)(cid:3)(cid:80)(cid:83)(cid:71)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:3)(cid:77)(cid:82)(cid:3)(cid:44)(cid:86)(cid:73)(cid:69)(cid:88)(cid:73)(cid:86)(cid:3)(cid:39)(cid:83)(cid:87)(cid:88)(cid:83)(cid:82)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:87)(cid:83)(cid:89)(cid:88)(cid:76)(cid:73)(cid:86)(cid:82)(cid:3)(cid:51)(cid:73)(cid:91)(cid:3)(cid:45)(cid:69)(cid:81)(cid:84)(cid:87)(cid:76)(cid:77)(cid:86)(cid:73)(cid:19)

Page 6

Sustainability, Diversity & Inclusion

For Cambridge Trust, an organization built to support the growth of the 
communities where we work and live, sustainable practices are a natural 
extension of our foundation and heritage for more than 130 years.

We launched a Sustainability Committee, with membership from numerous
areas of the Bank, to evaluate our sustainability practices and identify 
areas for growth. We made progress on employee engagement and 
environmental initiatives and worked to increase transparency around our
(cid:73)(cid:506)(cid:83)(cid:86)(cid:88)(cid:87)(cid:19)(cid:3)(cid:46)(cid:82)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:83)(cid:82)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:84)(cid:86)(cid:69)(cid:71)(cid:88)(cid:77)(cid:71)(cid:73)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:74)(cid:89)(cid:88)(cid:89)(cid:86)(cid:73)(cid:3)(cid:87)(cid:89)(cid:87)(cid:88)(cid:69)(cid:77)(cid:82)(cid:69)(cid:70)(cid:77)(cid:80)(cid:77)(cid:88)(cid:93)(cid:3)(cid:84)(cid:80)(cid:69)(cid:82)(cid:87)(cid:3)(cid:69)(cid:86)(cid:73)(cid:3)(cid:82)(cid:83)(cid:91)
(cid:69)(cid:90)(cid:69)(cid:77)(cid:80)(cid:69)(cid:70)(cid:80)(cid:73)(cid:3)(cid:90)(cid:77)(cid:69)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:38)(cid:70)(cid:83)(cid:89)(cid:88)(cid:3)(cid:57)(cid:87)(cid:3)(cid:87)(cid:73)(cid:71)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:83)(cid:74)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:3)(cid:91)(cid:73)(cid:70)(cid:87)(cid:77)(cid:88)(cid:73)(cid:19)(cid:3)

(cid:59)(cid:73)(cid:3)(cid:86)(cid:73)(cid:69)(cid:509)(cid:86)(cid:81)(cid:73)(cid:72)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:71)(cid:83)(cid:81)(cid:81)(cid:77)(cid:88)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:88)(cid:83)(cid:3)(cid:72)(cid:77)(cid:90)(cid:73)(cid:86)(cid:87)(cid:77)(cid:88)(cid:93)(cid:3)(cid:11)(cid:3)(cid:77)(cid:82)(cid:71)(cid:80)(cid:89)(cid:87)(cid:77)(cid:83)(cid:82)(cid:3)(cid:91)(cid:77)(cid:88)(cid:76)(cid:77)(cid:82)(cid:3)(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)
Trust and for the communities we serve. 2020 marked the fourth year of 
our Diversity & Inclusion Steering Committee, which now comprises 20 
members from all areas of the organization and has helped create a culture 
that advocates and promotes these ideals at Cambridge Trust. In a year 
of social upheaval, we focused our attention on the importance of social 
equity, justice, and opportunity, and to understanding how the actions of 
businesses, collectively and individually, can impact the communities we 
serve and live in.

More than ever, families and schools depend 
on CitySprouts to keep their children 
engaged and learning. Cambridge Trust is 
the community partner we need to meet 
these challenges, now and into the future.

— Jane Hirschi, Executive Director, CitySprouts, (cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:17)(cid:3)(cid:50)(cid:38)

”

“

Page 7

2020 Annual Report

(cid:38)(cid:3)(cid:79)(cid:73)(cid:93)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:83)(cid:82)(cid:73)(cid:82)(cid:88)(cid:3)(cid:83)(cid:74)(cid:3)(cid:72)(cid:77)(cid:90)(cid:73)(cid:86)(cid:87)(cid:77)(cid:88)(cid:93)(cid:3)(cid:11)(cid:3)(cid:77)(cid:82)(cid:71)(cid:80)(cid:89)(cid:87)(cid:77)(cid:83)(cid:82)(cid:3)(cid:77)(cid:87)(cid:3)(cid:86)(cid:73)(cid:84)(cid:86)(cid:73)(cid:87)(cid:73)(cid:82)(cid:88)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:17)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:91)(cid:73)(cid:3)
believe this starts at the top. With eight women on our Board of Directors,
Cambridge Trust has more women on its board than any other company 
(cid:80)(cid:77)(cid:87)(cid:88)(cid:73)(cid:72)(cid:3)(cid:83)(cid:82)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:51)(cid:38)(cid:8)(cid:41)(cid:38)(cid:54)(cid:3)(cid:87)(cid:88)(cid:83)(cid:71)(cid:79)(cid:3)(cid:73)(cid:92)(cid:71)(cid:76)(cid:69)(cid:82)(cid:75)(cid:73)(cid:19) (1)(cid:3)(cid:52)(cid:82)(cid:73)(cid:3)(cid:77)(cid:82)(cid:3)(cid:507)(cid:90)(cid:73)(cid:3)(cid:73)(cid:81)(cid:84)(cid:80)(cid:83)(cid:93)(cid:73)(cid:73)(cid:87)(cid:3)(cid:77)(cid:72)(cid:73)(cid:82)(cid:88)(cid:77)(cid:74)(cid:93)(cid:3)(cid:69)(cid:87)
ethnically or racially diverse, as do 17% of our executive management team.
(cid:59)(cid:83)(cid:81)(cid:73)(cid:82)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:86)(cid:77)(cid:87)(cid:73)(cid:3)(cid:26)(cid:21)(cid:9)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:39)(cid:83)(cid:69)(cid:86)(cid:72)(cid:17)(cid:3)(cid:24)(cid:26)(cid:9)(cid:3)(cid:83)(cid:74)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:50)(cid:69)(cid:82)(cid:69)(cid:75)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:56)(cid:73)(cid:69)(cid:81)(cid:17)(cid:3)(cid:25)(cid:27)(cid:9)
(cid:83)(cid:74)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:38)(cid:72)(cid:90)(cid:77)(cid:87)(cid:83)(cid:86)(cid:93)(cid:3)(cid:39)(cid:83)(cid:69)(cid:86)(cid:72)(cid:17)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:25)(cid:23)(cid:9)(cid:3)(cid:83)(cid:74)(cid:3)(cid:73)(cid:81)(cid:84)(cid:80)(cid:83)(cid:93)(cid:73)(cid:73)(cid:87)(cid:3)(cid:91)(cid:77)(cid:88)(cid:76)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:88)(cid:77)(cid:88)(cid:80)(cid:73)(cid:3)(cid:83)(cid:74)(cid:3)(cid:58)(cid:77)(cid:71)(cid:73)(cid:3)(cid:53)(cid:86)(cid:73)(cid:87)(cid:77)(cid:72)(cid:73)(cid:82)(cid:88)(cid:3)
(cid:83)(cid:86)(cid:3)(cid:69)(cid:70)(cid:83)(cid:90)(cid:73)(cid:19)(cid:3)(cid:59)(cid:73)(cid:3)(cid:71)(cid:83)(cid:82)(cid:88)(cid:77)(cid:82)(cid:89)(cid:73)(cid:3)(cid:88)(cid:83)(cid:3)(cid:86)(cid:69)(cid:82)(cid:79)(cid:3)(cid:69)(cid:81)(cid:83)(cid:82)(cid:75)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:56)(cid:83)(cid:84)(cid:3)(cid:22)(cid:26)(cid:3)(cid:44)(cid:86)(cid:73)(cid:69)(cid:88)(cid:73)(cid:86)(cid:3)(cid:39)(cid:83)(cid:87)(cid:88)(cid:83)(cid:82)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:87)
with the most diverse corporate boards. We also continue to expand 
(cid:88)(cid:76)(cid:73)(cid:3)(cid:72)(cid:77)(cid:90)(cid:73)(cid:86)(cid:87)(cid:77)(cid:88)(cid:93)(cid:3)(cid:83)(cid:74)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:87)(cid:88)(cid:69)(cid:506)(cid:3)(cid:88)(cid:76)(cid:86)(cid:83)(cid:89)(cid:75)(cid:76)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:86)(cid:73)(cid:71)(cid:86)(cid:89)(cid:77)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:76)(cid:77)(cid:86)(cid:77)(cid:82)(cid:75)(cid:3)(cid:84)(cid:86)(cid:69)(cid:71)(cid:88)(cid:77)(cid:71)(cid:73)(cid:87)(cid:3)(cid:69)(cid:71)(cid:86)(cid:83)(cid:87)(cid:87)
the organization.

(cid:50)(cid:83)(cid:90)(cid:77)(cid:82)(cid:75)(cid:3)(cid:74)(cid:83)(cid:86)(cid:91)(cid:69)(cid:86)(cid:72)(cid:17)(cid:3)(cid:91)(cid:73)(cid:3)(cid:91)(cid:77)(cid:80)(cid:80)(cid:3)(cid:70)(cid:89)(cid:77)(cid:80)(cid:72)(cid:3)(cid:71)(cid:83)(cid:82)(cid:88)(cid:77)(cid:82)(cid:89)(cid:73)(cid:72)(cid:3)(cid:84)(cid:86)(cid:83)(cid:75)(cid:86)(cid:73)(cid:87)(cid:87)(cid:3)(cid:77)(cid:82)(cid:3)(cid:73)(cid:69)(cid:71)(cid:76)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:87)(cid:73)(cid:3)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:3)(cid:69)(cid:87)
we believe this aligns with our core values and helps build a stronger, more 
successful bank.

“Cambridge Bancorp has more female 
Board of Directors members than any other 
company listed on NASDAQ.” (1)

(cid:13)(cid:22)(cid:14)(cid:3)(cid:8)(cid:83)(cid:89)(cid:86)(cid:71)(cid:73)(cid:31)(cid:3)(cid:8)(cid:11)(cid:53)(cid:3)(cid:44)(cid:80)(cid:83)(cid:70)(cid:69)(cid:80)(cid:3)(cid:50)(cid:69)(cid:86)(cid:79)(cid:73)(cid:88)(cid:3)(cid:46)(cid:82)(cid:88)(cid:73)(cid:80)(cid:80)(cid:77)(cid:75)(cid:73)(cid:82)(cid:71)(cid:73)(cid:3)(cid:22)(cid:23)(cid:20)(cid:22)(cid:21)(cid:20)(cid:23)(cid:21)(cid:23)(cid:21)

Page 8

“Operating diluted earnings per share were $6.90 for 
2020, representing an 11.3% increase over operating 
diluted earnings per share of $6.20 for 2019.”

Financial Performance

(cid:41)(cid:73)(cid:87)(cid:84)(cid:77)(cid:88)(cid:73)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:76)(cid:73)(cid:69)(cid:72)(cid:91)(cid:77)(cid:82)(cid:72)(cid:87)(cid:3)(cid:74)(cid:86)(cid:83)(cid:81)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:84)(cid:69)(cid:82)(cid:72)(cid:73)(cid:81)(cid:77)(cid:71)(cid:17)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:84)(cid:73)(cid:86)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:82)(cid:71)(cid:73)(cid:3)(cid:77)(cid:82)(cid:3)(cid:23)(cid:21)(cid:23)(cid:21)(cid:3)
was strong. Reported net income for 2020 was $32.0 million, an increase of 
27% compared to the $25.3 million for the year ending December 31, 2019. 
(cid:51)(cid:73)(cid:88)(cid:3)(cid:77)(cid:82)(cid:71)(cid:83)(cid:81)(cid:73)(cid:17)(cid:3)(cid:69)(cid:87)(cid:3)(cid:86)(cid:73)(cid:84)(cid:83)(cid:86)(cid:88)(cid:73)(cid:72)(cid:17)(cid:3)(cid:77)(cid:82)(cid:71)(cid:80)(cid:89)(cid:72)(cid:73)(cid:87)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:77)(cid:81)(cid:84)(cid:69)(cid:71)(cid:88)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:73)(cid:506)(cid:73)(cid:71)(cid:88)(cid:87)(cid:3)(cid:83)(cid:74)(cid:3)(cid:81)(cid:73)(cid:86)(cid:75)(cid:73)(cid:86)(cid:3)
accounting and other one-time non-operating expenses. When excluding
these items to provide a more comparable view of operations, net income
on an operating basis was $43.9 million for the year ended December 31,
2020, an increase of $14.7 million, or 50.5%, as compared to operating net 
income of $29.1 million for 2019. Operating diluted earnings per share
were $6.90 for 2020, representing an 11.3% increase over operating diluted
earnings per share of $6.20 for 2019. 

The company’s continued performance was driven by the strength of our
(cid:70)(cid:89)(cid:87)(cid:77)(cid:82)(cid:73)(cid:87)(cid:87)(cid:3)(cid:81)(cid:83)(cid:72)(cid:73)(cid:80)(cid:3)(cid:77)(cid:82)(cid:3)(cid:44)(cid:86)(cid:73)(cid:69)(cid:88)(cid:73)(cid:86)(cid:3)(cid:39)(cid:83)(cid:87)(cid:88)(cid:83)(cid:82)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:87)(cid:83)(cid:89)(cid:88)(cid:76)(cid:73)(cid:86)(cid:82)(cid:3)(cid:51)(cid:73)(cid:91)(cid:3)(cid:45)(cid:69)(cid:81)(cid:84)(cid:87)(cid:76)(cid:77)(cid:86)(cid:73)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)
the positive impact of increased scale associated with the Wellesley merger.
Total loans and core deposits, inclusive of the impact of the merger with
Wellesley, grew $927.0 million and $971.7 million, respectively, or 41.6% and
44.6%, respectively. Wealth assets increased by $715.0 million, or 20.7%,
from 2019, which was primarily a result of the strong equity market 
performance in 2020 and balances acquired from our merger with Wellesley.

(cid:56)(cid:76)(cid:73)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:438)(cid:87)(cid:3)(cid:84)(cid:86)(cid:83)(cid:507)(cid:88)(cid:69)(cid:70)(cid:77)(cid:80)(cid:77)(cid:88)(cid:93)(cid:3)(cid:86)(cid:69)(cid:88)(cid:77)(cid:83)(cid:87)(cid:3)(cid:91)(cid:73)(cid:86)(cid:73)(cid:3)(cid:86)(cid:83)(cid:70)(cid:89)(cid:87)(cid:88)(cid:3)(cid:77)(cid:82)(cid:3)(cid:23)(cid:21)(cid:23)(cid:21)(cid:19)(cid:3)(cid:56)(cid:76)(cid:73)(cid:3)(cid:83)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)
return on average assets and average tangible common equity in 2020 were 
1.25% and 14.38%, respectively, as compared to 1.12% and 14.80%, 
respectively, in 2019.

Page 9

2020 Annual Report

In 2020, like most bank stocks, the company underperformed broader market
(cid:77)(cid:82)(cid:72)(cid:77)(cid:71)(cid:73)(cid:87)(cid:19)(cid:3)(cid:45)(cid:83)(cid:91)(cid:73)(cid:90)(cid:73)(cid:86)(cid:17)(cid:3)(cid:69)(cid:75)(cid:69)(cid:77)(cid:82)(cid:87)(cid:88)(cid:3)(cid:70)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:18)(cid:87)(cid:84)(cid:73)(cid:71)(cid:77)(cid:507)(cid:71)(cid:3)(cid:77)(cid:82)(cid:72)(cid:77)(cid:71)(cid:73)(cid:87)(cid:17)(cid:3)(cid:91)(cid:73)(cid:3)(cid:71)(cid:83)(cid:82)(cid:88)(cid:77)(cid:82)(cid:89)(cid:73)(cid:3)(cid:88)(cid:83)(cid:3)(cid:83)(cid:89)(cid:88)(cid:84)(cid:73)(cid:86)(cid:74)(cid:83)(cid:86)(cid:81)(cid:3)
over the long term.

Cambridge Bancorp (CATC) Price Change % vs. Market Benchmarks

(cid:8)(cid:83)(cid:89)(cid:86)(cid:71)(cid:73)(cid:31)(cid:3)(cid:8)(cid:11)(cid:53)(cid:3)(cid:44)(cid:80)(cid:83)(cid:70)(cid:69)(cid:80)(cid:3)(cid:50)(cid:69)(cid:86)(cid:79)(cid:73)(cid:88)(cid:3)(cid:46)(cid:82)(cid:88)(cid:73)(cid:80)(cid:80)(cid:77)(cid:75)(cid:73)(cid:82)(cid:71)(cid:73)(cid:3)(cid:108)(cid:23)(cid:21)(cid:23)(cid:22)

(cid:49)(cid:83)(cid:83)(cid:79)(cid:77)(cid:82)(cid:75)(cid:3)(cid:38)(cid:76)(cid:73)(cid:69)(cid:72)(cid:3)

(cid:57)(cid:82)(cid:84)(cid:86)(cid:73)(cid:72)(cid:77)(cid:71)(cid:88)(cid:69)(cid:70)(cid:77)(cid:80)(cid:77)(cid:88)(cid:93)(cid:3)(cid:87)(cid:89)(cid:86)(cid:86)(cid:83)(cid:89)(cid:82)(cid:72)(cid:77)(cid:82)(cid:75)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:77)(cid:81)(cid:84)(cid:69)(cid:71)(cid:88)(cid:3)(cid:83)(cid:74)(cid:3)(cid:74)(cid:89)(cid:86)(cid:88)(cid:76)(cid:73)(cid:86)(cid:3)(cid:507)(cid:87)(cid:71)(cid:69)(cid:80)(cid:3)(cid:87)(cid:88)(cid:77)(cid:81)(cid:89)(cid:80)(cid:89)(cid:87)(cid:17)(cid:3)(cid:81)(cid:83)(cid:82)(cid:73)(cid:88)(cid:69)(cid:86)(cid:93)
policy, and the true economic impact of the pandemic will likely continue to 
create periodic market volatility along with the likelihood that interest rates
(cid:91)(cid:77)(cid:80)(cid:80)(cid:3)(cid:86)(cid:73)(cid:81)(cid:69)(cid:77)(cid:82)(cid:3)(cid:80)(cid:83)(cid:91)(cid:3)(cid:74)(cid:83)(cid:86)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:74)(cid:83)(cid:86)(cid:73)(cid:87)(cid:73)(cid:73)(cid:69)(cid:70)(cid:80)(cid:73)(cid:3)(cid:74)(cid:89)(cid:88)(cid:89)(cid:86)(cid:73)(cid:19)(cid:3)(cid:38)(cid:87)(cid:3)(cid:87)(cid:88)(cid:69)(cid:88)(cid:73)(cid:72)(cid:3)(cid:77)(cid:82)(cid:3)(cid:84)(cid:86)(cid:73)(cid:90)(cid:77)(cid:83)(cid:89)(cid:87)(cid:3)(cid:93)(cid:73)(cid:69)(cid:86)(cid:87)(cid:17)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:86)(cid:83)(cid:80)(cid:73)(cid:3)
remains focused on the long term and, although we are not yet through 
(cid:88)(cid:76)(cid:73)(cid:87)(cid:73)(cid:3)(cid:71)(cid:76)(cid:69)(cid:80)(cid:80)(cid:73)(cid:82)(cid:75)(cid:77)(cid:82)(cid:75)(cid:3)(cid:88)(cid:77)(cid:81)(cid:73)(cid:87)(cid:17)(cid:3)(cid:46)(cid:3)(cid:86)(cid:73)(cid:81)(cid:69)(cid:77)(cid:82)(cid:3)(cid:71)(cid:83)(cid:82)(cid:507)(cid:72)(cid:73)(cid:82)(cid:88)(cid:3)(cid:77)(cid:82)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:72)(cid:77)(cid:90)(cid:73)(cid:86)(cid:87)(cid:73)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:86)(cid:73)(cid:87)(cid:77)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:3)
(cid:73)(cid:71)(cid:83)(cid:82)(cid:83)(cid:81)(cid:93)(cid:3)(cid:88)(cid:76)(cid:69)(cid:88)(cid:3)(cid:44)(cid:86)(cid:73)(cid:69)(cid:88)(cid:73)(cid:86)(cid:3)(cid:39)(cid:83)(cid:87)(cid:88)(cid:83)(cid:82)(cid:3)(cid:84)(cid:86)(cid:83)(cid:90)(cid:77)(cid:72)(cid:73)(cid:87)(cid:19)(cid:3)(cid:59)(cid:73)(cid:3)(cid:70)(cid:73)(cid:82)(cid:73)(cid:507)(cid:88)(cid:3)(cid:74)(cid:86)(cid:83)(cid:81)(cid:3)(cid:69)(cid:3)(cid:86)(cid:83)(cid:70)(cid:89)(cid:87)(cid:88)(cid:3)(cid:81)(cid:69)(cid:86)(cid:79)(cid:73)(cid:88)(cid:3)
(cid:88)(cid:76)(cid:69)(cid:88)(cid:3)(cid:77)(cid:82)(cid:71)(cid:80)(cid:89)(cid:72)(cid:73)(cid:87)(cid:3)(cid:88)(cid:73)(cid:86)(cid:86)(cid:77)(cid:507)(cid:71)(cid:3)(cid:76)(cid:83)(cid:87)(cid:84)(cid:77)(cid:88)(cid:69)(cid:80)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:89)(cid:82)(cid:77)(cid:90)(cid:73)(cid:86)(cid:87)(cid:77)(cid:88)(cid:77)(cid:73)(cid:87)(cid:17)(cid:3)(cid:69)(cid:87)(cid:3)(cid:91)(cid:73)(cid:80)(cid:80)(cid:3)(cid:69)(cid:87)(cid:3)(cid:69)(cid:3)(cid:91)(cid:83)(cid:86)(cid:80)(cid:72)(cid:18)(cid:80)(cid:73)(cid:69)(cid:72)(cid:77)(cid:82)(cid:75)(cid:3)
technology and life sciences innovation cluster. This makes me optimistic
(cid:69)(cid:70)(cid:83)(cid:89)(cid:88)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:74)(cid:89)(cid:88)(cid:89)(cid:86)(cid:73)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:89)(cid:82)(cid:77)(cid:85)(cid:89)(cid:73)(cid:3)(cid:77)(cid:82)(cid:82)(cid:83)(cid:90)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:73)(cid:71)(cid:83)(cid:82)(cid:83)(cid:81)(cid:93)(cid:3)(cid:77)(cid:82)(cid:3)(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:20)(cid:39)(cid:83)(cid:87)(cid:88)(cid:83)(cid:82)(cid:17)(cid:3)(cid:69)(cid:82)
area that continues to expand locally—pandemic or not. 

Page 10

BUSINESS AREA HIGHLIGHTS

(cid:335)(cid:320)TH

LARGEST INDEPENDENT
INVESTMENT ADVISOR
(cid:77)(cid:82)(cid:3)(cid:50)(cid:69)(cid:87)(cid:87)(cid:69)(cid:71)(cid:76)(cid:89)(cid:87)(cid:73)(cid:88)(cid:88)(cid:87)

$(cid:266)(cid:355)(cid:407)(cid:24)

TOTAL ASSETS
UNDER MANAGEMENT
& ADMINISTRATION
(cid:566)(cid:521)(cid:19)(cid:558)(cid:9)(cid:3)(cid:44)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)

$(cid:401)(cid:355)(cid:401)(cid:97)

REVENUE GROWTH
IN WEALTH MANAGEMENT
(cid:550)(cid:566)(cid:19)(cid:525)(cid:9)(cid:3)(cid:44)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)

Page 11

2020 Annual Report

(cid:59)(cid:73)(cid:69)(cid:80)(cid:88)(cid:76)(cid:3)(cid:50)(cid:69)(cid:82)(cid:69)(cid:75)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)

(cid:59)(cid:73)(cid:3)(cid:87)(cid:88)(cid:69)(cid:93)(cid:3)(cid:88)(cid:86)(cid:89)(cid:73)(cid:3)(cid:88)(cid:83)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:70)(cid:89)(cid:87)(cid:77)(cid:82)(cid:73)(cid:87)(cid:87)(cid:3)(cid:81)(cid:83)(cid:72)(cid:73)(cid:80)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:88)(cid:83)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:507)(cid:72)(cid:89)(cid:71)(cid:77)(cid:69)(cid:86)(cid:93)(cid:3)(cid:84)(cid:86)(cid:77)(cid:82)(cid:71)(cid:77)(cid:84)(cid:80)(cid:73)(cid:87)(cid:3)(cid:88)(cid:76)(cid:69)(cid:88)
have guided us throughout our history. This continues to be evident
(cid:91)(cid:77)(cid:88)(cid:76)(cid:77)(cid:82)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:59)(cid:73)(cid:69)(cid:80)(cid:88)(cid:76)(cid:3)(cid:50)(cid:69)(cid:82)(cid:69)(cid:75)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:75)(cid:86)(cid:83)(cid:89)(cid:84)(cid:3)(cid:72)(cid:89)(cid:86)(cid:77)(cid:82)(cid:75)(cid:3)(cid:23)(cid:21)(cid:23)(cid:21)(cid:3)(cid:69)(cid:87)(cid:3)(cid:91)(cid:73)(cid:3)(cid:77)(cid:82)(cid:71)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:72)(cid:3)(cid:71)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)
communications with more detailed updates to keep clients informed 
regarding our thoughts on the impact of the pandemic on the markets and
found innovative ways for clients to connect with their relationship team.

(cid:38)(cid:87)(cid:3)(cid:69)(cid:3)(cid:86)(cid:73)(cid:87)(cid:89)(cid:80)(cid:88)(cid:3)(cid:83)(cid:74)(cid:3)(cid:71)(cid:83)(cid:82)(cid:88)(cid:77)(cid:82)(cid:89)(cid:73)(cid:72)(cid:3)(cid:71)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:3)(cid:69)(cid:87)(cid:87)(cid:73)(cid:88)(cid:3)(cid:75)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)(cid:17)(cid:3)(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:3)(cid:56)(cid:86)(cid:89)(cid:87)(cid:88)(cid:3)(cid:91)(cid:69)(cid:87)(cid:3)(cid:86)(cid:69)(cid:82)(cid:79)(cid:73)(cid:72)(cid:3)
(cid:69)(cid:87)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:22)(cid:30)(cid:88)(cid:76)(cid:3)(cid:49)(cid:69)(cid:86)(cid:75)(cid:73)(cid:87)(cid:88)(cid:3)(cid:46)(cid:82)(cid:72)(cid:73)(cid:84)(cid:73)(cid:82)(cid:72)(cid:73)(cid:82)(cid:88)(cid:3)(cid:46)(cid:82)(cid:90)(cid:73)(cid:87)(cid:88)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:38)(cid:72)(cid:90)(cid:77)(cid:87)(cid:83)(cid:86)(cid:3)(cid:77)(cid:82)(cid:3)(cid:50)(cid:69)(cid:87)(cid:87)(cid:69)(cid:71)(cid:76)(cid:89)(cid:87)(cid:73)(cid:88)(cid:88)(cid:87)(cid:3)
according to the Boston Business Journal in 2020.(2) Investment performance 
during the year remained exceptional, and we achieved wealth management 
(cid:86)(cid:73)(cid:90)(cid:73)(cid:82)(cid:89)(cid:73)(cid:3)(cid:75)(cid:86)(cid:83)(cid:91)(cid:88)(cid:76)(cid:3)(cid:83)(cid:74)(cid:3)(cid:7)(cid:24)(cid:19)(cid:24)(cid:3)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:17)(cid:3)(cid:83)(cid:86)(cid:3)(cid:22)(cid:23)(cid:19)(cid:26)(cid:9)(cid:17)(cid:3)(cid:77)(cid:82)(cid:3)(cid:23)(cid:21)(cid:23)(cid:21)(cid:19)(cid:3)(cid:38)(cid:87)(cid:3)(cid:87)(cid:76)(cid:83)(cid:91)(cid:82)(cid:3)(cid:77)(cid:82)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:71)(cid:76)(cid:69)(cid:86)(cid:88)
below, we ended the year with total assets under management and 
administration of $4.2 billion, an increase of 20.7% since year-end 2019.

(cid:50)(cid:83)(cid:90)(cid:77)(cid:82)(cid:75)(cid:3)(cid:74)(cid:83)(cid:86)(cid:91)(cid:69)(cid:86)(cid:72)(cid:17)(cid:3)(cid:91)(cid:73)(cid:3)(cid:69)(cid:86)(cid:73)(cid:3)(cid:77)(cid:82)(cid:90)(cid:73)(cid:87)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:77)(cid:82)(cid:3)(cid:69)(cid:3)(cid:87)(cid:77)(cid:75)(cid:82)(cid:77)(cid:507)(cid:71)(cid:69)(cid:82)(cid:88)(cid:3)(cid:88)(cid:73)(cid:71)(cid:76)(cid:82)(cid:83)(cid:80)(cid:83)(cid:75)(cid:93)(cid:3)(cid:89)(cid:84)(cid:75)(cid:86)(cid:69)(cid:72)(cid:73)(cid:3)(cid:88)(cid:83)(cid:3)
(cid:77)(cid:81)(cid:84)(cid:86)(cid:83)(cid:90)(cid:73)(cid:3)(cid:71)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:3)(cid:73)(cid:92)(cid:84)(cid:73)(cid:86)(cid:77)(cid:73)(cid:82)(cid:71)(cid:73)(cid:19)(cid:3)(cid:38)(cid:3)(cid:82)(cid:73)(cid:91)(cid:3)(cid:83)(cid:82)(cid:80)(cid:77)(cid:82)(cid:73)(cid:3)(cid:69)(cid:71)(cid:71)(cid:83)(cid:89)(cid:82)(cid:88)(cid:3)(cid:84)(cid:80)(cid:69)(cid:88)(cid:74)(cid:83)(cid:86)(cid:81)(cid:3)(cid:77)(cid:82)(cid:3)(cid:23)(cid:21)(cid:23)(cid:22)(cid:3)(cid:91)(cid:77)(cid:80)(cid:80)(cid:3)(cid:70)(cid:86)(cid:77)(cid:82)(cid:75)(cid:3)
an enhanced user interface, ease of access, and greater capabilities for 
clients, including account aggregation. The operational system upgrade will 
(cid:73)(cid:82)(cid:76)(cid:69)(cid:82)(cid:71)(cid:73)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:84)(cid:86)(cid:83)(cid:72)(cid:89)(cid:71)(cid:88)(cid:77)(cid:90)(cid:77)(cid:88)(cid:93)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:73)(cid:509)(cid:71)(cid:77)(cid:73)(cid:82)(cid:71)(cid:93)(cid:3)(cid:74)(cid:83)(cid:86)(cid:3)(cid:69)(cid:82)(cid:3)(cid:77)(cid:81)(cid:84)(cid:86)(cid:83)(cid:90)(cid:73)(cid:72)(cid:3)(cid:71)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:3)(cid:73)(cid:92)(cid:84)(cid:73)(cid:86)(cid:77)(cid:73)(cid:82)(cid:71)(cid:73)(cid:19)

Client Wealth Assets

(2) Source: Boston Business Journal

Page 12

Business & Commercial Banking

With the economic challenges of the past year, loan asset quality was
(cid:507)(cid:86)(cid:87)(cid:88)(cid:3)(cid:83)(cid:82)(cid:3)(cid:81)(cid:69)(cid:82)(cid:93)(cid:3)(cid:81)(cid:77)(cid:82)(cid:72)(cid:87)(cid:19)(cid:3)(cid:45)(cid:83)(cid:91)(cid:73)(cid:90)(cid:73)(cid:86)(cid:17)(cid:3)(cid:80)(cid:73)(cid:82)(cid:72)(cid:77)(cid:82)(cid:75)(cid:3)(cid:86)(cid:77)(cid:87)(cid:79)(cid:3)(cid:77)(cid:87)(cid:3)(cid:81)(cid:69)(cid:82)(cid:69)(cid:75)(cid:73)(cid:72)(cid:3)(cid:91)(cid:73)(cid:80)(cid:80)(cid:3)(cid:77)(cid:82)(cid:3)(cid:69)(cid:72)(cid:90)(cid:69)(cid:82)(cid:71)(cid:73)(cid:3)(cid:83)(cid:74)(cid:3)
challenging economic periods. We believe in the mantra that “bad loans are 
made in good times,” and this attention to sound underwriting standards
(cid:70)(cid:73)(cid:82)(cid:73)(cid:507)(cid:88)(cid:87)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:39)(cid:69)(cid:82)(cid:79)(cid:3)(cid:77)(cid:82)(cid:3)(cid:69)(cid:80)(cid:80)(cid:3)(cid:73)(cid:71)(cid:83)(cid:82)(cid:83)(cid:81)(cid:77)(cid:71)(cid:3)(cid:84)(cid:73)(cid:86)(cid:77)(cid:83)(cid:72)(cid:87)(cid:19)(cid:3)(cid:56)(cid:83)(cid:3)(cid:88)(cid:76)(cid:69)(cid:88)(cid:3)(cid:73)(cid:82)(cid:72)(cid:17)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:438)(cid:87)(cid:3)(cid:69)(cid:87)(cid:87)(cid:73)(cid:88)
(cid:85)(cid:89)(cid:69)(cid:80)(cid:77)(cid:88)(cid:93)(cid:3)(cid:86)(cid:73)(cid:81)(cid:69)(cid:77)(cid:82)(cid:73)(cid:72)(cid:3)(cid:87)(cid:89)(cid:84)(cid:73)(cid:86)(cid:70)(cid:3)(cid:77)(cid:82)(cid:3)(cid:23)(cid:21)(cid:23)(cid:21)(cid:3)(cid:91)(cid:77)(cid:88)(cid:76)(cid:3)(cid:82)(cid:73)(cid:88)(cid:3)(cid:71)(cid:76)(cid:69)(cid:86)(cid:75)(cid:73)(cid:18)(cid:83)(cid:506)(cid:87)(cid:3)(cid:83)(cid:74)(cid:3)(cid:21)(cid:19)(cid:21)(cid:22)(cid:9)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:83)(cid:88)(cid:69)(cid:80)(cid:3)(cid:80)(cid:83)(cid:69)(cid:82)(cid:87)(cid:3)
and non-performing assets to total assets of just 0.27%. 

The commercial team tirelessly supported clients through the Small 
(cid:39)(cid:89)(cid:87)(cid:77)(cid:82)(cid:73)(cid:87)(cid:87)(cid:3)(cid:38)(cid:72)(cid:81)(cid:77)(cid:82)(cid:77)(cid:87)(cid:88)(cid:86)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:438)(cid:87)(cid:3)(cid:53)(cid:69)(cid:93)(cid:71)(cid:76)(cid:73)(cid:71)(cid:79)(cid:3)(cid:53)(cid:86)(cid:83)(cid:88)(cid:73)(cid:71)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:53)(cid:86)(cid:83)(cid:75)(cid:86)(cid:69)(cid:81)(cid:3)(cid:13)(cid:53)(cid:53)(cid:53)(cid:14)(cid:19)(cid:3)(cid:52)(cid:89)(cid:86)(cid:3)(cid:69)(cid:71)(cid:71)(cid:83)(cid:89)(cid:82)(cid:88)(cid:3)
(cid:83)(cid:509)(cid:71)(cid:73)(cid:86)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:80)(cid:73)(cid:82)(cid:72)(cid:77)(cid:82)(cid:75)(cid:3)(cid:87)(cid:88)(cid:69)(cid:506)(cid:3)(cid:91)(cid:83)(cid:86)(cid:79)(cid:73)(cid:72)(cid:3)(cid:69)(cid:86)(cid:83)(cid:89)(cid:82)(cid:72)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:71)(cid:80)(cid:83)(cid:71)(cid:79)(cid:3)(cid:72)(cid:89)(cid:86)(cid:77)(cid:82)(cid:75)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:77)(cid:82)(cid:77)(cid:88)(cid:77)(cid:69)(cid:80)(cid:3)
stages of the program to provide almost 900 clients with approximately
(cid:7)(cid:23)(cid:21)(cid:21)(cid:3)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:3)(cid:77)(cid:82)(cid:3)(cid:74)(cid:89)(cid:82)(cid:72)(cid:77)(cid:82)(cid:75)(cid:17)(cid:3)(cid:70)(cid:73)(cid:82)(cid:73)(cid:507)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:69)(cid:82)(cid:3)(cid:73)(cid:87)(cid:88)(cid:77)(cid:81)(cid:69)(cid:88)(cid:73)(cid:72)(cid:3)(cid:22)(cid:28)(cid:17)(cid:21)(cid:21)(cid:21)(cid:3)(cid:80)(cid:83)(cid:71)(cid:69)(cid:80)(cid:3)(cid:78)(cid:83)(cid:70)(cid:87)(cid:19)(cid:3)(cid:56)(cid:76)(cid:73)
commercial team also worked diligently to support clients throughout 
the year, particularly those impacted by the pandemic with payment
forbearance programs where needed.

(cid:38)(cid:87)(cid:77)(cid:72)(cid:73)(cid:3)(cid:74)(cid:86)(cid:83)(cid:81)(cid:3)(cid:84)(cid:69)(cid:82)(cid:72)(cid:73)(cid:81)(cid:77)(cid:71)(cid:18)(cid:86)(cid:73)(cid:80)(cid:69)(cid:88)(cid:73)(cid:72)(cid:3)(cid:69)(cid:71)(cid:88)(cid:77)(cid:90)(cid:77)(cid:88)(cid:77)(cid:73)(cid:87)(cid:17)(cid:3)(cid:80)(cid:83)(cid:69)(cid:82)(cid:3)(cid:83)(cid:86)(cid:77)(cid:75)(cid:77)(cid:82)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:91)(cid:69)(cid:87)(cid:3)(cid:86)(cid:83)(cid:70)(cid:89)(cid:87)(cid:88)(cid:3)(cid:77)(cid:82)(cid:3)
(cid:23)(cid:21)(cid:23)(cid:21)(cid:3)(cid:69)(cid:87)(cid:3)(cid:91)(cid:69)(cid:87)(cid:3)(cid:80)(cid:83)(cid:69)(cid:82)(cid:3)(cid:84)(cid:69)(cid:93)(cid:83)(cid:506)(cid:3)(cid:69)(cid:71)(cid:88)(cid:77)(cid:90)(cid:77)(cid:88)(cid:93)(cid:3)(cid:72)(cid:89)(cid:73)(cid:3)(cid:88)(cid:83)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:80)(cid:83)(cid:91)(cid:3)(cid:80)(cid:73)(cid:90)(cid:73)(cid:80)(cid:3)(cid:83)(cid:74)(cid:3)(cid:77)(cid:82)(cid:88)(cid:73)(cid:86)(cid:73)(cid:87)(cid:88)(cid:3)(cid:86)(cid:69)(cid:88)(cid:73)(cid:87)(cid:19)(cid:3)(cid:38)(cid:87)(cid:3)(cid:69)(cid:3)
result, excluding PPP lending and acquired balances, the commercial loan
portfolio fell by less than 1% in 2020. Last and certainly not least, business 
deposit balances continued to grow during 2020, and as of year end
represented $1.5 billion, or 47% of core deposit balances.

Commercial Loans

Page 13

2020 Annual Report

Page 14

“

I am grateful to have a relationship with 
such a strong, local financial institution.

— Woody Baum, CEO, (cid:52)(cid:46)(cid:3)(cid:46)(cid:82)(cid:74)(cid:89)(cid:87)(cid:77)(cid:83)(cid:82)(cid:17)(cid:3)(cid:53)(cid:83)(cid:86)(cid:88)(cid:87)(cid:81)(cid:83)(cid:89)(cid:88)(cid:76)(cid:17)(cid:3)(cid:51)(cid:45)

”

Residential & Consumer Lending

2020 was a year of incredible volume from the residential mortgage 
team. We originated approximately $461 million in new loans, our largest
(cid:84)(cid:86)(cid:83)(cid:72)(cid:89)(cid:71)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:93)(cid:73)(cid:69)(cid:86)(cid:3)(cid:93)(cid:73)(cid:88)(cid:3)(cid:83)(cid:82)(cid:3)(cid:86)(cid:73)(cid:71)(cid:83)(cid:86)(cid:72)(cid:19)(cid:3)(cid:38)(cid:80)(cid:88)(cid:76)(cid:83)(cid:89)(cid:75)(cid:76)(cid:3)(cid:84)(cid:86)(cid:83)(cid:72)(cid:89)(cid:71)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:90)(cid:83)(cid:80)(cid:89)(cid:81)(cid:73)(cid:3)(cid:91)(cid:69)(cid:87)(cid:3)(cid:87)(cid:83)(cid:80)(cid:77)(cid:72)(cid:17)
(cid:88)(cid:76)(cid:73)(cid:3)(cid:69)(cid:71)(cid:88)(cid:77)(cid:90)(cid:73)(cid:3)(cid:86)(cid:73)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:73)(cid:3)(cid:81)(cid:69)(cid:86)(cid:79)(cid:73)(cid:88)(cid:3)(cid:71)(cid:86)(cid:73)(cid:69)(cid:88)(cid:73)(cid:72)(cid:3)(cid:87)(cid:77)(cid:75)(cid:82)(cid:77)(cid:507)(cid:71)(cid:69)(cid:82)(cid:88)(cid:3)(cid:80)(cid:83)(cid:69)(cid:82)(cid:3)(cid:84)(cid:69)(cid:93)(cid:83)(cid:506)(cid:3)(cid:69)(cid:71)(cid:88)(cid:77)(cid:90)(cid:77)(cid:88)(cid:93)(cid:3)(cid:88)(cid:76)(cid:69)(cid:88)(cid:3)
reduced the organic growth of the portfolio during the year. The strength
of the local economy and a continued troubling housing shortage have
contributed to strong demand for housing stock, supporting prices
regardless of the recession. 

Further, asset quality within our consumer portfolios remained exceptional 
throughout the year, and we helped more than 130 borrowers who needed 
payment assistance as a result of the pandemic. 

“We originated approximately $461 million in new 
loans, our largest production year yet on record.”

Page 15

Deposits

(cid:40)(cid:83)(cid:86)(cid:73)(cid:3)(cid:72)(cid:73)(cid:84)(cid:83)(cid:87)(cid:77)(cid:88)(cid:87)(cid:17)(cid:3)(cid:91)(cid:76)(cid:77)(cid:71)(cid:76)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:3)(cid:72)(cid:73)(cid:507)(cid:82)(cid:73)(cid:87)(cid:3)(cid:69)(cid:87)(cid:3)(cid:69)(cid:80)(cid:80)(cid:3)(cid:72)(cid:73)(cid:84)(cid:83)(cid:87)(cid:77)(cid:88)(cid:87)(cid:3)(cid:83)(cid:88)(cid:76)(cid:73)(cid:86)(cid:3)(cid:88)(cid:76)(cid:69)(cid:82)(cid:3)
(cid:71)(cid:73)(cid:86)(cid:88)(cid:77)(cid:507)(cid:71)(cid:69)(cid:88)(cid:73)(cid:87)(cid:3)(cid:83)(cid:74)(cid:3)(cid:72)(cid:73)(cid:84)(cid:83)(cid:87)(cid:77)(cid:88)(cid:17)(cid:3)(cid:77)(cid:82)(cid:71)(cid:86)(cid:73)(cid:69)(cid:87)(cid:73)(cid:72)(cid:3)(cid:70)(cid:93)(cid:3)(cid:7)(cid:30)(cid:28)(cid:22)(cid:19)(cid:28)(cid:3)(cid:81)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:17)(cid:3)(cid:83)(cid:86)(cid:3)(cid:25)(cid:25)(cid:19)(cid:27)(cid:9)(cid:17)(cid:3)(cid:88)(cid:83)(cid:3)(cid:7)(cid:24)(cid:19)(cid:22)(cid:3)(cid:70)(cid:77)(cid:80)(cid:80)(cid:77)(cid:83)(cid:82)(cid:3)
in 2020. Excluding the impact of the Wellesley merger, organic growth in 
core deposits was $422.9 million, or 19.4% last year. In fact, core deposits
represented 93% of total deposits in 2020.  

(cid:56)(cid:83)(cid:3)(cid:88)(cid:76)(cid:69)(cid:88)(cid:3)(cid:73)(cid:82)(cid:72)(cid:17)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:70)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:509)(cid:71)(cid:73)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:86)(cid:73)(cid:80)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:76)(cid:77)(cid:84)(cid:3)(cid:70)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:3)(cid:88)(cid:73)(cid:69)(cid:81)(cid:87)(cid:3)(cid:91)(cid:83)(cid:86)(cid:79)(cid:73)(cid:72)(cid:3)
tirelessly throughout the year to support new and existing client 
(cid:86)(cid:73)(cid:80)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:76)(cid:77)(cid:84)(cid:87)(cid:19)(cid:3)(cid:38)(cid:72)(cid:72)(cid:77)(cid:88)(cid:77)(cid:83)(cid:82)(cid:69)(cid:80)(cid:80)(cid:93)(cid:17)(cid:3)(cid:91)(cid:73)(cid:3)(cid:73)(cid:87)(cid:88)(cid:69)(cid:70)(cid:80)(cid:77)(cid:87)(cid:76)(cid:73)(cid:72)(cid:3)(cid:69)(cid:82)(cid:3)(cid:83)(cid:82)(cid:80)(cid:77)(cid:82)(cid:73)(cid:3)(cid:69)(cid:84)(cid:84)(cid:83)(cid:77)(cid:82)(cid:88)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)
scheduling service to minimize wait times for in-person, phone, or virtual 
(cid:81)(cid:73)(cid:73)(cid:88)(cid:77)(cid:82)(cid:75)(cid:87)(cid:3)(cid:91)(cid:77)(cid:88)(cid:76)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:70)(cid:69)(cid:82)(cid:79)(cid:73)(cid:86)(cid:87)(cid:19)(cid:3)(cid:40)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:87)(cid:3)(cid:82)(cid:83)(cid:91)(cid:3)(cid:76)(cid:69)(cid:90)(cid:73)(cid:3)(cid:69)(cid:71)(cid:71)(cid:73)(cid:87)(cid:87)(cid:3)(cid:88)(cid:83)(cid:3)(cid:23)(cid:22)(cid:3)(cid:70)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:509)(cid:71)(cid:73)(cid:87)
(cid:69)(cid:71)(cid:86)(cid:83)(cid:87)(cid:87)(cid:3)(cid:50)(cid:69)(cid:87)(cid:87)(cid:69)(cid:71)(cid:76)(cid:89)(cid:87)(cid:73)(cid:88)(cid:88)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:87)(cid:83)(cid:89)(cid:88)(cid:76)(cid:73)(cid:86)(cid:82)(cid:3)(cid:51)(cid:73)(cid:91)(cid:3)(cid:45)(cid:69)(cid:81)(cid:84)(cid:87)(cid:76)(cid:77)(cid:86)(cid:73)(cid:3)(cid:69)(cid:82)(cid:72)(cid:17)(cid:3)(cid:73)(cid:90)(cid:73)(cid:82)(cid:3)(cid:88)(cid:76)(cid:83)(cid:89)(cid:75)(cid:76)(cid:3)
we are observing COVID-19 safety protocols, clients continue to have 
multiple avenues to bank with us.

Client Deposits

2020 Annual Report

Page 16

Our Board of Directors

We welcomed new leadership to our Board of Directors to continue the work 
of those who have left us.

I want to thank two independent directors who retired in 2020 for their 
years of service and dedication: Linda Whitlock, who served as director for 
(cid:22)(cid:29)(cid:3)(cid:93)(cid:73)(cid:69)(cid:86)(cid:87)(cid:17)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:8)(cid:69)(cid:86)(cid:69)(cid:76)(cid:3)(cid:44)(cid:86)(cid:73)(cid:73)(cid:82)(cid:17)(cid:3)(cid:91)(cid:76)(cid:83)(cid:3)(cid:87)(cid:73)(cid:86)(cid:90)(cid:73)(cid:72)(cid:3)(cid:69)(cid:87)(cid:3)(cid:72)(cid:77)(cid:86)(cid:73)(cid:71)(cid:88)(cid:83)(cid:86)(cid:3)(cid:74)(cid:83)(cid:86)(cid:3)(cid:27)(cid:3)(cid:93)(cid:73)(cid:69)(cid:86)(cid:87)(cid:19)(cid:3)(cid:46)(cid:82)(cid:3)(cid:84)(cid:69)(cid:86)(cid:88)(cid:77)(cid:71)(cid:89)(cid:80)(cid:69)(cid:86)(cid:17)(cid:3)
(cid:46)(cid:3)(cid:91)(cid:69)(cid:82)(cid:88)(cid:3)(cid:88)(cid:83)(cid:3)(cid:84)(cid:73)(cid:86)(cid:87)(cid:83)(cid:82)(cid:69)(cid:80)(cid:80)(cid:93)(cid:3)(cid:88)(cid:76)(cid:69)(cid:82)(cid:79)(cid:3)(cid:49)(cid:77)(cid:82)(cid:72)(cid:69)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:8)(cid:69)(cid:86)(cid:69)(cid:76)(cid:3)(cid:74)(cid:83)(cid:86)(cid:3)(cid:88)(cid:76)(cid:73)(cid:77)(cid:86)(cid:3)(cid:87)(cid:77)(cid:75)(cid:82)(cid:77)(cid:507)(cid:71)(cid:69)(cid:82)(cid:88)(cid:3)(cid:80)(cid:73)(cid:69)(cid:72)(cid:73)(cid:86)(cid:87)(cid:76)(cid:77)(cid:84)(cid:3)
(cid:86)(cid:83)(cid:80)(cid:73)(cid:87)(cid:3)(cid:69)(cid:87)(cid:3)(cid:49)(cid:73)(cid:69)(cid:72)(cid:3)(cid:41)(cid:77)(cid:86)(cid:73)(cid:71)(cid:88)(cid:83)(cid:86)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:40)(cid:76)(cid:69)(cid:77)(cid:86)(cid:87)(cid:3)(cid:83)(cid:74)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:40)(cid:83)(cid:86)(cid:84)(cid:83)(cid:86)(cid:69)(cid:88)(cid:73)(cid:3)(cid:44)(cid:83)(cid:90)(cid:73)(cid:86)(cid:82)(cid:69)(cid:82)(cid:71)(cid:73)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:38)(cid:89)(cid:72)(cid:77)(cid:88)(cid:3)
(cid:40)(cid:83)(cid:81)(cid:81)(cid:77)(cid:88)(cid:88)(cid:73)(cid:73)(cid:87)(cid:17)(cid:3)(cid:86)(cid:73)(cid:87)(cid:84)(cid:73)(cid:71)(cid:88)(cid:77)(cid:90)(cid:73)(cid:80)(cid:93)(cid:17)(cid:3)(cid:72)(cid:89)(cid:86)(cid:77)(cid:82)(cid:75)(cid:3)(cid:88)(cid:76)(cid:73)(cid:77)(cid:86)(cid:3)(cid:88)(cid:73)(cid:82)(cid:89)(cid:86)(cid:73)(cid:87)(cid:19)(cid:3)(cid:38)(cid:87)(cid:3)(cid:69)(cid:3)(cid:86)(cid:73)(cid:87)(cid:89)(cid:80)(cid:88)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)
Wellesley Bank merger, the board also added two new independent 
(cid:72)(cid:77)(cid:86)(cid:73)(cid:71)(cid:88)(cid:83)(cid:86)(cid:87)(cid:17)(cid:3)(cid:8)(cid:77)(cid:81)(cid:83)(cid:82)(cid:3)(cid:44)(cid:73)(cid:86)(cid:80)(cid:77)(cid:82)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:48)(cid:69)(cid:88)(cid:76)(cid:86)(cid:93)(cid:82)(cid:3)(cid:45)(cid:77)(cid:82)(cid:72)(cid:73)(cid:86)(cid:76)(cid:83)(cid:74)(cid:73)(cid:86)(cid:17)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:56)(cid:76)(cid:83)(cid:81)(cid:69)(cid:87)(cid:3)(cid:43)(cid:83)(cid:82)(cid:88)(cid:69)(cid:77)(cid:82)(cid:73)(cid:3)(cid:69)(cid:87)
a non-independent director. 

(cid:46)(cid:82)(cid:3)(cid:80)(cid:69)(cid:88)(cid:73)(cid:3)(cid:23)(cid:21)(cid:23)(cid:21)(cid:17)(cid:3)(cid:50)(cid:69)(cid:86)(cid:79)(cid:3)(cid:56)(cid:76)(cid:83)(cid:81)(cid:84)(cid:87)(cid:83)(cid:82)(cid:3)(cid:69)(cid:82)(cid:82)(cid:83)(cid:89)(cid:82)(cid:71)(cid:73)(cid:72)(cid:3)(cid:76)(cid:77)(cid:87)(cid:3)(cid:86)(cid:73)(cid:88)(cid:77)(cid:86)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:69)(cid:74)(cid:88)(cid:73)(cid:86)(cid:3)(cid:74)(cid:83)(cid:89)(cid:86)(cid:3)(cid:72)(cid:73)(cid:71)(cid:69)(cid:72)(cid:73)(cid:87)(cid:3)
(cid:83)(cid:74)(cid:3)(cid:73)(cid:92)(cid:71)(cid:73)(cid:84)(cid:88)(cid:77)(cid:83)(cid:82)(cid:69)(cid:80)(cid:3)(cid:80)(cid:73)(cid:69)(cid:72)(cid:73)(cid:86)(cid:87)(cid:76)(cid:77)(cid:84)(cid:3)(cid:77)(cid:82)(cid:3)(cid:84)(cid:86)(cid:77)(cid:90)(cid:69)(cid:88)(cid:73)(cid:3)(cid:70)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:19)(cid:3)(cid:38)(cid:87)(cid:3)(cid:53)(cid:86)(cid:73)(cid:87)(cid:77)(cid:72)(cid:73)(cid:82)(cid:88)(cid:3)(cid:83)(cid:74)(cid:3)(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:3)(cid:56)(cid:86)(cid:89)(cid:87)(cid:88)(cid:3)
for the past three years, he brought valued experience and expertise to our
(cid:88)(cid:73)(cid:69)(cid:81)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:88)(cid:83)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:71)(cid:80)(cid:77)(cid:73)(cid:82)(cid:88)(cid:87)(cid:19)(cid:3)(cid:50)(cid:69)(cid:86)(cid:79)(cid:3)(cid:56)(cid:76)(cid:83)(cid:81)(cid:84)(cid:87)(cid:83)(cid:82)(cid:3)(cid:71)(cid:83)(cid:82)(cid:88)(cid:77)(cid:82)(cid:89)(cid:73)(cid:87)(cid:3)(cid:76)(cid:77)(cid:87)(cid:3)(cid:86)(cid:83)(cid:80)(cid:73)(cid:3)(cid:69)(cid:87)(cid:3)(cid:72)(cid:77)(cid:86)(cid:73)(cid:71)(cid:88)(cid:83)(cid:86)(cid:3)(cid:83)(cid:82)
the board for the remainder of his term and continues to lead the Cambridge 
(cid:56)(cid:86)(cid:89)(cid:87)(cid:88)(cid:3)(cid:38)(cid:72)(cid:90)(cid:77)(cid:87)(cid:83)(cid:86)(cid:93)(cid:3)(cid:39)(cid:83)(cid:69)(cid:86)(cid:72)(cid:19)(cid:3)(cid:52)(cid:82)(cid:3)(cid:70)(cid:73)(cid:76)(cid:69)(cid:80)(cid:74)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:3)(cid:56)(cid:86)(cid:89)(cid:87)(cid:88)(cid:3)(cid:88)(cid:73)(cid:69)(cid:81)(cid:17)(cid:3)(cid:46)(cid:3)(cid:88)(cid:76)(cid:69)(cid:82)(cid:79)(cid:3)(cid:76)(cid:77)(cid:81)(cid:3)(cid:74)(cid:83)(cid:86)(cid:3)
his service and wish him well in his retirement. 

We were saddened to learn of the passing of former director Leo H. Dworsky in
2020. Leo was a member of the Board of Directors for 37 years and contributed 
greatly to our success. Leo showed a great fondness for Cambridge Trust and
attended director events until recently. He will be missed.

Page 17

2020 Annual Report

“I enter 2021 confident in Cambridge Trust’s  
long-term prospects for future growth.”

Closing Thoughts 

(cid:38)(cid:74)(cid:88)(cid:73)(cid:86)(cid:3)(cid:69)(cid:3)(cid:93)(cid:73)(cid:69)(cid:86)(cid:3)(cid:83)(cid:74)(cid:3)(cid:71)(cid:76)(cid:69)(cid:80)(cid:80)(cid:73)(cid:82)(cid:75)(cid:73)(cid:87)(cid:3)(cid:82)(cid:83)(cid:88)(cid:3)(cid:87)(cid:73)(cid:73)(cid:82)(cid:3)(cid:77)(cid:82)(cid:3)(cid:81)(cid:83)(cid:86)(cid:73)(cid:3)(cid:88)(cid:76)(cid:69)(cid:82)(cid:3)(cid:69)(cid:3)(cid:75)(cid:73)(cid:82)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:17)(cid:3)(cid:23)(cid:21)(cid:23)(cid:22)(cid:3)(cid:77)(cid:87)(cid:3)
expected to bring short-term headwinds as vaccines and therapeutics begin
(cid:88)(cid:76)(cid:73)(cid:3)(cid:80)(cid:83)(cid:82)(cid:75)(cid:3)(cid:507)(cid:75)(cid:76)(cid:88)(cid:3)(cid:70)(cid:69)(cid:71)(cid:79)(cid:3)(cid:69)(cid:75)(cid:69)(cid:77)(cid:82)(cid:87)(cid:88)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:40)(cid:52)(cid:58)(cid:46)(cid:41)(cid:18)(cid:22)(cid:30)(cid:3)(cid:84)(cid:69)(cid:82)(cid:72)(cid:73)(cid:81)(cid:77)(cid:71)(cid:19)(cid:3)(cid:56)(cid:76)(cid:77)(cid:87)(cid:3)(cid:86)(cid:83)(cid:69)(cid:72)(cid:3)(cid:88)(cid:83)(cid:3)(cid:86)(cid:73)(cid:71)(cid:83)(cid:90)(cid:73)(cid:86)(cid:93)
comes with additional challenges, including a low interest rate environment.

