As filed with the Securities and Exchange Commission on January 22, 2019February 3, 2020

Registration No. 333-            333-236017

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Amendment No. 1

to

FORMS-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Cambridge Bancorp

(Exact name of registrant as specified in its charter)

 

 

 

Massachusetts 001-38184 04-2777442

(State or Other Jurisdiction of

Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

1336 Massachusetts Avenue

Cambridge, MA 02138

(617)876-5500

(Address and Telephone Number of Principal

Executive Offices) (Zip Code)

 

 

Michael F. Carotenuto

Chief Financial Officer

Cambridge Bancorp

1336 Massachusetts Avenue

Cambridge, MA 02138

(617)876-5500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

Richard A. Schaberg, Esq.

Abigail C. Smith,Les B. Reese, III, Esq.

Hogan Lovells US LLP

555 Thirteenth Street, NW

Columbia Square

Washington, DC 20004

Washington, D.C. 20004
(202)637-5600

 

William P. Mayer,Gary R. Bronstein, Esq.

Samantha M. Kirby,Edward G. Olifer, Esq.

Goodwin ProcterKilpatrick Townsend & Stockton LLP

100 Northern Avenue607 14th Street, NW, Suite 900

Boston, Massachusetts 02210Washington, DC 20005

(617)(202)570-1000508-5800

 

 

Approximate date of commencement of the proposed sale of the securities to the public:As soon as practicable after this registration statement becomes effective and upon completion of the merger described in the enclosed joint proxy statement/prospectus.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐  Accelerated filer  ☒
Non-accelerated filer ☐  Smaller reporting company  ☐
   Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

CALCULATION OF REGISTRATION FEE

 

Title of each class of

securities to be registered

 

Amount

to be

registered(1)

 

Proposed

maximum

aggregate

offering price(2)

 

Amount of

registration fee(3)

Common Stock, no par value per share

 

765,390

 $12,269,207.70 $1,487.03

 

 

(1)

Represents the estimated maximum number of shares of Cambridge Bancorp common stock that may be issued upon the completion of the merger described herein. This registration statement also relates to an indeterminate number of shares of Cambridge Bancorp common stock that may be issued upon stock splits, stock dividends or similar transactions in accordance with Rule 416 under the Securities Act.

(2)

Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act and computed pursuant to Rule 457(f) of the Securities Act, the proposed maximum aggregate offering price of the registrant’s common stock was computed by multiplying (a) $16.03, the book value per share of Optima Bank & Trust Company’s common shares to be exchanged or cancelled in the merger as of December 31, 2018, the latest practicable date prior to the date of filing of this registration statement by (b) 765,390, the maximum possible number of shares of Optima Bank & Trust Company common stock that may be exchanged or cancelled in the merger.

(3)

Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $121.20 per $1,000,000 of the proposed maximum aggregate offering price.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this joint proxy statement/prospectus is not complete and may be changed. We may not sell the securities offered by this joint proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer or solicitation is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED JANUARY 22, 2019FEBRUARY 3, 2020

 

LOGOLOGO LOGOLOGO

Proxy Statement/ProspectusJoint proxy statement/prospectus

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

On December 5, 2018,2019, the boards of directors of Cambridge Bancorp, or Cambridge, Cambridge’s wholly-owned subsidiary, Cambridge Trust Company, Wellesley Bancorp, Inc., or Wellesley, and OptimaWellesley’s wholly-owned subsidiary, Wellesley Bank, & Trust Company, or Optima, each approved a merger agreement among Cambridge, Cambridge Trust Company, Wellesley and Optima,Wellesley Bank pursuant to which Optima(i) Wellesley will merge with and into Cambridge, with Cambridge as the surviving entity, and (ii) Wellesley Bank will merge with and into Cambridge Trust Company, with Cambridge Trust Company as the surviving the merger.entity.

Optima isWellesley and Cambridge are each holding a special meeting for itstheir respective shareholders to vote on the merger agreement.proposals necessary to complete the merger. The special meeting of Cambridge shareholders will be held at the Cambridge Trust Wealth Management office, 75 State Street, 18th Floor, Boston, Massachusetts 02109 on ,March 16, 2020, at 8:30 a.m., local time. The boardspecial meeting of directorsWellesley shareholders will be held at the Wellesley College Club, 727 Washington Street, Wellesley, Massachusetts 02482 on March 12, 2020, at 9:00 a.m., local time.

At the special meeting of Optima recommends that allCambridge shareholders, Cambridge shareholders will be asked to consider and vote “FOR” approvalon (i) a proposal to approve the merger agreement and the other transactions contemplated by the merger agreement, including the issuance of Cambridge common stock in connection with the merger (the “Cambridge merger proposal”), and (ii) a proposal to adjourn the Cambridge special meeting, if necessary or appropriate, including to solicit additional proxies if there are not sufficient votes to approve the Cambridge merger proposal (the “Cambridge adjournment proposal”). Approval of the merger agreement. The merger cannot be completed unless a majorityproposal requires the affirmative vote of holders of at leasttwo-thirds of the shares of OptimaCambridge common stock present in person or represented by proxy and entitled to vote at the special meeting of Cambridge shareholders. Approval of the Cambridge adjournment proposal requires the affirmative vote of at least a majority of the votes cast, in person or represented by proxy, at the special meeting. The board of directors of Cambridge recommends that all Cambridge shareholders vote “FOR” the Cambridge merger proposal and “FOR” the Cambridge adjournment proposal.

At the special meeting of Wellesley shareholders, Wellesley shareholders will be asked to consider and vote on (i) a proposal to approve the merger agreement.agreement (the “Wellesley merger proposal”), (ii) a proposal to approve, on an advisory(non-binding) basis, specified compensation that may become payable to the named executive officers of Wellesley in connection with the merger (the “advisory proposal on specified compensation”), and (iii) a proposal to adjourn the Wellesley special meeting, if necessary or appropriate, including to solicit additional proxies if there are not sufficient votes to approve the Wellesley merger proposal (the “Wellesley adjournment proposal”). Approval of the Wellesley merger proposal requires the affirmative vote of the holders of a majority of the shares of Wellesley common stock outstanding and entitled to vote on the proposal. Approval of each of the advisory proposal on specified compensation and the Wellesley adjournment proposal requires the affirmative vote of a majority of the votes cast on the proposal. The board of directors of Wellesley recommends that all Wellesley shareholders vote “FOR” the Wellesley merger proposal, “FOR” the advisory proposal on specified compensation and “FOR” the Wellesley adjournment proposal.

If the merger is completed, OptimaWellesley shareholders will be able to elect to receive either (i) $32.00 in cash, or (ii) 0.34680.580 shares of Cambridge common stock for each share of OptimaWellesley common stock they own on the effective date of the merger, subject to allocation and proration procedures that are intended to ensure that 95% of the total number of Optima shares outstanding immediately prior to the effective time of the merger will be exchanged for stock, and the remaining Optima shares will be converted into cash. Optimamerger. Wellesley shareholders will also receive cash in lieu of any fractional shares they would have otherwise received in the merger.

UnderAs described in more detail elsewhere in this joint proxy statement/prospectus, under the terms of the merger agreement, inif the event thatratio of (i) the average daily closing price of Cambridge common stock for a specified periodover the 20 consecutive full trading days prior to, and including, the 10th day before the closing of the merger to (ii) the closing price of Cambridge common stock on the last trading day preceding the first public announcement of the merger is both (1) less than $68.4980% and (2) 20 percentage points less than the comparable ratio for the NASDAQ Bank Index, Wellesley would have a right to terminate the merger agreement, unless Cambridge elects to increase the exchange ratio such that the implied value of the exchange ratio would be equivalent to the

minimum implied value that would have avoided triggering this termination right, which would result in additional shares of Cambridge common stock being issued. The closing price of Cambridge common stock on December 4, 2019, the last trading day preceding the first public announcement of the merger, was $76.36 per share. In order for this termination right to be triggered, the average closing price of Cambridge common stock over the measurement period will need to be less than $61.09 per share and the decrease in the price of Cambridge’sCambridge common stock is more than 20% greater than the decrease inwill need to have underperformed the NASDAQ Bank Index over the samemeasurement period Optima has the right to terminate the merger agreement, provided that Cambridge has the option to increase the amount of Cambridge common stock issuable to Optima shareholders by a formula-based amount set forth in the merger agreement to prevent such termination.at least 20 percentage points.

The precise consideration that OptimaWellesley shareholders will receive will not be known at the time that OptimaWellesley shareholders vote on the proposal to approve the merger agreement or make an election as to the type of consideration that they would like to receive in the merger.proposal. On December 4, 2018,2019, which was the last trading day preceding the public announcement of the proposed merger, the closing price of Cambridge common stock was $85.61$76.36 per share, which after giving effect to the exchange ratio has an implied value of $29.69$44.29 per Wellesley share. On            , 2019,2020, which was the most recent practicable trading day before the printing of this joint proxy statement/prospectus, the closing price of Cambridge common stock was $        ,per share, which after giving effect to the exchange ratio, has an implied value of approximately $        per Wellesley share.

The market price of Cambridge common stock will fluctuate between now and the closing of the merger. We urge you to obtain current market quotations for Cambridge common stock before you vote. Cambridge common stock is listed on the NASDAQ Stock Market (“NASDAQ”) under the symbol “CATC”. Optima’s commonWellesley’s stock is not listed on any national securities exchange or quoted on any interdealer quotation system.NASDAQ under the symbol “WEBK”.

Your vote is important regardless of the number of shares you own. Whether or not you plan to attend theyour company’s shareholder meeting, please take the time to vote by completing and mailing the enclosed proxy card as soon as possible to make sure your shares are represented at the shareholder meeting.meeting, or you may submit your proxy by telephone or through the Internet as described on the enclosed instructions. If you submit a properly signed proxy card without indicating how you want to vote, your proxy will be counted as a vote “FOR” each of the proposals being voted on at theyour company’s shareholder meeting. The failure to vote by submitting your proxy or attending theyour company’s shareholder meeting and voting in person will have no impact on the same effect as a vote against the merger proposal.

This document serves as the joint proxy statement for the special meeting of OptimaCambridge and the special meeting of Wellesley, as well as the prospectus for the shares of Cambridge common stock to be issued in connection with the merger, and describes the shareholder meeting,meetings, the merger, the documents related to the merger and other related matters. We encourage you to read this joint proxy statement/prospectus in its entirety, including the documents attached as appendices and the section titled “Risk Factors” beginning on page 27.37.

Neither the Securities and Exchange Commission nor any state securities commission or bank regulatory agency has approved or disapproved of the securities to be issued in the merger or determined if the attached joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The shares of Cambridge common stock to be issued in the merger are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by any federal or state government or governmental agency.

This joint proxy statement/prospectus is dated            , 2019,2020, and is first being mailed to OptimaCambridge shareholders and Wellesley shareholders on or about            , 2019.2020.

LOGOLOGO

Two Harbour PlaceCambridge Bancorp

Portsmouth, NH 038011336 Massachusetts Avenue

Cambridge, Massachusetts 02138

(603)(617)433-9600876-5500

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON MARCH 16, 2020

A special meeting of shareholders of Optima Bank & Trust Company,Cambridge Bancorp, or Optima,Cambridge, will be held at the Cambridge Trust Wealth Management office, 75 State Street, 18th Floor, Boston, Massachusetts 02109 on ,March 16, 2020, at 8:30 a.m., local time, to consider and vote upon the following matter:matters:

 

 1.

a proposal to approve the Agreement and Plan of Merger or the merger agreement,(the “merger agreement”), by and among Cambridge Bancorp, or Cambridge, Cambridge Trust Company, a Massachusetts-chartered trust company and wholly ownedwholly-owned subsidiary of Cambridge, Wellesley Bancorp, Inc., or Cambridge Trust Company,Wellesley, and Optima,Wellesley’s wholly-owned subsidiary, Wellesley Bank, dated as of December 5, 2018,2019, pursuant to which Optima(i) Wellesley will merge with and into Cambridge, with Cambridge as the surviving entity, and (ii) Wellesley Bank will merge with and into Cambridge Trust Company, with Cambridge Trust Company as the surviving entity, and the merger.other transactions contemplated thereby, including the issuance of Cambridge common stock, par value $1.00 per share, in connection with the proposed merger (the “merger proposal”); and

2.

a proposal to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to approve the merger proposal (the “adjournment proposal”).

The merger agreement and proposed merger of Optima with and into Cambridge Trust Company are more fully described in the attached joint proxy statement/prospectus, which you should read carefully and in its entirety before voting. A copy of the merger agreement is included as Annex A to the attached joint proxy statement/prospectus.

The board of directors of OptimaCambridge has established the close of business on , 2019January 31, 2020 as the record date for the special meeting. Only record holders of OptimaCambridge common stock as of the close of business on that date will be entitled to notice of and to vote at the special meeting or any adjournment or postponement of that meeting. A list of shareholders entitled to vote at the special meeting will be available for inspection at the special meeting and before the special meeting, during the period beginning two business days after notice of the meeting is given and upon written request by any OptimaCambridge shareholder. The affirmative vote of holders of at leasttwo-thirds of the shares of Cambridge common stock entitled to vote at the special meeting of Cambridge shareholders is required to approve the merger proposal. The affirmative vote of at least a majority of the shares of Optima common stock presentvotes cast, in person or represented by proxy, and entitled to vote at the special meeting is required to approve the merger agreement.adjournment proposal.

Your vote is important, regardless of the number of shares that you own.Please complete, sign and return the enclosed proxy card promptly in the enclosed postage-paid envelope.envelope or vote by submitting a proxy through the Internet or by telephone as described on the enclosed instructions. Voting by proxy will not prevent you from voting in person at the special meeting, but will assure that your vote is counted if you are unable to attend. You may revoke your proxy at any time before the meeting. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions furnished to you by such record holder with these materials.

Under New Hampshire law, Optima shareholders who do not The failure to vote by submitting your proxy or attending Cambridge’s shareholder meeting and voting in favor of the merger agreementperson will have the right to seek the fair value of their Optima common stock ifsame effect as a vote against the merger is completed, but only if they strictly comply with New Hampshire law procedures explained in the attached proxy statement/prospectus. See the section of the attached proxy statement/prospectus entitled “The Merger—Dissenters’ Rights” beginning on page 66. The applicable New Hampshire law is reproduced in its entirety inAnnex C to the attached proxy statement/prospectus.proposal.

The OptimaCambridge board of directors recommends that you vote “FOR” approvaleach of the merger agreement.proposals.

By Order of the Board of Directors,

Daniel R. MorrisonMichael Carotenuto

Chairman, President and Chief Executive OfficerCorporate Secretary

Portsmouth, New HampshireCambridge, Massachusetts

            , 20192020

PLEASE DO

LOGO

Wellesley Bancorp, Inc.

100 Worcester Street, Suite 300

Wellesley, Massachusetts 02481

(781)235-2550

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON MARCH 12, 2020

A special meeting of shareholders of Wellesley Bancorp, Inc., or Wellesley, will be held at the Wellesley College Club, 727 Washington Street, Wellesley, Massachusetts 02482 on March 12, 2020, at 9:00 a.m., local time, to consider and vote upon the following matter:

1.

a proposal to approve the Agreement and Plan of Merger (the “merger agreement”), by and among Cambridge Bancorp, or Cambridge, Cambridge Trust Company, a Massachusetts-chartered trust company and wholly-owned subsidiary of Cambridge, Wellesley Bancorp, Inc., or Wellesley, and Wellesley’s wholly-owned subsidiary, Wellesley Bank, dated as of December 5, 2019, pursuant to which (i) Wellesley will merge with and into Cambridge, with Cambridge as the surviving entity, and (ii) Wellesley Bank will merge with and into Cambridge Trust Company, with Cambridge Trust Company as the surviving entity (the “merger proposal”);

2.

a proposal to approve, on an advisory(non-binding) basis, specified compensation that may become payable to the named executive officers of Wellesley in connection with the merger (the “advisory proposal on specified compensation”); and

3.

a proposal to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to approve the merger agreement (the “adjournment proposal”).

The merger agreement and proposed merger are more fully described in the attached joint proxy statement/prospectus, which you should read carefully and in its entirety before voting. A copy of the merger agreement is included as Annex A to the attached joint proxy statement/prospectus.

The board of directors of Wellesley has established the close of business on January 31, 2020 as the record date for the special meeting. Only record holders of Wellesley common stock as of the close of business on that date will be entitled to notice of and to vote at the special meeting or any adjournment or postponement of that meeting. A list of shareholders entitled to vote at the special meeting will be available for inspection at the special meeting and before the special meeting, during the period beginning two business days after notice of the meeting is given and upon written request by any Wellesley shareholder. The affirmative vote of the holders of a majority of the shares of Wellesley common stock outstanding and entitled to vote on the proposal is required to approve the merger proposal. The affirmative vote of a majority of votes cast on the proposal is required to approve the advisory proposal on specified compensation and the adjournment proposal.

Your vote is important, regardless of the number of shares that you own.Please complete, sign and return the enclosed proxy card promptly in the enclosed postage-paid envelope or vote by submitting a proxy through the Internet or by telephone as described on the enclosed instructions. Voting by proxy will not prevent you from voting in person at the special meeting, but will assure that your vote is counted if you are unable to attend. You may revoke your proxy at any time before the meeting. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions furnished to you by such record holder with these materials. The failure to vote by submitting your proxy or attending Wellesley’s shareholder meeting and voting in person will have the same effect as a vote against the merger proposal.

The Wellesley board of directors recommends that you vote “FOR” each of the proposals.

By Order of the Board of Directors,

Michael W. Dvorak

Corporate Secretary

Wellesley, Massachusetts

            , 2020

WELLESLEY SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THE PROXY CARD.AT THIS TIME. YOU WILL BE SENT SEPARATE INSTRUCTIONS ABOUT HOW TO ELECTRECEIVE THE FORM OF MERGER CONSIDERATION YOU WOULD LIKE TO RECEIVE AND THE SURRENDER OF YOUR STOCK CERTIFICATES.

ADDITIONAL INFORMATION

The accompanying joint proxy statement/prospectus incorporates by reference important business and financial information about Cambridge and Wellesley from documents that are not included in or delivered with the joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from Cambridgethe appropriate company at the following addresses and telephone numbers:

Cambridge Bancorp

78 Blanchard Road, 5th Floor

Burlington, Massachusetts 01803

Attention: Michael F. Carotenuto

Chief Financial Officer

(617)520-5520

Cambridge Bancorp

78 Blanchard Road, 5th Floor

Burlington, Massachusetts 01803

Attention: Michael F. Carotenuto

Chief Financial Officer

(617)520-5543

https://www.cambridgetrust.com

Wellesley Bancorp, Inc.

100 Worcester Street, Suite 300

Wellesley, Massachusetts 02481

Attention: Michael W. Dvorak

CFO, COO

(781)489-7606

www.wellesleybank.com

To obtain timely delivery, you must request the information no later than 2019.March 2, 2020.

For a more detailed description of the information incorporated by reference into the accompanying joint proxy statement/prospectus and how you may obtain it, see “Where You Can Find More Information” beginning on page 102.146.

The accompanying joint proxy statement/prospectus provides a detailed description of the merger and the merger agreement. We urge you to read the joint proxy statement/prospectus, including any documents incorporated by reference into the joint proxy statement/prospectus, and its annexes carefully and in their entirety. If you have any questions concerning the merger, the other meeting matters or the joint proxy statement/prospectus, or need assistance voting your shares, please contact Daniel R. Morrison, Chairman, President and CEO of Optima,the appropriate company representative, at the address or telephone number listed below:

Two Harbour Place

Portsmouth, NH 03801

603-433-9600

Cambridge Bancorp

Michael F. Carotenuto

Chief Financial Officer

78 Blanchard Road, 5th Floor

Burlington, Massachusetts 01803

(617)520-5520

Wellesley Bancorp, Inc.

Michael W. Dvorak

CFO, COO

100 Worcester Street, Suite 300

Wellesley, Massachusetts 02481

(781) 489-7606

Please do not send your stock certificates at this time. You will be sent separate instructions regarding the surrender of your stock certificates.

ABOUT THIS DOCUMENT

This joint proxy statement/prospectus, which forms part of a registration statement onForm S-4 (Registration StatementNo. 333-                )333-236017) filed by Cambridge with the SEC, constitutes a prospectus of Cambridge for purposes of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the Cambridge common stock to be issued to OptimaWellesley shareholders in exchange for shares of OptimaWellesley common stock pursuant to the merger agreement, as such agreement may be amended or modified from time to time. This joint proxy statement/prospectus also constitutes a proxy statement for Optima.Cambridge and for Wellesley. In addition, it constitutes a notice of special meeting with respect to the special meeting.meeting of Cambridge shareholders and the special meeting of Wellesley shareholders.

You should rely only on the information contained or incorporated by reference in this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated            , 2019,2020, and you should not assume that the information contained in, or incorporated by reference into, this joint proxy statement/prospectus is accurate as of any date other than that date (or, in the case of documents incorporated by reference, their respective dates). Neither the mailing of this joint proxy statement/prospectus to Optima’sCambridge’s shareholders or Wellesley’s shareholders nor the issuance by Cambridge of shares of Cambridge common stock pursuant to the merger agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or to any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding Cambridge has been provided by Cambridge and information contained in this joint proxy statement/prospectus regarding OptimaWellesley has been provided by Optima.Wellesley.

TABLE OF CONTENTS

 

   Page 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SHAREHOLDER MEETINGMEETINGS

   1 

SUMMARY

   68 

The Companies

   68 

The Special Meeting of Shareholders of OptimaCambridge

   710

The Special Meeting of Shareholders of Wellesley

11 

The Merger and the Merger Agreement

   812 

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF CAMBRIDGE BANCORP

   1419 

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF OPTIMA BANK & TRUST COMPANYWELLESLEY BANCORP, INC.

   1621 

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA FOR CAMBRIDGE BANCORP

   1823 

UNAUDITED COMPARATIVE PER SHARE DATA

   2434 

COMPARATIVE MARKET PRICE DATA AND DIVIDEND INFORMATION

   2535 

RISK FACTORS

   2737 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

   3345 

INFORMATION ABOUT THE COMPANIES

   3547 

Cambridge Bancorp

   3547 

Cambridge Trust Company

   3547 

Optima Bank & Trust CompanyWellesley Bancorp, Inc.

   3648 

Security Ownership of Certain Beneficial Owners and ManagementWellesley Bank

   37

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

3848 

THE SPECIAL MEETING OF OPTIMACAMBRIDGE SHAREHOLDERS

   4149 

Date, Time and Place of the Special Meeting

   4149 

Purpose of the Special Meeting

   4149 

Vote Required for Approval

   4149 

Recommendation of the OptimaCambridge Board of Directors

   4149 

Record Date; Outstanding Shares; Shares Entitled to Vote

   4149 

Quorum

   4150 

Share Ownership of Management; Voting Agreements

   4250 

How to Vote Shares Held Directly by ShareholderVoting of Proxies

   4250 

How to Revoke Your Proxy

   4251 

Voting in Person

   4351 

Abstentions and BrokerNon-Votes

   4351 

Proxy Solicitation

   4352

CAMBRIDGE PROPOSALS

53

Merger Proposal

53

Adjournment Proposal

53

THE SPECIAL MEETING OF WELLESLEY SHAREHOLDERS

55

Date, Time and Place of the Special Meeting

55

Purpose of the Special Meeting

55

Vote Required for Approval

55

Recommendation of the Wellesley Board of Directors

55

Record Date; Outstanding Shares; Shares Entitled to Vote

55

Quorum

56

Share Ownership of Management; Voting Agreements

56

Voting of Proxies

56

Participants in the ESOP or the 401(k) Plan

57

How to Revoke Your Proxy

57

Voting in Person

57

Abstentions and BrokerNon-Votes

58

Proxy Solicitation

58 

Stock Certificates

   43

PROPOSAL 1—THE MERGER

44

General

44

Background of the Merger

44

Optima’s Reasons for the Merger

46

Recommendation of the Optima Board of Directors

48

Opinion of Sandler O’Neill  & Partners, L.P., Financial Advisor to Optima

48

Interests of Optima’s Directors and Executive Officers in the Merger

59

Boards of Directors of Cambridge and Cambridge Trust Company After the Merger

62

Material U.S. Federal Income Tax Consequences of the Merger

62

Regulatory Approvals Required for the Merger

64

Accounting Treatment of the Merger

66

Dissenters’ Rights

66

Restrictions on Sales of Shares by Certain Affiliates

68

Stock Exchange Listing

6958 

 

i

   Page 

THE MERGER AGREEMENTWELLESLEY PROPOSALS

   7059 

StructureMerger Proposal

   7059 

Effective Time and Timing of ClosingAdvisory Proposal on Specified Compensation

   7059

Adjournment Proposal

59

THE MERGER

61

General

61

Background of the Merger

61

Cambridge’s Reasons for the Merger

67

Recommendation of the Cambridge Board of Directors

69

Wellesley’s Reasons for the Merger

69

Recommendation of the Wellesley Board of Directors

72

Opinion of Keefe, Bruyette  & Woods, Inc., Financial Advisor to Cambridge

72

Opinion of Sandler O’Neill  & Partners, L.P., Financial Advisor to Wellesley

84

Certain Unaudited Prospective Financial Information

95

Prospective Financial Information Regarding Cambridge

96

Prospective Financial Information Regarding Wellesley

97

Interests of Cambridge’s Directors and Executive Officers in the Merger

97

Interests of Wellesley’s Directors and Executive Officers in the Merger

98

Merger-Related Compensation for Wellesley’s Named Executive Officers

102 

Boards of Directors of Cambridge and Cambridge Trust Company After the Merger

   71104

Material U.S. Federal Income Tax Consequences of the Merger

104

Regulatory Approvals Required for the Merger

106

Accounting Treatment of the Merger

107

Appraisal Rights

108

Restrictions on Sales of Shares by Certain Affiliates

108

Stock Exchange Listing

108

Delisting of Wellesley Common Stock After the Merger

108

THE MERGER AGREEMENT

109

Structure

109

Effective Time and Timing of Closing

109

Boards of Directors of Cambridge and Cambridge Trust Company After the Merger

110 

Consideration to be Received in the Merger

   71

Election Procedures

71

Allocation Procedures

72110 

Exchange of Optima Stock Certificates for Cambridge Stock CertificatesCertificates; Dividends

   76110 

OptimaTreatment of Stock Options

   76111

Treatment of Restricted Stock Awards

111 

Representations and Warranties

   77111 

Conduct of Business Pending the Merger

   78112 

OptimaWellesley Shareholder Meeting

   81116

Cambridge Shareholder Meeting

116 

No Solicitation

   82117 

Employee Benefits

   83118 

Indemnification and Insurance

   84120 

Voting Agreements

   84120 

Additional Agreements

   85121 

Conditions to Complete the Merger

   85121 

Termination

   87123 

Termination Fee

   88124 

Waiver and Amendment

   89125 

Expenses

   89125 

Specific Performance

   89125

ii

Page 

COMPARISON OF SHAREHOLDER RIGHTS

   90126 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

   96132 

LEGAL MATTERS

   101144 

EXPERTS

   101144 

FUTURE SHAREHOLDER PROPOSALS

   101144 

Cambridge 2020 Annual Shareholder Meeting and Shareholder Proposals

   101144

Wellesley 2020 Annual Shareholder Meeting and Shareholder Proposals

145 

HOUSEHOLDING OF PROXY MATERIALS

   101146 

WHERE YOU CAN FIND MORE INFORMATION

   102

AUDITED FINANCIAL STATEMENTS OF OPTIMA BANK & TRUST COMPANY

F-1

UNAUDITED FINANCIAL STATEMENTS OF OPTIMA BANK & TRUST COMPANY

F-37146 

ANNEX A—AGREEMENT AND PLAN OF MERGER

   A-1 

ANNEX B—OPINION OF SANDLER O’NEILL & PARTNERS, L.P.

   B-1 

ANNEX C—NEW HAMPSHIRE LAW CONCERNING DISSENTERS’ RIGHTSOPINION OF KEEFE, BRUYETTE & WOODS, INC.

   C-1 

ANNEX D—CHARTER OF CAMBRIDGE TRUST COMPANY

D-1

 

iiiii

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SHAREHOLDER MEETINGMEETINGS

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger and the shareholder meeting.meetings. These questions and answers may not address all questions that may be important to you as a shareholder. To better understand these matters, and for a description of the legal terms governing the merger, you should carefully read this entire joint proxy statement/prospectus, including the annexes, as well as the documents that have been incorporated by reference into this joint proxy statement/prospectus.

 

Q:

Why am I receiving this joint proxy statement/prospectus?

 

A:

The boards of directors of Cambridge, Cambridge Trust Company, Wellesley and OptimaWellesley Bank have each approved the merger of Optima(i) Wellesley with and into Cambridge and (ii) Wellesley Bank with and into Cambridge Trust Company, under the terms of the merger agreement that is described in this joint proxy statement/prospectus. A copy of the merger agreement is attached to this joint proxy statement/prospectus asAnnex A. In order to complete the merger, OptimaCambridge shareholders and Wellesley shareholders must approve the merger agreement. Optimaagreement and Cambridge shareholders must approve the share issuance in connection with the merger. Each of Cambridge and Wellesley will hold a special meeting of shareholders to obtain this approval. This joint proxy statement/prospectus contains important information about the merger, the merger agreement, the Optima shareholder meetingmeetings of Cambridge and Wellesley and other related matters, and you should read it carefully. The enclosed voting materials for theeach shareholder meeting allow you to vote your shares of common stock without attending the Optimayour company’s shareholder meeting in person.

This document is both a joint proxy statement of OptimaCambridge and Wellesley and a prospectus of Cambridge. It is a joint proxy statement because the board of directors of Optima isboth Cambridge and Wellesley are soliciting proxies from Optimatheir respective shareholders. Your proxy will be used at theyour respective shareholder meeting or at any adjournment or postponement of thethat shareholder meeting. It is also a prospectus because Cambridge will issue Cambridge common stock to OptimaWellesley shareholders as consideration in the merger, and this prospectus contains information about that common stock.

 

Q:

What will happen in the merger?

 

A:

In the proposed merger, Optimatransactions: (i) Wellesley will merge with and into Cambridge, with Cambridge as the surviving entity, and (ii) Wellesley Bank will merge with and into Cambridge Trust Company, a Massachusetts-chartered trust company and wholly owned subsidiary of Cambridge, with Cambridge Trust Company as the surviving the merger.entity.

 

Q:

What will I receive in the merger?

 

A:

IfCambridge Shareholders. Cambridge shareholders will continue to hold their existing shares. Following the merger, is completed, Optima shareholders will be entitled to elect to receive either (i) $32.00 in cash, without interest or (ii) 0.3468 shares of Cambridge common stock for each outstanding share of Optima common stock held atwill continue to trade on NASDAQ under the time of the merger. You will have the opportunity to elect the form of consideration to be received for your shares, subject to proration and allocation procedures set forth in the merger agreement that are intended to ensure that 95% of the total number of Optima shares outstanding immediately prior to the effective time of the merger will be converted into the right to receive Cambridge common stock, and the remaining Optima shares will be converted into the right to receive cash. This may result in your receiving a portion of the merger consideration in a form other than that which you elected.symbol “CATC”.

Wellesley Shareholders. If the merger is completed, Wellesley shareholders will be entitled to receive 0.580 shares of Cambridge common stock for each outstanding share of Wellesley common stock held at the time of the merger and cash in lieu of fractional shares as described below.

The value of the stock consideration is dependent upon the value of Cambridge common stock and therefore will fluctuate with the market price of Cambridge common stock. Accordingly, any change in the price of Cambridge common stock prior to the merger will affect the market value of the stock consideration that OptimaWellesley shareholders may receive upon the closing of the merger.

Following the merger, Cambridge common stock will continue to trade on NASDAQ under the symbol “CATC”.

 

Q:

Will IWellesley shareholders receive any fractional shares of Cambridge common stock as part of the merger consideration?

 

A:

No. Cambridge will not issue any fractional shares of Cambridge common stock in the merger. Instead, Cambridge will pay youWellesley shareholders the cash value of a fractional share (without interest) in an amount determined by

 amount determined by multiplying the fractional share interest to which yousuch shareholder would otherwise be entitled by the average of the closing sales prices of one share of Cambridge common stock on NASDAQ for the 5five trading days ending on the third business day immediately preceding the closing date, rounded to the nearest whole cent.

 

Q:

What are the material U.S. federal income tax consequences of the merger to U.S. holders of shares of OptimaWellesley common stock?

 

A:

The merger is intended to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. Accordingly, OptimaWellesley shareholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the conversion of shares of OptimaWellesley common stock into shares of Cambridge common stock, except that such holders will recognize gain (but not loss)or loss to the extent such holders receive cash including cash received in lieu of any fractional share of Cambridge common stock that an Optimaa Wellesley shareholder would otherwise be entitled to receive. Holders of Optima common stock that receive the entirety of their consideration in cash, however, are expected to recognize gain or loss equal to the difference between the amount of cash received and the basis in the Optima common stock exchanged. See “The Merger Agreement—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 62.104.

 

Q:

What will happen to Optima’sWellesley’s stock options in the merger?

 

A:

Pursuant to the terms of the merger agreement, each option to purchase shares of OptimaWellesley common stock, whether vested or unvested, that is outstanding as of immediately prior to the effective time of the merger will be cancelled at the effective time of the merger. In exchange for the cancellation of each option, the holder of such option will receive a cash amount equal to the product of (x) the number of shares of OptimaWellesley common stock subject to such option at the effective time multiplied by (y) the excess of the “per share consideration” (as defined in the merger agreement) over the exercise price per share of such option, less applicable taxes and withholdings and without interest. In the event that the exercise price of an option is equal to or greater than the “per share consideration,” then the option shallwill be cancelled in exchange for no consideration. See “The Merger Agreement—Optima’sTreatment of Stock Options” beginning on page 76.111.

Q:

What will happen to Wellesley’s restricted stock awards in the merger?

A:

For Wellesley shareholders, pursuant to the terms of the merger agreement, any vesting restrictions on each share of restricted stock outstanding immediately prior to the effective time of the merger will automatically lapse and each share of restricted stock will be treated as an issued and outstanding share of Wellesley common stock. See “The Merger Agreement—Treatment of Restricted Stock Awards” beginning on page 111.

 

Q:

Will IWellesley shareholders be able to trade the shares of Cambridge common stock that Ithey receive in the merger?

 

A:

YouIf you are a Wellesley shareholder, you may freely trade the shares of Cambridge common stock issued in the merger, unless you are an “affiliate” of Cambridge as defined by Rule 144 under the Securities Act of 1933, as amended.Act. Affiliates consist of individuals or entities that control, are controlled by or are under the common control with Cambridge, and include the executive officers and directors of Cambridge after the merger and may include significant shareholders of Cambridge.

 

Q:

What are the conditions to completion of the merger?

 

A:

The obligations of Cambridge and OptimaWellesley to complete the merger are subject to the satisfaction or waiver of certain closing conditions contained in the merger agreement, including the receipt of required regulatory approvals and tax opinions, and the approval of the merger agreement by the shareholders of Optima.both Wellesley and Cambridge, including the approval by Cambridge shareholders of the issuance of Cambridge common stock in connection with the merger.

Q:

When do you expect the merger to be completed?

 

A:

We will complete the merger when all of the conditions to completion contained in the merger agreement are satisfied or waived, including obtaining required regulatory approvals and the approval of the merger agreementrequired approvals by OptimaCambridge and Wellesley shareholders at thetheir respective shareholder meeting.meetings. While we expect the merger to be completed in the second quarter of 2019,2020 and systems conversion in the fourth quarter of 2020, we cannot assure you of the actual timing.

 

Q:

What shareholder approvals are required to complete the merger?

 

A:

The merger cannot be completed unless (1) the holders of at leasttwo-thirds of the shares of Cambridge common stock entitled to vote at the special meeting of Cambridge shareholders vote to approve the merger agreement, including the issuance of Cambridge common stock in connection with the merger, and (2) the holders of a majority of the shares of OptimaWellesley common stock present in person or represented by proxyoutstanding and entitled to vote at the special meeting of Wellesley shareholders vote to approve the merger agreement.

Q:

Are there any shareholders already committed to voting in favor of the merger agreement?

 

A:

Yes. Each of the directors (including the Chief Executive Officer, the Executive Vice Presidentof Cambridge and Chief Administrative OfficerWellesley and the Executive Vice Presidentcertain executive officers of Cambridge and Chief Lending Officer) and one additional executive officer of OptimaWellesley have entered into a voting agreement with Cambridgeagreements requiring each of them to vote all of their respective shares of OptimaCambridge or Wellesley common stock, respectively, owned by such person in favor of approval of the merger agreement. As of the record date,date: (i) these Cambridge directors and the executive officerofficers held 131,233 shares of OptimaCambridge common stock, which represented approximately %2.4% of the outstanding shares of OptimaCambridge common stock; and (ii) these Wellesley directors and executive officers held 190,987 shares of Wellesley common stock, which represented approximately 7.4% of the outstanding shares of Wellesley common stock.

 

Q:

When and where isare the shareholder meeting?meetings?

 

A:

The special meeting of Cambridge shareholders will be held at the Cambridge Trust Wealth Management office, 75 State Street, 18th Floor, Boston, Massachusetts 02109 on March 16, 2020, at 8:30 a.m., local time. The special meeting of Wellesley shareholders will be held at the Wellesley College Club, 727 Washington Street, Wellesley, Massachusetts 02482 on March 12, 2020, at 9:00 a.m., local time.

 

Q:

What will happen at the shareholder meeting?meetings?

 

A:

At the Cambridge shareholder meeting, OptimaCambridge shareholders will consider and vote on the proposal to approve the merger agreement.agreement and the transactions contemplated thereby, including the issuance of Cambridge common stock in connection with the merger. If, at the time of the Cambridge shareholder meeting, there are insufficient votes for the shareholders to approve the merger agreement and the transactions contemplated thereby, including the issuance of Cambridge common stock in connection with the merger, you may be asked to consider and vote on a proposal to adjourn such shareholder meeting, so that additional proxies may be collected.

At the Wellesley shareholder meeting, Wellesley shareholders will consider and vote on the proposal to approve the merger agreement and to approve, on an advisory(non-binding) basis, specified compensation that may become payable to the named executive officers of Wellesley in connection with the merger. If, at the time of the Wellesley shareholder meeting, there are insufficient votes for the shareholders to approve the merger agreement, you may be asked to consider and vote on a proposal to adjourn such shareholder meeting, so that additional proxies may be collected.

 

Q:

Who is entitled to vote at the Cambridge shareholder meeting?

 

A:

All holders of OptimaCambridge common stock who held shares at the close of business on , 2019,January 31, 2020, which is the record date for the special meeting of Cambridge shareholders, are entitled to receive notice of and to vote at the Cambridge special meeting. Each holder of OptimaCambridge common stock is entitled to one vote for each share of OptimaCambridge common stock owned as of the record date.

Q:

Who is entitled to vote at the Wellesley shareholder meeting?

A:

All holders of Wellesley common stock who held shares at the close of business on January 31, 2020, which is the record date for the special meeting of Wellesley shareholders, are entitled to receive notice of and to vote at the Wellesley special meeting. Each holder of Wellesley common stock is entitled to one vote for each share of Wellesley common stock owned as of the record date.

 

Q:

What constitutes a quorum for theeach shareholder meeting?

 

A:

The quorum requirement for theeach company’s shareholder meeting is the presence in person or by proxy of a majority of the total number of outstanding shares of Optimacommon stock entitled to be cast.vote.

 

Q:

How doesdo the boardboards of directors of OptimaCambridge and Wellesley recommend I vote?

 

A:

The OptimaAfter careful consideration, the Cambridge board of directors recommends that all Cambridge shareholders vote “FOR” approval of the merger agreement.proposal and “FOR” the adjournment proposal, if necessary.

After careful consideration, the Wellesley board of directors recommends that all Wellesley shareholders vote “FOR” the merger proposal,“FOR”the advisory proposal on specified compensation and “FOR” the adjournment proposal, if necessary.

 

Q:

Are there any risks that I should consider in deciding whether to vote for approval of the merger agreement?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section in this joint proxy statement/prospectus entitled “Risk Factors,” beginning on page 27,37, as well as the other information contained in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in the section of this joint proxy statement/prospectus entitled “Information Regarding Forward-Looking Statements” on page 33.45.

 

Q:

What do I need to do now?

 

A:

You should carefully read and consider the information contained in or incorporated by reference into this joint proxy statement/prospectus, including its annexes. It contains important information about the merger, the merger agreement, Cambridge, Cambridge Trust Company, Wellesley, and Optima.Wellesley Bank. After you have read and considered this information, you should complete and sign your proxy card and return it in the enclosed postage-paid envelope as soon as possible so that your shares will be represented and voted at you the shareholder meeting.

 

Q:

How may I vote my shares for the shareholder meeting proposals presented in this joint proxy statement/prospectus?

 

A:

You may vote by completing, signing, dating and returning the proxy card in the enclosed postage-paid envelope as soon as possible.possible, or via telephone or the Internet as described on the enclosed instructions. This will enable your shares to be represented and voted at theyour company’s shareholder

meeting. If you attend the meeting, you may deliver your completed proxy card in person or may vote by completing a ballot that will be available at the meeting. If your shares are registered in “street name” in the name of a broker or other nominee and you wish to vote in person at the meeting, you will need to obtain a legal proxy from your bank or brokerage firm. Please consult the voting form sent to you by your bank or broker to determine how to obtain a legal proxy in order to vote in person at your company’s meeting.

Q:

How will my shares be represented at themy company’s shareholder meeting?

 

A:

At the shareholder meeting,meetings for each of Cambridge and Wellesley, the individuals named in your proxy card will vote your shares in the manner you requested if you properly signed and submitted your proxy. If you sign your proxy card and return it without indicating how you would like to vote your shares at your company’s shareholder meeting, your proxy will be votedvoted: (1) “FOR” the merger proposal, (2)“FOR”the advisory proposal on specified compensation (solely in connection with the Wellesley shareholder meeting) and (3) “FOR” the approval of the adjournment of your company’s shareholder meeting, if necessary, to solicit additional proxies if there are insufficient votes to approve the merger agreement.agreement at the time of the shareholder meeting.

Q:

If my shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee automatically vote my shares for me?

A:

No. Your broker, bank or other nominee will not vote your shares unless you provide instructions to your broker, bank or other nominee on how to vote. You should instruct your broker, bank or other nominee to vote your shares by following the instructions provided by the broker, bank or nominee with this joint proxy statement/prospectus.

Q:

As a participant in the Wellesley Bank Employee Stock Ownership Plan or the Wellesley Bank Employee 401(k) Plan, how do I vote shares allocated to me under the plan?

A:

If you participate in the Wellesley Bank Employee Stock Ownership Plan, or ESOP, or if you invest in Wellesley common stock through the Wellesley Bank Employee 401(k) Plan, or 401(k) plan, you will receive a voting instruction form for the plans in which you participate that reflects all shares you may direct the trustee to vote on your behalf under such plans. Under the terms of the ESOP, all allocated shares of Wellesley common stock held by the ESOP are voted by the ESOP trustee, as directed by plan participants. The ESOP trustee, subject to the exercise of its fiduciary duties, will vote all unallocated shares of Wellesley common stock held by the ESOP and allocated shares for which it does not receive timely voting instructions in a manner calculated to most accurately reflect the instructions the ESOP trustee receives from participants regarding the shares of common stock deemed allocated to their accounts, subject to the exercise of the trustee’s fiduciary duties. Under the terms of the 401(k) Plan, a participant may direct the stock fund trustee how to vote the shares credited to his or her account. The stock fund trustee will vote all shares for which timely voting instructions are not received in the same proportion as shares for which the trustees received voting instructions.

 

Q:

What if I fail to submit my proxy card?

 

A:

If you fail to properly submit your proxy card, and you do not attend theyour company’s shareholder meeting and vote your shares in person, your shares will not be voted. ThisAt the special meeting of Cambridge shareholders, this will have the same effect as a vote “AGAINST” the merger proposal, but will have no impact on the outcome of the adjournment proposal. At the special meeting of Wellesley shareholders, this will have the same effect as a vote “AGAINST” the merger proposal, but will have no impact on the outcome of the advisory proposal on specified compensation and the adjournment proposal.

 

Q:

Can I attend the shareholder meeting and vote my shares in person?

 

A:

Yes. Although the Optima boardCambridge and Wellesley boards of directors requestsrequest that you return the proxy card accompanying this joint proxy statement/prospectus, all shareholders are invited to attend thetheir company’s shareholder meeting. ShareholdersCambridge shareholders of record on , 2019January 31, 2020 can vote in person at the special meeting.meeting of Cambridge shareholders. Wellesley shareholders of record on January 31, 2020 can vote in person at the special meeting of Wellesley shareholders.

Q:

Can I change my vote after I have submitted my proxy?

 

A:

Yes. ThereIf you do not hold your shares in “street name,” there are three ways you can change your vote at any time after you have submitted your proxy and before your proxy is voted at the shareholder meeting:

 

you may deliver a written notice bearing a date later than the date of your proxy card to the Chairman, President and CEOcompany’s Secretary at the address listed below, stating that you revoke your proxy;

 

you may submit a new signed proxy card bearing a later date; or

 

you may attend the respective shareholder meeting and vote in person, although attendance at the shareholder meeting will not, by itself, revoke a proxy.

You should send any notice of revocation to:

Optima Bank & Trust Company

Two Harbour Place

Portsmouth, NH 03801

Attention: Daniel R. Morrison, Chairman, President and CEOto the appropriate company at:

 

Cambridge Bancorp

78 Blanchard Road, 5th Floor

Burlington, Massachusetts 01803

Attention: Michael F. Carotenuto

Wellesley Bancorp, Inc.

100 Worcester Street, Suite 300

Wellesley, Massachusetts 02481

Attention: Michael W. Dvorak

If you have instructed a bank, broker or other nominee to vote your shares, you must follow the directions you receive from your bank, broker or other nominee to change your voting instructions.

Q:

What if I hold stock of both Cambridge and Wellesley?

A:

If you hold shares of both Cambridge and Wellesley, you will receive two separate packages of proxy materials. A vote as a Wellesley shareholder for the merger proposal or any other proposals to be considered at the Wellesley special meeting will not constitute a vote as a Cambridge shareholder for the merger proposal or any other proposals to be considered at the Cambridge special meeting, and vice versa. Therefore, please sign, date and return all proxy cards that you receive, whether from Cambridge or Wellesley, or vote via the Internet or by telephone.

 

Q:

What happens if I sell my shares of Wellesley common stock after the record date but before the shareholder meeting?

 

A:

If you are a Wellesley shareholder and you sell or otherwise transfer your shares of Wellesley common stock after the record date, but before the date of the Wellesley shareholder meeting, you will retain your right to vote at the shareholder meeting, but you will not have the right to receive the merger consideration to be received by Wellesley shareholders in the merger. In order to receive the merger consideration, a Wellesley shareholder must hold his or her shares through completion of the merger.

 

Q:

Are shareholders entitled to seek appraisalWhat do I do if I receive more than one joint proxy statement/prospectus or dissenters’ rights if they do not vote in favorset of the approval of the merger agreement?voting instructions?

 

A:

Yes. Shareholders will haveIf you hold shares directly as a record holder and also in “street name” or otherwise through a nominee, you may receive more than one joint proxy statement/prospectus and/or set of voting instructions relating to the rightshareholder meeting. These should each be voted and/or returned separately in order to dissent from the merger if they properly follow the requirementsensure that all of New Hampshire law.your shares are voted.

Q:

Should shareholders send in theirDo I need to do anything with my shares of Wellesley common stock certificates now?

 

A:

No. ShareholdersAfter the effective time of the merger, Wellesley shareholders will receive an election forma letter of transmittal and instructions for surrendering their stock certificates prior to the closing of the merger.certificates. In the meantime, you should retain your stock certificates because they are still valid. Please do not send in your stock certificates with your proxy card.

Q:

Am I entitled to exercise appraisal rights?

A:

No. Neither Cambridge shareholders nor Wellesley shareholders will be entitled to appraisal rights.

 

Q:

Where can I find more information about the companies?

 

A:

You can find more information about Cambridge and Wellesley from the various sources described under “Where You Can Find More Information” beginning on page 102.146.

 

Q:

Whom should I call with questions?

 

A:

If you have any questions concerning the merger, the other meeting matters or the joint proxy statement/prospectus, or need assistance voting your shares please contact Daniel R. Morrison, Chairman, President and CEO of Optima,the appropriate company representative, at the address or telephone number listed below:

Two Harbour Place

Portsmouth, NH 03801

(603)433-9600

Cambridge Bancorp

Michael F. Carotenuto

Chief Financial Officer

78 Blanchard Road, 5th Floor

Burlington, Massachusetts 01803

(617)520-5520

Wellesley Bancorp, Inc.

Michael W. Dvorak

CFO, COO

100 Worcester Street, Suite 300

Wellesley, Massachusetts 02481

(781)489-7606

SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus. It does not contain all of the information that may be important to you. We urge you to read carefully the entire document and the other documents to which this joint proxy statement/prospectus refers in order to fully understand the merger and the related transactions. See “Where You Can Find More Information” beginning on Page 102.page 146. Each item in this summary refers to the page of this joint proxy statement/prospectus on which that subject is discussed in more detail.

The Companies (Page 47)(Page 35)

Cambridge Bancorp

Cambridge is a federally registered bank holding company headquartered in Cambridge, Massachusetts and was incorporated as a Massachusetts corporation in 1983. Cambridge is the parent company of Cambridge Trust Company, a Massachusetts trust company formed in 1890.

Cambridge Trust Company

Cambridge Trust Company is a commercial bank regulated by the Massachusetts Division of Banks (the “MDB”) and the Federal Deposit Insurance Corporation (the “FDIC”). Cambridge Trust Company has approximately $2.0$2.8 billion in assets and 1016 banking offices in Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, and Weston.New Hampshire.

Cambridge Trust Company operates ten16 full-service private banking offices in six citiesEastern Massachusetts and towns in Eastern Massachusetts.New Hampshire. Cambridge Trust Company is engaged principally in the business of attracting deposits from the public and investing those deposits. Cambridge Trust Company invests those funds in various types of loans, including residential and commercial real estate, and a variety of commercial and consumer loans, and also invests its deposits and borrowed funds in investment securities. Cambridge Trust Company has two wholly-owned Massachusetts security corporations, CTC Security Corporation and CTC Security Corporation III, for this purpose. Deposits at Cambridge Trust Company are insured by the FDIC for the maximum amount permitted by FDIC Regulations. As a private bank, Cambridge Trust Company focuses on four core services that center around client needs. OurIts core services include Wealth Management, Commercial Banking, Residential Lending and Personal Banking. Cambridge Trust Company’s customers consist primarily of consumers and small- andmedium-sized businesses in these communities and surrounding areas throughout Massachusetts and New Hampshire. Cambridge Trust Company’s Wealth Management Group has fourfive offices, onetwo in Boston, Massachusetts and three in New Hampshire in Concord, Manchester, and Portsmouth. The Wealth Management Group offers comprehensive investment management, as well as trust administration, estate settlement, and financial planning services. Cambridge’s wealth management clients value personal service and depend on the commitment and expertise of its experienced banking, investment, and fiduciary professionals. As of September 30, 2018,2019, Cambridge had assets under management and administration of approximately $3.2$3.3 billion.

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



Cambridge Trust Company’s lending area is primarily an urban market area with a substantial number ofone-to-four unit residential properties, some of which arenon-owner occupied, as well as apartment buildings,



condominiums, office buildings, and retail space. As a result, its loan portfolio contains a significantly greater number of multi-family and commercial real estate loans compared to institutions that operate innon-urban markets. Cambridge Trust Company’s market area is located largely in the Boston-Cambridge-Quincy, Massachusetts/New Hampshire Metropolitan Statistical Area.

At September 30, 2018,2019, Cambridge had $2.0$2.8 billion in assets, $1.7$2.4 billion in deposits and $156.3$243 million of shareholders’ equity.

Cambridge’s principal executive offices are located at 1336 Massachusetts Avenue, Cambridge, Massachusetts 02138, its phone number is(617)520-5520 and its website is www.cambridgetrust.com. Information that is included in this website does not constitute part of this joint proxy statement/prospectus.

Optima Bank & Trust CompanyWellesley Bancorp, Inc.

OptimaWellesley was foundedincorporated in 2008 as a New Hampshire-chartered bank. Optima is regulated bySeptember 2011 to be the New Hampshire Banking Department (“NHBD”)holding company for Wellesley Bank following Wellesley Bank’s conversion from the mutual to stock form of ownership. On January 25, 2012, the conversion was completed and Wellesley Bank became the FDIC. Optima operates outwholly-owned subsidiary of the Wellesley. Also on that date, Wellesley sold and issued 2,407,151 shares of its main office in Portsmouth, New Hampshire,common stock at a price of $10.00 per share, through which Wellesley received net offering proceeds of $21.2 million. Wellesley’s principal business activity is the ownership of the outstanding shares of common stock of Wellesley Bank. Wellesley does not own or lease any property, but instead uses the premises, equipment and its six branch offices in Bedford, Dover, North Hampton, Pease Tradeport, Portsmouthother property of Wellesley Bank, with the payment of appropriate rental fees, as required by applicable laws and Stratham, New Hampshire. Optima offers traditional community bank loan and deposit products.regulations, under the terms of an expense allocation agreement entered into with Wellesley Bank.

At September 30, 2018, Optima2019, Wellesley had $524.2$985.9 million in assets, $488.6$758.7 million in deposits and $33.0$71.8 million of shareholders’ equity.

Optima’s principalWellesley Bank

Founded in 1911, Wellesley Bank is a Massachusetts chartered cooperative bank headquartered in Wellesley, Massachusetts. Wellesley Bank operates as a community-oriented financial institution offering traditional financial services to consumers and businesses in its primary market areas of Wellesley, Newton, Needham, Cambridge, Boston and the surrounding communities. Wellesley Bank attracts deposits from the general public and uses those funds to originate primarily residential mortgage loans, commercial real estate loans and construction loans, commercial business loans, and, to a lesser extent, home equity lines of credit and other consumer loans. Wellesley Bank conducts its lending and deposit activities primarily with individuals and small businesses in its primary market areas. In addition, it also provides investment management services for high net worth individuals, families, businesses, private partnerships, nonprofit organizations, foundations and trusts through its wholly-owned subsidiary, Wellesley Investment Partners, LLC, a registered investment advisor.

Wellesley Bank’s and Wellesley’s executive offices are located at Two Harbour Place, Portsmouth, New Hampshire 03801,100 Worcester Street, Suite 300, Wellesley, Massachusetts 02481 and its phonetelephone number is (603)(781)433-9600235-2550. and its

Wellesley Bank’s website address is www.optimabank.com.www.wellesleybank.com. Information that is included in this website does not constitute part of this joint proxy statement/prospectus.



The Special Meeting of Shareholders of OptimaCambridge

Date, Time and Place of the Special Meeting(Page 41)49)

OptimaCambridge will hold its special meeting of shareholders at the Cambridge Trust Wealth Management office, 75 State Street, 18th Floor, Boston, Massachusetts 02109 on ,March 16, 2020, at 8:30 a.m., local time.

Purpose of the Special Meeting(Page 41)49)

At the special meeting, you will be asked to vote on the proposal to approve the merger agreement.proposals to:

1.

approve the merger agreement and the transactions contemplated by the merger agreement, including the issuance of Cambridge common stock in connection with the merger; and

2.

approve one or more adjournments of the special meeting, if necessary.

Recommendation of OptimaCambridge Board of Directors(Page 41)49)

The OptimaCambridge board of directors recommends that you vote “FOR” approval of the merger agreement.proposal and “FOR” the adjournment proposal.

Record Date; Outstanding Shares; Shares Entitled to Vote(Page 41) (Page 49)

Only holders of record of OptimaCambridge common stock at the close of business on the record date of , 2019January 31, 2020 are entitled to notice of and to vote at the special meeting. As of the record date, there were 5,412,417 shares of OptimaCambridge common stock outstanding, held of record by approximately 427 shareholders.

Quorum; Vote Required(Page 41)50)

A quorum of OptimaCambridge shareholders is necessary to hold a valid meeting. If the holders of at least majority of the total number of shares of OptimaCambridge common stock entitled to vote are present in person or represented by proxy at the special meeting, a quorum will exist. Abstentions will be counted for purposes of determining whether a quorum is present.

The affirmative vote of at leasttwo-thirds of the shares of Cambridge common stock entitled to vote at the special meeting of Cambridge shareholders is required to approve the merger proposal. The affirmative vote of at least a majority of the votes cast, in person or represented by proxy, at the special meeting is required to approve the adjournment proposal.

Share Ownership of Management; Voting Agreements (Page 50)

As of the record date, the directors and executive officers of Cambridge collectively owned 135,782 shares of Cambridge common stock, or approximately 2.5% of Cambridge’s outstanding shares.

Each of the directors and certain executive officers of Cambridge have entered into voting agreements, requiring each of them to vote all of their shares of Cambridge common stock beneficially owned by such person in favor of approval of the merger agreement. As of the record date, these directors and executive officers held 131,233 shares of Cambridge common stock, which represented approximately 2.4% of the outstanding shares of Cambridge common stock.



The Special Meeting of Shareholders of Wellesley

Date, Time and Place of the Special Meeting(Page 55)

Wellesley will hold its special meeting of shareholders at the Wellesley College Club, 727 Washington Street, Wellesley, Massachusetts 02482 on March 12, 2020, at 9:00 a.m., local time.

Purpose of the Special Meeting(Page 55)

At the special meeting, you will be asked to vote on proposals to:

1.

approve the merger agreement;

2.

a proposal to approve, on an advisory(non-binding) basis, specified compensation that may become payable to the named executive officers of Wellesley in connection with the merger; and

3.

approve one or more adjournments of the special meeting, if necessary.

Recommendation of Wellesley Board of Directors(Page 55)

The Wellesley board of directors recommends that you vote “FOR” the merger proposal, “FOR” the advisory proposal on specified compensation, and “FOR” the adjournment proposal.

Record Date; Outstanding Shares; Shares Entitled to Vote (Page 55)

Only holders of record of Wellesley common stock at the close of business on the record date of January 31, 2020 are entitled to notice of and to vote at the special meeting. As of the record date, there were 2,598,345 shares of Wellesley common stock outstanding, held of record by approximately 608 shareholders.

Quorum; Vote Required(Page 56)

A quorum of Wellesley shareholders is necessary to hold a valid meeting. If the holders of at least majority of the total number of shares of Wellesley common stock entitled to be cast are present in person or represented by proxy at the special meeting, a quorum will exist. Abstentions will be counted for purposes of determining whether a quorum is present.



The affirmative vote of a majority of the shares of OptimaWellesley common stock present in personoutstanding and represented by proxyentitled to vote at the special meeting is required to approve the merger agreement.proposal. The affirmative vote of a majority of votes cast on the proposal is required to approve the advisory proposal on specified compensation and the adjournment proposal.

Share Ownership of Management; Voting Agreements(Page 42) (Page 56)

As of the record date, the directors and executive officers of OptimaWellesley collectively owned 217,281 shares of OptimaWellesley common stock, or approximately %8.4% of Optima’sWellesley’s outstanding shares.

Each of the directors (including the Chief Executive Officer, the Executive Vice President and Chief Administrative Officer and the Executive Vice President and Chief Lending Officer) and one othercertain executive officerofficers of OptimaWellesley have entered into a voting agreement with Cambridge,agreements, requiring each of them to vote all of their shares of OptimaWellesley common stock beneficially owned by such person in favor of approval of the merger agreement. As of the record date, these directors and the executive officerofficers held 190,987 shares of OptimaWellesley common stock, which represented approximately %7.4% of the outstanding shares of OptimaWellesley common stock.



The Merger and the Merger Agreement

The proposed merger is of Optima(i) Wellesley with and into Cambridge and (ii) Wellesley Bank with and into Cambridge Trust Company, with Cambridge and Cambridge Trust Company as the surviving bank inentities following the merger. The merger agreement is attached to this joint proxy statement/prospectus asAnnex A. Please carefully read the merger agreement as it is the legal document that governs the merger.transactions.

Structure of the Merger(Page 70)109)

In the proposed merger, Optima(i) Wellesley will merge with and into Cambridge and (ii) Wellesley Bank will merge with and into Cambridge Trust Company, a Massachusetts-chartered trust companywith Cambridge and wholly owned subsidiary of Cambridge, with Cambridge Trust Company surviving the merger. Shares of Cambridge will continue to trade on NASDAQ with the NASDAQ trading symbol “CATC”. Upon completion of the merger, the separate existenceexistences of OptimaWellesley and Wellesley Bank will terminate.

Consideration to be Received in the Merger (Page 71)110)

Upon completion of the merger, each outstanding share of OptimaWellesley common stock will be converted into the right to elect to receive either (i) $32.00 in cash, or (ii) 0.34680.580 shares of Cambridge common stock, subject to proration and allocation procedures set forth in the merger agreement intended to ensure that 95% of the total number of Optima shares outstanding immediately prior to the effective time of the merger will be exchanged for stock, and the remaining Optima shares will be converted into cash.stock. No fractional shares of Cambridge common stock will be issued to any holder of OptimaWellesley common stock upon completion of the merger. For each fractional share that would otherwise be issued, Cambridge will pay each shareholder cash (without interest) in an amount determined by multiplying the fractional share interest to which such shareholder would otherwise be entitled by the average of the closing sales prices of one share of Cambridge common stock on NASDAQ for the five trading days ending on the third business day immediately preceding the effective time, rounded to the nearest whole cent.

OptimaTreatment of Stock Options and Restricted Stock Awards(Page 76)111)

Pursuant to the terms of the merger agreement, each option to purchase shares of OptimaWellesley common stock, whether vested or unvested, that is outstanding as of immediately prior to the effective time of the merger will be cancelled at the effective time of the merger. In exchange for the cancellation of each option, the holder of such option will receive a cash amount equal to the product of (x) the number of shares of OptimaWellesley common stock subject to such option at the effective time multiplied by (y) the excess of the “per share consideration” over the exercise price per share of such option, less applicable taxes and withholdings and without interest. In the event



that the exercise price of an option is equal to or greater than the per share consideration, then the option will be cancelled in exchange for no consideration. The per share consideration is determined according to the following formula: the sum of (1) the product of 95%, multiplied by the exchange ratio of 0.3468,0.580 multiplied by the average of the daily closing sales pricesprice of one share of Cambridge common stock on NASDAQ for the five consecutive trading days ending on the third business day immediately preceding the closing date, plus (2)rounded to the productnearest whole cent.

Pursuant to the terms of 5%the merger agreement, any vesting restrictions on each share of restricted stock outstanding immediately prior to the effective time of the merger will automatically lapse and each share of restricted stock will be treated as an issued and outstanding share of Wellesley common stock.

Opinion of Keefe, Bruyette & Woods, Inc., multipliedFinancial Advisor to Cambridge(Page 72)

In connection with the merger, Keefe, Bruyette & Woods, Inc. (“KBW”) delivered a written opinion, dated December 5, 2019, to the Cambridge board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to Cambridge of the exchange ratio in the proposed merger. The full text of KBW’s opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the cashopinion, is attached asAnnex C to this joint proxy statement/prospectus.The opinion was for the information of, and was directed to, the Cambridge board of



directors (in its capacity as such) in connection with its consideration of $32.00.the financial terms of the merger.The opinion did not address the underlying business decision of Cambridge to engage in the merger or enter into the merger agreement or constitute a recommendation to the Cambridge board of directors in connection with the merger, and it does not constitute a recommendation to any holder of Cambridge common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter.

Opinion of Sandler O’Neill & Partners, L.P., Financial Advisor to OptimaWellesley(Page 48)84)

On December 5, 2018, Sandler O’Neill & Partners, L.P. or(“Sandler O’Neill”) acted as financial advisor to Wellesley’s board of directors in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the December 5, 2019 meeting at which Wellesley’s board of directors considered the merger and the merger agreement, Sandler O’Neill rendereddelivered to the OptimaWellesley board of directors its oral opinion, which was subsequently confirmed in writing on December 5, 2019, to the effect that, as of such date, the merger consideration set forth in the merger agreementexchange ratio was fair to Optimathe holders of Wellesley’s common shareholdersstock from a financial point of view.The full text of Sandler O’Neill’s written opinion which sets forthis attached asAnnex B to this joint proxy statement/prospectus. The opinionoutlines the procedures followed, assumptions made, matters considered and qualifications and limitationson the review undertaken by Sandler O’Neill in connection with the opinion, is attached to this proxy statement/prospectus asAnnex B. Optima shareholdersrendering its opinion. Holders of Wellesley common stock are urged to read the entire opinion carefully in its entirety.connection with their consideration of the proposed transaction.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion iswas directed to the OptimaWellesley board of directors in connection with its consideration of the merger and is limitedthe merger agreement and does not constitute a recommendation to any shareholder of Wellesley as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger and the merger agreement. Sandler O’Neill’s opinion was directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of Wellesley common shareholders of Optima with regard to the merger consideration set forth in the merger agreement. Sandler O’Neill doesstock and did not express an opinion as toaddress the underlying business decision by Optimaof Wellesley to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other strategic alternativesalternative transactions or business strategies that may be availablemight exist for Wellesley or the effect of any other transaction in which Wellesley might engage. See the section of this joint proxy statement/prospectus entitled “The Merger— Opinion of Sandler O’Neill & Partners, L.P., Financial Advisor to Optima.Wellesley” beginning on page 84 for more information relating to Sandler O’Neill’s opinion is not a recommendation to any Optima shareholder as to how such shareholder should vote at the special meeting with respect to the merger agreement or any other matter.opinion.

Interests of Optima’sCambridge’s Directors and Executive Officers in the Merger(Page 59)97)

In considering the information contained in this joint proxy statement/prospectus, you should be aware that Optima’sCambridge’s directors and certain executive officers have interests in the merger that are different from, or in addition to, the interests of OptimaCambridge shareholders generally. These interests include, among other things:

the expectation that each current member of the Cambridge board of directors will continue to serve as a director of the board of directors of the combined company; and

the expectation that each current Cambridge executive officer will continue in his or her role as an executive officer of the combined company.

See the section of this joint proxy statement/prospectus entitled “The Merger—Interests of Cambridge’s Directors and Executive Officers in the Merger” beginning on page 97 for a discussion of these interests.



Interests of Wellesley’s Directors and Executive Officers in the Merger (Page 98)

In considering the information contained in this joint proxy statement/prospectus, you should be aware that Wellesley’s directors and certain executive officers have interests in the merger that are different from, or in addition to, the interests of Wellesley shareholders generally. These interests include, among other things:

 

the right to receive cash payments in exchange for cancellation of outstanding stock options, including unvested stock options;

the right to accelerated vesting of restricted stock awards;

 

the right of certain executive officers to receive cash payments in exchange for the termination of their existing employment agreements;agreements with Wellesley;

 

the right of certain other executive officers to receive cash severance and continued employee benefits under certain circumstances;

 

the right to continued indemnification and liability insurance coverage by Cambridge after the merger for acts or omissions occurring before the merger; and

 

the right to one seatthree seats on each of Cambridge’s and Cambridge Trust Company’s board of directors, and any related compensation for such services.

Cambridge and Cambridge Trust Company entered into an offer letter and a change in control agreement with Daniel R. Morrison and offer lettersThomas J. Fontaine regarding his continuing role with William Young and Pamela Morrison regarding their continuing roles with Cambridge and Cambridge Trust Company following the merger. See the section of this joint proxy statement/prospectus entitled “The Merger—Interests of Optima’sWellesley’s Directors and Executive Officers in the Merger” beginning on page 5998 for a discussion of these interests.

Boards of Directors of Cambridge and Cambridge Trust Company After the Merger(Page 62) (Page 104)

Effective immediately following the effective time of the merger, or at Cambridge’s option, immediately following the 2020 annual meeting of shareholders of Cambridge, Cambridge, upon consultation with Wellesley, will designate one memberthree members of the OptimaWellesley board of directors to serve as a membermembers of Cambridge’s board of directors and Cambridge Trust Company’s board of directors. Cambridge has designated



Thomas J. Fontaine, the current President and Chief Executive Officer of Wellesley and Wellesley Bank, as one of the designees. Mr. Morrison as the designee. Mr. MorrisonFontaine will serve on the Cambridge board of directors and Cambridge Trust Company board of directors until the next annual meeting following his appointment, at which timepoint he or she will be nominated for a three-year term. Mr. Morrison will also be appointed to the board of directors of Cambridge Trust Company, effective immediately following the effective time of the merger.

No Solicitation of Alternative Transactions(Page 82) (Page 117)

The merger agreement restricts Optima’sWellesley’s ability to solicit or engage in discussions or negotiations with a third party regarding a proposal to acquire a significant interest in Optima.Wellesley. However, if OptimaWellesley receives a bona fide unsolicited written acquisition proposal from a third party that its board of directors believes in good faith is or is reasonably likely to lead to a proposal (i) on terms which the OptimaWellesley board of directors determines in good faith, after consultation with its financial advisor, to be more favorable from a financial point of view to Optima’sWellesley’s shareholders than the transactions contemplated by the merger agreement, and (ii) that constitutes a transaction that, in the good faith judgment of the OptimaWellesley board of directors, is reasonably likely to be consummated on the terms set forth, taking into account all legal, financial, regulatory and other aspects of such proposal, OptimaWellesley may furnishnon-public information to that third party and engage in negotiations regarding an acquisition proposal with that third party, subject to specified conditions in the merger agreement, if its board of directors determines in good faith, after consultation with its outside legal counsel, that such action would be required in order for directors of OptimaWellesley to comply with their fiduciary duties under applicable law.



Conditions to Completion of the Merger(Page 85) (Page 121)

As more fully described in this joint proxy statement/prospectus and the merger agreement, the completion of the merger depends on a number of conditions being satisfied or waived, including:including, but not limited to:

 

shareholders of OptimaWellesley having approved the merger agreement;

 

shareholders of Cambridge having approved the merger agreement, including the issuance of Cambridge common stock in connection with the merger;

Cambridge and OptimaWellesley having obtained all regulatory approvals required to consummate the transactions contemplated by the merger agreement and all related statutory waiting periods having expired;

 

the absence of any judgment, order, injunction or decree, or any statute, rule or regulation enacted, entered, promulgated or enforced, preventing, prohibiting or making illegal the consummation of any of the transactions contemplated by the merger agreement;

 

Cambridge and OptimaWellesley having each received a legal opinion from their respective counsel regarding treatment of the merger as a “reorganization” for federal income tax purposes;

 

the representations and warranties of each of Cambridge and OptimaWellesley in the merger agreement being accurate, subject to exceptions that would not have a material adverse effect;

 

Cambridge and OptimaWellesley having each performed in all material respects all obligations required to be performed by it; and

 

the shares of Cambridge common stock to be issued in the merger having been approved for listing on the NASDAQ Stock Market.NASDAQ.

Termination of the Merger Agreement(Page 87) (Page 123)

Cambridge and OptimaWellesley can mutually agree to terminate the merger agreement before the merger has been completed if the boards of directors of each so determines by vote of a majority of the members of their respective boards of directors, and either company can terminate the merger agreement if:

 

any regulatory approval required for consummation of the merger and the other transactions contemplated by the merger agreement has been denied by final, nonappealable action of any regulatory authority, or an application for regulatory approval has been permanently withdrawn at the request of a governmental authority;



regulatory authority, or an application for regulatory approval has been permanently withdrawn at the request of a governmental authority;

 

the required approval of the merger agreement by the OptimaWellesley shareholders, or the required approval of the merger agreement, including the issuance of Cambridge common stock in connection with the merger, by the Cambridge shareholders, is not obtained;

 

the other party materially breaches any of its representations, warranties, covenants or other agreements set forth in the merger agreement (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained in the merger agreement), which breach is not cured within 30 days of written notice of the breach, or by its nature cannot be cured prior to the closing of the merger, and such breach would entitle thenon-breaching party not to consummate the merger; or

 

the merger is not consummated by September 30, 2019,2020, unless the failure to consummate the merger by such date is due to a material breach of the merger agreement by the terminating party.



In addition, Cambridge may terminate the merger agreement if:

 

OptimaWellesley materially breaches thenon-solicitation provisions in the merger agreement;

 

the OptimaWellesley board of directors:

 

fails to recommend approval of the merger agreement, or withdraws, modifies or changes such recommendation in a manner adverse to Cambridge’s interests; or

 

recommends, proposes or publicly announces its intention to recommend or propose to engage in an acquisition transaction with any person other than Cambridge or any of its subsidiaries; or

 

OptimaWellesley fails to call, give notice of, convene and hold its special meeting.

In addition, OptimaWellesley may terminate the merger agreement if:

 

the OptimaCambridge board of directors fails to recommend approval of the merger agreement, including the issuance of Cambridge common stock in connection with the merger, or withdraws, modifies or changes such recommendation in a manner adverse to Wellesley’s interests;

Cambridge fails to call, give notice of, convene and hold its special meeting;

Wellesley decides to accept a superior proposal in accordance with the merger agreement; or

the Wellesley board of directors so determines by a majority vote of the members of the entire board, at any time during thefive-day period commencing on the 10th day prior to the closing date of the merger (or the immediately preceding trading day if shares of Cambridge common stock are not trading on NASDAQ on such 10th day), which is referred to as the determination date, if both of the following conditions are satisfied:

 

the quotient obtained by dividing (i) the average of the daily closing prices for shares of Cambridge common stock for the 20 consecutive full trading days on which such shares are traded on NASDAQ (as reported by Bloomberg or, if not reported thereby, any other authoritative source) ending at the close of trading on the determination date by (ii) the closing price of a share of Cambridge common stock on NASDAQ (as reported by Bloomberg or, if not reported thereby, any other authoritative source) on the last trading day immediately preceding the date of the first public announcement of entry into the merger agreement, which is referred to as the Cambridge ratio, is less than 0.80; and

 

the Cambridge ratio is less than the quotient obtained by dividing (A) the average of the closing prices of the NASDAQ Bank Index for the 20 consecutive full trading days ending on the trading day prior to the determination date by (B) the closing price of the NASDAQ Bank Index on the last trading day immediately preceding the date of the first public announcement of entry into the merger agreement, and subtracting 0.20 from the quotient.

The closing price of Cambridge common stock on December 4, 2018,2019, the last trading day preceding the first public announcement of the merger, was $85.61$76.36 per share. In order for the termination right described immediately above to be triggered, the average closing price of Cambridge common stock over the measurement period will need to be less than $68.49$61.09 per share and Cambridge common stock will need to have underperformed the NASDAQ Bank Index over the measurement period by at least 20 percentage points. If the



Optima Wellesley board of directors exercises this termination right, Cambridge will have the option to increase the merger consideration such that the implied value of the exchange ratio would be equivalent to the minimum implied value that would have avoided triggering the termination right described above. If Cambridge elects to increase the merger consideration pursuant to the preceding sentence, no termination will occur.



Termination Fee(Page 88) (Page 124)

OptimaWellesley has agreed to pay Cambridge a termination fee of $2,500,000$4,100,000 if:

 

Cambridge or Optima terminates the merger agreement as a result of:

 

Optima materially breachesWellesley breaching thenon-solicitation provisions in the merger agreement;

 

the OptimaWellesley board of directors:

failsdirectors failing to recommend approval of the merger agreement by the Wellesley shareholders, or withdraws, modifieswithdrawing, modifying or changeschanging such recommendation in a manner adverse to Cambridge’s interests; or

 

recommends, proposesthe Wellesley board of directors recommending, proposing or publicly announcesannouncing its intention to recommend or propose to engage in an acquisition transaction with any person other than Cambridge or any of its subsidiaries;

Wellesley materially breaching the shareholder approval provisions in the merger agreement by failing to call, give notice of, convene and hold the Wellesley special meeting;

Wellesley terminates the merger agreement as a result of:

Wellesley receiving a superior proposal and, in accordance with the terms of the merger agreement, the Wellesley board of directors has made a determination to accept such superior proposal; or

 

OptimaWellesley or Wellesley Bank enters into a definitive agreement relating to an acquisition proposal or consummates an acquisition proposal within 12 months following the termination of the merger agreement by Cambridge as a result of a willful breach of any representation, warranty, covenant or other agreement by OptimaWellesley or Wellesley Bank after an acquisition proposal has been publicly announced or otherwise made known to Optima.Wellesley.

Waiver or Amendment of Merger Agreement Provisions(Page 89) (Page 125)

Prior to the effective time of the merger, any provision of the merger agreement may be waived by the party benefited by the provision, or amended or modified by a written agreement between Cambridge and Optima.Wellesley. However, after the OptimaCambridge special meeting and the Wellesley special meeting, no amendment will be made which by law requires further approval by the shareholders of OptimaCambridge or Wellesley without obtaining such approval.

Material U.S. Federal Income Tax Consequences of the Merger(Page 62) (Page 104)

The merger is intended to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Accordingly, OptimaWellesley shareholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the conversion of shares of OptimaWellesley common stock into shares of Cambridge common stock, except that such holders will recognize gain (but not loss)or loss to the extent such holders receive cash including cash received in lieu of any fractional share of Cambridge common stock that an Optimaa Wellesley shareholder would otherwise be entitled to receive. Holders of Optima common stock that receive the entirety of their consideration in cash, however, are expected to recognize gain or loss equal to the difference between the amount of cash received and the basis in the Optima common stock exchanged.

