Century Bancorp Inc. Annual Report 2008

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FY2008 Annual Report · Century Bancorp Inc.

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annual report 2008

years of family values

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$1.8

FROM OUR CHAIRMAN:

billion in assets
By building on the strength of our
relationships with small and medium-sized
businesses, retail customers, and
local governments and institutions,
we increased our total assets 7.2%
to $1.8 billion in 2008.

When I founded Century
40 years ago in an office
trailer on Fellsway West in
Somerville, I never dreamed
that we would grow to be
the largest family controlled
bank in New England, and in
2008, one of the very few
banks in the nation with
a solid balance sheet and
increasing earnings.

Marshall M. Sloane

As we approach our anniversary celebration in May, there
are so many memories of loyal customers and Century
Associates, deals done, and most of all, people helped and
communities that prospered. It seems like not that long
ago that I cut the first ribbon on opening day, May 1,
1969, and I’ve been blessed to cut many more new office
ribbons in the years that followed. I note with sadness
the passing in 2008 of our Founding Director, Henry L.
Foster, DVM. I am grateful for his 39 years of devoted
service and wisdom.

My father landed in Boston from Russia 100 years ago
next March. He had a strong conviction that success in
America was only limited by one's work ethic and values.
He instilled in me a strict moral compass and the values of
honesty, integrity and good character. He would be proud,
but not too surprised, by what Century has become.

I give much of the credit for our success to what we
call our “family values”: hard work, unwavering focus,
patient expectations, ethical behavior, and a lifelong

commitment to our home communities. I am proud that
my three children, and the entire Century family, will carry
on these values as they build Century for the future.

I’ve been a banker for over 50 years. I thought I’d seen
it all, but many of the events of the past couple of months
have left me astounded: monumental write-offs, absurd
executive compensation, bank failures, huge forced
mergers, frauds, depositor panics, and now the deepest
recession since the Great Depression. Over the years, I have
lost plenty of sleep worrying about events like these to
ensure Century would survive and prosper. In the 90’s,
I told my family that sound management principles are
as important during a recession as when times are
prosperous. I am proud to say we are sound, profitable,
and growing.

Century has always been a culture based on risk
management. We are spending more time than ever on
loan portfolio quality and underwriting standards. I feel
confident that by maintaining our centralized control of
lending in local markets, we’ll be fine.

Most of all, I have faith in the United States, the
economy of Massachusetts, and the core Greater Boston
communities we serve. I’m proud of the skills and
commitment of our management team, and take great
pride in our 40 years of achievement. I’m already making
plans for our next 40 years.

Sincerely,

Marshall M. Sloane
Founder & Chairman

About Century
Century Bancorp, Inc. is a $1.8 billion banking and financial services company headquartered in Medford,
Massachusetts. The Company operates 22 banking offices in 17 cities and towns in Massachusetts and provides
a full range of business, personal, and institutional services. The Company’s common stock is listed on the
NASDAQ Market under the symbol: “CNBKA.”

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DEAR FELLOW SHAREHOLDERS:

2008 was a strong and positive year for Century
Bancorp. Our earnings, assets, capital, and branch
footprint all grew meaningfully. Despite the most
challenging business environment in a generation,
each of our business units exceeded their goals.

Here are some highlights:

Net income for the year ended December 31, 2008
increased 15% to $9,046,000, or $1.63 per diluted
share, compared to $7,864,000, or $1.42 per
diluted share for 2007.

Total assets increased 7.2% from $1.7 billion
at December 31, 2007 to $1.8 billion at
December 31, 2008.

Net interest income increased 14.2% due to an
improvement of 35 basis points in the net interest
margin to 3.00%.

Total stockholders’ equity increased from
$118.8 million at year-end 2007 to $120.5 million
at year-end 2008. Book value per share increased
to $21.76.

Total loans increased by 15.1% from year-end 2007
to $836 million at year-end 2008, including a 20.5%
increase in commercial and industrial loans.

Jonathan G. Sloane and Barry R. Sloane

Total deposits grew $135 million from year-end
2007 to 2008, or 12%.

The efficiency ratio, a key measure of operating
effectiveness, improved (declined) from 77.5%
to 70.6% from 2007 to 2008.

We opened two new branches: Main Street in
Winchester and Riverside Avenue in Medford;
and repositioned our Medford Square branch to
the very center of the Square. Each location has
accomplished significant deposit growth, further
increasing our market share and our commitment
to the communities we serve.

Institutional Services increased its lockbox and
related cash management fees by 9% and grew
deposit balances by 22% in 2008.

15% increase in net income

Despite the challenging economic
climate, we grew our net income by
staying true to our core values and
focused on our communities.

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22branch locations

Continually seeking ways to
improve service and lower costs,
we optimized and expanded our
branch network to 22 offices in 17
Massachusetts cities and towns.

Century was founded 40 years ago on the philosophy of careful risk
management and centralized in-market lending, long before these
imperatives were cited as absent in the recent analysis of troubled banks.

A year ago, we perceived a significant deterioration in national credit quality,
so we fortified our loan approval mechanism. The improved process requires
daily Executive review and approval on all bank lending.

Our nonperforming assets (“NPA”) increased from $1.8 million at year-end
2007 to $3.7 million at year-end 2008. The NPAs represent a small
percentage of our loan portfolio, less than half of 1%, and the Bank has
no foreclosed real estate owned. Regardless, we remain relentlessly devoted
to proactively managing the credit quality of our portfolio.

Independent thinking.

The troubles of the giant, multinational banks have further distracted
their management’s attention from their communities and clients. Some
years ago, we wrote of our concern about “living in the land of the giants.”
The “giants” appear less formidable today. Clients and bankers have moved
to Century as a refuge from the “management by headline” that defines
those multinational banks. To seize this opportunity, we recognize how
critical it is that we remain focused on strengthening our local ties. It is
a relief to be fortunate to spend our days on constructive business building
initiatives, rather than on lobbying for federal assistance.

We did receive preliminary approval in December for $30 million of the
Capital Purchase Program (“CPP”) preferred capital stock investment from
the U.S. Treasury's Troubled Asset Relief Program (“TARP”). However, in
early February 2009, we cancelled our scheduled closing. We simply felt
that the relatively high percentage coupon, 10-year stock warrants, and
the almost daily announcements of proposed restrictions on dividends
and acquisitions did not justify the “insurance” value of the additional
and, in our case, unneeded capital.

Total Assets
(in thousands)

6
6
5
1
0
8
1
$

1
8
2
0
8
6
1
$

0
9
2
4
4
6
1
$

Net Income
(in thousands)

6
4
0
9
$

4
6
8
7
$

8
8
6
4
$

Earnings per Share,
Diluted

3
6
1
$

2
4
1
$

4
8
0
$

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Looking ahead.

There is no doubt of the severity of this recession,
but conservative economic forecasts foreshadow
a leveling of GDP in late 2009, followed by modest
growth in 2010. We feel comfortable that we can
manage our way through this economic contraction
without the TARP/CPP money and its burdens. There is
no doubt that we are living through a deleveraging of
American consumers and corporations. While less debt
will restrain spending and GDP growth in the short
term, less high-rate debt is a good and productive
development for America. We acknowledge recessions
are painful for our communities and clients, but we are
certain they will emerge stronger at the conclusion of
this challenging period.

As we mark our 40th anniversary, we are confident
that, with the continued support and commitment of
our 400 Associates, Century will continue to prosper
in the years ahead. Thank you for your business,
your share ownership, and your confidence in
our leadership.

Sincerely,

Barry R. Sloane
Co-CEO & Co-President

Jonathan G. Sloane
Co-CEO & Co-President

Management Committee members, from left: Brian J. Feeney, David B. Woonton,
William P. Hornby, Linda Sloane Kay, and Paul A. Evangelista

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years of giving and guidance
Providing financial and leadership support to
charitable organizations throughout our communities
is a proud family tradition that goes back to our
founding. In 2008, we continued to invest in our
communities, supporting 170 organizations.

Charitable Donations – 2008

Adopt-A-Student Foundation
Allston Village Main Streets
American Heart Association
American Red Cross of Massachusetts Bay
American Stroke Association
Anti-Defamation League
Associazione Gizio
Autism Speaks
Bay State Chapter Freedoms Foundation
Beacon Academy
Boston Harbor Association
Boston Minuteman Council,
Boy Scouts of America

Boston University
Boys & Girls Club of Lynn
Boys & Girls Club of Middlesex County
Braintree Police Superior Officers’ Union
Bread of Life
Brendan M. Curtin Sponsorship Fund
Bridge Over Troubled Waters
Brighton Board of Trade
Brookline Music School
Burlington Community Scholarship Foundation/

Dollars for Scholars

Burlington Education Foundation
Burlington High School Scholarship Fund
Burlington Recreation Department
Burlington Rotary Club
Business Advancement &

Social Entrepreneurs, Inc. (BASE)

Cambridge & Somerville Program for Alcoholism

and Drug Abuse Rehabilitation (CASPAR)

Casa Monte Casino
Catholic Charities of Boston
Catholic University
Center for Women & Enterprise
Chicopee Chamber of Commerce
City of Malden
City of Medford
City of Quincy
City of Somerville
City of Waltham
Combined Jewish Philanthropies
Congregation of Holy Cross
Congregation Shaarei Tefillah
Current Trends in Autism 2008/

Friends of LADDERS

Dana-Farber Cancer Institute
Digital Credit Union for Kids
Dimock Community Health Centers
Discover Quincy
Don Guanella Center
Dormition of the Virgin Mary Greek Orthodox

Church of Somerville

Eleanora Duse Italian American Theatre, LLC
Elizabeth Peabody House
Endicott College
Essex National Heritage Commission

Everett Chamber of Commerce
Everett Kiwanis Club
Federated Dorchester Neighborhood
First Candle/Marley Jaye Cherella Memorial Fund
Fishermen's Feast of Boston
Fontbonne Academy
Foundation for Faces of Children
Fourth Presbyterian Church of South Boston
Georgetown Light Department
Greenlight Fund - Raising A Reader
Harry Langburd Scholarship Fund
Hebrew Senior Life
Housing Families
Inner City 100
Interfaithfamily.com
International Union of Elevator Constructors
Irish Chamber of Commerce USA
Italia Unita
Jewish Cemetery Association of Massachusetts
Jewish Family Services of the North Shore
Katz Silver Lung Cancer Research
Kids Clothes Club
Little League of Somerville
Little Sisters of the Poor
Lupus Foundation of America
Lynn Area Chamber of Commerce
Lynn Housing Authority &

Neighborhood Development

Lynn Lions Club
Lynn Rotary Club
Maimonides School
Malden Beautification Program
Malden Chamber of Commerce
Malden Rotary Club
Malden YMCA
Massachusetts Affordable Housing Alliance
Medford Firefighters Union
Medford High School
Medford Historical Society
Medford Jingle Bell Festival
Medford Police Association
Medford Rotary Club
Medford Senior Football Associates
Medford Vocational Tech High School
Medical Academic & Scientific
Community Organization

Mental Health Programs, Inc. (MHPI)
MetroCast Foundation
MetroWest Jewish Day School
Middlesex County Deputy Sheriff’s Association
Middlesex County Sheriff’s Department
Milton Hospital
Muscular Dystrophy Association
Mystic Learning Centers
Nazzaro Recreation Center
NEMLEC Police Foundation
Neponset Valley Philharmonic Orchestra
Neurofibromatosis of New England
New England Aquarium
New England Athletes for Academic Excellence
New England Conservatory

New England Province of Jesuits
New England Shelter for Homeless Veterans
Newburyport Yankee Homecoming
Newmarket Business Association
North Bennet Street School
North Cambridge Senior Center
North End Christmas Fund
North Shore Medical Center Cancer Walk
Ocular Immunology and Uveitis Foundation
Operation A.B.L.E. of Greater Boston
Our Lady of Nazareth Academy
Pan-Mass Challenge
Peabody Chamber of Commerce
Peabody High School Hockey Boosters
Pope John XXIII High School
Prospect Hill Academy Charter School
Rashi School
Regis College
Rodman Ride for Kids
Run for Wednesday's Child
Sacred Heart Parish of Lynn
Saint John School
Salem Little League
Salem State College
Shakespeare & Company
Societa di San Giuseppe
Solomon Schechter Day School
Somerville Chamber of Commerce
Somerville Community Corporation
Somerville Housing Authority
Somerville Lions Club
Somerville Mental Health
Somerville Police Relief Association
Somerville Veterans' Services
Sons of Italy
Sportsmen's Tennis Club
Springstep
St. Leonard’s Parish of Boston
Synagogue Council of Massachusetts
Taste of the North End
Temple Israel of Boston
Templeton Municipal Light and Water
The Brotherhood Fund
The Genesis Fund
The Wellness Community
Torah Academy
Town of Burlington
Town of Swampscott
Town of Weymouth
Toys for Tots
Ward 7 Improvement Association
Wheelock College
Winchester Historical Society
Winchester Veterans’ Honor Roll Committee
World Unity
YMCAs of Greater Boston
Young Israel of Brookline

491070.Financial.QX7.qxd:CA14518_Financials 2/25/09 7:18 PM Page 1

CENTURY BANCORP, INC.
DIRECTORS

George R. Baldwin 1,4,6*
President & CEO
Baldwin & Company

Roger S. Berkowitz 2,5,7*
President & CEO
Legal Sea Foods, Inc.

Marshall I. Goldman 3*,5**
Professor Emeritus
Wellesley College

Russell B. Higley, Esq.6,7
Attorney
Higley & Higley

Jackie Jenkins-Scott 4,5
President
Wheelock College

Linda Sloane Kay 7
Senior Vice President
Century Bank and Trust Company

Fraser Lemley 2*,4,5
Chairman & CEO
Sentry Auto Group

Joseph J. Senna, Esq.1*,4
Attorney

Jonathan G. Sloane 4,5,6,7
Co-President & Co-CEO
Century Bank and Trust Company

Barry R. Sloane 4,5,6,7
Co-President & Co-CEO
Century Bank and Trust Company

Marshall M. Sloane 4,5
Chairman of the Board
Century Bank and Trust Company

Stephanie Sonnabend 1,3,5*
CEO & President
Sonesta International Hotels Corporation

George F. Swansburg 4*,5

Jon Westling 1,2,3
President Emeritus
Boston University

OFFICERS

Marshall M. Sloane
Founder & Chairman

Jonathan G. Sloane
Co-President & Co-CEO

Barry R. Sloane
Co-President & Co-CEO

William P. Hornby, CPA
Chief Financial Officer & Treasurer

Rosalie A. Cunio
Clerk

Paula A. Grimaldi
Assistant Clerk

CENTURY BANK AND TRUST
COMPANY OFFICERS

MANAGEMENT COMMITTEE

Marshall M. Sloane
Chairman of the Board

Jonathan G. Sloane
Co-President & Co-CEO

Barry R. Sloane
Co-President & Co-CEO

William P. Hornby, CPA
Chief Financial Officer & Treasurer

Paul A. Evangelista
Executive Vice President

Brian J. Feeney
Executive Vice President

Linda Sloane Kay
Senior Vice President

David B. Woonton
Executive Vice President

SENIOR VICE PRESIDENTS

Gerald S. Algere
Richard L. Billig
Janice A. Brandano
Bradford J. Buckley
Peter R. Castiglia
James M. Flynn, Jr.
William J. Gambon, Jr.
Timothy L. Glynn
Anthony C. LaRosa, CPA
Nancy Lindstrom
Jason J. Melius
Deborah R. Rush
Kenneth A. Samuelian
Yasmin D. Whipple

FIRST VICE PRESIDENTS

Susan B. Delahunt
Phillip A. Gallagher
Shipley C. Mason
Joanne C. McNamara, CISA

VICE PRESIDENTS

Michael D. Ballard
Jean P. Belcher-Scarpa
Robert A. Bennett
Gerald Bovardi
Joseph B. Chapman
Gracine Copithorne
Rosalie A. Cunio
Barbara J. Cunningham
Sandra R. Edey
Michele English

Judith A. Fallon
Jonathan S. Gilbert
Howard N. Gold
T. Daniel Kausel
Kathleen A. Kelly
Michael F. Long
Nancy M. Marsh
Karen M. Martin
Carl M. Mattos
Thomas E. Piemontese
Cornelius C. Prioleau
Andrew J. Santos, Jr.
Bernice A. Shuman
Janice D. Taylor
David J. Waryas

A SSISTANT VICE PRESIDENTS

John S. Bosco, Jr.
Pasqualina Buttiri
Frank A. Call
Toni M. Chardo
Cynthia A. Davidson
Laura A. DiFava
John R. Ferguson
Thatcher L. Freeborn
Anna M. Gorska
Lisa Gosling
Daniel F. Griffin
Janice D. Hallinan
Kristine M. Holopainen
James J. Jordan
Malcolm I. Maloon
Ann E. Mannion
Kathleen McGillicuddy
Carol A. Melisi
Richard D. Murray
Sarah A. O’Toole
Karen J. Pessia
Elizabeth M. Pinault
Laurie A. Rizzo
William F. Shutt, Jr.
Richard A. Thimble
Tuesday N. Thomas
Lawrence H. Tsoi
Jose I. Umana
Christina Welch-Matthews

OFFICERS

John J. Ferren
Marissa L. Fitzgerald
Janet Garcia
Sara A. Gaudet
Paula A. Grimaldi
Amelia N. Iocco
Brian Kelly
Brandon N. Letellier
Robson G. Miguel
Scott M. Rembis
Judith A. Shannon
Krzysztof A. Sikorski
Nikole A. Solomon
Elizabeth A. Theriault
Jeanne A. Wood

1 Audit Committee, 2 Compensation Committee, 3 Nominating Committee, 4 Executive Committee, 5 Asset Liability Committee,
6 Non-deposit Investment and Insurance Products Committee, 7 Trust Committee, * Committee Chairperson, ** Vice Chairperson

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 2

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Century Bancorp, Inc. AR ’08

F I N A N C I A L S TAT E M E N T S

Financial Highlights

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Management’s Report on Internal Control Over Financial Reporting

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 1

2008

2007

2006

2005

2004

80,693
35,914

44,779
4,425

40,354
13,975
43,028

11,301
2,255

83,008
43,805

39,203
1,500

37,703
13,948
40,255

11,396
3,532

9,046

7,864

5,541,983
5,543,702
5,538,407

5,542,461
5,546,707
5,543,804

$
$

1.63
1.63
24.0 %

$
$

1.42
1.42
27.6 %

$
$

80,707
43,944

36,763
825

35,938
11,365
40,196

7,107
2,419

4,688

5,540,966
5,550,722
5,541,188

72,811
32,820

39,991
600

39,391
10,973
40,318

10,046
3,166

65,033
23,646

41,387
300

41,087
10,431
37,663

13,855
4,974

6,880

8,881

5,535,202
5,553,009
5,535,422

5,526,202
5,553,197
5,534,088

0.85
0.84
46.2 %

$
$

1.24
1.24
31.3 %

$
$

1.61
1.60
24.2 %

$ 1,801,566
836,065
1,265,527
120,503
21.76

$ 1,680,281
726,251
1,130,061
118,806
21.43

$ 1,644,290
736,773
1,268,965
106,818
19.28

$ 1,728,769
689,645
1,217,040
103,201
18.64

$ 1,833,701
580,003
1,394,010
104,773
18.93

0.54 %
7.43 %
3.00 %

0.38 %

7.23 %
70.6 %

0.49 %
7.05 %
2.65 %

0.22 %

6.97 %
77.5 %

0.28 %
4.45 %
2.40 %

0.06 %

6.39 %
83.5 %

0.41 %
6.57 %
2.58 %

0.04 %

6.31 %
79.1 %

0.55 %
8.61 %
2.75 %

0.01 %

6.38 %
72.7 %

Financial Highlights

Century Bancorp, Inc. AR ’08

(dollars in thousands, except share data)

FOR THE YEAR

Interest income

Interest expense

Net interest income

Provision for loan losses

Net interest income after

provision for loan losses

Other operating income

Operating expenses

Income before income taxes

Provision for income taxes

Net income

Average shares outstanding, basic

Average shares outstanding, diluted

Shares outstanding at year-end

Earnings per share:

Basic

Diluted

Dividend payout ratio

AT YEAR-END

Assets

Loans

Deposits

Stockholders’ equity

Book value per share

SELECTED FINANCIAL PERCENTAGES

Return on average assets

Return on average stockholders’ equity

Net interest margin, taxable equivalent

Net charge-offs as a percent

of average loans

Average stockholders’ equity to

average assets

Efficiency ratio

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 2

Per Share Data

2008, Quarter Ended

Market price range (Class A)

High

Low

Dividends Class A

Dividends Class B

2007, Quarter Ended

Market price range (Class A)

High

Low

Dividends Class A

Dividends Class B

Financial Highlights

Century Bancorp, Inc. AR ’08

December 31,

September 30,

June 30,

March 31,

$ 18.00
11.50
0.12
0.06

$ 20.51
12.76
0.12
0.06

$ 21.62
17.00
0.12
0.06

$ 22.48
18.25
0.12
0.06

December 31,

September 30,

June 30,

March 31,

$ 25.49
19.80
0.12
0.06

$ 22.67
19.26
0.12
0.06

$ 26.55
21.27
0.12
0.06

$ 28.25
26.00
0.12
0.06

The stock performance graph below compares the cumulative total shareholder return of the Company’s Common Stock from December 31, 2003 to December 31,
2008 with the cumulative total return of the NASDAQ Market Index (U.S. Companies) and the NASDAQ Bank Stock Index. The lines in the table below represent
monthly index levels derived from compounded daily returns that include all dividends. If the monthly interval, based on the fiscal year-end, was not a trading day,
the preceding trading day was used.