(cid:41)(cid:73)(cid:87)(cid:84)(cid:77)(cid:88)(cid:73)(cid:3)(cid:88)(cid:76)(cid:73)(cid:87)(cid:73)(cid:3)(cid:71)(cid:83)(cid:82)(cid:72)(cid:77)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:17)(cid:3)(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:3)(cid:56)(cid:86)(cid:89)(cid:87)(cid:88)(cid:438)(cid:87)(cid:3)(cid:73)(cid:506)(cid:83)(cid:86)(cid:88)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:69)(cid:71)(cid:76)(cid:77)(cid:73)(cid:90)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:87)(cid:3)(cid:77)(cid:82)(cid:3)
2020 serve as proof of our strong position for long-term success. We helped 
clients weather the storm and ensured that they could rely on us throughout 
the challenges of the pandemic, while completing a merger that expanded 
our footprint and capabilities.

(cid:46)(cid:82)(cid:3)(cid:23)(cid:21)(cid:23)(cid:22)(cid:17)(cid:3)(cid:91)(cid:73)(cid:3)(cid:80)(cid:83)(cid:83)(cid:79)(cid:3)(cid:88)(cid:83)(cid:3)(cid:71)(cid:83)(cid:82)(cid:88)(cid:77)(cid:82)(cid:89)(cid:73)(cid:3)(cid:88)(cid:83)(cid:3)(cid:70)(cid:89)(cid:77)(cid:80)(cid:72)(cid:3)(cid:89)(cid:84)(cid:83)(cid:82)(cid:3)(cid:83)(cid:89)(cid:86)(cid:3)(cid:80)(cid:73)(cid:75)(cid:69)(cid:71)(cid:93)(cid:3)(cid:83)(cid:74)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:87)(cid:88)(cid:86)(cid:73)(cid:82)(cid:75)(cid:88)(cid:76)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)
credibility.  This focus begins with always doing what is in the best interest of 
our clients by bringing them contemporary private banking expertise across 
each of our businesses, namely wealth management, depository services,
and lending.

I am proud of our heritage and the foundation of trust on which we built
(cid:89)(cid:84)(cid:83)(cid:82)(cid:3)(cid:88)(cid:76)(cid:77)(cid:87)(cid:3)(cid:84)(cid:69)(cid:87)(cid:88)(cid:3)(cid:93)(cid:73)(cid:69)(cid:86)(cid:17)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:46)(cid:3)(cid:73)(cid:82)(cid:88)(cid:73)(cid:86)(cid:3)(cid:23)(cid:21)(cid:23)(cid:22)(cid:3)(cid:71)(cid:83)(cid:82)(cid:507)(cid:72)(cid:73)(cid:82)(cid:88)(cid:3)(cid:77)(cid:82)(cid:3)(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:3)(cid:56)(cid:86)(cid:89)(cid:87)(cid:88)(cid:438)(cid:87)(cid:3)
long-term prospects for future growth. I thank my colleagues for their 
(cid:77)(cid:82)(cid:71)(cid:86)(cid:73)(cid:72)(cid:77)(cid:70)(cid:80)(cid:73)(cid:3)(cid:73)(cid:506)(cid:83)(cid:86)(cid:88)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:71)(cid:83)(cid:81)(cid:81)(cid:77)(cid:88)(cid:81)(cid:73)(cid:82)(cid:88)(cid:87)(cid:3)(cid:88)(cid:76)(cid:69)(cid:88)(cid:3)(cid:76)(cid:69)(cid:90)(cid:73)(cid:3)(cid:70)(cid:86)(cid:83)(cid:89)(cid:75)(cid:76)(cid:88)(cid:3)(cid:89)(cid:87)(cid:3)(cid:76)(cid:73)(cid:86)(cid:73)(cid:17)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:46)(cid:3)(cid:88)(cid:76)(cid:69)(cid:82)(cid:79)
you for your continued trust and support.

(cid:41)(cid:73)(cid:82)(cid:77)(cid:87)(cid:3)(cid:48)(cid:19)(cid:3)(cid:8)(cid:76)(cid:73)(cid:69)(cid:76)(cid:69)(cid:82)
(cid:40)(cid:76)(cid:69)(cid:77)(cid:86)(cid:81)(cid:69)(cid:82)(cid:17)(cid:3)(cid:53)(cid:86)(cid:73)(cid:87)(cid:77)(cid:72)(cid:73)(cid:82)(cid:88)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:40)(cid:76)(cid:77)(cid:73)(cid:74)(cid:3)(cid:42)(cid:92)(cid:73)(cid:71)(cid:89)(cid:88)(cid:77)(cid:90)(cid:73)(cid:3)(cid:52)(cid:509)(cid:71)(cid:73)(cid:86)
(cid:50)(cid:69)(cid:86)(cid:71)(cid:76)(cid:3)(cid:22)(cid:26)(cid:17)(cid:3)(cid:23)(cid:21)(cid:23)(cid:22)

Page 18

(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:88)(cid:83)(cid:3)(cid:51)(cid:83)(cid:82)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:55)(cid:73)(cid:71)(cid:83)(cid:82)(cid:71)(cid:77)(cid:80)(cid:77)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)
(Dollars in thousands except per share data)

(cid:15)(cid:8)(cid:88)(cid:69)(cid:88)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:83)(cid:82)(cid:3)(cid:51)(cid:83)(cid:82)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:50)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:73)(cid:87)(cid:31)(cid:3)(cid:56)(cid:76)(cid:73)(cid:3)(cid:40)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:3)(cid:70)(cid:73)(cid:80)(cid:77)(cid:73)(cid:90)(cid:73)(cid:87)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:84)(cid:86)(cid:73)(cid:87)(cid:73)(cid:82)(cid:88)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:74)(cid:83)(cid:80)(cid:80)(cid:83)(cid:91)(cid:77)(cid:82)(cid:75)(cid:3)(cid:82)(cid:83)(cid:82)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:81)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:73)(cid:87)(cid:3)(cid:84)(cid:86)(cid:83)(cid:90)(cid:77)(cid:72)(cid:73)(cid:87)(cid:3)(cid:89)(cid:87)(cid:73)(cid:74)(cid:89)(cid:80)(cid:3)
(cid:87)(cid:89)(cid:84)(cid:84)(cid:80)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:69)(cid:80)(cid:3)(cid:77)(cid:82)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:88)(cid:76)(cid:69)(cid:88)(cid:3)(cid:77)(cid:87)(cid:3)(cid:73)(cid:87)(cid:87)(cid:73)(cid:82)(cid:88)(cid:77)(cid:69)(cid:80)(cid:3)(cid:88)(cid:83)(cid:3)(cid:69)(cid:82)(cid:3)(cid:77)(cid:82)(cid:90)(cid:73)(cid:87)(cid:88)(cid:83)(cid:86)(cid:438)(cid:87)(cid:3)(cid:84)(cid:86)(cid:83)(cid:84)(cid:73)(cid:86)(cid:3)(cid:89)(cid:82)(cid:72)(cid:73)(cid:86)(cid:87)(cid:88)(cid:69)(cid:82)(cid:72)(cid:77)(cid:82)(cid:75)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:86)(cid:73)(cid:87)(cid:89)(cid:80)(cid:88)(cid:87)(cid:3)(cid:83)(cid:74)(cid:3)(cid:83)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:71)(cid:83)(cid:82)(cid:72)(cid:77)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:40)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:19)(cid:3)
(cid:50)(cid:69)(cid:82)(cid:69)(cid:75)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:89)(cid:87)(cid:73)(cid:87)(cid:3)(cid:82)(cid:83)(cid:82)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:81)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:73)(cid:87)(cid:3)(cid:77)(cid:82)(cid:3)(cid:77)(cid:88)(cid:87)(cid:3)(cid:69)(cid:82)(cid:69)(cid:80)(cid:93)(cid:87)(cid:77)(cid:87)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:40)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:438)(cid:87)(cid:3)(cid:84)(cid:73)(cid:86)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:82)(cid:71)(cid:73)(cid:19)(cid:3)(cid:56)(cid:76)(cid:73)(cid:87)(cid:73)(cid:3)(cid:82)(cid:83)(cid:82)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:81)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:73)(cid:87)(cid:3)(cid:87)(cid:76)(cid:83)(cid:89)(cid:80)(cid:72)(cid:3)(cid:82)(cid:83)(cid:88)(cid:3)(cid:70)(cid:73)(cid:3)(cid:90)(cid:77)(cid:73)(cid:91)(cid:73)(cid:72)(cid:3)(cid:69)(cid:87)(cid:3)
(cid:87)(cid:89)(cid:70)(cid:87)(cid:88)(cid:77)(cid:88)(cid:89)(cid:88)(cid:73)(cid:87)(cid:3)(cid:74)(cid:83)(cid:86)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:81)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:73)(cid:87)(cid:3)(cid:72)(cid:73)(cid:88)(cid:73)(cid:86)(cid:81)(cid:77)(cid:82)(cid:73)(cid:72)(cid:3)(cid:77)(cid:82)(cid:3)(cid:69)(cid:71)(cid:71)(cid:83)(cid:86)(cid:72)(cid:69)(cid:82)(cid:71)(cid:73)(cid:3)(cid:91)(cid:77)(cid:88)(cid:76)(cid:3)(cid:44)(cid:38)(cid:38)(cid:53)(cid:17)(cid:3)(cid:82)(cid:83)(cid:86)(cid:3)(cid:69)(cid:86)(cid:73)(cid:3)(cid:88)(cid:76)(cid:73)(cid:93)(cid:3)(cid:82)(cid:73)(cid:71)(cid:73)(cid:87)(cid:87)(cid:69)(cid:86)(cid:77)(cid:80)(cid:93)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:69)(cid:86)(cid:69)(cid:70)(cid:80)(cid:73)(cid:3)(cid:88)(cid:83)(cid:3)(cid:82)(cid:83)(cid:82)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:84)(cid:73)(cid:86)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:82)(cid:71)(cid:73)(cid:3)(cid:81)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:73)(cid:87)(cid:3)
(cid:88)(cid:76)(cid:69)(cid:88)(cid:3)(cid:81)(cid:69)(cid:93)(cid:3)(cid:70)(cid:73)(cid:3)(cid:84)(cid:86)(cid:73)(cid:87)(cid:73)(cid:82)(cid:88)(cid:73)(cid:72)(cid:3)(cid:70)(cid:93)(cid:3)(cid:83)(cid:88)(cid:76)(cid:73)(cid:86)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:77)(cid:73)(cid:87)(cid:19)(cid:3)(cid:53)(cid:80)(cid:73)(cid:69)(cid:87)(cid:73)(cid:3)(cid:87)(cid:73)(cid:73)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:74)(cid:83)(cid:80)(cid:80)(cid:83)(cid:91)(cid:77)(cid:82)(cid:75)(cid:3)(cid:88)(cid:69)(cid:70)(cid:80)(cid:73)(cid:87)(cid:3)(cid:74)(cid:83)(cid:86)(cid:3)(cid:69)(cid:3)(cid:86)(cid:73)(cid:71)(cid:83)(cid:82)(cid:71)(cid:77)(cid:80)(cid:77)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:83)(cid:74)(cid:3)(cid:87)(cid:89)(cid:71)(cid:76)(cid:3)(cid:82)(cid:83)(cid:82)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:507)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:81)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:73)(cid:87)(cid:3)(cid:88)(cid:83)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:81)(cid:83)(cid:87)(cid:88)
(cid:72)(cid:77)(cid:86)(cid:73)(cid:71)(cid:88)(cid:80)(cid:93)(cid:3)(cid:71)(cid:83)(cid:81)(cid:84)(cid:69)(cid:86)(cid:69)(cid:70)(cid:80)(cid:73)(cid:3)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:81)(cid:73)(cid:69)(cid:87)(cid:89)(cid:86)(cid:73)(cid:19)

For the Year-Ended December 31

2020

2019

2018

(cid:52)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:51)(cid:73)(cid:88)(cid:3)(cid:46)(cid:82)(cid:71)(cid:83)(cid:81)(cid:73)(cid:3)(cid:20)(cid:3)(cid:52)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:41)(cid:77)(cid:80)(cid:89)(cid:88)(cid:73)(cid:72)(cid:3)(cid:42)(cid:69)(cid:86)(cid:82)(cid:77)(cid:82)(cid:75)(cid:87)(cid:3)(cid:53)(cid:73)(cid:86)(cid:3)(cid:8)(cid:76)(cid:69)(cid:86)(cid:73)

Net (Loss) Income (a GAAP measure)

Add: Merger and Capital issuance expenses 

Add: (Gain) Loss on disposition of investment securities

Add: Provision established for acquired Wellesley loans

(cid:36)(cid:71)(cid:71)(cid:29)(cid:3)(cid:3)(cid:37)(cid:85)(cid:68)(cid:81)(cid:70)(cid:75)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:73)(cid:191)(cid:70)(cid:72)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)

Tax effect of non-operating adjustments (1)

Operating Net Income (a non-GAAP measure)

Less: Dividends and Undistributed Earnings Allocated to Participating Securities (GAAP)

Operating Income Applicable to Common Shareholders (a non-GAAP measure)

Weighted Average Diluted Shares

Operating Diluted Earnings Per Share (a non-GAAP measure)

$

31,959 

$

25,257 

$

23,881 

6,368 

(69)

8,638 

1,244 

(4,270)

43,870 

(64)

43,806 

6,344,409 

6.90 

$

$

$

4,721

79 

— 

— 

 (901)

201 

(2)

— 

—

(56)

$

$

$

29,156 

$

24,024 

(243)

(239)

28,913 

$

23,785 

4,661,720 

4,098,633 

6.20

$

5.80 

Operating Return on Average Assets: (2)

Operating Net Income (a non-GAAP measure)

Average assets

$

43,870 

$

29,156 

$ 3,523,249 

$ 2,600,316 

$

$

24,024 

1,980,580 

Operating Return on Average Assets (a non-GAAP measure)

1.25%

1.12%

1.21%

(1) (cid:56)(cid:76)(cid:73)(cid:3)(cid:82)(cid:73)(cid:88)(cid:3)(cid:88)(cid:69)(cid:92)(cid:3)(cid:70)(cid:73)(cid:82)(cid:73)(cid:507)(cid:88)(cid:3)(cid:69)(cid:87)(cid:87)(cid:83)(cid:71)(cid:77)(cid:69)(cid:88)(cid:73)(cid:72)(cid:3)(cid:91)(cid:77)(cid:88)(cid:76)(cid:3)(cid:82)(cid:83)(cid:82)(cid:18)(cid:83)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:77)(cid:88)(cid:73)(cid:81)(cid:87)(cid:3)(cid:77)(cid:87)(cid:3)(cid:72)(cid:73)(cid:88)(cid:73)(cid:86)(cid:81)(cid:77)(cid:82)(cid:73)(cid:72)(cid:3)(cid:70)(cid:93)(cid:3)(cid:69)(cid:87)(cid:87)(cid:73)(cid:87)(cid:87)(cid:77)(cid:82)(cid:75)(cid:3)(cid:91)(cid:76)(cid:73)(cid:88)(cid:76)(cid:73)(cid:86)(cid:3)(cid:73)(cid:69)(cid:71)(cid:76)(cid:3)(cid:82)(cid:83)(cid:82)(cid:18)(cid:83)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:77)(cid:88)(cid:73)(cid:81)(cid:3)(cid:77)(cid:87)(cid:3)(cid:77)(cid:82)(cid:71)(cid:80)(cid:89)(cid:72)(cid:73)(cid:72)(cid:3)(cid:83)(cid:86)(cid:3)(cid:73)(cid:92)(cid:71)(cid:80)(cid:89)(cid:72)(cid:73)(cid:72)(cid:3)

from net taxable income and applying the Company’s combined marginal tax rate to only those items included in net taxable income. 

(2) Operating return on average assets represents operating net income as a percentage of average assets.

(cid:13)(cid:564)(cid:14)(cid:3)(cid:52)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:86)(cid:73)(cid:88)(cid:89)(cid:86)(cid:82)(cid:3)(cid:83)(cid:82)(cid:3)(cid:88)(cid:69)(cid:82)(cid:75)(cid:77)(cid:70)(cid:80)(cid:73)(cid:3)(cid:71)(cid:83)(cid:81)(cid:81)(cid:83)(cid:82)(cid:3)(cid:73)(cid:85)(cid:89)(cid:77)(cid:88)(cid:93)(cid:3)(cid:86)(cid:73)(cid:84)(cid:86)(cid:73)(cid:87)(cid:73)(cid:82)(cid:88)(cid:87)(cid:3)(cid:83)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:82)(cid:73)(cid:88)(cid:3)(cid:77)(cid:82)(cid:71)(cid:83)(cid:81)(cid:73)(cid:3)(cid:69)(cid:87)(cid:3)(cid:69)(cid:3)(cid:84)(cid:73)(cid:86)(cid:71)(cid:73)(cid:82)(cid:88)(cid:69)(cid:75)(cid:73)(cid:3)(cid:83)(cid:74)(cid:3)(cid:69)(cid:90)(cid:73)(cid:86)(cid:69)(cid:75)(cid:73)(cid:3)(cid:88)(cid:69)(cid:82)(cid:75)(cid:77)(cid:70)(cid:80)(cid:73)(cid:3)(cid:71)(cid:83)(cid:81)(cid:81)(cid:83)(cid:82)(cid:3)(cid:73)(cid:85)(cid:89)(cid:77)(cid:88)(cid:93)(cid:19)

Page 19

(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:88)(cid:83)(cid:3)(cid:51)(cid:83)(cid:82)(cid:18)(cid:44)(cid:38)(cid:38)(cid:53)(cid:3)(cid:55)(cid:73)(cid:71)(cid:83)(cid:82)(cid:71)(cid:77)(cid:80)(cid:77)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:13)(cid:71)(cid:83)(cid:82)(cid:88)(cid:77)(cid:82)(cid:89)(cid:73)(cid:72)(cid:14)
(Dollars in thousands except per share data)

2020 Annual Report

For the Year-Ended December 31

2020

2019

2018

(cid:52)(cid:84)(cid:73)(cid:86)(cid:69)(cid:88)(cid:77)(cid:82)(cid:75)(cid:3)(cid:55)(cid:73)(cid:88)(cid:89)(cid:86)(cid:82)(cid:3)(cid:83)(cid:82)(cid:3)(cid:56)(cid:69)(cid:82)(cid:75)(cid:77)(cid:70)(cid:80)(cid:73)(cid:3)(cid:40)(cid:83)(cid:81)(cid:81)(cid:83)(cid:82)(cid:3)(cid:42)(cid:85)(cid:89)(cid:77)(cid:88)(cid:93)(cid:31)(cid:3)(cid:13)(cid:564))

Operating Net Income (a non-GAAP measure)

Average Shareholders' Equity

Average Goodwill and merger related intangibles

Average tangible common equity

Operating Return on Tangible Common Equity (a non-GAAP measure)

$

$

$

43,870 

351,477 

(46,476)

305,001 

14.38%

$

$

$

29,156 

221,617 

(24,577)

197,040 

14.80%

$

$

$

24,024 

155,546 

(412)

155,134 

15.49%

Tangible Common Equity

Shareholders' Equity (GAAP)

Less: Goodwill and Merger-Related Intangibles (GAAP)

Tangible Common Equity (a non-GAAP measure)

Total Assets (GAAP)

$

401,732 

$

286,561 

$

167,026 

(54,889)

346,843 

(34,544)

 252,017 

(412)

166,614 

3,949,297

2,855,563

2,101,384

Less: Goodwill and Merger-Related Intangibles (GAAP)

(54,889)

(34,544)

 (412)

Tangible Assets (a non-GAAP measure)

$

3,894,408 

$ 2,821,019 

$ 2,100,972 

Tangible Common Equity Ratio (a non-GAAP measure)

8.91%

8.93%

7.93%

Tangible Book Value Per Share

Tangible Common Equity (a non-GAAP measure)

Common Shares Outstanding

Tangible Book Value Per Share (a non-GAAP measure)

Adjusted Net Interest Margin

$

$

346,843 

6,926,728

50.07 

$

$

252,017

5,400,868

46.66

$

$

166,614 

4,107,051

40.57 

For the Year Ended
December 31, 2020

Average
Balance

Interest
Income/
Expenses

Rate
Earned/
Paid

(dollars in thousands)

Total interest-earning assets (GAAP)

$

3,305,820 

Net interest income on a fully taxable equivalent basis (GAAP)

$

 120,797 

Net interest margin (GAAP)

Less: Paycheck Protection Program loan impact

 (120,048)

Less: Accretion of loan fair value adjustments

 (4,062)

 (9,791)

Adjusted net interest margin on a fully taxable equivalent basis

$

3,185,772 

$

106,944

3.65%

0.01%

-0.30%

3.36%

Page 20

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549 

FORM 10-K 

(Mark One) 
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended December 31, 2020
OR 
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
FOR THE TRANSITION PERIOD FROM                      TO
Commission File Number 001-38184

CAMBRIDGE BANCORP 

(Exact name of Registrant as specified in its Charter) 

Massachusetts
(State or other jurisdiction of
incorporation or organization)
1336 Massachusetts Avenue
Cambridge, MA
(Address of principal executive offices)

04-2777442
(I.R.S. Employer
Identification No.)

02138
(Zip Code)

Registrant’s telephone number, including area code: (617) 876-5500

Securities registered pursuant to Section 12(b) of the Act:

Common Stock
(Title of each class)

CATC

(Trading symbol)

NASDAQ
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒ 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  ☐   NO  ☒ 
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  ☒    NO  ☐ 
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the 
Registrant was required to submit).    YES  ☒    NO  ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting 
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting 
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Non-accelerated filer

 ☐
 ☐ 

 ☒
  Accelerated filer
  Smaller reporting company  ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for 
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES ☐    NO ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness 
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act  (15 U.S.C. 726.2(b)) by the registered 
public accounting firm that prepared or issued its audit report. YES  ☒ NO  ☐
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing 
price of the shares of common stock on The NASDAQ Stock Market on June 30, 2020, was $378.5 million. The number of shares of 
Registrant’s Common Stock outstanding as of March 12, 2021 was 6,960,194. 

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Shareholders, scheduled to be held on May 
17, 2021, are incorporated by reference into Part III of this Report. 

 
 
 
 
 
 
 
 
Table of Contents

PART I.................................................................................................................................................................................................
Item 1.
Business ..........................................................................................................................................................................
Item 1A. Risk Factors.....................................................................................................................................................................
Item 1B. Unresolved Staff Comments ...........................................................................................................................................
Properties ........................................................................................................................................................................
Item 2.
Legal Proceedings ...........................................................................................................................................................
Item 3.
Mine Safety Disclosures .................................................................................................................................................
Item 4.

Page

1
2
13
22
22
22
22

PART II ...............................................................................................................................................................................................
23
23
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.....
Item 5.
25
Selected Financial Data...................................................................................................................................................
Item 6.
26
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations .........................................
49
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................................................................
Financial Statements and Supplementary Data...............................................................................................................
Item 8.
50
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure........................................ 107
Item 9A. Controls and Procedures ................................................................................................................................................. 107
Item 9B. Other Information ........................................................................................................................................................... 108

PART III.............................................................................................................................................................................................. 109
Item 10. Directors, Executive Officers and Corporate Governance.............................................................................................. 109
Executive Compensation................................................................................................................................................. 109
Item 11.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters....................... 109
Item 12.
Certain Relationships and Related Transactions, and Director Independence ............................................................... 109
Item 13.
Principal Accounting Fees and Services ......................................................................................................................... 109
Item 14.

PART IV .............................................................................................................................................................................................. 110
Exhibits, Financial Statement Schedules ........................................................................................................................ 110
Item 15.
Item 16.
Form 10-K Summary ...................................................................................................................................................... 112
Signatures........................................................................................................................................................................................... 113

i

 
 
 
 
 
 
 
 
PART I

Unless the context requires otherwise, all references to the “Company,” “we,” “us,” and “our,” refer to Cambridge Bancorp.

Forward-Looking Statements

This  report  contains  forward-looking  statements  as  defined  in  the  Private  Securities  Litigation  Reform  Act  of  1995.  Such  forward-
looking statements about the Company and its industry involve substantial risks and uncertainties. Statements other than statements of 
current  or  historical  fact,  including  statements  regarding  the  Company’s  future  financial  condition,  results  of  operations,  business 
plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, are forward-looking 
statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” 
“should,”  and  other  similar  expressions  are  intended  to  identify  these  forward-looking  statements.  Such  statements  are  subject  to 
factors  that  could  cause  actual  results  to  differ  materially  from  anticipated  results.  Such  factors  include,  but  are  not  limited  to,  the 
following:

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

national, regional, and local economic conditions may be less favorable than expected, resulting in, among other things, 
increased charge offs of loans, higher provisions for credit losses and/or reduced demand for the Company’s services;

disruptions to the credit and financial markets, either nationally or globally;

the  duration  and  scope  of  the  coronavirus  disease  2019  (“COVID-19”)  pandemic  and  its  impact  on  levels  of  consumer 
confidence; 

actions governments, businesses and individuals take in response to the COVID-19 pandemic; 

the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies 
and economic activity; 

the pace of recovery when the COVID-19 pandemic subsides;

weakness in the real estate market, including the secondary residential mortgage market, which can affect, among other 
things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, and profits on sales 
of mortgage loans;

legislative, regulatory, or accounting changes, including changes resulting from the adoption and implementation of the 
Dodd-Frank  Act,  which  may  adversely  affect  our  business  and/or  competitive  position,  impose  additional  costs  on  the 
Company or cause us to change our business practices;

the  Dodd-Frank  Act’s  consumer  protection  regulations  which  could  adversely  affect  the  Company’s  business,  financial 
condition or results of operations;

disruptions  in  the  Company’s  ability  to  access  capital  markets  which  may  adversely  affect  its  capital  resources  and 
liquidity;

the Company’s heavy reliance on communications and information systems to conduct its business and reliance on third 
parties and affiliates to provide key components of its business infrastructure, any disruptions of which could interrupt the 
Company's operations or increase the costs of doing business;

that the Company’s financial reporting controls and procedures may not prevent or detect all errors or fraud;

the Company’s dependence on the accuracy and completeness of information about clients and counterparties;

the fiscal and monetary policies of the federal government and its agencies;

the failure to satisfy capital adequacy and liquidity guidelines applicable to the Company;

downgrades in the Company’s credit rating;

changes in interest rates which could affect interest rate spreads and net interest income;

costs and effects of litigation, regulatory investigations or similar matters;

the inability to realize expected cost savings or implement integration plans and other adverse consequences associated 
with the mergers with Optima Bank & Trust Company (“Optima”) and Wellesley Bancorp, Inc.  (“Wellesley”);

a  failure  by  the  Company  to  effectively  manage  the  risks  the  Company  faces,  including  credit,  operational  and  cyber 
security risks;

1

•

•

•

•

•

•

•

•

•

•

increased  pressures  from  competitors  (both  banks  and  non-banks)  and/or  an  inability  by  of  the  Company  to  remain 
competitive in the financial services industry, particularly in the markets which the Company serves, and keep pace with 
technological changes;

unpredictable natural or other disasters, which could adversely impact the Company’s customers or operations;

a loss of customer deposits, which could increase the Company’s funding costs;

the  disparate  impact  that  can  result  from  having  loans  concentrated  by  loan  type,  industry  segment,  borrower  type  or 
location of the borrower or collateral;

changes in the creditworthiness of customers;

increased credit losses or impairment of goodwill and other intangibles;

negative public opinion which could damage the Company’s reputation and adversely impact business and revenues;

the  Company  depends  on  the  expertise  of  key  personnel,  and  if  these  individuals  leave  or  change  their  roles  without 
effective replacements, operations may suffer;

the  Company  may  not  be  able  to  hire  or  retain  additional  qualified  personnel,  including  those  acquired  in  previous 
acquisitions, and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs 
and reduce profitability and may adversely impact the Company’s ability to implement the Company’s business strategies; 
and

changes in the Company’s accounting policies or in accounting standards which could materially affect how the Company 
reports financial results and condition. 

Except as required by law, the Company does not undertake, and specifically disclaims any obligation, to publicly release the result of 
any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or 
circumstances after the date of such statements. You are cautioned not to place undue reliance on these forward-looking statements.

Item 1. Business. 

The Company

Cambridge  Bancorp  (together  with  its  bank  subsidiary,  unless  the  context  otherwise  requires,  the  “Company”)  is  a  Massachusetts 
state-chartered,  federally  registered  bank  holding  company  headquartered  in  Cambridge,  Massachusetts.  The  Company  is  a 
Massachusetts corporation formed in 1983 and has one bank subsidiary, Cambridge Trust Company (the “Bank”), formed in 1890. On 
October  18,  2017,  shares  of  the  Company’s  common  stock  commenced  trading  on  the  NASDAQ  Stock  Market  under  the  symbol 
CATC. Prior to this date, the Company’s shares traded on the over-the-counter market. As of December 31, 2020, the Company had 
total assets of approximately $3.9 billion. Currently, the Bank operates 21 private banking offices in Eastern Massachusetts and New 
Hampshire.  As  a  private  bank,  we  focus  on  four  core  services  that  center  around  client  needs.  Our  core  services  include  Wealth 
Management, Commercial Banking, Residential Lending, and Private Banking. The Bank’s customers consist primarily of consumers 
and small- and medium-sized businesses in these communities and surrounding areas throughout Massachusetts and New Hampshire. 
The  Company’s  Wealth  Management  Group  has  five  offices,  two  in  Massachusetts  in  Boston  and  Wellesley,  and  three  in  New 
Hampshire  in  Concord,  Manchester,  and  Portsmouth.  As  of  December 31,  2020,  the  Company  had  Assets  under  Management  and 
Administration of approximately $4.2 billion. The Wealth Management Group offers comprehensive investment management, as well 
as trust administration, estate settlement, and financial planning services. Our wealth management clients value personal service and 
depend on the commitment and expertise of our experienced banking, investment, and fiduciary professionals.  

The  Wealth  Management  Group  customizes  investment  portfolios  to  help  clients  meet  their  long-term  financial  goals.  Through 
development of an appropriate asset allocation and disciplined security and fund election, the Company’s in-house investment team 
targets  long-term  capital  growth  while  seeking  to  minimize  downside  risk.  Our  internally  developed,  research-driven  process  is 
managed by our skilled team of portfolio managers and analysts. We build portfolios consisting of our best investment ideas, focusing 
on individual global equities, fixed income securities, exchange-traded funds, and mutual funds. 

The  Company  offers  a  wide  range  of  services  to  commercial  enterprises,  non-profit  organizations,  and  individuals.  The  Company 
emphasizes service to consumers and small- and medium-sized businesses in its market area. The Company makes commercial loans, 
commercial real estate loans, construction loans, consumer loans, and real estate loans (including one-to-four family and home equity 
lines  of  credit),  and  accepts  savings,  money  market,  time,  and  demand  deposits.  In  addition,  the  Company  offers  a  wide  range  of 
commercial and personal banking services which include cash management, online banking, mobile banking, and global payments.  

The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned 
on  loans  and  securities  and  interest  paid  on  deposits  and  borrowings,  and  non-interest  income  largely  from  its  wealth  management 

2

services. The results of operations are affected by the level of income and fees from loans, costs of deposits, and borrowings, as well 
as operating expenses, the provision for credit losses, the impact of federal and state income taxes, the relative levels of interest rates, 
and local and national economic activity.

Through the Bank, the Company focuses on wealth management, the commercial banking business and private banking for clients, 
including residential lending and relationship banking. Within the commercial loan portfolio, the Company has traditionally been a 
commercial  real  estate  lender.  However,  in  recent  years  the  Company  has  diversified  commercial  operations  within  the  areas  of 
commercial  and  industrial  lending  to  include  Renewable  Energy,  Innovation  Banking,  which  specializes  in  working  with  primarily 
New England-based entrepreneurs, and asset-based lending that helps companies throughout New England and New York grow by 
borrowing against existing assets. Through its renewable energy lending efforts, the Company provides financing for developers and 
operators  of  commercial  and  utility  scale  renewable  energy  projects.    Financing  is  provided  for  the  construction  and  permanent 
financing  of  new  projects,  the  acquisition  of  completed  projects,  or  the  refinancing  of  existing  operating  projects.  Target  clients 
include experienced developer/operators who have built or managed other renewable energy facilities. The Innovation Banking Group 
has a narrow client focus for lending and provides a local banking option for life science, technology and entrepreneurial companies 
within our market area. Relationship banking focuses on providing exceptional service to clients and in deepening relationships. 

Cambridge Trust Company

The  Bank  offers  a  full  range  of  commercial  and  consumer  banking  services  through  its  network  of  21  private  banking  offices  in 
Eastern Massachusetts and New Hampshire. The Bank is engaged principally in the business of attracting deposits from the public and 
investing those deposits. The Bank invests those funds in various types of loans, including residential and commercial real estate, and 
a variety of commercial and consumer loans. The Bank also invests its deposits and borrowed funds in investment securities and has 
two  wholly  owned  Massachusetts  security  corporations,  CTC  Security  Corporation  and  CTC  Security  Corporation  III,  for  this 
purpose.  Deposits  at  the  Bank  are  insured  by  the  Federal  Deposit  Insurance  Corporation  (the  “FDIC”)  for  the  maximum  amount 
permitted by FDIC regulations.

Investment management and trust services are offered through our two wealth management offices located in Massachusetts and three 
wealth  management  offices  located  in  New  Hampshire.  The  Bank  also  utilizes  its  subsidiary  and  non-depository  trust  company, 
Cambridge  Trust  Company  of  New  Hampshire,  Inc.,  to  provide  specialized  wealth  management  services  in  New  Hampshire.  The 
assets  held  for  wealth  management  customers  are  not  assets  of  the  Bank  and,  accordingly,  are  not  reflected  in  the  Company’s 
consolidated balance sheets.

The  Bank  is  active  in  the  communities  we  serve.  The  Bank  makes  contributions  to  various  non-profits  and  local  organizations, 
investments  in  community  development  lending,  and  investments  in  low-income  housing  all,  of  which  strive  to  improve  the 
communities that our employees and customers call home.

Merger with Wellesley Bancorp, Inc. 

On  June  1,  2020,  the  Company  completed  its  merger  with  Wellesley  (“the  Wellesley  Merger”),  adding  6  banking  offices  in 
Massachusetts. Under the terms of the Agreement and Plan of Merger with Wellesley, each outstanding share of Wellesley common 
stock  was  converted  into  0.580  shares  of  the  Company’s  common  stock.  As  a  result  of  the  merger,  former  Wellesley  shareholders 
received an aggregate of 1,502,814 shares of the Company’s common stock.  The total consideration paid amounted to $88.8 million, 
based on the closing price of $58.00 of the Company’s common stock, the value of Wellesley’s exercisable options, and cash paid for 
fractional shares on May 31, 2020.    

The Company accounted for the Wellesley Merger using the acquisition method pursuant to the Business Combinations Topic of the 
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Accordingly, the Company recorded 
merger expenses of approximately $6.4 million for the year ended December 31, 2020. The Company recorded total assets of $985.6 
million, assumed total liabilities of $917.6 million, and recorded an additional $20.7 million in goodwill.  Additionally, the Company 
recorded $8.6 million in provision for credit losses to reflect the impact of CECL  merger accounting on June 1, 2020. See NOTE 4 – 
MERGERS.  

Merger with Optima Bank & Trust Company

The  Company  completed  its  merger  with  Optima  on  April  17,  2019.  Under  the  terms  of  the  Agreement  and  Plan  of  Merger  with 
Optima,  each  outstanding  share  of  Optima  common  stock  was  converted  into  $32.00  in  cash  or  0.3468  shares  of  the  Company’s 
common  stock,  with  the  transaction  structured  as  95  percent  common  stock  and  5  percent  cash.    As  a  result  of  the  merger,  former 
Optima  shareholders  received  an  aggregate  of  approximately  722,746  shares  of  the  Company’s  common  stock  and  an  aggregate  of 
approximately $3.5 million in cash. The total consideration paid amounted to $64.3 million. 

3

The  Company  accounted  for  the  merger  using  the  acquisition  method  and  recorded  total  assets  of  $555.7  million,  assumed  total 
liabilities  of  $491.4  million,  and  recorded  an  additional  $30.8  million  in  goodwill.  Additionally,  the  Company  recorded  merger 
expenses of $3.9 million for the year ended December 31, 2019.  

Market Area

The Company operates in Eastern Massachusetts and Southern New Hampshire. Our primary lending market includes Middlesex and 
Norfolk counties in Massachusetts and Rockingham and Hillsborough counties in New Hampshire. We benefit from the presence of 
numerous  institutions  of  higher  learning,  medical  care  and  research  centers,  a  vibrant  innovation  economy  in  life  sciences  and 
technology,  and  the  corporate  headquarters  of  several  significant  financial  service  companies  within  the  Boston  area.  Eastern 
Massachusetts  also  has  many  high-technology  companies  employing  personnel  with  specialized  skills.  These  factors  affect  the 
demand  for  wealth  management  services,  residential  homes,  multi-family  apartments,  office  buildings,  shopping  centers,  industrial 
warehouses, and other commercial properties. 

Our lending area is primarily an urban market area with a substantial number of one-to-four-unit residential properties, some of which 
are  non-owner  occupied,  as  well  as  apartment  buildings,  condominiums,  office  buildings,  and  retail  space.  As  a  result,  our  loan 
portfolio contains a significantly greater number of multi-family and commercial real estate loans compared to institutions that operate 
in non-urban markets. 

Our  market  area  is  located  largely  in  the  Boston-Cambridge-Quincy,  Massachusetts/New  Hampshire  Metropolitan  Statistical  Area 
(“MSA”).  The  United  States  Census  Bureau  estimates  that  as  of  April  2020,  the  Boston  metropolitan  area  is  the  10th  largest 
metropolitan  area  in  the  United  States.  Located  adjacent  to  major  transportation  corridors,  the  Boston  metropolitan  area  provides  a 
highly  diversified  economic  base,  with  major  employment  sectors  ranging  from  services,  education,  manufacturing,  and 
wholesale/retail trade, to finance, technology, and medical care. According to the United States Department of Labor, in December 
2020,  the  Boston-Cambridge-Nashua,  Massachusetts/New  Hampshire  MSA  had  an  unemployment  rate  of  6.9%  compared  to  the 
national unemployment rate of 6.5%.

Competition

The financial services industry is highly competitive. The Company experiences substantial competition with other commercial banks, 
savings  and  loan  associations,  securities  and  brokerage  companies,  mortgage  companies,  insurance  companies,  finance  companies, 
money market funds, credit unions, and other non-bank financial service providers in attracting deposits, making loans, and attracting 
wealth management customers. The competing major commercial banks have greater resources that may provide them a competitive 
advantage  by  enabling  them  to  maintain  numerous  branch  offices  and  mount  extensive  advertising  campaigns.  The  increasingly 
competitive  environment  is  the  result  of  changes  in  regulation,  changes  in  technology  and  product  delivery  systems,  additional 
financial service providers, and the accelerating pace of consolidation among financial services providers.  

The financial services industry has become even more competitive as a result of legislative, regulatory, and technological changes and 
continued  consolidation.  Banks,  securities  firms,  and  insurance  companies  can  merge  under  the  umbrella  of  a  financial  holding 
company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency 
and underwriting), and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer 
products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.

Some of the Company’s non-banking competitors have fewer regulatory constraints and may have lower cost structures. In addition, 
some of the Company’s competitors have assets, capital, and lending limits greater than that of the Company, greater access to capital 
markets,  and  offer  a  broader  range  of  products  and  services  than  the  Company. These  institutions  may  have  the  ability  to  finance 
wide-ranging advertising campaigns and may also be able to offer lower rates on loans and higher rates on deposits than the Company 
can offer. Some of these institutions offer services, such as international banking, which the Company does not directly offer.

Various in-state market competitors and out-of-state banks continue to enter or have announced plans to enter or expand their presence 
in  the  market  areas  in  which  the  Company  currently  operates.  With  the  addition  of  new  banking  presences  within  our  market,  the 
Company expects increased competition for loans, deposits, and other financial products and services.

The Bank is a private bank, stressing the holistic client relationship, and relies upon local promotional activities, personal relationships 
established by officers, directors, and employees with their clients, and specialized services tailored to meet the needs of the communities 
served.  While  the  Bank’s  position  varies  by  market,  management  believes  that  it  can  compete  effectively  as  a  result  of  local  market 
knowledge, local decision making, and awareness of client needs.

4

Supervision and Regulation

General

Banking is a complex, highly regulated industry. Consequently, the performance of the Company and the Bank can be affected not 
only by management decisions and general and local economic conditions, but also by the statutes enacted by the U.S. Congress and 
state legislatures, and the regulations and policies of, various governmental regulatory authorities. These authorities include, but are 
not limited to, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Massachusetts Division of Banks 
(the “MA DOB”), the State of New Hampshire Banking Department, and the FDIC. 

The primary goals of bank regulation are to maintain a safe and sound banking system and to facilitate the conduct of sound monetary 
policy. In furtherance of these goals, the U.S. Congress and the Commonwealth of Massachusetts have created largely autonomous 
regulatory  agencies  that  oversee  and  have  enacted  numerous  laws  that  govern  banks,  bank  holding  companies,  and  the  banking 
industry. The system of supervision and regulation applicable to the Company and the Bank establishes a comprehensive framework 
for the entities’ respective operations and is intended primarily for the protection of the Bank’s depositors and the public, rather than 
the  shareholders  and  creditors.  The  following  summarizes  the  significant  laws,  rules,  and  regulations  governing  banks  and  bank 
holding companies, including the Company and the Bank, but does not purport to be a complete summary of all applicable laws, rules, 
and  regulations  governing  bank  holding  companies  and  banks  or  the  Company  or  the  Bank.  The  descriptions  are  qualified  in  their 
entirety  by  reference  to  the  specific  statutes,  regulations,  and  policies  discussed.  Any  change  in  applicable  laws,  regulations,  or 
regulatory  policies  may  have  a  material  effect  on  our  businesses,  operations,  and  prospects.  The  Company  is  unable  to  predict  the 
nature or extent of the effects that economic controls or new federal or state legislation may have on our business and earnings in the 
future.

In addition to the summary below, as a result of the COVID-19 pandemic, the U.S. bank regulators issued several letters and other 
guidance to bank holding companies and banks regarding expectations for supporting the community and certain related temporary 
regulatory changes or accommodations, including, for example, temporary relief for banks that may exceed certain regulatory asset 
thresholds due in large part to their participation in government programs established in response to the COVID-19 pandemic. The 
Company continues to monitor guidance and developments related to COVID-19.

Regulatory Agencies 

The  Company  is  a  legal  entity  separate  and  distinct  from  its  first-tier  bank  subsidiary,  the  Bank,  and  its  second-tier  subsidiaries, 
Cambridge  Trust  Company  of  New  Hampshire,  Inc.,  a  New  Hampshire  state-chartered  non-depository  trust  company,  and  CTC 
Security  Corporation  and  CTC  Security  Corporation  III,  which  are  used  to  invest  the  Bank’s  deposits  and  borrowed  funds  in 
investment  securities.  As  a  bank  holding  company,  the  Company  is  regulated  under  the  Bank  Holding  Company  Act  of  1956,  as 
amended (“BHC Act”), Massachusetts laws applying to bank holding companies and Massachusetts corporations more generally. The 
Company is subject to inspection, examination, and supervision by the Federal Reserve and the MA DOB.

As  a  Massachusetts  state-chartered  insured  depository  institution,  the  Bank  is  subject  to  supervision,  periodic  examination,  and 
regulation by the MA DOB as its chartering authority, and by the FDIC as its primary federal regulator. The prior approval of the MA 
DOB  and  the  FDIC  is  required,  among  other  things,  for  the  Bank  to  establish  or  relocate  any  additional  branch  offices,  assume 
deposits,  or  engage  in  any  merger,  consolidation,  purchase,  or  sale  of  all  or  substantially  all  the  assets  of  any  insured  depository 
institution.

Cambridge Trust Company of New Hampshire, Inc. is subject to supervision, periodic examination, and regulation by The State of 
New Hampshire Banking Department.

Bank Holding Company Regulations Applicable to the Company

The BHC Act and other federal laws and regulations subject bank holding companies to particular restrictions on the types of activities 
in  which  they  may  engage  and  to  a  range  of  supervisory  requirements  and  activities,  including  regulatory  enforcement  actions  for 
violations of laws and regulations. As a Massachusetts corporation and bank holding company, the Company is also subject to certain 
limitations and restrictions under applicable Massachusetts law.

Mergers & Acquisitions   

The BHC Act, the Bank Merger Act, the laws of the Commonwealth of Massachusetts applicable to financial institutions, and other 
federal and state statutes regulate acquisitions of banks and their holding companies. The BHC Act generally limits acquisitions by 
bank holding companies to banks and companies engaged in activities that the Federal Reserve has determined to be so closely related 
to banking as to be a proper incident thereto. The BHC Act requires every bank holding company to obtain the prior approval of the 
Federal Reserve before (i) acquiring more than 5% of the voting stock of any bank or other bank holding company, (ii) acquiring all or 
substantially  all  the  assets  of  any  bank  or  bank  holding  company,  or  (iii) merging  or  consolidating  with  any  other  bank  holding 
company.

5

In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities generally consider, 
among other things, the competitive effect and public benefits of the transactions, the financial and managerial resources and future 
prospects  of  the  combined  organization  (including  the  capital  position  of  the  combined  organization),  the  applicant’s  performance 
record under the Community Reinvestment Act (see —Community Reinvestment Act), fair housing laws, and the effectiveness of the 
subject organizations in combating money laundering activities.

Non-bank Activities

Generally, bank holding companies are prohibited, under the BHC Act, from engaging in, or acquiring direct or indirect control  of 
more than 5% of the voting shares of any company engaged in, any activity other than (i) banking or managing or controlling banks or 
(ii) an activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of 
banking. The Federal Reserve has the authority to require a bank holding company to terminate an activity or terminate control of, or 
liquidate or divest, certain subsidiaries or affiliates when the Federal Reserve believes the activity or the control of the subsidiary or 
affiliate constitutes a significant risk to the financial safety, soundness, or stability of any of its bank subsidiaries. 

A  bank  holding  company  that  qualifies  and  elects  to  become  a  financial  holding  company  is  permitted  to  engage  in  additional 
activities that are financial in nature or incidental or complementary to financial activity. The Company currently has no plans to make 
a financial holding company election. 

Bank  holding  companies  and  their  non-banking  subsidiaries  are  prohibited  from  engaging  in  activities  that  represent  unsafe  and 
unsound banking practices. For example, under certain circumstances the Federal Reserve’s Regulation Y requires a holding company 
to give the Federal Reserve prior notice of any redemption or repurchase of its own equity securities if the consideration to be paid, 
together with the consideration paid for any other redemptions or repurchases in the preceding year, is equal to 10% or more of the 
bank holding company’s consolidated net worth. The Federal Reserve may oppose the transaction if it believes that the transaction 
would  constitute  an  unsafe  or  unsound  practice  or  would  violate  a regulation.  As  another  example,  a  bank  holding  company  is 
prohibited from impairing its subsidiary bank’s soundness by causing the bank to make funds available to non-bank subsidiaries or 
their customers if the Federal Reserve believes it is not prudent to do so. The Federal Reserve has the power to assess civil money 
penalties for knowing or reckless violations if the activities leading to a violation caused a substantial loss to a depository institution. 
Potential penalties can reach as high as almost $2.0 million for each day such activity continues.

Source of Strength  

In accordance with Federal Reserve policy, the Company is expected to act as a source of financial and managerial strength to the 
Bank. Section 616 of the Dodd-Frank Act codifies the requirement that bank holding companies serve as a source of financial strength 
to their subsidiary depository institutions. Under this policy, the holding company is expected to commit resources to support its bank 
subsidiary,  including  at  times  when  the  holding  company  may  not  be  in  a  financial  position  to  provide  it.  As  discussed  below,  the 
Company  could  be  required  to  guarantee  the  capital  plan  of  the  Bank  if  it  becomes  undercapitalized  for  purposes  of  banking 
regulations. Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits and to 
certain other indebtedness of such subsidiary bank. The BHC Act provides that, in the event of a bank holding company’s bankruptcy, 
any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be 
assumed by the bankruptcy trustee and entitled to priority of payment. 

Regulatory  agencies  have  promulgated  regulations  to  increase  the  capital  requirements  for  bank  holding  companies  to  a  level  that 
matches those of banking institutions. See — Capital Adequacy and Prompt Corrective Action and Safety and Soundness.

Annual Reporting & Examinations   

The Company is required to file annual and periodic reports with the Federal Reserve and such additional information as the Federal 
Reserve may require. The Federal Reserve may examine a bank holding company and any of its subsidiaries and charge the Company 
for the cost of such an examination.

Imposition of Liability for Undercapitalized Subsidiaries 

Pursuant  to  Section  38  of  the  Federal  Deposit  Insurance  Act  (the  “FDIA”)  federal  banking  agencies  are  required  to  take  “prompt 
corrective action” should an insured depository institution fail to meet certain capital adequacy standards. In the event an institution 
becomes  “undercapitalized,”  it  must  submit  a  capital  restoration  plan.  The  capital  restoration  plan  will  not  be  accepted  by  the 
regulators unless each company “having control of” the undercapitalized institution has “guaranteed” the subsidiary’s compliance with 
the capital restoration plan until it has been “adequately capitalized” on average during each of four consecutive calendar quarters. For 
purposes  of  this  statute,  the  Company  has  control  of  the  Bank.  Under  the  FDIA,  the  aggregate  guarantee  liability  of  all  companies 
controlling  a  particular  institution  is  limited  to  the  lesser  of  5%  of  the  depository  institution’s  total  assets  at  the  time  it  became 

6

undercapitalized or the amount necessary to bring the institution into compliance with applicable capital standards. The FDIA grants 
greater  powers  to  the  federal  banking  agencies  in  situations  where  an  institution  becomes  “significantly”  or  “critically” 
undercapitalized or fails to submit a capital restoration plan. For example, a bank holding company controlling such an institution can 
be required to obtain prior Federal Reserve approval of proposed distributions or might be required to consent to a merger or to divest 
the troubled institution or other affiliates. See — Capital Adequacy and Prompt Corrective Action and Safety and Soundness.

Dividends  

Dividends from the Bank are the Company’s principal source of cash revenues. The Company’s earnings and activities are affected by 
legislation, regulations, and local legislative and administrative bodies and decisions of courts in the jurisdictions in which we conduct 
business. These include limitations on the ability of the Bank to pay dividends to the Company and our ability to pay dividends to our 
shareholders. It is the policy of the Federal Reserve that bank holding companies should pay cash dividends on common stock only 
out  of  income  available  over  the  past  year  and  only  if  prospective  earnings  retention  is  consistent  with  the  organization’s  expected 
future needs and financial condition. This policy provides that bank holding companies should not maintain a level of cash dividends 
that  undermines  the  bank  holding  company’s  ability  to  serve  as  a  source  of  strength  to  its  bank  subsidiary.  Consistent  with  such 
policy,  a  banking  organization  should  have  comprehensive  policies  on  dividend  payments  that  clearly  articulate  the  organization’s 
objectives and approaches for maintaining a strong capital position and achieving the objectives of the policy statement. The Company 
has a comprehensive dividend policy in place.

The FDIC has the authority to use its enforcement powers to prohibit a bank from paying dividends if, in its opinion, the payment of 
dividends  would  constitute  an  unsafe  or  unsound  practice.  Federal  law  also  prohibits  the  payment  of  dividends  by  a  bank  that  will 
result in the bank failing to meet its applicable capital requirements on a pro forma basis. Under applicable Massachusetts law, the 
Bank’s board may declare from net profits cash dividends annually, semi-annually, or quarterly, but not more frequently, and noncash 
dividends at any time, although no dividends may be declared, credited, or paid so long as there is any impairment of capital stock. 
The MA DOB Commissioner’s approval is required in order to authorize the payment of a dividend, if the total dividends declared in 
a calendar year exceed that year’s net profits combined with retained net profits for the preceding two years, less any required transfer 
to surplus or a fund for the retirement of any preferred stock.

Transactions with Affiliates 

Transactions between a bank and its affiliates are subject to certain restrictions under Sections 23A and 23B of the Federal Reserve 
Act (the “FRA”) and the Federal Reserve’s implementing Regulation W. The Company is considered an “affiliate” of the Bank under 
these sections. Generally, Sections 23A and 23B: (1) limit the extent to which an insured depository or its subsidiaries may engage in 
covered  transactions  (a) with  an  affiliate  (as  defined  in  such  sections)  to  an  amount  equal  to  10%  of  such  institution’s  capital  and 
surplus  and  (b) with  all  affiliates,  in  the  aggregate,  to  an  amount  equal  to  20%  of  such  capital  and  surplus;  and  (2) require  all 
transactions with an affiliate, whether or not covered transactions, to be on terms substantially the same, or at least as favorable to the 
institution or subsidiary, as the terms provided or that would be provided to a non-affiliate. The term “covered transaction” includes 
the  making  of  loans  to  an  affiliate,  purchase  securities  issued  by  an  affiliate,  purchase  of  assets  from  an  affiliate,  issuance  of  a 
guarantee on behalf of an affiliate, and other similar types of transactions.

Capital Adequacy 

In July 2013, the Federal Reserve, the Office of the Comptroller of the Currency (“OCC”), and the FDIC approved final rules (the 
“Capital  Rules”)  establishing  a  new  comprehensive  capital  framework  for  U.S.  banking  organizations.  The  Capital  Rules  generally 
implement the Basel Committee on Banking Supervision’s (the “Basel Committee”) December 2010 final capital framework referred 
to  as  “Basel  III”  for  strengthening  international  capital  standards.  The  Capital  Rules  revise  the  definitions  and  the  components  of 
regulatory capital, as well as address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Capital 
Rules also address asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios and 
replace the existing general risk-weighting approach with a more risk-sensitive approach.

The Capital Rules: (i) include “Common Equity Tier 1” (“CET1”) and related regulatory capital ratio of CET1 to risk-weighted assets; 
(ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) 
mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; 
and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations. Under the Capital 
Rules, for most banking organizations, including the Company, the most common form of Additional Tier 1 capital is non-cumulative 
perpetual  preferred  stock,  and  the  most  common  forms  of  Tier  2  capital  are  subordinated  notes  and  a  portion  of  the  allocation  for 
allowance for credit losses, in each case, subject to the Capital Rules’ specific requirements.

7

Pursuant to the Capital Rules, effective January 1, 2015, the minimum capital ratios are as follows:

•

•

•

•

4.5% CET1 to risk-weighted assets;

6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

4.0%  Tier  1  capital  to  average  consolidated  assets  as  reported  on  consolidated  financial  statements  (called  “leverage 
ratio”).

The  Capital  Rules  also  include  a  “capital  conservation  buffer,”  composed  entirely  of  CET1,  in  addition  to  these  minimum  risk-
weighted  asset  ratios.  The  capital  conservation  buffer  is  designed  to  absorb  losses  during  periods  of  economic  stress.  Banking 
institutions that do not hold the requisite capital conservation buffer will face constraints on dividends, capital instrument repurchases, 
interest  payments  on  capital  instruments  and  discretionary  bonus  payments  based  on  the  amount  of  the  shortfall.  Thus,  the  capital 
standards  applicable  to  the  Company  include  an  additional  capital  conservation  buffer  of  2.5%  of  CET1,  effectively  resulting  in 
minimum ratios inclusive of the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to 
risk-weighted assets of at least 8.5%, and (iii) total capital to risk-weighted assets of at least 10.5%.

The Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement 
that mortgage servicing assets, deferred tax assets arising from temporary differences that could not be realized through net operating 
loss carrybacks, and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one 
such  category  exceeds  10%  of  CET1  or  all  such  items,  in  the  aggregate,  exceed  15%  of  CET1.  In  November  2017,  the  Federal 
Reserve finalized a rule pausing the phase-in of these deductions and adjustments for non-advanced approaches institutions. In July 
2019, the Office of the Comptroller of the Currency, the Federal Reserve Board and the FDIC adopted a final rule intended to simply 
the  Capital  Rules  described  above  for  non-advanced  approaches  institutions.  Institutions  could  implement  the  provisions  of  the 
simplification rule beginning on January 1, 2020 and were required to implement them by April 1, 2020. The transition provisions to 
the Capital Rules issued by these agencies in November 2017 ceased to apply to an institution in the quarter in which it adopted the 
simplification rule. 

In addition, under the current general risk-based capital rules, the effects of accumulated other comprehensive income or loss items 
included  in  shareholders’  equity  (for  example,  mark-to-market  of  securities  held  in  the  available  for  sale  portfolio)  under  U.S. 
generally accepted accounting principles (“GAAP”) are reversed for the purposes of determining regulatory capital ratios. Pursuant to 
the Capital Rules, the effects of certain of the above items are not excluded. However, banking organizations, including the Company, 
that are not subject to the advanced approaches rule, could make a one-time permanent election to exclude these items. The Company 
made the one-time permanent election to exclude these items. 

The Capital Rules also preclude certain hybrid securities, such as trust preferred securities, from inclusion in bank holding companies’ 
Tier 1 capital, although bank holding companies that had total consolidated assets of less than $15 billion at December 31, 2009 may 
include trust preferred securities issued prior to May 19, 2010 as a component of Tier 1 capital.

The risk-weighting categories in the Capital Rules are standardized and include a risk-sensitive number of categories, depending on 
the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 1,250% for certain credit exposures, 
and resulting in higher risk weights for a variety of asset classes.