Regulatory Approvals Required for the Merger(Page 64) (Page 106)

To complete the merger, various consents, approvals, waiverswaiver or consentsnon-objections must be obtained from state and federal governmental authorities, including the FDIC, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Massachusetts Commissioner of Banks (the “MA Commissioner”), the Massachusetts Housing Partnership, and the New Hampshire Banking Commissioner (the “NH Commissioner”).Co-Operative Central Bank. The U.S. Department of Justice is able to provide input



into the approval process of federal banking agencies to challenge the merger on antitrust grounds. Cambridge and OptimaWellesley have filed or will file all required applications, notices and waiver requests to obtain the



regulatory approvals andnon-objections necessary to consummate the merger. Cambridge and OptimaWellesley cannot predict whether the required regulatory approvals will be obtained, when they will be received or whether such approvals will be subject to any conditions.

Accounting Treatment of the Merger(Page 66) (Page 107)

The merger will be accounted for using the acquisition method of accounting with Cambridge treated as the acquirer. Under this method of accounting, Optima’sWellesley’s assets and liabilities will be recorded by Cambridge at their respective fair values as of the closing date of the merger and added to those of Cambridge. Any excess of purchase price over the net fair values of Optima’sWellesley’s assets and liabilities will be recorded as goodwill. Any excess of the fair value of Optima’sWellesley’s net assets over the purchase price will be recognized in earnings by Cambridge on the closing date of the merger.

Dissenters’ Rights(Page 66)

Optima shareholders will have the right to dissent from the merger if they properly follow the requirements of applicable New Hampshire law.

Listing of Cambridge Common Stock to be Issued in the Merger(Page 69)108)

Cambridge common stock will continue to trade on NASDAQ under the trading symbol “CATC”.

Differences Between Rights of Cambridge and OptimaWellesley Shareholders(Page 90) (Page 126)

As a result of the merger, holders of OptimaWellesley common stock will become holders of Cambridge common stock. Following the merger, OptimaWellesley shareholders will have different rights as shareholders of Cambridge due to the different provisions of the governing documents of Cambridge and Optima.Wellesley. For additional information regarding the different rights as shareholders of Cambridge than as shareholders of Optima,Wellesley, see “Comparison of Shareholder Rights” beginning on page 90.126.

Appraisal Rights (Page 107)

Neither Cambridge shareholders nor Wellesley shareholders will be entitled to appraisal rights.

Summary of Risk Factors Related to the Merger(Page 27) (Page 37)

You should consider all the information contained in or incorporated by reference into this joint proxy statement/prospectus in deciding how to vote for the proposals presented in the joint proxy statement/prospectus. In particular, you should consider the factors described under “Risk Factors” beginning on page 27.37.



SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF

CAMBRIDGE BANCORP

The following tables set forth selected historical financial and other data of Cambridge for the periods and at the dates indicated. The financial data as of and for the years ended December 31, 20172018 and 20162017 has been derived from the audited consolidated financial statements and notes thereto of Cambridge incorporated by reference elsewhere in this joint proxy statement/prospectus. The information as of and for the years ended December 31, 2016, 2015 2014 and 20132014 is derived from Cambridge’s audited consolidated financial statements which are not included in this joint proxy statement/prospectus. The financial data as of and for the nine months ended September 30, 20182019 and 20172018 has been derived from Cambridge’s unaudited consolidated financial statements. In the opinion of management of Cambridge, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the results of operations for the unaudited periods, have been made. The selected operating data presented below for the nine months ended September 30, 20182019 and 20172018 is not necessarily indicative of the results that may be expected for future periods.

 

  At or for the
Nine Months Ended		  December 31, 
  2018  2017  2017  2016  2015  2014  2013 
  (unaudited)  (unaudited)  (dollars in thousands, except per share data) 

Operating Data

       

Interest Income

 $50,670  $45,447  $61,191  $57,028  $54,341  $50,371  $47,661 

Interest Expense

  3,492   2,617   3,587   3,355   2,694   2,098   2,194 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend Income

  47,178   42,830   57,604   53,673   51,647   48,273   45,467 

Provision for Loan Losses

  787   360   362   132   1,075   1,550   1,500 

Noninterest Income

  24,951   22,649   30,224   28,661   25,865   24,464   23,181 

Noninterest Expense

  47,145   44,280   59,292   56,750   53,192   49,007   46,111 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income Before Taxes

  24,197   20,839   28,174   25,452   23,245   22,180   21,037 

Income Taxes

  5,622   6,987   13,358   8,556   7,551   7,236   6,897 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net Income

 $18,575  $13,852  $14,816  $16,896  $15,694  $14,944  $14,140 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average shares outstanding, basic

  4,059,608   4,027,378   4,030,530   3,990,343   3,938,117   3,886,692   3,839,146 

Average shares outstanding, diluted

  4,095,447   4,062,743   4,065,754   4,028,944   3,993,599   3,957,416   3,907,201 

Total shares outstanding

  4,105,742   4,082,188   4,082,188   4,036,879   4,000,181   3,940,536   3,884,851 

Basic Earnings Per Share

 $4.53  $3.40  $3.64  $4.19  $3.94  $3.81  $3.65 

Diluted Earnings Per Share

 $4.49  $3.37  $3.61  $4.15  $3.93  $3.78  $3.62 

Dividends Declared Per Share

 $1.46  $1.39  $1.86  $1.84  $1.80  $1.68  $1.59 

Dividend payout ratio(1)

  33%   41%   51%   44%   46%   44%   44% 

Financial Condition Data

       

Total Assets

 $1,988,944  $1,864,231  $1,949,934  $1,848,999  $1,706,201  $1,573,692  $1,533,710 

Total Deposits

  1,731,279   1,676,918   1,775,400   1,686,038   1,557,224   1,370,536   1,409,047 

Total Loans

  1,451,781   1,355,908   1,350,899   1,320,154   1,192,214   1,080,766   942,451 

Shareholders’ equity

  160,776   146,051   147,957   134,671   125,063   116,258   109,283 

Book Value Per Share

 $39.16  $35.78  $36.24  $33.36  $31.26  $29.50  $28.13 

Performance Ratios

       

Return on Average Assets

  1.26%   0.99%   0.79%   0.95%   0.95%   0.98%   0.99% 

Return on Average Shareholders’ equity

  16.21%   13.25%   10.47%   12.77%   12.91%   12.87%   13.63% 

Equity to assets

  8.08%   7.83%   7.59%   7.44%   7.36%   7.62%   7.28% 

Interest rate spread(2)

  3.21%   3.16%   3.16%   3.12%   3.24%   3.31%   3.31% 

Net Interest Margin, taxable equivalent(3)

  3.33%   3.24%   3.25%   3.21%   3.32%   3.37%   3.38% 

Efficiency ratio(4)

  65.36%   67.62%   67.51%   68.93%   68.62%   67.38%   67.17% 


  At or for the
Nine Months Ended		  December 31, 
  2019  2018  2018  2017  2016  2015  2014 
  (unaudited)  (unaudited)     (dollars in thousands, except per share data) 

Operating Data

       

Interest Income

 $69,924  $50,670  $69,055  $61,191  $57,028  $54,341  $50,371 

Interest Expense

  12,836   3,492   5,467   3,587   3,355   2,694   2,098 

Net interest and dividend Income

  57,088   47,178   63,588   57,604   53,673   51,647   48,273 

Provision for Loan Losses

  2,673   787   1,502   362   132   1,075   1,550 

Noninterest Income

  26,468   24,951   32,989   30,224   28,661   25,865   24,464 

Noninterest Expense

  56,749   47,145   63,987   59,292   56,750   53,192   49,007 

Income Before Taxes

  24,134   24,197   31,088   28,174   25,452   23,245   22,180 

Income Taxes

  5,988   5,622   7,207   13,358   8,556   7,551   7,236 

Net Income

 $18,146  $18,575  $23,881  $14,816  $16,896  $15,694  $14,944 

Average shares outstanding, basic

  4,525,178   4,059,608   4,061,529   4,030,530   3,990,343   3,938,117   3,886,692 

Average shares outstanding, diluted

  4,552,092   4,095,447   4,098,633   4,065,754   4,028,944   3,993,599   3,957,416 

Total shares outstanding

  4,849,988   4,105,742   4,107,051   4,082,188   4,036,879   4,000,181   3,940,536 

Basic Earnings Per Share

 $3.98  $4.53  $5.82  $3.64  $4.19  $3.94  $3.81 

Diluted Earnings Per Share

 $3.95  $4.49  $5.77  $3.61  $4.15  $3.93  $3.78 

Dividends Declared Per Share

 $1.53  $1.46  $1.96  $1.86  $1.84  $1.80  $1.68 

Dividend payout ratio (1)

  39%   33%   34%   51%   44%   46%   44% 

Financial Condition Data

       

Total Assets

 $2,841,868  $1,988,944  $2,101,384  $1,949,934  $1,848,999  $1,706,201  $1,573,692 

Total Deposits

  2,407,859   1,731,279   1,811,410   1,775,400   1,686,038   1,557,224   1,370,536 

Total Loans

  2,179,882   1,451,781   1,559,772   1,350,899   1,320,154   1,192,214   1,080,766 

Shareholders’ equity

  243,345   160,776   167,026   147,957   134,671   125,063   116,258 

Book Value Per Share

 $50.17  $39.16  $40.67  $36.24  $33.36  $31.26  $29.50 

 At or for the
Nine Months Ended		 December 31,  At or for the
Nine Months Ended		 December 31, 
 2018 2017 2017 2016 2015 2014 2013  2019 2018 2018 2017 2016 2015 2014 
 (unaudited) (unaudited) (dollars in thousands, except per share data)  (unaudited) (unaudited)   (dollars in thousands, except per share data) 

Performance Ratios

       

Return on Average Assets

 0.97%  1.26%  1.21%  0.79%  0.95%  0.95%  0.98% 

Return on Average Shareholders’ equity

 11.52%  16.21%  15.35%  10.47%  12.77%  12.91%  12.87% 

Equity to assets

 8.56%  8.08%  7.95%  7.59%  7.28%  7.33%  7.39% 

Interest rate spread (2)

 2.94%  3.21%  3.19%  3.16%  3.12%  3.24%  3.31% 

Net Interest Margin, taxable equivalent (3)

 3.23%  3.33%  3.33%  3.25%  3.21%  3.32%  3.37% 

Efficiency ratio (4)

 67.92%  65.36%  66.25%  67.51%  68.93%  68.62%  67.38% 

Wealth Management Assets

              

Market Value of Assets Under Management & Administration

 $3,171,465  $2,932,726  $3,085,669  $2,689,103  $2,449,139  $2,371,012  $2,204,186  $3,278,046  $3,171,465  $2,876,702  $3,085,669  $2,689,103  $2,449,139  $2,371,012 

Asset Quality

              

Non-Performing Loans

 $807  $1,702  $1,298  $1,676  $1,481  $1,629  $1,703  $3,483  $807  $642  $1,298  $1,676  $1,481  $1,629 

Non-Performing Loans/Total Loans

 0.06%  0.13%  0.10%  0.13%  0.12%  0.15%  0.18%  0.16%  0.06%  0.04%  0.10%  0.13%  0.12%  0.15% 

Net (Charge-Offs)/Recoveries

 $(1)  $(1)  $(303)  $(62)  $(153)  $11  $260  $(1,406)  $(1)  $(54)  $(303)  $(62)  $(153)  $11 

Allowance/Total Loans

 1.11%  1.15%  1.13%  1.16%  1.27%  1.32%  1.35%  0.83%  1.11%  1.08%  1.13%  1.16%  1.27%  1.32% 

Capital Ratios(5):

       

Capital Ratios (5):

       

Total capital

 14.00%  13.70%  13.75%  13.14%  13.05%  13.18%  13.38%  11.56%  13.97%  13.25%  13.75%  13.14%  13.05%  13.18% 

Tier 1 capital

 12.80%  12.45%  12.50%  11.89%  11.80%  11.93%  12.18%  10.64%  12.75%  12.07%  12.50%  11.89%  11.80%  11.93% 

Common Equity Tier 1

 12.80%  12.45%  12.50%  11.89%  11.80%  N/A  N/A  10.64%  12.75%  12.07%  12.50%  11.89%  11.80%  N/A 

Tier 1 leverage capital

 8.50%  8.12%  8.06%  7.95%  7.75%  7.75%  7.63%  7.69%  8.51%  8.49%  8.06%  7.95%  7.75%  7.75% 

Other Data:

              

Number of full service offices

 10  10  11  11  12  12  12  16  10  10  11  11  12  12 

Full time equivalent employees

 245  239  239  238  228  225  225  322  245  252  239  238  228  225 

 

(1)

Dividend payout ratio represents per share dividends declared divided by diluted earnings per share.

(2)

The interest rate spread represents the difference between the fully taxable equivalent weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.

(3)

The net interest margin represents fully taxable equivalent net interest income as a percent of average interest-earning assets for the period.

(4)

The efficiency ratio represents noninterest expense as a percentage of the sum of net interest income and noninterest income.

(5)

Capital ratios are for Cambridge Bancorp.Cambridge.



SELECTED HISTORICAL FINANCIAL DATA OF

OPTIMA BANK & TRUST COMPANYWELLESLEY BANCORP, INC.

The following tables set forth selected historical financial and other data of OptimaWellesley for the periods and at the dates indicated. The financial data as of and for the years ended December 31, 20172018 and 20162017 has been derived from the audited financial statements and notes thereto of OptimaWellesley included elsewhere in this joint proxy statement/prospectus. The information as of and for the years ended December 31, 2016, 2015 2014 and 20132014 is derived from Optima’sWellesley’s audited financial statements which are not included in this joint proxy statement/prospectus. The financial data as of and for the nine months ended September 30, 20182019 and 20172018 has been derived from Optima’sWellesley’s unaudited financial statements included elsewhere in this joint proxy statement/prospectus. In the opinion of management of Optima,Wellesley, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the results of operations for the unaudited periods, have been made. The selected operating data presented below for the nine months ended September 30, 20182019 and 20172018 is not necessarily indicative of the results that may be expected for future periods.

 

  At or for the
Nine Months Ended		  At or for the Year Ended December 31, 
  2018  2017  2017  2016  2015  2014  2013 
  (unaudited)  (unaudited)  (dollars in thousands, except per share data) 

Operating Data

       

Interest Income

 $15,045  $12,464  $17,071  $14,424  $12,875  $11,502  $9,331 

Interest Expense

  4,261   2,660   3,775   2,922   2,320   1,852   1,569 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend Income

  10,784   9,804   13,296   11,502   10,555   9,650   7,762 

Provision for Loan Losses

  291   263   428   560   442   282   451 

Noninterest Income

  1,058   892   1,132   2,143   1,875   1,056   581 

Noninterest Expense

  9,027   8,259   11,048   9,822   8,675   7,788   6,535 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income Before Taxes

  2,524   2,174   2,952   3,263   3,313   2,636   1,357 

Income Taxes

  715   778   1,068   1,162   1,243   998   556 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net Income

 $1,809  $1,396  $1,884  $2,101  $2,070  $1,638  $801 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average shares outstanding, basic

  2,058,069   2,018,086   2,018,829   1,966,952   1,943,086   1,943,086   1,937,862 

Average shares outstanding, diluted

  2,321,445   2,282,640   2,341,383   2,300,656   2,287,040   2,275,790   2,258,566 

Total shares outstanding

  2,063,562   2,018,086   2,033,211   2,018,086   1,943,086   1,943,086   1,943,086 

Basic Earnings Per Share

 $0.88  $0.69  $0.93  $1.07  $1.07  $0.84  $0.41 

Diluted Earnings Per Share

 $0.78  $0.61  $0.80  $0.91  $0.91  $0.72  $0.35 

Financial Condition Data

       

Total Assets

 $524,157  $470,030  $495,902  $427,391  $368,629  $318,221  $281,698 

Total Deposits

  488,566   432,060   458,514   390,911   330,776   278,495   244,155 

Total Loans (gross)

  465,583   397,453   420,318   342,632   314,552   263,828   229,468 

Shareholders’ equity

  33,019   30,569   31,261   29,037   25,698   23,455   20,287 

Book Value Per Share

 $16.00  $15.15  $15.38  $14.39  $13.23  $12.07  $10.44 

Performance Ratios

       

Return on Average Assets

  0.49%   0.43%   0.42%   0.54%   0.60%   0.54%   0.31% 

Return on Average Shareholders’ equity

  7.51%   6.27%   6.28%   7.73%   8.45%   7.56%   3.83% 

Equity to assets

  6.30%   6.50%   6.30%   6.79%   6.97%   7.37%   7.20% 

Interest rate spread(1)

  2.89%   3.00%   2.99%   2.93%   3.06%   3.20%   3.03% 

Net Interest Margin, taxable equivalent(2)

  2.96%   3.07%   3.06%   3.01%   3.14%   3.25%   3.09% 

Efficiency ratio(3)

  76.75%   77.47%   76.76%   72.32%   69.95%   72.57%   80.71% 


  At or for the Nine Months
Ended		  At or for the Year Ended December 31, 
  2019  2018  2018  2017  2016  2015  2014 
  (unaudited)  (unaudited)     (dollars in thousands, except per share data) 

Operating Data

       

Interest Income

 $30,044  $24,618  $33,638  $28,366  $24,804  $22,085  $19,545 

Interest Expense

  9,993   6,238   8,909   5,688   4,899   3,690   3,425 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend Income

  20,051   18,380   24,729   22,678   19,905   18,395   16,120 

Provision for Loan Losses

  480   390   585   735   437   475   640 

Noninterest Income

  2,526   1,785   2,586   1,987   1,710   1,226   959 

Noninterest Expense

  15,454   13,733   18,563   17,181   16,404   14,845   13,558 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income Before Taxes

  6,643   6,042   8,167   6,749   4,774   4,301   2,881 

Income Taxes

  1,800   1,628   2,176   3,564   1,838   1,652   1,104 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net Income

 $4,843  $4,414  $5,991  $3,185  $2,936  $2,649  $1,777 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Average shares outstanding, basic

  2,454,103   2,398,671   2,404,371   2,369,466   2,329,645   2,311,364   2,293,339 

Average shares outstanding, diluted

  2,545,786   2,499,093   2,502,784   2,454,580   2,367,038   2,328,936   2,299,388 

Total shares outstanding

  2,569,542   2,525,186   2,525,611   2,503,532   2,484,852   2,458,553   2,459,138 

Basic Earnings Per Share

 $1.97  $1.84  $2.49  $1.34  $1.26  $1.14  $0.78 

Diluted Earnings Per Share

 $1.91  $1.77  $2.40  $1.30  $1.24  $1.14  $0.77 

Financial Condition Data

       

Total Assets

 $985,867  $836,871  $871,420  $805,395  $695,283  $621,182  $535,115 

Total Deposits

  758,745   670,503   717,931   616,742   522,810   463,738   422,245 

Total Loans

  825,585   720,050   737,032   686,302   576,131   507,307   443,346 

Shareholders’ equity

  71,785   63,022   65,130   59,245   55,214   52,178   49,346 

Book Value of Equity per Share

 $27.94  $24.96  $25.79  $23.66  $22.22  $21.22  $20.07 

 At or for the
Nine Months Ended		 At or for the Year Ended December 31,  At or for the Nine
Months Ended		 At or for the Year Ended December 31, 
 2018 2017 2017 2016 2015 2014 2013  2019 2018 2018 2017 2016 2015 2014 
 (unaudited) (unaudited) (dollars in thousands, except per share data)  (unaudited) (unaudited)   (dollars in thousands, except per share data) 

Performance Ratios

       

Return on Average Assets

 0.69%  0.72%  0.72%  0.43%  0.45%  0.46%  0.36% 

Return on Average Shareholders’ equity

 9.39%  9.62%  9.64%  5.47%  5.37%  5.21%  3.70% 

Equity to assets

 7.28%  7.53%  7.48%  7.92%  8.46%  8.90%  9.80% 

Interest rate spread (1)

 2.58%  2.80%  2.76%  2.97%  2.99%  3.16%  3.22% 

Net Interest Margin, taxable equivalent (2)

 2.95%  3.06%  3.04%  3.16%  3.17%  3.31%  3.37% 

Efficiency ratio (3)

 68.45%  68.10%  67.96%  69.66%  75.89%  75.66%  79.38% 

Wealth Management Assets (inclusive of bank portfolio)

       

Market Value of Assets Under Management & Administration

 $406,643  $435,735  $709,923  $367,613  $307,147  $234,936  $112,014 

Asset Quality

              

Non-Performing Loans

 $834  $1,510  $1,184  $2,078  $1,584  $1,783  $1,795  $1,616  $1,205  $1,137  $576  $591  $1,463  $4,837 

Non-Performing Loans/Total Loans

 0.18%  0.38%  0.28%  0.61%  0.50%  0.68%  0.78%  0.14%  0.16%  0.15%  0.08%  0.10%  0.29%  1.08% 

Net (Charge-Offs)/Recoveries

 $(93)  $14  $(7)  $(344)  $(178)  $—  $(15)  $—    $—     —    (14)  $(11)  $(1)  $(113) 

Allowance/Total Loans

 0.70%  0.73%  0.73%  0.77%  0.78%  0.82%  0.82%  0.87%  0.90%  0.91%  0.89%  0.93%  1.00%  1.06% 

Capital Ratios

              

Total capital

 10.09%  10.50%  10.28%  11.31%  11.59%  12.88%  14.52% 

Tier 1 capital

 9.18%  9.57%  9.35%  10.35%  10.60%  11.80%  13.38% 

Total capital (4)

 11.88%  12.92%  12.77%  12.26%  13.35%  15.27%  14.18% 

Tier 1 capital (4) (5)

 9.57%  10.26%  10.18%  9.63%  10.44%  11.83%  12.93% 

Common Equity Tier 1

 9.18%  9.57%  9.35%  10.35%  10.60%  N/A  N/A  9.57%  10.26%  10.18%  9.63%  10.44%  11.83%  12.93% 

Tier 1 leverage capital

 6.56%  6.84%  6.56%  7.04%  7.36%  7.65%  8.28%  7.28%  7.60%  7.63%  7.53%  8.21%  8.61%  9.46% 

Other Data:

              

Number of full service offices

 6  5  5  5  5  5  4  6  6  6  6  6  5  5 

Full time equivalent employees

 77  71  78  69  63  59  50  77  71  75  69  72  68  64 

 

(1)

The interest rate spread representsRepresents the difference between the fully taxable equivalent weighted-averageweighted average yield on average interest-earning assets and the weighted-averageweighted average cost of average interest-bearing liabilities for the period.liabilities.

(2)

The net interest margin represents fully taxable equivalentRepresents net interest income as a percent of average interest-earning assets for the period.assets.

(3)

The efficiency ratio representsRepresents noninterest expense as a percentage ofdivided by the sum of net interest income and noninterest income.income, excluding gains or losses on the sale of securities and loss on the early extinguishment of debt.

(4)

Capital ratios are for Wellesley.

(5)

Average assets represent average assets for the period as reported.



SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

FOR CAMBRIDGE BANCORP

The following table shows selected unaudited pro forma condensed combined financial data is basedabout the financial condition and results of operations of the combined company after giving effect to (i) the consummation of Cambridge’s merger with Optima Bank & Trust Company, or Optima, which was completed on April 17, 2019, or the Optima merger, (ii) the issuance and sale of 550,850 shares of Cambridge’s common stock, including the sale of 71,850 shares pursuant to an underwriter option, with net proceeds to Cambridge of $38.2 million after deducting the underwriting discount, and (iii) the consummation of the merger.

The following unaudited pro forma combined consolidated financial statements have been prepared in accordance with Article 11 ofRegulation S-X and combine the historical consolidated financial dataposition and results of operations of Cambridge and its subsidiaries, Optima and has been preparedWellesley as acquisitions by Cambridge of Optima and Wellesley using the acquisition method of accounting and giving effect to illustrate the effects of the merger. It is based on certain assumptions that Cambridge and Optima believe are reasonable, which arerelated pro forma adjustments described in the notes toaccompanying notes.

Under the unaudited pro forma condensed combined financial statements included in this proxy statement/prospectus. The selected unaudited pro forma condensed combined financial data does not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated withacquisition method of accounting, the merger.

Certain reclassificationsassets and liabilities of Optima were made to Optima’s historical financial information to conform to Cambridge’s presentation of financial information. This data should be read in conjunction with therecorded by Cambridge historical consolidated financial statements and accompanying notes in Cambridge’s Quarterly Reports onForm 10-Qat their respective fair values as of and for the nine months ended September 30, 2018, and Cambridge’s Annual Report on Form10-K as of and fordate the year ended December 31, 2017merger was completed and the Optima historical financial statementsexcess of the merger consideration over the fair value of the net assets was allocated to goodwill and accompanying notes included in this proxy statement/prospectus.

other intangible asset. Cambridge has not performed the detailed valuation analysis necessary to determine the fair market values of Optima’sWellesley’s assets to be acquired and liabilities to be assumed.assumed, and as such, estimates have been used. Accordingly, the unaudited pro forma condensed combined financial data does not includeincludes an estimated allocation of the purchase price, unless otherwise specified.price. The pro forma adjustments included in this joint proxy statement/prospectus are subject to change depending on changes in interest rates and the components of assets and liabilities, and as additional information becomes available and additional analyses are performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of thorough analyses to determine the fair value of Optima’sWellesley’s tangible and identifiable intangible assets and liabilities as of the date the merger is completed. Increases or decreases in the fair values of the net assets as compared with the information shown in the unaudited pro forma condensed combined financial data may change the amount of the purchase price allocated to goodwill and other assets and liabilities, and may impact Cambridge’s statement of operations due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to Optima’sWellesley’s shareholders’ equity, including results of operations and certain balance sheet changes from September 30, 20182019 through the date the merger is completed will also change the purchase price allocation, which may include the recording of a lower or higher amount of goodwill. The final adjustments may be materially different from the unaudited pro forma adjustments presented in this joint proxy statement/prospectus.

Certain reclassifications were made to Optima’s and Wellesley’s historical financial information to conform to Cambridge’s presentation of financial information. All significant pro forma adjustments and underlying assumptions are described in the accompanying notes. The unaudited pro forma combined consolidated statements of income give effect to the merger and the Optima merger, or collectively, the mergers, as if they occurred on January 1, 2018. The unaudited pro forma combined consolidated balance sheet gives effect to the mergers as if they occurred on September 30, 2019.

The unaudited pro forma combined financial statements should be read in conjunction with the following consolidated financial statements and accompanying notes of Cambridge, Wellesley and Optima for the applicable periods, as well as any other information contained in or incorporated by reference into this joint proxy statement/prospectus:

Cambridge’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, which were included in Cambridge’s Annual Reporton Form 10-K for the year ended December 31, 2018, and filed with the Securities and Exchange Commission, or SEC, on March 18, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Cambridge’s unaudited financial statements and the related notes thereto as of and for the nine months ended September 30, 2019, which were included in Cambridge’s Quarterly Report onForm 10-Q for the nine months ended September 30, 2019, and filed with the SEC on November 7, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Cambridge’s unaudited financial statements and the related notes thereto as of and for the six months ended June 30, 2019, which were included in Cambridge’s Quarterly Report onForm 10-Q for the six months ended June 30, 2019, which were filed with the SEC on August 8, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Wellesley’s audited consolidated financial statements as of and for the year ended December 31, 2018 and 2017, which were included in Wellesley’s Annual Report on Form10-K for the year ended December 31, 2018, and filed with the SEC on March 29, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Wellesley’s unaudited consolidated financial statements as of and for the nine months ended September 30, 2019, which were included in Wellesley’s Quarterly Report onForm 10-Q for the nine months ended September 30, 2019, and filed with the SEC on November 7, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Optima’s audited financial statements as of and for the years ended December 31, 2018 and 2017, which were filed as Exhibit 99.1 to Cambridge’s Current Report on Form8-K filed with the SEC on October 22, 2019, which has been incorporated by reference in this joint proxy statement/prospectus; and

Optima’s unaudited condensed financial statements as of and for the three months ended March 31, 2019, which were filed as Exhibit 99.2 to Cambridge’s Current Report on Form8-K filed with the SEC on October 22, 2019, which has been incorporated by reference in this joint proxy statement/prospectus.

Cambridge anticipates that the merger with OptimaWellesley will provide financial benefits that include reduced operating expenses. The pro forma information does not reflect the benefits of expected cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical benefits would have been had the two companies been combined during these periods.

The unaudited pro forma shareholders’ equity and net income are qualified by the statements set forth under this caption and should not be considered indicative of the market value of Cambridge common stock or the actual or future results of operations of Cambridge for any period. Actual results may be materially different than the pro forma information presented.



See also the unaudited pro forma condensed combined financial statements and notes thereto beginning on page 96.132.

  September 30, 2019 
  Cambridge
(as
Reported)		  Wellesley
(as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Adjustments
for Capital
Raise		  Cambridge
(Pro Forma
with
Wellesley
and Capital
Raise)		 
  (dollars in thousands, except par value) 
Assets      

Cash and cash equivalents

 $68,949  $81,353  $(15,001) (1)  $135,301  $38,201 (12)  $173,502 

Investment securities

      

Available for sale, at fair value

  148,068   33,793   288 (2)   182,149   —     182,149 

Held to maturity, at amortized cost

  269,475   100   —     269,575   —     269,575 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total investment securities

  417,543   33,893   288   451,724   —     451,724 

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

  2,082   6,351   —     8,433   —     8,433 

Loans

  2,179,882   832,803   (10,351) (3)   3,002,334   —     3,002,334 

Less: allowance for loan losses

  (18,035)   (7,218)   7,218 (4)   (18,035)   —     (18,035) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loans

  2,161,847   825,585   (3,133)   2,984,299   —     2,984,299 

Federal Home Loan Bank of Boston Stock, at cost

  9,159   6,162   —     15,321   —     15,321 

Bank owned life insurance

  37,161   7,946   —     45,107   —     45,107 

Banking premises and equipment, net

  14,954   3,785   —     18,739   —     18,739 

Right-of-use asset, operating leases

  34,553   6,852   —     41,405   —     41,405 

Deferred income taxes, net

  7,939   2,717   (798) (5)   9,858   —     9,858 

Accrued interest receivable

  6,959   2,769   —     9,728   —     9,728 

Goodwill

  31,206   —     44,258 (6)   75,464   —     75,464 

Merger related intangibles

  3,429   —     6,930 (7)   10,359   —     10,359 

Other assets

  46,087   8,454   —     54,541   —     54,541 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

 $2,841,868  $985,867  $32,544  $3,860,279  $38,201  $3,898,480 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
Liabilities      

Deposits

      

Demand

 $654,133  $133,187  $—    $787,320  $—    $787,320 

Interest bearing checking

  429,755   42,162   —     471,917   —     471,917 

Money market

  214,721   280,434   —     495,155   —     495,155 

Savings

  876,392   72,807   —     949,199   —     949,199 

Certificates of deposit

  232,858   230,155   671 (8)   463,684   —     463,684 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total deposits

  2,407,859   758,745   671   3,167,275   —     3,167,275 

Short-term borrowings

  113,935   51,000   —     164,935   —     164,935 

Long-term borrowings

  —     77,533   285 (9)   77,818   —     77,818 

Subordinated debt

  —     9,854   —     9,854   —     9,854 

Operating lease liabilities

  35,990   6,907   —     42,897   —     42,897 

Other liabilities

  40,739   10,043   —     50,782   —     50,782 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities

  2,598,523   914,082   956   3,513,561   —     3,513,561 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  September 30, 2018 
  Cambridge
Bancorp
Historical		  Optima Bank
Historical		  Adjustment  Pro Forma 
  (dollars in thousands, except par value) 
Assets    

Cash and cash equivalents

 $16,431  $23,336  $(9,882)(1)  $29,885 

Investment securities

    

Available for sale, at fair value

  180,363   22,843   —     203,206 

Held to maturity, at amortized cost

  271,005   —     —     271,005 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total investment securities

  451,368   22,843   —     474,211 

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

  —     —     —     —   

Loans

  1,451,781   465,583   (6,636)(2)   1,910,728 

Less: allowance for loan losses

  (16,106)   (3,273)   3,273(3)   (16,106) 
 

 

 

  

 

 

  

 

 

  

 

 

 

Net loans

  1,435,675   462,310   (3,363)   1,894,622 

Federal Home Loan Bank of Boston Stock, at cost

  6,666   1,049   —     7,715 

Bank owned life insurance

  30,800   5,699   —     36,499 

Banking premises and equipment, net

  8,836   5,719   —     14,555 

Deferred income taxes, net

  8,990   38   —     9,028 

Accrued interest receivable

  5,536   1,299   —     6,835 

Other assets

  24,642   1,864   34,814(4), (5)   61,320 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

 $1,988,944  $524,157  $21,569  $2,534,670 
 

 

 

  

 

 

  

 

 

  

 

 

 
Liabilities    

Deposits

    

Demand

 $505,951  $62,012  $—    $567,963 

Interest bearing checking

  385,617   26,906   —     412,523 

Money market

  119,241   78,539   —     197,780 

Savings

  606,843   174,839   —     781,682 

Certificates of deposit

  113,627   146,270   (849)(6)   259,048 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total deposits

  1,731,279   488,566   (849)   2,218,996 

Short-term borrowings

  66,700   2,210   —     68,910 

Long-term borrowings

  3,452   —     —     3,452 

Other liabilities

  26,737   362   744(7)   27,843 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities

 $1,828,168  $491,138  $(105)  $2,319,201 
Shareholders’ Equity    

Common Stock

  4,106   2,064   726(8)   6,896 

Additionalpaid-in capital

  37,789   21,733   20,948(9)   80,470 

Retained earnings

  127,883   9,516   —     137,399 

Accumulated other comprehensive loss

  (9,002)   (294)   —     (9,296) 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total shareholders’ equity

  160,776   33,019   21,674   215,469 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities and shareholders’ equity

 $1,988,944  $524,157  $21,569  $2,534,670 
 

 

 

  

 

 

  

 

 

  

 

 

 

  September 30, 2019 
  Cambridge
(as
Reported)		  Wellesley
(as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Adjustments
for Capital
Raise		  Cambridge
(Pro Forma
with
Wellesley
and Capital
Raise)		 
  (dollars in thousands, except par value) 
Shareholders’ Equity      

Common stock

 $4,850  $26  $1,452 (10)  $6,328  $551 (12)  $6,879 

Additionalpaid-in capital

  98,256   27,500   74,395 (11)   200,151   37,650 (12)   237,801 

Retained earnings

  142,237   44,598   (44,598) (11)   142,237   —     142,237 

Accumulated other comprehensive loss

  (1,998)   592   (592) (11)   (1,998)   —     (1,998) 

Unearned compensation - ESOP

  —     (931)   931 (11)   —     —     —   

Total shareholders’ equity

  243,345   71,785   31,588   346,669   38,201   384,919 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities and shareholders’ equity

 $2,841,868  $985,867  $32,544  $3,860,279  $38,201  $3,898,480 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Footnotes to Unaudited Pro Forma Consolidated Statements of Balance Sheets at September 30, 2019:

 

(1)

Includes $3.5 million cash consideration to Optima common stockholders, $1.3$4.4 million paid to the holders of OptimaWellesley stock options and estimatedafter-tax mergerday-one charges expenses of $5.1$10.6 million which will not impact goodwill calculations.

(2)

The pro formaRepresents the estimated adjustment to loans includes a negative $3.4 million credit component, and a negative $3.2 million interest component, which will be accreted over an estimated 3 years on a pooled basis.increase investments to fair market value



(3)

Represents the estimated adjustment to reduce loans to fair market value

(4)

Reflects the elimination of Optima’sWellesley’s existing loan loss reserve at acquisition.acquisition

(5)

Represents the amount to record estimated deferred income taxes on the fair value adjustments presented, at an estimated tax rate of 25.5%

(6)

Represents the preliminary estimated amount of goodwill, based on issuance of 1,477,645 shares of Cambridge common stock at $77.13 per share (January 10, 2020 closing price)

(7)

Represents the estimated amount of the core deposit intangible asset recognized in connection with the business combination

(8)

Represents the estimated amount to increase time deposits to fair market value

(9)

Represents the estimated amount to increase borrowings from FHLB to fair market value

(10)

Represents the amount to eliminate Wellesley common stock at par and record the estimated par value of shares issued by Cambridge

(11)

Represents the amount to eliminate Wellesley equity accounts and record the estimated additionalpaid-in capital

(12)

Represents the amount to record the issuance of 550,580 shares of Cambridge common stock at $73.00 per share, less estimated issuance cost of $2.0 million

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

  For the Nine Months Ended September 30, 2019 
  Cambridge
(as
Reported)		  Optima
(through
April 17,
2019)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with
Optima)		  Wellesley
(as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Cambridge
(Pro Forma
with
Wellesley
and Capital
Raise)		 
  (dollars in thousands, except share data) 

Interest and dividend income

        

Interest on taxable loans

 $60,919  $6,050  $591 (1)  $67,560  $27,867  $687 (8)  $96,114  $96,114 

Interest ontax-exempt loans

  385   30   —     415   73   —     488   488 

Interest on taxable investment securities

  6,074   155   —     6,229   1,076   (49) (9)   7,256   7,256 

Interest ontax-exempt investment securities

  1,709   —     —     1,709   238   —     1,947   1,947 

Dividends on FHLB of Boston stock

  281   18   —     299   213   —     512   512 

Interest on overnight investments

  556   196   —     752   577   —     1,329   1,329 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest and dividend income

  69,924   6,449   591   76,964   30,044   638   107,646   107,646 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Interest expense

        

Interest on deposits

  11,489   1,941   63 (2)   13,493   7,665   (535) (10)   20,623   20,623 

Interest on borrowed funds

  1,347   195   —     1,542   2,328   (226) (11)   3,644   3,644 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest expense

  12,836   2,136   63   15,035   9,993   (761)   24,267   24,267 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend income

  57,088   4,313   528   61,929   20,051   1,399   83,379   83,379 

Provision for Loan Losses

  2,673   70   —     2,743   480   —     3,223   3,223 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend income after provision for loan losses

  54,415   4,243   528   59,186   19,571   1,399   80,156   80,156 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Noninterest income

        

Wealth management revenue

  19,576   —     —     19,576   1,228   —     20,804   20,804 

Deposit account fees

  2,395   69   —     2,464   74   —     2,538   2,538 

ATM/Debit card income

  1,046   99   —     1,145   57   —     1,202   1,202 

Bank owned life insurance income

  454   36   —     490   177   —     667   667 

Gain (loss) on disposition of investment securities

  (79)   —     —     (79)   8   —     (71)   (71) 

Gain on loans held for sale

  491   47   —     538   161   —     699   699 

Loan related derivative income

  1,571   —     —     1,571   771   —     2,342   2,342 

Other income

  1,014   53   —     1,067   50   —     1,117   1,117 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total noninterest income

  26,468   304   —     26,772   2,526   —     29,298   29,298 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  For the Nine Months Ended September 30, 2019 
  Cambridge
(as
Reported)		  Optima
(through
April 17,
2019)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with
Optima)		  Wellesley
(as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Cambridge
(Pro Forma
with
Wellesley
and Capital
Raise)		 
  (dollars in thousands, except share data) 

Noninterest expense

        

Salaries and employee benefits

 $34,353  $2,238  $—    $36,591  $9,214  $—    $45,805  $45,805 

Occupancy and equipment

  7,813   678   18 (3)   8,509   2,466   —     10,975   10,975 

Data processing

  4,532   216   —     4,748   930   —     5,678   5,678 

Professional services

  2,411   414   —     2,825   637   —     3,462   3,462 

Marketing

  1,175   94   —     1,269   197   —     1,466   1,466 

FDIC Insurance

  369   4   —     373   336   —     709   709 

Merger expenses

  3,880   3,381   (7,261) (4)   —     —     —     —     —   

Other expenses

  2,216   195   120 (5)   2,531   1,674   945 (12)   5,150   5,150 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total noninterest expense

  56,749   7,220   (7,123)   56,846   15,454   945   73,245   73,245 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

  24,134   (2,673)   7,651   29,112   6,643   454   36,209   36,209 

Income tax expense (benefit)

  5,988   (570)   1,836 (6)   7,254   1,800   116 (13)   9,170   9,170 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

 $18,146   (2,103)   5,815  $21,858  $4,843  $338  $27,039  $27,039 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Share data:

        

Weighted average number of shares outstanding, basic

  4,525,178   2,192,588   —     4,948,444 (7)   2,454,103   —     6,426,088 (14)   6,976,938 (15) 

Weighted average number of shares outstanding, diluted

  4,552,092   2,325,417   —     4,975,358 (7)   2,545,786   —     6,453,002 (14)   7,003,852 (15) 

Basic earnings per share

 $3.98  $(0.96)  $—    $4.42  $1.97  $—    $4.21  $3.88 

Diluted earnings per share

 $3.95  $(0.90)  $—    $4.39  $1.91  $—    $4.19  $3.86 

Footnotes to Unaudited Pro Forma Consolidated Statements of Income for the Nine Months Ended September 30, 2019:

Notes for Merger with Optima:

(1)

Represents accretion income as a result of the fair market value adjustment on loans of $6.3 million

(2)

Represents amortization expense as a result of the fair market value adjustment on Certificates of Deposit of $472,000

(3)

Represents the depreciation as a result of the fair market value adjustment for fixed assets of $980,000

(4)

Adjustment to reflect approximately $29.2 millionRepresents the elimination of preliminary estimated goodwill from this business transaction.merger expenses in connection with the Optima merger

(5)

Adjustment to reflect approximately $5.6 millionRepresents the amortization expense as a result of preliminary estimatedthe recognition of the core deposit intangible expected to be amortized using the sumasset of the years’ digits method over 10 years; the amount of core deposit intangible is estimated at 2.52% of core deposits.$3.6 million

(6)

TheRepresents the Income tax effect of pro forma adjustment to deposits includes a negative $0.8 million interest component which will be amortized over approximately 3 years.adjustments utilizing an effective tax rate of 24%

(7)

Other liabilities reflects deferred tax liabilities relatedPro forma weighted average shares include 722,746 shares issued to fair value adjustments calculated using a 24% tax rate.former Optima shareholders

Notes for Merger with Wellesley:

(8)

Reflects parRepresents accretion income as a result of the fair market value adjustment on loans of shares expected to be issued to Optima common stockholders.$10.4 million

(9)

Adjustment to reflectRepresents amortization expense as a result of the eliminationfair market value adjustment on Investment Securities of Optima stockholders’ equity, the issuance of Cambridge common stock in the merger, and the impact of $5.1 million ofafter-tax merger charges.$288,000



(10)

Represents accretion income as a result of the fair market value adjustment on Certificates of Deposit of $671,000

(11)

Represents accretion income as a result of the fair market value adjustment on Federal Home Loan Bank borrowings of $285,000

(12)

Represents the amortization expense as a result of the recognition of the core deposit intangible asset of $6.9 million

(13)

Represents the Income tax effect of pro forma adjustments utilizing an effective tax rate of 25.5%

(14)

Pro forma weighted average shares include 1,477,645 shares to be issued to former Wellesley shareholders

(15)

Pro forma weighted average shares include 550,850 shares issued in connection with the capital raise

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

  For the Year Ended December 31, 2018 
  (dollars in thousands, except share data) 
  Cambridge
(as
Reported)		  Optima (as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with
Optima)		   Wellesley
(as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Cambridge
(Pro Forma
with
Wellesley
and Capital
Raise)		 
  (dollars in thousands, except share data) 

Interest and dividend income

         

Interest on taxable loans

 $57,941  $19,604  $2,038 (1)  $79,583   $30,927  $874 (8)  $111,384  $111,384 

Interest ontax-exempt loans

  371   30   —     401    101   —     502   502 

Interest on taxable investment securities

  7,457   580   —     8,037    1,441   (65) (9)   9,413   9,413 

Interest ontax-exempt investment securities

  2,404   15   —     2,419    327   —     2,746   2,746 

Dividends on FHLB of Boston stock

  287   56   —     343    333   —     676   676 

Interest on overnight investments

  595   263   —     858    509   —     1,367   1,367 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total interest and dividend income

  69,055   20,548   2,038   91,641    33,638   809   126,088   126,088 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Interest expense

         

Interest on deposits

  5,023   5,949  $253 (2)   11,225    6,442   (652) (10)   17,015   17,015 

Interest on borrowed funds

  444   3   —     447    2,467   (243) (11)   2,671   2,671 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total interest expense

  5,467   5,952   253   11,672    8,909   (895)   19,686   19,686 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend income

  63,588   14,596   1,785   79,969    24,729   1,704   106,402   106,402 

Provision for Loan Losses

  1,502   246   —     1,748    585   —     2,333   2,333 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend income after provision for loan losses

  62,086   14,350   1,785   78,221    24,144   1,704   104,069   104,069 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Noninterest income

         

Wealth management revenue

  25,191   —     —     25,191    1,616   —     26,807   26,807 

Deposit account fees

  3,071   245   —     3,316    87   —     3,403   3,403 

ATM/Debit card income

  1,180   344   —     1,524    89   —     1,613   1,613 

Bank owned life insurance income

  526   153   —     679    234   —     913   913 

 Nine Months Ended September 30, 2018  For the Year Ended December 31, 2018 
 Cambridge
Bancorp
Historical		 Optima Bank
Historical		 Adjustment Pro Forma  (dollars in thousands, except share data) 
 (dollars in thousands, except share data)  Cambridge
(as
Reported)		 Optima (as
Reported)		 Adjustments
for
Cambridge’s
Acquisition
of Optima		 Cambridge
(Pro Forma
with
Optima)		 Wellesley
(as
Reported)		 Adjustments
for
Cambridge’s
Acquisition
of Wellesley		 Cambridge
(Pro Forma
with
Wellesley)		 Cambridge
(Pro Forma
with
Wellesley
and Capital
Raise)		 

Interest and dividend income

    

Interest on taxable loans

 $42,318  $14,358  $1,163(1)  $57,839 

Interest ontax-exempt loans

 279  10   —    289 

Interest on taxable investment securities

 5,570  402   —    5,972 

Interest ontax-exempt investment securities

 1,817   —     —    1,817 

Dividends on FHLB of Boston stock

 202  40   —    242 

Interest on overnight investments

 484  235   —    719 
 

 

  

 

  

 

  

 

  (dollars in thousands, except share data) 

Total interest and dividend income

 50,670  15,045  1,163  66,878 
 

 

  

 

  

 

  

 

 

Interest expense

    

Interest on deposits

 3,290  4,259  337(2)  7,886 

Interest on borrowed funds

 202  2   —    204 
 

 

  

 

  

 

  

 

 

Total interest expense

 3,492  4,261  337  8,090 
 

 

  

 

  

 

  

 

 

Net interest and dividend income

 47,178  10,784  826  58,788 

Provision for Loan Losses

 787  291   —    1,078 
 

 

  

 

  

 

  

 

 

Net interest and dividend income after provision for loan losses

 46,391  10,493  826  57,710 
 

 

  

 

  

 

  

 

 

Noninterest income

    

Wealth management revenue

 19,044   —     —    19,044 

Deposit account fees

 2,306  52   —    2,358 

ATM/Debit card income

 875  248   —    1,123 

Bank owned life insurance income

 393  114   —    507 

Gain (loss) on disposition of investment securities

 2  83   —    85  $2  $22  $—    $24  $—    $—    $24  $24 

Gain on loans held for sale and portfolio loan sales

 82  199   —    281 

Gain on loans held for sale

 99  206   —    305  64   —    369  369 

Loan related derivative income

 1,220   —     —    1,220  1,651   —     —    1,651  340   —    1,991  1,991 

Other income

 1,029  362   —    1,391  1,269  335   —    1,604  156   —    1,760  1,760 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

��

  

 

  

 

 

Total noninterest income

 24,951  1,058   —    26,009  32,989  1,305   —    34,294  2,586   —    36,880  36,880 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Noninterest expense

            

Salaries and employee benefits

 30,842  5,393   —    36,235  41,212  7,104   —    48,316  10,842   —    59,158  59,158 

Occupancy and equipment

 6,736  1,634   —    8,370  9,072  2,185  54 (3)  11,311  3,004   —    14,315  14,315 

Data processing

 3,848  422   —    4,270  5,177  552   —    5,729  990   —    6,719  6,719 

Professional services

 2,477  560   —    3,037  3,258  959   —    4,217  766   —    4,983  4,983 

Marketing

 1,369  266   —    1,635  2,229  305   —    2,534  323   —    2,857  2,857 

FDIC Insurance

 437  382   —    819  574  495   —    1,069  626   —    1,695  1,695 

Merger expenses

 201   —    (201) (4)   —     —     —     —     —   

Other expenses

 1,436  370  383(3)  2,189  2,264  477  360 (5)  3,101  2,012  1,260 (12)  6,373  6,373 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total noninterest expense

 47,145  9,027  383  56,555  63,987  12,077  213  76,277  18,563  1,260  96,100  96,100 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Income before income taxes

 24,197  2,524  443  27,164  31,088  3,578  1,572  36,238  8,167  444  44,849  44,849 

Income tax expense

 5,622  715  106(4)  6,443  7,207  1,002  377 (6)  8,586  2,176  113 (13)  10,875  10,875 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net income

 $18,575  $1,809  $337  $20,721  $23,881  2,576  1,195  $27,652  $5,991  $331  $33,974  $33,974 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Share data:

            

Weighted average number of shares outstanding, basic

 4,059,608  2,058,069  (1,344,331)  4,773,346  4,061,529  2,069,880   —    4,784,275 (7)  2,404,371   —    6,261,920 (14)  6,812,770 (15) 

Weighted average number of shares outstanding, diluted

 4,095,447  2,321,445  (1,516,368)  4,900,524  4,098,633  2,331,569   —    4,821,379 (7)  2,502,784   —    6,299,024 (14)  6,849,874 (15) 

Basic earnings per share

 $4.53  $0.88  $—    4.34  $5.82  $1.24  $—    $5.78  $2.49  $—    $5.43  $4.99 

Diluted earnings per share

 $4.49  $0.78  $—    4.23  $5.77  $1.10  $—    $5.74  $2.40  $—    $5.39  $4.96 

Footnotes to Unaudited Pro Forma Consolidated Statements of Income for the Year Ended December 31, 2018:

Notes for Merger with Optima:

 

(1)

Adjustment reflectsRepresents accretion income as a result of the yieldfair market value adjustment for interest income on loans.loans of $6.3 million

(2)

Adjustment reflectsRepresents amortization expense as a result of the costfair market value adjustment for the interest expense on deposits.Certificates of Deposit of $472,000

(3)

Adjustment reflectsRepresents the net increase in amortizationdepreciation as a result of other intangiblethe fair market value adjustment for fixed assets generated in the transaction.of $980,000

(4)

Adjustment represents incomeRepresents the elimination of merger expenses in connection with the Optima merger

(5)

Represents the amortization expense as a result of the recognition of the core deposit intangible asset of $3.6 million

(6)

Represents the Income tax expense on theeffect of pro forma adjustments at the estimatedutilizing an effective tax rate of 24%.



  For the Year Ended December 31, 2017 
  Cambridge
Bancorp
Historical		  Optima Bank
Historical		  Adjustment  Pro Forma 
  (dollars in thousands, except par value) 

Interest and dividend income

    

Interest on taxable loans

 $51,238  $16,286  $1,550(1)  $69,074 

Interest ontax-exempt loans

  496   15   —     511 

Interest on taxable investment securities

  6,321   490   —     6,811 

Interest ontax-exempt investment securities

  2,600   —     —     2,600 

Dividends on FHLB of Boston stock

  245   33   —     278 

Interest on overnight investments

  291   247   —     538 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total interest and dividend income

  61,191   17,071   1,550   79,812 
 

 

 

  

 

 

  

 

 

  

 

 

 

Interest expense

    

Interest on deposits

  3,125   3,775   449(2)   7,349 

Interest on borrowed funds

  462   —     —     462 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total interest expense

  3,587   3,775   449   7,811 
 

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend income

  57,604   13,296   1,101   72,001 
 

 

 

  

 

 

  

 

 

  

 

 

 

Provision for Loan Losses

  362   428   —     790 

Net interest and dividend income after provision for loan losses

  57,242   12,868   1,101   71,211 
 

 

 

  

 

 

  

 

 

  

 

 

 

Noninterest income

    

Wealth management revenue

  23,029   —     —     23,029 

Deposit account fees

  3,142   44   —     3,186 

ATM/Debit card income

  1,182   300   —     1,482 

Bank owned life insurance income

  584   150   —     734 

Gain (loss) on disposition of investment securities

  (3)   42   —     39 

Gain on loans held for sale and portfolio sales

  355   311   —     666 

Loan related derivative income

  780   —     —     780 

Other income

  1,155   285   —     1,440 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total noninterest income

  30,224   1,132   —     31,356 
 

 

 

  

 

 

  

 

 

  

 

 

 

Noninterest expense

    

Salaries and employee benefits

  36,707   6,478   —     43,185 

Occupancy and equipment

  9,114   1,299   —     10,413 

Data processing

  4,956   662   —     5,618 

Professional services

  3,374   781   —     4,155 

Marketing

  1,620   394   —     2,014 

FDIC Insurance

  629   425   —     1,054 

Other expenses

  2,892   1,009   510(3)   4,411 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total noninterest expense

  59,292   11,048   510   70,850 
 

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

  28,174   2,952   590   31,716 

Income tax expense

  13,358   1,068   198(4)   14,624 
 

 

 

  

 

 

  

 

 

  

 

 

 

Net income

 $14,816  $1,884  $392  $17,092 
 

 

 

  

 

 

  

 

 

  

 

 

 


  For the Year Ended December 31, 2017 
  Cambridge
Bancorp
Historical		  Optima Bank
Historical		  Adjustment   Pro Forma 
  (dollars in thousands, except par value) 

Share data:

     

Weighted average number of shares outstanding, basic

  4,030,530   2,018,829   (1,318,699)    4,730,660 

Weighted average number of shares outstanding, diluted

  4,065,754   2,341,383   (1,529,392)    4,877,745 

Basic earnings per share

 $3.64  $0.93  $—      3.61 

Diluted earnings per share

 $3.61  $0.80  $—      3.50 

(1)

Adjustment reflects the yield adjustment for interest income on loans.

(2)(7)

Adjustment reflectsPro forma weighted average shares include 722,746 shares issued to former Optima shareholders

Notes for Merger with Wellesley:

(8)

Represents accretion income as a result of the costfair market value adjustment for the interest expense on deposits.loans of $10.4 million

(3)(9)

Adjustment reflectsRepresents amortization expense as a result of the net increase in amortizationfair market value adjustment on Investment Securities of other intangible assets generated in the transaction.$288,000

(4)(10)

Adjustment representsRepresents accretion income as a result of the fair market value adjustment on Certificates of Deposit of $671,000

(11)

Represents accretion income as a result of the fair market value adjustment on Federal Home Loan Bank borrowings of $285,000

(12)

Represents the amortization expense as a result of the recognition of the core deposit intangible asset of $6.9 million

(13)

Represents the Income tax expense on theeffect of pro forma adjustments at the estimatedutilizing an effective tax rate of 33.5%.25.5%

(14)

Pro forma weighted average shares include 1,477,645 shares to be issued to former Wellesley shareholders

(15)

Pro forma weighted average shares include 550,850 shares to be issued in connection with the capital raise

Preliminary Purchase Price Allocation

The estimated costspro forma adjustments include the accounting entries to record the merger transaction under the acquisition method of accounting for business combinations. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill and other intangible assets. Fair value adjustments included in the pro forma financial statements are based upon available information and certain assumptions which are considered reasonable, and will be revised as additional information becomes available.

The pro forma purchase price for the Wellesley merger are set forth below:is as follows (dollars in thousands):

 

   (in thousands) 

Change in control and severance payments

  $2,332 

Vendor and system contracts terminations

   749 

Facilities terminations

   432 

Professional and legal fees

   2,195 

Other acquisition related expenses

   700 
  

 

 

 

Pre-tax merger costs

   6,408 
  

 

 

 

Taxes

   1,346 
  

 

 

 

Total merger costs

  $5,062 
  

 

 

 

The estimated amount of goodwill is set forth below:

   (in thousands) 

Total Purchase Price of Optima

  $65,928 
  

 

 

 

Optima Equity

  $34,372 

Estimated Fair Value Adjustments

  

Loans – Credit Mark

   (3,403) 

Loans – Interest Rate Mark

   (3,233) 

Deposits—Interest Rate Mark

   849 

Allowance for Loan Losses

   3,273 

Core Deposit Intangible

   5,614 

Deferred Tax Liability

   (744) 
  

 

 

 

Goodwill resulting from the merger

  $29,200 
  

 

 

 


Purchase Price Calculation

  

Shares outstanding

   2,570 

ESOP plan termination

   (23) 
  

 

 

 

Shares outstanding

   2,547 

Shares exchanged for stock

   2,547 

Stock value

  $44.74 

Aggregate value of shares receiving stock

  $113,941 

Aggregate value to option holders

  $4,433 
  

 

 

 

Aggregate Purchase Price

  $118,374 
  

 

 

 

Preliminary pro forma goodwill

  

Fair value of assets acquired:

  

Cash and cash equivalents

  $81,353 

Investments available for sale

   34,181 

Loans held for sale

   6,351 

Loans, net

   822,452 

Other assets

   37,887 

Core deposit intangible

   6,930 
  

 

 

 

Total assets acquired

  $989,154 
  

 

 

 

Fair value of liabilities assumed:

  

Deposits

   759,416 

Borrowings

   138,672 

Other liabilities

   16,950 
  

 

 

 

Total liabilities assumed

  $915,038 
  

 

 

 

Net assets acquired

   74,116 
  

 

 

 

Preliminary pro forma goodwill

  $44,258 
  

 

 

 

UNAUDITED COMPARATIVE PER SHARE DATA

The table below summarizes selected per share data about Cambridge and Optima.Wellesley. Cambridge share data is presented on a pro forma basis to reflect the proposed merger with OptimaWellesley as if the merger had become effective at the end of the period presented, in the case of balance sheet information, and at the beginning of the period presented, in the case of income statement information. Cambridge expects to issue approximately 765,390up to 1,579,725 shares of its common stock in the merger.

The data in the table should be read together with the financial information and the financial statements of Cambridge and OptimaWellesley incorporated by reference into and included in this joint proxy statement/prospectus. The pro forma per share data or combined results of operations per share data is presented as an illustration only. The data does not necessarily indicate the combined financial position per share or combined results of operations per share that would have been reported if the merger had occurred when indicated, nor is the data a forecast of the combined financial position or combined results of operations for any future period. No pro forma adjustments have been included in this joint proxy statement/prospectus to reflect potential effects of merger integration expenses, cost savings or operational synergies which may be obtained by combining the operations of Cambridge and Optima,Wellesley, or the costs of combining the companies and their operations.

 

   Unaudited Comparative Per Common Share Data 
   Cambridge   Optima   Cambridge
Pro Forma
Combined(1)		   Optima
Pro Forma
Equivalent
Per Share(2)		 

Basic Earnings

        

Year ended December 31, 2017

  $3.64   $0.93   $3.61   $1.25 

Nine months ended September 30, 2018

  $4.53   $0.88   $4.34   $1.51 

Diluted Earnings

        

Year ended December 31, 2017

  $3.61   $0.80   $3.50   $1.22 

Nine months ended September 30, 2018

  $4.49   $0.78   $4.23   $1.47 

Cash Dividends Declared

        

Year ended December 31, 2017

  $1.86   $—     $1.86   $0.65 

Nine months ended September 30, 2018

  $1.46   $—     $1.46   $0.51 

Book Value

        

December 31, 2017

  $36.24   $15.38   $41.96   $14.55 

September 30, 2018

  $39.16   $16.00   $44.69   $15.50 
   Unaudited Comparative Per Common Share Data 
   Cambridge   Wellesley   Cambridge
Pro Forma
Combined(1)		   Wellesley
Pro Forma
Equivalent
Per Share(2)		 

Basic Earnings

        

Year ended December 31, 2018

  $5.82   $2.49   $5.43   $3.15 

Nine months ended September 30, 2019

  $3.98   $1.97   $4.21   $2.44 

Diluted Earnings

        

Year ended December 31, 2018

  $5.77   $2.40   $5.39   $3.13 

Nine months ended September 30, 2019

  $3.95   $1.91   $4.19   $2.43 

Cash Dividends Declared

        

Year ended December 31, 2018

  $1.96   $0.22   $1.96   $1.14 

Nine months ended September 30, 2019

  $1.53   $0.18   $1.53   $0.89 

Book Value

        

December 31, 2018

  $40.67   $25.79   $48.03   $27.86 

September 30, 2019

  $50.17   $27.94   $55.41   $32.14 

 

(1)

Pro forma combined dividends per share represent Cambridge’s historical dividends per share.

(2)

The pro forma equivalent per share is based upon the pro forma combined amounts multiplied by the exchange ratio of 0.3468.0.580.



CAMBRIDGECOMPARATIVE MARKET PRICE DATA AND DIVIDEND INFORMATION

Cambridge common stock is listed and traded on NASDAQ under the symbol “CATC”. ThereWellesley common stock is no established public trading market for Optima’s common stock.listed and traded on NASDAQ under the symbol “WEBK”. The following table sets forth, for the calendar quarters indicated, the high and low sales prices per share of Cambridge and Wellesley common stock, as reported on NASDAQ. The table also sets forth the quarterly cash dividends per share declared by Cambridge with respect toand Wellesley regarding its common stock. On            , 2019,2020, the last practicable trading day prior to the date of this joint proxy statement/prospectus, there were            shares of Cambridge common stock outstanding, which were held by            shareholders of record. On            , 2020, the last practicable trading day prior to the date of this joint proxy statement/prospectus, there were            shares of Wellesley common stock outstanding, which were held by            shareholders of record. Cambridge common stock and Wellesley common stock commenced trading on NASDAQ in October of 2017.2017 and January 2012, respectively.

 

  

Cambridge

 

   

Wellesley

 

 

 

 

   

 

 

 
For the calendar quarterly period ended:  Cambridge   High   Low   Dividends
Declared		   High   Low   Dividends
Declared (1)		 
High   Low   Dividends
Declared		 

2019

            

March 31, 2019

  $86.20   $71.35   $0.51   $33.79   $27.95   $0.055 

June 30, 2019

   85.95    75.87    0.51    35.50    30.03    0.06 

September 30, 2019

   82.80    71.24    0.51    33.25    30.11    0.06 

December 31, 2019

   82.00    73.00    0.51    33.00    30.57    0.06 

2018

                  

March 31, 2018

  $90.95   $75.00   $0.48   $90.95   $75.00   $0.48   $30.70   $28.01   $0.05 

June 30, 2018

   90.69    81.28    0.48    91.00    81.28    0.48    34.09    28.50    0.055 

September 30, 2018

   95.00    85.59    0.50    95.06    85.26    0.50    34.50    31.75    0.055 

December 31, 2018

   90.00    75.51    0.50    90.00    75.51    0.50    34.20    27.74    0.055 

2017

                  

March 31, 2017

  $67.00   $61.50   $0.46   $67.00   $61.50   $0.46   $28.25   $23.70   $0.04 

June 30, 2017

   70.00    64.90    0.46    70.00    64.90    0.46    28.00    25.25    0.05 

September 30, 2017

   72.50    64.25    0.47    72.50    64.25    0.47    27.70    25.00    0.05 

December 31, 2017

   87.15    69.90    0.47    87.15    69.90    0.47    29.95    26.00    0.05 

2016

      

March 31, 2016

  $47.65   $45.30   $0.46 

June 30, 2016

   49.90    46.15    0.46 

September 30, 2016

   50.45    46.45    0.46 

December 31, 2016

   62.90    50.05    0.46 

The following table presents the last reported sale price per share of Cambridge and Wellesley common stock, as reported on NASDAQ on December 4, 2018,2019, the last full trading day prior to the public announcement of the proposed merger, and on            , 2019,2020, the last practicable trading day prior to the date of this joint proxy statement/prospectus. The following table also presents the equivalent per share value of Cambridge common stock that OptimaWellesley shareholders would receive for each share of their OptimaWellesley common stock if the merger was completed on those dates:

 

   Cambridge
Common
Stock		   Optima
Common
Stock		  Equivalent Value
Per Share of
Optima
Common Stock(1)		 

December 4 , 2018

  $85.61   $—  (2)  $29.69 

                     , 2019

     
   Cambridge
Common
Stock		   Wellesley
Common
Stock		   Equivalent Value
Per Share of
Wellesley
Common
Stock(1)		 

December 4, 2019

  $76.36   $32.32   $44.29 

            , 2020

      

 

(1)

Calculated by multiplying the closing price of Cambridge common stock as of the specified date by the exchange ratio of 0.3468.

(2)

No pricing information reported.0.580.

The market value of Cambridge common stock to be issued in exchange for shares of OptimaWellesley common stock upon the completion of the merger will not be known at the time of the OptimaWellesley shareholder meeting. The above tables show only historical comparisons. Because the market price of Cambridge common stock will likely fluctuate prior to the merger, these comparisons may not provide meaningful information to Optima Wellesley

shareholders in determining whether to approve the merger agreement. Shareholders are encouraged to obtain current market quotations for Cambridge common stock, and to review carefully the other information contained in this joint proxy



statement/prospectus or incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 102.146.

The holders of Cambridge common stock receive dividends as and when declared by Cambridge’s board of directors out of statutory surplus or from net profits. Following the completion of the merger, subject to approval and declaration by Cambridge’s board of directors, Cambridge expects to continue paying quarterly cash dividends on a basis consistent with past practice. The current annualized rate of distribution on a share of Cambridge common stock is $2.00$2.04 per share. Following the merger, Cambridge anticipates that it will maintain its current dividend payout ratio on a combined company basis. However, the payment of dividends by Cambridge is subject to numerous factors, and no assurance can be given that Cambridge will pay dividends following the completion of the merger or that dividends will not be reduced in the future.

Optima does not currently pay cashWellesley pays regular quarterly dividends and prior to completion of the merger,$0.06 per share. Except for this allowance, the merger agreement does not permit OptimaWellesley to pay cash dividends.



RISK FACTORS

In addition to the other information contained in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed under the caption “Information Regarding Forward-Looking Statements” on page 33,45, you should carefully consider the following risk factors in deciding whether to vote for approval of the merger agreement.

Risks Related to the Merger

The value of the merger consideration will vary with changes in Cambridge’s stock price.

Upon completion of the merger, 95% of the outstanding shares of OptimaWellesley common stock will be converted into the right to receive shares of Cambridge common stock. The ratio at which the shares will be converted is fixed at 0.34680.580 shares of Cambridge common stock for each share of OptimaWellesley common stock. There will be no adjustment in the exchange ratio for changes in the market price of Cambridge common stock. Any change in the price of Cambridge common stock will affect the aggregate value OptimaWellesley shareholders will receive in the merger. Stock price changes may result from a variety of factors, including changes in businesses, operations and prospects, regulatory considerations, and general market and economic conditions. Many of these factors are beyond our control. Accordingly, at the time of the shareholder meeting,meetings, shareholders will not know the value of the stock consideration they will receive in the merger.

Optima shareholders may receive a form of consideration different from what they elect.

While each Optima shareholder may elect to receive cash or Cambridge common stock in the merger, only 5% of Optima common stock outstanding at the completion of the merger will be converted into the right to receive cash. Cambridge will issue no more than 765,390 shares of Cambridge common stock as merger consideration under the terms of the merger agreement. Therefore, if Optima shareholders elect more cash or stock than is available under the merger agreement, their elections will be prorated to permit 95% of Optima common stock outstanding at the completion of the merger to be converted into the right to receive Cambridge common stock. As a result, your ability to receive cash or stock in accordance with your election will depend on the elections of other Optima shareholders.

In addition, any Optima common stock received after the election deadline pursuant to the exercise of a Optima option will be considerednon-election shares and may be paid in cash, Cambridge common stock or a mix of cash and shares of Cambridge common stock depending on, and after giving effect to, the number of valid cash elections and stock elections that have been made by other Optima shareholders.

Shareholders may be unable to timely sell shares after completion of the merger.

There will be a time period between the completion of the merger and the time at which former OptimaWellesley shareholders actually receive their shares of Cambridge common stock. Until shares are received, former OptimaWellesley shareholders may not be able to sell their Cambridge shares in the open market and, therefore, may not be able to avoid losses resulting from any decrease, or secure gains resulting from any increase, in the trading price of Cambridge common stock during this period.

The market price of Cambridge common stock may decline as a result of the merger and the market price of Cambridge common stock after the consummation of the merger may be affected by factors different from those affecting the sharesprice of Cambridge common stock or Optima currently.Wellesley common stock before the merger.

The businessesmarket price of Cambridge/Cambridge Trust Companycommon stock may decline as a result of the merger if Cambridge does not achieve the perceived benefits of the merger or the effect of the merger on Cambridge’s financial results is not consistent with the expectations of financial or industry analysts.

In addition, the consummation of the merger will result in the combination of two companies that currently operate as independent public companies. The business of Cambridge and Optima differthe business of Wellesley differ. As a result, while Cambridge expects to benefit from certain synergies following the merger, Cambridge may also encounter new risks and accordingly,liabilities associated with these differences. Following the merger, Cambridge’s and Wellesley’s shareholders will own interests in a combined company operating an expanded business and may not wish to continue to invest in Cambridge, or for other reasons may wish to dispose of some or all of Cambridge common stock. If, following the effective time of the merger, large amounts of Cambridge common stock are sold, the price of Cambridge common stock could decline.

Further, the results of operations of the combined bankCambridge and the market price of Cambridge’s shares ofCambridge common stock may be affected by factors different from those currently affecting the independent results of operations of each of Cambridge and OptimaWellesley and the market price of Cambridge common stock and Wellesley common stock. Accordingly, Cambridge’s and Wellesley’s historical market prices and financial results may not be indicative of Cambridge. these matters for Cambridge after the merger.

For a discussion of the businesses of Cambridge and

Optima Wellesley and of certain factors to consider in connection with those businesses, see the documents incorporated by reference into this joint proxy statement/prospectus and referred to under “Where You Can Find More Information” beginning on page 102.146.

Because the number of shares of Cambridge common stock exchanged per share of Wellesley common stock is fixed and will not be adjusted in the event of any change in Cambridge’s or Wellesley’s share price, the value of the common shares issued by Cambridge and received by Wellesley shareholders may be higher or lower at the closing of the merger than when the merger agreement was executed.

Upon the consummation of the merger, each share of common stock of Wellesley (other than shares of treasury stock) will be converted into 0.580 shares of common stock of Cambridge. The exchange ratio is fixed in the merger agreement and will not be adjusted for changes in the market price of either Cambridge common stock or Wellesley common stock. Changes in the market price of shares of Cambridge common stock prior to the merger will affect the market value of the consideration that Wellesley shareholders will receive on the closing date of the merger. Stock price changes may result from a variety of factors (many of which are beyond Cambridge’s control), including the following factors:

market reaction to the announcement of the merger;

changes in Cambridge’s or Wellesley’s respective businesses, operations, assets, liabilities and prospects;

changes in market assessments of the business, operations, financial position and prospects of either company or the combined company;

market assessments of the likelihood that the merger will be completed;

interest rates, general market and economic conditions and other factors generally affecting the market prices of Cambridge common stock and Wellesley common stock;

the actual or perceived impact of U.S. monetary policy;

federal, state and local legislation, governmental regulation and legal developments in the businesses in which Cambridge and Wellesley operate; and

other factors beyond Cambridge’s control, including those described or referred to elsewhere in this “Risk Factors” section.

The market price of Cambridge common shares at the closing of the merger may vary from its price on the date the merger agreement was executed, on the date of this joint proxy statement/prospectus and on the dates of Cambridge’s and Wellesley’s shareholder meetings. As a result, the market value of the consideration for the merger represented by the exchange ratio also will vary.

Therefore, while the number of shares of Cambridge common stock to be issued per share of Wellesley common stock is fixed, (1) Cambridge shareholders cannot be sure of the market value of the consideration that will be paid to Wellesley shareholders upon completion of the merger and (2) Wellesley shareholders cannot be sure of the market value of the consideration they will receive upon completion of the merger.

Both OptimaWellesley and Cambridge shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management of the combined company.

EachThe merger will dilute the ownership position of Optima and Cambridge shareholders currently have the right to voteand result in Wellesley shareholders having an ownership stake in the election of their respective board of directors and on other matters affecting their respectivecombined company. Upon completion of the merger, each OptimaWellesley shareholder will become a shareholder of Cambridge with a percentage ownership of the combined company that is much smaller than such shareholder’s current percentage ownership of Optima.Wellesley. It is expected that the former shareholders of OptimaWellesley as a group will receive shares in the merger constituting approximately %22% of the

outstanding shares of Cambridge common stock immediately after the merger. Furthermore, because shares of Cambridge common stock will be issued to existing OptimaWellesley shareholders, current Cambridge shareholders will have their ownership and voting interests diluted by approximately %.22%. Accordingly, both Optima and Cambridge shareholders will have less influence on the management and policies of the combined company than they now have on the management and policies of their respective company.Cambridge.

After the merger is completed, OptimaWellesley shareholders will become Cambridge shareholders and will have different rights that may be less advantageous than their current rights.

Upon completion of the merger, OptimaWellesley shareholders will become Cambridge shareholders. Differences in Optima’s CharterWellesley’s charter and Bylawsbylaws and Cambridge’s Chartercharter and Bylawsbylaws will result in changes to the rights of OptimaWellesley shareholders who become Cambridge shareholders. For more information, see “Comparison of ShareholdersShareholder Rights,” beginning on page 90126 of this joint proxy statement/prospectus.

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

Until the completion of the merger, OptimaWellesley is 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 Cambridge. In addition, OptimaWellesley has agreed to pay a termination fee of $2,500,000$4,100,000 to Cambridge in specified circumstances. These provisions could discourage other companies from trying to acquire OptimaWellesley even though those other companies might be willing to offer greater value to OptimaWellesley shareholders than Cambridge has offered in the merger. The payment of the termination fee also could have a material adverse effect on Optima’sWellesley’s results of operations.

OptimaWellesley 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 Optima.Wellesley. These uncertainties may impair Optima’sWellesley’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers, suppliers and others who deal with OptimaWellesley to seek to change existing business relationships with Optima. OptimaWellesley. Wellesley 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 Cambridge.

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 the financial results of OptimaWellesley and, following the merger, Cambridge. In addition, the merger agreement requires that OptimaWellesley operate in the ordinary course of business consistent with past practice and restricts OptimaWellesley from taking certain actions prior to the effective time of the merger or termination of the merger agreement. These restrictions may prevent OptimaWellesley from retaining existing customers or pursuing attractive business opportunities that may arise prior to the completion of the merger.

Optima’sWellesley’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of OptimaWellesley shareholders.

In considering the information contained in this joint proxy statement/prospectus, you should be aware that Optima’sWellesley’s directors and certain executive officers have interests in the merger that are different from, or in addition to, the interests of OptimaWellesley shareholders generally. These interests include, among other things:

 

the right to receive cash payments in exchange for the cancellation of outstanding stock options, including unvested stock options;

the right to accelerated vesting of restricted stock awards;

 

the right of certain executive officers to receive cash payments in exchange for the termination theirof existing employment agreements;agreements with Wellesley;

 

the right of certain other executive officers to receive cash severance and continued employee benefits under certain circumstances;

 

the right to continued indemnification and liability insurance coverage by Cambridge after the merger for acts or omissions occurring before the merger; and

 

the right to one seatthree seats on each of Cambridge’s and Cambridge Trust Company’s board of directors, and any related compensation for such services.

Also, Cambridge and Cambridge Trust Company entered into an offer letter and a change in control agreement with Daniel R. Morrison and offer lettersThomas J. Fontaine regarding his continuing role with William Young and Pamela Morrison regarding their continuing roles with Cambridge and Cambridge Trust Company following the merger. See the section of this joint proxy statement/prospectus entitled “The Merger—Interests of Optima’sWellesley’s Directors and Executive Officers in the Merger” beginning on page 5998 for a discussion of these interests.

The unaudited pro forma financial data included in this joint proxy statement/prospectus is illustrative only, and may differ materially from Cambridge’s actual financial position and results of operations after the merger.

The unaudited pro forma financial data in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Cambridge’s actual financial position or results of operations would have been had the merger been completed on the dates indicated. The pro forma financial data reflects adjustments, which are based on preliminary estimates, to record Optima’sWellesley’s identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this joint proxy statement/prospectus is preliminary and final allocation of the purchase price will be based on the actual purchase price and the fair value of the assets and liabilities of OptimaWellesley as of the date of the completion of the merger. As a result, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this joint proxy statement/prospectus.

The fairness opinionopinions received by the board of directors of OptimaCambridge from Keefe, Bruyette & Woods, Inc., and the board of directors of Wellesley from Sandler O’Neill & Partners, L.P., respectively, prior to execution of the merger agreement doesdo not reflect changes in circumstances subsequent to the date of the fairness opinion.opinions.

Sandler O’Neill, Optima’sThe opinion of KBW, Cambridge’s financial advisor in connection with the proposed merger, and the opinion of Sandler O’Neill, Wellesley’s financial advisor in connection with the proposed merger, were delivered to the boardboards of directors of Optima its opinionCambridge and Wellesley, respectively, on December 5, 2018 to the effect that, as of such date and subject to the assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill as set forth in the opinion, the merger consideration set forth in the merger agreement was fair, from a financial point of view, to the holders of Optima common stock.2019. The opinion speaksopinions speak only as of the date of the opinion.opinions. The opinion doesopinions do not reflect changes that may occur or may have occurred after the date of the opinion,opinions, including changes to the operations and prospects of Cambridge or Optima,Wellesley, changes in general market and economic conditions or regulatory or other factors. Any such changes may materially alter or affect the relative values of Cambridge and Optima.Wellesley.

