UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

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

For the quarterly period ended ~~March 31,~~June 30, 2021.

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

Commission file number:

0-15752

CENTURY BANCORP, INC.

(Exact name of registrant as specified in its charter)


COMMONWEALTH OF MASSACHUSETTS		04-2498617
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

400 MYSTIC AVENUE, MEDFORD, MA		02155
(Address of principal executive offices)		(Zip Code)

(781)

391-4000

(Registrant’s telephone number, including area code)

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


Title of class	Trading Symbol(s)	Name of exchange
Class A Common Stock, $1.00 par value	CNBKA	Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all

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

Yes

☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

(Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange

Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). ☐ Yes ☒ No

As of ~~April 30,~~July 31, 2021, the Registrant had outstanding:


Class A Common Stock, $1.00 par value			~~3,658,569~~3,661,569 Shares
Class B Common Stock, $1.00 par value			~~1,909,340~~1,906,340 Shares

~~Table of Contents~~

Century Bancorp, Inc.

Index


			Page Number
Part I	Financial Information		4
	Forward Looking Statements			3

Item 1.	~~Item 1.~~Financial Statements (unaudited)		~~Financial Statements (unaudited)~~

	Consolidated Balance Sheets: ~~March 31,~~ June 30, 2021 and December 31, 2020			4
	Consolidated Statements of Income: Three Months and Six Months Ended ~~March 31,~~June 30, 2021 and 2020			5
	Consolidated Statements of Comprehensive Income: Three Months and Six Months Ended ~~March 31,~~June 30, 2021 and 2020			6
	Consolidated Statements of Changes in Stockholders’ Equity: Three Months Ended ~~March 31,~~June 30, 2021 and 2020			7
	Consolidated Statements of Changes in Stockholders’ Equity: Six Months Ended June 30, 2021 and 2020			8
	Consolidated Statements of Cash Flows: ~~Three~~ Six Months Ended ~~March 31,~~June 30, 2021 and 2020		8	9
	Notes to Consolidated Financial Statements		~~9 - 30~~
~~Item 2.~~		10 - 33

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		~~31 - 41~~
~~Item 3.~~		34 - 46

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		41
~~Item 4.~~		47

Item 4.	Controls and Procedures		41
	47

Part II.	Other Information
Item 1.	Legal Proceedings			47
Item 1A.	~~Item 1.~~Risk Factors		~~Legal Proceedings~~	47	42
Item ~~1A.~~	~~Risk Factors~~ 2.		~~42-43~~
~~Item 2.~~	Unregistered Sales of Equity Securities and Use of Proceeds		44
~~Item 3.~~		47
Item 3.	Defaults Upon Senior Securities		44
~~Item 4.~~		47
Item 4.	Mine Safety Disclosures		44
~~Item 5.~~	~~Other Information~~		44
~~Item 6.~~	~~Exhibits~~		44

~~Signatures~~			45
~~Exhibits~~	~~Ex-2.1~~			47
Item 5.	~~Ex-10.1~~Other Information			47
Item 6.	~~Ex-10.2~~Exhibits			47-48

Signatures				49

Exhibits	Ex-31.1
	Ex-31.2
	Ex-32.1
	Ex-32.2
	Ex-101 Instance Document
	Ex-101 Schema Document
	Ex-101 Calculation Linkbase Document
	Ex-101 Labels Linkbase Document
	Ex-101 Presentation Linkbase Document
	Ex-101 Definition Linkbase Document

~~Table of Contents~~

Forward Looking Statements

Except for the historical information contained herein, this quarterly report on Form

10-Q

may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, (i) the fact that the Company’s business, financial condition and results of operation have been or may be negatively impacted by the extent and duration of the

COVID-19

pandemic, ~~(iii)~~(ii) the fact that consumer behavior may change due to changing political, business and economic conditions, including increased unemployment, or legislative or regulatory initiatives, ~~(iv)~~(iii) the fact that the Company’s success is dependent to a significant extent upon general economic conditions in New England, ~~(v)~~(iv) the fact that the Company’s earnings depend to a great extent upon the level of net interest income (the difference between interest income earned on loans and investments and the interest expense paid on deposits and other borrowings) generated by the Bank and thus the Bank’s results of operations may be adversely affected by increases or decreases in interest rates, ~~(vi) failure to obtain~~(v) the ~~approval~~timing of ~~our shareholders in connection with our~~the proposed merger with Eastern Bankshares, Inc. (“Eastern”)~~; (vii) the timing to consummate the proposed merger; (viii)~~, (vi) the risk that a condition to closing of the proposed merger may not be ~~satisfied; (ix)~~satisfied, (vii) the risk that a regulatory approval that may be required for the proposed merger is not obtained or is obtained subject to conditions that are not ~~anticipated; (x)~~anticipated, (viii) the effect of the announcement of the proposed merger on our ability to maintain relationships with our key partners, customers and employees, and on our operating results and business ~~generally; (xi)~~generally, (ix) the fact that the Bank’s participation in the Paycheck Protection Program involves reputational risks, ~~(xii)~~(x) the fact that the banking business is highly competitive and the profitability of the Company depends upon the Bank’s ability to attract loans and deposits within its market area, where the Bank competes with a variety of traditional banking and other institutions such as credit unions and finance companies, ~~(xiii)~~(xi) the fact that our operations are subject to risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics, ~~(xiv)~~(xii) the fact that future credit losses may be higher than currently expected due to changes in economic assumptions and adverse economic developments, and ~~(xvi)~~(xiii) the fact that a significant portion of the Company’s loan portfolio is comprised of commercial loans, exposing the Company to the risks inherent in loans based upon analyses of credit risk, the value of underlying collateral, including real estate, and other more intangible factors, which are considered in making commercial loans. Accordingly, the Company’s profitability may be negatively impacted by errors in risk analyses, and by loan defaults, and the ability of certain borrowers to repay such loans may be adversely affected by any downturn in general economic conditions, these factors, as well as general economic and market conditions, may materially and adversely affect the market price of shares of the Company’s common stock. Because of these and other factors, past financial performance should not be considered an indicator of future performance. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control. The forward-looking statements contained herein represent the Company’s judgment as of the date of this quarterly report on from

10-Q,

and the Company cautions readers not to place undue reliance on such statements.

Page 3 of 4549

~~Table of Contents~~

PART I – Item 1

Century Bancorp, Inc.

Consolidated Balance Sheets (unaudited)

(In thousands, except share data)


	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
Assets
Cash and due from banks	$	116,242		$	136,735		$	101,001		$	136,735
Federal funds sold and interest-bearing deposits in other banks		500,521			237,265			384,454			237,265

Total cash and cash equivalents		616,763			374,000			485,455			374,000
Securities available-for-sale, amortized cost $263,089 and $282,273, respectively		263,898			282,448
Securities held-to-maturity, fair value $3,222,903 and $2,579,103, respectively		3,217,176			2,509,088
Securities available-for-sale, amortized cost $230,285 and $282,273, respectively								232,033			282,448
Securities held-to-maturity, fair value $3,360,731 and $2,579,103, respectively								3,350,561			2,509,088
Federal Home Loan Bank of Boston, stock at cost		13,361			13,361			11,594			13,361
Equity securities, amortized cost $1,635 and $1,635, respectively		1,722			1,668			1,697			1,668
Loans, net:
Construction and land development		7,854			10,909			6,404			10,909
Commercial and industrial		1,315,295			1,314,245			1,296,399			1,314,245
Municipal		137,073			137,607			138,771			137,607
Commercial real estate		796,660			789,836			813,163			789,836
Residential real estate		460,123			448,436			471,671			448,436
Consumer and overdrafts		19,987			20,439			20,611			20,439
Home equity		255,770			274,357			252,114			274,357

Total loans, net		2,992,762			2,995,829			2,999,133			2,995,829
Less: allowance for loan losses		34,952			35,486			34,949			35,486

Net loans		2,957,810			2,960,343			2,964,184			2,960,343
Bank premises and equipment		39,750			39,062			40,824			39,062
Accrued interest receivable		13,981			13,283			13,122			13,283
Goodwill		2,714			2,714			2,714			2,714
Other assets		162,149			162,867			161,830			162,867

Total assets	$	7,289,324		$	6,358,834		$	7,264,014		$	6,358,834

Liabili1ties
Liabilities
Deposits:
Demand deposits	$	1,321,084		$	1,103,878		$	1,183,266		$	1,103,878
Savings and NOW deposits		2,269,617			1,728,092			2,454,287			1,728,092
Money market accounts		2,324,557			2,074,108			2,302,147			2,074,108
Time deposits		480,784			546,143			433,479			546,143

Total deposits		6,396,042			5,452,221			6,373,179			5,452,221
Securities sold under agreements to repurchase		228,755			232,090			248,302			232,090
Other borrowed funds		151,769			177,009			119,029			177,009
Subordinated debentures		36,083			36,083			36,083			36,083
Due to broker		1,310			—			800			—
Other liabilities		94,033			91,022			94,066			91,022

Total liabilities		6,907,992			5,988,425			6,871,459			5,988,425
Stockholders’ Equity
Preferred Stock – $1.00 par value; 100,000 shares authorized; 0 shares issued and outstanding		0—			0—			0—			0—
Common stock, Class A, $1.00 par value per share; authorized 10,000,000 shares; issued 3,656,469 shares and 3,655,469 shares, respectively		3,657			3,656
Common stock, Class B, $1.00 par value per share; authorized 5,000,000 shares; issued 1,911,440 shares and 1,912,440 shares respectively		1,911			1,912
Common stock, Class A, $1.00 par value per share; authorized 10,000,000 shares; issued 3,661,569 shares and 3,655,469 shares, respectively								3,662			3,656
Common stock, Class B, $1.00 par value per share; authorized 5,000,000 shares; issued 1,906,340 shares and 1,912,440 shares respectively								1,906			1,912
Additional paid-in capital		12,292			12,292			12,292			12,292
Retained earnings		388,638			378,699			398,630			378,699

	406,498			396,559			416,490			396,559
Unrealized gains on securities available-for-sale, net of taxes		594			130			1,270			130
Unrealized losses on securities transferred to held-to-maturity, net of taxes		(1,107	)		(1,221	)		(958	)		(1,221	)
Pension liability, net of taxes		(24,653	)		(25,059	)		(24,247	)		(25,059	)

Total accumulated other comprehensive loss, net of taxes		(25,166	)		(26,150	)		(23,935	)		(26,150	)

Total stockholders’ equity		381,332			370,409			392,555			370,409

Total liabilities and stockholders’ equity	$	7,289,324		$	6,358,834		$	7,264,014		$	6,358,834

See accompanying notes to unaudited consolidated interim financial statements.

Page 4 of 49

Century Bancorp, Inc.

Consolidated Statements of Income (unaudited)

(In thousands, except share data)


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021			2020
Interest income
Loans	$	20,888	$	19,848	$	42,493		$	42,047
Securities held-to-maturity		14,113		15,222		27,230			30,515
Securities available-for-sale		557		982		1,187			2,675
Federal funds sold and interest-bearing deposits in other banks		112		68		291			678

Total interest income		35,670		36,120		71,201			75,915


Interest expense
Savings and NOW deposits		753		2,118		1,871			5,843
Money market accounts		2,489		3,462		5,375			9,034
Time deposits		1,115		3,111		2,696			6,283
Securities sold under agreements to repurchase		98		309		239			935
Other borrowed funds and subordinated debentures		1,224		1,302		2,462			2,801

Total interest expense		5,679		10,302		12,643			24,896

Net interest income		29,991		25,818		58,558			51,019
(Credit) provision for loan losses		—		1,700		(550	)		2,775


Net interest income after (credit) provision for loan losses		29,991		24,118		59,108			48,244

Other operating income
Service charges on deposit accounts		2,171		2,023		4,389			4,319
Lockbox fees		966		924		1,962			1,854
Other income		969		1,094		1,958			2,178

Total other operating income		4,106		4,041		8,309			8,351

Operating expenses
Salaries and employee benefits		12,302		10,287		24,552			21,658
Occupancy		1,591		1,456		3,293			2,971
Equipment		931		962		1,880			1,799
FDIC Assessments		757		310		1,229			310
Other		5,431		4,027		10,929			8,477

Total operating expenses		21,012		17,042		41,883			35,215

Income before income taxes		13,085		11,117		25,534			21,380
Provision for income taxes		2,262		1,061		3,941			1,658

Net income	$	10,823	$	10,056	$	21,593		$	19,722

Share data:

Weighted average number of shares outstanding, basic
Class A		3,661,569		3,652,469		3,659,019			3,652,409
Class B		1,906,340		1,915,440		1,908,890			1,915,500
Weighted average number of shares outstanding, diluted
Class A		5,567,909		5,567,909		5,567,909			5,567,909
Class B		1,906,340		1,915,440		1,908,890			1,915,500
Basic earnings per share:
Class A	$	2.35	$	2.18	$	4.68		$	4.28
Class B	$	1.17	$	1.09	$	2.34		$	2.14
Diluted earnings per share
Class A	$	1.94	$	1.81	$	3.88		$	3.54
Class B	$	1.17	$	1.09	$	2.34		$	2.14

See accompanying notes to unaudited consolidated interim financial statements.

Page 5 of 49

Century Bancorp, Inc.

Consolidated Statements of Comprehensive Income (unaudited)

(In thousands)


	Three months ended June 30,
	2021		2020
Net income	$	10,823	$	10,056
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized gains arising during period		676		1,490
Less: reclassification adjustment for gains included in net income		0		0

Total unrealized gains on securities		676		1,490
Accretion of net unrealized losses transferred		149		162
Defined benefit pension plans:
Amortization of prior service cost and loss included in net periodic benefit cost		406		361

Other comprehensive income		1,231		2,013

Comprehensive income	$	12,054	$	12,069


	Six months ended June 30,
	2021		2020
Net income	$	21,593	$	19,722
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized gains (losses) arising during period		1,140		(41	)
Less: reclassification adjustment for gains included in net income		0		0

Total unrealized gains (losses) on securities		1,140		(41	)
Accretion of net unrealized losses transferred		263		326
Defined benefit pension plans:
Amortization of prior service cost and loss included in net periodic benefit cost		812		721

Other comprehensive income		2,215		1,006

Comprehensive income	$	23,808	$	20,728

See accompanying notes to unaudited consolidated interim financial statements.

Page 6 of 49

Century Bancorp, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

For the Three Months Ended June 30, 2021 and 2020


	Class A Common Stock		Class B Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
						(In thousands)
Balance at March 31, 2020	$	3,652	$	1,916		$	12,292	$	348,093		$	(25,266	)	$	340,687
Net income		—		—			—		10,056			—			10,056
Other comprehensive income, net of tax:		—
Unrealized holding gains (losses) arising during period, net of $538 in taxes		—		—			—		—			1,490			1,490
Accretion of unrealized losses on securities transferred to held-to-maturity, net of $57 in taxes		—		—			—		—			162			162
Pension liability adjustment, net of $141 in taxes		—		—			—		—			361			361
Conversion of Class B Common Stock to Class A Common Stock, 120 shares		1		(1	)		—		—			—			—
Cash dividends paid, Class A common stock, $.12 per share		—		—			—		(439	)		—			(439	)
Cash dividends paid, Class B common stock, $.06 per share		—		—			—		(115	)		—			(115	)

Balance at June 30, 2020	$	3,653	$	1,915		$	12,292	$	357,595		$	(23,253	)	$	352,202

Balance at March 31, 2021	$	3,657	$	1,911		$	12,292	$	388,638		$	(25,166	)	$	381,332
Net income		—		—			—		10,823			—			10,823
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period, net of $263 in taxes		—		—			—		—			676			676
Accretion of unrealized losses on securities transferred to held-to-maturity, net of $65 in taxes		—		—			—		—			149			149
Pension liability adjustment, net of $158 in taxes		—		—			—		—			406			406
Conversion of Class B Common Stock to Class A Common Stock, 5,100 shares		5		(5	)		—		—			—			—
Cash dividends paid, Class A common stock, $0.18 per share		—		—			—		(660	)		—			(660	)
Cash dividends paid, Class B common stock, $0.09 per share		—		—			—		(171	)		—			(171	)

Balance at June 30, 2021	$	3,662	$	1,906		$	12,292	$	398,630		$	(23,935	)	$	392,555

See accompanying notes to unaudited consolidated interim financial statements.

Page 7 of 49

Century Bancorp, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

For the Six Months Ended June 30, 2021 and 2020


	Class A Common Stock		Class B Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
						(In thousands)
Balance at December 31, 2019	$	3,651	$	1,917		$	12,292	$	338,980		$	(24,259	)	$	332,581
Net income		—		—			—		19,722			—			19,722
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period, net of $10 in taxes		—		—			—		—			(41	)		(41	)
Accretion of unrealized losses on securities transferred to held-to-maturity, net of $115 in taxes		—		—			—		—			326			326
Pension liability adjustment, net of $281 in taxes		—		—			—		—			721			721
Conversion of Class B Common Stock to Class A Common Stock, 1,520 shares		2		(2	)		—		—			—			—
Cash dividends paid, Class A common stock, $.24 per share		—		—			—		(877	)		—			(877	)
Cash dividends paid, Class B common stock, $.12 per share		—		—			—		(230	)		—			(230	)

Balance at June 30, 2020	$	3,653	$	1,915		$	12,292	$	357,595		$	(23,253	)	$	352,202

Balance at December 31, 2020	$	3,656	$	1,912		$	12,292	$	378,699		$	(26,150	)	$	370,409
Net income		—		—			—		21,593			—			21,593
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period, net of $433 in taxes		—		—			—		—			1,140			1,140
Accretion of unrealized losses on securities transferred to held-to-maturity, net of $106 in taxes		—		—			—		—			263			263
Pension liability adjustment, net of $317 in taxes		—		—			—		—			812			812
Conversion of Class B Common Stock to Class A Common Stock, 6,100 shares		6		(6	)		—		—			—			—
Cash dividends paid, Class A common stock, $0.36 per share		—		—			—		(1,318	)		—			(1,318	)
Cash dividends paid, Class B common stock, $0.18 per share		—		—			—		(344	)		—			(344	)

Balance at June 30, 2021	$	3,662	$	1,906		$	12,292	$	398,630		$	(23,935	)	$	392,555

See accompanying notes to unaudited consolidated interim financial statements.

Page 8 of 49

Century Bancorp, Inc.