In September 2019, the Office of the Comptroller of the Currency, the Federal Reserve Board, and the FDIC adopted a final rule that 
is intended to further simply the Capital Rules for depository institutions and their holding companies that have less than $10 billion in 
total consolidated assets, such as us, if such institutions meet certain qualifying criteria. This final rule became effective on January 1, 
2020.  Under  this  final  rule,  if  we  meet  the  qualifying  criteria,  including  having  a  leverage  ratio  (equal  to  tier  1  capital  divided  by 
average total consolidated assets) of a certain size (greater than 8.5 percent through 2021 and 9 percent thereafter), we will be eligible 
to opt into the community bank leverage ratio framework. If we opt into this framework, we will be considered to have satisfied the 
generally applicable risk-based and leverage capital requirements in the Capital Rules (as modified pursuant to the simplification rule) 
and will be considered to have met the well-capitalized ratio requirements for PCA purposes. The Bank has not elected to adopt this 
framework. 

The Company and the Bank are in compliance with the currently applicable capital requirements.  

8

Prompt Corrective Action and Safety and Soundness

Pursuant  to  Section  38  of  the  FDIA,  federal  banking  agencies  are  required  to  take  “prompt  corrective  action”  should  a  depository 
institution fail to meet certain capital adequacy standards. At each successive lower capital category, an insured depository institution 
is  subject  to  more  restrictions  and  prohibitions,  including  restrictions  on  growth,  restrictions  on  interest  rates  paid  on  deposits, 
restrictions,  or  prohibitions  on  payment  of  dividends,  and  restrictions  on  the  acceptance  of  brokered  deposits.  For  example,  “well-
capitalized” institutions are permitted to accept brokered deposits, but banks that are not well-capitalized are generally restricted or 
prohibited from accepting such deposits. Furthermore, if an insured depository institution is classified in one of the undercapitalized 
categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company must 
guarantee  the  performance  of  that  plan.  Based  upon  its  capital  levels,  a  bank  that  is  classified  as  well-capitalized,  adequately 
capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking 
agency,  after  notice  and  opportunity  for  hearing,  determines  that  an  unsafe  or  unsound  condition  or  an  unsafe  or  unsound  practice 
warrants such treatment.

For purposes of prompt corrective action, to be: (i) well-capitalized, a bank must have a total risk-based capital ratio of at least 10%, a 
Tier 1 risk-based capital ratio of at least 8%, a CET1 risk-based capital ratio of at least 6.5%, and a Tier 1 leverage ratio of at least 5%; 
(ii) adequately capitalized, a bank must have a total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at least 
6%,  a  CET1  risk-based  capital  ratio  of  at  least  4.5%,  and  a  Tier  1  leverage  ratio  of  at  least  4%  (but  not  otherwise  meet  all  of  the 
criteria to be considered “well-capitalized”); (iii) undercapitalized, a bank would have a total risk-based capital ratio of less than 8%, a 
Tier 1 risk-based capital ratio of less than 6%, a CET1 risk-based capital ratio of less than 4.5%, or a Tier 1 leverage ratio of less than 
4%  (but  not  otherwise  meet  all  of  the  criteria  to  be  considered  “significantly”  or  “critically”  undercapitalized);  (iv)  significantly 
undercapitalized, a bank would have a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a 
CET1 risk-based capital ratio of less than 3%, or a Tier 1 leverage ratio of less than 3% (but not otherwise meet the criterion to be 
considered  “critically  undercapitalized”);  and  (v)  critically  undercapitalized,  a  bank  would  have  a  ratio  of  tangible  equity  to  total 
assets that is less than or equal to 2%.

The Bank is currently well-capitalized, under the prompt corrective action standards.

Bank holding companies and insured banks also may be subject to potential enforcement actions of varying levels of severity by the 
federal  banking  agencies  for  unsafe  or  unsound  practices  in  conducting  their  business,  or  for  violation  of  any  law,  rule,  regulation, 
condition  imposed  in  writing  by  the  agency  or  term  of  a  written  agreement  with  the  agency.  In  more  serious  cases,  enforcement 
actions  may  include:  issuances  of  directives  to  increase  capital;  issuances  of  formal  and  informal  agreements;  impositions  of  civil 
monetary penalties; issuances of a cease and desist order that can be judicially enforced; issuances of removal and prohibition orders 
against  officers,  directors,  and  other  institution−affiliated  parties;  terminations  of  the  bank’s  deposit  insurance;  appointment  of  a 
conservator or receiver for the bank; and enforcements of such actions through injunctions or restraining orders based upon a judicial 
determination that the agency would be harmed if such equitable relief was not granted.

Deposit Insurance

The Bank’s deposit accounts are fully insured by the Deposit Insurance Fund (the “DIF”) of the FDIC up to the deposit insurance limit 
of $250,000 per depositor, per insured institution, per ownership category, in accordance with applicable laws and regulations.

The FDIC uses a risk-based assessment system that imposes insurance premiums based upon a risk matrix that accounts for a bank’s 
capital level and supervisory rating (CAMELS rating). The risk matrix uses different risk categories distinguished by capital levels 
and  supervisory  ratings.  The  base  for  deposit  insurance  assessments  is  average  consolidated  total  assets  less  average  tangible 
equity.  Assessment rates are calculated using formulas that take into account the risk of the institution being assessed. The FDIC may 
increase or decrease the assessment rate schedule in order to manage the DIF to prescribed statutory target levels. An increase in the 
risk category for the Bank or in the assessment rates could have an adverse effect on the Bank’s, and consequently the Company’s 
earnings. The FDIC may terminate deposit insurance if it determines the institution involved has engaged in or is engaging in unsafe 
or unsound banking practices, is in an unsafe or unsound condition, or has violated applicable laws, regulations, or orders. The Bank is 
not aware of any practice, condition, or violation that might lead to the termination of its deposit insurance.

The  FDIA  and  FDIC  regulations  generally  limit  the  ability  of  an  insured  depository  institution  to  accept,  renew  or  roll  over  any 
brokered deposit unless the institution’s capital category is “well capitalized” or, with the FDIC’s approval, “adequately capitalized.” 
Depository institutions that have brokered deposits in excess of 10% of total assets are subject to increased FDIC deposit insurance 
premium assessments. However, for institutions that are well capitalized and have a CAMELS composite rating of 1 or 2, reciprocal 
deposits are deducted from brokered deposits. Section 202 of the Economic Growth, Regulatory Relief, and Consumer Protection Act 
(the “Economic Growth Act”), which was enacted in 2018, amended the FDIA to exempt a capped amount of reciprocal deposits from 
treatment as brokered deposits for certain insured depository institutions.

9

Depositor Preference

The  FDIA  provides  that,  in  the  event  of  the  “liquidation  or  other  resolution”  of  an  insured  depository  institution,  the  claims  of 
depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative 
expenses  of  the  FDIC  as  a  receiver,  will  have  priority  over  other  general  unsecured  claims  against  the  institution.  If  an  insured 
depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, 
non-deposit creditors, including the parent bank holding company, with respect to any extensions of credit they have made to such 
insured depository institution.

Consumer Financial Protection

The Company and the Bank are subject to a number of federal and state consumer protection laws that govern their relationship with 
customers.  These  laws  include  the  Consumer  Financial  Protection  Act  of  2010,  Equal  Credit  Opportunity  Act,  the  Fair  Credit 
Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability 
Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection 
Practices  Act,  the  Right  to  Financial  Privacy  Act,  the  Servicemembers  Civil  Relief  Act,  and  these  laws’  respective  state-law 
counterparts,  as  well  as  state  usury  laws  and  laws  regarding  unfair  and  deceptive  acts  and  practices.  These  and  other  federal  laws, 
among  other  things,  require  disclosures  of  the  cost  of  credit  and  terms  of  deposit  accounts,  provide  substantive  consumer  rights, 
prohibit  discrimination  in  credit  transactions,  regulate  the  use  of  credit  report  information,  provide  financial  privacy  protections, 
prohibit unfair, deceptive, and abusive practices, restrict the Bank’s ability to raise interest rates, and subject the Bank to substantial 
regulatory  oversight.  Violations  of  applicable  consumer  protection  laws  can  result  in  significant  potential  liability  from  litigation 
brought by customers, including actual damages, restitution, and attorneys’ fees.

Further, the Consumer Financial Protection Bureau (“CFPB”) has broad rulemaking authority for a wide range of consumer financial 
laws that apply to all banks, including, among other things, the authority to prohibit “unfair, deceptive or abusive” acts and practices. 
While there are no statutory definitions for those terms, the CFPB has found an act or practice to be “unfair” when: “(i) it causes or is 
likely  to  cause  substantial  injury  to  consumers;  (ii)  the  injury  is  not  reasonably  avoidable  by  consumers;  and  (iii)  the  injury  is  not 
outweighed  by  countervailing  benefits  to  consumers  or  to  competition.”  “Deceptive  acts  or  practices”  occur  when  “(i)  the  act  or 
practice misleads or is likely to mislead the consumer; (ii) the consumer’s interpretation is reasonable under the circumstances; and 
(iii) the misleading act or practice is material.” Finally, an act or practice is “abusive” when it: “(i) materially interferes with the ability 
of a consumer to understand a term or condition of a consumer financial product or service; or (ii) takes unreasonable advantage of (a) 
a consumer’s lack of understanding of the material risks, costs, or conditions of the product or service; (b) a consumer’s inability to 
protect his or her interests in selecting or using a consumer financial product or service; or (c) a consumer’s reasonable reliance on a 
covered person to act in his or her interests.”

Neither  the  Dodd-Frank  Act,  nor  the  individual  consumer  financial  protection  laws  prevent  states  from  adopting  stricter  consumer 
protection standards.

Community Reinvestment Act 

The Community Reinvestment Act of 1977 (the “CRA”) requires depository institutions to assist in meeting the credit needs of their 
market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the 
credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. 
These  factors  are  also  considered  in  evaluating  mergers,  acquisitions,  and  applications  to  open  a  branch  or  facility.  The  applicable 
federal banking agencies regularly conduct CRA examinations to assess the performance of financial institutions and assign one of 
four ratings to the institution’s records of meeting the credit needs of its community. The Bank received a “Satisfactory” rating during 
its last examination in July 2020.

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Insider Credit Transactions

Section 22(h) of the FRA and its implementing Regulation O restricts loans to directors, executive officers, and principal shareholders 
of a bank or its affiliates, and companies and political or campaign committees controlled by such persons (“insiders”). Under Section 
22(h), a loan by a bank to any insider may not exceed, together with all other outstanding loans to such person and any company or 
political or campaign committee controlled by such person, the bank’s loan-to-one-borrower limit. Loans to insiders above specified 
amounts must receive the prior approval of the board of directors. Further, under Section 22(h) of the FRA, loans to insiders must be 
made on terms substantially the same as offered in comparable transactions to other persons, except that such insiders may receive 
preferential  loans  made  under  a  benefit  or  compensation  program  that  is  widely  available  to  the  bank’s  (or,  if  applicable,  the  bank 
affiliate’s)  employees  and  does  not  give  preference  to  the  insider  over  the  employees.  Section  22(g)  of  the  FRA  places  additional 
limitations on loans to executive officers. A violation of these restrictions may result in the assessment of substantial civil monetary 
penalties on the affected bank or any officer, director, employee, agent, or other person participating in the conduct of the affairs of 
that bank, the imposition of a cease and desist order, and other regulatory sanctions.

Financial Privacy 

The  Company  is  subject  to  federal  laws,  including  the  Gramm-Leach-Bliley  Act  (the  “GLBA”),  and  certain  state  laws  containing 
consumer  privacy  protection  provisions.  These  provisions  limit  the  ability  of  banks  and  other  financial  institutions  to  disclose 
nonpublic  information  about  consumers  to  affiliated  and  non-affiliated  third  parties  and  limit  the  reuse  of  certain  consumer 
information received from non-affiliated financial institutions. These provisions require notice of privacy policies to customers and, in 
some  circumstances,  allow  consumers  to  prevent  disclosure  of  certain  nonpublic  personal  information  to  affiliates  or  non-affiliated 
third parties by means of “opt out” or “opt in” authorizations. 

Financial Data Security

The  GLBA  requires  that  financial  institutions  implement  comprehensive  written  information  security  programs  that  include 
administrative, technical, and physical safeguards to protect consumer information. Further, pursuant to interpretive guidance issued 
under the GLBA and certain state laws, financial institutions are required to notify customers and regulators of security breaches that 
result in unauthorized access to their nonpublic personal information. 

Incentive Compensation

The  Dodd-Frank  Act  requires  the  federal  banking  agencies  and  the  Securities  and  Exchange  Commission  (the  “SEC”)  to  establish 
joint  regulations  or  guidelines  prohibiting  incentive-based  payment  arrangements  at  specified  regulated  entities,  including  the 
Company  and  the  Bank,  with  at  least  $1  billion  in  total  consolidated  assets  that  encourage  inappropriate  risks  by  providing  an 
executive  officer,  employee,  director  or  principal  shareholder  with  excessive  compensation,  fees,  or  benefits  that  could  lead  to 
material financial loss to the entity. The federal banking agencies and the SEC most recently proposed such regulations in 2016, but 
the regulations have not yet been finalized. If the regulations are adopted in the form initially proposed, they will restrict the manner in 
which executive compensation is structured. 

The Dodd-Frank Act also requires publicly traded companies to give shareholders a non-binding vote on executive compensation and 
on so-called “golden parachute” payments in connection with approvals of mergers and acquisitions.

Anti-Money Laundering Initiatives and the USA PATRIOT Act

Under  Title  III  of  the  USA  PATRIOT  Act,  all  financial  institutions  are  required  to  take  certain  measures  to  identify  their  customers, 
prevent  money  laundering,  monitor  customer  transactions,  and  report  suspicious  activity  to  U.S.  law  enforcement  agencies.  Financial 
institutions  also  are  required  to  respond  to  requests  for  information  from  federal  banking  agencies  and  law  enforcement  agencies. 
Information sharing among financial institutions for the above purposes is encouraged by an exemption granted to complying financial 
institutions from the privacy provisions of the GLBA and other privacy laws. Financial institutions that hold correspondent accounts for 
foreign  banks  or  provide  private  banking  services  to  foreign  individuals  are  required  to  take  measures  to  avoid  dealing  with  certain 
foreign  individuals  or  entities,  including  foreign  banks  with  profiles  that  raise  money  laundering  concerns,  and  are  prohibited  from 
dealing with foreign “shell banks” and persons from jurisdictions of particular concern. The primary federal banking agencies and the 
Secretary  of  the  U.S.  Department  of  the  Treasury  have  adopted  regulations  to  implement  several  of  these  provisions.  All  financial 
institutions  also  are  required  to  establish  internal  anti-money  laundering  programs.  The  effectiveness  of  a  financial  institution  in 
combating money laundering activities is a factor to be considered in any application submitted by the financial institution under the Bank 
Merger Act. The Company has a Bank Secrecy Act and USA PATRIOT Act compliance program commensurate with its risk profile.

11

The Fair Credit Reporting Act’s Red Flags Rule requires financial institutions with covered accounts (e.g., consumer bank accounts 
and loans) to develop, implement, and administer an identity theft prevention program. This program must include reasonable policies 
and  procedures  to  detect  suspicious  patterns  or  practices  that  indicate  the  possibility  of  identity  theft,  such  as  inconsistencies  in 
personal information or changes in account activity. 

Office of Foreign Assets Control (“OFAC”) Regulation

The Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury administers and enforces economic and trade 
sanctions  based  on  U.S.  foreign  policy  and  national  security  goals  against  targeted  foreign  countries  and  regimes,  terrorists, 
international  narcotics  traffickers,  those  engaged  in  activities  related  to  the  proliferation  of  weapons  of  mass  destruction,  and  other 
threats to the national security, foreign policy, or economy of the United States. OFAC publishes lists of individuals and companies 
owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists 
and narcotics traffickers, designated under programs that are not country specific. These are typically known as the OFAC rules based 
on  their  administration  by  the  OFAC.  The  OFAC-administered  sanctions  targeting  countries  take  many  different  forms.  Generally, 
they  contain  one  or  more  of  the  following  elements:  (i)  restrictions  on  trade  with  or  investment  in  a  sanctioned  country,  including 
prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in 
financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; 
and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest by 
prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked 
assets (property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from OFAC. 
Failure to comply with these sanctions could have serious legal and reputational consequences.

Available Information

The  SEC  maintains  an  Internet  website  at  http://www.sec.gov  that  contains  reports,  proxy  and  information  statements,  and  other 
information regarding issuers that file electronically with the SEC.

Our Internet website is https://www.cambridgetrust.com. You can obtain on our website, free of charge, a copy of our Annual Report 
on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports, as soon as 
reasonably practicable after we electronically file such reports or amendments with, or furnish them to, the SEC. Our Internet website 
and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

Human Capital 

As  of  December  31,  2020,  the  Company  had  372  full-time  and  11  part-time  employees.  At  any  given  time,  less  than  1%  of  our 
employees are temporary. The Company’s employees are not represented by any collective bargaining unit. 

The Company is committed to recruiting, developing and promoting a diverse workforce to meet the current and future demands of 
our business. In 2019, we instituted a policy which requires that all searches for positions Vice President and above include least one 
racially  or  ethnically  diverse  and  one  female  candidate.  All  of  our  positions  are  listed  on  multiple  job  boards  specifically  targeted 
towards women, minorities, veterans, and people with disabilities. 

As of December 31, 2020, our overall workforce was 54.8% female and 21.3% racially or ethnically diverse. Of those employees with 
position titles of Vice President and above, 42% were female and 12.5% were racially or ethnically diverse. 

To  ensure  we  provide  a  rich  experience  for  our  employees,  we  measure  organizational  culture  and  engagement  by  periodically 
engaging  independent  third  parties  to  conduct  cultural  assessments  and  employee  engagement  surveys.  Our  employee  driven 
Engagement Committee and Culture Task Force focus on monitoring and making continuous improvements to our work environment 
and employee engagement.

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The Company encourages employees to contribute their personal best while respecting the balance between work and personal life. To 
empower employees to reach their potential, we provide training and development programs including traditional classroom training 
and coaching and experiential learning through Company-wide initiative beyond the scope of their everyday responsibilities. We also 
provide access to virtual and self-directed online courses in topics ranging from compliance to management skills through our BAI 
Learning system. To identify and develop our next generation of leaders, we have a robust talent and succession planning process and 
specialized programs to support the development of our talent pipeline at different levels.  The Company believes that its employee 
relations are good. 

Item 1A. Risk Factors. 

Risks Related to our Business and Industry

The  COVID-19  pandemic  is  adversely  impacting  us  and  our  customers,  counterparties,  employees,  and  third-party  service 
providers. Further, the COVID-19 pandemic could lead to an economic recession or other severe disruptions in the U.S. economy 
and may disrupt banking and other financial activity in the areas in which we operate and the adverse impacts on our business, 
financial position, results of operations and prospects could be significant. 

The  outbreak  of  COVID-19  has  caused  significant  economic  dislocation  in  the  United  States  as  many  state  and  local  governments 
have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-
down in economic activity and a related increase in unemployment. Since the COVID-19 outbreak, more than 70 million people have 
filed claims for unemployment, and stock markets have declined in value and in particular bank stocks have significantly declined in 
value. In response to the COVID-19 pandemic, the Federal Reserve has reduced the benchmark fed funds rate to a target range of 0% 
to 0.25%, and the yields on 10-year and 30-year treasury notes have declined to historic lows. Various state governments and federal 
agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). We 
have  instituted  payment  deferral  programs  to  aid  existing  borrowers  with  payment  forbearance.  In  addition,  the  federal  banking 
agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided 
relief  from  reporting  loan  classifications  due  to  modifications  related  to  the  COVID-19  outbreak.  Certain  industries  have  been 
particularly hard-hit, including the travel and hospitality industry, the restaurant industry, and the retail industry. Finally, the spread of 
COVID-19 has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of 
physical participation in meetings, events, and conferences. We have many employees working remotely and may take further actions 
as may be required by government authorities or that we determine is in the best interests of our employees, customers, and business 
partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our 
business. The extent of such impact will depend on future developments, which are highly uncertain, including when COVID-19 can 
be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related 
adverse  local  and  national  economic  consequences,  we  could  be  subject  to  any  of  the  following  risks,  any  of  which  could  have  a 
material, adverse effect on our business, financial condition, liquidity, and results of operations:

•

•

•

•

•

•

•

•

•

demand for products and services may decline, making it difficult to grow assets and income;

if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of 
time,  loan  delinquencies,  problem  assets,  and  foreclosures  may  increase,  resulting  in  increased  charges  and  reduced 
income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

our  allowance  for  credit  losses  may  have  to  be  increased  if  unemployment  forecasts  increase  or  borrowers  experience 
financial difficulties beyond forbearance periods, which will adversely affect our net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets 
may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin 
and spread and reducing net income;

a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly 
cash dividend;

our wealth management revenues may decline with continuing market turmoil; 

our cyber security risks are increased as the result of an increase in the number of employees working remotely; and

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• we  rely  on  third  party  vendors  for  certain  services  and  the  unavailability  of  a  critical  service  due  to  the  COVID-19 

outbreak could have an adverse effect on us.

These  factors,  among  others,  together  or  in  combination  with  other  events  or  occurrences  not  yet  known  or  anticipated,  could 
adversely affect our operations. In addition, other countries as well as the United States are currently experiencing a resurgence of the 
COVID-19 virus and if the rate of infections continues to rise, these factors will be exacerbated.

Deterioration in local economic conditions may negatively impact our financial performance.

The Company’s success depends primarily on the general economic conditions in Eastern Massachusetts and New Hampshire and the 
specific  local  markets  in  which  the  Company  operates.  Unlike  larger  national  or  other  regional  banks  that  are  more  geographically 
diversified, the Company provides banking and financial services to customers primarily in Massachusetts and New Hampshire. The local 
economic  conditions  in  these  areas  have  a  significant  impact  on  the  demand  for  the  Company’s  products  and  services  as  well  as  the 
ability of the Company’s customers to repay loans, the value of the collateral securing loans, and the stability of the Company’s deposit 
funding sources.

A downturn in our local economy may limit funds available for deposit and may negatively affect our borrowers’ ability to repay their 
loans on a timely basis, both of which could have an impact on our profitability.

Variations in interest rates may negatively affect our financial performance.

The  Company’s  earnings  and  financial  condition  are  largely  dependent  upon  net  interest  income,  which  is  the  difference  between 
interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads could 
adversely affect the Company’s earnings and financial condition. The Company cannot predict with certainty, or control, changes in 
interest  rates.  Regional  and  local  economic  conditions  and  the  policies  of  regulatory  authorities,  including  monetary  policies of  the 
Federal  Reserve,  affect  interest  income  and  interest  expense.  High  interest  rates  could  also  affect  the  amount  of  loans  that  the 
Company can originate because higher rates could cause customers to apply for fewer mortgages or cause depositors to shift funds 
from  accounts  that  have  a  comparatively  lower  cost  to  accounts  with  a  higher  cost.  The  Company  may  also  experience  customer 
attrition due to competitor pricing.  If the cost of interest-bearing deposits increases at a rate greater than the yields on interest-earning 
assets increase, then net interest income will be negatively affected. Changes in the asset and liability mix may also affect net interest 
income. Similarly, lower interest rates cause higher yielding assets to prepay and floating or adjustable-rate assets to reset to lower 
rates. If the Company is not able to reduce its funding costs sufficiently, due to either competitive factors or the maturity schedule of 
existing liabilities, then the Company’s net interest margin will decline.

Although management believes it has implemented effective asset and liability management strategies to mitigate the potential adverse 
effects  of  changes  in  interest  rates  on  the  Company’s  results  of  operations,  any  substantial  or  unexpected  change  in,  or  prolonged 
change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations. 

Changes in the economy or the financial markets could materially affect our financial performance.

Downturns in the United States or global economies or financial markets could adversely affect the demand for and income received 
from  the  Company’s  fee-based  services.  Revenues  from  the  Wealth  Management  Group  depend  in  large  part  on  the  level  of  assets 
under management and administration. Market volatility that leads customers to liquidate investments, as well as lower asset values, 
can  reduce  our  level  of  assets  under  management  and  administration  and  thereby  decrease  our  investment  management  and 
administration revenues.

Our loan portfolio includes loans with a higher risk of loss.

The Bank originates commercial and industrial loans, commercial real estate loans, consumer loans, and residential mortgage loans 
primarily  within  our  market  area.  Our  lending  strategy  focuses  on  residential  real  estate  lending,  as  well  as  servicing  commercial 
customers,  including  increased  emphasis  on  commercial  and  industrial  lending,  and  commercial  deposit  relationships.  Commercial 
and industrial loans, commercial real estate loans, and consumer loans may expose a lender to greater credit risk than loans secured by 
residential  real  estate  because  the  collateral  securing  these  loans  may  not  be  sold  as  easily  as  residential  real  estate.  In  addition, 
commercial real estate and commercial and industrial loans may also involve relatively large loan balances to individual borrowers or 
groups of borrowers. These loans also have greater credit risk than residential real estate for the following reasons: 

•

Commercial  Real  Estate  Loans.  Repayment  is  dependent  on  income  being  generated  in  amounts  sufficient  to  cover 
operating expenses and debt service.

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•

•

Commercial  and  Industrial  Loans.  Repayment  is  generally  dependent  upon  the  successful  operation  of  the  borrower’s 
business.

Consumer  Loans.  Consumer  loans  are  collateralized,  if  at  all,  with  assets  that  may  not  provide  an  adequate  source  of 
payment of the loan due to depreciation, damage, or loss.

Any  downturn  in  the  real  estate  market  or  local  economy  could  adversely  affect  the  value  of  the  properties  securing  the  loans  or 
revenues from the borrowers’ businesses thereby increasing the risk of non-performing loans. 

We may experience losses and expenses if security interests granted for loans are not enforceable.  

When  the  Company  makes  loans  it  sometimes  obtains  liens,  such  as  real  estate  mortgages  or  other  asset  pledges,  to  provide  the 
Company  with  a  security  interest  in  collateral.  If  there  is  a  loan  default,  the  Company  may  seek  to  foreclose  upon  collateral  and 
enforce  the  security  interests  to  obtain  repayment  and  eliminate  or  mitigate  the  Company’s  loss.  Drafting  errors,  recording  errors, 
other defects or imperfections in the security interests granted to the Company and/or changes in law may render liens granted to the 
Company unenforceable. The Company may incur losses or expenses if security interests granted to the Company are not enforceable.

If our allowance for credit losses is not sufficient to cover actual loan losses, then our earnings will decrease.

The Bank’s loan customers may not repay their loans according to their terms and the collateral securing the payment of these loans 
may be insufficient to pay any remaining loan balance. The Bank therefore may experience significant credit losses, which could have 
a material adverse effect on our operating results. Material additions to our allowance for credit losses would materially decrease our 
net income, and the charge-off of loans may cause us to increase the allowance. The Bank makes various assumptions and judgments 
about the collectability of the loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other 
assets  serving  as  collateral  for  the  repayment  of  many  of  our  loans.  We  rely  on  our  loan  quality  reviews,  our  experience,  and  our 
evaluation  of  economic  conditions,  among  other  factors,  in  determining  the  amount  of  the  allowance  for  credit  losses.  If  our 
assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, 
resulting in additions to our allowance.

Strong competition within our industry and market area could hurt our performance and slow our growth.

The  Company  operates  in  a  competitive  market  for  both  attracting  deposits,  which  is  our  primary  source  of  funds,  and  originating 
loans. Historically, our most direct competition for deposits has come from savings and commercial banks. Our competition for loans 
comes  principally  from  commercial  banks,  savings  institutions,  mortgage  banking  firms,  credit  unions,  finance  companies,  mutual 
funds, insurance companies, and investment banking firms. We also face additional competition from internet-based institutions and 
brokerage firms. Competition for loan originations and deposits may limit our future growth and earnings prospects.

The Company’s ability to compete successfully depends on a number of factors, including, among other things:

•

•

•

•

•

•

•

the ability to develop, maintain, and build upon long-term customer relationships based on service quality, high ethical 
standards and reputation;

the ability to expand the Company’s market position;

the scope, relevance, and pricing of products and services offered to meet customer needs and demands;

the rate at which the Company introduces new products, services, and technologies relative to its competitors;

customer satisfaction with the Company’s level of service;

industry and general economic trends; and

the ability to attract and retain talented employees.

Failure to perform in any of these areas could significantly weaken the Company’s competitive position, which could adversely affect 
the Company’s growth and profitability, which, in turn, could have a material adverse effect on the Company’s financial condition and 
results of operations.

The Company’s earnings may not grow if we are unable to successfully attract core deposits and lending opportunities and execute 
opportunities to generate fee-based income. 

The Company has experienced growth, and our future business strategy is to continue to expand. Historically, the growth of our loans 
and deposits has been the principal factor in our increase in net-interest income. In the event that we are unable to execute our business 
strategy of continued growth in loans and deposits, our earnings could be adversely impacted. The Company’s ability to continue to 

15

grow  depends,  in  part,  upon  our  ability  to  expand  our  market  share,  to  successfully  attract  core  deposits  and  identify  loan  and 
investment opportunities, as well as opportunities to generate fee-based income. Our ability to manage growth successfully will also 
depend on whether we can continue to efficiently fund asset growth and maintain asset quality and cost controls, as well as on factors 
beyond our control, such as economic conditions and interest-rate trends.

There are substantial risks and uncertainties associated with the introduction or expansion of lines of business or new products 
and services within existing lines of business. 

From  time  to  time,  the  Company  may  implement  new  lines  of  business  or  offer  new  products  and  services  within  existing  lines  of 
business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not 
fully  developed.  In  developing  and  marketing  new  lines  of  business  and/or  new  products  and  services,  the  Company  may  invest 
significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or 
services may not be achieved and price and profitability targets may not prove attainable.  External factors, such as compliance with 
regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of 
business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant 
impact  on  the  effectiveness  of  the  Company’s  system  of  internal  controls.  Failure  to  successfully  manage  these  risks  in  the 
development  and  implementation  of  new  lines  of  business  or  new  products  or  services  could  have  a  material  adverse  effect  on  the 
Company’s business, results of operations, and financial condition.

The Company is subject to liquidity risk, which could adversely affect net interest income and earnings.

The purpose of the Company’s liquidity management is to meet the cash flow obligations of its customers for both deposits and loans.  
One liquidity measurement the Company utilizes is called basic surplus, which captures the adequacy of the Company’s access to reliable 
sources of cash relative to the stability of its funding mix of average liabilities. This approach recognizes the importance of balancing 
levels  of  cash  flow  liquidity  from  short-  and  long-term  securities  with  the  availability  of  dependable  borrowing  sources  which can  be 
accessed when necessary.  However, competitive pressure on deposit pricing could result in a decrease in the Company’s deposit base or 
an increase in funding costs. In addition, liquidity will come under additional pressure if loan growth exceeds deposit growth.  To manage 
this risk, the Company has the ability to purchase brokered certificates of deposit, borrow against established borrowing facilities with 
other banks (Federal funds), and enter into repurchase agreements with investment companies. Depending on the level of interest rates, 
the Company’s net interest income, and therefore earnings, could be adversely affected. 

Our ability to service our debt, pay dividends, and otherwise pay our obligations as they come due is substantially dependent on 
capital distributions from our subsidiary.

The  Company  is  a  separate  and  distinct  legal  entity  from  its  subsidiary,  the  Bank.  It  receives  substantially  all  of  its  revenue  from 
dividends  from  the  Bank.  These  dividends  are  the  principal  source  of  funds  to  pay  dividends  on  the  Company’s  common  stock.  
Various  federal  and/or  state  laws  and  regulations  limit  the  amount  of  dividends  that  the  Bank  may  pay  to  the  Company.  Also,  the 
Company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims 
of  the  subsidiary’s  depositors  and  certain  other  creditors.  In  the  event  the  Bank  is  unable  to  pay  dividends  to  the  Company,  the 
Company may not be able to service debt, pay obligations, or pay dividends on the Company’s common stock. The inability to receive 
dividends  from  the  Bank  could  have  a  material  adverse  effect  on  the  Company’s  business,  financial  condition,  and  results  of 
operations.

The  Company  depends  on  its  executive  officers  and  key  personnel  to  continue  the  implementation  of  our  long-term  business 
strategy and could be harmed by the loss of their services. 

The Company believes that its continued growth and future success will depend in large part upon the skills of our management team. 
The competition for qualified personnel in the financial services industry is intense, and the loss of our key personnel, or an inability 
to continue to attract or retain and motivate key personnel could adversely affect our business. We cannot provide any assurance that 
we will be able to retain our existing key personnel, attract additional qualified personnel, or effectively manage the succession of key 
personnel. We have change of control agreements with our actively employed named executive officers, and the loss of the services of 
one or more of our executive officers or key personnel could impair our ability to continue to develop our business strategy.

16

The Company relies on third parties to provide key components of its business infrastructure. 

The  Company  relies  on  third  parties  to  provide  key  components  for  its  business  operations,  such  as  data  processing  and  storage, 
recording  and  monitoring  transactions,  online  banking  interfaces  and  services,  internet  connections,  and  network  access.  While  the 
Company  selects  these  third-party  vendors  carefully,  it  does  not  control  their  actions.  Any  problems  caused  by  these  third  parties, 
including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to 
handle  current  or  higher  volumes,  cyber-attacks  and  security  breaches  at  a  vendor,  failure  of  a  vendor  to  provide  services  for  any 
reason, or poor performance of services by a vendor, could adversely affect the Company’s ability to deliver products and services to 
its  customers  and  otherwise  conduct  its  business.  Financial  or  operational  difficulties  of  a  third-party  vendor  could  also  hurt  the 
Company’s  operations  if  those  difficulties  interfere  with  the  vendor’s  ability  to  serve  the  Company.  Replacing  these  third-party 
vendors could create significant delays and expense that adversely affect the Company’s business and performance.

The possibility of the economy’s return to recessionary conditions and the possibility of further turmoil or volatility in the financial 
markets would likely have an adverse effect on our business, financial position, and results of operations.

The  economy  in  the  United  States  and  globally  has  experienced  volatility  in  recent  years  and  may  continue  to  experience  such 
volatility for the foreseeable future. There can be no assurance that economic conditions will not worsen. Unfavorable or uncertain 
economic conditions can be caused by declines in economic growth, business activity, or investor or business confidence, limitations 
on  the  availability  or  increases  in  the  cost  of  credit  and  capital,  increases  in  inflation  or  interest  rates,  the  timing  and  impact  of 
changing  governmental  policies,  natural  disasters,  epidemics  /  pandemics,  such  as  COVID-19,  terrorist  attacks,  acts  of  war,  or  a 
combination of these or other factors. A worsening of business and economic conditions could have adverse effects on our business, 
including the following:

•

•

•

•

•

•

•

investors may have less confidence in the equity markets in general and in financial services industry stocks in particular, 
which could place downward pressure on the Company’s stock price and resulting market valuation; 

economic and market developments may further affect consumer and business confidence levels and may cause declines 
in credit usage and adverse changes in payment patterns, causing increases in delinquencies and default rates; 

the Company’s ability to assess the creditworthiness of its customers may be impaired if the models and approaches the 
Company uses to select, manage, and underwrite its customers become less predictive of future behaviors;

the Company could suffer decreases in demand for loans or other financial products and services or decreased deposits or 
other investments in accounts with the Company; 

customers  of  the  Company’s  Wealth  Management  Group  may  liquidate  investments,  which  together  with  lower  asset 
values,  may  reduce  the  level  of  assets  under  management  and  administration,  and  thereby  decrease  the  Company’s 
investment management and administration revenues; 

competition  in  the  financial  services  industry  could  intensify  as  a  result  of  the  increasing  consolidation  of  financial 
services companies in connection with current market conditions or otherwise; and

the value of loans and other assets or collateral securing loans may decrease.

The Company may be adversely affected by the soundness of other financial institutions, including the FHLB of Boston.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other 
financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, or other relationships. 
The Company has exposure to different industries and counterparties, and we routinely execute transactions with counterparties in the 
financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other 
institutional  clients.  As  a  result,  defaults  by,  or  even  rumors  or  questions  about,  one  or  more  financial  services  companies,  or  the 
financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other 
institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our 
credit risk may be exacerbated if the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full 
amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect 
our business, financial condition, or results of operations.

The  Company  owns  common  stock  of  the  Federal  Home  Loan  Bank  of  Boston  (“FHLB  of  Boston”)  in  order  to  qualify  for 
membership in the FHLB system, which enables it to borrow funds under the FHLB of Boston’s advance program. The carrying value 
and fair market value of our FHLB of Boston common stock was $5.7 million as of December 31, 2020. There are 11 branches of the 
FHLB, including Boston, which are jointly liable for the consolidated obligations of the FHLB system. To the extent that one FHLB 
branch  cannot  meet  its  obligations  to  pay  its  share  of  the  system’s  debt,  other  FHLB  branches  can  be  called  upon  to  make  the 
payment.  Any  adverse  effects  on  the  FHLB  of  Boston  could  adversely  affect  the  value  of  our  investment  in  its  common  stock  and 
negatively impact our results of operations.

17

Risks Related to an Investment in the Company’s Securities

The Company’s common stock price may fluctuate significantly.

The market price of the Company’s common stock may fluctuate significantly in response to a number of factors including, but not 
limited to:

•

•

•

•

•

•

•

•

•

•

•

the  political  climate  and  whether  the  proposed  policies  of  the  current  presidential  administration  in  the  U.S.  that  have 
affected market prices for financial institution stocks are successfully implemented;

changes in securities analysts’ recommendations or expectations of financial performance;

volatility of stock market prices and volumes;

incorrect information or speculation;

changes in industry valuations;

announcements regarding proposed acquisitions;

variations in operating results from general expectations;

actions taken against the Company by various regulatory agencies;

changes in authoritative accounting guidance;

changes  in  general  domestic  economic  conditions  such  as  inflation  rates,  tax  rates,  unemployment  rates,  labor  and 
healthcare cost trend rates, recessions, and changing government policies, laws, and regulations; and

severe weather, natural disasters, epidemics / pandemics such as COVID-19, acts of war or terrorism, and other external 
events.

Future issuance of our common stock may have a dilutive effect and may reduce the voting power and relative percentage interests 
of  current  common  stockholders  in  our  earnings  and  market  value,  and  there  may  be  future  sales  or  other  dilution  of  the 
Company’s equity, which may adversely affect the market price of the Company’s stock. 

Future  issuances  of  shares  of  our  common  stock,  including  for  acquisitions,  may  have  a  dilutive  effect  and  may  reduce  the  voting 
power and relative percentage interests of current common stockholders in our earnings and market value. Additionally, the Company 
is not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that 
represent the right to receive, common stock. The Company also grants shares of common stock to employees and directors under the 
Company’s incentive plan each year. The issuance of any additional shares of the Company’s common stock or securities convertible 
into, exchangeable for or that represent the right to receive common stock, or the exercise of such securities could be substantially 
dilutive to shareholders of the Company’s common stock. Holders of the Company’s common stock have no preemptive rights that 
entitle such holders to purchase their pro rata share of any offering of shares or any class or series. Because the Company’s decision to 
issue securities in any future offering will depend on market conditions, its acquisition activity and other factors, the Company cannot 
predict  or  estimate  the  amount,  timing,  or  nature  of  its  future  offerings.  Thus,  the  Company’s  shareholders  bear  the  risk  of  the 
Company’s  future  offerings  reducing  the  market  price  of  the  Company’s  common  stock  and  diluting  their  stock  holdings  in  the 
Company.

Risks Related to Legal, Governmental and Regulatory Changes

The  Company  is  subject  to  extensive  government  regulation  and  supervision,  which  may  interfere  with  its  ability  to  conduct  its 
business and may negatively impact its financial results.

The Company, primarily through the Bank, Cambridge Trust Company of New Hampshire, Inc., and certain non-bank subsidiaries, 
are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ 
funds, the DIF and the safety and soundness of the banking system as a whole, not shareholders. These laws and regulations affect the 
Company’s lending practices, capital structure, investment practices, dividend policy, and growth, among other things. Congress and 
federal  and  state  banking  agencies  continually  review  banking  laws,  regulations,  and  policies  for  possible  changes.  Changes  to 
statutes, regulations, or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, 
could affect the Company in substantial and unpredictable ways. Such changes could subject the Company to additional costs, limit 
the  types  of  financial  services  and  products  the  Company  may  offer,  and/or  limit  the  pricing  the  Company  may  charge  on  certain 
banking services, among other things. Compliance personnel and resources may increase our costs of operations and adversely impact 
our earnings.

18

Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation 
damage, which could have a material adverse effect on our business, financial condition, and results of operations. While the Company has 
policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.

State  and  federal  banking  agencies  periodically  conduct  examinations  of  our  business,  including  for  compliance  with  laws  and 
regulations,  and  our  failure  to  comply  with  any  supervisory  actions  to  which  we  are  or  become  subject  as  a  result  of  such 
examinations may adversely affect our business.

Federal  and  state  regulatory  agencies  periodically  conduct  examinations  of  our  business,  including  our  compliance  with  laws  and 
regulations. If, as a result of an examination, an agency were to determine that the financial, capital resources, asset quality, earnings 
prospects,  management,  liquidity,  or  other  aspects  of  any  of  our  operations  had  become  unsatisfactory  or  violates  any  law  or 
regulation, such agency may take certain remedial or enforcement actions it deems appropriate to correct any deficiency. Remedial or 
enforcement actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions 
resulting from any violation or practice, to issue an administrative order that can be judicially enforced against a bank, to direct an 
increase in the bank’s capital, to restrict the bank’s growth, to assess civil monetary penalties against a bank’s officers or directors, and 
to  remove  officers  and  directors.  In  the  event  that  the  FDIC  concludes  that,  among  other  things,  our  financial  condition  cannot  be 
corrected or that there is an imminent risk of loss to our depositors, it may terminate our deposit insurance. The Consumer Financial 
Protection  Bureau  (“CFPB”)  also  has  authority  to  take  enforcement  actions,  including  cease-and  desist  orders  or  civil  monetary 
penalties, if it finds that we offer consumer financial products and services in violation of federal consumer financial protection laws.

If we are unable to comply with future regulatory directives, or with the terms of any future supervisory requirements to which we 
may become subject, then we could become subject to a variety of supervisory actions and orders, including cease and desist orders, 
prompt  corrective  actions,  memoranda  of  understanding,  and  other  regulatory  enforcement  actions.  Such  supervisory  actions  could, 
among  other  things,  impose  greater  restrictions  on  our  business,  as  well  as  our  ability  to  develop  any  new  business.  The  Company 
could also be required to raise additional capital or dispose of certain assets and liabilities within a prescribed time period, or both. 
Failure to implement remedial measures as required by financial regulatory agencies could result in additional orders or penalties from 
federal and state regulators, which could trigger one or more of the remedial actions described above. The terms of any supervisory 
action and associated consequences with any failure to comply with any supervisory action could have a material negative effect on 
our business, operating flexibility, and overall financial condition.

The Company may be subject to more stringent capital requirements. 

The Bank and the Company are each subject to capital adequacy guidelines and other regulatory requirements specifying minimum 
amounts and types of capital which each of the Bank and the Company must maintain. From time to time, the regulators implement 
changes  to  these  regulatory  capital  adequacy  guidelines.  If  we  fail  to  meet  these  minimum  capital  guidelines  and  other  regulatory 
requirements, then our financial condition would be materially and adversely affected. Any changes to regulatory capital requirements 
could adversely affect our ability to pay dividends or could require us to reduce business levels or to raise capital, including in ways 
that may adversely affect our financial condition or results of operations.

Replacement  of  the  LIBOR  benchmark  interest  rate  could  adversely  affect  our  business,  financial  condition,  and  results  of 
operations.    

In  2017,  the  United  Kingdom’s  Financial  Conduct  Authority  (“FCA”),  which  regulates  the  London  Interbank  Offered  Rate 
(“LIBOR”), announced that the FCA intends to stop persuading or compelling banks to submit the rates required to calculate LIBOR 
after 2021. This announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 
2021. The U.S. bank regulators issued a Statement on LIBOR Transition on November 30, 2020 encouraging banks to transition away 
from U.S. Dollar (USD) LIBOR as soon as practicable and in any event by December 31, 2021 for new contracts. LIBOR is currently 
anticipated to be fully phased out by June 30, 2023. At this time, it is not possible to predict whether and to what extent banks will 
continue to provide submissions for the calculation of LIBOR. Similarly, it is not possible to predict whether LIBOR will continue to 
be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR or what the effect of 
any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments.

We  have  other  financial  instruments  with  attributes  that  are  either  directly  or  indirectly  dependent  on  LIBOR.  The  transition  from 
LIBOR, or any changes or reforms to the determination or supervision of LIBOR, could have an adverse impact on the market for or 
value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us, could create 
considerable  costs  and  additional  risk  and  could  have  an  adverse  impact  on  or  overall  financial  condition  or  results  of  operations. 
Since  proposed  alternative  rates  are  calculated  differently,  payments  under  contracts  referencing  new  rates  will  differ  from  those 
referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, 
product  design  and  hedging  strategies.  Furthermore,  failure  to  adequately  manage  this  transition  process  with  our  customers  could 
adversely impact our reputation. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR 
will  be,  failure  to  adequately  manage  the  transition  could  have  a  material  adverse  effect  on  our  business,  financial  condition,  and 
results of operations.

19

Accounting standards periodically change and the application of our accounting policies and methods may require management to 
make estimates about matters that are uncertain.

The  regulatory  bodies  that  establish  accounting  standards,  including,  among  others,  the  FASB,  and  the  SEC,  periodically  revise  or 
issue new financial accounting and reporting standards that govern the preparation of our consolidated financial statements. The effect 
of such revised or new standards on our financial statements can be difficult to predict and can materially impact how we record and 
report our financial condition and results of operations.

In  addition, management  must  exercise  judgment  in  appropriately  applying  many  of  our  accounting  policies  and  methods  so  they 
comply with generally accepted accounting principles. In some cases, management may have to select a particular accounting policy 
or  method  from  two  or  more  alternatives.  In  some  cases,  the  accounting  policy  or  method  chosen  might  be  reasonable  under  the 
circumstances and yet might result in our reporting materially different amounts than would have been reported if we had selected a 
different policy or method. Accounting policies are critical to fairly presenting our financial condition and results of operations and 
may require management to make difficult, subjective, or complex judgments about matters that are uncertain.

Our controls and procedures may fail or be circumvented, which may result in a material adverse effect on our business.

Management  regularly  reviews  and  updates  our  internal  controls,  disclosure  controls  and  procedures,  and  corporate  governance 
policies. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only 
reasonable,  not  absolute,  assurances  that  the  objectives  of  the  system  are  met.  Any  failure  or  circumvention  of  the  controls  and 
procedures or failure to comply with regulations related to could have a material adverse effect on our business, results of operations 
and financial condition.

Legal proceedings to which we are subject or may become subject may have a material adverse impact on our financial position 
and results of operations.

Like  many  banks  and  other  financial  services  organizations  in  our  industry,  we  are  from  time  to  time  involved  in  various  legal 
proceedings and subject to claims and other actions related to our business activities brought by customers, employees, and others. All 
such  legal  proceedings  are  inherently  unpredictable  and,  regardless  of  the  merits  of  the  claims,  litigation  is  often  expensive,  time-
consuming, disruptive to our operations and resources, and distracting to management. If resolved against us, such legal proceedings 
could result in excessive verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our 
financial  condition  and  how  we  operate  our  business.  Similarly,  if  we  settle  such  legal  proceedings,  it  may  affect  our  financial 
condition  and  how  we  operate  our  business.  Future  court  decisions,  alternative  dispute  resolution  awards,  matters  arising  due  to 
business  expansion,  or  legislative  activity  may  increase  our  exposure  to  litigation  and  regulatory  investigations.   In  some  cases, 
substantial non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can 
be no assurance that such coverage will cover any particular verdict, judgment, or settlement that may be entered against us, that such 
coverage  will  prove  to  be  adequate,  or  that  such  coverage  will  continue  to  remain  available  on  acceptable  terms,  if  at  all.  Legal 
proceedings to which we are subject or may become subject may have a material adverse impact on our financial position and results 
of operations.

The Company is exposed to risk of environmental liabilities with respect to properties to which we obtain title. 

A significant portion of our loan portfolio is secured by real estate. In the course of our business, we may foreclose and take title to 
real  estate  and  could  be  subject  to  environmental  liabilities  with  respect  to  these  properties.  The  Company  may  be  held  liable  to  a 
government entity or to third parties for property damage, personal injury, investigation, and clean-up costs incurred by these parties 
in connection with environmental contamination or may be required to clean up hazardous or toxic substances or chemical releases at 
a property. The costs associated with investigation and remediation activities could be substantial. In addition, if we are the owner or 
former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting 
from environmental contamination emanating from the property. These costs and claims could adversely affect our business, results of 
operations, and prospects.

20

Risks Related to Cybersecurity and Data Privacy

A breach of information security, including cyber-attacks, could disrupt our business and impact our earnings.

The  Company  depends  upon  data  processing,  communication,  and  information  exchange  on  a  variety  of  computing  platforms  and 
networks  and  over  the  internet.  In  addition,  we  rely  on  the  services  of  a  variety  of  vendors  to  meet  our  data  processing  and 
communication needs.  Despite existing safeguards, we cannot be certain that all of our systems are free from vulnerability to attack or 
other technological difficulties or failures. During the normal course of our business, we have experienced and we expect to continue 
to  experience  attempts  to  breach  our  systems,  none  of  which  has  been  material  to  the  Company  to  date,  and  we  may  be  unable  to 
protect sensitive data and the integrity of our systems. If information security is breached or difficulties or failures occur, despite the 
controls we and our third-party vendors have instituted, information can be lost or misappropriated, resulting in financial loss or costs 
to  us,  reputational  harm,  or  damages  to  others.  Such  costs  or  losses  could  exceed  the  amount  of  insurance  coverage,  if  any,  which 
would adversely affect our earnings.

The Company may be adversely affected by fraud.

The Company is inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, customers, and 
other  third  parties  targeting  the  Company  and/or  the  Company’s  customers  or  data.  Such  activity  may  take  many  forms,  including 
check  fraud,  electronic  fraud,  wire  fraud,  phishing,  social  engineering,  and  other  dishonest  acts.  During  the  normal  course  of  our 
business, we have been subjected to and we expect to continue to be subject to theft and fraudulent activity, none of which has been 
material to the Company to date. 

The Company continually encounters technological change and the failure to understand and adapt to these changes could hurt 
its business.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-
driven  products  and  services.  The  effective  use  of  technology  increases  efficiency  and  enables  financial  institutions  to  better  serve 
customers and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by 
using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the 
Company’s  operations.  Many  of  the  Company’s  competitors  have  substantially  greater  resources  to  invest  in  technological 
improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful 
in marketing these products and services to its customers. Failure to successfully keep pace with technological changes affecting the 
financial  services  industry  could  have  a  material  adverse  impact  on  the  Company’s  business  and,  in  turn,  the  Company’s  financial 
condition and results of operations.

Risks Related to Acquisitions 

The  risks  presented  by  acquisitions,  such  as  the  acquisition  of  Optima  and  the  Wellesley  Merger,  could  adversely  affect  our 
financial condition and results of operations. 

The business strategy of the Company may include growth through acquisition such as the acquisition of Optima and the Wellesley 
merger.    Any  such  future  acquisitions  will  be  accompanied  by  the  risks  commonly  encountered  in  acquisitions.    These  risks  may 
include, among other things:

•

•

•

•

•

our ability to realize anticipated cost savings;

the difficulty of integrating operations and personnel, and the loss of key employees;

the potential disruption of our or the acquired company’s ongoing business in such a way that could result in decreased 
revenues, the inability of our management to maximize our financial and strategic position;

the inability to maintain uniform standards, controls, procedures, and policies; and

the  impairment  of  relationships  with  the  acquired  company’s  employees  and  customers  as  a  result  of  changes  in 
ownership and management.

The Company cannot provide any assurance that we will be successful in overcoming these risks or any other problems encountered in 
connection with acquisitions. Our inability to overcome these risks could have an adverse effect on the achievement of our business 
strategy and results of operations.

The  integration  of  the  Company  and  Wellesley  will  present  significant  challenges  that  may  result  in  the  combined  business  not 
operating as effectively as expected or in the failure to achieve some or all of the anticipated benefits of the transaction.

The benefits and synergies expected to result from the Wellesley merger will depend in part on whether the operations of Wellesley 
can be integrated in a timely and efficient manner with those of the Company. The Company will face challenges in consolidating its 

21

functions with those of Wellesley, and integrating the organizations, procedures, and operations of the two businesses. The integration 
of the Company and Wellesley will be complex and time-consuming, and the management of both companies will have to dedicate 
substantial time and resources to it. These efforts could divert management’s focus and resources from serving existing customers or 
other strategic opportunities and from day-to-day operational matters during the integration process. Failure to successfully integrate 
the  operations  of  the  Company  and  Wellesley  could  result  in  the  failure  to  achieve  some  of  the  anticipated  benefits  from  the 
transaction,  including  cost  savings  and  other  operating  efficiencies,  and  the  Company  may  not  be  able  to  capitalize  on  the  existing 
relationships of Wellesley to the extent anticipated, or it may take longer, or be more difficult or expensive than expected to achieve 
these goals. This could have an adverse effect on the business, results of operations, financial condition, or prospects of the Company 
and/or the Bank after the transaction.

General Risks

Natural disasters, acts of war or terrorism, the impact of health epidemics and other adverse external events could detrimentally 
affect our financial condition and results of operations.

Natural disasters, acts of war or terrorism, and other adverse external events could have a significant negative impact on our ability to 
conduct  business  or  upon  third  parties  who  perform  operational  services  for  us  or  our  customers. Such  events  also  could  affect the 
stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, 
cause significant property damage, result in lost revenue or cause us to incur additional expenses.

The recent COVID-19 outbreak could negatively impact the ability of our employees and customers to engage in banking and other 
financial transactions in the geographic areas in which the Company operates. The Company also could be adversely affected if key 
personnel  or  a  significant  number  of  employees  were  to  become  unavailable  due  to  a  coronavirus  outbreak  in  our  market  areas. 
Although  the  Company  has  business  continuity  plans  and  other  safeguards  in  place,  there  is  no  assurance  that  such  plans  and 
safeguards  will  be  effective. In  the  event  of  a  natural  disaster,  the  spread  of  the  coronavirus  to  our  market  areas  or  other  adverse 
external events, our business, services, asset quality, financial condition and results of operations could be adversely affected.

The effects of widespread public health emergencies may negatively affect our local economies or disrupt our operations, which 
would have an adverse effect on our business or results of operations. 

Widespread  health  emergencies,  such  as  the  recent  coronavirus  outbreak,  can  disrupt  our  operations  through  their  impact  on  our 
employees, customers and their businesses, and the communities in which we operate. Disruptions to our customers could result in 
increased risk of delinquencies, defaults, foreclosures, and losses on our loans, negatively impact regional economic conditions, result 
in a decline in local loan demand, loan originations and deposit availability and negatively impact the implementation of our growth 
strategy. Any one or more of these developments could have a material adverse effect on our business, financial condition, and results 
of operations.

Item 1B. Unresolved Staff Comments. 

None. 

Item 2. Properties. 

The  Company  conducts  its  business  through  21  private  banking  offices,  including  its  main  banking  office  and  headquarters  in 
Cambridge, Massachusetts. The Company also has operations centers in Burlington and Wellesley, Massachusetts, and Portsmouth, 
New Hampshire, five wealth management offices, and two off-site ATMs.  

Item 3. Legal Proceedings. 

From time to time, the Company and its subsidiaries may be parties to various claims and lawsuits arising in the ordinary course of 
their  normal  business  activities.  Although  the  ultimate  outcome  of  these  suits,  if  any,  cannot  be  ascertained  at  this  time,  it  is  the 
opinion of management that none of these matters, even if it resolved adversely to the Company, will have a material adverse effect on 
the Company’s consolidated financial position. The Company is not currently party to any material pending legal proceedings.  

Item 4. Mine Safety Disclosures.

None. 

22

PART II

Item 5. Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities. 

Market Information 

On October 18, 2017, shares of the Company’s common stock commenced trading on the NASDAQ Stock Market under the symbol 
“CATC”. Prior to this date, the Company’s shares traded on the over-the-counter market. 

As of February 28, 2021, there were 6,940,649 shares of the Company’s common stock outstanding held by 559 holders of record. 
The  number  of  record-holders  may  not  reflect  the  number  of  persons  or  entities  holding  stock  in  nominee  name  through  banks, 
brokerage  firms,  and  other  nominees.  The  closing  price  of  the  Company’s  common  stock  on  December 31,  2020  was  $69.75.  The 
Company declared cash dividends of $2.12 and $2.04 per share in 2020 and 2019, respectively.  

The continued payment of dividends depends upon our profitability, debt and equity structure, earnings, financial condition, need for 
capital  and  other  factors,  including  economic  conditions,  regulatory  restrictions,  and  tax  considerations.  We  cannot  guarantee  the 
payment of dividends or that, if paid, that dividends will not be reduced or eliminated in the future. 

The only funds available for the payment of dividends on our capital stock will be cash and cash equivalents held by us, dividends 
paid to us by the Bank, and borrowings. The Bank will be prohibited from paying cash dividends to us to the extent that any such 
payment would reduce the Bank’s capital below required capital levels. 

The Company’s primary source of funds for dividends paid to shareholders is the receipt of dividends from the Bank. A discussion of 
the  restrictions  on  the  advance  of  funds  or  payments  of  dividends  by  the  Bank  to  the  Company  is  included  in  “Supervision  and 
Regulation – Dividends.”

Stock Performance Graph

The following compares the cumulative total shareholder return on the Company’s common stock against the cumulative total return 
of the KBW NASDAQ Index and the SNL U.S. Bank and Thrift Index from December 31, 2015 to December 31, 2020. The results 
presented assume that the value of the Company’s common stock and each index was $100.00 on December 31, 2015. The total return 
assumes reinvestment of dividends.