The merger agreement may be terminated in accordance with its terms and the merger may not be completed.

The merger agreement is subject to a number of conditions that must be fulfilled in order to complete the merger. Those conditions include, but are not limited to:

 

approval of (1) the merger agreement and the transactions contemplated thereby, including the issuance of Cambridge common stock in connection with the merger, by Cambridge shareholders and (2) the merger agreement by OptimaWellesley shareholders;

receipt of required regulatory approvals;

 

absence of orders prohibiting the completion of the merger;

 

continued accuracy of the representations and warranties by both parties and the performance by both parties of their covenants and agreements; and

 

receipt by both parties of legal opinions from their respective tax counsels.

In addition, if the ratio of (i) the average closing price of Cambridge common stock over the 20 consecutive full trading days prior to, and including, the 10th day before the closing of the merger to (ii) the closing price of Cambridge common stock on the last trading day preceding the first public announcement of the merger is both (1) less than 80% and (2) 20 percentage points less than the comparable ratio for the NASDAQ Bank Index, OptimaWellesley would have a right to terminate the merger agreement, unless Cambridge elects to increase the exchange ratio such that the implied value of the exchange ratio would be equivalent to the minimum implied value that would have avoided triggering this termination right. The closing price of Cambridge common stock on December 4, 2018,2019, the last trading day preceding the first public announcement of the merger, was $85.61$76.36 per share. In order for this termination right to be triggered, the average closing price of Cambridge common stock over the measurement period will need to be less than $68.49$61.09 per share and Cambridge common stock will need to have underperformed the NASDAQ Bank Index over the measurement period by at least 20 percentage points. See the section of this joint proxy statement/prospectus entitled “The Merger Agreement—Termination” beginning on page 87123 for a more complete discussion of the circumstances under which the merger agreement could be terminated.

If the merger is not consummated by September 30, 2020, Cambridge or Wellesley may terminate the merger agreement.

Either Cambridge or Wellesley may terminate the merger agreement under certain circumstances, including if the merger has not been consummated by September 30, 2020. However, this termination right will not be available to a party if the failure to consummate the transaction by such is due to a material breach of the merger agreement by the party seeking to terminate the merger agreement.

The merger is subject to a number of conditions which, if not satisfied or waived in a timely manner, would delay the merger or adversely impact Cambridge’s and Wellesley’s ability to complete the merger.

The completion of the merger is subject to the satisfaction or waiver of a number of conditions. In addition, under circumstances specified in the merger agreement, Cambridge or Wellesley may terminate the merger agreement. While it is currently anticipated that the merger will be completed promptly following the receipt of all required regulatory approvals, there can be no assurance that the conditions to closing will be satisfied in a timely manner or at all, or that an effect, event, development or change will not transpire that could delay or prevent these conditions from being satisfied. Accordingly, Cambridge or Wellesley cannot provide any assurances with respect to the timing of the closing of the merger, whether the merger will be completed at all and when Wellesley shareholders would receive the consideration for the merger, if at all. The price of Cambridge’s or Wellesley’s common stock may decline to the extent that the current market price of Cambridge’s or Wellesley’s common stock, respectively, reflects a market assumption that the merger will be consummated and that Cambridge or Wellesley, respectively, will realize certain anticipated benefits of the merger.

The merger and related transactions are subject to approval by shareholders of both Cambridge and Wellesley.

The merger cannot be completed unless (i) Wellesley’s shareholders approve the merger and the other transactions contemplated by the merger agreement by the affirmative vote of the holders of at least a majority of

the Wellesley common stock outstanding and entitled to vote on the proposal and (ii) Cambridge’s shareholders approve the merger and the other transactions contemplated thereby, including the issuance of Cambridge common stock in connection with the merger, by the affirmative vote of the holders of at leasttwo-thirds of all shares of Cambridge common stock outstanding and entitled to vote at the special meeting of Cambridge shareholders. If shareholder approval is not obtained by Wellesley’s or Cambridge’s shareholders, the merger and related transactions cannot be completed.

The merger is subject to the receipt of consents and approvals from governmental authorities that may delay the date of completion of the merger or impose conditions that could have an adverse effect on Cambridge.

Before the merger may be completed, various consents, approvals, waiverswaiver or consentsnon-objections must be obtained from state and federal governmental authorities, including the FDIC, the Federal Reserve, the MA Commissioner, the Massachusetts CommissionerHousing Partnership, and the New Hampshire Commissioner.Co-Operative Central Bank. Satisfying the requirements of these governmental authorities may delay the date of completion of the merger. In addition, these governmental authorities may include conditions on the completion of the merger, or require changes to the terms of the merger. While Cambridge and OptimaWellesley do not currently expect that any such conditions or changes would result in a material adverse effect on Cambridge, there can be no assurance that they will not, and such conditions or changes could have the effect of delaying completion of the merger, or imposing additional costs on or limiting the revenues of Cambridge following the merger, any of which might have a material adverse effect on Cambridge following the merger. The parties are not obligated to complete the merger should any regulatory approval contain anon-standard condition, restriction or requirement that the Cambridge board of directors reasonably determines in good faith would, individually or in the aggregate, materially reduce the benefits of the merger to such a degree that Cambridge would not have entered into the merger agreement had such condition, restriction or requirement been known at the date of the merger agreement.

Failure to complete the merger could negatively impact the stock price of Cambridge and future businesses and financial results of Cambridge and Optima.Wellesley.

Completion of the merger is subject to the satisfaction or waiver of a number of conditions, including approval by Cambridge’s and Wellesley’s shareholders of the merger. Cambridge or Wellesley cannot guarantee when or if these conditions will be satisfied or that the merger will be successfully completed. The consummation of the merger may be delayed, the merger may be consummated on terms different than those contemplated by the merger agreement, or the merger may not be consummated at all. If the merger is not completed, or is completed on different terms than as contemplated by the ongoing businesses ofmerger agreement, Cambridge and Optima mayor Wellesley could be adversely affected and Cambridge and Optima will be subject to severala variety of risks associated with the failure to complete the merger, or to complete the merger as contemplated by the merger agreement, including the following:

 

OptimaWellesley may be required, under certain circumstances, to pay Cambridge a termination fee of $2,500,000$4,100,000 under the merger agreement;

 

Cambridge and Optima will be required to pay certainWellesley could incur substantial costs relating to the proposed merger, whether or not the merger is completed, such as legal, accounting, financial advisor, filing, printing and printingmailing fees;

 

under the merger agreement, OptimaWellesley is subject to certain restrictions on the conduct of its business prior to completing the merger, which may adversely affect its ability to execute certain of its business strategies;

Cambridge’s and Wellesley’s management’s and employees’ attention may be diverted from theirday-to-day business and operational matters as a result of efforts relating to attempting to consummate the merger;

Cambridge and Wellesley shareholders may be prevented from realizing the anticipated benefits of the merger;

the market price of Cambridge’s or Wellesley’s common stock could decline significantly; and

 

matters relatingCambridge or Wellesley could incur reputational harm due to the merger may require substantial commitmentsadverse perception of time and resources by management of Cambridge and Optima, which could otherwise have been devotedany failure to serving existing customers or other opportunities that may have been beneficial to Cambridge and Optima as independent companies, assuccessfully complete the case may be.merger.

Any delay in the consummation of the merger or any uncertainty about the consummation of the merger on terms other than those contemplated by the merger agreement, or if the merger is not completed, could materially adversely affect Cambridge’s or Wellesley’s business, financial results and share price. In addition, if the merger is not completed, Cambridge may experience negative reactions from the financial markets, and Cambridge and/or OptimaWellesley may experience negative reactions from their respective customers and employees. Cambridge and/or OptimaWellesley also could be subject to litigation related to any failure to complete the merger or to enforcement proceedings commenced against Cambridge or OptimaWellesley to perform their respective obligations under the merger agreement. If the merger is not completed, Cambridge and OptimaWellesley cannot assure their respective shareholders that the risks described above will not materialize and will not materially affect the business and financial results of Cambridge and/or OptimaWellesley and stock price of Cambridge.

Risks Related to the Combined Company if the Merger is Completed

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

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

Unanticipated costs relating to the merger could reduce Cambridge’s future earnings per share.

Cambridge has incurred substantial legal, accounting, financial advisory and other costs, and Cambridge’s management has devoted considerable time and effort in connection with the merger. If the merger is not completed, Cambridge will bear certain fees and expenses associated with the merger without realizing the benefits of the merger. If the merger is completed, Cambridge expects to incur substantial expenses in connection with integrating the business, operations, network, systems, technologies, policies and procedures of the two companies. The fees and expenses may be significant and could have an adverse impact on Cambridge’s results of operations.

Cambridge and Cambridge Trust Company believe that each has reasonably estimated the likely costs of integrating the operations of Cambridge Trust Company and Optima,Wellesley, and the incremental costs of operating as a combined company. However, it is possible that unexpected transaction costs such as taxes, fees or professional

expenses or unexpected future operating expenses such as increased personnel costs or increased taxes, as well as other types of unanticipated adverse developments, could have a material adverse effect on the results of operations and financial condition of the combined company. If unexpected costs are incurred, the merger could have a dilutive effect on Cambridge’s earnings per share. In other words, if the merger is completed, the earnings per share of Cambridge common stock could be less than anticipated or even less than if the merger had not been completed.

Estimates as to the future value of the combined company are inherently uncertain. You should not rely on such estimates without considering all of the information contained or incorporated by reference into this joint proxy statement/prospectus.

Any estimates as to the future value of the combined company, including estimates regarding the earnings per share of the combined company, are inherently uncertain. The future value of the combined company will depend upon, among other factors, the combined company’s ability to achieve projected revenue and earnings expectations and to realize the anticipated synergies described in this joint proxy statement/prospectus, all of which are subject to the risks and uncertainties described in this joint proxy statement/prospectus, including these risk factors. Accordingly, you should not rely upon any estimates as to the future value of the combined company, whether made before or after the date of this joint proxy statement/prospectus by Cambridge’s and Optima’sWellesley’s respective management or affiliates or others, without considering all of the information contained or incorporated by reference into this joint proxy statement/prospectus.

Following the merger, Cambridge may not continue to pay dividends at or above the rate currently paid by Cambridge.

Following the merger, Cambridge shareholders may not receive dividends at the same rate that they did as Cambridge shareholders prior to the merger for various reasons, including the following:

Cambridge may not have enough cash to pay such dividends due to changes in its cash requirements, capital spending plans, cash flow or financial position;

decisions on whether, when and in what amounts to make any future dividends will remain at all times entirely at the discretion of Cambridge’s board of directors, which reserves the right to change Cambridge’s dividend practices at any time and for any reason; and

the amount of dividends that Cambridge’s subsidiaries may distribute to Cambridge may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.

Cambridge’s shareholders will have no contractual or other legal right to dividends that have not been declared by Cambridge’s board of directors.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus, including information included or incorporated by reference into this joint proxy statement/prospectus, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about the benefits of the merger between Cambridge/Cambridge Trust Company and Optima,Wellesley/Wellesley Bank, including future financial and operating results and performance; statements about Cambridge’s and Optima’sWellesley’s plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “should,” “may” or words of similar meaning. These forward-looking statements are based on the current beliefs and expectations of Cambridge’s and Optima’sWellesley’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond the control of Cambridge and Optima.Wellesley plans. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

 

the failure of the parties to satisfy the closing conditions in the merger agreement in a timely manner or at all;

 

the failure of the shareholders of OptimaCambridge to approve the merger agreement, including the issuance of Cambridge common stock in connection with the merger;

the failure of the shareholders of Wellesley to approve the merger agreement;

 

the failure to obtain governmental approvals of the merger or the imposition of adverse regulatory conditions in connection with regulatory approvals of the merger;

 

disruptions to the parties’ businesses as a result of the announcement and pendency of the merger;

 

costs or difficulties related to the integration of the businesses following the merger;

 

operating costs, customer losses and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected;

 

the risk that the future business operations of Cambridge or OptimaWellesley will not be successful;

 

the risk that the anticipated benefits, cost savings and any other savings from the merger may not be fully realized or may take longer than expected to realize;

 

changes in the interest rate environment that reduce margins;

 

changes in the regulatory environment;

 

the highly competitive industry and market areas in which Cambridge and OptimaWellesley operate;

 

general economic conditions, either nationally or regionally, resulting in, among other things, a deterioration in credit quality;

 

changes in credit market conditions leading to increases in Cambridge’s or Optima’sWellesley’s loan losses or level ofnon-performing loans;

 

changes in the securities markets which affect investment management revenues;

 

increases in FDIC deposit insurance premiums and assessments could adversely affect financial condition;

changes in technology used in the banking business;

 

the soundness of other financial services institutions which may adversely affect credit risk;

 

certain intangible assets may become impaired in the future;

internal controls and procedures may fail or be circumvented;

 

new lines of business or new products and services, which may pose additional risks;

 

changes in key management personnel which may adversely impact operations;

 

the effect on operations of governmental legislation and regulation, including changes in accounting regulation or standards, the nature and timing of the adoption and effectiveness of new requirements that may be enacted; and

 

severe weather, natural disasters, acts of war or terrorism and other external events which could significantly impact the business.

Additional factors that could cause Cambridge’s or Wellesley’s results to differ materially from those described in the forward-looking statements can be found in the section of this joint proxy statement/prospectus entitled “Risk Factors” beginning on page 27,37, and Cambridge’s and Wellesley’s filings with the Securities and Exchange Commission, or the SEC, including Cambridge’s Annual Report on Form10-K, as amended, for the fiscal year ended December 31, 2017.2018, and Wellesley’s Annual Report on Form10-K for the fiscal year ended December 31, 2018.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or the date of any document incorporated by reference into this joint proxy statement/prospectus. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this joint proxy statement/prospectus and attributable to Cambridge or OptimaWellesley or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, Cambridge and OptimaWellesley undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this joint proxy statement/prospectus or to reflect the occurrence of unanticipated events.

INFORMATION ABOUT THE COMPANIES

Cambridge Bancorp

Cambridge is a federally registered bank holding company headquartered in Cambridge, Massachusetts and was incorporated as a Massachusetts corporation in 1983. Cambridge is the parent company of Cambridge Trust Company, a Massachusetts trust company formed in 1890.

Cambridge Trust Company

Cambridge Trust Company is regulated by the Massachusetts Division of Banks (the “MDB”)MDB and the Federal Deposit Insurance Corporation (the “FDIC”).FDIC. Cambridge Trust Company has approximately $2.0$2.8 billion in assets and 1016 banking offices in Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, and Weston.New Hampshire.

Cambridge Trust Company operates ten16 full-service private banking offices in six citiesEastern Massachusetts and towns in Eastern Massachusetts.New Hampshire. Cambridge Trust Company is engaged principally in the business of attracting deposits from the public and investing those deposits. Cambridge Trust Company invests those funds in various types of loans, including residential and commercial real estate, and a variety of commercial and consumer loans, and also invests its deposits and borrowed funds in investment securities. Cambridge Trust Company has two wholly-owned Massachusetts security corporations, CTC Security Corporation and CTC Security Corporation III, for this purpose. Deposits at Cambridge Trust Company are insured by the FDIC for the maximum amount permitted by FDIC Regulations.

As a private bank, Cambridge Trust Company focuses on four core services that center around client needs. OurCambridge Trust Company’s core services include Wealth Management, Commercial Banking, Residential Lending and Personal Banking. Cambridge Trust Company’s customers consist primarily of consumers and small- andmedium-sized businesses in these communities and surrounding areas throughout Massachusetts and New Hampshire. Cambridge Trust Company’s Wealth Management Group has fourfive offices, onetwo in Boston, Massachusetts and three in New Hampshire in Concord, Manchester, and Portsmouth. The Wealth Management Group offers comprehensive investment management, as well as trust administration, estate settlement, and financial planning services. Cambridge’s wealth management clients value personal service and depend on the commitment and expertise of its experienced banking, investment, and fiduciary professionals. As of September 30, 2018,2019, Cambridge had assets under management and administration of approximately $3.2$3.3 billion.

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

Cambridge Trust Company’s lending area is primarily an urban market area with a substantial number ofone-to-four unit residential properties, some of which arenon-owner occupied, as well as apartment buildings, condominiums, office buildings, and retail space. As a result, its loan portfolio contains a significantly greater number of multi-family and commercial real estate loans compared to institutions that operate innon-urban markets. Cambridge Trust Company’s market area is located largely in the Boston-Cambridge-Quincy, Massachusetts/New Hampshire Metropolitan Statistical Area.

At September 30, 2018,2019, Cambridge had $2.0$2.8 billion in assets, $1.7$2.4 billion in deposits and $156.3$243 million of shareholders’ equity.

Cambridge’s principal executive offices are located at 1336 Massachusetts Avenue, Cambridge, Massachusetts 02138, its phone number is(617)520-5520 and its website is www.cambridgetrust.com. Information that is included in this website does not constitute part of this joint proxy statement/prospectus.

Optima Bank & Trust CompanyWellesley Bancorp, Inc.

OptimaWellesley was foundedincorporated in 2008 as a New Hampshire-chartered bank. Optima is regulated bySeptember 2011 to be the New Hampshire Banking Department (“NHBD”)holding company for Wellesley Bank following Wellesley Bank’s conversion from the mutual to stock form of ownership. On January 25, 2012, the conversion was completed and Wellesley Bank became the FDIC. Optima operates outwholly-owned subsidiary of the Wellesley. Also on that date, Wellesley sold and issued 2,407,151 shares of its main office in Portsmouth, New Hampshirecommon stock at a price of $10.00 per share, through which Wellesley received net offering proceeds of $21.2 million. Wellesley’s principal business activity is the ownership of the outstanding shares of common stock of Wellesley Bank. Wellesley does not own or lease any property, but instead uses the premises, equipment and its six branch offices in Bedford, Dover, North Hampton, Pease Tradeport, Portsmouthother property of Wellesley Bank, with the payment of appropriate rental fees, as required by applicable laws and Stratham, New Hampshire. Optima offers traditional community bank loan and deposit products.regulations, under the terms of an expense allocation agreement entered into with Wellesley Bank.

At September 30, 2018, Optima2019, Wellesley had $524.2$985.9 million in assets, $488.6$758.7 million in deposits and $33.0$71.8 million of shareholders’ equity.

Optima’s principalWellesley Bank

Founded in 1911, Wellesley Bank is a Massachusetts chartered cooperative bank headquartered in Wellesley, Massachusetts. Wellesley Bank operates as a community-oriented financial institution offering traditional financial services to consumers and businesses in its primary market areas of Wellesley, Newton, Needham, Cambridge, Boston and the surrounding communities. Wellesley Bank attracts deposits from the general public and uses those funds to originate primarily residential mortgage loans, commercial real estate loans and construction loans, commercial business loans, and, to a lesser extent, home equity lines of credit and other consumer loans. Wellesley Bank conducts its lending and deposit activities primarily with individuals and small businesses in its primary market areas. In addition, it also provides investment management services for high net worth individuals, families, businesses, private partnerships, nonprofit organizations, foundations and trusts through its wholly-owned subsidiary, Wellesley Investment Partners, LLC, a registered investment advisor.

Wellesley Bank’s and Wellesley’s executive offices are located at Two Harbour Place, Portsmouth, New Hampshire 03801,100 Worcester Street, Suite 300, Wellesley, Massachusetts 02481 and its phonetelephone number is (603)(781)433-9600235-2550. and its

Wellesley Bank’s website address is www.optimabank.com. www.wellesleybank.com. Information that is included in this website does not constitute part of this joint proxy statement/prospectus.

Security Ownership of Certain Beneficial Owners and Management

The table below provides certain information about beneficial ownership of Optima common stock as of December 31, 2018. The table shows information for (i) each of Optima’s directors, (ii) each of Optima’s executive officers, (iii) all of Optima’s directors and executive officers as a group, and (iv) each person, or group of affiliated persons, who is known to Optima to beneficially own more than 5% of Optima’s common stock.

Except as otherwise noted, the persons or entities in the below tables have sole voting and investing power with respect to all shares of common stock beneficially owned by them, subject to community property laws, where applicable. Unless otherwise indicated, the address for each of the shareholders in the table below is c/o Optima Bank & Trust Company, Two Harbour Place, Portsmouth, New Hampshire 03801.

Name of Beneficial Owner  Number of Shares
of Common
Stock Beneficially
Owned		   Stock Options
Exercisable
within 60 Days		   Total Shares
of Common
Stock to be
Beneficially
Owned		   Percentage of
Common Stock
Beneficially Owned		 

Directors:

        

Robert A. Brown, III

   40,112    7,000    47,112    2.14% 

Michael S. Daigle(3)

   56,138    6,000    62,138    2.82% 

Erik S. Dodier

   72,780    7,000    79,780    3.62% 

Jaye Morency

   50,896    7,000    57,896    2.63% 

Daniel R. Morrison(1)

   69,193    7,000    76,193    3.46% 

Pamela A. Morrison(1)

   46,423    7,000    53,423    2.43% 

Coleen M. Penacho(4)

   29,000    11,539    40,539    1.84% 

Leonard S. Rishkofski

   9,887    7,000    16,887    0.77% 

Jagat S. Sisodia

   16,289    7,000    23,289    1.06% 

David E. Speltz(5)

   63,422    7,000    70,422    3.20% 

James G. Sununu(6)

   100,829    11,539    112,368    5.09% 

Michael C. Sununu(7)

   104,345    11,539    115,884    5.25% 

William D. Young(1)

   39,206    7,000    46,206    2.10% 

Executive Officers:

        

Edwin L. Garside

   36,095    1,500    37,595    1.71% 

All directors and executive officers as a group(8)

   641,056    105,117    746,173    32.43% 

Other Shareholders:

        

Siang Kiang Beswick

   116,725    0    116,725    5.32% 

Total(8)

   2,195,438    127,517    2,322,955    100.00% 

(1)

Also an Executive Officer.

(2)

Directors James Sununu and Michael Sununu are managing members of Sununu Holdings LLC.

(3)

Includes 40,099 shares held by The Daigle Family Trust.

(4)

Includes 2,000 shares held by Penacho Family Trust.

(5)

Includes 28,875 shares held by Wheat Ventures, LLC.

(6)

Includes 93,559 shares held by Sununu Holdings LLC, of which Mr. Sununu is a managing member along with Michael C. Sununu.

(7)

Includes 93,559 shares held by Sununu Holdings LLC, of which Mr. Sununu is a managing member along with James G. Sununu.

(8)

Shares held by Sununu Holdings LLC are reflected in the individual holdings of both James G. Sununu and Michael C. Sununu but are included in the totals only once.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

OF OPTIMA BANK & TRUST COMPANY

As of and for the Nine-Month Periods Ended September 30, 2018 and 2017

Balance Sheet

Total assets were $524.2 million as of September 30, 2018, an increase from $495.9 million as of December 31, 2017 and $470.0 million as of September 30, 2017. Total assets have increased as Optima has increased deposits to fund both residential and commercial loan growth.

Total loans, before the allowance for loan losses, was $465.6 million as of September 30, 2018, an increase of $45.3 million from $420.3 million as of December 31, 2017, and an increase of $68.1 million from $397.5 million as of September 30, 2017. Optima’s loan portfolio as of September 30, 2018 was comprised primarily of residential real estate loans and commercial real estate loans. Owner occupiedone- to four-family real estate loans represented over 56% of Optima’s loan portfolio as of September 30, 2018, compared to 56% as of December 31, 2017 and 55% as of September 30, 2017. Commercial real estate loans, which also include owner occupied,non-owner occupiedone- to four-family family properties, and multi-family properties, represented 32% of the portfolio as of September 30, 2018, compared to 31% as of December 31, 2017 and 31% as of September 30, 2017. Optima’s construction loan portfolio of $29.1 million as of September 30, 2018 was comprised of 65% consumer residential construction loans and 35% is commercial real estate construction loans.

Total deposits of $488.6 million as of September 30, 2018 increased from $458.5 million as of December 31, 2017 and $432.1 million as of September 30, 2017. Demand deposit account balances of $62.0 million as of September 30, 2018 increased from $40.2 million as of December 31, 2017 and $48.4 million as of September 30, 2017. Savings account balances of $174.8 million as of September 30, 2018 increased from $125.5 million as of December 31, 2017 and $139.4 million as of September 30, 2017. The increase in savings account balances was primarily due to a new promotional rate offered by Optima in 2018. Money market account balances of $78.5 million as of September 30, 2018 decreased from $98.9 million as of December 31, 2017 and increased from $65.7 million as of September 30, 2017. Total certificate of deposit balances decreased to $146.3 million as of September 30, 2018, compared to $158.7 million as of December 31, 2017 and $153.0 million as of September 30, 2017 as Optima has focused on growth within core checking and savings accounts.

Asset Quality

As of September 30, 2018, Optima had four loans more than 30 days overdue for a total principal of $947,000, none of which are past due 90 or more days, down from total past due loans of $1.2 million as of December 31, 2017, of which $257 thousand were past due for 90 or more days. Past due loans represented 0.20% of total loans as of September 30, 2018, a decrease from 0.28% as of December 31, 2017. Loans of $834 thousand were onnon-accrual as of September 30, 2018, a decrease from $1.2 million as of December 31, 2017. Loans of $2.3 million were classified as of September 30, 2018, an increase from $2.1 million as of December 31, 2017.

Gross charge offs for the nine-month period ended September 30, 2018 were $95,000, resulting from charge-offs on three loans, one of which was later fully recovered. This amount represents 0.03% of the average loan balances on an annualized basis, compared to $14,000, or 0.00% of average loans and leases, for the twelve-month period ended December 31, 2017, and $14,000, or 0.00% of average loans and leases, for the nine-month period ended September 30, 2017.

The ratio of the allowance for loan losses to total loans was 0.70% as of September 30, 2018, compared to 0.73% as of December 31, 2017, and 0.73% as of September 30, 2017.

Capital Strength

Optima is a “well capitalized” institution under the FDIC’s prompt corrective action rules. Optima’s Tier 1 capital to average assets ratio was 6.56% as of September 30, 2018, compared to 6.66% as of December 31, 2017 and 6.84% as of September 30, 2017. As of September 30, 2018, Optima’s Tier 1 capital to risk-weighted assets ratio was 9.18%, compared to 9.35% as of December 31, 2017 and 9.57% as of September 30, 2017. Optima’s total risk-based capital to risk weighted assets ratio was 10.09% as of September 30, 2018, compared to 10.28% as of December 31, 2017 and 10.50% as of September 30, 2017.

Net Income

For the nine-month period ended September 30, 2018, Optima reported net income of $1.8 million, or $0.88 per basic share, an increase of $413,000 from $1.4 million, or $0.69 per basic share, reported for the nine-month period ended September 30, 2017. The increase in net income was primarily the result of an increase in net interest income, while controlling operating expenses as Optima grew assets.

Optima’s annualized return on average assets was 0.49% for the nine-month period ended September 30, 2018, compared to 0.43% for the nine-month period ended September 30, 2017. The annualized return on average stockholders’ equity was 7.51% for the nine-month period ended September 30, 2018, compared to 6.27% for the nine-month period ended September 30, 2017.

Optima’s net interest margin was 2.96% for the nine-month period ended September 30, 2018, down from the 3.07% for the nine-month period ended September 30, 2017. The decrease in the net interest margin was primarily the result of rising short-term interest rates as the yield curve has flattened.

As of and for the Years Ended December 31, 2017 and 2016

Balance Sheet

Total assets of $495.9 million as of December 31, 2017 represented an increase of $68.5 million from $427.4 million as of December 31, 2016. The increase in assets was driven primarily by an increase in loans which grew 22.6% from December 31, 2016.

Total loans, before the allowance for loan losses, increased to $419.6 million as of December 31, 2017, which represented an increase of $77.6 million from the $342.0 million reported as of December 31, 2016. Optima’s loan portfolio as of December 31, 2017 was comprised primarily of residential and commercial real estate loans. Owner occupiedone- to four-family real estate loans represented approximately 56% of Optima’s loan portfolio as of December 31, 2017, compared to approximately 51% as of December 31, 2016. Commercial real estate loans, which also include owner andnon-owner occupiedone- to four-family properties, and multi-family properties, represented approximately 31% of the portfolio as of December 31, 2017, compared to approximately 34% as of December 31, 2016.

Total deposits of $458.5 million as of December 31, 2017 represented an increase of $67.6 million from $390.9 million reported as of December 31, 2016. Total certificate of deposit balances decreased to $158.7 million as of December 31, 2017, from $165.8 million as of December 31, 2016.

Demand and NOW deposit account balances of $75.4 million, of which $40.2 million were innon-interest bearing accounts, as of December 31, 2017 represented an increase from $60.1 million, of which $36.1 million was innon-interest bearing accounts, as of December 31, 2016. Savings deposit balances of $125.5 million as of December 31, 2017 increased from $124.6 million as of December 31, 2016. Money market deposits of $98.9 million as of December 31, 2017 increased from $40.4 million as of December 31, 2016. Money market deposits increased by $58.5 million, or approximately 145%, in 2017. Money market deposits represented approximately 22% of total deposits as of December 31, 2017, compared to 10% as of December 31, 2016. The increase in money market deposits was primarily due to new insured cash sweep money market accounts.

Asset Quality

Optima had approximately $1.2 million in nonperforming loans as of December 31, 2017, a decrease from $2.1 million as of December 31, 2016. As a percentage of total loans nonperforming loans represented 0.28% of total loans at December 31, 2017 a decline from 0.61% of total loans as of December 31, 2016.

For the year ended December 31, 2017, Optima reported net charge offs totaling $7,000. For the year ended December 31, 2016, Optima reported net charge-offs totaling $344,000 or 0.10% of the average loan balances.

The ratio of the allowance for loan and lease losses to total loans was 0.73% as of December 31, 2017, compared to 0.78% as of December 31, 2016.

Capital Strength

Optima is a “well capitalized” institution under the FDIC’s prompt corrective action rules. Optima’s Tier 1 capital to average assets ratio was 6.66% as of December 31, 2017 compared to 7.04% as of December 31, 2016. As of December 31, 2017, Optima’s Tier 1 capital to risk-weighted assets ratio was 9.35% compared to 10.35% as of December 31, 2016. Optima’s total risk-based capital to risk weighted assets ratio was 10.28% as of December 31, 2017, compared to 11.31% as of December 31, 2016.

Optima’s ratio of stockholders’ equity to total assets was 6.30% as of December 31, 2017, compared to 6.79% as of December 31, 2016.

Net Income

For the year ended December 31, 2017, Optima reported net income of $1.9 million, or $0.93 per basic share, a decline of $216,000, over the $2.1 million, or $1.04 per basic share, reported for the year ended December 31, 2016. The decrease in net income was primarily the result of a decline in gains from loan sales as Optima sold less residential loans in 2017 than in 2016. Portfolio loans were sold servicing retained, while loans sold through the Federal Home Loan Bank’s MPF program were sold service released. Total noninterest income decreased to $1.1 million for the year-ended December 31, 2017 from $2.1 million for the year-ended December 31, 2016. Net interest income for the year ended December 31, 2017 increased to $13.3 million from $11.5 million for the year ended December 31, 2016. The provision for loan loss decreased to $428,000 as of December 31, 2017 from $560,000 as of December 31, 2016, as the quality of loans in the portfolio improved. Expenses increased to $11 million for the year ended December 31, 2017 from $9.8 million for the year ended December 31, 2016, primarily due to the growth in assets of 13.8% and the resources needed to support that growth.

Optima’s annualized return on average assets was 0.42% for the year ended December 31, 2017, compared to 0.54% for the year ended December 31, 2016. The annualized return on average stockholders’ equity was 6.28% for the year ended December 31, 2017, compared to 7.73% for the year ended December 31, 2016.

Optima’s net interest margin was 3.06% for the year ended December 31, 2017, an increase from 3.01% for the year ended December 31, 2016.

THE SPECIAL MEETING OF OPTIMACAMBRIDGE SHAREHOLDERS

This joint proxy statement/prospectus is being furnished to holders of OptimaCambridge common stock for use at a special meeting of OptimaCambridge shareholders and any adjournments or postponements thereof.

Date, Time and Place of the Special Meeting

OptimaCambridge will hold its special meeting of shareholders at the Cambridge Trust Wealth Management office, 75 State Street, 18th Floor, Boston, Massachusetts 02109 on ,March 16, 2020, at 8:30 a.m., local time.

Purpose of the Special Meeting

At the special meeting, OptimaCambridge shareholders as of the record date will be asked to consider and vote on the following proposal:proposals:

 

 1.

to approve the Agreement and Plan of Merger or the merger agreement, by and among Cambridge, Bancorp, or Cambridge, Cambridge Trust Company, a Massachusetts-chartered trust companyWellesley, and wholly owned subsidiary of Cambridge, or Cambridge Trust Company, and Optima,Wellesley Bank, dated as of December 5, 2018,2019, pursuant to which Optima(i) Wellesley will merge with and into Cambridge, with Cambridge as the surviving entity, and (ii) Wellesley Bank will merge with and into Cambridge Trust Company, with Cambridge Trust Company as the surviving entity, and the merger.other transactions contemplated thereby, including the issuance of Cambridge common stock, par value $1.00 per share, in connection with the proposed merger;

2.

to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to approve the merger proposal.

Vote Required for Approval

The affirmative vote of at leasttwo-thirds of the shares of Cambridge common stock entitled to vote at the special meeting of Cambridge shareholders is required to approve the merger proposal. The affirmative vote of at least a majority of the shares of Optima common stock presentvotes cast, in person or represented by proxy, and entitled to vote at the special meeting is required to approve the merger agreement.adjournment proposal. Abstentions, failures to vote and brokernon-votes will have the same effect as a vote “AGAINST” the approval ofmerger proposal, but will have no effect on the merger agreement.adjournment proposal.

Recommendation of the OptimaCambridge Board of Directors

The OptimaCambridge board of directors has approved the merger agreement, including the issuance of Cambridge common stock in connection with the merger, and recommends that you vote your shares “FOR” approval of the merger agreement.proposal and “FOR” the adjournment proposal.

Record Date; Outstanding Shares; Shares Entitled to Vote

Only holders of record of OptimaCambridge common stock at the close of business on the record date of , 2019,January 31, 2020, are entitled to notice of and to vote at Optima’sCambridge’s special meeting. As of the record date, there were 5,412,417 shares of OptimaCambridge common stock outstanding, held of record by approximately 427 shareholders. Each holder of OptimaCambridge common stock is entitled to one vote for each share of OptimaCambridge common stock owned as of the record date.

A list of shareholders entitled to vote at the special meeting will be available for inspection at the special meeting and before the special meeting, during the period beginning two business days after notice of the meeting is given and upon written request by any OptimaCambridge shareholder.

Quorum

A quorum of OptimaCambridge shareholders is necessary to hold a valid meeting. If the holders of at least a majority of the total number of the outstanding shares of OptimaCambridge common stock entitled to be cast are represented in person or by proxy at the special meeting, a quorum will exist. Your shares will be counted towards the quorum only if you submit a valid proxy or vote in person at the special meeting. Abstentions will be counted for purposes of determining whether a quorum is present. If there is no quorum, the holders of a majority of shares present at the special meeting in person or represented by proxy may adjourn the special meeting to another date.

Share Ownership of Management; Voting Agreements

As of the record date, the directors and executive officers of OptimaCambridge and their affiliates collectively owned 135,782 shares of OptimaCambridge common stock, or approximately %2.5% of Optima’sCambridge’s outstanding shares.

Each of the directors and onecertain executive officerofficers of OptimaCambridge have entered into a voting agreement with Cambridge,agreements, requiring each of them to vote all shares of OptimaCambridge common stock beneficially owned by such person in favor of approval of the merger agreement.proposal. As of the record date, these directors and executive officerofficers held 131,233 shares of OptimaCambridge common stock, which represented approximately %2.4% of the outstanding shares of OptimaCambridge common stock.

When considering the Optima boardVoting of directors’ recommendation that you vote in favor of the approval of the merger agreement, you should be aware that the directors and executive officers of Optima have interests in the merger that may be different from, or in addition to, the interests of shareholders of Optima. See “The Merger—Interests of Optima’s Directors and Executive Officers in the Merger” beginning on page 59.

How to Vote Shares Held Directly by ShareholderProxies

If you are an Optimaa Cambridge shareholder, the OptimaCambridge board of directors requests that you return the proxy card accompanying this joint proxy statement/prospectus for use at the OptimaCambridge special meeting. Please complete, date and sign the proxy card and promptly return it in the enclosed postage-paid envelope.envelope or submit a proxy through the Internet or by telephone as described on the enclosed instructions.

Instead of voting by mailing a proxy card, registered shareholders can vote their shares of Cambridge common stock via the Internet or by telephone. The Internet and telephone voting procedures are designed to authenticate shareholders’ identities, and allow shareholders to cast their vote and confirm that their vote has been recorded properly. Specific instructions for Internet and telephone voting are set forth on the proxy card. The deadline for voting via the Internet or by telephone is 11:59 p.m., local time, on March 15, 2020.

All properly signed proxies received prior to the special meeting and not revoked before the vote at the special meeting will be voted at the special meeting according to the instructions indicated on the proxies or,if no instructions are given, the shares will be voted “FOR” approvaleach of the merger agreement.proposals.

If you have any questions concerning the merger, the other meeting matters or this joint proxy statement/prospectus or need assistance voting your shares please contact Daniel R. Morrison, Chairman, PresidentMichael F. Carotenuto, Chief Financial Officer and CEOCorporate Secretary of Optima,Cambridge, at the address or telephone number listed below:

Two Harbour Place78 Blanchard Road, 5th Floor,

Portsmouth, NH 03801Burlington, Massachusetts 01803

(603)Telephone:433-9600617-520-5543

If you hold your shares of Cambridge common stock in “street name,” meaning in the name of a bank, broker or other nominee who is the record holder, you must either direct the record holder of your shares of Cambridge common stock how to vote your shares or obtain a proxy from the record holder to vote your shares in person at the special meeting.

If you fail to properly submit your proxy card or to instruct your broker, bank or other nominee to vote your shares of Cambridge common stock and you do not attend the special meeting and vote your shares in person, your shares will not be voted. This will have the same effect as a vote “AGAINST” approval of the merger agreement, including the issuance of Cambridge common stock in connection with the merger, but will have no impact on the outcome of the adjournment proposal.

How to Revoke Your Proxy

If you are an Optimaa Cambridge shareholder, you may revoke your proxy at any time by taking any of the following actions before your proxy is voted at the special meeting:

 

delivering a written notice bearing a date later than the date of your proxy card to the Chairman, President and CEO of Optima,Corporate Secretary, stating that you revoke your proxy;

 

submitting a new signed proxy card bearing a later date (any earlier proxies will be revoked automatically); or

 

attending the special meeting and voting in person, although attendance at the special meeting will not, by itself, revoke a proxy.

You should send any notice of revocation to the following address:

Optima Bank & Trust CompanyCambridge Bancorp

Two Harbour Place78 Blanchard Road, 5th Floor

Portsmouth, New Hampshire 03801Burlington, Massachusetts 01803

Attention: Daniel R. Morrison, Chairman, President and CEOMichael Carotenuto

If you have instructed a bank, broker or other nominee to vote your shares, you must follow the directions you receive from your bank, broker or other nominee to change your vote.

Voting in Person

If you are an Optimaa Cambridge shareholder and plan to attend the OptimaCambridge special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares are held in “street name,” and you wish to vote at the special meeting, you must bring to the special meeting a legal proxy executed in your favor from the record holder of the shares (your broker, bank, or other nominee) authorizing you to vote at the special meeting.

Whether or not you plan to attend the special meeting, OptimaCambridge requests that you complete, sign, date and return the enclosed proxy card as soon as possible in the enclosed postage-paid envelope. This will not prevent you from voting in person at the special meeting, but will assure that your vote is counted if you are unable to attend.

Abstentions and BrokerNon-Votes

Only shares affirmatively voted for the proposal, including shares represented by properly executed proxies that do not contain voting instructions, will be counted as votes “FOR” the proposal.proposals.

Brokers who hold shares of Cambridge common stock in street name for a customer who is the beneficial owner of those shares may not exercise voting authority on the customer’s shares with respect to the actions proposed in this joint proxy statement/prospectus without specific instructions from the customer. When a broker does not vote on a particular proposal because the broker does not have discretionary voting power with respect to a proposal and has not received voting instructions from the beneficial owner it is referred to as a brokernon-vote.

If your broker holds your Cambridge stock in street name, your broker will vote your shares only if you provide instructions on how to vote by filling out the voting instruction form sent to you by your broker with this joint proxy statement/prospectus.

Accordingly, you are urged to mark and return the enclosed proxy card to indicate your vote.vote, or fill out the voting instruction form, if applicable. Abstentions and brokernon-votes will be included in determining the presence of a quorum at the special meeting. Abstentions and brokernon-votes will have the same effect as a vote “AGAINST” the approval of the merger agreement.agreement, including the issuance of Cambridge common stock in connection with the merger, but will have no impact on the outcome of the adjournment proposal.

Proxy Solicitation

If you are an Optimaa Cambridge shareholder, the enclosed proxy is solicited by and on behalf of the OptimaCambridge board of directors. OptimaCambridge will pay the expenses of soliciting proxies to be voted at the Cambridge special meeting, including any attorneys’ and accountants’ fees, except OptimaCambridge and CambridgeWellesley have each agreed to share equally the costs of printing this joint proxy statement/prospectus. Following the original mailing of the proxies and other soliciting materials, OptimaCambridge and its agents may also solicit proxies by mail, telephone, facsimile or in person. No additional compensation will be paid to directors, officers or other employees of OptimaCambridge for making these solicitations. OptimaCambridge intends to reimburse persons who hold OptimaCambridge common stock of record but not beneficially, such as brokers, custodians, nominees and fiduciaries, for their reasonable expenses in forwarding copies of proxies and other soliciting materials to, and requesting authority for the exercise of proxies from, the persons for whom they hold the shares.

In addition, Cambridge has engaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements, which are not expected to exceed $10,000 in total.

This joint proxy statement/prospectus and the proxy card are first being sent to OptimaCambridge shareholders on or about            , 2019.2020.

CAMBRIDGE PROPOSALS

Merger Proposal

Cambridge is requesting that holders of the outstanding shares of Cambridge common stock consider and vote on a proposal to approve the merger agreement, a copy of which is attached asAnnex A to this joint proxy statement/prospectus, and the other transactions contemplated thereby, including the issuance of Cambridge common stock, in connection with the proposed merger. Approval of the merger proposal by Cambridge shareholders is a condition to the closing of the merger. If the merger proposal is not approved by Cambridge shareholders, the merger will not occur.

Vote Required for Approval

The affirmative vote of holders of at leasttwo-thirds of the shares of Cambridge common stock entitled to vote at the special meeting of Cambridge shareholders is required to approve the merger agreement. Abstentions and brokernon-votes will have the same effect as a vote “AGAINST” the approval of the merger agreement, including the issuance of Cambridge common stock in connection with the merger.

Recommendation of the Cambridge Board of Directors

THE CAMBRIDGE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE MERGER PROPOSAL.

Adjournment Proposal

Cambridge is requesting that holders of the outstanding shares of Cambridge common stock consider and vote on a proposal to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to approve the merger agreement. Even though a quorum may be present at the special meeting, it is possible that Cambridge may not receive sufficient votes to approve the merger agreement by the time of the special meeting. In that event, Cambridge would need to adjourn the special meeting in order to solicit additional proxies. The adjournment proposal relates only to an adjournment of the special meeting for purposes of soliciting additional proxies to obtain the requisite shareholder approval to approve the merger agreement. Any other adjournment of the special meeting (e.g., an adjournment required because of the absence of a quorum) would be voted on pursuant to the discretionary authority granted by the proxy card. The Cambridge board of directors retains full authority to the extent set forth in Cambridge’s articles of organization, or Cambridge’s amended and restated bylaws, and Massachusetts law to adjourn the special meeting for any other purpose, or to postpone the special meeting before it is convened, without the consent of any Cambridge shareholders.

If Cambridge shareholders approve the adjournment proposal, Cambridge could adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from Cambridge shareholders who have previously voted. Cambridge is not required to notify shareholders of any adjournment if the new place, date and time are announced at the special meeting before adjournment. If, after the adjournment, a new record date is fixed for the adjourned special meeting, notice of the adjourned special meeting will be given to each shareholder of record entitled to vote at the special meeting.

Vote Required for Approval

The affirmative vote of at least a majority of the votes cast, in person or represented by proxy, at the special meeting is required to approve the proposal to adjourn the special meeting. Abstentions and brokernon-votes are not counted as votes cast and will not affect the outcome of this proposal.

Recommendation of the Cambridge Board of Directors

THE CAMBRIDGE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE ADJOURNMENT PROPOSAL.

THE SPECIAL MEETING OF WELLESLEY SHAREHOLDERS

This joint proxy statement/prospectus is being furnished to holders of Wellesley common stock for use at a special meeting of Wellesley shareholders and any adjournments or postponements thereof.

Date, Time and Place of the Special Meeting

Wellesley will hold its special meeting of shareholders at the Wellesley College Club, 727 Washington Street, Wellesley, Massachusetts 02482 on March 12, 2020, at 9:00 a.m., local time.

Purpose of the Special Meeting

At the special meeting, Wellesley shareholders as of the record date will be asked to consider and vote on the following proposals:

1.

to approve the Agreement and Plan of Merger by and among Cambridge, Cambridge Trust Company, Wellesley, and Wellesley Bank, dated as of December 5, 2019, pursuant to which (i) Wellesley will merge with and into Cambridge, with Cambridge as the surviving entity, and (ii) Wellesley Bank will merge with and into Cambridge Trust Company, with Cambridge Trust Company as the surviving entity; and

2.

to approve, on an advisory(non-binding) basis, specified compensation that may become payable to the named executive officers of Wellesley in connection with the merger; and

3.

to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are insufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to approve the merger proposal.

Vote Required for Approval

The affirmative vote of the holders of a majority of the shares of Wellesley common stock outstanding and entitled to vote at the special meeting is required to approve the merger proposal. The affirmative vote of a majority of votes cast on the proposal is required to approve each of the advisory proposal on specified compensation and the adjournment proposal. Abstentions and brokernon-votes will have the same effect as a vote “AGAINST” the merger proposal, but will have no effect on the advisory proposal on specified compensation and the adjournment proposal.

Recommendation of the Wellesley Board of Directors

The Wellesley board of directors has approved the merger agreement and recommends that you vote your shares “FOR” approval of the merger agreement, “FOR” the advisory proposal on specified compensation, and “FOR” the adjournment proposal.

Record Date; Outstanding Shares; Shares Entitled to Vote

Only holders of record of Wellesley common stock at the close of business on the record date of January 31, 2020, are entitled to notice of and to vote at Wellesley’s special meeting. As of the record date, there were 2,598,345 shares of Wellesley common stock outstanding, held of record by approximately 608 shareholders. Each holder of Wellesley common stock is entitled to one vote for each share of Wellesley common stock owned as of the record date.

A list of shareholders entitled to vote at the special meeting will be available for inspection at the special meeting and before the special meeting, during the period beginning two business days after notice of the meeting is given and upon written request by any Wellesley shareholder.

Quorum

A quorum of Wellesley shareholders is necessary to hold a valid meeting. If the holders of at least a majority of the total number of the outstanding shares of Wellesley common stock entitled to be cast are represented in person or by proxy at the special meeting, a quorum will exist. Your shares will be counted towards the quorum only if you submit a valid proxy or vote in person at the special meeting. Abstentions will be counted for purposes of determining whether a quorum is present. If there is no quorum, the holders of a majority of shares present at the special meeting in person or represented by proxy may adjourn the special meeting to another date.

Share Ownership of Management; Voting Agreements

As of the record date, the directors and executive officers of Wellesley and their affiliates collectively owned 217,281 shares of Wellesley common stock, or approximately 8.4% of Wellesley’s outstanding shares.

Each of the directors and certain executive officers of Wellesley have entered into a voting agreement with Cambridge, requiring each of them to vote all shares of Wellesley common stock beneficially owned by such person in favor of the merger proposal. As of the record date, these directors and executive officers held 190,987 shares of Wellesley common stock, which represented approximately 7.4% of the outstanding shares of Wellesley common stock.

When considering the Wellesley board of directors’ recommendation that you vote in favor of the approval of the merger agreement, you should be aware that the directors and certain executive officers of Wellesley have interests in the merger that may be different from, or in addition to, the interests of shareholders of Wellesley. See “The Merger—Interests of Wellesley’s Directors and Executive Officers in the Merger” beginning on page 98.

Voting of Proxies

If you are a Wellesley shareholder, the Wellesley board of directors requests that you return the proxy card accompanying this joint proxy statement/prospectus for use at the Wellesley special meeting. Please complete, date and sign the proxy card and promptly return it in the enclosed postage-paid envelope or submit a proxy through the Internet or by telephone as described on the enclosed instructions.

Instead of voting by mailing a proxy card, shareholders can vote their shares of Wellesley common stock via the Internet or by telephone. The Internet and telephone voting procedures are designed to authenticate shareholders’ identities, and allow shareholders to cast their vote and confirm that their vote has been recorded properly. Specific instructions for Internet and telephone voting are set forth on the proxy card. The deadline for voting via the Internet or by telephone is 11:59 p.m., local time, on March 11, 2020.

All properly signed proxies received prior to the special meeting and not revoked before the vote at the special meeting will be voted at the special meeting according to the instructions indicated on the proxies or,if no instructions are given, the shares will be voted “FOR” each proposal.

If you have any questions concerning the merger, the other meeting matters or this joint proxy statement/prospectus or need assistance voting your shares, please contact Michael W. Dvorak, Chief Financial Officer and Chief Operating Officer of Wellesley, at the address or telephone number listed below:

100 Worcester Street, Suite 300

Wellesley, MA 02481

(781)489-7606

If you hold your shares of Wellesley common stock in “street name,” meaning in the name of a bank, broker or other nominee who is the record holder, you must either direct the record holder of your shares of Wellesley common stock how to vote your shares or obtain a proxy from the record holder to vote your shares in person at the special meeting.

Participants in the ESOP or the 401(k) Plan

If you participate in the ESOP or if you invest in Wellesley common stock through the 401(k) plan, you will receive a voting instruction form for the plans in which you participate that reflects all shares you may direct the trustee to vote on your behalf under such plans. Under the terms of the ESOP, all allocated shares of Wellesley common stock held by the ESOP are voted by the ESOP trustee, as directed by plan participants. The ESOP trustee, subject to the exercise of its fiduciary duties, will vote all unallocated shares of Wellesley common stock held by the ESOP and allocated shares for which it does not receive timely voting instructions in a manner calculated to most accurately reflect the instructions the ESOP trustee receives from participants regarding the shares of common stock deemed allocated to their accounts, subject to the exercise of the trustee’s fiduciary duties. Under the terms of the 401(k) Plan, a participant may direct the stock fund trustee how to vote the shares credited to his or her account. The stock fund trustee will vote all shares for which timely voting instructions are not received in the same proportion as shares for which the trustees received voting instructions.

If you fail to properly submit your proxy card or to instruct your broker, bank or other nominee to vote your shares of Wellesley common stock and you do not attend the special meeting and vote your shares in person, your shares will not be voted. This will have the same effect as a vote “AGAINST” approval of the merger agreement, but will have no impact on the outcome of the advisory proposal on specified compensation and the adjournment proposal. The deadline for voting via Internet or by telephone for shares held or credited to a participant through the ESOP or 401(k) plans is 11:59 p.m., local time, on March 9, 2020.

How to Revoke Your Proxy

If you are a Wellesley shareholder, you may revoke your proxy at any time by taking any of the following actions before your proxy is voted at the special meeting:

delivering a written notice bearing a date later than the date of your proxy card to the Corporate Secretary of Wellesley, stating that you revoke your proxy;

submitting a new signed proxy card bearing a later date (any earlier proxies will be revoked automatically); or

attending the special meeting and voting in person, although attendance at the special meeting will not, by itself, revoke a proxy.

You should send any notice of revocation to the following address:

Wellesley Bancorp, Inc.

100 Worcester Street, Suite 300

Wellesley, MA 02481

Attention: Michael W. Dvorak

If you have instructed a bank, broker or other nominee to vote your shares, you must follow the directions you receive from your bank, broker or other nominee to change your vote.

Voting in Person

If you are a Wellesley shareholder and plan to attend the Wellesley special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares are held in “street name,” and you wish to vote at the special meeting, you must bring to the special meeting a legal proxy executed in your favor from the record holder of the shares (your broker, bank, or other nominee) authorizing you to vote at the special meeting.

Whether or not you plan to attend the special meeting, Wellesley requests that you complete, sign, date and return the enclosed proxy card as soon as possible in the enclosed postage-paid envelope or submit a proxy through the Internet or by telephone as described on the enclosed instructions. This will not prevent you from voting in person at the special meeting, but will assure that your vote is counted if you are unable to attend.

Abstentions and BrokerNon-Votes

Only shares affirmatively voted for the proposal, including shares represented by properly executed proxies that do not contain voting instructions, will be counted as votes “FOR” the proposals.

Brokers who hold shares of Wellesley common stock in street name for a customer who is the beneficial owner of those shares may not exercise voting authority on the customer’s shares with respect to the actions proposed in this joint proxy statement/prospectus without specific instructions from the customer. When a broker does not vote on a particular proposal because the broker does not have discretionary voting power with respect to a proposal and has not received voting instructions from the beneficial owner it is referred to as a brokernon-vote. If your broker holds your Wellesley stock in street name, your broker will vote your shares only if you provide instructions on how to vote by filling out the voting instruction form sent to you by your broker with this joint proxy statement/prospectus.

Accordingly, you are urged to mark and return the enclosed proxy card to indicate your vote, or fill out the voting instruction form, if applicable. Abstentions and brokernon-votes will be included in determining the presence of a quorum at the special meeting. Abstentions and brokernon-votes will have the same effect as a vote “AGAINST” the approval of the merger agreement, but will have no effect on the advisory proposal on specified compensation or the adjournment proposal.

Proxy Solicitation

If you are a Wellesley shareholder, the enclosed proxy is solicited by and on behalf of the Wellesley board of directors. Wellesley will pay the expenses of soliciting proxies to be voted at the special meeting, including any attorneys’ and accountants’ fees, except Wellesley and Cambridge have each agreed to share equally the costs of printing this joint proxy statement/prospectus. Following the original mailing of the proxies and other soliciting materials, Wellesley and its agents may also solicit proxies by mail, telephone, facsimile or in person. No additional compensation will be paid to directors, officers or other employees of Wellesley for making these solicitations. Wellesley intends to reimburse persons who hold Wellesley common stock of record but not beneficially, such as brokers, custodians, nominees and fiduciaries, for their reasonable expenses in forwarding copies of proxies and other soliciting materials to, and requesting authority for the exercise of proxies from, the persons for whom they hold the shares.

In addition, Wellesley has engaged Morrow Sodali LLC to assist Wellesley in soliciting proxies from the Wellesley shareholders and provide related advice and informational support. Wellesley has agreed to pay $7,500, plus expenses, for these services. If you need assistance completing your proxy card or have questions regarding the Wellesley special meeting, please contact Morrow Sodali LLC at 470 West Avenue, Stamford, CT 06902 or by telephone at (800) 662-5200 (for shareholders) and (203) 658-9400 (for banks and brokers).

This joint proxy statement/prospectus and the proxy card are first being sent to Wellesley shareholders on or about            , 2020.

Stock Certificates

If you are an Optimaa Wellesley shareholder, you should not send in any certificates representing OptimaWellesley common stock.stock with the proxy card. You will receive an election form and instructions for the exchange of your certificates representing OptimaWellesley common stock prior to the closing of the merger.

WELLESLEY PROPOSALS

Merger Proposal

Wellesley is requesting that holders of the outstanding shares of Wellesley common stock consider and vote on a proposal to approve the merger agreement, a copy of which is attached asAnnex A to this joint proxy statement/prospectus. Approval of the merger proposal by Wellesley shareholders is a condition to the closing of the merger. If the merger proposal is not approved by Wellesley shareholders, the merger will not occur.

Vote Required for Approval

The affirmative vote of holders of a majority of the shares of Wellesley common stock entitled to vote at the special meeting of Wellesley shareholders is required to approve the merger agreement. Abstentions and brokernon-votes will have the same effect as a vote “AGAINST” the approval of the merger agreement.

Recommendation of the Wellesley Board of Directors

THE WELLESLEY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE MERGER PROPOSAL.

Advisory Proposal on Specified Compensation

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Wellesley is providing its shareholders with the opportunity to cast an advisory(non-binding) vote on the compensation that may be payable to its named executive officers in connection with the merger, the value of which is set forth in the table included in the section of this document entitled “The Merger—Merger-Related Compensation for Wellesley’s Named Executive Officers.” As required by Section 14A of the Exchange Act, Wellesley is asking its shareholders to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to Wellesley’s named executive officers in connection with the merger, as disclosed in the table in the section of the joint proxy statement/prospectus statement entitled “The Merger—Merger-Related Compensation for Wellesley’s Named Executive Officers,” including the associated narrative discussion, are hereby APPROVED.”

The vote on executive compensation payable in connection with the merger is a vote separate and apart from the vote to approve the merger proposal. Accordingly, a shareholder may vote to approve the executive compensation and vote not to approve the merger proposal and vice versa. Because the vote is advisory in nature only, it will not be binding on either Wellesley or Cambridge. Accordingly, because Wellesley is contractually obligated to pay the compensation, the compensation will be payable, subject only to the conditions applicable thereto, if the merger proposal is approved and regardless of the outcome of the advisory vote.

Vote Required for Approval

The affirmative vote of a majority of votes cast on the proposal is required to approve the advisory proposal on specified compensation. Abstentions and brokernon-votes are not counted as votes cast and will not affect the outcome of this proposal.

Recommendation of the Wellesley Board of Directors

THE WELLESLEY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE ADVISORY PROPOSAL 1—ON SPECIFIED COMPENSATION.

Adjournment Proposal

Wellesley is requesting that holders of the outstanding shares of Wellesley common stock consider and vote on a proposal to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation

of proxies if there are insufficient votes at the time of the special meeting, or at any adjournment or postponement of that meeting, to approve the merger agreement. Even though a quorum may be present at the special meeting, it is possible that Wellesley may not receive sufficient votes to approve the merger agreement by the time of the special meeting. In that event, Wellesley would need to adjourn the special meeting in order to solicit additional proxies. The adjournment proposal relates only to an adjournment of the special meeting for purposes of soliciting additional proxies to obtain the requisite shareholder approval to approve the merger agreement. Any other adjournment of the special meeting (e.g., an adjournment required because of the absence of a quorum) would be voted on pursuant to the discretionary authority granted by the proxy card. The Wellesley board of directors retains full authority to the extent set forth in Wellesley’s articles of incorporation, or Wellesley’s amended and restated bylaws, and Maryland law to adjourn the special meeting for any other purpose, or to postpone the special meeting before it is convened, without the consent of any Wellesley shareholders.

If Wellesley shareholders approve the adjournment proposal, Wellesley could adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from Wellesley shareholders who have previously voted. Wellesley is not required to notify shareholders of any adjournment if the new place, date and time are announced at the special meeting before adjournment. If, after the adjournment, a new record date is fixed for the adjourned special meeting, notice of the adjourned special meeting will be given to each shareholder of record entitled to vote at the special meeting.

Vote Required for Approval

The affirmative vote of a majority of votes cast on the proposal is required to approve the proposal to adjourn the special meeting. Abstentions and brokernon-votes are not counted as votes cast and will not affect the outcome of this proposal.

Recommendation of the Wellesley Board of Directors

THE WELLESLEY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE ADJOURNMENT PROPOSAL.

THE MERGER

The following discussion contains material information about the merger. The discussion is subject, and qualified in its entirety by reference, to the merger agreement and other documents attached as annexes to this joint proxy statement/prospectus. We urge you to read carefully this entire joint proxy statement/prospectus, including the merger agreement and other documents attached as annexes to this joint proxy statement/ prospectus, for a more complete understanding of the merger.

General

On December 5, 2018,2019, the boards of directors of Cambridge, Cambridge Trust Company, Wellesley, and Optima,Wellesley Bank, each approved a merger agreement among Cambridge, Cambridge Trust Company, Wellesley, and Optima,Wellesley Bank pursuant to which Optima(i) Wellesley will merge with and into Cambridge, with Cambridge as the surviving entity, and (ii) Wellesley Bank will merge with and into Cambridge Trust Company, with Cambridge Trust Company as the surviving the merger.entity.

OptimaWellesley shareholders will be able to elect to receive either (i) $32.00 in cash, or (ii) 0.34680.580 shares of Cambridge common stock for each share of OptimaWellesley common stock they own, on the effective date of the merger, subject to allocation and proration procedures that are intended to ensure that 95% of the total number of Optima shares outstanding immediately prior to the effective time of the merger will be converted into the right to receive Cambridge common stock, and the remaining Optima shares will be converted into the right to receive cash. Optimamerger. Wellesley shareholders will also receive cash in lieu of any fractional shares they would have otherwise received in the merger.

See “The Merger Agreement,” beginning on page 70,109, for additional and more detailed information regarding the legal documents that govern the merger, including information about the conditions to the merger and the provisions for terminating or amending the merger agreement.

Background of the Merger

FromThe boards of directors and management teams of Cambridge and Wellesley periodically and in the ordinary course have, from time to time, evaluated and considered a variety of financial and strategic opportunities as part of their respective long-term strategies to enhance value for their shareholders, including potential acquisitions, divestitures, business combinations and other transactions.

Additionally, the OptimaWellesley board of directors has considered variousregularly reviewed and discussed Wellesley’s business strategy, performance and prospects in the context of the national and local economic environment, developments in the regulation of financial institutions and the competitive landscape. Among other things, these reviews and discussions have included possible strategic initiatives available to Wellesley, such as capital management strategies, potential acquisitions, and business combinations involving other financial institutions. These reviews and discussions included analyses of the mergers and acquisitions environment, including multiples and premiums being paid, and an assessment of potential partners for Wellesley. In connection with the evaluation of these strategic alternatives, Thomas J. Fontaine, President and Chief Executive Officer of Wellesley, has had, from time to enhance shareholder value, including potential strategic partnerships. On June 26, 2018, Optima engaged Sandler O’Neill to assist the Optima board of directors in its evaluation of its business plan and its review of strategic alternatives.

On July 19, 2018, the Optima board of directors held a meeting and authorized Sandler O’Neill to work with management to prepare a confidential information memorandum and anon-disclosure agreement to be used to solicit indications of interest, and to establish an electronic data room. During the next several weeks, these documents were drafted and the data room was populated.

Beginning on July 31, 2018, representatives of Sandler O’Neill contacted nine financial institutions regarding their interest in a possible acquisition of Optima. Eight companies expressed initial interest, executednon-disclosure agreements, were provided with the confidential information memorandum and granted access to the data room. The confidential information memorandum requested that anon-binding indication of interest be provided to Sandler O’Neill by August 28, 2018.

At an Optima board of directors meeting held on August 16, 2018, representatives of Sandler O’Neill discussed with the Optima board of directors the status of the ongoing outreach to potential buyers.

On August 28, 2018, three indications of interest were received. One potential acquirer, Company A, proposed anall-stock transaction with a purchase price of $30.00 per share of Optima stock. Another potential acquirer, Company B, proposed anall-stock transaction with a purchase price of $22.00 per share of Optima stock. Cambridge’s indication of interest proposed anall-stock transaction with a purchase price of $30.00 per share of Optima stock. Company A and Cambridge each offered one board seat to a member of the Optima board of directors.

On August 30, 2018, after furthertime, informal discussions with representatives of Sandler O’Neill,other financial institutions, including Cambridge, and Company A submitted revised indications of interest. Both Cambridge and Company A proposed anall-stock transaction at a price of $32.00 per share of Optima stock, withhas regularly updated the exchange ratio to be set at the signing of the definitive agreement.

On September 4, 2018, at a special meeting of the OptimaWellesley board of directors representativesregarding such discussions.

On May 2, 2019, Mr. Fontaine met with Denis K. Sheahan, President and Chief Executive Officer of Sandler O’Neill reviewedCambridge in Waltham, Massachusetts for a general discussion of the financial services industry, the local and regional economic environment and the businesses of the two institutions. During this meeting, Messrs. Fontaine and Sheahan briefly discussed the potential combination of Wellesley and Cambridge, but they did not discuss any specific terms of the three indications of interest and, because each proposal included a significant stock component, reviewed publicly available summary financial and market performance data for each company. Goodwin Procter LLP also attended the meeting, and discussed the fiduciary duties of the board in the context of a proposed sale process. Following discussion, the Optima board of directors determined not to proceed with further discussions with Company B, and to engage each of Company A and Cambridge in limited due diligence of Optima for the purpose of obtaining further revised indications of interest by October 2, 2018.any such combination.

On SeptemberJune 26, 2018, anin-person due diligence meeting between members of Optima’s and Cambridge’s respective management teams was held at Goodwin Procter LLP’s offices in Boston, Massachusetts, with representatives of Optima’s and Cambridge’s respective counsel and financial advisors also attending.

On September 27, 2018, anin-person due diligence meeting between members of Optima’s and Company A’s respective management teams was held in Portsmouth, New Hampshire, with representatives of Optima’s and Company A’s respective financial advisors also attending.

On October 2, 2018, Company A and Cambridge submitted revised indications of interest. Company A proposed anall-stock transaction with a fixed exchange ratio of .7, which valued Optima at $30.63 per share based on Company A’s 10-day volume weighted-average closing share price. Cambridge proposed anall-stock transaction with a price of $30.00 per share with2019, the exchange ratio to be set at the signing of the definitive agreement, representing an implied exchange ratio of 0.3371 based on Cambridge’s then current trading price. Cambridge also indicated a willingness to use a fixed exchange ratio.

On October 4, 2018, the OptimaWellesley board of directors held a special meeting at Wellesley’s strategic planning retreat that was attended by representatives of Sandler O’Neill & Partners, L.P., which we refer to as Sandler O’Neill, and by representatives of Kilpatrick Townsend & Stockton LLP, which we refer to as Kilpatrick Townsend. At this meeting, the Wellesley board of directors discussed the future and strategic plans of

Wellesley. Representatives of Sandler O’Neill provided the Wellesley board of directors with an overview of the current mergers and acquisitions market with respect to financial institutions generally and Wellesley in particular. Representatives of Sandler O’Neill reviewed, and the Wellesley board of directors discussed, Wellesley’s strategic plan and its prospects for creation of shareholder value through organic growth, the viability of growth through acquisition, and the potential creation of value through a strategic business combination with another financial institution. The Sandler O’Neill representatives provided a preliminary ability to pay analysis for potential strategic partners. The Sandler O’Neill representatives then provided general financial and market information about each of the potential strategic partners. It appeared that two banks in particular, including Cambridge, were determined to be the financial institutions best positioned to pay the highest value consideration in a business combination with Wellesley. A representative of Kilpatrick Townsend reviewed with the Wellesley board of directors the applicable legal standards in connection with a possible business combination.

The Wellesley board of directors discussed the risks and challenges associated with the path of independence and organic growth, including the competition for low cost deposits and the need for deposits to fund loan growth, the challenges of growing the wealth management business, the attractiveness of potential acquisition targets and likelihood of successfully consummating an acquisition, and the potential benefits associated with various strategic business combinations. The Wellesley board of directors believed that Cambridge was the strongest possible partner for a business combination as having a strong strategic fit based on various factors, including its business model, strong currency, corporate culture, strong core deposit base, established and growing wealth management business, financial capacity to engage in a transaction, geographic footprint, the synergies that could result from a business combination involving the two companies and the likelihood that Wellesley employees and communities would be best served by such a strategic partnership. As a result of this discussion, the Wellesley board of directors authorized Mr. Fontaine to contact Cambridge management to have discussions with Cambridge to determine Cambridge’s interest in evaluating a business combination with Wellesley and to further evaluate whether such a business combination would be in the best interest of Wellesley’s shareholders.

Mr. Fontaine contacted Mr. Sheahan, President and Chief Executive Officer of Cambridge to request a meeting, and the two met in Boston, Massachusetts on July 10, 2019. Their discussion focused on the Massachusetts and New England banking markets, their respective companies’ business models and strategies and the potential operational and cultural fit between Cambridge and Wellesley. In particular, they discussed the similarity of their respective companies’ efforts to grow their wealth management businesses, the competition for low cost core deposits, their need to generate additional earnings power and the synergies that might be achieved in combining the two organizations. No specific terms of a business combination were discussed. At the conclusion of the meeting, Mr. Fontaine and Mr. Sheahan agreed that the parties should enter into anon-disclosure agreement to enable them to discuss a potential business combination.

On July 11, 2019, Wellesley and Cambridge entered into a mutualnon-disclosure agreement.

At the regular meeting of the Wellesley board of directors held on July 24, 2019, Mr. Fontaine updated the directors on his meetings and discussions with Mr. Sheahan. Following a detailed discussion on the potential business combination between Wellesley and Cambridge, the Wellesley board of directors authorized management to provide additionalnon-public information to Cambridge through the electronic data room established for the parties. The Wellesley board of directors also appointed a Strategic Committee to assist the Wellesley board of directors with performing a thorough and detailed analysis of whether a business combination with Cambridge was in the best interests of Wellesley and its shareholders, and to participate in negotiations with Cambridge with respect to such potential business combination, subject to the Wellesley board of directors’ approval of the definitive terms of any such proposed business combination. The Strategic Committee was comprised of Simon R. Gerlin, Wellesley’s Lead Independent Director, Kathryn M. Hinderhofer, James J. Malerba, and Mr. Fontaine.

On July 26, 2019, Wellesley formally retained Sandler O’Neill as Wellesley’s financial advisor for evaluating a potential business combination with Cambridge, based on, among other factors, Sandler O’Neill’s reputation,

experience in mergers and acquisitions, valuations, financing and capital markets and its familiarity with Wellesley, Wellesley’s strategic goals and the industry in which Wellesley operates.

Over the following weeks, Cambridge performed due diligence on Wellesley, and Mr. Fontaine and members of Wellesley senior management continued discussions with Mr. Sheahan and members of Cambridge senior management regarding the viability of a potential business combination with Cambridge. During this time Mr. Fontaine regularly consulted with representatives of Sandler O’Neill and Kilpatrick Townsend and with the members of the Strategic Committee regarding the ongoing discussions with Cambridge.

On August 13, 2019, Cambridge engaged Keefe, Bruyette & Woods, Inc., which we refer to as KBW, to act as its financial advisor in connection with a possible transaction based on, among other factors, KBW’s reputation as a nationally-recognized investment banking firm, experience in mergers and acquisitions and capital markets and its familiarity with the industry in which Cambridge operates.

On August 20, 2019, the Strategic Committee of the Wellesley board of directors held a telephonic meeting in which representatives of Sandler O’Neill reviewedand Kilpatrick Townsend participated. Representatives of Sandler O’Neill provided the financial terms of the revised indications of interest. Goodwin Procter LLP also attended the meeting. The OptimaWellesley board of directors following extensive discussion of, among other things, the qualitative aspectswith an updated overview of the current mergers and acquisitions market with respect to financial institutions generally and Wellesley and Cambridge in particular, including a review of updated stock prices and market valuations that impacted potential transaction values and external factors that negatively impacted valuations, including stagnant earnings growth, net interest margin compression from recent Federal Reserve rate cuts, further suppressed global interest rates and yield curve inversion, trade and currency wars, investors’ fears of Company Aa recession and continued market volatility. Mr. Fontaine provided the Strategic Committee with an update as to his discussions with members of Cambridge senior management and Cambridge’s ongoing due diligence review of Wellesley regarding a potential business combination between Cambridge and Wellesley. The Strategic Committee determined to present the information discussed at this meeting at a regularly scheduled meeting of the Wellesley board of directors to be held on August 28, 2019.

At the regular meeting of the Wellesley board of directors held on August 28, 2019, Mr. Fontaine updated the Wellesley board of directors regarding the ongoing discussions and due diligence review of the potential business combination with Cambridge. The Wellesley board of directors was provided with Sandler O’Neill’s updated presentation that was provided to the Strategic Committee on August 20, 2019. The Wellesley board of directors then engaged in robust discussion regarding the advantages and disadvantages of pursuing and entering into a business combination with Cambridge. The Wellesley board of directors determined to continue discussions with Cambridge and to allow Cambridge to complete its due diligence process so as to enable Cambridge to provide an indicative price and deal structure for a business combination that the Wellesley board of directors could further evaluate. The Wellesley board of directors authorized management to provide additionalnon-public information to Cambridge through the electronic data room established for the process and authorized Mr. Fontaine to inform Cambridge that Wellesley would be interested in pursuing a business combination with Cambridge if Cambridge provided a fair value to Wellesley shareholders, representation on the management team of the combined company, and representation on the Cambridge board of directors commensurate with the percentage interest of Wellesley shareholders in the combined company.    

On August 29, 2019, Mr. Sheahan, Mr. Fontaine and other members of Wellesley and Cambridge senior management, together with representatives of Sandler O’Neill and KBW, held a meeting to discuss the financial modeling of a potential business combination between Wellesley and Cambridge.

On September 10, 2019, Mr. Sheahan informed Mr. Fontaine that the Cambridge board of directors had an interest in a possible transaction and had authorized Mr. Sheahan to prepare preliminary pro forma financial information to determine if a transaction could be structured that would be financially attractive to both parties. Mr. Fontaine acknowledged Wellesley’s interest in continuing to evaluate a business combination with Cambridge if the merger consideration to be paid to Wellesley shareholders would be sufficient for Wellesley

shareholders and if the interests of all Wellesley constituents were sufficiently addressed in the proposed business combination. Mr. Fontaine also advised that the Wellesley shareholders would need to be well represented on the Cambridge board of directors.

On September 10, 2019, in accordance with Cambridge’s directives, representatives of KBW verbally informed representatives of Sandler O’Neill that Cambridge had established, based on metrics widely used in the current mergers and acquisitions market, certain parameters regarding the level of earnings accretion, tangible book value dilution and earn-back period that would have to be met in order for Cambridge to proceed with the transaction. KBW relayed that, based on those metrics and Cambridge’s review of publicly available information regarding Wellesley and limited scope due diligence review, Cambridge’s proposed price was $43.00 per share, which equated to 0.5667 shares of Cambridge common stock as of market close on September 9, 2019. Cambridge would also offer to add two then current members of the Wellesley board of directors to the Cambridge board of directors.

Later on September 10, 2019, the Strategic Committee of the Wellesley board of directors held a telephonic meeting to discuss Cambridge’s proposal with representatives of Sandler O’Neill and Kilpatrick Townsend. At the conclusion of the meeting, the Strategic Committee determined that the price being proposed was a good starting point for negotiations.

On September 12, 2019, Mr. Sheahan, Mr. Fontaine and other members of Wellesley and Cambridge senior management, together with representatives of Sandler O’Neill and KBW, held a telephonic meeting to discuss the financial modeling of a potential business combination between Wellesley and Cambridge and to discuss the long-term prospects for Optima’s shareholders of a merger with each of Company A and Cambridge, determined to inviteassumptions reflected in Cambridge’s September 10, 2019 offer.

Later on September 12, 2019, the chief executive officers of Company A and Cambridge to meet individually with the OptimaWellesley board of directors before requesting that each party submit its bestheld a special telephonic meeting to discuss Cambridge’s proposed offer, including the advantages and final indicationdisadvantages of interest.

On October 10, 2018, the Optima board of directors met with the chief executive officer of Company A, and on October 11, 2018, the Optima board of directors met with the chief executive officer of Cambridge.

On October 15, 2018, Cambridge submitted a revised indication of interest that proposed anall-stock transaction with a fixed exchange ratio versus a fixed price. At the conclusion of 0.3468, which valued Optima at $29.00 per sharethe meeting, the Wellesley board of directors, based on the information previously provided to the Wellesley board of directors, including Sandler O’Neill’s assessment of the range of what Cambridge was able to pay, and preliminary indications of what Cambridge would be willing to pay, instructed Sandler O’Neill to propose to Cambridge an increase in the exchange ratio to 0.5850 shares. Representatives of Sandler O’Neill communicated this request to representatives of KBW.

On September 13, 2019 and September 20, 2019, Mr. Fontaine and Mr. Sheahan continued to discuss the Wellesley board of directors’ request to increase the exchange ratio and the number of board seats represented by Wellesley’s board. During this meeting, Mr. Sheahan informed Mr. Fontaine that Cambridge had agreed to increase the exchange ratio to 0.5760 shares.

On September 20, 2019, the Strategic Committee of the Wellesley board of directors, together with representatives of Sandler O’Neill and Kilpatrick Townsend, held a telephonic meeting to discuss the continued negotiations with Cambridge. Mr. Fontaine notified the committee that he and representatives of Sandler O’Neill had communicated the Wellesley board of directors’ request to increase the exchange ratio to 0.5850 shares, and that Cambridge had agreed to increase the exchange ratio to 0.5760 shares. The Wellesley board of directors then discussed that Cambridge’s October 17th market price. Company A declinedstock price had since traded higher, and that the implied value of the merger consideration, taking the increased exchange ratio and higher stock price into consideration, was $45.79 per share. At the conclusion of the meeting, the Strategic Committee determined that the exchange ratio of 0.5760 shares was acceptable. Given the expected ownership interest in Cambridge that Wellesley shareholders would have following the contemplated business combination, the Strategic Committee also instructed management to further revise itsrequest that three members of the Wellesley board of directors be appointed to the board of the combined company. The Strategic Committee’s counteroffer was communicated to Cambridge on September 23, 2019.