Comparison of Five-Year
Cumulative Total Return*

$200

$175

$150

$125

$100

$75

$50

$25

NASDAQ Banks

NASDAQ U.S.

Century Bancorp, Inc.

2003

2004

2005

2006

2007

2008

Value of $100 Invested on
December 31, 2003 at:

Century Bancorp, Inc.

NASDAQ Banks

NASDAQ U.S.

2004

$ 84.46
114.44
108.84

2005

2006

$ 85.16
111.80
111.16

$ 80.87
125.47
122.11

2007

$ 61.03
99.45
132.42

2008

$ 49.02
72.51
63.80

*Assumes that the value of the investment in the Company’s Common Stock and each index was $100
on December 31, 2003 and that all dividends were reinvested.

491070.Financial.QX7.qxd:CA14518_Financials 2/25/09 7:21 PM Page 3

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

FORWARD-LOOKING STATEMENTS
Certain statements contained herein are not based on historical facts and
are “forward-looking statements” within the meaning of Section 21A of the
Securities Exchange Act of 1934. Forward-looking statements, which are based
on various assumptions (some of which are beyond the Company’s control),
may be identified by reference to a future period or periods, or by the use of
forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,”
“anticipate,” “continue” or similar terms or variations on those terms, or the
negative of these terms. Actual results could differ materially from those set
forth in forward-looking statements due to a variety of factors, including, but not
limited to, those related to the economic environment, particularly in the market
areas in which the Company operates, competitive products and pricing,
fiscal and monetary policies of the U.S. Government, changes in government
regulations affecting financial institutions, including regulatory fees and capital
requirements, changes in prevailing interest rates, acquisitions and the
integration of acquired businesses, credit risk management, asset/liability
management, the financial and securities markets, and the availability of and
costs associated with sources of liquidity.

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.

RECENT MARKET DEVELOPMENTS
The financial services industry is facing unprecedented challenges in the face
of the current economic crisis. The global and U.S. economies are experiencing
significantly reduced business activity as a result of, among other factors,
disruptions in the financial system during the past year. Dramatic declines in the
housing market, and increased foreclosure levels and unemployment rates, have
resulted in significant writedowns of asset values by financial institutions,
including government-sponsored entities and major commercial and investment
banks. These writedowns, initially of mortgage-backed securities but spreading
to credit default swaps and other derivative securities, have caused many financial
institutions to seek additional capital; to merge with larger and stronger
institutions; and, in some cases, to fail. The Company is fortunate that the
markets it serves have been impacted to a lesser extent than many areas
around the country.

In response to the financial crises affecting the banking system and financial
markets, there have been several recent announcements of federal programs
designed to purchase assets from, provide equity capital to, and guarantee
the liquidity of the industry.

On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (the
“EESA”) was signed into law. The EESA authorizes the U.S. Treasury to, among
other things, purchase up to $700 billion of mortgages, mortgage-backed
securities, and certain other financial instruments from financial institutions for
the purpose of stabilizing and providing liquidity to the U.S. financial markets.
The Company does not expect to participate in the sale of any of its assets
into these programs. EESA also immediately increased the FDIC deposit
insurance limit from $100,000 to $250,000 through December 31, 2009.

On October 14, 2008, the U.S. Treasury announced that it will purchase equity
stakes in a wide variety of banks and thrifts. Under this program, known as the
Troubled Asset Relief Program Capital Purchase Program (the “TARP Capital
Purchase Program”), the U.S. Treasury has made approximately $250 billion of
capital available (from the $750 billion authorized by the EESA) to U.S. financial
institutions in the form of preferred stock. In conjunction with the purchase of
preferred stock, the U.S. Treasury will receive warrants to purchase common stock
with an aggregate market price equal to 15% of the preferred investment.
Participating financial institutions will be required to adopt the U.S. Treasury’s

standards for executive compensation, dividend restrictions and corporate
governance for the period during which the U.S. Treasury holds equity issued under
the TARP Capital Purchase Program. The U.S. Treasury also announced that nine
large financial institutions had already agreed to participate in the TARP Capital
Purchase Program. Subsequently, a number of smaller institutions have participated
in the TARP Capital Purchase Program. On December 18, 2008, the Company
announced, in a press release, it had received preliminary approval from the U.S.
Treasury to participate in the TARP Capital Purchase Program, in an amount up to
$30 million in the form of Century Bancorp, Inc. preferred stock and warrants to
purchase Class A common stock. In light of uncertainty surrounding additional
restrictions that may be imposed on participants under pending legislation, the
Company, on January 14, 2009, informed the U.S. Treasury that it would not be
closing on the transaction on January 16, 2009, as originally scheduled. The
Company will monitor developments and may decide to close on the transaction
once uncertainties are resolved if it is in the best interest of the Company to do
so, though the U.S. Treasury did not commit to close at a future date.

On October 14, 2008, the U.S. Treasury and the FDIC jointly announced a
new program, known as the Temporary Liquidity Guarantee Program (“TLGP”), to
strengthen confidence and encourage liquidity in the nation’s banking system.
The TLGP consists of two programs: the Debt Guarantee Program (“DGP”) and
the Transaction Account Guarantee Program (“TAGP”). Under the DGP, the FDIC
will guarantee certain newly issued senior unsecured debt of participating banks,
thrifts and certain holding companies issued from October 14, 2008 through
June 30, 2009, which debt matures on or prior to June 30, 2012, up to a fixed
maximum amount per participant. In addition, under the TAGP, the FDIC will fully
guarantee deposits in noninterest bearing transaction accounts without dollar
limitation through December 31, 2009. Institutions opting to participate in the
DGP will be charged a 50-, 75- or 100-basis point fee (depending on maturity)
for the guarantee of eligible debt, and a 10-basis point assessment will be
applicable to deposits in noninterest bearing transaction accounts at institutions
participating in the TAGP that exceed the existing deposit insurance limit of
$250,000. The Company opted to participate in both the DGP and the TAGP.

OVERVIEW
Century Bancorp, Inc. (together with its bank subsidiary, unless the context
otherwise requires, the “Company”) is a Massachusetts state-chartered bank
holding company headquartered in Medford, Massachusetts. The Company is a
Massachusetts corporation formed in 1972 and has one banking subsidiary (the
“Bank”): Century Bank and Trust Company formed in 1969. At December 31,
2008, the Company had total assets of $1.8 billion. Currently, the Company
operates 22 banking offices in 17 cities and towns in Massachusetts ranging from
Braintree in the south to Beverly in the north. The Bank’s customers consist
primarily of small and medium-sized businesses and retail customers in these
communities and surrounding areas, as well as local governments and institutions
throughout Massachusetts.

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 the interest paid on deposits and borrowings. The results of operations are
also affected by the level of income/fees from loans and deposits, as well as
operating expenses, the provision for loan losses, the impact of federal and state
income taxes and the relative levels of interest rates and economic activity.

The Company offers a wide range of services to commercial enterprises, state
and local governments and agencies, nonprofit organizations and individuals.
It emphasizes service to small and medium-sized businesses and retail customers
in its market area. The Company makes commercial loans, real estate and
construction loans, and consumer loans, and accepts savings, time and demand
deposits. In addition, the Company offers to its corporate and institutional
customers automated lockbox collection services, cash management services and
account reconciliation services, and actively promotes the marketing of these

491070.RevFinancial.QX7.qxd:CA14518_Financials 2/24/09 10:34 PM Page 4

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

services to the municipal market. Also, the Company provides full-service securities
brokerage services through a program called Investment Services at Century Bank which
is supported by Linsco/Private Ledger Corp., a full-service securities brokerage business.

A yield curve is a line that typically plots the interest rates of U.S. Treasury Debt,
which have different maturity dates, but the same credit quality, at a specific point
in time. The three main types of yield curve shapes are normal, inverted and flat.

The Company is also a provider of financial services, including cash management,
transaction processing and short-term financing, to municipalities in Massachusetts
and Rhode Island. The Company has deposit relationships with approximately 43%
of the 351 cities and towns in Massachusetts.

The Company had net income of $9,046,000 for the year ended December 31,
2008, compared with net income of $7,864,000 for the year ended December 31,
2007 and net income of $4,688,000 for the year ended December 31, 2006.
Diluted earnings per share were $1.63 in 2008, compared to $1.42 in 2007 and
$0.84 in 2006. Included in income for 2007 is a $1,321,000 pre-tax gain on the
sale of the building that houses the Company’s Medford Square branch. Included in
income for 2006 is a pre-tax gain of $600,000 from the sale of the Company’s
rights to future royalty payments for a portion of its Merchant Credit Card
customer base.

Throughout 2007 and 2008, the Company has seen improvement in its net
interest margin as illustrated in the graph below:

Net Interest Margin

2.64%

2.77%

2.79%

2.41%

2.82% 2.86%

3.14% 3.16%

3.60 %
3.20 %
2.80 %
2.40 %
2.00 %

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
2008
2007

2007

2008

The primary factors accounting for the increase in net interest margin are:

• a continuing decline in the cost of funds as a result of increased pricing

discipline related to deposits,

• an increase in average loans outstanding during 2008,

• the maturity of lower-yielding investment securities,

• an increase in the slope of the yield curve,

During 2008, the U.S. economy has experienced a lower rate environment along
with a steepening of the yield curve, which means that the spread between the
long-term and short-term yields has increased. This has positively impacted
the net interest margin. During 2007, rates fell and the yield curve steepened
somewhat. This positively impacted the net interest margin. During 2006, the
Company’s earnings were negatively impacted primarily by a decrease in net
interest income. This decrease was primarily due to the inverted yield curve
during 2006 as well as increased funding costs.

Total assets were $1,801,566,000 at December 31, 2008, an increase of 7.2%
from total assets of $1,680,281,000 on December 31, 2007.

On December 31, 2008, stockholders’ equity totaled $120,503,000, compared
with $118,806,000 on December 31, 2007. Book value per share increased to
$21.76 at December 31, 2008 from $21.43 on December 31, 2007.

On August 17, 2007, the Company sold the building that houses one of its branches
located at 55 High Street, Medford, Massachusetts, for $1.5 million at market
terms. The Bank relocated this branch to 1 Salem Street (formerly 3 Salem Street),
Medford, Massachusetts. This sale resulted in a pre-tax gain of $1,321,000. The
branch opened on May 5, 2008.

On April 14, 2008, the Company opened a branch located on Riverside Avenue in
Medford, Massachusetts. On November 17, 2008, the Company opened a branch
located on Main Street in Winchester, Massachusetts. During October 2008, the
Company received regulatory approval to close a branch on Albany Street in
Boston, Massachusetts. This branch closed during the first quarter of 2009.

During the fourth quarter of 2007, the Company sold the assets associated with
the Sherman Union branch located on Commonwealth Avenue in Boston,
Massachusetts, as well as automated teller machines (“ATMs”) located at or near
Boston University. The buyer assumed the leases for the branch and ATMs. The
deposits associated with the Sherman Union branch were transferred to Century’s
Hotel Commonwealth branch located at 512 Commonwealth Avenue in Boston,
Massachusetts. This resulted in a gain of $115,000.

• an increase in the loan yield due to an increase in prepayment fees, particularly

in the second quarter of 2007, and

• an increase in investment yields due, in part, to taking advantage of elevated
yields in the municipal auction rate securities market, particularly in the third
quarter of 2008.

On February 7, 2006, the Company announced that it had renewed its contract
with NOVA Information Systems, a wholly owned subsidiary of U.S. Bancorp, and
had also sold its rights to future royalty payments for a portion of its Merchant
Credit Card customer base for $600,000, which the Bank has included as
other income.

While management will continue its efforts to improve the net interest
margin, there can be no assurance that certain factors beyond its control,
such as prepayments of loans and changes in market interest rates, will
continue to positively impact the net interest margin.

Historical U.S. Treasury Yield Curve

6.00 %

5.00 %

4.00 %

3.00 %

2.00 %

1.00 %

0.00 %

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 the following to be its critical accounting policies:
allowance for loan losses and impairment of investment securities. There have been
no significant changes in the methods or assumptions used in the accounting
policies that require material estimates and assumptions.

3 Month 6 Month 2 Year

3 Year

5 Year

10 Year

30 Year

U.S. Treasury Yield Curve 12/31/2006
U.S. Treasury Yield Curve 12/31/2007
U.S. Treasury Yield Curve 12/31/2008

491070.RevFinancial.QX7.qxd:CA14518_Financials 2/24/09 10:34 PM Page 5

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Impaired Investment Securities
If a decline in fair value below the amortized cost basis of an investment security
is judged to be “other-than-temporary,” the cost basis of the investment is written
down to fair value. The amount of the writedown is included as a charge to
earnings. An other-than-temporary impairment exists for debt securities if it is
probable that the Company will be unable to collect all amounts due according
to contractual terms of the security. Some factors considered for other-than-
temporary impairment related to a debt security include an analysis of yield which
results in a decrease in expected cash flows, whether an unrealized loss is issuer
specific, whether the issuer has defaulted on scheduled interest and principal
payments, whether the issuer’s current financial condition hinders its ability to
make future scheduled interest and principal payments on a timely basis or
whether there was a downgrade in ratings by rating agencies.

The Company has the ability and intent to hold all securities with an unrealized
loss until recovery of fair value, which may be maturity.

FINANCIAL CONDITION
Investment Securities
The Company’s securities portfolio consists of securities available-for-sale and
securities held-to-maturity.

Securities available-for-sale consist of certain U.S. Treasury and U.S. Government
Sponsored Enterprise mortgage-backed securities; state, county and municipal
securities; foreign debt securities and other marketable equities.

These securities are carried at fair value, and unrealized gains and losses,
net of applicable income taxes, are recognized as a separate component
of stockholders’ equity. The fair value of securities available-for-sale at
December 31, 2008 totaled $495,585,000 and includes gross unrealized
gains of $4,783,000 and gross unrealized losses of $5,244,000. A year
earlier, securities available-for-sale were $388,104,000 including gross
unrealized gains of $1,728,000 and unrealized losses of $2,077,000. In 2008,
the Company recognized gross gains of $251,000 and gross losses of $2,000
on the sale of available-for-sale securities. The Company also recognized
$76,000 in realized losses on the writedown of two stocks. In 2007, the
Company recognized gross gains of $153,000 on the sale of one stock.

Securities which management intends to hold until maturity consist of
U.S. Government Sponsored Enterprises and mortgage-backed securities.
Securities held-to-maturity as of December 31, 2008 are carried at their
amortized cost of $184,047,000 and exclude gross unrealized gains of
$1,820,000 and gross unrealized losses of $434,000. A year earlier, securities
held-to-maturity totaled $183,710,000 excluding gross unrealized gains of
$131,000 and gross unrealized losses of $2,137,000.

Century Bancorp, Inc. AR ’08

Allowance for Loan Losses
Arriving at an appropriate level of allowance for loan losses necessarily involves
a high degree of judgment. Management maintains an allowance for loan losses
to absorb losses inherent in the loan portfolio. The allowance is based on
assessments of the probable estimated losses inherent in the loan portfolio.
Management’s methodology for assessing the appropriateness of the allowance
consists of several key elements, which include the formula allowance and specific
allowances for identified problem loans.

The formula allowance evaluates groups of loans to determine the allocation
appropriate within each portfolio segment. Individual loans within the commercial
and industrial, commercial real estate and real estate construction loan portfolio
segments are assigned internal risk ratings to group them with other loans
possessing similar risk characteristics. Changes in risk grades affect the amount of
the formula allowance. Risk grades are determined by reviewing current collateral
value, financial information, cash flow, payment history and other relevant facts
surrounding the particular credit. Provisions for losses on the remaining commercial
and commercial real estate loans are based on pools of similar loans using a
combination of historical net loss experience and qualitative adjustments. For the
residential real estate and consumer loan portfolios, the reserves are calculated by
applying historical charge-off and recovery experience and qualitative adjustments
to the current outstanding balance in each loan category. Loss factors are based
on the Company’s historical net loss experience, as well as regulatory guidelines.

Specific allowances for loan losses entail the assignment of allowance amounts
to individual loans on the basis of loan impairment. Certain loans are evaluated
individually and are judged to be impaired when management believes it is
probable that the Company will not collect all the contractual interest and
principle payments as scheduled in the loan agreement. Under this method, loans
are selected for evaluation based upon a change in internal risk rating, occurrence
of delinquency, loan classification or nonaccrual status. A specific allowance
amount is allocated to an individual loan when such loan has been deemed
impaired and when the amount of a probable loss is able to be estimated on
the basis of: (a) present value of anticipated future cash flows, (b) the loan’s
observable fair market price or (c) fair value of collateral if the loan is
collateral dependent.

The formula allowance and specific allowances also include management’s
evaluation of various conditions, including business and economic conditions,
delinquency trends, charge-off experience and other quality factors.

Management has identified certain risk factors, which could impact the degree of
loss sustained within the portfolio. These include: (a) market risk factors, such as
the effects of economic variability on the entire portfolio, and (b) unique portfolio
risk factors that are inherent characteristics of the Company’s loan portfolio.
Market risk factors may consist of changes to general economic and business
conditions that may impact the Company’s loan portfolio customer base in terms
of ability to repay and that may result in changes in value of underlying collateral.
Unique portfolio risk factors may include industry concentrations and geographic
concentrations or trends that may exacerbate losses resulting from economic
events which the Company may not be able to fully diversify out of its portfolio.

Management believes that the allowance for loan losses is adequate. In addition,
various regulatory agencies, as part of the examination process, periodically review
the Company’s allowance for loan losses. Such agencies may require the Company
to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 6

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

The following table sets forth the fair value and percentage distribution of securities available-for-sale (“AFS”) at the dates indicated.

Fair Value of Securities Available-for-Sale

At December 31,

(dollars in thousands)

U.S. Treasury

U.S. Government Sponsored Enterprise

U.S. Government Agency and Sponsored Enterprise

Mortgage-Backed Securities

Privately Issued Mortgage-Backed Securities

Obligations of States and Political Subdivisions

Other

Total

2008

2007

2006

Amount

Percent

Amount

Percent

Amount

Percent

$ 2,028

161,292

260,132

9,026

60,259

2,848

0.4 %

32.5 %

52.5 %

1.8 %

12.2 %

0.6 %

$ 2,036

218,729

145,638

16,524

1,678

3,499

0.5 %

56.4 %

37.5 %

4.3 %

0.4 %

0.9 %

1,991

221,037

148,134

30,942

—

3,554

0.5 %

54.5 %

36.5 %

7.6 %

0 %

0.9 %

$ 495,585

100.0 %

$ 388,104

100.0 %

$ 405,658

100.0 %

Included in Obligations Issued by States and Political Subdivisions as of December 31, 2008, are $33,300,000 of auction rate municipal obligations (“ARSs”) and
$20,000,000 of variable rate demand notes (“VRDNs”) with unrealized losses of $1,254,000 for ARSs. VRDNs’ market value equals the carrying value. These debt
securities were issued by governmental entities, but are not necessarily debt obligations of the issuing entity. Of the total of $53,300,000 of ARSs and VRDNs,
$25,000,000 are obligations of governmental entities and the remainder are obligations of large nonprofit entities. These obligations are variable rate securities with
long-term maturities whose interest rates are set periodically through an auction process for ARSs and by prevailing market rates for VRDNs. Should the auction not
attract sufficient bidders, the interest rate adjusts to the default rate defined in each obligation’s underlying documents. The Company increased its holdings in these
types of securities during the second and third quarters of 2008 to take advantage of yields available due to market disruption. Although many of these issuers have
bond insurance, the Company purchased the securities based on the creditworthiness of the underlying obligor.

In the case of a failed auction, the Company may not have access to funds as only a limited market exists for failed ARSs. As of December 31, 2008, three of the Company’s
ARSs were purchased subsequent to their failure with a fair value of $12,000,000 and an amortized cost of $13,300,000. Three securities issued by governmental entities
were purchased prior to their failure with a fair value and amortized cost of $10,000,000. The remaining securities were issued by governmental entities, and large
nonprofit entities, and are the debt of nonprofit organizations which the Company believes to be creditworthy. As of December 31, 2008, the weighted average taxable
equivalent yield on these securities was 5.69%.

The majority of the Company’s securities AFS are classified as Level 2, as defined in footnote 1 of the “Notes to Consolidated Financial Statements.” The fair values of these
securities are obtained from a pricing service, which provides the Company with a description of the inputs generally utilized for each type of security. These inputs include
benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Market indicators and
industry and economic events are also monitored. The decline in fair value of $460,000 from amortized cost for available-for-sale securities is attributable to changes in
interest rates and not credit quality. Because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity, the
Company does not consider these investments to be other-than-temporarily impaired at December 31, 2008.

Securities available-for-sale totaling $3,470,000, or 0.19% of assets, are classified as Level 3, as defined in footnote 1 of the “Notes to Consolidated Financial Statements.”
These securities are generally equity investments or municipal securities with no readily determinable fair value. The securities are carried at fair value with periodic review of
underlying financial statements and credit ratings to assess the appropriateness of these valuations.

Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac. Control of these enterprises was directly taken over
by the U.S. Government in the third quarter of 2008.

The following table sets forth the amortized cost and percentage distribution of securities held-to-maturity at the dates indicated.