NASDAQ:CATC: 47.15 %

SNL U.S. Bank and Thrift: 28.65 %

KBW Nasdaq Bank Index: 33.97 %

)

%

(

e
g
n
a
h
C
e
c
i
r

P

125

100

75

50

25

0

-25

Dec '15

Jun '16

Dec '16

Jun'17

Dec '17

Jun '18

Dec '18

Jun '19

Dec '19

Jun '20

Dec '20

Index
NASDAQ:CATC: 47.15 %
SNL U.S. Bank and Thrift: 28.65 %
KBW Nasdaq Bank Index: 33.97 %

Dec '15
0.00
0.00
0.00

Jun '16
-1.71
-10.42
-11.25

Period Ending
Dec '16
31.41
23.34
25.60

Jun'17
41.88
27.53
30.81

Dec '17
68.35
42.40
46.01

Jun '18
82.57
38.00
42.16

Dec '18
75.63
15.88
17.39

Jun '19
71.94
31.92
34.08

Dec '19
69.09
52.66
55.11

Jun '20
24.98
-0.72
1.99

Dec '20
47.15
28.65
33.97

Source:  S&P Global Market Intelligence © 2021

23

 
 
 
This  performance  graph  shall  not  be  deemed  “filed”  for  the  purposes  of  Section  18  of  the  Securities  Exchange  Act  of  1934,  as 
amended, or incorporated by reference into any filing by us under the Securities Act of 1933, as amended, or the Securities Exchange
Act, except as shall be expressly set forth by specific reference in such filing.

Issuer Purchase of Equity Securities

The  following  table  sets  forth  the  information  regarding  the  Company’s  repurchases  of  its  common  stock  during  the  three  months 
ended December 31, 2020:  

Period

October 1 to October 31, 2020
November 1 to November 30, 2020
December 1 to December 31, 2020

Total

Total Number of
Shares Repurchased (1)

Weighted Average
Price Paid Per Share

— $
172
$
— $
172

—
69.74
—

(1)

Shares repurchased by the Company relate to shares tendered by employees to pay their income tax liability on current period 
equity award vestings.

On March 15, 2021, the Company's board of directors authorized a stock repurchase program to acquire from time to time up to 5.0%
shares of the Company’s common stock through March 15, 2022, provided that the aggregate purchase price does not exceed $26.0
million.  The timing and amount of any shares of the Company’s common stock repurchased will be determined by the Company’s
management  based  on  its  evaluation  of  market  conditions  and  other  factors.   The  stock  repurchase  program  may  be  suspended  or 
discontinued at any time.

Recent Sales of Unregistered Securities

There were no unregistered sales of equity securities during the year ended December 31, 2020.

24

Item 6. Selected Financial Data. 

The selected consolidated financial data set forth below does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information 
including the Consolidated Financial Statements and related Notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 

p

Operating Data
Interest Income
Interest Expense
Net Interest and Dividend Income
Provision for Credit Losses
Noninterest Income
Noninterest Expense
Income Before Taxes
Income Taxes
Net Income (a GAAP Measure)

p

g

g

Operating Net Income (a non-GAAP measure)*
Average shares outstanding, basic
Average shares outstanding, diluted
Total shares outstanding
g
Basic Earnings Per Share
Diluted Earnings Per Share
Operating Diluted Earnings Per Share (a non-GAAP measure)*
Dividends Declared Per Share
Dividend payout ratio (1)

g

Financial Condition Data
Total Assets
Total Deposits
Total Loans
Shareholders' Equity
Book Value Per Share
Tangible Book Value Per Share (a non-GAAP measure)*

g

g

Performance Ratios
Return on Average Assets
Operating Return on Average Assets (a non-GAAP measure)*
Return on Average Shareholders' equity
y
q
Operating Return on Tangible Common Equity (a non-GAAP measure)*
Total Shareholders’ Equity to Total Assets
q
Interest rate spread (2)
Net Interest Margin, taxable equivalent (3)
Efficiency ratio (4)
Operating Efficiency Ratio (a non-GAAP measure)*
g

g

y

y

q

p

Wealth Management Assets
Market Value of Assets Under Management & Administration

g

Asset Quality
Non-Performing Loans
Non-Performing Loans/Total Loans
Net (Charge-Offs)/Recoveries
g
Allowance/Total Loans

Capital Ratios (5):
Total capital
p
Tier 1 capital
Common Equity Tier 1
q
Tier 1 leverage capital

y

Other Data:
Number of full-service offices
Full time equivalent employees

$

$

$

$
$
$
$

$

$

$

$

$

$

$

$

$
$
$
$

$

$

$

$

$

2020

129,378
9,145
120,233
18,310
39,525
98,085
43,363
11,404
31,959

43,870
6,289,481
6,344,409
6,926,728
5.07
5.03
6.90
2.12

42%

3,949,297
3,403,083
3,153,648
401,732
58.00
50.07

0.91%
1.25%
9.09%
14.38%
10.17%
3.52%
3.65%
61.40%
56.66%

4,167,903

8,962
0.28%
(439 )
1.14%

13.93%
12.68%
12.68%
8.89%

21
372

2019

December 31,
2018
(dollars in thousands, except per share data)

2017

$

$

$

$
$
$
$

$

$

$

$

$

96,339
17,643
78,696
3,004
36,401
78,175
33,918
8,661
25,257

29,156
4,629,255
4,661,720
5,400,868
5.41
5.37
6.20
2.04

38%

2,855,563
2,358,878
2,226,728
286,561
53.06
46.66

0.97%
1.12%
11.40%
14.80%
10.04%
2.93%
3.22%
67.92%
63.78%

3,452,852

5,651
0.25%
(1,592 )
0.82%

13.61%
12.70%
12.70%
8.98%

16
303

$

$

$

$
$
$
$

$

$

$

$

$

69,055
5,467
63,588
1,502
32,989
63,987
31,088
7,207
23,881

24,024
4,061,529
4,098,633
4,107,051
5.82
5.77
5.80
1.96

34%

2,101,384
1,811,410
1,559,772
167,026
40.67
40.57

1.21%
1.21%
15.35%
15.49%
7.95%
3.19%
3.33%
66.25%
66.05%

2,876,702

642
0.04%
(54 )
1.08%

13.25%
12.07%
12.07%
8.49%

10
252

$

$

$
$
$
$

$

$

$

$

$

61,191
3,587
57,604
362
30,224
59,292
28,174
13,358
14,816

18,687
4,030,530
4,065,754
4,082,188
3.64
3.61
4.56
1.86

51%

1,949,934
1,775,400
1,350,899
147,957
36.24
36.14

0.79%
1.00%
10.47%
13.24%
7.59%
3.16%
3.25%
67.51%
67.51%

3,085,669

1,298
0.10%
(303 )
1.13%

13.75%
12.50%
12.50%
8.06%

11
239

2016

57,028
3,355
53,673
132
28,661
56,750
25,452
8,556
16,896

16,896
3,990,343
4,028,944
4,036,879
4.19
4.15
4.15
1.84

44%

1,848,999
1,686,038
1,320,154
134,671
33.36
33.26

0.95%
0.95%
12.77%
12.81%
7.28%
3.12%
3.21%
68.93%
68.93%

2,689,103

1,676
0.13%
(62 )
1.16%

13.14%
11.89%
11.89%
7.95%

11
238

*

(1)
(2)

(3)
(4)
(5)

See GAAP to Non-GAAP reconciliations in Item 7 

Dividend payout ratio represents per share dividends declared divided by diluted earnings per share.
The interest rate spread represents the difference between the fully taxable equivalent weighted-average yield on interest-earning assets and the weighted-average cost of 
interest-bearing liabilities for the period.
The net interest margin represents fully taxable equivalent net interest income as a percent of average interest-earning assets for the period.
The efficiency ratio represents noninterest expense as a percentage of the sum of net interest income and noninterest income.
Capital ratios are for Cambridge Bancorp.

25

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW 

Cambridge  Bancorp  (together  with  its  bank  subsidiary,  unless  the  context  otherwise  requires,  the  “Company”)  is  a  Massachusetts 
state-chartered,  federally  registered  bank  holding  company  headquartered  in  Cambridge,  Massachusetts.  The  Company  is  a 
Massachusetts corporation formed in 1983 and has one banking subsidiary, Cambridge Trust Company (the “Bank”), formed in 1890.  
At December 31, 2020, the Company had total assets of approximately $3.9 billion. Currently, the Bank operates 21 private banking 
offices in Eastern Massachusetts and New Hampshire. The Company’s Wealth Management Group has five offices, one in Boston and 
Wellesley,  Massachusetts  and  three  in  New  Hampshire  in  Concord,  Manchester,  and  Portsmouth.  The  Company’s  Assets  under 
Management and Administration as of December 31, 2020 were approximately $4.2 billion. The Bank’s clients consist primarily of 
small- and medium-sized businesses and retail customers in these communities and surrounding areas throughout Massachusetts and 
New Hampshire. 

The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned 
on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income 
and fees from wealth management services, loans, deposits, as well as operating expenses, the provision for credit losses, the impact 
of federal and state income taxes, and the relative levels of interest rates and economic activity. 

CRITICAL ACCOUNTING POLICIES

Accounting policies involving significant judgments and assumptions by management, which have, or could have, a material impact 
on the carrying value of certain assets and impact income, are considered critical accounting policies. 

The Company considers allowance for credit losses and income taxes to be its critical accounting policies. 

Allowance for credit losses   

The  Company  adopted  ASU-2016-13  -  Financial  Instruments  -  Credit  Losses  (Topic  326):  Measurement  of  Credit  Losses  on 
Financial Instruments (“ASU 2016-13”) during the first quarter of 2020. ASU 2016-13, which has been codified under Topic 326, 
replaced the previous GAAP method of calculating loan losses. Previously, GAAP required the use of the incurred loss methodology 
versus ASU 2016-13 which utilizes an expected loss methodology. The use of an expected loss methodology, referred to as the current 
expected credit loss (“CECL”) methodology, requires institutions to account for potential losses that previously would not have been 
part of the calculation. The CECL methodology incorporates forecasting in addition to historical and current measures utilized in the 
prior incurred loss methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial 
assets measured at amortized cost, including loan receivables, held to maturity and available for sale debt securities. 

Under  the  CECL  methodology,  the  allowance  for  credit  losses  (“ACL”)  consists  of  quantitative  and  qualitative  components.  The 
quantitative  component  of  the ACL  is  model  based  and  utilizes  a  forward-looking  macroeconomic  forecast,  complemented  by  a 
qualitative  component  in  estimating  expected  credit  losses.  The  qualitative  component  of  the ACL considers  (i)  the  uncertainty  of 
forward-looking  scenarios;  (ii)  certain  portfolio  characteristics,  such  as  portfolio  concentrations,  real  estate  values,  changes  in  the 
number and amount of non-accrual and past due loans; and (iii) model limitations; among other factors.  

ASU 2016-13 also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of 
credit,  financial  guarantees,  and  other  similar  investment;)  and  net  investments  in  leases  recognized  by  a  lessor  in  accordance  with 
ASU 2016-02 - Leases (Topic 842).  

Losses on loan receivables are estimated and recognized upon origination of the loan, based on expected credit losses for the life of 
the loan balance as of the period end date. The Company uses a discounted cash flow method incorporating probability of default and 
loss given default forecasted based on statistically derived economic variable loss drivers combined with qualitative factors to estimate 
expected credit losses. This process includes estimates which involve modeling loss projections attributable to existing loan balances, 
considering historical experience, current conditions, and future expectations for homogeneous pools of loans over a reasonable and 
supportable  forecast  period.  The  historical  information  either  experienced  by  the  Company  or  by  a  selection  of  peer  banks  when 
appropriate, is derived from a combination of recessionary and non-recessionary performance periods for which data is available.

26

The  reasonable  and  supportable  forecast  period  is  primarily  determined  based  upon  the  stability  of  current  economic  conditions  at 
each measurement date. Management considers the accuracy level of historical loss forecast estimates, the specific loan level models 
and  methodology  utilized,  and  considers  material  changes  in  growth  and  credit  strategy;  and  business  changes  which  may  not  be 
applicable within the current environment. For periods beyond a reasonable and supportable forecast interval, we revert to historical 
information over a period for which comparable data is available.

We also perform a qualitative assessment beyond model estimates and apply qualitative adjustments as management deems necessary  
Adjustments  are  considered  when  management  believes  expected  credit  losses  are  not  representative  of  historical  loss  experience 
alone, and should be adjusted to reflect the current conditions and characteristics of the Company’s own portfolio.  They are made at 
the segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, and other relevant 
data shifts over time.

We evaluate the allowance for credit losses quarterly. We regularly review our collection experience (including delinquencies and net 
charge-offs) in determining our allowance for credit losses. We also consider our historical loss experience to date based on actual 
defaulted loans and overall portfolio indicators including delinquent and non-accrual loans, trends in loan volume and lending terms, 
credit policies and other observable environmental factors such as unemployment and interest rate changes.

The underlying assumptions, estimates and assessments we use to estimate the allowance for credit losses reflect management’s best 
estimate of model assumptions and forecasted conditions at that time. Changes in such estimates can significantly affect the allowance 
and  provision  for  credit  losses.  It  is  possible  and  likely  that  we  will  experience  credit  losses  that  are  different  from  our  current 
estimates.  Charge-offs  are  deducted  from  the  allowance  for  credit  losses  when  we  judge  the  principal  to  be  uncollectible,  and 
subsequent recoveries are added to the allowance, generally at the time cash is received on a charged-off account. 

The expected credit losses for unfunded commitments are measured over the contractual period of the Company’s exposure to credit 
risk. The estimate of credit loss incorporates assumptions for both the likelihood and amount of funding over the estimated life of the 
commitments,  for  the  risk  of  loss,  and  current  conditions  and  expectations.  Management  periodically  reviews  and  updates  its 
assumptions  for  estimated  funding  rates  based  on  historical  rates,  and  factors  such  as  portfolio  growth,  changes  to  organizational 
structure, economic conditions, borrowing habits, or any other factor which could impact the likelihood that funding will occur. The 
Company does not reserve for unfunded commitments which are unconditionally cancellable.

Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, the Commonwealth of Massachusetts, the 
State of New Hampshire, the State of Maine, and other states as required. Income taxes are accounted for under the asset and liability 
method.  Deferred  tax  assets  and  liabilities  are  reflected  at  currently  enacted  income  tax  rates  applicable  to  the  period  in  which  the 
deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets 
and  liabilities  are  adjusted  through  income  tax  expense.  Deferred  tax  assets  are  reviewed  quarterly  and  reduced  by  a  valuation 
allowance if, based upon the information available, it is more likely than not that some or all of the deferred tax assets will not be 
realized. Interest and penalties related to unrecognized tax benefits, if incurred, are recognized as a component of income tax expense. 

Recent Accounting Developments  

See  NOTE  3  –  RECENTLY  ISSUED  AND  ADOPTED  ACCOUNTING  STANDARDS  to  the  audited  Consolidated  Financial  Statements  for 
additional  details  on  other  recently  issued  and  adopted  accounting  pronouncements  and  their  expected  impact  on  the  Company’s 
financial statements.

27

COVID-19

In  December  2019,  a  novel  strain  of  coronavirus  was  reported  in  Wuhan,  China.  The  World  Health  Organization  has  declared  the 
outbreak  to  constitute  a  “Public  Health  Emergency  of  International  Concern.”  The  COVID-19  outbreak  is  disrupting  supply  chains 
and affecting production and sales across a range of industries. 

The  impact  of  the  pandemic  on  the  Company’s  business,  financial  condition,  results  of  operations,  and  its  customers  has  not  fully 
manifested  in  2020.  The  fiscal  stimulus  and  relief  programs  appear  to  have  delayed  any  materially  adverse  financial  impact  to  the 
Company.  Once  these  stimulus  programs  have  been  exhausted,  loan  credit  metrics  may  worsen  and  credit  losses  may  ultimately 
materialize. The magnitude of future credit losses may be affected by the impact of COVID-19 on individuals and businesses in the 
long  and  short  term.  However,  economic  uncertainty  remains  high  and  bouts  of  elevated  volatility  are  expected  to  continue,  which 
may have a future adverse financial impact on the Company. The extent of the continued impact of COVID-19 on our operational and 
financial  performance  will  depend  on  certain  developments,  including  the  duration  and  spread  of  the  outbreak,  impact  on  our 
customers, employees, and vendors all of which are uncertain and cannot be predicted. Please see Risk Factors above for more detail 
on risks related to COVID-19.

RESULTS OF OPERATIONS 

Results of Operations for the years ended December 31, 2020 and 2019 

General. Net income increased by $6.7 million, or 26.5%, to $32.0 million for the year ended December 31, 2020, from $25.3 million 
for  the  year  ended  December 31,  2019,  primarily  due  to  a  $26.2  million  increase  in  net  interest  and  dividend  income  after  the 
provision for credit losses and a $3.1 million increase in noninterest income. These increases were partially offset by a $19.9 million 
increase  in  noninterest  expense  and  higher  income  tax  expenses  of  $2.7  million.    Diluted  earnings  per  share  were  $5.03  for  2020, 
representing a 6.3% decrease over diluted earnings per share of $5.37 for 2019. 

The  results  for  the  year  ended  December 31,  2020,  included  the  merger  accounting  impact  of  the  current  expected  credit  loss 
accounting standard (“CECL”) within the provision for credit losses, merger expenses, office closures and related one-time occupancy 
expenses,  and  other  non-operating  items.  Operating  net  income,  excluding  these  items,  was  $43.9  million  for  the  year  ended 
December 31, 2020, an increase of $14.7 million, or 50.5%, as compared to operating net income of $29.2 million for 2019. Operating 
diluted earnings per share were $6.90 for 2020, representing an 11.3% increase over operating diluted earnings per share of $6.20 for 
2019.

Net Interest and Dividend Income. Net interest and dividend income before provision for credit losses increased by $41.5 million, or 
52.8%, to $120.2 million for the year ended December 31, 2020, as compared to $78.7 million for the year ended December 31, 2019, 
primarily due to loan growth (both organic and as a result of the Optima and Wellesley mergers), lower cost of funds, loan accretion 
associated with merger accounting and accelerated interest income from Payment Protection Program (“PPP”)  loans forgiven during 
the year. 

•

•

Interest on loans increased by $35.4 million, or 41.6%, primarily due to merger related loan growth. 

Interest on deposits decreased $8.3 million, or 53.4%, due to a decrease in interest rates paid on these deposits.

Total  average  interest-earning  assets  increased  by  $850.7  million,  or  34.6%,  to  $3.3  billion  for  the  year  ended  December 31,  2020 
from $2.5 billion in 2019. The Company’s net interest margin, on a fully tax equivalent basis, increased 43 basis points to 3.65% for 
the year ended December 31, 2020, as compared to 3.22% in 2019, and the net interest rate spread increased 59 basis points to 3.52% 
for the year ended December 31, 2020, as compared to 2.93% in 2019. 

Interest and Dividend Income. Total interest and dividend income increased by $33.0 million, or 34.3%, to $129.4 million for the 
year ended December 31, 2020, from $96.3 million in 2019, primarily due to loan growth, as a result of the Optima and Wellesley 
mergers, loan accretion associated with merger accounting, and accelerated interest income from PPP loans forgiven during the year.  

Interest Expense. Interest expense decreased by $8.5 million, or 48.2% to $9.1 million for the year ended December 31, 2020, from 
$17.6 million in 2019, primarily driven by a decrease in cost of deposits.

Average interest-bearing liabilities increased $487.7 million to $2.2 billion at December 31, 2020 from $1.7 billion at December 31, 
2019,  primarily  related  to  the  mergers  with  Optima  and  Wellesley  coupled  with  organic  core  deposit  growth.  The  average  cost  of 
funds decreased to 0.28% at December 31, 2020 from 0.72% at December 31, 2019. The increase in average interest-bearing liabilities 
was primarily driven by higher average savings account balances of $110.0 million, higher average money market accounts of $160.3 
million, higher average certificates of deposits of $38.3 million, and higher average  borrowed funds of $37.0 million.

28

Provision for Credit Losses. The Company recorded a provision for credit losses of $18.3 million for the year ended December 31,
2020,  compared  to  a  provision  for  loan  losses  of  $3.0  million  in  2019.  The  provision  includes  $9.4  million  associated  with  the
expected impact of the COVID-19 pandemic on future loan losses and $8.6 million for the recognition of the non-operating impact of 
the merger related CECL accounting. The Company recorded net charge-offs of $439,000 for the year ended December 31, 2020, as 
compared to net charge-offs of $1.6 million during the same period in 2019. 

The allowance for credit losses was $36.0 million, or 1.14% of total loans outstanding at December 31, 2020, as compared to $18.2 
million, or 0.82% of total loans outstanding at year end 2019. 

Noninterest Income. Inclusive of the Wellesley merger, total noninterest income increased by $3.1 million, or 8.6%, to $39.5 million 
for  the  year  ended  December 31,  2020,  as  compared  to  $36.4  million  for  the  same  period  in  2019,  primarily  as  a  result  of  higher 
Wealth  Management  revenue  and  higher  gains  on  loans  sold,  partially  offset  by  lower  deposit  and  ATM  related  fees,  lower  loan 
related derivative income and other fee income. Total noninterest income was 24.7% of total revenue for the year ended December 31,
2020. 

•

•

•

•

•

•

Wealth Management revenue increased by $3.3 million, or 12.3%, for the year ended December 31, 2020, as compared to 
the  year  ended  December 31,  2019,  as  a  result  of  the  Wellesley  merger  and  appreciation  in  the  equity  markets  during 
2020. Assets Under Management combined with Assets Under Administration were $4.2 billion at December 31, 2020, as
compared to $3.5 billion at December 31, 2019.

Gain  on  loans  sold  increased  by  $680,000  as  compared  to  the  same  period  in  2019  primarily  due  to  increased  sales  of 
residential mortgage loans given the low-rate environment and active refinance market. 

Deposit  account  fees  decreased  by  $590,000,  or  18.5%,  for  the  year  ended  December  31,  2020  primarily  as  a  result  of 
lower transactional fee activity during the year.

Other  income  decreased  $201,000  during  the  year  ended  December  31,  2020  primarily  as  a  result  of  lower  loan 
prepayment income during the year.

ATM/Debit  card  income  decreased  $105,000  during  the  year  ended  December  31,  2020  primarily  as  a  result  of  the 
COVID-19 pandemic’s impact on transactions during 2020.

Loan related derivative income decreased $195,000 during the year ended December 31, 2020, primarily due to valuation 
adjustments associated with changes in interest rates on existing derivative transactions. 

The categories of Wealth Management revenues are shown in the following table:

Wealth Management revenues:

g

Trust and investment advisory fees
Financial planning fees and other service fees
g

p

Total wealth management revenues

For the Year Ended December 31,

2020

2019

(dollars in thousands)

$

$

28,599
1,152
29,751

$

$

25,544
955
26,499

The following table presents the changes in wealth management assets under management:

Wealth Management Assets under Management
Balance at the beginning of the period

g

g

q

g

Acquired wealth management assets
Gross client asset inflows
Gross client asset outflows
Net market impact

Balance at the end of the period
Weighted average management fee

p

For the Year Ended December 31,

2020

2019

(dollars in thousands)

$

$

3,287,371
338,676
314,032
(383,059)
437,132
3,994,152

0.81%

$

$

2,759,547
—
343,477
(348,938)
533,285
3,287,371

0.84%

There were no significant changes to the average fee rates and fee structure for the year ended December 31, 2020 and 2019.

29

Noninterest  Expense.  Total  noninterest  expense  increased  by  $19.9  million,  or  25.5%,  to  $98.1  million  for  the  year  ended 
December 31,  2020,  as  compared  to  $78.2  million  for  the  year  ended  December 31,  2019.  This  increase  was  primarily  driven  by 
increases  in  salaries  and  employee  benefits  expense,  merger  and  other  non-operating  expenses  including  branch  and  office  closure 
related expense, occupancy and equipment expense, and data processing expenses resulting from our mergers with Optima in 2019 
and Wellesley in 2020, as described below. 

• Salaries and employee benefits increased $11.5 million, or 24.2%, primarily as a result of the increased staffing related to the 
mergers with Optima and Wellesley in 2019 and 2020, respectively, additions to support business initiatives, normal merit 
increases and higher employee benefit costs. 

• Non-operating expenses increased $2.9 million primarily due to merger expenses associated with the Wellesley merger and 

branch and office closure expenses of $1.2 million during the fourth quarter of 2020. 

Occupancy and equipment expense increased by $2.1 million, or 19.8%, primarily as a result of additional branches and office space 
as a result of the mergers with Optima and Wellesley. 

• Data processing expense increased by $1.4 million, or 22.9%, primarily as a result of increased client activity associated with 

the mergers with Optima and Wellesley.

Income  Tax  Expense.  The  Company  recorded  income  tax  expense  of  $11.4  million  for  the  year  ended  December 31,  2020,  as 
compared to $8.7 million for the same period in 2019. For the year ended December 31, 2020, the effective tax rate was 26.3%, as 
compared to 25.5% for the year ended December 31, 2019. 

The Coronavirus Aid, Relief, and Economic Security (the “CARES Act”) was signed into law on March 27, 2020, to help stimulate 
the United States economy. One of the business tax provisions of the CARES Act included allowing net operating losses (“NOL”) 
generated by the Company in tax years 2018 and 2019 to be carried back up to five years at the tax rates in effect during those periods, 
rather than carried forward at current federal tax rates of 21%.  The effect of the Act allowed the Company to recognize lower tax 
expense  associated  with  NOL  carryforwards  from  2018  and  2019  (as  a  result  of  the  Optima  merger)  and  resulted  in  a  benefit  of 
$539,000. 

Results of Operations for the years ended December 31, 2019 and 2018

General. Net income increased by $1.4 million, or 5.8%, to $25.3 million for the year ended December 31, 2019, from $23.9 million 
for  the  year  ended  December 31,  2018,  primarily  due  to  a  $13.6  million  increase  in  net  interest  and  dividend  income  after  the 
provision for loan losses and a $3.4 million increase in noninterest income. These increases were partially offset by a $14.2 million 
increase  in  noninterest  expense  and  higher  provision  for  income  taxes  of  $1.5  million.    Diluted  earnings  per  share  were  $5.37  for 
2019, representing a 6.9% decrease over diluted earnings per share of $5.77 for 2018. Net income for 2019 included non-operating 
expenses  of  $4.7  million  related  to  costs  associated  with  the  Company’s  December  common  stock  offering  and  merger  related 
expenses resulting from the completed merger with Optima and the pending merger with Wellesley.

Excluding non-operating expenses, operating net income was $29.2 million for the year ended December 31, 2019, an increase of $5.1 
million, or 21.4%, as compared to operating net income of $24.0 million for 2018. Operating diluted earnings per share were $6.20 for 
2019, representing a 7% increase over operating diluted earnings per share of $5.80 for 2018.

Net Interest and Dividend Income. Net interest and dividend income before provision for loan losses increased by $15.1 million, or 
23.8%, to $78.7 million for the year ended December 31, 2019, as compared to $63.6 million for the year ended 2018, primarily due to 
loan growth, both organic and as a result of the Optima merger and higher levels of interest-earning assets. 

•

•

Interest  on  loans  increased  by  $26.7  million,  or  45.7%,  primarily  due  to  organic  loan  growth  and  the  impact  of  loan 
balances acquired related to the Optima merger. 

Interest on deposits increased $10.6 million, or 211.4%, due to an increase in cost primarily as a result of the impact of the 
cost of deposits acquired from our merger with Optima and growth within our higher cost savings products. 

Total  average  interest-earning  assets  increased  by  $532.0  million,  or  27.7%,  to  $2.5  billion  for  the  year  ended  December 31,  2019 
from $1.9 billion in 2018. The Company’s net interest margin, on a fully tax equivalent basis, decreased 11 basis points to 3.22% for 
the year ended December 31, 2019, as compared to 3.33% in 2018, and the net interest rate spread decreased 26 basis points to 2.93% 
for the year ended December 31, 2019, as compared to 3.19% in 2018. 

30

Interest and Dividend Income. Total interest and dividend income increased by $27.3 million, or 39.5%, to $96.3 million for the year 
ended December 31, 2019, from $69.1 million in 2018, primarily due to a $26.7 million increase in interest income on loans.

Interest  Expense. Interest  expense  increased  by  $12.2  million,  or  222.7%  to  $17.6  million  for  the  year  ended  December 31,  2019, 
from $5.5 million in 2018, primarily as a result of the impact of the cost of deposits acquired from our merger with Optima and growth
within our higher cost savings products.  

Average interest-bearing liabilities increased $462.6 million to $1.7 billion at December 31, 2019 from $1.3 billion, which contributed 
to a 44 basis points increase in the average cost of funds of 0.72% from 0.28%. The increase in average interest-bearing liabilities was 
primarily  driven  by  higher  average  savings  account  balances  of  $202.9  million,  higher  average  money  market  accounts  of  $96.4 
million, higher average certificates of deposits of $87.3 million, and higher average other borrowed funds of $68.0 million.  

Provision for Loan Losses. The Company recorded a provision for loan losses of $3.0 million for the year ended December 31, 2019, 
compared to a provision for loan losses of $1.5 million in 2018. The increase is the result of strong loan growth and a $1.2 million 
charge-off  on  an  acquired  commercial  real  estate  loan  during  the  third  quarter  of  2019.  The  charge-off  was  taken  upon  receipt  of 
information indicating misstatements of fact and potential borrower fraud. We believe this to be an isolated incident and do not have 
any  additional  exposure  to  the  borrower.  We  recorded  net  charge-offs  of  $1.6  million  for  the  year  ended  December 31,  2019,  as
compared to net charge-offs of $54,000 during the same period in 2018. The allowance for loan losses was $18.2 million, or 0.82% of 
total loans outstanding at December 31, 2019, as compared to $16.8 million, or 1.08% of total loans outstanding at year end 2018. 

Noninterest Income. Noninterest income increased by $3.4 million, or 10.3%, to $36.4 million for the year ended December 31, 2019, 
as compared to $33.0 million for the same period in 2018, primarily as a result of higher Wealth Management revenue, higher gains 
on  loans  sold  and  higher  loan  prepayment  income.  Total  noninterest  income  was  31.6%  of  total  revenue  for  the  year  ended 
December 31, 2019. 

•

•

•

Wealth Management revenue increased by $1.3 million, or 5.2%, for the year ended December 31, 2019, as compared to 
the year ended December 31, 2018, due to higher average assets under management during the period and higher average 
fees. Assets under Management combined with Assets under Administration were $3.5 billion at December 31, 2019, as
compared to $2.9 billion at December 31, 2018.

Gain  on  loans  sold  increased  by  $1.1  million  as  compared  to  the  same  period  in  2018  primarily  due  to  the  sale  of 
residential mortgages totaling $90.0 million during 2019. 

Other  income  increased  $658,000  during  the  year  ended  2019  primarily  as  a  result  of  higher  loan  prepayment  income 
during the year.

The categories of Wealth Management revenues are shown in the following table:

Wealth Management revenues:

g

Trust and investment advisory fees
Financial planning fees and other service fees
g

p

Total wealth management revenues

Wealth Management Assets under Management
Balance at the beginning of the period

g

g

Gross client asset inflows
Gross client asset outflows
Net market impact

p

Balance at the end of the period
Weighted average management fee
g

g

g

For the Year Ended December 31,

2019

2018

(dollars in thousands)

25,544
955
26,499

$

$

24,126
1,065
25,191

For the Year Ended December 31,

2019

2018

(dollars in thousands)

2,759,547
343,477
(348,938)
533,285
3,287,371

0.84%

$

$

2,971,322
313,629
(490,094)
(35,310)
2,759,547

0.81%

$

$

$

$

There were no significant changes to the average fee rates and fee structure for the year ended December 31, 2019 and 2018.

31

Noninterest Expense. Noninterest expense increased by $14.2 million, or 22.2%, to $78.2 million for the year ended December 31, 
2019, as compared to $64.0 million for the year ended December 31, 2018, primarily driven by an increase in non-operating expenses, 
salaries  and  employee  benefit  expense,  occupancy  and  equipment  expense,  data  processing  fees,  and  professional  service  fees.  The 
increase to noninterest expense was partially offset by lower marketing, and FDIC insurance expenses. 

•

•

•

•

Non-operating expense of $4.7 million were primarily related to professional fees, compensation and severance payments, 
and contract termination costs associated with the Optima merger combined with expenses associated with the pending 
Wellesley merger and the December 2019 common equity offering.

Salaries and employee benefit increases of $6.3 million were primarily the result of the merger with Optima, increased 
staffing to support business initiatives, and higher employee benefit costs.

Occupancy and equipment expense increases of $1.8 million were primarily due to the merger with Optima and additional 
office space in Boston, Massachusetts.

Data  processing  expense  increases  of  $1.1  million  were  primarily  due  to  increased  transaction  volume  related  to  the 
merger with Optima and investments made in technology.

Income  Tax  Expense.  The  Company  recorded  income  tax  expense  of  $8.7  million  for  the  year  ended  December 31,  2019,  as 
compared to $7.2 million for the same period in 2018, reflecting effective tax rates of 25.5% and 23.2%, respectively. The increase in 
the  effective  tax  rate  was  primarily  driven  by  the  costs  associated  with  the  Optima  merger,  the  pending  Wellesley  merger  and  the 
common stock offering completed during the fourth quarter of 2019, as some of these items were nondeductible for tax purposes.

CHANGES IN FINANCIAL CONDITION

Total  Assets.  Inclusive  of  the  merger  with  Wellesley  and  organic  growth,  total  assets  increased  $1.1  billion,  or  38.3%,  from 
December 31, 2019 and were $3.9 billion as of December 31, 2020. The increase was primarily the result of a $926.9 million increase 
in  total  loans,  an  increase  of  $86.2  million  in  investment  securities,  an  increase  in  goodwill  of  $20.7  million  associated  with  the 
Wellesley merger, and a $14.5 million increase in cash and cash equivalents. 

Investment Securities. The carrying value of total investment securities increased by $86.2 million to $484.7 million at December 31, 
2020, from $398.5 million at December 31, 2019, as the Company invested excess cash.  

Loans. Inclusive of the Wellesley merger, total loans increased by $926.9 million, or 41.6%, to $3.2 billion at December 31, 2020, 
from $2.2 billion at December 31, 2019. Residential real estate loans increased $381.3 million to $1.3 billion at December 31, 2020, 
from $917.6 million at December 31, 2019.

•

•

•

Commercial  real  estate  loans  increased  $298.4  million  to  $1.4  billion  at  December 31,  2020,  from  $1.1  billion  at 
December 31, 2019. 

Commercial & industrial loans increased $214.6 million to $347.9 million at December 31, 2020, from $133.2 million at 
December 31, 2019.

Loans  under  the  Small  Business  Administration’s  (“SBA”)  Paycheck  Protection  Program  (“PPP”)  amounted  to  $124.2 
million at December 31, 2020. PPP loans are included in commercial & industrial loans. 

Excluding  the  impact  of  the  Wellesley  merger  and  PPP  loans,  total  loans  decreased  by  $35.0  million,  or  1.6%,  from  December 31, 
2019.

For further details, see the “Organic Loan and Deposit Growth” table at the end of this section.

Bank-Owned Life Insurance. The Company invests in bank-owned life insurance to help offset the costs of our employee benefit plan 
obligations.  Bank-owned  life  insurance  also  generally  provides  noninterest  income  that  is  nontaxable.  At  December 31,  2020,  our 
investment  in  bank-owned  life  insurance  was  $46.2  million,  an  $8.9  million  increase  from  $37.3  million  at  December 31,  2019, 
primarily due to new policies acquired as a result of the Wellesley merger.  

Goodwill and Merger Related intangibles.  The Company recorded additional goodwill of $20.7 million during the second quarter of 
2020 due to the Wellesley merger. Goodwill and merger related intangible assets totaled $54.9 million at December 31, 2020.

Other  Assets.    Other  assets  increased  $40.9  million,  or  96.8%  to  $83.2  million  at  December  31,  2020  from  $42.3  million  at 
December 31, 2019, primarily due to higher loan related derivative assets at December 31, 2020.

Deposits. Total deposits increased by $1.0 billion, or 44.3%, to $3.4 billion at December 31, 2020, from $2.4 billion at December 31, 
2019, primarily driven by a combination of the impact of the Wellesley merger and organic core deposit growth.  

32

•

•

Core deposits, which the Company defines as all deposits other than certificates of deposit, increased by $971.7 million,
or 44.6%, to $3.1 billion from $2.2 billion at December 31, 2019. 

Excluding  the  impact  of  the  Wellesley  merger,  organic  growth  in  core  deposits  was  $422.9  million,  or  19.4%,  as  of 
December 31, 2020.

Certificates  of  deposit,  which  totaled  $254.8  million  at  December 31,  2020,  increased  by  $72.5  million  from  $182.3  million  at 
December 31, 2019, primarily due to the impact of the Wellesley merger. Total brokered certificates of deposit, which are included
within certificates of deposit, were $30.8 million and $7.1 million at December 31, 2020 and 2019, respectively. 

For further details on the loans and deposits acquired, see the “Organic Loan and Deposit Growth” table provided at the end of this 
section.

Borrowings. At December 31, 2020, borrowings consisted of advances from the FHLB of Boston. Total borrowings decreased $102.7 
million, or 75.7%, to $33.0 million at December 31, 2020, from $135.7 million at December 31, 2019 as the Company utilized excess
cash to pay down borrowings. Additionally, during the fourth quarter of 2020, the Company redeemed $10.0 million in subordinated 
debt, bearing a 6.0% coupon, assumed as part of the Wellesley merger.  

Shareholders’ Equity. Total shareholders’ equity increased $115.2 million, or 40.2%, to $401.7 million at December 31, 2020, from 
$286.6 million at December 31, 2019, primarily due to $87.2 million of equity issued as a result of the Wellesley merger, net income
of $32.0 million, before tax-effect increases in the value of the Company’s interest rate derivative positions of $4.7 million, and before
tax-effect  increases  in  unrealized  gains  on  the  available  for  sale  investment  portfolio  of  $3.6  million,  partially  offset  by  regular 
dividend payments of $13.1 million paid during the year.

$87.2 million of f equity issued as a resultt off the Wellesley merger, 

partially  offset t by 

primarily due 

The  Company’s  ratio  of  tangible  common  equity  to  tangible  assets  was  8.91%  at  December 31,  2020,  as  compared  to  8.93%  at 
December 31, 2019. Tangible book value per share increased by $3.41, or 7.3%, to $50.07 as of December 31, 2020, as compared to
$46.66 as of December 31, 2019.  

Organic Loan and Deposit Growth (dollars in thousands)

p

g

Loans

Residential mortgage
Commercial mortgage
g g
Home equity
Commercial & Industrial
Consumer

Total loans excluding PPP loans

g

PPP Loans (1)
Total loans

Deposits

Demand
Interest bearing checking
yMoney market
Savings

Core deposits

p

Certificates of deposit

Total deposits

p

December 31, 
2020

December 31, 
2019

Balance 
Acquired

December 2020 vs December 2019
Organic 
Growth/(Decline) 
%

Organic 
Growth/(Decline) 
$

$

$

$

$

$

1,298,868
1,358,962
106,194
223,654
41,769
3,029,447
124,201
3,153,648

1,006,132
625,650
532,218
984,262
3,148,262
254,821
3,403,083

$

$

$

$

$

917,566
1,060,574
80,675
133,236
34,677
2,226,728
—
2,226,728

630,593
450,098
181,406
914,499
2,176,596
182,282
2,358,878

$

$

$

$

403,855
290,909
36,213
106,664
103
837,744
32,289
870,033

175,912
49,944
250,226
72,700
548,782
212,096
760,878

$

$

$

$

$

(22,553)
7,479
(10,694)
(16,246)
6,989
(35,025)
91,912
56,887

199,627
125,608
100,586
(2,937)
422,884
(139,557)
283,327

(2.5%)
0.7%
(13.3%)
(12.2%)
20.2%
(1.6%)
—
2.6%

31.7%
27.9%
55.4%
(0.3%)
19.4%
(76.6%)
12.0%

(1) PPP loans are included within Commercial & Industrial on the face of the Balance Sheet.

33

GAAP to Non-GAAP Reconciliations (dollars in thousands except per share data)

Statement on Non-GAAP Measures: The Company believes the presentation of the following non-GAAP financial measures provides 
useful  supplemental  information  that  is  essential  to  an  investor’s  proper  understanding  of  the  results  of  operations  and  financial 
condition  of  the  Company.  Management  uses  non-GAAP  financial  measures  in  its  analysis  of  the  Company’s  performance.  These 
non-GAAP measures should not be viewed as substitutes for the financial measures determined in accordance with GAAP, nor are 
they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Operating Net Income / Operating Diluted Earnings Per Share

p

p

g

g

g

Net Income (a GAAP measure)
   Add: Merger and Capital issuance expenses
   Add: (Gain) Loss on disposition of investment securities
Add: Provision established for acquired Wellesley loans
Add: Branch and office closure expenses
Add: Impact of the Tax Cuts and Jobs Act of 2017(1)

p

p

j

Tax effect of non-operating adjustments(2)
p
g
   Operating Net Income (a non-GAAP measure)
Less: Dividends and Undistributed Earnings Allocated to Participating 
Securities (GAAP)
   Operating Income Applicable to Common Shareholders (a non-
GAAP measure)
Weighted Average Diluted Shares
g
   Operating Diluted Earnings Per Share (a non-GAAP measure)

g

2020

2019

2018

2017

2016

For the Years Ended December 31,

$

$

$

$

31,959
6,368
(69)
8,638
1,244
—
(4,270)
43,870

(64)

43,806
6,344,409
6.90

$

$

$

$

25,257
4,721
79
—
—
—
(901)
29,156

(243)

28,913
4,661,720
6.20

$

$

$

$

23,881
201
(2)
—
—
—
(56)
24,024

(239)

23,785
4,098,633
5.80

$

$

$

$

14,816
—
3
—
—
3,869
(1)
18,687

$

$

16,896
—
—
—
—
—
—
16,896

(157)

(181)

18,530
4,065,754
4.56

$

$

16,715
4,028,944
4.15

(1)
(2)

Income adjustment related to the re-measurement of net deferred tax assets due to the Tax Cuts and Jobs Act. 
The net tax benefit associated with non-operating items is determined by assessing whether each noncore item is included or excluded from
net taxable income and applying the Company’s combined marginal tax rate to only those items included in net taxable income.

The following tables summarize the calculation of the Company’s tangible common equity ratio and tangible book value per share for 
the periods indicated:

December 31,
2020

December 31,
2019

December 31,
2018
(in thousands, except share data)

December 31,
2017

December 31,
2016

g

q

Tangible Common Equity:
y
Shareholders' equity (GAAP)
Less: Goodwill and acquisition related intangibles
(GAAP)
Tangible Common Equity (a non-GAAP measure)
Total assets (GAAP)
Less: Goodwill and acquisition related intangibles
(GAAP)
gTangible assets (a non-GAAP measure)

$

401,732

$

286,561

$

167,026

$

147,957

$

134,671

(54,889)

(34,544)

(412)

(412)

(412)

346,843
3,949,297
(54,889)

252,017
2,855,563
(34,544)

166,614
2,101,384
(412)

147,545
1,949,934
(412)

134,259
1,848,999
(412)

$

3,894,408

$

2,821,019

$

2,100,972

$

1,949,522

$

1,848,587

Tangible Common Equity Ratio (a non-
GAAP measure)
g

Tangible Book Value Per Share:
Tangible Common Equity (a non-GAAP measure) $
Common shares outstanding
g

Tangible Book Value Per Share (a non-
GAAP measure)

$

INVESTMENT SECURITIES 

8.91%

8.93%

7.93%

7.57%

7.26%

346,843
6,926,728
50.07

$

$

252,017
5,400,868
46.66

$

$

166,614
4,107,051
40.57

$

$

147,545
4,082,188
36.14

$

$

134,259
4,036,879
33.26

The  Company’s  securities  portfolio  consists  of  securities  available  for  sale  (“AFS”)  and  securities  held  to  maturity  (“HTM”).  The 
largest component of the securities portfolio is mortgage-backed securities, all of which are issued by U.S. government agencies or 
U.S. government-sponsored enterprises.

34

Securities  available  for  sale  consist  of  certain  U.S.  Government  Sponsored  Enterprises  (“GSE”)  obligations,  U.S.  GSE  mortgage-
backed  securities,  and  corporate  debt  securities.  These  securities  are  carried  at  fair  value,  and  unrealized  gains  and  losses  net  of 
applicable income taxes are recognized as a separate component of shareholders’ equity. The fair value of securities available for sale 
totaled $237.0 million and included gross unrealized gains of $3.2 million and gross unrealized losses of $406,000 at December 31,
2020. At December 31, 2019, the fair value of securities available for sale totaled $140.3 million and included gross unrealized gains 
of $231,000 and gross unrealized losses of $1.0 million. 

Securities classified as held to maturity consist of certain U.S. GSE obligations, U.S. GSE mortgage-backed securities, corporate debt 
securities,  and  state,  county,  and  municipal  securities.  Securities  held  to  maturity  as  of  December 31,  2020  are  carried  at  their 
amortized cost of $247.7 million. At December 31, 2019, the amortized cost of securities held to maturity totaled $258.2 million. 

The following table sets forth the fair value of available for sale 
investment securities, the amortized costs of held to maturity, and 
the percentage distribution at the dates indicated:  

Available for sale securities
U.S. GSE obligations
Mortgage-backed securities
Corporate debt securities

Total securities available for sale

Held to maturity securities
U.S. GSE obligations
Mortgage-backed securities
Corporate debt securities
Municipal securities

Total securities held to maturity

Total

December 31,
2020

December 31,
2019

Amount

Percent

Amount

Percent

(dollars in thousands)

$

$

$

$
$

23,617
210,630
2,783
237,030

—
137,435
6,989
103,248
247,672
484,702

10% $
89%
1%
100% $

— $
55%
3%
42%
100% $
100% $

37,848
102,482
—
140,330

5,000
161,759
6,980
84,433
258,172
398,502

27%
73%
—
100%

2%
63%
3%
32%
100%
100%

The following tables set forth the composition and maturities of investment securities. Actual maturities may differ from contractual 
maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. 

Within One Year

Amortized 
Cost

Weighted
Average
Yield (1)

After One, But
Within Five Years

Amortized 
Cost

Weighted
Average
Yield (1)

After Five, But
Within Ten Years

Amortized 
Cost

Weighted
Average
Yield (1)
(dollars in thousands)

After Ten Years

Total

Amortized 
Cost

Weighted
Average
Yield (1)

Amortized 
Cost

Weighted
Average
Yield (1)

$

—

— $ 9,995

0.5% $

5,000

2.3% $

8,000

2.6% $ 22,995

1.6%

1
1,001

5.2% 4,226
1.1% 1,741

1.4% 54,849
—
1.8%

1.5% 149,439
—
—

1.2% 208,515
2,742
—

1.3%
1.6%

$ 1,002

1.1% $ 15,962

0.9% $ 59,849

1.6% $157,439

1.2% $234,252

1.3%

At December 31, 2020
Available for sale securities
U.S. GSE obligations
Mortgage-backed
   securities
Corporate debt securities
Total available for
   sale securities

Held to maturity securities
Mortgage-backed
   securities
Corporate debt securities
Municipal securities

Total held to maturity
   securities
Total

$

—
—
2,541

$ 2,541
$ 3,543

2
— $
—
6,989
4.5% 19,343

5.6% $ 60,933
2.6%
—
3.7% 40,934

2.4% $ 76,500
—
—
3.4% 40,430

2.1% $137,435
—
6,989
2.8% 103,248

4.5% $ 26,334
3.5% $ 42,296

3.4% $101,867
2.4% $161,716

2.8% $116,930
2.4% $274,369

2.3% $247,672
1.7% $481,924

2.3%
2.6%
3.3%

2.7%
2.0%

35

Within One Year

Amortized 
Cost

Weighted
Average
Yield (1)

After One, But
Within Five Years

Amortized 
Cost

Weighted
Average
Yield (1)

After Five, But
Within Ten Years

Amortized 
Cost

Weighted
Average
Yield (1)
(dollars in thousands)

After Ten Years

Total

Amortized 
Cost

Weighted
Average
Yield (1)

Amortized 
Cost

Weighted
Average
Yield (1)

$ 5,000

1.4% $ 20,000

1.5% $

5,000

2.3% $

8,000

2.6% $ 38,000

1.8%

—

—

37

5.4% 36,393

1.9% 66,679

2.1% 103,109

2.0%

$ 5,000

1.4% $ 20,037

1.5% $ 41,393

1.9% $ 74,679

2.1% $141,109

2.0%

$ 5,000

1.6% $

—

— $

—

— $

—

— $

5,000

1.6%

—
—
3,270

2
—
—
6,980
4.6% 10,606

5.6% 48,088
2.6%
—
4.2% 45,201

2.7% 113,669
—
—
3.7% 25,356

2.6% 161,759
—
6,980
3.4% 84,433

$ 8,270
$ 13,270

2.8% $ 17,588
2.3% $ 37,625

3.6% $ 93,289
2.4% $134,682

3.2% $139,025
2.8% $213,704

2.8% $258,172
2.5% $399,281

2.6%
2.6%
3.7%

3.0%
2.6%

At December 31, 2019
Available for sale securities
U.S. GSE obligations
Mortgage-backed
   Securities

Total available for
   sale securities

Held to maturity securities
U.S. GSE obligations
Mortgage-backed
   Securities
Corporate debt securities
Municipal securities

Total held to maturity
   securities
Total

(1) Weighted Average Yield is shown on a fully taxable equivalent basis using a federal tax rate of 21% for 2020 and 2019.

The Company adopted Topic 326 on January 1, 2020 and did not record an allowance for credit losses on its investment securities as
of  December 31, 2020. The Company regularly reviews debt securities for expected credit loss using both qualitative and quantitative 
criteria, as necessary based on the composition of the portfolio at period end. 

Prior  to  January  1,  2020,  investment  securities  were  evaluated  by  management  for  other-than-temporary  impairment  on  at  least  a
quarterly basis, and more frequently when economic or market conditions warranted such evaluation. Consideration is given to: (1) the 
length of time and the extent to which the fair value has been less than cost; (2) the financial condition and near-term prospects of the 
issuer; and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for 
any anticipated recovery in fair value.

As  of  December 31,  2020,  30  debt  securities  had  gross  unrealized  losses,  with  an  aggregate  depreciation  of  0.47%  from  the 
Company’s  amortized  cost  basis.  The  largest  unrealized  loss  percentage  of  any  single  security  was  2.07%,  or  $55,000,  the  largest 
unrealized dollar loss of a single security of its amortized cost.

As  of  December 31,  2019,  68  debt  securities  had  gross  unrealized  losses,  with  an  aggregate  depreciation  of  0.74%  from  the 
Company’s amortized cost basis. The largest unrealized loss percentage of any single security was 3.15%, or $63,000, of its amortized 
cost. The largest unrealized dollar loss of any single security was $96,000, or 1.93%, of its amortized cost.

36

LOANS 

The Company’s lending activities are conducted principally in Eastern Massachusetts and Southern New Hampshire. The Company
grants  single-  and  multi-family  residential  loans,  commercial  &  industrial  (“C&I”),  commercial  real  estate  (“CRE”),  construction 
loans, and a variety of consumer loans. Most of the loans granted by the Company are secured by real estate collateral. Repayment of 
the Company’s residential loans are generally dependent on the health of the employment market in the borrowers’ geographic areas 
and that of the general economy with liquidation of the underlying real estate collateral being typically viewed as the primary source 
of repayment in the event of borrower default. The repayment of C&I loans depends primarily on the cash flow and credit worthiness
of  the  borrower  and  secondarily  on  the  underlying  collateral  provided  by  the  borrower.  As  borrower  cash  flow  may  be  difficult  to 
predict,  liquidation  of  the  underlying  collateral  securing  these  loans  is  typically  viewed  as  the  primary  source  of  repayment  in  the 
event of borrower default. However, collateral typically consists of equipment, inventory, accounts receivable, or other business assets 
that  may  fluctuate  in  value,  so  the  liquidation  of  collateral  in  the  event  of  default  is  often  an  insufficient  source  of  repayment.  For 
renewable energy loans, cash flow is generally from multiple revenue sources and dependent on energy output.  For PPP loans, the 
SBA  guarantees  100%  of  the  PPP  loans  made  to  eligible  borrowers.    The  entire  principal  amount  of  the  borrower’s  PPP  loan,
including  any  accrued  interest,  is  eligible  to  be  reduced  by  the  loan  forgiveness  amount  subject  to  program  requirements.    The 
Company’s  CRE  loans  are  primarily  made  based  on  the  cash  flow  from  the  collateral  property  and  secondarily  on  the  underlying 
collateral  provided  by  the  borrower,  with  liquidation  of  the  underlying  real  estate  collateral  typically  being  viewed  as  the  primary
source of repayment in the event of borrower default. The Company’s construction loans are primarily made based on the borrower’s
expected ability to execute and the future completed value of the collateral property, with sale of the underlying real estate collateral 
typically being viewed as the primary source of repayment. 

The following summary shows the composition of the loan portfolio at the dates indicated:

Residential mortgage
Mortgages - fixed rate
Mortgages - adjustable rate
Construction
Deferred costs net of unearned fees
Total residential mortgages
Commercial mortgage
Mortgages - non-owner occupied
Mortgages - owner occupied
Construction
Deferred costs net of unearned fees
Total commercial mortgages
Home equity
Home equity - lines of credit
Home equity - term loans
Deferred costs net of unearned fees
Total home equity
Commercial & industrial
Commercial & industrial
PPP loans
Unearned fees, net of deferred costs
Total commercial & industrial
Consumer
Secured
Unsecured
Unearned fees net of deferred costs
Total consumer
Total loans

2020

% of
Total

2019

% of
Total

December 31,

2018

% of
Total

(dollars in thousands)

2017

% of
Total

2016

% of
Total

$

535,804
734,593
25,495
2,976
1,298,868

1,064,317
153,474
139,075
2,096
1,358,962

102,460
3,503
231
106,194

225,441
124,201
(1,787 )
347,855

41,409
341
19
41,769

17% $
23%
1%
0%
41%

430,877
467,139
17,374
2,176
917,566

870,047
35%
114,095
5%
76,288
4%
0%
144
44% 1,060,574

3%
0%
0%
3%

7%
4%
0%
11%

1%
0%
0%
1%

73,880
6,555
240
80,675

133,337
—
(101 )
133,236

33,453
1,199
25
34,677

19% $
21%
1%
0%
41%

40%
5%
3%
0%
48%

293,267
309,656
—
1,408
604,331

654,394
59,335
44,146
82
757,957

3%
1%
0%
4%

6%
0%
0%
6%

1%
0%
0%
1%

63,421
5,665
250
69,336

93,728
-
(16 )
93,712

33,252
1,171
13
34,436

19% $
20%
0%
0%
39%

42%
4%
3%
0%
49%

4%
0%
0%
4%

6%
0%
0%
6%

2%
0%
0%
2%

298,851
239,027
—
1,042
538,920

562,203
35,343
35,904
199
633,649

70,326
3,863
255
74,444

65,305
—
(10 )
65,295

37,272
1,303
16
38,591

22% $
18%
0%
0%
40%

41%
3%
3%
0%
47%

5%
0%
0%
5%

5%
0%
0%
5%

3%
0%
0%
3%

305,404
228,028
—
972
534,404

513,578
43,932
58,406
224
616,140

70,883
3,925
243
75,051

59,638
—
68
59,706

33,386
1,451
16
34,853

23%
17%
0%
0%
40%

39%
3%
4%
0%
46%

6%
0%
0%
6%

5%
0%
0%
5%

3%
0%
0%
3%

$ 3,153,648

100% $ 2,226,728

100% $ 1,559,772

100% $

1,350,899

100% $ 1,320,154

100%

Residential Mortgage. Residential real estate loans held in portfolio amounted to $1.3 billion at December 31, 2020, an increase of 
$381.3 million, or 41.6%, from $917.6 million at December 31, 2019 and consisted of one-to-four family residential mortgage loans. 
The residential mortgage portfolio represented 41% of total loans at both December 31, 2020 and December 31, 2019. 

The average loan balance outstanding in the residential portfolio was $454,000 and the largest individual residential mortgage  loan 
outstanding  was  $5.9  million  as  of  December 31,  2020.  At  December 31,  2020,  this  loan  was  performing  in  accordance  with  its 
original terms. 

$454,000

37

 
The  Bank  offers  fixed  and  adjustable-rate  residential  mortgage  and  construction  loans  with  maturities  up  to  30  years.  One-to-four 
family residential mortgage loans are generally underwritten according to Fannie Mae and Freddie Mac guidelines, and we refer to
loans that conform to such guidelines as “conforming loans.” The Bank generally originates and purchases both fixed and adjustable-
rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency,
which increased to $510,400 in 2020 from $484,350 in 2019, for one-unit properties. In addition, the Bank also offers loans above
conforming  lending  limits  typically  referred  to  as  “jumbo”  loans  and  interest  only  loans.  These  loans  are  typically  underwritten  to 
jumbo conforming guidelines; however, the Bank may choose to hold a jumbo loan within its portfolio with underwriting criteria that 
does not exactly match conforming guidelines. The Bank may also, from time to time, purchase residential loans that are either jumbo, 
conforming, or meet our Community Reinvestment Act (“CRA”) requirements. Purchases have historically been made to satisfy CRA
requirements for lending to low- and moderate-income borrowers within the Bank’s CRA Assessment Area.

$510,400

484,350

Generally,  our  residential  construction  loans  are  based  on  complete  value  per  plans  and  specifications,  with  loan  proceeds  used  to
construct the house for single family primary residence. Loans are provided for terms up to 12 months during the construction phase, 
with loan-to-values that generally do not exceed 80% on as complete basis. The loans then convert to permanent financing at terms up 
to 360 months.  

The  Company  does  not  offer  reverse  mortgages,  nor  do  we  offer  loans  that  provide  for  negative  amortization  of  principal,  such  as
“Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance 
during  the  life  of  the  loan.  We  do  not  offer  “subprime  loans”  (loans  that  are  made  with  low  down  payments  to  borrowers  with 
weakened  credit  histories  typically  characterized  by  payment  delinquencies,  previous  charge-offs,  judgments,  bankruptcies,  or 
borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (defined
as loans having less than full documentation).    