On September 24, 2019, Cambridge delivered anon-binding indication of interest letter that proposed the acquisition of Wellesley by Cambridge at a price of 0.5760 shares of Cambridge common stock per share of

Wellesley common stock in anall-stock transaction utilizing a fixed exchange ratio. The indication of interest letter required that Wellesley agree to a30-day period of exclusive negotiations, with an automatic15-day extension if the parties were continuing to negotiate in good faith.

On September 25, 2019, the Wellesley board of directors held a meeting at which Mr. Fontaine updated the Wellesley board of directors on the preliminary discussions with Cambridge. The Wellesley board of directors discussed Cambridge’snon-binding indication of interest and mutual exclusivity agreement. Cambridge’s letter provided for an exchange ratio of 0.5760 shares which, based on Company A’supon a10-day average closing price of Cambridge’s stock over the period ending September 24, 2019, represented a price of $45.47 per share. Cambridge also offered to appoint three members of Wellesley’s board of directors to the Cambridge and Cambridge Trust boards of directors. Thenon-binding indication of interest and exclusivity agreement was discussed in detail. An updated presentation by Sandler regarding the deal metrics was provided and the Wellesley board of directors expressed it was impressed with the thoughtfulness of the indication of interest and its tone around social issues and expense reductions. The Wellesley board of directors engaged in a robust discussion of the advantages and disadvantages of engaging in a business combination with Cambridge at this time. There was significant discussion regarding the use of a fixed exchange ratio, the process and timing for calculating the exchange ratio, and the impact on both Wellesley and Cambridge shareholders of using a fixed exchange ratio. Representatives of Sandler O’Neill presented to the Wellesley board of directors an analysis of the financial condition and trading prices of Wellesley and Cambridge common stock, its views on valuation and a pro forma analysis of the proposed on October 2, 2018, valued Optima at $29.63 per share based on Company A’s then currenttransaction. At the conclusion of the meeting, the Wellesley board of directors determined to request that the exclusivity period in the indication of interest be shortened if negotiations break down during the due diligence period and authorized the Strategic Committee to negotiate the indication of interest.

Over the next several days, Mr. Fontaine and Mr. Sheahan discussed possible revisions to the indication of interest letter that would make the proposal more attractive for Wellesley’s shareholders, including providing more specificity as to how the merger consideration was determined, the number of directors that would be added to the Cambridge board of directors and the role that Mr. Fontaine would play in the combined company.

On September 27, 2019, the Strategic Committee of the Wellesley board of directors, together with representatives of Sandler O’Neill and Kilpatrick Townsend, held a telephonic meeting to discuss the negotiations regarding and revisions to Cambridge’snon-binding indication of interest and exclusivity agreement. At the conclusion of the meeting, the Strategic Committee authorized Mr. Fontaine to execute thenon-binding indication of interest and exclusivity agreement with Cambridge.     

During the next 30 days Wellesley reviewed business lines, cost savings, earnings projections under various rate environments and filled the data room with requested information and made other members of the management team available for discussion with Cambridge. During this time, there were multiple communications between Mr. Fontaine and Mr. Sheahan regarding to the potential business combination. Most notably, Mr. Sheahan informed Mr. Fontaine of a $1.2 millioncharge-off resulting from an acquired loan. As a result, the Wellesley Strategic Committee determined to temporarily halt negotiations regarding the potential business combination until the Strategic Committee was able to assess the market price.impact of Cambridge’s public release of information related to thecharge-off. Following the release of Cambridge’s third quarter results, negotiations regarding the potential transaction resumed. As part of these negotiations, the Strategic Committee determined to request that Cambridge increase the exchange ratio, after taking into consideration various factors, including Wellesley’s expected contribution to the combined company and lower than previously projected expenses to be incurred for terminating certain compensation arrangements in advance of the proposed transaction and the change in Cambridge’s stock price following its third quarter earnings release.

At a specialthe regular meeting of the OptimaCambridge board of directors held on October 18, 2018, Daniel Morrison, Optima’s President and Chief Executive Officer, reported that Company A declined to further revise its indication of interest. At21, 2019, Cambridge senior management provided an update on the direction of the Optima board of directors, Mr. Morrison and certain members of the Optima board of directors metnegotiations with Company A on October 26, 2018. After the meeting, Company A indicated that it would not further revise its indication of interest.

On November 7, 2018, Cambridge submitted a revised indication of interest proposing to pay consideration comprised of 5% cash at $32.00 per Optima share and 95% Cambridge common stock at a fixed exchange ratio of 0.3468.Wellesley.

At a special meeting of the Optima board of directors held on November 8, 2018, the Optima board of directors discussed theOn October 2, 201830, 2019, Cambridge delivered an updatednon-binding indication of interest letter that proposed the acquisition of Company A andWellesley by Cambridge at a price of 0.580 shares of Cambridge common stock in anall-stock transaction utilizing a fixed exchange ratio.

On November 6, 2019, the November 7, 2018 indication of interest of Cambridge. UponStrategic Committee met telephonically to discuss Cambridge’s updated proposal. At the conclusion of discussion, the Optima boardmeeting the Strategic Committee determined to proceed with the evaluation and negotiation of directors authorized management to execute Cambridge’s indication of interest.

Following the execution of Cambridge’s indication of interest on November 8, 2018, Optima commenced itstransaction, including conducting reverse due diligence investigation ofon Cambridge.

On November 11, 2019, Cambridge began to make available to Wellesley additionalnon-public information, including information regarding its loans, investments and deposits, credit quality, vendor contracts, revenues and operating expenses.

On November 13, 2019, Cambridge and Cambridge continued its due diligence investigation of Optima. On November 16, 2018, a firstHogan Lovells provided Wellesley and Kilpatrick Townsend with an initial draft merger agreement for the proposed transaction. Over the following days, Kilpatrick Townsend and Hogan Lovells exchanged drafts of the merger agreement was provided to Goodwin Procter LLP byand Hogan Lovells US LLP, counselprovided drafts of other transaction documents, including voting agreements to Cambridge. be entered into by the Wellesley and Cambridge directors and a settlement agreement andnon-competition agreement to be entered into by Mr. Fontaine in connection with the merger agreement, and the two firms worked towards finalizing the terms and conditions of the transaction. During this period, Wellesley and Cambridge continued their reciprocal due diligence efforts.

On November 26, 2018, anin-person due diligence meeting took place between Optima19, 2019, representatives of Wellesley, Sandler O’Neill and Cambridge in Burlington, Massachusetts,Kilpatrick Townsend met with representatives of Sandler O’Neill, Goodwin Procter LLPCambridge, KBW and Keefe, Bruyette & Woods, Inc., Cambridge’s financial advisor also attending.Hogan Lovells and engaged in detailed discussions regarding various aspects of the parties’ businesses.

On each of November 30, December 3 and December 4, 2018,20, 2019, the Optima board of directors held special meetings to discuss the status of the merger negotiations and to review the draft merger agreement and related documentation that were distributed in advance of the meetings.

On December 5, 2018, the OptimaWellesley board of directors held a special meeting. Aregular meeting at which Mr. Fontaine updated the Wellesley board of directors regarding Wellesley’s due diligence review of Cambridge. Following a detailed discussion, the Wellesley board of directors determined to proceed with negotiation of the definitive merger agreement and authorized Mr. Fontaine to execute the updatednon-binding indication of interest letter.

On December 2, 2019, the Cambridge board of directors met to consider the draft merger agreement was distributedas negotiated to date. Representatives of KBW and Hogan Lovells participated in the Optima board of directors in advance ofmeeting. At the meeting, reflecting the fixed exchange ratio and merger consideration consisting of 95% stock / 5% cash with aggregate implied transaction value of $67 million, based on the then-current trading price of Cambridge common stock. Goodwin Procter LLP reviewed in detail the provisions of the merger agreement, including the representations and warranties, the various negative and affirmative covenants, the termination provisions, thenon-solicitation and related termination fee provisions, and the voting agreements requested of the Optima directors and certain executive officers. Representatives of Sandler O’NeillKBW reviewed the financial aspects of the proposed merger based ontransaction. Hogan Lovells reviewed the financialspecific terms of the merger agreement and the process involved in negotiating its terms. The Cambridge board of directors considered all these matters and determined to continue negotiating the proposed transaction.

At a meeting held on December 5, 2019, which was attended by members of Wellesley’s senior executive management and representatives of Sandler O’Neill and Kilpatrick Townsend, the Wellesley board of directors considered the approval of the merger agreement and the transactions contemplated by the merger agreement. The Wellesley board of directors had been provided with a set of meeting materials in advance of the meeting, including the merger agreement and a summary of the material terms of the merger agreement prepared by Kilpatrick Townsend. At the meeting, representatives of Sandler O’Neill reviewed with the Wellesley board withof directors Sandler O’Neill’s financial analysis of the transaction and rendered its fairnessoral opinion, which was subsequently confirmed in writing (a copy of which is attached to this joint proxy statement/prospectus as Annex B), to the effect that, as of suchthat date and subject to the merger considerationprocedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Sandler O’Neill as set forth in such opinion, the exchange ratio in the merger agreement was fair, from a financial point of view, to the holders of OptimaWellesley common stock. The OptimaRepresentatives of Kilpatrick Townsend discussed the terms of the merger agreement and related transaction documents (including the voting agreements and the settlement agreement andnon-competition agreement to be executed by Mr. Fontaine) with the Wellesley board of directors. After considering the proposed terms of the merger agreement and related transaction documents and the various presentations of its financial and legal advisors, and taking into consideration the matters discussed during that meeting and prior meetings of the Wellesley board of directors, then (i)including the strategic alternatives discussed at those meetings and the factors

described under the sections of this joint proxy statement/prospectus entitled “—Wellesley’s Reasons for the Merger” and “—Recommendation of the Wellesley Board of Directors”, the Wellesley board of directors unanimously determined that the merger, the merger agreement and the other transactions contemplated by the merger agreement were in the best interests of OptimaWellesley and its shareholders, (ii)and the directors unanimously approved and adopted the merger agreement (iii) recommendedand the transactions contemplated by it and unanimously determined to recommend that OptimaWellesley’s shareholders approve the merger agreement.

Also on December 5, 2019, the Cambridge board of directors met to discuss the final merger agreement and the other transaction documents and the proposed transaction. Representatives of KBW and Hogan Lovells participated in the meeting. At the meeting, members of Cambridge senior management, together with representatives of KBW and Hogan Lovells, discussed the outcome of negotiations with Wellesley and updated the Cambridge board of directors as to the changes to the terms and conditions of the merger agreement and the other transaction documents since the December 2, 2019 meeting of the Cambridge board of directors. KBW rendered its opinion, which was initially verbal and confirmed by a written opinion dated December 5, 2019 (a copy of which is attached to this joint proxy statement/prospectus as Annex C), to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the exchange ratio in the merger was fair, from a financial point of view, to Cambridge. The Cambridge board of directors then discussed the proposed transaction and its effect on Cambridge. Taking into consideration the matters discussed during that meeting and prior meetings of the Cambridge board of directors, including the factors described under the sections of this joint proxy statement/prospectus entitled “—Cambridge’s Reasons for the Merger” and “—Recommendation of the Cambridge Board of Directors”, the Cambridge board of directors unanimously determined that the merger, the merger agreement and the other transactions contemplated by the merger agreement were in the best interests of Cambridge and its shareholders, and the directors unanimously approved and adopted the merger agreement and the transactions contemplated by it and unanimously determined to recommend that Cambridge’s shareholders approve the merger agreement, and (iv) directed thatincluding the merger agreement be submitted for consideration byissuance of Cambridge common stock in connection with the Optima shareholders at a special meetingtransaction.

Following the respective board meetings of Optima’s shareholders. Mr. Morrison, Ms. Morrison and Mr. Young executed their respective agreements with Cambridge. OptimaWellesley and Cambridge, alsoWellesley and Cambridge executed the merger agreement, and Cambridge entered intothe directors of Wellesley executed the voting agreements with each ofCambridge and the directors of OptimaCambridge executed the voting agreements with Wellesley, and Edwin Garside, Chief Financial OfficerMr. Fontaine executed the settlement agreement and thenon-competition agreement. Later that evening, Cambridge and Wellesley issued a joint press release announcing the execution of Optima.the merger agreement.

Optima’sCambridge’s Reasons for the Merger

In reaching its decision to approve the merger agreement, and to recommend that OptimaCambridge shareholders adopt the merger agreement, the OptimaCambridge board of directors evaluated the merger in consultation with Optima’sCambridge’s management, as well as Optima’s independentCambridge’s outside financial and legal advisors, and considered a number of factors, including the following material factors:

 

information concerning the Optima board of director’s familiarity with and review of Optima’s business, operations, financial condition, results of operationsearnings and prospects of each of Cambridge and Wellesley as separate entities and on a combined basis, including but not limitedthat the transaction is estimated to its business plan and its potentialbe approximately 4.4% accretive from an earnings per share perspective for growth and profitability;the pro forma company in the first full year after completion;

 

the currentmerger will expand and prospective environment in which Optima operates, including national and local economic conditions, the competitive environment for financial institutions generally, the increased regulatory burden on financial institutions generally and the trend toward consolidationenhance Cambridge’s existing franchise in the financial services industry;attractive Boston market area;

 

the Optima boardopportunity to further diversify Cambridge’s customer base as a whole, by expanding the size of directors’ review,its footprint through the merger and to do so in a market where Cambridge has an existing presence;

the compatibility of the cultures of Cambridge and Wellesley, particularly with the assistance of Optima’s management and legal and financial advisors, of strategic alternativesrespect to the merger;meeting of local banking needs and strong community ties;

the Optima board of directors’ review, basedpotential challenges in part oncombining the due diligence performed by Optima in connection with the transaction, of Cambridge’s business, financial condition, results of operations and management; the potential synergies expected from the merger; and the geographic fit between Optima’s and Cambridge’s service areas;two companies;

 

the expected pro forma financial impacts of the transaction, taking into account anticipated cost savingsagreement by Thomas J. Fontaine to remain with Cambridge and other factors, on Optima shareholders;

the structure of the transaction as a 95% stock / 5% cash merger following which Optima’s existing shareholders will have the opportunity to participate in the strategic plan for the combined company;

the fact that the exchange ratio is fixed, which the Optima board of directors believed was consistent with market practice for transactions of this type, was likely to be protective of the total consideration to be received by Optima shareholders based on past performance of Cambridge’s share price, offered the possibility of an upside tocompany following the merger consideration, and was consistent with the strategic purpose of the transaction;

the Optima board of director’s review with Optima’s legal and financial advisors of the financial and other terms of the merger agreement, including the fixed exchange ratio, tax treatment and termination fee provisions;

the opinion, dated December 5, 2018, of Sandler O’Neill directed to the Optima board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Optima common stock of the merger consideration in the merger, as more fully described below under “Opinion of Sandler O’Neill & Partners, L.P., Financial Advisor to Optima” on page 48; and

Cambridge’sWellesley’s agreement, upon the closing of the merger, for Cambridge to appoint one individual(upon consultation with Wellesley) three individuals who is a directorare current directors of OptimaWellesley, including Mr. Fontaine, to the boards of directors of Cambridge and Cambridge Trust Company, respectively, which is expected to provide a degree of continuity and involvement by Optima’sWellesley’s board following the merger and enhance the likelihood that the strategic benefits that OptimaCambridge expects to achieve as a result of the merger will be realized.realized;

the potential for the combined company to enhancenon-interest income growth by providing enhanced and additional financial products and services to the customers of Wellesley;

the anticipated operating efficiencies, cost savings, new branding and opportunities for revenue enhancements of the combined company following the completion of the merger, and the likelihood that they would be achieved after the merger;

the fact that the merger is expected to provide an increase in shareholder value, including the benefits of a stronger strategic position;

the structure of the merger and the financial and other terms of the merger agreement, including the fixed exchange ratio and Wellesley’s right to terminate the merger agreement if the price of Cambridge common stock decreases to the extent set forth in the merger agreement (with Cambridge’s option to increase the exchange ratio to avoid termination);

the deal protection provided by the terms of the merger agreement and the termination fee of $4,100,000 to Cambridge under certain circumstances;

the opinion, dated December 5, 2019, of KBW to the Cambridge board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to Cambridge of the exchange ratio in the proposed merger, as more fully described below under “Opinion of Keefe, Bruyette & Woods, Inc., Financial Advisor to Cambridge” beginning on page 72;

the intended tax treatment of the merger as atax-free reorganization; and

the likelihood of receiving all of the regulatory approvals required for the merger.

The OptimaCambridge board of directors also considered potential risks relating to the merger, including the following:

 

the regulatory and other approvals required in connection with the merger and the expectation that such regulatory approvals will be received in a timely manner and without the imposition of unacceptable conditions;

 

the potential for diversion of management and employee attention, and for employee attrition, during the period prior to the completion of the merger and the potential effect on Optima’sCambridge’s business and relations with customers, service providers and other stakeholders, whether or not the merger is completed;

the merger agreement provisions generally requiring Optima to conduct its business in the ordinary course and the other restrictions on the conduct of Optima’s business prior to completion of the merger, which may delay or prevent Optima from undertaking business opportunities that may arise pending completion of the merger;

with stock consideration based on a fixed exchange ratio, the risk that the consideration to be paid to Optima shareholders could be adversely affected by a decrease in the trading price of Cambridge common stock during the pendency of the merger;

 

expected benefits and synergies sought in the merger, including cost savings and Cambridge’s ability to market successfully its financial products to Optima’sWellesley’s customers, may not be realized or may not be realized within the expected time period;

 

the challenges of integrating the businesses, operations and employees of OptimaWellesley and Cambridge;

certain provisions of the merger agreement prohibit Optima from soliciting, and limit its ability to respond to, proposals for alternative transactions;

Optima’s obligation to pay Cambridge a termination fee of $2.5 million in certain circumstances, as described in the section entitled “The Merger Agreement—Termination Fee” on page 88, may deter others from proposing an alternative transaction that may be more advantageous to Optima’s shareholders;

that Optima’s directors and executive officers may have interests in the merger that are different from or in addition to those of its shareholders generally, as described in the section entitled “Interests of Optima’s Directors and Executive Officers in the Merger” on page 59; and

 

the other risks described in the section entitled “Risk Factors” beginning on page 27 and the risks of investing in Cambridge common stock identified in the Risk Factors sections of Cambridge’s periodic reports filed with the SEC and incorporated by reference herein.37.

The discussion of the information and factors considered by the OptimaCambridge board of directors is not exhaustive, but includes the material factors considered by the OptimaCambridge board of directors. In view of the wide variety of

factors considered by the OptimaCambridge board of directors in connection with its evaluation of the merger and the complexity of these matters, the OptimaCambridge board of directors did not attempt to quantify, rank, or otherwise assign relative weights to the specific factors that it considered in reaching its decision. Furthermore, in considering the factors described above, individual members of the OptimaCambridge board of directors may have given different weights to different factors. The OptimaCambridge board of directors evaluated the factors described above and reached the decision that the merger was in the best interests of OptimaCambridge and its shareholders. The OptimaCambridge board of directors realized that there can be no assurance about future results, including results expected or considered in the factors listed above. However, the OptimaCambridge board of directors concluded that the potential positive factors outweighed the potential risks of completing the merger. It should be noted that this explanation of the OptimaCambridge board of directors’ reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Information Regarding Forward-Looking Statements” beginning on page 33.45.

On the basis of these considerations, the OptimaCambridge board of directors adopted and approved the merger agreement and the transactions contemplated by the merger agreement and recommended to the shareholders that they adopt the merger agreement and the transactions contemplated by the merger agreement.

Recommendation of the OptimaCambridge Board of Directors

The OptimaCambridge board of directors has approved the merger agreement and recommends that OptimaCambridge shareholders vote“FOR” approval of the merger agreement and the transactions contemplated thereby, including the issuance of Cambridge common stock in connection with the merger.

Wellesley’s Reasons for the Merger

After careful consideration, at a meeting held on December 5, 2019, the Wellesley board of directors unanimously determined that the merger agreement, including the merger and the other transactions contemplated thereby, is in the best interests of Wellesley and its shareholders and approved the merger agreement.

In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement and recommend that its shareholders vote “FOR” the merger proposal, the Wellesley board of directors consulted with Wellesley management, as well as its independent financial and legal advisors, and considered a number of factors, including the following material factors:

its knowledge of Wellesley’s business, operations, regulatory and financial condition, asset quality, earnings, loan portfolio, capital and prospects both as an independent organization, and as a part of a combined company with Cambridge;

its understanding of Cambridge’s business, operations, regulatory and financial condition, asset quality, earnings, capital and prospects, taking into account presentations by senior management of its due diligence review of Cambridge and information furnished by Sandler O’Neill;

the Wellesley board’s belief that significant growth in earnings is required for Wellesley to be in a position to deliver a competitive return to its shareholders and that achieving such growth in earnings would require significant investment in both resources and time to achieve those results;

its belief that the merger will result in a more competitive banking franchise with strong capital ratios and an attractive funding base that has the potential to deliver a higher value to Wellesley’s shareholders as compared to continuing to operate as a stand-alone entity;

the expanded possibilities, including organic growth and future acquisitions, that would be available to the combined company, given its larger size, asset base, capital, market capitalization and footprint;

the anticipated pro forma impact of the merger on Cambridge, including potential synergies, and the expected impact on financial metrics such as earnings and tangible common equity per share, as well as on regulatory capital levels;

the financial analyses of Sandler O’Neill, Wellesley’s independent financial advisor, and its written opinion, dated as of December 5, 2019, delivered to the board of directors to the effect that, as of that date, and subject to and based on the various assumptions, considerations, qualifications and limitations set forth in the opinion, the exchange ratio was fair, from a financial point of view, to the holders of Wellesley common stock;

the structure of the transaction as astock-for-stock merger, which offers Wellesley shareholders the opportunity to participate as shareholders of Cambridge in the future performance of the combined company;

the board’s understanding that the merger will qualify as a “reorganization” under Section 368(a) of the Internal Revenue Code and that, as a result, Wellesley’s shareholders will not recognize gain or loss with respect to their receipt of Cambridge common stock in the merger;

the fact that the current quarterly dividend Cambridge pays to its shareholders is higher than the dividend Wellesley pays to its shareholders;

the fact that the exchange ratio is fixed, which the Wellesley board of directors believes is consistent with market practice for transactions of this type and with the strategic purpose of the transaction;

the fact that the more active trading market in Cambridge common stock would give Wellesley shareholders greater liquidity for their investment;

the benefits to Wellesley and its customers of operating as a larger organization, including enhancements in products and services, higher lending limits, and greater financial resources;

the increasing importance of operational scale and financial resources in maintaining efficiency and remaining competitive over the long term and in being able to capitalize on technological developments that significantly impact industry competitive conditions;

the expected social and economic impact of the merger on the constituencies served by Wellesley, including its borrowers, customers, depositors, employees, and communities;

the effects of the merger on Wellesley employees, including the prospects for continued employment in a larger organization and various benefits agreed to be provided to Wellesley employees;

the enhanced likelihood of realizing the strategic benefits of the proposed combination that the Wellesley board of directors believes will result from the continuity provided to Wellesley shareholders by the corporate governance aspects of the proposed combination, including Wellesley’s agreement, upon the closing of the merger, to appoint three current members of the Wellesley board of directors, including Mr. Fontaine, as directors of Cambridge and Cambridge Bank and to appoint Mr. Fontaine as Cambridge Trust’s Chief Banking Officer;

the Wellesley board’s understanding of the current and prospective environment in which Wellesley and Cambridge operate, including national and local economic conditions, the interest rate environment, increasing operating costs resulting from regulatory initiatives and compliance mandates, and the competitive effects of the continuing consolidation in the banking industry;

the ability of Cambridge to complete the merger from a financial and regulatory perspective;

the low probability of securing a more attractive proposal from another institution capable of consummating the transaction;

the low probability of Wellesley completing a desirable acquisition in the near term; and

the board’s review with its independent legal advisor, Kilpatrick Townsend, of the material terms of the merger agreement, including (i) the board’s ability, under certain circumstances, to consider an

unsolicited acquisition proposal and terminate the merger agreement in order to enter into an agreement with respect to a superior proposal, subject to the required payment by Wellesley of a termination fee to Cambridge, which the Wellesley board of directors concluded was reasonable in the context of termination fees in comparable transactions and in light of the overall terms of the merger agreement, and (ii) the board’s ability to terminate the merger agreement if Cambridge common stock both declined below $61.09 during a measurement period prior to the closing and underperformed the NASDAQ Bank Index by a specified amount, as well as the nature of the covenants, representations and warranties and termination provisions in the merger agreement.

The Wellesley board of directors also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberation of the proposed transaction, including, without limitation, the following:

the risk that the consideration to be paid to Wellesley shareholders could be adversely affected by a decrease in the trading price of Cambridge common stock during the pendency of the merger;

the potential risk of diverting management attention and resources from the operation of Wellesley’s business and towards the completion of the merger;

the restrictions on the conduct of Wellesley’s business prior to the completion of the merger, which are customary for public company merger agreements involving financial institutions, but which, subject to specific exceptions, could delay or prevent Wellesley from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of Wellesley absent the pending merger;

the potential risks associated with achieving anticipated cost synergies and savings and successfully integrating Wellesley’s business, operations and workforce with those of Cambridge;

the fact that the interests of certain of Wellesley’s directors and executive officers may be different from, or in addition to, the interests of Wellesley’s other shareholders as described under the heading “The Merger— Wellesley’s Directors and Executive Officers in the Merger”;

that Sandler O’Neill, Wellesley’s financial advisor in connection with the transaction, also maintains an investment banking relationship with Cambridge, although Cambridge was advised by another investment banking firm in connection with the merger and Wellesley engaged Sandler O’Neill to provide a fairness opinion;

that, while Wellesley expects that the merger will be consummated, there can be no assurance that all conditions to the parties’ obligations to complete the merger agreement will be satisfied, including the risk that necessary regulatory approvals or Wellesley or Cambridge shareholder approval might not be obtained and, as a result, the merger may not be consummated;

the risk of potential employee attrition and/or adverse effects on business and customer relationships as a result of the pending merger;

the fact that: (i) Wellesley would be prohibited from affirmatively soliciting acquisition proposals after execution of the merger agreement; and (ii) Wellesley would be obligated to pay to Cambridge a termination fee of $4.1 million if the merger agreement is terminated under certain circumstances, which may discourage other parties potentially interested in a strategic transaction with Wellesley from pursuing such a transaction; and

the possibility of litigation challenging the merger, and its belief that any such litigation would be without merit.

The foregoing discussion of the information and factors considered by the Wellesley board of directors is not intended to be exhaustive, but includes the material factors considered by the board of directors. In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger

agreement, the Wellesley board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Wellesley board of directors considered all these factors as a whole, including discussions with, and questioning of Wellesley’s management and Wellesley’s independent financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

This summary of the reasoning of the Wellesley board of directors and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Special Notes Concerning Forward-Looking Statements.”

Recommendation of the Wellesley Board of Directors

The Wellesley board of directors has approved the merger agreement and recommends that Wellesley shareholders vote“FOR” approval of the merger agreement and the transactions contemplated thereby.

Wellesley shareholders should be aware that Wellesley’s directors and executive officers have interests in the merger that are different from, or in addition to, those of other Wellesley shareholders. The Wellesley board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, and in recommending that the merger proposal be approved by the shareholders of Wellesley. See “The Merger— Wellesley’s Directors and Executive Officers in the Merger.”

Opinion of Keefe, Bruyette & Woods, Inc., Financial Advisor to Cambridge

Cambridge engaged Keefe, Bruyette & Woods, Inc. (“KBW”) to render financial advisory and investment banking services to Cambridge, including an opinion to the Cambridge board of directors as to the fairness, from a financial point of view, to Cambridge of the exchange ratio in the proposed merger. Cambridge selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger. As part of its investment banking business, KBW is continually engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.

As part of its engagement, representatives of KBW attended the meeting of the Cambridge board of directors held on December 5, 2019 at which the Cambridge board of directors evaluated the proposed merger. At this meeting, KBW rendered an opinion to the Cambridge board of directors to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to Cambridge. The Cambridge board of directors approved the merger agreement at this meeting.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex C to this document and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.

KBW’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the Cambridge board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, of the exchange ratio in the merger to Cambridge. It did not address the underlying business decision of Cambridge to engage in the merger or enter into the merger agreement or constitute a recommendation to the Cambridge board of directors in connection with the merger, and it does not constitute a recommendation to any holder of Cambridge common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter, nor does it constitute a

recommendation as to whether or not any such shareholder should enter into a voting, shareholders’, affiliates’ or other agreement with respect to the merger or exercise any dissenters’ or appraisal rights that may be available to such shareholder.

KBW’s opinion was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of Cambridge and Wellesley and bearing upon the merger, including, among other things:

a draft of the merger agreement, dated November 18, 2019 (the most recent draft then made available to KBW);

the audited financial statements and the Annual Reports on Form10-K for the two fiscal years ended December 31, 2018 of Cambridge and the audited financial statements for the fiscal year ended December 31, 2016 of Cambridge;

the unaudited quarterly financial statements and the Quarterly Reports on Form10-Q for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 of Cambridge;

the audited financial statements and the Annual Reports on Form10-K for the three fiscal years ended December 31, 2018 of Wellesley;

the unaudited quarterly financial statements and the Quarterly Reports on Form10-Q for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 of Wellesley;

certain regulatory filings of Cambridge, Cambridge Trust, Wellesley and Wellesley Bank, including, as applicable, the quarterly reports on FormFRY-9C and quarterly call reports that were filed with respect to each quarter during the three year period ended December 31, 2018 as well as the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019;

certain other interim reports and other communications of Cambridge and Wellesley to their respective shareholders; and

other financial information concerning the respective businesses and operations of Cambridge and Wellesley that was furnished to KBW by Cambridge and Wellesley or which KBW was otherwise directed to use for purposes of its analysis.

KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:

the historical and current financial position and results of operations of Cambridge and Wellesley;

the assets and liabilities of Cambridge and Wellesley;

the nature and terms of certain other merger transactions and business combinations in the banking industry;

a comparison of certain financial and stock market information of Cambridge and Wellesley with similar information for certain other companies, the securities of which were publicly traded;

financial and operating forecasts and projections of Wellesley that were prepared by Cambridge management, provided to and discussed with KBW by such management, and used and relied upon by KBW at the direction of such management and with the consent of the Cambridge board of directors;

publicly available consensus “street estimates” of Cambridge, as well as assumed Cambridge long-term growth rates that were provided to KBW by Cambridge management, all of which information was discussed with KBW by such management and used and relied upon by KBW at the direction of such management and with the consent of the Cambridge board of directors; and

estimates regarding certain pro forma financial effects of the merger on Cambridge (including without limitation the cost savings and related expenses expected to result or be derived from the merger) that were prepared by Cambridge management, provided to and discussed with KBW by such management, and used and relied upon by KBW at the direction of such management and with the consent of the Cambridge board of directors.

KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the banking industry generally. KBW also participated in discussions that were held by the managements of Cambridge and Wellesley regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as KBW deemed relevant to its inquiry.

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information provided to it or that was publicly available and KBW did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or completeness. KBW relied upon the management of Cambridge, as to the reasonableness and achievability of the financial and operating forecasts and projections of Wellesley, the publicly available consensus “street estimates” of Cambridge, the assumed Cambridge long-term growth rates, and the estimates regarding certain pro forma financial effects of the merger on Cambridge (including, without limitation, the cost savings and related expenses expected to result or be derived from the merger), all as referred to above, (and the assumptions and bases for all such information), and KBW assumed that such information has been reasonably prepared and represented, or in the case of the publicly available consensus “street estimates” of Cambridge referred to above that such estimates were consistent with, the best currently available estimates and judgments of Cambridge management and that the forecasts, projections and estimates reflected in such information would be realized in the amounts and in the time periods estimated.

It is understood that the portion of the foregoing financial information of Cambridge and Wellesley that was provided to and discussed with KBW was not prepared with the expectation of public disclosure, and that all of the foregoing financial information, including the publicly available consensus “street estimates” of Cambridge referred to above, was based on numerous variables and assumptions that are inherently uncertain (including, without limitation, factors related to general economic and competitive conditions) and, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with the respective managements of Cambridge and Wellesley and with the consent of the Cambridge board of directors, that all such information provided a reasonable basis upon which KBW could form its opinion and KBW expressed no view as to any such information or the assumptions or bases therefor. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

KBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either Cambridge or Wellesley since the date of the last financial statements of each such entity that were made available to KBW and that KBW was directed to use. KBW is not an expert in the independent verification of the adequacy of allowances for loan and lease losses and KBW assumed, without independent verification and with Cambridge’s consent, that the aggregate allowances for loan and lease losses for each of Cambridge and Wellesley are adequate to cover such losses. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of Cambridge or Wellesley, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of Cambridge or Wellesley under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, KBW assumed no responsibility or liability for their accuracy.

KBW assumed, in all respects material to its analyses, the following:

the merger would be completed substantially in accordance with the terms set forth in the merger agreement (the final terms of which KBW assumed would not differ in any respect material to its analyses from the draft version of the merger agreement reviewed by KBW and referred to above), with no adjustments to the exchange ratio and with no other consideration or payments in respect of Wellesley common stock;

any related transactions (including the bank merger and the concurrent Cambridge common stock offering) would be completed substantially in accordance with the terms set forth in the merger agreement or as otherwise described to KBW by representatives of Cambridge;

the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement were true and correct;

each party to the merger agreement or any of the related documents would perform all of the covenants and agreements required to be performed by such party under such documents;

there were no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the merger or any related transaction and that all conditions to the completion of the merger and any related transaction would be satisfied without any waivers or modifications to the merger agreement or any of the related documents; and

in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger and any related transactions, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would have a material adverse effect on the future results of operations or financial condition of Cambridge, Wellesley or the pro forma entity, or the contemplated benefits and effects of the merger, including without limitation the cost savings and related expenses expected to result or be derived from the merger.

KBW assumed that the merger would be consummated in a manner that complied with the applicable provisions of the Securities Act, the Exchange Act and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of Cambridge that Cambridge relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to Cambridge, Wellesley, the merger and any related transaction, and the merger agreement. KBW did not provide advice with respect to any such matters.

KBW’s opinion addressed only the fairness, from a financial point of view, as of the date of such opinion, of the exchange ratio in the merger to Cambridge. KBW expressed no view or opinion as to any other terms or aspects of the merger or any term or aspect of any related transaction (including the subsidiary bank merger and the concurrent Cambridge common stock offering), including without limitation, the form or structure of the merger or any such related transaction, any consequences of the merger or any such related transaction to Cambridge, its shareholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, retention,non-compete, consulting, voting, support, escrow, cooperation, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger, any such related transaction, or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. Developments subsequent to the date of KBW’s opinion may have affected the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

the underlying business decision of Cambridge to engage in the merger or enter into the merger agreement;

the relative merits of the merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by Cambridge or the Cambridge board of directors;

any business, operational or other plans with respect to Wellesley or the pro forma entity that may be currently contemplated by Cambridge or the Cambridge board of directors or that may be implemented by Cambridge or the Cambridge board of directors subsequent to the closing of the merger;

the fairness of the amount or nature of any compensation to any of Cambridge’s officers, directors or employees, or any class of such persons, relative to any compensation to the holders of Cambridge common stock or relative to the exchange ratio;

the effect of the merger or any related transaction on, or the fairness of the consideration to be received by, holders of any class of securities of Cambridge, Wellesley or any other party to any transaction contemplated by the merger agreement;

any adjustments (as provided in the merger agreement) to the exchange ratio assumed for purposes of KBW’s opinion;

the actual value of Cambridge common stock to be issued in connection with the merger;

the prices, trading range or volume at which Cambridge common stock or Wellesley common stock would trade following the public announcement of the merger or the prices, trading range or volume at which Cambridge common stock would trade following the consummation of the merger;

any advice or opinions provided by any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement; or

any legal, regulatory, accounting, tax or similar matters relating to Cambridge, Wellesley, any of their respective shareholders, or relating to or arising out of or as a consequence of the merger or any other related transaction, including whether or not the merger would qualify as atax-free reorganization for United States federal income tax purposes.

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW, Cambridge and Wellesley. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the Cambridge board of directors in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the Cambridge board of directors with respect to the fairness of the exchange ratio. The type and amount of consideration payable in the merger were determined through negotiation between Cambridge and Wellesley and the decision of Cambridge to enter into the merger agreement was solely that of the Cambridge board of directors.

The following is a summary of the material financial analyses presented by KBW to the Cambridge board of directors in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the Cambridge board of directors, but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information

presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

For purposes of the financial analyses described below, KBW utilized an implied transaction value for the proposed merger of $121.6 million (inclusive of the implied value ofin-the-money Wellesley stock options), or $45.54 per outstanding share of Wellesley common stock, based on the 0.580x exchange ratio in the proposed merger and the closing price of Cambridge common stock on November 27, 2019. In addition to the financial analyses described below, KBW reviewed with the Cambridge board of directors for informational purposes, among other things, implied transaction multiples for the proposed merger (based on the implied transaction value for the merger of $45.54 per outstanding share of Wellesley common stock) of 17.2x Wellesley’s estimated 2019 earnings per share (“EPS”) and 17.6x Wellesley’s estimated 2020 EPS using financial forecasts and projections of Wellesley provided by Cambridge management. With Cambridge’s consent, KBW assumed the occurrence of the concurrent Cambridge common stock offering for purposes of certain of KBW’s analyses.

Wellesley Selected Companies Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of Wellesley to 13 selected publicly-traded banks and thrifts that were headquartered in the Northeast United States with total assets between $500 million and $3.0 billion and most recent completed quarter (“MRQ”) core return on average assets greater than 0.00%. Merger targets and mutual holding companies were excluded from the selected companies.

The selected companies were as follows:

Bankwell Financial Group, Inc.

Cambridge Bancorp

Community Bancorp.

First Bancorp, Inc.

Hingham Institution for Savings

Katahdin Bankshares Corporation

Ledyard Financial Group, Inc.

Northeast Bank

Northway Financial, Inc.

Randolph Bancorp, Inc.

Salisbury Bancorp, Inc.

Union Bankshares, Inc.

Western New England Bancorp, Inc.

To perform this analysis, KBW used profitability and other financial information for the most recent completed quarter or the latest 12 months available (“LTM”) or as of the end of such periods and market price information as of November 27, 2019. KBW also used 2019 and 2020 EPS estimates taken from financial forecasts and projections of Wellesley provided by Cambridge management, publicly available consensus “street estimates” for the six selected companies for which consensus “street estimates” for 2019 EPS were available and publicly available consensus “street estimates” for the five selected companies for which consensus “street estimates” for 2020 EPS were available. Where consolidated holding company level financial data for the selected companies was unreported, subsidiary bank level data was utilized to calculate ratios. Certain financial data prepared by KBW, as referenced in the tables presented below, may not correspond to the data presented in Wellesley’s historical financial statements, or the data prepared by Sandler O’Neill presented under the section “— Opinion of Sandler O’Neill & Partners, L.P., Financial Advisor to Wellesley,” as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.

KBW’s analysis showed the following concerning the financial performance of Wellesley and the selected companies:

       Selected Companies 
       25th           75th 
   Wellesley   Percentile   Median   Average   Percentile 
          

MRQ Core Return on Average Assets (%)(1)

   0.78    0.88    1.19    1.09    1.25 

MRQ Core Return on Average Equity (%)(1)

   10.75    9.22    11.92    10.89    12.90 

MRQ Core Return on Average Tangible Common
Equity (%)(1)

   10.75    9.37    12.79    11.87    14.93 

MRQ Net Interest Margin (%)

   2.89    2.96    3.30    3.46    3.41 

MRQ Fee Income / Revenue Ratio (%)(2)

   10.6    11.3    18.5    21.8    26.4 

MRQ Efficiency Ratio (%)

   64.8    67.8    63.9    64.0    58.7 

(1)

Core income excluded extraordinary items, gain/loss on sale of securities, nonrecurring revenue/expenses, and amortization of intangibles as calculated by S&P Global Market Intelligence.

(2)

Excluded gains/losses on sale of securities.

KBW’s analysis also showed the following concerning the financial condition of Wellesley and the selected companies:

       Selected Companies 
       25th           75th 
   Wellesley   Percentile   Median   Average   Percentile 
          

Tangible Common Equity / Tangible Assets (%)

   7.28    8.08    8.98    9.36    10.01 

Total Risk Based Capital Ratio (%)

   11.56    13.45    14.01    14.79    15.44 

Loans / Deposits (%)

   109.8    90.5    95.6    96.8    102.9 

Loan Loss Reserve / Gross Loans (%)

   0.86    0.76    0.86    0.91    0.96 

Nonperforming Assets / Loans + OREO (%)

   0.19    1.28    0.86    1.14    0.77 

MRQ NetCharge-Offs / Average Loans (%)

   0.00    0.12    0.01    0.08    (0.00) 

In addition, KBW’s analysis showed the following concerning the market performance of Wellesley and, to the extent publicly available, the selected companies (excluding the impact of the LTM EPS multiple for one of the selected companies, which multiple was considered to be not meaningful because it was greater than 30.0x):

       Selected Companies 
       25th          75th 
   Wellesley   Percentile  Median   Average   Percentile 
         

1-Year Stock Price Change (%)

   5.4    (1.4)   0.1    0.5    3.8 

1-Year Total Return (%)

   6.2    0.4   4.3    3.5    7.7 

Year-to-date Stock Price Change (%)

   18.7    (2.9)   7.9    6.2    15.4 

Stock Price / Tangible Book Value per Share (x)

   1.18    1.22   1.32    1.45    1.72 

Stock Price / LTM EPS (x)

   13.0    12.1   13.2    13.8    14.7 

Stock Price / 2019 Estimated EPS (x)

   12.4    11.9   12.3    15.1    18.1 

Stock Price / 2020 Estimated EPS (x)

   12.7    12.3   13.0    15.6    17.9 

Dividend Yield (%)

   0.7    1.8   2.4    2.3    3.2 

LTM Dividend Payout Ratio (%)

   9.4    20.2   31.4    31.6    42.5 

No company used as a comparison in the above selected companies analysis is identical to Wellesley. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Cambridge Selected Companies Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of Cambridge to 12 selected major exchange-traded banks and thrifts that were headquartered in the Northeast United States with total assets between $1.0 billion and $6.0 billion and MRQ core return on average assets greater than 0.00%. Merger targets and mutual holding companies were excluded from the selected companies.

The selected companies were as follows:

Bankwell Financial Group, Inc.HarborOne Bancorp, Inc.
Bar Harbor BanksharesHingham Institution for Savings
Camden National CorporationNortheast Bank
Century Bancorp, Inc.Salisbury Bancorp, Inc.
Enterprise Bancorp, Inc.Washington Trust Bancorp, Inc.
First Bancorp, Inc.Western New England Bancorp, Inc.

To perform this analysis, KBW used profitability and other financial information for the most recent completed quarter or the latest 12 months available or as of the end of such periods and market price information as of November 27, 2019. KBW also used 2019 and 2020 EPS estimates taken from publicly available consensus “street” estimates for Cambridge, the seven selected companies for which consensus “street estimates” for 2019 EPS were available and the six selected companies for which consensus “street estimates” for 2020 EPS were available. Certain financial data prepared by KBW, as referenced in the tables presented below, may not correspond to the data presented in Cambridge’s historical financial statements, or the data prepared by Sandler O’Neill presented under the section “— Opinion of Sandler O’Neill & Partners, L.P., Financial Advisor to Wellesley,” as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.

KBW’s analysis showed the following concerning the financial performance of Cambridge and the selected companies:

       Selected Companies 
       25th           75th 
   Cambridge   Percentile   Median   Average   Percentile 

MRQ Core Return on Average Assets (%)(1)

   1.15    0.83    1.11    1.10    1.33 

MRQ Core Return on Average Equity (%)(1)

   13.37    8.81    12.10    10.98    12.50 

MRQ Core Return on Average Tangible Common
Equity (%)(1)

   15.63    10.11    12.66    12.21    14.32 

MRQ Net Interest Margin (%)

   3.24    2.77    2.94    3.20    3.18 

MRQ Fee Income / Revenue Ratio (%)(2)

   33.0    12.0    17.9    18.9    25.1 

MRQ Efficiency Ratio (%)

   58.5    64.4    59.9    58.5    54.2 

(1)

Core income excluded extraordinary items, gain/loss on sale of securities, nonrecurring revenue/expenses, and amortization of intangibles as calculated by S&P Global Market Intelligence.

(2)

Excluded gains/losses on sale of securities.

KBW’s analysis also showed the following concerning the financial condition of Cambridge and the selected companies:

       Selected Companies 
       25th           75th 
   Cambridge   Percentile   Median   Average   Percentile 

Tangible Common Equity / Tangible Assets (%)

   7.43    8.41    9.00    9.63    9.70 

Total Risk Based Capital Ratio (%)

   11.56    13.55    13.99    14.74    14.46 

Loans / Deposits (%)

   90.5    88.1    103.0    96.5    105.6 

Loan Loss Reserve / Gross Loans (%)

   0.83    0.70    0.79    0.85    0.94 

Nonperforming Assets / Loans + OREO (%)

   0.17    1.37    0.88    1.18    0.49 

MRQ NetCharge-Offs / Average Loans (%)

   0.23    0.13    0.07    0.10    0.01 

In addition, KBW’s analysis showed the following concerning the market performance of Cambridge and, to the extent publicly available, the selected companies (excluding the impact of the LTM and 2020 EPS multiples for one of the selected companies, which multiples were considered to be not meaningful because they were greater than 30.0x):

      Selected Companies 
      25th          75th 
   Cambridge  Percentile  Median   Average   Percentile 

1-Year Stock Price Change (%)

   (9.6)   (0.5)   4.7    4.8    8.0 

1-Year Total Return (%)

   (7.3)   2.9   7.2    7.2    10.1 

YTD Stock Price Change (%)

   (5.7)   1.4   12.9    12.8    21.4 

Stock Price / Tangible Book Value per Share (x)

   1.82   1.29   1.37    1.48    1.72 

Stock Price / LTM EPS (x)

   15.0   12.2   12.8    13.5    13.7 

Stock Price / 2019 Estimated EPS (x)

   12.5   12.0   12.1    15.4    16.4 

Stock Price / 2020 Estimated EPS (x)

   12.3   12.9   13.0    13.8    13.5 

Dividend Yield (%)

   2.6   0.8   2.0    2.0    2.9 

LTM Dividend Payout Ratio (%)

   38.9   9.8   26.7    27.0    42.0 

No company used as a comparison in the above selected companies analysis is identical to Cambridge. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Selected Transactions Analysis. KBW reviewed publicly available information related to 15 selected bank and thrift transactions in the Northeast andMid-Atlantic United States announced in the last 12 months since November 27, 2019 with disclosed deal values between $50 million and $250 million. The selected transactions were as follows:

Acquiror

Acquired Company

Flushing Financial Corporation

Centreville Bank

Community Bank System, Inc.

ConnectOne Bancorp, Inc.

OceanFirst Financial Corp.

OceanFirst Financial Corp.

Investors Bancorp, Inc.

ACNB Corporation

1st Constitution Bancorp

Columbia Financial, Inc.

S&T Bancorp, Inc.

Liberty Bank

Community Bank System, Inc.

Berkshire Hills Bancorp, Inc.

Cambridge Bancorp

Empire Bancorp, Inc.

PB Bancorp, Inc.

Steuben Trust Corporation

Bancorp of New Jersey, Inc.

Country Bank Holding Company, Inc.

Two River Bancorp

Gold Coast Bancorp, Inc.

Frederick County Bancorp, Inc.

Shore Community Bank

Stewardship Financial Corporation

DNB Financial Corporation

SBT Bancorp, Inc.

Kinderhook Bank Corp.

SI Financial Group, Inc.

Optima Bank & Trust Company

For each selected transaction, KBW derived the following implied transaction statistics, in each case based on the transaction consideration value paid for the acquired company and using financial data based on the acquired company’s then latest publicly available financial statements prior to the announcement of the acquisition:

Price per common share to tangible book value per share of the acquired company (in the case of selected transactions involving a private acquired company, this transaction statistic was calculated as total transaction consideration divided by total tangible common equity);

Tangible equity premium to core deposits (total deposits less time deposits greater than $100,000) of the acquired company, referred to as core deposit premium; and

Price per common share to LTM EPS of the acquired company (in the case of selected transactions involving a private acquired company, this transaction statistic was calculated as total transaction consideration divided by LTM net income).

KBW also reviewed the price per common share paid for the acquired company for the 14 selected transactions in which the acquired company was publicly traded as a premium to the closing price of the acquired company one day prior to the announcement of the respective transaction (expressed as a percentage and referred to as theone-day market premium). The above transaction statistics for the selected transactions were compared with the corresponding transaction statistics for the proposed merger based on the implied transaction value for the proposed merger of $45.54 per outstanding share of Wellesley common stock and using historical financial information for Wellesley as of or for the 12 months ended September 30, 2019 and the closing price of Wellesley common stock on November 27, 2019.

The results of the analysis are set forth in the following table:

       Selected Transactions 
   Cambridge /                 
   Wellesley   25th           75th 

Transaction Price to

  Merger   Percentile   Median   Average   Percentile 

Price to Tangible Book Value (x)

   1.63    1.43    1.63    1.63    1.79 

Core Deposit Premium (%)

   8.2    6.3    9.1    8.2    10.6 

Price to LTM EPS(1) (x)

   17.9    16.2    17.4    19.6    23.5 

One - Day Market Premium (%)

   38.3    13.3    36.2    35.1    44.5 

(1)

LTM EPS adjusted for revaluation of deferred tax asset/liability due to the Tax Cuts and Jobs Act in the fourth quarter of 2017, where applicable.

No company or transaction used as a comparison in the above selected transaction analysis is identical to Wellesley or the proposed merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Relative Contribution Analysis. KBW analyzed the relative standalone contribution of Cambridge and Wellesley to various pro forma balance sheet and income statement items and the pro forma market capitalization of the combined entity. This analysis did not include purchase accounting adjustments or cost savings. To perform this analysis, KBW used (i) historical balance sheet data for Cambridge and Wellesley as of September 30, 2019, (ii) publicly available consensus “street estimates” of Cambridge, (iii) financial forecasts and projections of Wellesley provided by Cambridge management, and (iv) market price data as of November 27, 2019. The results of KBW’s analysis are set forth in the following table, which also compares the results of KBW’s analysis with the implied pro forma ownership percentages of Cambridge and Wellesley shareholders in the combined company based on the 0.580x exchange ratio in the proposed merger:

   Cambridge
as a % of
Total		  Wellesley
as a % of
Total		 

Ownership

   

Ownership at 0.580x Merger Exchange Ratio

   76%   24% 

Balance Sheet

   

Assets

   74%   26% 

Gross Loans

   72%   28% 

Deposits

   76%   24% 

Tangible Common Equity

   74%   26% 

   Cambridge
as a % of
Total		  Wellesley
as a % of
Total		 

Income Statement

   

2019 Est. GAAP Net Income

   79%   21% 

2019 Est. Adjusted Net Income

   81%(1)   19% 

2020 Est. GAAP Net Income

   82%   18% 

Market Capitalization

   

Pre-Deal Market Capitalization

   82%   18% 

(1)

Per Cambridge management, excludedafter-tax merger charges associated with the acquisition of Optima Bank & Trust Company.

Pro Forma Financial Impact Analysis. KBW performed a pro forma financial impact analysis that combined projected income statement and balance sheet information of Cambridge and Wellesley. Using (i) closing balance sheet estimates as of March 31, 2020 for Cambridge and Wellesley, extrapolated from historical data using growth rates taken from publicly available consensus “street estimates” of Cambridge in the case of Cambridge and provided by Cambridge management in the case of Wellesley, (ii) publicly available consensus “street estimates” of Cambridge and assumed Cambridge long-term growth rates provided by Cambridge management, (iii) financial and operating forecasts and projections of Wellesley provided by Cambridge management, and (iv) pro forma assumptions (including, without limitation, the cost savings and related expenses expected to result from the merger, certain accounting adjustments and restructuring charges assumed with respect thereto) provided by Cambridge management, KBW analyzed the estimated financial impact of the merger on certain projected financial results. This analysis indicated that the merger could be accretive to Cambridge’s 2020 and 2021 estimated EPS and could be dilutive to Cambridge’s estimated tangible book value per share at closing as of March 31, 2020. Furthermore, the analysis indicated that, pro forma for the merger, each of Cambridge’s tangible common equity to tangible assets ratio, Leverage Ratio, Tier 1Risk-Based Capital Ratio and Total Risk-Based Capital Ratio could be lower at closing as of March 31, 2020.

In addition, to illustrate the impact of the concurrent Cambridge common stock offering, KBW then performed the pro forma financial analysis giving effect to certain assumptions regarding the concurrent Cambridge common stock offering. This analysis indicated that the merger, taken together with the concurrent Cambridge common stock offering (including and excluding the underwriter overallotment option), could be accretive to Cambridge’s 2020 and 2021 estimated EPS and could be dilutive to Cambridge’s estimated tangible book value per share at closing as of March 31, 2020. Furthermore, the analysis indicated that, pro forma for the merger, taken together with the concurrent Cambridge common stock offering (including and excluding the underwriter overallotment option), each of Cambridge’s tangible common equity to tangible assets ratio, Leverage Ratio, Tier 1Risk-Based Capital Ratio and Total Risk-Based Capital Ratio could be higher at closing as of March 31, 2020.

For all of the above analyses, the actual results achieved by Cambridge following the merger may vary from the projected results, and the variations may be material.

Wellesley Discounted Cash Flow Analysis. KBW performed a discounted cash flow analysis to estimate a range for the implied equity value of Wellesley, taking into account the cost savings and related expenses expected to result from the merger as well as certain accounting adjustments and restructuring charges assumed with respect thereto. In this analysis, KBW used financial and operating forecasts and projections relating to the earnings and assets of Wellesley provided by Cambridge management and assumptions regarding cost savings and related expenses and accounting adjustments and restructuring charges provided by Cambridge management, and KBW assumed discount rates ranging from 13.0% to 16.0%. The range of values was derived by adding (i) the present value of the estimated excess cash flows that Wellesley could generate over thefive-year period from 2020 to 2024 and (ii) the present value of Wellesley’s implied terminal value at the end of such period, in each case applying estimated cost savings and related expenses and accounting adjustments and restructuring charges.

KBW assumed that Wellesley would maintain a tangible common equity to tangible assets ratio of 8.00% and Wellesley would retain sufficient earnings to maintain that level. In calculating the terminal value of Wellesley, KBW applied a range of 12.5x to 14.5x Wellesley’s estimated 2025 earnings. This discounted cash flow analysis resulted in a range of implied values per share of Wellesley common stock, taking into account the cost savings and related expenses expected to result from the merger as well as certain accounting adjustments and restructuring charges assumed with respect thereto, of $47.37 per share to $60.71 per share.

The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates, and discount rates. The above analyses did not purport to be indicative of the actual values or expected values of Wellesley.

Cambridge Discounted Cash Flow Analysis. KBW performed a discounted cash flow analysis to estimate a range for the implied equity value of Cambridge. In this analysis, KBW used publicly available consensus “street estimates” of Cambridge and assumed Cambridge long-term growth rates provided by Cambridge management, and KBW assumed discount rates ranging from 8.5% to 10.5%. The range of values was derived by adding (i) the present value of the estimated excess cash flows that Cambridge could generate over thefive-year period from 2020 to 2024 and (ii) the present value of Cambridge’s implied terminal value at the end of such period. KBW assumed that Cambridge would maintain a tangible common equity to tangible assets ratio of 8.00% and Cambridge would retain sufficient earnings to maintain that level. In calculating the terminal value of Cambridge, KBW applied a range of 12.5x to 14.5x Cambridge’s estimated 2025 earnings. This discounted cash flow analysis resulted in a range of implied values per share of Cambridge common stock of $80.85 per share to $99.14 per share.

The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates, and discount rates. The above analyses did not purport to be indicative of the actual values or expected values of Cambridge or the pro forma combined company.

Miscellaneous. KBW acted as financial advisor to Cambridge in connection with the proposed merger and did not act as an advisor to or agent of any other person. As part of its investment banking business, KBW is continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, KBW has experience in, and knowledge of, the valuation of banking enterprises. Further to certain existing sales and trading relationships between Cambridge and each of KBW and a KBW broker-dealer affiliate and otherwise in the ordinary course of its and its affiliates’broker-dealer businesses, KBW and its affiliates may from time to time purchase securities from, and sell securities to, Cambridge and Wellesley. In addition, as market makers in securities, KBW and its affiliates may from time to time have a long or short position in, and buy or sell, debt or equity securities of Cambridge or Wellesley for KBW and its affiliates’ own accounts and for the accounts of KBW and its affiliates’ respective customers and clients.

Pursuant to the KBW engagement agreement, Cambridge has agreed to pay KBW a cash fee currently estimated to be approximately $1,000,000, $200,000 of which became payable with the rendering of KBW’s opinion and the balance of which is contingent upon the consummation of the merger. Cambridge also agreed to reimburse KBW for reasonableout-of-pocket expenses and disbursements incurred in connection with its engagement and to indemnify KBW against certain liabilities relating to or arising out of KBW’s engagement or KBW’s role in connection therewith. In addition to the present engagement, in the two years preceding the date of KBW’s opinion, KBW provided investment banking and financial advisory services to Cambridge and received compensation for such services. KBW acted as financial advisor to Cambridge in connection with its April 2019 acquisition of Optima Bank & Trust Company. In the two years preceding the date of KBW’s opinion, KBW did not provide investment banking or financial advisory services to Wellesley. KBW may in the future provide

investment banking and financial advisory services to Cambridge or Wellesley and receive compensation for such services. At the time of delivery of KBW’s opinion, KBW was expected to act, and, following delivery of KBW’s opinion, KBW did act, as sole bookrunner in connection with the concurrent Cambridge common stock offering.

Opinion of Sandler O’Neill & Partners, L.P., Financial Advisor to OptimaWellesley

OptimaWellesley retained Sandler O’Neill to act as financial advisor to Optima’sWellesley’s board of directors in connection with Optima’sWellesley’s consideration of a possible business combination. Wellesley selected Sandler O’Neill to act as its financial advisor because Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Sandler O’Neill acted as financial advisor to Wellesley’s board of directors in connection with the proposed transactionmerger and participated in certain of the negotiations leading to the execution of the merger agreement. At the December 5, 20182019 meeting at which Optima’sWellesley’s board of directors considered and discussed the terms ofmerger and the merger agreement, and the merger, Sandler O’Neill delivered to Optima’sthe Wellesley board of directors its oral opinion, which was subsequently confirmed in writing on December 5, 2018,2019, to the effect that, as of such date, the merger consideration provided for in the

merger agreementexchange ratio was fair to the holders of OptimaWellesley’s common stock from a financial point of view.The full text of Sandler O’Neill’s opinion is attached as AppendixAnnex B to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of OptimaWellesley common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.transaction.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to Optima’sthe Wellesley board of directors in connection with its consideration of the merger agreement and the merger agreement and does not constitute a recommendation to any shareholder of OptimaWellesley as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement and the merger.merger agreement. Sandler O’Neill’s opinion was directed only as to the fairness, from a financial point of view, of the merger considerationexchange ratio to the holders of OptimaWellesley common stock and doesdid not address the underlying business decision of OptimaWellesley to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to anyother alternative transactions or business strategies that might exist for OptimaWellesley or the effect of any other transaction in which OptimaWellesley might engage.Sandler O’Neill also did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of OptimaWellesley or Cambridge, or any class of such persons, if any, relative to the compensation to be received in the merger by any other shareholder, including the merger consideration to be received by the holders of Optima common stock.shareholder. Sandler O’Neill’s opinion was approved by itsSandler O’Neill’s fairness opinion committee.

In connection with its opinion, Sandler O’Neill reviewed and considered, among other things:

 

a draft of the merger agreement, dated December 4, 2018;3, 2019;

 

certain publicly available financial statements and other historical financial information of OptimaWellesley and Wellesley Bank that Sandler O’Neill deemed relevant;

 

certain publicly available financial statements and other historical financial information of Cambridge and Cambridge Trust Company that Sandler O’Neill deemed relevant;

 

certain internal financial projections for OptimaWellesley for the years ending December 31, 20182019 through December 31, 2022,2021, as provided by the senior management of Optima;

internalWellesley, as well as an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023 and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Wellesley;

publicly available median analyst earnings per share estimates for Cambridge for the years ending December 31, 20182019 and December 31, 2019,2020, as well as an estimated long-term earnings per share andannual net income growth ratesrate for the years thereafterending December 31, 2021 through December 31, 2023 and estimated dividends per share for the years ending December 31, 20182019 through December 31, 2022,2023, as provided by the senior management of Cambridge;

 

the pro forma financial impact of the merger on Cambridge based on certain assumptions relating to transaction expenses, purchase accounting adjustments, and cost savings as well as net income projections for Optima for the years ending December 31, 2018 through December 31, 2022,and transaction expenses, as provided by the senior management of Cambridge, (collectively,as well as estimated net income for Wellesley for the “Pro Forma Assumptions”);years ending December 31, 2020 and December 31, 2021 with an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023, as provided by the senior management of Cambridge;

 

the publicly reported historical price and trading activity for Wellesley common stock and Cambridge common stock, including a comparison of certain stock tradingmarket information for Wellesley common stock and Cambridge common stock and certain stock indices as well as similar publicly available information for certain other similar companies, the securities of which are publicly traded;

 

a comparison of certain financial information for OptimaWellesley and Cambridge with similar financial institutions for which information wasis publicly available;

 

the financial terms of certain recent business combinations in the bank and thrift industry (on a regional and nationwide basis), to the extent publicly available;

the current market environment generally and the banking environment in particular; and

 

such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

Sandler O’Neill also discussed with certain members of the senior management of OptimaWellesley and its representatives the business, financial condition, results of operations and prospects of OptimaWellesley and held similar discussions with certain members of the senior management of Cambridge and its representatives regarding the business, financial condition, results of operations and prospects of Cambridge.

In performing its review, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by Sandler O’Neill from public sources, that was provided to Sandler O’Neill by OptimaWellesley or Cambridge or their respective representatives, or that was otherwise reviewed by Sandler O’Neill, and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Sandler O’Neill relied on the assurances of the respective senior managements of OptimaWellesley and Cambridge that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading.misleading in any material respect. Sandler O’Neill was not asked to and did not undertake an independent verification of any of such information and Sandler O’Neill did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Optima orWellesley, Cambridge or any of their respective subsidiaries, nor was Sandler O’Neill furnished with any such evaluations or appraisals. Sandler O’Neill rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of OptimaWellesley, Cambridge or Cambridge.their respective subsidiaries. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of OptimaWellesley, Cambridge or Cambridge,their respective subsidiaries, or of the combined entity after the merger, and Sandler O’Neill did not review any individual credit files relating to OptimaWellesley, Cambridge or Cambridge.their respective subsidiaries. Sandler O’Neill assumed, with Optima’sWellesley’s consent, that the respective allowances for loan losses for both OptimaWellesley, Cambridge and Cambridgetheir respective subsidiaries were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used certain internal financial projections for OptimaWellesley for the years ending December 31, 20182019 through December 31, 2022,2021, as provided by the senior management of Optima.Wellesley, as

well as an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023 and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Wellesley. In addition, Sandler O’Neill used internal net income andpublicly available median analyst earnings per share estimates for Cambridge for the years ending December 31, 20182019 and December 31, 2019,2020, as well as an estimated long-term earnings per share andannual net income growth ratesrate for the years thereafterending December 31, 2021 through December 31, 2023 and estimated dividends per share for the years ending December 31, 20182019 through December 31, 2022,2023, as provided by the senior management of Cambridge. Sandler O’Neill also received and used in its pro forma analyses certain assumptions relating to purchase accounting adjustments, cost savings and transaction expenses, as provided by the Pro Forma Assumptions,senior management of Cambridge, as well as estimated net income for Wellesley for the years ending December 31, 2020 and December 31, 2021 with an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023, as provided by the senior management of Cambridge. With respect to the foregoing information, the respective senior managements of OptimaWellesley and Cambridge confirmed to Sandler O’Neill that such information reflected (or, in the case of the publicly available analyst estimates referred to above, were consistent with) the best currently available projections, estimates and judgments of those respective senior managements as to the future financial performance of OptimaWellesley and Cambridge, respectively, and the other matters covered thereby, and Sandler O’Neill assumed that the future financial performance reflected in such information would be achieved. Sandler O’Neill expressed no opinion as to such information, or the assumptions on which such information was based. Sandler O’Neill also assumed that there had been no material change in the respective assets, financial condition, results of operations, business or prospects of OptimaWellesley, Cambridge or Cambridgeany of their respective subsidiaries since the date of the most recent financial statements made available to Sandler O’Neill. Sandler O’Neill assumed in all respects material to Sandler O’Neill’sits analyses that OptimaWellesley and Cambridge would remain as going concerns for all periods relevant to Sandler O’Neill’sits analyses.

Sandler O’Neill also assumed, with Optima’sWellesley’s consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that

the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Optima,Wellesley, Cambridge, or the merger or any related transactions, and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with Optima’sWellesley’s consent, Sandler O’Neill relied upon the advice that OptimaWellesley received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Sandler O’Neill expressed no opinion as to any such matters.

SandlerSander O’Neill’s opinion was necessarily based on financial, economic, regulatory, economic, market and other conditions as in effect on, and the information made available to Sandler O’Neill as of, the date of its opinion.thereof. Events occurring after the date of its opinionthereof could materially affect SanderSandler O’Neill’s opinion. Sandler O’Neill didhas not undertakeundertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Sandler O’Neill expressed no opinion as to the trading value of Wellesley common stock or Cambridge common stock at any time or what the value of Cambridge common stock would be once it is actually received by the holders of OptimaWellesley common stock.

In rendering its opinion, Sandler O’Neill performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to Optima’sWellesley’s board of directors, but is a summary of allthe material analyses performed and presented by Sandler O’Neill. The summary includes information presented in tabular format.In order to fullyunderstand thefinancial analyses, these tables must be read together with the accompanying text. Thetables alone do not constitute a complete description of the financial analyses. The preparation of a fairness

opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to OptimaWellesley or Cambridge and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of OptimaWellesley and Cambridge and the companies to which they are beingwere compared. In arriving at its opinion, Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler O’Neill made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Sandler O’Neill made its determination as to the fairness of the merger considerationexchange ratio to the holders of Wellesley common stock on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

In performing its analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Optima,Wellesley, Cambridge, and Sandler O’Neill. The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to Optima’sWellesley’s board of directors at its December 5, 20182019 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of Optima

Wellesley common stock or Cambridge common stock or the prices at which Optima common stockWellesley or Cambridge common stock may be sold at any time. The analyses of Sandler O’Neill and its opinion were among a number of factors taken into consideration by Optima’sWellesley’s board of directors in making its determination to approve the merger agreement and the analyses described below should not be viewed as determinative of the merger consideration or the decision of Optima’sWellesley’s board of directors or management with respect to the fairness of the merger. The type and amount of consideration payable in the merger were determined through negotiation between Optima and Cambridge.exchange ratio.

Summary of Proposed Merger Consideration and Implied Transaction Metrics.Metrics

Sandler O’Neill reviewed the financial terms of the proposed merger. As set forth inPursuant to the terms of the merger agreement, at the effective time of the merger each share of Wellesley common stock of Optima issued and outstanding immediately prior to the effective time of the merger, except for certain shares of Optima common stock as set forth in the merger agreement, shall become andwill be converted into the right to receive at the election of the holder thereof, either (i) $32.00 in cash, or (ii) 0.34680.580 shares of Cambridge common stock;provided, however, that the merger agreement provides, generally, that ninety-five percent of the total number of shares of Optima common stock issued and outstanding prior to the effective time shall be converted into the stock consideration and five percent of such shares shall be converted into the cash consideration in accordance with the allocation procedures set forth in the merger agreement.stock. Based on the closing price per share of Cambridge common stock on December 4, 20182019 of $85.61, 2,177,282$76.36 and based upon 2,569,401 Wellesley common shares of Optima common stock outstanding and 149,206154,760 Wellesley options outstanding with a weighted average exercise price of $17.54 as of November 30, 2018,$16.09, Sandler O’Neill calculated an implied per share transaction value of $44.29 and an aggregate implied transaction value of approximately $66.7 million, or an implied transaction price per share of $29.81.$118.2 million. Based upon financial information for OptimaWellesley as of or for the last twelve months (“LTM”) ended September 30, 20182019, and financial information asthe closing price of or for the year to date (“YTD”) ended September 30, 2018,Wellesley’s common stock on December 4, 2019, Sandler O’Neill calculated the following implied transaction metrics:

 

Transaction Price Per Share / Optima LTM EarningsWellesley September 30, 2019 Book Value Per Share:Share

   26.8x 

Transaction Price Per Share / Optima YTD Annualized Earnings Per Share:

25.5x 

Transaction Price Per Share / Optima Book Value Per Share:

187159% 

Transaction Price Per Share / OptimaWellesley September 30, 2019 Tangible Book Value Per Share:Share

   187159% 

Tangible Book PremiumTransaction Price Per Share / Core Deposits(1):Wellesley LTM Earnings per Share

   9.317.4x 

Core Deposit Premium(¹)

7.6% 

Market Premium as of December 4, 2019

37.0% 

 

1)(1)

Core Depositsdeposits defined as total deposits less time deposits with balances greater than $100,000

Stock Trading History.History

Sandler O’Neill reviewed the publicly available historical reported trading prices of Wellesley common stock price performance ofand Cambridge common stock for theone-one-year and three-year periods ended December 4, 2018.2019. Sandler O’Neill then compared the relationship between the movements in the price of Wellesley common stock price performance ofand Cambridge common stock, respectively, to stock price movements in the Cambridge Peer Grouptheir respective peer groups (as described below) as well as certain stock indices.

CambridgeWellesley’sOne-Year Stock Price Performance

 

  Beginning
December 4, 2017		 Ending
December 4, 2018		   Beginning Value
December 4, 2018		 Ending Value
December 4, 2019		 

Cambridge

   100%  116.2% 

Cambridge Peer Group

   100%  91.4% 

Wellesley

   100%  100.8% 

Wellesley Peer Group

   100%  95.5% 

S&P 500 Index

   100%  115.3% 

NASDAQ Bank Index

   100%  87.6%    100%  105.8% 

S&P 500 Index

   100%  102.3% 

Wellesley’s Three-Year Stock Performance

   Beginning Value
December 2, 2016		  Ending Value
December 4, 2019		 

Wellesley

   100%   125.8% 

Wellesley Peer Group

   100%   107.6% 

S&P 500 Index

   100%   142.0% 

NASDAQ Bank Index

   100%   105.0% 

Cambridge’sOne-Year Stock Performance

   Beginning Value
December 4, 2018		  Ending Value
December 4, 2019		 

Cambridge

   100%   89.2% 

Cambridge Peer Group

   100%   108.9% 

S&P 500 Index

   100%   115.3% 

NASDAQ Bank Index

   100%   105.8% 

Cambridge’s Three-Year Stock Performance

   Beginning Value
December 2, 2016		  Ending Value
December 4, 2019		 

Cambridge

   100%   122.7% 

Cambridge Peer Group

   100%   111.0% 

S&P 500 Index

   100%   142.0% 

NASDAQ Bank Index

   100%   105.0% 

Cambridge Three-Year Stock Price Performance

   Beginning
December 4, 2015		  Ending
December 4, 2018		 

Cambridge

   100%   164.6% 

Cambridge Peer Group

   100%   135.5% 

NASDAQ Bank Index

   100%   119.6% 

S&P 500 Index

   100%   129.1% 

Comparable Company Analyses.Analyses

Sandler O’Neill used publicly available information to compare selected financial information for OptimaWellesley with a group of financial institutions selected by Sandler O’Neill (the “Optima“Wellesley Peer Group”). The OptimaWellesley Peer Group consisted of publicly-tradedincluded publicly traded banks and thrifts headquartered in the New England region with total assets between $200$500 million and $1$3.0 billion, excludingbut excluded targets of announced merger targets and Guarantytransactions; it also excluded Provident Bancorp, Inc., Primary Bank and Grand Bank Corporation due to lackthe recent completion of per share information.its second-step conversion, and Northeast Bank due to its differentiated business model. The OptimaWellesley Peer Group consisted of the following companies:

 

Bankwell Financial Group, Inc.

Northway Financial, Inc.

Cambridge BancorpPatriot National Bancorp, Inc.
Community Bancorp.  Randolph Bancorp, Inc.

Patriot NationalFirst Bancorp, Inc.

  SBTSalisbury Bancorp, Inc.

Wellesley Bancorp, Inc.

Hingham Institution for Savings		  PBUnion Bankshares, Inc.
Katahdin Bankshares CorporationWestern New England Bancorp, Inc.

Katahdin Bankshares Corporation

Ledyard Financial Group, Inc.

Union Bankshares, Inc.

Middlebury National Corporation

Community Bancorp.

Melrose Bancorp, Inc.

Peoples Trust Company of St. Albans

  

The analysis compared publicly available financial information for Optima as of or for the period ended September 30, 2018Wellesley with the corresponding publicly available data for the OptimaWellesley Peer Group as of or for the periodLTM ended September 30, 2018 (or, if data as of or for the period ended September 30, 2018 was not publicly available, as of or for the period ended June 30, 2018),2019 with pricing data as of December 4, 2018.2019. The table below sets forth the data for OptimaWellesley and the high,median, mean, low median and meanhigh data for the OptimaWellesley Peer Group. Certain financial data prepared by Sandler O’Neill, as referenced in the table presented below, may not correspond to the data presented in Wellesley’s historical financial statements as a result of the different periods, assumptions and methods used by Sander O’Neill to compute the financial data presented.

Optima Peer GroupWellesley Comparable Company Analysis

 

   Optima  Optima
Peer Group
Median		  Optima
Peer Group
Mean		  Optima
Peer Group
Low		  Optima
Peer Group
High		 

Total assets (in millions)

  $524  $590  $621  $274  $969 

Loans/Deposits

   95.3%   95.4%   94.4%   75.6%   110.7% 

Non-performing assets(1)/Total assets

   0.44%   0.95%   0.78%   0.14%   1.71% 

Tangible common equity/Tangible assets

   6.29%   7.53%   9.22%   6.32%   15.28% 

Leverage Ratio

   6.56%   9.36%   10.04%   7.59%   14.72% 

Total RBC Ratio

   10.09%   15.57%   15.20%   10.33%   19.74% 

CRE/Total RBC(2)

   284.44%   167.65%   191.94%   93.37%   325.64% 

Year to Date Return on average assets

   0.49%   0.79%   0.77%   (0.45)%   1.34% 

Year to Date Return on average equity

   7.51%   9.59%   8.64%   (3.10)%   16.86% 

Year to Date Net interest margin

   2.96%   3.35%   3.36%   2.46%   4.04% 

Year to Date Efficiency ratio

   76.8%   72.5%   75.7%   65.3%   109.4% 

Price/Tangible book value

   —     114%   141%   97%   338% 

Price/Year to Date Ann. Earnings per share

   —     13.6x   14.8x   9.5x   26.9x 

Current Dividend Yield

   —     2.2%   1.8%   0.0%   4.5% 

Market value (in millions)

   —    $78  $75  $32  $197 
      Wellesley   Wellesley   Wellesley  Wellesley 
      Peer Group   Peer Group   Peer Group  Peer Group 
   Wellesley  Median   Mean   Low  High 

Total assets ($mm)

   986   972    1,382    504   2,842 

Loans / Deposits (%)

   109.8   95.6    97.1    77.8   126.4 

Nonperforming assets(¹) / Total assets (%)

   0.17(²)   0.70    0.84    0.11   2.39 

Tangible common equity/Tangible assets (%)

   7.28   8.91    8.82    6.83   11.22 

Tier 1 Leverage ratio (%)

   8.01(²)   9.46    9.48    7.36   12.30 

Total risk-based capital ratio (%)

   11.51(²)   13.85    14.13    10.54   18.70 

CRE / Total risk-based capital ratio (%)

   323.3(²)   255.5    267.5    123.7   464.7 

LTM return on average assets (%)

   0.70   0.96    0.87    (0.10)   1.31 

LTM return on average equity (%)

   9.48   11.16    9.33    (1.41)   14.42 

LTM Net interest margin (%)

   2.96   3.25    3.26    2.71   3.96 

LTM Efficiency ratio (%)

   68.57   67.58    68.21    30.38   95.60 

Price/Tangible book value (%)

   116   131    139    72   216 

Price/LTM earnings per share (x)

   12.7   12.9    15.4    8.6   36.4 

Current dividend yield (%)

   0.7   2.4    2.4    0.0   4.9 

Market value ($mm)

   80   131    176    47   408 

 

1)(1)

Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.owned

2)(2)

Bank-levelBank level financial data as of September 30, 2018.shown

Sandler O’Neill used publicly available information to perform a similar analysis for Cambridge andby comparing selected financial information for Cambridge with a group of financial institutions selected by Sandler O’Neill (the “Cambridge Peer Group”). The Cambridge Peer Group consisted of publicly-tradedincluded publicly traded banks and thrifts headquartered in the New England region with total assets between $1$2.0 billion and $5$12.0 billion, but excluded

targets of announced merger transactions; it also excluded Provident Bancorp, Inc. and Independent Bank Corp.HarborOne Bancorp, Inc. due to its focus on wealth management, excluding announced merger targets.the recent completion of their second-step conversions, as well as Boston Private Financial Holdings, Inc. and Northeast Bank due to their differentiated business models. The Cambridge Peer Group consisted of the following companies:

 

Bar Harbor Bankshares

Hingham Institution for Savings
Brookline Bancorp, Inc.Independent Bank Corp.