Consolidated Statements of Cash Flows (unaudited)


	For the Six Months Ended June 30,
	2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	21,593		$	19,722
Adjustments to reconcile net income to net cash provided by operating activities:
Net (gain) loss on equity securities		(29	)		19
(Credit) provision for loan losses		(550	)		2,775
Deferred income taxes		(948	)		(795	)
Net depreciation and amortizati o n (accretion)		1,405			(1,029	)
Decrease in accrued interest receivable		161			1,020
Decrease in other assets		201			3,337
Increase in other liabilities		5,851			850

Net cash provided by operating activities		27,684			25,899


CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemptions of Federal Home Loan Bank of Boston stock		1,767			10,701
Purchase of Federal Home Loan Bank of Boston stock		—			(4,601	)
Proceeds from calls/maturities of securities available-for-sale		68,112			34,603
Purchase of securities available-for-sale		(16,055	)		(73,093	)
Proceeds from calls/maturities of securities held-to-maturity		518,044			319,328
Purchase of securities held-to-maturity		(1,358,830	)		(392,637	)
Net increase in loans		(3,273	)		(371,792	)
Bank owned life insurance purchases		—			(6,000	)
Capital expenditures		(3,522	)		(4,010	)

Net cash used in investing activities		(793,757	)		(487,501	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in time deposits		(112,664	)		55,049
Net increase in demand, savings, money market and NOW deposits		1,033,622			656,808
Cash dividends		(1,662	)		(1,107	)
Net increase (decrease) in securities sold under agreements to repurchase		16,212			(61,073	)
Net decrease in other borrowed funds		(57,980	)		(218,470	)

Net cash provided by financing activities		877,528			431,207

Net increase (decrease) in cash and cash equivalents		111,455			(30,395	)
Cash and cash equivalents at beginning of period		374,000			258,693

Cash and cash equivalents at end of period	$	485,455		$	228,298

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	12,969		$	25,153
Income taxes		3,580			750
Change in unrealized gains (losses) on securities available-for-sale,
net of taxes		1,140			(41	)
Change in unrealized losses on securities transferred to held-to-maturity,
net of taxes		263			326
Pension liability adjustment, net of taxes		812			721

See accompanying notes to unaudited consolidated interim financial statements.

Page 49 of 4549

~~Table of Contents~~

Century Bancorp, Inc.

~~Consolidated Statements of Income (unaudited)~~

~~(In thousands, except share data)~~

Three months ended
March 31,


2021
   2020
Interest income

Loans

$
21,605

   $ 22,199
Securities
held-to-maturity


13,117

   15,293
Securities
available-for-sale


630

   1,693
Federal funds sold and interest-bearing deposits in other banks


179

   610

Total interest income


35,531

   39,795

Interest expense

Savings and NOW deposits


1,118

   3,725
Money market accounts


2,886

   5,572
Time deposits


1,581

   3,172
Securities sold under agreements to repurchase


141

   626
Other borrowed funds and subordinated debentures


1,238

   1,499

Total interest expense


6,964

   14,594

Net interest income


28,567

   25,201
(Credit) provision for loan losses


(550
)
   1,075

Net interest income after (credit) provision for loan losses


29,117

   24,126
Other operating income

Service charges on deposit accounts


2,218

   2,296
Lockbox fees


996

   930
Other income


989

   1,084

Total other operating income


4,203

   4,310

Operating expenses

Salaries and employee benefits


12,250

   11,371
Occupancy


1,702

   1,515
Equipment


949

   837
Other


5,970

   4,450

Total operating expenses


20,871

   18,173

Income before income taxes


12,449

   10,263
Provision for income taxes


1,679

   597

Net income

$
10,770

   $ 9,666

Share data:

Weighted average number of shares outstanding, basic

Class A


3,656,469

   3,652,349
Class B


1,911,440

   1,915,560
Weighted average number of shares outstanding, diluted

Class A


5,567,909

   5,567,909
Class B


1,911,440

   1,915,560
Basic earnings per share:

Class A

$
2.34

   $ 2.10
Class B

$
1.17

   $ 1.05
Diluted earnings per share

Class A

$
1.93

   $ 1.74
Class B

$
1.17

   $ 1.05

~~See accompanying notes to unaudited consolidated interim financial statements.~~

~~Page 5 of 45~~

~~Table of Contents~~

~~Century Bancorp, Inc.~~

~~Consolidated Statements of Comprehensive Income (unaudited)~~

~~(In thousands)~~

Three months ended
March 31,


2021
   2020
Net income

$
10,770

   $ 9,666
Other comprehensive income
,
net of tax:

Unrealized gains (losses) on securities:

Unrealized gains (losses) arising during period


464

   (1,531 )
Less: reclassification adjustment for gains included in net income


—

   —

Total unrealized gains (losses) on securities


464

   (1,531 )
Accretion of net unrealized losses transferred


114

   164
Defined benefit pension plans:

Amortization of prior service cost and loss included
in net periodic benefit cost


406

   360

Other comprehensive income (loss)


984

   (1,007 )

Comprehensive income

$
11,754

   $ 8,659

~~See accompanying notes to unaudited consolidated interim financial statements.~~

~~Page 6 of 45~~

~~Table of Contents~~

~~Century Bancorp, Inc.~~

~~Consolidated Statements of Changes in Stockholders’ Equity (unaudited)~~

~~For the Three Months Ended March 31, 2021 and 2020~~

Class A
Common
Stock

Class B
Common
Stock

Additional
Paid-In

Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total
Stockholders’
Equity

   (In thousands)
Balance at December 31, 2019
   $ 3,651    $ 1,917 $ 12,292    $ 338,980 $ (24,259 ) $ 332,581
Net income
   —      —   —      9,666 —   9,666
Other comprehensive income, net of tax:

Unrealized holding gains (losses) arising during period, net of $548 in taxes
   —      —   —      —   (1,531 ) (1,531 )
Accretion of unrealized losses on securities transferred to
held-to-maturity,
net of $58 in taxes
   —      —   —      —   164 164
Pension liability adjustment, net of $141 in taxes
   —      —   —      —   360 360
Conversion of Class B Common Stock to Class A Common Stock, 1,400 shares
   1    (1 ) —      —   —   —
Cash dividends paid, Class A common stock, $.12 per share
   —      —   —      (438 ) —   (438 )
Cash dividends paid, Class B common stock, $.06 per share
   —      —   —      (115 ) —   (115 )

Balance at March 31, 2020
   $ 3,652    $ 1,916 $ 12,292    $ 348,093 $ (25,266 ) $ 340,687

Balance at December 31, 2020
   $ 3,656    $ 1,912 $ 12,292    $ 378,699 $ (26,150 ) $ 370,409
Net income
   —      —   —      10,770 —   10,770
Other comprehensive income, net of tax:

Unrealized holding
gains (losses)
arising during period, net of $170 in taxes
   —      —   —      —   464 464
Accretion of unrealized losses on securities transferred to
held-to-maturity,
net of $41 in taxes
   —      —   —      —   114 114
Pension liability adjustment, net of $159 in taxes
   —      —   —      —   406 406
Conversion of Class B Common Stock to Class A Common Stock, 1,000 shares
   1    (1 ) —      —   —   —
Cash dividends paid, Class A common stock, $0.18 per share
   —      —   —      (658 ) —   (658 )
Cash dividends paid, Class B common stock, $0.09 per share
   —      —   —      (173 ) —   (173 )

Balance at March 31, 2021

$
3,657


$
1,911

$
12,292


$
388,638

$
(25,166
)

$
381,332

~~See accompanying notes to unaudited consolidated interim financial statements.~~

~~Page 7 of 45~~

~~Table of Contents~~

~~Century Bancorp, Inc.~~

~~Consolidated Statements of Cash Flows (unaudited)~~

For the Three Months

Ended

March 31,


2021
   2020
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
10,770

   $ 9,666
Adjustments to reconcile net income to net cash provided by operating activities:

Net (gain) loss on equity securities


(54
)
   79
(Credit) provision for loan losses


(550
)
   1,075
Deferred income taxes


(1,007
)
   (114 )
Net depreciation and amortization (accretion)


528

   (578 )
(Increase) decrease in accrued interest receivable


(699
)
   112
Decrease in other assets


898

   2,359
Increase (decrease) in other liabilities


5,325

   (336 )

Net cash provided by operating activities


15,211

   12,263

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from redemptions of Federal Home Loan Bank of Boston stock


—

   6,831
Purchase of Federal Home Loan Bank of Boston stock


—

   (4,601 )
Proceeds from calls/maturities of securities
available-for-sale


25,993

   20,734
Purchase of securities
available-for-sale


(6,770
)
   (39,719 )
Proceeds from calls/maturities of securities
held-to-maturity


257,255

   123,723
Purchase of securities
held-to-maturity


(964,868
)
   (70,171 )
Net decrease (increase) in loans


3,092

   (72,621 )
Bank owned life insurance purchases


—

   (6,000 )
Capital expenditures


(1,565
)
   (3,084 )

Net cash used in investing activities


(686,863
)
   (44,908 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net (decrease) increase in time deposits


(65,359
)
   57,402
Net increase in demand, savings, money market and NOW deposits


1,009,180

   104,999
Cash dividends


(831
)
   (553 )
Net decrease in securities sold under agreements to repurchase


(3,335
)
   (46,050 )
Net decrease in other borrowed funds


(25,240
)
   (58,835 )

Net cash provided by financing activities


914,415

   56,963

Net increase in cash and cash equivalents


242,763

   24,318
Cash and cash equivalents at beginning of period


374,000

   258,693

Cash and cash equivalents at end of period

$
616,763

   $ 283,011

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid (received) during the period for:

Interest

$
7,127

   $ 14,711
Income taxes


1,075

   300
Change in unrealized gains (losses) on securities
available-for-sale,
net of taxes


464

   (1,531 )
Change in unrealized losses on securities transferred to
held-to-maturity,
net of taxes


114

   164
Pension liability adjustment, net of taxes


406

   360
Change in due to broker


1,310

   5,500

~~See accompanying notes to unaudited consolidated interim financial statements.~~

~~Page 8 of 45~~

~~Table of Contents~~

~~Century Bancorp, Inc.~~

Notes to Unaudited Consolidated Interim Financial Statements

~~Three~~

Six Months Ended ~~March 31,~~June 30, 2021 and 2020

Note 1. 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, New Hampshire, Rhode Island, Connecticut, New York, Virginia, Washington D.C, and Pennsylvania. As a bank holding company, the Company is subject to the regulation and supervision of the Board of Governors of the Federal Reserve System (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 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 interest 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 1 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. The Company’s Quarterly Report on Form

10-Q

should be read in conjunction with the Company’s Annual Report on Form

10-K

for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission and which provides a summary of the Company’s significant accounting principles. The interim results of consolidated operations are not necessarily indicative of the results for the entire year. Certain reclassifications are made to prior-year amounts whenever necessary to conform with the current-year presentation.

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 a review of factors, including historical

charge-off

rates with additional allocations based on qualitative risk factors for each category and general economic factors. 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. Certain risks and uncertainties remain in the allowance for loan losses as a result of the

COVID-19

pandemic that occurred during 2020. Future provision levels will be dependent upon the length of the economic disruption and the effectiveness of government programs to mitigate the economic impact. 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.~~

Page 910 of 4549

~~Table of Contents~~

Note 2. Securities

Available-for-Sale


	March 31, 2021								December 31, 2020								June 30, 2021								December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)																(in thousands)
SBA Backed Securities	$	43,154	$	0	$	299	$	42,855	$	44,328	$	0	$	289	$	44,039	$	40,406	$	660	$	1	$	41,065	$	44,328	$	0	$	289	$	44,039
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		165,846		1,097		132		166,811		177,239		819		317		177,741		154,763		1,003		134		155,632		177,239		819		317		177,741
Privately Issued Residential Mortgage-Backed Securities		321		5		0		326		330		2		4		328		269		5		0		274		330		2		4		328
Obligations Issued by States and Political Subdivisions		45,668		0		0		45,668		52,276		0		0		52,276		26,747		0		0		26,747		52,276		0		0		52,276
Other Debt Securities		8,100		178		40		8,238		8,100		24		60		8,064		8,100		224		9		8,315		8,100		24		60		8,064

Total	$	263,089	$	1,280	$	471	$	263,898	$	282,273	$	845	$	670	$	282,448	$	230,285	$	1,892	$	144	$	232,033	$	282,273	$	845	$	670	$	282,448

Included in SBA Backed 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 ~~$172,427,000~~$160,723,000 and $183,269,000 at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. Also included in securities

available-for-sale

are securities at fair value pledged for borrowing at the Federal Home Loan Bank of Boston (“FHLBB”) amounting to ~~$28,830,000~~$28,070,000 and $29,885,000 at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. There were 0 sales of

available-for-sale

securities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020, respectively.

Debt securities of U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities primarily refer to debt securities of Fannie Mae and Freddie Mac.

The following table shows the maturity distribution of the Company’s securities

available-for-sale

at ~~March 31,~~June 30, 2021.


	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in thousands)				(in thousands)
Within one year	$	48,041	$	48,047	$	28,420	$	28,442
After one but within five years		104,714		105,250		96,690		97,477
After five but within ten years		89,033		89,484		91,931		92,687
More than 10 years		21,301		21,117		13,244		13,427

Total	$	263,089	$	263,898	$	230,285	$	232,033

The weighted average remaining life of investment securities

available-for-sale

at ~~March 31,~~June 30, 2021 was ~~5.0~~5.3 years. 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. Also ~~$210,125,000~~$195,045,000 of the securities are floating rate or adjustable rate and reprice prior to maturity.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not more likely than not that it will be required to sell these debt securities before the anticipated recovery of its remaining amortized cost. In making its other-than-temporary impairment evaluation, the Company considered that the principal and interest on these securities are from issuers that are investment grade.

The unrealized loss on SBA Backed Securities, U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities related primarily to 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 ~~March 31,~~June 30, 2021 or December 31, 2020.

Page 1011 of 4549

~~Table of Contents~~

In evaluating the underlying credit quality of a security, management considers several factors such as the credit rating of the obligor 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 to determine the estimated future cash flows of the securities. Factors considered include the level of subordination, current and estimated future default rates, current and estimated prepayment rates, estimated loss severity rates, geographic concentrations and origination dates of underlying loans.

The following table shows the temporarily impaired securities of the Company’s

available-for-sale

portfolio at ~~March 31,~~June 30, 2021. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 31 and 279 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of ~~151~~140 holdings at ~~March 31,~~June 30, 2021.


	March 31, 2021												June 30, 2021
	Less than 12 months				12 months or longer				Total				Less than 12 months				12 months or longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)												(in thousands)
SBA Backed Securities	$	0	$	0	$	42,856	$	299	$	42,856	$	299	$	0	$	0	$	98	$	1	$	98	$	1
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		346		5		17,288		127		17,634		132		0		0		15,742		134		15,742		134
Privately Issued Residential Mortgage-Backed Securities		—		—		0		0		0		0		—		—		0		0		0		0
Obligations Issued by States and Political Subdivisions		—		—		—		—		—		—		—		—		—		—		—		—
Other Debt Securities		2,461		39		1,299		1		3,760		40		1,491		8		100		1		1,591		9

Total temporarily impaired securities	$	2,807	$	44	$	61,443	$	427	$	64,250	$	471	$	1,491	$	8	$	15,940	$	136	$	17,431	$	144

The following table shows the temporarily impaired securities of the Company’s

available-for-sale

portfolio at December 31, 2020. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 13 and 21 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 153 holdings at December 31, 2020.


	December 31, 2020												December 31, 2020
	Less than 12 months				12 months or longer				Total				Less than 12 months				12 months or longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)												(in thousands)
SBA Backed Securities	$	13,839	$	42	$	30,200	$	247	$	44,039	$	289	$	13,839	$	42	$	30,200	$	247	$	44,039	$	289
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		18,188		50		33,617		267		51,805		317		18,188		50		33,617		267		51,805		317
Privately Issued Residential Mortgage-Backed Securities		—		—		210		4		210		4		—		—		210		4		210		4
Obligations Issued by States and Political Subdivisions		—		—		—		—		—		—		—		—		—		—		—		—
Other Debt Securities		3,942		58		1,298		2		5,240		60		3,942		58		1,298		2		5,240		60

Total temporarily impaired securities	$	35,969	$	150	$	65,325	$	520	$	101,294	$	670	$	35,969	$	150	$	65,325	$	520	$	101,294	$	670

Page 1112 of 4549

~~Table of Contents~~

Note 3. Investment Securities

Held-to-Maturity


	March 31, 2021								December 31, 2020								June 30, 2021								December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)																(in thousands)
U.S. Government Sponsored Enterprises	$	381,077	$	218	$	9,017	$	372,278	$	244,220	$	389	$	866	$	243,743	$	356,080	$	131	$	5,119	$	351,092	$	244,220	$	389	$	866	$	243,743
SBA Backed Securities		36,330		1,142		0		37,472		37,783		2,002		—		39,785		34,626		1,713		0		36,339		37,783		2,002		—		39,785
U.S. Government Sponsored Enterprises Mortgage- Backed Securities		2,799,769		45,772		32,388		2,813,153		2,227,085		69,522		1,032		2,295,575
U.S. Government Sponsored Enterprises Mortgage-Backed Securities																		2,959,855		39,856		26,411		2,973,300		2,227,085		69,522		1,032		2,295,575

Total	$	3,217,176	$	47,132	$	41,405	$	3,222,903	$	2,509,088	$	71,913	$	1,898	$	2,579,103	$	3,350,561	$	41,700	$	31,530	$	3,360,731	$	2,509,088	$	71,913	$	1,898	$	2,579,103

Included in total investment securities

held-to-maturity

are securities pledged to secure public deposits and repurchase agreements at fair value amounting to ~~$2,038,453,000~~$2,315,698,000 and $1,866,989,000 at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. Also included are securities pledged for borrowing at the FHLBB at fair value amounting to ~~$484,029,000~~$729,455,000 and $537,367,000 at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. There were 0 sales of

held-to-maturity

securities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 or ~~March 31,~~June 30, 2020, respectively.

At ~~March 31,~~June 30, 2021 and December 31, 2020, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises. Debt securities of U.S. Government Sponsored Enterprises and U.S. Government Sponsored Enterprises Mortgage-Backed Securities primarily refer to debt securities of Fannie Mae and Freddie Mac.

The following table shows the maturity distribution of the Company’s securities

held-to-maturity

at ~~March 31,~~June 30, 2021.


	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in thousands)				(in thousands)
Within one year	$	84,709	$	85,698	$	53,832	$	54,279
After one but within five years		1,707,454		1,738,266		1,889,085		1,914,143
After five but within ten years		1,425,013		1,398,939		1,407,644		1,392,309
More than ten years		0		0		0		0

Total	$	3,217,176	$	3,222,903	$	3,350,561	$	3,360,731

The weighted average remaining life of investment securities

held-to-maturity

at ~~March 31,~~June 30, 2021 was ~~3.6~~4.7 years. Included in the weighted average remaining life calculation at ~~March 31,~~June 30, 2021 were ~~$320,611,000~~$265,612,000 of U.S. Government Sponsored Enterprises 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. Also ~~$81,000~~$72,000 of the securities are floating rate or adjustable rate and reprice prior to maturity.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not more likely than not that it will be required to sell these debt securities before the anticipated recovery of their remaining amortized costs. 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.

Page 1213 of 4549

~~Table of Contents~~

The unrealized loss on U.S. Government Sponsored Enterprises, SBA Backed Securities, and U.S. Government Sponsored Enterprises Mortgage-Backed Securities related primarily to interest rates and not credit quality, and because the Company does not intend to sell any of these securities and it is not more likely than not that it will be required to sell these securities before the anticipated recovery of the remaining amortized cost, the Company does not consider these investments to be other-than-temporarily impaired at ~~March 31,~~June 30, 2021 or December 31, 2020. In evaluating the underlying credit quality of a security, management considers several factors such as the credit rating of the obligor and the issuer, if applicable. Internal reviews of issuer financial statements are performed as deemed necessary.

The following table shows the temporarily impaired securities of the Company’s

held-to-maturity

portfolio ~~March 31,~~June 30, 2021. 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 or longer. There are ~~156~~168 and 01 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of ~~655~~659 holdings at ~~March 31,~~June 30, 2021.