Residential real estate loans are originated both for sale to the secondary market, as well as for retention in the Bank’s loan portfolio. 
The decision to sell a loan to the secondary market or retain within the portfolio is determined based on a variety of factors including 
but not limited to the Bank’s asset/liability position, the current interest rate environment, and customer preference. 

The Company was servicing mortgage loans sold to others without recourse of approximately $188.2 million at December 31, 2020 
and $159.6 million at December 31, 2019.

The table below presents residential real estate loan origination activity for the periods indicated:

Originations for retention in portfolio
Originations for sale to the secondary market

Total

2020

$

$

378,247
82,620
460,867

$

2019
(dollars in thousands)
229,163
17,537
246,700

$

2018

$

$

135,468
9,431
144,899

Loans are sold with servicing retained or released. The table below presents residential real estate loan sale activity for the periods 
indicated:

For the Year Ended December 31,

2020

2019

2018

Loans sold with servicing rights retained
Loans sold with servicing rights released

Total

$

$

60,453
18,024
78,477

$

(dollars in thousands)
82,932
7,006
89,938

$

$

$

1,605
7,826
9,431

Loans sold with the retention of servicing typically result in the capitalization of servicing rights. Loan servicing rights are included in 
other  assets  and  subsequently  amortized  as  an  offset  to  other  income  over  the  estimated  period  of  servicing.  The  net  balance  of 
capitalized servicing rights amounted to $1.2 million and $1.3 million at December 31, 2020 and 2019, respectively. 

Commercial Mortgage. Commercial real estate loans were $1.4 billion as of December 31, 2020, an increase of $298.4 million, or 
28.1%, from $1.1 billion at December 31, 2019. The commercial real estate loan portfolio represented 44% and 48% of total loans at 
December 31, 2020 and 2019, respectively. The average loan balance outstanding in this portfolio was $1.6 million and the largest 
individual  commercial  real  estate  loan  outstanding  was  $27.0  million  as  of  December 31,  2020.  At  December 31,  2020,  this
commercial mortgage was performing in accordance with its original terms.

38

 
CRE loans are secured by a variety of property types inclusive of multi-family dwellings, retail facilities, office buildings, commercial 
mixed use, lodging, industrial and warehouse properties, and other specialized properties.

Generally,  our  CRE  loans  are  for  terms  of  up  to  ten  years,  with  loan-to-values  that  generally  do  not  exceed  75%.    Amortization 
schedules are long-term, and thus, a balloon payment is generally due at maturity. Under most circumstances, the Bank will offer to 
rewrite or otherwise extend the loan at prevailing interest rates.

Generally,  our  commercial  construction  loans  are  speculative  in  nature,  with  loan  proceeds  used  to  acquire  and  develop  real  estate 
property  for  sale  or  rental.  Loans  are  provided  for  terms  up  to  36  months  during  the  construction  phase,  with  loan-to-values  that 
generally do not exceed 75% on both an “as is” and “as complete and stabilized” basis.  Construction projects are primarily for the 
development of residential property types, inclusive of one-to-four family and multifamily properties.

Home Equity. The home equity portfolio totaled $106.2 million and $80.7 million at December 31, 2020 and 2019, respectively. The 
home equity portfolio represented 3% and 4% of total loans at December 31, 2020 and 2019, respectively. At December 31, 2020, the 
largest home equity line of credit was a $3.5 million line of credit and had an outstanding balance of $3.3 million at December 31, 
2020. At December 31, 2020, this line of credit was performing in accordance with its original terms.

Home equity lines of credit are extended as both first and second mortgages on owner-occupied residential properties in the Bank’s 
market area. Home equity lines of credit are generally underwritten with the same criteria that we use to underwrite one-to-four family 
residential mortgage loans. 

Our  home  equity  lines  of  credit  are  revolving  lines  of  credit,  which  generally  have  a  term  between  15  and  20  years,  with  draws 
available for the first 10 years. Our 15-year lines of credit are interest only during the first 10 years and amortize on a five-year basis 
thereafter.  Our  20-year  lines  of  credit  are  interest  only  during  the  first  10  years  and  amortize  on  a  10-year  basis  thereafter.  We 
generally originate home equity lines of credit with loan-to-value ratios of up to 80% when combined with the principal balance of the 
existing first mortgage loan, although loan-to-value ratios may occasionally exceed 80% on a case-by-case basis. Maximum combined 
loan-to-values are determined based on an applicant’s loan/line amount and the estimated property value. Lines of credit above $1.0 
million  generally  will  not  exceed  combined  loan-to-value  of  75%.  Rates  are  adjusted  monthly  based  on  changes  in  a  designated 
market  index.  We  also  offer  home  equity  term  loans,  which  are  extended  as  second  mortgages  on  owner-occupied  residential 
properties in our market area. Our home equity term loans are fixed rate second mortgage loans, which generally have a term between 
5 and 20 years.

Commercial and Industrial (C&I). The commercial and industrial portfolio totaled $347.9 million at December 31, 2020, an increase 
of  $214.6  million,  or  161.1%,  from  $133.2  million  at  December 31,  2019.  C&I  loans  represented  11%  and  6%  of  total  loans  at 
December 31, 2020 and 2019, respectively. The average loan balance outstanding in this portfolio was $414,000, excluding PPP loans, 
and  the  largest  individual  commercial  and  industrial  loan  outstanding  was  $8.8  million  as  of  December 31,  2020.  At  December 31, 
2020, this loan was performing in accordance with its original terms.  

Loans under the SBA’s PPP program totaled $126.2 million at December 31, 2020 and are included in the C&I portfolio.

•

•

•

At December 31, 2020, Innovation Banking loans totaled $19.9 million and the average loan balance outstanding in this 
portfolio  was  $795,000.  The  largest  individual  loan  outstanding  was  $4.7  million  and  this  loan  was  performing  in 
accordance with its original terms at December 31, 2020.

At December 31, 2020, asset-based loans totaled $21.2 million and the average loan balance outstanding in this portfolio 
was $1.5 million. The largest individual loans outstanding was $5.0 million and this loan was performing in accordance 
with its original terms at December 31, 2020.

At  December 31,  2020,  commercial  renewable  energy loans  totaled  $89.8  million  and  the  average  loan  balance 
outstanding in this portfolio was $2.7 million. The largest individual loan outstanding was $8.8 million, and this loan was 
performing in accordance with its original terms at December 31, 2020.

The  Company’s  C&I  loan  customers  represent  various  small-  and  middle-market  established  businesses  involved  in  professional 
services,  accommodation  and  food  services,  utilities,  health  care,  wholesale  trade,  manufacturing,  distribution,  retailing,  and  non-
profits. Most clients are privately owned businesses with markets that range from local to national in scope. Many of the loans to this 
segment  are  secured  by  liens  on  corporate  assets  and  the  personal  guarantees  of  the  principals.  The  Company  also  makes  loans  to 
entrepreneurial  and  technology  businesses,  where  regional  economic  strength  or  weakness  impacts  the  relative  risks  in  this  loan 
category, in addition to renewable energy lending which is more specialized in nature. The Bank has expanded its exposure within 
renewable energy lending but otherwise there are no significant concentrations in any one business sector, and loan risks are generally 
diversified among many borrowers.

39

Consumer Loans.  The consumer loan portfolio totaled $41.8 million at December 31, 2020, an increase of $7.1 million, or 20.5%, 
from $34.7 million at December 31, 2019. Consumer loans represented 1% of the total loan portfolio at both December 31, 2020 and
December 31, 2019. Consumer loans include secured and unsecured loans, lines of credit, and personal installment loans. Unsecured
consumer  loans  generally  have  greater  risk  compared  to  longer-term  loans  secured  by  improved,  owner-occupied  real  estate, 
particularly  consumer  loans  that  are  secured  by  rapidly  depreciable  assets.  The  secured  consumer  loans  and  lines  portfolio  are 
generally fully secured by pledged assets such as bank accounts or investments. The average loan balance outstanding in this portfolio
was $14,000 and the largest individual consumer loan outstanding was $3.0 million as of December 31, 2020. At December 31, 2020,
this loan was performing in accordance with its original terms.  

Loan Portfolio Maturities. The following table summarizes the dollar amount of loans maturing in our portfolio based on their loan 
type  and  contractual  terms  to  maturity  at  December 31,  2020.  The  table  does  not  include  any  estimate  of  prepayments,  which  can
significantly  shorten  the  average  life  of  all  loans  and  may  cause  our  actual  repayment  experience  to  differ  from  that  shown  below. 
Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or 
less.

Residential mortgage
Commercial mortgage
Home equity
Commercial & Industrial
Consumer
Total

One Year
or Less

December 31, 2020

One to
Five Years

Over Five
Years

$

$

6,702
124,400
527
40,434
41,615
213,678

$

$

(dollars in thousands)
13,020
301,752
5,057
192,400
73
512,302

$ 1,279,146
932,810
100,610
115,021
81
$ 2,427,668

Total

$ 1,298,868
1,358,962
106,194
347,855
41,769
$ 3,153,648

Loan Portfolio by Interest Rate Type. The following table summarizes the dollar amount of loans maturing in our portfolio based on 
whether the loan has a fixed, adjustable, or floating rate of interest at December 31, 2020:

December 31, 2020

Fixed

Adjustable

Floating

Total

q

Residential mortgage
g g
Commercial mortgage
Home equity
y
Commercial & Industrial
Consumer
Total

$

544,663
418,787
4,297
177,438
413
$ 1,145,598

$

$

(dollars in thousands)
741,002
411,371
—
51,106
468
$ 1,203,947

13,203
528,804
101,897
119,311
40,888
804,103

$

$ 1,298,868
1,358,962
106,194
347,855
41,769
$ 3,153,648

NONPERFORMING LOANS AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

The composition of nonperforming loans is as follows: 

December 31,

2020

2019

2018
(dollars in thousands)
$

$

Non-accruals
Loans past due > 90 days, but still accruing
Troubled debt restructurings
g
Total non-performing loans
Accruing troubled debt restructured loans
Nonperforming loans as a percentage of gross loans
Nonperforming loans as a percentage of total assets
p

g

p

g

g

$

$
$

$

7,744
407
811
8,962

4,160
1,264
227
5,651

$
— $

$
— $

0.28%
0.23%

0.25%
0.20%

2017

2016

$

$
$

1,148
—
150
1,298
29
0.10%
0.07%

1,023
232
421
1,676
—
0.13%
0.09%

525
—
117
642
6
0.04%
0.03%

$
$

Total  non-performing  loans  increased  $3.3  million  at  December 31,  2020  as  compared  to  December 31,  2019,  primarily  due  to  an 
increase of loans on non-accrual. 

40

The Company continues to closely monitor the portfolio of non-performing loans for which management has concerns regarding the 
ability of the borrowers to perform. The majority of the loans are secured by real estate and are considered to have adequate collateral 
value to cover the loan balances at December 31, 2020 and December 31, 2019, although such values may fluctuate with changes in 
the economy and the real estate market. In addition to the monitoring and review of loan performance internally, the Company has 
contracted with an independent organization to review the Company’s commercial and CRE loan portfolios. This independent review 
was performed in each of the past five years.

Non-accrual Loans.  Loans are typically placed on non-accrual status when any payment of principal and/or interest is 90 days or 
more past due unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. The 
Company  monitors  closely  the  performance  of  its  loan  portfolio.  The  status  of  delinquent  loans,  as  well  as  situations  identified  as 
potential problems, is reviewed on a regular basis by management.

Troubled  Debt  Restructurings.    Loans  are  considered  restructured  in  a  troubled  debt  restructuring  when  the  Company  has  granted 
concessions to a borrower due to the borrower’s financial condition that it otherwise would not have considered. These concessions 
may include modifications of the terms of the debt such as deferral of payments, extension of maturity, reduction of principal balance, 
reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions. Debt may be 
bifurcated  with  separate  terms  for  each  tranche  of  the  restructured  debt.  Restructuring  a  loan  in  lieu  of  aggressively  enforcing  the 
collection of the loan may benefit the Company by increasing the ultimate probability of collection.

Restructured  loans  are  classified  as  accruing  or  non-accruing  based  on  management’s  assessment  of  the  collectability  of  the  loan. 
Loans  which  are  already  on  non-accrual  status  at  the  time  of  the  restructuring  generally  remain  on  non-accrual  status  for 
approximately six months or longer before management considers such loans for return to accruing status. Accruing restructured loans 
are  placed  into  non-accrual  status  if  and  when  the  borrower  fails  to  comply  with  the  restructured  terms  and  management  deems  it 
unlikely  that  the  borrower  will  return  to  a  status  of  compliance  in  the  near  term.  Troubled  debt  restructurings  are  individually 
evaluated for credit losses. 

Pursuant to Section 4013 of the CARES Act, financial institutions can suspend the requirements under U.S. GAAP related to TDRs 
for  modifications  made  before  December  31,  2020  to  loans  that  were  current  as  of  December  31,  2019.    On  January  3,  2021,  the 
President  signed  into  law  the  Consolidated  Appropriations  Act,  2021  (the  “Act”).    As  a  result  of  the  Act,  the  suspension  of  TDR 
accounting  has  been  extended  to  the  earlier  of  January  1,  2022,  or  the  date  that  is  60  days  after  the  date  on  which  the  national 
emergency concerning the COVID-19 pandemic declared by the President terminates.  The requirement that a loan be not more than 
30 days past due as of December 31, 2019 is still applicable. In response to the COVID-19 and its economic impact to customers, a 
short-term modification program that complies with the CARES Act was implemented to provide temporary payment relief to those 
borrowers directly impacted by COVID-19. The deferred payments along with interest accrued during the deferral period are due and 
payable on the maturity date. Under recently issued guidance, provided these loans were current as of either year end or the date of the 
modification, these loans are not considered TDR loans at December 31, 2020 and will not be reported as past due during the deferral 
period. As of December 31, 2020, the Company had $23.1 million of loans in deferral.

41

ALLOWANCE FOR CREDIT LOSSES 

The following table summarizes the changes in the Company’s allowance for credit losses for the years indicated:

Period-end loans outstanding (net of unearned
   discount and deferred loan fees)
Average loans outstanding (net of unearned
   discount and deferred loan fees)
Balance of allowance for credit losses at the
   beginning of year - loans
Loans charged-off:

g

g

y

Commercial and industrial
Commercial mortgage
Consumer

Recovery of loans previously charged-off:

g

Total loans charged-off
p
y

y
Commercial and industrial
Commercial mortgage
g g
Residential mortgage
Home Equity
y
q
Consumer

Total recoveries of loans previously
   charged-off:
g

p

Net loan (charge-offs) recoveries
     Adoption of CECL accounting standard - loans
g
Provision for credit losses - acquired loans
Initial allowance for PCD
Provision for credit losses - loans
Balance at end of period

p

2020

Years Ended December 31,
2018

2019

2017

(dollars in thousands)

2016

$ 3,153,648

$2,226,728

$1,559,772

$1,350,899

$1,320,154

$ 2,856,631

$1,969,696

$1,417,237

$1,333,341

$1,262,497

$

18,180

$

16,768

$

15,320

$

15,261

$

15,191

(400)
(264)
(40)
(704)

250
—
—
—
15

265
(439)
205
8,282
437
9,351
36,016

$

$

$

(338)
(1,270)
(48)
(1,656)

53
—
—
—
11

64
(1,592)
—
—
—
3,004
18,180

$

$

$

(73)
—
(36)
(109)

48
—
—
—
7

55
(54)
—
—
—
1,502
16,768

(284)
—
(39)
(323)

13
—
—
—
7

20
(303)
—
—
—
362
15,320

$

$

$

(71)
—
(33)
(104)

14
7
13
1
7

42
(62)
—
—
—
132
15,261

$

$

$

$

$

$

Ratio of net (charge-offs) recoveries to average loans outstanding
Ratio of allowance for credit losses to loans outstanding
g

(0.02)%
1.14%

(0.08)%
0.82%

(0.00)%
1.08%

(0.02)%
1.13%

(0.00)%
1.16%

The allowance for credit losses to loans outstanding excluding PPP loans was 1.19% at December 31, 2020.

The level of charge-offs depends on many factors, including the national and regional economy. Cyclical lagging factors may result in
charge-offs  being  higher  than  historical  levels.  Although  the  allowance  is  allocated  between  categories,  the  entire  allowance  is
available to absorb losses attributable to all loan categories. Management believes that the allowance for credit losses is adequate. 

See additional discussion regarding the allowance for credit losses, in Item 7 under the caption “Critical Accounting Policies” and in 
Note 7 to the Audited Consolidated Financial Statements.

SOURCES OF FUNDS 

General. Deposits traditionally have been our primary source of funds for our investment and lending activities. The Company also 
borrows  from  the  FHLB  of  Boston  or  the  Federal  Reserve  Bank  of  Boston  (“FRB  of  Boston”),  and  utilizes  brokered  deposits  to
supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management purposes, and to manage our 
cost  of  funds.  Our  additional  sources  of  funds  are  scheduled  payments  and  prepayments  of  principal  and  interest  on  loans  and
investment securities and fee income and proceeds from the sales of loans and securities.

Deposits.  The Company accepts deposits primarily from customers in the communities in which our branches and offices are located, 
as well as from small- and medium-sized businesses and other  customers throughout our lending  area.  We  rely on our competitive 
pricing and products, convenient locations, and client service to attract and retain deposits. We offer a variety of deposit accounts with 
a  range  of  interest  rates  and  terms.  Our  deposit  accounts  consist  of  relationship  checking  for  consumers  and  businesses,  statement 
savings accounts, certificates of deposit, money market accounts, interest on lawyer trust accounts, commercial and regular checking 
accounts,  and  individual  retirement  accounts.  Deposit  rates  and  terms  are  based  primarily  on  current  business  strategies,  market 
interest  rates,  liquidity  requirements,  and  our  deposit  growth  goals.  The  Bank  may  also  access  the  brokered  deposit  market  for 
funding. 

42

At  December 31,  2020,  we  had  a  total  of  $223.8 million  in  certificates  of  deposit,  excluding  brokered  deposits,  of  which  $185.9 
million had remaining maturities of one year or less. Based on historical experience and our current pricing strategy, we believe the 
Bank will retain a large portion of these accounts upon maturity. The Bank had total brokered deposits of $30.8 million, $7.1 million, 
and $27.5 million at December 31, 2020, 2019, and 2018, respectively.

The following table sets forth the Bank’s deposits for the periods indicated: 

Demand deposits (non-interest bearing)
Interest bearing checking
Money market
Savings
Retail certificates of deposit under
   $100,000
Retail certificates of deposit of
   $100,000 or greater
Wholesale certificates of deposit

Total

December 31,
2020

December 31,
2019

Amount

Percent

Amount

Percent

1,006,132
625,650
532,218
984,262

(dollars in thousands)

29.7% $
18.4%
15.6%
28.9%

630,593
450,098
181,406
914,499

62,646

1.8%

56,602

161,387
30,788
3,403,083

4.7%
0.9%
100.0% $

118,596
7,084
2,358,878

$

$

26.7%
19.1%
7.7%
38.8%

2.4%

5.0%
0.3%
100.0%

Retail certificates of deposit of $100,000 or greater by maturity are as follows: 

December 31,

2020

2019

Less than 3 months remaining
3 to 5 months remaining
6 to 11 months remaining
12 months or more remaining
Total

$

$

$

(dollars in thousands)
34,453
41,755
61,320
23,859
161,387

$

35,054
32,245
27,119
24,178
118,596

Interest  expense  on  retail  certificates  of  deposit  of  $100,000  or  greater  was  $126,000  and  $2.1  million  for  the  years  ended 
December 31, 2020 and 2019, respectively.  

The following table sets forth certificates of deposit classified by interest rate as of the dates indicated: 

Interest Rate:

Less than 1.00%
1.00% to 1.99%
2.00% to 2.99%

Total

December 31,

2020

2019

(dollars in thousands)

$

$

156,732
62,194
35,895
254,821

$

$

51,306
62,986
67,990
182,282

Borrowings.  Total borrowings were $33.0 million, a decrease of $102.7 million as compared to $135.7 million at December 31, 2019.
The  Company’s  borrowings  consisted  of  advances  from  the  FHLB  of  Boston.    FHLB  of  Boston  advances  are  collateralized  by  a
blanket pledge agreement on the Company’s FHLB of Boston stock and residential mortgages held in the Bank’s portfolios.

The  Bank’s  remaining  borrowing  capacity  at t the  FHLB  of f Boston  at t Decemberr 31,  2020  was  approximately  $672.7  million.  In 
FHLB  of  Boston  at  December 31,  2020  was  approximately  $672.7  million.  In 
.
with the FHLB of Boston
addition, the Bankk has a $10.0 million line of f creditt 

The Company had no borrowings outstanding with the FRB Boston at both December 31, 2020 and 2019.  The Company’s remaining
borrowing capacity at the FRB Boston at December 31, 2020 was approximately $562.4 million. 

See NOTE 12 - BORROWINGS, for a schedule, including related interest rates and other information.

43

NET INTEREST MARGIN

Net interest income represents the difference between interest earned, primarily on loans and investments, and interest paid on funding 
sources,  primarily  deposits  and  borrowings.  Interest  rate  spread  is  the  difference  between  the  average  rate  earned  on  total  interest-
earning assets and the average rate paid on total interest-bearing liabilities. Net interest margin is the amount of net interest income, on 
a fully taxable-equivalent basis, expressed as a percentage of average interest-earning assets. The average rate earned on earning assets
is the amount of annualized taxable equivalent interest income expressed as a percentage of average earning assets. The average rate 
paid on interest-bearing liabilities is equal to annualized interest expense as a percentage of average interest-bearing liabilities. 

The following table sets forth the distribution of the Company’s average assets, liabilities and shareholders’ equity, and average rates
earned or paid on a fully taxable equivalent basis for each of the periods indicated: 

ASSETS

Loans (2)

Tax-exempt
p
Securities available for sale (3)

Taxable

Securities held to maturity

Taxable
Tax-exempt
q

Cash and cash equivalents

Total interest-earning assets (4)
Non interest-earning assets

g
Allowance for loan losses

Total assets

LIABILITIES AND SHAREHOLDERS’
EQUITY
Interest-bearing deposits

p

g

g

Savings accounts
Money market accounts
Certificates of deposit

p

Total interest-bearing deposits

Subordinated debt
Other borrowed funds

Total interest-bearing liabilities

g
Non-interest-bearing liabilities
p

Demand deposits
Other liabilities
Total liabilities

Shareholders’ equity

Total liabilities & shareholders’ equity
y

q

December 31, 2020
Interest
Income/
Expenses (1)

Rate
Earned/
Paid (1)

Average
Balance

Year Ended
December 31, 2019
Interest
Income/
Expenses (1)
(dollars in thousands)

Rate
Earned/
Paid (1)

Average
Balance

December 31, 2018
Interest
Income/
Expenses (1)

Rate
Earned/
Paid (1)

Average
Balance

$2,832,796 $ 119,447
1,115

23,835

4.22% $1,952,374 $
4.68

17,322

84,382
740

4.32% $1,407,079 $
4.27

10,158

57,941
469

4.12%
4.62

136,776

2,337

1.71

154,256

2,884

1.87

194,419

3,202

1.65

3,711
3,145
187
129,942

152,789
89,841
69,783
3,305,820
245,316
(27,887)
$3,523,249

2.43
204,909
3.50
75,432
50,839
0.27
3.93% 2,455,132
162,529
(17,345)
$2,600,316

5,079
2,897
731
96,713

2.48
189,120
3.84
76,966
45,365
1.44
3.94% 1,923,107
73,330
(15,857)
$1,980,580

4,255
3,043
595
69,505

2.25
3.95
1.31
3.61%

$ 554,000 $
937,247
350,117
259,568
2,100,932
5,408
123,693
2,230,033

838,653
103,086
3,171,772
351,477
$3,523,249

682
3,378
1,277
1,958
7,295
444
1,406
9,145

0.12% $ 417,226 $
827,279
0.36
189,836
0.36
0.75
221,299
0.35% 1,655,640
—
8.21
1.14
86,712
0.41% 1,742,352

440
8,708
2,481
4,012
15,641
—
2,002
17,643

0.11% $ 409,178 $
624,421
1.05
93,449
1.31
1.81
134,007
0.94% 1,261,055
-
—
2.31
18,671
1.01% 1,279,726

247
2,900
597
1,279
5,023

444
5,467

0.06%
0.46
0.64
0.95
0.40%

2.38
0.43%

567,500
68,847
2,378,699
221,617
$2,600,316

521,091
24,217
1,825,034
155,546
$1,980,580

120,797
(895)
$ 119,902

79,070
(764)
78,306

$

64,038
(737)
63,301

$

j

q

Net interest income on a fully taxable equivalent 
basis
Less taxable equivalent adjustment
Net interest income
Net interest spread (5)
Net interest margin (6)
(1)
(2)
(3)
(4)
(5)

p

3.52%
3.65%

2.93%
3.22%
Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% for 2020, 2019, and 2018.
Non-accrual loans are included in average amounts outstanding.
Average balances of securities available for sale calculated utilizing amortized cost.
Federal Home Loan Bank stock balance and dividend income is excluded from interest-earning assets.
Net  Interest  rate  spread  represents  the  difference  between  the  weighted  average  yield  on  interest-earning  assets,  inclusive  of  PPP  loans  originated 
during 2020, and the weighted average cost of interest-bearing liabilities.
Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets, inclusive of PPP loans 
originated during 2020.

3.19%
3.33%

(6)

44

Rate/Volume Analysis

The following table describes the extent to which changes in interest rates and changes in the volume of interest-earning assets and
interest-bearing liabilities have affected the Company’s interest income and interest expense during the periods indicated. Information 
is provided in each category with respect to: (i) changes attributable to changes in volumes (changes in average balance multiplied by 
prior year average rate), (ii) changes attributable to changes in rate (change in average interest rate multiplied by prior year average 
balance), and (iii) changes attributable to the combined impact of volumes and rates have been allocated proportionately to separate 
volume and rate categories. 

Year Ended December 31, 2020
Compared with
Year Ended December 31, 2019
Increase/(Decrease)
Due to Change in
Rate
(dollars in thousands)

Year Ended December 31, 2019
Compared with
Year Ended December 31, 2018
Increase/(Decrease)
Due to Change in
Rate
(dollars in thousands)

Volume

Total

Volume

Total

Interest income

Loans

Taxable
Tax-exempt

Securities available for sale

Taxable

Securities held to maturity

Taxable
Tax-exempt

Cash and due from banks

Total interest income
Interest expense
Deposits

Checking accounts
Savings accounts
Money market accounts
Certificates of deposit

Total interest-bearing deposits

Subordinated debt
Other borrowed funds

Total interest expense
Change in net interest income

g

$

37,171
299

$

(2,106) $
76

35,065
375

$

23,441
308

$

$

3,000
(37)

26,441
271

(311)

(236)

(547)

(716)

398

(318)

(1,268)
520
203
36,614

$

(100)
(272)
(747)
(3,385) $

(1,368)
248
(544)
33,229

$

372
(60)
76
23,421

$

452
(86)
60
3,787

$

824
(146)
136
27,208

160
1,030
1,280
601
3,071
444
656
4,171
32,443

$
$

82
(6,360)
(2,484)
(2,655)
(11,417)
—
(1,252)
(12,669) $
$
9,284

242
(5,330)
(1,204)
(2,054)
(8,346)
444
(596)
(8,498) $
$
41,727

5
1,186
936
1,148
3,275
—
1,571
4,846
18,575

$
$

188
4,622
948
1,585
7,343
—
(13)
7,330
$
(3,543) $

193
5,808
1,884
2,733
10,618
—
1,558
12,176
15,032

$

$
$

Excluding the impact of merger-related loan accretion and the impact of PPP loans, the adjusted net interest margin for the year ended
December 31, 2020 was 3.36%, representing a 14 basis points increase over the net interest margin for the year ended December 31, 
2019 of 3.22%. 

Total interest-earning assets (GAAP)
Net interest income on a fully taxable equivalent basis (GAAP)
Net interest margin (GAAP)
Less: Paycheck Protection Program loan impact
Less: Accretion of loan fair value adjustments
Adjusted net interest margin on a fully taxable equivalent basis

q

g

y

j

Average
Balance

3,305,820

For the Year Ended
December 31, 2020
Interest
Income/
Expenses
(dollars in thousands)

$

120,797

(120,048)

3,185,772

$

(4,062)
(9,791)
106,944

$

$

Rate
Earned/
Paid

3.65%
0.01%
-0.30%
3.36%

45

MARKET RISK AND ASSET LIABILITY MANAGEMENT 

Market  risk  is  the  risk  of  loss  from  adverse  changes  in  market  prices  and  rates.  The  Company’s  market  risk  arises  primarily  from 
interest  rate  risk  inherent  in  its  lending  and  deposit-taking  activities.  To  that  end,  management  actively  monitors  and  manages  its 
interest rate risk exposure. 

The  Company’s  profitability  is  affected  by  fluctuations  in  interest  rates.  A  sudden  and  substantial  change  in  interest  rates  may
adversely impact the Company’s earnings to the extent that the interest rates borne by assets and liabilities do not change at the same
speed,  to  the  same  extent  or  on  the  same  basis.  The  Company  monitors  the  impact  of  changes  in  interest  rates  on  its  net  interest 
income using several tools.

The Company’s primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the
Company’s net interest income and capital, while structuring the Company’s asset-liability structure to obtain the maximum yield-cost 
spread on that structure. The Company relies primarily on its asset-liability structure to control interest rate risk. 

Interest  Rate  Sensitivity.  The  Company  actively  manages  its  interest  rate  sensitivity  position.  The  objectives  of  interest  rate  risk 
management are to control exposure of net interest income to risks associated with interest rate movements and to achieve sustainable
growth in net interest income. The Company’s Asset Liability Committee (“ALCO”), using policies and procedures approved by the 
Company’s board of directors, is responsible for the management of the Company’s interest rate sensitivity position. The Company 
manages interest rate sensitivity by changing the mix, pricing, and re-pricing characteristics of its assets and liabilities, through the 
management of its investment portfolio, its offerings of loan and selected deposit terms, and through wholesale funding. Wholesale 
funding consists of, but is not limited to, multiple sources including borrowings with the FHLB of Boston, the Federal Reserve Bank 
of Boston’s discount window, and certificates of deposit from institutional brokers.  

The  Company  uses  several  tools  to  manage  its  interest  rate  risk  including  interest  rate  sensitivity  analysis,  or  gap  analysis,  market 
value of portfolio equity analysis, interest rate simulations under various rate scenarios, and net interest margin reports. The results of 
these reports are compared to limits established by the Company’s ALCO policies and appropriate adjustments may be made if the
results are outside the established limits.

The following table demonstrates the annualized result of an interest rate simulation (excluding purchase accounting adjustments and 
PPP fee income) and the estimated effect that a parallel interest rate shift, or “shock,” in the yield curve and subjective adjustments in 
deposit pricing might have on the Company’s projected net interest income over the next 12 months and 24 months. 

As of December 31, 2020: 

Change in Interest
Rates (in Basis Points)

Parallel rate shocks

+400
+300
+200
+100
–100

Year 1
Percentage Change
in Net Interest
Income

2.3
1.1
(0.1)
0.1
(2.3)

Year 2
Percentage Change
in Net Interest
Income

15.2
10.2
5.1
1.0
(12.0)

The following table demonstrates the annualized result of an interest rate simulation (excluding purchase accounting adjustments and 
PPP  fee  income)  and  the  estimated  effect  that  a  gradual  interest  rate  shift  in  the  yield  curve  and  subjective  adjustments  in  deposit 
pricing might have on the Company’s projected net interest income over the next 12 months and 24 months.

As of December 31, 2020:

Change in Interest
Rates (in Basis Points)

Gradual rate shifts

+200
–100

Year 1
Percentage Change
in Net Interest
Income

(1.3)
0.3

46

Year 2
Percentage Change
in Net Interest
Income

1.6
(9.2)

These simulations assume that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months and 
24 months. The changes to net interest income shown above are in compliance with the Company’s policy guidelines.

Economic  Value  of  Equity  Analysis.  The  Company  also  analyzes  the  sensitivity  of  the  Bank’s  financial  condition  to  changes  in 
interest rates through our economic value of equity model. This analysis measures the difference between estimated changes in the 
present value of the Bank’s assets and estimated changes in the present value of the Bank’s liabilities assuming various changes in 
current interest rates. 

The  Bank’s  economic  value  of  equity  analysis  as  of  December 31,  2020  estimated  that,  in  the  event  of  an  instantaneous  200  basis 
point increase in interest rates, the Bank would experience a 9.7% decrease in the economic value of equity for the next 12 months, 
and a 9.9% increase in the economic value of equity for the next 24 months. At the same date, our analysis estimated that, in the event 
of an instantaneous 100 basis point decrease in interest rates, the Bank would experience an 8.0% increase in the economic value of 
equity over the next 12 months, and an 11.2% increase in the economic value of equity for the next 24 months. The estimates within 
the  economic  value  of  equity  calculation  are  significantly  impacted  by  management’s  assumption  that  the  value  of  non-maturity 
deposits  do  not  fall  below  their  stated  balance  as  of  December 31,  2020. This  assumption  has  the  impact  of  increasing  the  Bank’s 
economic value of equity in the falling rate scenario as lower market rates increase the value of the loan and investment portfolios 
while the value of the non-maturity deposit base remains static. The Company believes retaining customer relationships is the most 
desirable strategy over the long term. 

The estimates of changes in the economic value of our equity require us to make certain assumptions including loan- and mortgage-
related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently 
uncertain  and,  as  a  result,  we  cannot  precisely  predict  the  impact  of  changes  in  interest  rates  on  the  economic  value  of  our  equity. 
Although our economic value of equity analysis provides an indication of our interest rate risk exposure at a particular point in time, 
such  estimates  are  not  intended  to,  and  do  not,  provide  a  precise  forecast  of  the  effect  of  changes  in  market  interest  rates  on  the 
economic value of our equity and will differ from actual results.

LIQUIDITY AND CAPITAL RESOURCES

Impact of Inflation and Changing Prices. Our Consolidated Financial Statements and related notes have been prepared in accordance 
with  GAAP.  GAAP  generally  requires  the  measurement  of  financial  position  and  operating  results  in  terms  of  historical  dollars 
without  consideration  of  changes  in  the  relative  purchasing  power  of  money  over  time  due  to  inflation.  The  impact  of  inflation  is 
reflected  in  the  increased  cost  of  our  operations.  Unlike  industrial  companies,  our  assets  and  liabilities  are  primarily  monetary  in 
nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation. 

Liquidity.  Liquidity  is  defined  as  the  Company’s  ability  to  generate  adequate  cash  to  meet  its  needs  for  day-to-day  operations  and 
material long- and short-term commitments. Liquidity risk is the risk of potential loss if the Company were unable to meet its funding 
requirements at a reasonable cost. The Company manages its liquidity based on demand and specific events and uncertainties to meet 
current  and  future  financial  obligations  of  a  short-term  nature.  The  Company’s  objective  in  managing  liquidity  is  to  respond  to  the 
needs of depositors and borrowers, as well as increase to earnings enhancement opportunities in a changing marketplace. At December 
31, 2020, the Company had access to funds totaling $1.8 billion. 

The Company’s liquidity position is managed on a daily basis as part of the daily settlement function and continuously as part of the 
formal asset liability management process. The Bank’s liquidity is maintained by managing its core deposits as the primary source, 
selling investment securities, selling loans in the secondary market, borrowing from the FHLB of Boston and the FRB, and purchasing 
wholesale certificates of deposit as its secondary sources.

47

The sources of funds for dividends paid by the Company are dividends received from the Bank and liquid funds held by the Company. 
The  Company  and  the  Bank  are  regulated  enterprises  and  their  abilities  to  pay  dividends  are  subject  to  regulatory  review  and 
restriction. Certain regulatory and statutory restrictions exist regarding dividends, loans, and advances from the Bank to the Company. 
Generally, the Bank has the ability to pay dividends to the Company subject to minimum regulatory capital requirements. 

Quarterly, ALCO reviews the Company’s liquidity needs and reports any findings (if required) to the Board of Directors.

Capital  Adequacy. Total  shareholders’  equity  was  $401.7  million  at  December 31,  2020,  as  compared  to  $286.6  million  at 
December 31, 2019. The Company’s equity increased primarily due to net income of $32.0 million, $87.2 million of equity issued as a 
result  of  the  Wellesley  merger,  before  tax-effect  increases  in  the  value  of  the  Company’s  interest  rate  derivative  positions  of  $4.7
million,  and  before  tax-effect  increases  in  unrealized  gains  on  the  available  for  sale  investment  portfolio  of  $3.6  million,  partially 
partially 
offsett by 
offset by regular dividend payments of $13.1 million paid during the year. The ratio of total equity to total assets was 10.17% and 
10.04% at December 31, 2020 and December 31, 2019, respectively.  Book value per share was $58.00 and $53.06, at December 31, 
2020 and 2019, respectively.  

The Company and the Bank are subject to various regulatory capital requirements.  As of December 31, 2020, the Company and the 
Bank  exceeded  the  regulatory  minimum  levels  to  be  considered  “well  capitalized.”  See  NOTE  18  –  SHAREHOLDERS’ EQUITY  to  the 
Consolidated Financial Statements for additional discussion of regulatory capital requirements.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, AND CONTINGENCIES 

The Company has entered into contractual obligations and commitments. The following tables summarize the Company’s contractual
cash obligations and other commitments by maturity at December 31, 2020: 

CONTRACTUAL OBLIGATIONS

Total

FHLBB advances
Retirement benefit obligations
Lease obligations
Certificates of deposit

Total contractual cash
   Obligations
g

OTHER COMMITMENTS

Unused portion of existing lines of
   credit
Standby letters of credit
Originations of new loans
Total commitments

$

$

$

$

Less Than
One Year

Payments Due — By Period as of December 31, 2020
Three to
One to
Five
Three
Years
Years
(dollars in thousands)
17,835
$
5,332
13,151
35,291

15,157
2,456
7,173
214,900

$

5,658
10,010
4,630

— $

After Five
Years

—
15,587
11,347
—

$

32,992
29,033
41,681
254,821

358,527

$

239,686

$

71,609

$

20,298

$

26,934

Amounts of Commitments Expiring — By Period as of December 31, 2020
One to
Three
Years
(dollars in thousands)

Three to
Five
Years

Less Than
One Year

After Five
Years

Total

584,520
9,430
94,399
688,349

$

$

280,892
8,212
94,399
383,503

$

$

120,268
440
—
120,708

$

$

68,520
778
—
69,298

$

$

114,840
—
—
114,840

Further discussion regarding commitments and contingencies can be found in NOTE 16 – FINANCIAL INSTRUMENTS WITH OFF-
BALANCE SHEET RISK and NOTE 17 – COMMITMENTS AND CONTINGENCIES to the Consolidated Financial Statements.  

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs 
of  its  customers.  These  financial  instruments  primarily  include  commitments  to  originate  and  sell  loans,  standby  letters  of  credit,
unused lines of credit, and unadvanced portions of construction loans. The instruments involve, to varying degrees, elements of credit 
and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of those 
instruments reflect the extent of involvement the Company has in these particular classes of financial instruments.

48

The  Company’s  exposure  to  credit  loss  in  the  event  of  nonperformance  by  the  other  party  to  the  financial  instrument  for  loan 
commitments,  standby  letters  of  credit  and  unadvanced  portions  of  construction  loans  is  represented  by  the  contractual  amount  of 
those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-
balance-sheet instruments. 

Off-Balance-Sheet Arrangements. Our significant off-balance-sheet arrangements consist of the following:

•

•

•

•

•

•

•

commitments to originate and sell loans,

standby and commercial letters of credit,

unused lines of credit,

unadvanced portions of construction loans,

unadvanced portions of other loans,

loan related derivatives, and

risk participation agreements. 

Off-balance-sheet arrangements are more fully discussed in NOTE 16 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK to 
the Consolidated Financial Statements. 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 

The information required by this item is included in Item 7 of this report under “Market Risk and Asset Liability Management.”

49

Item 8. Financial Statements and Supplementary Data.

CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

Cash and cash equivalents
Investment securities

Assets

Available for sale, at fair value (amortized cost $234,252 and $141,109, 
respectively)
Held to maturity, at amortized cost (fair value $260,139 and $264,114, 
respectively)

Total investment securities

Loans held for sale, at lower of cost or fair value
Loans

Residential mortgage
Commercial mortgage
Home equity
Commercial & Industrial
Consumer

Total loans

Less: allowance for credit losses on loans

Net loans

Federal Home Loan Bank of Boston Stock, at cost
Bank owned life insurance
Banking premises and equipment, net
Right-of-use asset operating leases
Deferred income taxes, net
Accrued interest receivable
Goodwill
Merger related intangibles, net
Other assets

Total assets

Liabilities

Deposits

Demand
Interest bearing checking
Money market
Savings
Certificates of deposit
Total deposits

Borrowings
Operating lease liabilities
Other liabilities

Total liabilities

Shareholders’ Equity

December 31, 2020

December 31, 2019

(dollars in thousands, except par value)

$

75,785

$

61,335

237,030

247,672
484,702
6,909

1,298,868
1,358,962
106,194
347,855
41,769
3,153,648
(36,016)
3,117,632
5,734
46,169
18,158
34,927
11,639
9,514
51,912
2,977
83,239
3,949,297

1,006,132
625,650
532,218
984,262
254,821
3,403,083
32,992
37,448
74,042
3,547,565

$

$

140,330

258,172
398,502
1,546

917,566
1,060,574
80,675
133,236
34,677
2,226,728
(18,180)
2,208,548
7,854
37,319
14,756
33,587
8,229
7,052
31,206
3,338
42,291
2,855,563

630,593
450,098
181,406
914,499
182,282
2,358,878
135,691
35,054
39,379
2,569,002

5,401
136,766
146,875
(2,481)
286,561
2,855,563

$

$

$

Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 
6,926,728 shares and 5,400,868 shares, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)

6,927
226,967
165,404
2,434
401,732
3,949,297
The accompanying notes are an integral part of these consolidated financial statements.

Total shareholders’ equity
Total liabilities and shareholders’ equity
y

$

q

50

CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

Interest and dividend income
Interest on taxable loans
Interest on tax-exempt loans
p
Interest on taxable investment securities
Interest on tax-exempt investment securities
p
Dividends on FHLB of Boston stock
Interest on overnight investments
g

Total interest and dividend income

Interest expense

p

Interest on deposits
Interest on borrowed funds
Interest on subordinated debt
Total interest expense

p

Net interest and dividend income

Provision for credit losses

Net interest and dividend income after provision for credit 
losses

Noninterest income

Wealth management revenue
pDeposit account fees
ATM/Debit card income
Bank owned life insurance income
Gain (loss) on disposition of investment securities
Gain on loans sold
Loan related derivative income
Other income

Total noninterest income

Noninterest expense

p

y

p

q p

Salaries and employee benefits
Occupancy and equipment
Data processing
Professional services
Marketing
FDIC insurance (credit)
Nonoperating expenses
Other expenses

p

Total noninterest expense

Income before income taxes

Income tax expense

Net income

Share data:

g

g

Weighted average number of shares outstanding, basic
Weighted average number of shares outstanding, diluted
Basic earnings per share
Diluted earnings per share

g p

g

For the Year Ended December 31,

2020

2019

2018

$

$

$
$

119,447
880
6,048
2,485
331
187
129,378

7,295
1,406
444
9,145
120,233
18,310

101,923

29,751
2,595
1,308
747
69
1,850
1,479
1,726
39,525

58,975
13,004
7,662
4,190
1,818
992
7,612
3,832
98,085
43,363
11,404
31,959

6,289,481
6,344,409
5.07
5.03

$

$

$
$

84,382
584
7,963
2,289
390
731
96,339

15,641
2,002
—
17,643
78,696
3,004

75,692

26,499
3,185
1,413
612
(79)
1,170
1,674
1,927
36,401

47,494
10,855
6,232
3,623
1,760
291
4,721
3,199
78,175
33,918
8,661
25,257

4,629,255
4,661,720
5.41
5.37

$

$

$
$

57,941
371
7,457
2,404
287
595
69,055

5,023
444
—
5,467
63,588
1,502

62,086

25,191
3,071
1,180
526
2
99
1,651
1,269
32,989

41,212
9,072
5,177
3,258
2,229
574
201
2,264
63,987
31,088
7,207
23,881

4,061,529
4,098,633
5.82
5.77

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

51

CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Net income
Other comprehensive income, net of tax:

Available for sale securities

Unrealized holding gains(losses)
Less: reclassification adjustment for (gains)losses
  realized in net income

Total unrealized gains(losses) on available for sale securities

Interest rate swaps designated as cash flow hedges

Unrealized holding gains(losses)
Less: reclassification adjustment for (gains)losses
  realized in net income
Defined benefit retirement plans

Change in retirement liabilities

Other comprehensive income
pComprehensive income

2020

For the Year Ended December 31,
2019
(dollars in thousands)

2018

$

31,959

$

25,257

$

23,881

2,800

(57)
2,743

4,758

(1,354)

2,500

62
2,562

713

108

(242)

(2)
(244)

720

31

(1,232)
4,915
36,874

$

623
4,006
29,263

$

89
596
24,477

$

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

52

CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Years Ended December 31,

Balance at December 31, 2017
Cumulative effect of accounting changes
Net income
Other comprehensive income
Share based compensation and other share-based activity
y
p
Dividends declared ($1.96 per share)
Balance at December 31, 2018

Balance at December 31, 2018
Net income
Other comprehensive income
p
Share based compensation and other share-based activity
Dividends declared ($2.04 per share)
p
Common stock issued for Optima merger
Common stock offering
g
Balance at December 31, 2019

g

g

Balance at December 31, 2019
Cumulative effect of accounting changes (Note 3)
Net income
Other comprehensive income
p
Share based compensation and other share-based activity
Dividends declared ($2.12 per share)
p
Common stock issued for Wellesley merger
Balance at December 31, 2020

Common
Stock

Additional
Paid-In
Capital
(dollars in thousands, except per share data)

Retained
Earnings

Accumulated
Other
Comprehensive
Income /
(Loss)

Total
Shareholders’
Equity

$

$

$

$

$

$

4,082
—
—
—
25
—
4,107

4,107
—
—
20
—
723
551
5,401

5,401
—
—
—
23
—
1,503
6,927

$

$

35,663
—
—
—
2,608
—
38,271

$

38,271
—
—
2,150
—
58,694
37,651
$ 136,766

$ 136,766
—
—
—
4,541
—
85,660
$ 226,967

$ 114,093
1,202
23,881
—
—
(8,041)
$ 131,135

$ 131,135
25,257
—
—
(9,517)
—
—
$ 146,875

$ 146,875
(347)
31,959
—
—
(13,083)
—
$ 165,404

$

$

$

$

$

$

(5,881) $
(1,202)
—
596
—
—
(6,487) $

(6,487) $
—
4,006
—
—
—
—
(2,481) $

(2,481) $
—
—
4,915
—
—
—
2,434

$

147,957
—
23,881
596
2,633
(8,041)
167,026

167,026
25,257
4,006
2,170
(9,517)
59,417
38,202
286,561

286,561
(347)
31,959
4,915
4,564
(13,083)
87,163
401,732

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

p y g

p

g

53

CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses
Amortization(accretion) of deferred charges and fees net
(Accretion), depreciation, and amortization, net
Bank owned life insurance income
(Gain)/loss on disposition of investment securities
Share based compensation and other share-based activity
Change in accrued interest receivable
Deferred income tax (benefit)/expense
Change in other assets, net
Change in other liabilities, net
Change in loans held for sale

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Origination of loans
Proceeds from principal payments of loans
Proceeds from loan pool sale
Proceeds from calls/maturities of securities available for sale
Purchase of securities available for sale
Proceeds from sales of securities available for sale
Proceeds from calls/maturities of securities held to maturity
Purchase of securities held to maturity
Proceeds from settlement of bank owned life insurance policies
Redemption (purchase) of FHLB of Boston stock
Purchase of banking premises and equipment
Net cash acquired in business combinations
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES

Change in demand, interest bearing, money market and savings accounts
Change in certificates of deposit
Change in borrowings
Proceeds from common stock offering (net of underwriting fees)
Redemption of subordinated debt
Cash dividends paid on common stock

Net cash provided by financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest
Income taxes

Significant non-cash transactions

Right-of-use assets for lessee operating leases
Right-of-use liabilities for lessee operating leases
Transfer of other real estate owned
Common Stock issued to shareholders due to merger
Fair value of assets acquired, net of cash acquired
Fair value of liabilities assumed

2020

2019
(dollars in thousands)

2018

$

31,959

$

25,257

$

23,881

18,310
(780)
(8,134)
(747)
(69)
4,564
253
(665)
(22,863)
20,332
(5,363)
36,797

(1,070,321)
1,022,516
—
47,087
(140,570)
10,821
56,007
(33,818)
—
8,505
(2,218)
43,063
(58,928)

422,866
(138,213)
(224,989)
—
(10,000)
(13,083)
36,581
14,450
61,335
75,785

9,172
14,628

—
—
2,293
87,163
961,668
917,569

$

$

$

$

3,004
166
828
(612)
79
2,170
(162)
110
(11,667)
11,166
(1,546)
28,793

(790,097)
524,907
74,412
49,832
(23,450)
26,552
72,655
(48,906)
—
456
(1,896)
2,063
(113,472)

171,961
(101,928)
28,823
38,202
—
(9,517)
127,541
42,862
18,473
61,335

17,918
7,770

33,587
35,054
163
59,417
548,801
491,447

$

$

1,502
777
1,888
(526)
(2)
2,633
(634)
(721)
(12,231)
7,455
—
24,022

(596,259)
387,537
—
35,415
—
702
33,064
(84,261)
676
(2,602)
(1,155)
—
(226,883)

74,421
(38,467)
89,830
—
—
(8,041)
117,743
(85,118)
103,591
18,473

5,457
8,330

—
—
—
—
—
—

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

p y g

g

p

54

CAMBRIDGE BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020

1.

THE BUSINESS

The  accompanying  consolidated  financial  statements  include  the  accounts  of  Cambridge  Bancorp  (the  “Company”)  and  its  wholly 
owned  subsidiary,  Cambridge  Trust  Company  (the  “Bank”),  and  the  Bank’s  subsidiaries,  Cambridge  Trust  Company  of  New 
Hampshire,  Inc.,  CTC  Security  Corporation,  and  CTC  Security  Corporation  III.  References  to  the  Company  herein  relate  to  the 
consolidated group of companies. All significant intercompany accounts and transactions have been eliminated in preparation of the 
consolidated financial statements.

The  Company  is  a  state-chartered,  federally  registered  bank  holding  company  headquartered  in  Cambridge,  Massachusetts, 
incorporated in 1983. The Company is the sole shareholder of the Bank, a Massachusetts trust company chartered in 1890 which is a 
commercial  bank.  The  Company  is  a  private  bank  offering  a  full  range  of  private  banking  and  wealth  management  services  to  our 
clients. The private banking business, the Company’s only reportable operating segment, is managed as a single strategic unit.

As  a  private  bank,  the  Company  focuses  on  four  core  services  that  center  around  client  needs.  The  core  services  include  Wealth 
Management,  Commercial  Banking,  Residential  Lending,  and  Personal  Banking.  The  Bank  offers  a  full  range  of  commercial  and 
consumer  banking  services  through  its  network  of  21  private  banking  offices  in  Massachusetts  and  New  Hampshire.  The  Bank  is 
engaged principally in the business of attracting deposits from the public and investing those deposits. The Bank invests those funds in 
various types of loans, including residential and commercial real estate, and a variety of commercial and consumer loans. The Bank 
also invests its deposits and borrowed funds in investment securities and has two wholly owned Massachusetts security corporations, 
CTC Security Corporation and CTC Security Corporation III, for this purpose. Deposits at the Bank are insured by the Federal Deposit 
Insurance Corporation (“FDIC”) for the maximum amount permitted by FDIC Regulations.

Trust  and  investment  management  services  are  offered  through  the  Bank’s  private  banking  offices  in  Massachusetts  and  New 
Hampshire,  and  its  wealth  management  offices  located  in  Boston  and  Wellesley,  Massachusetts  and  Concord,  Manchester,  and 
Portsmouth,  New  Hampshire.  The  Bank  also  has  a  non-depository  trust  company,  Cambridge  Trust  Company  of  New  Hampshire, 
Inc., which allows non-New Hampshire residents the opportunity to take advantage of the state’s favorable trust laws. The assets held 
for wealth management clients are not assets of the Bank and, accordingly, are not reflected in the accompanying consolidated balance 
sheets. 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The  consolidated  financial  statements  have  been  prepared  in  conformity  with  U.S.  generally  accepted  accounting  principles 
(“GAAP”).

Use of Estimates

The  preparation  of  consolidated  financial  statements  in  conformity  with  GAAP  requires  management  to  make  estimates  and 
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 
consolidated financial statements. Actual results could differ from those estimates. The allowance for credit losses, the valuation of 
deferred tax assets, and the valuation of assets acquired and liabilities assumed in business combinations are particularly subject to 
change. 

Reclassifications

Certain amounts in the prior year’s financial statements may have been reclassified to conform with the current year’s presentation.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, amounts due from banks, and overnight investments.

Investment Securities

Investment  securities  are  classified  as  either  ‘held  to  maturity’  or  ‘available  for  sale’  in  accordance  with  the  Financial  Accounting 
Standards  Board  (“FASB”)  Accounting  Standards  Codification  (“ASC”)  320,  Investments  –  Debt  Securities.  Debt  securities  that 
management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amortized cost. 

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Debt securities not classified as held to maturity are classified as available for sale and carried at fair value with unrealized after-tax 
gains  and  losses  reported  net  as  a  separate  component  of  shareholders’  equity.  The  Company  classifies  its  securities  based  on  its 
intention at the time of purchase.

Purchase premiums and discounts are recognized in interest income using the effective yield or straight-line method over the term of 
the securities, except for callable debt securities for which the purchase premiums are recognized through the earliest call date.  Gains 
and losses on the sale of debt securities are recorded on the trade date and determined using the specific identification method.

Allowance for Credit Losses- Held to Maturity Securities

The Company measures expected credit losses on held to maturity debt securities on a collective basis by security type and risk rating 
where  available.  The  reserve  for  each  pool  is  calculated  based  on  a  Probability  of  Default/Loss  Given  Default  (“PD/LGD”)  basis 
taking  into  consideration  the  expected  life  of  each  security.  Held  to  maturity  securities  which  are  issued  by  the  United  States  of 
America  (“U.S.”)  or  are  guaranteed  by  U.S.  federal  agencies  do  not  currently  have  an  allowance  for  credit  loss  as  the  Company 
determined  these  securities  are  either  backed  by  the  full  faith  and  credit  of  the  U.S.  government  and/or  there  is  an  unconditional 
commitment  to  make  interest  payments  and  to  return  the  principal  investment  in  full  to  investors  when  a  debt  security  reaches 
maturity. The Company will evaluate this position no less than annually, however, certain items which may cause the Company to 
change this methodology include legislative changes that remove a government-sponsored enterprise’s (“GSE”) ability to draw funds 
from the U.S. government, or legislative changes to housing policy that reduce or eliminate the U.S. government’s implicit guarantee 
on such securities. For securities which are not U.S. treasury or agency backed, risk ratings are generally sourced from Moody’s or 
Standard & Poor’s (“S&P”). The Company updates loss given default, probability of default, and recovery rates for each security as 
that information becomes available but no less than annually. The expected remaining life to maturity of each applicable security is 
updated quarterly. Any expected credit losses on held to maturity securities would be presented as an allowance rather than as a direct 
write-down through the consolidated statement of income if the Company does not intend to sell or believes that it is more-likely-than-
not that the Company will be required to sell the security. 

Allowance for Credit Losses-Available for Sale Securities

The Company measures expected credit losses on available for sale securities based upon the gain or loss position of the security. For 
available-for sale debt securities in an unrealized loss position, which the Company does not intend to sell, or it is not more likely than 
not that the Company will be required to sell the security before recovery of the Company’s amortized cost, the Company evaluates 
qualitative criteria to determine any expected loss. This includes among other items the financial health of, and specific prospects for 
the issuer, including whether the issuer is in compliance with the terms and covenants of the security. The Company also evaluates 
quantitative criteria including determining whether there has been an adverse change in expected future cash flows of the security. If 
the  Company  does  not  expect  to  recover  the  entire  amortized  cost  basis  of  the  security,  an  allowance  for  credit  losses  would  be 
recorded,  with  a  related  charge  to  earnings,  limited  by  the  amount  of  the  fair  value  of  the  security  less  its  amortized  cost.  If  the 
Company intends to sell the security or it is more likely than not that the Company will be required to sell the debt security before 
recovery of its amortized cost basis, the Company recognizes the entire difference between the security’s amortized cost basis and its 
fair value in earnings.

Prior to the adoption of Topic 326 on January 1, 2020, declines in the fair value of investment securities below their amortized cost 
that were deemed to be other-than-temporary were reflected in earnings as realized losses to the extent the impairment was related to 
credit  losses.  The  amount  of  the  impairment  related  to  other  factors  was  recognized  in  other  comprehensive  income.  In  estimating 
other-than-temporary  impairment  losses,  management  considered:  (1)  the  length  of  time  and  the  extent  to  which  the  fair  value  has 
been less than cost; (2) the financial condition and near-term prospects of the issuer; and (3) the Company’s intent to sell the security 
or whether it is more likely than not that the Company will be required to sell the debt security before its anticipated recovery.

Loans

Loans  are  reported  at  the  amount  of  their  outstanding  principal,  including  deferred  loan  origination  fees  and  costs,  reduced  by 
unearned discounts, and the allowance for credit losses. Loans are considered delinquent when a payment of principal and/or interest 
becomes past due 30 days following its scheduled payment due date. Loans on which the accrual of interest has been discontinued are 
designated as non-accrual loans. Loans are removed from non-accrual when they become less than 90 days past due and when concern 
no longer exists as to the collectability of principal or interest. 