Camden National CorporationMeridian Bancorp, Inc.
Century Bancorp, Inc.Washington Trust Bancorp, Inc.
Enterprise Bancorp, Inc.  Western New England Bancorp, Inc.

Century Bancorp, Inc.

First Bancorp, Inc.

Washington Trust Bancorp, Inc.

Bankwell Financial Group, Inc.

Camden National Corporation

SI Financial Group, Inc.

Bar Harbor Bankshares

Northeast Bancorp

Enterprise Bancorp, Inc.

Salisbury Bancorp, Inc.

Hingham Institution for Savings

  

The analysis compared publicly available financial information for Cambridge as of or for the period ended September 30, 2018 with the corresponding publicly available data for the Cambridge Peer Group as of or for the periodLTM ended September 30, 2018 (or, if data as of or for the period ended September 30, 2018 was not publicly available, as of or for the period ended June 30, 2018),2019 with pricing data as of December 4, 2018.2019. The table below sets forth the data for Cambridge and the high,median, mean, low median and meanhigh data for the Cambridge Peer Group:Group. Certain financial data prepared by Sandler O’Neill, as referenced in the table presented below, may not correspond to the data presented in Cambridge’s historical financial statements as a result of the different periods, assumptions and methods used by Sander O’Neill to compute the financial data presented.

Cambridge Peer GroupComparable Company Analysis

 

   Cambridge  Cambridge
Peer
Group
Median		  Cambridge
Peer
Group
Mean		  Cambridge
Peer
Group
Low		  Cambridge
Peer
Group
High		 

Total assets (in millions)

  $1,989  $2,370  $3,151  $1,099  $8,375 

Loans/Deposits

   83.9%   100.5%   95.3%   57.0%   116.0% 

Non-performing assets(1)/Total assets

   0.04%   0.83%   0.92%   0.08%   2.03% 

Tangible common equity/Tangible assets

   8.06%   8.19%   8.59%   5.84%   11.76% 

Leverage Ratio

   8.51%   9.05%   9.33%   7.03%   12.83% 

Total RBC Ratio

   13.97%   14.16%   14.18%   11.98%   19.81% 

CRE/Total RBC

   333.30(2)%   230.87%   239.63%   28.00%   467.78% 

Year to Date Return on average assets

   1.26%   1.04%   1.12%   0.68%   1.52% 

Year to Date Return on average equity

   16.17%   12.57%   11.71%   6.32%   17.17% 

Year to Date Net interest margin

   3.32%   3.11%   3.26%   2.19%   4.97% 

Year to Date Efficiency ratio

   65.0%   59.3%   58.1%   29.9%   69.3% 

Price/Tangible book value

   219%   159%   167%   105%   270% 

Price/Year to Date Ann. Earnings per share

   14.3x   13.0x   14.5x   11.0x   28.4x 

Current Dividend Yield

   2.3%   1.8%   2.1%   0.2%   4.2% 

Market value (in millions)

  $351  $302  $479  $106  $2,090 
      Cambridge   Cambridge   Cambridge   Cambridge 
      Peer Group   Peer Group   Peer Group   Peer Group 
   Cambridge  Median   Mean   Low   High 

Total assets ($mm)

   2,842   4,520    4,931    2,033    11,539 

Loans / Deposits (%)

   90.5   103.2    97.7    54.7    126.4 

Nonperforming assets(1) / Total assets (%)

   0.13   0.57    0.55    0.07    1.60 

Tangible common equity/Tangible assets (%)

   7.43   9.10    9.09    6.16    10.87 

Tier 1 Leverage ratio (%)

   7.70   9.24    9.41    7.25    10.89 

Total risk-based capital ratio (%)

   11.56   13.97    13.74    12.04    15.44 

CRE / Total risk-based capital ratio (%)

   405.4(²)   255.5    270.3    26.2    559.4 

LTM return on average assets (%)

   0.98   1.16    1.10    0.65    1.45 

LTM return on average equity (%)

   11.82   11.99    11.08    5.95    15.25 

LTM Net interest margin (%)

   3.25   2.90    3.08    2.10    4.08 

LTM Efficiency ratio (%)

   63.93   55.21    55.28    30.38    69.71 

Price/Tangible book value (%)

   177   163    166    120    250 

Price/LTM earnings per share (x)

   14.6   12.9    14.3    11.7    19.1 

Price/2019E earnings per share(3) (x)

   13.6   14.6    14.9    12.1    19.5 

Price/2020E earnings per share(3) (x)

   11.9   14.1    14.6    12.9    17.9 

Current dividend yield (%)

   2.7   2.1    2.4    0.6    4.3 

Market value ($mm)

   370   479    809    254    2,864 

 

1)(1)

Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.owned

2)(2)

Regulatory holding companyBank level financial data as of June 30, 2018.shown

(3)

Based on publicly available median analyst earnings per share estimates

Analysis of Selected Nationwide MergerPrecedent Transactions.

Sandler O’Neill reviewed a grouptwo groups of nationwide merger and acquisition transactions, involving U.S. banksincluding a regional and thrifts (the “Nationwide Transactions”).nationwide group. The Nationwide Transactionsregional group consisted of bank and thrift transactions announced between June 30, 2018 and December 4, 2019 with disclosed deal values and targets headquartered in the New England region with total

assets less than $10.0 billion (the “Regional Precedent Transactions”). The nationwide group consisted of bank and thrift transactions announced between January 1, 20182019 and December 4, 2018 for targets2019 with disclosed deal values and target total assets between $300$700 million and $1$1.25 billion and tangible common equity to tangible assets at announcement less than 9%, excluding acquisitions by private investors. (the “Nationwide Precedent Transactions”).

The NationwideRegional Precedent Transactions group was composed of the following transactions:

 

Acquiror

  

Target

Spirit of Texas Bancshares Inc.

Centreville Bank		  First Beeville Financial Corp.

First Citizens BancShares Inc.

Biscayne Bancshares Inc.

BancorpSouth Bank

CaseyPB Bancorp, Inc.

OrrstownPeople’s United Financial, Services

Inc.		  HamiltonUnited Financial Bancorp, Inc.

Lakeland Bancorp

Liberty Bank		  HighlandsSBT Bancorp, Inc.

Banner Corp.

Berkshire Hills Bancorp, Inc.		  Skagit BancorpSI Financial Group, Inc.

First Bancshares Inc.

Cambridge Bancorp		  FMB Banking Corp.

Independent Bank Corp.

MNB Bancorp

Capitol Federal Financial Inc.

Capital City Bancshares Inc.

First Interstate BancSystem

Northwest Bancorp

RBB Bancorp

First American International Corp.

QCR Holdings Inc.

Springfield Bancshares Inc.

Triumph Bancorp Inc.

First Bancorp of Durango Inc.

RCB Holding Co.

CentralOptima Bank & Trust Company

Mid PennPeople’s United Financial, Inc.

BSB Bancorp, Inc.

Independent Bank Corp.Blue Hills Bancorp, Inc.
Hometown Financial Group MHCPilgrim Bancshares, Inc.
PeoplesBancorp, MHC  First PrioritySuffield Financial, Corp.

Heritage Commerce Corp.

United American BankInc.

Using the latest publicly available information prior to the announcement of the relevant transaction, Sandler O’Neill reviewed the following transaction metrics: transaction price to last-twelve-months earnings per share, transaction price to tangible book value per share, and core deposit premium. Sandler O’Neill compared the indicated transaction multiples for the merger to the high, low, mean and median multiples of theThe Nationwide Transactions group.

   Optima/
Cambridge		  Nationwide
Transactions
Group
Median		  Nationwide
Transactions
Group
Mean		  Nationwide
Transactions
Group
Low		  Nationwide
Transactions
Group
High		 

Transaction price/ LTM Earnings per share

   26.8x   22.5x   21.6x   7.0x   41.4x 

Transaction price/Tangible book value per share:

   187%   191%   188%   126%   241% 

Core deposit premium:

   9.3%   11.2%   10.6%   4.1%   15.6% 

Analysis of Selected Regional Merger Transactions. Sandler O’Neill also reviewed a regional group of merger and acquisition transactions involving U.S. banks and thrifts headquartered in the New England region (the “Regional Transactions”). The Regional Transactions group consisted of transactions announced between January 1, 2017 and December 4, 2018 for targets headquartered in the New England region with total assets less than $1 billion. The RegionalPrecedent Transactions group was composed of the following transactions:

 

Acquiror

  

Target

PeoplesBancorp MHC

Flushing Financial Corporation		Empire Bancorp, Inc.
Reliant Bancorp, Inc.  First Suffield FinancialAdvantage Bancorp
BancPlus CorporationState Capital Corporation
First Midwest Bancorp, Inc.Bankmanagers Corp.
ConnectOne Bancorp, Inc.Bancorp of New Jersey, Inc.

Independent BankOceanFirst Financial Corp.

  MNBTwo River Bancorp

Salem Five Bancorp

OceanFirst Financial Corp.		  SageCountry Bank Holding Company, Inc.

HaborOne BancorpColumbia Financial, Inc. (MHC)

  Coastway Bancorp, Inc.

Bangor Bancorp Inc.

First Colebrook Bancorp Inc.

Brookline Bancorp Inc.

First Commons Bank NA

Atlantic Community Bancshares Inc.

BBNStewardship Financial Corporation

Patriot NationalS&T Bancorp, Inc.

  PrimeDNB Financial Corporation
Heritage Commerce CorpPresidio Bank

MeridianGlacier Bancorp, Inc.

  MeetinghouseHeritage Bancorp
Heartland Financial USA, Inc.Blue Valley Ban Corp.
First Financial CorporationHopFed Bancorp, Inc.

Using the latest publicly available information prior to the announcement of the relevant transaction, Sandler O’Neill reviewed the following transaction metrics: transaction price to last-twelve-months earnings per share, transaction price to tangible book value per share, and core deposit premium, to core deposits.and1-day market premium. Sandler O’Neill compared the indicated transaction multiplesmetrics for the merger to the median, mean, low and high low, mean and median multiplesmetrics of the Regional Precedent Transactions group as well as to the median, mean, low and high metrics of the Nationwide Precedent Transactions group.

 

   Optima/
Cambridge		  Regional
Transactions
Median		  Regional
Transactions
Mean		  Regional
Transactions
Low		  Regional
Transactions
High		 

Transaction price/LTM earnings per share:

   26.8x   34.2x   32.6x   19.6x   44.1x 

Transaction price/Tangible book value per share:

   187%   158%   158%   109%   204% 

Core deposit premium:

   9.3%   11.5%   9.2%   1.1%   14.7% 
       Regional Precedent Transactions 
   Cambridge/
Wellesley		   Median   Mean   Low   High 

Transaction Price / LTM Earnings Per Share (x)(1)

   17.4    25.4    22.8    13.2    32.1 

Transaction Price / Tangible Book Value Per Share (%)

   159    160    165    118    204 

Tangible Book Value Premium to Core Deposits (%)

   7.6    10.6    10.5    2.6    19.2 

1-Day Market Premium (%)

   37.0    16.9    20.7    4.5    44.3 

       Nationwide Precedent Transactions 
   Cambridge/
Wellesley		   Median   Mean   Low   High 

Transaction Price / LTM Earnings Per Share (x)(1)

   17.4    17.9    19.1    9.8    34.6 

Transaction Price / Tangible Book Value Per Share (%)

   159    165    170    122    240 

Tangible Book Value Premium to Core Deposits (%)

   7.6    8.2    9.4    3.6    20.8 

1-Day Market Premium (%)

   37.0    27.9    32.7    11.7    77.0 

(1)

Transaction price / LTM Earnings per Share multiples greater than 35.0x were noted as not meaningful

Net Present Value Analyses.Analyses

Sandler O’Neill performed an analysis that estimated the net present value per share of OptimaWellesley common stock assuming OptimaWellesley performed in accordance with certain internal financial projections for the years ending December 31, 20182019 through December 31, 2022,2021, as provided by the senior management of Optima.Wellesley, as well as an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023 and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Wellesley. To approximate the terminal value of a share of OptimaWellesley common stock at December 31, 2022,2023 Sandler O’Neill applied price to 20222023 earnings per share multiples ranging from 13.0x11.0x to 18.0x16.0x and price tomultiples of December 31, 20222023 tangible book value per share multiples ranging from 100%110% to 150%170%. The terminal values were then discounted to present values using different discount rates ranging from 10.0% to 15.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of OptimaWellesley common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of OptimaWellesley common stock of $25.82$28.42 to $43.19$49.39 when applying multiples of earnings per share and $14.72$26.89 to $26.67$49.58 when applying multiples of tangible book value per share.value.

Earnings Per Share Multiples

 

Discount Rate

  

13.0x

  

14.0x

  

15.0x

  

16.0x

  

17.0x

  

18.0x

10.0%

  $31.19  $33.59  $35.99  $38.39  $40.79  $43.19

11.0%

  $30.01  $32.32  $34.63  $36.94  $39.25  $41.56

12.0%

  $28.89  $31.11  $33.34  $35.56  $37.78  $40.00

13.0%

  $27.82  $29.96  $32.10  $34.24  $36.38  $38.52

14.0%

  $26.80  $28.86  $30.92  $32.98  $35.04  $37.10

15.0%

  $25.82  $27.81  $29.79  $31.78  $33.77  $35.75

Discount

Rate

  

11.0x

  

12.0x

  

13.0x

  

14.0x

  

15.0x

  

16.0x

10.0%

  $34.25  $37.28  $40.31  $43.34  $46.36  $49.39

11.0%

  $32.97  $35.89  $38.80  $41.71  $44.63  $47.54

12.0%

  $31.75  $34.56  $37.36  $40.17  $42.97  $45.78

13.0%

  $30.59  $33.29  $35.99  $38.69  $41.39  $44.09

14.0%

  $29.48  $32.08  $34.68  $37.28  $39.89  $42.49

15.0%

  $28.42  $30.92  $33.43  $35.94  $38.44  $40.95

Tangible Book Value Per Share Multiples

 

Discount Rate

  

100%

  

110%

  

120%

  

130%

  

140%

  

150%

  

110%

  

122%

  

134%

  

146%

  

158%

  

170%

10.0%

  $17.78  $19.56  $21.34  $23.11  $24.89  $26.67  $32.41  $35.85  $39.28  $42.71  $46.15  $49.58

11.0%

  $17.11  $18.82  $20.53  $22.24  $23.95  $25.66  $31.20  $34.51  $37.81  $41.12  $44.42  $47.72

12.0%

  $16.47  $18.12  $19.76  $21.41  $23.06  $24.70  $30.05  $33.23  $36.41  $39.59  $42.77  $45.95

13.0%

  $15.86  $17.44  $19.03  $20.62  $22.20  $23.79  $28.95  $32.01  $35.07  $38.14  $41.20  $44.26

14.0%

  $15.28  $16.80  $18.33  $19.86  $21.39  $22.91  $27.90  $30.85  $33.80  $36.75  $39.70  $42.65

15.0%

  $14.72  $16.19  $17.66  $19.14  $20.61  $22.08  $26.89  $29.74  $32.58  $35.42  $38.26  $41.11

Sandler O’Neill also considered and discussed with the OptimaWellesley board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income.earnings. To illustrate this impact, Sandler O’Neill performed a similar analysis, assuming Optima’s net incomeWellesley’s earnings varied from 15% 15.0%

above projections to 15%15.0% below projections. This analysis resulted in the following range of per share values for OptimaWellesley’s common stock, applying the price to 20222023 earnings per share multiples range of 13.0x11.0x to 18.0x16.0x referred to above and a discount rate of 12.68%12.50%.

Earnings Per Share Multiples

 

Annual Budget
Variance

  

13.0x

  

14.0x

  

15.0x

  

16.0x

  

17.0x

  

18.0x

  

11.0x

  

12.0x

  

13.0x

  

14.0x

  

15.0x

  

16.0x

(15.0%)

  $23.93  $25.78  $27.62  $29.46  $31.30  $33.14  $26.62  $28.96  $31.30  $33.64  $35.98  $38.32

(10.0%)

  $25.34  $27.29  $29.24  $31.19  $33.14  $35.09  $28.14  $30.61  $33.09  $35.57  $38.05  $40.52

(5.0%)

  $26.75  $28.81  $30.87  $32.92  $34.98  $37.04  $29.65  $32.27  $34.88  $37.50  $40.11  $42.72

0.0%

  $28.16  $30.32  $32.49  $34.66  $36.82  $38.99  $31.16  $33.92  $36.67  $39.42  $42.17  $44.93

5.0%

  $29.57  $31.84  $34.11  $36.39  $38.66  $40.94  $32.68  $35.57  $38.46  $41.35  $44.24  $47.13

10.0%

  $30.97  $33.36  $35.74  $38.12  $40.50  $42.89  $34.19  $37.22  $40.25  $43.28  $46.30  $49.33

15.0%

  $32.38  $34.87  $37.36  $39.85  $42.34  $44.84  $35.71  $38.87  $42.04  $45.20  $48.37  $51.53

Sandler O’Neill also performed an analysis that estimated the net present value per share of Cambridge common stock, assuming Cambridge performed in accordance with internal net income andpublicly available median analyst earnings per share estimates for Cambridge for the years ending December 31, 20182019 and December 31, 2020, as well as an estimated long-term annual net income growth rate for the years ending December 31, 2021 through December 31, 2019, as provided by the senior management of Cambridge, as well as a long-term earnings per share2023 and net income growth rates for the years thereafter andestimated dividends per share for the years ending December 31, 20182019 through December 31, 2022,2023, as provided by the senior management of Cambridge. To approximate the terminal value of a share of Cambridge common stock at December 31, 2022,2023, Sandler O’Neill applied price to 20222023 earnings per share multiples ranging from 14.0x13.0x to 19.0x18.0x and price tomultiples of December 31, 20222023 tangible book value per share multiples ranging from 150%140% to 250%210%. The terminal values were then discounted to present values using different discount rates ranging from 9.0%8.0% to 14.0%13.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Cambridge common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Cambridge common stock of $65.83$65.31 to $104.93$105.61 when applying multiples of earnings per share and $57.22$59.05 to $109.88$102.33 when applying multiples of tangible book value per share.value.

Earnings Per Share Multiples

 

Discount Rate

  

14.0x

  

15.0x

  

16.0x

  

17.0x

  

18.0x

  

19.0x

9.0%

  $79.08  $84.25  $89.42  $94.59  $99.76  $104.93

10.0%

  $76.18  $81.15  $86.13  $91.10  $96.07  $101.04

11.0%

  $73.41  $78.19  $82.98  $87.76  $92.55  $97.33

12.0%

  $70.76  $75.37  $79.98  $84.58  $89.19  $93.80

13.0%

  $68.24  $72.68  $77.11  $81.55  $85.98  $90.42

14.0%

  $65.83  $70.10  $74.37  $78.65  $82.92  $87.19

Discount

Rate

  

13.0x

  

14.0x

  

15.0x

  

16.0x

  

17.0x

  

18.0x

8.0%

  $78.53  $83.94  $89.36  $94.78  $100.19  $105.61

9.0%

  $75.63  $80.84  $86.05  $91.25  $96.46  $101.67

10.0%

  $72.87  $77.88  $82.89  $87.90  $92.91  $97.92

11.0%

  $70.23  $75.05  $79.87  $84.69  $89.52  $94.34

12.0%

  $67.72  $72.36  $77.00  $81.64  $86.28  $90.92

13.0%

  $65.31  $69.78  $74.25  $78.72  $83.19  $87.66

Tangible Book Value Per Share Multiples

 

Discount Rate

  

150%

  

170%

  

190%

  

210%

  

230%

  

250%

  

140%

  

154%

  

168%

  

182%

  

196%

  

210%

8.0%

  $70.93  $77.21  $83.49  $89.77  $96.05  $102.33

9.0%

  $68.66  $76.90  $85.15  $93.39  $101.64  $109.88  $68.32  $74.36  $80.40  $86.44  $92.48  $98.52

10.0%

  $66.16  $74.90  $82.02  $89.95  $97.88  $105.81  $65.84  $71.65  $77.46  $83.27  $89.08  $94.88

11.0%

  $63.76  $71.40  $79.03  $86.66  $94.29  $101.92  $63.47  $69.06  $74.65  $80.24  $85.83  $91.42

12.0%

  $61.48  $68.83  $76.17  $83.52  $90.87  $98.21  $61.21  $66.59  $71.97  $77.35  $82.73  $88.11

13.0%

  $59.30  $66.38  $73.45  $80.52  $87.60  $94.67  $59.05  $64.23  $69.41  $74.59  $79.77  $84.95

14.0%

  $57.22  $64.04  $70.85  $77.66  $84.48  $91.29

Sandler O’Neill also considered and discussed with the OptimaWellesley board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income.earnings. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming Cambridge’s net incomeearnings varied from 15% 15.0%

above estimates to 15%15.0% below estimates. This analysis resulted in the following range of per share values for Cambridge common stock, applying the price to 20222023 earnings per share multiples range of 14.0x13.0x to 19.0x18.0x referred to above and a discount rate of 12.68%10.50%.

Earnings Per Share Multiples

 

Annual Budget
Variance

  

14.0x

  

15.0x

  

16.0x

  

17.0x

  

18.0x

  

19.0x

Annual

Estimate

Variance

  

13.0x

  

14.0x

  

15.0x

  

16.0x

  

17.0x

  

18.0x

(15.0%)

  $59.61  $63.42  $67.24  $71.06  $74.87  $78.69  $61.95  $66.13  $70.30  $74.48  $78.66  $82.84

(10.0%)

  $62.75  $66.79  $70.83  $74.87  $78.91  $82.95  $65.14  $69.57  $73.99  $78.41  $82.84  $87.26

(5.0%)

  $65.89  $70.16  $74.42  $78.69  $82.95  $87.22  $68.34  $73.01  $77.68  $82.35  $87.01  $91.68

0.0%

  $69.04  $73.52  $78.01  $82.50  $86.99  $91.48  $71.53  $76.45  $81.36  $86.28  $91.19  $96.11

5.0%

  $72.18  $76.89  $81.61  $86.32  $91.03  $95.75  $74.73  $79.89  $85.05  $90.21  $95.37  $100.53

10.0%

  $75.32  $80.26  $85.20  $90.13  $95.07  $100.01  $77.92  $83.33  $88.73  $94.14  $99.55  $104.95

15.0%

  $78.46  $83.63  $88.79  $93.95  $99.11  $104.28  $81.12  $86.77  $92.42  $98.07  $103.72  $109.38

Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Pro Forma Merger Analysis.Transaction Analysis

Sandler O’Neill analyzed certain potential pro forma effects of the merger on Cambridge assuming the merger closes at the end of the second calendar quarter of 2019. In performing its analysis,March 31, 2020. Sandler O’Neill utilized the Pro Forma Assumptions,following information and assumptions: (a) estimated net income for Wellesley for the years ending December 31, 2020 and December 31, 2021 with an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023, as provided by the senior management of Cambridge.Cambridge; (b) publicly available median analyst earnings per share estimates for Cambridge for the years ending December 31, 2019 and December 31, 2020, as well as an estimated long-term annual net income growth rate for the years ending December 31, 2021 through December 31, 2023 and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Cambridge; and (c) certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as provided by Cambridge senior management. The analysis indicated that the merger could be accretive to Cambridge’s estimated earnings per share (excludingone-time transaction costs and expenses) in the years endedending December 31, 2019,2020 through December 31, 2023 and dilutive to Cambridge’s estimated tangible book value per share at close and at December 31, 2020, December 31, 2021, and December 31, 2022, and dilutiveaccretive to Cambridge’s estimated tangible book value per share at closing.December 31, 2023.

In connection with thisits analysis, Sandler O’Neill considered and discussed with the OptimaWellesley board of directors how the analysis wouldcould be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction,merger, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Sandler O’Neill’s Relationship.Relationship

Sandler O’Neill actedis acting as Optima’sWellesley’s financial advisor in connection with the merger and will receive a fee for such services in an amount equal to 1.0%1.25% of the aggregate merger consideration,purchase price, which fee was approximately $0.7 million at the time of announcement of the merger and is contingent upon the closing of the merger. At the time of announcement of the merger, Sandler O’Neill’s fee was approximately $1.5 million. Sandler O’Neill also received a $150,000 fee of $100,000 forfrom Wellesley upon rendering its opinion, which opinion fee will be credited in full towards the transactionadvisory fee which will become due and payable to Sandler O’Neill on the day ofupon closing of the merger. OptimaWellesley has also agreed to indemnify Sandler O’Neill against certain claims and liabilities arising out of Sandler O’Neill’s engagement and to reimburse Sandler O’Neill for certain of Sandler O’Neill’sitsout-of-pocket expenses incurred in connection with Sandler O’Neill’s engagement. Sandler O’Neill did not provide any other

investment banking services to Optima in the two years preceding the date of its opinion;provided, however, an affiliate of Sandler O’Neill, Sandler O’Neill Mortgage Finance L.P., acted as introducing broker to Optima in connection with the sale of certain loans duringIn the two years preceding the date of Sandler O’Neill’s opinion.opinion Sandler O’Neill did not provide any other investment banking services to Wellesley. Sandler O’Neill did not provide any investment banking services to Cambridge in the two years preceding the date of its opinion. In the ordinary course of Sandler O’Neill’s business as a broker-dealer, Sandler O’Neill may purchase securities from and sell securities to Optima,Wellesley, Cambridge and their respective affiliates. Sandler O’Neill may also actively trade the equity and debt securities of Wellesley, Cambridge and itstheir respective affiliates for Sandler O’Neill’s own account and for the accounts of Sandler O’Neill’s customers.

Additional Information Relating to Sandler O’Neill

On January 3, 2020, pursuant to the Agreement and Plans of Merger, dated as of July 9, 2019, by and among Piper Sandler Companies (formerly known as Piper Jaffray Companies), SOP Holdings, LLC and certain of its subsidiaries, including Sandler O’Neill, and the other parties thereto, Piper Sandler Companies completed its acquisition of one hundred percent of the outstanding ownership interests of Sandler O’Neill (the “Sandler Transaction”). Effective as of the closing of the Sandler Transaction, Piper Sandler Companies’ wholly owned broker-dealer subsidiary Piper Jaffray & Co. changed its name to “Piper Sandler & Co.” References herein to “Sandler O’Neill” shall include its successor “Piper Sandler & Co.” as the context requires.

Certain Unaudited Prospective Financial Information

Cambridge and Wellesley do not, as a matter of course, publicly disclose forecasts or internal projections as to their respective future performance, earnings or other results due to, among other reasons, the inherent uncertainty of the underlying assumptions and estimates.

However, in connection with the merger, Cambridge’s senior management and Wellesley’s senior management prepared or approved for use certain unaudited prospective financial information which was provided to and considered by KBW and Sandler O’Neill for the purpose of performing financial analyses in connection with their respective fairness opinions, as described in this joint proxy statement/prospectus under “—Opinion of Keefe, Bruyette & Woods, Inc., Financial Advisor to Cambridge” beginning on page 72 and “—Opinion of Sandler O’Neill & Partners, L.P., Financial Advisor to Wellesley” beginning on page 84. We refer to this information collectively as the prospective financial information.

The prospective financial information was not prepared for the purpose of, or with a view toward, public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, published guidelines of the SEC regarding forward-looking statements or generally accepted accounting principles. A summary of certain significant elements of this information is set forth below, and is included in this joint proxy statement/prospectus solely for the purpose of providing holders of Cambridge common stock and holders of Wellesley common stock access to certain nonpublic information made available to Cambridge’s and Wellesley’s respective financial advisors for the purpose of performing financial analyses in connection with their respective fairness opinions.

Although presented with numeric specificity, the prospective financial information reflects numerous estimates and assumptions made by Cambridge’s senior management or Wellesley’s senior management, as applicable, at the time such prospective financial information was prepared, or was approved for use by the financial advisors, and represents, as applicable, Cambridge senior management’s or Wellesley senior management’s respective evaluation of Wellesley’s expected future financial performance on a stand-alone basis, without reference to the merger, and Cambridge’s expected future financial performance on a stand-alone basis, without reference to the merger. These and the other estimates and assumptions underlying the prospective financial information involve judgments with respect to, among other things, economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among other things,

the inherent uncertainty of the business and economic conditions affecting the industry in which Cambridge and Wellesley operate and the risks and uncertainties described under “Risk Factors” and “Information Regarding Forward-Looking Statements” in this joint proxy statement/prospectus and in the reports that Cambridge and Wellesley file with the SEC from time to time, all of which are difficult to predict and many of which are outside the control of Cambridge and Wellesley and will be beyond the control of the combined company. There can be no assurance that the underlying assumptions would prove to be accurate or that the projected results would be realized, and actual results could differ materially from those reflected in the prospective financial information, whether or not the merger is completed. Further, these assumptions do not include all potential actions that the senior management of Cambridge or Wellesley could or might have taken during these time periods. The inclusion in this joint proxy statement/prospectus of the unaudited prospective financial information below should not be regarded as an indication that Cambridge, Wellesley or their respective boards of directors or financial advisors considered, or now consider, this prospective financial information to be material information to any holders of Cambridge common stock or holders of Wellesley common stock, as the case may be, particularly in light of the inherent risks and uncertainties associated with such prospective financial information. The prospective financial information is not fact and should not be relied upon as being necessarily indicative of actual future results. The prospective financial information also reflects numerous variables, expectations and assumptions available at the time it was prepared as to certain business decisions that are subject to change and do not take into account any circumstances or events occurring after the date they were prepared. No assurances can be given that if the prospective financial information and the underlying assumptions had been prepared as of the date of this joint proxy statement/prospectus, similar assumptions would be used. In addition, the prospective financial information may not reflect the manner in which the combined company would operate after the merger.

The prospective financial information included in this document has been prepared by, and is the responsibility of, management of Cambridge and Wellesley. KPMG LLP (Cambridge’s independent registered public accounting firm) and Wolf & Company, P.C. (Wellesley’s independent registered public accounting firm) have not audited, reviewed, examined, compiled nor applied agreed upon procedures with respect to the prospective financial information and, accordingly, KPMG LLP and Wolf & Company, P.C. have not expressed any opinion or given any other form of assurance with respect thereto and they assume no responsibility for the prospective financial information. The reports of the independent registered public accounting firms incorporated by reference in this joint proxy statement/prospectus relate to the historical financial information of Cambridge and Wellesley, respectively. Such reports do not extend to the prospective financial information and should not be read to do so. No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto and no independent registered public accounting firm assumes any responsibility for the prospective financial information.

Prospective Financial Information Regarding Cambridge

The following prospective financial information used by KBW in performing its financial analysis with respect to Cambridge on a stand-alone basis was provided to KBW by Cambridge management and approved by Cambridge for use by KBW: (i) estimated annual asset growth rate of 5.4% in 2020 per FactSet consensus estimates, with an assumed 6.0% annual asset growth rate in 2021 and thereafter per Cambridge management and (ii) estimated net income for Cambridge of $26.1 million for the year ending December 31, 2019 excluding the impact of merger related costs and the capital raise and $31.1 million for the year ending December 31, 2020, per FactSet consensus estimates, with an annual net income growth rate thereafter in themid-single digits, per Cambridge management.

For the purposes of the Cambridge net present value analysis and pro forma merger analyses performed by Sandler O’Neill in connection with its fairness opinion, Cambridge directed Sandler O’Neill to rely upon and utilize estimates for Cambridge earnings per share for 2019 and 2020 that reflected consensus Wall Street research estimates, as well as estimated long-term annual net income growth rates for the years thereafter and

estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Cambridge. Sandler O’Neill utilized the following unaudited prospective financial information with respect to Cambridge for the years ending December 31, 2019, 2020, 2021, 2022 and 2023, respectively: (i) net income of $26.0 million, $31.1 million, $33.0 million, $34.9 million, and $37.1 million; (ii) EPS of $5.62, $6.40, $6.77, $7.13 and $7.51; and (iii) dividends per share of $0.51 (representing the estimated dividend payment for the quarter ended December 31, 2019), $2.08, $2.36, $2.49, and $2.63.

Prospective Financial Information Regarding Wellesley

The following prospective financial information used by KBW in performing its financial analysis with respect to Wellesley on a stand-alone basis was provided to KBW by Cambridge management and approved by Cambridge for use by KBW: (i) estimated annual asset growth rate of 3.3% in 2020, 6.5% in 2021 and 6.0% in 2022 and each year thereafter and (ii) estimated net income available to common shareholders of Wellesley of $6.8 million for the year ending December 31, 2019 excluding the impact of merger related costs, $6.8 million for the year ending December 31, 2020, $8.0 million for the year ending December 31, 2021 and (iii) assumed net income growth at an upper single digit rate annually thereafter.

For purposes of Sandler O’Neill’s Wellesley net present value analysis performed in connection with Sandler O’Neill’s opinion, Sandler O’Neill used certain internal financial projections for Wellesley for the years ending December 31, 2019 through December 31, 2021, as well as an estimated long-term annual net income growth rates for the years thereafter and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Wellesley. Sandler O’Neill utilized the following unaudited prospective financial information with respect to Wellesley for the years ending December 31, 2019, 2020, 2021, 2022 and 2023, respectively: (i) net income of $6.5 million, $7.6 million, $9.9 million, $10.7 million, and $11.6 million; (ii) EPS of $2.54, $2.98, $3.89, $4.20 and $4.54; and (iii) dividends per share of $0.06 (representing the estimated dividend payment for the quarter ended December 31, 2019), $0.26, $0.28, $0.30, and $0.32.

For purposes of Sandler O’Neill’s pro forma merger analysis performed in connection with Sandler O’Neill’s opinion, Sandler O’Neill used the following estimated net income for Wellesley for the years ending December 31, 2020, 2021, 2022 and 2023, respectively, as provided by the senior management of Cambridge: $6.8 million, $8.0 million, $8.6 million and $9.3 million.

Interests of Optima’sCambridge’s Directors and Executive Officers in the Merger

In considering the recommendation of the OptimaCambridge board of directors regarding the merger, OptimaCambridge shareholders should know that certain directors and executive officers of OptimaCambridge have interests in the merger in addition to their interests as shareholders of Optima.Cambridge. All those additional interests are described below, to the extent they are material and are known to Optima.Cambridge. The Optimaboards of directors of Cambridge and Cambridge Trust and the boards of directors of Wellesley and Wellesley Bank were aware of these interests and considered them, among other matters, in approving the merger agreement.

Following the consummation of the merger, each current member of the Cambridge board of directors is expected to continue to serve as a director of the board of directors of the combined company and each current Cambridge executive officer is expected continue in his or her role as an executive officer of the combined company.

Interests of Wellesley’s Directors and Executive Officers in the Merger

In considering the recommendation of the Wellesley board of directors regarding the merger, Wellesley shareholders should know that certain directors and executive officers of Wellesley have interests in the merger in addition to their interests as shareholders of Wellesley. All those additional interests are described below, to the extent they are material and are known to Wellesley. The boards of directors of Wellesley and Wellesley Bank and the boards of directors of Cambridge and Cambridge Trust Company were aware of these interests and considered them, among other matters, in approving the merger agreement.

The following discussion sets forth the interests in the merger of each person who has served as a director or executive officer of OptimaWellesley since January 1, 2018.2019. Except as described below, to the knowledge of Optima,Wellesley, the directors and executive officers of OptimaWellesley do not have any substantial interest, direct or indirect, by security holdings or otherwise in the merger or the merger agreement proposal apart from their interests as shareholders of Optima.Wellesley. The amounts presented in the following discussion do not reflect the impact of applicable withholding or other taxes.

Treatment of Stock Options

Pursuant to the terms of the merger agreement, each option to purchase shares of OptimaWellesley common stock, whether vested or unvested, that is outstanding as of immediately prior to the effective time of the merger will be cancelled at the effective time of the merger. In exchange for the cancellation of each option, the holder of such option will receive a cash amount equal to the product of (x) the number of shares of OptimaWellesley common stock subject to such option at the effective time multiplied by (y) the amount by which the “per share consideration” exceeds the per share exercise price of such option, less applicable taxes and withholdings and without interest. In the event that the exercise price of an option is equal to or greater than the “per share consideration,” then the option shallwill be cancelled in exchange for no consideration. The “perper share consideration”consideration is determined according to the following formula: the sum of (1) the product of 95%, multiplied by the exchange ratio of 0.3468,0.580 multiplied by the average of the daily closing sales pricesprice of one share of Cambridge common stock on NASDAQ for the five consecutive trading days ending on the third business day immediately preceding the closing date, plus (2)rounded to the product of 5%, multiplied by the cash consideration of $32.00.nearest whole cent.

Cash Payment for Stock Options

The following table sets forth, as of January 15,December 31, 2019, the number of shares of OptimaWellesley common stock underlying the options held by each director and executive officer of Optima,Wellesley, as well as the cash payment that each director and executive officer of OptimaWellesley would receive, assuming the Cambridge stock price at the consummation of the merger were the same as it was on December 31, 2018:2019:

 

Executive Officer

  Shares
Underlying
Options
(#)		   Cash
Payment
($)		 

Edwin Garside

   3,000    30,090 

Daniel R. Morrison(1)

   7,000    76,180 

Pamela Morrison(1)

   7,000    76,180 

William Young(1)

   7,000    76,180 

Director

    

Robert Brown

   7,000    76,180 

Michael Daigle

   6,000    66,150 

Erik Dodier

   7,000    76,180 

Jaye Morency

   7,000    76,180 

Colleen Penacho

   7,000    76,180 

Leonard Rishkofski

   7,000    76,180 

James Sununu

   7,000    76,180 

Michael Sununu

   7,000    76,180 

Executive Officer

  Shares Underlying Options
(#)		   Cash Payment
($)		 

Thomas J. Fontaine (1)

   16,285    507,066 

Ralph L. Letner

   10,000    274,870 

Louis P. Crosier

   1,600    74,379 

Michael W. Dvorak

   —      —   

Director

   

Shares Underlying Options

(#)


 

   

Cash Payment

($)


 

Simon R. Gerlin

   —      —   

Nancy Marden Goodall

   9,027    281,074 

Kathryn M. Hinderhofer

   —      —   

Garry R. Holmes

   —      —   

James J. Malerba

   —      —   

Leslie B. Shea

   9,027    281,074 

Tina L. Wang

   9,027    281,074 

(1)

Also a member of the board of directors.

Treatment of Restricted Stock Awards

Pursuant to the terms of the merger agreement, any vesting restrictions on each share of restricted stock outstanding immediately prior to the effective time of the merger will automatically lapse and each share of restricted stock will be treated as an issued and outstanding share of Wellesley common stock.

The following table sets forth, as of December 31, 2019, the amounts of unvested restricted stock awards that will vest upon the closing of the merger, assuming an effective time of the merger of December 31, 2019:

Executive Officer

Number of Restricted Stock
Awards
(#)

Thomas J. Fontaine (1)

2,666

Ralph L. Letner

1,000

Louis P. Crosier

1,200

Michael W. Dvorak

4,533

Director

Simon R. Gerlin

1,200

Nancy Marden Goodall

—  

Kathryn M. Hinderhofer

1,200

Garry R. Holmes

2,400

James J. Malerba

3,000

Leslie B. Shea

—  

Tina L. Wang

—  

 

(1)

Also a member of the board of directors.

Employment AgreementsAgreement with OptimaMr. Fontaine

Mr. Morrison, Ms. Morrison, and Mr. Young are eachFontaine is party to an employment agreement with OptimaWellesley and Wellesley Bank. The term of the agreement runs for 36 months and renews daily, unless either party provides notice to the other party of its intention not to renew the agreement.

Under the employment agreement, Wellesley may terminate Mr. Fontaine’s employment for “cause” at any time in accordance with the terms of the agreement. If Wellesley terminates Mr. Fontaine’s employment for cause, Wellesley will have each entered into a settlement agreement with Optima, Cambridge, and Cambridge Trust Company. Pursuantno further financial obligation to each settlement agreement, if such executive officer remains employed with Optima throughhim except for the payment of any amounts that he has earned but that have not been paid as of the effective date of his termination and benefits accrued under certain employee benefit plans. Wellesley may also terminate Mr. Fontaine’s employment for any other reason that does not constitute cause upon60-days’ notice. Mr. Fontaine may terminate his employment with Wellesley for “good reason” in accordance with the mergerterms of the agreement. The term “good reason” includes (1) a material diminution in duties and timely executesresponsibilities, (2) a releasematerial diminution in his base salary and (3) a change in reporting responsibilities. In addition, If Wellesley terminates Mr. Fontaine for reasons that do not constitute cause or if Mr. Fontaine voluntarily terminates his employment with good reason, then Wellesley will pay him a lump sum amount equal to the product of claims,his average monthly compensation by the number of months remaining during the unexpired term of the agreement or, if greater, 12. “Average monthly compensation” equals the monthly average of Mr. Fontaine’s three highest years of compensation, as reported on FormW-2. In addition, Wellesley will pay Mr. Fontaine his cost of obtaining health insurance through COBRA for the unexpired term of the agreement or, if greater, 12 months.

Mr. Fontaine may voluntarily terminate his employment within the period beginning three months prior to and ending 12 months after a change in control. In the event of such executive officer willa termination or another termination of the employment agreement by Wellesley or Mr. Fontaine following a change in control (other than a termination for

cause), Mr. Fontaine would be entitled to a severance benefit equal to three times his highest annual compensation as reported in his FormW-2 for the three calendar years prior to a change in control. In addition, Mr. Fontaine would receive a lump sum cash payment equal to the cost of COBRA health continuation coverage for Mr. Fontaine and his eligible dependents for a period of 36 months. If Mr. Fontaine is already entitled to or has received the payment described in exchange forthe prior paragraph due to a termination of all rightsemployment without cause by Wellesley or a termination by Mr. Fontaine with good reason, then Mr. Fontaine is not entitled to the change in control payment described in this paragraph. If the change in control severance benefits under his or herthe employment agreement with Optima.or other payments by Wellesley Bank to Mr. Morrison is eligible to receive $832,916; Ms. Morrison is eligible to receive $339,564; and Mr. Young is eligible to receive $335,814. These amountsFontaine are subject to reduction to the extent necessary to ensure that no portion of the payments will be subject to the golden parachute tax rulesconsidered “parachute payments” under Section 280G of the Internal Revenue Code, of 1986, as amended (the “Code”)then such payments or benefits will be limited to the excise taxgreatest amount that may be paid to Mr. Fontaine under Section 4999280G without causing any loss of deduction to Wellesley or its affiliates under such section but only if, by reason of such reduction, the Code.net after tax benefit to him will exceed the net after tax benefit if such reduction were not made.

Mr. Garside is also partyAt or immediately prior to an employment agreement with Optima. Upon consummationthe effective time of the merger, Mr. Fontaine, Wellesley and Wellesley Bank will terminate the term ofemployment agreement. Mr. Fontaine is entitled to receive $1,921,137 pursuant to the employment agreement, will automatically extend for a periodassuming an effective time of not less than 18 months beyond the month in which the merger is consummated. Pursuantof December 31, 2019. The amount payable pursuant to hisMr. Fontaine’s employment agreement ifwill be reduced because of Section 280G of the Code to an amount estimated to be approximately $80,000.

Salary Continuation Agreement with Mr. Garside’s employmentFontaine

Mr. Fontaine is terminated without “cause”party to a salary continuation agreement with Wellesley Bank whereby, upon separating from service on or he terminates employment for “good reason” (each asafter reaching age 65, Wellesley Bank would pay Mr. Fontaine a lump sum benefit equivalent to a15-year annual benefit equal to 75% of his highest earnings (as defined in the employment agreement), less Wellesley Bank’s portion of social security benefits, pension plan benefits and Wellesley Bank’s matching contributions under Wellesley Bank’s 401(k) plan. Mr. GarsideFontaine is fully vested in his benefits under the salary continuation agreement. Upon a change in control, Mr. Fontaine will bebecome entitled to the benefit to which he would have otherwise become entitled at his normal retirement age of 65 (regardless of his actual age).

At or immediately prior to the effective time of the merger, Wellesley Bank will terminate the salary continuation agreement and pay Mr. Fontaine a lump amount equal to the present value of the benefit under which he is entitled under the terms of the agreement. Mr. Fontaine is entitled to receive in additionan amount estimated to any accrued compensation: (i)equal $3,687,793 pursuant to the salary continuation agreement, assuming an effective time of the merger of December 31, 2019 and based on current estimates of the values of the offsets, including social security and retirement plan benefits.

Employee Severance Arrangements

Wellesley Bank maintains a severance compensation agreement with Ralph Letner that provides him with a severance benefit of 24 months base salary if he is dismissed without cause or is not offered a comparable position within 12 months of the effective date of a change in control. In addition, Wellesley Bank would continue to pay its share of health insurance premiums for Mr. Letner if Mr. Letner elects COBRA health continuation coverage. Wellesley will terminate Mr. Letner’s severance compensation agreement prior to closing, in exchange for a payment equalof $150,000 to 1.5 times the sumMr. Letner.

Wellesley Bank also maintains a severance compensation agreement with Michael W. Dvorak. Mr. Dvorak’s severance compensation agreement allows for continued payment of his base salary for 24 months and his past three-year average bonus and (ii) groupfor ongoing payment of Wellesley Bank’s share of Mr. Dvorak’s health dental, and vision programinsurance premiums if he elects COBRA health care continuation atcoverage following a termination without cause, or the active employee rate for 18 months. Assame benefits if Mr. Dvorak is not offered a condition to receiving the severance benefits, Mr. Garside must timely execute and not revoke a release of claims and must continue to comply with the confidentiality restrictions in the employment agreement in perpetuity and thenon-compete andnon-solicit restrictions in the employment agreement for 12 months following termination. But, if such termination occurscomparable position within 12 months following the consummation of a change in control, such as the merger, Mr. Garside is not required to execute a release of claims.control.

Offer LettersLetter with Cambridge Trust Company

Concurrently with the execution of the merger agreement, each of Mr. Morrison, Ms. Morrison, and Mr. YoungFontaine entered into an offer letter with Cambridge Trust Company that will be effective as of the closing date of the

merger. Pursuant to the offer letters, (i)letter, Mr. MorrisonFontaine will be employed as the Chief ExecutiveBanking Officer of Cambridge Trust in New HampshireCompany at an annual salary rate of $290,000, (ii) Mrs. Morrison will be employed as Lead NH Branch Banking Executive$450,000 for his first year of Cambridge Trust at an annual salary rate of $175,000 for a period of one year, and (iii) Mr. Young will be employed as Senior Vice President and Senior Lender in New Hampshire at an annual salary rate of $194,000. Eachemployment. The offer letter further provides eligibility to receive an annual performance-based bonus and grants of annual equity awards, as determined by Cambridge’s Compensation Committee, and to participate in the various employee benefit plans, programs, and arrangements that the Cambridge Trust Company may offer to similarly-situated employees from time to time, and Mr. Young’s offer letter further provides eligibility for grants of equity incentive awards with respect to Cambridge at a level comparable to similarly-situated employees, subject to the discretion of Cambridge’s Compensation Committee.time.

Change in Control Agreement with Cambridge

Concurrently with the execution of the merger agreement, Mr. MorrisonFontaine entered into a change in control agreement with Cambridge that will be effective as of the closing date of the merger. The change in control agreement provides for severance benefits in the event a “change in control” or “potential change in control” (each as(as defined in the change in control agreement)Cambridge’s 2017 Equity and Cash Incentive Plan) occurs and the executive’sMr. Fontaine’s employment with Cambridge Trust Company subsequently terminates within specified periods thereafter for certain reasons. The change in control agreement automatically renews each January 1 following the effective date unless terminated by Cambridge prior to September 30 of the preceding year, provided however, that if a change in control or potential change in control occurs, the change in control agreement will continue in effect for a period of 12 months following such change in control, or potential change in control, notwithstanding any notice to terminate Cambridge provided. Pursuant to the change in control agreement, if Mr. Morrison’sFontaine’s employment is terminated by Cambridge Trust Company without “cause” or he terminates employment for “good reason” (each as defined in the change in control agreement) within 12 months following a change in control, or within certain periods of time following a potential change in control as set forth in the change in control agreement, Mr. MorrisonFontaine will be entitled to receive, in addition to any accrued compensation: (i) a severance payment equal to twothree times the average of his highest three consecutive calendar years of annual base salary and annual cash incentive bonus; and (ii) continued participation, for a period of up to one year, in welfare benefit plans in which he participated prior to termination of employment. In the event that the severance payment and benefits provided under the change in control agreement, together with any other payments Mr. MorrisonFontaine is entitled to receive from Cambridge or its affiliates, constitute a “parachute payment” within the meaning of Section 280G of the Code or are subject to an excise tax imposed by Section 4999 of the Code, Cambridge will reduce the payments, to the minimum extent necessary, if it would put Mr. MorrisonFontaine in a betterafter-tax position than if he were to pay the excise tax on such payments and benefits. As a condition to receiving the severance payment, the change in control agreement provides that Mr. MorrisonFontaine will not, for a period of one year following his termination from employment, compete either directly or indirectly (other than as a holder of less than 10% of any publicly-traded securities) with Cambridge and any subsidiary or affiliate of Cambridge in any city or town in which Cambridge or such subsidiary or affiliate operates at any time during the term of the change in control agreement and any contiguous city or town.

Supplemental Executive Retirement Plan

Wellesley Bank sponsors a supplemental executive retirement plan, or SERP, to provide participating executives with benefits otherwise limited under Wellesley’s employee stock ownership plan and/or 401(k) plan due to limitations under the Internal Revenue Code or the terms of the employee stock ownership plan loan. Specifically, the plan provides benefits to eligible individuals that Wellesley cannot provide under the employee stock ownership plan and/or 401(k) plan as a result of these limitations, but that Wellesley would have provided under those plans but for these limitations. In addition to providing for benefits lost under thetax-qualified plans as a result of limitations imposed by the Internal Revenue Code, the SERP also provides supplemental benefits to designated individuals upon a change of control before the complete scheduled repayment of the employee stock ownership plan loan. Generally, upon a change in control, the SERP provides the participant with a benefit equal to the benefit the individual would have received under the employee stock ownership plan had he remained employed throughout the term of the plan, less the benefits actually provided under the employee stock ownership plan on behalf of the participant. Mr. Fontaine is the only participant in the SERP.

At or immediately prior to the effective time of the merger, Wellesley Bank will terminate the SERP and pay each participant a lump sum equal to the benefit to which such participant is entitled pursuant to the terms of such plan. Mr. Fontaine is eligible to receive $405,000, assuming an effective time of the merger of December 31, 2019.

Appointment of One DirectorThree Directors to the Boards of Directors of Cambridge and Cambridge Trust Company

AtEffective immediately following the effective time of the merger, or at Cambridge’s option, immediately following the 2020 annual meeting of shareholders of Cambridge, Cambridge will appoint one memberthree members of the OptimaWellesley board of directors to the boards of directors of Cambridge and Cambridge Trust Company. The designeedesignees will serve on the Cambridge boardand Cambridge Trust Company boards of directors until the next annual meeting following his or her appointment, at which time he or she will each be nominated for a three-year term. The directordirectors will be entitled to receive compensation from Cambridge and Cambridge Trust Company for his or her service on the boards of directors in accordance with the fee schedule for services that is applicable from time to time for similar services by other members of Cambridge’s and Cambridge Trust Company’s boards of directors. Cambridge has designated Thomas J. Fontaine, the current President and Chief Executive Officer of Wellesley and Wellesley Bank, as one of the designees. Mr. Fontaine will serve on the Cambridge board of directors and Cambridge Trust Company board of directors until the next annual meeting following his appointment, at which point he will be nominated for a three-year term. Mr. Fontaine will not receive any separate compensation from Cambridge and Cambridge Trust Company for his service on the boards of directors.

Indemnification and Insurance of Directors and Officers

Pursuant to the merger agreement, Cambridge has agreed that, for a period of six years after the effective date of the merger, it will indemnify, defend and hold harmless each present and former director and officer of OptimaWellesley against any reasonable costs, expenses or fees (including reasonable attorneys’ fees), judgments, amounts paid in settlement, fines, penalties, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the effective time of the merger, whether asserted or claimed prior to, at or after the Effective Time,effective time, arising out of the fact that he or she was a director or officer of OptimaWellesley or is or was serving at the request of OptimaWellesley as a director, officer, employee or other agent of any other organization or in any capacity with respect to any employee benefit plan of Optima,Wellesley, including without limitation matters related to the negotiation, execution and performance of the merger agreement or any of the related transactions, to the fullest extent which such person would have been entitled to indemnification under Optima’sWellesley’s Charter and Optima’sWellesley’s Bylaws prior to the effective date of the merger.

In addition, Cambridge has agreed to maintain a directors’ and officers’ liability insurance policy for six years after the effective time of the merger to cover the present officers and directors of OptimaWellesley with respect to claims against such directors and officers arising from facts or events that occurred before the effective time of the merger; provided that, Cambridge is not obligated to pay more than 250% of Optima’sWellesley’s annual premiums for such coverage.

Merger-Related Compensation for Wellesley’s Named Executive Officers

The information set forth in the following table is intended to comply with Item 402(t) of the SEC’s RegulationS-K, which requires disclosure of information about certain compensation for each of Wellesley’s named executive officers that is based on, or otherwise relates to, the merger, which we refer to in this section as merger-related compensation. The merger-related compensation payable to these individuals is the subject of anon-binding advisory vote of Wellesley shareholders, as described above in “The Wellesley Proposals—Advisory Proposal on Specified Compensation.”

The following table sets forth the amount of payments and benefits that each of Wellesley’s named executive officers would receive in connection with the merger, assuming: (i) that the effective time of the merger is December 31, 2019, which is the assumed date of the closing solely for purposes of the disclosure in this section; (ii) a per share price of Wellesley common stock of $42.58, which is the average closing price per share over the first five business days following the announcement of the merger agreement; and (iii) that the employment of each named executive officer of Wellesley is terminated without cause or due to resignation with good reason (as such terms are defined in the relevant Wellesley agreement) immediately following the assumed effective time of December 31, 2019. This table does not include the value of benefits in which the named executive officers are vested without regard to the occurrence of a change in control. In addition, consistent with SEC guidance, the amounts below do not reflect amounts payable pursuant to the new agreements between the named executive officers and Cambridge. The amounts shown below are estimates based on multiple assumptions that may or may not actually occur, and as a result of the foregoing assumptions, the actual amounts to be received by a named executive officer may differ materially from the amounts shown below.

Named Executive Officers

  Cash
($)(1)		   Equity
($)(2)		   Pension/
NQDC(3)		   Perquisites/
Benefits
($)(4)		   Total
($)		 

Thomas J. Fontaine

   80,000    113,518    1,884,397    0    2,077,915 

Louis P. Crosier

   —    43,328    —    —    43,328 

Michael W. Dvorak

   525,200    193,015    —    33,518    751,733 

Ralph L. Letner

   150,000    42,580    —    0    192,580 

(1)

Cash. The amounts in this column reflect cash severance payments or payments in lieu of cash severance to which the named executive officers are entitled in connection with the merger Mr. Fontaine is entitled to receive $1,921,137 pursuant to his employment agreement, assuming an effective time of the merger of December 31, 2019. The amount payable pursuant to Mr. Fontaine’s employment agreement will be reduced because of Section 280G of the Code to an amount estimated to be approximately $80,000. Mr. Dvorak is entitled to $525,200 in connection with his severance compensation agreement. Mr. Letner will receive a $150,000 under the merger agreement in lieu of severance that would have been payable under his severance compensation agreement.

(2)

Equity. The amounts in this column reflect (a) the cash payment to be made in exchange for the cancellation of unvested Wellesley stock options (which, for purposes of this table, is equal to the number of unvested Wellesley stock options multiplied by the difference, if positive, between (i) $46.49, the “per share merger consideration” (as defined in the merger agreement) assuming the “Cambridge measurement price” (as defined in the merger agreement) was equal to the closing price of Cambridge common stock as of December 31, 2019, and (ii) the exercise price of each unvested Wellesley stock option) and (b) the value of unvested Wellesley restricted stock awards that will vest at the effective time of the merger. For purposes of this table, the value of unvested restricted stock was determined by multiplying the number of unvested shares by $42.58, which is the average closing market price of Wellesley common stock over the five business days following the public announcement of the merger. The following table sets forth the cash payment to be made in exchange for the cancellation of unvested Wellesley stock options and the value of unvested Wellesley restricted stock.

   Stock
Options
($)		   Restricted
Stock
($)		 

Thomas J. Fontaine

   0    113,518 

Louis P. Crosier

   43,328    0 

Michael W. Dvorak

   0    193,015 

Ralph L. Letner

   0    42,580 

(3)

Pension and nonqualified deferred compensation. The amount in the table reflects the aggregate dollar value of pension and nonqualified deferred compensation benefit enhancements. Set forth below are the benefit enhancement under Mr. Fontaine’s individual supplemental executive retirement plan (SERP), equivalent to

the supplemental stock ownership benefit for Mr. Fontaine under the SERP. Due to their employment and severance agreements being terminated prior to closing in connection with the merger, Thomas Fontaine and Ralph Letner will not receive COBRA health continuation coverage pursuant to the merger.

(4)

Perquisites/Benefits. The amount in the table reflects the estimated present value of Wellesley’s cost of COBRA health continuation coverage under the applicable employment or severance agreements, reflected as a lump sum. The following table sets forth the projected amount of the lump sum cash payment with respect to continued insurance coverage. Due to their employment and severance agreements being terminated prior to closing in connection with the merger, Thomas Fontaine and Ralph Letner will not receive COBRA health continuation coverage pursuant to the merger.

Continued
Insurance
Coverage
($)

Thomas J. Fontaine

0

Michael W. Dvorak

33,518

Ralph L. Letner

0

Boards of Directors of Cambridge and Cambridge Trust Company After the Merger

Pursuant to the merger agreement, at the effective time of the merger, one member of the Optima board of directors will serve as a member of Cambridge’s board of directors. Cambridge has designated Mr. Morrison as the designee. Mr. Morrison will serve on the Cambridge board until the next annual meeting, at which time he or she will each be nominated for a three-year term. Mr. Morrison will also be appointed to the board of directors of Cambridge Trust Company, effectiveEffective immediately following the effective time of the merger.merger, or at Cambridge’s option, immediately following the 2020 annual meeting of shareholders of Cambridge, Cambridge, upon consultation with Wellesley, will designate three members of the Wellesley board of directors to serve as members of Cambridge’s board of directors and Cambridge Trust Company’s board of directors. Cambridge has designated Thomas J. Fontaine, the current President and Chief Executive Officer of Wellesley and Wellesley Bank, as one of the designees. Mr. Fontaine will serve on the Cambridge board of directors and Cambridge Trust Company board of directors until the next annual meeting following his appointment, at which point he will be nominated for a three-year term. Cambridge has designated Thomas J. Fontaine, the current President and Chief Executive Officer of Wellesley and Wellesley Bank, as one of the designees.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a general summary of material U.S. federal income tax consequences of the merger of Cambridge, Cambridge Trust Company, Wellesley, and Optima.Wellesley Bank. The federal income tax laws are complex and the tax consequences of the merger may vary depending upon each shareholder’s individual circumstances or tax status. The following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, or the Code, existing temporary and final regulations under the Code and current administrative rulings and court decisions, all of which are subject to change, possibly on a retroactive basis. No attempt has been made to comment on all U.S. federal income tax consequences of the merger that may be relevant to OptimaWellesley shareholders. The tax discussion set forth below is included for general information only. It is not intended to be, nor should it be construed to be, legal or tax advice to a particular OptimaWellesley shareholder.

The following discussion may not apply to particular categories of holders of shares of OptimaWellesley common stock subject to special treatment under the Code, such as insurance companies, financial institutions, broker-dealers,tax-exempt organizations, individual retirement and othertax-deferred accounts, banks, persons subject to the alternative minimum tax, persons who hold OptimaWellesley capital stock as part of a straddle, hedging or conversion transaction, persons whose functional currency is other than the U.S. dollar, persons eligible for tax treaty benefits, foreign corporations, foreign partnerships and other foreign entities, individuals who are not citizens or residents of the United States and holders of stock options or holders whose shares were acquired pursuant to the exercise of an employee stock option or otherwise as compensation. This discussion assumes that holders of shares of OptimaWellesley common stock hold their shares as capital assets. The following discussion does not address state, local or foreign tax consequences of the merger. You are urged to consult your tax advisors to determine the specific tax consequences of the merger, including any state, local or foreign tax consequences of the merger.

Tax Consequences of the Merger Generally

Cambridge will receive an opinion from Hogan Lovells US LLP and OptimaWellesley will receive an opinion from Goodwin ProcterKilpatrick Townsend & Stockton LLP, each to be filed with the SEC and dated as of the same date as the registration statement of which this joint proxy statement/prospectus is a part, to the effect that the merger will qualify as atax-free reorganization under Section 368(a) of the Code. The tax opinions to be received by Cambridge and OptimaWellesley will be based on certain representations, covenants and assumptions, as set forth in certificates provided to Hogan Lovells US LLP and Goodwin ProcterKilpatrick Townsend & Stockton LLP by appropriate officers of Cambridge and Optima,Wellesley, all of which must continue to be true and accurate in all material respects as of the effective time of the merger. Neither Cambridge nor OptimaWellesley intends to waive this condition. If any of the representations, covenants or assumptions relied upon by tax counsel is inaccurate, tax counsel may not be able to provide the required closing date opinions or the tax consequences of the merger could differ from those described below. An opinion of counsel neither binds the Internal Revenue Service, the IRS, nor precludes the IRS or the courts from adopting a contrary position. Neither Cambridge nor OptimaWellesley intends to obtain a ruling from the IRS regarding the tax consequences of the merger.

Based on the opinions that the merger will qualify as a reorganization under Section 368(a) of the Code, it is the opinion of Hogan Lovells US LLP and Goodwin ProcterKilpatrick Townsend & Stockton LLP that the material U.S. federal income tax consequences of the merger are as follows:

 

no gain or loss will be recognized by Cambridge or OptimaWellesley as a result of the merger;

 

except with respect to cash received insteadin lieu of a fractional share of Cambridge common stock, no gain or loss will be recognized by U.S. holders who exchange all of their OptimaWellesley common stock solely for Cambridge common stock pursuant to the merger. A U.S. holder of OptimaWellesley common stock who receives cash insteadin lieu of a fractional share of Cambridge common stock will be treated as having received the fractional share pursuant to the merger and then as having exchanged the fractional share for cash in a redemption by Cambridge. As a result, such U.S. holder of OptimaWellesley common stock will generally recognize gain or loss equal to the difference between the amount of cash received and the basis in his or her fractional share interest;

 

gain (but not loss) will be recognized by U.S. holders of Optima common stock who receive a combination of stock consideration and cash consideration in exchange for shares of Optima common stock pursuant to the merger, in an amount equal to the lesser of (1) the amount by which the sum of the fair market value of the Cambridge common stock and cash received by a U.S. holder of Optima common stock exceeds such U.S. holder’s basis in its Optima common stock and (2) the amount of cash received by such U.S. holder of Optima common stock;

the aggregate tax basis in the Cambridge common stock received by an Optimaa Wellesley shareholder pursuant to the merger will equal that shareholder’s aggregate tax basis in the shares of OptimaWellesley common stock being exchanged, decreasedreduced by theany amount of cash received in the merger (other than cash received instead ofallocable to a fractional share interest in Cambridge common stock) and increased by the amount of gain recognized on the exchange, other than with respect to cash received instead of fractional share interests in Cambridge common stock (regardless of whether such gainfor which cash is classified as capital gain or as dividend income, as discussed below under “—Additional Considerations—Recharacterization of Gain as a Dividend”);received; and

 

the holding period of Cambridge common stock received by an Optimaa Wellesley shareholder in the merger will include the holding period of the shares of OptimaWellesley common stock being exchanged; andexchanged.

a U.S. holder of Optima common stock who receives the entirety of his or her consideration in the form of cash will generally recognize gain or loss equal to the difference between the amount of cash received and the basis in his or her Optima common stock. The gain or loss recognized by the U.S. holders described in this paragraph will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the U.S. holder’s holding period for the relevant shares is greater than one year. The deductibility of capital losses is subject to limitations.

For purposes of the above discussion of the bases and holding periods for shares of OptimaWellesley common stock and Cambridge common stock, Cambridge shareholders who acquired different blocks of Cambridge common stock at different times for different prices must calculate their basis, gains and losses, and holding periods separately for each identifiable block of such stock exchanged, converted, cancelled or received in the merger.

Additional Considerations—Recharacterization of Gain as a Dividend

All or part of the gain that a particular U.S. holder of Optima common stock recognizes could be treated as dividend income rather than capital gain if (1) such U.S. holder is a significant shareholder of Cambridge or (2) such U.S. holder’s percentage ownership, taking into account constructive ownership rules, in Cambridge after the merger is not meaningfully reduced from what its percentage ownership would have been if it had received solely stock consideration rather than a combination of cash consideration and stock consideration in the merger. This could happen, for example, because of ownership of additional shares of Cambridge common stock by such holder, ownership of shares of Cambridge common stock by a person related to such holder or a share repurchase by Cambridge from other holders of Cambridge common stock. The Internal Revenue Service has indicated in rulings that any reduction in the interest of a minority shareholder that owns a small number of shares in a publicly and widely held corporation and that exercises no control over corporate affairs would result in capital gain as opposed to dividend treatment. Because the possibility of dividend treatment depends primarily upon the particular circumstances of a holder of Optima common stock, including the application of certain constructive ownership rules, holders of Optima common stock should consult their own tax advisor regarding the potential tax consequences of the merger to them.

Backup Withholding

Payments of cash to an Optimaa Wellesley shareholder pursuant to the merger are subject to information reporting and may, under certain circumstances, be subject to backup withholding unless such shareholder provides Cambridge with its taxpayer identification number and otherwise complies with the backup withholding rules. Any amounts withheld from payments to an Optimaa Wellesley shareholder under the backup withholding rules are not an additional tax and generally will be allowed as a refund or credit against the OptimaWellesley shareholder’s federal income tax liability; provided that the OptimaWellesley shareholder timely furnishes the required information to the IRS.

Reporting Requirements

OptimaWellesley shareholders who receive Cambridge common stock as a result of the merger will be required to retain records pertaining to the merger, and OptimaWellesley shareholders who hold at least 5% of the outstanding OptimaWellesley common stock immediately before the merger will be required to file with their U.S. federal income tax return for the year in which the merger takes place a statement setting forth certain facts relating to the merger.

This summary does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, it does not address anynon-income tax or any foreign, state or local tax consequences of the merger. Tax matters are very complicated, and the tax consequences of the merger to you will depend upon the facts of your particular situation. Accordingly, we strongly urge you to consult with a tax advisor to determine the particular federal, state, local and foreign income and other tax consequences to you of the merger.

Regulatory Approvals Required for the Merger

General

Cambridge and OptimaWellesley have agreed to use all reasonable efforts to obtain all permits, consents, approvals and authorizations of all third parties and governmental authorities that are necessary to consummate the merger of Cambridge, Cambridge Trust Company, Wellesley and Optima.Wellesley Bank. This includes the approval of the Massachusetts Division of Banks,various notices, approvals, waivers or

the MDOB, the New Hampshire Banking Department, or the NHBD, consents from state and the Federal Deposit Insurance Corporation, orfederal governmental authorities, including the FDIC, as well as the waiver of from application requirements, or if no waiver is granted, approval, of the Board of Governors of the Federal Reserve System, or the Federal Reserve BankMassachusetts Commissioner of Boston acting pursuant to delegated authority. CambridgeBanks, the Massachusetts Housing Partnership and Cambridge Trust CompanytheCo-Operative Central Bank. The parties have filed or will file all required applications, notices and waiver requests to obtain the regulatory approvals and waivers necessary to consummate the merger. Cambridge and OptimaWellesley cannot predict whether the required regulatory approvals will be obtained, when they will be received or whether such approvals will be subject to any conditions.

Massachusetts Commissioner of Banks

To consummate the merger, Cambridge will seek the approval of the Massachusetts Commissioner of Banks, or the MA Commissioner, pursuant to Chapter 167I, Section 3 of the Massachusetts General Laws.

In deciding whether to approve the merger, the MA Commissioner must determine whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. In making this determination, the MA Commissioner must consider, at a minimum, a showing of net new benefits, which includes initial capital investments, job creation plans, consumer and business services, commitments to maintain and open branch offices within the continuing institution’s Community Reinvestment Act assessment area and such other matters as the MA Commissioner may deem necessary or advisable.

Cambridge is not aware of any reason why it will not receive the MA Commissioner’s approval for the merger.

New Hampshire Banking Commissioner

Cambridge will also seek the approval of the New Hampshire Bank Commissioner, or the NH Commissioner, pursuant to sections383-B:10-1002,383-B:10-1003 and383-A:6 of the New Hampshire Revised Statutes Annotated.

Cambridge is not aware of any reason why it will not receive the NH Commissioner’s approval for the merger.

Federal Deposit Insurance Corporation

To consummate the merger, Cambridge will seek the approval of the FDIC under Section 18(c) of the Federal Deposit Insurance Act, as amended, which is commonly known as the Bank Merger Act. The FDIC may not approve the merger if:

 

such transaction would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of the United States; or

 

the effect of such transaction, in any section of the country, may be to substantially lessen competition, or tend to create a monopoly, or in any manner restrain trade, unless the FDIC finds that the anticompetitive effects of the merger are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the communities to be served.

In every case, the FDIC is required to consider the financial and managerial resources and future prospects of the institutions concerned, the convenience and needs of the communities to be served, and the effectiveness of each insured depository institution involved in the proposed merger in combating money-laundering activities. Consideration of financial resources generally focuses on capital adequacy of the institutions involved. In assessing the convenience and needs of the community to be served, the FDIC will consider such elements as the extent to which the proposed merger is likely to benefit the general public through higher lending limits, new or expanded services, reduced prices, increased convenience in utilizing the services and facilities of the resulting institution, or other means. The FDIC, as required by the Community Reinvestment Act of 1977, as amended,

will also note and consider the record of performance of Cambridge Trust Company and OptimaWellesley in meeting the credit needs of the entire community, including low and moderate-income neighborhoods. An unsatisfactory record may form the basis for denial or conditional approval of an application. Applicable regulations require publication of notice of an application for approval of the merger.

Federal Reserve

Cambridge will seek a waiver from the Federal Reserve from application requirements associated with the merger pursuant to 12 CFR 225.12(d), which authorizes the Federal Reserve to waive application requirements associated with a bank holding company merger or a bank holding company acquiring a new subsidiary bank if the transaction involves a bank merger and certain other conditions are met, including that the bank merger will be approved under the Bank Merger Act. If the Federal Reserve does not provide this waiver, Cambridge will seek the requisite approval from the Federal Reserve to consummate the merger.

Massachusetts Housing Partnership

Under Massachusetts law, the proposed transaction may not be completed until Cambridge has made “arrangements satisfactory” to the Massachusetts Housing Partnership Fund. Cambridge is working with the Massachusetts Housing Partnership Fund to make such arrangements and will request at the appropriate time that the Massachusetts Housing Partnership Fund send the MA Commissioner a letter confirming that such arrangements were made.

MassachusettsCo-Operative Central Bank

Under Massachusetts law, the merger of Wellesley Bank with and into Cambridge Trust Company may not be completed until “arrangements satisfactory” to TheCo-operative Central Bank (the excess deposit insurer of Wellesley Bank) have been made. Cambridge Trust Company and Wellesley Bank are working with TheCo-operative Central Bank to make such arrangements and will request at the appropriate time that TheCo-operative Central Bank send the MA Commissioner a letter confirming that such arrangements were made.

Accounting Treatment of the Merger

The merger will be accounted for using the acquisition method of accounting with Cambridge treated as the acquirer. Under this method of accounting, Optima’sWellesley’s assets and liabilities will be recorded by Cambridge at their respective fair values as of the closing date of the merger and added to those of Cambridge. Any excess of purchase price over the net fair values of Optima’sWellesley’s assets and liabilities will be recorded as goodwill. Any excess of the fair value of Optima’sWellesley’s net assets over the purchase price will be recognized in earnings by Cambridge on the closing date of the merger. Financial statements of Cambridge issued after the merger will reflect these values, but will not be restated retroactively to reflect the historical financial position or results of operations of OptimaWellesley prior to the merger. The results of operations of OptimaWellesley will be included in the results of operations of Cambridge beginning on the effective date of the merger.

Dissenters’Appraisal Rights

Under the New Hampshire Business Corporation Act (“NHBCA”),Neither Cambridge shareholders may, under certain circumstances, exercisenor Wellesley shareholders will be entitled to appraisal rights in the event of certain limited corporate actions and obtain payment for the fair value of their shares. For example, subject to certain exceptions, appraisal rights are available under New Hampshire law to any shareholder of a constituent corporation in the event of a merger if such shareholder is entitled to vote upon the merger or if the corporation is a subsidiary that is merged with its parent. Neither Optima’s Charter nor Optima’s Bylaws grant any appraisal rights in addition to the statutorily prescribed rights.

Shareholders who desire to exercise their appraisal rights must satisfy all of the conditions and requirements set forth in the NHBCA in order to maintain these rights and obtain any payment due in respect of the exercise of these rights.

Pursuant to Sections 13.01 et seq. of Chapter293-A of the NHBCA, in the event that the merger is consummated, any holder of shares of Optima common stock who objects to the merger is entitled to dissent from the merger and to have the fair value of such shares, or Dissenting Stock, as determined by Optima, or if necessary, judicially determined, paid to him or her, by complying with the provisions of Sections 13.01 et seq. of the NHBCA. Failure to take any steps set forth in Sections 13.01 et seq. in connection with the exercise of such rights may result in termination or waiver thereof.

The following is a summary of the statutory procedures required to be followed by a holder of Dissenting Stock, or a dissenting shareholder, in order to exercise his or her rights under the NHBCA. This summary, however, is not a complete statement of all applicable requirements but contains substantially all material information regarding the exercise of appraisal rights under Sections293-A:13.01 et seq. of the NHBCA, the text of which is attached as Annex C to this proxy statement/prospectus. Additionally, the following summary does not constitute any legal or other advice, nor does it constitute a recommendation that Optima shareholders exercise their appraisal rights underSection 293-A; 13.01 et seq.

If a shareholder elects to exercise appraisal rights with respect to the merger, such shareholder must (i) deliver to Optima prior to the vote on the merger at the special meeting a written notice of intention to demand payment for his shares if the merger is effected and (ii) not vote in favor of the merger. The written notice required to be delivered to Optima by a dissenting shareholder is in addition to and separate from any proxy or vote against the merger. Neither voting against nor failure to vote for the merger will constitute the written notice required to be filed by a dissenting shareholder. Failure to vote against the merger, however, will not constitute a waiver of rights underSection 293-A:13.01 et seq. of the NHBCA provided that a written notice has been properly filed. A signed proxy that is returned but which does not contain any instructions as to how it should be voted will be voted in favor of approval of the merger and will be deemed a waiver of appraisal rights.

Subject to the foregoing, a beneficial shareholder may assert appraisal rights as to shares held on his or her behalf only if (i) he or she submits to Optima the record shareholder’s written consent to the dissent not later than the time the beneficial shareholder asserts appraisal rights and (ii) he or she does so with respect to all shares of Optima common stock of which he or she is the beneficial owner or over which he or she has the power to direct the vote. A record holder of shares of Optima common stock may dissent on behalf of any beneficial owner with respect to all but not less than all the shares of such beneficial owner if the record holder notifies Optima in writing of the name and address of each such person on whose behalf he or she asserts appraisal rights. All notices of intention to demand payment should be addressed to Michael F. Carotenuto, Chief Financial Officer, at Cambridge Trust Company, 78 Blanchard Road, 5th Floor, Burlington, Massachusetts 01803.

If the merger is approved, Optima is obligated to give written notice to each dissenting shareholder who timely filed a notice of intention to demand payment and who did not vote in favor of approval of the merger no later than 10 days after the approval of the merger by the shareholders of Optima. The notice must be accompanied by a copy ofSection 293-A:13.01 et seq. and must (i) state where a demand for payment must be sent and where and when certificates for Dissenting Stock must be deposited in order to obtain payment, (ii) inform holders of Optima’s estimate of the fair value of the shares, (iii) be accompanied by a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed merger (i.e., December 5, 2018) and requires that the person asserting appraisal rights certify whether or not he or she acquired beneficial ownership of the shares before that date and that such dissenting shareholder did not vote for the merger, (iv) set a date by which Optima shall receive the payment demand, which date shall not be less than 40 days nor more than 60 days after the date the notice is delivered, and state that the dissenting shareholder shall have waived the right to demand appraisal unless the form is received by such date, (v) state that Optima will provide to any requesting dissenting shareholder, within 10 days after the deadline to submit the form, the number of dissenting shareholders and the total number of shares owned by them, and (vi) the date by which the notice to withdraw appraisal rights must be received, which must be within 20 days of the deadline to submit the form. The dissenting shareholder must demand payment, certify whether he or she acquired ownership of such shares prior to December 5, 2018, and deposit the certificates in accordance with the terms of the notice. A dissenting shareholder who fails to demand payment or deposit certificates for Dissenting Stock, as required, shall have no right underSection 293-A:13.01 et seq. to receive payment for the Dissenting Stock.

Unless the merger has been effected and Optima has made the payment required below within 30 days after the date for demanding payment and depositing certificates for Dissenting Stock, Optima shall return any certificates for Dissenting Stock so deposited. If such Dissenting Stock has been returned by Optima, then Optima may at a later time send a new notice conforming to the requirements herein described.