Amortized Cost of Securities Held-to-Maturity

At December 31,

(dollars in thousands)

2008

2007

2006

Amount

Percent

Amount

Percent

Amount

Percent

U.S. Government Sponsored Enterprise

$ 44,000

23.9 %

$ 94,987

51.7 %

$ 159,969

60.2 %

U.S. Government Agency and Sponsored Enterprise

Mortgage-Backed Securities

140,047

76.1 %

88,723

48.3 %

105,743

39.8 %

Total

$ 184,047

100.0 %

$ 183,710

100.0 %

$ 265,712

100.0 %

For all years presented, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 7

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

The following two tables set forth contractual maturities of the Bank’s securities portfolio at December 31, 2008. Actual maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Fair Value of Securities Available-for-Sale
Amounts Maturing

Within

One

Year

Weighted

One Year

Weighted

Five Years

% of

Total

Average

Yield

to Five

Years

% of

Total

Average

Yield

to Ten

Years

% of

Total

Weighted

Average

Yield

Over

Ten

Years

Weighted

Average

Yield

% of

Total

(dollars in thousands)

U.S. Treasury

U.S. Government

$ 2,028

0.4 %

4.60 %

—

0.0 %

—

0.0 %

—

$ —

0.0 %

Sponsored Enterprise

$ 25,000

13.6 %

3.92 % $ —

—

— $ 19,000

10.3 %

4.16 % $ 44,000

23.9 % 4.02 %

Mortgage-Backed

Securities

Total

2,022

1.1 %

3.90 %

136,869

74.4 %

4.34 %

1,156

0.6 %

4.68 %

140,047

76.1 % 4.34 %

$ 27,022

14.7 %

3.92 % $ 136,869

74.4 %

4.34 %

$ 20,156

10.9 %

4.19 % $ 184,047

100.0 % 4.26 %

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 8

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

At December 31, 2008 and 2007, the Bank had no investments in obligations of individual states, counties, municipalities or nongovernment corporate entities
which exceeded 10% of stockholders’ equity. Additionally, in 2008, there were sales totaling $123,704,000 in gross proceeds in state, county or municipal securities
resulting in gross gains of $46,000 and gross losses of $0. There were no sales of state, county or municipal securities in 2007. In 2008, sales of securities totaling
$238,894,000 in gross proceeds resulted in a net realized gain of $249,000. One equity security was sold during 2007 with gross proceeds of $336,000 resulting
in a gain of $153,000. The book value of two equity securities was written down $76,000 during 2008.

Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac. Control of these enterprises was directly taken
over by the U.S. Government in the third quarter of 2008.

Management reviews the investment portfolio for other-than-temporary impairment of individual securities on a regular basis. The results of such analysis are
dependent upon general market conditions and specific conditions related to the issuers of our securities.

Loans
The Company’s lending activities are conducted principally in Massachusetts. The Company grants single and multi-family residential loans, commercial and commercial
real estate loans, and a variety of consumer loans. To a lesser extent, the Company grants loans for the construction of residential homes, multi-family properties,
commercial real estate properties and land development. Most loans granted by the Company are secured by real estate collateral. The ability and willingness of
commercial real estate, commercial, construction, residential and consumer loan borrowers to honor their repayment commitments are generally dependent on the
health of the real estate market in the borrowers’ geographic areas and of the general economy.

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

December 31,

2008

2007

2006

2005

2004

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

Amount

Percent
of Total

(dollars in thousands)

Construction and

land development

$ 59,511

7.1 %

$ 62,412

8.6 %

$ 49,709

6.7 % $ 58,846

8.5 % $ 51,918

9.0 %

Commercial and industrial

Commercial real estate

Residential real estate

Consumer

Home equity

Overdrafts

Total

141,373

332,325

194,644

8,246

98,954

1,012

16.9 %

39.8 %

23.3 %

1.0 %

11.8 %

0.1 %

117,332

299,920

168,204

8,359

68,585

1,439

16.2 %

41.3 %

23.2 %

1.1 %

9.4 %

0.2 %

117,497

327,040

167,946

7,104

66,157

1,320

15.9 %

44.4 %

22.8 %

1.0 %

9.0 %

0.2 %

94,139

13.7 %

71,962

12.4 %

302,279

43.8 %

258,524

44.6 %

146,355

21.2 %

118,223

20.4 %

8,318

1.2 %

7,653

1.3 %

78,369

11.4 %

70,911

12.2 %

1,339

0.2 %

812

0.1 %

$ 836,065

100.0 %

$ 726,251

100.0 %

$ 736,773

100.0 % $ 689,645 100.0 % $ 580,003 100.0 %

At December 31, 2008, 2007, 2006, 2005 and 2004, loans were carried net of discounts of $2,000, $3,000, $3,000, $4,000 and $4,000, respectively. Net
deferred loan fees of $81,000, $38,000, $183,000, $482,000 and $485,000 were carried in 2008, 2007, 2006, 2005 and 2004, respectively.

The following table summarizes the remaining maturity distribution of certain components of the Company’s loan portfolio on December 31, 2008. The table excludes
loans secured by 1-4 family residential real estate and loans for household and family personal expenditures. Maturities are presented as if scheduled principal
amortization payments are due on the last contractual payment date.

(dollars in thousands)

Construction and land development

Commercial and industrial

Commercial real estate

Total

Remaining Maturities of Selected Loans at December 31, 2008

One Year
or Less

One to Five
Years

Over
Five Years

Total

$ 23,004
74,570
135,178

$232,752

$ 4,637
38,235
50,213

$93,085

$ 31,870
28,568
146,934

$ 207,372

$ 59,511
141,373
332,325

$ 533,209

The following table indicates the rate variability of the above loans due after one year.

December 31, 2008

(dollars in thousands)

Predetermined interest rates

Floating or adjustable interest rates

Total

One to Five
Years

Over
Five Years

Total

$ 26,069
67,016

$ 93,085

$ 14,759
192,613

$ 40,828
259,629

$ 207,372

$ 300,457

491070.Financial.QX7.qxd:CA14518_Financials 2/25/09 7:23 PM Page 9

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

The Company’s commercial and industrial (“C&I”) loan customers represent various small and middle-market established businesses involved in manufacturing,
distribution, retailing and services. Most clients are privately owned 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 regional economic strength or weakness impacts the relative risks in this loan catgory.
There is little concentration to any one business sector, and loan risks are generally diversified among many borrowers.

Commercial real estate loans are extended to finance various manufacturing, warehouse, light industrial, office, retail and residential properties in the Bank’s market area,
which generally includes Eastern Massachusetts and Southern New Hampshire. Loans are normally extended in amounts up to a maximum of 80% of appraised value and
normally for terms between three to five years. Amortization schedules are long term and thus a balloon payment is due at maturity. Under most circumstances, the
Bank will offer to rewrite or otherwise extend the loan at prevailing interest rates. During recent years, the Bank has emphasized nonresidential-type owner-occupied
properties. This complements our C&I emphasis placed on the operating business entities and will continue. The regional economic environment affects the risk of both
nonresidential and residential mortgages.

Residential real estate (1-4 family) includes two categories of loans. Included in residential real estate are approximately $8,498,000 of C&I type loans secured by 1-4
family real estate. Primarily, these are small businesses with modest capital or shorter operating histories where the collateral mitigates some risk. This category of loans
shares similar risk characteristics with the C&I loans, notwithstanding the collateral position.

The other category of residential real estate loans is mostly 1-4 family residential properties located in the Bank’s market area. General underwriting criteria are largely
the same as those used by Fannie Mae but normally only one- or three-year adjustable interest rates are used. The Bank utilizes mortgage insurance to provide lower
down payment products and has provided a “First Time Homebuyer” product to encourage new home ownership. Residential real estate loan volume has increased and
remains a core consumer product. The economic environment impacts the risks associated with this category.

Home equity loans are extended as both first and second mortgages on owner-occupied residential properties in the Bank’s market area. Loans are underwritten to a
maximum loan to property value of 75%.

Bank officers evaluate the feasibility of construction projects, based on independent appraisals of the project, architects’ or engineers’ evaluations of the cost of
construction and other relevant data. As of December 31, 2008, the Company was obligated to advance a total of $16,642,000 to complete projects under construction.

The composition of nonperforming assets is as follows:

December 31,

(dollars in thousands)

Total nonperforming loans/loans on nonaccrual

Other real estate owned

Total nonperforming assets

Restructured loans

Loans past due 90 and still accruing

Nonperforming loans as a percent of gross loans

Nonperforming assets as a percent of total assets

The composition of impaired loans at December 31, is as follows:

Residential real estate, multi-family

Commercial real estate

Construction and land development

Commercial and industrial

Total impaired loans

$ 3,661
—

$ 3,661

$—

89
0.44 %

0.20 %

2008

194
1,175
—
1,329

$ 2,698

2008

2007

2006

2005

2004

$ 1,312
452

$ 1,764

$—

122
0.18 %

0.10 %

2007

$ —

——
—
196

$ 135
—

$ 135

$ —
789
0.02 %

0.01 %

2006

$ —

—
16

949
—

949

—
—
0.14 %

0.05 %

628
—

628

—
160
0.11 %

0.03 %

2005

2004

—
—
675
211

886

512
—
—
452

964

$ 196

At December 31, 2008 and December 31, 2007, impaired loans had specific reserves of $600,000 and $75,000, respectively. There were no impaired loans with
specific reserves from December 31, 2004 through December 31, 2006.

The Company was servicing mortgage loans sold to others without recourse of approximately $768,000, $559,000, $798,000, $1,078,000 and $1,538,000
at December 31, 2008, 2007, 2006, 2005 and 2004, respectively. Additionally, the Company services mortgage loans sold to others with limited recourse. The
outstanding balance of these loans with limited recourse was approximately $56,000, $65,000, $72,000, $80,000 and $86,000 at December 31, 2008, 2007,
2006, 2005 and 2004, respectively.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 10

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

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.

Loans are placed on nonaccrual 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. In addition to internal loan
review, the Company has contracted with an independent organization to review the Company’s commercial and commercial real estate loan portfolios. This
independent review was performed in each of the past five years. The status of delinquent loans, as well as situations identified as potential problems, are reviewed
on a regular basis by senior management and monthly by the Board of Directors of the Bank.

Nonaccrual loans increased from 2007 to 2008 primarily as a result of eight consumer mortgages totaling $1,649,000. Nonaccrual loans increased from 2006
to 2007 primarily as a result of three consumer mortgages totaling $938,000. The relatively low level of nonperforming assets of $135,000 in 2006 and $949,000
in 2005 resulted from fewer additions to nonperforming assets during the year combined with an improvement in the resolution of nonperforming assets including
payments on nonperforming loans.

In addition to the above, the Company continues to monitor closely $21,807,000 and $14,117,000 at December 31, 2008 and 2007, respectively, of 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, 2008, although such values may fluctuate with changes in the economy and the real estate market.

Allowance for Loan Losses
The Company maintains an allowance for loan losses in an amount determined by management on the basis of the character of the loans, loan performance, the
financial condition of borrowers, the value of collateral securing loans and other relevant factors. The following table summarizes the changes in the Company’s
allowance for loan losses for the years indicated.

Year Ended December 31,

(dollars in thousands)

Year-end loans outstanding

2008

2007

2006

2005

2004

(net of unearned discount and deferred loan fees)

$ 836,065

$ 726,251

$ 736,773

$ 689,645

$ 580,003

Average loans outstanding

(net of unearned discount and deferred loan fees)

$ 775,337

$ 725,903

$ 723,825

$ 641,103

$ 546,147

Balance of allowance for

loan losses at the beginning of year

Loans charged-off:

Commercial

Construction

Residential real estate

Consumer

Total loans charged-off

Recovery of loans previously charged-off:

Commercial

Real estate

Consumer

Total recoveries of loans previously charged-off:

Net loan charge-offs

Additions to allowance charged to operating expense

9,633

9,713

9,340

9,001

8,769

2,869
15
—
489

3,373

159
5
270

434

2,939
4,425

1,828
—
—
311

2,139

268
149
142

559

1,580
1,500

386
—
—
322

708

96
49
111

256

452
825

366
—
—
324

690

75
235
119

429

261
600

1
—
194
113

308

117
103
20

240

68
300

Balance at end of year

11,119

9,633

9,713

9,340

9,001

Ratio of net charge-offs during the year

to average loans outstanding

Ratio of allowance for loan losses to loans outstanding

0.38 %

1.33 %

0.22 %

1.33 %

0.06 %

1.32 %

0.04 %

1.35 %

0.01 %

1.55 %

These provisions are the result of management’s evaluation of the quality of the loan portfolio considering such factors as loan status, collateral values, financial
condition of the borrower, the state of the economy and other relevant information. The pace of the 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. Charge-offs increased during 2007 and 2008 due to an increase
in commercial loan charge-offs as a result of the weakening of the overall economy.

491070.RevFinancial.QX7.qxd:CA14518_Financials 2/24/09 10:34 PM Page 11

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

The allowance for loan losses is an estimate of the amount needed for an adequate reserve to absorb losses in the existing loan portfolio. This amount is determined
by an evaluation of the loan portfolio, including input from an independent organization engaged to review selected larger loans, a review of loan experience and current
economic conditions. Although the allowance is allocated between categories, the entire allowance is available to absorb losses attributable to all loan categories.
At December 31 of each year listed below, the allowance was comprised of the following:

2008

2007

2006

2005

2004

Percent
of Loans
in Each
Category
to Total
Loans

Amount

Percent
of Loans
in Each
Category
to Total
Loans

Amount

Percent
of Loans
in Each
Category
to Total
Loans

Amount

(dollars in thousands)

Construction and land development

$ 679

7.1 %

$ 592

8.6 %

$ 849

6.7 %

$ 1,014

8.5 %

$ 806

9.0 %

Commercial and industrial

Commercial real estate

Residential real estate

Consumer and other

Home equity

Unallocated

Total

5,148

2,632

782

344

16.9

39.8

23.3

1.1

1,534

11.8

——

4,714

2,584

647

407

689

16.2

41.3

23.2

1.3

9.4

15.9

44.4

22.8

1.2

9.0

1,916

4,502

512

135

219

1,580

13.7

43.8

21.2

1.4

11.4

1,575

4,131

778

148

625

1,069

12.4

44.6

20.4

1.4

12.2

1,232

3,626

628

130

560

2,019

$11,119 100.0 %

$ 9,633 100.0 %

$ 9,713 100.0 %

$ 9,340 100.0 %

$ 9,001 100.0 %

The shift in the allocations of the allowance for loan losses in 2007 is the result of the implementation of guidance issued by the FDIC. The current allocation is based on
historical charge-off rates with additional allocations based on risk factors for each category and general economic factors. Prior to 2007, the allowance related to general
economic factors was included solely in the unallocated category.

Deposits
The Company offers savings accounts, NOW accounts, demand deposits, time deposits and money market accounts. Additionally, the Company offers cash management
accounts which provide either automatic transfer of funds above a specified level from the customer’s checking account to a money market account or short-term
borrowings. Also, an account reconciliation service is offered whereby the Company provides a computerized report balancing the customer’s checking account.

Interest rates on deposits are set bi-monthly by the Bank’s rate-setting committee, based on factors including loan demand, maturities and a review of competing
interest rates offered. Interest rate policies are reviewed periodically by the Executive Management Committee.

The following table sets forth the average balances of the Bank’s deposits for the periods indicated.

2008

2007

2006

Amount

Percent

Amount

Percent

Amount

Percent

(dollars in thousands)

Demand Deposits

$ 267,966

Savings and Interest Checking

Money Market

Time Certificates of Deposit

369,687

308,432

273,925

22.0 %

30.3 %

25.3 %

22.4 %

$ 278,402

314,961

277,482

335,972

23.1 %

26.1 %

23.0 %

27.8 %

$ 284,295

22.6 %

290,172

23.0 %

327,203

26.0 %

359,045

28.4 %

Total

$1,220,010 100.0 %

$1,206,817 100.0 %

$1,260,715 100.0 %

Time Deposits of $100,000 or more as of December 31 are as follows:

2008

$ 56,982
44,491
49,302
31,919

$ 182,694

(dollars in thousands)

Three months or less

Three months through six months

Six months through 12 months

Over 12 months

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 12

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

Borrowings
The Bank’s borrowings consisted primarily of FHLB borrowings collateralized by a blanket pledge agreement on the Bank’s FHLB stock, certain qualified investment securities,
deposits at the FHLB and residential mortgages held in the Bank’s portfolios. The Bank’s borrowings from the FHLB totaled $237,000,000, a decrease of $52,250,000
from the prior year. The Bank’s remaining term borrowing capacity at the FHLB at December 31, 2008 was approximately $194,415,000. In addition, the Bank has a
$14,500,000 line of credit with the FHLB. See Note 12, “Other Borrowed Funds and Subordinated Debentures,” for a schedule, their interest rates and other information.

Subordinated Debentures
In May 1998, the Company consummated the sale of a Trust Preferred Securities offering, in which it issued $29,639,000 of subordinated debt securities due 2029 to
its newly formed unconsolidated subsidiary, Century Bancorp Capital Trust.

Century Bancorp Capital Trust then issued 2,875,000 shares of Cumulative Trust Preferred Securities with a liquidation value of $10 per share. These securities pay
dividends at an annualized rate of 8.30%. The Company redeemed through its subsidiary, Century Bancorp Capital Trust, its 8.30% Trust Preferred Securities,
January 10, 2005.

In December 2004, the Company consummated the sale of a Trust Preferred Securities offering, in which it issued $36,083,000 of subordinated debt securities due 2034
to its newly formed unconsolidated subsidiary, Century Bancorp Capital Trust II.

Century Bancorp Capital Trust II then issued 35,000 shares of Cumulative Trust Preferred Securities with a liquidation value of $1,000 per share. These securities pay
dividends at an annualized rate of 6.65% for the first ten years and then convert to the three-month LIBOR rate plus 1.87% for the remaining 20 years. The Company is
using the proceeds primarily for general business purposes.

Securities Sold Under Agreements to Repurchase
The Bank’s remaining borrowings consist primarily of securities sold under agreements to repurchase. Securities sold under agreements to repurchase totaled
$112,510,000, an increase of $26,520,000 from the prior year. See Note 11, “Securities Sold Under Agreements to Repurchase,” for a schedule, including their interest rates
and other information.

RESULTS OF OPERATIONS
Net Interest Income
The Company’s operating results depend primarily on net interest income and fees received for providing services. Net interest income on a fully taxable equivalent basis
increased 18.9% in 2008 to $46,750,000, compared with $39,313,000 in 2007. The increase in net interest income for 2008 was mainly due to a 13.2% or a 35 basis
point increase in the net interest margin. The level of interest rates, the ability of the Company’s earning assets and liabilities to adjust to changes in interest rates and the
mix of the Company’s earning assets and liabilities affect net interest income. The net interest margin on a fully taxable equivalent basis increased to 3.00% in 2008 from
2.65% in 2007, and from 2.40% in 2006.

Additional information about the increased net interest margin is contained in the “Overview” section of this report. Also, there can be no assurance that certain factors
beyond its control, such as the prepayment of loans and changes in market interest rates, will continue to positively impact the net interest margin. Management believes
that the current yield curve environment will continue to present challenges as deposit and borrowing costs may have the potential to increase at a faster rate than
corresponding asset categories.

491070.RevFinancial.QX7.qxd:CA14518_Financials 2/24/09 10:35 PM Page 13

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

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

Year Ended December 31,

(dollars in thousands)

ASSETS

Interest-earning assets:
Loans(2)

Securities available-for-sale:(3)

Taxable

Tax-exempt

Securities held-to-maturity:

Taxable

Federal funds sold

Interest-bearing deposits

in other banks

2008

Interest
Income/
Expense(1)

Rate
Earned/
Paid(1)

2007

Interest
Income/
Expense(1)

Rate
Earned/
Paid(1)

2006

Interest
Income/
Expense(1)

Rate
Earned/
Paid(1)

Average
Balance

$ 775,337

$ 50,199

6.47 %

725,903

$ 52,902

7.29 %

723,825

$ 51,466

7.11 %

411,938
61,406

18,183
3,204

193,584

99,784

8,265

2,442

4.41
5.24

4.27

2.45

372,878
330

14,466
17

248,338

131,737

9,065

6,661

3.88
5.21

3.65

5.06

497,113
354

17,182
18

275,897

10,112

37,511

1,955

3.46
5.02

3.67

5.21

14,478

371

2.56

163

4.29

217

4.15

Total interest-earning assets

1,556,527

82,664

5.31 %

1,479,349

83,118

5.62 %

1,534,917

80,742

5.26 %

Noninterest-earning assets

Allowance for loan losses

Total assets

LIABILITIES AND

STOCKHOLDERS’ EQUITY

Interest-bearing deposits:

NOW accounts

Savings accounts

Money market accounts

Time deposits

136,830
(9,997)

$ 1,683,360

130,652
(9,719)

$ 1,600,282

123,601
(9,608)

$ 1,648,910

$ 203,678
166,009
308,432
273,925

$ 3,076
2,929
7,260
9,744

1.51 %
1.76
2.35
3.56

202,761
112,200
277,482
335,972

$ 4,235
2,477
8,901
15,640

2.09 %
2.21
3.21
4.66

205,645
84,527
327,203
359,045

$ 3,936
1,013
9,804
16,026

1.91 %
1.20
3.00
4.46

Total interest-bearing deposits

952,044

23,009

2.42

928,415

31,253

3.37

976,420

30,779

3.15

Securities sold under

agreements to repurchase

94,526

1,393

1.47

89,815

3,193

3.56

70,862

2,681

3.78

Other borrowed funds

and subordinated debentures

225,743

11,512

5.10

168,535

9,359

5.55

192,143

10,484

5.46

Total interest-bearing liabilities

1,272,313

35,914

2.82 %

1,186,765

43,805

3.69 %

1,239,425

43,944

3.55 %

Noninterest-bearing liabilities

Demand deposits

Other liabilities

Total liabilities

Stockholders’ equity

Total liabilities and

267,966
21,363

1,561,642

121,718

278,402
23,565

1,488,732

111,550

284,295
19,801

1,543,521

105,389

stockholders’ equity

$ 1,683,360

$ 1,600,282

$ 1,648,910

Net interest income on a fully

taxable equivalent basis

Less taxable equivalent adjustment

Net interest income

Net interest spread

Net interest margin

$ 46,750

(1,971)

$ 44,779

$ 39,313

(110)

$ 39,203

$ 36,798

(35)

$ 36,763

2.49 %

3.00 %

1.93 %

2.65 %

1.71 %

2.40 %

(1) On a fully taxable equivalent basis calculated using a federal tax rate of 34%.
(2) Nonaccrual loans are included in average amounts outstanding.
(3) At amortized cost.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 14

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

The following table summarizes the year-to-year changes in the Company’s net interest income resulting from fluctuations in interest rates and volume changes in
earning assets and interest-bearing liabilities. Changes due to rate are computed by multiplying the change in rate by the prior year’s volume. Changes due to volume
are computed by multiplying the change in volume by the prior year’s rate. Changes in volume and rate that cannot be separately identified have been allocated in
proportion to the relationship of the absolute dollar amounts of each change.