Allowance for Credit Losses - Loans

Losses on loan receivables are estimated and recognized upon origination of the loan, based on expected credit losses for the life of 
the loan balance as of the period end date. The Company uses a discounted cash flow method incorporating probability of default and 
loss  given  default  forecasted  based  on  statistically  derived  economic  variable  loss  drivers  combined  with  qualitative  factors,  to 
estimate expected credit losses.  This process includes estimates which involve modeling loss projections attributable to existing loan 

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balances,  considering  historical  experience,  current  conditions,  and  future  expectations  for  homogeneous  pools  of  loans  over  the 
reasonable  and  supportable  forecast  period.  The  reasonable  and  supportable  forecast  period  is  determined  based  upon  the  accuracy 
level of historical loss forecast estimates, the specific loan level models and methodology utilized, and considers material changes in 
growth  and  credit  strategy,  and  business  changes.  For  periods  beyond  a  reasonable  and  supportable  forecast  interval,  the  Company 
reverts to historical information over a period for which comparable data is available. The historical information either experienced by 
the Company, or by a selection of peer banks when appropriate, is derived from a combination of recessionary and non-recessionary 
performance periods for which data is available. Similar to the reasonable and supportable forecast period, the Company reassesses the 
reversion period at the segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, 
and other relevant data shifts over time.

The  Company  generally  segments  its  loan  receivable  population  into  homogeneous  pools  of  loans.  Consistent  with  the  Company’s 
other assumptions, the Company regularly reviews segmentation to determine whether the segmentation pools remain relevant as risk 
characteristics  change.  When  a  loan  no  longer  meets  the  criteria  of  its  initial  pooling  as  a  result  of  credit  deterioration  or  other 
changes, the Company may evaluate the credit for estimated losses on an individual basis if it determines that they no longer retain the 
same risk characteristics.  To the extent that there are a multitude of these loans with new similar credit characteristics, the Company 
would anticipate a change to the pooling methodology. Loans that do not share risk characteristics are evaluated on an individual basis 
and are not included in the collective evaluation. For loans with real estate collateral, when management determines that foreclosure is 
probable,  expected  credit  losses  are  based  on  the  fair  value  of  the  collateral  at  the  reporting  date,  adjusted  for  selling  costs  as 
appropriate.

The  Company  evaluates  the  loan  allowance  for  credit  losses  quarterly.  The  Company  regularly  reviews  its  collection  experience 
(including delinquencies and net charge-offs) in determining our allowance for credit losses. The Company also considers its historical 
loss  experience  to  date  based  on  actual  defaulted  loans  and  overall  portfolio  indicators  including  delinquent  and  non-accrual  loans, 
trends  in  loan  volume  and  lending  terms,  credit  policies  and  other  observable  environmental  factors  such  as  unemployment  and 
interest rate changes.

The  underlying  assumption  estimates  and  assessments  the  Company  uses  to  estimate  the  allowance  for  credit  losses  reflects  the 
Company’s best estimate of model assumptions and forecasted conditions at that time.  Changes in such estimates can significantly 
affect the allowance and provision for credit losses. It is possible and likely that the Company will experience credit losses that are 
different from the current estimates. 

The  provision  for  credit  losses  charged  to  income  is  based  on  management’s  judgment  of  the  amount  necessary  to  maintain  the 
allowance  at  a  level  to  provide  for  probable  inherent  credit  losses  as  of  the  evaluation  date.  When  management  believes  that  the 
collectability of a loan’s principal balance, or portions thereof, is unlikely, the principal amount is charged against the allowance for 
credit losses. Recoveries on loans that have been previously charged off are credited to the allowance for loan losses, generally at the 
time cash is received on a charged-off account. The allowance is an estimate, and ultimate losses may vary from current estimates. As 
adjustments become necessary, they are reported in the results of operations through the provision for credit losses in the period in 
which they become known.

Risk characteristics relevant to each portfolio segment are as follows:

Residential mortgage and home equity loans – The Company generally does not originate loans in these segments with a loan-to-value 
ratio greater than 80%, unless covered by private mortgage insurance, and in all cases not greater than a loan-to-value ratio of 97%. 
The Company does not originate subprime loans. Loans in these segments are secured by one-to-four family residential real estate, 
and repayment is primarily dependent on the credit quality of the individual borrower.

Commercial  mortgage  loans  –  This  includes  multi-family  properties  and  construction.  The  Company  generally  does  not  originate 
loans  in  this  segment  with  a  loan-to-value  ratio  greater  than  75%.  Loans  in  this  segment  are  secured  by  owner-occupied  and 
nonowner-occupied  commercial  real  estate,  and  repayment  is  primarily  dependent  on  the  cash  flows  of  the  property  (if  nonowner-
occupied) or of the business (if owner-occupied). 

Commercial  &  industrial  loans  –  Loans  in  this  segment  are  made  to  businesses  and  are  generally  secured  by  equipment,  accounts 
receivable,  or  inventory,  as  well  as  the  personal  guarantees  of  the  principal  owners  of  the  business,  and  repayment  is  primarily 
dependent on the cash flows generated by the business.  In addition, this segment includes loans issued under the United States Small 
Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”).  These loans are guaranteed and are not evaluated for an 
allowance for credit losses because the Company expects the guarantees will be effective, if necessary.

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Consumer loans – Loans in this segment are made to individuals and can be secured or unsecured. Repayment is primarily dependent 
on the credit quality of the individual borrower.

The  majority  of  the  Company’s  loans  are  concentrated  in  Eastern  Massachusetts  and  Southern  New  Hampshire  and  therefore  the 
overall health of the local economy, including unemployment rates, vacancy rates, and consumer spending levels, can have a material 
effect on the credit quality of all of these portfolio segments.

The process to determine the allowance for credit losses requires management to exercise considerable judgment regarding the risk 
characteristics of the loan portfolio segments and the effect of relevant internal and external factors.

Allowance for Credit Losses- Unfunded Commitments

The expected credit losses for unfunded commitments are measured over the contractual period of the Company’s exposure to credit 
risk.  The estimate of credit loss incorporates assumptions for both the likelihood and amount of funding over the estimated life of the 
commitments,  for  the  risk  of  loss,  and  current  conditions  and  expectations.  Management  periodically  reviews  and  updates  its 
assumptions  for  estimated  funding  rates  based  on  historical  rates,  and  factors  such  as  portfolio  growth,  changes  to  organizational 
structure, economic conditions, borrowing habits, or any other factor which could impact the likelihood that funding will occur. The 
Company does not reserve for unfunded commitments which are unconditionally cancellable.

Acquired Loans

Acquired  loans  are  recorded  at  fair  value  at  the  date  of  acquisition  based  on  a  discounted  cash  flow  methodology  that  considers 
various factors, including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and 
whether  or  not  the  loan  was  amortizing,  and  a  discount  rate  reflecting  the  Company’s  assessment  of  risk  inherent  in  the  cash  flow 
estimates.  Purchased  loans  are  grouped  together  according  to  similar  risk  characteristics  and  are  treated  in  the  aggregate  when 
applying various valuation techniques. These cash flow evaluations are inherently subjective as they may be susceptible to significant 
change.

Effective  January  1,  2020,  loans  acquired  in  a  business  combination  that  have  experienced  more-than-insignificant  deterioration  in 
credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. The Company evaluates acquired loans for 
deterioration  in  credit  quality  based  on,  but  not  limited  to,  the  following:  (1)  non-accrual  status;  (2)  troubled  debt  restructured 
designation; (3) risk ratings of special mention, substandard or doubtful; (4) watchlist credits; and (5) delinquency status, including 
loans that are current on acquisition date, but had been previously delinquent. At the acquisition date, an estimate of expected credit 
losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. 
This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair 
values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase 
price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance 
of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts 
and premiums are recognized through interest income on a level-yield method over the life of the loans. 

For acquired loans not deemed PCD at acquisition, the differences between the initial fair value and the unpaid principal balance are 
recognized as interest income on a level-yield basis over the lives of the related loans. At the acquisition date, an initial allowance for 
expected credit losses is estimated and recorded as provision for credit losses.  The subsequent measurement of expected credit losses 
for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans.

Allowance for Loan Losses

Prior to the adoption of CECL on January 1, 2020, the Company calculated provision for loan losses and the level of the allowance for 
loan  losses  to  reflect  management’s  estimate  of  probable  loan  losses  inherent  in  the  loan  portfolio  at  the  balance  sheet  date. 
Management  used  a  systematic  process  and  methodology  to  establish  the  allowance  for  loan  losses  each  quarter.  To  determine  the 
total allowance for loan losses, an estimate was made by management of the allowance needed for each of the following segments of 
the loan portfolio: (a) residential mortgage loans, (b) commercial mortgage loans, (c) home equity loans, (d) commercial & industrial 
loans, and (e) consumer loans. Portfolio segments were further disaggregated into classes of loans. The establishment of the allowance 
for each portfolio segment was based on a process that evaluated the risk characteristics relevant to each portfolio segment and took 
into consideration multiple internal and external factors. Internal factors included, but were not limited to, (a) historic levels and trends 
in charge-offs, delinquencies, risk ratings, and foreclosures, (b) level and changes in industry, geographic, and credit concentrations, 
(c) underwriting policies and adherence to such policies, (d) the growth and vintage of the portfolios, and (e) the experience of, and 
any changes in, lending and credit personnel. External factors included, but were not limited to, (a) conditions and trends in the local 
and national economy and (b) levels and trends in national delinquent and non-performing loans.

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The  Bank  evaluated  certain  loans  individually  for  specific  impairment.  A  loan  was  considered  impaired  when,  based  on  current 
information and events, it was probable that the Bank would be unable to collect the scheduled payments of principal or interest when 
due  according  to  the  contractual  terms  of  the  loan  agreement.  Loans  that  experienced  insignificant  payment  delays  and  payment 
shortfalls generally were not classified as impaired. Loans were selected for evaluation based upon internal risk rating, delinquency 
status,  or  non-accrual  status.  A  specific  allowance  amount  was  allocated  to  an  individual  loan  when  such  loan  had  been  deemed 
impaired and when the amount of the probable loss was able to be estimated. Estimates of loss were determined by the present value 
of anticipated future cash flows, the loan’s observable fair market value, or the fair value of the collateral, if the loan was collateral 
dependent. 

Loans Held for Sale

Residential mortgage loans originated and intended for sale in the secondary market are classified as held for sale at the time of their 
origination and are carried at the lower of cost or fair value on an individual loan basis. Changes in fair value relating to loans held for 
sale below the loans cost basis are charged against gain on loans sold. Gains and losses on the actual sale of the residential loans are 
recorded in earnings as net gains (losses) on loans sold on the consolidated statements of income.

Bank Owned Life Insurance

Bank owned life insurance (“BOLI”) represents life insurance on the lives of certain active and former employees who have provided 
positive  consent  allowing  the  Bank  to  be  the  beneficiary  of  such  policies.  Since  the  Company  is  the  primary  beneficiary  of  the 
insurance policies, increases in the cash value of the policies, as well as insurance proceeds received in excess of cash surrender value, 
are recorded in other noninterest income, and are not subject to income taxes. Applicable regulations generally limit the Company’s 
investment in bank-owned life insurance to 25% of our Tier 1 capital plus its allowance for credit losses. The Company reviews the 
financial strength of the insurance carriers prior to the purchase of BOLI and at least annually thereafter.

Banking Premises and Equipment

Land  is  stated  at  cost.  Buildings,  leasehold  improvements,  and  equipment  are  stated  at  cost,  less  accumulated  depreciation,  and 
amortization, which is computed using the straight-line method over the estimated useful lives of the assets or the terms of the leases, 
if shorter. The cost of ordinary maintenance and repairs is charged to expense when incurred.

Leases

The Company leases office space, certain branch locations under noncancelable operating leases, and two automated teller machine 
(“ATM”) locations, several of which have renewal options to extend lease terms. Upon commencement of a new lease, the Company 
will recognize a right of use (“ROU”) asset and corresponding lease liability. The Company makes the decision on whether to renew 
an  option  to  extend  a  lease  by  considering  various  factors.  The  Company  will  recognize  an  adjustment  to  its  ROU  asset  and  lease 
liability when lease agreements are amended and executed. The discount rate used in determining the present value of lease payments 
is based on the Company’s incremental borrowing rate for borrowings with terms similar to each lease at commencement date. The 
Company  has  lease  agreements  with  lease  and  non-lease  components,  which  are  generally  accounted  for  separately.  For  real  estate 
leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance 
are not included in the measurement of the lease liability since they are generally able to be segregated. 

Marketing Expense

Advertising costs are expensed as incurred.

Other Real Estate Owned

Other  real  estate  owned  consists  of  properties  formerly  pledged  as  collateral  to  loans,  which  have  been  acquired  by  the  Company 
through  foreclosure  proceedings  or  acceptance  of  a  deed  in  lieu  of  foreclosure.  Upon  transfer  of  a  loan  to  foreclosure  status,  an 
appraisal  is  obtained  and  any  excess  of  the  loan  balance  over  the  fair  value,  less  estimated  costs  to  sell,  is  charged  against  the 
allowance for credit losses. Expenses and subsequent adjustments to the fair value are treated as noninterest expense through other 
expenses.

Goodwill, Core Deposit Intangibles, and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Core deposit 
intangible  (“CDI”)  represents  a  premium  paid  to  acquire  the  core  deposits  of  an  institution  and  is  recorded  as  an  intangible  asset. 
Goodwill and intangible assets that are not amortized are tested for impairment, based on their fair values, at least annually. There was 
no goodwill impairment recognized during 2020, 2019, or 2018. Identifiable intangible assets that are subject to amortization are also 

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reviewed for impairment based on their fair value. Any impairment is recognized as a charge to earnings and the adjusted carrying 
amount  of  the  intangible  asset  becomes  its  new  accounting  basis.  The  remaining  useful  life  of  an  intangible  asset  that  is  being 
amortized is also evaluated each reporting period to determine whether events and circumstances warrant a revision to the remaining 
period of amortization. The Company is amortizing the CDI on a straight-line basis over a ten-year period.

Mortgage  servicing  rights  (“MSR”)  are  recognized  as  separate  assets  when  rights  are  acquired  through  purchase  or  through  sale  of 
financial assets with servicing rights retained. The fair value of the servicing rights is determined by estimating the present value of 
future net cash flows, taking into consideration market loan prepayment speeds, discount rates, servicing costs, and other economic 
factors.  For  purposes  of  measuring  impairment,  the  underlying  loans  are  stratified  into  relatively  homogeneous  pools  based  on 
predominant risk characteristics which include product type (i.e., fixed or adjustable) and interest rate bands. If the aggregate carrying 
value  of  the  capitalized  mortgage  servicing  rights  for  a  stratum  exceeds  its  fair  value,  MSR  impairment  is  recognized  in  earnings 
through  a  valuation  allowance  for  the  difference.  As  the  loans  are  repaid  and  net  servicing  revenue  is  earned,  the  MSR  asset  is 
amortized  as  an  offset  to  loan  servicing  income.  Servicing  revenues  are  expected  to  exceed  this  amortization  expense.  However,  if 
actual prepayment experience or defaults exceed what was originally anticipated, net servicing revenues may be less than expected 
and mortgage servicing rights may be impaired.

Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, the Commonwealth of Massachusetts, the 
state of New Hampshire, the state of Maine, and other states as required. For the tax year ended December 31, 2020, the Company 
expects to will file taxes in Massachusetts, New Hampshire, and Maine.

Income  taxes  are  accounted  for  under  the  asset  and  liability  method.  Deferred  tax  assets  and  liabilities  are  reflected  at  currently 
enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As 
changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expenses in the period of 
enactment.  Deferred tax assets are reviewed quarterly and reduced by a valuation allowance if, based upon the information available, 
it is more likely than not that some or all of the deferred tax assets will not be realized.

Interest and penalties related to unrecognized tax benefits, if incurred, are recognized as a component of income tax expense. 

Wealth Management Fee Revenue 

The  Company  earns  wealth  management  fees  for  providing  investment  management,  trust  administration,  and  financial  planning 
services  to  clients.    The  Company’s  performance  obligation  under  these  contracts  is  satisfied  over  time  as  the  wealth  management 
services are provided.  Fees are recognized monthly based on the monthly value of the assets under management and the applicable 
fee  rate,  or  at  a  fixed  annual  rate,  depending  on  the  terms  of  the  contract.    No  performance-based  incentives  are  earned  on  wealth 
management contracts.

The  Company  also  earns  trust  fees  for  servicing  as  trustee  for  certain  clients.    As  trustee,  the  Company  serves  as  a  fiduciary, 
administers the client’s trust, and in some cases, manages the assets of the trust.  The Company’s performance obligation under these 
agreements is satisfied over time as the administrative and management services are provided.  Fees are recognized monthly based on 
a percentage of the market value of the account or at a fixed annual rate as outlined in the agreement.  The Company also earns fees 
for  trust  related  activities.    The  Company’s  performance  obligation  under  these  agreements  is  satisfied  at  a  point  in  time  and 
recognized when these services have been performed.  

Other Banking Fee Income

The Company charges a variety of fees to its clients for services provided on the deposit and deposit management related accounts.  
Each fee is either transaction-based or assessed monthly.  The types of fees include service charges on accounts, overdraft fees, wire 
transfer  fees,  maintenance  fees,  ATM  fee  charges,  and  other  miscellaneous  charges  related  to  the  accounts.    These  fees  are  not 
governed  by  individual  contracts  with  clients.    They  are  charged  to  clients  based  on  disclosures  presented  to  these  clients  upon 
opening these accounts, along with updated disclosures when changes are made to the fee structures.  The transaction-based fees are 
recognized in revenue when charged to the client based on specific activity on the client’s account.  Monthly service and maintenance 
charges are recognized in the month they are earned and are charged directly to the client’s account.

Pension and Retirement Plans

The  Company  sponsors  a  defined  benefit  pension  plan  (the  “Pension  Plan”)  and  a  postretirement  health  care  plan  covering 
substantially all employees hired before May 2, 2011. Effective December 31, 2017, the accrual of benefits for all participants in the 
Pension Plan was frozen.  Benefits for the postretirement health care plan are based on years of service. Expense for the postretirement 
health  care  plan  is  recognized  over  the  employee’s  service  life  utilizing  the  projected  unit  credit  actuarial  cost  method.   Effective 
November 7, 2019, the postretirement health care plan was frozen for employees hired after that date. 

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The Company also sponsors non-qualified retirement programs that provide supplemental retirement benefits to certain current and 
former executives. Prior to 2016, the Company provided individual non-qualified defined benefit supplemental executive retirement 
plans  (“DB  SERPs”)  to  certain  executives.  The  DB  SERPs  generally  provide  for  an  annual  benefit  payable  in  equal  monthly 
installments  following  the  executive’s  retirement  and  continuing  for  at  least  the  remainder  of  his  or  her  lifetime,  with  such  annual 
benefit generally based on the executive’s years of service and his or her highest three consecutive years of base salary and bonus. In 
2016,  the  Company’s  Board  of  Directors  discontinued  the  use  of  DB  SERPs  for  new  entrants  to  the  Company’s  non-qualified 
retirement  programs. Instead,  new  entrants  are  provided  with  individual  non-qualified  defined  contribution  supplemental  executive 
retirement plans (“DC SERPs”). Under the DC SERPs, the Company may contribute an amount equal to 10% of the executive’s base 
salary  and  bonus  to  his  or  her  account  under  the  Company’s  non-qualified  deferred  compensation  plan,  the  Executive  Deferred 
Compensation  Plan. Expense  for  the  DB  SERPs  is  recognized  over  the  executive’s  service  life  utilizing  the  projected  unit  credit 
actuarial cost method. Expense for the DC SERPs is recognized as incurred. 

The  Company  maintains  a  Profit-Sharing  Plan  (“PSP”)  that  provides  for  deferral  of  federal  and  state  income  taxes  on  employee 
contributions allowed under Section 401(k) of federal law. Beginning in 2018, the Company matched employee contributions up to 
100% of the  first 4% of each participant’s salary,  eligible  bonus, and eligible incentive. Each year, the Company may also make a 
discretionary contribution to the PSP based on eligible salary, bonus, and incentive. Employees are eligible to participate in the PSP 
on the first day of their initial date of service. Effective January 1, 2019, employees were eligible to participate in the discretionary 
contribution portion of the PSP on the first date of their initial date of service. During 2018, employees were eligible to participate in 
the  discretionary  contribution  portion  of  the  PSP  after  completing  12  months  of  employment,  and  1,000  hours  of  service.  The 
employee must be employed on the last day of the calendar year or retire at the normal retirement age of 65 during the calendar year to 
receive the discretionary contribution.  

Share-Based Compensation

Share-based compensation plans provide for stock option awards, restricted stock awards, time-based restricted stock units (“RSUs”), 
and performance-based restricted stock units (“PRSUs”).

Compensation expense for restricted stock awards is recognized over the service period based on the fair value at the date of grant. 
RSUs and PRSUs are valued at the fair market value of the Company’s common stock as of the award date. PRSUs’ compensation 
expense is based on the most recent performance assumption available and is adjusted as assumptions change. If the goals are not met, 
vesting does not occur, no compensation cost will be recognized and any recognized compensation costs will be reversed. Stock-based 
awards that do not require future service are expensed in the year of grant. 

Derivative Instruments and Hedging Activities

Derivatives  are  recognized  as  either  assets  or  liabilities  on  the  balance  sheet  and  are  measured  at  fair  value.  The  accounting  for 
changes in the fair value of such derivatives depends on the intended use of the derivative and resulting designation. For derivatives 
not designated as hedges, changes in fair value of the derivative instruments are recognized in earnings in noninterest income.

For derivatives designated as fair value hedges, changes in the fair value of such derivatives are recognized in earnings together with 
the changes in the fair value of the related hedged item. The net amount, if any, represents hedge ineffectiveness and is reflected in 
earnings.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded in other 
comprehensive  income  (loss)  and  recognized  in  earnings  when  the  hedged  transaction  affects  earnings.  The  ineffective  portion  of 
changes in the fair value of cash flow hedges is recognized directly in earnings.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between 
market participants at the measurement date. The Company measures the fair values of its financial instruments in accordance with 
accounting guidance that requires an entity to base fair value on exit price and maximize the use of observable inputs and minimize 
the use of unobservable inputs to determine the exit price.

ASC  820,  “Fair  Value  Measurements  and  Disclosures”  establishes  a  fair  value  hierarchy  that  gives  the  highest  priority  to  quoted 
prices in active markets and the lowest priority to unobservable data and requires fair value measurements to be disclosed by level 
within the hierarchy. The three broad levels defined by the fair value hierarchy are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The type of 
financial instruments included in Level 1 are highly liquid cash instruments with quoted prices such as government or agency 
securities, listed equities, and money market securities, as well as listed derivative instruments.

61

Level 2 – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of 
the reported date. The nature of these financial instruments includes cash instruments for which quoted prices are available 
but traded less frequently, derivative instruments whose fair value has been derived using a model where inputs to the model 
are  directly  observable  in  the  market  or  can  be  derived  principally  from  or  corroborated  by  observable  market  data,  and 
instruments  that  are  fair  valued  using  other  financial  instruments,  the  parameters  of  which  can  be  directly  observed. 
Instruments which are generally included in this category are corporate bonds and loans, mortgage whole loans, municipal 
bonds, and over-the-counter derivatives.

Level 3 – Instruments that have little to no pricing observability as of the reported date. These financial instruments do not 
have  two-way  markets  and  are  measured  using  management’s  best  estimate  of  fair  value,  where  the  inputs  into  the 
determination  of  fair  value  require  significant  management  judgment  to  estimation.  Instruments  that  are  included  in  this 
category  generally  include  certain  commercial  mortgage  loans,  certain  private  equity  investments,  distressed  debt,  non-
investment  grade  residual  interests  in  securitizations,  as  well  as  certain  highly  structured  over-the-counter  derivative 
contracts.

Earnings per Common Share

Earnings per common share is computed using the two-class method prescribed under ASC Topic 260, “Earnings Per Share.” ASC 
Topic 260 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents 
(whether  paid  or  unpaid)  are  participating  securities  and  shall  be  included  in  the  computation  of  earnings  per  share  pursuant  to  the 
two-class method. The Company has determined that its outstanding non-vested stock awards are participating securities.

Under the two-class method, basic earnings per common share is computed by dividing net earnings allocated to common stock by the 
weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. 
Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per 
common  share  computation  plus  the  dilutive  effect  of  common  stock  equivalents.  A  reconciliation  of  the  weighted-average  shares 
used in calculating basic earnings per common share and the weighted average common shares used in calculating diluted earnings per 
common share for the reported periods is provided in NOTE 20 - EARNINGS PER SHARE. 

Subsequent Events

Management has reviewed events occurring through March 15, 2021, the date the consolidated financial statements were issued and 
determined that no subsequent events occurred requiring adjustment to or disclosure in these financial statements.

3.

RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS  

Accounting Pronouncements Yet to be Adopted

Accounting Standards Update (“ASU”) 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 
2020-04”).  On March 12, 2020, the FASB issued ASU 2020-04 and related amendments to ease the potential burden in accounting 
for  reference  rate  reform.  The  amendments  in  ASU  2020-04  are  elective  and  apply  to  all  entities  that  have  contracts,  hedging 
relationships, and other transactions that reference the London Inter-bank Offer Rate (“LIBOR”) or another reference rate expected to 
be discontinued due to reference rate reform. The new guidance provides the following optional expedients: 

•

Simplify accounting analyses for contract modifications.

• Allow  hedging  relationships  to  continue  without  de-designation  if  there  are  qualifying  changes  in  the  critical  terms  of  an 

existing hedging relationship due to reference rate reform.

• Allow  a  change  in  the  systematic  and  rational  method  used  to  recognize  in  earnings  the  components  excluded  from  the 

assessment of hedge effectiveness.

• Allow  a  change  in  the  designated  benchmark  interest  rate  to  a  different  eligible  benchmark  interest  rate  in  a  fair  value 

hedging relationship.

• Allow the shortcut method for a fair value hedging relationship to continue for the remainder of the hedging relationship.
•

Simplify  the  assessment  of  hedge  effectiveness  and  provide  temporary  optional  expedients  for  cash  flow  hedging 
relationships affected by reference rate reform.

• Allow  a  one-time  election  to  sell  or  transfer  debt  securities  classified  as  held  to  maturity  that  reference  a  rate  affected  by 

reference rate reform and that are classified as held to maturity before January 1, 2020.

The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of the ASU. An 
entity may elect to apply the amendments prospectively through December 31, 2022.  The Company is currently assessing the impact 
the adoption of this guidance will have on its consolidated balance sheets, statements of income, and cash flows.

62

Accounting Pronouncements Adopted in 2020

Accounting Standards Update 2018-13 - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). On 
August 28, 2018, the FASB issued guidance to remove, add, and clarify certain disclosures for fair value measurement. The Company 
adopted the amended guidance on January 1, 2020 using the prospective method.  

Accounting  Standards  Update  2018-14  -  Changes  to  the  Disclosure  Requirements  for  Defined  Benefit  Plans  (“ASU  2018-14”). On 
August 28, 2018, the FASB issued guidance to remove, add, and clarify certain disclosures for defined benefit plans.  The standard 
became effective on December 31, 2020 for the Company.  The Company adopted this standard as of December 31, 2020. 

Accounting  Standards  Update  2016-13  -  Financial  Instruments  -  Credit  Losses  (“Topic  326”):  Measurement  of  Credit  Losses  on
Financial  Instruments  (“ASU  2016-13”).  ASU  2016-13,  which  has  been  codified  under  Topic  326,  replaced  the  previous  GAAP 
method of calculating loan losses. Previously, GAAP required the use of the incurred loss methodology versus ASU 2016-13 which 
utilizes an expected loss methodology. The current expected credit loss (“CECL”) methodology incorporates forecasting in addition to 
historical and current measures. The measurement of expected credit losses under the CECL methodology is applicable to financial 
assets measured at amortized cost, including loan receivables, held to maturity and available for sale debt securities. The Company 
adopted  ASU  2016-13  and  related  amendments  on  January  1,  2020  using  a  modified-retrospective  approach  for  all  financial  assets 
measured at amortized cost and off-balance-sheet (“OBS”) credit exposures and recorded an additional allowance for credit loss  of 
$481,000  before  taxes  and  a  corresponding  decrease  in  retained  earnings  of  $347,000,  net  of  taxes.  Results  for  reporting  periods 
beginning after January 1, 2020 are presented under Topic 326 while prior period amounts continue to be reported in accordance with
previously applicable GAAP.

ASU  2016-13  also  applies  to  OBS  credit  exposure  not  accounted  for  as  insurance  (loan  commitments,  standby  letters  of  credit, 
financial guarantees, and other similar investment) and net investments in leases recognized by a lessor in accordance with ASU 2016-
02 - Leases (Topic 842).    

January 1, 2020 CECL Transition (Day 1) Impact

The CECL methodology reflects the Company’s view of the state of the economy and forecasted macroeconomic conditions and their 
impact on the Company’s loan and investment portfolios as of the adoption date. 

The following table illustrates the impact of Topic 326:

As reported under 
ASC 326

January 1, 2020
Pre-ASC 326 
Adoption

(dollars in thousands)

Impact of ASC 
326 Adoption

$

$

$

7,202
9,545
256
896
486
18,385

326

$

$

$

5,141
10,992
461
1,388
198
18,180

50

$

$

$

2,061
(1,447)
(205)
(492)
288
205

276

ASSETS
Loans

Residential mortgage
Commercial mortgage
Home equity
Commercial & industrial
Consumer
Allowance for credit losses on loans

LIABILITIES

Allowance for credit losses on OBS credit exposure

p

4. 

MERGERS

Wellesley Bancorp, Inc.

On  June  1,  2020,  the  Company  completed  its  merger  with  Wellesley  Bancorp,  Inc.  (“Wellesley”),  adding  6  banking  offices  in 
Massachusetts.  Under  the  terms  of  the  Agreement  and  Plan  of  Merger,  each  outstanding  share  of  Wellesley  common  stock  was 
converted into 0.580 shares of the Company’s common stock. As a result of the merger, former Wellesley stockholders received an 
aggregate of 1,502,814 shares of the Company's common stock.  The total consideration paid amounted to $88.8 million, based on the
closing  price  of  $58.00  of  the  Company's  common  stock,  the  value  of  Wellesley's  exercisable  options,  and  cash  paid  for  fractional 
shares on May 31, 2020.

63

The  Company  accounted  for  the  merger  using  the  acquisition  method  pursuant  to  ASC  Topic  805,  “Business  Combinations”.
Accordingly, the Company recorded merger expenses of $6.4 million during the year ended at December 31, 2020.  Additionally, on 
June 1, 2020, the Company recorded $8.6 million in provision for credit losses to reflect the impact of CECL on the acquired loans.

The acquisition method requires the acquirer to recognize the assets acquired and the liabilities assumed at their fair values as of the 
acquisition date. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed as of the date
of the acquisition:

Total Purchase Price
Assets

Cash and cash equivalents
Investments
Gross Loans
Allowance for loan loss
Premises and equipment
Other assets

Total assets acquired

Deposits
Borrowings & Subordinated debt
Other liabilities

Total liabilities assumed

Net Assets Acquired
Goodwill

Wellesley
Book Value

At June 1, 2020

Purchase Accounting 
Adjustments

(dollars in thousands)

Net Assets 
Acquired at Fair 
Value

$

88,766

$

$

44,667
23,331
883,659
(8,461)
2,972
41,082
987,250

758,976
132,005
21,847
912,828
74,422

$

$

— $
—
(13,626)
8,461
1,040
2,505
(1,620)

1,902
477
2,362
4,741
(6,361) $
$

44,667
23,331
870,033
—
4,012
43,587
985,630

760,878
132,482
24,209
917,569
68,061
20,705

Fair value adjustments to assets acquired and liabilities assumed are generally amortized using either an effective yield or straight-line 
basis over periods consistent with the average life, useful life, and/or contractual term of the related assets and liabilities.

Fair values of the major categories of assets acquired and liabilities assumed were determined as follows:

Cash and Cash Equivalents

The  fair  values  of  cash  and  cash  equivalents  approximate  the  respective  carrying  amounts  because  the  instruments  are  payable  on
demand or have short-term maturities. 

Investments

The  fair  values  of  securities  were  based  on  quoted  market  prices  for  identical  securities  received  from  an  independent,  nationally 
recognized, third-party pricing service. Prices provided by the independent pricing service were based on recent trading activity and
other  observable  information  including,  but  not  limited  to,  market  interest  rate  curves,  referenced  credit  spreads,  and  estimated 
prepayment rates where applicable. 

Loans 

Fair value was determined using market participant assumptions in estimating the amount and timing of both principal and interest 
cash flows expected to be collected, as adjusted for an estimate of default rate and prepayments, and then applying a market-based 
discount rate to those cash flows.

Premises and Equipment 

The fair value of premises was determined based upon appraisals by licensed real estate appraisers. The appraisal was based upon the
best and highest use of the property with the final value determined based upon an analysis of the cost, sales comparison, and income
capitalization approaches for the property appraised.

64

Deposits 

The fair value of acquired savings and transaction deposit accounts was assumed to approximate the carrying value as these accounts
have no stated maturity and are payable on demand. The fair value of time deposits was determined based on the present value of the 
contractual cash flows over the remaining period to maturity using a market interest rate. 

Borrowings

The  fair  value  represents  the  adjustment  necessary  because  the  weighted  average  interest  rate  of  the  Federal  Home  Loan  Bank 
borrowings differed from the cost of similar funding at the time of acquisition. 

Subordinated Debt 

The fair value represents the adjustment necessary because the interest rate of the subordinated debt differed from the cost of similar 
funding at the time of acquisition.

Optima Bank & Trust Company

The  Company  completed  its  merger  with  Optima  Bank  &  Trust  Company  (“Optima”)  on  April  17,  2019.  Under  the  terms  of  the 
Agreement and Plan of Merger, each outstanding share of Optima common stock was converted into $32.00 in cash or 0.3468 shares 
of the Company’s common stock, with the transaction structured as 95 percent common stock and 5 percent cash. As a result of the
merger, former Optima shareholders received an aggregate of approximately 722,746 shares of the Company’s common stock and an 
aggregate of approximately $3.5 million in cash. The total consideration paid amounted to $64.3 million. 

The  Company  accounted  for  the  merger  using  the  acquisition  method  and  recorded  total  assets  of  $555.7  million,  including  $30.8
million  in  goodwill,  and  assumed  total  liabilities  of  $491.4  million.  Additionally,  the  Company  recorded  merger  expenses  of  $3.9
million during the year ended December 31, 2019. 

5.

CASH AND CASH EQUIVALENTS

At  December 31,  2020  and  2019,  cash  and  due  from  banks  totaled $75.8  million  and  $61.3  million,  respectively.  There  were  no 
amounts required to be maintained at the Federal Reserve Bank of Boston (“FRB”) at December 31, 2020. At December 31, 2019, the 
Company  maintained  $31.5  million  of  cash  and  cash  equivalents  at  the  FRB  to  satisfy  reserve  requirements.  Additionally,  at 
December 31,  2020  and  2019,  the  Company  pledged  $500,000  to  the  New  Hampshire  Banking  Department  relating  to  Cambridge 
Trust  Company  of  New  Hampshire,  Inc.’s  operations  in  that  state.  The  Company  also  pledged  cash  collateral  to  derivative
counterparties  totaling  $29.9  million  and  $10.4  million  at  December 31,  2020  and  2019,  respectively.  See  NOTE  21 - DERIVATIVES 
AND HEDGING ACTIVITIES for a discussion of the Company’s derivative and hedging activities. 

6.

INVESTMENT SECURITIES

Investment securities have been classified in the accompanying consolidated balance sheets according to management’s intent. The
carrying amounts of securities and their approximate fair values were as follows:

December 31, 2020
Gross
Gross
Unrealized
Unrealized
Losses
Gains

Amortized
Cost

December 31, 2019
Gross
Gross
Unrealized
Unrealized
Losses
Gains

Fair
Value

Fair
Value
(dollars in thousands)

Amortized
Cost

Available for sale securities
U.S. GSE obligations
Mortgage-backed securities
Corporate debt securities

$ 22,995 $
208,515
2,742

641 $

2,502
41

(19) $ 23,617 $ 38,000 $
(387) 210,630
2,783

103,109
—

—

Total available for sale securities

$234,252 $ 3,184 $

(406) $237,030 $141,109 $

(152) $ 37,848
— $
(858) 102,482
231
—
—
—
231 $ (1,010) $140,330

U.S. GSE obligations
Mortgage-backed securities
Corporate debt securities
Municipal securities

Total held to maturity securities

Total

$

— $

— $

137,435
6,989
103,248

6,784
197
5,643

$247,672 $ 12,624 $
$481,924 $ 15,808 $

65

— $

— $

— $

5,000 $

5,000
— $
(111) 164,399
(97) 144,122
7,096
—
7,186
—
(66)
87,619
(60) 108,831
(157) $260,139 $258,172 $ 6,119 $
(177) $264,114
(563) $497,169 $399,281 $ 6,350 $ (1,187) $404,444

161,759
6,980
84,433

2,751
116
3,252

All  of  the  Company’s  mortgage-backed  securities  have  been  issued  by,  or  are  collateralized  by  securities  issued  by,  either  the
Government National Mortgage Association (“Ginnie Mae” or “GNMA”), the Federal National Mortgage Association (“Fannie Mae”
or “FNMA”), or the Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMA”).

The amortized cost and fair value of investment securities, aggregated by contractual maturity, are shown below. Municipal securities
are  aggregated  by  the  earliest  of  call  date  or  contractual  maturity.  Maturities  of  mortgage-backed  securities  do  not  take  into 
consideration scheduled amortization or prepayments. Actual maturities may differ from contractual maturities because issuers may 
have the right to call or prepay obligations with or without call or prepayment penalties.

At December 31, 2020
Available for sale securities
U.S. GSE obligations
Mortgage-backed
   securities
Corporate debt securities
Total available for
   sale securities

Held to maturity securities
Mortgage-backed
   securities
Corporate debt securities
Municipal securities

Total held to maturity
   securities
Total

Within One Year
Fair
Value

Amortized
Cost

After One, But
Within Five Years
Fair
Value

Amortized
Cost

After Five, But
Within Ten Years
Fair
Value

Amortized
Cost
(dollars in thousands)

After Ten Years
Fair
Value

Amortized
Cost

Total

Amortized
Cost

Fair
Value

$

— $ — $ 9,995 $ 9,983 $

5,000 $

5,150 $

8,000 $

8,484 $ 22,995 $ 23,617

1

1
1,001 1,002

4,226
1,741

4,318
1,781

54,849
—

56,127 149,439 150,184
—

—

—

208,515
2,742

210,630
2,783

$ 1,002 $1,003 $ 15,962 $16,082 $ 59,849 $ 61,277 $157,439 $158,668 $234,252 $237,030

$

— $ — $
—

2,541 2,561

— 6,989

7,186
19,343 20,222

2 $ 60,933 $ 64,779 $ 76,500 $ 79,341 $137,435 $144,122
7,186
—
108,831
40,430

6,989
103,248

—
42,213

—
43,835

—
40,934

2 $

$ 2,541 $2,561 $ 26,334 $27,410 $101,867 $108,614 $116,930 $121,554 $247,672 $260,139
$ 3,543 $3,564 $ 42,296 $43,492 $161,716 $169,891 $274,369 $280,222 $481,924 $497,169

The following tables show the Company’s investment securities with gross unrealized losses, aggregated by investment category and
length of time that individual investment securities have been in a continuous loss position at December 31, 2020:

Available for sale securities
U.S. GSE obligations
Mortgage-backed securities

Total available for sale securities

Held to maturity securities

Mortgage-backed securities
Municipal securities

Total held to maturity securities

Total

Less than 12 months
Fair
Value

Unrealized
Losses

December 31, 2020
12 months or longer
Unrealized
Fair
Value
Losses
(dollars in thousands)

Total

Fair
Value

Unrealized
Losses

$

4,981
91,094
$ 96,075

$ 16,340
6,221
$ 22,561
$ 118,636

$

$

$

$
$

(19) $
(384)
(403) $

— $
944
944

$

— $
(3)
(3) $

4,981
92,038
97,019

(97) $
(60)
(157) $
(560) $

— $
—
— $
$
944

16,340
— $
6,221
—
— $
22,561
(3) $ 119,580

$

$

$

$
$

(19)
(387)
(406)

(97)
(60)
(157)
(563)

66

Available for sale securities
U.S. GSE obligations
Mortgage-backed securities

g g

Total available for sale securities

Held to maturity securities
U.S. GSE obligations
g
Mortgage-backed securities
Municipal securities

p

Total held to maturity securities

Total temporarily impaired securities

p

y

p

Less than 12 months
Fair
Value

Unrealized
Losses

December 31, 2019
12 months or longer
Unrealized
Fair
Losses
Value
(dollars in thousands)

Total

Fair
Value

Unrealized
Losses

$ 12,912
33,381
$ 46,293

$

$

(88) $ 24,936
50,766
(265)
(353) $ 75,702

$

— $

14,838
4,934
$ 19,772
$ 66,065

$
$

5,000
— $
12,928
(27)
(66)
—
(93) $ 17,928
(446) $ 93,630

$

$

$

$
$

37,848
(64) $
84,147
(593)
(657) $ 121,995

5,000
— $
27,766
(84)
4,934
—
(84) $
37,700
(741) $ 159,695

$

$

$

$
$

(152)
(858)
(1,010)

—
(111)
(66)
(177)
(1,187)

The Company adopted Topic 326 on January 1, 2020 and did not record an allowance for credit losses on its investment securities as
of  December 31, 2020. The Company regularly reviews debt securities for expected credit loss using both qualitative and quantitative 
criteria, as necessary based on the composition of the portfolio at period end. 

Prior  to  January  1,  2020,  investment  securities  were  evaluated  by  management  for  other-than-temporary  impairment  on  at  least  a
quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to: (1) the 
length of time and the extent to which the fair value has been less than cost; (2) the financial condition and near-term prospects of the 
issuer; and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for 
any anticipated recovery in fair value. 

As  of  December 31,  2020,  30  debt  securities  had  gross  unrealized  losses,  with  an  aggregate  depreciation  of  0.47%  from  the 
Company’s amortized cost basis. The largest unrealized dollar and percentage loss percentage of any single security was 2.07%, or 
$55,000.

The following table sets forth information regarding sales of investment securities and the resulting gains or losses from such sales:

Amortized cost of securities sold
Gross gains realized on securities sold
Gross losses realized on securities sold
pNet proceeds from securities sold

2020

For the Year Ended December 31,
2019
(dollars in thousands)

2018

$

$

10,752
111
(42)
10,821

$

$

26,631
—
(79)
26,552

$

$

700
2

702

The Company monitors the credit quality of certain debt securities through the use of credit rating among other factors on a quarterly
basis. The following table summarizes the credit rating of the Company’s debt securities portfolio at December 31, 2020.

Available for sale securities, at fair value

AAA/AA/A (1)
BBB/BB/B

Total available for sale securities
Held to maturity securities, at amortized cost

y
AAA/AA/A
BBB/BB/B

$

$

$

December 31, 2020

Corporate
Debt Securities

Municipal
Securities

U.S. GSE
obligations

Total

(dollars in thousands)

$

$

$

1,779
1,004
2,783

6,989
—
6,989

— $
—
— $

23,617
—
23,617

$

$

236,026
1,004
237,030

$

102,973
275
103,248

— $
—
— $

247,397
275
247,672

Mortgage-
backed
Securities

210,630
—
210,630

137,435
—
137,435

$

$

$

67

(1)

$
Total held to maturity securities
Includes  Agency  mortgage-backed  pass-through  securities  and  collateralized  mortgage  obligations  issued  by  GSEs  and  U.S. 
government agencies, such as FNMA, FHLMC, and GNMA that are not rated by Moody’s or S&P. Each security contains a
guarantee by the issuing GSE or agency and therefore carries an implicit guarantee of the U.S. government. These have been
categorized as AAA/AA/A. 

$

$

$

7.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

The  Company’s  lending  activities  are  conducted  primarily  in  Eastern  Massachusetts  and  Southern  New  Hampshire.  The  Company
grants  single-  and  multi-family  residential  loans,  commercial  &  industrial  (“C&I”),  commercial  real  estate  (“CRE”),  construction 
loans, and a variety of consumer loans.  Most of the loans granted by the Company are secured by real estate collateral. Repayment of 
the Company’s residential loans are generally dependent on the health of the employment market in the borrowers’ geographic areas 
and that of the general economy with liquidation of the underlying real estate collateral being typically viewed as the primary source 
of repayment in the event of borrower default. The repayment of C&I loans depends primarily on the cash flow and credit worthiness
of the borrower and secondarily on the underlying collateral provided by the borrower.  As borrower cash flow may be difficult to 
predict,  liquidation  of  the  underlying  collateral  securing  these  loans  is  typically  viewed  as  the  primary  source  of  repayment  in  the 
event  of  borrower  default.    However,  collateral  typically  consists  of  equipment,  inventory,  accounts  receivable,  or  other  business 
assets that may fluctuate in value, so the liquidation of collateral in the event of default is often an insufficient source of repayment. 
The Company’s CRE loans are primarily made based on the cash flow from the collateral property and secondarily on the underlying 
collateral  provided  by  the  borrower,  with  liquidation  of  the  underlying  real  estate  collateral  typically  being  viewed  as  the  primary
source of repayment in the event of borrower default. The Company’s construction loans are primarily made based on the borrower’s
expected ability to execute and the future completed value of the collateral property, with sale of the underlying real estate collateral 
typically being viewed as the primary source of repayment.

Loans outstanding are detailed by category as follows:

Residential mortgage

Mortgages - fixed rate
Mortgages - adjustable rate
Construction
Deferred costs net of unearned fees
Total residential mortgages

Commercial mortgage

Mortgages - non-owner occupied
Mortgages - owner occupied
Construction
Deferred costs net of unearned fees
Total commercial mortgages

Home equity

Home equity - lines of credit
Home equity - term loans
Deferred costs net of unearned fees

Total home equity

Commercial & industrial

Commercial & industrial
PPP loans
Unearned fees, net of deferred costs
Total commercial & industrial

Consumer
Secured
Unsecured
Deferred costs, net of unearned fees

Total consumer
Total loans

December 31, 2020

December 31, 2019

(dollars in thousands)

$

$

$

535,804
734,593
25,495
2,976
1,298,868

1,064,317
153,474
139,075
2,096
1,358,962

102,460
3,503
231
106,194

223,415
126,227
(1,787)
347,855

430,877
467,139
17,374
2,176
917,566

870,047
114,095
76,288
144
1,060,574

73,880
6,555
240
80,675

133,337
—
(101)
133,236

41,409
341
19
41,769
3,153,648

$

33,453
1,199
25
34,677
2,226,728

68

The  Coronavirus  Aid,  Relief,  and  Economic  Security  Act,  or  CARES  Act,  was  signed  into  law  on  March  27,  2020,  and  provided 
emergency economic relief to individuals and businesses impacted by the novel coronavirus (“COVID-19”) pandemic.  The CARES 
Act authorized the SBA to temporarily guarantee loans under a new 7(a) loan program called the PPP.  As a qualified SBA lender, the 
Company was automatically authorized to originate PPP loans.

An eligible business could apply for a PPP loan up to the lesser of: (1) 2.5 times its average monthly “payroll costs”; or (2) $10.0 
million.    PPP  loans  have:  (a)  an  interest  rate  of  1.0%,  (b)  a  two  or  five-year  loan  term  to  maturity;  and  (c)  principal  and  interest 
payments deferred until the SBA remits the forgiven amount to the Company or 10 months from the end of the covered period, as 
defined.  The SBA will guarantee 100% of the PPP loans made to eligible borrowers.  The entire principal amount of the borrower’s
PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee 
and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expense, with the remaining 
40% of the loan proceeds used for other qualifying expenses. 

Directors and officers of the Company and their associates are customers of, and have other transactions with, the Company in the
normal  course  of  business.  All  loans  and  commitments  included  in  such  transactions  were  made  on  substantially  the  same  terms, 
including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve 
more than normal risk of collection or present other unfavorable features. 

Asset Quality
The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection 
and  response  to  delinquent  and  default  situations.  The  Company  seeks  to  make  arrangements  to  resolve  any  delinquent  or  default 
situation over the shortest possible time frame. As a general rule, loans more than 90 days past due with respect to principal or interest 
are classified as non-accrual loans. The Company may use discretion regarding other loans over 90 days past due if the loan is well 
secured and/or in process of collection.

The following tables set forth information regarding non-performing loans disaggregated by loan category:

December 31, 2020

.

Residential
Mortgages

Commercial
Mortgages

Home
Equity
(dollars in thousands)

Commercial 
&
Industrial

Non-performing loans:
Non-accrual loans
Loans past due >90 days, but still accruing
Troubled debt restructurings

Total

$

$

3,695
—
689
4,384

$

$

3,917
—
—
3,917

$

$

— $
—
—
— $

132
407
122
661

December 31, 2019

Residential
Mortgages

Commercial
Mortgages

Home
Equity
(dollars in thousands)

Commercial 
&
Industrial

Non-performing loans:
Non-accrual loans
Loans past due >90 days, but still accruing
Troubled debt restructurings

Total

$

$

1,298
527
99
1,924

$

$

2,800
486
—
3,286

$

$

12
—
—
12

$

$

50
251
128
429

Total

7,744
407
811
8,962

Total

4,160
1,264
227
5,651

$

$

$

$

It  is  the  Company’s  policy  to  reverse  any  accrued  interest  when  a  loan  is  put  on  non-accrual  status;  as  such  the  Company  did  not 
record any interest income on non-accrual loans during the years ended December 31, 2020 and 2019.

Troubled Debt Restructurings (“TDRs”)

Loans are considered restructured in a troubled debt restructuring when the Company has granted concessions to a borrower due to the 
borrower’s financial condition that it otherwise would not have considered. These concessions may include modifications of the terms 
of  the  debt  such  as  deferral  of  payments,  extension  of  maturity,  reduction  of  principal  balance,  reduction  of  the  stated  interest  rate 
other  than  normal  market  rate  adjustments,  or  a  combination  of  these  concessions.  Debt  may  be  bifurcated  with  separate  terms  for 
each tranche of the restructured debt. Restructuring a loan in lieu of aggressively enforcing the collection of the loan may benefit the
Company by increasing the ultimate probability of collection.

69

Restructured  loans  are  classified  as  accruing  or  non-accruing  based  on  management’s  assessment  of  the  collectability  of  the  loan. 
Loans  which  are  already  on  non-accrual  status  at  the  time  of  the  restructuring  generally  remain  on  non-accrual  status  for 
approximately six months or longer before management considers such loans for return to accruing status. Accruing restructured loans 
are  placed  into  non-accrual  status  if  and  when  the  borrower  fails  to  comply  with  the  restructured  terms  and  management  deems  it 
unlikely that the borrower will return to a status of compliance in the near term. TDRs are individually evaluated for credit losses.

There was one new TDR during the year ended December 31, 2020. At December 31, 2020, four loans were determined to be TDRs 
with a total carrying value of $811,000. There were no TDR defaults during the year ended December 31, 2020. 

As  of  December 31,  2019  three  loans  were  determined  to  be  TDRs  with  a  total  carrying  value  of  $227,000.  There  were  no  TDR
defaults during the year ended December 31, 2019. 

The allowance for credit losses includes a specific reserve for these TDRs of approximately $90,000 as of December 31, 2020. The 
allowance for loan losses included a specific reserve for these TDRs of approximately $87,000 as of December 31, 2019.

As of December 31, 2020 and 2019, there were no significant commitments to lend additional funds to borrowers whose loans were 
restructured.

Pursuant to Section 4013 of the CARES Act, financial institutions can suspend the requirements under U.S. GAAP related to TDRs 
for  modifications  made  before  December  31,  2020  to  loans  that  were  current  as  of  December  31,  2019.    On  January  3,  2021,  the
President  signed  into  law  the  Consolidated  Appropriations  Act,  2021  (the  “Act”).    As  a  result  of  the  Act,  the  suspension  of  TDR
accounting  has  been  extended  to  the  earlier  of  January  1,  2022,  or  the  date  that  is  60  days  after  the  date  on  which  the  national 
emergency concerning the COVID-19 pandemic declared by the President terminates.  The requirement that a loan be not more than 
30 days past due as of December 31, 2019 is still applicable. In response to the COVID-19 and its economic impact to customers, a
short-term modification program that complies with the CARES Act was implemented to provide temporary payment relief to those 
borrowers directly impacted by COVID-19. The deferred payments along with interest accrued during the deferral period are due and
payable on the maturity date. Under recently issued guidance, provided these loans were current as of either year end or the date of the
modification, these loans are not considered TDR loans at December 31, 2020 and will not be reported as past due during the deferral 
period. As of December 31, 2020, the Company had $23.1 million of loans in deferral.

Purchased Credit Deteriorated Loans

As  part  of  the  Wellesley  merger,  the  Company  purchased  loans,  for  which  there  was,  at  acquisition,  evidence  of  more  than 
insignificant deterioration of credit quality since origination. The carrying amount of those loans was $16.9 million at December 31, 
2020. 

These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the statement of income. On June
1, 2020, the Company acquired PCD loans with a fair value of $18.6 million and total discount of $825,000.  In connection with Topic 
326,  the  fair  value  mark  was  reduced  by  $438,000,  which  represents  the  ACL  amount  recorded.  The  outstanding  balance  at 
December 31, 2020 and related allowance on PCD loans is as follows:

Residential Mortgages
Commercial Mortgages
Home Equity
Commercial & Industrial
Consumer loans

Total

Loan Balance

ACL Balance

(dollars in thousands)

$

$

558
15,114
106
1,128
—
16,906

$

$

10
300
3
37
—
350

70

Loans by Credit Quality Indicator.

 Residential:
Current
Non-performing
g

p
Total

Home equity:
Current
Non-performing

Total

Consumer:
Current
Non-performing
g

p
Total

Commercial:

Credit risk profile by internally 
assigned grade:
1-6 (Pass)
7 (Special Mention)
8 (Substandard)
9 (Doubtful)
10 (Loss)
Total

Commercial & Industrial:

Credit risk profile by internally 
assigned grade:
1-6 (Pass)
7 (Special Mention)
8 (Substandard)
9 (Doubtful)
10 (Loss)
Total

Credit Quality Indicator - by Origination Year as of December 31, 2020

2020

2019

2018

2017

2016

Prior

(in thousands)

Revolving 
loans 
amortized 
cost basis

Total

$ 398,267
—
398,267

$ 221,019
—
221,019

$ 158,962
782
159,744

$ 144,256
58
144,314

$ 106,360
1,454
107,814

$ 265,620
2,090
267,710

$

— $1,294,484
—
4,384
— 1,298,868

$

$

2,131
—
2,131

$ 16,192
—
$ 16,192

$

$

$

$

6,024
—
6,024

5,819
—
5,819

$

$

$

$

7,997
—
7,997

3,652
—
3,652

$

$

$

$

6,976
—
6,976

2,643
—
2,643

$

$

$

$

2,119
—
2,119

4,879
—
4,879

$

$

$

$

5,191
—
5,191

$ 75,756
—
$ 75,756

$ 106,194
—
$ 106,194

8,032
—
8,032

$

$

552
—
552

$

$

41,769
—
41,769

Credit Quality Indicator - by Origination Year as of December 31, 2020

2020

2019

2018

2017

2016

Prior

(in thousands)

Revolving 
loans 
amortized 
cost basis

Revolving 
loans 
converted 
to term

Total

$282,870 $396,026 $197,473 $106,489 $126,537
85
215
—
—
$282,870 $397,043 $210,918 $107,759 $126,837

13,445
—
—
—

1,270
—
—
—

872
145
—
—

—
—
—
—

$221,257 $
8,304
3,300
674
—

$233,535 $

— $
—
—
—
—
— $

— $1,330,652
23,976
—
3,660
—
674
—
—
—
— $1,358,962

$210,356 $ 51,424 $ 37,286 $ 23,700 $

534
1,333
—
—

3,407
1,116
—
—

3,725
544
—
—

420
—
—
—

$212,223 $ 55,947 $ 41,555 $ 24,120 $

2,920
180
1,907
—
—
5,007

$

$

7,373 $
1,001
203
—
—
8,577 $

416 $
10
—
—
—
426 $

— $ 333,475
9,277
—
5,103
—
—
—
—
—
— $ 347,855

71

Residential
Mortgages

December 31, 2019
Home
Equity
(dollars in thousands)

Consumer

Credit risk profile based on payment activity:
y

p y

p

Performing
Non-performing
g
p
Total

$

$

915,642
1,924
917,566

Credit risk profile by internally assigned grade:

y

g

g

y

p
1-6 (Pass)
7 (Special Mention)
p
8 (Substandard)
9 (Doubtful)
10 (Loss)
Total

$

$

$

$

80,663
12
80,675

Commercial
Mortgages

1,050,037
7,360
3,177
—
—
1,060,574

$

$

$

$

34,677
—
34,677

Commercial &
Industrial

123,900
4,289
5,047
—
—
133,236

With  respect  to  residential  real  estate  mortgages,  home  equity,  and  consumer  loans,  the  Bank  utilizes  the  following  categories  as
indicators of credit quality:

•

•

Performing – These loans are accruing and are considered having low to moderate risk.

Non-performing  –  These  loans  are  on  non-accrual  or  are  past  due  more  than  90  days  but  are  still  accruing  or  are
restructured. These loans may contain greater than average risk.

With respect to commercial real estate mortgages and commercial loans, the Bank utilizes a 10-grade internal loan rating system as an 
indicator of credit quality. The grades are as follows:

•

•

•

•

•

Loans rated 1-6 (Pass) – These loans are considered “pass” rated with low to moderate risk.

Loans  rated  7  (Special  Mention)  –  These  loans  have  potential  weaknesses  warranting  close  attention,  which,  if  left 
uncorrected, may result in deterioration of the credit at some future date.