	March 31, 2021												June 30, 2021
	Less Than 12 Months				12 Months or Longer				Total				Less Than 12 Months				12 Months or Longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)												(in thousands)
US Government Sponsored Enterprises	$	346,560	$	9,017	$	0	$	0	$	346,560	$	9,017	$	140,480	$	5,119	$	0	$	0	$	140,480	$	5,119
SBA Backed Securities		0		0		0		0		0		0		0		0		0		0		0		0
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		1,332,059		32,388		0		0		1,332,059		32,388		375,533		26,384		2,491		27		378,024		26,411

Total temporarily impaired securities	$	1,678,619	$	41,405	$	0	$	0	$	1,678,619	$	41,405	$	516,013	$	31,503	$	2,491	$	27	$	518,504	$	31,530

The following table shows the temporarily impaired securities of the Company’s

held-to-maturity

portfolio at December 31, 2020. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 53 and 0 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 600 holdings at December 31, 2020.


	December 31, 2020												December 31, 2020
	Less Than 12 Months				12 Months or Longer				Total				Less Than 12 Months				12 Months or Longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)												(in thousands)
U.S. Government Sponsored Enterprises	$	162,870	$	866	$	0	$	0	$	162,870	$	866	$	162,870	$	866	$	0	$	0	$	162,870	$	866
SBA Backed Securities		0		0		0		0		0		0		0		0		0		0		0		0
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		302,401		1,032		0		0		302,401		1,032		302,401		1,032		0		0		302,401		1,032

Total temporarily impaired securities	$	465,271	$	1,898	$	0	$	0	$	465,271	$	1,898	$	465,271	$	1,898	$	0	$	0	$	465,271	$	1,898

Page 1314 of 4549

~~Table of Contents~~

Note 4. 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, 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 periods indicated.

   Three months ended
March 31,

2021
   2020
   (in thousands)
Allowance for loan losses, beginning of period

$
35,486

   $ 29,585
Loans charged off


(67
)
   (62 )
Recoveries on loans previously
charged-off


83

   206

Net recoveries (charge-offs)


16

   144
(Credit) provision charged to expense


(550
)
   1,075

Allowance for loan losses, end of period

$
34,952

   $ 30,804

~~Further information pertaining to the allowance for loan losses for the three months ending March 31, 2021 is as follows:~~

Construction
and Land
Development

Commercial
and
Industrial

Municipal

Commercial
Real Estate

Residential
Real Estate

Consumer

Home
Equity

Unallocated

Total

(in thousands)

Allowance for loan losses:

Balance at December 31, 2020

$
429

$
16,713

$
2,804

$
11,751

$
2,111

$
241

$
1,208

$
229

$
35,486

Charge-offs

—

—

—

—

—

(67
)

—

—

(67
)
Recoveries

—

3

—

—

—

80

—

—

83

(Credit) provision

(136
)

(246
)

33

(96
)

(44
)

(60
)

(159
)

158

(550
)

Ending balance at

March 31, 2021

$
293

$
16,470

$
2,837

$
11,655

$
2,067

$
194

$
1,049

$
387

$
34,952

Amount of allowance for loan losses
for loans deemed to be impaired

$
—

$
125

$
—

$
74

$
—

$
—

$
—

$
—

$
199

Amount of allowance for loan losses
for loans not deemed to be impaired

$
293

$
16,345

$
2,837

$
11,581

$
2,067

$
194

$
1,049

$
387

$
34,753

Loans:

Ending balance

$
7,854

$
1,315,295

$
137,073

$
796,660

$
460,123

$
19,987

$
255,770

$
—

$
2,992,762

Loans deemed to be impaired

$
—

$
357

$
—

$
2,300

$
—

$
—

$
—

$
—

$
2,657

Loans not deemed to be impaired

$
7,854

$
1,314,938

$
137,073

$
794,360

$
460,123

$
19,987

$
255,770

$
—

$
2,990,105


	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
	(in thousands)						(in thousands)
Allowance for loan losses, beginning of period	$	34,952		$	30,804		$	35,486		$	29,585
Loans charged off		(29	)		(17	)		(96	)		(79	)
Recoveries on loans previously charged-off		26			29			109			235

Net recoveries (charge-offs)		(3	)		12			13			156
(Credit) provision charged to expense		—			1,700			(550	)		2,775

Allowance for loan losses, end of period	$	34,949		$	32,516		$	34,949		$	32,516

Page 1415 of 4549

~~Table of Contents~~

Further information pertaining to the allowance for loan losses for the three months ending ~~March 31, 2020~~June 30, 2021 is as follows:


	Construction and Land Development			Commercial and Industrial			Municipal		Commercial Real Estate			Residential Real Estate		Consumer			Home Equity		Unallocated		Total
	(in thousands)																							Construction and Land Development			Commercial and Industrial		Municipal			Commercial Real Estate		Residential Real Estate			Consumer			Home Equity			Unallocated		Total
Allowance for loan losses:																								(in thousands)
Balance at December 31, 2019	$	331		$	11,596		$	2,566	$	11,464		$	2,194	$	312		$	1,065	$	57	$	29,585
Balance at March 31, 2021																								$	293		$	16,470	$	2,837		$	11,655	$	2,067		$	194		$	1,049		$	387	$	34,952
Charge-offs		—			(5	)		—		—			—		(57	)		—		—		(62	)		—			—		—			—		—			(29	)		—			—		(29	)
Recoveries		—			164			—		—			—		37			5		—		206			—			2		—			—		—			24			—			—		26
Provision		(85	)		673			323		(343	)		255		4			67		181		1,075
Provision (credit)																									(73	)		30		(20	)		53		(38	)		15			(92	)		125		—

Ending balance at March 31, 2020	$	246		$	12,428		$	2,889	$	11,121		$	2,449	$	296		$	1,137	$	238	$	30,804
Ending balance at June 30, 2021																								$	220		$	16,502	$	2,817		$	11,708	$	2,029		$	204		$	957		$	512	$	34,949

Amount of allowance for loan losses for loans deemed to be impaired	$	—		$	—		$	—	$	85		$	—	$	—		$	—	$	—	$	85		$	—		$	9	$	—		$	74	$	—		$	—		$	—		$	—	$	83

Amount of allowance for loan losses for loans not deemed to be impaired	$	246		$	12,428		$	2,889	$	11,036		$	2,449	$	296		$	1,137	$	238	$	30,719		$	220		$	16,493	$	2,817		$	11,634	$	2,029		$	204		$	957		$	512	$	34,866

Loans:
Ending balance	$	6,493		$	867,599		$	141,588	$	761,464		$	393,338	$	21,039		$	307,373	$	—	$	2,498,894		$	6,404		$	1,296,399	$	138,771		$	813,163	$	471,671		$	20,611		$	252,114		$	—	$	2,999,133

Loans deemed to be impaired	$	—		$	623		$	—	$	2,322		$	—	$	—		$	—	$	—	$	2,945		$	—		$	224	$	—		$	2,271	$	—		$	—		$	—		$	—	$	2,495

Loans not deemed to be impaired	$	6,493		$	866,976		$	141,588	$	759,142		$	393,338	$	21,039		$	307,373	$	—	$	2,495,949		$	6,404		$	1,296,175	$	138,771		$	810,892	$	471,671		$	20,611		$	252,114		$	—	$	2,996,638

Further information pertaining to th

allowance for loan losses for the six months ending June 30, 2021 is as follows:


	Construction and Land Development			Commercial and Industrial			Municipal		Commercial Real Estate			Residential Real Estate			Consumer			Home Equity			Unallocated		Total
Allowance for loan losses:	(in thousands)
Balance at December 31, 2020	$	429		$	16,713		$	2,804	$	11,751		$	2,111		$	241		$	1,208		$	229	$	35,486
Charge-offs		—			—			—		—			—			(96	)		—			—		(96	)
Recoveries		—			5			—		—			—			104			—			—		109
Provision (credit)		(209	)		(216	)		13		(43	)		(82	)		(45	)		(251	)		283		(550	)

Ending balance at June 30, 2021	$	220		$	16,502		$	2,817	$	11,708		$	2,029		$	204		$	957		$	512	$	34,949

Amount of allowance for loan losses for loans deemed to be impaired	$	—		$	9		$	—	$	74		$	—		$	—		$	—		$	—	$	83

Amount of allowance for loan losses for loans not deemed to be impaired	$	220		$	16,493		$	2,817	$	11,634		$	2,029		$	204		$	957		$	512	$	34,866

Loans:
Ending balance	$	6,404		$	1,296,399		$	138,771	$	813,163		$	471,671		$	20,611		$	252,114		$	—	$	2,999,133

Loans deemed to be impaired	$	—		$	224		$	—	$	2,271		$	—		$	—		$	—		$	—	$	2,495

Loans not deemed to be impaired	$	6,404		$	1,296,175		$	138,771	$	810,892		$	471,671		$	20,611		$	252,114		$	—	$	2,996,638

There was a credit to the ~~provision~~p

ovision for losses of $550,000 for the ~~quarter~~six m

nths ended ~~March 31, 2021, compared to a provision of $1,075,000 for the quarter ended March 31, 2020.~~June 30, 2021. The credit provision for the first ~~quarter~~six months of 2021 was primarily attributable to ~~a decline in loan balances exclusive of U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans and~~ a reduction in specific allocations to the allowance for loan ~~losses. As~~losses and a reduction in the historical experience reserve allocation.

Page 16 of ~~March 31, 2021, PPP loans totaled approximately 1,117 loans for approximately $213,000,000. These types of loans are categorized as commercial and industrial and are 100% guaranteed by~~49

Further information pertaining to the ~~SBA and require 0~~ allowance for loan ~~losses.~~losses for the three months ending June 30, 2020 is as follows:


	Construction and Land Development		Commercial and Industrial			Municipal			Commercial Real Estate		Residential Real Estate		Consumer			Home Equity		Unallocated			Total
Allowance for loan losses:	(in thousands)
Balance at March 31, 2020	$	246	$	12,428		$	2,889		$	11,121	$	2,449	$	296		$	1,137	$	238		$	30,804
Charge-offs		—		(6	)		—			—		—		(11	)		—		—			(17	)
Recoveries		—		6			—			—		—		23			—		—			29
Provision		43		693			(21	)		182		645		(19	)		328		(151	)		1,700

Ending balance at June 30, 2020	$	289	$	13,121		$	2,868		$	11,303	$	3,094	$	289		$	1,465	$	87		$	32,516

Amount of allowance for loan losses for loans deemed to be impaired	$	—	$	15		$	—		$	80	$	—	$	—		$	—	$	—		$	95

Amount of allowance for loan losses for loans not deemed to be impaired	$	289	$	13,106		$	2,868		$	11,223	$	3,094	$	289		$	1,465	$	87		$	32,421

Loans:
Ending balance	$	6,513	$	1,155,592		$	153,017		$	764,886	$	400,867	$	19,857		$	297,355	$	—		$	2,798,087

Loans deemed to be impaired	$	—	$	180		$	—		$	2,716	$	235	$	—		$	—	$	—		$	3,131

Loans not deemed to be impaired	$	6,513	$	1,155,412		$	153,017		$	762,170	$	400,632	$	19,857		$	297,355	$	—		$	2,794,956

Further information pertai

ing to the allowance for loan losses for the six months ending June 30, 2020 is as follows:


	Construction and Land Development			Commercial and Industrial			Municipal		Commercial Real Estate			Residential Real Estate		Consumer			Home Equity		Unallocated		Total
Allowance for loan losses:	(in thousands)
Balance at December 31, 2019	$	331		$	11,596		$	2,566	$	11,464		$	2,194	$	312		$	1,065	$	57	$	29,585
Charge-offs		—			(11	)		—		—			—		(68	)		—		—		(79	)
Recoveries		—			170			—		—			—		60			5		—		235
Provision		(42	)		1,366			302		(161	)		900		(15	)		395		30		2,775

Ending balance at June 30, 2020	$	289		$	13,121		$	2,868	$	11,303		$	3,094	$	289		$	1,465	$	87	$	32,516

Amount of allowance for loan losses for loans deemed to be impaired	$	—		$	15		$	—	$	80		$	—	$	—		$	—	$	—	$	95

Amount of allowance for loan losses for loans not deemed to be impaired	$	289		$	13,106		$	2,868	$	11,223		$	3,094	$	289		$	1,465	$	87	$	32,421

Loans:
Ending balance	$	6,513		$	1,155,592		$	153,017	$	764,886		$	400,867	$	19,857		$	297,355	$	—	$	2,798,087

Loans deemed to be impaired	$	—		$	180		$	—	$	2,716		$	235	$	—		$	—	$	—	$	3,131

Loans not deemed to be impaired	$	6,513		$	1,155,412		$	153,017	$	762,170		$	400,632	$	19,857		$	297,355	$	—	$	2,794,956

There was a provision fo

loan losses of $2,775,000 for the six months ended June 30, 2020. The provision for the first ~~quarter~~six months of 2020 was primarily ~~the~~a result of provisions related to the onset of the

COVID-19

~~pandemic~~pandemic.

The Company utilizes a ~~six grade~~

six-grade

internal loan rating system for commercial real estate, construction, commercial, and municipal loans as follows:

Loans rated

1-3

(Pass):

Loans in this category are considered “pass” rated loans with low to average risk.

Loans rated 4 (Monitor):

These loans represent classified loans that management is closely monitoring for credit quality. These loans have had or may have minor credit quality deterioration as of ~~March 31,~~June 30, 2021 and December 31, 2020.

Page 17 of 49

Loans rated 5 (Substandard):

Substandard loans represent classified loans that management is closely monitoring for credit quality. These loans have had more significant credit quality deterioration as of ~~March 31,~~June 30, 2021 and December 31, 2020.

Loans rated 6 (Doubtful):

Doubtful loans represent classified loans that management is closely monitoring for credit quality. These loans had more significant credit quality deterioration as of ~~March 31,~~June 30, 2021 and December 31, 2020 and full collectability is doubtful.

Impaired:

Impaired loans represent classified loans that management is closely monitoring for credit quality. A loan is classified as impaired when it is probable that the Company will be unable to collect all amounts due.

~~Page 15 of 45~~

~~Table of Contents~~

The following table presents the Company’s loans by risk rating at ~~March 31,~~June 30, 2021.


									Construction and Land Development		Commercial and Industrial		Municipal		Commercial Real Estate
	Construction and Land Development		Commercial and Industrial		Municipal		Commercial Real Estate		(in thousands)
Grade:	(in thousands)
1-3 (Pass)	$	7,854	$	1,310,993	$	137,073	$	770,872	$	6,404	$	1,292,230	$	138,771	$	787,676
4 (Monitor)		—		3,945		—		23,488		—		3,945		—		23,216
5 (Substandard)		—		—		—		—		—		—		—		—
6 (Doubtful)		—		—		—		—		—		—		—		—
Impaired		—		357		—		2,300		—		224		—		2,271

Total	$	7,854	$	1,315,295	$	137,073	$	796,660	$	6,404	$	1,296,399	$	138,771	$	813,163

The following table presents the Company’s loans by risk rating at December 31, 2020.


									Construction and Land Development		Commercial and Industrial		Municipal		Commercial Real Estate
	Construction and Land Development		Commercial and Industrial		Municipal		Commercial Real Estate		(in thousands)
Grade:	(in thousands)
1-3 (Pass)	$	10,909	$	1,309,861	$	137,607	$	761,101	$	10,909	$	1,309,861	$	137,607	$	761,101
4 (Monitor)		—		3,945		—		23,795		—		3,945		—		23,795
5 (Substandard)		—		—		—		—		—		—		—		—
6 (Doubtful)		—		—		—		—		—		—		—		—
Impaired		—		439		—		4,940		—		439		—		4,940

Total	$	10,909	$	1,314,245	$	137,607	$	789,836	$	10,909	$	1,314,245	$	137,607	$	789,836

Page 18 of 49

Credit ratings issued by national organizations were utilized as credit quality indicators as presented in the following table at ~~March 31,~~June 30, 2021 and are included within the total loan portfolio.


	Commercial and Industrial		Municipal		Commercial Real Estate		Total		Commercial and Industrial		Municipal		Commercial Real Estate		Total
	(in thousands)								(in thousands)
Credit Rating:
Aaa – Aa3	$	705,387	$	73,758	$	36,519	$	815,664	$	761,705	$	75,825	$	36,184	$	873,714
A1 – A3		182,559		7,103		145,096		334,758		181,928		6,983		143,001		331,912
Baa1 – Baa3		50,000		51,132		146,930		248,062		50,000		51,133		145,513		246,646
Ba2		—		5,080		—		5,080		—		4,830		—		4,830

Total	$	937,946	$	137,073	$	328,545	$	1,403,564	$	993,633	$	138,771	$	324,698	$	1,457,102

Credit ratings issued byb

national organizations were utilized as credit quality indicators as presented in the following table at December 31, 2020.

   Commercial
and Industrial    Municipal    Commercial
Real Estate    Total
   (in thousands)
Credit Rating:

Aaa – Aa3
   $ 710,955    $ 74,291    $ 38,035    $ 823,281
A1 – A3
   183,123    7,103    145,583    335,809
Baa1 – Baa3
   50,000    51,133    140,905    242,038
Ba2
   —      5,080    —      5,080

Total
   $ 944,078    $ 137,607    $ 324,523    $ 1,406,208

~~Page 16 of 45~~

~~Table of Contents~~


	Commercial and Industrial		Municipal		Commercial Real Estate		Total
	(in thousands)
Credit Rating:
Aaa – Aa3	$	710,955	$	74,291	$	38,035	$	823,281
A1 – A3		183,123		7,103		145,583		335,809
Baa1 – Baa3		50,000		51,133		140,905		242,038
Ba2		—		5,080		—		5,080

Total	$	944,078	$	137,607	$	324,523	$	1,406,208

The Company utilized payment performance as credit quality indicators for the loan types listed below.