Year Ended December 31,

(dollars in thousands)

Interest income:

Loans

Securities available-for-sale:

Taxable

Tax-exempt

Securities held-to-maturity:

Taxable

Federal funds sold

Interest-bearing deposits

in other banks

Total interest income

Interest expense:

Deposits:

NOW accounts

Savings accounts

Money market accounts

Time deposits

Total interest-bearing deposits

Securities sold under agreements to repurchase

Other borrowed funds and subordinated debentures

Total interest expense

Change in net interest income

2008 Compared with 2007
Increase/(Decrease)
Due to Change in

2007 Compared with 2006
Increase/(Decrease)
Due to Change in

Volume

Rate

Total

Volume

Rate

Total

$ 3,450

$ (6,153)

$(2,703)

148

$ 1,288

$ 1,436

1,606
3,187

(2,190)
(1,349)

368

5,072

19
1,020
915
(2,589)

(635)
159
2,968

2,492

2,111
—

1,390
(2,870)

(4)

(5,526)

(1,178)
(568)
(2,556)
(3,307)

(7,609)
(1,959)
(815)

(10,383)

3,717
3,187

(800)
(4,219)

364

(454)

(1,159)
452
(1,641)
(5,896)

(8,244)
(1,800)
2,153

(7,891)

(4,647)
(1)

(1,006)
4,766

(2)

(742)

(56)
410
(1,562)
(1,056)

(2,264)
682
(1,308)

(2,890)

1,931
—

(41)
(60)

—

3,118

355
1,054
659
670

2,738
(170)
183

2,751

(2,716)
(1)

(1,047)
4,706

(2)

2,376

299
1,464
(903)
(386)

474
512
(1,125)

(139)

$ 2,580

$ 4,857

$ 7,437

$ 2,148

367

$ 2,515

Average earning assets were $1,556,527,000 in 2008, an increase of $77,178,000 or 5.2% from the average in 2007, which was 3.6% lower than the average in 2006.
Total average securities, including securities available-for-sale and securities held-to-maturity, were $666,928,000, an increase of 7.3% from the average in 2007. The
increase in securities volume was mainly attributable to an increase in tax-exempt securities. Investments in tax-exempt securities increased to take advantage of increased
yields in this market. An increase in securities balances resulted in higher securities income, which increased 25.9% to $29,652,000 on a fully tax equivalent basis. Total
average loans increased 6.8% to $775,337,000 after increasing $2,078,000 in 2007. The primary reason for the increase in loans was due in large part to an increase in
residential first and second mortgage lending as well as an increase in commercial real estate lending. The increase in loan volume partially offset by decreases in loan rates
resulted in lower loan income, which decreased by 5.1% or $2,703,000 to $50,199,000. Total loan income was $51,466,000 in 2006.

The Company’s sources of funds include deposits and borrowed funds. On average, deposits showed an increase of 1.1% or $13,193,000 in 2008 after decreasing
by 4.3% or $53,898,000 in 2007. Deposits increased in 2008 primarily as a result of increases in savings and money market accounts, which increased by 21.8% or
$84,759,000, somewhat offset by decreases in time deposits, which decreased by 18.5% or $62,047,000. During 2007, deposits decreased primarily as a result of
decreases in money market accounts, which decreased by 15.2% or $49,721,000 and time deposits, which decreased by 6.4% or $23,073,000. Borrowed funds and
subordinated debentures increased by 33.9% in 2008 following a decrease of 12.3% in 2007. The majority of the Company’s borrowed funds are borrowings from the
FHLB and retail repurchase agreements. Borrowings from the FHLB increased by approximately $57,208,000, and retail repurchase agreements increased by $4,711,000.
Interest expense totaled $35,914,000 in 2008, a decrease of $7,891,000 or 18.0% from 2007 when interest expense decreased 0.3% from 2006. The decrease in
interest expense is primarily due to market decreases in deposit rates and continued deposit pricing discipline.

Provision for Loan Losses
The provision for loan losses was $4,425,000 in 2008, compared with $1,500,000 in 2007 and $825,000 in 2006. These provisions are the result of
management’s evaluation of the amounts and quality of the loan portfolio considering such factors as loan status, collateral values, financial condition of the borrower,
the state of the economy and other relevant information. The provision increased during 2008 primarily as a result of growth in the loan portfolio, nonperforming
loans and an increase in net charge-offs during the year as well as management’s quantitative analysis of the loan portfolio.

The allowance for loan losses was $11,119,000 at December 31, 2008, compared with $9,633,000 at December 31, 2007. Expressed as a percentage of outstanding
loans at year-end, the allowance was 1.33% in 2008 and 2007. This ratio remained stable as a result of management’s evaluation of the loan portfolio.

Nonperforming loans, which include all nonaccruing loans, totaled $3,661,000 on December 31, 2008, compared with $1,312,000 on December 31, 2007.
Nonperforming loans increased primarily as a result of an increase in both nonperforming consumer mortgages and commercial loans.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 15

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

Other Operating Income
During 2008, the Company continued to experience positive results in its fee-
based services, including fees derived from traditional banking activities such as
deposit-related services, its automated lockbox collection system and full-service
securities brokerage offered through Linsco/Private Ledger Corp. (“LPL”), an
unaffiliated registered securities broker-dealer and investment advisor.

Under the lockbox program, which is not tied to extensions of credit by the
Company, the Company’s customers arrange for payments of their accounts
receivable to be made directly to the Company. The Company records the
amounts paid to its customers, deposits the funds to the customer’s account
and provides automated records of the transactions to customers. Typical
customers for the lockbox service are municipalities that use it to automate tax
collections, cable TV companies and other commercial enterprises.

Through a program called Investment Services at Century Bank, the Bank
provides full-service securities brokerage services supported by LPL, a full-service
securities brokerage business. Registered representatives employed by LPL offer
limited investment advice, execute transactions and assist customers in financial
and retirement planning. LPL provides research to and supervises its
representatives. The Bank receives a share in the commission revenues.

Total other operating income in 2008 was $13,975,000, an increase of
$27,000 or 0.2% compared to 2007. This increase followed an increase of
$2,583,000 or 22.7% in 2007, compared to 2006. Included in 2007 is the
$1,321,000 pre-tax gain on the sale of the building that houses the Company’s
Medford Square branch. Service charge income, which continues to be a major
area of other operating income totaling $8,190,000 in 2008, increased
$611,000 compared to 2007. This followed an increase of $877,000 compared
to 2006. Service charges on deposit accounts increased mainly because of
increases in fees. Lockbox revenues totaled $2,953,000, down $3,000 in 2008
following an increase of $184,000 in 2007. Other income totaled $2,479,000,
up $792,000 in 2007 following a decrease of $55,000 in 2007. The increase in
2008 was mainly attributable to an increase of $420,000 in the growth of cash
surrender values on life insurance policies which was attributable to higher
returns on life insurance policies, an increase of $143,000 in foreign ATM
surcharges and an increase of $138,000 in royalty payments on the merchant
and credit card customer base. The decrease in 2007 was mainly attributable to
an increase of $217,000 in foreign ATM surcharges and an increase of $183,000
in the growth of cash surrender values on life insurance policies that was
attributable to higher returns on life insurance policies offset by a pre-tax gain
of $600,000 from the sale of rights to future royalty payments for a portion of
the Company’s Merchant Credit Card customer base during 2006. Foreign ATM
surcharges increased because of an increase in rates charged and the addition
of ATMs.

Operating Expenses
Total operating expenses were $43,028,000 in 2008, compared to
$40,255,000 in 2007 and $40,196,000 in 2006.

Salaries and employee benefits expenses increased by $1,072,000 or 4.4% in
2008, after increasing by 3.1% in 2007. The increase in 2008 and 2007 was
mainly attributable to an increase in staff levels, merit increases in salaries and
increases in health insurance costs. Pension expense for 2009 is expected to
increase.

Occupancy expense increased by $394,000 or 10.2% in 2008, following a
decrease of $55,000 or 1.4% in 2007. The increase in 2008 was primarily
attributable to an increase in rent expense associated with general rent
escalations as well as retail branch expansion, depreciation and real estate taxes.
The decrease in 2007 was primarily attributable to an increase in rental income.

Equipment expense decreased by $83,000 or 2.8% in 2008, following a
decrease of $86,000 or 2.8% in 2007. The decrease in 2008 and 2007 was
primarily attributable to a decrease in depreciation expense. Other operating
expenses increased by $1,390,000 in 2008, which followed a $528,000
decrease in 2007. The increase in 2008 was primarily attributable to an increase
in FDIC assessments, legal expense, consulting expense and contributions to
charitable organizations. The decrease in 2007 was primarily attributable to
a decrease in bank processing charges and legal expense.

Currently, the Company pays approximately 5.3 basis points for FDIC deposit
insurance. Under a proposal by the FDIC, the assessment rate schedule would be
raised uniformly by 7 basis points (annualized) beginning on January 1, 2009.
Beginning with the second quarter of 2009, changes would be made to the
deposit insurance assessment system to make the increase in assessments fairer
by requiring riskier institutions to pay a larger share. As discussed in the “Recent
Market Developments” section, the Company has elected to participate in
the TAGP. The annual impact to the Company of raising the deposit insurance
rate by seven basis points and participating in the TAGP will be approximately
$1.2 million in FDIC insurance premiums.

Provision for Income Taxes
Income tax expense was $2,255,000 in 2008, $3,532,000 in 2007 and
$2,419,000 in 2006. The effective tax rate was 20.0% in 2008, 31.0% in 2007
and 34.0% in 2006. The decrease in the effective tax rate for 2008 and 2007
was mainly attributable to an increase in tax-exempt interest income as
a percentage of taxable income. The federal tax rate was 34% in 2008, 2007
and 2006.

On July 3, 2008, the Commonwealth of Massachusetts enacted a law that
included reducing the tax rates on net income applicable to financial institutions.
The rate drops from the current rate of 10.5% to 10% for tax years beginning
on or after January 1, 2010; to 9.5% for tax years beginning on or after January
1, 2011; and to 9% for tax years beginning on or after January 1, 2012 and
thereafter. The Company has analyzed the impact of this law and as a result of
revaluing its net deferred tax assets, we calculated the impact to be additional
tax expense of approximately $80,000. This charge was recognized during the
third quarter of 2008.

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. One measure of the Company’s exposure to
differential changes in interest rates between assets and liabilities is an interest
rate risk management test.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 16

Management’s Discussion and Analysis of Results of Operations and Financial Condition

This test measures the impact on net interest income of an immediate change in
interest rates in 100-basis point increments as set forth in the following table:

Change in Interest Rates
(in Basis Points)

Percentage Change in
Net Interest Income(1)

+300
+200
+100
–100
–200
–300

(2.0) %
(1.8) %
(1.2) %
1.5 %
3.1 %
(5.9) %

(1) The percentage change in this column represents net interest income for 12 months in various

rate scenarios versus the net interest income in a stable interest rate environment.

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.

Liquidity and Capital Resources
Liquidity is provided by maintaining an adequate level of liquid assets that
include cash and due from banks, federal funds sold and other temporary
investments. Liquid assets totaled $199,982,000 on December 31, 2008,
compared with $299,901,000 on December 31, 2007. In each of these two
years, deposit and borrowing activity has generally been adequate to support
asset activity.

Century Bancorp, Inc. AR ’08

The source of funds for dividends paid by the Company is dividends received from
the Bank. 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.

Capital Adequacy
Total stockholders’ equity was $120,503,000 at December 31, 2008, compared
with $118,806,000 at December 31, 2007. The increase in 2008 was primarily
the result of earnings offset by an increase in accumulated other comprehensive
loss, net of taxes and dividends paid. The increase in accumulated other
comprehensive loss was mainly attributable to an increase of $4,723,000 in the
pension liability, net of taxes, and an increase of $81,000 in the net unrealized
loss on the Company’s available-for-sale portfolio, net of taxes.

Federal banking regulators have issued risk-based capital guidelines, which
assign risk factors to asset categories and off-balance-sheet items. The current
guidelines require a Tier 1 capital-to-risk assets ratio of at least 4.00% and a
total capital-to-risk assets ratio of at least 8.00%. The Company and the Bank
exceeded these requirements with a Tier 1 capital-to-risk assets ratio of 15.30%
and 12.10%, respectively, and total capital-to-risk assets ratio of 16.38% and
13.19%, respectively, at December 31, 2008. Additionally, federal banking
regulators have issued leverage ratio guidelines, which supplement the risk-based
capital guidelines. The minimum leverage ratio requirement applicable to the
Company is 4.00%; and at December 31, 2008, the Company and the Bank
exceeded this requirement with leverage ratios of 9.05% and 7.15%, respectively.

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 at December 31, 2008.

Contractual Obligations and Commitments by Maturity

(dollars in thousands)

CONTRACTUAL OBLIGATIONS

FHLB advances

Subordinated debentures

Retirement benefit obligations

Lease obligations

Other

Treasury, tax and loan

Customer repurchase agreements

Total

$237,000
36,083
21,622
5,601

1,413
112,510

Payments Due — By Period

Less Than
One Year

$ 104,500
—
1,754
1,439

1,413
112,510

One to
Three Years

$ 70,000
—
3,617
2,069

—
—

Three to
Five Years

$ 20,500
—
3,940
618

—
—

After Five
Years

$ 42,000
36,083
12,311
1,475

—
—

Total contractual cash obligations

$414,229

$ 221,616

$ 75,686

$ 25,058

$ 91,869

OTHER COMMITMENTS

Lines of credit

Standby and commercial letters of credit

Other commitments

Total commitments

Amount of Commitment Expiring — By Period

Total

$144,653
14,225
24,425

$183,303

Less Than
One Year

$ 82,296
12,248
7,063

$ 101,607

One to
Three Years

$ 5,412
1,727
12,646

$ 19,785

Three to
Five Years

$ 4,564
250
903

5,717

After Five
Years

$ 52,381
—
3,813

$ 56,194

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 notational amounts of those instruments reflect the extent of involvement the Company has in these particular classes of financial instruments.

491070.RevFinancial.QX7.qxd:CA14518_Financials 2/24/09 10:35 PM Page 17

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

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. Financial instruments with off-balance-sheet risk
at December 31, are as follows:

Contract or Notational Amount

2008

2007

(dollars in thousands)

Financial instruments whose contract amount

represents credit risk:
Commitments to originate 1-4 family mortgages

Standby and commercial letters of credit

Unused lines of credit

Unadvanced portions of construction loans

Unadvanced portions of other loans

1,225
14,225
144,653
16,642
6,558

$ 2,442
13,498
155,378
27,294
8,746

Commitments to originate loans, unadvanced portions of construction loans
and unused letters of credit are generally agreements to lend to a customer
provided 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 many of the commitments are expected
to 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, if deemed necessary by the Company upon extension of credit, is
based on management’s credit evaluation of the borrower.

Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance by a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. The fair market value of standby letters of
credit was $117,000 and $109,000 for 2008 and 2007, respectively.

Recent Accounting Developments
Statement of Financial Accounting Standard No. 159 (“SFAS 159”), “The Fair
Value Option for Financial Assets and Financial Liabilities.” In February 2007, the
Financial Accounting Standards Board (“FASB”) issued SFAS 159, which gives
entities the option to measure eligible financial assets, and financial liabilities at fair
value on an instrument by instrument basis, that are otherwise not permitted to be
accounted for at fair value under other accounting standards. The election to use
the fair value option is available when an entity first recognizes a financial asset or
financial liability. Subsequent changes in fair value must be recorded in earnings.
This statement is effective as of the beginning of a company’s first fiscal year after
November 15, 2007. The Company adopted SFAS 159 on January 1, 2008 and did
not elect to apply the fair value to any existing financial instruments.

Statement of Financial Accounting Standards No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”) and Statement of Financial Accounting Standards
No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an
Amendment of ARB No. 51” (“SFAS 160”). In December 2007, the FASB issued
SFAS 141R and SFAS 160. These statements require significant changes in the
accounting and reporting for business acquisitions and the reporting of
noncontrolling interests in subsidiaries. Among many changes under SFAS 141R,
an acquirer will record 100% of all assets and liabilities at fair value for partial
acquisitions, contingent consideration will be recognized at fair value at the
acquisition date with changes possibly recognized in earnings, and acquisition
related costs will be expensed rather than capitalized. SFAS 160 establishes new
accounting and reporting standards for the noncontrolling interest in a subsidiary.
Key changes under the standard are that noncontrolling interests in a subsidiary
will be reported as part of equity, losses allocated to a noncontrolling interest can
result in a deficit balance, and changes in ownership interests that do not result in
a change of control are accounted for as equity transactions and, upon a loss of
control, gain or loss is recognized and the remaining interest is remeasured at fair
value on the date control is lost. SFAS 141R applies prospectively to business
combinations for which the acquisition is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008. The effective
date for applying SFAS 160 is also the first annual reporting period beginning on
or after December 15, 2008. Adoption of these statements will affect the
Company’s accounting for any business acquisitions occurring after the effective
date and the reporting of any noncontrolling interests in subsidiaries existing on
or after the effective date.

SFAS No. 162 (“SFAS 162”), “The Hierarchy of Generally Accepted Accounting
Principles.” In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of
Generally Accepted Accounting Principles.” This statement identifies the sources
of accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (“GAAP”)
in the United States (“the GAAP hierarchy”). This Statement shall be effective
60 days following the Security and Exchange Commission’s approval of the Public
Company Accounting Oversight Board (“PCAOB”) amendments to AU Section
411, “The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles.” The Company has not yet determined the impact of the
adoption of SFAS 162 to the Company’s statement of financial position or results
of operations.

FASB Staff Position FAS 142-3 (“FSP FAS 142-3”), “Determination of the
Useful Life of Intangible Assets.” In April 2008, the FASB issued FSP FAS 142-3,
“Determination of the Useful Life of Intangible Assets.” This FSP amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets.”
The intent of this FSP is to improve the consistency between the useful life of a
recognized intangible asset under SFAS 142 and the period of expected cash flows
used to measure the fair value of the asset under FASB Statement No. 141 (revised
2007) (“SFAS 141R”), “Business Combinations,” and other U.S. generally accepted
accounting principles (“GAAP”). This Statement is effective for fiscal years
beginning on or after December 15, 2008, and interim periods within those years.
Early application is not permitted. The Company has not yet determined the
impact of the adoption of FSP FAS 142-3 to the Company’s statement of financial
position or results of operations.

491070.Financial.QX7.qxd:CA14518_Financials 2/25/09 7:41 PM Page 18

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Century Bancorp, Inc. AR ’08

FSP EITF 03-6-01, “Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities.” In June 2008, the FASB issued
FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities.” This FSP addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings
allocation in computing earnings per share (“EPS”) under the two-class method
described in paragraphs 60 and 61 of FASB Statement No. 128 (“SFAS 128”),
“Earnings per Share.” The guidance in this FSP applies to the calculation of EPS
under SFAS 128 for share-based payment awards with rights to dividends or
dividend equivalents. 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 EPS
pursuant to the two-class method. This Statement is effective for fiscal years
beginning on or after December 15, 2008, and interim periods within those years.
All prior-period EPS data presented shall be adjusted retrospectively (including
interim financial statements, summaries of earnings and selected financial data)
to conform with the provisions of this FSP. Early application is not permitted. The
Company has determined that the impact of the adoption of FSP EITF 03-6-1 to
the Company’s statement of financial position or results of operations is immaterial.

FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan
Assets.” In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’
Disclosures about Postretirement Benefit Plan Assets.” The FSP requires disclosure
of additional information about investment allocation, fair values of major asset
categories of assets, the development of fair value measurements, and
concentrations of risk. The FSP is effective for fiscal years ending after December
15, 2009; however, earlier application is permitted. The Company will adopt the
FSP upon its effective date and will report the required disclosures in our Form
10-K for the period ending December 31, 2009.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 19

Consolidated Balance Sheets

Century Bancorp, Inc. AR ’08

December 31,

(dollars in thousands except share data)

ASSETS

Cash and due from banks (Note 2)

Federal funds sold and interest-bearing deposits in other banks

Total cash and cash equivalents

Short-term investments

Securities available-for-sale, amortized cost $496,046 in 2008 and $388,453

in 2007 (Notes 3 and 9)

Securities held-to-maturity, fair value $185,433 in 2008 and $181,704

in 2007 (Notes 4 and 11)

Federal Home Loan Bank of Boston, stock at cost

Loans, net (Note 5)

Less: allowance for loan losses (Note 6)

Net loans

Bank premises and equipment (Note 7)

Accrued interest receivable

Other assets (Notes 8 and 14)

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Demand deposits

Savings and NOW deposits

Money market accounts

Time deposits (Note 10)

Total deposits

Securities sold under agreements to repurchase (Note 11)

Other borrowed funds (Note 12)

Subordinated debentures (Note 12)

Other liabilities

Total liabilities

Commitments and contingencies (Notes 7, 16 and 17)

Stockholders’ equity (Note 13):

Common stock, Class A,

$1.00 par value per share; authorized

10,000,000 shares; issued 3,511,307 shares in 2008 and

3,516,704 shares in 2007

Common stock, Class B,

$1.00 par value per share; authorized 5,000,000 shares; issued

2,027,100 shares in 2008 and 2,027,100 shares in 2007

Additional paid-in capital

Retained earnings

Unrealized losses on securities available-for-sale, net of taxes

Pension liability, net of taxes

Total accumulated other comprehensive loss, net of taxes (Notes 3 and 13)

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying “Notes to Consolidated Financial Statements.”

2008

2007

61,195
94,973

156,168

43,814

495,585

184,047
15,531
836,065
11,119

824,946
22,054
6,723
52,698

66,974
232,927

299,901

—

388,104

183,710
15,531
726,251
9,633

716,618
21,985
6,590
47,842

$ 1,801,566

$ 1,680,281

277,217
353,261
308,177
326,872

289,526
310,858
234,099
295,578

1,265,527

1,130,061

112,510
238,558
36,083
28,385

85,990
289,885
36,083
19,456

1,681,063

1,561,475

3,511

3,517

2,027
11,475
112,135

129,148

(292)
(8,353)

(8,645)

120,503

2,027
11,553
105,550

122,647

(211)
(3,630)

(3,841)

118,806

$ 1,801,566

$ 1,680,281

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 20

Year Ended December 31,

(dollars in thousands except share data)

INTEREST INCOME

Loans, taxable

Loans, non-taxable

Securities available-for-sale, taxable

Securities available-for-sale, non-taxable

Federal Home Loan Bank of Boston dividends

Securities held-to-maturity

Federal funds sold, interest-bearing deposits in other banks and short-term investments

Total interest income

INTEREST EXPENSE

Savings and NOW deposits

Money market accounts

Time deposits (Note 8)

Securities sold under agreements to repurchase

Other borrowed funds and subordinated debentures

Total interest expense

Net interest income

Provision for loan losses (Note 6)

Net interest income after provision for loan losses

OTHER OPERATING INCOME

Service charges on deposit accounts

Lockbox fees

Brokerage commissions

Net gains on sales of securities

Writedown of certain investments to fair value (Note 3)

Net gains on sales of fixed assets

Other income

Total other operating income

OPERATING EXPENSES

Salaries and employee benefits (Note 15)

Occupancy

Equipment

Other (Note 18)

Total operating expenses

Income before income taxes

Provision for income taxes (Note 14)

Net income

SHARE DATA (Note 13)

Weighted average number of shares outstanding, basic

Weighted average number of shares outstanding, diluted

Net income per share, basic

Net income per share, diluted

See accompanying “Notes to Consolidated Financial Statements.”

Consolidated Statements of Income

Century Bancorp, Inc. AR ’08

2008

2007

2006

47,521
1,782
17,680
2,101
531
8,265
2,813

80,693

6,005

7,260

9,744

1,393

11,512

35,914

44,779

4,425

40,354

8,190

2,953

180

249

(76)

—

2,479

13,975

25,615

4,246

2,874

10,293

43,028

11,301

2,255

9,046

5,541,983

5,543,702

1.63

52,589
207
13,815
12
651
9,065
6,669

83,008

6,712

8,901

15,640

3,191

9,361

43,805

39,203

1,500

37,703

7,579

2,956

135

153

——

1,438

1,687

13,948

24,543

3,852

2,957

8,903

40,255

11,396

3,532

7,864

5,542,461

5,546,707

1.42

51,332
105
16,449
12
733
10,112
1,964

80,707

4,950

9,804

16,026

2,681

10,483

43,944

36,763

825

35,938

6,702

2,772

149

—

1,742

11,365

23,815

3,907

3,043

9,431

40,196

7,107

2,419

4,688

5,540,966

5,550,722

0.85

0.84

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 21

Consolidated Statements of Changes in Stockholders’ Equity

Century Bancorp, Inc. AR ’08

Class A
Common
Stock

Class B
Common
Stock

Additional
Paid-in
Capital

Accumulated
Other

Total

Retained
Earnings

Comprehensive Stockholders’

Loss

Equity

(dollars in thousands except share data)

BALANCE, DECEMBER 31, 2005

$ 3,453

$ 2,082

$ 11,416 $ 97,338

$ (11,088)

$ 103,201

Net income

Other comprehensive income, net of tax:

Unrealized holding gains arising during period, net of $2,156 in taxes

Comprehensive income

Adjustment to initially apply SFAS 158, net of $1,421 in taxes

Conversion of Class B Common Stock to Class A Common Stock, 39,790 shares

Stock options exercised, 5,746 shares

Cash dividends, Class A Common Stock, $0.48 per share

Cash dividends, Class B Common Stock, $0.24 per share

—

—
40
6
—
—

—

—
(40)
—
—
—

—

—
—
89
—
—

4,688

—

4,688

—

3,159

—
—
—
(1,674)
(493)

(2,158)

—
—
—
—

7,847
(2,158)
—
95
(1,674)
(493)

BALANCE, DECEMBER 31, 2006

$ 3,499

$ 2,042

$ 11,505 $ 99,859

$ (10,087)

$ 106,818

Net income

Other comprehensive income, net of tax:

Unrealized holding gains arising during period, net of $2,977 in taxes

Pension liability adjustment, net of $934 in taxes

Comprehensive income

Conversion of Class B Common Stock to Class A Common Stock, 15,350 shares

Stock options exercised, 2,616 shares

Cash dividends, Class A Common Stock, $0.48 per share

Cash dividends, Class B Common Stock, $0.24 per share

—

—
—

15
3
—
—

—

—
—

(15)
—
—
—

—

—
—

—
48
—
—

7,864

—

7,864

—
—

4,900
1,346

—
—
(1,685)
(488)

—
—
—
—

4,900
1,346

14,110
—
51
(1,685)
(488)

BALANCE, DECEMBER 31, 2007

$ 3,517

$ 2,027

$ 11,553 $ 105,550

$ (3,841)

$ 118,806

Net income

Other comprehensive income, net of tax:

Unrealized holding losses arising during period, net of $32 in taxes

Pension liability adjustment, net of $3,054 in taxes

Comprehensive income

Effects of changing pension plans’ measurement

date pursuant to SFAS 158, net of $177 in taxes

Stock repurchased, 5,397 shares

Cash dividends, Class A Common Stock, $0.48 per share

Cash dividends, Class B Common Stock, $0.24 per share

—

—
—

—
(6)
—
—

—

—
—

—
—
—
—

9,046

—

9,046

—

—
—

(81)
(4,754)

—
(78)
—
—

(287)
—
(1,687)
(487)

31
—
—
—

(81)
(4,754)

4,211

(256)
(84)
(1,687)
(487)

BALANCE, DECEMBER 31, 2008

$ 3,511

$ 2,027

$ 11,475 $ 112,135

$ (8,645)

$ 120,503

See accompanying “Notes to Consolidated Financial Statements.”

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 22

Consolidated Statements of Cash Flows

Century Bancorp, Inc. AR ’08

Year Ended December 31,

(dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

2008

2007

2006

9,046

7,864

4,688

Mortgage loans originated for sales

Proceeds from mortgage loans sold

Gain on sale of loans

Gain on sale of building

Gain on sale of fixed assets

Gain on sales of securities

Writedown of certain investments to fair value

Provision for loan losses

Deferred tax (benefit) expense

Net depreciation and amortization
(Increase) decrease in accrued interest receivable
Loss on sales of other real estate owned

Writedown of other real estate owned

Increase in other assets

Increase (decrease) in other liabilities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturities of short-term investments

Purchase of short-term investments

Proceeds from calls/maturities of securities available-for-sale

Proceeds from sales of securities available-for-sale

Purchase of securities available-for-sale

Proceeds from calls/maturities of securities held-to-maturity

Purchase of securities held-to-maturity

Loan acquired, net of discount

Net (increase) decrease in loans

Proceeds from sales of other real estate owned

Proceeds from sale of building

Proceeds from sales of fixed assets

Capital expenditures

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in time deposit accounts

Net increase (decrease) in demand, savings, money market and NOW deposits

Net payments for the repurchase of stock

Net proceeds from the exercise of stock options

Cash dividends

Net increase (decrease) in securities sold under agreements to repurchase

Net (decrease) increase in other borrowed funds

Net cash provided by (used in) financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the year for:

Interest

Income taxes

Change in unrealized losses on securities available-for-sale, net of taxes

Pension liability adjustment, net of taxes

Effects of changing pension plans’ measurement date pursuant to

SFAS 158, net of taxes

Transfer of loans to other real estate owned

See accompanying “Notes to Consolidated Financial Statements.”

(512)
515
(3)
—
—
(249)
76
4,425
(1,094)
3,229
(133)
33
77
(1,415)
737

14,732

3,717
(47,531)
282,705
238,894
(593,958)
56,123
(91,431)
(4,099)
(108,950)
673
—
—
(3,009)

(266,866)

31,294
104,172
(84)
—
(2,174)
26,520
(51,327)

108,401

(143,733)
299,901

$ 156,168

$ 35,997
2,750
(81)
(4,754)

(256)
330

——
——
——

(1,321)
(117)
(153)

——

1,500
111
3,443
782

——
——
(5,809)
(656)

5,644

——
——

197,322
160
(177,870)
82,074

——
——

8,489

——

1,500
300
(2,252)

109,723

(114,519)
(24,385)

——
51
(2,173)
(970)
166,862

24,866

140,233
159,668

—
—
—

825
(713)
3,595
(245)

(2,644)
1,202

6,708

123,013
—
(498)
20,965

(47,580)

—
—
(723)

95,177

8,324
43,601

95
(2,167)
36,950
(181,699)

(94,896)

6,989
152,679

$ 299,901

$ 159,668

44,787
3,942
4,900
1,346

——

453

$ 42,887
2,713
3,159
(2,158)

—

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 23

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

Summary of Significant Accounting Policies
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the accounts of Century
Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Century Bank
and Trust Company (the “Bank”). The consolidated financial statements also
include the accounts of the Bank’s wholly owned subsidiaries, Century
Subsidiary Investments, Inc. (“CSII”), Century Subsidiary Investments, Inc. II
(“CSII II”), Century Subsidiary Investments, Inc. III (“CSII III”) and Century
Financial Services Inc. (“CFSI”). CSII, CSII II, and CSII III are engaged in buying,
selling and holding investment securities. CFSI has the power to engage in
financial agency, securities brokerage, and investment and financial advisory
services and related securities credit.

The Company also owns 100% of Century Bancorp Capital Trust II (“CBCT II”).
The entity is an unconsolidated subsidiary of the Company.

All significant intercompany accounts and transactions have been eliminated
in consolidation. The Company provides a full range of banking services to
individual, business and municipal customers in Massachusetts. As a bank holding
company, the Company is subject to the regulation and supervision of the Federal
Reserve Board. The Bank, a state chartered financial institution, is subject to
supervision and regulation by applicable state and federal banking agencies,
including the Federal Reserve Board, the Federal Deposit Insurance Corporation
(the “FDIC”) and the Commonwealth of Massachusetts Commissioner of Banks.
The Bank is also subject to various requirements and restrictions under federal
and state law, including requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be granted and the inter-
est that may be charged thereon, and limitations on the types of investments that
may be made and the types of services that may be offered. Various
consumer laws and regulations also affect the operations of the Bank. In addition
to the impact of regulation, commercial banks are affected significantly by the
actions of the Federal Reserve Board as it attempts to control the money supply
and credit availability in order to influence the economy. All aspects of the
Company’s business are highly competitive. The Company faces aggressive
competition from other lending institutions and from numerous other providers
of financial services. The Company has one reportable operating segment.

The financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America and general practices
within the banking industry. In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and revenues and expenses
for the period. Actual results could differ from those estimates.

Material estimates that are susceptible to change in the near term relate to the
allowance for loan losses. Management believes that the allowance for loan
losses is adequate based on independent appraisals and review of other factors
associated with the loans. While management uses available information to
recognize loan losses, future additions to the allowance for loan losses may be
necessary based on changes in economic conditions. In addition, regulatory
agencies periodically review the Company’s allowance for loan losses. Such
agencies may require the Company to recognize additions to the allowance for
loan losses based on their judgments about information available to them at the
time of their examination.

Certain reclassifications are made to prior-year amounts whenever necessary to
conform with the current-year presentation.

FAIR VALUE MEASUREMENTS
In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
157, “Fair Value Measurements,” which, among other things, requires enhanced
disclosures about assets and liabilities carried at fair value. SFAS 157 is effective for
fiscal years beginning after November 15, 2007. FASB Staff Position 157-2 delays the
effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except
for items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually) to fiscal years beginning after November 15, 2008.

SFAS 157 establishes a hierarchal disclosure framework associated with the level of
pricing observability utilized in measuring financial instruments at fair value. The three
broad levels defined by the SFAS 157 hierarchy are as follows:

Level I – 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 I are highly liquid cash instruments with quoted prices such as G-7
government, agency securities, listed equities and money market securities, as
well as listed derivative instruments.

Level II – 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 OTC derivatives.

Level III – 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 or estimation.
Instruments that are included in this category generally include certain commercial
mortgage loans, certain private equity investments, distressed debt, noninvestment
grade residual interests in securitizations, as well as certain highly structured OTC
derivative contracts.

In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active.” FSP No. FAS
157-3 clarifies the application of SFAS No. 157 in an inactive market, without
changing its existing principles. The FSP was effective immediately upon issuance.
The adoption of FSP No. FAS 157-3 did not have an effect on our financial
condition, results of operations or cash flows.

CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash equivalents include highly liquid
assets with an original maturity of three months or less. Highly liquid assets
include cash and due from banks, federal funds sold and certificates of deposit.

SHORT-TERM INVESTMENTS
As of December 31, 2008, short-term investments include highly liquid certificates
of deposit with original maturities of greater than 90 days but less than one year.

INVESTMENT SECURITIES
Debt securities that the Company has the positive intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost; debt
and equity securities that are bought and held principally for the purpose of
selling are classified as trading and reported at fair value, with unrealized gains
and losses included in earnings; and debt and equity securities not classified as
either held-to-maturity or trading are classified as available-for-sale and reported
at fair value, with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders’ equity, net of estimated
related income taxes. The Company has no securities held for trading.

Premiums and discounts on investment securities are amortized or accreted
into income by use of the level-yield method. If a decline in fair value below the
amortized cost basis of an investment is judged to be other-than-temporary,
the cost basis of the investment is written down to fair value. The amount of the
writedown is included as a charge to earnings. Gains and losses on the sale
of investment securities are recognized on the trade date on a specific
identification basis.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 24

The Company owns Federal Home Loan Bank (“FHLB”) stock which is
considered a restricted equity security. As a voluntary member of the FHLB, the
Company is required to invest in stock of the FHLB in an amount equal to 4.5%
of its outstanding advances from the FHLB. Stock is purchased at par value. As
and when such stock is redeemed, the Company would receive from the FHLB
an amount equal to the par value of the stock. At its discretion, the FHLB may
declare dividends on the stock. During the fourth quarter, the Company received
notice that the FHLB has placed a moratorium on all excess stock repurchases
and has placed limitations on quarterly dividend payouts.

LOANS
Interest on loans is recognized based on the daily principal amount outstanding.
Accrual of interest is discontinued when loans become 90 days’ delinquent
unless the collateral is sufficient to cover both principal and interest and the
loan is in the process of collection. Loans, including impaired loans, on which
the accrual of interest has been discontinued are designated nonaccrual loans.
When a loan is placed on nonaccrual, all income which has been accrued but
remains unpaid is reversed against current period income, and all amortization of
deferred loan costs and fees is discontinued. Nonaccrual loans may be returned
to an accrual status when principal and interest payments are not delinquent or
the risk characteristics of the loan have improved to the extent that there no
longer exists a concern as to the collectibility of principal and income. Income
received on nonaccrual loans is either recorded in income or applied to the
principal balance of the loan depending on management’s evaluation as to the
collectibility of principal.

Loan origination fees and related direct loan origination costs are offset, and the
resulting net amount is deferred and amortized over the life of the related loans
using the level-yield method. Prepayments are not initially considered when
amortizing premiums and discounts.

The Bank accounts for impaired loans at lower of cost or fair value, by either the
present value of the expected future cash flows discounted at the loan’s effective
interest rate or the fair value of the collateral if the loan is collateral dependent.
This method applies to all loans, uncollateralized as well as collateralized, except
large groups of smaller-balance homogeneous loans such as residential real estate
and consumer loans that are collectively evaluated for impairment and loans that
are measured at fair value. Management considers the payment status, net
worth and earnings’ potential of the borrower, and the value and cash flow of
the collateral as factors to determine if a loan will be paid in accordance with its
contractual terms. Management does not set any minimum delay of payments as a
factor in reviewing for impaired classification. Loans are charged-off when
management believes that the collectibility of the loan’s principal is not probable.
In addition, criteria for classification of a loan as in-substance foreclosure has
been modified so that such classification need be made only when a lender is
in possession of the collateral. The Bank measures the impairment of troubled
debt restructurings using the pre-modification rate of interest.

ACQUIRED LOANS
In accordance with Statement of Position (“SOP”) No. 03-3, “Accounting for
Certain Loans or Debt Securities Acquired in a Transfer,” the Company reviews
acquired loans for differences between contractual cash flows and cash flows
expected to be collected from the Company’s initial investment in the acquired
loans to determine if those differences are attributable, at least in part, to credit
quality. If those differences are attributable to credit quality, the loan’s
contractually required payments received in excess of the amount of its cash
flows expected at acquisition, or nonaccretable discount, is not accreted into
income. SOP No. 03-3 requires that the Company recognize the excess of all
cash flows expected at acquisition over the Company’s initial investment in the
loan as interest income using the interest method over the term of the loan.
This excess is referred to as accretable discount and is recorded as a reduction
of the loan balance.

Loans which, at acquisition, do not have evidence of deterioration of credit
quality since origination are outside the scope of SOP No. 03-3. For such loans,

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

the discount, if any, representing the excess of the amount of reasonably
estimable and probable discounted future cash collections over the purchase
price, is accreted into interest income using the interest method over the term of
the loan. Prepayments are not considered in the calculation of accretion income.
Additionally, discount is not accreted on nonperforming loans.

When a loan is paid off, the excess of any cash received over the net investment
is recorded as interest income. In addition to the amount of purchase discount
that is recognized at that time, income may also include interest owed by the
borrower prior to the Company’s acquisition of the loan, interest collected if on
nonperforming status, prepayment fees and other loan fees.

NONPERFORMING ASSETS
In addition to nonperforming loans, nonperforming assets include other real
estate owned. Other real estate owned is comprised of properties acquired
through foreclosure or acceptance of a deed in lieu of foreclosure. Other real
estate owned is recorded initially at estimated fair value less costs to sell. When
such assets are acquired, the excess of the loan balance over the estimated fair
value of the asset is charged to the allowance for loan losses. An allowance for
losses on other real estate owned is established by a charge to earnings when,
upon periodic evaluation by management, further declines in the estimated fair
value of properties have occurred. Such evaluations are based on an analysis of
individual properties as well as a general assessment of current real estate
market conditions. Holding costs and rental income on properties are included
in current operations, while certain costs to improve such properties are
capitalized. Gains and losses from the sale of other real estate owned are
reflected in earnings when realized.

ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based on management’s evaluation of the
quality of the loan portfolio and is used to provide for losses resulting from
loans which ultimately prove uncollectible. In determining the level of the
allowance, periodic evaluations are made of the loan portfolio which take into
account such factors as the character of the loans, loan status, financial posture
of the borrowers, value of collateral securing the loans and other relevant
information sufficient to reach an informed judgment. The allowance is increased
by provisions charged to income and reduced by loan charge-offs, net of
recoveries. Management maintains an allowance for loan losses to absorb losses
inherent in the loan portfolio. The allowance is based on assessments of the
probable estimated losses inherent in the loan portfolio. Management’s
methodology for assessing the appropriateness of the allowance consists of
several key elements, which include the formula allowance, specific allowances,
if appropriate, for identified problem loans and the unallocated allowance.

While management uses available information in establishing the allowance for
loan losses, future adjustments to the allowance may be necessary if economic
conditions differ substantially from the assumptions used in making the
evaluations. Loans are charged-off in whole or in part when, in management’s
opinion, collectibility is not probable.

BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets or the terms of leases, if shorter. It is
general practice to charge the cost of maintenance and repairs to operations when
incurred; major expenditures for improvements are capitalized and depreciated.