As soon as the merger has been consummated, or upon receipt of demand for payment, if the merger has already been consummated, Optima shall pay to each dissenting shareholder who has made proper demand and deposited his or her certificates the amount which Optima estimates to be the fair value of his or her Dissenting Stock, with accrued interest, if any, accompanied by (i) Optima’s annual financial statements of a fiscal year ending not more than 16 months before the date of payment, (ii) a statement of Optima’s estimate of the fair value of the shares and (ii) a statement of the dissenting shareholder’s right to demand supplemental payment

pursuant toSection 293-A:13.26 if the shareholder is dissatisfied with Optima’s offer, as well as a copy ofSection 293-A:13.01 et seq. Optima may withhold payment from any dissenting shareholder acquiring beneficial ownership of Optima common stock subsequent to December 5, 2018, the date on which announcement of the merger was first made. For such shares of Optima common stock acquired after December 5, 2018, Optima, upon consummation of the merger, shall estimate the fair value of such shares, plus accrued interest, if any, and pay such estimated amount to each holder of such shares who agrees to accept such payment in full satisfaction of his or her demand. With each such offer of payment, Optima shall send (i) Optima’s annual financial statements of a fiscal year ending not more than 16 months before the date of payment, (ii) its estimate of the fair value of such shares of Optima common stock, an explanation of how the interest was calculated, (iii) that the dissenting shareholder may accept Optima’s estimate of fair value plus interest in full satisfaction of their appraisal right, (iv) that such dissenting shareholders should notify Optima of their acceptance of Optima’s offer within 30 days after receiving the offer, and (v) that such dissenting shareholders who do not satisfy the requirements for demanding appraisal shall be deemed to have accepted Optima’s offer.

Fair value of Dissenting Stock means the value immediately before the effective date, using customary and current valuation concepts generally employed for similar businesses, without discounting for lack of marketability or minority status.

If such dissenting shareholder believes the amount paid or offered to be paid, as the case may be, to be less than fair value (or that the interest, if any, is not correct), such dissenting shareholder may send Optima his or her own estimate of fair value (and interest, if any) and demand payment of the deficiency, or reject Optima’s offer and demand payment of the fair value (and interest, if any). If the dissenting shareholder does not notify Optima of his or her payment demand within 30 days after Optima has made payment or offered payment, as the case may be, such shareholder shall be entitled to no more than the amount remitted.

Within 60 days after a demand for payment of the deficiency, if it remains unsettled, Optima (or its successor, as applicable) shall file a petition with the court of its choosing in New Hampshire, or the Court, requesting determination of the fair value of the Dissenting Stock and accrued interest. All dissenting shareholders whose demands have not been settled shall be parties to such action and shall be served a copy of the petition. The Court shall determine the fair value of the Dissenting Stock and each dissenting shareholder shall be entitled to judgment for the amount by which the amount previously remitted by Optima is exceeded by the Court’s determination of fair value, if any. If Optima does not file a petition, each dissenting shareholder who has made a demand and who has not settled his or her claim shall be entitled to receive the amount demanded with interest and may sue to enforce his or her claim in an appropriate court.

Costs of an appraisal proceeding, including costs and expenses of appraisers appointed by the Court, shall be determined by the Court and assessed against Optima, except that the Court may assess any part of such costs and expenses to all or some of the dissenting shareholders who are parties and whose action the Court finds to be arbitrary, vexatious or not in good faith in demanding payment underSection 293-A:13.01 et seq. Fees and expenses of counsel and experts for the respective parties may be assessed against (i) Optima if the Court finds it failed to comply substantially with the requirements ofSection 293-A: 13.01 et seq. or (ii) either Optima or a dissenting shareholder if the Court finds that the party acted arbitrarily, vexatiously or not in good faith with respect to its appraisal rights. The Court may award reasonable attorney fees to be paid out of the amounts awarded to the dissenting shareholders if the Court finds that the services of counsel for any dissenting shareholder have been of substantial benefit to other dissenting shareholders similarly situated and that such attorney fees should not be assessed against Optima.

In view of the complexity ofSection 293-A:13.01 et seq of the NHBCA, Optima shareholders who may wish to pursue appraisal rights should consult their legal counsel and financial advisors.

Restrictions on Sales of Shares by Certain Affiliates

The shares of Cambridge common stock to be issued in the merger will be freely transferable under the Securities Act of 1933, as amended, or the Securities Act, except for shares issued to any shareholder who is an “affiliate”

of Cambridge as defined by Rule 144 under the Securities Act. Affiliates generally consist of individuals or entities that control, are controlled by or are under common control with Cambridge, and include the executive officers and directors of Cambridge and may include significant shareholders of Cambridge.

Stock Exchange Listing

Following the merger, the shares of Cambridge common stock will continue to trade on NASDAQ under the symbol “CATC”.

Delisting of Wellesley Common Stock After the Merger

Upon completion of the merger, the Wellesley common stock currently listed on NASDAQ will ceased to be listed on NASDAQ and will subsequently be deregistered under the Securities Exchange Act of 1934.

THE MERGER AGREEMENT

This section of the joint proxy statement/prospectus describes the material terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is incorporated by reference into this joint proxy statement/prospectus and attached asAnnex A to this joint proxy statement/prospectus. This summary may not contain all of the information about the merger agreement that may be important to you. You are urged to read the full text of the merger agreement. The merger agreement contains customary representations and warranties of Cambridge and OptimaWellesley made to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the agreement between Cambridge and OptimaWellesley and are not intended to provide factual, business or financial information about Cambridge and Optima.Wellesley. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a contractual standard of materiality different from those generally applicable to shareholders or different from what a shareholder might view as material, may have been used for purposes of allocating risk between Cambridge and OptimaWellesley rather than establishing matters as facts, may have been qualified by certain disclosures not reflected in the merger agreement that were made to the other party in connection with the negotiation of the merger agreement, and generally were solely for the benefit of the parties to that agreement.

Structure

Subject to the terms and conditions of the merger agreement, and in accordance with the Massachusetts General Laws (“MGL”) and the New Hampshire Revised Statutes AnnotatedMaryland General Corporation Law (“NHRSA”MGCL”) and the regulations promulgated thereunder, at the completion of the merger, Optima(i) Wellesley will merge with and into Cambridge and (ii) Wellesley Bank will merge with and into Cambridge Trust Company. Cambridge and Cambridge Trust Company will be the surviving bankentities in the merger and will continue its existencetheir existences under the laws of the Commonwealth of Massachusetts. Upon completion of the merger, the separate existenceexistences of OptimaWellesley and Wellesley Bank will terminate.

The articles of organization of Cambridge and Cambridge Trust Company and Cambridge Trust Company’sthe amended and restated bylaws of Cambridge and Cambridge Trust Company will remain as the articles of organization and bylaws, respectively, of Cambridge and Cambridge Trust Company. See “Comparison of Shareholder Rights” beginning on page 90.126.

The merger agreement provides that Cambridge may, at any time prior to the effective time, change the method of effecting the business combination of Cambridge Trust Company and Optima.Wellesley. However, no such change may (a) alter or change the merger consideration, (b) adversely affect the tax treatment of Cambridge or OptimaWellesley in connection with the merger, or (d)(c) be reasonably likely to materially impede or delay consummation of the merger.transactions contemplated by the merger agreement.

Effective Time and Timing of Closing

The merger can be completed and become effective after the following steps are completed: (1) approval of the merger by the FDIC, the MA Commissioner, and the NH Commissioner, and receipt of the Federal Reserve’s approval of the application waiver request (or approval of the merger by the Federal Reserve if the waiver request is denied), and satisfaction of requirements of the Massachusetts Housing Partnership and theCo-Operative Central Bank, (2) approval of the merger, including the issuance of Cambridge common stock in connection with the merger, by the shareholders of Cambridge, (3) approval of the merger by the shareholders of Optima,Wellesley, and (3)(4) filing of all documents as may be required by applicable laws and regulations to consummate the merger, including articles of merger with the Secretary of the Commonwealth of Massachusetts and with the Secretary of the State of New Hampshire.Maryland. Subject to the satisfaction or waiver of all conditions to closing set forth in the merger agreement, the closing of the merger will occur as promptly as practicable after all of the conditions in the agreement have been satisfied, or if permissible, waived by the party entitled to the benefit of the same, or on such other date as Cambridge and OptimaWellesley may mutually agree upon.

Cambridge and OptimaWellesley anticipate that the merger will be completed in the second quarter of 2019.2020. However, completion of the merger could be delayed if there is a delay in obtaining the required regulatory approvals or in satisfying any other conditions to the merger. There can be no assurances as to whether, or when, Cambridge and OptimaWellesley will obtain the required approvals or complete the merger.

Boards of Directors of Cambridge and Cambridge Trust Company After the Merger

Effective immediately following the effective time of the merger, or at Cambridge’s option, immediately following the 2020 annual meeting of shareholders of Cambridge, Cambridge, upon consultation with Wellesley, will designate one memberthree members of the OptimaWellesley board of directors to be selected by Cambridge, to serve as a membermembers of Cambridge’s board of directors and Cambridge Trust Company’s board of directors. The designeedesignees must meet the qualifications for directors as set forth in the amended and restated bylaws of Cambridge (“Cambridge’s Bylaws”).and Cambridge Trust Company. The designeedesignees will serve on the Cambridge boardand Cambridge Trust Company boards of directors until the next annual meeting following their appointments, at which time he or shethey will be nominated for a three-year term. The designee will also be appointed to the board of directors of Cambridge Trust Company, effective immediately following the effective time of the merger.

Consideration to be Received in the Merger

In the merger, each outstanding share of OptimaWellesley common stock will be converted into the right to receive at the election of the holder, either:

$32.00 in cash, without interest (which is referred to as the cash consideration); or

0.34680.580 shares of Cambridge common stock, plus cash in lieu of any fractional share (which is referred to as the stock consideration);

subject to the allocation and proration procedures described below. Subject to these procedures, you may elect to receive a portion of your merger consideration in cash and the remaining portion in shares of Cambridge common stock.share.

No fractional shares of Cambridge common stock will be issued in connection with the merger. Instead, each OptimaWellesley shareholder will receive an amount of cash, in lieu of any fractional share, based on the average per share closing price of Cambridge common stock on NASDAQ for the five consecutive trading days ending on the third business day immediately prior to the closing date of the merger, rounded to the nearest whole cent.

No interest will be paid on any cash merger consideration.

Election Procedures

No less than 20 business days prior to the anticipated closing date of the merger, each holder of record of Optima common stock will be sent an election form and other appropriate and customary transmittal materials which will permit each Optima shareholder:

to elect to receive $32.00 per share in cash, without interest, in exchange for all shares of Optima common stock held by the shareholder;

to elect to receive 0.3468 shares of Cambridge common stock, plus cash in lieu of any fractional share, in exchange for all shares of Optima common stock held by the shareholder;

to elect to receive the cash consideration with respect to a portion of the shares of Optima common stock held by the shareholder and the stock consideration with respect to the remaining shares of Optima common stock held by the shareholder; or

to make no election with respect to the consideration to be received in exchange for the shareholder’s shares of Optima common stock.

If you hold a portion of your shares in an individual retirement account and the remaining portion of your shares is held directly in your name, you will receive two election forms: one for your shares held in the individual retirement account and one for the shares held directly in your name.

An election form must be either accompanied by the Optima stock certificates as to which the election is being made, or must be accompanied by an appropriate guarantee of delivery of those stock certificates. Any election

form may be revoked or changed by the person submitting such election form to the exchange agent by written notice to the exchange agent only if such notice of revocation or change is actually received by the exchange agent at or prior to the election deadline. Stock certificates relating to any revoked election form will be promptly returned without charge.

In order to be effective, a properly completed election form must be received by the exchange agent on or before 5:00 p.m., Eastern time, on the 25th day following the mailing date of the election form to Optima shareholders, unless Cambridge and Optima have mutually agreed to another date and time as the election deadline, which date will be at least five business days prior to the anticipated closing date of the merger and publicly announced by Cambridge as soon as practicable prior to the election deadline. Optima shareholders are urged to carefully read and follow the instructions for completion of the election form and to submit the form along with the stock certificate(s) in advance of the election deadline.

If a Optima shareholder either:

does not submit a properly completed election form in a timely fashion; or

revokes his, her or its election form prior to the deadline for the submission of the election form and does not resubmit a properly completed election form by the election form deadline,

the shares of Optima common stock held by the shareholder will be designatednon-election shares. The exchange agent will have reasonable discretion in determining whether any election, revocation or change was properly or timely made and to disregard any immaterial defects in the election form.

If you have a preference for receiving either cash or Cambridge common stock for your shares of Optima common stock, you should return the election form indicating your preference. Optima shareholders who make an election will be accorded priority over those shareholders who make no election in instances where the cash consideration or stock consideration must bere-allocated in order to achieve the required ratio of Optima shares being converted into the right to receive cash and Cambridge common stock. If you do not make an election, you will be allocated cash and/or Cambridge common stock depending entirely on the elections made by other Optima shareholders.However, even if you do make an election, the form of merger consideration you actually receive may differ from the form of merger consideration you elect to receive due to the allocation procedures described below.

The market price of Cambridge common stock will fluctuate between the date of this proxy statement/prospectus, the date of your election and the effective time of the merger. Because the exchange ratio is fixed, such fluctuations will alter the value of the shares of Cambridge common stock that you may receive in the merger. In addition, because the tax consequences of receiving cash will differ from the tax consequences of receiving Cambridge common stock, you should carefully read the section of this proxy statement/prospectus titled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 62.

All election forms will be automatically revoked, and all Optima stock certificates returned, if the exchange agent is notified in writing by Cambridge and Optima that the merger agreement has been terminated.

Allocation Procedures

A shareholder’s ability to elect to receive cash or shares of Cambridge common stock in exchange for shares of Optima common stock in the merger is subject to allocation procedures set forth in the merger agreement. These allocation procedures are designed to ensure that 95% of the total number of shares of Optima common stock outstanding immediately prior to the effective time of the merger, will be converted into the right to receive shares of Cambridge common stock, and the remaining shares of Optima common stock will be converted into the right to receive cash.

Whether you receive the amount of cash and/or stock you request in your election form will depend in part on the elections of other Optima shareholders. You may not receive the form of consideration that you elect in the merger, and you may instead receive apro-rata amount of cash and Cambridge common stock.

Through the use of examples, we illustrate below the possible adjustments to elections in connection with these allocation procedures. The first of our three examples assumes you make an effective stock election with respect to all of your Optima shares. The second example assumes you make no election with respect to your Optima shares. Finally, the third example assumes that you make an effective cash election with respect to all of your Optima shares. You should note, however, that you are not required to elect to receive only cash or only Cambridge common stock. You may instead elect to receive cash with respect to a portion of your Optima shares and shares of Cambridge common stock with respect to the rest of your Optima shares. You also should note that the examples below are included for illustrative purposes only, and thepro-rated amounts of cash and stock that a shareholder may receive in the merger are subject to the application of the allocation provisions in the merger agreement by the exchange agent, including the exchange agent’s procedures for rounding the various amounts.

Allocation if Too Many Shares of Cambridge Common Stock are Elected. If Optima shareholders elect to receive more Cambridge common stock than Cambridge has agreed to issue in the merger, then all Optima shareholders who elected to receive cash or who have made no election would receive the cash consideration with respect to their Optima shares, and all Optima shareholders who elected to receive Cambridge common stock would receive apro-rata portion of the available shares of Cambridge common stock calculated in the manner described below.

EXAMPLE #1: Assume that (1) 2,000,000 shares of Optima common stock are outstanding immediately prior to the merger, (2) holders of 1,950,000 shares of Optima common stock have made effective stock elections, and (3) holders of 50,000 shares of Optima common stock have made effective cash elections. You hold 1,000 Optima shares and have made an effective election to receive the stock consideration for those shares. In this example,pro-ration would be required with respect to the Optima shareholders who elected the stock consideration.

EXPLANATION #1:

Step 1. Derive the stock fraction: the stock fraction equals the stock conversion number divided by the aggregate number of Optima shares for which an effective stock election was made, and represents the fraction to be used inpro-rating the stock consideration. The stock conversion number is the number of shares of Optima common stock that are to be converted into the right to receive the stock consideration in accordance with the terms of the merger agreement. The stock conversion number is equal to 1,900,000 shares of Optima common stock (95% of 2,000,000). The stock fraction for the example above is calculated as follows:

stock conversion number=1,900,000 shares=0.974
stock election shares1,950,000 shares

Step 2. Derive the stock consideration: thepro-rated stock consideration is the product of the stock fraction multiplied by the number of Optima shares as to which you have made an effective stock election. This amount is then multiplied by the exchange ratio of 0.3468. Thepro-rated stock consideration for the example above is calculated as follows:

0.974 × 1,000 = 974

974 × 0.3468 = 337.8 shares of Cambridge common stock

Because no fractional shares of Cambridge common stock will be issued in the merger, you would receive 337 shares of Cambridge common stock and cash for the additional 0.8 fractional share.

Step 3. Derive the cash consideration: the cash consideration that you will receive for your Optima shares is the product of $32.00, multiplied by the remaining number of Optima shares as to which you made an effective stock election. The cash consideration for the example above is calculated as follows:

$32.00 × (1,000 - 974) = $32.00 × 26 = $832

Thus, in this example, if you own 1,000 shares of Optima common stock and have made an effective stock election for all of those shares, you would receive (subject to rounding):

337 shares of Cambridge common stock;

cash for the 0.8 fractional share of Cambridge common stock; and

$832 in cash.

Allocation if Too Few Shares of Cambridge Common Stock are Elected. If Optima shareholders elect less Cambridge common stock than the merger agreement provides for Cambridge to issue in the merger, then all shares with respect to which Optima shareholders have elected to receive stock consideration would be converted into the right to receive Cambridge common stock, and the shares for which Optima shareholders have elected to receive cash or with respect to which no election was made would be treated in the manner illustrated below.

EXAMPLE #2: Assume that (1) 2,000,000 shares of Optima common stock are outstanding immediately prior to the merger, (2) holders of 1,850,000 shares of Optima common stock have made effective stock elections, (3) holders of 10,000 shares of Optima common stock have made effective cash elections and (4) holders of 140,000 shares of Optima common stock have made no election with respect to their shares. You hold 1,000 Optima shares and have made no election with respect to those shares. In this example,pro-ration would be required with respect to the shareholders who made no election with respect to their Optima shares.

EXPLANATION #2:

Step 1. Derive the shortfall number: the shortfall number is the amount by which the stock conversion number exceeds the aggregate number of Optima shares with respect to which the stock consideration was elected. The stock conversion number is the number of shares of Optima common stock that are to be converted into the right to receive the stock consideration in accordance with the terms of the merger agreement. The stock conversion number is equal to 1,900,000 shares of Optima common stock (95% of 2,000,000). The shortfall number for the example above is calculated as follows:

1,900,000 – 1,850,000 = 50,000 shares

Step 2. Determine whether the shortfall number is less than or equal to the number ofnon-election shares: In this example, the shortfall number (0,000 shares) is less than the number ofnon-election shares (140,000 shares). As a result, all Optima shares with respect to which an effective cash election was made would be converted into the right to receive the cash consideration, and the holders ofnon-election shares would receive a mix of stock consideration and cash consideration.

Step 3. Derive the stock fraction: the stock fraction equals the shortfall number divided by the aggregate number of Optima shares for which no election was made, and represents the fraction to be used inpro-rating the stock consideration. The stock fraction for the example above is calculated as follows:

shortfall number    

=50,000 shares=0.36

non-election shares

140,000 shares

Step 4. Derive the stock consideration: thepro-rated stock consideration is the product of the stock fraction multiplied by the number of Optima shares as to which you have made no election. This amount is then multiplied by the exchange ratio of 0.3468. Thepro-rated stock consideration for the example above is calculated as follows:

0.36 × 1,000 = 360

360 × 0.3468 = 124.8 shares of Cambridge common stock

Because no fractional shares of Cambridge common stock will be issued in the merger, you would receive 124 shares of Cambridge common stock and cash for the additional 0.8 fractional share.

Step 5. Derive the cash consideration: the cash consideration that you will receive for your Optima shares is the product of $32.00, multiplied by the remaining number of Optima shares as to which you made no election. The cash consideration for the example above is calculated as follows:

$32.00 × (1,000 - 360) = $32.00 × 640 = $20,480

Thus, in this example, if you own 1,000 shares of Optima common stock and made no election with respect to those shares, you would receive (subject to rounding):

124 shares of Cambridge common stock;

cash for the 0.8 fractional share of Cambridge common stock; and

$20,480 in cash.

EXAMPLE #3: Assume that (1) 2,000,000 shares of Optima common stock are outstanding immediately prior to the merger, (2) holders of 1,500,000 shares of Optima common stock have made effective stock elections, (3) holders of 200,000 shares of Optima common stock have made effective cash elections and (4) holders of 300,000 shares of Optima common stock have made no election with respect to their shares. You hold 1,000 Optima shares and have made an effective election to receive the cash consideration for those shares. In this example,pro-ration would be required with respect to the shareholders who made cash elections.

EXPLANATION #3:

Step 1. Derive the shortfall number: the shortfall number is the amount by which the stock conversion number exceeds the aggregate number of Optima shares with respect to which the stock consideration was elected. The stock conversion number is the number of shares of Optima common stock that are to be converted into the right to receive the stock consideration in accordance with the terms of the merger agreement. The stock conversion number is equal to 1,900,000 shares of Optima common stock (95% of 2,000,000). The shortfall number for the example above is calculated as follows:

1,900,000 - 1,500,000 = 400,000 shares

Step 2. Determine whether the shortfall number is less than or equal to the number ofnon-election shares: In this example, the shortfall number (400,000 shares) is greater than the number ofnon-election shares (300,000 shares). As a result, all Optima shares with respect to which no election was made would be converted into the right to receive the stock consideration, and the holders of shares with respect to which an effective cash election was made would receive a mix of stock consideration and cash consideration.

Step 3. Derive the stock fraction: the stock fraction equals the amount by which the shortfall number exceeds the total number ofnon-election shares, divided by the aggregate number of Optima shares for which an effective cash election was made, and represents the fraction to be used inpro-rating the stock consideration. The stock fraction for the example above is calculated as follows:

shortfall number -  non-election shares

  =  (400,000 - 300,000)  =  100,000  =  0.50  
    

 

    

 

      

cash election shares

    200,000    200,000      

Step 4. Derive the stock consideration: thepro-rated stock consideration is the product of the stock fraction multiplied by the number of Optima shares as to which you have made an effective cash election. This amount is then multiplied by the exchange ratio of 0.3468. Thepro-rated stock consideration for the example above is calculated as follows:

0.50 × 1,000 = 500

500 × 0.3468 = 173.4 shares of Cambridge common stock

Because no fractional shares of Cambridge common stock will be issued in the merger, you would receive 173 shares of Cambridge common stock and cash for the additional 0.4 fractional share.

Step 5. Derive the cash consideration: the cash consideration that you will receive for your Optima shares is the product of $32.00, multiplied by the remaining number of Optima shares as to which you made an effective cash election. The cash consideration for the example above is calculated as follows:

$32.00 × (1,000 - 500) = $32.00 × 500 = $16,000

Thus, in this example, if you own 1,000 shares of Optima common stock and made an effective cash election for all of those shares, you would receive (subject to rounding):

173 shares of Cambridge common stock;

cash for the 0.4 fractional share of Cambridge common stock; and

$16,000 in cash.

Exchange of Optima Stock Certificates for Cambridge Stock CertificatesCertificates; Dividends

On or before the closing date of the merger, Cambridge will cause to be delivered to the exchange agent certificates, or at Cambridge’s option, evidence of shares in book-entry form, representing the shares of Cambridge common stock to be issued in the merger. In addition, Cambridge will deliver to the exchange agent an aggregate amount of cash consideration sufficient to pay the aggregate amount of cash consideration payable in the merger, including an estimated amount of cash to be paid in lieu of fractional shares of Cambridge common stock. Cambridge has selected American Stock Transfer & Trust Company, LLC to act as exchange agent in connection with the merger.

Optima shareholders who surrender their stock certificates and complete transmittal and election forms prior to the election deadline will automatically receive the merger consideration allocated to them promptly following completion of the allocation procedures.

As promptly as practicable followingPromptly after the effective time of the merger, the exchange agent will mail to each OptimaWellesley shareholder of record at the effective time of the merger, who did not previously surrender Optima stock certificates withnotice advising such holder of the effectiveness of the merger, including a properly completed election form aof letter of transmittal (in a form satisfactory to Cambridge and Wellesley) containing instructions for use in surrendering the shareholder’s OptimaWellesley stock certificates. When such OptimaWellesley shareholders deliver their OptimaWellesley stock certificates or book-entry shares to the exchange agent with a properly completed and duly executed letter of transmittal and any other required documents, their OptimaWellesley stock certificates or book-entry shares will be cancelled and in exchange, Optimasuch Wellesley shareholders will receive, as allocated to them:receive:

 

a Cambridge stock certificate, or at the election of Cambridge, a statement reflecting shares issued in book-entry form, representing the number of whole shares of Cambridge common stock that they are entitled to receive under the merger agreement;

a check representing the amount of cash that they are entitled to receive under the merger agreement; and/or

 

a check representing the amount of cash that they are entitled to receive in lieu of any fractional shares.

No interest will be paid or accrued on any cash constituting merger consideration.

OptimaWellesley shareholders who are receiving the stock consideration in the merger are not entitled to receive any dividends or other distributions on Cambridge common stock with a record date after the closing date of the merger until they have surrendered their OptimaWellesley stock certificates or book-entry shares in exchange for a Cambridge stock certificate.certificate or book-entry shares. After the surrender of their OptimaWellesley stock certificates Optimaor book-entry shares, Wellesley shareholders of record will be entitled to receive any dividend or other distribution, without interest, which had become payable with respect to their Cambridge common stock.

OptimaTreatment of Stock Options

Pursuant to the terms of the merger agreement, each option to purchase shares of OptimaWellesley common stock, whether vested or unvested, that is outstanding as of immediately prior to the effective time of the merger will be

cancelled at the effective time of the merger. In exchange for the cancellation of each option, the holder of such option will receive a cash amount equal to the product of (x) the number of shares of OptimaWellesley common stock subject to such option at the effective time multiplied by (y) the excess of the “per share consideration” over the exercise price per share of such option, less applicable taxes and withholdings and without interest. In the event that the exercise price of an option is equal to or greater than the per share consideration, then the option will be cancelled in exchange for no consideration. The per share consideration is determined according to the following formula: the sum of (1) the product of 95%, multiplied by the exchange ratio of 0.3468,0.580 multiplied by the average of the closing sales pricesprice of one share of Cambridge common stock on NASDAQ for the five consecutive trading days ending on the third business day immediately preceding the closing date, plus (2)date.

Treatment of Restricted Stock Awards

Pursuant to the productterms of 5%, multiplied by the cash considerationmerger agreement, any vesting restrictions on each share of $32.00.restricted stock outstanding immediately prior to the effective time of the merger will automatically lapse and each share of restricted stock will be treated as an issued and outstanding share of Wellesley common stock.

Representations and Warranties

The merger agreement contains representations and warranties made by and to Cambridge and Optima.Wellesley. The statements embodied in those representations and warranties were made for purposes of the agreement between Cambridge and OptimaWellesley and are subject to important qualifications and limitations agreed to by Cambridge and OptimaWellesley in connection with negotiating the terms of the merger agreement. In addition, certain representations and warranties were made as of a specified date, may be subject to contractual standards of materiality different from what may be viewed as material to shareholders, or may have been used for the purpose of allocating risk between Cambridge and OptimaWellesley rather than establishing matters as fact. For the foregoing reasons, you should not rely on the representations and warranties as statements of factual information. Third parties are not entitled to the benefits of the representations and warranties in the merger agreement.

Each of Cambridge, Cambridge Trust Company, Wellesley and OptimaWellesley Bank has made representations and warranties to the other regarding, among other things:

 

due organization, good standing and authority;

 

capitalization;

 

subsidiaries;

 

corporate power;

 

corporate records;

 

corporate authority;

 

regulatory approvals, no defaults;

 

financial statements;

 

SEC filings;

financial controls and procedures;

 

absence of certain changes or events;

 

regulatory matters;

legal proceedings;

 

compliance with laws;

 

brokers;

 

taxemployee benefit plans;

labor matters;

 

employee benefit plans;environmental matters;

tax matters;

 

derivative transactions;

 

propertiesloans and leases;nonperforming and classified assets;

inapplicability of antitakeover laws;

the accuracy of information in this joint proxy statement/prospectus; and

 

anti-money laundering, community reinvestment and customer information security.

In addition, Optima hasWellesley and Wellesley Bank have made representations and warranties to Cambridge regarding, among other things:

 

regulatory action;

 

material contracts;

 

labor matters;

environmental mattersdefaults;

 

investment securities;

loans and nonperforming and classified assets;

 

tangible properties and assets;

 

trust activities;intellectual property;

fiduciary accounts;

 

insurance;

 

intellectual property;

inapplicability of antitakeover laws;fairness opinion; and

 

transactions with affiliates.

In addition, Cambridge has made representations and warranties to OptimaWellesley regarding, among other things:

 

SEC filings;

Sufficient funds;deposit insurance; and

 

stock issued in the merger; and

deposit insurance.merger.

The representations and warranties of each of Cambridge and OptimaWellesley will expire upon the effective time of the merger. The representations and warranties in the merger agreement are complicated and not easily summarized. You are urged to carefully read Articles III and IV of the merger agreement attached to this joint proxy statement/prospectus asAnnex A.

Conduct of Business Pending the Merger

Conduct of Business of OptimaWellesley and Wellesley Bank Pending the Merger

Under the merger agreement, Optima hasWellesley and Wellesley Bank have agreed that, until the effective time of the merger or the termination of the merger agreement, OptimaWellesley and Wellesley Bank will not, except as expressly permitted by the merger agreement or with the prior written consent of Cambridge:

 

conduct its business other than in the ordinary course consistent with past practice and prudent banking practice and in compliance in all material respects with all applicable laws and regulations;

fail to use reasonable best efforts to preserve itstheir business organizationorganizations intact, maintain the services of current officers, employees, directors and employeesother key individual service providers of Optima,Wellesley and any of its subsidiaries, and preserve the goodwill of Optima’stheir customers and others with whom business relationships exist;

 

issue, sell or otherwise permit to become outstanding, or authorize the creation or reservation of, any securities or equity equivalents or enter into any agreement with respect to the foregoing, except with respect to stock based awards outstanding on the date of the merger agreement;

 

permit any additional shares of capital stock to become subject to grants of employee or director stock options, warrants, rights, convertible securities and other arrangements or commitments which obligate OptimaWellesley to issue or dispose of any of its capital stock or other ownership interests

directly or indirectly redeem, retire, purchase or otherwise acquire any shares of its capital stock (except to the extent necessary to effect a cashless exercise of an option to purchase OptimaWellesley stock that was outstanding at the time of the merger agreement);

 

except for its regular quarterly dividends, make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of OptimaWellesley stock;

 

directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its capital stock;

 

enter into, amend or renew any employment, consulting, severance or similar agreement or arrangement with any director, officer, employee or employee,individual service provider, or grant any salary or wage increase or increase any employee benefit or pay any incentive or bonus payments, except for (i) normal increases in compensation tonon-executive employees in the ordinary course of business consistent with past practice not to exceed 10% with respect to any individualnon-executive employee and all such increases in the aggregate not to exceed 3%4% of total compensation, and provided that any increases, either singularly or collectively, are consistent with its 20182019 budget, (ii) cash contributions to its 401(k) plan and ESOP in the ordinary course of business consistent with past practice, and make apro-rated ESOP contribution for 2020 and normal accruals under its supplemental executive retirement plan consistent with past practice, and (iii) payment of 2019 bonuses and 2020 accrued bonuses at the closing of the merger consistent with past practice and prorated through the closing date;

 

hire any person as an employee or promote any employee to a position of Vice President or above to the extent such hire or promotion would increase any severance obligation, except (i) to satisfy existing contractual obligations, and (ii) persons hired to fill any vacancies at an annual salary of less than $75,000$100,000 and whose employment is terminable at will;

 

enter into, establish, adopt, amend, modify or terminate any benefit and compensation plans, contracts, policies or arrangements covering current or former directors, officers or employees, exceptexcept: (i) as required by applicable law or the merger agreement, subject to prior written notice and consultation with Cambridge; or (ii) to satisfy certain contractual obligations existing as of the date of the merger agreement.

 

pay, loan or advance any amount to, or sell, transfer or lease any properties or assets to, or enter into any other transaction with, its officers or directors or any of their immediate family members or any affiliates or associates of any of its officers or directors, other than (i) compensation in the ordinary course of business consistent with past practice, or (ii) certain loans permitted under the merger agreement;

 

sell, transfer, mortgage, pledge, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties, except in the ordinary course of business consistent with past practice and in a transaction that, together with all other such transactions, is not material to OptimaWellesley taken as a whole;

acquire all or any portion of the assets, business, deposits or properties of any other entity other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice;

 

make any capital expenditures other than capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $25,000 individually or $100,000 in the aggregate;

 

amend Optima’s Charterthe charter of bylaws of Wellesley or Optima’s Bylaws;Wellesley Bank;

 

implement or adopt any change in its accounting principles, practices or methods other than as may be required by applicable laws or regulations or by accounting principles generally accepted in the United States, or GAAP;

 

enter into, amend, modify or terminate any contract, lease or insurance policy that involves the payment of, or incurs fees, in excess of $25,000$50,000 per annum, except in the ordinary course of business consistent with past practice or as expressly permitted by the merger agreement;

enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation to which OptimaWellesley or any of its subsidiariesWellesley Bank is or becomes a party, which involves a payment that exceeds $25,000$100,000 and/or would impose a material restriction on its business;their businesses;

 

enter into any new material line of business;

 

materially change its material lending, investment, underwriting, risk and asset liability management and other material banking and operating policies, except as required by applicable law, regulation or policies imposed by any regulatory authority;

 

file any application or make any contract with respect to branching or site location or site relocation;

 

enter into any derivatives transactions, except in the ordinary course of business consistent with past practice;

 

incur any indebtedness for borrowed money or other liabilities (including brokered deposits and wholesale funding), federal funds purchased, borrowings from the Federal Home Loan Bank, and securities sold under agreements to repurchase, each with a duration exceeding 1 year, or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other person, other than in the ordinary course of business consistent with past practice;

 

acquire (other than by way of foreclosures or acquisitions in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary course of business consistent with past practice) (i) any debt security or equity investment of a type or in an amount that is not in accordance with Optima’sWellesley’s investment policy, or (ii) any debt security other than U.S. government and U.S. government agency securities with final maturities not greater than five years or mortgage-backed or mortgage related securities which would not be considered “high risk” securities under applicable regulatory pronouncements, in each case purchased in the ordinary course of business consistent with past practice;

 

restructure or materially change its investment securities portfolio, through purchases, sales or otherwise, or the manner in which such portfolio is classified under GAAP or reported for regulatory purposes;

 

make, renegotiate, renew, increase, extend, modify or purchase any loan, other than in accordance with its existing loan policies and procedures, or to satisfy existing contractual obligations; provided, however, that prior notification to Cambridge Trust Company and Cambridge is required for (i) any new origination in excess of $2,000,000,$4,000,000, or (ii) any loan not made in accordance with its existing loan policies;

make any equity investment or equity commitment to invest in real estate or in any real estate development project other than by way of foreclosures or acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith, in each case in the ordinary course of business consistent with past practice;

 

make or change any material tax election, file any amended tax return, enter into any material closing agreement, settle or compromise any material liability with respect to taxes, agree to any adjustment of any material tax attribute, file any material claim for a refund of taxes, or consent to any extension or waiver of the limitation period applicable to any material tax claim or assessment;

 

commit any act or omission which constitutes a material breach or default under any agreement with any governmental authority or under any material contract, lease or other material agreement or material license to which it is a party or by which it or its properties is bound;

 

foreclose on or take a deed or title to any commercial real estate without first conducting a Phase I environmental assessment of the property or foreclose on any commercial real estate if such environmental assessment indicates the presence of a hazardous substance in amounts which would be material;

cause or allow the loss of insurance coverage that would have a material adverse effect to Optima,Wellesley, unless replaced with coverage which is substantially similar (in amount and insurer) to that in effect at the time of the merger agreement;

 

discharge or satisfy any lien or pay any obligation or liability, whether absolute or contingent, due or to become due, except in the ordinary course of business consistent with normal banking practices;

 

take any action or fail to take any action that is intended or is reasonably likely to (i) result in any of its representations and warranties set forth in the merger agreement being or becoming untrue in any material respect at any time at or prior to the effective time of the merger, (ii) result in any of the conditions to the merger set forth in the merger agreement not being satisfied, (iii) result in a material violation of any provision of the merger agreement, except, in each case, as required by applicable law or regulation or (iv) result in a material delay of the approval or completion of the merger; or

 

enter into any contract with respect to, or otherwise agree or commit to do, any of these prohibited activities.

Conduct of Business of Cambridge Pending the Merger

Under the merger agreement, Cambridge has agreed that, until the effective time of the merger or the termination of the merger agreement, Cambridge and Cambridge Trust Company will not, except as expressly permitted by the merger agreement or with the prior written consent of Optima:Wellesley:

 

take any action or fail to take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in the merger agreement being or becoming untrue in any material respect at any time at or prior to the effective time, (ii) any of the conditions to the merger agreement not being satisfied or (iii) a material violation of any provision of the merger agreement except, in each case, as may be required by applicable law or regulation;

 

change its record date for payment of its quarterly dividend from the record date established in the prior year’s quarter in a manner that is inconsistent with past practice;

 

enter into any contract with respect to, or otherwise agree or commit to do, any of these prohibited activities;

grant, issue, deliver or sell any additional shares of capital stock or rights; provided, however, that Cambridge may (i) grant equity awards pursuant to its employee benefit plans as required by any Cambridge employee benefit plan or in the ordinary course consistent with past practice, (ii) issue capital stock upon the vesting or exercise of any equity awards granted pursuant to a Cambridge employee benefits plan outstanding as of the date hereof in accordance with the terms and conditions thereof as in effect on the date hereof, including in connection with “net settling” any outstanding awards, and (iii) issue Cambridge capital stock in connection with the transactions contemplated hereby; or

thereof as in effect on the date hereof, including in connection with “net settling” any outstanding awards, and (iii) issue Cambridge capital stock in connection with the transactions contemplated by the merger agreement;

 

other than in the ordinary course of business consistent with past practice or in connection with the transactions contemplated hereby, make, declare, pay or set aside for payment any stock dividend on or in respect of, or declare or make any distribution on any shares of Cambridge Stockcommon stock or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its capital stock.stock;

amend its charter or bylaws in a manner that would materially and adversely affect the holders of Wellesley common stock, as prospective holders of Cambridge common stock, relative to other holders of Cambridge common stock;

enter into any binding definitive agreement, or publicly announce its intent to enter into any binding definitive agreement, to acquire any other depository institution or credit union prior to the receipt of all regulatory approvals required for the transactions contemplated by the merger agreement;

adopt or publicly propose a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, in each case, of Cambridge Trust Company; or

enter into any contract with respect to, or otherwise agree or commit to do, any of these prohibited activities.

OptimaWellesley Shareholder Meeting

OptimaWellesley has agreed to use its best efforts to call, hold and convene a meeting of its shareholders within 3540 days after the initial mailing of this joint proxy statement/prospectus to its shareholders (and in any event to convene such meeting within 45 days after the initial mailing of this proxy statement/prospectus to its shareholders) to consider and vote on the approval of the merger agreement and any other matters required to be approved by its

shareholders in order to consummate the merger. OptimaWellesley has also agreed to ensure that its shareholder meeting is called, noticed, convened, held and conducted, and that all proxies solicited in connection with the meeting are solicited, in compliance with applicable law, Optima’s CharterWellesley’s charter and Optima’s Bylaws.Wellesley’s bylaws.

Additionally, the board of directors of OptimaWellesley has agreed to recommend that its shareholders vote to approve the merger agreement and the transactions contemplated thereby (including the merger) and any other matters required to be approved by its shareholders for consummation of the merger.

Cambridge Shareholder Meeting

Cambridge has agreed to use its best efforts to call, hold and convene a meeting of its shareholders within 40 days after the initial mailing of this joint proxy statement/prospectus to its shareholders to consider and vote on the approval of the merger agreement, including the issuance of Cambridge common stock in connection with the merger, and any other matters required to be approved by its shareholders in order to consummate the merger. Cambridge has also agreed to ensure that its shareholder meeting is called, noticed, convened, held and conducted, and that all proxies solicited in connection with the meeting are solicited, in compliance with applicable law, Cambridge’s charter and Cambridge’s bylaws.

Additionally, the board of directors of Cambridge has agreed to recommend that its shareholders vote to approve the merger agreement and the transactions contemplated thereby (including the merger), including the issuance of Cambridge common stock in connection with the merger and any other matters required to be approved by its shareholders for consummation of the merger.

No Solicitation

OptimaWellesley has agreed that neither it nor any of its respective directors, officers, employees, investment bankers, financial advisors, attorneys, accountants and other representative retained by OptimaWellesley (which we refer to as Optima’sWellesley’s representatives) will, directly or indirectly:

 

solicit, initiate, induce or knowingly encourage or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an acquisition proposal;

 

participate in any discussions or negotiations regarding any acquisition proposal or furnish, or otherwise provide access to, any confidential ornon-publicinformation or data with respect to OptimaWellesley or otherwise relating to an acquisition proposal; or

 

release any person from, waive any provision of, or fail to enforce any confidentiality agreement or standstill agreement to which OptimaWellesley is a party.

OptimaWellesley must immediately cease any existing discussions or negotiations with any person (other than Cambridge) with respect to any of the foregoing, and use reasonable best efforts to cause all persons (other than Cambridge) who have been furnished confidential information regarding OptimaWellesley in connection with the solicitation of or discussions regarding an acquisition proposal within the 12 months prior to the date of the merger agreement to promptly return or destroy such information. Optima will take all steps necessary to terminate any approval that may have been given under any such provisions authorizing any person to make an acquisition proposal.

Under the merger agreement, an “acquisition proposal” means any proposal or offer with respect to any of the following (other than the transactions contemplated thereunder):

 

merger, consolidation, share exchange, business combination or other similar transactions;

 

sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets and/or liabilities that constitute a substantial portion of the net revenues, net income or assets of OptimaWellesley or Wellesley Bank in a single transaction or series of transactions;

 

tender offer or exchange offer for 10%25% or more of the outstanding shares of capital stock or the filing of a registration statement under the Securities Act in connection therewith; or

 

public announcement by any person of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

If OptimaWellesley receives a bona fide unsolicited written acquisition proposal prior to its shareholder meeting that did not result from a breach by OptimaWellesley of any of thenon-solicitation provisions in the merger agreement as discussed above, OptimaWellesley may participate in discussions or negotiations regarding the unsolicited acquisition proposal or furnish the third party with, or otherwise afford access to the third party of, any information or data with respect to OptimaWellesley or any of its subsidiaries or otherwise relating to the acquisition proposal if:

 

the OptimaWellesley board of directors first determines in good faith, after consultation with its outside legal counsel and with respect to financial matters, its independent financial advisor, that such action would be required in order for directors of OptimaWellesley to comply with their fiduciary duties under applicable law in response to an acquisition proposal that the OptimaWellesley board of directors believes in good faith is a superior proposal;

during the four business day period following notification by Optima to Cambridge about such proposal, Optima and its advisors negotiate in good faith with Cambridge to make adjustments in the terms and conditions of the merger agreement so that such proposal no longer constitutes a superior proposal;

 

such negotiations with Cambridge fail to result in the necessary adjustments to the merger agreement;

OptimaWellesley has provided Cambridge with at least 24 hourshour notice of receipt of such acquisition proposal; and

 

prior to furnishing or affording access to any information or data with respect to OptimaWellesley or any of its subsidiaries or otherwise relating to an acquisition proposal, the third party enters into a confidentiality agreement with OptimaWellesley containing terms no less favorable to Cambridge than those contained in its confidentiality agreement with Cambridge.

A “superior proposal” means any bona fide written proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 25% of the combined voting power of the shares of OptimaWellesley common stock then outstanding or all or substantially all of the assets of OptimaWellesley and otherwise (a) on terms which the OptimaWellesley board of directors determines in good faith, after consultation with its financial advisor, to be more favorable from a financial point of view to the OptimaWellesley shareholders than the transactions contemplated with Cambridge, and (b) that constitutes a transaction that, in the OptimaWellesley board of directors’ good faith judgment, is reasonably likely to be consummated on the terms set forth, taking into account all legal, financial, regulatory and other aspects of such proposal.

OptimaWellesley must deliver to Cambridge within twenty-four hours a new notice of each such superior proposal.

Employee Benefits

Following the closing date of the merger, Cambridge may, in its sole discretion, choose to maintain any or all of Optima’sWellesley’s benefit plans, and OptimaWellesley and Wellesley Bank must cooperate with Cambridge in order to effect any plan terminations to be made as of the effective time of the merger. For the12-month period followingcommencing at the effective time of the merger and ending on December 31, 2020 (or the applicable continuing employee’s earlier termination of employment), Cambridge shallwill provide or cause to be provided to each OptimaWellesley and Wellesley Bank employee who continues employment with Cambridge or Cambridge Trust Company (a “continuing employee”) (i) at least the same base salary or base rate of pay as provided to such continuing employee immediately prior to the effective time of the merger, (ii) target cash bonus opportunities as provided to similarly-situated employees of Cambridge or Cambridge Trust Company, and (iii) other benefits (other than severance, termination pay or termination pay)equity compensation) substantially comparable in the aggregate to the benefits provided such continuing employees immediately prior to similarly-situated employeesthe effective time of the merger.

For any Wellesley benefit plan terminated for which there is a comparable employee benefit or compensation plan, program, policy, agreement or arrangement of Cambridge or any of its subsidiaries of general applicability, Cambridge Trust Company. Cambridge shallwill take all commercially reasonable actionsaction so that continuing employees areof Wellesley or Wellesley Bank will be entitled to participate in such Cambridge benefit plans of general applicabilityplan to the same extent as similarly-situated Cambridge employees. employees of Cambridge.

Cambridge will cause each Cambridge benefit plan in which continuing employees of Wellesley or Wellesley Bank are eligible to participate to take into account for purposes of eligibility and vesting under the Cambridge benefit plans, but not for purposes of benefit accrual, under a defined benefit plan, the service of such employees with OptimaWellesley or Wellesley Bank to the same extent as such service was credited for such purpose by Optima.Wellesley or Wellesley Bank. Such service, however, will not be recognized to the extent that such recognition would result in a duplication of benefits or retroactive application. benefits.

Cambridge may amend, merge or terminate any OptimaWellesley benefit plan or Cambridge benefit plan in accordance with their terms at any time. However, Cambridge will continue to maintain the OptimaWellesley benefit plans (other((other than cashstock-based or incentive equity or equity-based incentive, retention, change in control, severance, defined benefit, retiree welfare, or similar plans, programs or agreements)plans) for which there is a comparable Cambridge benefit plan until the continuing employees are permitted to participate in the Cambridge benefit plan, unless such Cambridge benefit plan has been frozen or terminated with respect to similarly-situated Cambridge employees.

Following the closing date of the merger, Cambridge will honor, in accordance with Wellesley’s policies and procedures in effect as of the date of the merger agreement, any employee expense reimbursement obligations of Wellesley forout-of-pocket expenses incurred during the calendar year in which the closing occurs by any Wellesley employee whose employment continues after the effective time of the merger.

In the event Cambridge elects to terminate the Wellesley Bank 401(k) plan prior to the closing date, Cambridge will take any and all actions as may be required to permit continuing employees to roll over their account

balances in the Wellesley Bank 401(k) plan into the Cambridge 401(k) plan. Cambridge will honor, under the vacation policies of Optima,Wellesley and Wellesley Bank, the accrued but unused vacation time of each continuing employee.employees.

If a continuingan employee of Wellesley or Wellesley Bank becomes eligible to participate in a medical, dental, vision, prescription drug, or other health plan, disability plan or life insurance plan of Cambridge upon termination of such plan of Optima,Wellesley or Wellesley Bank, Cambridge will make all commercially reasonable efforts to cause each such plan to (a) waive any preexisting condition limitations to the extent such conditions are covered under the applicable medical, health or dental plan of Cambridge, (b) honorprovide credit under any such plans for any deductible,co-payment andout-of-pocket expenses incurred by the continuing employees and their beneficiaries during the portion of the calendar year prior to such participation, and (c) waive any waiting period limitation,actively-at-work requirement or evidence of insurability requirement which would otherwise be applicable to such continuing employee on or after the effective time of the merger, in each case to the extent such employee satisfied any similar limitation or requirement under an analogous OptimaWellesley benefit plan prior to the effective time of the merger.

Any Optima employee (excluding any employee who is partySubject to an employment agreement,change-in-control agreement or any other agreement which provides for severance payments) whose employment isthe occurrence of the closing of the merger, the Wellesley Bank ESOP will be terminated (other than for cause)by Wellesley Bank prior to the closing date. In connection with the termination of the Wellesley Bank ESOP, all plan accounts will be fully vested, all outstanding indebtedness of the Wellesley Bank ESOP will be repaid by delivering a sufficient number of unallocated shares of Wellesley common stock to Wellesley, at the request of Cambridge (but by and in the sole discretion of Optima)least five business days prior to the effective time of the merger, or is terminatedall remaining shares of Wellesley common stock held by Cambridge within 12 monthsthe Wellesley Bank ESOP will be converted into the right to receive the merger consideration, and the balance of the unallocated shares and any other unallocated assets remaining in the Wellesley Bank ESOP after repayment of the Wellesley Bank ESOP loan will be allocated as earnings to the accounts of the Wellesley Bank ESOP participants who are employed as of the date of termination of the Wellesley Bank ESOP based on their account balances under the Wellesley Bank ESOP as of the date of termination of the Wellesley Bank ESOP and distributed to Wellesley Bank ESOP participants after the receipt of a favorable determination letter from the IRS.

Prior to the effective time of the merger, Wellesley Bank will submit the application for favorable determination letter in advance of the effective time of the merger. Wellesley Bank will adopt such amendments to the Wellesley Bank ESOP. Promptly following the effectivereceipt of a favorable determination letter from the IRS regarding the qualified status of the Wellesley Bank ESOP upon its termination, the account balances in the Wellesley Bank ESOP will either be distributed to participants and beneficiaries or transferred to an eligibletax-qualified retirement plan or individual retirement account as a participant or beneficiary may direct. Prior to the closing date of the merger, shall be entitledWellesley Bank will provide Cambridge with the final documentation evidencing that the actions contemplated have been effectuated. Wellesley Bank will continue to receive severance paymentsaccrue and make contributions to the Wellesley Bank ESOP trust from the date of the merger agreement through the termination date of the Wellesley Bank ESOP in an amount sufficient, but not to exceed, the loan payments which become due in the ordinary course on the outstanding loans to the Wellesley Bank ESOP prior to the termination of the Wellesley Bank ESOP and will make apro-rated payment on the Wellesley Bank ESOP loan for the 2020 plan year through and including the end of the calendar quarter immediately preceding the closing, prior to the termination of the Wellesley Bank ESOP.

Wellesley Bank will take all necessary action to terminate the Wellesley Bank supplemental executive retirement plan at or immediately prior to the effective time of the merger in accordance with Section 409A of the Code and to pay to each participant a lump sum amount equal to two weeksthe benefit to which such participant is entitled pursuant to the terms of base pay for each full year of service (includingsuch plan.

Wellesley Bank will take all service with Optimanecessary action to terminate the existing salary continuation agreement by and Cambridge), with a minimum of twobetween Wellesley Bank and a maximum of 26 weeks of base pay. SeeMr. Fontaine at or immediately prior to the section of this proxy statement/prospectus entitled “The Merger — Interests of Optima’s Directors and Executive Officers in the Merger — Employment Agreements with Optima” for a descriptioneffective time of the aggregate amounts duemerger in accordance with Section 409A of the Code and to Mr. Morrison, Ms. Morrison, Mr. Youngpay the executive a lump sum amount equal to the benefit to which such participant is entitled pursuant to the terms of such agreement. Wellesley and Wellesley Bank will take all necessary action to terminate the employment agreement by and among Wellesley, Wellesley Bank and Mr. Garside.Fontaine at or immediately prior to the effective time of the merger.

Cambridge and OptimaWellesley may provide a retention pool to be paid to certain OptimaWellesley employees designated by Cambridge in consultation with Optima.Wellesley.

Indemnification and Insurance

Indemnification

Under the merger agreement, Cambridge has agreed that for a period of six years following the effective time of the merger, it will indemnify and hold harmless each present and former director and officer of OptimaWellesley and Wellesley Bank against any reasonable costs, expenses or fees (including reasonable attorneys’ fees), judgments, amounts paid in settlement, fines, penalties, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, for matters existing or occurring at or prior to the effective time of the merger, arising in whole or in part out of or pertaining to the fact that he or she was a director or officer of OptimaWellesley and Wellesley Bank or is or was serving at the request of OptimaWellesley or Wellesley Bank as a director, officer, employee or other agent of any other organization or in any capacity with respect to any employee benefit plan of Optima,Wellesley and Wellesley Bank, to the fullest extent which such indemnified party would be entitled under Optima’s Charterthe charter and Optima’s Bylawsbylaws of Wellesley and Wellesley Bank as in effect of the date of the merger agreement.

Directors’ and Officers’ Insurance

The merger agreement requires Cambridge to use its reasonable best efforts to cause the directors and officers of OptimaWellesley immediately prior to the effective time of the merger to be covered by Optima’sWellesley’s directors’ and officers’ liability insurance policy for asix-year period following the effective time of the merger with respect to acts or omissions occurring prior to the effective time committed by such directors and officers in their capacities as such. Cambridge will not be required to expend in any one year more than 250% of the current annual amount expended by OptimaWellesley to maintain such insurance. If the current insurance policy requires Cambridge to expend more than this amount, Cambridge shall use reasonable best efforts to obtain as much comparable insurance as is available.

Voting Agreements

Each of the directors (including the Chief Executive Officer, the Executive Vice President and Chief Administrative Officercertain executive officers of Cambridge and the Executive Vice President and Chief Lending Officer) and one other executive

officer of OptimaWellesley have entered into a voting agreement with Cambridge.agreements. In the voting agreement, theagreements, these directors and executive officerofficers agreed to vote, and granted Wellesley or Cambridge, as applicable, an irrevocable proxy and power of attorney to vote, all of his or her shares of OptimaCambridge or Wellesley common stock, as applicable, in favor of the consummation of the merger or any of the transactions contemplated by the merger agreement and against any other acquisition proposal.

Except under limited circumstances, thethese directors and executive officerofficers also agreed not to, directly or indirectly, sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option, commitment or other arrangement or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, any such shares. Each voting agreement terminates immediately upon the earlier of the adjournment of the meetingmeetings of shareholders of OptimaCambridge and Wellesley, as applicable, called and held pursuant to merger agreement, or the termination of the merger agreement in accordance with its terms.

As of the record date, thethese directors and the executive officerofficers held 131,233 shares of OptimaCambridge common stock, which represented approximately %2.4% of the outstanding shares of OptimaCambridge common stock. TheAs of the record date, these directors and executive officerofficers held 190,987 shares of Wellesley common stock, which represented approximately 8.4% of the outstanding shares of Wellesley common stock. These directors and executive officers were not paid any additional consideration in connection with the execution of the voting agreement.

Additional Agreements

Cambridge and OptimaWellesley have also agreed to use their reasonable best efforts in good faith to:

 

take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate the merger and the transactions contemplated thereby as promptly as practicable; and

 

enable consummation of the transactions contemplated under the merger agreement, including the fulfillment of conditions set forth in the merger agreement, and cooperate fully with the other parties to the merger agreement to such end.

The merger agreement also contains covenants relating to cooperation in the preparation of this joint proxy statement/prospectus and additional agreements relating to, among other things, access to information and notice of certain matters.

Conditions to Complete the Merger

The obligations of Cambridge and OptimaWellesley to consummate the merger are subject to the fulfillment of the following conditions:

 

Cambridge and OptimaWellesley having obtained all regulatory approvals, and completed any requirements required by such regulatory approvals, required to consummate the transactions contemplated by the merger agreement and all related statutory waiting periods having expired or been terminated;

 

the registration statement, of which this joint proxy statement/prospectus is a part, being declared effective and the absence of any stop order suspending that effectiveness;

 

the shares of Cambridge common stock issuable in connection with the merger being approved for listing on NASDAQ;

 

the absence of any judgment, order, injunction or decree, or any statute, rule, regulation, order, injunction or decree enacted, entered, promulgated or enforced, preventing, prohibiting or making illegal the consummation of any of the transactions contemplated by the merger agreement; and

 

Cambridge having received the written opinion of Hogan Lovells US LLP and OptimaWellesley having received the written opinion of Goodwin ProcterKilpatrick Townsend & Stockton LLP, in each case substantially to the effect that the merger will constitute a tax freetax-free reorganization described in Section 368(a) of the Code; andCode.

the offer letters having been executed and delivered by all each of the executives and Cambridge.

In addition, the obligations of Cambridge to consummate the merger are subject to the fulfillment or written waiver, where permissible, of the following additional conditions:

 

each of the representations and warranties of OptimaWellesley and Wellesley Bank set forth in the merger agreement shallwill be true and correct as of the date of the merger agreement and as of the closing date of the merger, unless the failure of such representations and warranties to be true and correct, individually or in the aggregate, has not had, or would not reasonably be likely to have, a material adverse effect on Optima;Wellesley or, after the effective time of the merger, on Cambridge;

 

Optima shallWellesley and Wellesley Bank will have performed in all material respects all obligations required to be performed by it under the merger agreement at or prior to the closing date of the merger;

 

no regulatory approval shallwill contain any condition, restriction or requirement that the Cambridge board of directors reasonably determines in good faith would, individually or in the aggregate, materially reduce the benefits of the merger to such a degree that Cambridge would not have entered into the merger agreement had such condition, restriction or requirement been known on the date of the merger agreement;

 

the voting agreements shallwill have been executed and delivered concurrently with Optima’sWellesley’s execution and delivery of the merger agreement;

the merger agreement shallwill have been duly approved by the requisite vote of OptimaWellesley shareholders;

 

Optima shallWellesley will have furnished certificates of its officers and such other documents to evidence fulfillment of certain conditions set forth in the merger agreement as Cambridge may reasonably request.

The obligations of OptimaWellesley to consummate the merger are subject to the fulfillment or written waiver, where permissible, of the following additional conditions:

 

each of the representations and warranties of Cambridge set forth in the merger agreement shallwill be true and correct as of the date of the merger agreement and as of the closing date of the merger, unless the failure of such representations and warranties to be true and correct, individually or in the aggregate, has not had, or would not reasonably be likely to have, a material adverse effect on Cambridge;

 

Cambridge shallwill have performed in all material respects all obligations required to be performed by it under the merger agreement at or prior to the closing date of the merger;

the voting agreements will have been executed and delivered concurrently with Cambridge’s execution and delivery of the merger agreement;

the merger agreement, including the issuance of Cambridge common stock in connection with the merger, will have been duly approved by the requisite vote of Cambridge shareholders; and

 

Cambridge shallwill have furnished certificates of its officers and such other documents to evidence fulfillment of certain conditions set forth in the merger agreement as OptimaWellesley may reasonably request.

“Material adverse effect” when used with respect to Cambridge or OptimaWellesley means any effect that is material and adverse to its financial condition, results of operations or business or that would materially impair its ability to perform its obligations under the merger agreement or otherwise materially threaten or materially impede its ability to consummate the transactions contemplated by the merger agreement. However, material adverse effect does not include the impact of:

 

changes in GAAP or applicable regulatory accounting requirements, except to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its subsidiaries, taken as a whole, as compared to other companies in the financial services industry;

 

changes in rules or regulations of general applicability to financial institutions and/or their holding companies, or interpretations thereof by courts or any bank regulator or governmental authorities, except to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its subsidiaries, taken as a whole, as compared to other companies in the financial services industry;

 

changes in in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in economic or market (including equity, credit and debt markets, as well as changes in interest rates) conditions affecting the financial services industry generally and not specifically relating to such party or its subsidiaries, except to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its subsidiaries, taken as a whole, as compared to other companies in the financial services industry;

interest rates) conditions affecting the financial services industry generally and not specifically relating to such party or its subsidiaries, except to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its subsidiaries, taken as a whole, as compared to other companies in the financial services industry;

 

public disclosure of the execution of the merger agreement, public disclosure or consummation of the transactions contemplated under the merger agreement (including any effect on a party’s relationships with its customers or employees) or actions expressly required by the merger agreement or actions or omissions that are taken with the prior written consent of the other party in contemplation of the transactions contemplated under the merger agreement;

a decline in the trading price of a party’s common stock or the failure, in and of itself, to meet earnings projections or internal financial forecasts (it being understood that the underlying cause of such decline or failure may be taken into account in determining whether a material adverse effect has occurred);

 

the expenses incurred byactions and omissions of either party in negotiating, documenting, effecting and consummatingtaken with the transactions contemplated byprior written consent, or at the merger agreement; andrequest, of the other;

 

Anyany failure by the parties to meet any internal projections or forecasts or estimates of revenues or earnings for any period.period; and

the expenses incurred by either party in investigating, negotiating, documenting, effecting and consummating the transactions contemplated by the merger agreement.

Termination

The merger agreement may be terminated and the merger and the transactions contemplated by the merger agreement abandoned as follows:

 

by mutual consent of the parties;

 

by Cambridge or OptimaWellesley if any regulatory approval required for consummation of the merger and the other transactions contemplated by the merger agreement has been denied by final, nonappealable action of any governmental authority, or an application for regulatory approval has been permanently withdrawn at the request of a governmental authority;

 

by Cambridge or OptimaWellesley if the approval of the shareholders of OptimaWellesley and Cambridge required to satisfy the closing conditions is not obtained at a duly held shareholder meeting or at any adjournment or postponement thereof (provided that if OptimaWellesley is the terminating party it shallwill not be in material breach of any of its obligations under the shareholder approval provisions in the merger agreement);

 

by Cambridge or OptimaWellesley if the other party materially breaches any of its representations, warranties, covenants or other agreements set forth in the merger agreement (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained in the merger agreement), which breach is not cured within 30 days of written notice of the breach, or by its nature cannot be cured prior to the closing of the merger, and such breach would entitle thenon-breaching party not to consummate the merger;

 

by Cambridge or OptimaWellesley if the merger is not consummated by September 30, 2019,2020, unless the failure to consummate the merger by such date is due to a material breach of the merger agreement by the terminating party;

 

by Cambridge or Optima if:

 

OptimaWellesley materially breaches thenon-solicitation provisions in the merger agreement;

 

the OptimaWellesley board of directors fails to recommend approval of the merger agreement by the OptimaWellesley shareholders, or withdraws, modifies or changes such recommendation in a manner adverse to Cambridge’s interests;

the OptimaWellesley board of directors recommends, proposes or publicly announces its intention to recommend or propose to engage in an acquisition transaction with any person other than Cambridge or any of its subsidiaries; or

 

OptimaWellesley fails to call, give notice of, convene and hold its special meeting;

by Wellesley if:

the Cambridge board of directors fails to recommend approval of the merger agreement, including the issuance of Cambridge common stock, by the Cambridge shareholders, or withdraws, modifies or changes such recommendation in a manner adverse to Wellesley’s interests;

Cambridge fails to call, give notice of, convene and hold its special meeting;

Under the merger agreement, an “acquisition transaction” means (other than the transactions contemplated between Cambridge and Optima)Wellesley): (a) a merger, consolidation, share exchange, business combination or any similar transaction,transaction; (b) a sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets and/or liabilities that constitute a substantial portion of the net revenues, net income or assets in a single transaction or series of transactions,transactions; (c) a tender offer or exchange offer for 10%25% or more of the outstanding shares of the capital stock or the filing of a registration statement under the Securities Act in connection therewith,therewith; or (d) an agreement or commitment to take any of the foregoing actions.

 

by OptimaWellesley if:

 

the OptimaWellesley board of directors so determines by a majority vote of the members of the entire board of directors, at any time during thefive-day period commencing on the 10th day prior to the closing date of the merger (or the immediately preceding trading day if shares of Cambridge common stock are not trading on NASDAQ on such 10th day), which is referred to as the determination date, if both of the following conditions are satisfied:

 

the quotient obtained by dividing (i) the average of the daily closing prices for shares of Cambridge common stock for the 20 consecutive full trading days on which such shares are traded on NASDAQ (as reported by Bloomberg or, if not reported thereby, any other authoritative source) ending at the close of trading on the determination date by (ii) the closing price of a share of Cambridge common stock on NASDAQ (as reported by Bloomberg or, if not reported thereby, any other authoritative source) on the last trading day immediately preceding the date of the first public announcement of entry into the merger agreement, which is referred to as the Cambridge ratio, is less than 0.80; and

 

the Cambridge ratio is less than the quotient obtained by dividing (A) the average of the closing prices of the NASDAQ Bank Index for the 20 consecutive full trading days ending on the trading day prior to the determination date by (B) the closing price of the NASDAQ Bank Index on the last trading day immediately preceding the date of the first public announcement of entry into the merger agreement, and subtracting 0.20 from the quotient;

The closing price of Cambridge common stock on December 4, 2018,2019, the last trading day preceding the first public announcement of the merger, was $85.61$76.36 per share. In order for the termination right described immediately above to be triggered, the average closing price of Cambridge common stock over the measurement period will need to be less than $68.49$61.09 per share and Cambridge common stock will need to have underperformed the NASDAQ Bank Index over the measurement period by at least 20 percentage points. If the OptimaWellesley board of directors exercises the termination right described immediately above, Cambridge will have the option to increase the merger consideration such that the implied value of the exchange ratio would be equivalent to the minimum implied value that would have avoided triggering this termination right. If Cambridge elects to increase the merger consideration pursuant to the preceding sentence, no termination will occur.

Termination Fee

Under the terms of the merger agreement, OptimaWellesley must pay Cambridge a termination fee of $2,500,000$4,100,000 if:

 

Cambridge or Optima terminates the merger agreement as a result of:

 

Optima materiallyWellesley breaching thenon-solicitation provisions in the merger agreement;

the OptimaWellesley board of directors failing to recommend approval of the merger agreement by the OptimaWellesley shareholders, or withdrawing, modifying or changing such recommendation in a manner adverse to Cambridge’s interests;

 

the OptimaWellesley board of directors recommending, proposing or publicly announcing its intention to recommend or propose to engage in an acquisition transaction with any person other than Cambridge or any of its subsidiaries; or

OptimaWellesley materially breaching the shareholder approval provisions in the merger agreement by failing to call, give notice of, convene and hold itsthe Wellesley special meeting;

Wellesley terminates the merger agreement as a result of:

Wellesley receiving a superior proposal and, in accordance with the terms of the merger agreement, the Wellesley board of directors has made a determination to accept such superior proposal; or

 

OptimaWellesley or Wellesley Bank enters into a definitive agreement relating to an acquisition proposal or consummates an acquisition proposal within 12 months following the termination of the merger agreement by Cambridge as a result of a willful breach by OptimaWellesley after an acquisition proposal has been publicly announced or otherwise made known to Optima.Wellesley.

Waiver and Amendment

Prior to the effective time of the merger, any provision of the merger agreement may be waived by the party benefited by the provision, or amended or modified by a written agreement between Cambridge, Cambridge Trust Company, Wellesley and Optima.Wellesley Bank. However, after the OptimaCambridge and Wellesley special meeting,meetings, no amendment will be made which by law requires further approval by the shareholders of OptimaCambridge or Wellesley, respectively, without obtaining such approval.

Expenses

Each party will pay all expenses it incurs in connection with the merger agreement and the related transactions, including fees and expenses of its own financial consultants, accountants and counsel, except that Cambridge and OptimaWellesley will share equally any printing expenses and SEC filing and registrations fees for this joint proxy statement/prospectus.

Specific Performance

Cambridge and OptimaWellesley have agreed that they are each entitled to an injunction or other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement, this being in addition to any other remedy to which they are entitled at law or in equity.

COMPARISON OF SHAREHOLDER RIGHTS

The rights of OptimaWellesley shareholders who receive shares of Cambridge common stock as a result of the merger will be governed by the articles of incorporation of Cambridge, or Cambridge’s Charter, and the amended and restated bylaws of Cambridge, or Cambridge’s Bylaws, and by the Massachusetts Business Corporation Act, or MBCA, whereas the rights of OptimaWellesley shareholders currently are governed by Optima’sthe articles of incorporation of Wellesley, or Wellesley’s Charter, and Optima’sthe amended and restated bylaws of Wellesley, or Wellesley’s Bylaws and the New Hampshire Revised Statutes Annotated,Maryland General Corporation Law, as amended. The following discussion summarizes certain material differences between the rights of Cambridge shareholders and OptimaWellesley shareholders.

This discussion does not purport to be a complete statement of the rights of shareholders of Cambridge or the rights shareholders of OptimaWellesley shareholders, and is qualified in its entirety by reference to the governing corporate documents of Cambridge and OptimaWellesley and applicable Massachusetts and New HampshireMaryland law. See “Where You Can Find More Information” beginning on page 102.146.

 

   

Cambridge

  

OptimaWellesley

Authorized Capital Stock

  Cambridge’s Charter authorizes it to issue up to 10,000,000 shares of capital stock, par value $1.00 per share.  Optima’sWellesley’s Charter authorizes it to issue up to of 9,000,00015,000,000 shares of commoncapital stock, par value $1.00 per share, and 1,000,000 shares of preferred stock, par value $1.00$0.01 per share.

Directors

  Cambridge’s Bylaws provide for not less than three director and not more than 25 directors.  Optima’sWellesley’s Bylaws provide for notthat the number of directors be fixed from time to time exclusively by the vote of the directors, provided that such number shall never be less than nine (9) directors and nor more than fifteen (15) directors.the minimum required by the MGCL (1).

Director Classes

  Cambridge’s Bylaws provide that directors are divided into three classes, as nearly identical in number as the then total number of directors constituting the entire board of directors permits, and are elected for three year staggered terms.  Optima’sWellesley’s Charter and Optima’s Bylaws provideprovides that directors are divided into three classes, as nearly identicalequal in number as the then total number of directors constituting the entire board of directors permits,reasonably possible, and are elected for three-yearthree year staggered terms.

Removal of Directors

  Cambridge’s Bylaws provide that a director may be removed only for cause by the affirmative vote of at least 80% of the shares of capital stock entitled to vote at any special meeting called for the purpose of considering such removal.  Optima’s Bylaws provideWellesley’s Charter provides that a director may be removed only for cause and only by the affirmative vote of the holders of at least the majority of holders ofthe shares of stock entitled to vote onin the election of directors.

Cambridge

Wellesley

Filling Board Vacancies

  Cambridge’s Bylaws provide that any vacancy newly created directorships resulting from an increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy created by the death, resignation or removal of anotherOptima’s Bylaws provide that a vacancy, caused by any reason, can be filled by a vote of the majority vote of the remaining directors. The new director will hold the office until the next election of the Class of Directors to which he or she is elected. In lieu of filling such vacancy, the shareholders or the board of directors may reduce the number

Cambridge

Optima

director shall serve for a term coinciding with the remaining term of his or her predecessor. Any director elected to fill a vacancy created by an increase in the number of directors shall serve until the next meeting of stockholdersshareholders at which directors are elected.  As per Wellesley’ election to be governed underSection 3-804(c) of the MGCL, Wellesley’s Bylaws provide that any vacancy in the directors resulting from an increase in size of the board, the death, resignation or removal of a director may be filled only by the affirmative vote of the majority of directors butremaining in office, even if the remaining directors do not constitute a quorum. Any director elected to less than seven.fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies.

Nomination of Director Candidates by Shareholders

  Cambridge’s Bylaws provide that any shareholder of record may nominate a candidate for director if the shareholder provides notice to the corporate Secretary of Cambridge at least 50 days, but not more than 70 days, prior to the annual meeting with the following information: (i) the name and address of such stockholdershareholder and of each person to be nominated, (ii) the class and number of shares of capital stock of the corporation beneficially owned by such stockholdershareholder and by each person to be nominated, (iii) a representation that such stockholdershareholder intends to appear in person or by proxy at the meeting to nominate such person(s), (iv) a description of all arrangements between such stockholdershareholder and each person to be nominated pursuant to which the nomination or nominations are to be made by such stockholder,shareholder, (v) such other information regarding each nominee proposed in the notice as would be required to be included in a proxy statement filed pursuantWellesley’s Bylaws provide that nominations for election as a director may be made at a meeting of shareholders at which directors are to be elected only: (i) by or at the direction of the Board of Directors; or (ii) by any shareholder entitled to vote for the election of directors at the meeting who gives notice delivered or mailed to and received at the principal executive office of Wellesley not less than 90 days prior to the date of the meeting, provided that in the event that less than 100 days’ notice or prior disclosure of the date of the meeting is given or made to shareholders, the notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. The shareholder’s notice must include (i) all information relating to the nominee that is required to be disclosed in solicitations of

Cambridge

Wellesley

to the proxy rules of the Securities and Exchange Commission, and (vi) the consent of each nominee to serve as a director of the corporation if elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in accordance with the foregoing procedure.  Optima’s Bylaws provide that any shareholderproxies for election of record at the time of notice of the annual meeting may nominate a director. Shareholder nominations must be made in writing to the Clerk of Optima not less than 90 but not more than 120 days prior to prior to the anniversary of the last annual meeting; provided, however, if the annual meeting is convened more than 30 days before or more than 60 days after the anniversary of the preceding year, or if there was no annual meeting held the preceding year, then the shareholder nomination must be provided to the Clerk no later than the later of 90 days prior to the meeting or 10 days following the day on which the meeting was first publically announced. The notice shall provide: (1) any information required to be disclosed in solicitations for proxies of directors in an election contest pursuant to Regulation 14A ofunder the Securities Exchange Act of 1934 (including such person’s written consent to being named in the proxy statement as amended; (2) (i)a nominee and to serving as a director if elected); and (ii) (A) the name and address of the proposing shareholder, giving notice, andas such appears on Wellesley’s books; (B) the class or series and number of shares heldof beneficially owned by such person, includingshareholder; and (C) a statement disclosing (1) whether such shareholder or any shares as to which such person has a right to acquire beneficial ownership atnominee thereof is acting with or on behalf of any time in the future, (ii) any proxy, agreement, arrangement, understanding or relationship pursuant to which such person has or shares a right to, directly or

Cambridge

Optima

indirectly, vote any shares,other person; and (iii) a description of the material terms of all agreements, arrangements or understandings entered into by such person or its affiliates for the purpose of acquiring, holding, disposing or voting any such shares; (3) a description of all agreements, arrangements or understandings pertaining to the nominations and(2) if applicable, the identity and addresses of other shareholders known to support such nominations, and (4) a statement whether the shareholder will deliver a proxy statement and form of proxy to any of Optima’s holders of capital stock.person.

Vote Required

  

The MBCA does not requirerequires the approval of the plan of merger bytwo-thirds of the shareholdersshares of Cambridge Trust Company.common stock entitled to vote at the special meeting of Cambridge Trust Company’s charter is attached hereto as Annex D, as required by New Hampshire law, which requires Cambridge Trust Company’s Charter to be disclosed.shareholders

.

  New Hampshire law provides that approval of aUnder Wellesley’s Charter, the plan of merger requires approval by the approvalaffirmative vote of shareholders at a meeting at which a quorum consistingthe holders of at least a majority of the votestotal number of shares of all classes outstanding and entitled to be cast on the plan of merger exists.vote thereon.

Exculpation of Directors and Officers

  The MBCA provides that directors and officers shall not be personally liable except in cases where the director or officer does not discharge his or her duty: (i) in good faith; (ii) with the reasonable care of a person in a like position under similar circumstances; or (iii) in a manner that the director or officer believes to be in the best interests of the corporation.  Optima’s CharterWellesley’s charter provides that directors and officers shall not be personally liable to Optima or to any shareholders of Optima for monetary damages for a breach of any fiduciary duty owed to OptimaWellesley or its shareholders provided, howeverfor money damages except: (i) to the foregoing does not relieve any director of Optima from liabilityextent that it is proved that the person actually received an improper benefit or profit in money, property or services, for any breach of duty based upon an act or omission: (i) in breachthe amount of the dutybenefit or profit in money, property or services actually received; (ii) to the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person’s action, or failure to act, was the result of loyaltyactive and deliberate dishonesty and was material to Optima or its shareholders; (ii) notthe cause of action adjudicated in good faith or involving intentional misconduct or a knowing violation of the law;proceeding; or (iii) or from which a director derives an improper personal benefit. Optima provides directors withto the full protection available to directors of a business corporation under Chapter293-A ofextent otherwise provided by the New Hampshire Revised Statutes Annotated.MGCL.