Loans  rated  8  (Substandard)  –  These  loans  have  well-defined  weaknesses  that  jeopardize  the  orderly  liquidation  of  the 
debt under the original loan terms. Loss potential exists but is not identifiable in any one customer.

Loans rated 9 (Doubtful) – These loans have pronounced weaknesses that make full collection highly questionable and 
improbable.

Loans rated 10 (Loss) – These loans are considered uncollectible and continuance as a bankable asset is not warranted.

Delinquencies

The past due status of a loan is determined in accordance with its contractual repayment terms. All loan types are reported past due 
when one scheduled payment is due and unpaid for 30 days or more. Loan delinquencies can be attributed to many factors, such as but 
not limited to, a continuing weakness in, or deteriorating, economic conditions in the region in which the collateral is located, the loss 
of a tenant or lower lease rates for commercial borrowers, or the loss of income for consumers and the resulting liquidity impacts on 
the borrowers. 

72

The following tables contain period-end balances of loans receivable disaggregated by past due status:

30-59 Days

60-89 Days

December 31, 2020

90 Days or
greater
(dollars in thousands)

Total Past
Due

Current
Loans

Total

Amortized Cost 
90+ Days and 
Accruing

Residential Mortgages
Commercial Mortgages
g g
Home Equity
Commercial & Industrial
Consumer loans
Total

$

$

12,647
1,080
843
276
3,120
17,966

$

$

2,450
—
353
1,917
—
4,720

$

$

2,335
674
—
409
—
3,418

$

$

17,432
1,754
1,196
2,602
3,120
26,104

$

$

1,281,436
1,357,208
104,998
345,253
38,649
3,127,544

$ 1,298,868
1,358,962
106,194
347,855
41,769
$ 3,153,648

$

$

—
—
—
407
—
407

December 31, 2019

30-59 Days
Past Due

60-89 Days
Past Due

90 Days
or Greater

Total
Past Due
(dollars in thousands)
$

$

Current
Loans

Total

Amortized 
Cost 90+ Days 
and Accruing

Residential Mortgages
Commercial Mortgages
Home Equity
Commercial & Industrial
Consumer loans
Total

$

$

8,710
811
57
272
4
9,854

$

$

1,089
—
12
226
5
1,332

$

$

1,047
3,161
—
251
—
4,459

$

10,846
3,972
69
749
9
15,645

906,720
1,056,602
80,606
132,487
34,668
$ 2,211,083

$

917,566
1,060,574
80,675
133,236
34,677
$ 2,226,728

$

$

527
486
—
251
—
1,264

There were no significant commitments to lend additional funds to borrowers whose loans were on non-accrual status at December 31, 
2020. 

73

Allowance for Credit Losses

The following tables contain changes in the allowance for credit losses disaggregated by loan category: 

Residential
Mortgages

Commercial
Mortgages

For the Year Ended December 31, 2020
Commercial 
&
Industrial
(dollars in thousands)

Home
Equity

Consumer

Unfunded 
Commitments

Total

Allowance for credit loss:
Allowance for credit losses - loan portfolio:

Balance at December 31, 2019
Adoption of ASC 326
Provision for acquired loans
Initial allowance for PCD
Charge-offs
Recoveries
Provision for (Release of)-loan portfolio
Allowance for credit losses - loan 
portfolio

Allowance for credit losses - unfunded 
commitments:

$

$

5,141
2,061
2,880
35
—
—
2,950

$ 10,905
(1,447)
3,625
382
(264)
—
5,363

$

461
(205)
188
—
—
—
108

$

1,475
(492)
1,577
20
(400)
250
879

$

198
288
12
—
(40)
15
51

— $18,180
—
205
— 8,282
437
—
(704)
—
—
265
— 9,351

$ 13,067

$ 18,564

$

552

$

3,309

$

524

$

— $36,016

Balance at December 31, 2019
Adoption of ASC 326
Acquired loan commitments
Provision for - unfunded commitments

$

— $
—
—
—

— $
—
—
—

— $
—
—
—

— $
—
—
—

— $
—
—
—

50 $
276
356
322

50
276
356
322

Allowance for credit losses-unfunded 
commitments

Total allowance for credit loss

—
$ 13,067

—
$ 18,564

$

—
552

$

—
3,309

$

—
524

$

1,004
1,004
1,004 $37,020

Allowance for loan losses:

Balance at December 31, 2018
Charge-offs
Recoveries
Provision for (Release of)

Balance at December 31, 2019

Allowance for loan losses:

Balance at December 31, 2017
Charge-offs
Recoveries
Provision for (Release of)

Balance at December 31, 2018

Residential
Mortgages

Commercial
Mortgages

$

$

4,946
—
—
195
5,141

$

9,626
(1,270)
—
2,549
$ 10,905

Residential
Mortgages

Commercial
Mortgages

$

$

5,047
—
—
(101)
4,946

$

$

8,289
—
—
1,337
9,626

$

$

$

$

For the Year Ended December 31, 2019
Commercial &
Home
Industrial
Equity
(dollars in thousands)

Consumer

Impaired

Total

517
—
—
(56)
461

$

$

1,415
(338)
53
258
1,388

$

$

264
(48)
11
(29)
198

$

$

— $ 16,768
(1,656)
—
64
—
3,004
87
$ 18,180
87

For the Year Ended December 31, 2018
Commercial &
Home
Industrial
Equity
(dollars in thousands)

Consumer

Impaired

Total

630
—
—
(113)
517

$

$

946
(73)
48
494
1,415

$

$

315
(36)
7
(22)
264

$

$

$ 15,320
93
(109)
—
55
—
(93)
1,502
— $ 16,768

74

The  following  tables  contain  period-end  balances  of  the  allowance  for  loan  losses  and  related  loans  receivable  disaggregated  by 
impairment method:

Allowance for loan losses

Residential
Mortgages

Commercial
Mortgages

Individually evaluated for impairment
Collectively evaluated for impairment

y

p

Total

Loans receivable

$

$

— $

— $

5,141
5,141

$

10,905
10,905

Individually evaluated for impairment
Collectively evaluated for impairment

y

p

Total

$

764
916,802
$ 917,566

$

3,161
1,057,413
$1,060,574

December 31, 2019

Home
Equity

Commercial &
Industrial

(dollars in thousands)

— $
461
461

$

87
1,388
1,475

92
80,583
80,675

$

$

128
133,108
133,236

Consumer

Total

$

$

$

$

— $
198
198

$

87
18,093
18,180

— $

4,145
2,222,583
$2,226,728

34,677
34,677

$

$

$

The following is information pertaining to impaired loans:

Carrying
Value

Average
Carrying
Value

For the Year Ended December 31, 2019
Unpaid
Principal
Balance
(dollars in thousands)

Related Allowance

Interest
Income
Recognized

With no required reserve recorded:

q

Commercial mortgage
Residential mortgage
g g
Home equity
Total

With required reserve recorded:
Commercial and industrial

Total

Total:

Commercial and industrial
Commercial mortgage
g g
Residential mortgage
Home equity
y
q
Total

$

$

3,161
765
93
4,019

128
128

128
3,161
765
93
4,147

$ 

$

1,385
691
96
2,172

59
59

59
1,385
691
96
2,231

$

$

4,376
940
133
5,449

167
167

167
4,376
940
133
5,616

$

$

— $
—
—
—

87
87

87
—
—
—
87

$

35
5
1
41

—
—

—
35
5
1
41

8.

FEDERAL HOME LOAN BANK OF BOSTON STOCK

As a voluntary member of the FHLB of Boston, the Bank is required to invest in stock of the FHLB of Boston (which is considered a
restricted equity security) in an amount based upon its outstanding advances from the FHLB of Boston. At December 31, 2020 and
2019, the Bank’s investment in FHLB of Boston stock totaled $5.7 million and $7.9 million, respectively. No market exists for shares
of  this  stock.  The  Bank’s  cost  for  FHLB  of  Boston  stock  is  equal  to  its  par  value.  Upon  redemption  of  the  stock,  which  is  at  the
discretion of the FHLB of Boston, the Bank would receive an amount equal to the par value of the stock. At its discretion, the FHLB 
of Boston may also declare dividends on its stock.

The  Bank’s  investment  in  FHLB  of  Boston  stock  is  reviewed  for  impairment  at  each  reporting  date  based  on  the  ultimate 
recoverability of the cost basis of the stock. As of December 31, 2020 and 2019, no impairment has been recognized.

75

9.

BANKING PREMISES AND EQUIPMENT

A  summary  of  the  cost  and  accumulated  depreciation  and  amortization  of  property,  leasehold  improvements,  and  equipment  is 
presented below:

Land
Building and leasehold improvements
Equipment, including vaults
Work in process
Subtotal

Accumulated depreciation and amortization

Total

December 31,

2020

2019

(dollars in thousands)

Estimated
Useful Lives

$

$

1,516
20,017
17,097
138
38,768
(20,610)
18,158

$

$

1,116
17,817
13,686
550
33,169
(18,413)
14,756

3-30 years
3-20 years

Total depreciation expense for the years ended December 31, 2020, 2019, and 2018 amounted to $2.5 million, $2.0 million and $1.9 
million, respectively, and is included in occupancy and equipment expenses in the accompanying consolidated statements of income.

10. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill.  At December 31, 2020 and 2019, the carrying value of goodwill, which is included in other assets, totaled $51.9 million 
and $31.2 million, respectively. Goodwill is tested for impairment, based on its fair value, at least annually. As of December 31, 2020 
and 2019, no goodwill impairment has been recognized.

Core deposit intangibles.   The Company recorded an asset for the CDI of $3.6 million related to the Optima merger. Amortization of 
CDI assets totaled $361,000 and $271,000 for the years ended December 31, 2020 and 2019, respectively.  At December 31, 2020 and
2019,  the  carrying  value  of  CDI  assets  totaled  $3.0  million  and  $3.3  million,  respectively.  The  weighted-average  remaining 
amortization period for CDI was 8.3 years at December 31, 2020.

Mortgage  servicing  rights.    Periodically,  the  Company  sells  certain  residential  mortgage  loans  to  the  secondary  market.  Generally, 
these loans are sold without recourse or other credit enhancements. 

The Company sells loans and either releases or retains the servicing rights. For loans sold with servicing rights retained, the Company
provides the servicing for the loans on a per-loan fee basis. Mortgage loans sold and servicing rights retained during the years ended 
December 31, 2020, 2019, and 2018 were $60.5 million, $82.9 million, and $1.6 million, respectively.  

76

An analysis of mortgage servicing rights, which are included in other assets, follows:

Balance at December 31, 2017

Mortgage servicing rights capitalized
Amortization charged against servicing income
Change in impairment reserve

Balance at December 31, 2018

Mortgage servicing rights acquired as a result of the merger
Mortgage servicing rights capitalized
Amortization charged against servicing income
Change in impairment reserve

Balance at December 31, 2019

Mortgage servicing rights acquired as a result of the merger
Mortgage servicing rights capitalized
Amortization charged against servicing income
Change in impairment reserve

Balance at December 31, 2020

Mortgage
Servicing
Rights

Valuation
Allowance
(dollars in thousands)

Total

$

$

$

$

$

$

823
20
(147)
(30)
666

666
334
618
(271)
—
1,347

1,347
50
536
(572)
—
1,361

$

$

$

$

$

$

(30) $
—
—
30
— $

— $
—
—
—
(26)
(26) $

(26) $
—
—
—
(116)
(142) $

793
20
(147)
—
666

666
334
618
(271)
(26)
1,321

1,321
50
536
(572)
(116)
1,219

The fair value of the Company’s mortgage servicing rights portfolio was $1.2 million and $1.5 million as of December 31, 2020 and
2019,  respectively.  The  fair  value  of  mortgage  servicing  rights  is  estimated  based  on  the  present  value  of  expected  cash  flows, 
incorporating assumptions for discount rate, prepayment speed, and servicing cost.

The weighted-average amortization period for mortgage servicing rights portfolio was 3.3 years and 5.2 years at December 31, 2020
and 2019, respectively.  

The estimated aggregate future amortization expense for mortgage servicing rights for each of the next five years and thereafter is as
follows:  

2021
2022
2023
2024
2025
Thereafter
Total

$

$

Future Amortization Expense
(dollars in thousands)

370
281
205
147
82
134
1,219

77

11. DEPOSITS  

Deposits are summarized as follows:

Demand deposits (non-interest bearing)
Interest bearing checking
Money market
Savings
Retail certificates of deposit under $250,000
Retail certificates of deposit $250,000 or greater
Wholesale certificates of deposit

Total deposits

p

Certificates of deposit had the following schedule of maturities:

2020
2021
2022
2023
2024
2025

Total certificates of deposit

p

Related Party Deposits

December 31, 2020

December 31, 2019

(dollars in thousands)

$

$

1,006,132
625,650
532,218
984,262
127,202
96,831
30,788
3,403,083

$

$

630,593
450,098
181,406
914,499
113,940
61,258
7,084
2,358,878

December 31, 2020

December 31, 2019

$

$

(dollars in thousands)
— $

215,206
23,006
11,997
2,156
2,456
254,821

$

140,938
30,240
6,426
3,071
1,607
—
182,282

Deposit  accounts  of  directors,  executive  officers,  and  their  respective  affiliates  totaled  $7.7  million  and  $7.2  million  as  of 
December 31, 2020 and 2019, respectively.  

12. BORROWINGS

Federal Home Loan Bank Advances

At  December  31,  2020  and  2019,  the  Company  had  $15.0  million  and  $135.7  million  of  short-term  advances  outstanding  from  the 
FHLB of Boston, with a weighted average rate of 2.14% and 2.31%, respectively.

Information relating to long-term borrowings from the FHLB of Boston is presented below:

2022
2023*

December 31, 2020

Amount

Rate

(dollars in thousands)

$

$

595
17,240
17,835

1.84 %
3.61
3.55 %

*Includes a $15 million advance with an interest rate of 3.80%, that is callable by the FHLB of Boston on January 27, 2021.

There were no long-term borrowings outstanding at December 31, 2019.

Federal Reserve Bank PPP Loan Facility (“PPPLF”) Advances

During the year ended December 31, 2020, in order to fund a portion of the Company’s PPP loan originations, the Company borrowed
$85.4 million from the Federal Reserve Bank’s PPPLF, which carried a rate of 0.35% fixed for the term of the corresponding PPP
loan.  The Company pledged eligible PPP loans as collateral for the borrowings.  At December 31, 2020, all of the Company’s 
borrowings under the PPPLF were repaid.

Subordinated Debt

78

In the fourth quarter of 2020, the Company redeemed $10.0 million in subordinated debt, bearing a 6.0% coupon, which was assumed 
as part of the Wellesley merger.

Unused Borrowing Capacity with the FHLB of Boston and FRB Boston

All  short-  and  long-term  borrowings  with  the  FHLB  of  Boston  are  secured  by  the  Company’s  stock  in  the  FHLB  of  Boston  and  a 
blanket lien on “qualified collateral” defined principally as 95% of the market value of certain U.S. Government and GSE obligations
and  75%  of  the  carrying  value  of  certain  residential  mortgage  loans.  Based  upon  collateral  pledged,  the  Bank’s  unused  borrowing 
capacity with the FHLB of Boston at December 31, 2020 was approximately $672.0 million.

The Company also has a line of credit with the FRB Boston. At December 31, 2020 and 2019, the Company had pledged commercial
real estate and commercial & industrial loans with aggregate principal balances of approximately $734.3 million and $316.4 million, 
respectively, as collateral for this line of credit. Based upon the collateral pledged, the Company’s unused borrowing capacity with the 
FRB Boston at December 31, 2020 and 2019 was approximately $562.4 million and $134.9 million, respectively.

13.

INCOME TAXES

The components of income tax expense were as follows:

Current tax expense

Federal
State

Federal
State

Total income tax expense

p

2020

For the Year Ended December 31,
2019
(dollars in thousands)

2018

$

$

7,877
4,192
12,069

(250)
(415)
(665)
11,404

$

$

5,954
2,597
8,551

(63)
173
110
8,661

$

$

5,524
2,404
7,928

(490)
(231)
(721)
7,207

The following is a reconciliation of the total income tax expense, calculated at statutory federal income tax rates, to the income tax 
provision in the consolidated statements of income:

Income tax expense at statutory rates
Increase/(decrease) resulting from:

State tax, net of federal tax benefit
Tax-exempt income
ESOP dividends
Bank owned life insurance
Compensation limited under 162(m)
Benefit from stock compensation
Non-deductible acquisition Costs
Impact of CARES Act
Other

Total income tax expense

p

2020

Dollars

Rate

For the Year Ended December 31,
2019

Dollars
(dollars in thousands)

Rate

2018

Dollars

Rate

$

9,106

21.0 % $

7,123

21.0 % $

6,528

21.0 %

2,984
(694)
(125)
(157)
511
—
186
(539)
132
$ 11,404

6.9
(1.6)
(0.3)
(0.4)
1.2
—
0.4
(1.2)
0.3
26.3 % $

2,188
(599)
(124)
(129)
—
(150)
236
—
116
8,661

6.5
(1.8)
(0.4)
(0.4)
—
(0.4)
0.7
—
0.3
25.5 % $

1,717
(580)
(127)
(140)
—
(168)
—
—
(23)
7,207

5.5
(1.9)
(0.4)
(0.5)
—
(0.5)
—
—
(0.1)
23.2 %

The Coronavirus Aid, Relief, and Economic Security (the “CARES Act”) was signed into law on March 27, 2020, to help stimulate 
the United States economy. One of the business tax provisions of the CARES Act included allowing net operating losses (“NOL”)
generated by the Company in tax years 2018 and 2019 to be carried back up to five years at the tax rates in effect during those periods, 
rather than carried forward at current federal tax rates of 21%.  The effect of the Act allowed the Company to recognize lower tax 

79

expense  associated  with  NOL  carryforwards  from  2018  and  2019  (as  a  result  of  the  Optima  merger)  and  resulted  in  a  benefit  of 
$539,000.

The Company’s 2020 and 2019 net deferred tax assets were measured using a 27.92% and 27.86% tax rate, respectively, and consisted
of the following components:

Gross deferred tax assets

Allowance for credit losses
Accrued retirement benefits
Unrealized losses on available for sale securities
Incentive compensation
Equity based compensation
Lease liability
ESOP dividends
Loss carryforwards as a result of the Optima merger
Intangibles / Fair value marks (merger related)
Other

Total gross deferred tax assets

Gross deferred tax liabilities

Deferred loan origination costs
Unrealized gains on available for sale securities
Depreciation of premises and equipment
Right of use asset
Mortgage servicing rights
Goodwill
Derivative transactions

Total gross deferred tax liabilities
Net deferred tax asset

December 31, 2020

December 31, 2019

(dollars in thousands)

$

$

10,336
1,576
—
1,591
1,343
10,455
166
21
1,971
205
27,664

(1,434)
(641)
(1,816)
(9,751)
(340)
(115)
(1,928)
(16,025)
11,639

$

$

5,029
1,592
171
1,248
1,034
9,765
165
877
472
252
20,605

(911)
—
(1,021)
(9,356)
(368)
(113)
(607)
(12,376)
8,229

It is management’s belief that it is more likely than not that the reversal of deferred tax liabilities and results of future operations will 
generate  sufficient  taxable  income  to  realize  the  deferred  tax  assets.  Therefore,  no  valuation  allowance  was  required  at  either 
December 31, 2020 and 2019 for the deferred tax assets. It should be noted, however, that factors beyond management’s control, such
as  the  general  state  of  the  economy  and  real  estate  values,  can  affect  future  levels  of  taxable  income  and  that  no  assurance  can  be 
given that sufficient taxable income will be generated in future periods to fully absorb deductible temporary differences.

At December 31, 2020 and 2019, the Company had no unrecognized tax benefits or any uncertain tax positions. The Company does
not expect the total amount of unrecognized tax benefits to significantly increase in the next 12 months.

The  Company’s  federal  income  tax  returns  are  open  and  subject  to  examination  from  the  2017  tax  return  year  and  forward.  The
Company’s state income tax returns are open from the 2017 and later tax return years based on individual states’ statute of limitations.

14. PENSION AND RETIREMENT PLANS

The Company has a noncontributory, defined benefit pension plan (“Pension Plan”) covering substantially all employees hired before 
May 2, 2011. Employees in positions requiring at least 1,000 hours of service per year were eligible to participate upon the attainment 
of age 21 and the completion of 12 months of service. Benefits are based primarily on years of service and the employee’s average 
monthly  pay  during  the  five  highest  consecutive  plan  years  of  the  employee’s  final  ten  years.  On  October  23,  2017,  the  Company 
announced its decision to freeze the accrual of benefits within the Pension Plan, effective December 31, 2017.  The Company also 
provides  supplemental  retirement  benefits  to  certain  current  and  former  executive  officers  of  the  Company  under  the  terms  of 
Supplemental Executive Retirement Agreements (“Supplemental Retirement Plan”). Prior to 2016, the Company provided individual 
non-qualified defined benefit supplemental executive retirement plans (“DB SERPs”) to certain executives. The DB SERPs generally 
provide for an annual benefit payable in equal monthly installments following the executive’s retirement and continuing for at least 
the remainder of his or her lifetime, with such annual benefit generally based on the executive’s years of service and his or her highest 
three consecutive years of base salary and bonus. In 2016, the Company’s Board discontinued the use of DB SERPs for new entrants
to  the  Company’s  non-qualified  retirement  programs. Instead,  new  entrants  are  provided  with  individual  non-qualified  defined

80

contribution supplemental executive retirement plans (“DC SERPs”). Under the DC SERPs, the Company may contribute an amount 
equal to 10% of the executive’s base salary and bonus to his or her account under the Company’s non-qualified deferred compensation 
plan, the Executive Deferred Compensation Plan. The Company also offers postretirement health care benefits for current and future
retirees  of  the  Bank.  Certain  employees  receive  a  fixed  monthly  benefit  at  age  65  toward  the  purchase  of  postretirement  medical 
coverage.  The  benefit  received  is  based  on  the  employee’s  years  of  active  service.  Effective  November  7,  2019,  the  postretirement 
health care plan was frozen for employees hired after that date.  The Company uses a December 31st measurement date each year to 
determine the benefit obligations for these plans.

t

Projected benefit obligations and funded status were as follows:

Change in projected benefit obligation
Obligation at beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid

Obligation at end of year

Change in plan assets

Fair value at beginning of year
Actual return on plan assets
Employer contribution
Benefits paid

Fair value at end of year

Funded status at end of year

y

Pension Plan

2020

Supplemental
Retirement Plan

2019

2020

(dollars in thousands)

2019

$

$

45,401
—
1,438
4,827
(1,549)
50,117

50,131
7,220
—
(1,549)
55,802
5,685

$

$

40,522
—
1,680
4,670
(1,471)
45,401

42,648
8,954
—
(1,471)
50,131
4,730

$

$

$

9,622
355
283
840
(595)
10,505

—
—
595
(595)
—
(10,505) $

8,830
283
349
770
(610)
9,622

—
—
610
(610)
—
(9,622)

The  discount  rate  used  to  calculate  the  benefit  obligation  for  the  2020  fiscal  year  was  2.46%,  as  compared  to  3.22%,  for  the  2019 
fiscal year.  This discount rate decrease was the primary source of the increase in the benefit obligation during the year.

Accumulated benefit obligation

g

Amounts recognized in the consolidated balance sheets consisted of:

Pension Plan

Supplemental
Retirement Plan

2020

2019

2020

2019

50,117

(dollars in thousands)
45,401

9,909

9,207

Pension Plan

2020

Supplemental
Retirement Plan

2019

2020

(dollars in thousands)

2019

Other assets/(liabilities)

$

5,685

$

4,730

$

(10,505) $

(9,622)

Amounts recognized in accumulated other comprehensive income (loss) consisted of:

Net actuarial loss
Prior service credit
Total

Pension Plan

Supplemental
Retirement Plan

2020

2019

2020

2019

$

$

4,517
(3)
4,514

$

$

(dollars in thousands)

3,709
(7)
3,702

$

$

1,959
—
1,959

$

$

1,128
—
1,128

81

The components of net periodic benefit cost and amounts recognized in other comprehensive income were as follows:

Net periodic benefit cost

Service cost
Interest cost
Expected return on assets
Amortization of prior service credit
Amortization of net actuarial loss
Net periodic benefit cost

Amounts recognized in other comprehensive income

Net actuarial loss/(gain)
Amortization of prior service credit
Amortization of net actuarial loss

Total recognized in other comprehensive income
Total recognized in net periodic benefit cost and other
   comprehensive income

p

Pension Plan

2020

Supplemental
Retirement Plan

2019

2020

(dollars in thousands)

2019

$

— $

— $

1,438
(3,201)
(4)
—
(1,767)

807
4
—
811

1,680
(2,721)
(4)
154
(891)

(1,563)
4
(154)
(1,713)

$

355
283
—
—
8
646

840
—
(8)
832

283
349
—
—
—
632

770

—
770

$

(956) $

(2,604) $

1,478

$

1,402

Weighted-average assumptions used to determine projected benefit obligations are as follows:

Discount rate
Rate of compensation increase
p

Pension Plan

Supplemental
Retirement Plan

2020

2019

2020

2019

2.45%
N/A

3.22%
N/A

2.21%
4.00%

3.04%
4.00%

Weighted-average assumptions used to determine net periodic benefit cost are as follows:

Discount rate
Expected long-term return on plan assets
Rate of compensation increase

Pension Plan

Supplemental
Retirement Plan

2020

2019

2020

2019

3.22%
6.50%
N/A

4.23%
6.50%
N/A

3.04%
N/A
4.00%

4.10%
N/A
4.00%

To develop the expected long-term rate of return on assets assumption for the Pension Plan, the Company considered the historical 
returns and the future expectations for returns for each asset class, as well as target asset allocations of the pension portfolio. 

The Company maintains an Investment Policy for its Pension Plan. The objective of this policy is to seek a balance between capital
appreciation, current income, and preservation of capital, with a longer-term weighting towards equities because of the extended time 
horizon of the Pension Plan. 

The  Investmentt  Policy  guidelines  suggest t thatt  the  target t assett  allocation  percentages  are  from  30%  to  60%  in  domestic  large  cap 
equities, from 5% to 20% in domestic small/mid cap equities, from 0% to 20% in international equities, and from 20% to 60% in cash
equities, from 5% to 20% in domestic small/mid cap equities, from 0% to 20% in international equities, and from 20% to 60% in cash
and fixed income. 

The Company’s Pension Plan weighted-average asset allocations by asset category were as follows:

Equity securities
Debt securities
Other
Cash and equivalents

Total

December 31,

2020

2019

42%
46
9
3
100%

53%
36
3
8
100%

82

 
The three broad levels of fair values used to measure the Pension Plan assets are as follows:

•

•

•

Level 1 – Quoted prices for identical assets in active markets.

Level  2  –  Quoted  prices  for  similar  assets  in  active  markets;  quoted  prices  for  identical  or  similar  assets  in  inactive
markets; and model-derived valuations in which all significant inputs and significant value drivers are observable in active 
markets.

Level  3  –  Valuations  derived  from  techniques  in  which  one  or  more  significant  inputs  or  significant  value  drivers  are 
unobservable in the markets and which reflect the Company’s market assumptions.

The following table summarizes the various categories of the Pension Plan’s assets:

Asset category

Cash and cash equivalents
Fixed income
Equity securities

Common stock

Large cap core
Small cap core

Mutual funds

Domestic equity
International
Domestic fixed income

Total

Asset category

Cash and cash equivalents
Fixed income
Equity securities

Common stock

Large cap core
Small cap core

Mutual funds

Domestic equity
International
Domestic fixed income

Total

Fair Value as of December 31, 2020

Level 1

Level 2

Level 3

Total

(dollars in thousands)

$

1,527
—

— $

14,402

— $
—

1,527
14,402

12,604
1,767

9,306
4,868
11,328
41,400

—
—

—
—
—
14,402

$

$

—
—

—
—
—
— $

12,604
1,767

9,306
4,868
11,328
55,802

Fair Value as of December 31, 2019

Level 1

Level 2

Level 3

Total

(dollars in thousands)

$

4,834
—

— $

7,197

— $
—

4,834
7,197

17,180
2,627

3,931
3,650
10,712
42,934

$

—
—

—
—
—
7,197

$

—
—

—
—
—
— $

17,180
2,627

3,931
3,650
10,712
50,131

$

$

$

$

83

There were no transfers between fair value levels during the years ended December 31, 2020 and 2019.

The Company offers postretirement health care benefits for current and future retirees of the Bank. Employees receive a fixed monthly
benefit at age 65 toward the purchase of postretirement medical coverage. The benefit received is based on the employee’s years of 
active service. The Company uses a December 31 measurement date each year to determine the benefit obligation for this plan. On 
November 7, 2019, the Company announced its decision to freeze the accrual of benefits to new hires within the plan.

Projected benefit obligations and funded status were as follows:

Change in projected benefit obligation
Obligation at beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid
Obligation at end of year

Change in plan assets

Fair value at beginning of year
Employer contribution
Benefits paid

Fair value at end of year

Funded status at end of year

y

Accumulated benefit obligation

g

Amounts recognized in the consolidated balance sheets consisted of:

Other liabilities

Amounts recognized in accumulated other comprehensive loss consisted of:

Net actuarial (gain)/loss

g

Postretirement
Healthcare Plan

2020

2019

(dollars in thousands)

$

$

689
30
21
51
(30)
761

—
30
(30)
—

$

(761) $

598
25
25
76
(35)
689

—
35
(35)
—
(689)

Postretirement
Healthcare Plan

2020

2019

(dollars in thousands)

761

689

Postretirement
Healthcare Plan

2020

2019

(dollars in thousands)

(761)

$

(689)

Postretirement
Healthcare Plan

2020

2019

(dollars in thousands)

18

$

(34)

$

$

84

The components of net periodic benefit cost and amounts recognized in other comprehensive income were as follows:

Net periodic benefit cost

Service cost
Interest cost
Amortization of net actuarial gain
Net periodic benefit cost

Amounts recognized in other comprehensive income/(loss)

Net actuarial (gain) loss
Amortization of net actuarial loss

Total recognized in other comprehensive income
Total recognized in net periodic benefit cost and
   other comprehensive income

p

Postretirement
Healthcare Plan

2020

2019

(dollars in thousands)

$

$

$

30
21
—
51

51
—
51

25
25
(3)
47

76
3
79

102

$

126

Weighted-average assumptions used to determine the projected benefit obligation are as follows:

Discount rate
Rate of compensation increase
p

Weighted-average assumptions used to determine net periodic benefit cost are as follows:

Discount rate
Expected long-term return on plan assets
Rate of compensation increase

p

Assumed health care cost trend rates are as follows:

Health care cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate

Benefits expected to be paid in the next ten years are as follows:

Postretirement
Healthcare Plan

2020

2019

2.52%
N/A

3.26%
N/A

Postretirement
Healthcare Plan

2020

2019

3.26%
N/A
N/A

Postretirement
Healthcare Plan

2020

2019

4.00%
4.00%
2020

4.22%
N/A
N/A

4.00%
4.00%
2019

Year-ended December 31,,

2021
2022
2023
2024
2025
2026-2030 inclusive
yTen year total

Pension
Plan

Supplemental
Retirement Plan

Postretirement
Healthcare Plan

Total

(dollars in thousands)

$

$

1,829
1,966
2,081
2,156
2,232
12,183
22,447

$

$

594
611
608
604
600
3,238
6,255

$

$

33
33
33
33
33
166
331

$

$

2,456
2,610
2,722
2,793
2,865
15,587
29,033

85

The  estimated  amounts  that  will  be  amortized  from  accumulated  other  comprehensive  income  (loss)  into  net  periodic  benefit  cost 
during 2021 are as follows:

Prior service credit

Employee Profit Sharing and 401(k) Plan 

Pension
Plan

Supplemental
Retirement Plan

Postretirement
Healthcare Plan

Total

$

3

$

(dollars in thousands)
— $

— $

3

The  Company  maintains  a  Profit-Sharing  Plan  (“PSP”)  that  provides  for  deferral  of  federal  and  state  income  taxes  on  employee
contributions allowed under Section 401(k) of federal law. The Company matches employee contributions up to 100% of the first 4%
of each participant’s salary, eligible bonus, and eligible incentive. Employees are eligible to participate in the PSP on the first day of 
their  initial  date  of  service.  Each  year,  the  Company  may  also  make  a  discretionary  contribution  to  the  PSP.  Effective  in  2019, 
employees are eligible to participate in the discretionary contribution portion of the PSP on the first day of their initial date of service. 
In  2018,  employees  were  eligible  to  participate  in  the  discretionary  contribution  portion  of  the  PSP  after  completing  12  months  of 
employment, and 1,000 hours of service. The employee must be employed on the last day of the calendar year or retire at the normal 
retirement age of 65 during the calendar year to receive the discretionary contribution. 

Employee Stock Ownership Plan

The Company has an Employee Stock Ownership Plan (“ESOP”) for its eligible employees. Employees are eligible to participate upon
the attainment of age 21 and the completion of 12 months of service consisting of at least 1,000 hours. Purchases of the Company’s stock 
by the ESOP will be funded by employer contributions or reinvestment of cash dividends. 

Total expenses related to the Profit Sharing and ESOP Plans for the years ended December 31, 2020, 2019 and 2018, amounted to 
$3.6 million, $2.8 million, and $2.6 million, respectively.

Defined Contribution SERP Plan (“DC SERP”)

For executives participating in the DC SERP plan, the Company made a discretionary contribution of 10% of each executive’s base 
salary and bonus to his or her account under the Company’s DC SERP, the Executive Deferred Compensation Plan. Total expenses
related to the Company’s DC SERP for the years ended December 31, 2020, 2019, and 2018, amounted to $209,000, $167,000, and 
$209,000, respectively.

15.

SHARE-BASED COMPENSATION

In 2017, the Company adopted the 2017 Equity and Cash Incentive Plan (the “2017 Plan”) and all future awards will be made under 
the 2017 Plan. The 2017 plan permits the issuance of restricted stock, restricted stock units (both time and performance-based), stock 
options, and stock appreciation rights.

Restricted stock awards time-vest either over a three-year or five-year period and have been fair valued as of the date of grant. The 
holders of restricted stock awards participate fully in the rewards of stock ownership of the Company, including voting and dividend 
rights. A summary of restricted stock outstanding as of December 31, 2020 and 2019, and changes during the years ended on those
dates, is presented below: 

Restricted stock

Non-vested at beginning of year

Granted
Vested
Forfeited

Non-vested at end of year

y

2020

2019

Number
of Shares

Weighted
Average
Grant Value

Number
of Shares

Weighted
Average
Grant Value

36,121
12,790
(13,846)
(3,416)
31,649

$

$

70.25
72.48
66.55
67.50
73.07

41,311
11,330
(14,642)
(1,878)
36,121

$

$

65.10
75.67
60.55
65.33
70.25

86

Performance-based  restricted  stock  units  vest  based  upon  the  Company’s  performance  over  a  three-year  period  and  have  been  fair 
valued  as  of  the  date  of  grant.  The  holders  of  performance-based  restricted  stock  units  do  not  participate  in  the  rewards  of  stock 
ownership  of  the  Company  until  vested.  A  summary  of  non-vested  performance-based  restricted  stock  units  outstanding  as  of 
December 31, 2020 and 2019, and changes during the years ended on those dates, is presented below:

Performance-based restricted stock units
Non-vested at beginning of year

Granted
Vested (Performance achieved)
Forfeited

Non-vested at end of year

y

2020

2019

Number
of Units

Weighted
Average
Grant Value

Number
of Units

Weighted
Average
Grant Value

57,256
36,067
(8,623)
(9,454)
75,246

$

$

72.82
71.36
62.54
70.21
73.41

41,411
28,542
(12,697)
—
57,256

$

$

66.39
73.00
46.00
—
72.82

Time-based restricted stock units vest over a three-year-period and have been fair valued as of the date of the grant. The holders of 
time-based restricted stock units do not participate in the rewards of stock ownership of the company until vested. A summary of non-
vested time-based restricted stock units outstanding as of December 31, 2020 and 2019, and changes during the years ended on those
dates, is presented below:

Time-based restricted stock units

Non-vested at beginning of year

Granted
Vested
Forfeited

Non-vested at end of year

y

2020

2019

Number
of Shares

Weighted
Average
Grant Value

Number
of Shares

Weighted
Average
Grant Value

12,658
9,120
(4,958)
(1,852)
14,968

$

$

74.27
74.69
74.62
70.86
74.84

6,777
8,132
(2,251)
—
12,658

$

$

76.56
73.00
76.56
—
74.27

The  following  table  presents  the  amounts  recognized  in  the  Consolidated  Statement  of  Income  for  restricted  stock,  time-based 
restricted stock units, and performance-based restricted stock units:

Share-based compensation expense
Related income tax benefit

2020

$
$

4,923
1,375

December 31,
2019
(dollars in thousands)
$
$

2,632
733

$
$

2018

2,592
729

The 2017 Plan allows Directors of the Company to receive their annual retainer fee in the form of stock in the Company. Total shares 
issued under the 2017 Plan in the years ended December 31, 2020 and 2019 were 8,403 and 4,484, respectively.

16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

To meet the financing needs of its customers, the Company is a party to financial instruments with off-balance-sheet risk in the normal
course  of  business.  These  financial  instruments  are  primarily  comprised  of  commitments  to  extend  credit,  commitments  to  sell 
residential  real  estate  mortgage  loans,  risk  participation  agreements,  and  standby  letters  of  credit.  Those  instruments  involve,  to
varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The  Company’s  exposure  to  credit  loss  in  the  event  of  nonperformance  by  the  other  party  to  the  financial  instrument  for  loan
commitments and standby letters of credit is represented by the contractual amount of those instruments assuming that the amounts are 
fully advanced and that collateral or other security is of no value. The Company uses the same credit policies in making commitments 
and conditional obligations as it does for on-balance-sheet instruments.

87

Off-balance-sheet financial instruments with contractual amounts that present credit risk included the following:

Financial instruments whose contractual amount
   represents credit risk:

Commitments to extend credit:

Unused portion of existing lines of credit
Origination of new loans

Standby letters of credit

Financial instruments whose notional amount exceeds
   the amount of credit risk:

Commitments to sell residential mortgage loans

g g

December 31, 2020

December 31, 2019

(dollars in thousands)

$

$

584,520
94,399
9,430

428,020
24,413
9,150

17,644

3,909

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of a customer to a third party.
Those  guarantees  are  primarily  issued  to  support  public  and  private  borrowing  arrangements.  Most  guarantees  extend  for  one  year. 
The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. 
The collateral supporting those commitments varies and may include real property, accounts receivable, or inventory. 

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration  dates or other termination clauses and may require payment of a fee. Since
some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future 
cash  requirements.  The  Company  evaluates  each  customer’s  creditworthiness  on  a  case-by-case  basis.  The  amount  of  collateral
obtained  upon  extension  of  the  credit  is  based  on  management’s  credit  evaluation  of  the  customer.  Collateral  held  varies,  but  may 
include  primary  residences,  accounts  receivable,  inventory,  property,  plant  and  equipment,  and  income-producing  commercial  real
estate.

See NOTE 21 - DERIVATIVES AND HEDGING ACTIVITIES for a discussion of the Company’s derivatives and hedging activities. 

17. COMMITMENTS AND CONTINGENCIES

Lease  Commitments.  The  Company  is  obligated  under  various  lease  agreements  covering  its  main  office,  branch  offices,  and  other 
locations.  These  agreements  are  accounted  for  as  operating  leases  and  their  terms  expire  between  2021  and  2032  and,  in  some
30 years
instances, contain options to renew for periods up to 30 years.

Effective January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 - Leases (“ASU 2016-02”) and began 
recognizing  its  operating  leases  on  its  consolidated  balance  sheet  by  recording  a  lease  liability,  representing  the  Company’s  legal
obligation to make lease payments, and a right-of-use (ROU) Asset, representing the Company’s legal right to use the leased office 
space and banking centers. The Company, by policy, does not include renewal options for leases as part of its right-of-use assets and
lease liabilities unless they are deemed reasonably certain to exercise. The Company does not have any material sub-lease agreements.

Operating  lease  expenses  are  comprised  of  operating  lease  costs  and  variable  lease  costs,  net  of  sublease  income.  The  pattern  and
measurement of expense recognition of these costs were not significantly impacted by ASU 2016-02 and subsequent ASUs issued to
amend this Topic.

Variable lease payments that are not dependent on an index or a rate or changes in variable payments based on an index or rate after 
the  commencement  date  are  excluded  from  the  measurement  of  the  lease  liability,  recognized  in  the  period  incurred  and  included 
within variable lease costs below.

88

The Company determines whether a contract contains a lease based on whether a contract, or a part of a contract, conveys the right to 
control the use of an identified asset for a period of time in exchange for consideration. The discount rate is determined as either the 
rate implicit in the lease or, when a rate cannot be readily determined, the Company’s incremental borrowing rate. The incremental 
borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term.  

The components of operating lease cost and other related information are as follows:

p

 Operating lease cost
g
 Variable lease cost (Cost excluded from lease payments)
 Sublease income
 Total operating lease cost
Other Information
 Cash paid for amounts included in the measurement of lease liabilities –
   operating cash flows for operating leases
 Operating Lease - Operating cash flows (Liability reduction)
p
 Right-of-use assets obtained in exchange for new operating lease liabilities
 Weighted average lease term - operating leases
 Weighted average discount rate - operating leases

g

g

g

p

y

p

g

g

$

$

$

For the Year Ended December 31,
2019
2020

(dollars in thousands)

$

$

$

6,691
2
(65)
6,628

6,547
5,430
7,850
6.90 Years

2.98%

5,280
2
(64)
5,218

5,027
3,868
37,728
8.15 Years

3.39%

The total minimum lease payments due in future periods under these agreements in effect at December 31, 2020 and December 31, 
2019 were as follows:

December 31, 2020

2021
2022
2023
2024
2025
Thereafter
Total minimum lease payments
Less: interest
Total lease liability
y

December 31, 2019

2020
2021
2022
2023
2024
Thereafter
Total minimum lease payments
Less: interest
Total lease liability
y

p y

Future Minimum
Lease Payments
(dollars in thousands)

Future Minimum
Lease Payments
(dollars in thousands)

7,173
6,789
6,362
5,493
4,517
11,347
41,681
(4,233)
37,448

5,478
5,523
5,371
5,021
4,355
14,553
40,301
(5,247)
35,054

$

$

$

$

Several  lease  agreements  contain  clauses  calling  for  escalation  of  minimum  lease  payments  contingent  on  increases  in  real  estate
taxes,  gross  income  adjustments,  percentage  increases  in  the  consumer  price  index,  and  certain  ancillary  maintenance  costs.  Total
rental expense was $7.0 million, $5.7 million, and $4.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

During  the  fourth  quarter  of  2020,  the  Company  closed  its  South  End  branch  location  and  a  support  office  location  in  Boston.   At 
December 31, 2020, the Company determined the remaining right-of-use assets for these locations were fully impaired.  Impairment 
charges of $1.2 million were recorded as noninterest expenses, within nonoperating expenses, in the consolidated statement of income.

89

Change  in  Control  Agreements.  The  Company  has  entered  into  agreements  with  its  Chief  Executive  Officer  and  with  certain  other 
senior  officers,  whereby,  following  the  occurrence  of  a  change  in  control  of  the  Company,  if  employment  is  terminated  (except 
because of death, retirement, disability, or for “cause” as defined in the agreements) or is voluntarily terminated for “good reason,” as 
defined in the agreements, said officers will be entitled to receive additional compensation, as defined in the agreements.

18.

SHAREHOLDERS’ EQUITY 

Capital guidelines issued by the Federal Reserve Bank (the “FRB”) and by the FDIC require that the Company and the Bank maintain 
minimum capital levels for capital adequacy purposes. These regulations also require banks and their holding companies to maintain 
higher capital levels to be considered “well-capitalized.” Failure to meet minimum capital requirements can initiate certain mandatory, 
and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s 
financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, there are specific 
capital  guidelines  that  involve  quantitative  measures  of  assets,  liabilities,  and  certain  off-balance-sheet  items  as  calculated  under 
regulatory accounting practices. 

The Capital Rules: (i) include “Common Equity Tier 1” (“CET1”) and related regulatory capital ratio of CET1 to risk-weighted assets; 
(ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) 
mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; 
and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations. Under the Capital 
Rules, for most banking organizations, including the Company, the most common form of Additional Tier 1 capital is non-cumulative 
perpetual preferred stock, and the most common forms of Tier 2 capital are subordinated notes and a portion of the allocation for loan 
and lease losses, in each case, subject to the Capital Rules’ specific requirements.

Pursuant to the Capital Rules, effective January 1, 2015, the minimum capital ratios are as follows:

•

•

•

•

4.5% CET1 to risk-weighted assets;

6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

4.0%  Tier  1  capital  to  average  consolidated  assets  as  reported  on  consolidated  financial  statements  (called  “leverage 
ratio”).

Additionally,  the  Company  is  required  to  maintain  additional  capital  conservation  buffer  of  2.5%  of  CET1,  effectively  resulting  in 
minimum ratios inclusive of the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to 
risk-weighted assets of at least 8.5%, and (iii) total capital to risk-weighted assets of at least 10.5%.

Management  believes  that  as  of  December 31,  2020  and  2019,  the  Company  and  the  Bank  met  all  applicable  minimum  capital 
requirements and were considered “well-capitalized” by both the FRB and the FDIC. 

The Company adopted ASU 2016-13 on January 1, 2020.  The joint federal bank regulatory agencies issued an interim final rule that 
allows  banking  organizations  to  phase-in  the  effects  of  the  CECL  accounting  standard  in  their  regulatory  capital,  over  a  three-year 
period from January 1, 2022 through December 31, 2024.  The Company did not elect to delay the adoption of CECL and did not 
adopt the transition period for regulatory capital. 

90

The Company’s and the Bank’s actual and required capital measures were as follows:

At December 31, 2020

Cambridge Bancorp:

Total capital (to risk-weighted
   assets)
Tier I capital (to risk-weighted
   assets)
Common equity tier I capital
   (to risk-weighted assets)
Tier I capital (to average
   assets)

Cambridge Trust Company:

Total capital (to risk-weighted
   assets)
Tier I capital (to risk-weighted
   assets)
Common equity tier I capital
   (to risk-weighted assets)
Tier I capital (to average
   assets)

At December 31, 2019

Cambridge Bancorp:

Total capital (to risk-weighted
   assets)
Tier I capital (to risk-weighted
   assets)
Common equity tier I capital
   (to risk-weighted assets)
Tier I capital (to average
   assets)

Cambridge Trust Company:

Total capital (to risk-weighted
   assets)
Tier I capital (to risk-weighted
   assets)
Common equity tier I capital
   (to risk-weighted assets)
Tier I capital (to average
   assets)

Actual

Amount

Ratio

Minimum Capital
Required For
Capital Adequacy Plus
Capital Conservation Buffer
Amount

Ratio

(dollars in thousands)

Minimum To Be
Well-Capitalized
Under
Prompt Corrective
Action Provisions

Amount

Ratio

$

378,393

13.9% $

285,145

10.5%

344,409

344,409

344,409

12.7%

230,832

12.7%

190,097

8.9%

155,009

8.5%

7.0%

4.0%

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

$

376,209

13.9% $

285,117

10.5% $

271,540

10.0%

342,229

342,229

342,229

12.6%

230,809

12.6%

190,078

8.8%

154,999

8.5%

7.0%

4.0%

217,232

176,501

193,748

8.0%

6.5%

5.0%

Actual

Amount

Ratio

Minimum Capital
Required For
Capital Adequacy Plus
Capital Conservation Buffer
Amount

Ratio

(dollars in thousands)

Minimum To Be
Well-Capitalized
Under
Prompt Corrective
Action Provisions

Amount

Ratio

$

272,727

13.6% $

210,342

10.5%

254,497

254,497

254,497

12.7%

170,277

12.7%

140,228

9.0%

113,365

8.5%

7.0%

4.0%

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

$

271,034

13.5% $

210,341

10.5% $

200,325

10.0%

252,804

252,804

252,804

12.6%

170,276

12.6%

140,227

8.9%

113,364

8.5%

7.0%

4.0%

160,260

130,211

141,705

8.0%

6.5%

5.0%

91

19.

COMPREHENSIVE INCOME

Comprehensive income is defined as all changes to shareholders’ equity except investments by and distributions to shareholders. Net 
income  is  a  component  of  comprehensive  income,  with  all  other  components  referred  to  in  the  aggregate  as  “other  comprehensive 
income.” The Company’s other comprehensive income consists of unrealized gains or losses on securities held at year-end classified
as available for sale and the component of the unfunded retirement liability computed in accordance with the requirements of ASC 
715,  “Compensation  –  Retirement  Benefits.”  The  before-tax  and  after-tax  amount  of  each  of  these  categories,  as  well  as  the  tax 
(expense)/benefit of each, is summarized as follows: 

For the Year Ended
December 31, 2020
Tax
(Expense)
or Benefit

Net-of-
tax
Amount

Before
Tax
Amount

For the Year Ended
December 31, 2019
Tax
(Expense)
or Benefit

Net-of-
tax
Amount

Before
Tax
Amount

For the Year Ended
December 31, 2018
Tax
(Expense)
or Benefit

Net-of-
tax
Amount

Before
Tax
Amount

Available for sale securities

Unrealized holding gains/(losses)
Reclassification adjustment for (gains)/losses
    realized in net income

Interest rate swaps designated as cash flow hedges

Unrealized holding gains(losses)
Reclassification adjustment for (gains)/losses
    recognized in net income
Defined benefit retirement plans

(dollars in thousands)

$ 3,630 $

(830) $ 2,800 $ 3,267 $

(767) $ 2,500 $ (231) $

(11) $ (242)

(73)

16

(57)

81

(19)

62

(2)

—

(2)

6,602

(1,844)

4,758

(1,879)

525

(1,354)

984

150

(271)

713

1,002

(282)

720

(42)

108

43

(12)

31

Net change in retirement liability

(1,695)

463

(1,232)

864

(241)

623

Total other comprehensive income
p

$ 6,585 $ (1,670) $ 4,915 $ 5,346 $ (1,340) $ 4,006 $

124
936 $

(35)
(340) $

89
596

Reclassifications out of accumulated other comprehensive income (“AOCI”) are presented below:

Details about Accumulated Other
Comprehensive Income (Loss) Components

Unrealized gains (losses) on available 
for sale securities
Unrealized gains (losses) on derivatives
Tax (expense) benefit

Net of tax

For the Year Ended December 31,

2020

2019
(dollars in thousands)

2018

$

$

73
1,879
(541)
1,411

$

$

(81) $
(150)
61
(170) $

Affected Line Item in the Statement
where Net Income is Presented

Gain (loss) on disposition of
investment securities
Interest on taxable loans
Income tax expense
Net income

2
(43)
12
(29)

92

20. EARNINGS PER SHARE

The following represents a reconciliation between basic and diluted earnings per share:

Earnings per common share - basic:
Numerator:

Net income
Less dividends and undistributed earnings allocated
   to participating securities

Net income applicable to common shareholders

Weighted average common shares outstanding
Earnings per common share – basic

Numerator:

Net income
Less dividends and undistributed earnings allocated
   to participating securities

Net income applicable to common shareholders

Weighted average common shares outstanding
Dilutive effect of common stock equivalents
Weighted average diluted common shares outstanding
Earnings per common share – diluted

g p

21. DERIVATIVES AND HEDGING ACTIVITIES 

2020

For the Year Ended December 31,
2019
(dollars in thousands, except per share data)

2018

$

$

$

$

$

$

31,959

(47)
31,912

6,289
5.07

31,959

(47)
31,912

6,289
55
6,344
5.03

$

$

$

$

$

$

25,257

(210)
25,047

4,629
5.41

25,257

(210)
25,047

4,629
33
4,662
5.37

$

$

$

$

$

$

23,881

(239)
23,642

4,062
5.82

23,881

(239)
23,642

4,062
37
4,099
5.77

The  Company  utilizes  interest  rate  swaps  and  floors  to  mitigate  exposure  to  interest  rate  risk  and  to  facilitate  the  needs  of  our 
customers.  The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the 
Company’s known or expected cash receipts principally related to the Company’s assets. 

Cash Flow Hedges of Interest Rate Risk

The  Company  uses  interest  floors  to  manage  its  exposure  to  interest  rate  movements.  Interest  rate  floors  designated  as  cash  flow
hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in 
exchange for an up-front premium. 

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in
AOCI and subsequently reclassified into interest income in the same period(s) during which the hedged transaction affects earnings. 
Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over 
the  life  of  the  hedge  on  a  systematic  and  rational  basis.  The  earnings  recognition  of  excluded  components  is  presented  in  interest 
income. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are received on 
the Company’s variable-rate assets.

Non-designated Hedges 

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. For the 
Company’s customers, these are interest rate swaps and risk participation agreements. 

93

Interest Rate Swaps. The Company enters into interest rate swap contracts to help commercial loan borrowers manage their interest
rate risk. The interest rate swap contracts with commercial loan borrowers allow them to convert floating-rate loan payments to fixed 
rate loan payments. When the Company enters into an interest rate swap contract with a commercial loan borrower, it simultaneously
enters into a “mirror” swap contract with a third party. The third party exchanges the client’s fixed-rate loan payments for floating-rate
loan payments. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings. Because
these derivatives have mirror-image contractual terms, the changes in fair value substantially offset each other through earnings. Fees
earned  in  connection  with  the  execution  of  derivatives  related  to  this  program  are  recognized  in  earnings  through  loan  related
derivative income.

The credit risk associated with swap transactions is the risk of default by the counterparty. To minimize this risk, the Company enters 
into interest rate agreements only with highly rated counterparties that management believes to be creditworthy. The notional amounts 
of these agreements do not represent amounts exchanged by the parties and, thus, are not a measure of the potential loss exposure.

Risk Participation Agreements.
The  Company  enters  into  risk  participation  agreements  (“RPAs”)  with  other  banks  participating  in  commercial  loan  arrangements. 
Participating  banks  guarantee  the  performance  on  borrower-related  interest  rate  swap  contracts.  RPAs  are  derivative  financial
instruments  and  are  recorded  at  fair  value.  These  derivatives  are  not  designated  as  hedges  and  therefore,  changes  in  fair  value  are
recognized in earnings with a corresponding offset within other assets or other liabilities. 

Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with 
the  interest  rate  swap  position  executed  with  the  commercial  borrower,  for  a  fee  paid  to  the  participating  bank.  Under  a  risk 
participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with 
the interest rate swap position with the commercial borrower for a fee received from the other bank.

The  following  tables  present  the  notional  amount,  the  location,  and  fair  values  of  derivative  instruments  in  the  Company’s 
consolidated balance sheets:

December 31, 2020

Derivative Assets

Notional 
Amount

Balance Sheet 
Location

Fair Value

Notional 
Amount

(dollars in thousands)

Derivative Liabilities
Balance Sheet 
Location

(dollars in thousands)

Fair Value

Derivatives designated as hedging instruments

$

150,000

Other Assets

Total derivatives designated as hedging instruments

g g

g

Derivatives not designated as hedging instruments

Interest rate swaps with customers
p
Mirror swaps with counterparties
Risk participation agreements-out to counterparties
Risk participation agreements-in with counterparties
Total derivatives not designated as hedging instruments

g g

g

g

p

p

p

409,493

26,580

Other Assets
— Other Assets
Other Assets
— Other Assets

$
$

$

$

$

7,618
7,618

— Other Liabilities $
$

—
—

38,415
—
51
—
38,466

— Other Liabilities $

409,493

Other Liabilities
— Other Liabilities
Other Liabilities

104,956

$

—
38,415
—
496
38,911

December 31, 2019

Derivative Assets

Notional 
Amount

Balance Sheet 
Location

Fair Value

Notional 
Amount

(dollars in thousands)

Derivative Liabilities
Balance Sheet 
Location

(dollars in thousands)

Fair Value

Derivatives designated as hedging instruments

Interest rate contracts

$

150,000

Other Assets

Total derivatives designated as hedging instruments

Derivatives not designated as hedging instruments

Loan related derivative contracts

Interest rate swaps with customers
Mirror swaps with counterparties
Risk participation agreements-out to counterparties
Risk participation agreements-in with counterparties
Total derivatives not designated as hedging instruments

g g

g

241,187

19,000

Other Assets
— Other Assets
Other Assets
— Other Assets

$

$

$
$

$

$

2,911
2,911

12,980
—
21
—
13,001

— Other Liabilities $
$

—
—

— Other Liabilities $

241,187

Other Liabilities
— Other Liabilities
Other Liabilities

88,489

$

—
12,980
—
250
13,230

94

The following tables presents the effect of cash flow hedge accounting on AOCI as of the periods presented: 

For the Year Ended December 31, 2020

Amount of Gain 
or (Loss)
Recognized in 
OCI

Amount of Gain 
or (Loss) 
Recognized in 
OCI Included 
Component

Amount of Gain 
or (Loss) 
Recognized in 
OCI Excluded 
Component

Location of Gain
or (Loss)

Amount of Gain 
or (Loss) 
Reclassified 
from AOCI into 
Income

Amount of Gain 
or (Loss) 
Reclassified 
from AOCI into
Income 
Included
Component

Amount of Gain 
or (Loss) 
Reclassified
from AOCI into 
Income 
Excluded 
Component

 Interest rate contracts

$

4,723

$

5,650

$

(927)

Interest Income $

1,879

$

2,074

$

(195)

(dollars in thousands)

(dollars in thousands)

For the Year Ended December 31, 2019

Amount of Gain 
or (Loss)
Recognized in 
OCI

Amount of Gain 
or (Loss) 
Recognized in 
OCI - Included 
Component
(dollars in thousands)

Amount of Gain 
or (Loss) 
Recognized in 
OCI - Excluded
Component

Location of Gain
or (Loss)

Amount of Gain 
or (Loss) 
Reclassified 
from AOCI into 
Income

Amount of Gain 
or (Loss) 
Recognized in
OCI - Included 
Component
(dollars in thousands)

Amount of Gain 
or (Loss) 
Recognized in 
OCI - Excluded 
Component

 Interest rate contracts

$

984

$

2,120

$

(1,136)

Interest Income $

(150) $

— $

(150)

The  Company  estimates  that  an  additional  $2.5  million  will  be  reclassified  out  of  AOCI  into  earnings,  as  an  increase  to  interest 
income over the next twelve months. 