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
Goodwill represents the excess of the cost of an acquisition over the fair value of
the net assets acquired. Goodwill is not subject to amortization. Identifiable
intangible assets consist of core deposit intangibles and are assets resulting from
acquisitions that are being amortized over their estimated useful lives.
Goodwill and identifiable intangible assets are included in other assets on the
consolidated balance sheets. The Company tests goodwill for impairment on an

491070.Financial.QX7.qxd:CA14518_Financials 2/24/09 10:28 PM Page 25

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

annual basis, or more often if events or circumstances indicate there may be
impairment. Goodwill impairment testing is performed at the segment (or
“reporting unit”) level. Currently, the Company’s goodwill is evaluated at the
entity level as there is only one reporting unit. Goodwill is assigned to reporting
units at the date the goodwill is initially recorded. Once goodwill has been
assigned to reporting units, it no longer retains its association with a particular
acquisition, and all of the activities within a reporting unit, whether acquired or
organically grown, are available to support the value of the goodwill.

The goodwill impairment analysis is a two-step test. The first step, used to
identify potential impairment, involves comparing each reporting unit’s fair value
to its carrying value including goodwill. If the fair value of a reporting unit
exceeds its carrying value, applicable goodwill is considered not to be impaired.
If the carrying value exceeds fair value, there is an indication of impairment and
the second step is performed to measure the amount of impairment.

STOCK OPTION ACCOUNTING
The Company follows the fair value recognition provisions of SFAS 123R for all
share-based payments, using the modified-prospective transition method. The
Company’s method of valuation for share-based awards granted utilizes the Black-
Scholes option-pricing model which was also previously used for the Company’s
pro forma information required under SFAS 123. The Company will recognize
compensation expense for its awards on a straight-line basis over the requisite
service period for the entire award (straight-line attribution method), ensuring
that the amount of compensation cost recognized at any date at least equals
the portion of the grant-date fair value of the award that is vested at that time.

During 2000 and 2004, common stockholders of the Company approved stock
option plans (the “Option Plans”) that provide for granting of options to purchase
up to 150,000 shares of Class A common stock per plan. Under the Option Plans,
all officers and key employees of the Company are eligible to receive nonqualified
or incentive stock options to purchase shares of Class A common stock. The
Option Plans are administered by the Compensation Committee of the Board of
Directors, whose members are ineligible to participate in the Option Plans. Based
on management’s recommendations, the Committee submits its recommendations
to the Board of Directors as to persons to whom options are to be granted, the
number of shares granted to each, the option price (which may not be less than
85% of the fair market value for nonqualified stock options, or the fair market
value for incentive stock options, of the shares on the date of grant) and the time
period over which the options are exercisable (not more than ten years from the
date of grant). There were options to purchase an aggregate of 81,037 shares of
Class A common stock exercisable at December 31, 2008.

On December 30, 2005, the Board of Directors approved the acceleration and
immediate vesting of all unvested options with an exercise price of $31.60 or
greater per share. As a consequence, options to purchase 23,950 shares of Class A
common stock became exercisable immediately. The average of the high and low
price at which the Class A common stock traded on December 30, 2005, the date
of the acceleration and vesting, was $29.28 per share. In connection with this
acceleration, the Board of Directors approved a technical amendment to each of
the Option Plans to eliminate the possibility that the terms of any outstanding
or future stock option would require a cash settlement on the occurrence of any
circumstance outside the control of the Company. Effective as of January 1, 2006,
the Company adopted SFAS 123R for all share-based payments. The Company
estimates that, as a result of this accelerated vesting, approximately $190,000 of
2006 noncash compensation expense was eliminated that would otherwise have
been recognized in the Company’s earnings.

The Company decided to accelerate the vesting of certain stock options
primarily to reduce the noncash compensation expense that would otherwise
be expected to be recorded in conjunction with the Company’s required
adoption of SFAS 123R in 2006. There was no earnings impact for 2006 due
to the Company’s adoption of SFAS 123R.

The Company uses the fair value method to account for stock options. All of
the Company’s stock options are vested, and there were no options granted
during 2008.

INCOME TAXES
The Company uses the asset and liability method in accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
temporary differences are expected to be recovered or settled. Under this
method, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.

In July 2006, the FASB issued Financial Accounting Standards Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies
the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements in accordance with FASB Statement No. 109, “Accounting
for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement
attributable for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosures and transitions. The Company adopted FIN 48 on
January 1, 2007. The adoption of FIN 48 did not have a material impact on
the Company’s results of operations or its financial position.

The Company classifies interest resulting from underpayment of income taxes
as income tax expense in the first period the interest would begin accruing
according to the provisions of the relevant tax law.

The Company classifies penalties resulting from underpayment of income taxes
as income tax expense in the period for which the Company claims or expects
to claim an uncertain tax position or in the period in which the Company’s
judgment changes regarding an uncertain tax position.

TREASURY STOCK
Effective July 1, 2004, companies incorporated in Massachusetts became subject
to Chapter 156D of the Massachusetts Business Corporation Act, provisions of
which eliminate the concept of treasury stock and provide that shares reacquired
by a company are to be treated as authorized but unissued shares.

PENSION
The Company provides pension benefits to its employees under a noncontributory,
defined benefit plan which is funded on a current basis in compliance with the
requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”)
and recognizes costs over the estimated employee service period.

The Company also has a Supplemental Executive Insurance/Retirement Plan
(“the Supplemental Plan”) which is limited to certain officers and employees of the
Company. The Supplemental Plan is accrued on a current basis and recognizes
costs over the estimated employee service period.

Executive officers of the Company or its subsidiaries who have at least one year
of service may participate in the Supplemental Plan. The Supplemental Plan is
voluntary, and participants are required to contribute to its cost. Individual life
insurance policies, which are owned by the Company, are purchased covering
the lives of each participant.

Effective December 31, 2006, the Company adopted SFAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans — An
Amendment of FASB Statements No. 87, 88, 106, and 132(R),” which requires the
Company to recognize the overfunded or underfunded status of a single employer
defined benefit pension or postretirement plan as an asset or liability on its

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 26

balance sheet and to recognize changes in the funded status in comprehensive
income in the year in which the change occurred. However, gains or losses, prior
service costs or credits, and transition assets or obligations that have not yet been
included in net periodic benefit cost as of the end of 2006, the fiscal year in which
the Statement is initially applied, are to be recognized as components of the
ending balance of accumulated other comprehensive income, net of tax. The
Company recorded an additional $2,158,000 pension liability adjustment, net
of tax, through stockholders’ equity, as a result of the adoption of SFAS 158.
SFAS 158 also required the Company to measure plan assets and benefit
obligations as of December 31, 2008, the date of the Company’s fiscal year-end.

RECENT ACCOUNTING DEVELOPMENTS
Statement of Financial Accounting Standard No. 159 ("SFAS 159"), “The Fair Value
Option for Financial Assets and Financial Liabilities.” In February 2007, the FASB
issued SFAS 159, which gives entities the option to measure eligible financial assets,
and financial liabilities at fair value on an instrument by instrument basis, that are
otherwise not permitted to be accounted for at fair value under other accounting
standards. The election to use the fair value option is available when an entity first
recognizes a financial asset or financial liability. Subsequent changes in fair value
must be recorded in earnings. This statement is effective as of the beginning of a
company's first fiscal year after November 15, 2007. The Company adopted SFAS
159 on January 1, 2008 and did not elect to apply the fair value to any existing
financial instruments.

SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”) and
SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,
an Amendment of ARB No. 51” (“SFAS 160”). In December 2007, the FASB
issued SFAS 141R and SFAS 160. These statements require significant changes in
the accounting and reporting for business acquisitions and the reporting of non-
controlling interests in subsidiaries. Among many changes under SFAS 141R, an
acquirer will record 100% of all assets and liabilities at fair value for partial
acquisitions, contingent consideration will be recognized at fair value at the
acquisition date with changes possibly recognized in earnings, and acquisition-
related costs will be expensed rather than capitalized. SFAS 160 establishes
new accounting and reporting standards for the noncontrolling interest in a
subsidiary. Key changes under the standard are that noncontrolling interests in a
subsidiary will be reported as part of equity, losses allocated to a noncontrolling
interest can result in a deficit balance, and changes in ownership interests that
do not result in a change of control are accounted for as equity transactions
and, upon a loss of control, gain or loss is recognized and the remaining interest
is remeasured at fair value on the date control is lost. SFAS 141R applies
prospectively to business combinations for which the acquisition is on or after
the beginning of the first annual reporting period beginning on or after
December 15, 2008. The effective date for applying SFAS 160 is also the first
annual reporting period beginning on or after December 15, 2008. Adoption
of these statements will affect the Company’s accounting for any business
acquisitions occurring after the effective date and the reporting of any
noncontrolling interests in subsidiaries existing on or after the effective date.

SFAS No. 162 (“SFAS 162”), “The Hierarchy of Generally Accepted Accounting
Principles.” In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of
Generally Accepted Accounting Principles.” This statement identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles
(“GAAP”) in the United States (“the GAAP hierarchy”). This Statement shall be
effective 60 days following the Security and Exchange Commission’s approval of
the Public Company Accounting Oversight Board (“PCAOB”) amendments to
AU Section 411, “The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles.” The Company has not yet determined the
impact of the adoption of SFAS 162 to the Company’s statement of financial
position or results of operations.

FASB Staff Position FAS 142-3 (“FSP FAS 142-3”), “Determination of the
Useful Life of Intangible Assets.” In April 2008, the FASB issued FSP FAS 142-3,

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

“Determination of the Useful Life of Intangible Assets.” This FSP amends the
factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under FASB Statement No. 142 (“SFAS 142”), “Goodwill and Other Intangible
Assets.” The intent of this FSP is to improve the consistency between the useful
life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under FASB Statement
No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations,” and other U.S.
generally accepted accounting principles (“GAAP”). This Statement is effective
for fiscal years beginning on or after December 15, 2008, and interim periods
within those years. Early application is not permitted. The Company has not
yet determined the impact of the adoption of FSP FAS 142-3 to the Company’s
statement of financial position or results of operations.

FSP EITF 03-6-01, “Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities.” In June 2008, the FASB
issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-
Based Payment Transactions Are Participating Securities.” This FSP addresses
whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore, need to be included in
the earnings allocation in computing earnings per share (“EPS”) under the
two-class method described in paragraphs 60 and 61 of FASB Statement
No. 128 (“SFAS 128”), “Earnings per Share.” The guidance in this FSP applies
to the calculation of EPS under SFAS 128 for share-based payment awards with
rights to dividends or dividend equivalents. 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 EPS pursuant to the two-class method. This Statement is
effective for fiscal years beginning on or after December 15, 2008, and interim
periods within those years. All prior-period EPS data presented shall be adjusted
retrospectively (including interim financial statements, summaries of earnings and
selected financial data) to conform with the provisions of this FSP. Early applica-
tion is not permitted. The Company has determined that the impact
of the adoption of FSP EITF 03-6-1 to the Company’s statement of financial
position or results of operations is immaterial.

FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan
Assets.” In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’
Disclosures about Postretirement Benefit Plan Assets.” The FSP requires
disclosure of additional information about investment allocation, fair values of
major asset categories of assets, the development of fair value measurements,
and concentrations of risk. The FSP is effective for fiscal years ending after
December 15, 2009; however, earlier application is permitted. The Company
will adopt the FSP upon its effective date and will report the required disclosures
in our Form 10-K for the period ending December 31, 2009.

Cash and Due from Banks
The Company is required to maintain a portion of its cash and due from banks
as a reserve balance under the Federal Reserve Act. Such reserve is calculated
based upon deposit levels and amounted to $1,020,000 at December 31,
2008 and $1,909,000 at December 31, 2007.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 27

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

Securities Available-for-Sale

December 31, 2008
Gross
Unrealized
Losses

Gross
Unrealized
Gains

Estimated
Fair
Value

Amortized
Cost*

December 31, 2007
Gross
Gross
Unrealized
Unrealized
Losses
Gains

Estimated
Fair
Value

Amortized
Cost

1,999
159,100

29
2,216

—
24

2,028
161,292

1,997
218,168

39
982

259,264
10,972

2,427
—

61,532
3,179

38
73

1,559
1,946

1,311
404

260,132
9,026

60,259
2,848

146,630
16,693

1,678
3,287

400
2

—
305

— $

421

1,392
171

—
93

2,036
218,729

145,638
16,524

1,678
3,499

$ 496,046

$ 4,783

$ 5,244

$ 495,585

$ 388,453

$ 1,728

$ 2,077

$ 388,104

(dollars in thousands)

U.S. Treasury
U.S. Government Sponsored Enterprise
U.S. Government Agency and Sponsored
Enterprise Mortgage-Backed Securities
Privately Issued Mortgage-Backed Securities
Obligations of States and
Political Subdivisions

Other

Total

*Amortized cost is net of impairment writedown.

Included in U.S. Government Sponsored Enterprise Securities and U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities are securities at fair
value pledged to secure public deposits and repurchase agreements amounting to $113,259,000 and $80,260,000 at December 31, 2008 and 2007, respectively.
Also included in securities available-for-sale at fair value are securities pledged for borrowing at the Federal Home Loan Bank amounting to $244,409,000 and
$233,544,000 at December 31, 2008 and 2007, respectively. The Company realized gross gains of $251,000 and gross losses of $2,000 from the proceeds of
$238,894,000 from the sales of available-for-sale securities for the year ended December 31, 2008. The Company realized gross gains of $153,000 in 2007 from
gross proceeds of $336,000 on the sale of one stock. The Company did not realize any gains or losses in 2006.

Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac. Control of these enterprises was directly taken
over by the U.S. Government in the third quarter of 2008.

The following table shows the estimated maturity distribution of the Company’s securities available-for-sale at December 31, 2008.

(dollars in thousands)

Within one year
After one but within five years
After five but within ten years
More than ten years
Nonmaturing

Total

*Amortized cost is net of impairment writedown.

Amortized
Cost*

Fair
Value

$ 93,598 $ 93,518
301,511
45,943
52,465
2,148

300,874
45,397
53,698
2,479

$ 496,046 $ 495,585

The weighted average remaining life of investment securities available-for-sale at December 31, 2008 and 2007 was 4.8 and 2.2 years, respectively. Excluding auction
rate municipal obligations (“ARSs”) and variable rate demand notes (“VRDNs”), which have maturities up to 30 years, but reprice more frequently, the estimated average
remaining life is 2.9 years for 2008. ARSs and VRDNs are included in Obligations of States and Political Subdivisions above. There were no holdings of ARSs and VRDNs
during 2007. Included in the weighted average remaining life calculation at December 31, 2008 and 2007 were $126,145,000 and $113,160,000, respectively, of
U.S. Government Sponsored Enterprise obligations that are callable at the discretion of the issuer. These call dates were not utilized in computing the weighted average
remaining life. The contractual maturities, which were used in the table above, of mortgage-backed securities will differ from the actual maturities, due to the ability of
the issuers to prepay underlying obligations.

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at December 31, 2008. This table shows the
unrealized loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer.
There are 44 and 17 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 260 holdings at
December 31, 2008.

As of December 31, 2008, management has concluded that the unrealized losses below its investment securities are temporary in nature since they are not related
to the underlying credit quality of the issuers, and the Company has the intent and ability to hold these investments for the time necessary to recover its cost which
for debt securities may be at maturity. In making its other-than-temporary impairment evaluation, the Company considered the fact that the principal and interest on
these securities are from issuers that are investment grade. The change in the unrealized losses on the state and municipal securities and the nonagency mortgage-
backed securities were caused by changes in credit spreads and liquidity issues in the marketplace.

In evaluating the underlying credit quality of a security, management considers several factors such as the credit notary of the obliger and the issuer, if applicable.
Internal reviews of issuer financial statements are performed as deemed necessary. In the case of privately issued mortgage-backed securities, the performance of the
underlying loans is analyzed as deemed necessary.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 28

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

Temporarily Impaired Investments*

December 31, 2008

(dollars in thousands)

U.S. Government Sponsored Enterprise
U.S. Government Agency and Sponsored
Enterprise Mortgage-Backed Securities
Privately Issued Mortgage-Backed Securities
Obligations of States and Political Subdivisions
Other

Less Than 12 Months

12 Months or Longer

Total

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

4,976

—

4,976

80,873
1,716
13,645
482

1,351
569
1,311
266

15,793
7,310
—
1,569

208
1,377
—
125

96,666
9,026
13,645
2,051

1,559
1,946
1,311
391

Total temporarily impaired securities

$ 101,692

$ 3,521

$ 24,672

$ 1,710

$ 126,364

$ 5,231

*The decline in fair value is attributable to change in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value, which may
be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2008. Excluded from the table above are two stocks that were written down by
$76,000. The current fair value is $96,000 with an unrealized loss of $13,000. These stocks were deemed to be impaired based on the extent of the decline in value and the length of time the stocks had
been trading below cost.

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at December 31, 2007. This table shows the unrealized
market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer.
There are 5 and 63 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 174 holdings at
December 31, 2007. The Company believes that the investments are temporarily impaired.

Temporarily Impaired Investments*

December 31, 2007

(dollars in thousands)

U.S. Government Sponsored Enterprise
U.S. Government Agency and Sponsored
Enterprise Mortgage-Backed Securities
Privately Issued Mortgage-Backed Securities
Other

Total temporarily impaired securities

Less Than 12 Months

12 Months or Longer

Total

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

—

7,186
3,218
198

—

24
58
28

$ 89,570

421

$ 89,570

421

83,553
12,560
1,985

1,368
113
65

90,739
15,778
2,183

1,392
171
93

$ 10,602

110

$ 187,668

$ 1,967

$ 198,270

$ 2,077

*The decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value, which
may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2007.

Investment Securities Held-to-Maturity

December 31, 2008
Gross
Gross
Unrealized
Unrealized
Losses
Gains

Estimated
Fair
Value

Amortized
Cost

December 31, 2007
Gross
Gross
Unrealized
Unrealized
Losses
Gains

Estimated
Fair
Value

Amortized
Cost

(dollars in thousands)

U.S. Government Sponsored Enterprise

$ 44,000

506

—

$ 44,506

$ 94,987

251

$ 94,795

U.S. Government Agency and Sponsored

Enterprise Mortgage-Backed Securities

140,047

1,314

434

140,927

88,723

1,886

86,909

Total

$ 184,047

$ 1,820

434

$ 185,433

$ 183,710

131

$ 2,137

$ 181,704

Included in U.S. Government and Agency Securities are securities pledged to secure public deposits and repurchase agreements at fair value amounting to $35,000,000
and $93,000,000 at December 31, 2008 and 2007, respectively. Also included are securities pledged for borrowing at the Federal Home Loan Bank at fair value amounting
to $114,103,000 and $86,987,000 at December 31, 2008 and 2007, respectively.

At December 31, 2008 and 2007, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises. Government Sponsored Enterprises primarily refer
to debt securities of Fannie Mae and Freddie Mac. Control of these enterprises was directly taken over by the U.S. Government in the third quarter of 2008.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 29

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

The following table shows the maturity distribution of the Company’s securities held-to-maturity at December 31, 2008.

(dollars in thousands)

Within one year
After one but within five years
After five but within ten years

Total

Amortized
Cost

Fair
Value

$ 27,022
136,869
20,156

$ 27,245
137,745
20,443

$ 184,047 $ 185,433

The weighted average remaining life of investment securities held-to-maturity at December 31, 2008 and 2007 was 2.4 and 1.8 years, respectively. Included in
the weighted average remaining life calculation at December 31, 2008 were $19,000,000 of U.S. Government Sponsored Enterprise obligations that are callable at
the discretion of the issuer. The contractual maturities, which were used in the table above, of mortgage-backed securities will differ from the actual maturities, due
to the ability of the issuers to prepay underlying obligations.

The following table shows the temporarily impaired securities of the Company’s held-to-maturity portfolio at December 31, 2008. This table shows the unrealized
market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer.
There are 9 and 12 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 80 holdings at
December 31, 2008.

Temporarily Impaired Investments*

December 31, 2008

(dollars in thousands)

U.S. Government Agency and Sponsored
Enterprise Mortgage-Backed Securities

Total temporarily impaired securities

Less Than 12 Months

12 Months or Longer

Total

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

$ 12,995

111

$ 19,821

323

$ 32,816

434

*The decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value,
which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2008.

The following table shows the temporarily impaired securities of the Company’s held-to-maturity portfolio at December 31, 2007. This table shows the unrealized
market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer.
There are 63 securities that are temporarily impaired for 12 months or longer, out of a total of 78 holdings at December 31, 2007. The Company believes that the
investments are temporarily impaired.

Temporarily Impaired Investments*

December 31, 2007

(dollars in thousands)

U.S. Government Sponsored Enterprise
U.S. Government Agency and Sponsored
Enterprise Mortgage-Backed Securities

Total temporarily impaired securities

Less Than 12 Months

12 Months or Longer

Total

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

—

$ 74,737

251

$ 74,737

251

82,667

1,886

82,667

1,886

$ 157,404

$ 2,137

$ 157,404

$ 2,137

*The decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value,
which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2007.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 30

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

Loans
The majority of the Bank’s lending activities are conducted in the Commonwealth of Massachusetts. The Bank originates construction, commercial and residential real
estate loans, commercial and industrial loans, consumer, home equity and other loans for its portfolio.

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

December 31,

2008

2007

(dollars in thousands)

Construction and

land development

$ 59,511

$ 62,412

Commercial and industrial

Commercial real estate

Residential real estate

Consumer

Home equity

Overdrafts

Total

141,373

332,325

194,644

8,246

98,954

1,012

117,332

299,920

168,204

8,359

68,585

1,439

$ 836,065

$ 726,251

Net deferred fees included in loans at December 31, 2008 and December 31, 2007 were $81,000 and $38,000, respectively.