   

Cambridge

  

OptimaWellesley

Indemnification

  Cambridge’s Bylaws provide broad indemnification for current and former directors, officers, employees, and agents in civil, criminal administrative and investigative suits, except (a) with respect to a proceeding voluntarily initiated by such person unless he or she is successful on the merits, the proceeding was authorized by the corporation, or the proceeding seeks a declaratory judgment regarding his or her own conduct or (b) with respect to a compromise payment made to dispose of a matter, pursuant to a consent decree or otherwise, unless the payment and indemnification thereof have been approved by the corporation, or a court of competent jurisdiction. No indemnification will be provided if the director or officer’s (a) did not act in good faith, in the reasonable belief that his or her action was in, or at least not opposed to, the best interests of Cambridge, and (b) in a criminal proceeding, had a reasonable believe that such acts or omissions were unlawful.  Optima’sWellesley’s Charter providesnon-exclusive broad indemnification for: (i) its directors and officers, whether serving Wellesley or at its request any other entity, to the fullest extent required or permitted by the general laws of the State of Maryland, as amended, including the advance of expenses under the procedures required; and (ii) other employees and agents to such extent as shall be authorized by the directors or Wellesley’s Bylaws provide forand be permitted by law. Directors may take such action as is necessary to carry the indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such bylaws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. The foregoing provided that any indemnification payments made remain subject to compliance with § 18(k) of current and former directors or officers from threatened civil, criminal administrative and investigative cases, to the extent permissible under federal lawFederal Deposit Insurance Act, 12 U.S.C. § 1828(k), and the New Hampshire Business Corporation Act.regulations promulgated thereunder by the Federal Deposit Insurance Corporation.

Dissenters’ Rights

  The MBCA provides that dissenters’ right of appraisal are only available in connection with (1) mergers if shareholder approval is required or if the corporation is a subsidiary that is merged with its parent, unless shareholders are receiving cash or marketable securities as consideration; (2) share exchanges to which the corporation is a party as the corporation whose shares will be acquired and the shares being received are not marketable securities; (3) sales of substantially all of the assets (other than sales that are in the usual and regular course of business and certain liquidations  Under the New Hampshire Business Corporation Act, made applicable toThe MGCL provides that shareholders of Optima by New Hampshire law, shareholders may, under certain circumstances, exercise appraisal rights ina Maryland corporation has the eventright to demand and receive payment of certain limited corporate actions and obtain payment for the fair value of their shares. Appraisal rights are available under New Hampshire law to any shareholder of a constituent corporationthe shareholder’s stock from the successor in the event of a merger if such shareholder is entitled to vote upon thecase of: (i) merger or ifconsolidation with another corporation, unless the corporationcompany’s charter provides otherwise; (ii) acquisition of the shareholder’s stock by share exchange; (iii) amendment to the charter adversely affecting the shareholder’s rights, unless right to do so is reserved by the charter itself; and (iv) a subsidiary that is merged with its parent. Neither Optima’s Charter nor Optima’sbusiness

   

Cambridge

  

OptimaWellesley

  (other than sales that are in the usual and regular course of business and certain liquidations and court-ordered sales); (4) certain amendments to the articles of organization that materially and adversely affect rights in respect of a dissenter’s shares; and (5) certain corporate conversions.  Bylaws grantcombination between a corporation and an interested shareholder or affiliate, subject to certain exceptions. Under Wellesley’s Charter, holders of Wellesley common stock shall not be entitled to exercise any appraisal rights in additionof an objecting shareholder under Title 3, Subtitle 2 of the MGCL or any successor statute unless the board of directors, pursuant to the statutorily prescribed rights.a resolution approves a resolution applying such rights to a given transaction or series of transactions.

Notice of Shareholder Meetings

  Cambridge’s Bylaws provide that shareholders will be given written notice stating the place, date, and hour of a shareholder meeting and stating the purpose of the meeting not less than seven days nor more than 60 days before the date of the meeting.  Optima’sWellesley’s Bylaws provide that notice of a meeting of shareholders shallwill be given to the shareholder not less than 10 nor more than 60 days prior to the meeting, either personally or by mail, and suchwritten notice shall specifystating the place, daydate and hourtime of the meeting and, in the case of a special meeting, the purposespurpose(s) for which the meeting is called.called, not less than 10 days or more than 90 days before the date of the meeting.

Calling a Special Meeting of Shareholders

  Cambridge’s Bylaws provide that a special meeting of shareholders can be called for any purpose by: (i) the CEO; (ii) the board of directors; or (iii) by the Secretary in response to a written request from a stockholdershareholder who holds at leastone-tenth part in interest of the capital stock entitled to vote thereat. If a special meeting is called by the shareholders, the meeting shall be held no fewer than 60 nor more than 90 days after such application, with no fewer than 20 days’ notice.  Optima’sWellesley’s Bylaws provide that a special meeting of shareholders can be called for any purpose by: (i) the President; (ii) a majoritychairman of the board, the President, or bytwo-thirdsof directors; or (iii)the total number of directors which the Wellesley would have if there were no vacancies on the board. Pursuant to Wellesley’s election to be governed under the MGCL, a special meeting of the shareholders shall be called by the President atsecretary of Wellesley upon the written request of shareholdersthe holders of not less than 10%at least a majority of all the shares outstanding and entitled to vote on the business to be transacted at such meeting. Notwithstanding the meeting. Notice requirements areforegoing, the same as for an annualsecretary shall not be obligated to call a special meeting of the shareholders.shareholders requested by shareholders for the purpose of taking any action that isnon-binding or advisory in nature.

Cambridge

Wellesley

Record Date

  Cambridge’s Bylaws provide that the board of directors may fix in advance a time, which shall not be more than 70 days before the date of any meeting of stockholdersshareholders or the date for the payment of any dividend or the making of any distribution to stockholdersshareholders or the last day on which the consent or dissent of stockholdersshareholders may be effectively expressed for any purpose, as the record date.  Optima’sWellesley’s Bylaws providedprovide that the board of directors may fix, thein advance, a record date, which shall not be more than 7090 or less than 10 days and,before the date of such meeting, nor more than 90 days prior to any other action. The transfer books may not be closed for a shareholderperiod longer than 20 days. In the case of a meeting no less than ten prior toof shareholders, the closing of the transfer books shall be at 10 days before the date on which the particular action requiring the determination of the shareholders is to be taken.meeting.

Dividends

  The MBCA provides that a corporation may not make a distribution if, after giving effect thereto, either: (i) it would be unable to pay its debts as theyOptima’s Bylaws provide that the board of directors has the power to declare and pay dividends. The New Hampshire Business Corporations Act provides that a

Cambridge

Optima

become due in the usual course of its business; or (ii) its total assets would be less than its total liabilities.  The MGCL provides that a corporation may not make a distribution if, after giving effect thereto, either: (i) it would be unable to pay its debts as they become due in the usual course of its business; or (ii) its total assets would be less than its total liabilities.

Action Without a Meeting

  Cambridge’s Bylaws provide that any action required or permitted to be taken at any meeting of the directors may be taken without a meeting if all the directors consent to the action in writing, signed or delivered to the corporation by electronic transmission, and the written consents are filed with the records of the meetings of directors.  Optima’s BylawsWellesley’s bylaws provide that any action required or permitted to be taken at any meetingcommittees of the board of directors may be takentake action without a meeting if all the directorsmembers thereof consent to the actionthereto in writing, setting forthand the action taken. The written consentswriting(s) are filed with the recordsminutes of the meetingsproceedings of directors and are effective when signed by all directors.such committee.

Stock Ownership Requirement for Directors

  Massachusetts law does not provide a stock ownership requirement for directors of Massachusetts corporations. A director of a Massachusetts trust company, such as Cambridge Trust Company, is required to hold stock of the trust company or its holding company (in this case, Cambridge) having a fair market value of at least $1,000.  New HampshireMaryland law does not provide a stock ownership requirement for directors of New Hampshire-chartered banks.Maryland corporations.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following table shows selected unaudited pro forma condensed combined financial data is basedabout the financial condition and results of operations of the combined company after giving effect to (i) the consummation of Cambridge’s merger with Optima Bank & Trust Company, or Optima, which was completed on April 17, 2019, or the Optima merger, (ii) the issuance and sale of 550,850 shares of Cambridge’s common stock, including the sale of 71,850 shares pursuant to an underwriter option, with estimated net proceeds to Cambridge of $38.2 million after deducting the underwriting discount, and (iii) the consummation of the merger.

The following unaudited pro forma combined consolidated financial statements have been prepared in accordance with Article 11 ofRegulation S-X and combine the historical consolidated financial dataposition and results of operations of Cambridge and its subsidiaries, Optima and has been preparedWellesley as acquisitions by Cambridge of Optima and Wellesley using the acquisition method of accounting and giving effect to illustrate the effects of the merger. It is also based on certain assumptions that Cambridge and Optima believe are reasonable, which arerelated pro forma adjustments described in the notes toaccompanying notes.

Under the unaudited pro forma condensed combined financial statements included in this proxy statement/prospectus. The unaudited pro forma condensed combined financial data does not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated withacquisition method of accounting, the merger. The unaudited pro forma condensed combined income statement also does not include any integration costsassets and liabilities of Optima were recorded by Cambridge at their respective fair values as of the companies may incur related todate the merger as part of combiningwas completed and the operationsexcess of the companies.

Certain reclassifications were mademerger consideration over the fair value of the net assets was allocated to Optima’s historical financial information to conform to Cambridge’s presentation of financial information. This data should be read in conjunction with the Cambridge historical consolidated financial statementsgoodwill and accompanying notes in Cambridge’s Annual Report on Form10-K, as amended, as of and for the year ended December 31, 2017 and the Optima historical financial statements and accompanying notes included in this proxy statement/prospectus.

other intangible asset. Cambridge has not performed the detailed valuation analysis necessary to determine the fair market values of Optima’sWellesley’s assets to be acquired and liabilities to be assumed.assumed, and as such, estimates have been used. Accordingly, the unaudited pro forma condensed combined financial data does not include an estimated allocation of the purchase price, unless otherwise specified.price. The pro forma adjustments included in this joint proxy statement/prospectus are subject to change depending on changes in interest rates and the components of assets and liabilities, and as additional information becomes available and additional analyses are performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of thorough analyses to determine the fair value of Optima’sWellesley’s tangible and identifiable intangible assets and liabilities as of the date the merger is completed. Increases or decreases in the fair values of the net assets as compared with the information shown in the unaudited pro forma condensed combined financial data may change the amount of the purchase price allocated to goodwill and other assets and liabilities, and may impact Cambridge’s statement of operations due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to Optima’sWellesley’s shareholders’ equity, including results of operations and certain balance sheet changes from September 30, 20182019 through the date the merger is completed will also change the purchase price allocation, which may include the recording of a lower or higher amount of goodwill. The final adjustments may be materially different from the unaudited pro forma adjustments presented in this joint proxy statement/prospectus.

Certain reclassifications were made to Optima’s and Wellesley’s historical financial information to conform to Cambridge’s presentation of financial information. All significant pro forma adjustments and underlying assumptions are described in the accompanying notes. The unaudited pro forma combined consolidated statements of income give effect to the merger and the Optima merger, or collectively, the mergers, as if they occurred on January 1, 2018. The unaudited pro forma combined consolidated balance sheet gives effect to the mergers as if they occurred on September 30, 2019.

The unaudited pro forma combined financial statements should be read in conjunction with the following consolidated financial statements and accompanying notes of Cambridge, Wellesley and Optima for the applicable periods, as well as any other information contained in or incorporated by reference into this joint proxy statement/prospectus:

Cambridge’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, which were included in Cambridge’s Annual Reporton Form 10-K for the year ended December 31, 2018, and filed with the Securities and Exchange Commission, or SEC, on March 18, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Cambridge’s unaudited financial statements and the related notes thereto as of and for the nine months ended September 30, 2019, which were included in Cambridge’s Quarterly Report onForm 10-Q for the nine months ended September 30, 2019, and filed with the SEC on November 7, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Cambridge’s unaudited financial statements and the related notes thereto as of and for the six months ended June 30, 2019, which were included in Cambridge’s Quarterly Report onForm 10-Q for the six months ended June 30, 2019, which were filed with the SEC on August 8, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Wellesley’s audited consolidated financial statements as of and for the year ended December 31, 2018 and 2017, which were included in Wellesley’s Annual Report on Form10-K for the year ended December 31, 2018, and filed with the SEC on March 29, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Wellesley’s unaudited consolidated financial statements as of and for the nine months ended September 30, 2019, which were included in Wellesley’s Quarterly Report onForm 10-Q for the nine months ended September 30, 2019, and filed with the SEC on November 7, 2019, which has been incorporated by reference in this joint proxy statement/prospectus;

Optima’s audited financial statements as of and for the years ended December 31, 2018 and 2017, which were filed as Exhibit 99.1 to Cambridge’s Current Report on Form8-K filed with the SEC on October 22, 2019, which has been incorporated by reference in this joint proxy statement/prospectus; and

Optima’s unaudited condensed financial statements as of and for the three months ended March 31, 2019, which were filed as Exhibit 99.2 to Cambridge’s Current Report on Form8-K filed with the SEC on October 22, 2019, which has been incorporated by reference in this joint proxy statement/prospectus.

Cambridge anticipates that the merger with OptimaWellesley will provide financial benefits that include reduced operating expenses. The pro forma information does not reflect the benefits of expected cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical benefits would have been had the two companies been combined during these periods.

The unaudited pro forma shareholders’ equity and net income are qualified by the statements set forth under this caption and should not be considered indicative of the market value of Cambridge common stock or the actual or future results of operations of Cambridge for any period. Actual results may be materially different than the pro forma information presented.

  September 30, 2019 
  Cambridge (as
Reported)		  Wellesley (as
Reported)		  Adjustments for
Cambridge’s
Acquisition of
Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Adjustments
for Capital
Raise		  Cambridge (Pro
Forma with
Wellesley and
Capital Raise)		 
  (dollars in thousands, except par value) 
Assets      

Cash and cash equivalents

 $68,949  $81,353  $(15,001) (1)  $135,301  $38,201 (12)  $173,502 

Investment securities

      

Available for sale, at fair value

  148,068   33,793   288 (2)   182,149   —     182,149 

Held to maturity, at amortized cost

  269,475   100   —     269,575   —     269,575 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total investment securities

  417,543   33,893   288   451,724   —     451,724 

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

  2,082   6,351   —     8,433   —     8,433 

Loans

  2,179,882   832,803   (10,351) (3)   3,002,334   —     3,002,334 

Less: allowance for loan losses

  (18,035)   (7,218)   7,218 (4)   (18,035)   —     (18,035) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loans

  2,161,847   825,585   (3,133)   2,984,299   —     2,984,299 

Federal Home Loan Bank of Boston Stock, at cost

  9,159   6,162   —     15,321   —     15,321 

Bank owned life insurance

  37,161   7,946   —     45,107   —     45,107 

Banking premises and equipment, net

  14,954   3,785   —     18,739   —     18,739 

Right-of-use asset, operating leases

  34,553   6,852   —     41,405   —     41,405 

Deferred income taxes, net

  7,939   2,717   (798) (5)   9,858   —     9,858 

Accrued interest receivable

  6,959   2,769   —     9,728   —     9,728 

Goodwill

  31,206   —     44,258 (6)   75,464   —     75,464 

Merger related intangibles

  3,429   —     6,930 (7)   10,359   —     10,359 

Other assets

  46,087   8,454   —     54,541   —     54,541 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

 $2,841,868  $985,867  $32,544  $3,860,279  $38,201  $3,898,480 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 September 30, 2018  September 30, 2019 
 Cambridge
Bancorp
Historical		 Optima Bank
Historical		 Adjustment Pro Forma  Cambridge (as
Reported)		 Wellesley (as
Reported)		 Adjustments for
Cambridge’s
Acquisition of
Wellesley		 Cambridge
(Pro Forma
with
Wellesley)		 Adjustments
for Capital
Raise		 Cambridge (Pro
Forma with
Wellesley and
Capital Raise)		 
 (dollars in thousands, except par value) 
Assets    

Cash and cash equivalents

 $16,431  $23,336  $(9,882)(1)  $29,885 

Investment securities

    

Available for sale, at fair value

 180,363  22,843   —    203,206 

Held to maturity, at amortized cost

 271,005   —     —    271,005 
 

 

  

 

  

 

  

 

 

Total investment securities

 451,368  22,843   —    474,211 

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

  —     —     —     —   

Loans

 1,451,781  465,583  (6,636)(2)  1,910,728 

Less: allowance for loan losses

 (16,106)  (3,273)  3,273(3)  (16,106) 
 

 

  

 

  

 

  

 

 

Net loans

 1,435,675  462,310  (3,363)  1,894,622 

Federal Home Loan Bank of Boston Stock, at cost

 6,666  1,049   —    7,715 

Bank owned life insurance

 30,800  5,699   —    36,499 

Banking premises and equipment, net

 8,836  5,719   —    14,555 

Deferred income taxes, net

 8,990  38   —    9,028 

Accrued interest receivable

 5,536  1,299   —    6,835 

Other assets

 24,642  1,864  34,814(4), (5)  61,320 
 

 

  

 

  

 

  

 

 

Total assets

 $1,988,944  $524,157  $21,569  $2,534,670 
 

 

  

 

  

 

  

 

  (dollars in thousands, except par value) 
Liabilities          

Deposits

 $505,951  $62,012  $—    $567,963       

Demand

 385,617  26,906   —    412,523  $654,133  $133,187   —    $787,320   —    $787,320 

Interest bearing checking

 119,241  78,539   —    197,780  429,755  42,162   —    471,917   —    471,917 

Money market

 606,843  174,839   —    781,682  214,721  280,434   —    495,155   —    495,155 

Savings

 113,627  146,270  (849)(6)  259,048  876,392  72,807   —    949,199   —    949,199 

Certificates of deposit

 232,858  230,155  671 (8)  463,684   —    463,684 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Certificates of deposit

 1,731,279  488,566  (849)  2,218,996 

Total deposits

 66,700  2,210   —    68,910  2,407,859  758,745  671  3,167,275   —    3,167,275 

Short-term borrowings

 3,452   —     —    3,452  113,935  51,000   —    164,935   —    164,935 

Long-term borrowings

 26,737  362  744(7)  27,843   —    77,533  285 (9)  77,818   —    77,818 
 

 

  

 

  

 

  

 

 

Subordinated debt

  —    9,854   —    9,854   —    9,854 

Operating lease liabilities

 35,990  6,907   —    42,897   —    42,897 

Other liabilities

 $1,828,168  $491,138  $(105)  $2,319,201  40,739  10,043   —    50,782   —    50,782 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total liabilities

     2,598,523  914,082  956  3,513,561   —    3,513,561 
 

 

  

 

  

 

  

 

  

 

  

 

 
Shareholders’ Equity          

Common Stock

 4,106  2,064  726(8)  6,896 

Common stock

 4,850  26  1,452 (10)  6,328  551 (12)  6,879 

Additionalpaid-in capital

 37,789  21,733  20,948(9)  80,470  98,256  27,500  74,395 (11)  200,151  37,650(12)  237,801 

Retained earnings

 127,883  9,516   —    137,399  142,237  44,598  (44,598) (11)  142,237   —    142,237 

Accumulated other comprehensive loss

 (9,002)  (294)   —    (9,296)  (1,998)  592  (592) (11)  (1,998)   —    (1,998) 
 

 

  

 

  

 

  

 

 

Unearned compensation - ESOP

  —    (931)  931 (11)   —     —     —   

Total shareholders’ equity

 160,776  33,019  21,674  215,469  243,345  71,785  31,588  346,669  38,201  384,919 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total liabilities and shareholders’ equity

 $1,988,944  $524,157  $21,569  $2,534,670  $2,841,868  $985,867  $32,544  $3,860,279  $38,201  $3,898,480 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Footnotes to Unaudited Pro Forma Consolidated Statements of Balance Sheets at September 30, 2019:

 

(1)

Includes $3.5 million cash consideration to Optima common stockholders, $1.3$4.4 million paid to the holders of OptimaWellesley stock options and estimatedafter-tax merger chargesexpenses of $5.1$10.6 million

(2)

The pro formaRepresents the estimated adjustment to loans includes a negative $3.4 million credit component, and a negative $3.2 million interest component, which will be accreted over an estimated 3 yearsincrease investments to fair market value

(3)

Represents the estimated adjustment to reduce loans to fair market value

(4)

Reflects the elimination of Optima’sWellesley’s existing loan loss reserve at acquisition

(5)

Represents the amount to record estimated deferred income taxes on the fair value adjustments presented, at an estimated tax rate of 25.5%

(6)

Represents the preliminary estimated amount of goodwill, based on issuance of 1,477,645 CATC shares outstanding at $77.13 per share (January 10, 2020 closing price)

(7)

Represents the estimated amount of the core deposit intangible asset recognized in connection with the business combination

(8)

Represents the estimated amount to increase time deposits to fair market value

(9)

Represents the estimated amount to increase borrowings from FHLB to fair market value

(10)

Represents the amount to eliminate Wellesley common stock at par and record the estimated par value of shares issued by Cambridge

(11)

Represents the amount to eliminate Wellesley equity accounts and record the estimated additionalpaid-in capital

(12)

Represents the amount to record the issuance of 550,580 CATC shares at $73.00 per share, less estimated issuance cost of $2.0 million

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

  For the Nine Months Ended September 30, 2019 
  Cambridge
(as Reported)		  Optima
(through
April 17,
2019)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with Optima)		   Wellesley (as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		   Cambridge
(Pro Forma
with
Wellesley and
Capital Raise)		 
  (dollars in thousands, except share data) 

Interest and dividend income

          

Interest on taxable loans

 $60,919  $6,050  $591 (1)  $67,560   $27,867  $687 (8)  $96,114   $96,114 

Interest ontax-exempt loans

  385   30   —     415    73   —     488    488 

Interest on taxable investment securities

  6,074   155   —     6,229    1,076   (49) (9)   7,256    7,256 

Interest ontax-exempt investment securities

  1,709   —     —     1,709    238   —     1,947    1,947 

Dividends on FHLB of Boston stock

  281   18   —     299    213   —     512    512 

Interest on overnight investments

  556   196   —     752    577   —     1,329    1,329 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total interest and dividend income

  69,924   6,449   591   76,964    30,044   638   107,646    107,646 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Interest expense

          

Interest on deposits

  11,489   1,941   63 (2)   13,493    7,665   (535) (10)   20,623    20,623 

Interest on borrowed funds

  1,347   195   —     1,542    2,328   (226) (11)   3,644    3,644 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total interest expense

  12,836   2,136   63   15,035    9,993   (761)   24,267    24,267 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Net interest and dividend income

  57,088   4,313   528   61,929    20,051   1,399   83,379    83,379 

Provision for Loan Losses

  2,673   70   —     2,743    480   —     3,223    3,223 
 

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

  For the Nine Months Ended September 30, 2019 
  Cambridge
(as Reported)		  Optima
(through
April 17,
2019)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with Optima)		  Wellesley (as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		   Cambridge
(Pro Forma
with
Wellesley and
Capital Raise)		 
  (dollars in thousands, except share data) 

Net interest and dividend income after provision for loan losses

 $54,415  $4,243  $528  $59,186  $19,571  $1,399  $80,156   $80,156 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

Noninterest income

         

Wealth management revenue

  19,576   —     —     19,576   1,228   —     20,804    20,804 

Deposit account fees

  2,395   69   —     2,464   74   —     2,538    2,538 

ATM/Debit card income

  1,046   99   —     1,145   57   —     1,202    1,202 

Bank owned life insurance income

  454   36   —     490   177   —     667    667 

Gain (loss) on disposition of investment securities

  (79)   —     —     (79)   8   —     (71)    (71) 

Gain on loans held for sale

  491   47   —     538   161   —     699    699 

Loan related derivative income

  1,571   —     —     1,571   771   —     2,342    2,342 

Other income

  1,014   53   —     1,067   50   —     1,117    1,117 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

Total noninterest income

  26,468   304   —     26,772   2,526   —     29,298    29,298 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

Noninterest expense

         

Salaries and employee benefits

  34,353   2,238   —     36,591   9,214   —     45,805    45,805 

Occupancy and equipment

  7,813   678   18 (3)   8,509   2,466   —     10,975    10,975 

Data processing

  4,532   216   —     4,748   930   —     5,678    5,678 

Professional services

  2,411   414   —     2,825   637   —     3,462    3,462 

Marketing

  1,175   94   —     1,269   197   —     1,466    1,466 

  For the Nine Months Ended September 30, 2019 
  Cambridge
(as Reported)		  Optima
(through
April 17,
2019)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with Optima)		  Wellesley (as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Cambridge
(Pro Forma
with
Wellesley and
Capital Raise)		 
  (dollars in thousands, except share data) 

FDIC Insurance

 $369  $4  $—    $373  $336  $—    $709  $709 

Merger expenses

  3,880   3,381   (7,261) (4)   —     —     —     —     —   

Other expenses

  2,216   195   120 (5)   2,531   1,674   945 (12)   5,150   5,150 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total noninterest expense

  56,749   7,220   (7,123)   56,846   15,454   945   73,245   73,245 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

  24,134   (2,673)   7,651   29,112   6,643   454   36,209   36,209 

Income tax expense (benefit)

  5,988   (570)   1,836 (6)   7,254   1,800   116 (13)   9,170   9,170 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

 $18,146   (2,103)   5,815  $21,858  $4,843  $338  $27,039  $27,039 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Share data:

        

Weighted average number of shares outstanding, basic

  4,525,178   2,192,588   —     4,948,444 (7)   2,454,103   —     6,426,088 (14)   6,976,938 (15) 

Weighted average number of shares outstanding, diluted

  4,552,092   2,325,417   —     4,975,358 (7)   2,545,786   —     6,453,002 (14)   7,003,852 (15) 

Basic earnings per share

 $3.98  $(0.96)  $—    $4.42  $1.97  $—    $4.21  $3.88 

Diluted earnings per share

 $3.95  $(0.90)  $—    $4.39  $1.91  $—    $4.19  $3.86 

Footnotes to Unaudited Pro Forma Consolidated Statements of Income for the Nine Months Ended September 30, 2019:

Notes for Merger with Optima:

(1)

Represents accretion income as a result of the fair market value adjustment on loans of $6.3 million

(2)

Represents amortization expense as a result of the fair market value adjustment on Certificates of Deposit of $472,000

(3)

Represents the depreciation as a result of the fair market value adjustment for fixed assets of $980,000

(4)

Adjustment to reflect approximately $29.2 millionRepresents the elimination of preliminary estimated goodwill from this business transactionmerger expenses in connection with the Optima merger

(5)

Adjustment to reflect approximately $5.6 millionRepresents the amortization expense as a result of preliminary estimatedthe recognition of the core deposit intangible expectedasset of $3.6 million

(6)

Represents the Income tax effect of pro forma adjustments utilizing an effective tax rate of 24%

(7)

Pro forma weighted average shares include 722,746 shares issued to be amortized using the sumformer Optima shareholders

Notes for Merger with Wellesley:

(8)

Represents accretion income as a result of the years’ digits method over 10 years;fair market value adjustment on loans of $10.4 million

(9)

Represents amortization expense as a result of the amountfair market value adjustment on Investment Securities of $288,000

(10)

Represents accretion income as a result of the fair market value adjustment on Certificates of Deposit of $671,000

(11)

Represents accretion income as a result of the fair market value adjustment on Federal Home Loan Bank borrowings of $285,000

(12)

Represents the amortization expense as a result of the recognition of the core deposit intangible is estimated at 2.52%asset of $6.9 million

(13)

Represents the Income tax effect of pro forma adjustments utilizing an effective tax rate of 25.5%

(14)

Pro forma weighted average shares include 1,477,645 shares to be issued to former Wellesley shareholders

(15)

Pro forma weighted average shares include 550,850 shares issued in connection with the capital raise

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

  For the Year Ended December 31, 2018 
  (dollars in thousands, except share data) 
  Cambridge
(as Reported)		  Optima (as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with Optima)		  Wellesley
(as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Cambridge
(Pro Forma
with
Wellesley and
Capital Raise)		 
  (dollars in thousands, except share data) 

Interest and dividend income

        

Interest on taxable loans

 $57,941  $19,604  $2,038 (1)  $79,583  $30,927  $874 (8)  $111,384  $111,384 

Interest ontax-exempt loans

  371   30   —     401   101   —     502   502 

Interest on taxable investment securities

  7,457   580   —     8,037   1,441   (65) (9)   9,413   9,413 

Interest ontax-exempt investment securities

  2,404   15   —     2,419   327   —     2,746   2,746 

Dividends on FHLB of Boston stock

  287   56   —     343   333   —     676   676 

Interest on overnight investments

  595   263   —     858   509   —     1,367   1,367 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest and dividend income

  69,055   20,548   2,038   91,641   33,638   809   126,088   126,088 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Interest expense

        

Interest on deposits

  5,023   5,949  $253 (2)   11,225   6,442   (652) (10)   17,015   17,015 

Interest on borrowed funds

  444   3   —     447   2,467   (243) (11)   2,671   2,671 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest expense

  5,467   5,952   253   11,672   8,909   (895)   19,686   19,686 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend income

  63,588   14,596   1,785   79,969   24,729   1,704   106,402   106,402 

Provision for Loan Losses

  1,502   246   —     1,748   585   —     2,333   2,333 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest and dividend income after provision for loan losses

  62,086   14,350   1,785   78,221   24,144   1,704   104,069   104,069 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  For the Year Ended December 31, 2018 
  (dollars in thousands, except share data) 
  Cambridge
(as Reported)		  Optima (as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with Optima)		  Wellesley
(as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Cambridge
(Pro Forma
with
Wellesley and
Capital Raise)		 
  (dollars in thousands, except share data) 

Noninterest income

        

Wealth management revenue

 $25,191  $—    $—    $25,191  $1,616  $—    $26,807  $26,807 

Deposit account fees

  3,071   245   —     3,316   87   —     3,403   3,403 

ATM/Debit card income

  1,180   344   —     1,524   89   —     1,613   1,613 

Bank owned life insurance income

  526   153   —     679   234   —     913   913 

Gain (loss) on disposition of investment securities

  2   22   —     24   —     —     24   24 

Gain on loans held for sale

  99   206   —     305   64   —     369   369 

Loan related derivative income

  1,651   —     —     1,651   340   —     1,991   1,991 

Other income

  1,269   335   —     1,604   156   —     1,760   1,760 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total noninterest income

  32,989   1,305   —     34,294   2,586   —     36,880   36,880 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Noninterest expense

        

Salaries and employee benefits

  41,212   7,104   —     48,316   10,842   —     59,158   59,158 

Occupancy and equipment

  9,072   2,185   54 (3)   11,311   3,004   —     14,315   14,315 

Data processing

  5,177   552   —     5,729   990   —     6,719   6,719 

Professional services

  3,258   959   —     4,217   766   —     4,983   4,983 

Marketing

  2,229   305   —     2,534   323   —     2,857   2,857 

FDIC Insurance

  574   495   —     1,069   626   —     1,695   1,695 

Merger expenses

  201   —     (201) (4)   —     —     —     —     —   

Other expenses

  2,264   477   360 (5)   3,101   2,012   1,260 (12)   6,373   6,373 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total noninterest expense

  63,987   12,077   213   76,277   18,563   1,260   96,100   96,100 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

  31,088   3,578   1,572   36,238   8,167   444   44,849   44,849 

Income tax expense

  7,207   1,002   377 (6)   8,586   2,176   113 (13)   10,875   10,875 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

 $23,881   2,576   1,195  $27,652  $5,991  $331  $33,974  $33,974 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  For the Year Ended December 31, 2018 
  (dollars in thousands, except share data) 
  Cambridge
(as Reported)		  Optima (as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Optima		  Cambridge
(Pro Forma
with Optima)		  Wellesley
(as
Reported)		  Adjustments
for
Cambridge’s
Acquisition
of Wellesley		  Cambridge
(Pro Forma
with
Wellesley)		  Cambridge
(Pro Forma
with
Wellesley and
Capital Raise)		 
  (dollars in thousands, except share data) 

Share data:

        

Weighted average number of shares outstanding, basic

 $4,061,529  $2,069,880  $—    $4,784,275 (7)  $2,404,371  $—    $6,261,920 (14)  $6,812,770 (15) 

Weighted average number of shares outstanding, diluted

  4,098,633   2,331,569   —     4,821,379 (7)   2,502,784   —     6,299,024 (14)   6,849,874 (15) 

Basic earnings per share

 $5.82  $1.24  $—    $5.78  $2.49  $—    $5.43  $4.99 

Diluted earnings per share

 $5.77  $1.10  $—    $5.74  $2.40  $—    $5.39  $4.96 

Footnotes to Unaudited Pro Forma Consolidated Statements of Income for the Year Ended December 31, 2018:

Notes for Merger with Optima:

(1)

Represents accretion income as a result of the fair market value adjustment on loans of $6.3 million

(2)

Represents amortization expense as a result of the fair market value adjustment on Certificates of Deposit of $472,000

(3)

Represents the depreciation as a result of the fair market value adjustment for fixed assets of $980,000

(4)

Represents the elimination of merger expenses in connection with the Optima merger

(5)

Represents the amortization expense as a result of the recognition of the core depositsdeposit intangible asset of $3.6 million

(6)

TheRepresents the Income tax effect of pro forma adjustment to deposits includes a negative $0.8 million interest component which will be amortized over approximately 3 yearsadjustments utilizing an effective tax rate of 24%

(7)

Other liabilities reflects deferred tax liabilities relatedPro forma weighted average shares include 722,746 shares issued to fair value adjustments calculated using a 24% tax rateformer Optima shareholders

Notes for Merger with Wellesley:

(8)

Reflects parRepresents accretion income as a result of the fair market value adjustment on loans of shares expected to be issued to Optima common stockholders$10.4 million

(9)

Adjustment to reflectRepresents amortization expense as a result of the eliminationfair market value adjustment on Investment Securities of Optima stockholders’ equity, the issuance of Cambridge common stock in the merger, and the impact of $5.1 million ofafter-tax merger charges

The estimated costs of the merger are set forth below:

   (in thousands) 

Change in control and severance payments

  $2,332 

Vendor and system contracts terminations

   749 

Facilities terminations

   432 

Professional and legal fees

   2,195 

Other acquisition related expenses

   700 
  

 

 

 

Pre-tax merger costs

   6,408 
  

 

 

 

Taxes

   1,346 
  

 

 

 

Total merger costs

  $5,062 
  

 

 

 

The estimated amount of goodwill is set forth below:

   (in thousands) 

Total Purchase Price of Optima

  $65,928 
  

 

 

 

Optima Equity

  $34,372 

Estimated Fair Value Adjustments

  

Loans – Credit Mark

   (3,403) 

Loans – Interest Rate Mark

   (3,233) 

Deposits—Interest Rate Mark

   849 

Allowance for Loan Losses

   3,273 

Core Deposit Intangible

   5,614 

Deferred Tax Liability

   (744) 
  

 

 

 

Goodwill resulting from the merger

  $29,200 
  

 

 

 

   Nine Months Ended September 30, 2018 
   Cambridge
Bancorp
Historical		   Optima Bank
Historical		   Adjustment  Pro Forma 
   (dollars in thousands, except share data) 

Interest and dividend income

       

Interest on taxable loans

  $42,318   $14,358   $1,163(1)  $57,839 

Interest ontax-exempt loans

   279    10    —     289 

Interest on taxable investment securities

   5,570    402    —     5,972 

Interest ontax-exempt investment securities

   1,817    —      —     1,817 

Dividends on FHLB of Boston stock

   202    40    —     242 

Interest on overnight investments

   484    235    —     719 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total interest and dividend income

   50,670    15,045    1,163   66,878 
  

 

 

   

 

 

   

 

 

  

 

 

 

Interest expense

       

Interest on deposits

   3,290    4,259    337(2)   7,886 

Interest on borrowed funds

   202    2    —     204 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total interest expense

   3,492    4,261    337   8,090 
  

 

 

   

 

 

   

 

 

  

 

 

 

Net interest and dividend income

   47,178    10,784    826   58,788 

Provision for Loan Losses

   787    291    —     1,078 
  

 

 

   

 

 

   

 

 

  

 

 

 

Net interest and dividend income after provision for loan losses

   46,391    10,493    826   57,710 
  

 

 

   

 

 

   

 

 

  

 

 

 

Noninterest income

       

Wealth management revenue

   19,044    —      —     19,044 

Deposit account fees

   2,306    52    —     2,358 

ATM/Debit card income

   875    248    —     1,123 

Bank owned life insurance income

   393    114    —     507 

Gain (loss) on disposition of investment securities

   2    83    —     85 

Gain on loans held for sale and portfolio loan sales

   82    199    —     281 

Loan related derivative income

   1,220    —      —     1,220 

Other income

   1,029    362    —     1,391 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total noninterest income

   24,951    1,058    —     26,009 
  

 

 

   

 

 

   

 

 

  

 

 

 

Noninterest expense

       

Salaries and employee benefits

   30,842    5,393    —     36,235 

Occupancy and equipment

   6,736    1,634    —     8,370 

Data processing

   3,848    422    —     4,270 

Professional services

   2,477    560    —     3,037 

Marketing

   1,369    266    —     1,635 

FDIC Insurance

   437    382    —     819 

Other expenses

   1,436    370    383(3)   2,189 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total noninterest expense

   47,145    9,027    383   56,555 
  

 

 

   

 

 

   

 

 

  

 

 

 

Income before income taxes

   24,197    2,524    443   27,164 

Income tax expense

   5,622    715    106(4)   6,443 
  

 

 

   

 

 

   

 

 

  

 

 

 

Net income

  $18,575   $1,809   $337  $20,721 
  

 

 

   

 

 

   

 

 

  

 

 

 

Share data:

       

Weighted average number of shares outstanding, basic

   4,059,608    2,058,069    (1,344,331)   4,773,346 

Weighted average number of shares outstanding, diluted

   4,095,447    2,321,445    (1,516,368)   4,900,524 

Basic earnings per share

  $4.53   $0.88   $—     4.34 

Diluted earnings per share

  $4.49   $0.78   $—     4.23 

(1)

Adjustment reflects the yield adjustment for interest income on loans$288,000

(2)(10)

Adjustment reflectsRepresents accretion income as a result of the costfair market value adjustment for the interest expense on depositsCertificates of Deposit of $671,000

(3)(11)

Adjustment reflectsRepresents accretion income as a result of the net increase in amortizationfair market value adjustment on Federal Home Loan Bank borrowings of other intangible assets generated in the transaction$285,000

(4)(12)

Adjustment represents incomeRepresents the amortization expense as a result of the recognition of the core deposit intangible asset of $6.9 million

(13)

Represents the Income tax expense on theeffect of pro forma adjustments at the estimatedutilizing an effective tax rate of 24%25.5%

(14)

Pro forma weighted average shares include 1,477,645 shares to be issued to former Wellesley shareholders

(15)

Pro forma weighted average shares include 550,850 shares to be issued in connection with the capital raise

   For the Year Ended December 31, 2017 
   Cambridge
Bancorp
Historical		  Optima Bank
Historical		   Adjustment  Pro Forma 
   (dollars in thousands, except par value) 

Interest and dividend income

      

Interest on taxable loans

  $51,238  $16,286   $1,550(1)  $69,074 

Interest ontax-exempt loans

   496   15    —     511 

Interest on taxable investment securities

   6,321   490    —     6,811 

Interest ontax-exempt investment securities

   2,600   —      —     2,600 

Dividends on FHLB of Boston stock

   245   33    —     278 

Interest on overnight investments

   291   247    —     538 
  

 

 

  

 

 

   

 

 

  

 

 

 

Total interest and dividend income

   61,191   17,071    1,550   79,812 
  

 

 

  

 

 

   

 

 

  

 

 

 

Interest expense

      

Interest on deposits

   3,125   3,775    449(2)   7,349 

Interest on borrowed funds

   462   —      —     462 
  

 

 

  

 

 

   

 

 

  

 

 

 

Total interest expense

   3,587   3,775    449   7,811 
  

 

 

  

 

 

   

 

 

  

 

 

 

Net interest and dividend income

   57,604   13,296    1,101   72,001 

Provision for Loan Losses

   362   428    —     790 
  

 

 

  

 

 

   

 

 

  

 

 

 

Net interest and dividend income after provision for loan losses

   57,242   12,868    1,101   71,211 
  

 

 

  

 

 

   

 

 

  

 

 

 

Noninterest income

      

Wealth management revenue

   23,029   —      —     23,029 

Deposit account fees

   3,142   44    —     3,186 

ATM/Debit card income

   1,182   300    —     1,482 

Bank owned life insurance income

   584   150    —     734 

Gain (loss) on disposition of investment securities

   (3)   42    —     39 

Gain on loans held for sale and portfolio loan sales

   355   311    —     666 

Loan related derivative income

   780   —      —     780 

Other income

   1,155   285    —     1,440 
  

 

 

  

 

 

   

 

 

  

 

 

 

Total noninterest income

   30,224   1,132    —     31,356 
  

 

 

  

 

 

   

 

 

  

 

 

 

Noninterest expense

      

Salaries and employee benefits

   36,707   6,478    —     43,185 

Occupancy and equipment

   9,114   1,299    —     10,413 

Data processing

   4,956   662    —     5,618 

Professional services

   3,374   781    —     4,155 

Marketing

   1,620   394    —     2,014 

FDIC Insurance

   629   425    —     1,054 

Other expenses

   2,892   1,009    510(3)   4,411 
  

 

 

  

 

 

   

 

 

  

 

 

 

Total noninterest expense

   59,292   11,048    510   70,850 
  

 

 

  

 

 

   

 

 

  

 

 

 

Income before income taxes

   28,174   2,952    590   31,716 

Income tax expense

   13,358   1,068    198(4)   14,624 
  

 

 

  

 

 

   

 

 

  

 

 

 

Net income

  $14,816  $1,884   $392  $17,092 
  

 

 

  

 

 

   

 

 

  

 

 

 

Share data:

      

Weighted average number of shares outstanding, basic

   4,030,530   2,018,829    (1,318,699)   4,730,660 

Weighted average number of shares outstanding, diluted

   4,065,754   2,341,383    (1,529,392)   4,877,745 

Basic earnings per share

  $3.64  $0.93   $—     3.61 

Diluted earnings per share

  $3.61  $0.80   $—     3.50 

Preliminary Purchase Price Allocation

The pro forma adjustments include the accounting entries to record the merger transaction under the acquisition method of accounting for business combinations. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill and other intangible assets. Fair value adjustments included in the pro forma financial statements are based upon available information and certain assumptions which are considered reasonable, and will be revised as additional information becomes available.

The pro forma purchase price for the Wellesley merger is as follows (dollars in thousands):

 

(1)

Adjustment reflects the yield adjustment for interest income on loans

(2)

Adjustment reflects the cost adjustment for the interest expense on deposits

(3)

Adjustment reflects the net increase in amortization of other intangible assets generated in the transaction

(4)

Adjustment represents income tax expense on the pro forma adjustments at the estimated rate of 33.5%

Purchase Price Calculation

  

Shares outstanding

   2,570 

ESOP plan termination

   (23) 
  

 

 

 

Shares outstanding

   2,547 

Shares exchanged for stock

   2,547 

Stock value

  $44.74 

Aggregate value of shares receiving stock

  $113,941 

Aggregate value to option holders

  $4,433 
  

 

 

 

Aggregate Purchase Price

  $118,374 
  

 

 

 

Preliminary pro forma goodwill

  

Fair value of assets acquired:

  

Cash and cash equivalents

  $81,353 

Investments available for sale

   34,181 

Loans held for sale

   6,351 

Loans, net

   822,452 

Other assets

   37,887 

Core deposit intangible

   6,930 
  

 

 

 

Total assets acquired

  $989,154 
  

 

 

 

Fair value of liabilities assumed:

  

Deposits

   759,416 

Borrowings

   138,672 

Other liabilities

   16,950 
  

 

 

 

Total liabilities assumed

  $915,038 
  

 

 

 

Net assets acquired

   74,116 
  

 

 

 

Preliminary pro forma goodwill

  $44,258 
  

 

 

 

LEGAL MATTERS

The validity of the shares of Cambridge common stock to be issued in the merger will be passed upon for Cambridge by Hogan Lovells US LLP. Hogan Lovells US LLP and Goodwin ProcterKilpatrick Townsend & Stockton LLP will deliver opinions to Cambridge and Optima,Wellesley, respectively, as to certain federal income tax consequences of the merger. See “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 62.104.

EXPERTS

Cambridge

The consolidated financial statements of Cambridge Bancorp as of December 31, 20172018 and 2016,2017, and for each of the three years then ended, and management’s assessment of the effectiveness of internal control over financial reporting incorporated in this joint proxy statement/prospectus by reference to theCambridge’s Annual Report on Form10-K for the year ended December 31, 20172018 have been so incorporated in reliance on the report of KPMG LLP, an independent registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting.

Wellesley

The financial statements of Wellesley Bancorp, Inc. as of December 31, 2018 and 2017, and for each of the years then ended, incorporated in this joint proxy statement/prospectus by reference to Wellesley’s Annual Report on Form10-K for the year ended December 31, 2018 have been audited by Wolf & Company, P.C., Independent Auditors, as stated in their report thereon (which report expresses an unqualified opinion), and included in this joint proxy statement/prospectus in reliance upon such report and upon the authority of saidsuch firm as experts in auditing and accounting.

Optima

The financial statements of Optima Bank & Trust Company as of December 31, 2018 and 2017, and 2016, and for each of the years then ended, appearingincluded in this proxy statement/prospectusCambridge’s Current Report on Form8-K dated October 22, 2019 have been audited by Baker Newman & Noyes LLC, Independent Auditors, as stated in their report thereon (which report expresses an unqualified opinion), and included in this joint proxy statement/prospectus in reliance upon such report and upon the authority of such firm as experts in auditing and accounting.

FUTURE SHAREHOLDER PROPOSALS

Cambridge 2020 Annual Shareholder Meeting and Shareholder Proposals

If the merger is completed, OptimaWellesley shareholders will become shareholders of Cambridge. Cambridge currently intends to hold a regularly scheduled annual meeting of shareholders in 2019. To be included in Cambridge’s 2019 annual meeting,2020. Any shareholder proposals will only be consideredproposal pursuant to Rule14a-8 of the Exchange Act intended for inclusion in Cambridge’s proxy statement for the 20192020 annual meeting of shareholders must have been received by the Cambridge by November 20, 2019. Shareholder proposals to be acted upon at the 2020 annual meeting of shareholders (but not for inclusion in the proxy statement) will only be considered if they (a) are submitted to Cambridge’sreceived by the Corporate Secretary of Cambridge at 1336 Massachusetts Avenue, Cambridge, Massachusetts 02138 between March 4, 2019, and March 24, 2019,within the time period described below and (b) concern a matter that may properly be considered and acted upon at the annual meeting in accordance with law and the rules of the SEC, including RuleRule 14a-8 under the Exchange Act. In addition, under Cambridge’s Bylaws,bylaws, if a shareholder wishesyou wish to nominate a director foror bring other business before the 20192020 annual meeting of shareholders, the following criteria must be met: (i) the shareholderyou must be a shareholder of record; (ii) the shareholderyou must have given timely notice in writing to Cambridge’s Secretary;the Corporate Secretary of Cambridge; and (iii) the shareholder’syour notice must contain specific information required in Article

II Section 8 and Article III Section 2 of Cambridge’s Bylaws.bylaws. To be timely, a shareholder’s notice to the Corporate Secretary of Cambridge must be delivered to or mailed and received at Cambridge’s principal executive offices between March 4, 2019,9, 2020 and March 24, 2019.29, 2020. Nothing in this paragraph shallwill be deemed to require Cambridge to include in its proxy statement and proxy card for the 20192020 annual meeting any shareholder proposal which does not meet the requirements of the SEC in effect at the time. Any such proposal will be subject to 17 C.F.R.§240.14a-8 of the rules and regulations promulgated by the SEC under the Exchange Act.

Wellesley 2020 Annual Shareholder Meeting and Shareholder Proposals

Wellesley does not anticipate holding a 2020 annual meeting of Wellesley shareholders if the merger is completed before the second quarter of 2020. However, if the merger is not completed within the expected time frame, or at all, Wellesley may hold an annual meeting of its shareholders in 2020. Wellesley must receive proposals that shareholders seek to include in the proxy statement for Wellesley’s next annual meeting no later than December 12, 2019. If next year’s annual meeting is held on a date that is more than 30 calendar days from May 22, 2020, a shareholder proposal must be received by a reasonable time before Wellesley begins to print and mail its proxy solicitation materials for such annual meeting. Any shareholder proposals will be subject to the requirements of the proxy rules adopted by the SEC.

Wellesley’s Bylaws provide that, in order for a shareholder to make nominations for the election of directors or proposals for business to be brought before the annual meeting, a shareholder must deliver notice of such nomination and/or proposals to Wellesley’s Corporate Secretary not less than 90 days before the date of the annual meeting. However, if less than 100 days’ notice or prior public disclosure of the annual meeting is given to shareholders, such notice must be delivered not later than the close of business on the tenth day following the day on which notice of the annual meeting was mailed to shareholders or public disclosure of the meeting date was made. A copy of Wellesley’s bylaws may be obtained from Wellesley. Nothing in this paragraph will be deemed to require Wellesley to include in its proxy statement and proxy card for the 2020 annual meeting any shareholder proposal which does not meet the requirements of the SEC in effect at the time. Any such proposal will be subject to 17 C.F.R.§240.14a-8 of the rules and regulations promulgated by the SEC under the Exchange Act.

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same

address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for shareholders and cost savings for companies.

This year, a number of brokers with account holders who are shareholders of Cambridge will be “householding” the proxy materials. A single joint proxy statement/prospectus will be delivered to multiple shareholders sharing an address, unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your broker.

Shareholders who currently receive multiple copies of the proxy statement at their addresses and would like to request “householding” of their communications should contact their brokers.

WHERE YOU CAN FIND MORE INFORMATION

Cambridge filesand Wellesley each file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information on file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at1-800-SEC-0330.SEC filings are also available to the public at the SEC’s website at www.sec.gov.

Cambridge has filed a registration statement on FormS-4 to register with the SEC the shares of Cambridge common stock that OptimaWellesley shareholders will receive in the merger. This joint proxy statement/prospectus is part of Cambridge’s registration statement on FormS-4, and is a prospectus of Cambridge and a proxy statement of OptimaCambridge and Wellesley for itstheir shareholder meeting.meetings.

The SEC permits Cambridge to “incorporate by reference” information into this joint proxy statement/prospectus. This means that Cambridge can disclose important information to you by referring to another document filed separately with the SEC. The information incorporated by reference is considered a part of this joint proxy statement/prospectus, except for any information superseded by information contained directly in this joint proxy statement/prospectus or by information contained in documents filed with or furnished to the SEC after the date of this joint proxy statement/prospectus that is incorporated by reference into this joint proxy statement/prospectus.

This joint proxy statement/prospectus incorporates by reference the Cambridge documents set forth below that have been previously filed with the SEC. These documents contain important information about Cambridge and OptimaWellesley and their financial conditions.

 

Cambridge SEC Filings (SEC File Number 001-12569)001-38184)

  

Period or Date Filed

Annual Report onForm10-K  Year ended December 31, 2017,2018, filed March 21, 2018
18, 2019
Proxy Statement onSchedule 14A  Filed March 22, 201819, 2019 (solely to the extent incorporated by reference into Part III of our Annual Report onForm 10-K for the year ended December 31, 2017)
2018)
Quarterly Report on Form10-Q  Quarters ended March 31, 2018,2019, filedMay 9, 2018,2019, June  30, 2018,2019, filedAugust 9, 2018,8, 2019, and September  30, 2018,2019, filedNovember 8, 20187, 2019

Cambridge SEC Filings (SEC File Number001-38184)

Period or Date Filed

Current Reports on Form8-K  FiledJanuary  23, 2019,January 25, 2018, March 1, 2018, March 16, 2018, 2019,February  19, 2019,February 22, 2019,April  19, 2018, 17, 2019,April 18, 2019,April 29, 2019,May 8, 2019,May  13, 2019,May 14, 2018, 2019,May 15, 2018, June 19, 2018, 2019,July 19, 2018. 16, 2019,July 31, 2018, September 20, 2018, September 26, 2018, 30, 2019,October 15, 2018, 22, 2019,November  21, 2018, November 23, 201813, 2019,December 5, 2019,December  10, 2019,January 28, 2020 and December 6, 2018January  28, 2020 (other than the portions of those documents not deemed to be filed)
Description of Cambridge common stock contained in Cambridge’s registration statement onForm 10/12B10-12B and any amendment or report filed for the purpose of updating such description.  Filed August 9, 2017

This joint proxy statement/prospectus incorporates by reference the Wellesley documents set forth below that have been previously filed with the SEC. These documents contain important information about Cambridge and Wellesley and their financial conditions.

Wellesley SEC Filings (SEC File Number001-35352)

Period or Date Filed

Annual Report onForm10-KYear ended December 31, 2018, filed March 29, 2019
Proxy Statement onSchedule 14AFiled April 10, 2019 (solely to the extent incorporated by reference into Part III of our Annual Report onForm 10-K for the year ended December 31, 2018)
Quarterly Report on Form10-QQuarters ended March 31, 2019, filedMay 9, 2019, June  30, 2019, filedAugust 6, 2019, and September  30, 2019, filedNovember 7, 2019
Current Reports on Form8-KFiledJanuary 24, 2019,January  29, 2019,February 27, 2019,March 11, 2019,April 1, 2019,April  25, 2019,May 23, 2019,July  25, 2019,August 28, 2019,October 24, 2019,November 20, 2019,December 5, 2019 andJanuary 23, 2020 (other than the portions of those documents not deemed to be filed)
Description of Wellesley common stock contained in Wellesley’s registration statement onFormS-1 and any amendment or report filed for the purpose of updating such description.Filed September 9, 2011

In addition, Cambridge and Wellesley each also incorporates by reference additional documents that it may file with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, between the date of this joint proxy statement/prospectus and the datedates of the Cambridge and Wellesley special meeting.meetings. These documents include Annual Reports on Form10-K, Quarterly Reports on Form10-Q, Current Reports on Form8-K and proxy statements. To the extent that any information contained in any Current Report on Form8-K, or any exhibit to such report, was furnished to, rather than filed with, the SEC, such information or exhibit is not specifically incorporated by reference into this joint proxy statement/prospectus.

Documents incorporated by reference are available from Cambridge and Wellesley, without charge, excluding all exhibits unless an exhibit has been specifically incorporated by reference into this joint proxy statement/ prospectus. You can obtain documents incorporated by reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

Cambridge Bancorp

Attention: Chief Financial Officer

1336 Massachusetts Avenue

Cambridge, MA 02138

(617)876-5500

Cambridge Bancorp

78 Blanchard Road, 5th Floor

Burlington, Massachusetts 01803

Attention: Michael F. Carotenuto

Chief Financial Officer

(617)520-5543

https://www.cambridgetrust.com

(“About – Investor Relations” tab)

Wellesley Bancorp, Inc.

100 Worcester Street, Suite 300

Wellesley, Massachusetts 02481

Attention: Michael W. Dvorak

CFO, COO

(781)489-7606

www.wellesleybank.com

Neither Cambridge nor OptimaWellesley has authorized anyone to give any information or make any representation about the merger or the OptimaCambridge or Wellesley shareholder meetingmeetings that is different from, or in addition to, that contained in this joint proxy statement/prospectus or in any of the materials that are incorporated by reference into this joint proxy statement/prospectus. Therefore, if anyone gives you information of this sort, you should not rely on it. This joint proxy

statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this joint proxy statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction. Neither the delivery of this joint proxy statement/prospectus nor any distribution of securities pursuant to this joint proxy statement/prospectus shall,will, under any circumstances, create any implication that there has been no change in the information set forth or incorporated into this joint proxy statement/prospectus by reference or in our affairs since the date of this joint proxy statement/prospectus. The information contained in this joint proxy statement/prospectus with respect to Cambridge was provided by Cambridge, and the information contained in this joint proxy statement/prospectus with respect to OptimaWellesley was provided by Optima.Wellesley. The information contained in this joint proxy statement/prospectus speaks only as of the date of this joint proxy statement/prospectus unless the information specifically indicates that another date applies.

OPTIMA BANK & TRUST COMPANY

Audited Financial Statement

Years Ended December 31, 2017 and 2016

Table of Contents

Page

Independent Auditor’s Report

F-2

Balance Sheets

F-3

Statement of Income and Statement of Comprehensive Income

F-4

Statement of Changes in Stockholders’ Equity

F-6

Statements of Cash Flows

F-7

Notes to the Financial Statements

F-9

LOGO

Baker Newman & Noyes LLC

MAINE | MASSACHUSETTS | NEW HAMPSHIRE

800.244.7444 | www.bnncpa.com

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors

Optima Bank & Trust Company

Report on the Financial Statements

We have audited the accompanying financial statements of Optima Bank & Trust Company (the Bank), which comprise the balance sheets as of December 31, 2017 and 2016, the related statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Optima Bank & Trust Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

LOGO

Portland, Maine

February 9, 2018

OPTIMA BANK & TRUST COMPANY

BALANCE SHEETS

December 31, 2017 and 2016

   2017  2016 
ASSETS   

Cash and due from banks(note 11)

  $36,747,811  $51,236,644 

Federal funds sold

   918,000   712,000 
  

 

 

  

 

 

 

Cash and cash equivalents

   37,665,811   51,948,644 

Investment securities available for sale(note 2)

   27,316,420   22,680,245 

Loans, net of allowance for loan losses(note 3)

   417,243,076   339,977,838 

Accrued interest receivable

   985,732   765,839 

Federal Home Loan Bank stock

   788,600   754,700 

Bank premises and equipment, net(note 4)

   4,902,668   3,880,156 

Other real estate owned

   —     173,187 

Deferred income tax asset, net(note 9)

   —     97,649 

Bank-owned life insurance

   5,584,550   5,435,033 

Other assets

   1,415,547   1,677,736 
  

 

 

  

 

 

 

Total assets

  $495,902,404  $427,391,027 
  

 

 

  

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

Liabilities:

   

Deposit accounts(note 5)

  $458,513,937  $390,910,879 

Customer repurchase agreements(notes 2 and 7)

   5,471,267   6,698,022 

Deferred income tax liability, net(note 9)

   9,771   —   

Accrued expenses and other liabilities

   646,411   744,652 
  

 

 

  

 

 

 

Total liabilities

   464,641,386   398,353,553 

Commitments and contingencies(notes 8 and 12)

   

Stockholders’ equity(notes 8 and 11):

   

Common stock, $1.00 par value; 9,000,000 shares authorized; 2,033,211 and 2,018,086 shares issued and outstanding at December 31, 2017 and 2016, respectively

   2,033,211   2,018,086 

Additionalpaid-in capital

   21,688,312   21,440,089 

Accumulated surplus

   7,707,007   5,794,663 

Accumulated other comprehensive loss(note 10)

   (167,512)   (215,364) 
  

 

 

  

 

 

 

Total stockholders’ equity

   31,261,018   29,037,474 
  

 

 

  

 

 

 

Total liabilities and stockholders’ equity

  $495,902,404  $427,391,027 
  

 

 

  

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF INCOME

Years Ended December 31, 2017 and 2016

   2017   2016 

Interest income:

    

Interest on loans

  $16,300,832   $13,817,805 

Interest on investments

   523,122    429,330 

Interest from interest-bearing deposits in other banks

   247,181    177,024 
  

 

 

   

 

 

 

Total interest income

   17,071,135    14,424,159 

Interest expense:

    

Interest on deposits

   3,775,262    2,915,235 

Interest on borrowings

   —      7,283 
  

 

 

   

 

 

 

Total interest expense

   3,775,262    2,922,518 
  

 

 

   

 

 

 

Net interest income

   13,295,873    11,501,641 

Provision for loan losses(note 3)

   428,093    560,000 
  

 

 

   

 

 

 

Net interest income after provision for loan losses

   12,867,780    10,941,641 

Noninterest income:

    

Service charges, fees and other income

   669,936    925,972 

Gain on sale of loans

   310,684    983,386 

Net gain on sale of investments(note 2)

   1,939    73,059 

Bank-owned life insurance income

   149,517    160,566 
  

 

 

   

 

 

 

Total noninterest income

   1,132,076    2,142,983 

Noninterest expenses:

    

Salaries and employee benefits

   6,477,622    5,644,378 

Occupancy expense(note 12)

   1,298,841    1,128,662 

Equipment expense

   662,289    587,333 

Other

   2,608,756    2,461,240 
  

 

 

   

 

 

 

Total noninterest expenses

   11,047,508    9,821,613 
  

 

 

   

 

 

 

Income before income taxes

   2,952,348    3,263,011 

Income tax expense(note 9)

   1,068,000    1,162,500 
  

 

 

   

 

 

 

Net income

  $1,884,348   $2,100,511 
  

 

 

   

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31, 2017 and 2016

   2017   2016 

Net income

  $1,884,348   $2,100,511 

Other comprehensive income, net of income taxes:

    

Unrealized gain on securitiesavailable-for-sale:

    

Unrealized holding gains/losses arising during the period, net of income taxes of $(32,959) and $16,261 in 2017 and 2016, respectively

   50,270    (24,801) 

Reclassification adjustment for gains and losses and net accretion or amortization of investment securities included in net income, net of income taxes of $(16,769) and $(308,398) in 2017 and 2016, respectively

   25,578    470,384 
  

 

 

   

 

 

 

Other comprehensive income

   75,848    445,583 
  

 

 

   

 

 

 

Comprehensive income

  $1,960,196   $2,546,094 
  

 

 

   

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, 2017 and 2016

   Common
Stock		   Additional
Paid-in Capital		   Accumulated
Surplus		   Accumulated
Other
Comprehensive
Loss		  Total 

Balance at December 31, 2015

  $1,943,086   $20,721,279   $3,694,152   $(660,947)  $25,697,570 

Net income

   —      —      2,100,511    —     2,100,511 

Exercise of stock warrants

   75,000    675,000    —      —     750,000 

Change in net unrealized loss onavailable-for-sale securities, net of income taxes

   —      —      —      445,583   445,583 

Stock-based compensation(note 8)

   —      43,810    —      —     43,810 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Balance at December 31, 2016

   2,018,086    21,440,089    5,794,663    (215,364)   29,037,474 

Net income

   —      —      1,884,348    —     1,884,348 

Exercise of stock warrants

   15,000    135,000    —      —     150,000 

Exercise of stock options

   125    2,250    —      —     2,375 

Change in net unrealized loss onavailable-for-sale securities, net of income taxes

   —      —      —      75,848   75,848 

Tax rate adjustment

   —      —      27,996    (27,996)   —   

Stock-based compensation(note 8)

   —      110,973    —      —     110,973 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Balance at December 31, 2017

  $2,033,211   $21,688,312   $7,707,007   $(167,512)  $31,261,018 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF CASH FLOWS

Years Ended December 31, 2017 and 2016

   2017  2016 

Cash flows from operating activities:

   

Net income

  $1,884,348  $2,100,511 

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

   

Depreciation

   481,749   454,127 

Amortization of mortgage servicing rights

   144,011   79,121 

Net amortization of bond premiums/discounts

   44,286   51,473 

Net realized gain on sale of investments

   (1,939)   (73,059) 

Stock-based compensation

   110,973   43,810 

Gain on sale of loans

   (310,684)   (983,386) 

Loss on sale of other real estate owned

   154   —   

Provision for loan losses

   428,093   560,000 

Loans originated for sale

   (18,830,444)   (12,187,937) 

Proceeds from sale of loans originated for sale

   19,141,128   12,618,780 

Capitalized mortgage servicing rights

   —     (264,707) 

Deferred income tax expense

   57,692   308,741 

Deferred origination costs, net

   (45,230)   (117,909) 

Income on bank-owned life insurance

   (149,517)   (160,565) 

Changes in:

   

Interest receivable

   (219,893)   55,841 

Other assets

   118,178   (706,309) 

Accrued expenses and other liabilities

   (98,241)   53,550 
  

 

 

  

 

 

 

Net cash provided by operating activities

   2,754,664   1,832,082 

Cash flows from investing activities:

   

Sale and maturity of investment securities available for sale

   4,006,705   8,519,413 

Sale of investment securities held to maturity

   —     11,993,646 

Purchases of investment securities available for sale

   (10,535,993)   (18,511,598) 

Principal collected on mortgage-backed securities to be held to maturity

   —     18,744 

Principal collected on mortgage-backed securities available for sale

   1,976,342   1,501,619 

Net purchases and redemptions of Federal Home Loan Bank stock

   (33,900)   (69,600) 

Net increase in loans

   (77,648,101)   (57,420,992) 

Sale of portfolio loans

   —     29,494,363 

Acquisition of bank premises and equipment

   (1,504,261)   (1,336,878) 

Proceeds from sale of other real estate owned

   173,033   —   
  

 

 

  

 

 

 

Net cash used by investing activities

   (83,566,175)   (25,811,283) 

Cash flows from financing activities:

   

Net (decrease) increase in certificates of deposit

   (7,061,488)   36,365,854 

Net increase in other deposit accounts

   74,664,546   23,768,739 

Proceeds from exercise of stock warrants

   150,000   750,000 

Proceeds from exercise of stock options

   2,375   —   

Net decrease in customer repurchase agreements

   (1,226,755)   (4,765,605) 
  

 

 

  

 

 

 

Net cash provided by financing activities

   66,528,678   56,118,988 
  

 

 

  

 

 

 

Net (decrease) increase in cash and cash equivalents

   (14,282,833)   32,139,787 

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF CASH FLOWS (CONTINUED)

Years Ended December 31, 2017 and 2016

   2017  2016 

Cash and cash equivalents, beginning of year

  $51,948,644  $19,808,857 
  

 

 

  

 

 

 

Cash and cash equivalents, end of year

  $37,665,811  $51,948,644 
  

 

 

  

 

 

 

Supplemental disclosure of cash flow information:

   

Interest paid

  $3,787,236  $2,867,694 

Income taxes paid

   1,055,500   1,200,000 

Supplemental disclosure of noncash transactions:

   

Loans transferred to other real estate owned

   —     173,187 

Increase in fair value of investments available for sale:

   

Investments available for sale

   125,576   737,720 

Change in deferred tax asset

   (49,728)   (292,137) 

Accumulated other comprehensive income

   75,848   445,583 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

1.

Summary of Significant Accounting Policies

Business

Optima Bank & Trust Company (the Bank) provides a full range of banking services to individual and corporate customers in southern and coastal areas of New Hampshire. The Bank is subject to the regulations of certain state and federal agencies and undergoes periodic examinations by those regulatory authorities.

Basis of Financial Statement Presentation

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. 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 significantly from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses. A substantial portion of the Bank’s loans are in the southern and coastal areas of New Hampshire. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio is susceptible to changes in economic conditions in those areas. In connection with the determination of the allowance for loan losses, management obtains independent appraisals for significant properties.

Investment Securities

Available for sale securities (AFS) consist of debt securities that the Bank anticipates could be made available for sale in response to changes in market interest rates, liquidity needs, funding sources and other similar factors. These assets are specifically identified and are carried at fair value. Unrealized holding gains and losses on these assets, net of related income taxes, are excluded from earnings and are included in accumulated other comprehensive loss and reported as a separate component of stockholders’ equity. Gains and losses on the sale of available for sale securities are computed on the specific identification of the adjusted costs of each security sold, are recognized upon realization and are shown separately in the statements of income. Premiums and discounts on investment securities are amortized using methods that approximate the effective yield method.

Management of the Bank, in addition to considering current trends and economic conditions that may affect the quality of individual securities within the Bank’s investment portfolio, also considers the Bank’s ability and intent to hold available for sale debt securities or whether it is more likely than not it will be required to sell debt securities before recovery of the amortized cost basis. When a decline in fair value of AFS is considered other than temporary and there is intent to hold the debt security, the credit loss portion is recognized in the statements of income, resulting in the establishment of a new cost basis for the security. If the Bank intends to sell the security, the entire unrealized loss for the security is recognized in the statements of income. There were no other-than-temporary declines in fair value as of December 31, 2017 and 2016.

Loans and Interest Income on Loans

Loans are stated at the principal amounts outstanding, plus net deferred loan origination costs. Interest is recognized on loans using the accrual method, unless it is no longer probable of collection or the loan is 90

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

1.

Summary of Significant Accounting Policies (Continued)

days or more past due, at which time interest ceases to accrue and is recognized on the cash basis. Loans are restored to accrual status when there has been a period of sustained positive performance on the loans, the borrower has demonstrated the ability to make future payments of principal and interest, and management believes outstanding principal and interest receivable are collectible. Interest received on an impaired loan for which the Bank does not expect full collection of principal will generally be recorded as a reduction in the recorded investment in the loan. When the recorded carrying value in the impaired loan has been reduced to a point at which ultimate collection is probable, then interest income may be recognized.

Allowance for Loan Losses

The allowance for loan losses is established by management to absorb probable future charge-offs of loans deemed uncollectible. This allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged off. Loan losses are charged against the allowance when management believes that the collectibility of the loan principal is unlikely. Management, considering current information and events regarding the borrowers’ ability to repay their obligations, considers loans to be impaired when it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the note agreement. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the note’s effective interest rate, or the fair value of collateral if the loan is collateral dependent. Impairment losses are included in the allowance for loan losses through a charge to provision for loan losses.

Management believes that the allowance for loan losses is adequate. Arriving at an appropriate level of allowance for loan loss involves judgment; the primary considerations are the level of delinquencies (based on contractual terms), the nature of the loan portfolio, prior loan loss experience by loan category, and qualitative factors including the local economic conditions and current real estate market trends. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on judgments different from those of management.

The qualitative factors are determined based on the various risk characteristics of each portfolio segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate and home equity lines of credit: The Bank generally does not originate loans with aloan-to-value ratio greater than 80 percent and does not grant subprime loans. Loans withloan-to-value ratios greater than 85 percent require the purchase of private mortgage insurance unless strong mitigating factors are identified. Loans in these segments are collateralized primarily by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in these segments.

Commercial real estate and multi-family residential: Loans in these segments are primarily income-producing properties throughout southern and coastal areas of New Hampshire. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates which, in turn, may have an effect on the credit quality in these segments. Management periodically obtains rent rolls and continually monitors the cash flows of these loans.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

1.

Summary of Significant Accounting Policies (Continued)

Construction loans: The loans in this segment are primarily residential and commercialconstruction-to-permanent loans collateralized by owner-occupied residential and commercial real estate, and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment.

Commercial loans: Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, may have an effect on the credit quality in this segment.

Consumer loans: Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

A substantial portion of the loan portfolio consists of loans to borrowers in southern and coastal areas of New Hampshire. The ability of the Bank’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas.

Origination Fees and Costs

Loan origination fees and direct origination costs are deferred and amortized over the life of the related loan on the level yield method. Amortization ceases while loans are on nonaccrual status. The Bank does not anticipate prepayments in determining the amortization but recognizes the amortization at the time of prepayment.

Loan Servicing

The Bank recognizes as separate assets the rights to service mortgage loans for others, and performs an assessment of capitalized mortgage servicing rights for impairment, based on the current fair value of those rights. The Bank capitalizes mortgage servicing rights at their fair values upon the sale of the related loans. Capitalized mortgage servicing rights are amortized in proportion to, and over the period of, estimated future net servicing income. Fair values are estimated using bid quotations received from dealers for similar instruments. For purposes of measuring impairment, the rights are stratified, as necessary, based on interest rates and the expected maturities of the underlying loans.

Federal Home Loan Bank Stock

Stock in the Federal Home Loan Bank (FHLB) is a required investment due to membership in FHLB, and is carried at cost and can be redeemed at the FHLB subject to current redemption policies.

Other Real Estate Owned (OREO)

Collateral acquired through foreclosure is recorded at fair value, less estimated costs to sell, at the time of acquisition. The excess, if any, of the loan balance over the fair value of the property at the time of transfer from loans to OREO, is charged to the allowance for loan losses. Subsequent declines in the fair value of the properties are recorded as noninterest expense. Net operating income or expense related to foreclosed property is included in noninterest expense in the accompanying statements of income. There are inherent

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

1.

Summary of Significant Accounting Policies (Continued)

uncertainties in the assumptions with respect to the estimated fair value of other real estate owned, and the amounts ultimately realized on other real estate owned may differ from the amounts reflected in the accompanying financial statements. There was no OREO at December 31, 2017. The balance in OREO was $173,187 at December 31, 2016.

Bank Premises and Equipment

Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the expected lease term or the estimated useful life. Maintenance and repairs are charged to current expense as incurred and the cost of major renewals and betterments are capitalized.

Income Taxes

The Bank follows the asset and liability method of accounting for income taxes, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If it is not determined that realization of the deferred tax assets is more likely than not to occur, then a valuation allowance is established. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. See note 9 for additional information.

Assets and liabilities are established for certain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the“more-likely-than-not” threshold, based upon the technical merits of the position. Estimated interest and penalties, if applicable, related to uncertain tax positions are included as a component of income tax expense. Management has determined that the Bank has not taken, nor does it expect to take, any uncertain tax positions in any income tax return.

Advertising and Marketing Expense

Advertising and marketing costs are expensed as incurred. Advertising and marketing expense was approximately $393,800 and $353,800 in 2017 and 2016, respectively.

Stock-Based Compensation

Stock-based compensation represents the cost related to stock-based awards to employees and directors. The Bank measures stock-based compensation cost at the grant date based upon the estimated fair value of the award, and recognizes the cost as expense on a straight-line basis over the employee requisite service period. Forfeitures are recognized as they occur. The Bank estimates the fair value of stock options using the Black-Scholes valuation method.

Statement of Cash Flows

For the purpose of reporting cash flows, cash and cash equivalents includes cash and due from banks, interest-bearing deposits in other banks with an original maturity of three months or less and federal funds sold.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

1.

Summary of Significant Accounting Policies (Continued)

Comprehensive Income

The only component of other comprehensive income reported in the accompanying statements of comprehensive income and of accumulated other comprehensive loss on the balance sheets is the unrealized net holding gains or losses on securitiesavailable-for-sale, net of tax. Components of accumulated other comprehensive loss are presented net of taxes, which are determined using a tax rate of 27.5% and 39.6% in 2017 and 2016, respectively.

Transfers of Financial Assets

Transfers of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets.

During the normal course of business, the Bank may transfer a portion of a financial asset, for example, a participation loan or the government-guaranteed portion of a loan. In order to be eligible for sales treatment, the transfer of the portion of the loan must meet the criteria of a participating interest. If it does not meet the criteria of a participating interest, the transfer must be accounted for as a secured borrowing. In order to meet the criteria for a participating interest, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties and no loan holder has the right to pledge or exchange the entire loan.

Subsequent Events

Events occurring after the balance sheet date are evaluated by management to determine whether such events should be recognized or disclosed in the financial statements. Management has evaluated subsequent events through February 9, 2018, which is the date the financial statements were available to be issued.

New Accounting Pronouncements

Recognition and Measurement of Financial Instruments

In January 2016 the FASB issued Accounting Standards Update (ASU)2016-01,Financial Instruments—Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The more significant changes are:

1.

Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

1.

Summary of Significant Accounting Policies (Continued)

2.

Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.

3.

Eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost (only for companies that are not considered public business entities).

4.

Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related toavailable-for-sale securities in combination with the entity’s other deferred tax assets.

ASU2016-01 is effective for years beginning after December 15, 2017 for public business entities, and years beginning after December 15, 2018 for all other entities. Early application of certain amendments within the ASU is permitted for entities not considered public business entities. The Bank has early adopted number 3 above and eliminated certain fair value disclosures for financial instruments measured at amortized cost. The Bank is currently reviewing the remaining amendments of this ASU to determine the impact on its financial statements.

Accounting for Leases

In February 2016, the FASB issuedASU 2016-02,Leases. This ASU requires that an operating lease be recognized on the statement of financial condition as a“right-to-use” asset along with a corresponding liability representing the rent obligation. The asset and liability will initially be measured at the present value of the future lease payments. The standard is expected to result in an increase to assets and liabilities recognized and, therefore, increase risk-weighted assets for regulatory capital purposes. The guidance requires the use of the modified retrospective transition approach for existing leases that have not expired before the date of initial application and will become effective for reporting periods beginning after December 15, 2018 for public business entities, and years beginning after December 15, 2019 for all other entities. Early adoption will be permitted. The Bank is currently evaluating the impact of the pronouncement on its financial statements.

Credit Losses

In June 2016, the FASB issuedASU 2016-13,Financial Instruments—Credit Losses. This significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (CECL) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certainoff-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held to maturity securities, loan commitments, and financial guarantees. The CECL model does not apply toavailable-for-sale (AFS) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. It also expands the disclosure requirements regarding an entity’s assumptions, models, and methods

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

1.

Summary of Significant Accounting Policies (Continued)

for estimating the allowance for loan losses. In addition entities will need to disclose the amortized cost balance of each class of financial asset by credit quality indicator, disaggregated by year of origination. The standard is effective for the Bank interim and annual reporting periods beginning after December 15, 2020 with early adoption permitted for periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first period in which the guidance is effective. The Bank is currently evaluating the provisions of the standard to determine the potential impact the new standard will have on its financial statements.

2.

Investment Securities

Following is a summary of investment securities available for sale at amortized cost and fair value as of December 31, 2017 and 2016:

   Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair
Value		 

2017

        

Debt securities:

        

GNMA mortgage-backed securities

  $2,913,277   $—     $82,936   $2,830,341 

GNMA collateralized mortgage obligations

   23,249,569    19,885    138,130    23,131,324 

SBA mortgage-backed securities

   886,493    —      29,584    856,909 

U.S. Treasury securities

   498,067    —      221    497,846 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $27,547,406   $19,885   $250,871   $27,316,420 
  

 

 

   

 

 

   

 

 

   

 

 

 

2016

        

Debt securities:

        

GNMA mortgage-backed securities

  $3,824,307   $—     $106,250   $3,718,057 

GNMA collateralized mortgage obligations

   17,663,346    —      209,565    17,453,781 

SBA mortgage-backed securities

   1,049,269    —      40,729    1,008,540 

U.S. Treasury securities

   499,885    —      18    499,867 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $23,036,807   $—     $356,562   $22,680,245 
  

 

 

   

 

 

   

 

 

   

 

 

 

The carrying amounts and fair value of debt securitiesavailable-for-sale at December 31, 2017, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:

   Amortized
Cost		   Fair
Value		 

Due less than five years

  $498,067   $497,846 

Mortgage-backed securities, amortizing monthly

   3,799,770    3,687,250 

Collateralized mortgage obligations, amortizing monthly

   23,249,569    23,131,324 
  

 

 

   

 

 

 
  $27,547,406   $27,316,420 
  

 

 

   

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

2.