The following table presents the effect of the Company’s derivative financial instruments on the consolidated statements of income as
of the periods presented:  

Total amount of income presented in the statements of income
   in which the effects of cash flow hedges are recorded
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20
Interest rate contracts:

Amount of gain (loss) reclassed from AOCI into income
Amount of loss reclassed from AOCI
  into income - Included Component
Amount of loss reclassed from AOCI
  into income - Excluded Component

p

For the Year Ended 
December 31, 2020
Interest Income
(dollars in thousands)

For the Year Ended 
December 31, 2019
Interest Income
(dollars in thousands)

$

$

$

$

$

1,879

1,879

2,074

(195)

$

(150)

(150)

—

(150)

The  following  table  presents  the  effect  of  the  Company’s  derivative  financial  instruments  that  are  not  designated  as  hedging 
instruments on the consolidated statements of income as of the periods presented:

Other contracts

Location of Gain or 
(Loss)
Other income

$

Credit-risk-related Contingent Features 

Amount of Gain or (Loss) Recognized in Income on Derivative
Year Ended December 31

2020

2019

2018

(dollars in thousands)

155

$

311 $

276

By  entering  into  derivative  transactions,  the  Company  is  exposed  to  credit  risk  to  the  extent  that  counterparties  to  the  derivative 
contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s
credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty. 
The  Company  seeks  to  minimize  counterparty  credit  risk  through  credit  approvals,  limits,  monitoring  procedures,  and  obtaining 
collateral,  where  appropriate.  Institutional  counterparties  must  have  an  investment  grade  credit  rating  and  be  approved  by  the 
Company’s  Board  of  Directors.  As  such,  management  believes  the  risk  of  incurring  credit  losses  on  derivative  contracts  with
institutional counterparties is remote.

95

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its 
indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could
also be declared in default on its derivative obligations.  In addition, the Company also has agreements with certain of its derivative 
counterparties  that  contain  a  provision  where  if  the  Company  fails  to  maintain  its  status  as  a  well-  capitalized  institution,  then  the
counterparty  could  terminate  the  derivative  position(s)  and  the  Company  would  be  required  to  settle  its  obligations  under  the 
agreements.

Balance Sheet Offsetting

Certain financial instruments may be eligible for offset in the consolidated balance sheet and/or subject to master netting arrangements 
or  similar  agreements.  The  Company’s  derivative  transactions  with  institutional  counterparties  are  generally  executed  under 
International  Swaps  and  Derivative  Association  (“ISDA”)  master  agreements  which  include  “right  of  set-off”  provisions.  In  such 
cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts 
on a net basis. Generally, the Company does not offset such financial instruments for financial reporting purposes.

The following tables present the information about financial instruments that are eligible for offset in the Consolidated Balance Sheets
as December 31, 2020 and 2019: 

Gross Amounts 
Recognized

Gross Amounts 
Offset

Net Amounts 
Recognized

Financial 
Instruments

Collateral 
Pledged 
(Received)

Net Amount

Gross Amounts Not Offset

December 31, 2020
(dollars in thousands)

46,084

$

— $

46,084

$

7,649

$

— $

38,435

38,911

$

— $

38,911

$

7,649

$

30,724

$

538

Gross Amounts 
Recognized

Gross Amounts 
Offset

Net Amounts 
Recognized

Financial 
Instruments

Collateral 
Pledged 
(Received)

Net Amount

December 31, 2019
(dollars in thousands)

15,912

$

— $

15,912

$

3,128

$

—

$

12,784

13,230

$

— $

13,230

$

3,128

$

9,645

$

457

Offsetting of Derivative Assets
g
g
Derivative Assets

Offsetting of Derivative Liabilities
g
Derivative Liabilities

Offsetting of Derivative Assets
g
g
Derivative Assets

g
Offsetting of Derivative Liabilities
Derivative Liabilities

$

$

$

$

As  of  December 31,  2020  and  December 31,  2019,  the  fair  value  of  derivatives  in  a  net  liability  position,  which  includes  accrued 
interest  but  excludes  any  adjustment  for  nonperformance  risk,  related  to  these  agreements  was  $30.7  million  and  $9.6  million, 
respectively.  As of December 31, 2020 and December 31, 2019, the Company has minimum collateral posting thresholds with certain
of  its  derivative  counterparties  and  has  posted  cash  collateral  of  $29.9  million  and  $10.4  million,  respectively,  against  these
agreements. If the Company had breached any of these provisions at December 31, 2020 or December 31, 2019, it could have been 
required to settle its obligations under the agreements at their termination value of $30.7 million and $9.6 million, respectively.

96

22. FAIR VALUE MEASUREMENTS 

The following is a summary of the carrying values and estimated fair values of the Company’s significant financial instruments as of 
the dates indicated:

Financial assets

Cash and cash equivalents
Securities available for sale
Securities held to maturity
Loans, net
Loans held for sale
FHLB Boston stock
Accrued interest receivable
Mortgage servicing rights
Interest rate contracts
Loan level interest rate swaps
Risk participation agreements out to counterparties

Financial liabilities

Deposits
Borrowings
Loan level interest rate swaps
Risk participation agreements in with counterparties

p

p

g

p

December 31, 2020

December 31, 2019

Carrying
Value

Estimated
Fair Value

Carrying
Value

(dollars in thousands)

Estimated
Fair Value

$

75,785
237,030
247,672
3,117,632
6,909
5,734
9,514
1,219
7,618
38,415
51

3,403,083
32,992
38,415
496

$

75,785
237,030
260,139
3,092,021
7,101
5,734
9,514
1,219
7,618
38,415
51

3,403,832
34,284
38,415
496

$

61,335
140,330
258,172
2,208,548
1,546
7,854
7,052
1,321
2,911
12,980
21

2,358,878
135,691
12,980
250

$

61,335
140,330
264,114
2,160,087
2,051
7,854
7,052
1,526
2,911
12,980
21

2,358,089
135,744
12,980
250

The Company follows ASC 820, Fair Value Measurements and Disclosures, for financial assets and liabilities. ASC 820 defines fair 
value, establishes a framework  for measuring fair value, and expands  disclosure requirements about fair value measurements. ASC 
820, among other things, emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states
that a fair value measurement should be determined based on the assumptions the market participants would use in pricing the asset or 
liability.  In  addition,  ASC  820  specifies  a  hierarchy  of  valuation  techniques  based  on  whether  the  types  of  valuation  information 
(“inputs”)  are  observable  or  unobservable.  Observable  inputs  reflect  market  data  obtained  from  independent  sources,  while 
unobservable  inputs  reflect  the  Company’s  market  assumptions.  These  two  types  of  inputs  have  created  the  following  fair  value 
hierarchy:

•

•

•

Level 1 – Quoted prices for identical assets or liabilities in active markets.

Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or 
liabilities in inactive markets; and model-derived valuations in which all significant inputs and significant value drivers 
are observable in active markets.

Level  3  –  Valuations  derived  from  techniques  in  which  one  or  more  significant  inputs  or  significant  value  drivers  are 
unobservable in the markets and which reflect the Company’s market assumptions.

Under ASC 820, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly 
transaction  between  market  participants  at  the  measurement  date.  When  available,  the  Company  uses  quoted  market  prices  to
determine fair value. If quoted prices are not available, fair value is based upon valuation techniques, such as matrix pricing or other 
models  that  use,  where  possible,  current  market-based  or  independently  sourced  market  parameters,  such  as  interest  rates.  If 
observable  market-based  inputs  are  not  available,  the  Company  uses  unobservable  inputs  to  determine  appropriate  valuation 
adjustments using methodologies applied consistently over time.

Valuation techniques based on unobservable inputs are highly subjective and require judgments regarding significant matters, such as
the amount and timing of future cash flows and the selection of discount rates that may appropriately reflect market and credit risks.

Changes  in  these  judgments  often  have  a  material  impact  on  the  fair  value  estimates.  In  addition,  since  these  estimates  are  as  of  a
specific  point  in  time,  they  are  susceptible  to  material  near-term  changes.  The  fair  values  disclosed  do  not  reflect  any  premium  or 
discount that could result from offering significant holdings of financial instruments at bulk sale, nor do they reflect the possible tax 
ramifications or estimated transaction costs. Changes in economic conditions may also dramatically affect the estimated fair values.

97

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value 
disclosures.  Securities  available  for  sale,  derivative  instruments,  and  hedges  are  recorded  at  fair  value  on  a  recurring  basis. 
Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as 
loans held for sale, mortgage servicing rights, other real estate owned, and collateral dependent impaired loans.  The Company uses an 
exit price notion for its fair value disclosures.

The following tables summarize certain assets reported at fair value on a recurring basis:

Measured on a recurring basis
Securities available for sale
U.S. GSE obligations
Mortgage-backed securities
Corporate debt securities

Other assets

Interest rate swaps with customers
Risk participation agreements out to counterparties
Interest rate contracts

Other liabilities

Mirror swaps with counterparties
Risk participation agreements in with counterparties

g

p

p

p

Measured on a recurring basis
Securities available for sale
U.S. GSE obligations
Mortgage-backed securities

Other assets

Interest rate swaps with customers
Risk participation agreements out to counterparties
Interest rate contracts

Other liabilities

Mirror swaps with counterparties
Risk participation agreements in with counterparties

p

p

p

g

Fair Value as of December 31, 2020

Level 1

Level 2

Level 3

Total

(dollars in thousands)

$

— $
—
—

$

23,617
210,630
2,783

— $
—
—

23,617
210,630
2,783

—
—
—

—
—

38,415
51
7,618

38,415
496

—
—
—

—
—

38,415
51
7,618

38,415
496

Fair Value as of December 31, 2019

Level 1

Level 2

Level 3

Total

(dollars in thousands)

$

— $
—

37,848
102,482

$

— $
—

37,848
102,482

—
—
—

—
—

12,980
21
2,911

12,980
250

—
—
—

—
—

12,980
21
2,911

12,980
250

The following table presents the carrying value of assets held at December 31, 2020 and 2019, which were measured at fair value on a 
non-recurring basis:

Items recorded at fair value on a non-recurring basis

Assets

Mortgage servicing rights
Loans held for sale
Individually evaluated collateral dependent loans
Other real estate owned

Total

Level 1

December 31, 2020

Level 2

Level 3

(dollars in thousands)

Total

$

$

— $

6,909
—
—
6,909

$

— $
—
—
—
— $

1,219
—
672
1,820
3,711

$

$

1,219
6,909
672
1,820
10,620

98

Level 1

December 31, 2019

Level 2

Level 3

(dollars in thousands)

Total

Items recorded at fair value on a non-recurring basis

g

Loans held for sale
Individually evaluated collateral dependent loans
Other real estate owned

Total

1,546
—
—
1,546

$

$

—
—
—
— $

—
2,541
163
2,704

$

1,546
2,541
163
4,250

Individually  evaluated  collateral  dependent  loans.  Collateral  dependent  loans  are  carried  at  the  lower  of  cost  or  fair  value  of  the
collateral  less  estimated  costs  to  sell  which  approximates  fair  value.  The  Company  uses  the  appraisal  value  of  the  collateral  and
applies certain adjustments depending on the nature, quality, and type of collateral securing the loan.

Loans held for sale. Loans held for sale are carried at the lower of fair value or carrying value (unpaid principal and unamortized loans 
fees).

Other Real Estate Owned. These properties are carried at fair value less estimated costs to sell.

Mortgage  servicing  rights.  These  assets  are  carried  at  the  fair  value  determined  by  estimating  the  present  value  of  future  net  cash 
flows, taking into consideration market loan prepayment speeds, discount rates, servicing costs, and other economic factors.

There were no transfers between fair value levels for the years ended December 31, 2020 and 2019.

The following is a description of the principal valuation methodologies used by the Company to estimate the fair values of its financial 
instruments.

Investment Securities 

For investment securities, fair values are primarily based upon valuations obtained from a national pricing service which uses matrix 
pricing  with  inputs  that  are  observable  in  the  market  or  can  be  derived  from,  or  corroborated  by,  observable  market  data.  When
available, quoted prices in active markets for identical securities are utilized.

Loans Held for Sale

For  loans  held  for  sale,  fair  values  are  estimated  using  projected  future  cash  flows,  discounted  at  rates  based  upon  either  trades  of 
similar loans or mortgage-backed securities, or at current rates at which similar loans would be made to borrowers with similar credit 
ratings and for similar remaining maturities.

Loans

For most categories of loans, fair values are estimated using projected future cash flows, discounted at rates based upon current rates 
at  which  similar  loans  would  be  made  to  borrowers  with  similar  credit  ratings,  and  for  similar  remaining  maturities.  Projected 
estimated  cash  flows  are  adjusted  for  prepayment  assumptions,  liquidity  premium  assumptions,  and  credit  loss  assumptions.  Loans
that are deemed to be impaired in accordance with ASC 310, Receivables, are valued based upon the lower of cost or fair value of the 
underlying collateral.

FHLB of Boston Stock

The fair value of FHLB of Boston stock equals its carrying value since such stock is only redeemable at its par value.

Deposits

The fair value of non-maturity deposit accounts is the amount payable on demand at the reporting date. This amount does not take into 
account  the  value  of  the  Company’s  long-term  relationships  with  core  depositors.  The  fair  value  of  fixed-maturity  certificates  of 
deposit  is  estimated  using  a  replacement  cost  of  funds  approach  and  is  based  upon  rates  currently  offered  for  deposits  of  similar 
remaining maturities.

99

Borrowings

For  long-term  borrowings,  fair  values  are  estimated  using  future  cash  flows,  discounted  at  rates  based  upon  current  costs  for  debt 
securities with similar terms and remaining maturities.

Other Financial Assets and Liabilities

Cash and cash equivalents, accrued interest receivable, and short-term borrowings have fair values which approximate their respective 
carrying values because these instruments are payable on demand or have short-term maturities and present relatively low credit risk 
and interest rate risk.

Derivative Instruments and Hedges

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis
on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to 
maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates 
credit valuation adjustments to appropriately reflect nonperformance risk in the fair value measurements. In adjusting the fair value of 
its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable 
credit enhancements, such as collateral postings.

Off-Balance-Sheet Financial Instruments

In the course of originating loans and extending credit, the Company will charge fees in exchange for its commitment. While these 
commitment fees have value, the Company has not estimated their value due to the short-term nature of the underlying commitments 
and their immateriality.

Values Not Determined

In  accordance  with  ASC  820,  the  Company  has  not  estimated  fair  values  for  non-financial  assets  such  as  banking  premises  and
equipment, goodwill, the intangible value of the Company’s portfolio of loans serviced for itself, and the intangible value inherent in 
the Company’s deposit relationships (i.e., core deposits), among others. Accordingly, the aggregate fair value amounts presented do 
not represent the underlying value of the Company.

23. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)  

2020 Quarters

Interest and Dividend Income
Interest Expense

Net Interest and Dividend Income
Provision for (Release of) Credit Losses

Net Interest and Dividend Income after Provision for
   Credit Losses
Noninterest Income
Noninterest Expense

Income (Loss) Before Taxes

Income Taxes

Net Income (Loss)

Share Data:

Average Shares Outstanding, Basic
Average Shares Outstanding, Diluted
Basic Earnings (Loss) Per Share
Diluted Earnings (Loss) Per Share
g

Fourth

Third

Second

First

(dollars in thousands, except share data)

$

$

$
$

35,870
1,789
34,081
(120)

34,201
10,802
27,127
17,876
4,862
13,014

6,897,450
6,970,542
1.88
1.86

$

$

$
$

36,881
1,919
34,962
2,000

32,962
10,933
25,445
18,450
5,021
13,429

6,918,692
6,954,324
1.94
1.93

$

$

$
$

$

30,531
1,742
28,789
14,430

14,359
8,972
25,587
(2,256)
(540)
(1,716) $

26,095
3,695
22,400
2,000

20,400
8,818
19,925
9,293
2,061
7,232

5,912,889
5,912,889

(0.29) $
(0.29) $

5,397,040
5,432,099
1.34
1.33

100

2019 Quarters

Fourth

Third

Second

First

Interest and Dividend Income
Interest Expense

Net Interest and Dividend Income
Provision for (Release of) Loan Losses

Net Interest and Dividend Income after Provision for
   Loan Losses
Noninterest Income
Noninterest Expense

Income Before Taxes

Income Taxes
Net Income

Share Data:

Average Shares Outstanding, Basic
Average Shares Outstanding, Diluted
Basic Earnings Per Share
Diluted Earnings Per Share

g

$

$

$
$

26,415
4,807
21,608
331

21,277
9,933
21,428
9,782
2,673
7,109

4,939,973
4,980,439
1.43
1.42

$

(dollars in thousands, except share data)
24,470
$
4,694
19,776
596

26,336
5,285
21,051
2,170

18,881
10,366
18,863
10,384
2,708
7,676

4,815,020
4,842,965
1.58
1.57

$

$
$

19,180
8,145
21,513
5,812
1,540
4,272

4,682,109
4,715,724
0.91
0.90

$

$
$

$

$

$
$

19,118
2,857
16,261
(93)

16,354
7,957
16,373
7,938
1,740
6,198

4,072,805
4,106,658
1.51
1.49

24. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY 

The condensed balance sheets of Cambridge Bancorp, the Parent Company, as of December 31, 2020 and 2019 and the condensed
statements of income and cash flows for each of the years in the three-year period ended December 31, 2020 are presented below. The 
statements of changes in shareholders’ equity are identical to the consolidated statements of changes in shareholders’ equity and are 
therefore not presented here.

CONDENSED BALANCE SHEET

ASSETS

Cash and cash equivalents
Goodwill
Other assets
Investment in subsidiary

Total assets

SHAREHOLDERS’ EQUITY

Shareholders’ equity

Total shareholders’ equity
y

q

Income

Dividends from subsidiary

Total income

Expenses

Interest expense
Other expenses

Total expenses

December 31,

2020

2019

(dollars in thousands)

$

$

$
$

1,920
33
260
399,519
401,732

401,732
401,732

$

$

$
$

1,680
—
13
284,868
286,561

286,561
286,561

CONDENSED STATEMENTS OF INCOME

2020

For the Year Ended December 31,
2019
(dollars in thousands)

2018

$

$

21,639
21,639

$

10,732
10,732

$

444
110
554
21,085
(153)
21,238
10,721
31,959

$

—
132
132
10,600
(36)
10,636
14,621
25,257

$

8,615
8,615

—
116
116
8,499
(32)
8,531
15,350
23,881

Income before income taxes and equity in undistributed income of subsidiary
Income tax benefit
Income of parent company
Equity in undistributed income of subsidiary

Net income

101

CONDENSED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income
Adjustments to reconcile net income to net cash provided
   by operating activities
      Deferred income tax (benefit)/expense
      Change in other assets, net
      Change in other liabilities, net

Undistributed income of subsidiary

Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid in business combinations
Investment in subsidiary

Net cash (used in)/provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock
Repurchase of common stock
Redemption of subordinate debt
Cash dividends paid on common stock

Net cash provided by/(used in) financing activities

Net increase (decrease) in cash
Cash at beginning of year
Cash at end of year

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Significant non-cash transactions
     Common Stock issued to shareholders due to merger

g

2020

For the Year Ended December 31,
2019
(dollars in thousands)

2018

$

31,959

$

25,257

$

23,881

(153)
3,032
444
(10,721)
24,561

(534)
—
(534)

452
(556)
(10,600)
(13,083)
(23,787)
240
1,680
1,920

$

—
(13)
—
(14,621)
10,623

(3,525)
(38,202)
(41,727)

38,576
(687)
—
(9,517)
28,372
(2,732)
4,412
1,680

$

—
—
—
(15,350)
8,531

—
—
—

761
(574)
—
(8,041)
(7,854)
677
3,735
4,412

87,163

$

59,417

$

—

$

$

102

Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Cambridge Bancorp

Opinion on the Consolidated Financial Statements 

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Cambridge  Bancorp  and  subsidiaries  (the  Company)  as  of 
December 31, 2020, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash 
flows for the year then ended and the related notes (collectively referred to as the financial statements). In our opinion, the financial 
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its 
operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States 
of America. 

We  have  also  audited,  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United  States) 
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal 
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 
and  our  report  dated  March  15,  2021  expressed  an  unqualified  opinion  on  the  effectiveness  of  the  Company's  internal  control  over 
financial reporting. 

Basis for Opinion 

These  financial  statements  are  the  responsibility  of  the  Company’s  management.  Our  responsibility  is  to  express  an  opinion  on  the 
Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be 
independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of 
the Securities and Exchange Commission and the PCAOB. 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. 
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error 
or  fraud,  and  performing  procedures  that  respond  to  those  risks.  Such  procedures  included  examining,  on  a  test  basis,  evidence 
regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used 
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe 
that our audit provides a reasonable basis for our opinion. 

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were 
communicated or required to be communicated to the Company’s Audit Committee and that: (1) relate to accounts or disclosures that 
are  material  to  the  financial  statements  and  (2)  involved  our  especially  challenging,  subjective,  or  complex  judgments.  The 
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are 
not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or 
disclosures to which they relate.

Adoption of Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses 

Critical Audit Matter Description

As described in Note 3 to the financial statements, on January 1, 2020, the Company adopted Accounting Standards Update (ASU) 
No. 2016-13, Financial  Instruments-Credit  Losses,  which  introduces  a  Current  Expected  Credit  Losses  (CECL)  model  to  estimate 
credit losses over the remaining expected life of the Company’s loan portfolio, rather than the incurred loss model applied in  prior 
periods.  Estimates  of  expected  credit  losses  under  the  CECL  model  are  based  on  relevant  information  about  past  events,  current 
conditions, and reasonable and supportable forward-looking forecasts regarding the collectability of the loan portfolio.

To  estimate  expected  loan  credit  losses,  the  Company  implemented  new  credit  loss  systems  aligned  with  the  CECL  model  and 
determined: 
•
•

the method of calculation to be used;
the role of peer loss data and the appropriate peer group;

103

•
•
•
•

the economic factor(s) indicative of expected losses;
the length of the reasonable and supportable forecast period; 
estimated loan cash flows and corresponding expected duration of loans;
the method of determining and applying qualitative factors.

We  determined  that  performing  procedures  relating  to  these  aspects  of  the  Company’s  adoption  of  ASU  2016-13  is  a  critical  audit 
matter.  The principal considerations for our determination are (i) the application of significant judgment and estimation on the part of 
management, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit 
evidence obtained, and (ii) significant audit effort was necessary in evaluating management’s methodology, significant assumptions 
and calculations. 

How the Critical Audit Matter Was Addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion 
on the financial statements. These procedures included, among others:

•

•

•

tests of the design and operating effectiveness of management’s controls covering the key assumptions and judgments of its 
CECL estimation model, and the selection and application of new accounting policies;
tests  of  the  Company’s  methodology  for  the  determination  of  its  peer  group  and  the  completeness  and  accuracy  of 
information included in peer group data and how it is used in the Company’s allowance for credit loss calculation; 
tests of the model loan cash flow and qualitative factor determinations. 

Allowance for Credit Losses – Qualitative Factors

Critical Audit Matter Description

As  described  in  Notes  2  and  7  to  the  financial  statements,  the  Company  has  recorded  an  allowance  for  credit  losses  for  its  loan 
portfolio  in  the  amount  of  $36.0  million  as  of  December  31,  2020,  representing  management’s  estimate  of  credit  losses  over  the 
remaining  expected  life  of  the  Company’s  loan  portfolio  as  of  that  date.    Management  determined  this  amount,  and  corresponding 
provision for credit loss expense, pursuant to the application of Accounting Standards Codification Topic 326, Financial Instruments 
– Credit Losses which was adopted by the Company on January 1, 2020.   

The Company’s methodology to determine its allowance for credit losses incorporates qualitative assessments of current loan portfolio 
and economic conditions and the application of forecasted economic conditions. We determined that performing procedures relating to 
these components of the Company’s methodology is a critical audit matter. The principal considerations for our determination are (i) 
the  application  of  significant  judgment  and  estimation  on  the  part  of  management,  which  in  turn  led  to  a  high  degree  of  auditor 
judgment  and  subjectivity  in  performing  procedures  and  evaluating  audit  evidence  obtained,  and  (ii)  significant  audit  effort  was 
necessary in evaluating management’s methodology, significant assumptions and calculations. 

How the Critical Audit Matter was addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion 
on the financial statements. These procedures included testing the effectiveness of controls relating to the Company’s determination of 
qualitative factors and forecasted economic conditions. These procedures also included, among others, testing management’s process 
for  determining  the  qualitative  reserve  component,  evaluating  the  appropriateness  of  management’s  methodology  relating  to  the 
qualitative reserve component and testing the completeness and accuracy of data utilized by management. 

/s/ Wolf & Company, P.C.

Boston, Massachusetts
March 15, 2021

We have served as the Company’s auditor since 2020. 

104

Report of Independent Registered Public Accounting Firm

 To the Shareholders and the Board of Directors of Cambridge Bancorp:

Opinion on the Internal Control Over Financial Reporting

We have audited Cambridge Bancorp and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 
2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations 
of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over 
financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework issued by the 
Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We  have  also  audited,  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United  States) 
(“PCAOB”),  the  December  31,  2020  consolidated  financial  statements  of  the  Company  and  our  report  dated  March  15,  2021 
expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of 
the  effectiveness  of  internal  control  over  financial  reporting  in  the  accompanying  Management’s  Report  on  Internal  Control  Over 
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on 
our  audit.  We  are  a  public  accounting  firm  registered  with  the  PCAOB  and  are  required  to  be  independent  with  respect  to  the 
Company  in  accordance  with  U.S.  federal  securities  laws  and  the  applicable  rules  and  regulations  of  the  Securities  and  Exchange 
Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. 
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness 
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also 
included  performing  such  other  procedures  as  we  considered  necessary  in  the  circumstances.  We  believe  that  our  audit  provides  a 
reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of 
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting 
principles.  A  company’s  internal  control  over  financial  reporting  includes  those  policies  and  procedures  that  (1)  pertain  to  the 
maintenance  of  records  that,  in  reasonable  detail,  accurately  and  fairly  reflect  the  transactions  and  dispositions  of  the  assets  of  the 
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in 
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in 
accordance  with  authorizations  of  management  and  directors  of  the  company;  and  (3)  provide  reasonable  assurance  regarding 
prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect 
on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections 
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in 
conditions, or that the degree of compliance with the policies or procedures may deteriorate

/s/ Wolf & Company, P.C.

Boston, Massachusetts
March 15, 2021

105

 
  
 
 
 
 
 
Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
Cambridge Bancorp:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Cambridge Bancorp and subsidiaries (the Company) as of 
December 31, 2019, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash 
flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively, the consolidated 
financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position 
of the Company as of December 31, 2019, and the results of its operations and its cash flows for each of the years in the two-year 
period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an 
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public 
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in 
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission 
and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to 
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial 
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, 
on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included 
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall 
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We served as the Company’s auditor from 2006 to 2019.

Boston, Massachusetts
March 16, 2020

106

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

On March 16, 2020, the Company’s Audit Committee dismissed KPMG LLP (“KPMG”) as the Company’s independent registered 
public  accounting  firm  for  the  fiscal  year  ending  December  31,  2020,  and  all  quarterly  periods  therein.    The  Company’s  Audit 
Committee participated in and approved the decision to change its independent registered public accounting firm.

The audit reports of KPMG on the consolidated financial statements of the Company as of and for the years ended December 31, 2019 
and 2018 did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified, or expected to be modified 
or qualified, as to uncertainty, audit scope, or accounting principles. 

During the fiscal years ended December 31, 2019 and 2018 and the subsequent interim period through March 16, 2020, there were no: 
(1) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or 
procedures, which disagreements, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference in connection 
with its opinion to the subject matter, or (2) reportable events under Item 304(a)(1)(v) of Regulation S-K.

Also,  on  March  16,  2020,  the  Company  engaged  Wolf  &  Company,  P.C.  (“Wolf  &  Company”)  as  the  Company’s  independent 
registered  public  accounting  firm  starting  with  the  fiscal  year  ending  December  31,  2020.    The  engagement  was  approved  by  the 
Company’s Audit Committee.  During the fiscal years ended December 31, 2019 and 2018, and the subsequent interim period prior to 
the engagement of Wolf & Company, the Company did not consult with Wolf & Company regarding any of the matters or events set 
forth in Item 304(a)(2)(i) and (ii) of Regulation S-K. 

Item 9A. Controls and Procedures. 

Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has evaluated, with the participation of 
management, including the Chief Executive Officer and the Chief Financial Officer, as of the end of the period covered by this report, 
the effectiveness of the design and operation of its disclosure controls and procedures.

Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and 
procedures were effective as of December 31, 2020 in ensuring that material information required to be disclosed by the Company, 
including its consolidated subsidiaries:

a)

b)

was made known to the certifying officers by others within the Company and its consolidated subsidiaries in the reports 
that it files or submits under the Exchange Act; and

is  recorded,  processed,  summarized,  and  reported  within  the  time  periods  specified  in  the  Securities  Exchange 
Commission rules and forms.

On a quarterly basis, the Company evaluates the disclosure controls and procedures and may, from time to time, make changes aimed 
at enhancing their effectiveness and to ensure that the Company’s systems evolve with its business.

Changes in Internal Controls over Financial Reporting

The Company adopted ASU 2016-13 and related amendments during the quarter ended March 31, 2020 and implemented additional 
controls for calculating the allowance for credit losses.  There were no other changes in the Company’s internal control over financial 
reporting  that  have  materially  affected,  or  are  reasonably  likely  to  materially  affect,  the  Company’s  internal  control  over  financial 
reporting in 2020. 

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control (as defined in Rule 13a-
15(f) under the Securities Exchange Act of 1934, as amended) over financial reporting. The Company’s internal control over financial 
reporting is a process designed to provide reasonable assurance to the Company’s Chief Executive Officer and Chief Financial Officer 
regarding the reliability of financial reporting and preparation of the Company’s financial statements in accordance with accounting 
principles generally accepted in the U.S.

In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that any 
controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired 
control  objectives,  and  management  was  required  to  apply  its  judgment  in  evaluating  and  implementing  possible  controls  and 

107

procedures. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial 
statement  preparation  and  presentation  and  may  not  prevent  or  detect  misstatements.  Also,  projections  of  any  evaluation  of 
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the 
degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 
2020. In making this assessment, management used the criteria set forth in Internal Control—Integrated Framework (2013) issued by 
the  Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission  (“COSO”).  Based  on  management’s  assessment,  the 
Company believes that, as of December 31, 2020, the Company’s internal control over financial reporting is effective based on the 
criteria established by Internal Control—Integrated Framework (2013) issued by COSO.

Wolf  &  Company,  P.C,  an  independent  registered  public  accounting  firm,  has  audited  the  Company’s  consolidated  financial 
statements included in this Annual Report on Form 10-K and, as part of its audit, has issued its report, included herein on page 105, on 
the effectiveness of the Company’s internal control over financial reporting.

Item 9B. Other Information. 

None. 

108

Item 10. Directors, Executive Officers and Corporate Governance. 

PART III 

The  information  required  by  this  Item  is  incorporated  herein  by  reference  to  the  captions  “Proposal  1:  Election  of  Directors,” 
“Committees  of  the  Board  of  Directors–  Audit  Committee,”  “Information  about  the  Company’s  Executive  Officers  Who  are  not 
Directors,”  and  “Code  of  Ethics”  in  the  Company’s  definitive  proxy  statement  for  the  2021  Annual  Meeting  of  Shareholders  (the 
“Proxy Statement”), which will be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Annual 
Report on Form 10-K.     

Item 11. Executive Compensation. 

The information required by this Item is incorporated herein by reference to the captions “Compensation Discussion and Analysis,” 
“Director  Compensation,”  “Executive  Compensation  Tables,”  “Compensation  Committee  Interlocks  and  Insider  Participation,”  and 
“Compensation Committee Report” in the Company’s Proxy Statement, which are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is incorporated herein by reference to the caption “Security Ownership of Certain Beneficial 
Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” in the Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence. 

The  information  required  by  this  Item  is  incorporated  herein  by  reference  to  the  captions  “Transactions  with  Related  Persons”  and 
“Corporate Governance – Board of Directors Independence” in the Company’s Proxy Statement.

Item 14. Principal Accounting Fees and Services. 

The information required by this Item is incorporated herein by reference to the caption “Independent Registered Public Accounting 
Firm Fees and Services” in the Proxy Statement.

109

PART IV 

Item 15. Exhibits, Financial Statement Schedules. 

(a) Documents filed as a Part of this Annual Report on Form 10-K:

(1) Financial Statements—Included in Item 8 of this Annual Report on Form 10-K.

Audited Consolidated Financial Statements

Consolidated Balance Sheets as of December 31, 2020 and 2019  ....................................................................................................
Consolidated Statements of Income for the Years Ended December 31, 2020, 2019, and 2018  ......................................................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019, and 2018 .............................
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2020, 2019, and 2018 .................................
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019, and 2018 ................................................
Notes to Consolidated Financial Statements ......................................................................................................................................
Report of Independent Registered Public Accounting Firm ..............................................................................................................

50
51
52
53
54
55
103

(2) Financial Statement Schedules

1.

2.

3.

Financial Statements.  The financial statements of the Company required in response to this item are listed in response to Part 
II, Item 8 of this Annual Report on Form 10-K.

Financial Statement Schedules.  There are no financial statement schedules that are required to be filed as part of this form 
since they are not applicable, or the information is included in the consolidated financial statements.

Exhibits.  The following exhibits are included as part of this Form 10-K.

(3) Index to Exhibits.

Exhibit
Number

Description

    2.1

    2.2

    3.1

    3.2

    4.1

    4.2#

  10.1**

  10.2**

  10.3**

  10.4**

Agreement and Plan of Merger, dated December 5, 2018, by and between Cambridge Bancorp, Cambridge Trust 
Company and Optima Bank & Trust Company (incorporated by reference to Exhibit 2.1 of the Form 8-K filed with the 
SEC on December 6, 2018)

Agreement and Plan of Merger, dated December 5, 2019, by and between Cambridge Bancorp, Cambridge Trust 
Company, Wellesley Bancorp, Inc., and Wellesley Bank (incorporated by reference to Exhibit 2.1 of the Form 8-K 
filed with the SEC on December 5, 2019)

Articles of Organization (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the SEC on June 19, 
2018)

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of Amendment No. 2 of the Registration 
Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)

Specimen stock certificate (incorporated by reference to Exhibit 4.1 of Amendment No. 2 of the Registration Statement 
File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)

Description of Cambridge Bancorp Securities Registered under Section 12 of the Securities Exchange Act of 1934.

Cambridge Bancorp 2017 Equity and Cash Incentive Plan (incorporated by reference to Exhibit 10.2 of Amendment No. 2 
of the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)

Cambridge Bancorp Director Stock Plan, amended as of April 25, 2011 (incorporated by reference to Exhibit 10.3 of 
Amendment No. 2 of the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)

2016 Annual Incentive Plan (incorporated by reference to Exhibit 10.4 of Amendment No. 2 of the Registration 
Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)

The Executive Nonqualified Excess Plan of Cambridge Trust Company (incorporated by reference to Exhibit 10.5 of 
Amendment No. 2 of the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)

110

  10.5**

  10.6**

  10.7**

  10.8**

  10.9**

  10.10**

  10.11**

  10.12**

  10.19**

  10.22**

  10.29**

Cambridge Trust Company Amended and Restated Supplemental Executive Retirement Agreement for Denis K. 
Sheahan, dated July 7, 2017 (incorporated by reference to Exhibit 10.6 of Amendment No. 2 of the Registration 
Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)

Cambridge Trust Company Supplemental Executive Retirement Agreement for Martin B. Millane, Jr., dated January 1, 
2016 (incorporated by reference to Exhibit 10.11 of Amendment No. 2 of the Registration Statement File No. 1-38184 
on Form 10 filed with the SEC on October 4, 2017)

Change in Control Agreement with Denis K. Sheahan, dated December 21, 2015 (incorporated by reference to Exhibit 
10.12 of Amendment No. 2 of the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 
2017)

Change in Control Agreement with Mr. Michael Carotenuto, dated April 26, 2019 (incorporated by reference to Exhibit 
10.1 of the Form 8-K filed with the SEC on April 29, 2019) 

Agreement with Mr. Martin Millane, dated April 26, 2019 (incorporated by reference to Exhibit 10.2 of the Form 8-K 
filed with the SEC on April 29, 2019)

Change in Control Agreement with Mark D. Thompson, dated September 17, 2017 (incorporated by reference to 
Exhibit 10.1 of the Form 8-K filed with the SEC on November 30, 2017)

Change in Control Agreement with Ms. Jennifer Pline, dated April 26, 2019 (incorporated by reference to Exhibit 10.3 of 
the Form 8-K filed with the SEC on April 29, 2019)

Change in Control Agreement with Daniel R. Morrison, dated December 5, 2018 (incorporated by reference to Exhibit 
10.18 of the Form 10-K filed with the SEC on March 18, 2019)

Cambridge Trust Company Supplemental Executive Retirement Agreement for Mark D. Thompson, dated September 25, 
2017 (incorporated by reference to Exhibit 99.1 of the Form 8-K filed with the SEC on November 30, 2017)

Cambridge Trust Company Supplemental Executive Retirement Agreement for Jennifer A. Pline, dated January 30, 
2017 (incorporated by reference to Exhibit 10.22 of the Form 10-K filed with the SEC on March 18, 2019)

Consulting Agreement with Mark D. Thompson, dated December 21, 2020 (incorporated by reference to Exhibit 10.1 
of the Form 80K filed with the SEC on December 23, 2020)

  10.30#**

Offer Letter for Thomas J. Fontaine, dated December 5, 2019

  10.31#**

Change in Control Agreement with Thomas J. Fontaine, dated December 5, 2019

  10.32#**

Cambridge Trust Company Supplemental Executive Retirement Agreement for Thomas J. Fontaine, dated December 5, 
2019

  21#

  23.1#

  23.2#

  31.1#

  31.2#

  32.1#

  32.2#

Subsidiaries of the Registrant

Consent of Wolf & Company P.C. dated March 15, 2021

Consent of KPMG LLP dated March 15, 2021

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange 
Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange 
Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of 
the Sarbanes-Oxley Act of 2002

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of 
the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document- the instance document does not appear in the Interactive data File because XBRL 
tags are embedded within the Inline XBRL

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

111

104 

Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101)_

Filed herewith.

#
** Management Compensatory plans or arrangements.

Item 16. Form 10-K Summary.

None.

112

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.

SIGNATURES

March 15, 2021

March 15, 2021

CAMBRIDGE BANCORP

By:

/s/  Denis K. Sheahan
Denis K. Sheahan
Chairman, President & Chief Executive Officer 

By:

/s/  Michael F. Carotenuto
Michael F. Carotenuto
Chief Financial Officer 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following 
persons on behalf of the Registrant in the capacities and on the dates indicated. 

Name
/s/ Denis K. Sheahan
Denis K. Sheahan
/s/ Michael F. Carotenuto
Michael F. Carotenuto

/s/ Jeanette G. Clough
Jeanette G. Clough
/s/ Thomas J. Fontaine
Thomas J. Fontaine

/s/ Christine Fuchs
Christine Fuchs

/s/ Simon R. Gerlin
Simon R. Gerlin
/s/ Pamela A. Hamlin
Pamela A. Hamlin
/s/ Kathryn M. Hinderhofer
Kathryn M. Hinderhofer

/s/ Edward F. Jankowski
Edward F. Jankowski
/s/ Hambleton Lord
Hambleton Lord
/s/ Thalia M. Meehan
Thalia M. Meehan
/s/ Daniel R. Morrison
Daniel R. Morrison
/s/ Leon A. Palandjian
Leon A. Palandjian
/s/ Laila S. Partridge
Laila S. Partridge
/s/ Jody A. Rose
Jody A. Rose
/s/ Cathleen A. Schmidt
Cathleen A. Schmidt

/s/ R. Gregg Stone
R. Gregg Stone
/s/ Mark D. Thompson
Mark D. Thompson

Title

Chairman, President & Chief Executive Officer 
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer and 
Principal Accounting Officer)

  Director

Executive Vice President and 
Chief Banking Officer

  Director

  Director

  Director

  Director

  Director

  Director

  Director

  Chief Executive Officer New
   Hampshire Market and Director
  Director

  Director

  Director

  Director

  Director

  Director

113

Date
March 15, 2021

March 15, 2021

  March 15, 2021

March 15, 2021

  March 15, 2021

  March 15, 2021

  March 15, 2021

March 15, 2021

  March 15, 2021

  March 15, 2021

  March 15, 2021

  March 15, 2021

  March 15, 2021

  March 15,2021

  March 15, 2021

  March 15, 2021

  March 15, 2021

  March 15, 2021

 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
   
   
   
   
 
 
 
 
 
   
   
 
 
 
 
 
   
   
   
 
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
   
 
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
[THIS PAGE INTENTIONALLY LEFT BLANK]

2020 Annual Report

(cid:40)(cid:69)(cid:81)(cid:70)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)(cid:3)(cid:56)(cid:86)(cid:89)(cid:87)(cid:88)(cid:3)(cid:41)(cid:77)(cid:86)(cid:73)(cid:71)(cid:88)(cid:83)(cid:86)(cid:87)(cid:3)(cid:69)(cid:82)(cid:72)(cid:3)(cid:52)(cid:509)(cid:71)(cid:73)(cid:86)(cid:87)

(cid:41)(cid:77)(cid:86)(cid:73)(cid:71)(cid:88)(cid:83)(cid:86)(cid:87)

(cid:47)(cid:73)(cid:69)(cid:82)(cid:73)(cid:88)(cid:88)(cid:73)(cid:3)(cid:44)(cid:19)(cid:3)(cid:40)(cid:80)(cid:83)(cid:89)(cid:75)(cid:76)
(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:41)(cid:452)(cid:229)(cid:207)(cid:419)(cid:402)(cid:286)(cid:445)(cid:229)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)
Mount Auburn Hospital

(cid:47)(cid:83)(cid:72)(cid:93)(cid:3)(cid:38)(cid:19)(cid:3)(cid:55)(cid:83)(cid:87)(cid:73)
President
New England Venture Capital Association

(cid:56)(cid:76)(cid:83)(cid:81)(cid:69)(cid:87)(cid:3)(cid:47)(cid:19)(cid:3)(cid:43)(cid:83)(cid:82)(cid:88)(cid:69)(cid:77)(cid:82)(cid:73)
(cid:41)(cid:452)(cid:229)(cid:207)(cid:419)(cid:402)(cid:286)(cid:445)(cid:229)(cid:400)(cid:154)(cid:286)(cid:207)(cid:229)(cid:400)(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:24)(cid:177)(cid:315)(cid:299)(cid:286)(cid:315)(cid:271)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)
Cambridge Trust

(cid:40)(cid:69)(cid:88)(cid:76)(cid:80)(cid:73)(cid:73)(cid:82)(cid:3)(cid:38)(cid:19)(cid:3)(cid:8)(cid:71)(cid:76)(cid:81)(cid:77)(cid:72)(cid:88)
Executive Director and CEO
McLane Middleton Professional Association

(cid:40)(cid:76)(cid:86)(cid:77)(cid:87)(cid:88)(cid:77)(cid:82)(cid:73)(cid:3)(cid:43)(cid:89)(cid:71)(cid:76)(cid:87)
Retired Equity Analyst and Sector Portfolio Manager
Wellington Management

(cid:41)(cid:73)(cid:82)(cid:77)(cid:87)(cid:3)(cid:48)(cid:19)(cid:3)(cid:8)(cid:76)(cid:73)(cid:69)(cid:76)(cid:69)(cid:82)
(cid:26)(cid:282)(cid:177)(cid:286)(cid:377)(cid:311)(cid:177)(cid:315)(cid:216)(cid:400)(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:41)(cid:452)(cid:229)(cid:207)(cid:419)(cid:402)(cid:286)(cid:445)(cid:229)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)
Cambridge Bancorp and Cambridge Trust Company

(cid:8)(cid:77)(cid:81)(cid:83)(cid:82)(cid:3)(cid:55)(cid:19)(cid:3)(cid:44)(cid:73)(cid:86)(cid:80)(cid:77)(cid:82)
(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:56)(cid:286)(cid:315)(cid:177)(cid:315)(cid:207)(cid:286)(cid:177)(cid:302)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:41)(cid:452)(cid:229)(cid:207)(cid:419)(cid:402)(cid:286)(cid:445)(cid:229)(cid:400)(cid:154)(cid:286)(cid:207)(cid:229)(cid:400)(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)
of Finance
MassDevelopment

(cid:53)(cid:69)(cid:81)(cid:73)(cid:80)(cid:69)(cid:3)(cid:38)(cid:19)(cid:3)(cid:45)(cid:69)(cid:81)(cid:80)(cid:77)(cid:82)
President 
York Creative Collective

(cid:48)(cid:69)(cid:88)(cid:76)(cid:86)(cid:93)(cid:82)(cid:3)(cid:50)(cid:19)(cid:3)(cid:45)(cid:77)(cid:82)(cid:72)(cid:73)(cid:86)(cid:76)(cid:83)(cid:74)(cid:73)(cid:86)
Retired Executive Vice President of Operations 
and Technology 
National Bank Holdings Corp

(cid:42)(cid:72)(cid:91)(cid:69)(cid:86)(cid:72)(cid:3)(cid:43)(cid:19)(cid:3)(cid:47)(cid:69)(cid:82)(cid:79)(cid:83)(cid:91)(cid:87)(cid:79)(cid:77)
Retired Senior Vice President-Residential Lending
and Corporate Compliance 
Rockland Trust Company

(cid:45)(cid:69)(cid:81)(cid:70)(cid:80)(cid:73)(cid:88)(cid:83)(cid:82)(cid:3)(cid:41)(cid:19)(cid:3)(cid:49)(cid:83)(cid:86)(cid:72)
Managing Director
Launchpad Venture Group
Co-Founder
Seraf

(cid:56)(cid:76)(cid:69)(cid:80)(cid:77)(cid:69)(cid:3)(cid:50)(cid:19)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:69)(cid:82)
Retired Team Lead and Portfolio Manager
Putnam Investments

(cid:41)(cid:69)(cid:82)(cid:77)(cid:73)(cid:80)(cid:3)(cid:55)(cid:19)(cid:3)(cid:50)(cid:83)(cid:86)(cid:86)(cid:77)(cid:87)(cid:83)(cid:82)
(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:41)(cid:452)(cid:229)(cid:207)(cid:419)(cid:402)(cid:286)(cid:445)(cid:229)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)
Cambridge Trust New Hampshire

(cid:49)(cid:73)(cid:83)(cid:82)(cid:3)(cid:38)(cid:19)(cid:3)(cid:53)(cid:69)(cid:80)(cid:69)(cid:82)(cid:72)(cid:78)(cid:77)(cid:69)(cid:82)
(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:127)(cid:286)(cid:382)(cid:299)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)
Intercontinental Capital Management, LLC

(cid:49)(cid:69)(cid:77)(cid:80)(cid:69)(cid:3)(cid:8)(cid:19)(cid:3)(cid:53)(cid:69)(cid:86)(cid:88)(cid:86)(cid:77)(cid:72)(cid:75)(cid:73)
Contingent Managing Director
Techstars, Inc.

(cid:55)(cid:19)(cid:3)(cid:44)(cid:86)(cid:73)(cid:75)(cid:75)(cid:3)(cid:8)(cid:88)(cid:83)(cid:82)(cid:73)
Lead Director
Cambridge Bancorp and Cambridge Trust Company
Manager
Kestrel Management, LLC

(cid:50)(cid:69)(cid:86)(cid:79)(cid:3)(cid:41)(cid:19)(cid:3)(cid:56)(cid:76)(cid:83)(cid:81)(cid:84)(cid:87)(cid:83)(cid:82)
Retired President 
Cambridge Bancorp and Cambridge Trust Company

(cid:52)(cid:509)(cid:71)(cid:73)(cid:86)(cid:87)

(cid:50)(cid:77)(cid:71)(cid:76)(cid:69)(cid:73)(cid:80)(cid:3)(cid:43)(cid:19)(cid:3)(cid:40)(cid:69)(cid:86)(cid:83)(cid:88)(cid:73)(cid:82)(cid:89)(cid:88)(cid:83)
(cid:132)(cid:229)(cid:315)(cid:286)(cid:327)(cid:377)(cid:400)(cid:154)(cid:286)(cid:207)(cid:229)(cid:400)(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:56)(cid:286)(cid:315)(cid:177)(cid:315)(cid:207)(cid:286)(cid:177)(cid:302)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)

(cid:50)(cid:69)(cid:86)(cid:88)(cid:77)(cid:82)(cid:3)(cid:39)(cid:19)(cid:3)(cid:50)(cid:77)(cid:80)(cid:80)(cid:69)(cid:82)(cid:73)(cid:3)(cid:47)(cid:86)(cid:19)
(cid:41)(cid:452)(cid:229)(cid:207)(cid:419)(cid:402)(cid:286)(cid:445)(cid:229)(cid:400)(cid:154)(cid:286)(cid:207)(cid:229)(cid:400)(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:88)(cid:229)(cid:315)(cid:218)(cid:286)(cid:315)(cid:271)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)

(cid:48)(cid:73)(cid:86)(cid:86)(cid:77)(cid:3)(cid:38)(cid:19)(cid:3)(cid:50)(cid:83)(cid:83)(cid:82)(cid:73)(cid:93)
(cid:132)(cid:229)(cid:315)(cid:286)(cid:327)(cid:377)(cid:400)(cid:154)(cid:286)(cid:207)(cid:229)(cid:400)(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:37)(cid:286)(cid:377)(cid:229)(cid:207)(cid:402)(cid:327)(cid:377)(cid:400)(cid:327)(cid:252)(cid:400)(cid:123)(cid:377)(cid:286)(cid:445)(cid:177)(cid:402)(cid:229)(cid:400)(cid:24)(cid:177)(cid:315)(cid:299)(cid:286)(cid:315)(cid:271)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:382)

Puneet Nevatia
(cid:132)(cid:229)(cid:315)(cid:286)(cid:327)(cid:377)(cid:400)(cid:154)(cid:286)(cid:207)(cid:229)(cid:400)(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:70)(cid:315)(cid:252)(cid:327)(cid:377)(cid:311)(cid:177)(cid:402)(cid:286)(cid:327)(cid:315)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)

(cid:47)(cid:73)(cid:82)(cid:82)(cid:77)(cid:74)(cid:73)(cid:86)(cid:3)(cid:38)(cid:19)(cid:3)(cid:53)(cid:80)(cid:77)(cid:82)(cid:73)(cid:17)(cid:3)(cid:40)(cid:43)(cid:38)
Executive Vice President and Head of Wealth Management

Pilar Pueyo
Senior Vice President and Director of Human Resources

(cid:47)(cid:83)(cid:76)(cid:82)(cid:3)(cid:47)(cid:19)(cid:3)(cid:8)(cid:89)(cid:80)(cid:80)(cid:77)(cid:90)(cid:69)(cid:82)
Senior Vice President and Director of Consumer Lending

(cid:47)(cid:73)(cid:82)(cid:82)(cid:77)(cid:74)(cid:73)(cid:86)(cid:3)(cid:50)(cid:19)(cid:3)(cid:59)(cid:77)(cid:80)(cid:80)(cid:77)(cid:87)
(cid:132)(cid:229)(cid:315)(cid:286)(cid:327)(cid:377)(cid:400)(cid:154)(cid:286)(cid:207)(cid:229)(cid:400)(cid:123)(cid:377)(cid:229)(cid:382)(cid:286)(cid:218)(cid:229)(cid:315)(cid:402)(cid:400)(cid:177)(cid:315)(cid:218)(cid:400)(cid:26)(cid:282)(cid:286)(cid:229)(cid:252)(cid:400)(cid:97)(cid:177)(cid:377)(cid:299)(cid:229)(cid:402)(cid:286)(cid:315)(cid:271)(cid:400)(cid:107)(cid:254)(cid:207)(cid:229)(cid:377)

(cid:59)(cid:73)(cid:69)(cid:80)(cid:88)(cid:76)(cid:3)(cid:50)(cid:69)(cid:82)(cid:69)(cid:75)(cid:73)(cid:81)(cid:73)(cid:82)(cid:88)(cid:3)(cid:52)(cid:509)(cid:71)(cid:73)(cid:87)

(cid:50)(cid:69)(cid:87)(cid:87)(cid:69)(cid:71)(cid:76)(cid:89)(cid:87)(cid:73)(cid:88)(cid:88)(cid:87)

Boston
75 State Street, 18th Floor
Boston, MA 02109
617-876-5500

Wellesley
100 Worcester Street, Suite 300
Wellesley, MA 02481

(cid:51)(cid:73)(cid:91)(cid:3)(cid:45)(cid:69)(cid:81)(cid:84)(cid:87)(cid:76)(cid:77)(cid:86)(cid:73)

(cid:40)(cid:83)(cid:82)(cid:71)(cid:83)(cid:86)(cid:72)
49 South Main Street, Suite 203
Concord, NH 03301
603-226-1212

(cid:50)(cid:69)(cid:82)(cid:71)(cid:76)(cid:73)(cid:87)(cid:88)(cid:73)(cid:86)
1000 Elm Street, Suite 201
Manchester, NH 03101
603-657-9015

(cid:53)(cid:83)(cid:86)(cid:88)(cid:87)(cid:81)(cid:83)(cid:89)(cid:88)(cid:76)
Two Harbour Place, First Floor
Portsmouth, NH 03801
603-373-6010

Corporate Headquarters

Harvard Square
1336 Massachusetts Avenue
Cambridge, MA 02138
617-876-2790

(cid:53)(cid:86)(cid:77)(cid:90)(cid:69)(cid:88)(cid:73)(cid:3)(cid:39)(cid:69)(cid:82)(cid:79)(cid:77)(cid:82)(cid:75)(cid:3)(cid:52)(cid:509)(cid:71)(cid:73)(cid:87)

(cid:50)(cid:69)(cid:87)(cid:87)(cid:69)(cid:71)(cid:76)(cid:89)(cid:87)(cid:73)(cid:88)(cid:88)(cid:87)

Belmont
361 Trapelo Road
Belmont, MA 02478
617-484-0892

(cid:39)(cid:83)(cid:87)(cid:88)(cid:83)(cid:82)(cid:3)(cid:18)(cid:3)(cid:39)(cid:73)(cid:69)(cid:71)(cid:83)(cid:82)(cid:3)(cid:45)(cid:77)(cid:80)(cid:80)
65 Beacon Street
Boston, MA 02108
617-523-3551

(cid:39)(cid:83)(cid:87)(cid:88)(cid:83)(cid:82)(cid:3)(cid:18)(cid:3)(cid:43)(cid:77)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:3)(cid:41)(cid:77)(cid:87)(cid:88)(cid:86)(cid:77)(cid:71)(cid:88)
One Federal Street
Boston, MA 02110
617-778-5860

Cambridge - Harvard Square
1336 Massachusetts Avenue
Cambridge, MA 02138
617-876-2790

Cambridge - Huron Village
353 Huron Avenue
Cambridge, MA 02138
617-661-1317

Cambridge - Kendall Square
415 Main Street
Cambridge, MA 02142
617-441-0951

Cambridge - Porter Square
1720 Massachusetts Avenue
Cambridge, MA 02138
617-661-0398

(cid:40)(cid:83)(cid:82)(cid:71)(cid:83)(cid:86)(cid:72)
75 Main Street
Concord, MA 01742
978-369-9909

Lexington
1690 Massachusetts Avenue
Lexington, MA 02420
781-863-0976

(cid:51)(cid:73)(cid:73)(cid:72)(cid:76)(cid:69)(cid:81)
865 Central Ave., H-302
Needham, MA 02492
781-489-7040

Newton Centre
776-1 Beacon Street
Newton Centre, MA 02459
617-778-5888

Wellesley - Lower Falls 
29 Washington Street
Wellesley, MA 02481
781-489-4500

Wellesley - Linden Square 
197 Linden Street
Wellesley, MA 02482
781-489-7630

Wellesley - Wellesley Square 
40 Central Street
Wellesley, MA 02482
781-489-7600

Weston
494 Boston Post Road
Weston, MA 02493

781-893-5500

(cid:51)(cid:73)(cid:91)(cid:3)(cid:45)(cid:69)(cid:81)(cid:84)(cid:87)(cid:76)(cid:77)(cid:86)(cid:73)

Bedford
99 South River Road
Bedford, NH 03110
603-488-6040

(cid:41)(cid:83)(cid:90)(cid:73)(cid:86)
920 Central Avenue
Dover, NH 03820
603-516-1175

(cid:51)(cid:83)(cid:86)(cid:88)(cid:76)(cid:3)(cid:45)(cid:69)(cid:81)(cid:84)(cid:88)(cid:83)(cid:82)
26 Lafayette Road
North Hampton, NH 03862
603-433-9633

(cid:53)(cid:83)(cid:86)(cid:88)(cid:87)(cid:81)(cid:83)(cid:89)(cid:88)(cid:76)
143 Daniel Street
Portsmouth, NH 03801
603-433-9611

(cid:53)(cid:83)(cid:86)(cid:88)(cid:87)(cid:81)(cid:83)(cid:89)(cid:88)(cid:76)(cid:3)(cid:18)(cid:3)(cid:53)(cid:73)(cid:69)(cid:87)(cid:73)(cid:3)(cid:56)(cid:86)(cid:69)(cid:72)(cid:73)(cid:84)(cid:83)(cid:86)(cid:88)
20 International Drive
Portsmouth, NH 03801
603-433-9655

(cid:8)(cid:88)(cid:86)(cid:69)(cid:88)(cid:76)(cid:69)(cid:81)
17 Portsmouth Avenue
Stratham, NH 03885
603-773-5222

Parent of Cambridge Trust Company

NASDAQ: CATC

cambridgetrust.com