The Company was servicing mortgage loans sold to others without recourse of approximately $768,000 and $559,000 at December 31, 2008 and December 31,
2007, respectively. Additionally, the Company was servicing mortgage loans sold to others with limited recourse. The outstanding balance of these loans with limited
recourse was approximately $56,000 and $65,000 at December 31, 2008 and at December 31, 2007, respectively.

As of December 31, 2008 and 2007, the Bank recorded investment in impaired loans was $2,698,000 and $196,000, respectively.

At December 31, 2008, there were $1,460,000 of impaired loans with a specific reserve of $600,000. At December 31, 2007, there were $75,000 of impaired
loans with a specific reserve of $75,000.

The composition of nonaccrual loans and impaired loans is as follows:

December 31,

(dollars in thousands)

Loans on nonaccrual

Loans 90 days past due and still accruing

Impaired loans on nonaccrual included above

Total recorded investment in impaired loans

Average recorded value of impaired loans

Interest income on nonaccrual loans according to their original terms

Interest income on nonaccrual loans actually recorded

Interest income recognized on impaired loans

2008

2007

2006

$ 3,661
89
1,511
2,698
1,194
121
—
24

$ 1,312
122
196
196
332
52
——
——

135
789
16
16
278
3

During the first quarter of 2008, the Company purchased a loan for $4,823,000 with a discount of $724,000. The entire discount is classified as an accretable
discount. The Company accreted $34,000 of the discount during 2008.

The following table shows the aggregate amount of loans to directors and officers of the Company and their associates during 2008.

Balance at
December 31, 2007

(dollars in thousands)

Additions

Repayments
and Deletions

Balance at
December 31, 2008

$ 2,396

$ 303

$ 127

$ 2,572

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 31

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

6. Allowance for Loan Losses

The Company maintains an allowance for loan losses in an amount determined by management on the basis of the character of the loans, loan performance,
the financial condition of borrowers, the value of collateral securing loans and other relevant factors. The following table summarizes the changes in the Company’s
allowance for loan losses for the years indicated.

An analysis of the total allowances for loan losses for each of the three years ending December 31, 2008, 2007 and 2006 are as follows:

(dollars in thousands)

Allowance for loan losses, beginning of year

Loans charged-off

Recoveries on loans previously charged-off

Net charge-offs

Provision charged to expense

Allowance for loan losses, end of year

Bank Premises and Equipment

December 31,

(dollars in thousands)

Land

Bank premises

Furniture and equipment

Leasehold improvements

Accumulated depreciation and amortization

2008

2007

2006

9,633
(3,373)
434

(2,939)
4,425

9,713
(2,139)
559

(1,580)
1,500

9,340
(708)
256

(452)
825

$ 11,119

9,633

9,713

2008

2007

Estimated Useful Life

3,478
17,846
25,357
6,558

53,239
(31,185)

3,478
17,710
23,889
5,114

50,191
(28,206)

—
30 –39 years
3–10 years
30 –39 years or lease term

Total

$ 22,054

$ 21,985

During 2007, the Company sold the building which houses one of its branches located at 55 High Street, Medford, Massachusetts, for $1,500,000 at market terms.
This property was sold to an entity affiliated with a director of the Company. The Bank financed $1,000,000 of this purchase at market terms. This sale resulted in
a pre-tax gain of $1,321,000.

The Bank relocated this branch to 1 Salem Street (formerly 3 Salem Street), Medford, Massachusetts. This property is leased from an entity affiliated with Marshall
M. Sloane, Chairman of the Board of the Company. The lease is for a period of 15 years. The annual base rent amount is $28,500 with annual increases based on the
consumer price index. The Company is also required to pay 25% of all real estate taxes and operating costs. The lease contains options to extend the lease for three
additional five-year periods. The lease was effective on September 1, 2007. The terms of the lease were based on an independent appraisal of the property and are
considered to be market terms. The branch opened on May 5, 2008.

The Company and its subsidiaries are obligated under a number of noncancelable operating leases for premises and equipment expiring in various years through 2026.
Total lease expense approximated $1,533,000, $1,349,000 and $1,113,000 for the years ended December 31, 2008, 2007 and 2006, respectively. Rental income
approximated $399,000, $351,000 and $69,000 in 2008, 2007 and 2006, respectively.

Future minimum rental commitments for noncancelable operating leases with initial or remaining terms of one year or more at December 31, 2008 were as follows:

Year

Amount

2009
2010
2011
2012
2013
Thereafter

$ 1,439
1,179
890
323
295
1,475

$ 5,601

(dollars in thousands)

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 32

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

Goodwill and Identifiable Intangible Assets
Historically, the Company has determined fair values of reporting units based on stock prices, market earnings and tangible book value multiples of peer companies
for the reporting unit. During the third quarter of 2008, management determined that the Company’s goodwill should be tested for impairment as the Company’s
Class A common stock had been trading below book value per share. In the third quarter of 2008, management enhanced the valuation methodology with discounted
cash flow analysis. During the fourth quarter of 2008, management reviewed the assumptions used during the third quarter and concluded that the assumptions
continued to be appropriate. Based on management’s assessment of the reporting unit’s fair value, goodwill is not considered to be impaired at December 31, 2008.

The changes in goodwill and identifiable intangible assets for the years ended December 31, 2008 and 2007 are shown in the table below.

Carrying Amount of Goodwill and Intangibles

Goodwill

Core Deposit
Intangibles

Total

(dollars in thousands)

Balance at December 31, 2006

Amortization Expense

Balance at December 31, 2007

Amortization Expense

Balance at December 31, 2008

2,714
—

2,059
(388)

1,671
(388)

4,773
(388)

4,385
(388)

2,714

1,283

3,997

The following table sets forth the estimated annual amortization expense of the identifiable intangible assets.

Core Deposit Intangibles

(dollars in thousands)

Year

Amount

2009
2010
2011
2012

388
388
388
119

$ 1,283

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 33

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

Fair Value Measurements
The Company has evaluated SFAS 157, and the results of the fair value hierarchy required by SFAS 157 as of December 31, 2008 are as follows:

Fair Value Measurements Using

Quoted Prices
in Active Markets
for Identical Assets
(Level 1)

Significant
Observable Inputs
(Level 2)

Significant
Other Unobservable
Inputs
(Level 3)

Carrying
Value

(dollars in thousands)

Financial Instruments Measured at Fair Value on a Recurring Basis:

Securities AFS

$ 495,585

$ 578

$ 491,537

$ 3,470

Financial Instruments Measured at Fair Value on a Nonrecurring Basis:

Impaired Loans

1,460

$ —

1,460

—

Impaired loan balances in the table above represent those collateral-dependent loans where management has estimated the credit loss by comparing the loan’s carrying
value against the expected realizable fair value of the collateral, in accordance with SFAS 114 (as amended). Specific provisions related to impaired loans recognized for
2008 for credit losses amounted to $2,519,000.

There were purchases of $13,367,000 and maturities of $9,897,000 for a net increase of $3,470,000 in the fair value of available-for-sale securities valued using
significant unobservable inputs (Level 3), between January 1, 2008 and December 31, 2008. The increase was attributable to an increase in certain municipal securities
without readily available fair values. The securities in this category are generally equity investments or municipal securities with no readily determinable fair value. In the
judgment of management, the fair value of these securities was considered to approximate their carrying value because they were deemed to be fully collectible and the
rates paid on the securities were at least equal to rates paid on securities with similar maturities.

10.

Deposits
The following is a summary of original maturities or repricing of time deposits as of December 31,

(dollars in thousands)

Within one year

Over one year to two years

Over two years to three years

Over three years to five years

Total

2008

Percent

2007

Percent

$ 254,314
23,517
36,576
12,465

$ 326,872

78 %
7 %
11 %
4 %

$ 255,983
27,945
5,849
5,801

87 %
9 %
2 %
2 %

100 %

$ 295,578

100 %

Time deposits of $100,000 or more totaled $182,694,000 and $172,592,000 in 2008 and 2007, respectively.

11.

Securities Sold Under Agreements to Repurchase
The following is a summary of securities sold under agreements to repurchase as of December 31,

(dollars in thousands)

Amount outstanding at December 31,

Weighted average rate at December 31,

Maximum amount outstanding at any month end

Daily average balance outstanding during the year

Weighted average rate during the year

2008

2007

2006

$ 112,510

$ 85,990

$ 86,960

1.08 %

2.95 %

3.71 %

$ 112,510
$ 94,526

$102,110
$ 89,815

$ 139,460
$ 70,862

1.47 %

3.56 %

3.78 %

Amounts outstanding at December 31, 2008, 2007 and 2006 carried maturity dates of the next business day. U.S. Government Sponsored Enterprise securities with a
total amortized cost of $112,072,000, $86,760,000 and $89,114,000 were pledged as collateral and held by custodians to secure the agreements at December 31,
2008, 2007 and 2006, respectively. The approximate fair value of the collateral at those dates was $112,990,000, $86,692,000 and $87,249,000, respectively.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 34

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

12.

Other Borrowed Funds and Subordinated Debentures

The following is a summary of other borrowed funds and subordinated debentures as of December 31,

(dollars in thousands)

Amount outstanding at December 31,

Weighted average rate at December 31,

Maximum amount outstanding at any month end

Daily average balance outstanding during the year

Weighted average rate during the year

2008

2007

2006

$ 274,641

$ 325,968

$ 159,106

4.22 %

4.94 %

5.54 %

$ 293,668
$ 225,743

$ 325,968
$ 168,535

$ 339,858
$ 192,143

5.10 %

5.55 %

5.46 %

FEDERAL HOME LOAN BANK BORROWINGS
Federal Home Loan Bank (“FHLB”) borrowings are collateralized by a blanket pledge agreement on the Bank’s FHLB stock, certain qualified investment securities,
deposits at the FHLB and residential mortgages held in the Bank’s portfolios. The Bank’s remaining term borrowing capacity at the FHLB at December 31, 2008 was
approximately $194,415,000. In addition, the Bank has a $14,500,000 line of credit with the FHLB. A schedule of the maturity distribution of FHLB advances with the
weighted average interest rates is as follows:

December 31,

2008

2007

2006

(dollars in thousands)

Within one year

Over one year to two years

Over two years to three years

Over three years to five years

Over five years

Total

Amount

$ 104,500
59,000
11,000
20,500
42,000

$ 237,000

Weighted
Average
Rate

2.80 %
5.17 %
4.05 %
4.18 %
4.55 %

3.88 %

Amount

$ 124,750
54,500
59,000
9,000
42,000

$ 289,250

Weighted
Average
Rate

4.65 %
4.67 %
5.17 %
4.14 %
4.53 %

4.73 %

Amount

2,750
19,500
32,000
40,500
27,000

$ 121,750

Weighted
Average
Rate

3.80 %
5.38 %
5.17 %
5.80 %
4.44 %

5.22 %

SUBORDINATED DEBENTURES
Subordinated debentures totaled $36,083,000 at December 31, 2008 and 2007. In May 1998, the Company consummated the sale of a trust preferred securities
offering, in which it issued $29,639,000 of subordinated debt securities due 2029 to its newly formed unconsolidated subsidiary Century Bancorp Capital Trust.

In December 2004, the Company consummated the sale of a trust preferred securities offering, in which it issued $36,083,000 of subordinated debt securities due
2034 to its newly formed unconsolidated subsidiary Century Bancorp Capital Trust II.

OTHER BORROWED FUNDS
There were no overnight federal funds purchased at December 31, 2008 and 2007.

The Bank serves as a Treasury Tax and Loan depository under a note option with the Federal Reserve Bank of Boston. This open-ended interest-bearing borrowing carries an
interest rate equal to the daily federal funds rate less 0.25%. This amount totaled $1,413,000 and $489,000 at December 31, 2008 and 2007, respectively.

The Bank also has an outstanding loan in the amount of $145,000 and $146,000 at December 31, 2008 and 2007, respectively, borrowed against the cash value of a
whole life insurance policy for a key executive of the Bank.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 35

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

13.

Stockholders’ Equity
DIVIDENDS
Holders of the Class A common stock may not vote in the election of directors, but may vote as a class to approve certain extraordinary corporate transactions.
Holders of Class B common stock may vote in the election of directors. Class A common stockholders are entitled to receive dividends per share equal to at least
200% per share of that paid, if any, on each share of Class B common stock. Class A common stock is publicly traded. Class B common stock is not publicly traded;
however, it can be converted on a per share basis to Class A common stock at any time at the option of the holder. Dividend payments by the Company are
dependent in part on the dividends it receives from the Bank, which are subject to certain regulatory restrictions.

EARNINGS PER SHARE (“EPS”)
Diluted EPS includes the dilutive effect of common stock equivalents; basic EPS excludes all common stock equivalents. The only common stock equivalents for the
Company are the stock options discussed below. The dilutive effect of these stock options for 2008, 2007 and 2006 was an increase of 1,719, 4,246 and
9,756 shares, respectively.

STOCK OPTION PLAN
During 2000 and 2004, common stockholders of the Company approved stock option plans (the “Option Plans”) that provide for granting of options for not more
than 150,000 shares of Class A common stock per plan. Under the Option Plans, all officers and key employees of the Company are eligible to receive nonqualified
and incentive stock options to purchase shares of Class A common stock. The Option Plans are administered by the Compensation Committee of the Board of
Directors, whose members are ineligible to participate in the Option Plans. Based on management’s recommendations, the Committee submits its recommendations to
the Board of Directors as to persons to whom options are to be granted, the number of shares granted to each, the option price (which may not be less than 85% of
the fair market value for nonqualified stock options, or the fair market value for incentive stock options, of the shares on the date of grant) and the time period over
which the options are exercisable (not more than ten years from the date of grant). There were 81,037 options exercisable at December 31, 2008.

Stock option activity under the plan is as follows:

Shares under option:

Outstanding at beginning of year

Granted

Forfeitured

Exercised

Outstanding at end of year

Exercisable at end of year

Available to be granted at end of year

December 31, 2008

December 31, 2007

December 31, 2006

Weighted
Average
Exercise Price

Amount

94,787

27.66

122,737

27.20

——

(13,750)

29.07

——

81,037

190,509

27.42

——
(25,334)
(2,616)

94,787

176,759

26.32
19.20

27.66

Weighted
Average
Exercise Price

26.74
—
28.05
16.54

27.20

Amount

130,133
—

(1,650)
(5,746)

122,737

151,425

At December 31, 2008, 2007 and 2006, the options outstanding have exercise prices between $15,063 and $35,010, and a weighted average remaining contractual
life of four years for 2008, four years for 2007 and five years for 2006. The weighted average intrinsic value of options exercised for the period ended December 31,
2007 and 2006 was $4.90 and $10.76 per share with an aggregate value of $61,805 and $16,857, respectively. The average intrinsic value of options exercisable at
December 31, 2008, 2007 and 2006 had an aggregate value of $7,331, $54,805 and $271,511, respectively.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 36

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

The Bank and the Company are subject to various regulatory requirements administered by federal banking agencies. 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 Bank and Company’s
financial statements. Under capital adequacy guidelines and regulatory framework for prompt corrective action, the Bank and Company must meet specific capital
guidelines that involve quantitative measures of the Bank and Company’s assets and liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank and Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk
weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Company to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier 1 capital (as defined in the regulation) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets
(as defined). Management believes, as of December 31, 2008, that the Bank and the Company meet all capital adequacy requirements to which they are subject.

As of December 31, 2008, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier risk-based, and Tier 1 leverage ratios as set forth in the table below.
There are no conditions or events since that notification that management believes would cause a change in the Bank’s categorization.

The Bank’s actual capital amounts and ratios are presented in the following table:

As of December 31, 2008

Total Capital (to Risk-Weighted Assets)

Tier 1 Capital (to Risk-Weighted Assets)

Tier 1 Capital (to 4th Qtr. Average Assets)

As of December 31, 2007

Total Capital (to Risk-Weighted Assets)

Tier 1 Capital (to Risk-Weighted Assets)

Tier 1 Capital (to 4th Qtr. Average Assets)

Actual
Amount

$ 134,990

123,871

$ 128,405

118,772

Ratio

13.19 %

12.10 %

7.15 %

14.08 %

13.02 %

7.56 %

The Company’s actual capital amounts and ratios are presented in the following table:

As of December 31, 2008

Total Capital (to Risk-Weighted Assets)

Tier 1 Capital (to Risk-Weighted Assets)

Tier 1 Capital (to 4th Qtr. Average Assets)

As of December 31, 2007

Total Capital (to Risk-Weighted Assets)

Tier 1 Capital (to Risk-Weighted Assets)

Tier 1 Capital (to 4th Qtr. Average Assets)

Actual
Amount

$ 168,121

157,002

$ 160,076

150,443

Ratio

16.38 %

15.30 %

9.05 %

17.51 %

16.46 %

9.56 %

For Capital Adequacy
Purposes

Amount

Ratio

$ 81,904

40,952

69,264

$ 72,960

36,480

62,846

8.00 %

4.00 %

8.00 %

4.00 %

For Capital Adequacy
Purposes

Amount

Ratio

$ 82,114

41,057

69,404

$ 73,130

36,565

62,966

8.00 %

4.00 %

8.00 %

4.00 %

To Be Well Capitalized
Under Prompt Corrective
Action Provisions

Amount

Ratio

$ 102,380

10.00 %

61,428

86,580

6.00 %

5.00 %

$ 91,200

10.00 %

54,720

78,557

6.00 %

5.00 %

To Be Well Capitalized
Under Prompt Corrective
Action Provisions

Amount

Ratio

$ 102,643

10.00 %

61,586

86,755

6.00 %

5.00 %

$ 91,413

10.00 %

54,848

78,708

6.00 %

5.00 %

14.

Income Taxes
The current and deferred components of income tax expense for the years ended December 31 are as follows:

(dollars in thousands)

Current expense:

Federal

State

Total current expense

Deferred expense (benefit):

Federal

State

Total deferred expense (benefit)

Provision for income taxes

2008

2007

2006

3,117
232

3,349

3,137
284

3,421

2,968
164

3,132

(954)
(140)

(1,094)

50
61

111

(592)
(121)

(713)

2,255

3,532

2,419

Included in income tax expense for the year ended December 31, 2008, 2007, and 2006 is interest of $0, $0 and $24,000, respectively. There were no penalties
during these periods.

491070.RevFinancial.QX7.qxd:CA14518_Financials 2/24/09 10:36 PM Page 37

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

Income tax accounts included in other assets/liabilities at December 31 are as follows:

(dollars in thousands)

Currently (payable) receivable

Deferred income tax asset, net

Total

2008

2007

(9)
12,822

$ 12,813

589
8,465

9,054

Differences between income tax expense at the statutory federal income tax rate and total income tax expense are summarized as follows:

(dollars in thousands)

Federal income tax expense at statutory rates

State income tax, net of federal income tax benefit

Insurance income

Effect of tax-exempt interest

Other

Total

Effective tax rate

2008

2007

2006

3,842
62
(353)
(1,307)
11

3,875
225
(210)
(105)
(253)

2,417
108
(109)
(4)
7

2,255

3,532

2,419

20.0 %

31.0 %

34.0 %

The following table sets forth the Company’s gross deferred income tax assets
and gross deferred income tax liabilities at December 31:

The Company and its subsidiaries file a consolidated federal tax return and
separate state income tax return. For years before 2005, the Company is no
longer subject to federal or state income tax examinations.

(dollars in thousands)

Deferred income tax assets:

Allowance for loan losses

Deferred compensation

Unrealized loss on securities

available-for-sale

Pension and SERP liability

Acquisition premium

Depreciation

Investments writedown

Deferred gain

Other

Gross deferred

income tax asset

Deferred income tax liabilities:

Depreciation

Limited partnerships

Other

Gross deferred income

tax liability

Deferred income tax

asset net

2008

2007

15.

$ 4,495
4,151

$ 3,943
4,132

169
5,745
519
64
27
91
65

137
2,514
515
—
27
112
2

15,326

11,382

—
(2,401)
(103)

(360)
(2,415)
(142)

(2,504)

(2,917)

$ 12,822

$ 8,465

Based on the Company’s historical and current pre-tax earnings, management
believes it is more likely than not that the Company will realize the deferred
income tax asset existing at December 31, 2008. Management believes that
existing net deductible temporary differences which give rise to the deferred tax
asset will reverse during periods in which the Company generates net taxable
income. In addition, gross deductible temporary differences are expected to
reverse in periods during which offsetting gross taxable temporary differences are
expected to reverse. 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 no assurance can be given that sufficient taxable income will be
generated to fully absorb gross deductible temporary differences.

Employee Benefits
The Company has a Qualified Defined Benefit Pension Plan (the “Plan”), which
had been offered to all employees reaching minimum age and service requirements.
In 2006, the Bank became a member of the Savings Bank Employees Retirement
Association (“SBERA”) within which it then began maintaining the Qualified Defined
Benefit Pension Plan. SBERA offers a common and collective trust as the underlying
investment structure for pension plans participating in SBERA. The Trustees of
SBERA, through SBERA’s Investment Committee, select investment managers for
the common and collective trust portfolio. A professional advisory firm is retained
by the Investment Committee to provide allocation analysis and performance
measurement and to assist with manager searches. The target allocation mix calls
for an equity-based investment deployment range from 55% to 75% of total
portfolio assets. The remainder of the portfolio is allocated to fixed income. The
overall investment objective is to diversify equity investments across a spectrum
of investment types (e.g., small cap, large cap, international, etc.) and styles
(e.g., growth, value, etc.). The Company closed the plan to employees hired
after March 31, 2006.