Further information pertaining to the allowance for loan losses at ~~March 31,~~June 30, 2021 follows:


	Accruing 30-89 Days Past Due		Non Accrual		Accruing Greater than 90 Days			Total Past Due		Current Loans		Total		Accruing 30-89 Days Past Due		Non Accrual		Accruing Greater than 90 Days		Total Past Due		Current Loans		Total
	(in thousands)													(in thousands)
Construction and land development	$	—	$	—	$	—		$	—	$	7,854	$	7,854	$	—	$	—	$	—	$	—	$	6,404	$	6,404
Commercial and industrial		0		297		0			297		1,314,998		1,315,295		11		164		0		175		1,296,224		1,296,399
Municipal		—		—		—			—		137,073		137,073		—		—		—		—		138,771		138,771
Commercial real estate		—		261		—			261		796,399		796,660		—		251		—		251		812,912		813,163
Residential real estate		1,373		188		—			1,561		458,562		460,123		715		633		—		1,348		470,323		471,671
Consumer and overdrafts		12		7		—			19		19,968		19,987		10		—		—		10		20,601		20,611
Home equity		1,325		189		—	��		1,514		254,256		255,770		685		222		—		907		251,207		252,114

Total	$	2,710	$	942	$	0		$	3,652	$	2,989,110	$	2,992,762	$	1,421	$	1,270	$	0	$	2,691	$	2,996,442	$	2,999,133

Page 19 of 49

Further information pertaining to the allowance for loan losses at December 31, 2020 follows:


	Accruing 30-89 Days Past Due		Non Accrual		Accruing Greater than 90 Days		Total Past Due		Current Loans		Total		Accruing 30-89 Days Past Due		Non Accrual		Accruing Greater than 90 Days		Total Past Due		Current Loans		Total
	(in thousands)												(in thousands)
Construction and land development	$	—	$	—	$	—	$	—	$	10,909	$	10,909	$	—	$	—	$	—	$	—	$	10,909	$	10,909
Commercial and industrial		56		297		90		443		1,313,802		1,314,245		56		297		90		443		1,313,802		1,314,245
Municipal		—		—		—		—		137,607		137,607		—		—		—		—		137,607		137,607
Commercial real estate		—		2,881		—		2,881		786,955		789,836		—		2,881		—		2,881		786,955		789,836
Residential real estate		390		527		—		917		447,519		448,436		390		527		—		917		447,519		448,436
Consumer and overdrafts		21		1		—		22		20,417		20,439		21		1		—		22		20,417		20,439
Home equity		1,001		290		—		1,291		273,066		274,357		1,001		290		—		1,291		273,066		274,357
																��
Total	$	1,468	$	3,996	$	90	$	5,554	$	2,990,275	$	2,995,829	$	1,468	$	3,996	$	90	$	5,554	$	2,990,275	$	2,995,829

Impaired ~~loans~~Loans

A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, the Company measures impairment based on a loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. Loans are

charged-off

when management believes that the collectability of the loan’s principal is not probable. The specific factors that management considers in making the determination that the collectability of the loan’s principal is not probable include: the delinquency status of the loan, the fair value of the collateral, if secured, and the financial strength of the borrower and/or guarantors. For collateral dependent loans, the amount of the recorded investment in a loan that exceeds the fair value of the collateral is

charged-off

against the allowance for loan losses in lieu of an allocation of a specific allowance amount when such an amount has been identified definitively as uncollectible. The Company’s policy for recognizing interest income on impaired loans is contained within Note 1 of the consolidated financial statements contained in the Company’s Annual Report for the fiscal year ended December 31, 2020.

Page 1720 of 4549

~~Table~~

The following is information pertaining to impaired loans for June 30, 2021:


	Carrying Value		Unpaid Principal Balance		Required Reserve		Average Carrying Value for 3 Months Ending 6/30/2021		Interest Income Recognized for 3 Months Ending 6/30/2021		Average Carrying Value for 6 Months Ending 6/30/2021		Interest Income Recognized for 6 Months Ending 6/30/2021
	(in thousands)
With no required reserve recorded:
Construction and land development	$	—	$	—	$	0	$	—	$	—	$	—	$	—
Commercial and industrial		—		—		0		1		—		4		—
Municipal		—		—		0		—		—		—		—
Commercial real estate		251		287		0		256		—		261		—
Residential real estate		—		—		0		—		—		0		—
Consumer		—		—		0		—		—		—		—
Home equity		—		—		0		—		—		—		—

Total	$	251	$	287	$	0	$	257	$	—	$	265	$	—

With required reserve recorded:
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		224		243		9		321		1		347		2
Municipal		—		—		—		—		—		—		—
Commercial real estate		2,020		2,152		74		2,029		21		2,785		41
Residential real estate		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	2,244	$	2,395	$	83	$	2,350	$	22	$	3,132	$	43

Total:
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		224		243		9		322		1		351		2
Municipal		—		—		—		—		—		—		—
Commercial real estate		2,271		2,439		74		2,285		21		3,046		41
Residential real estate		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	2,495	$	2,682	$	83	$	2,607	$	22	$	3,397	$	43

Page 21 of ~~Contents~~49

The following is information pertaining to impaired loans for ~~March 31, 2021:~~

Carrying
Value

Unpaid
Principal
Balance

Required
Reserve

Average
Carrying
Value
for 3
Months
Ending 3/31/21

Interest
Income
Recognized
for 3
Months
Ending 3/31/21


(in thousands)

With no required reserve recorded:

Construction and land development

$
—


$
—


$
0


$
—


$
—

Commercial and industrial


4



5



0



7



0

Municipal


—



—



0



—



—

Commercial real estate


261



296



0



267



—

Residential real estate


—



—



0



0



—

Consumer


—



—



0



—



—

Home equity


—



—



0



—



—


Total

$
265


$
301


$
0


$
274


$
0


With required reserve recorded:

Construction and land development

$
—


$
—


$
—


$
—


$
—

Commercial and industrial


353



373



125



374



1

Municipal


—



—



—



—



—

Commercial real estate


2,039



2,169



74



3,354



20

Residential real estate


—



—



—



—



—

Consumer


—



—



—



—



—

Home equity


—



—



—



—



—


Total

$
2,392


$
2,542


$
199


$
3,728


$
21


Total:

Construction and land development

$
—


$
—


$
—


$
—


$
—

Commercial and industrial


357



378



125



381



1

Municipal


—



—



—



—



—

Commercial real estate


2,300



2,465



74



3,621



20

Residential real estate


—



—



—



0



—

Consumer


—



—



—



—



—

Home equity


—



—



—



—



—


Total

$
2,657


$
2,843


$
199


$
4,002


$
21

~~Page 18 of 45~~

~~Table of Contents~~

~~The following is information pertaining to impaired loans for March 31,~~June 30, 2020:

   Carrying
Value    Unpaid
Principal
Balance    Required
Reserve
Average
Carrying
Value
for 3
Months
Ending
3/31/20

Interest
Income
Recognized
for 3
Months
Ending
3/31/20

   (in thousands)
With no required reserve recorded:

Construction and land development
   $ —      $ —      $ 0      $ —      $ —
Commercial and industrial
   623    641    0      582    1
Municipal
   —      —      0      —      —
Commercial real estate
   155    185    0      157    —
Residential real estate
   —      —      0      —      —
Consumer
   —      —      0      —      —
Home equity
   —      —      0      —      —

Total
   $ 778    $ 826    $ 0      $ 739    $ 1

With required reserve recorded:

Construction and land development
   $ —      $ —      $ —      $ —      $ —
Commercial and industrial
   0      0      0      113    1
Municipal
   —      —      —      —      —
Commercial real estate
   2,167    2,290    85    2,176    22
Residential real estate
   —      —      —      —      —
Consumer
   —      —      —      —      —
Home equity
   —      —      —      —      —

Total
   $ 2,167    $ 2,290    $ 85    $ 2,289    $ 23

Total:

Construction and land development
   $ —      $ —      $ —      $ —      $ —
Commercial and industrial
   623    641    0      695    2
Municipal
   —      —      —      —      —
Commercial real estate
   2,322    2,475    85    2,333    22
Residential real estate
   —      —      —      0      0
Consumer
   —      —      —      —      —
Home equity
   —      —      —      —      —

Total
   $ 2,945    $ 3,116    $ 85    $ 3,028    $ 24


	Carrying Value		Unpaid Principal Balance		Required Reserve		Average Carrying Value for 3 Months Ending 6/30/2020		Interest Income Recognized for 3 Months Ending 6/30/2020		Average Carrying Value for 6 Months Ending 6/30/2020		Interest Income Recognized for 6 Months Ending 6/30/2020
	(in thousands)
With no required reserve recorded:
Construction and land development	$	—	$	—	$	0	$	—	$	—	$	—	$	—
Commercial and industrial		77		97		0		213		1		380		2
Municipal		—		—		0		—		—		—		—
Commercial real estate		612		645		0		346		—		266		—
Residential real estate		235		235		0		118		—		67		—
Consumer		—		—		0		—		—		—		—
Home equity		—		—		0		—		—		—		—

Total	$	924	$	977	$	0	$	677	$	1	$	713	$	2

With required reserve recorded:
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		103		103		15		78		1		94		2
Municipal		—		—		—		—		—		—		—
Commercial real estate		2,104		2,227		80		2,147		22		2,161		44
Residential real estate		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	2,207	$	2,330	$	95	$	2,225	$	23	$	2,255	$	46

Total:
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		180		200		15		291		2		474		4
Municipal		—		—		—		—		—		—		—
Commercial re a l estate		2,716		2,872		80		2,493		22		2,427		44
Residential real estate		235		235		—		118		0		67		0
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	3,131	$	3,307	$	95	$	2,902	$	24	$	2,968	$	48

Troubled debt restructurings (“TDR”) are identified as modifications in which a concession was granted to a customer who was having financial difficulties. This concession may be below market rate, longer amortization/term, or a lower payment amount. The present value calculation of the modifications did not result in an increase in the allowance for these loans beyond any previously established allocations.

There ~~was~~were no ~~TDR~~TDRs made during the ~~three-month~~

six-month

period ended ~~March 31,~~June 30, 2021. Also, there were no commitments to lend additional funds to TDR borrowers. There were no TDRs that subsequently defaulted during the first ~~three~~six months of 2021.

Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for

COVID-19

modifications. The Company can then suspend the requirements under GAAP for loan modifications related to

COVID-19

that would otherwise be categorized as a TDR and suspend any determination of a loan modified as a result of

COVID-19

as being a TDR, including the requirement to determine impairment for accounting purposes.

Page 1922 of 4549

~~Table of Contents~~

As of ~~March 31,~~June 30, 2021, and as a result of

COVID-19

loan modifications, the Company had modifications of 84 loans aggregating ~~$36,152,000,~~$16,508,000, primarily consisting of short-term payment deferrals. Of these modifications, ~~$36,152,000,~~$16,508,000, or 100%, were performing in accordance with their modified terms.

There ~~was~~were no ~~TDR~~TDRs made during the ~~three-month~~

six-month

period ended ~~March 31,~~June 30, 2020. Also, there were no commitments to lend additional funds to TDR borrowers. There were no TDRs that subsequently defaulted during the first ~~three~~six months of 2020.

Note 5. Reclassifications Out of Accumulated Other Comprehensive Income

(a)

~~(a)~~

Amount Reclassified from Accumulated Other Comprehensive Income

Details about Accumulated Other
Comprehensive Income
Components

Three
Months Ended
March 31, 2021
Three
Months Ended
March 31, 2020
Affected Line Item in the Statement
where Net Income is Presented
   (in thousands)
Accretion of unrealized losses transferred
   $ (155 ) $ (222 )
Interest on securities
held-to-maturity
   41 58 Provision for income taxes


$
(114
)
$ (164 ) Net income

Amortization of defined benefit pension items

Prior-service costs
   $ (54
)
(b)
$ (29 )(b) Salaries and employee benefits
Actuarial gains (losses)
   (511
)
(b)
(472 )(b) Salaries and employee benefits

Total before tax


(565
)
(501 ) Income before taxes

Tax (expense) or benefit


159

141 Provision for income taxes

Net of tax

$
(406
)
$ (360 ) Net income


Details about Accumulated Other Comprehensive Income Components	Three Months Ended June 30, 2021				Three Months Ended June 30, 2020				Affected Line Item in the Statement where Net Income is Presented
	(in thousands)
Unrealized gains and losses on available-for-sale securities	$	0			$	0			Net gains on sales of investments
		0				0			Provision for income taxes

	$	0			$	0			Net income


Accretion of unrealized losses transferred	$	(214	)		$	(219	)		Interest on securities held-to- maturity
		65				57			Provision for income taxes

	$	(149	)		$	(162	)		Net income

Amortization of defined benefit pension items
Prior-service costs	$	(54	)	(b)	$	(29	)	(b)	Salaries and employee benefits
Actuarial gains (losses)		(510	)	(b)		(473	)	(b)	Salaries and employee benefits

Total before tax		(564	)			(502	)		Income before taxes

Tax (expense) or benefit		158				141			Provision for income taxes

Net of tax	$	(406	)		$	(361	)		Net income


Details about Accumulated Other Comprehensive Income Components	Six Months Ended June 30, 2021				Six Months Ended June 30, 2020				Affected Line Item in the Statement where Net Income is Presented
	(in thousands)
Unrealized gains and losses on available-for-sale securities	$	0			$	0			Net gains on sales of investments
		0				0			Provision for income taxes

	$	0			$	0			Net income


Accretion of unrealized losses transferred	$	(369	)		$	(441	)		Interest on securities held-to- maturity
		106				115			Provision for income taxes

	$	(263	)		$	(326	)		Net income

Amortization of defined benefit pension items
Prior-service costs	$	(108	)	(b)	$	(58	)	(b)	Salaries and employee benefits
Actuarial gains (losses)		(1,021	)	(b)		(944	)	(b)	Salaries and employee benefits

Total before tax		(1,129	)			(1,002	)		Income before taxes

Tax (expense) or benefit		317				281			Provision for income taxes

Net of tax	$	(812	)		$	(721	)		Net income

(a)	Amount in parentheses indicates reductions to net income.

(b)	These accumulated other comprehensive income components are included in the computation of net periodic pension ~~cost(~~cost (see Employee Benefits footnote (Note 7) for additional details).

Page 23 of 49

Note 6. Earnings per Share (“EPS”)

Class A and Class B shares participate equally in undistributed earnings. Under the Company’s Articles of Organization, the holders of Class A Common Stock are entitled to receive dividends per share equal to at least 200% of dividends paid, if any, from time to time, on each share of Class B Common Stock.

Diluted EPS includes the dilutive effect of common stock equivalents and assumes the conversion of all Class B common stock; basic EPS excludes all common stock equivalents. The Company had no common stock equivalents outstanding for the periods ended ~~March 31,~~June 30, 2021 and 2020.

~~Page 20 of 45~~

~~Table of Contents~~

The following table is a reconciliation of basic EPS and diluted EPS.


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands except share and per share data)	2021		2020		2021		2020		2021		2020
Basic EPS Computation:
Numerator:
Net income, Class A	$	8,538	$	7,658	$	8,588	$	7,967	$	17,126	$	15,618
Net income, Class B		2,232		2,008		2,235		2,089		4,467		4,104
Denominator:
Weighted average shares outstanding, Class A		3,656,469		3,652,349		3,661,569		3,652,469		3,659,019		3,652,409
Weighted average shares outstanding, Class B		1,911,440		1,915,560		1,906,340		1,915,440		1,908,890		1,915,500
Basic EPS, Class A	$	2.34	$	2.10	$	2.35	$	2.18	$	4.68	$	4.28
Basic EPS, Class B		1.17		1.05		1.17		1.09		2.34		2.14

Diluted EPS Computation:
Numerator:
Net income, Class A	$	8,538	$	7,658	$	8,588	$	7,967	$	17,126	$	15,618
Net income, Class B		2,232		2,008		2,235		2,089		4,467		4,104

Total net income, for diluted EPS, Class A computation		10,770		9,666		10,823		10,056		21,593		19,722
Denominator:
Weighted average shares outstanding, basic, Class A		3,656,469		3,652,349		3,661,569		3,652,469		3,659,019		3,652,409
Weighted average shares outstanding, Class B		1,911,440		1,915,560		1,906,340		1,915,440		1,908,890		1,915,500

Weighted average shares outstanding diluted, Class A		5,567,909		5,567,909		5,567,909		5,567,909		5,567,909		5,567,909
Weighted average shares outstanding, Class B		1,911,440		1,915,560		1,906,340		1,915,440		1,908,890		1,915,500
Diluted EPS, Class A	$	1.93	$	1.74	$	1.94	$	1.81	$	3.88	$	3.54
Diluted EPS, Class B		1.17		1.05		1.17		1.09		2.34		2.14

Page 24 of 49

Note 7. Employee Benefits

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 the Century Bancorp, Inc. Supplemental Executive Retirement and Insurance 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 and 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. Life insurance policies, which are owned by the Company, are purchased covering the lives of each participant.

~~Page 21 of 45~~

~~Table of Contents~~

Components of Net Periodic Benefit Cost for the Three Months Ended ~~March 31,~~June 30,


	Pension Benefits						Supplemental Insurance/ Retirement Plan				Pension Benefits						Supplemental Insurance/ Retirement Plan
	2021			2020			2021		2020		2021			2020			2021		2020
	(in thousands)										(in thousands)
Service cos t	$	379		$	344		$	363	$	353
Service cost											$	379		$	344		$	363	$	353
Interest		434			450			434		466		434			450			434		466
Expected return on plan assets		(1,062	)		(952	)		—		—		(1,062	)		(952	)		—		—
Recognized prior service cost (benefit)		—			—			54		29		—			—			54		29
Recognized net actuarial losses		241			261			269		211		241			261			269		212

Net periodic benefit (credit) cost	$	(8	)	$	103		$	1,120	$	1,059	$	(8	)	$	103		$	1,120	$	1,060

Components of Net Periodic Benefit Cost for the Six Months Ended June 30,


	Pension Benefits						Supplemental Insurance/ Retirement Plan
	2021			2020			2021		2020
	(in thousands)
Service cost	$	758		$	688		$	725	$	706
Interest		868			900			869		932
Expected return on plan assets		(2,123	)		(1,904	)		—		—
Recognized prior service cost (benefit)		—			—			108		58
Recognized net actuarial losses		482			522			539		422

Net periodic benefit (credit) cost	$	(15	)	$	206		$	2,241	$	2,118

Approximately ~~$371,000~~$743,000 and ~~$465,000~~$930,000 of costs other than service costs, from the table above, are included in other expenses with the remaining cost included in salaries and employee benefits, for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

Contributions

The Company has contributed $1,302,000 to the Defined Benefit Pension Plan in 2021.

Page 25 of 49

Note 8. Fair Value Measurements

The Company follows FASB ASC

820-10,

Fair Value Measurements and Disclosures and ASU

2016-1,

“Financial Instruments-Overall”

(Subtopic 825-10)

Recognition and Measurement of Financial Assets and Financial Liabilities

, which among other things, requires enhanced disclosures about assets and liabilities carried at fair value. ASC

820-10

establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring financial instruments at fair value. The three broad levels of the 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 include cash instruments for which quoted prices are available but traded less frequently, derivative instruments whose fair value have 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 municipal securities with no observable fair value with an average life of one year or less. The securities are carried at cost which approximates fair value. A periodic review of underlying financial statements and credit ratings is performed to assess the appropriateness of these valuations.

~~Page 22 of 45~~

~~Table of Contents~~

The results of the fair value hierarchy as of ~~March 31,~~June 30, 2021, are as follows:


	Securities AFS Fair Value Measurements Using								Fair Value Measurements Using
	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
	(in thousands)								(in thousands)
Financial Instruments Measured at Fair Value on a Recurring Basis
Securities AFS
SBA Backed Securities	$	42,855	$	—	$	42,855	$	—	$	41,065	$	—	$	41,065	$	—
U.S. Government Agency and Sponsored Mortgage-Backed Securities		166,811		—		166,811		—		155,632		—		155,632		—
Privately Issued Residential Mortgage- Backed Securities		326		—		326		—
Privately Issued Residential Mortgage-Backed Securities										274		—		274		—
Obligations Issued by States and Political Subdivisions		45,668		—		—		45,668		26,747		—		—		26,747
Other Debt Securities		8,238		—		8,238		—		8,315		—		8,315		—

Total	$	263,898	$	—	$	218,230	$	45,668	$	232,033	$	—	$	205,286	$	26,747

Equity Securities	$	1,722	$	376	$	1,346	$	—	$	1,697	$	351	$	1,346	$	—
Financial Instruments Measured at Fair Value on a Non-recurring Basis
Impaired Loans	$	558	$	—	$	—	$	558
Financial Instruments Measured at Fair Value on a Non-recurring Basis Impaired Loans									$	251	$	—	$	—	$	251

Page 26 of 49

The results of the fair value hierarchy as of December 31, 2020, are as follows:

   Securities AFS Fair Value Measurements Using
   Carrying
Value
Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)
   Significant
Observable
Inputs
(Level 2)    Significant
Other
Unobservable
Inputs
(Level 3)
   (in thousands)
Financial Instruments Measured at Fair Value on a Recurring Basis

SBA Backed Securities
   $ 44,039    $ —      $ 44,039    $ —
U.S. Government Agency and Sponsored Mortgage-Backed Securities
   177,741    —      177,741    —
Privately Issued Residential
Mortgage-
Backed Securities
   328    —      328    —
Obligations Issued by States and Political Subdivisions
   52,276    —      —      52,276
Other Debt Securities
   8,064    —      8,064    —

Total
   $ 282,448    $ —      $ 230,172    $ 52,276

Equity Securities
   $ 1,668    $ 303    $ 1,365    $ —
Financial Instruments Measured at Fair Value on a Non-recurring Basis

Impaired Loans
   $ 3,178    $ —      $ —      $ 3,178

~~Page 23 of 45~~

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	Fair Value Measurements Using
	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
	(in thousands)
Financial Instruments Measured at Fair Value on a Recurring Basis
Securities AFS
SBA Backed Securities	$	44,039	$	—	$	44,039	$	—
U.S. Government Agency and Sponsored Mortgage-Backed Securities		177,741		—		177,741		—
Privately Issued Residential Mortgage- Backed Securities		328		—		328		—
Obligations Issued by States and Political Subdivisions		52,276		—		—		52,276
Other Debt Securities		8,064		—		8,064		—

Total	$	282,448	$	—	$	230,172	$	52,276

Equity Securities	$	1,668	$	303	$	1,365	$	—
Financial Instruments Measured at Fair Value on a Non-recurring Basis
Impaired Loans	$	3,178	$	—	$	—	$	3,178

Impaired loan balances 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. Fair value is generally determined through a review process that includes independent appraisals, discounted cash flows, or other external assessments of the underlying collateral, which generally include various Level 3 inputs which are not observable. The Company discounts the fair values, as appropriate, based on management’s observations of the local real estate market for loans in this category.

Appraisals, discounted cash flows and real estate tax assessments are reviewed quarterly. There is no specific policy regarding how frequently appraisals will be updated. Adjustments are made to appraisals and real estate tax assessments based on management’s estimate of changes in real estate values. All impaired loans have been reviewed during the past quarter using either a discounted cash flow analysis, appraisal of collateral or other type of real estate tax assessment. The types of adjustments that are made to specific provisions (credits) related to impaired loans recognized for the ~~three-month~~ three and

six-month

period ended ~~March 31,~~June 30, 2021 amounted to ($~~375,000)~~125,000) and ~~amounted~~($500,000). The types of adjustments that are made to ~~$501,000~~specific provisions related to impaired loans recognized for the year ended December 31, ~~2020.~~

2020 amounted to $501,000.

There were 0 transfers between level 1, 2 and 3 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and the year ended December 31, 2020. There were 0 liabilities measured at fair value on a recurring or nonrecurring basis during the ~~three~~six months ended ~~March 31,~~June 30, 2021 and the year ended December 31, 2021.

Page 27 of 49

The following table presents additional information about assets measured at fair value on a recurring and nonrecurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands) at ~~March 31,~~June 30, 2021. Management continues to monitor the assumptions used to value the assets listed below.

Asset

Fair Value

Valuation Technique

Unobservable Input

Unobservable Input
Value or Range

Fair Value

Valuation Technique

Unobservable Input

Unobservable Input
Value or Range

Securities AFS (1)

45,668

Discounted cash flow

Discount rate

0% - 1.0% (2)

26,747

Discounted cash flow

Discount rate

% –

1.0% (2)

Impaired Loans

558

Appraisal of collateral (3)

Appraisal adjustments (4)

0%—22% discount

251

Appraisal of collateral (3)

Appraisal adjustments (4)

% –

22% discount

The following table presents additional information about assets measured at fair value on a recurring and nonrecurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands) at December 31, 2020. Management continues to monitor the assumptions used to value the assets listed below.

Asset

Fair Value

Valuation Technique

Unobservable Input

Unobservable Input
Value or Range

Fair Value

Valuation Technique

Unobservable Input

Unobservable Input
Value or Range

Securities AFS (1)

52,276

Discounted cash flow

Discount rate

0% - 1.0% (2)

52,276

Discounted cash flow

Discount rate

% –

1.0% (2)

Impaired Loans

3,178

Appraisal of collateral (3)

Appraisal adjustments (4)

0%-17% discount

3,178

Appraisal of collateral (3)

Appraisal adjustments (4)

% –

17% discount

(1)	Municipal securities generally have maturities of one year or less and, therefore, the amortized cost equates to the fair value.

(2)	Weighted averages.

(3)	Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

(4)	Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated expenses.

~~Page 24 of 45~~

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The changes in Level 3 securities for the ~~three-month~~

six-month

period ended ~~March 31,~~June 30, 2021 are shown in the table below:


	Obligations Issued by States & Political Subdivisions
Balance at December 31, 2020	$	52,276
Purchases		14,855
Maturities and calls		(40,347	)
Amortization		(37	)

Balance at June 30, 2021	$	26,747

Obligations
Issued by States
&

Political Subdivisions

Balance at December 31, 2020

$
52,276

Purchases


6,770

Maturities and calls


(13,353
)
Amortization


(25
)

Balance at March 31, 2021

$
45,668

The amortized cost of Level 3 securities was ~~$45,668,000~~$26,747,000 at ~~March 31,~~June 30, 2021 with an unrealized loss of $0. The securities in this category are generally municipal securities with no readily determinable fair value. Management evaluated the fair value of these securities based on an evaluation of the underlying issuer, prevailing rates and market liquidity.

The changes in Level 3 securities for the ~~three-month~~

six-month

period ended ~~March 31,~~June 30, 2020 are shown in the table below:


	Obligations Issued by States & Political Subdivisions
Balance at December 31, 2019	$	13,301
Purchases		44,324
Maturities and calls		(8,879	)
Amortization		(7	)

Balance at June 30, 2020	$	48,739

Obligations
Issued by States
&

Political
Subdivisions

Balance at December 31, 2019
   $ 13,301
Purchases
   9,372
Maturities and calls
   (5,449 )
Amortization
   0
Changes in fair value
   —

Balance at March 31, 2020
   $ 17,224

Page 28 of 49

The amortized cost of Level 3 securities was ~~$17,224,000~~$48,739,000 at ~~March 31,~~June 30, 2020 with an unrealized loss of $0. The securities in this category are generally municipal securities with no readily determinable fair value. Management evaluated the fair value of these securities based on an evaluation of the underlying issuer, prevailing rates and market liquidity.

The fair value of impaired loans decreased by ~~$2,624,000,~~$2,927,000, for the first ~~three~~six months of 2021, ~~mainly attributable to one loan that was paid down. The fair value of impaired loans decreased by $269,000, for the first three months of 2020,~~ mainly attributable to one loan that was paid down. There were 0 liabilities measured at fair value on a recurring or nonrecurring basis during the ~~three-month~~

six-month

period ended ~~March 31,~~June 30, 2020.

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Note 9. 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

non-financial

instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The assumptions used below are expected to approximate those that market participants would use in valuing these financial instruments.

Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of timing, amount of expected future cash flows and the credit standing of the issuer. Such estimates do not consider the tax impact of the realization of unrealized gains or losses. In some cases, the fair value estimates cannot be substantiated by comparison to independent markets. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial instrument. Care should be exercised in deriving conclusions about our business, its value or financial position based on the fair value information of financial instruments presented below.

Securities

Held-to-Maturity

The fair values of these securities were based on quoted market prices, where available, as provided by third-party investment portfolio pricing vendors. If quoted market prices were not available, fair values provided by the vendors were based on quoted market prices of comparable instruments in active markets and/or based on a matrix pricing methodology which employs The Bond Market Association’s standard calculations for cash flow and price/yield analysis, live benchmark bond pricing and terms/condition data available from major pricing sources. Management regards the inputs and methods used by third party pricing vendors to be “Level 2 inputs and methods” as defined in the “fair value hierarchy” provided by FASB.

Loans

The fair value of loans is estimated using the exit price notion consistent with Topic 820, Fair Value Measurement. Fair value is determined based on a discounted cash flow analysis. The discounted cash flow analysis was based on the contractual maturity of the loan and market indications of rates, prepayment speeds, defaults and credit risk. For certain

non-performing

assets, fair value of the underlying collateral is determined based on the estimated values of individual receipts.

Time Deposits

The fair value of time deposits was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments. The fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

Other Borrowed Funds

The fair value of 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.

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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.

The following presents (in thousands) the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of ~~March 31,~~June 30, 2021 and December 31, 2020. This table excludes financial instruments for which the carrying amount approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, short-term investments, FHLBB stock and accrued interest receivable. Financial liabilities for which the fair value approximates carrying value include

non-maturity

deposits, short-term borrowings and accrued interest payable.

March 31, 2021

Carrying
Amount

Estimated
Fair Value

Fair Value
Measurements
Level 1 Inputs

Level 2
Inputs

Level 3
Inputs


(in thousands)

Financial assets:

Securities
held-to-maturity

$
3,217,176


$
3,222,903


$
—


$
3,222,903


$
—

Loans (1)


2,957,810



2,877,220



—



—



2,877,220

Financial liabilities:

Time deposits


480,784



479,087



—



479,087



—

Other borrowed funds


151,769



155,001



—



155,001



—

Subordinated debentures


36,083



36,083



—



36,083



—

December 31, 2020

Financial assets:

Securities held-to-maturity
   $ 2,509,088    $ 2,579,103    $ —      $ 2,579,103    $ —
Loans (1)
   2,960,343    2,902,390    —      —      2,902,390
Financial liabilities:

Time deposits
   546,143    556,470    —      556,470    —
Other borrowed funds
   177,009    183,000    —      183,000    —
Subordinated debentures
   36,083    36,083    —      36,083    —


June 30, 2021	Carrying Amount		Estimated Fair Value		Fair Value Measurements Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
	(in thousands)
Financial assets:
Securities held-to-maturity	$	3,350,561	$	3,360,731	$	—	$	3,360,731	$	—
Loans (1)		2,964,184		2,867,548		—		—		2,867,548
Financial liabilities:
Time deposits		433,479		431,087		—		431,087		—
Other borrowed funds		119,029		122,560		—		122,560		—
Subordinated debentures		36,083		36,083		—		36,083		—

December 31, 2020
Financial assets:
Securities held-to-maturity	$	2,509,088	$	2,579,103	$	—	$	2,579,103	$	—
Loans (1)		2,960,343		2,902,390		—		—		2,902,390
Financial liabilities:
Time deposits		546,143		556,470		—		556,470		—
Other borrowed funds		177,009		183,000		—		183,000		—
Subordinated debentures		36,083		36,083		—		36,083		—

(1)	Comprised of loans (including collateral dependent impaired loans), net of deferred loan costs and the allowance for ~~loanlosses.~~loan losses.

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.

Note 10. Revenue from Contracts with Customers

Revenue from contracts with customers in the scope of ASC Topic 606 is measured based on the consideration specified in the contract with a customer, and excludes amounts collected on behalf of third parties. The Company recognizes revenue from contracts with customers when it satisfies its performance obligations.

The Company’s performance obligations are typically satisfied as services are rendered, and our contracts do not include multiple performance obligations. Payment is generally collected at the time services are rendered, or monthly. Unsatisfied performance obligations at the report date are not material to our consolidated financial statements.

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The Company pays sales commissions to its employees in accordance with certain incentive plans. The Company expenses sales commissions when incurred if we do not expect to recover these costs from the terms of the contract with the customer. Sales commissions are included in compensation expense.

In certain cases, other parties are involved with providing products and services to our customers. If the Company is a principal in the transaction (providing goods or services itself), revenues are reported based on the gross consideration received from the customer and any related expenses are reported gross in noninterest expense. If the Company is an agent in the transaction (arranging for another party to provide goods or services), the Company reports its net fee or commission retained as revenue.

Waivers and reversals are recorded as a reduction of revenue either when the revenue is recognized by the Company or at the time the waiver or reversal is earned by the customer.

Nature of goods and services

The vast majority of the Company’s revenue is specifically

out-of-scope

of Topic 606. For the revenue

in-scope,

the following is a description of principal activities, separated by the timing of revenue recognition, from which the Company generates its revenue from contracts with customers.

Revenue earned at a point in time – Examples of revenue earned at a point in time are ATM transaction fees, wire transfer fees,

“non-sufficient

funds” fees, credit and debit card interchange fees and foreign exchange transaction fees. Revenue is generally derived from transactional information accumulated by our systems and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction. The Company is the principal in each of these contracts, with the exception of credit and debit card interchange fees, in which case we are acting as the agent and record revenue net of expenses paid to the principal.

Revenue earned over time – The Company earns revenue from contracts with customers in a variety of ways in which the revenue is earned over a period of time – generally monthly or quarterly. Examples of this type of revenue are deposit account service fees, lockbox fees, investment management fees, merchant referral services, and safe deposit box fees. Account service charges, management fees and referral fees are recognized on a monthly basis while any transaction based income is recorded as the activity occurs. Revenue is primarily based on the number and type of transactions or assets managed and is generally derived from transactional information accumulated by our systems. Revenue is recorded in the same period as the related transactions occur or services are rendered to the customer.

Disaggregation of revenue

The following table presents total revenues as presented in the Consolidated Statements of Income and the related amounts which are from contracts with customers within the scope of Topic 606. As illustrated here, the vast majority of our revenues are specifically excluded from the scope of Topic 606.


	Three Months Ended 3/31/2021		Revenue from Contracts in Scope of Topic 606		Three Months Ended 3/31/2020		Revenue from Contracts in Scope of Topic 606		Six Months Ended 6/30/2021		Revenue from Contracts in Scope of Topic 606		Six Months Ended 6/30/2020		Revenue from Contracts in Scope of Topic 606
	(dollars in thousands)								(dollars in thousands)
Total net interest income	$	28,567	$	—	$	25,201	$	—
Net interest income									$	58,558	$	—	$	51,019	$	—

Noninterest income:
Service charges on deposit accounts		2,218		2,218		2,296		2,296		4,389		4,389		4,319		4,319
Lockbox fees		996		996		930		930		1,962		1,962		1,854		1,854
Other income		989		695		1,084		599		1,958		1,366		2,178		1,158

Total noninterest income		4,203		3,909		4,310		3,825		8,309		7,717		8,351		7,331

Total net revenues	$	32,770	$	3,909	$	29,511	$	3,825
Total revenues									$	66,867	$	7,717	$	59,370	$	7,331

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	Three Months Ended 6/30/2021		Revenue from Contracts in Scope of Topic 606		Three Months Ended 6/30/2020		Revenue from Contracts in Scope of Topic 606
	(dollars in thousands)
Net interest income	$	29,991	$	—	$	25,818	$	—

Noninterest income:
Service charges on deposit accounts		2,171		2,171		2,023		2,023
Lockbox fees		966		966		924		924
Other income		969		671		1,094		559

Total noninterest income		4,106		3,808		4,041		3,506

Total revenues	$	34,097	$	3,808	$	29,859	$	3,506

The following table provides information about receivables with customers.


					June 30, 2021		December 31, 2020
(dollars in thousands)	March 31, 2021		December 31, 2020
Receivables, which are included in “Other assets”	$	1,393	$	1,397	$	1,486	$	1,397

Note 11. Leases

The Company has operating leases primarily for branch locations as well as data processing centers. The Company’s operating leases have remaining lease terms of 1 year to 31 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. The Company also has one sublease for part of a data processing center that the Company currently leases from a lessor. The sublease expires in ~~2022 with an option to terminate and no option to extend.~~2024 which can be terminated early after each sublease year. Lease income, for the sublease, totaled approximately ~~$10,000~~$20,000 for the ~~three~~six months ended ~~March 31,~~June 30, 2021. Variable lease costs include costs that are not included in the lease liability.

The components of lease expense were as follows:


					Three Months Ended 6/30/2021		Six Months Ended 6/30/2021		Three Months Ended 6/30/2020		Six Months Ended 6/30/2020
(in thousands)	Three Months Ended 3/31/2021		Three Months Ended 3/31/2020
Operating lease cost	$	560	$	546	$	560	$	1,121	$	546	$	1,092

Variable lease cost		153		133		201		353		173		307

Total lease cost	$	713	$	679	$	761	$	1,474	$	719	$	1,399

Supplemental cash flow information related to leases was as follows:


					Three Months Ended 6/30/2021		Six Months Ended 6/30/2021		Three Months Ended 6/30/2020		Six Months Ended 6/30/2020
(in thousands)	(in thousands) Three Months Ended 3/31/2021		Three Months Ended 3/31/2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	541	$	529	$	542	$	1,083	$	529	$	1,057

Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	0	$	0
Right-of-use assets obtained i n exchange for lease obligations: Operating leases					$	0	$	0	$	434	$	875

Page 32 of 49

Supplemental balance sheet information related to leases was as follows:

3/31/2021
12/31/2020
(in thousands, except lease term and discount rate)
Operating Leases:

Operating lease
right-of-use
assets

$
13,262

$ 13,713
Operating lease liabilities

$
13,496

$ 13,935
Weighted Average Remaining Lease Term:

Operating Leases


10 Years

10 Years
Weighted Average Discount Rate:

Operating Leases


3.1
%
3.1 %

~~Page 29 of 45~~

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	6/30/2021		12/31/2020
(in thousands, except lease term and discount rate)
Operating Leases:
Operating lease right-of-use assets	$	12,810	$	13,713
Operating lease liabilities	$	13,057	$	13,935
Weighted Average Remaining Lease Term:
Operating Leases		10 Years		10 Years
Weighted Average Discount Rate:
Operating Leases		3.1%		3.1%

The Company has payment obligations under a number of

non-cancelable

operating leases for premises and equipment expiring in various years through 2030. Total lease expense approximated ~~$713,000~~$1,475,000 and ~~$679,000~~$1,399,000 for the ~~quarters~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Included in lease expense are amounts paid to a company affiliated with Barry R. Sloane, Chairman, President and CEO, and Linda Sloane Kay, Vice Chair, amounting to ~~$111,000~~$275,000 and ~~$109,000,~~$219,000, for the six months ended June 30, 2021 and 2020, respectively. Rental income approximated ~~$165,000~~$370,000 and ~~$168,000 in~~$347,000, for the six months ended June 30, 2021 and 2020, respectively.

A summary of future minimum rental payments under such leases as the dates indicated follows:


	Minimum Rental Payments						Minimum Rental Payments
	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
Year Ending December 31,	(in thousands)
2021	$	1,612		$	2,156
							(in thousands)
Year Ending December 31, 2021							$	1,088		$	2,156
2022		1,995			1,995			1,995			1,995
2023		1,962			1,962			1,962			1,962
2024		1,692			1,692			1,692			1,692
2025		1,471			1,471			1,471			1,471
Thereafter		7,394			7,394			7,394			7,394

Total lease payments	$	16,126		$	16,670		$	15,602		$	16,670

Less imputed interest		(2,630	)		(2,735	)		(2,545	)		(2,735	)

Present value of lease liability	$	13,496		$	13,935		$	13,057		$	13,935

~~March 31,~~June 30, 2021 minimum rental payments represent ~~nine~~six months of rental payments remaining in calendar year 2021.