Prior to 2008, the measurement date for the Plan was September 30 for each
year. Beginning in 2008, the measurement date was changed to December 31 in
accordance with SFAS No. 158. The benefits expected to be paid in each year from
2009 to 2013 are $720,000, $752,000, $774,000, $910,000 and $934,000,
respectively. The aggregate benefits expected to be paid in the five years from
2014 to 2018 are $5,830,000. The Company plans to contribute $1,275,000
to the Plan in 2009.

The weighted-average asset allocation of pension benefit assets was:

Asset Category

Fixed income

Domestic equity

International equity

Total

December 31,
2008

September 30,
2007

35 %
53 %
12 %

38 %
46 %
16 %

100 %

The performance of the plan assets is dependent upon general market conditions
and specific conditions related to the issuers of the underlying securities.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 38

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

The Company has a Supplemental Executive Insurance/Retirement Plan (the Supplemental Plan), which is limited to certain officers and employees of the Company. The
Supplemental Plan is voluntary and participants are required to contribute to its cost. Under the Supplemental Plan, each participant will receive a retirement benefit based
on compensation and length of service. Individual life insurance policies, which are owned by the Company, are purchased covering the lives of each participant. Effective
December 31, 2006, the Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB
Statements No. 87, 88, 106 and 132(R).” The Company recorded an additional $2,158,000 net pension liability adjustment, through stockholders’ equity, as a result of
this adoption.

Prior to 2008, the measurement date for the Supplemental Plan was September 30 for each year. Beginning in 2008, the measurement date was changed to December 31 in
accordance with SFAS No. 158. The benefits expected to be paid in each year from 2009 to 2013 are $1,034,000, $1,042,000, $1,049,000, $1,051,000 and $1,045,000,
respectively. The aggregate benefits expected to be paid in the five years from 2014 to 2018 are $6,481,000.

(dollars in thousands)

Change projected in benefit obligation

Benefit obligation at beginning of year

Service cost

Interest cost

Actuarial (gain)/loss

Benefits paid

Defined Benefit Pension Plan

Supplemental Insurance/
Retirement Plan

2008

2007

2008

2007

19,139
1,026
1,436
459
(647)

18,795
867
1,081
(1,116)
(488)

13,462
336
1,008
2,255
(1,293)

13,740
107
758
(111)
(1,032)

Projected benefit obligation at end of year

21,413

19,139

15,768

13,462

Change in plan assets

Fair value of plan assets at beginning of year

Actual (loss) return on plan assets

Employer contributions

Benefits paid

Fair value of plan assets at end of year

(Unfunded) Funded status

Accumulated benefit obligation

Weighted-average assumptions as of December 31

Discount rate — Liability

Discount rate — Expense

Expected return on plan assets

Rate of compensation increase

Components of net periodic benefit cost

Service cost

Interest cost

Expected return on plan assets

Recognized prior service cost

Recognized net losses

Net periodic cost

Other changes in plan assets and benefit obligations

recognized in other comprehensive income

Amortization of prior service cost

Net (gain) loss

Total recognized in other comprehensive income

Total recognized in net periodic benefit cost and

other comprehensive income

13,873
1,735
1,540
(488)

16,660

(2,479)

17,375

6.00 %
5.75 %
8.00 %
4.00 %

867
1,081
(1,110)
(116)
398

(15,768)

14,165

(13,462)

12,584

5.75 %
6.00 %
NA
4.00 %

308
814
—
108
49

6.00 %
5.75 %
NA
4.00 %

107
758
—
64
81

1,120

1,279

1,010

16,660
(3,731)
1,777
(647)

14,059

(7,534)

19,468

5.75 %
6.00 %
8.00 %
4.00 %

821
1,148
(1,333)
(116)
211

731

116
5,623

5,739

116
(2,140)

(2,024)

(108)
2,177

2,069

6,470

(904)

3,348

(64)
(192)

(256)

754

491070.RevFinancial.QX7.qxd:CA14518_Financials 2/24/09 10:36 PM Page 39

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

The following table summarizes amounts recognized in Accumulated Other Comprehensive Loss as of:

Prior service cost

Net actuarial loss

Total

December 31, 2008
Supplemental
Plan

Total

$ (1,513)
(3,666)

(468)
(13,483)

Plan

1,045
(9,817)

(8,772)

$ (5,179)

$ (13,951)

December 31, 2007
Supplemental
Plan

(964)
(2,146)

Plan

1,190
(4,225)

(3,035)

$ (3,110)

Total

226
(6,371)

(6,145)

The following table summarizes the amounts included in Accumulated Other Comprehensive Loss at December 31, 2008 expected to be recognized as components
of net periodic benefit cost in the next year:

Amortization of prior service cost to be

recognized in 2009

Amortization of loss to be recognized in 2009

Plan

$ (116)
684

Supplemental
Plan

$ 110
139

Assumptions for the expected return on plan assets and discount rates in the Company’s Plan and Supplemental Plan are periodically reviewed. As part of the review,
management in consultation with independent consulting actuaries performs an analysis of expected returns based on the plan’s asset allocation. This forecast reflects
the Company’s and actuarial firm’s expected return on plan assets for each significant asset class or economic indicator. The range of returns developed relies on
forecasts and on broad market historical benchmarks for expected return, correlation and volatility for each asset class. Also, as a part of the review, the Company’s
management in consultation with independent consulting actuaries performs an analysis of discount rates based on expected returns of high grade fixed income
debt securities.

The Company offers a 401(k) defined contribution plan for all employees reaching minimum age and service requirements. The plan is voluntary and employee
contributions are matched by the Company at a rate of 33.3% for the first 6% of compensation contributed by each employee. The Company’s match totaled
$265,000 for 2008, $229,000 for 2007 and $210,000 for 2006. Administrative costs associated with the plan are absorbed by the Company.

The Company has a cash incentive plan that is designed to reward our executives and officers for the achievement of annual financial performance goals of the
Company as well as business line, department and individual performance. The plan supports the philosophy that management be measured for their performance
as a team in the attainment of these goals. There were no payments under this plan for 2006, 2007 and 2008. Discretionary bonus expense amounted to
$348,000, $154,000, and $0, in 2008, 2007, and 2006, respectively.

The Company does not offer any postretirement programs other than pensions.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 40

16.

Commitments and Contingencies
A number of legal claims against the Company arising in the normal course of
business were outstanding at December 31, 2008. Management, after reviewing
these claims with legal counsel, is of the opinion that their resolution will not
have a material adverse effect on the Company’s consolidated financial position
or results of operations.

17.

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 notational amounts of those
instruments reflect the extent of involvement the Company has in these
particular classes of financial instruments.

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. Financial instruments with off-balance-sheet
risk at December 31 are as follows:

Contract or Notational Amount

(dollars in thousands)

Financial instruments whose contract

amount represents credit risk:

Commitments to originate

1-4 family mortgages

Standby and commercial letters of credit

Unused lines of credit

Unadvanced portions

of construction loans

Unadvanced portions

of other loans

2008

2007

1,225
14,225
144,653

2,442
13,498
155,378

16,642

27,294

6,558

8,746

Commitments to originate loans, unadvanced portions of construction loans and
unused letters of credit are generally agreements to lend to a customer provided
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 many of the commitments are expected to 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,
if deemed necessary by the Company upon extension of credit, is based on
management’s credit evaluation of the borrower.

Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance by a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers.

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

18.

Other Operating Expenses

Year ended December 31,

2008

2007

2006

(dollars in thousands)

Marketing

Processing services

Legal and audit

Postage and delivery

Software maintenance/amortization

Supplies

Consulting

Telephone

Core deposit tangible amortization

Insurance

Director’s fees

FDIC assessment

Capital expense amortization

Other

Total

$ 1,482
921
994
922
807
698
832
626
388
322
229
613
12
1,447

$ 1,540
876
776
867
721
759
639
546
388
380
232
148
12
1,019

$ 1,515
1,326
894
849
717
684
642
524
388
368
219
154
12
1,139

$ 10,293

$ 8,903

$ 9,431

19.

Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating fair values of its financial instruments. Excluded from this disclosure
are all nonfinancial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.

CASH AND CASH EQUIVALENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents approximate the fair values of these assets because of the short-term
nature of these financial instruments.

SHORT-TERM INVESTMENTS
The fair value of short-term investments is estimated using the discounted value
of contractual cash flows. The discount rate used is estimated based on the rates
currently offered for short-term investments of similar remaining maturities.

SECURITIES HELD-TO-MATURITY AND SECURITIES AVAILABLE-FOR-SALE
The fair value of these securities is estimated based on prices published in
financial newspapers or received from pricing services, or bid quotations received
from securities dealers.

LOANS
For variable-rate loans, which reprice frequently and with no significant change
in credit risk, fair values are based on carrying amounts. The fair value of other
loans is estimated using discounted cash flow analysis, based on interest rates
currently being offered for loans with similar terms to borrowers of similar credit
quality. Incremental credit risk for nonperforming loans has been considered.

ACCRUED INTEREST RECEIVABLE AND PAYABLE
The carrying amounts for accrued interest receivable and payable approximate
fair values because of the short-term nature of these financial instruments.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 41

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

DEPOSITS
The fair value of deposits, with no stated maturity, is equal to the carrying amount. The fair value of time deposits is based on the discounted value of contractual cash
flows, applying interest rates currently being offered on the deposit products of similar maturities. The fair value estimates for deposits do not include the benefit that
results from the low-cost funding provided by the deposit liabilities compared to the cost of alternative forms of funding (“deposit base intangibles”).

REPURCHASE AGREEMENTS AND OTHER BORROWED FUNDS
The fair value of repurchase agreements and other borrowed funds is based on the discounted value of contractual cash flows. The discount rate used is estimated
based on the rates currently offered for other borrowed funds of similar remaining maturities.

SUBORDINATED DEBENTURES
The fair value of subordinated debentures is based on the discounted value of contractual cash flows. The discount rate used is estimated based on the rates currently
offered for other subordinated debentures of similar remaining maturities.

OFF-BALANCE-SHEET INSTRUMENTS
The fair values of the Company’s unused lines of credit and unadvanced portions of construction loans, commitments to originate and sell loans and standby
letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the
counterparties’ credit standing.

The carrying amounts and fair values of the Company’s financial instruments at December 31 are as follows:

2008

2007

Carrying
Amounts

Fair Value

Carrying
Amounts

Fair Value

(dollars in thousands)

Financial assets:

Cash and cash equivalents

Short-term investments

Securities available-for-sale

Securities held-to-maturity

Net loans

Accrued interest receivable

Financial liabilities:

Deposits

Repurchase agreement and other borrowed funds

Subordinated debentures

Accrued interest payable

Standby letters of credit

$ 299,901

299,901

$ 156,168
43,814
495,585
184,047
824,946
6,723

1,265,527
351,068
36,083
1,488

156,168
43,978
495,585
185,433
837,064
6,723

1,271,404
357,927
41,908
1,488

——

388,104
183,710
716,618
6,590

1,130,061
375,875
36,083
1,678

—

117

—

388,104
181,704
711,611
6,590

1,131,503
379,229
36,694
1,678

109

LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant market information and information about the type of financial instrument. These estimates
do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular financial instrument. Because no
active market exists for some of the Bank’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, cash flows,
current economic conditions, risk characteristics and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in assumptions and changes in the loan, debt and interest rate markets could significantly affect
the estimates. Further, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates
and have not been considered.

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 42

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

20.

Quarterly Results of Operations (unaudited)

2008 Quarters

(in thousands, except share data)

Interest income

Interest expense

Net interest income

Provision for loan losses

Net interest income after provision for loan losses

Other operating income

Operating expenses

Income before income taxes

Provision for income taxes

Net income

Share data:

Average shares outstanding, basic

Average shares outstanding, diluted

Earnings per share, basic

Earnings per share, diluted

2007 Quarters

(in thousands, except share data)

Interest income

Interest expense

Net interest income

Provision for loan losses

Net interest income after provision for loan losses

Other operating income

Operating expenses

Income before income taxes

Provision for income taxes

Net income

Share data:

Average shares outstanding, basic

Average shares outstanding, diluted

Earnings per share, basic

Earnings per share, diluted

Fourth

Third

Second

First

20,570
8,638

11,932
1,450

10,482
3,499
10,850

3,131
320

2,811

5,539,043

5,539,092

0.51

Fourth

20,481
10,378

10,103
600

9,503
3,591
9,765

3,329
955

2,374

5,543,804

5,547,234

0.43

20,891
8,932

11,959
1,350

10,609
3,577
11,051

3,135
576

2,559

5,541,345

5,542,404

0.46

Third

20,944
10,835

10,109
300

9,809
4,416
9,940

4,285
1,421

2,864

5,542,483

5,545,915

0.52

19,470
8,814

10,656
925

9,731
3,477
10,743

2,465
589

1,876

5,543,781

5,546,128

0.34

19,762
9,530

10,232
700

9,532
3,422
10,384

2,570
770

1,800

5,543,804

5,546,700

0.32

Second

First

20,837
11,048

9,789
300

9,489
3,092
10,247

2,334
711

1,623

5,542,304

5,548,105

0.29

20,746
11,544

9,202
300

8,902
2,849
10,302

1,449
445

1,004

5,541,225

5,550,653

0.18

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 43

Notes to Consolidated Financial Statements

Century Bancorp, Inc. AR ’08

21.

Parent Company Financial Statements
The balance sheets of Century Bancorp, Inc. (“Parent Company”) as of December 31, 2008 and 2007 and the statements of income and cash flows for each of the
years in the three-year period ended December 31, 2008 are presented below. The statements of changes in stockholders’ equity are identical to the consolidated
statements of changes in stockholders’ equity and are therefore not presented here.

BALANCE SHEETS
December 31,

(dollars in thousands)

ASSETS:

Cash

Investment in subsidiary, at equity

Other assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Liabilities

Subordinated debentures

Stockholders’ equity

Total liabilities and stockholders’ equity

STATEMENTS OF INCOME
Year Ended December 31,

(dollars in thousands)

Income:

Dividends from subsidiary

Interest income from deposits in bank

Other income

Total income

Interest expense

Operating expenses

Income before income taxes and equity in undistributed income of subsidiary

Benefit from income taxes

Income before equity in undistributed income of subsidiary

Equity in undistributed income of subsidiary

2008

2007

$ 31,588
122,324
2,786

$ 156,698

112
36,083
120,503

$ 156,698

30,399
122,085
2,512

$ 154,996

107
36,083
118,806

$ 154,996

2008

2007

2006

4,778
884
72

5,734
2,400
165

3,169
(547)

3,716
5,330

3,611
1,442
72

5,125
2,400
130

2,595
(345)

2,940
4,924

2,891
1,381
72

4,344
2,400
158

1,786
(375)

2,161
2,527

Net income

$ 9,046

$ 7,864

$ 4,688

STATEMENTS OF CASH FLOWS
December 31,

(dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

2008

2007

2006

$ 9,046

$ 7,864

$ 4,688

Undistributed income of subsidiary

Depreciation and amortization

Increase in other assets

Increase (decrease) in liabilities

Net cash provided by operating activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Stock repurchases

Net proceeds from the exercise of stock options

Cash dividends paid

Net cash used in financing activities

Net increase (decrease) in cash

Cash at beginning of year

Cash at end of year

(5,330)
12
(286)
5

3,447

(84)
—
(2,174)

(2,258)

1,189

30,399

(4,924)
12
(495)
(39)

2,418

——
51
(2,173)

(2,122)

296

30,103

(2,527)
12
(490)
34

1,717

95
(2,167)

(2,072)

(355)

30,458

$ 31,588

$ 30,399

$ 30,103

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 44

Report of Independent Registered Public Accounting Firm

Century Bancorp, Inc. AR ’08

KPMG LLP

Independent Registered Public Accounting Firm
99 High Street
Boston, Massachusetts 02110

The Board of Directors and Stockholders
Century Bancorp, Inc.:

We have audited the accompanying consolidated balance sheets of Century Bancorp, Inc. and its subsidiary as of December 31, 2008 and 2007, and the related
consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008. 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 conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Century Bancorp, Inc. and
its subsidiary as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended
December 31, 2008, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Century Bancorp, Inc.’s internal control
over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 24, 2009 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.

Boston, Massachusetts

February 24, 2009

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 45

Report of Independent Registered Public Accounting Firm

Century Bancorp, Inc. AR ’08

KPMG LLP

Independent Registered Public Accounting Firm
99 High Street
Boston, Massachusetts 02110

The Board of Directors and Stockholders
Century Bancorp, Inc.:

We have audited Century Bancorp, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Century Bancorp, Inc.’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, included 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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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.

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.

In our opinion, Century Bancorp, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of
Century Bancorp, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the
years in the three-year period ended December 31, 2008, and our report dated February 24, 2009 expressed an unqualified opinion on those consolidated
financial statements.

Boston, Massachusetts

February 24, 2009

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 46

Management’s Report on Internal Control Over Financial Reporting

Century Bancorp, Inc. AR ’08

CENTURY BANCORP, INC.

400 Mystic Avenue
Medford, Massachusetts 02155

We, together with the other members of Century Bancorp, Inc. and our subsidiary (the “Company”), are responsible for establishing and maintaining adequate internal
control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of
directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this
assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated
Framework. Based on our assessment, we believe that, as of December 31, 2008, the Company’s internal control over financial reporting is effective based on
those criteria.

The Company’s independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal control over financial
reporting. Their report appears on page 45.

Marshall M. Sloane
Chairman of the Board

Jonathan G. Sloane
Co-President & Co-CEO

Barry R. Sloane
Co-President & Co-CEO

William P. Hornby, CPA
Chief Financial Officer
& Treasurer

February 24, 2009

491070.Financial.QX7.qxd:CA14518_Financials 2/20/09 6:54 PM Page 47

Notes

Century Bancorp, Inc. AR ’08

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Stockholder Information

CORPORATE HEADQUA RTERS
Century Bank
400 Mystic Avenue
Medford, MA 02155-6316
TEL (866) 8.CENTURY or (866) 823.6887
AskCentury.com

TRANSFER AG ENT AND REGISTRAR
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
TEL (781) 575.3400
Computershare.com

ANNUAL MEETING
The annual meeting of stockholders will be held on Tuesday, April 14, 2009, at 10:00 a.m. The meeting will take place at
Century Bank, 400 Mystic Avenue, Medford, MA.

STOCK LISTING
Century Bancorp, Inc. became a public company in 1987. Century’s Class A Common Stock is listed on the NASDAQ national market
and is traded under the symbol “CNBKA.”

10-K REPORT
A copy of the Company’s annual report to the Securities and Exchange Commission on Form 10-K may be obtained without charge
upon written request to: Century Bancorp, Inc., Investor Relations, 400 Mystic Avenue, Medford, MA 02155 or online at
http://www.century-bank.com/about/investorrelations.cfm.

Century Bank Locations

OFFICES
Allston
Beverly
Boston
Boston
Boston
Boston
Braintree
Brookline
Burlington
Cambridge
Everett
Lynn
Malden
Medford
Medford
Medford
Newton
Peabody
Quincy
Salem
Somerville
Winchester

300 Western Avenue, Allston, MA 02134
428 Rantoul Street, Beverly, MA 01915
512 Commonwealth Avenue, Boston, MA 02215
275 Hanover Street, Boston, MA 02113
24 Federal Street, Boston, MA 02110
136 State Street, Boston, MA 02110
703 Granite Street, Braintree, MA 02184
1184-1186 Boylston Street/Rt 9 East, Brookline, MA 02467
134 Cambridge Street/Rt 3A, Burlington, MA 01803
2309 Massachusetts Avenue, Cambridge, MA 02140
1763 Revere Beach Parkway/Rt 16, Everett, MA 02149
2 State Street, Lynn, MA 01901
140 Ferry Street at Eastern Avenue, Malden, MA 02148
1 Salem Street, Medford, MA 02155
400 Mystic Avenue, Medford, MA 02155
503 Riverside Avenue, Fellsway Plaza, Medford, MA 02155
31 Boylston Street/Rt 9 West, Newton, MA 02467
12 Peabody Square, Peabody, MA 01960
651 Hancock Street, Quincy, MA 02170
37 Central Street, Salem, MA 01970
102 Fellsway West at Mystic Avenue, Somerville, MA 02145
522 Main Street, Winchester, MA 01890

FREE-STANDING CASH DISPENSERS
Boston
Cambridge
Cambridge
Medford
Milton
Weston

The Hotel Commonwealth, 500 Commonwealth Avenue, Boston, MA 02215
CambridgeSide Galleria, 100 CambridgeSide Place, Cambridge, MA 02141
One Kendall Square, Building #100, Cambridge, MA 02139
Sloane Square, 110 Medford Street, Medford, MA 02155
Milton Hospital, 199 Reedsdale Road, Milton, MA 02186
College Hall, Regis College, 235 Wellesley Street, Weston, MA 02493

(617) 562.1700
(978) 921.2300
(617) 424.1644
(617) 557.2950
(617) 423.1490
(617) 367.3712
(781) 356.3400
(617) 713.4910
(781) 238.8700
(617) 349.5300
(617) 381.6300
(781) 586.8700
(781) 388.2100
(781) 391.9830
(781) 393.4160
(781) 393.6520
(617) 582.0920
(978) 977.4900
(617) 376.8100
(978) 740.6900
(617) 629.0929
(781) 756.3480

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400 Mystic Avenue
Medford, MA 02155
(866) 8.CENTURY or
(866) 823.6887
AskCentury.com

Equal Housing Lender / Member FDIC

002-CS17893