Note 12. ~~Subsequent Events~~

Proposed Transaction with Eastern Bankshares, Inc.

On April 7, 2021, the Company and Eastern Bankshares, Inc. (“Eastern”) (NASDAQ: EBC) entered into an Agreement

and Plan of Merger pursuant to which, through a series of transactions, Eastern will acquire the Company in a cash transaction for total consideration valued at approximately $642 million. Under the terms of the Agreement and Plan of Merger, (i) each holder of Class A common stock will receive a cash payment of $115.28 per share of Class A common stock and (ii) each holder of Class B common stock will receive a cash payment of $115.28 per share of Class B common stock. The transaction is expected to close in the fourth quarter of 2021 and is subject to customary closing conditions, including ~~approval by~~required regulatory approvals. The Company’s shareholders approved the ~~shareholders~~Agreement and Plan of Merger at the Special Meeting of the Shareholders held on July 7, 2021.

The Company has recognized approximately $1.2 million in merger related costs, mainly consisting of legal and ~~required regulatory approvals.~~consulting expenses. The expenses have been recorded in other expenses on the income statement. The Company also has contingent merger related fees of approximately $7.9 million mainly consisting of underwriting and legal fees that have not been recognized. The contingent merger related fees will be recognized upon closing of the proposed transaction.

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

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, a Massachusetts state-chartered trust company formed in ~~1969.~~1969 and headquartered in Medford, Massachusetts. At ~~March 31,~~June 30, 2021, the Company had total assets of $7.3 billion. Currently, the Company operates 2728 banking offices in 2021 cities and towns in Massachusetts and Southern New Hampshire, ranging from Braintree in the south to ~~Andover~~Salem, New Hampshire 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 large healthcare and higher educational institutions primarily throughout Massachusetts, New Hampshire, Rhode Island, Connecticut, New York, Virginia, Washington D.C., and Pennsylvania.

The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income and fees from loans, 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,

non-profit

organizations and individuals. It emphasizes service to small and medium sized businesses and retail customers in its market area. In recent years, the Company has increased business to larger institutions, specifically, healthcare and higher education. 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 its corporate and institutional customers automated lock box collection services, cash management services and account reconciliation services, and actively promotes the marketing of these 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 LPL Financial, a third party full-service securities brokerage business.

The Company has municipal cash management client engagements in Massachusetts, New Hampshire and Rhode Island composed of approximately 302 government entities.

Net income for the ~~three~~six months ended ~~March 31,~~June 30, 2021, was ~~$10,770,000~~$21,593,000 or ~~$1.93~~$3.88 per Class A share diluted, an increase of ~~11.4%~~9.5% compared to net income of ~~$9,666,000,~~$19,722,000, or ~~$1.74~~$3.54 per Class A share diluted, for the same period a year ago.

Earnings per share ~~(EPS)~~“EPS” for each class of stock and time period is as follows:


	Three Months Ended
	March 31,				Three Months Ended June 30,
	2021		2020		2021		2020
Basic EPS – Class A common	$	2.34	$	2.10	$	2.35	$	2.18
Basic EPS – Class B common	$	1.17	$	1.05	$	1.17	$	1.09
Diluted EPS – Class A common	$	1.93	$	1.74	$	1.94	$	1.81
Diluted EPS – Class B common	$	1.17	$	1.05	$	1.17	$	1.09

					Six Months Ended June 30,
					2021		2020
Basic EPS – Class A common					$	4.68	$	4.28
Basic EPS – Class B common					$	2.34	$	2.14
Diluted EPS – Class A common					$	3.88	$	3.54
Diluted EPS – Class B common					$	2.34	$	2.14

Page 34 of 49

Net interest income totaled ~~$28,567,000~~$58.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$25,201,000~~$51.0 million for the same period in 2020. The ~~13.4%~~14.8% increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. The net interest margin decreased from ~~2.11%~~2.04% on a fully

tax-equivalent

basis for the first ~~three~~six months of 2020 compared to ~~1.80%~~1.81% for the same period in 2021. This was primarily the result of ~~increased margin pressure during~~ the recent decrease in interest rates across the yield curve.

The average balances of ~~earning~~interest-earning assets increased for ~~the first three months of~~ 2021 compared to the same period last year, by ~~$1,608,721,000~~$1.49 billion or ~~31.0%~~27.5%, combined with an average yield decrease of ~~1.03%~~0.79%, resulting in a decrease in interest income of ~~$4,264,000.~~$4.7 million. The average balance of interest-bearing liabilities increased for ~~the first three months of~~ 2021 compared to the same period last year, by ~~$1,191,116,000~~$1.14 billion or ~~27.9%~~26.0%, combined with an average interest-bearing liabilities interest cost decrease of ~~0.86%~~0.68%, resulting in a decrease in interest expense of ~~$7,630,000.~~$12.3 million.

~~Page 31 of 45~~

~~Table of Contents~~

The trends in the net interest margin are illustrated in the graph below:

The net interest margin decreased during the first quarter of 2020 mainly as a result of decreases in rates on earning assets. This was partially offset by prepayment penalties collected of $874,000 and contributed approximately seven basis points to the net interest margin. The net interest margin decreased during the second, third, and fourth quarters of 2020 primarily as a result of increased margin pressure during the recent decrease in interest rates across the yield curve. This was partially offset by prepayment penalties collected of $453,000 and contributed approximately three basis points to the net interest margin during the fourth quarter of 2020. The net interest margin decreased during the first ~~quarter~~half of 2021 primarily as a result of ~~increased margin pressure during~~ the recent decrease in interest rates across the yield curve. 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 the prepayment of loans and changes in market interest rates, will positively impact the net interest margin.

There was a credit to the provision for loan losses of $550,000 for the ~~quarter~~six months ended ~~March 31,~~June 30, 2021 compared to a provision of ~~$1,075,000~~$3.3 million for the ~~quarter ended March 31,~~same period in 2020. The credit provision for the first quarter of 2021 was primarily attributable to a decline in loan balances exclusive of PPP loans and a reduction in specific allocations to the allowance for loan losses. The provision for the first ~~quarter~~six months of 2020 was primarily as a result of provisions related to the onset of the

COVID-19

pandemic. The credit provision for the first six months of 2021 was primarily attributable to a reduction in specific allocations to the allowance for loan losses and a reduction in the historical experience reserve allocation.

The Company’s effective tax rate increased from ~~5.8%~~7.8% for the ~~quarter~~six months ended ~~March 31,~~June 30, 2020 to ~~13.5%~~15.4% for the same period in 2021. This was primarily as a result of an increase in taxable income relative to total ~~income.~~income and nondeductible merger related expenses.

During the third quarter of 2019, the Company purchased a future branch location in Salem, New Hampshire. The Company ~~plans to open~~opened this branch during the second quarter of 2021. During the second quarter of 2020, the Company executed a lease for a future branch location in Needham, Massachusetts. The Company plans to open this branch during the ~~third~~fourth quarter of 2021.

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Recent Market Developments

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), Families First Coronavirus Response Act (“FFCRA”), and Coronavirus Response and Relief Supplemental Appropriations Act of 2021

On March 18, 2020, the FFCRA was signed into law and on March 27, 2020, the CARES Act was signed into law. The FFCRA and the CARES Act provide relief for families and businesses impacted by the coronavirus pandemic. The provisions in this legislation include, among other things, loan programs for businesses, expanded unemployment insurance benefits, stimulus payments to certain taxpayers, new provisions on sick leave and family leave, and funding for a variety of health-related efforts and government programs. Also, as a result of the CARES Act, the full balance of the Company’s AMT credit was refunded in 2020.

The CARES Act, among other things, provides cash payments to certain individuals and has various programs for businesses. In particular, it includes the PPP which provides forgivable loans to qualified small businesses, primarily to allow these businesses to continue to pay their employees. The original amount allocated to the program was $349 billion, which was exhausted on April 16, 2020. On April 24, 2020, an additional allocation of $310 billion was signed into law. These loans are funded by participating banks and are 100% guaranteed by the SBA. If utilized primarily for payroll, subject to certain other conditions, the loans may be forgiven, in whole or in part, and repaid by the SBA. During 2020 and 2021, the Company participated in the PPP. Since the inception of the program, PPP originations totaled approximately ~~1,860~~2,008 loans for approximately ~~$325~~$341 million. As of ~~March 31,~~June 30, 2021, Century Bank’s PPP loans totaled approximately ~~1,117~~939 loans for approximately ~~$213~~$142 million. The fees collected, from the SBA, amount to approximately ~~$11.9~~$12.7 million. The amount of fees recognized during the first ~~quarter~~six months of 2021 amounted to approximately ~~$2.2 million.~~$3.5 million compared to $1.1 million for the same period last year. Total cost deferrals amounted to approximately ~~$1.7~~$1.9 million since inception. The amount of costs recognized during the first six months of 2021 amounted to approximately $688,000 compared to $146,000 for the same period last year. The fees and costs are being amortized over the lives of the loans utilizing the level-yield method.

Under Section 4013 of the CARES Act, from March 1, 2020 through the earlier of January 1, 2022 or 60 days after the termination date of the national emergency declared by the President on March 13, 2020 concerning the

COVID-19

outbreak (the “national emergency”), a financial institution may elect to suspend the requirements under U.S. GAAP for loan modifications related to the

COVID-19

pandemic that would otherwise be categorized as a troubled debt restructured, including impairment accounting. This troubled debt restructuring relief applies for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019.

As of ~~March 31,~~June 30, 2021, and as a result of

COVID-19

loan modifications, the Company has modifications of 84 loans aggregating ~~approximately $36.2~~$16.5 million, primarily consisting of short-term payment deferrals. Of these modifications, ~~$36.2~~$16.5 million, or 100%, were performing in accordance with their modified terms.

The CARES Act also allows companies to delay Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU)

2016-13,

Measurement of Credit Losses on Financial Instruments (CECL), including the current expected credit losses methodology for estimating allowances for credit losses. The Company elected to delay FASB ASU

2016-13.

This ASU was delayed until the earlier of the date on which the national emergency ~~concerning the~~

~~COVID-19~~

~~outbreak declared by the President on March 15, 2020~~ terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020. On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 was signed into law. The law changed the delayed implementation date to the earlier of the Company’s fiscal year that begins after the date on which the national emergency terminates or January 1, 2022.

Recent Accounting Developments

Recently Adopted Accounting Standards Updates

In August 2018, FASB issued ASU

2018-14,

“Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic

715-20)”

(“ASU

2018-14”),

to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. ASU

2018-14

is effective for fiscal years beginning after December 15, 2020, for public business entities and for fiscal years beginning after December 15, 2021, for all other entities. Early adoption is permitted. Management has evaluated ASU

2018-14

and as of ~~March 31,~~January 1, 2021, the Company has adopted ASU

2018-14

and determined the impact to be immaterial.

In December 2019, the FASB issued ASU

2019-12,

Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The effect of this ASU did not have a material impact on the Company’s consolidated financial position.

Page 3336 of 4549

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Accounting Standards Issued but not yet Adopted

The following list identifies ASUs applicable to the Company that have been issued by the FASB but are not yet effective:

In March 2020, the FASB issued ASU

2020-04,

Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU are effective for a limited period and mainly address accounting and reporting challenges due to the transition from LIBOR on existing contracts. The optional expedients may be applied to loans, borrowings, leases and derivatives at any period as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020 up to the date that the financial statements are available to be issued. The ASU simplifies the accounting analyses for contract modifications and simplifies the hedge effectiveness assessment and allows hedging relationships impacted by the LIBOR transition to continue. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is assessing the impact of this standard but does not expect that it will have a material impact on the Company’s consolidated financial statements, or results of operations.

In June 2016, the FASB issued ASU

2016-13,

Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL). This ASU was issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

To achieve this objective, the amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. See discussion below of the deferral of the amendments in this ASU.

To implement the new standard the Company has purchased a software solution and has captured the information needed to implement this ASU. As part of the FASB ASC 326 implementation process, the company is using two models: a rating migration model and a probability of default model. The ratings migration model, which will be used for our larger loans made to institutions with available credit ratings, is designed to estimate loss reserves according to the CECL standard for rated loans or similar instruments. The model structure follows a grade migration approach, where the default rate is based on the probability of each grade transition which is modelled using historical data. The probability of default model, which will be used for our remaining commercial loans and our consumer loans, is based primarily on four components: loss history, product life cycle, behavioral attributes and the economic environment. ~~During~~Since the fourth quarter of 2019, ~~and during 2020,~~ the Company tested the two CECL credit models in parallel with the existing incurred loss models. The securities

held-to-maturity

include U.S. Treasury, U.S. Government Sponsored Enterprises, SBA Backed Securities and U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities. The CECL standard allows assumption of zero expected credit losses where expectation of

non-payment

is zero for these types of securities. The Company expects no impact from ASU

2016-13

to arise from this portfolio.

Since ASU

2016-13,

the FASB has issued amendments intended on improving the clarification of the amendment, ASU

2018-19

Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU

2019-04

Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging. The amendment in ASU

2018-19

was issued in November 2018 and was intended to clarify that receivables arising from operating leases are not within the scope of Subtopic

326-20.

Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The amendment in ASU

2019-04

was issued in April 2019 and was intended to clarify stakeholders’ specific issues about certain aspects of the amendments in ASU

2016-13.

ASU 2019- 05 Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief was also issued in May 2019. This ASU provides entities the option to irrevocably elect the fair value option for certain financial assets previously measured at amortized costs basis. The fair value option election does not apply to

held-to-maturity

debt securities. An entity that elects the fair value option should subsequently apply the guidance in Subtopics

820-10,

Fair Value Measurement—Overall. The amendments in this ASU should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance in the statement of financial position as of the date that an entity early adopted the amendments in ASU

2016-13.

In November 2019, the FASB issued ASU

2019-11,

Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments in this ASU affect a variety of Topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance. This ASU is effective for annual reporting periods beginning after December 15, 2019. See discussion below of the deferral of the amendments in this ASU.

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On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act allows certain companies to delay FASB ASU

2016-13,

Measurement of Credit Losses on Financial Instruments (CECL), and subsequent amendments to the ASU noted above, including the current expected credit losses methodology for estimating allowances for credit losses. The Company has elected to delay FASB ASU

2016-13.

This ASU was delayed until the earlier of the date on which the national emergency concerning the

COVID-19

outbreak declared by the President on March 15, 2020 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020. On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 was signed into law. The law changed the delayed implementation date to the earlier of the first day of the Company’s fiscal year that begins after the date on which the national emergency terminates or January 1, 2022. The Company does not believe the impact of adoption would have been material to the Company’s consolidated financial statements as of ~~March 31,~~June 30, 2021.

Financial Condition

Loans

On ~~March 31,~~June 30, 2021, total loans outstanding were ~~$2,992,762,000, down~~$2,999,133,000, up by ~~$3,067,000~~$3,304,000 from the total on December 31, 2020. At ~~March 31,~~June 30, 2021, commercial real estate loans accounted for ~~26.6%~~27.1%, commercial and industrial accounted for ~~43.9%~~43.2%, and residential real estate loans, including home equity loans, accounted for ~~23.9%~~24.1% of total loans.

Commercial and industrial loans ~~increased~~decreased to ~~$1,315,295,000~~$1,296,399,000 on ~~March 31,~~June 30, 2021 from $1,314,245,000 at December 31, 2020. The Company originated approximately ~~$92,800,000~~$108,197,000 of PPP loans during the ~~first quarter of~~six months ended June 30, 2021 and received approximately ~~$76,200,000~~$162,837,000 of PPP loan payoffs, primarily from loan forgiveness, during the first ~~quarter~~six months of 2021. Commercial real estate loans increased to ~~$796,660,000~~$813,163,000 on ~~March 31,~~June 30, 2021 from $789,836,000 on December 31, 2020 primarily as a result of loan originations. Construction loans decreased to ~~$7,854,000~~$6,404,000 at ~~March 31,~~June 30, 2021 from $10,909,000 on December 31, 2020, primarily as a result of loan payoffs. Residential real estate loans increased to ~~$460,123,000~~$471,671,000 on ~~March 31,~~June 30, 2021 from $448,436,000 on December 31, 2020, primarily as a result of loan originations. Home equity loans decreased to ~~$255,770,000~~$252,114,000 on ~~March 31,~~June 30, 2021 from $274,357,000 on December 31, 2020, primarily as a result of a home equity loan payoffs. Municipal loans ~~decreased~~increased slightly to ~~$137,073,000~~$138,771,000 from $137,607,000.

In recent years, the Company has increased business to larger institutions, specifically, healthcare, higher education, and municipal organizations. Further discussion relating to changes in portfolio composition is provided in the allowance for loan loss section of the management discussion and analysis. We will closely monitor the concentrations to determine the impact of

COVID-19

upon their short-term and long-term operations.

Allowance for Loan Losses

The allowance for loan loss at ~~March 31,~~June 30, 2021 was ~~$34,952,000~~$34,949,000 as compared to $35,486,000 at December 31, 2020. The level of the allowance for loan losses to total loans was 1.17% at ~~March 31,~~June 30, 2021 and 1.18% at December 31, 2020. The ratio of the allowance for loan losses to loans outstanding has decreased slightly from December 31, 2020, primarily from the payoff of ~~one~~a large loan relationship which had a specific reserve and a ~~decrease~~reduction in ~~general economic factor allocations.~~the historical experience reserve allocation. The Company monitors the outlook for the industries in which our borrowers operate. Healthcare and higher education are two of the primary industries. In particular the Company utilizes outlooks and forecasts from various sources. The Company also monitors the volatility of the losses within the historical data.

By combining the credit rating, the industry outlook and the loss volatility, the Company arrives at the loss factor for each credit grade. For a large loan to large institutions with publicly available credit ratings, the Company tracks these ratings. These ratings are tracked as a credit quality indicator for these loans. Credit ratings issued by national organizations were utilized as credit quality indicators as presented in the following table at ~~March 31,~~June 30, 2021.

Page 38 of 49


	Commercial and Industrial		Municipal		Commercial Real Estate		Total		Commercial and Industrial		Municipal		Commercial Real Estate		Total
	(in thousands)								(in thousands)
Credit Rating:
Aaa – Aa3	$	705,387	$	73,758	$	36,519	$	815,664	$	761,705	$	75,825	$	36,184	$	873,714
A1 – A3		182,559		7,103		145,096		334,758		181,928		6,983		143,001		331,912
Baa1 – Baa3		50,000		51,133		146,930		248,063		50,000		51,133		145,513		246,646
Ba2		—		5,080		—		5,080		—		4,830		—		4,830

Total	$	937,946	$	137,074	$	328,545	$	1,403,565	$	993,633	$	138,771	$	324,698	$	1,457,102

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Credit ratings issued by national organizations are presented in the following table at December 31, 2020.


	Commercial and Industrial		Municipal		Commercial Real Estate		Total		Commercial and Industrial		Municipal		Commercial Real Estate		Total
	(in thousands)								(in thousands)
Credit Rating:
Aaa – Aa3	$	710,955	$	74,291	$	38,035	$	823,281	$	710,955	$	74,291	$	38,035	$	823,281
A1 – A3		183,123		7,103		145,583		335,809		183,123		7,103		145,583		335,809
Baa1 – Baa3		50,000		51,133		140,905		242,038		50,000		51,133		140,905		242,038
Ba2		—		5,080		—		5,080		—		5,080		—		5,080

Total	$	944,078	$	137,607	$	324,523	$	1,406,208	$	944,078	$	137,607	$	324,523	$	1,406,208

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.

The following table summarizes the changes in the Company’s allowance for loan losses for the periods indicated.


	Three months ended March 31,						Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020			2021			2020
	(in thousands)						(in thousands)						(in thousands)
Allowance for loan losses, beginning of period	$	35,486		$	29,585		$	34,952		$	30,804		$	35,486		$	29,585
Loans charged off		(67	)		(62	)		(29	)		(17	)		(96	)		(79	)
Recoveries on loans previously charged-off		83			206			26			29			109			235

Net recoveries		16			144
Provision (credit) charged to expense		(550	)		1,075
Net recoveries (charge-offs)								(3	)		12			13			156
(Credit) provision charged to expense								—			1,700			(550	)		2,775

Allowance for loan losses, end of period	$	34,952		$	30,804		$	34,949		$	32,516		$	34,949		$	32,516

The Company may experience increased levels of nonaccrual loans if borrowers are negatively impacted by future negative economic conditions. Management continually monitors trends in the loan portfolio to determine the appropriate level of allowance for loan losses. At the current time, management believes that the allowance for loan losses is adequate.

Page 39 of 49

Nonperforming Assets

The following table sets forth information regarding nonperforming assets held by the Bank at the dates indicated:


	March 31,			December 31,
	2021			2020			June 30, 2021			December 31, 2020
	(dollars in thousands)						(dollars in thousands)
Nonaccruing loans	$	942		$	3,996		$	1,270			$3,996
Total nonperforming assets	$	942		$	3,996		$	1,270			$3,996
Loans past due 90 days or more and still accruing	$	—		$	90		$	—			$ 90
Nonaccruing loans as a percentage of total loans		0.03	%		0.13	%		0.04	%		0.13	%
Nonperforming assets as a percentage of total assets		0.01	%		0.06	%		0.02	%		0.06	%
Accruing troubled debt restructures	$	2,099		$	2,202		$	2,079			$2,202

Investments

Management continually evaluates its investment alternatives in order to properly manage the overall balance sheet mix. The timing of purchases, sales and reinvestments, if any, will be based on various factors including expectation of movements in market interest rates, deposit flows and loan demand. Notwithstanding these events, it is the intent of management to grow the earning asset base mainly through loan originations while funding this growth through a mix of retail deposits, FHLB advances, and retail repurchase agreements.

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Securities

Available-for-Sale

(at Fair Value)

The securities

available-for-sale

portfolio totaled ~~$263,898,000~~$232,033,000 at ~~March 31,~~June 30, 2021, a decrease of ~~6.6%~~17.8% from December 31, 2020. The portfolio decreased mainly as a result of paydowns and maturities of securities

available-for-sale

totaling ~~$25,993,000~~$68,112,000 offset, somewhat by purchases of ~~$6,770,000.~~$16,055,000. The portfolio is concentrated in United States Government Sponsored Enterprises, Mortgage-backed Securities and Obligations issued by States and Political Subdivisions and had an estimated weighted average remaining life of ~~5.0~~5.3 years.

At ~~March 31,~~June 30, 2021, ~~82.7%~~88.5% of the Company’s securities

available-for-sale

are classified as Level 2. The fair values of these securities are generally 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.

Securities

available-for-sale

totaling ~~$45,668,000~~$26,747,000 or ~~17.3%~~11.5% of securities

available-for-sale

are classified as Level 3. These securities are generally municipal securities with no observable fair value with an average life of one year or less. The securities are carried at cost which approximates fair value. A periodic review of underlying financial statements and credit ratings is performed to assess the appropriateness of these valuations.

During the first ~~three~~six months of 2021, net unrealized gains on the securities

available-for-sale

increased to ~~$809,000~~$1,748,000 from a net unrealized gain of $175,000 at December 31, 2020. This was primarily the result of an increase in the value of floating rate securities.

The following table sets forth the fair value of securities

available-for-sale

at the dates indicated.


	March 31,		December 31,
	2021		2020		June 30, 2021		December 31, 2020
	(in thousands)				(in thousands)
Small Business Administration	$	42,855	$	44,039	$	41,065		$ 44,039
U.S Government Agency and Sponsored Enterprise Mortgage-backed Securities		166,811		177,741		155,632		177,741
Privately Issued Residential Mortgage-backed Securities		326		328		274		328
Obligations issued by States and Political Subdivisions		45,668		52,276		26,747		52,276
Other Debt Securities		8,238		8,064		8,315		8,064

Total Securities Available–for-Sale	$	263,898	$	282,448	$	232,033		$282,448

There were no sales of

available-for-sales

securities for the ~~three~~six months ended ~~March 31,~~June 30, 2021.

Page 40 of 49

Securities

Held-to-Maturity

(at Amortized Cost)

The securities

held-to-maturity

portfolio totaled ~~$3,217,176,000~~$3,350,561,000 on ~~March 31,~~June 30, 2021, an increase of ~~28.2%~~33.5% from December 31, 2020. Purchases of

held-to-maturity

securities totaled ~~$964,868,000~~$1,358,830,000 for the ~~three~~six months ended ~~March 31,~~June 30, 2021. The purchases were offset somewhat, by maturities and scheduled principal payments of ~~$257,255,000.~~$518,044,000. The portfolio is concentrated in United States Government Sponsored Enterprises and Mortgage-backed Securities and had an estimated weighted average remaining life of 4.7 years.

The following table sets forth the amortized cost of securities

held-to-maturity

at the dates indicated.


	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(in thousands)				(in thousands)
U.S. Government Sponsored Enterprises	$	381,077	$	244,220	$	356,080	$	244,220
SBA Backed Securities		36,330		37,783		34,626		37,783
U.S. Government Agency and Sponsored Enterprise Mortgage-backed Securities		2,799,769		2,227,085		2,959,855		2,227,085

Total Securities Held-to-Maturity	$	3,217,176	$	2,509,088	$	3,350,561	$	2,509,088

There were no sales of

held-to-maturity

securities for the ~~three~~six months ended ~~March 31,~~June 30, 2021.

~~Page 37 of 45~~

~~Table of Contents~~

The net unrealized gains on investment securities

held-to-maturity

~~was $5,727,000~~were $10,170,000 or ~~0.2%~~0.3% of the total securities

held-to-maturity

portfolio at ~~March 31,~~June 30, 2021 and the net unrealized gains was $70,015,000 or 2.8% of the total securities

held-to-maturity

portfolio at December 31, 2020. The decrease in the net unrealized gains on securities

held-to-maturity

related primarily to an increase in interest rates. The gross unrealized losses relate primarily to interest rates and not credit quality, and because the Company does not intend to sell any of these securities and it is not likely that it will be required to sell these securities before the anticipated recovery of the remaining amortized cost, the Company does not consider these investments to be other-than-temporarily impaired as of ~~March 31,~~June 30, 2021 and December 31, 2020.

~~At March 31,~~On June 30, 2021 and December 31, 2020, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises. Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac.

Federal Home Loan Bank of Boston Stock

The Bank, as a member of the Federal Home Loan Bank of Boston (“FHLBB”), is required to maintain an investment in capital stock of the FHLBB. Based on redemption provisions, the stock has no quoted market value and is carried at cost. At its discretion, the FHLBB may declare dividends on the stock. The Company reviews this investment for impairment based on the ultimate recoverability of the cost basis in the stock. As of ~~March 31,~~June 30, 2021, there have been no indicators of impairment that would require further consideration of potential impairment.

Equity Securities

On ~~March 31,~~June 30, 2021, equity securities totaled ~~$1,722,000~~$1,697,000 compared to $1,668,000 at December 31, 2020, the increase is ~~primarily~~ the result of changes in fair values.

Deposits and Borrowed Funds

On ~~March 31,~~June 30, 2021, deposits totaled ~~$6,396,042,000~~$6,373,179,000 representing a ~~17.3%~~16.9% increase from December 31, 2020. Total deposits increased primarily as a result of an increase in savings and NOW deposits, demand deposits, and money market accounts. These types of deposits increased primarily from an increased customer base and the cyclical nature of the municipal deposit base. Savings and NOW deposits increased mainly as a result of an increase in municipal NOW accounts and corporate savings accounts. Demand deposits increased mainly as a result of increased corporate checking balances as a result of PPP loan proceed deposits. Money market accounts increased mainly as a result of an increase in municipal and corporate money market accounts. Time deposits decreased primarily as a result of decreased municipal time deposits.

Borrowed funds totaled ~~$380,524,000~~$367,331,000 at ~~March 31,~~June 30, 2021 compared to $409,099,000 at December 31, 2020. Borrowed funds decreased mainly as a result of a decrease in borrowings from the FHLBB, ~~and a decrease~~offset, somewhat by an increase in repurchase agreements. FHLBB borrowings decreased mainly as a result of anthe increase in funds provided by deposits. Repurchase agreements ~~decreased~~increased primarily as a result of short-term customer activity.

Page 41 of 49

Stockholders’ Equity

At ~~March 31,~~June 30, 2021, total equity was ~~$381,332,000~~$392,555,000 compared to $370,409,000 on December 31, 2020. The Company’s equity increased primarily as a result of earnings, partially offset by dividends paid. The Company’s leverage ratio stood at ~~6.16%~~6.13% on ~~March 31,~~June 30, 2021, compared to 6.64% at December 31, 2020. The decrease in the leverage ratio was due to an increase in quarterly average assets, offset somewhat by an increase in stockholders’ equity. Book value as of ~~March 31,~~June 30, 2021, was ~~$68.49~~$70.50 as compared to $66.53 on December 31, 2020.

Page 3842 of 4549

~~Table of Contents~~

Results of Operations

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


	Three Months Ended																		Three Months Ended
	March 31, 2021									March 31, 2020									June 30, 2021									June 30, 2020
	Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)
	(dollars in thousands)																		(dollars in thousands)
ASSETS
Interest-earning assets:
Loans (2)
Loans taxable	$	1,740,943		$	15,636			3.64	%	$	1,275,999		$	13,481			4.25	%	$	1,724,413		$	14,889			3.46	%	$	1,501,889		$	13,270			3.55	%
Loans tax-exempt		1,241,051			7,582			2.48	%		1,171,963			10,789			3.70	%		1,269,934			7,625			2.41	%		1,204,389			8,374			2.80	%
Securities available-for-sale (5):
Taxable		240,695			539			0.90	%		262,332			1,582			2.41	%		226,453			481			0.85	%		280,834			938			1.34	%
Tax-exempt		48,274			110			0.91	%		9,640			137			5.68	%		41,096			93			0.91	%		11,378			54			1.90	%
Securities held-to-maturity:
Taxable		2,816,215			13,117			1.86	%		2,299,750			15,293			2.66	%		3,314,919			14,113			1.70	%		2,370,522			15,222			2.57	%
Interest-bearing deposits in other banks		715,155			179			0.10	%		173,928			610			1.40	%		431,658			112			0.10	%		266,089			68			0.10	%

Total interest-earning assets		6,802,333			37,163			2.19	%		5,193,612			41,892			3.23	%		7,008,473			37,313			2.13	%		5,635,101			37,926			2.69	%
Non interest-earning assets		362,917									285,422									353,817									290,228
Allowance for loan losses		(35,734	)								(29,765	)								(35,268	)								(31,477	)

Total assets	$	7,129,516								$	5,449,269								$	7,327,022								$	5,893,852

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
NOW accounts	$	1,159,180		$	647			0.23	%	$	1,016,266		$	2,252			0.89	%	$	1,338,232		$	430			0.13	%	$	1,143,571		$	1,320			0.46	%
Savings accounts		1,068,525			471			0.18	%		716,569			1,473			0.83	%		1,015,868			323			0.13	%		803,135			798			0.40	%
Money market accounts		2,296,286			2,886			0.51	%		1,480,399			5,572			1.51	%		2,394,172			2,489			0.42	%		1,580,486			3,462			0.88	%
Time deposits		510,287			1,581			1.26	%		589,396			3,172			2.16	%		462,382			1,115			0.97	%		607,942			3,111			2.06	%

Total interest-bearing deposits		5,034,278			5,585			0.45	%		3,802,630			12,469			1.32	%		5,210,654			4,357			0.34	%		4,135,134			8,691			0.85	%
Securities sold under agreements to repurchase		234,810			141			0.24	%		246,272			626			1.02	%		244,666			98			0.16	%		206,764			309			0.60	%
Other borrowed funds and subordinated debentures		188,769			1,238			2.66	%		217,839			1,499			2.77	%		171,568			1,224			2.86	%		192,843			1,302			2.72	%

Total interest-bearing liabilities		5,457,857			6,964			0.52	%		4,266,741			14,594			1.38	%		5,626,888			5,679			0.40	%		4,534,741			10,302			0.91	%

Non-interest-bearing liabilities
Demand deposits		1,195,863									758,173									1,217,456									924,506
Other liabilities		99,787									87,423									95,165									87,756

Total liabilities		6,753,507									5,112,337									6,939,509									5,547,003

Stockholders’ equity		376,009									336,932									387,513									346,849
Total liabilities & stockholders’ equity	$	7,129,516								$	5,449,269								$	7,327,022								$	5,893,852

Net interest income on a fully taxable equivalent basis					30,199									27,298									31,634									27,624
Less taxable equivalent adjustment					(1,632	)								(2,097	)								(1,643	)								(1,806	)

Net interest income				$	28,567								$	25,201								$	29,991								$	25,818

Net interest spread (3)								1.67	%								1.85	%								1.72	%								1.78	%

Net interest margin (4)								1.80	%								2.11	%								1.81	%								1.97	%

(1)	On a fully taxable equivalent basis calculated using a federal tax rate of 21%. Rates are annualized.

(2)	Nonaccrual loans are included in average amounts outstanding.

(3)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the ~~weightedaverage~~weighted average cost of interest-bearing liabilities.

(4)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

(5)	Average balances of securities available-for-sale calculated utilizing amortized cost.

Page 3943 of 4549

~~Table~~

Results of ~~Contents~~Operations


	Six Months Ended
	June 30, 2021									June 30, 2020
	Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)
	(dollars in thousands)
ASSETS
Interest-earning assets:
Loans (2)
Loans taxable	$	1,734,048		$	30,576			3.56	%	$	1,388,944		$	26,751			3.87	%
Loans tax-exempt		1,254,157			15,156			2.44	%		1,188,176			19,163			3.24	%
Securities available-for-sale (5):
Taxable		233,534			1,020			0.87	%		271,583			2,520			1.86	%
Tax-exempt		44,666			203			0.91	%		10,509			191			3.63	%
Securities held-to-maturity:
Taxable		3,066,945			27,230			1.78	%		2,335,136			30,515			2.61	%
Interest-bearing deposits in other banks		572,623			291			0.10	%		220,008			678			0.62	%

Total interest-earning assets		6,905,973			74,476			2.17	%		5,414,356			79,818			2.96	%
Non interest-earning assets		358,342									287,825
Allowance for loan losses		(35,500	)								(30,621	)

Total assets	$	7,228,815								$	5,671,560

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
NOW accounts	$	1,249,201		$	1,077			0.17	%	$	1,079,919		$	3,573			0.67	%
Savings accounts		1,042,051			794			0.15	%		759,852			2,270			0.60	%
Money market accounts		2,345,499			5,375			0.46	%		1,530,442			9,034			1.19	%
Time deposits		486,202			2,696			1.12	%		598,669			6,283			2.11	%

Total interest-bearing deposits		5,122,953			9,942			0.39	%		3,968,882			21,160			1.07	%
Securities sold under agreements to repurchase		239,765			239			0.20	%		226,518			935			0.83	%
Other borrowed funds and subordinated debentures		180,121			2,462			2.76	%		205,341			2,801			2.74	%

Total interest-bearing liabilities		5,542,839			12,643			0.46	%		4,400,741			24,896			1.14	%

Non-interest-bearing liabilities
Demand deposits		1,206,719									841,339
Other liabilities		97,464									87,589

Total liabilities		6,847,022									5,329,669

Stockholders’ equity		381,793									341,891
Total liabilities & stockholders’ equity	$	7,228,815								$	5,671,560

Net interest income on a fully taxable equivalent basis					61,833									54,922
Less taxable equivalent adjustment					(3,275	)								(3,903	)

Net interest income				$	58,558								$	51,019

Net interest spread (3)								1.71	%								1.83	%

Net interest margin (4)								1.81	%								2.04	%

(1)	On a fully taxable equivalent basis calculated using a federal tax rate of 21%. Rates are annualized.

(2)	Nonaccrual loans are included in average amounts outstanding.

(3)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(4)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

(5)	Average balances of securities available-for-sale calculated utilizing amortized cost.

Page 44 of 49

The following table presents certain information on a

fully-tax

equivalent basis regarding changes in the Company’s interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to changes in rate and changes in volume.


	Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020									Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020									Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020
	Increase/(Decrease) Due to Change in									Increase/(Decrease) Due to Change in									Increase/(Decrease) Due to Change in
	Volume			Rate			Total			Volume			Rate			Total			Volume			Rate			Total
	(in thousands)									(in thousands)									(in thousands)
Interest income:
Loans
Taxable	$	4,371		$	(2,216	)	$	2,155		$	1,959		$	(340	)	$	1,619		$	6,164		$	(2,339	)	$	3,825
Tax-exempt		599			(3,806	)		(3,207	)		446			(1,195	)		(749	)		1,003			(5,010	)		(4,007	)
Securities available-for-sale
Taxable		(121	)		(922	)		(1,043	)		(159	)		(298	)		(457	)		(314	)		(1,186	)		(1,500	)
Tax-exempt		168			(195	)		(27	)		80			(41	)		39			243			(231	)		12
Securities held-to-maturity
Taxable		2,994			(5,170	)		(2,176	)		4,957			(6,066	)		(1,109	)		8,048			(11,333	)		(3,285	)
Interest-bearing deposits in other banks		541			(972	)		(431	)		43			1			44			490			(877	)		(387	)


Total interest income		8,552			(13,281	)		(4,729	)		7,326			(7,939	)		(613	)		15,634			(20,976	)		(5,342	)

Interest expense:
Deposits
NOW accounts		290			(1,895	)		(1,605	)		195			(1,085	)		(890	)		484			(2,980	)		(2,496	)
Savings accounts		512			(1,514	)		(1,002	)		172			(647	)		(475	)		630			(2,106	)		(1,476	)
Money market accounts		2,173			(4,859	)		(2,686	)		1,326			(2,299	)		(973	)		3,421			(7,080	)		(3,659	)
Time deposits		(370	)		(1,221	)		(1,591	)		(621	)		(1,375	)		(1,996	)		(1,024	)		(2,563	)		(3,587	)

Total interest-bearing deposits		2,605			(9,489	)		(6,884	)		1,072			(5,406	)		(4,334	)		3,511			(14,729	)		(11,218	)
Securities sold under agreements to repurchase		(25	)		(460	)		(485	)		50			(261	)		(211	)		51			(747	)		(696	)
Other borrowed funds and subordinated debentures		(186	)		(75	)		(261	)		(147	)		69			(78	)		(352	)		13			(339	)


Total interest expense		2,394			(10,024	)		(7,630	)		975			(5,598	)		(4,623	)		3,210			(15,463	)		(12,253	)


Change in net interest income	$	6,158		$	(3,257	)	$	2,901		$	6,351		$	(2,341)		$	4,010		$	12,424		$	(5,513)		$	6,911

Net Interest Income

For the three months ended ~~March 31,~~June 30, 2021, net interest income on a fully ~~taxable equivalent~~taxable-equivalent basis totaled ~~$30,109,000~~$31,634,000 compared to ~~$27,298,000~~$27,624,000 for the same period in 2020, an increase of ~~$2,811,000~~$4,010,000, or ~~10.3%~~14.5%. The increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. The net interest margin decreased from ~~2.11%~~1.97% on a fully

tax-equivalent

basis for the first ~~quarter~~three months of 2020 compared to ~~1.80%~~1.81% for the same period in 2021. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. The average balances of ~~earning~~interest-earning assets increased for 2021 compared to the same period last year, by ~~$1,608,721,000~~$1,373,372,000 or ~~31.0%~~24.4%, combined with an average yield decrease of ~~1.03%~~0.56%, resulting in a decrease in interest income of ~~$4,729,000 on a fully~~

~~tax-equivalent~~

~~basis.~~$613,000. The average balance of interest-bearing liabilities increased for 2021 compared to the same period last year, by ~~$1,191,116,000~~$1,092,147,000, or ~~27.9%~~24.1%, combined with an average interest-bearing liabilities interest cost decrease of ~~0.86%~~0.51%, resulting in a decrease in interest expense of ~~$7,630,000.~~$4,623,000.

For the six months ended June 30, 2021, net interest income on a fully taxable equivalent basis totaled $61,833,000 compared to $54,922,000 for the same period in 2020, an increase of $6,911,000, or 12.6%. The increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. The net interest margin decreased from 2.04% on a fully

tax-equivalent

basis for the first six months of 2020 compared to 1.81% for the same period in 2021. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. The average balances of interest-earning assets increased for 2021 compared to the same period last year, by $1,491,617,000, or 27.5%, combined with an average yield decrease of 0.79%, resulting in a decrease in interest income of $5,342,000. The average balance of interest-bearing liabilities increased for 2021 compared to the same period last year, by $1,142,098,000, or 26.0%, combined with an average interest-bearing liabilities interest cost decrease of 0.68%, resulting in a decrease in interest expense of $12,253,000.

Page 45 of 49

As illustrated in the table above, the main contributors to the increase in net interest income for the ~~three-month~~ three and

six-month

period was a decrease in rates paid on interest-bearing deposits. The Company has decreased interest rates on these products as market rates have decreased. Securities

held-to-maturity,

~~income increased, for the three-month period, primarily as a result of an increase in volume. Securities~~securities

available-for-sale,

interest-bearing deposits in other banks, and loan income decreased primarily from a decrease in rates paid on the portfolios. ~~The Company has~~Securities

held-to-maturity

income decrease was offset, somewhat, by an increase in volume. Loan income increased for the three months ended June 30, 2021, primarily as a ~~sizable floating rate~~

~~available-for-sale~~

~~and loan portfolio. These portfolios reprice as interest rates rise or fall.~~

~~Page 40~~result of 45increased volume.

~~Table of Contents~~

Provision for Loan Losses

The provision for loan losses decreased by ~~$1,625,000~~$3,325,000 from ~~$1,075,000~~$2,775,000 for the ~~quarter~~six months ended ~~March 31,~~June 30, 2020 compared to a credit of $550,000 for the same period in 2021. The provision for the first ~~quarter~~six months of 2020 was primarily ~~the~~a result of provisions related to the onset of the

COVID-19

pandemic. The credit provision for the first ~~quarter~~six months of 2021 was primarily attributable to ~~a decline in loan balances exclusive of PPP loans and~~ a reduction in specific allocations to the allowance for loan ~~losses.~~losses and a reduction in the historical experience reserve allocation.

Further discussion relating to changes in portfolio composition is discussed in Note 4.

Non-Interest

Income and Expense

Other operating income for the quarter ended ~~March 31,~~June 30, 2021 ~~decreased~~increased by ~~$107,000~~$65,000 from the same period last year to ~~$4,203,000.~~$4,106,000. This was mainly attributable to ~~a decrease in other income of $95,000 and a decrease~~an increase in service charges on deposit accounts of ~~$78,000.~~$148,000 and an increase in lockbox fees of $42,000. This was offset, somewhat, by ~~an increase~~a decrease of ~~$66,000~~$125,000 in ~~lockbox fees.~~other income. Service charges on deposit accounts ~~decreased~~increased mainly as a result of an increase in processing activities and an increase in debit card fees. Lockbox fees increased mainly as a ~~decrease in~~result of increased customer ~~activity due in large part to the~~

~~COVID-19~~

~~pandemic.~~activity. Other income decreased mainly as a result of a decrease in insurance gains on life insurance policies.

Other operating income for the six months ended June 30, 2021 decreased by $42,000 from the same period last year to $8,309,000. This was mainly attributable to a decrease in other income of $220,000. This was offset, somewhat, by an increase of $108,000 in lockbox fees and $70,000 in service charges on deposit accounts. Service charges on deposit accounts increased mainly as a result of a increase in processing activities and an increase in debit card fees. Lockbox fees increased mainly as a result of increased customer activity. Other income decreased mainly as a result of a decrease in insurance gains on life insurance policies.

For the quarter ended ~~March 31,~~June 30, 2021, operating expenses increased by ~~$2,698,000~~$3,970,000, or ~~14.8%~~23.3%, to ~~$20,871,000,~~$21,012,000, from the same period last year. This was primarily attributable to an increase in salaries and employee benefits of ~~$879,000,~~$2,015,000, an increase of ~~$187,000~~$135,000 in occupancy costs, an increase of ~~$112,000 in equipment expenses, an increase of $472,000~~$447,000 in FDIC assessments, and an increase of ~~$1,048,000~~$1,404,000 in other expenses. The increase in salaries and employee benefits was mainly attributable to merit increases, lower bonus accruals during the same period in 2020 as a result of uncertainties from the

COVID-19

pandemic, decreased deferred origination cost credits, and increased employee benefits including health insurance costs. The increase in FDIC assessments was attributable to increased deposits and increased deposit assessment rates. The increase in occupancy costs was mainly attributable to an increase in building maintenance costs. Other expenses increased mainly as a result of expenses related to the previously announced merger, increases in

COVID-19

related expenses, and increases in charitable contributions.

For the six months ended June 30, 2021, operating expenses increased by $6,668,000, or 18.9%, to $41,883,000, from the same period last year. This was primarily attributable to an increase in salaries and employee benefits of $2,894,000, an increase of $322,000 in occupancy costs, an increase of $81,000 in equipment expenses, an increase of $919,000 in FDIC assessments, and an increase of $2,452,000 in other expenses. The increase in salaries and employee ~~benefits.~~benefits was mainly attributable to merit increases, lower bonus accruals during the same period in 2020 as a result of uncertainties from the

COVID-19

pandemic, decreased deferred origination cost credits, and increased employee benefits including health insurance costs. The increase in FDIC assessments was attributable to credits applied during the first quarter of ~~2020.~~2020, increased deposits and increased deposit assessment rates. The increase in occupancy costs was mainly attributable to an increase in building maintenance. Other expenses increased mainly as a result of expenses related to the previously announced merger, increases in ~~bank security,~~

COVID-19

related expenses, and increases in charitable contributions. Equipment expense increased mainly from an increase in depreciation expense.

Income Taxes

For the quarter ended ~~March 31,~~June 30, 2021, the Company’s income tax expense totaled ~~$1,679,000~~$2,262,000 on pretax income of ~~$12,449,000~~$13,085,000 resulting in an effective tax rate of ~~13.5%~~17.3%. For last year’s corresponding quarter, the Company’s income tax expense totaled ~~$597,000~~$1,061,000 on pretax income of ~~$10,263,000~~$11,117,000 resulting in an effective tax rate of ~~5.8%~~9.5%. This increase was primarily the result of an increase in taxable income relative to total ~~income.~~income and nondeductible merger related expenses.

For the six months ended June 30, 2021, the Company’s income tax expense totaled $3,941,000 on pretax income of $25,534,000 resulting in an effective tax rate of 15.4%. For the six months ended June 30, 2020, the Company’s income tax expense totaled $1,658,000 on pretax income of $21,380,000 resulting in an effective tax rate of 7.8%. This increase was primarily the result of an increase in taxable income relative to total income and nondeductible merger related expenses.

Page 46 of 49

Item 3. Quantitative and Qualitative Disclosure about Market Risk

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 increase or decrease in interest rates may adversely impact the Company’s earnings to the extent that the interest rates tied to specific assets and liabilities do not change at the same speed, to the same extent, or on the same basis. The Company monitors the impact of changes in interest rates on its net interest income using several tools. The Company’s primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company’s net interest income and capital, while structuring the Company’s asset-liability structure to obtain the maximum yield-cost spread on that structure. Management believes that there has been no material changes in the interest rate risk reported in the Company’s Annual Report on

Form 10-K

for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission. The information is contained in the

Form 10-K

within the Market Risk and Asset Liability Management section of Management’s Discussion and Analysis of Results of Operations and Financial Condition.

Item 4. Controls and Procedures

The Company’s management, with participation of the Company’s principal executive and financial officers, has evaluated its disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, the Company’s management, with participation of its principal executive and financial officers, has concluded that the Company’s disclosure controls and procedures are effective. The disclosure controls and procedures also effectively ensure that information required to be disclosed in the Company’s filings and submissions with the Securities and Exchange Commission under the Exchange Act is accumulated and reported to Company management (including the principal executive officer and the principal financial officer) as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. In addition, the Company has evaluated its internal control over financial reporting and during the first ~~three~~six months of 2021 there were no changes that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~Page 41 of 45~~

~~Table of Contents~~

Part II

–

Other Information

Item 1

number of legal claims against the Company arising in the normal course of business were outstanding at ~~March 31,~~June 30, 2021. 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.

Item 1A

Risk Factors – Please read the “Risk ~~Factors”~~Factors in the Company’s Annual Report on Form

~~Form~~ 10-K

for the fiscal year ended December 31, ~~2020. Except as noted below, there~~2020 and the Quarterly Report on Form

10-Q

for the quarter ended on March 31, 2021 (the

“10-Q”).

There have been no material changes since ~~this~~the

~~10-K~~10-Q

was filed. These risks are not the only ones facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and operating results.

~~If our merger with Eastern Bankshares, Inc. is not completed, we will have incurred substantial expenses without our shareholders realizing the expected benefits.~~

On April 7, 2021, we entered into an Agreement and Plan of Merger with Eastern Bankshares, Inc. pursuant to which we will merge with and into Eastern, with Eastern as the surviving corporation. Completion of the merger is subject to closing conditions including, but not limited to, various regulatory approvals and the approval of our shareholders. We currently expect that the merger will be completed in the fourth quarter of 2021. It is possible, however, that factors outside of our control could require the parties to complete the merger at a later time, or not to complete the merger at all. In the event that the merger is not consummated for any reason, we will be subject to many risks, including the costs related to the merger, such as legal, accounting and advisory fees, which must be paid even if the merger is not completed, and, potentially, the payment of a termination fee under certain circumstances. If the merger is not consummated, the market price of our common stock could decline. We also could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against us to perform our obligations under the merger agreement.

~~We will be subject to business uncertainties and contractual restrictions while the merger is pending.~~

Uncertainty about the effect of the merger on employees, suppliers and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers, suppliers and others who deal with us to seek to change existing business relationships with us. Our employee retention and recruitment may be particularly challenging prior to the effective time of the merger, as employees and prospective employees may experience uncertainty about their future roles with the combined company.

The pursuit of the merger and the preparation for the integration may place a significant burden on management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect our financial results. In addition, the merger agreement generally requires that we operate in the usual, regular and ordinary course of business and restricts us from taking certain actions prior to the effective time of the merger or termination of the merger agreement without Eastern’s consent in writing. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the merger.

~~Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.~~

Before the merger may be completed, certain approvals or consents must be obtained from the various bank regulatory and other authorities. There can be no assurance as to whether regulatory approval will be received or the timing of the approvals. Eastern is not obligated to complete the merger if the regulatory approvals received in connection with the completion of the merger include any conditions or restrictions that would constitute a “Materially Burdensome Regulatory Condition” as defined in the merger agreement. There can be no assurance that regulatory approvals will not include such conditions or restrictions and such conditions or restrictions could have the effect of delaying completion of the merger.

~~The termination fee and the restrictions on solicitation contained in the merger agreement may discourage other companies from trying to acquire us.~~

Until the completion of the merger, we are prohibited from soliciting, initiating, encouraging, or with some exceptions, considering any inquiries or proposals that may lead to a proposal or offer for a merger or other business combination transaction with any person other than Eastern. In addition, we have agreed to pay a termination fee of approximately $25.7 million to Eastern in specified circumstances. These provisions could discourage other companies from trying to acquire us even though those other companies might be willing to offer greater value to our shareholders than Eastern has offered in the merger. The payment of the termination fee also could have a material adverse effect on our results of operations.

~~Page 42 of 45~~

~~Table of Contents~~

Litigation may be filed against the board of directors the Company and/or Eastern that could prevent or delay the completion of the merger or result in the payment of damages following completion of the merger.

In connection with the merger, it is possible that our shareholders may file putative class action lawsuits against the boards of directors of the Company and/or Eastern. Among other remedies, these shareholders could seek to enjoin the merger. The outcome of any such litigation would be uncertain. If a dismissal is not granted or a settlement is not reached, such potential lawsuits could prevent or delay completion of the merger and result in substantial costs to Eastern and the Company, including any costs associated with indemnification obligations of the Company and/or Eastern.

~~Page 43 of 45~~

~~Table of Contents~~

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds –

(a) – (b) Not applicable.

Item 3

Defaults Upon Senior Securities – None

Item 4

Mine Safety Disclosures – Not applicable

Item 5

Other Information – None

Item 6

Exhibits


~~2.1~~		Agreement and Plan of Merger by and among Eastern Bankshares, Inc., Clarion Acquisition Corp., Century Bancorp, Inc. and Century Bank and Trust Company, dated as of April 7, 2021, incorporated by reference to the Registrant’s ~~8-K~~ ~~filed on April 8, 2021~~.

~~10.1~~		~~Form of Voting Agreement, incorporated by reference to the Registrant’s~~ ~~8-K~~ ~~filed on April 8, 2021.~~

~~10.2~~		~~Employment letter, dated as of April 6, 1999, from Century Bank and Trust Company to David B. Woonton.~~

31.1		Certification of Chairman, President and Chief Executive Officer of the Company Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14.

31.2		Certification of Chief Financial Officer of the Company Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14.

Page 47 of 49


+32.1		Certification of Chairman, President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

++101.		INS XBRL Instance Document

++101.		SCH XBRL Taxonomy Extension Schema

++101.		CAL XBRL Taxonomy Extension Calculation Linkbase

++101.		LAB XBRL Taxonomy Extension Label Linkbase

++101.		PRE XBRL Taxonomy Extension Presentation Linkbase

++101.		DEF XBRL Taxonomy Definition Linkbase

104		Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

As provided in Rule 406T of regulation

S-T,

this information is filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 and consists of the following materials from Century Bancorp Inc.’s Quarterly Report on

10-Q

for the quarter ended ~~March 31,~~June 30, 2021, formatted in XBRL: (i) Consolidated Balance Sheets at ~~March 31,~~June 30, 2021 and December 31, 2020; (ii) Consolidated Statements of Income for the three and six months ended ~~March 31,~~June 30, 2021 and 2020; (iii) Consolidated Statements of Comprehensive Income for the three and six months ended ~~March 31,~~June 30, 2021 and 2020; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended ~~March 31,~~June 30, 2021 and 2020; (v) Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2021 and 2020; (vi) Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020; and ~~(vi)~~(vii) Notes to Unaudited Consolidated Interim Financial Statements.

Page 4448 of 4549

~~Table of Contents~~

SIGNATURES

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


Date: ~~May 7,~~August 6, 2021				Century Bancorp, Inc.

/s/ Barry R. Sloane
Barry R. Sloane
~~Barry R. Sloane~~
Chairman, President and Chief Executive Officer

/s/ William P. Hornby
William P. Hornby, CPA
~~William P. Hornby, CPA~~ Chief Financial Officer and Treasurer
~~Chief Financial Officer and Treasurer~~
(Principal Accounting Officer)

Page 4549 of 4549


	For the Three Months Ended March 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	10,770		$	9,666
Adjustments to reconcile net income to net cash provided by operating activities:
Net (gain) loss on equity securities		(54	)		79
(Credit) provision for loan losses		(550	)		1,075
Deferred income taxes		(1,007	)		(114	)
Net depreciation and amortization (accretion)		528			(578	)
(Increase) decrease in accrued interest receivable		(699	)		112
Decrease in other assets		898			2,359
Increase (decrease) in other liabilities		5,325			(336	)

Net cash provided by operating activities		15,211			12,263

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemptions of Federal Home Loan Bank of Boston stock		—			6,831
Purchase of Federal Home Loan Bank of Boston stock		—			(4,601	)
Proceeds from calls/maturities of securities available-for-sale		25,993			20,734
Purchase of securities available-for-sale		(6,770	)		(39,719	)
Proceeds from calls/maturities of securities held-to-maturity		257,255			123,723
Purchase of securities held-to-maturity		(964,868	)		(70,171	)
Net decrease (increase) in loans		3,092			(72,621	)
Bank owned life insurance purchases		—			(6,000	)
Capital expenditures		(1,565	)		(3,084	)

Net cash used in investing activities		(686,863	)		(44,908	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in time deposits		(65,359	)		57,402
Net increase in demand, savings, money market and NOW deposits		1,009,180			104,999
Cash dividends		(831	)		(553	)
Net decrease in securities sold under agreements to repurchase		(3,335	)		(46,050	)
Net decrease in other borrowed funds		(25,240	)		(58,835	)

Net cash provided by financing activities		914,415			56,963

Net increase in cash and cash equivalents		242,763			24,318
Cash and cash equivalents at beginning of period		374,000			258,693

Cash and cash equivalents at end of period	$	616,763		$	283,011

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest	$	7,127		$	14,711
Income taxes		1,075			300
Change in unrealized gains (losses) on securities available-for-sale, net of taxes		464			(1,531	)
Change in unrealized losses on securities transferred to held-to-maturity, net of taxes		114			164
Pension liability adjustment, net of taxes		406			360
Change in due to broker		1,310			5,500


Details about Accumulated Other Comprehensive Income Components	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020			Affected Line Item in the Statement where Net Income is Presented
	(in thousands)
Accretion of unrealized losses transferred	$	(155	)	$	(222	)	Interest on securities held-to-maturity
		41			58		Provision for income taxes

	$	(114	)	$	(164	)	Net income

Amortization of defined benefit pension items
Prior-service costs	$	(54	) (b)	$	(29	)(b)	Salaries and employee benefits
Actuarial gains (losses)		(511	) (b)		(472	)(b)	Salaries and employee benefits

Total before tax		(565	)		(501	)	Income before taxes

Tax (expense) or benefit		159			141		Provision for income taxes

Net of tax	$	(406	)	$	(360	)	Net income


	3/31/2021			12/31/2020
(in thousands, except lease term and discount rate)
Operating Leases:
Operating lease right-of-use assets	$	13,262		$	13,713
Operating lease liabilities	$	13,496		$	13,935
Weighted Average Remaining Lease Term:
Operating Leases		10 Years			10 Years
Weighted Average Discount Rate:
Operating Leases		3.1	%		3.1	%

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company