Investment Securities (Continued)

The following tables show the Bank’s gross unrealized losses and fair value of securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2017 and 2016:

  Less than 12 Months  More than 12 Months  Total 
  Number of
Securities		  Fair
Value		  Unrealized
Losses		  Number of
Securities		  Fair
Value		  Unrealized
Losses		  Fair
Value		  Unrealized
Losses		 

2017

        

GNMA mortgage-backed securities

  —    $—    $—     5  $2,830,341  $82,936  $2,830,341  $82,936 

GNMA collateralized mortgage obligations

  2   3,630,706   13,206   5   12,949,143   124,924   16,579,849   138,130 

SBA mortgage-backed securities

  —     —     —     3   856,909   29,584   856,909   29,584 

U.S. Treasury notes

  1   497,846   221   —     —     —     497,846   221 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total temporarily impaired securities

  3  $4,128,552  $13,427   13  $16,636,393  $237,444  $20,764,945  $250,871 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2016

        

GNMA mortgage-backed securities

  1  $1,886,362  $29,413   4  $1,831,695  $76,837  $3,718,057  $106,250 

GNMA collateralized mortgage obligations

  6   15,600,863   200,470   2   1,852,918   9,095   17,453,781   209,565 

SBA mortgage-backed securities

  —     —     —     3   1,008,540   40,729   1,008,540   40,729 

U.S. Treasury notes

  1   499,867   18   —     —     —     499,867   18 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total temporarily impaired securities

  8  $17,987,092  $229,901   9  $4,693,153  $126,661  $22,680,245  $356,562 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The primary cause for unrealized losses within debt securities is the impact movements in market interest rates have had in comparison to the underlying yields on securities and the impact of temporary market fluctuations. No declines are deemed to be other than temporary and management has the intent and ability to hold depreciated debt securities until recovery or maturity. All GNMA and SBA securities are backed by the full faith and credit of the United States as to timely payment of principal and interest.

For the year ended December 31, 2017, proceeds from the sales ofavailable-for-sale securities amounted to $2,006,705. Gross realized gains on those sales amounted to $1,939. For the year ended December 31, 2016,

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

2.

Investment Securities (Continued)

proceeds from the sales ofavailable-for-sale securities amounted to $8,019,413. Gross realized gains and (losses) on those sales amounted to $17,861 and $(1,166), respectively.

For the year ended December 31, 2016, proceeds from the sales of held to maturity securities amounted to $11,993,646. Gross realized gains and (losses) on those sales amounted to $129,072 and $(72,708), respectively. Included in these amounts is the recognition of the unrealized holding loss out of accumulated other comprehensive loss of approximately $711,000 related to these GNMA collateralized mortgage obligations that were transferred fromavailable-for-sale toheld-to-maturity in 2014 and sold during 2016.

At December 31, 2017, approximately $8,181,000 (fair value) of government-sponsored enterprise obligations and a U.S. Treasury security of $498,000 (fair value) have been pledged to secure customer repurchase agreements.

At December 31, 2016, approximately $22,204,000 (fair value) of government-sponsored enterprise obligations and a U.S. Treasury security of $500,000 (fair value) have been pledged to secure customer repurchase agreements.

3.

Loans

Major classifications of loans at December 31, 2017 and 2016 are as follows:

   2017   2016 

Mortgage loans:

    

Residential

  $234,378,976   $174,028,676 

Commercial

   128,176,387    114,724,646 

Construction

   31,199,766    27,765,693 
  

 

 

   

 

 

 

Total mortgage loans

   393,755,129    316,519,015 

U.S. Government guaranteed loans

   2,426,203    3,044,858 

Commercial loans

   22,736,697    20,285,664 

Consumer loans

   698,654    2,126,245 
  

 

 

   

 

 

 
   419,616,683    341,975,782 

Plus deferred loan origination costs, net

   701,201    655,971 
  

 

 

   

 

 

 
   420,317,884    342,631,753 

Less allowance for loan losses

   (3,074,808)    (2,653,915) 
  

 

 

   

 

 

 
  $417,243,076   $339,977,838 
  

 

 

   

 

 

 

At December 31, 2017 and 2016, certain officers and directors, or their companies, were indebted to the Bank or have available credit in the aggregate amounts of approximately $3,193,000 and $1,732,000, respectively.

Residential mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balance of mortgage loans serviced for others was approximately $37,951,000 and $54,673,000 at December 31, 2017 and 2016, respectively.

The amortized cost of mortgage servicing rights (included in other assets) at December 31, 2017 and 2016, of approximately $357,000 and $501,000, respectively, approximates the fair value and no valuation

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

3.

Loans (Continued)

allowance for impairment has been recorded. There were no mortgage servicing rights capitalized in 2017. Mortgage servicing rights of approximately $264,700 were capitalized in 2016. Amortization of mortgage servicing rights was approximately $144,000 and $79,100 in 2017 and 2016, respectively.

The following table presents the activity in the allowance for loan losses and select loan information by portfolio segment for the year ended December 31, 2017:

  Mortgage
Residential		  Mortgage
Commercial		  Mortgage
Construction		  U.S.
Government
Guaranteed		  Commercial  Consumer  Un-
allocated		  Total 

Allowance

        

Beginning balance, December 31, 2016

 $851,663  $1,093,483  $188,407  $—    $496,271  $14,000  $ 10,091  $2,653,915 

Provision (reduction)

  334,188   140,928   17,593   —     (50,404)   (9,000)   (5,212)   428,093 

Charge-offs

  —     —     —     —     (14,000)   —     —     (14,000) 

Recoveries

  —     —     —     —     6,800   —     —     6,800 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance, December 31, 2017

 $1,185,851  $1,234,411  $206,000  $—    $438,667  $5,000  $4,879  $3,074,808 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance: Individually evaluated for impairment

 $57,851  $87,411  $—    $—    $24,667  $—    $—    $169,929 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance: Collectively evaluated for impairment

 $1,128,000  $1,147,000  $206,000  $—    $414,000  $5,000  $4,879  $2,904,879 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans ending balance

        

Ending balance: Individually evaluated for impairment

 $697,738  $512,199  $—    $—    $898,563  $—    $—    $2,108,500 

Ending balance: Collectively evaluated for impairment

  233,681,238   127,664,188   31,199,766   2,426,203   21,838,134   698,654   —     417,508,183 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans ending balance

 $234,378,976  $128,176,387  $31,199,766  $2,426,203  $22,736,697  $698,654  $—    $419,616,683 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

3.

Loans (Continued)

The following table presents the activity in the allowance for loan losses and select loan information by portfolio segment for the year ended December 31, 2016:

  Mortgage
Residential		  Mortgage
Commercial		  Mortgage
Construction		  U.S.
Government
Guaranteed		  Commercial  Consumer  Un-
allocated		  Total 

Allowance

        

Beginning balance, December 31, 2015

 $829,212  $1,117,891  $127,834  $—    $345,093  $6,000  $11,836  $2,437,866 

Provision (reduction)

  22,451   (11,538)   60,573   —     482,259   8,000   (1,745)   560,000 

Charge-offs

  —     (12,870)   —     —     (331,581)   —     —     (344,451) 

Recoveries

  —     —     —     —     500   —     —     500 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance, December 31, 2016

 $851,663  $1,093,483  $188,407  $—    $496,271  $14,000  $10,091  $2,653,915 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance: Individually evaluated for impairment

 $6,663  $60,483  $12,407  $—    $100,270  $—    $—    $179,823 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance: Collectively evaluated for impairment

 $845,000  $1,033,000  $176,000  $—    $396,001  $14,000  $10,091  $2,474,092 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans ending balance

        

Ending balance: Individually evaluated for impairment

 $1,077,003  $620,161  $71,874  $—    $741,358  $—    $—    $2,510,396 

Ending balance: Collectively evaluated for impairment

  172,951,673   114,104,485   27,693,819   3,044,858   19,544,306   2,126,245   —     339,465,386 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans ending balance

 $174,028,676  $114,724,646  $27,765,693  $3,044,858  $20,285,664  $2,126,245  $—    $341,975,782 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

3.

Loans (Continued)

At December 31, 2017 and 2016, all loans past due greater than 90 days are on nonaccrual status with interest payments collected applied to reduce the loan balance. At December 31, 2017 and 2016, there were nine and twelve loans, respectively, on nonaccrual status that were past due less than 90 days. The following table presents an aged analysis of past due and nonaccrual loans by class of loans as of December 31, 2017 and 2016:

  30-59
Days
Past Due		  60-89
Days
Past Due		  Greater
Than
90 Days		  Total Past
Due		  Current  Total
Loans
Held for
Investment		  Greater than
90 Days
and Still
Accruing		  Non-
Accrual
Loans		 

2017

        

Mortgage loans:

        

Residential

 $548,772  $—    $—    $548,772  $233,830,204  $234,378,976  $—    $441,757 

Commercial

  44,921   —     —     44,921   128,131,466   128,176,387   —     112,203 

Construction

  —     —     —     —     31,199,766   31,199,766   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total mortgage loans

  593,693   —     —     593,693   393,161,436   393,755,129   —     553,960 

U.S. Government guaranteed loans

  —     —     —     —     2,426,203   2,426,203   —     —   

Commercial loans

  303,974   2,709   257,199   563,882   22,172,815   22,736,697   —     629,760 

Consumer loans

  4,773   —     —     4,773   693,881   698,654   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

 $902,440  $2,709  $257,199  $1,162,348  $418,454,335  $419,616,683  $—    $1,183,720 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2016

        

Mortgage loans:

        

Residential

 $145,182  $—    $—    $145,182  $173,883,494  $174,028,676  $—    $1,172,382 

Commercial

  —     —     169,701   169,701   114,554,945   114,724,646   —     220,165 

Construction

  —     —     —     —     27,765,693   27,765,693   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total mortgage loans

  145,182   —     169,701   314,883   316,204,132   316,519,015   —     1,392,547 

U.S. Government guaranteed loans

  —     —     —     —     3,044,858   3,044,858   —     —   

Commercial loans

  434,267   —     —     434,267   19,851,397   20,285,664   —     685,464 

Consumer loans

  —     —     —     —     2,126,245   2,126,245   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

 $579,449  $—    $169,701  $749,150  $341,226,632  $341,975,782  $—    $2,078,011 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Management evaluates certain loans rated substandard or worse individually for impairment. All other loans are evaluated collectively. For impaired loans that are collateral dependent their respective impairment analysis is based on appraised values less estimated selling costs. Noncollateral dependent loans are evaluated using the present value of expected future cash flows discounted at the loan’s effective interest rate. The required valuation allowance is included in the allowance for loan losses in the balance sheets.

Interest income which would have been recognized on nonaccrual loans, if interest had been accrued, was approximately $83,000 and $113,000 in 2017 and 2016, respectively.

The Bank may modify certain loans to retain customers or to maximize collection of the loan balance. All loan modifications are made on a case by case basis. When a modification is made on an impaired loan, the Bank will evaluate the modified terms to current market terms. When a concession is granted that is not at market terms considering the credit quality of the borrower, these loans would be classified as a troubled debt restructuring (TDR). There are no new modifications classified as TDRs in 2017. TDRs during 2016

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

3.

Loans (Continued)

consisted primarily of modification of repayment terms. At December 31, 2017, loan balances related to TDRs totaled approximately $1,855,000. At December 31, 2016, loan balances related to TDRs totaled approximately $2,278,000.

The following table presents the December 31, 2016 number of accounts,pre-modification unpaid principal balance, and post-modification unpaid principal balance that were modified TDRs during the year ended December 31, 2016:

New Troubled

Debt Restructurings

  Number
of
Contracts		   Pre-Modification
Unpaid Principal
Balance		   Post-Modification
Unpaid Principal
Balance(1)		   Decrease/
Increase in
Allowance
at Modification		 

Mortgage loans:

        

Residential

   2   $383,683   $385,000   $(36,658) 

Commercial

   —      —      —      —   

Construction

   2    78,124    78,124    —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   4    461,807    463,124    (36,658) 

U.S. Government guaranteed loans

   —      —      —      —   

Commercial loans

   3    701,464    701,464    81,651 

Consumer loans

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total troubled debt restructuring

   7   $1,163,271   $1,164,588   $44,993 
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)

Post-modification balances include past due amounts that are capitalized at modification date.

There were no significant loans that have subsequently defaulted during the years ended December 31, 2017 and 2016 that had been modified as a TDR during the previous twelve month period.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

3.

Loans (Continued)

The following table presents impaired loans with no related allowance for loan losses and with an allowance for loan losses recorded for the years ended December 31, 2017 and 2016:

   Recorded
Carrying
Value		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Carrying
Value		   Interest
Income
Recognized		 

2017

          

With no related allowance recorded:

          

Mortgage loans:

          

Residential

  $441,757   $580,172   $—     $740,027   $—   

Commercial

   54,644    68,669    —      58,416    —   

Construction

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   496,401    648,841    —      798,443    —   

U.S. Government guaranteed loans

   —      —      —      —      —   

Commercial loans

   —      —      —      —      —   

Consumer loans

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   496,401    648,841    —      798,443    —   

With a related allowance recorded:

          

Mortgage loans:

          

Residential

   255,981    255,981    57,851    259,329    —   

Commercial

   457,555    457,555    87,411    457,546    13,000 

Construction

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   713,536    713,536    145,262    716,875    13,000 

U.S. Government guaranteed loans

   —      —      —      —      —   

Commercial loans

   898,563    929,075    24,667    991,335    13,631 

Consumer loans

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,612,099    1,642,611    169,929    1,708,210    26,631 

Total:

          

Mortgage loans:

          

Residential

   697,738    836,153    57,851    999,356    —   

Commercial

   512,199    526,224    87,411    515,962    13,000 

Construction

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   1,209,937    1,362,377    145,262    1,515,318    13,000 

U.S. Government guaranteed loans

   —      —      —      —      —   

Commercial loans

   898,563    929,075    24,667    991,335    13,631 

Consumer loans

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $2,108,500   $2,291,452   $169,929   $2,506,653   $26,631 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

3.

Loans (Continued)

   Recorded
Carrying
Value		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Carrying
Value		   Interest
Income
Recognized		 

2016

          

With no related allowance recorded:

          

Mortgage loans:

          

Residential

  $918,669   $1,082,447   $—     $938,822   $—   

Commercial

   220,165    233,388    —      53,598    —   

Construction

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   1,138,834    1,315,835    —      992,420    —   

U.S. Government guaranteed loans

   —      —      —      —      —   

Commercial loans

   117,438    121,129    —      122,697    —   

Consumer loans

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,256,272    1,436,964    —      1,115,117    —   

With a related allowance recorded:

          

Mortgage loans:

          

Residential

   158,334    160,557    6,663    133,207    —   

Commercial

   399,996    399,996    60,483    399,996    13,000 

Construction

   71,874    71,874    12,407    80,238    4,072 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   630,204    632,427    79,553    613,441    17,072 

U.S. Government guaranteed loans

   —      —      —      —      —   

Commercial loans

   623,920    629,920    100,270    592,974    14,355 

Consumer loans

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,254,124    1,262,347    179,823    1,206,415    31,427 

Total:

          

Mortgage loans:

          

Residential

   1,077,003    1,243,004    6,663    1,072,029    —   

Commercial

   620,161    633,384    60,483    453,594    13,000 

Construction

   71,874    71,874    12,407    80,238    4,072 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   1,769,038    1,948,262    79,553    1,605,861    17,072 

U.S. Government guaranteed loans

   —      —      —      —      —   

Commercial loans

   741,358    751,049    100,270    715,671    14,355 

Consumer loans

   —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $2,510,396   $2,699,311   $179,823   $2,321,532   $31,427 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impaired loans not requiring an allowance represent loans for which expected discounted cash flows or the fair value of the collateral less estimated selling costs exceeded the carrying value of such loans.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

3.

Loans (Continued)

The Bank utilizes an internal risk rating system on loans. A description of the Bank’s internal risk ratings as they relate to credit quality is as follows:

Loans rated as Excellent, Very Good, Good and Satisfactory are considered as “Pass”. Additionally, unrated overdraft lines of credit have been categorized as “Pass” credits.

Watch—A Watch asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Watch assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

The purpose of the Watch category is to identify assets that do not yet warrant adverse classification but possess credit deficiencies or potential weaknesses deserving of Management’s close attention. Watch assets are noted for the benefit of Management to indicate that a potential weakness or risk exists, which could cause a more serious problem if not corrected. These assets are not included in the regulatory reporting requirements of classified assets.

Substandard—A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

One or more of the above characteristics does not automatically mean an asset should be classified as substandard. Contractual delinquency may not in itself cause a substandard classification. If successful collection of all contractual principal and interest, or liquidation of the collateral at the asset’s book value is expected in a reasonable timeframe, a substandard classification may not be warranted.

Doubtful—An asset classified Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The probability of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage of and strengthening of the loan, its classification as an estimated loss is deferred until more exact status may be determined. Loans rated Doubtful are placed on nonaccrual.

Loss—An asset classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

3.

Loans (Continued)

The following tables present loans by internal risk rating by loan category as of December 31, 2017 and 2016:

  Commercial
Mortgage		  Commercial  U.S.
Government
Guaranteed
Loans		  Residential
Mortgage		  Construction  Consumer 

2017

      

Pass

 $126,997,465  $20,699,847  $2,426,203  $233,227,625  $31,199,766  $698,654 

Watch

  666,724   1,138,286   —     453,612   —     —   

Substandard

  512,198   641,365   —     697,739   —     —   

Doubtful

  —     257,199   —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $128,176,387  $22,736,697  $2,426,203  $234,378,976  $31,199,766  $698,654 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2016

      

Pass

 $113,924,763  $18,974,026  $3,044,858  $172,225,623  $27,765,693  $2,126,245 

Watch

  107,848   571,138   —     248,346   —     —   

Substandard

  692,035   740,500   —     1,554,707   —     —   

Doubtful

  —     —     —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $114,724,646  $20,285,664  $3,044,858  $174,028,676  $27,765,693  $2,126,245 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

4.

Bank Premises and Equipment

Bank premises and equipment at December 31, 2017 and 2016 consists of the following:

   2017   2016 

Leasehold improvements

  $1,548,301   $1,703,913 

Branch building and improvements

   1,624,891    1,621,941 

Office furniture and equipment

   3,580,298    3,250,837 

Construction in progress

   1,327,462    —   
  

 

 

   

 

 

 
   8,080,952    6,576,691 

Less accumulated depreciation

   3,178,284    2,696,535 
  

 

 

   

 

 

 
  $4,902,668   $3,880,156 
  

 

 

   

 

 

 

Construction in progress of a branch building at December 31, 2017 is substantially complete with no significant remaining commitments.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

5.

Deposit Accounts

Deposits at December 31, 2017 and 2016 are summarized as follows:

   2017   2016 

Demand and NOW accounts, including noninterest-bearing deposits of approximately $40,200,000 in 2017 and $36,100,000 in 2016

  $75,427,823   $60,105,492 

Money market deposit accounts

   98,898,547    40,444,874 

Regular savings accounts

   125,475,392    124,586,850 
  

 

 

   

 

 

 
   299,801,762    225,137,216 

Certificates of deposit

   158,712,175    165,773,663 
  

 

 

   

 

 

 
  $458,513,937   $390,910,879 
  

 

 

   

 

 

 

As of December 31, 2017, approximately 24% of deposit accounts were held with three relationships. As of December 31, 2016, approximately 27% of deposit accounts were held with three relationships. Deposits under the Certificate of Deposit Account Registry Service (CDARS) and insured cash sweep accounts (ICS program) programs for these customers at December 31, 2017 and 2016 amounted to approximately $20,960,000 and $46,396,000, respectively.

The aggregate amount of certificates of deposit with a balance more than $250,000 was approximately $38,890,000 and $12,443,000 at December 31, 2017 and 2016, respectively. Total deposits under the CDARS programs, which the Federal Deposit Insurance Corporation (FDIC) classifies as brokered deposits, totaled approximately $33,321,000 and $53,970,000 at December 31, 2017 and 2016, respectively. Additionally, at December 31, 2017 and 2016, total deposits included approximately $77,867,000 and $10,609,000, respectively, in ICS accounts, which the FDIC classifies as brokered money market deposit accounts.

As of December 31, 2017, the scheduled maturities of certificates of deposit are as follows:

2018

  $91,907,576 

2019

   41,941,471 

2020

   9,637,188 

2021

   11,696,604 

2022

   3,529,336 
  

 

 

 
  $158,712,175 
  

 

 

 

6.

Borrowing Capacity

Federal Home Loan Bank

As of December 31, 2017 and 2016, there were no outstanding FHLB advances.

The Bank has available borrowings, based upon pledged collateral, of approximately $138,000,000 and $69,000,000 at December 31, 2017 and 2016, respectively, with the FHLB.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

6.

Borrowing Capacity (Continued)

Federal Funds Lines of Credit

The Bank has a $5,000,000 federal funds borrowing line of credit with Atlantic Community Bankers Bank. The line is unsecured. There were no balances outstanding under this line of credit agreement at December 31, 2017 and 2016.

7.

Repurchase Agreements

Repurchase agreements are overnight agreements with certain customers. At December 31, 2017 and 2016, the weighted average rate paid was 0.50% and 0.52%, respectively. See note 2 for securities pledged as collateral to secure these agreements.

The average daily balance of these repurchase agreements was $7,767,032 and $10,596,750 during 2017 and 2016, respectively. The maximum amount outstanding on these agreements at anymonth-end period was $12,097,650 and $13,793,263 during 2017 and 2016, respectively.

Securities sold under agreements to repurchase as of December 31, 2017 and 2016 are securities sold on a short-term basis that have been accounted for not as sales but as borrowings.

8.

Stockholders’ Equity

Common Stock

The Bank has a total of 9,000,000 authorized shares of voting common stock, par value of $1.00 per share, of which 2,033,211 and 2,018,086 were issued and outstanding at December 31, 2017 and 2016, respectively.

Preferred Stock

The Bank has a total of 1,000,000 shares of preferred stock authorized with a par value of $1.00 per share. No preferred stock was issued or outstanding at December 31, 2017 and 2016.

Stock Option Plans

In 2008, the Bank adopted the 2008 Stock Option and Incentive Plan (the 2008 Plan) which allows for granting of options for up to 175,876 shares of the Bank’s common stock to employees and directors.

In 2011, the Bank adopted the 2011 Stock Option and Incentive Plan (the 2011 Plan) which allows for granting options for up to an additional 50,000 shares of the Bank’s common stock to employees and directors.

In 2013, the Bank amended the 2011 Plan to allow for granting options for up to an additional 30,000 shares of the Bank’s common stock to employees and directors.

In 2016, the Bank amended the 2011 plan to allow for granting options up to an additional 30,000 shares (110,000 total shares allowed under the 2011 plan) of the Bank’s common stock to employees and directors.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

8.

Stockholders’ Equity (Continued)

In 2016, the Bank granted 13,000 options to directors to acquire Bank stock at $19 per share. The 13,000 options granted vested immediately and were in exchange for services rendered in 2016. The options have a ten year term. Additionally, 52,500 options were granted to employees to acquire Bank stock at $19 per share. The options vest ratably over four years through January 2020. The options have a ten year term.

In 2017, the Bank granted 13,000 options to directors to acquire Bank stock at $31 per share. The 13,000 options granted vested immediately and were in exchange for services rendered in 2017. The options have a ten year term.

Activity under the stock option plans described above was as follows for the years ended December 31, 2017 and 2016:

   Stock
Option
Plans		   Weighted
Average
Exercise
Price		 

Outstanding at December 31, 2015

   208,954   $11.78 

Grants

   65,500    19.00 

Forfeited

   (750)    18.00 
  

 

 

   

 

 

 

Outstanding at December 31, 2016

   273,704    13.49 

Grants

   13,000    31.00 

Forfeited

   (9,025)    19.00 

Exercised

   (125)    19.00 
  

 

 

   

 

 

 

Outstanding at December 31, 2017

   277,554   $14.13 
  

 

 

   

 

 

 

Exercisable at December 31, 2017

   245,729   $13.50 
  

 

 

   

 

 

 

Reserved for future grants

   7,197   
  

 

 

   

The outstanding and exercisable options at December 31, 2017 have a total intrinsic value of $4,055,355. The outstanding options have a weighted average remaining contractual life of 4.21 years. The exercisable options have a weighted average remaining contractual life of 3.56 years. The exercise price of the options outstanding and of the options exercisable as of December 31, 2017 ranged from $10 to $31 per share.

At December 31, 2017 and 2016, options to acquire 245,729 and 221,704 shares, respectively, had vested. No options expired in 2017 or 2016. Total compensation cost related to nonvested awards not yet recognized totaled approximately $107,000 at December 31, 2017 and is expected to be recognized ratably over the next three years.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

8.

Stockholders’ Equity (Continued)

The weighted-average grant date fair values of options granted in 2017 and 2016 were $7.04 and $3.37 per share, respectively. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

   2017
Options		  2016
Options		 

Risk-free interest rate

   2.08%   1.3% 

Dividend yield

   0%   0% 

Expected volatility

   19.4%   15.8% 

Expected life

   5.4 years   5.4 years 

Stock Warrants

In January 2008, the Bank issued warrants to allow the acquisition of 135,000 shares of common stock at $10.00 per share, which is the original issue price. Warrants to acquire 15,000 and 75,000 shares were exercised for shares of common stock during 2017 and 2016, respectively. The remaining warrants, representing 45,000 shares, have not been exercised and expire in February 2018.

9.

Income Taxes

The expected income tax at the federal statutory rate of 34% differs from the actual expense due to nondeductible expenses and state income taxes as follows:

   2017  2016 

Income tax at statutory rate

  $1,003,798    34.0%  $1,109,424    34.0% 

Cash surrender value—bank-owned life insurance

   (50,835)    (1.7)   (54,592)    (1.7) 

State taxes, net of federal benefit

   139,718    4.7   157,770    4.8 

Other items

   (24,681)    (0.8)   (50,102)    (1.5) 
  

 

 

   

 

 

  

 

 

   

 

 

 
  $1,068,000    36.2%  $1,162,500    35.6% 
  

 

 

   

 

 

  

 

 

   

 

 

 

The federal and state income tax expense is allocated as follows at December 31, 2017 and 2016:

   2017   2016 

Current income tax expense:

    

Federal

  $779,530   $641,535 

State

   258,774    212,224 

Deferred income tax expense:

    

Federal

   21,776    266,359 

State

   7,920    42,382 
  

 

 

   

 

 

 

Total income tax expense

  $1,068,000   $1,162,500 
  

 

 

   

 

 

 

On December 22, 2017, the U.S. Federal Government enacted a tax bill, H.R.1,An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

9.

Income Taxes (Continued)

(Tax Act). Among other provisions, the Tax Act reduces the historical corporate income tax rate to a newly enacted rate of 21 percent for tax years beginning after December 31, 2017. At the date the new legislation is enacted, under ASC 740,Income Taxes,the Bank is required to recognize the effects of the change in tax law and rates on its deferred tax assets and liabilities as a charge to income tax expense. There was no significant impact to income tax expense or to the net deferred tax liability as a result of the newly enacted federal tax rate.

The tax effects of temporary differences which give rise to the deferred income tax assets and liabilities are approximately as follows at December 31, 2017 (at 27.5%) and 2016 (at 39.5%):

   2017   2016 

Deferred tax assets:

    

Allowance for loan losses

  $754,700   $916,400 

Organizational and start up costs

   53,100    92,200 

Accrued expenses

   41,200    83,000 

Investments

   63,475    141,199 

Other

   161,054    201,500 
  

 

 

   

 

 

 
   1,073,529    1,434,299 

Deferred tax liabilities:

    

Net loan origination costs

   (414,700)    (503,900) 

Bank premises and equipment

   (553,200)    (579,900) 

Prepaid expenses

   (17,400)    (55,600) 

Mortgage servicing rights

   (98,000)    (197,250) 
  

 

 

   

 

 

 
   (1,083,300)    (1,336,650) 
  

 

 

   

 

 

 

Net deferred income taxes

  $(9,771)   $97,649 
  

 

 

   

 

 

 

In assessing the need for a deferred tax asset valuation allowance, management considers whether it is likely that some or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. No deferred tax valuation allowance was recorded at December 31, 2017 or 2016.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

10.

Accumulated Other Comprehensive Loss

The change in accumulated other comprehensive loss for the years ended December 31, 2017 and 2016 is comprised of the following:

   Net Unrealized
Loss on
AFS Securities		   Unamortized Net
Unrealized Loss on
Securities Transferred
From AFS to HTM		   Accumulated
Other
Comprehensive
Loss		 

Balance at December 31, 2015

  $(206,695)   $ (454,252)   $ (660,947) 

Change, net of income taxes

   (8,669)    454,252    445,583 
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2016

   (215,364)    —      (215,364) 

Change, net of income taxes

   75,848    —      75,848 

Tax rate adjustment

   (27,996)    —      (27,996) 
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2017

  $(167,512)   $                $(167,512) 
  

 

 

   

 

 

   

 

 

 

A summary of the reclassification adjustments out of accumulated other comprehensive loss for 2017 and 2016 follows:

Reclassification Adjustment

  2017  2016  

Affected Line Item in
Statements of Income

Net realized gains on investment securities available for sale

  $1,939  $16,695  Net gain on sale of investments

Net amortization or accretion of premium or discount on investment securities available for sale

   (44,286)   (43,404)  Interest on investments

Amortization of net unrealized loss on securities transferred from AFS to HTM prior to sale in 2016

   —     (40,765)  Interest on investments

Reclassification of remaining net unrealized loss on securities transferred from AFS to HTM and sold in 2016

   —     (711,308)  Included in net gain on sale of investments*
  

 

 

  

 

 

  
   (42,347)   (778,782)  Income before income taxes

Tax effect

   16,769   308,398  Income tax expense
  

 

 

  

 

 

  
  $(25,578)  $(470,384)  Net income
  

 

 

  

 

 

  

*

Amount is included within the net gain on sale of investments total of $73,059 on the 2016 statement of income as follows: total proceeds on sale of HTM securities of approximately $11,994,000, less book value of HTM securities of approximately $11,226,000 and less remaining unrealized holding loss of approximately $711,000 created in 2014 when the Bank transferred the respective securities from AFS to HTM.

11.

Regulatory Matters

Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

11.

Regulatory Matters (Continued)

discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certainoff-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believes, as of December 31, 2017, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2017, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Effective January 1, 2015, the Bank adopted the Basel III capital adequacy rules which, among other changes, added a new risk-weighted capital measure called Common Equity Tier I (CETI). The Basel III capital adequacy guidelines require all banks and bank holding companies to maintain minimum capital ratios as follows:

Common Equity Tier I to risk-weighted assets of 4.5%

Total risk-based capital to risk-weighted assets of 8.0%

Tier I capital to total risk-weighted assets of 6.0%

Tier I capital to average assets (Leverage Ratio) of 4.0%

In addition, the regulations establish a capital conservation buffer above the minimum capital ratios that phase in beginning January 1, 2016 at 0.625% and increases each year by 0.625% until it is fully phased in at 2.5% effective January 1, 2019. Failure to maintain the required capital conservation buffer will limit the ability of the Bank to pay dividends, repurchase shares or pay discretionary bonuses. At December 31, 2017, the Bank exceeded the regulatory requirement for the capital conservation buffer required as of December 31, 2017.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

11.

Regulatory Matters (Continued)

The following tables set forth the Bank’s regulatory capital at December 31, 2017 and December 31, 2016:

   Actual  For Capital
Adequacy Purposes		  To Be Well Capitalized
Under Prompt Corrective
Action Provisions		 
  Amount   Ratio      Amount           Ratio          Amount           Ratio     
   (Dollars in Thousands) 

As of December 31, 2017

          

Total Capital (to risk-weighted assets)

  $34,529    10.3%  $26,864    8.0%  $33,580    10.0% 

Common Equity Tier 1 (to risk-weighted assets)

   31,401    9.4   15,111    4.5   21,827    6.5 

Tier 1 Capital (to risk-weighted assets)

   31,401    9.4   20,148    6.0   26,864    8.0 

Leverage Capital Ratio Tier 1 capital (to total average assets)

   31,401    6.7   18,871    4.0   23,589    5.0 

As of December 31, 2016

          

Total Capital (to risk-weighted assets)

  $31,950    11.3%  $22,712    8.0%  $28,390    10.0% 

Common Equity Tier 1 (to risk-weighted assets)

   29,253    10.3   12,776    4.5   18,454    6.5 

Tier 1 Capital (to risk-weighted assets)

   29,253    10.3   17,034    6.0   22,712    8.0 

Leverage Capital Ratio Tier 1 capital (to total average assets)

   29,253    7.0   16,610    4.0   20,762    5.0 

Cash Restriction

The Bank is required to maintain a certain reserve balance in the form of cash or deposits with the Federal Reserve Bank. At December 31, 2017 and 2016, the required reserve balance was approximately $653,000 and $510,000, respectively.

12.

Commitments

Financial Instruments withOff-Balance Sheet Risk

The Bank is a party to financial instruments withoff-balance-sheet risk. These instruments, which arise in the normal course of business, are commitments to extend credit to customers in the form of residential loans, commercial loans and home equity loans, as well as letters of credit. The commitments involve varying degrees of credit and interest rate risk in excess of the amount recognized in the balance sheets. The Bank follows the same credit policies in making commitments and conditional obligations as it does foron-balance-sheet instruments, including requiring similar collateral or other security to support financial instruments with credit risk. The Bank’s exposure to credit loss in the event of nonperformance by the customer is represented by the contractual amount of those instruments.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

12.

Commitments (Continued)

As of December 31, 2017 and 2016, financial instruments withoff-balance-sheet commitments are approximately as follows:

   2017   2016 

1 – 4 family residential construction loans

  $9,756,000   $8,684,000 

Commercial real estate construction and development loans

   7,672,000    7,892,000 

Real estate lines of credit

   13,344,000    10,950,000 

Other unused commitments

   10,557,000    6,780,000 

Standby letters of credit

   736,000    1,305,000 
  

 

 

   

 

 

 
  $42,065,000   $35,611,000 
  

 

 

   

 

 

 

Commitments generally have fixed expiration dates or other termination clauses. Since a portion of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Operating Leases

The Bank has an operating lease agreement for office and retail space in downtown Portsmouth, New Hampshire. The initial lease term expired in October 2017, with the Bank having four five-year renewal options. The Bank exercised their option to renew this lease through October 2022.

The Bank has a land lease for a branch location in North Hampton, New Hampshire. The lease commenced in October 2009 and has an initial term of ten years, with four five-year renewal options.

The Bank has a land lease for a branch location in Stratham, New Hampshire. The lease commenced in July 2011 and has an initial term of ten years, with four five-year renewal options.

The Bank has an operating lease agreement for a loan production office in Dover, New Hampshire. The lease expires in February 2018.

The Bank has an operating lease for a branch location in the Pease International Tradeport, Portsmouth. The lease commenced in October 2013 and has an initial term of ten years, with four five-year renewal options.

The Bank has an operating lease for a branch location in Bedford, New Hampshire. The lease commenced in September 2014 and has an initial term of five years and three months, with five five-year renewal options.

In May 2016, the Bank entered into an operating lease for a branch location in Portsmouth, New Hampshire. The lease commenced in August 2016 and has an initial term of ten years, with six five-year renewal options.

In October 2016, the Bank entered into a land lease for a future branch location in Dover, New Hampshire. The lease will commence in 2018 and has an initial term of ten years, with six five-year renewal options.

The Bank recognized lease expense of approximately $686,100 and $616,800 in 2017 and 2016, respectively.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

12.

Commitments (Continued)

Future lease payments expected during the initial lease terms and the renewal options of all leases described above are approximately as follows:

2018

  $835,000 

2019

   847,000 

2020

   826,000 

2021

   819,000 

2022

   822,000 

Thereafter

   20,922,000 

13.

Fair Value Measurements

The Bank adopted a framework for measuring fair value under generally accepted accounting principles for all financial instruments that are being measured and reported on a fair value basis.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Bank uses various methods including market, income and cost approaches. Based on these approaches, the Bank often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Bank utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Bank is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1—Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2—Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities.

Level 3—Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

In determining the appropriate levels, the Bank performs a detailed analysis of the assets and liabilities that are subject to fair value measurements. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2017 and 2016

13.

Fair Value Measurements (Continued)

For the year ended December 31, 2017, the application of valuation techniques applied to similar assets and liabilities has been consistent. The following is a description of the valuation methodologies used for instruments measured at fair value:

Fair Value on a Recurring Basis

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis at December 31, 2017 and 2016:

   Total   Level 1   Level 2   Level 3 

2017

        

Available-for-sale securities(note 2)

  $27,316,420   $497,846   $26,818,574   $—   
  

 

 

   

 

 

   

 

 

   

 

 

 

2016

        

Available-for-sale securities(note 2)

  $22,680,245   $499,867   $22,180,378   $—   
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents the assets carried on the balance sheet by caption and by level within the fair value hierarchy (as described above) as of December 31, 2017 and 2016, for which a nonrecurring change in fair value has been recorded.

Fair values for nonperforming loans measured at fair value on a nonrecurring basis are determined using appraisals of collateral values.

   Total   Level 1   Level 2   Level 3   Total Losses 

2017

          

Nonperforming loans

  $96,741   $—     $96,741   $—     $14,000 

2016

          

Nonperforming loans

  $374,775   $—     $374,775   $—     $12,900 

The losses in 2017 and 2016 relating to nonperforming loans were charged to the allowance for loan losses.

Optima Bank & Trust Company

Unaudited Interim Financial Statements

OPTIMA BANK & TRUST COMPANY

Unaudited Interim Financial Statements

Table of Contents

Page

Balance Sheet

F-39

Liabilities and Stockholders’ Equity

F-39

Statement of Income (Unaudited)

F-40

Statement of Comprehensive Income (Unaudited)

F-41

Statements of Changes in Stockholders’ Equity (Unaudited)

F-42

Statement of Cash Flows (Unaudited)

F-43

Notes to the Financial Statements

F-44

OPTIMA BANK & TRUST COMPANY

BALANCE SHEETS

September 30, 2018 and December 31, 2017

   2018   2017 
   (Unaudited)     
ASSETS    

Cash and due from banks

  $23,092,589   $36,747,811 

Federal funds sold

   244,000    918,000 
  

 

 

   

 

 

 

Cash and cash equivalents

   23,336,589    37,665,811 

Investment securities available for sale

   22,843,260    27,316,420 

Loans, net of allowance for loan losses

   462,309,756    417,243,076 

Accrued interest receivable

   1,299,204    985,732 

Federal Home Loan Bank stock

   1,048,700    788,600 

Bank premises and equipment, net

   5,718,611    4,902,668 

Deferred income tax asset, net

   38,099    —   

Bank-owned life insurance

   5,698,751    5,584,550 

Other assets

   1,863,968    1,415,547 
  

 

 

   

 

 

 

Total assets

  $524,156,938   $495,902,404 
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

   

Deposit accounts

  $488,565,872  $458,513,937 

Customer repurchase agreements

   2,209,601   5,471,267 

Deferred income tax liability, net

   —     9,771 

Accrued expenses and other liabilities

   362,187   646,411 
  

 

 

  

 

 

 

Total liabilities

   491,137,660   464,641,386 

Commitments and contingencies

   

Stockholders’ equity:

   

Common stock, $1.00 par value; 9,000,000 shares authorized; 2,063,562 and 2,033,211 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively

   2,063,562   2,033,211 

Additionalpaid-in capital

   21,733,111   21,688,312 

Accumulated surplus

   9,516,323   7,707,007 

Accumulated other comprehensive loss

   (293,718)   (167,512) 
  

 

 

  

 

 

 

Total stockholders’ equity

   33,019,278   31,261,018 
  

 

 

  

 

 

 

Total liabilities and stockholders’ equity

  $524,156,938  $495,902,404 
  

 

 

  

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF INCOME (UNAUDITED)

Nine Month Periods Ended September 30, 2018 and 2017

   2018   2017 

Interest income:

    

Interest on loans

  $14,367,740   $11,921,412 

Interest on investments

   441,588    383,976 

Interest from interest-bearing deposits in other banks

   235,289    158,588 
  

 

 

   

 

 

 

Total interest income

   15,044,617    12,463,976 

Interest expense:

    

Interest on deposits

   4,259,238    2,659,563 

Interest on borrowings

   1,406    —   
  

 

 

   

 

 

 

Total interest expense

   4,260,644    2,659,563 
  

 

 

   

 

 

 

Net interest income

   10,783,973    9,804,413 

Provision for loan losses

   291,000    263,093 
  

 

 

   

 

 

 

Net interest income after provision for loan losses

   10,492,973    9,541,320 

Noninterest income:

    

Service charges, fees and other income

   721,543    504,285 

Gain on sale of loans

   199,374    234,190 

Net gain on sale of investments

   22,911    41,939 

Bank-owned life insurance income

   114,201    111,659 
  

 

 

   

 

 

 

Total noninterest income

   1,058,029    892,073 

Noninterest expenses:

    

Salaries and employee benefits

   5,392,966    4,845,737 

Occupancy expense

   1,118,111    966,058 

Equipment expense

   516,041    496,378 

Other

   2,000,068    1,951,509 
  

 

 

   

 

 

 

Total noninterest expenses

   9,027,186    8,259,682 
  

 

 

   

 

 

 

Income before income taxes

   2,523,816    2,173,711 

Income tax expense

   714,500    778,000 
  

 

 

   

 

 

 

Net income

  $1,809,316   $1,395,711 
  

 

 

   

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Nine Month Periods Ended September 30, 2018 and 2017

   2018  2017 

Net income

  $1,809,316  $1,395,711 

Other comprehensive (loss) income, net of income taxes:

   

Unrealized (loss) gain on securitiesavailable-for-sale:

   

Unrealized holding gains/losses arising during the period, net of income taxes of $41,571 and $(76,374) in 2018 and 2017, respectively

   (109,596)   116,489 

Reclassification adjustment for gains and losses included in net income, net of income taxes of $6,301 and $16,608 in 2018 and 2017, respectively

   (16,610)   (25,331) 
  

 

 

  

 

 

 

Other comprehensive (loss) income

   (126,206)   91,158 
  

 

 

  

 

 

 

Comprehensive income

  $1,683,110  $1,486,869 
  

 

 

  

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

Nine Month Periods Ended September 30, 2018 and 2017

   Common
Stock		   Additional
Paid-in Capital		  Accumulated
Surplus		   Accumulated
Other
Comprehensive
Loss		  Total 

Balance at December 31, 2016

  $2,018,086   $21,440,089  $5,794,663   $(215,364)  $29,037,474 

Net income

   —      —     1,395,711    —     1,395,711 

Change in net unrealized loss onavailable-for-sale securities, net of income taxes

   —      —     —      91,158   91,158 

Stock-based compensation

   —      45,000   —      —     45,000 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Balance at September 30, 2017

   2,018,086    21,485,089   7,190,374    (124,206)   30,569,343 

Balance at December 31, 2017

   2,033,211    21,688,312   7,707,007    (167,512)   31,261,018 

Net income

   —      —     1,809,316    —     1,809,316 

Net exercise of stock warrants

   30,001    (30,001)   —      —     —   

Exercise of stock options

   350    6,300   —      —     6,650 

Change in net unrealized loss onavailable-for-sale securities, net of income taxes

   —      —     —      (126,206)   (126,206) 

Stock-based compensation

   —      68,500   —      —     68,500 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Balance at September 30, 2018

  $2,063,562   $21,733,111  $9,516,323   $(293,718)  $33,019,278 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Month Periods Ended September 30, 2018 and 2017

   2018  2017 

Net cash provided by operating activities

  $1,298,211  $1,704,595 

Cash flows from investing activities:

   

Sale and maturity of investment securities available for sale

   2,999,205   3,506,705 

Purchases of investment securities available for sale

   (993,350)   (10,039,045) 

Principal collected on mortgage-backed securities available for sale

   2,295,111   1,591,001 

Net purchases and redemptions of Federal Home Loan Bank stock

   (260,100)   (33,900) 

Net increase in loans

   (57,522,565)   (54,530,673) 

Sale of portfolio loans

   12,396,834   —   

Acquisition of bank premises and equipment

   (1,339,487)   (648,153) 

Proceeds from sale of other real estate owned

   —     173,033 
  

 

 

  

 

 

 

Net cash used by investing activities

   (42,424,352)   (59,981,032) 

Cash flows from financing activities:

   

Net decrease in certificates of deposit

   (12,441,947)   (12,792,361) 

Net increase in other deposit accounts

   42,493,882   53,941,034 

Proceeds from exercise of stock options

   6,650   —   

Net (decrease) increase in customer repurchase agreements

   (3,261,666)   19,709 
  

 

 

  

 

 

 

Net cash provided by financing activities

   26,796,919   41,168,382 
  

 

 

  

 

 

 

Net decrease in cash and cash equivalents

   (14,329,222)   (17,108,055) 

Cash and cash equivalents, beginning of period

   37,665,811   51,948,644 
  

 

 

  

 

 

 

Cash and cash equivalents, end of period

  $23,336,589  $34,840,589 
  

 

 

  

 

 

 

See accompanying notes.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

1.

Summary of Significant Accounting Policies

Business

Optima Bank & Trust Company (the Bank) provides a full range of banking services to individual and corporate customers in southern and coastal areas of New Hampshire. The Bank is subject to the regulations of certain state and federal agencies and undergoes periodic examinations by those regulatory authorities.

Basis of Financial Statement Presentation

The (unaudited) financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. 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 significantly from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses. A substantial portion of the Bank’s loans are in the southern and coastal areas of New Hampshire. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio is susceptible to changes in economic conditions in those areas. In connection with the determination of the allowance for loan losses, management obtains independent appraisals for significant properties.

Investment Securities

Available for sale securities (AFS) consist of debt securities that the Bank anticipates could be made available for sale in response to changes in market interest rates, liquidity needs, funding sources and other similar factors. These assets are specifically identified and are carried at fair value. Unrealized holding gains and losses on these assets, net of related income taxes, are excluded from earnings and are included in accumulated other comprehensive loss and reported as a separate component of stockholders’ equity. Gains and losses on the sale of available for sale securities are computed on the specific identification of the adjusted costs of each security sold, are recognized upon realization and are shown separately in the statements of income. Premiums and discounts on investment securities are amortized using methods that approximate the effective yield method.

Loans and Interest Income on Loans

Loans are stated at the principal amounts outstanding, plus net deferred loan origination costs. Interest is recognized on loans using the accrual method, unless it is no longer probable of collection or the loan is 90 days or more past due, at which time interest ceases to accrue and is recognized on the cash basis. Loans are restored to accrual status when there has been a period of sustained positive performance on the loans, the borrower has demonstrated the ability to make future payments of principal and interest, and management believes outstanding principal and interest receivable are collectible. Interest received on an impaired loan for which the Bank does not expect full collection of principal will generally be recorded as a reduction in the recorded investment in the loan. When the recorded carrying value of the impaired loan has been reduced to a point at which ultimate collection is probable, then interest income may be recognized.

Allowance for Loan Losses

The allowance for loan losses is established by management to absorb probable future charge-offs of loans deemed uncollectible. This allowance is increased by provisions charged to operating expense and by

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

1.

Summary of Significant Accounting Policies (Continued)

recoveries on loans previously charged off. Loan losses are charged against the allowance when management believes that the collectibility of the loan principal is unlikely. Management, considering current information and events regarding the borrowers’ ability to repay their obligations, considers loans to be impaired when it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the note agreement. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the note’s effective interest rate, or the fair value of collateral if the loan is collateral dependent. Impairment losses are included in the allowance for loan losses through a charge to provision for loan losses.

Management believes that the allowance for loan losses is adequate. Arriving at an appropriate level of allowance for loan loss involves judgment; the primary considerations are the level of delinquencies (based on contractual terms), the nature of the loan portfolio, prior loan loss experience by loan category, and qualitative factors including the local economic conditions and current real estate market trends. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on judgments different from those of management.

The qualitative factors are determined based on the various risk characteristics of each portfolio segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate and home equity lines of credit: The Bank generally does not originate loans with aloan-to-value ratio greater than 80 percent and does not grant subprime loans. Loans withloan-to-value ratios greater than 85 percent require the purchase of private mortgage insurance unless strong mitigating factors are identified. Loans in these segments are collateralized primarily by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in these segments.

Commercial real estate and multi-family residential: Loans in these segments are primarily income-producing properties throughout southern and coastal areas of New Hampshire. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates which, in turn, may have an effect on the credit quality in these segments. Management periodically obtains rent rolls and continually monitors the cash flows of these loans.

Construction loans: The loans in this segment are primarily residential and commercialconstruction-to-permanent loans collateralized by owner-occupied residential and commercial real estate, and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment.

Commercial loans: Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, may have an effect on the credit quality in this segment.

Consumer loans: Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

A substantial portion of the loan portfolio consists of loans to borrowers in southern and coastal areas of New Hampshire. The ability of the Bank’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

1.

Summary of Significant Accounting Policies (Continued)

Origination Fees and Costs

Loan origination fees and direct origination costs are deferred and amortized over the life of the related loan on the level yield method. Amortization ceases while loans are on nonaccrual status. The Bank does not anticipate prepayments in determining the amortization but recognizes the amortization at the time of prepayment.

Loan Servicing

The Bank recognizes as separate assets the rights to service mortgage loans for others, and performs an assessment of capitalized mortgage servicing rights for impairment, based on the current fair value of those rights. The Bank capitalizes mortgage servicing rights at their fair values upon the sale of the related loans. Capitalized mortgage servicing rights are amortized in proportion to, and over the period of, estimated future net servicing income. Fair values are estimated using bid quotations received from dealers for similar instruments. For purposes of measuring impairment, the rights are stratified, as necessary, based on interest rates and the expected maturities of the underlying loans.

Federal Home Loan Bank Stock

Stock in the Federal Home Loan Bank (FHLB) is a required investment due to membership in FHLB, and is carried at cost and can be redeemed at the FHLB subject to current redemption policies.

Other Real Estate Owned (OREO)

Collateral acquired through foreclosure is recorded at fair value, less estimated costs to sell, at the time of acquisition. The excess, if any, of the loan balance over the fair value of the property at the time of transfer from loans to OREO, is charged to the allowance for loan losses. Subsequent declines in the fair value of the properties are recorded as noninterest expense. Net operating income or expense related to foreclosed property is included in noninterest expense in the accompanying unaudited statements of income. There are inherent uncertainties in the assumptions with respect to the estimated fair value of other real estate owned, and the amounts ultimately realized on other real estate owned may differ from the amounts reflected in the accompanying unaudited financial statements. There was no OREO at September 30, 2018 and December 31, 2017.

Bank Premises and Equipment

Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the expected lease term or the estimated useful life. Maintenance and repairs are charged to current expense as incurred and the cost of major renewals and betterments are capitalized.

Income Taxes

The Bank follows the asset and liability method of accounting for income taxes, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

1.

Summary of Significant Accounting Policies (Continued)

in the years in which those temporary differences are expected to be recovered or settled. If it is not determined that realization of the deferred tax assets is more likely than not to occur, then a valuation allowance is established. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Assets and liabilities are established for certain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the“more-likely-than-not” threshold, based upon the technical merits of the position. Estimated interest and penalties, if applicable, related to uncertain tax positions are included as a component of income tax expense. Management has determined that the Bank has not taken, nor does it expect to take, any uncertain tax positions in any income tax return.

Advertising and Marketing Expense

Advertising and marketing costs are expensed as incurred.

Stock-Based Compensation

Stock-based compensation represents the cost related to stock-based awards to employees and directors. The Bank measures stock-based compensation cost at the grant date based upon the estimated fair value of the award, and recognizes the cost as expense on a straight-line basis over the employee requisite service period. Forfeitures are recognized as they occur. The Bank estimates the fair value of stock options using the Black-Scholes valuation method.

Statement of Cash Flows

For the purpose of reporting cash flows, cash and cash equivalents includes cash and due from banks, interest-bearing deposits in other banks with an original maturity of three months or less and federal funds sold.

Comprehensive Income

The only component of other comprehensive income reported in the accompanying unaudited statements of comprehensive income and of accumulated other comprehensive loss on the balance sheets is the unrealized net holding gains or losses on securitiesavailable-for-sale, net of tax. Components of accumulated other comprehensive loss are presented net of taxes, which are determined using a tax rate of 27.5% at September 30, 2018 and December 31, 2017.

Transfers of Financial Assets

Transfers of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets.

During the normal course of business, the Bank may transfer a portion of a financial asset, for example, a participation loan or the government-guaranteed portion of a loan. In order to be eligible for sales treatment,

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

1.

Summary of Significant Accounting Policies (Continued)

the transfer of the portion of the loan must meet the criteria of a participating interest. If it does not meet the criteria of a participating interest, the transfer must be accounted for as a secured borrowing. In order to meet the criteria for a participating interest, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties and no loan holder has the right to pledge or exchange the entire loan.

New Accounting Pronouncements

Recognition and Measurement of Financial Instruments

In January 2016 the FASB issued Accounting Standards Update (ASU)2016-01,Financial Instruments – Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The more significant changes are:

1.

Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

2.

Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.

3.

Eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost (only for companies that are not considered public business entities).

4.

Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related toavailable-for-sale securities in combination with the entity’s other deferred tax assets.

ASU2016-01 is effective for years beginning after December 15, 2017 for public business entities, and years beginning after December 15, 2018 for all other entities. Early application of certain amendments within the ASU is permitted for entities not considered public business entities. The Bank early adopted number 3 above and eliminated certain fair value disclosures for financial instruments measured at amortized cost. The remaining amendments in ASU2016-01 will not have a material impact to the Bank’s financial statements.

Accounting for Leases

In February 2016, the FASB issuedASU 2016-02,Leases. This ASU requires that an operating lease be recognized on the statement of financial condition as a“right-to-use” asset along with a corresponding liability representing the rent obligation. The asset and liability will initially be measured at the present value of the future lease payments. The standard is expected to result in an increase to assets and liabilities recognized and, therefore, increase risk-weighted assets for regulatory capital purposes. The guidance requires the use of the modified retrospective transition approach for existing leases that have not expired before the date of initial application and will become effective for reporting periods beginning after

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

1.

Summary of Significant Accounting Policies (Continued)

December 15, 2018 for public business entities, and years beginning after December 15, 2019 for all other entities. Early adoption will be permitted. The Bank is currently evaluating the impact of the pronouncement on its financial statements.

Credit Losses

In June 2016, the FASB issuedASU 2016-13,Financial Instruments – Credit Losses. This significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (CECL) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certainoff-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held to maturity securities, loan commitments, and financial guarantees. The CECL model does not apply toavailable-for-sale (AFS) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a result, entities will recognize improvements to estimated credit losses immediately in earnings rather than as interest income, as they do today. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. It also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan losses. In addition entities will need to disclose the amortized cost balance of each class of financial asset by credit quality indicator, disaggregated by year of origination. The standard is effective for the Bank interim and annual reporting periods beginning after December 15, 2021 with early adoption permitted for periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first period in which the guidance is effective. The Bank is currently evaluating the provisions of the standard to determine the potential impact the new standard will have on its financial statements.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

2.

Investment Securities

Following is a summary of investment securities available for sale at amortized cost and fair value as of September 30, 2018 and December 31, 2017:

  Amortized
Cost		  Gross
Unrealized
Gains		  Gross
Unrealized
Losses		  Fair Value 

September 30, 2018

    

Debt securities:

    

GNMA mortgage-backed securities

 $2,483,664  $—    $129,423  $2,354,241 

GNMA collateralized mortgage obligations

  19,475,048   39,712   265,940   19,248,820 

SBA mortgage-backed securities

  792,122   —     49,033   743,089 

U.S. Treasury securities

  497,491   —     381   497,110 
 

 

 

  

 

 

  

 

 

  

 

 

 
 $23,248,325  $39,712  $444,777  $22,843,260 
 

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2017

    

Debt securities:

    

GNMA mortgage-backed securities

 $2,913,277  $—    $82,936  $2,830,341 

GNMA collateralized mortgage obligations

  23,249,569   19,885   138,130   23,131,324 

SBA mortgage-backed securities

  886,493   —     29,584   856,909 

U.S. Treasury securities

  498,067   —     221   497,846 
 

 

 

  

 

 

  

 

 

  

 

 

 
 $27,547,406  $19,885  $250,871  $27,316,420 
 

 

 

  

 

 

  

 

 

  

 

 

 

The carrying amounts and fair value of debt securitiesavailable-for-sale at September 30, 2018, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:

   Amortized
Cost		   Fair Value 

Due less than five years

  $497,491   $497,110 

Mortgage-backed securities, amortizing monthly

   3,275,786    3,097,330 

Collateralized mortgage obligations, amortizing monthly

   19,475,048    19,248,820 
  

 

 

   

 

 

 
  $23,248,325   $22,843,260 
  

 

 

   

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

2.

Investment Securities (Continued)

The following tables show the Bank’s gross unrealized losses and fair value of securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2018 and December 31, 2017:

  Less than 12 Months  More than 12 Months  Total 
  Number of
Securities		  Fair
Value		  Unrealized
Losses		  Number of
Securities		  Fair
Value		  Unrealized
Losses		  Fair
Value		  Unrealized
Losses		 

September 30, 2018

        

GNMA collateralized mortgage obligations

  —    $—    $—     10  $12,955,473  $395,363  $12,955,473  $395,363 

SBA mortgage-backed securities

  —     —     —     3   792,122   49,033   792,122   49,033 

U.S. Treasury notes

  1   497,110   381   —     —     —     497,110   381 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total temporarily impaired securities

  1  $497,110  $381   13  $13,747,595  $444,396  $14,244,705  $444,777 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2017

        

GNMA mortgage-backed securities

  —    $—    $—     5  $2,830,341  $82,936  $2,830,341  $82,936 

GNMA collateralized mortgage obligations

  2   3,630,706   13,206   5   12,949,143   124,924   16,579,849   138,130 

SBA mortgage-backed securities

  —     —     —     3   856,909   29,584   856,909   29,584 

U.S. Treasury notes

  1   497,846   221   —     —     —     497,846   221 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total temporarily impaired securities

  3  $4,128,552  $13,427   13  $16,636,393  $237,444  $20,764,945  $250,871 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The primary cause for unrealized losses within debt securities is the impact movements in market interest rates have had in comparison to the underlying yields on securities and the impact of temporary market fluctuations. No declines are deemed to be other than temporary and management has the intent and ability to hold depreciated debt securities until recovery or maturity. All GNMA and SBA securities are backed by the full faith and credit of the United States as to timely payment of principal and interest.

For the period ended September 30, 2018, proceeds from the sales ofavailable-for-sale securities amounted to approximately $2,900,200. Gross realized gains on those sales amounted to $22,911. For the period ended September 30, 2017, proceeds from the sales ofavailable-for-sale securities amounted to approximately $2,006,700. Gross realized gains on those sales amounted to $41,939.

At September 30, 2018, approximately $4,348,000 (fair value) of government-sponsored enterprise obligations and a U.S. Treasury security of $497,000 (fair value) have been pledged to secure customer repurchase agreements.

At December 31, 2017, approximately $8,181,000 (fair value) of government-sponsored enterprise obligations and a U.S. Treasury security of $498,000 (fair value) have been pledged to secure customer repurchase agreements.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

3.

Loans

Major classifications of loans at September 30, 2018 and December 31, 2017 are as follows:

   2018   2017 

Mortgage loans:

    

Residential

  $261,145,967   $234,378,976 

Commercial

   148,163,595    128,176,387 

Construction

   29,082,027    31,199,766 
  

 

 

   

 

 

 

Total mortgage loans

   438,391,589    393,755,129 

U.S. Government guaranteed loans

   2,278,783    2,426,203 

Commercial loans

   23,338,533    22,736,697 

Consumer loans

   839,753    698,654 
  

 

 

   

 

 

 
   464,848,658    419,616,683 

Plus deferred loan origination costs, net

   733,776    701,201 
  

 

 

   

 

 

 
   465,582,434    420,317,884 

Less allowance for loan losses

   (3,272,678)    (3,074,808) 
  

 

 

   

 

 

 
  $462,309,756   $417,243,076 
  

 

 

   

 

 

 

At September 30, 2018 and December 31, 2017, certain officers and directors, or their companies, were indebted to the Bank or have available credit in the aggregate amounts of approximately $3,297,000 and $3,193,000, respectively.

Residential mortgage loans serviced for others are not included in the accompanying (unaudited) balance sheets. The unpaid principal balance of mortgage loans serviced for others was approximately $43,801,000 and $37,951,000 at September 30, 2018 and December 31, 2017, respectively.

The amortized cost of mortgage servicing rights (included in other assets) at September 30, 2018 and December 31, 2017, of approximately $427,000 and $357,000, respectively, approximates the fair value and no valuation allowance for impairment has been recorded.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

3.

Loans (Continued)

The following table presents the activity in the allowance for loan losses and select loan information by portfolio segment for the nine month period ended September 30, 2018:

  Mortgage
Residential		  Mortgage
Commercial		  Mortgage
Construction		  U.S.
Government
Guaranteed		  Commercial  Consumer  Un-
allocated		  Total 

Allowance

        

Beginning balance, December 31, 2017

 $1,185,851  $1,234,411  $206,000  $—    $438,667  $5,000  $4,879  $3,074,808 

Provision (reduction)

  70,197   243,621   (23,000)   —     (21,460)   —     21,642   291,000 

Charge-offs

  —     —     —     —     (94,838)   —     —     (94,838) 

Recoveries

  —     —     —     —     1,708   —     —     1,708 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance, September 30, 2018

 $1,256,048  $1,478,032  $183,000  $—    $324,077  $5,000  $26,521  $3,272,678 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance: Individually evaluated for impairment

 $65,047  $193,032  $—    $—    $3,078  $—    $—    $261,157 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance: Collectively evaluated for impairment

 $1,191,001  $1,285,000  $183,000  $—    $320,999  $5,000  $26,521  $3,011,521 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans ending balance

        

Ending balance: Individually evaluated for impairment

 $741,440  $549,293  $271,545  $—    $741,658  $—    $—    $2,303,936 

Ending balance: Collectively evaluated for impairment

  260,404,527   147,614,302   28,810,482   2,278,783   22,596,875   839,753   —     462,544,722 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans ending balance

 $261,145,967  $148,163,595  $29,082,027  $2,278,783  $23,338,533  $839,753  $—    $464,848,658 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

3.

Loans (Continued)

The following table presents the activity in the allowance for loan losses and select loan information by portfolio segment for the nine month period ended September 30, 2017:

  Mortgage
Residential		  Mortgage
Commercial		  Mortgage
Construction		  U.S.
Government
Guaranteed		  Commercial  Consumer  Un-
allocated		  Total 

Allowance

        

Beginning balance, December 31, 2016

 $851,663  $1,093,483  $188,407  $—    $496,271  $14,000  $10,091  $2,653,915 

Provision (reduction)

  224,081   77,000   23,412   —     (26,847)   (9,000)   (25,553)   263,093 

Charge-offs

  —     —     —     —     (13,999)   —     —     (13,999) 

Recoveries

  —     —     —     —     —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance, September 30, 2017

 $1,075,744  $1,170,483  $211,819  $—    $455,425  $5,000  $(15,462)  $2,903,009 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance: Individually evaluated for impairment

 $21,744  $60,483  $9,818  $—    $48,426  $—    $—    $140,471 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending balance: Collectively evaluated for impairment

 $1,054,000  $1,110,000  $202,001  $—    $406,999  $5,000  $(15,462)  $2,762,538 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans ending balance

        

Ending balance: Individually evaluated for impairment

 $1,052,862  $600,024  $67,282  $—    $646,441  $—    $—    $2,366,609 

Ending balance: Collectively evaluated for impairment

  215,961,679   123,304,802   30,546,060   2,474,397   21,362,123   710,976   —     394,360,037 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans ending balance

 $217,014,541  $123,904,826  $30,613,342  $2,474,397  $22,008,564  $710,976  $—    $396,726,646 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

3.

Loans (Continued)

At September 30, 2018 and December 31, 2017, all loans past due greater than 90 days are on nonaccrual status with interest payments collected applied to reduce the loan balance. At September 30, 2018 and December 31, 2017, there were seven and nine loans, respectively, on nonaccrual status that were past due less than 90 days. The following table presents an aged analysis of past due and nonaccrual loans by class of loans as of September 30, 2018 and December 31, 2017:

  30-59
Days
Past Due		  60-89
Days
Past Due		  Greater
Than 90
Days		  Total Past
Due		  Current  Total Loans
Held for
Investment		  Greater
than 90
Days
and Still
Accruing		  Non-
Accrual
Loans		 

September 30, 2018

        

Mortgage loans:

        

Residential

 $340,975  $—    $—    $340,975  $260,804,992  $261,145,967  $—    $13,919 

Commercial

  346,945   —     —     346,945   147,816,650   148,163,595   —     149,299 

Construction

  —     —     —     —     29,082,027   29,082,027   —     271,545 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total mortgage loans

  687,920   —     —     687,920   437,703,669   438,391,589   —     434,763 

U.S. Government guaranteed loans

  —     —     —     —     2,278,783   2,278,783   —     —   

Commercial loans

  249,126   3,883   —     253,009   23,085,524   23,338,533   —     398,749 

Consumer loans

  10,000   —     —     10,000   829,753   839,753   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

 $947,046  $3,883  $—    $950,929  $463,897,729  $464,848,658  $—    $833,512 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2017

        

Mortgage loans:

        

Residential

 $548,772  $—    $—    $548,772  $233,830,204  $234,378,976  $—    $441,757 

Commercial

  44,921   —     —     44,921   128,131,466   128,176,387   —     112,203 

Construction

  —     —     —     —     31,199,766   31,199,766   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total mortgage loans

  593,693   —     —     593,693   393,161,436   393,755,129   —     553,960 

U.S. Government guaranteed loans

  —     —     —     —     2,426,203   2,426,203   —     —   

Commercial loans

  303,974   2,709   257,199   563,882   22,172,815   22,736,697   —     629,760 

Consumer loans

  4,773   —     —     4,773   693,881   698,654   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

 $902,440  $2,709  $257,199  $1,162,348  $418,454,335  $419,616,683  $—    $1,183,720 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Management evaluates certain loans rated substandard or worse individually for impairment. All other loans are evaluated collectively. For impaired loans that are collateral dependent their respective impairment analysis is based on appraised values less estimated selling costs. Noncollateral dependent loans are evaluated using the present value of expected future cash flows discounted at the loan’s effective interest rate. The required valuation allowance is included in the allowance for loan losses in the balance sheets.

The Bank may modify certain loans to retain customers or to maximize collection of the loan balance. All loan modifications are made on a case by case basis. When a modification is made on an impaired loan, the Bank will evaluate the modified terms to current market terms. When a concession is granted that is not at market terms considering the credit quality of the borrower, these loans would be classified as a troubled debt restructuring (TDR). New TDRs during the periods ended September 30, 2018 and 2017 were not material. At September 30, 2018 and December 31, 2017, loan balances related to TDRs totaled approximately $2,032,000 and $1,855,000, respectively.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

3.

Loans (Continued)

The following table presents impaired loans with no related allowance for loan losses and with an allowance for loan losses recorded at September 30, 2018 and December 31, 2017:

   Recorded
Carrying
Value		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Carrying
Value		 

September 30, 2018

        

With no related allowance recorded:

        

Mortgage loans:

        

Residential

  $493,496   $493,496   $—     $477,314 

Commercial

   92,176    130,737    —      98,394 

Construction

   271,545    278,625    —      292,507 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   857,217    902,858    —      868,215 

U.S. Government guaranteed loans

   —      —      —      —   

Commercial loans

   492,532    516,771    —      499,784 

Consumer loans

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,349,749    1,419,629    —      1,367,999 

With a related allowance recorded:

        

Mortgage loans:

        

Residential

   247,944    248,461    65,047    251,572 

Commercial

   457,117    457,117    193,032    457,480 

Construction

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   705,061    705,578    258,079    709,052 

U.S. Government guaranteed loans

   —      —      —      —   

Commercial loans

   249,126    258,440    3,078    257,494 

Consumer loans

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   954,187    964,018    261,157    966,546 

Total:

        

Mortgage loans:

        

Residential

   741,440    741,957    65,047    728,886 

Commercial

   549,293    587,854    193,032    555,874 

Construction

   271,545    278,625    —      292,507 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   1,562,278    1,608,436    258,079    1,577,267 

U.S. Government guaranteed loans

   —      —      —      —   

Commercial loans

   741,658    775,211    3,078    757,278 

Consumer loans

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $2,303,936   $2,383,647   $261,157   $2,334,545 
  

 

 

   

 

 

   

 

 

   

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

3.

Loans (Continued)

   Recorded
Carrying
Value		   Unpaid
Principal
Balance		   Related
Allowance		   Average
Recorded
Carrying
Value		 

December 31, 2017

        

With no related allowance recorded:

        

Mortgage loans:

        

Residential

  $441,757   $580,172   $—     $740,027 

Commercial

   54,644    68,669    —      58,416 

Construction

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   496,401    648,841    —      798,443 

U.S. Government guaranteed loans

   —      —      —      —   

Commercial loans

   —      —      —      —   

Consumer loans

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   496,401    648,841    —      798,443 

With a related allowance recorded:

        

Mortgage loans:

        

Residential

   255,981    255,981    57,851    259,329 

Commercial

   457,555    457,555    87,411    457,546 

Construction

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   713,536    713,536    145,262    716,875 

U.S. Government guaranteed loans

   —      —      —      —   

Commercial loans

   898,563    929,075    24,667    991,335 

Consumer loans

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,612,099    1,642,611    169,929    1,708,210 

Total:

        

Mortgage loans:

        

Residential

   697,738    836,153    57,851    999,356 

Commercial

   512,199    526,224    87,411    515,962 

Construction

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mortgage loans

   1,209,937    1,362,377    145,262    1,515,318 

U.S. Government guaranteed loans

   —      —      —      —   

Commercial loans

   898,563    929,075    24,667    991,335 

Consumer loans

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $2,108,500   $2,291,452   $169,929   $2,506,653 
  

 

 

   

 

 

   

 

 

   

 

 

 

Impaired loans not requiring an allowance represent loans for which expected discounted cash flows or the fair value of the collateral less estimated selling costs exceeded the carrying value of such loans.

Interest income recognized on impaired loans was not material for the nine month periods ended September 30, 2018 and 2017.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

3.

Loans (Continued)

The Bank utilizes an internal risk rating system on loans. A description of the Bank’s internal risk ratings as they relate to credit quality is as follows:

Loans rated as Excellent, Very Good, Good and Satisfactory are considered as “Pass”. Additionally, unrated overdraft lines of credit have been categorized as “Pass” credits.

Watch – A Watch asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Watch assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

The purpose of the Watch category is to identify assets that do not yet warrant adverse classification but possess credit deficiencies or potential weaknesses deserving of Management’s close attention. Watch assets are noted for the benefit of Management to indicate that a potential weakness or risk exists, which could cause a more serious problem if not corrected. These assets are not included in the regulatory reporting requirements of classified assets.

Substandard – A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

One or more of the above characteristics does not automatically mean an asset should be classified as substandard. Contractual delinquency may not in itself cause a substandard classification. If successful collection of all contractual principal and interest, or liquidation of the collateral at the asset’s book value is expected in a reasonable timeframe, a substandard classification may not be warranted.

Doubtful – An asset classified Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The probability of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage of and strengthening of the loan, its classification as an estimated loss is deferred until more exact status may be determined. Loans rated Doubtful are placed on nonaccrual.

Loss – An asset classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

3.

Loans (Continued)

The following tables present loans by internal risk rating by loan category as of September 30, 2018 and December 31, 2017:

  Commercial
Mortgage		  Commercial  U.S.
Government
Guaranteed
Loans		  Residential
Mortgage		  Construction  Consumer 

September 30, 2018

      

Pass

 $147,422,230  $21,755,191  $2,278,783  $260,404,527  $28,810,482  $839,753 

Watch

  192,072   1,184,593   —     493,496   —     —   

Substandard

  549,293   398,749   —     247,944   271,545   —   

Doubtful

  —     —     —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $148,163,595  $23,338,533  $2,278,783  $261,145,967  $29,082,027  $839,753 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2017

      

Pass

 $126,997,465  $20,699,847  $2,426,203  $233,227,625  $31,199,766  $698,654 

Watch

  666,724   1,138,286   —     453,612   —     —   

Substandard

  512,198   641,365   —     697,739   —     —   

Doubtful

  —     257,199   —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $128,176,387  $22,736,697  $2,426,203  $234,378,976  $31,199,766  $698,654 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

4.

Deposit Accounts

Deposits at September 30, 2018 and December 31, 2017 are summarized as follows:

   2018   2017 

Demand and NOW accounts, including noninterest-bearing deposits of approximately $49,100,000 at September 30, 2018 and $40,200,000 at December 31, 2017

  $88,917,637   $75,427,823 

Money market deposit accounts

   78,538,790    98,898,547 

Regular savings accounts

   174,839,217    125,475,392 
  

 

 

   

 

 

 
   342,295,644    299,801,762 

Certificates of deposit

   146,270,228    158,712,175 
  

 

 

   

 

 

 
  $488,565,872   $458,513,937 
  

 

 

   

 

 

 

As of September 30, 2018, approximately 41% of deposit accounts were held with five relationships. As of December 31, 2017, approximately 24% of deposit accounts were held with three relationships. Deposits under the Certificate of Deposit Account Registry Service (CDARS) and insured cash sweep accounts (ICS program) programs for these customers at September 30, 2018 and December 31, 2017 amounted to approximately $100,071,000 and $20,960,000, respectively.

The aggregate amount of certificates of deposit with a balance more than $250,000 was approximately $43,573,000 and $38,890,000 at September 30, 2018 and December 31, 2017, respectively. Total deposits under the CDARS programs, totaled approximately $41,548,000 and $33,321,000 at September 30, 2018 and December 31, 2017, respectively. Additionally, at September 30, 2018 and December 31, 2017, total deposits included approximately $67,779,000 and $77,867,000, respectively, in ICS money market accounts.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

4.

Deposit Accounts (Continued)

As of September 30, 2018, the scheduled maturities of certificates of deposit are as follows:

2018

  $40,047,937 

2019

   75,562,050 

2020

   14,199,630 

2021

   12,814,524 

2022

   3,503,752 

2023

   142,335 
  

 

 

 
  $146,270,228 
  

 

 

 

5.

Borrowing Capacity

Federal Home Loan Bank

As of September 30, 2018 and December 31, 2017, there were no outstanding FHLB advances.

The Bank has available borrowings, based upon pledged collateral, of approximately $151,560,000 and $138,000,000 at September 30, 2018 and December 31, 2017, respectively, with the FHLB.

Federal Funds Lines of Credit

The Bank has a $5,000,000 federal funds borrowing line of credit with Atlantic Community Bankers Bank. The line is unsecured. There were no balances outstanding under this line of credit agreement at September 30, 2018 and December 31, 2017.

6.

Repurchase Agreements

Repurchase agreements are overnight agreements with certain customers. At September 30, 2018 and December 31, 2017, the weighted average rate paid was 0.37% and 0.50%, respectively.

Securities sold under agreements to repurchase as of September 30, 2018 and December 31, 2017 are securities sold on a short-term basis that have been accounted for not as sales but as borrowings.

7.

Stockholders’ Equity

Common Stock

The Bank has a total of 9,000,000 authorized shares of voting common stock, par value of $1.00 per share, of which 2,063,562 and 2,033,211 were issued and outstanding at September 30, 2018 and December 31, 2017, respectively.

Preferred Stock

The Bank has a total of 1,000,000 shares of preferred stock authorized with a par value of $1.00 per share. No preferred stock was issued or outstanding at September 30, 2018 and December 31, 2017.

Stock Option Plans

In 2008, the Bank adopted the 2008 Stock Option and Incentive Plan (the 2008 Plan) which allows for granting of options for up to 175,876 shares of the Bank’s common stock to employees and directors.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

7.

Stockholders’ Equity (Continued)

In 2011, the Bank adopted the 2011 Stock Option and Incentive Plan (the 2011 Plan) which allows for granting options for up to an additional 50,000 shares of the Bank’s common stock to employees and directors.

In 2013, the Bank amended the 2011 Plan to allow for granting options for up to an additional 30,000 shares of the Bank’s common stock to employees and directors.

In 2016, the Bank amended the 2011 plan to allow for granting options up to an additional 30,000 shares (110,000 total shares allowed under the 2011 plan) of the Bank’s common stock to employees and directors.

In 2016, the Bank granted 13,000 options to directors to acquire Bank stock at $19 per share. The 13,000 options granted vested immediately and were in exchange for services rendered in 2016. The options have a ten year term. Additionally, 52,500 options were granted to employees to acquire Bank stock at $19 per share. The options vest ratably over four years through January 2020. The options have a ten year term.

In 2017, the Bank granted 13,000 options to directors to acquire Bank stock at $31 per share. The 13,000 options granted vested immediately and were in exchange for services rendered in 2017. The options have a ten year term.

In 2018, the Bank amended the 2011 plan to allow for granting options up to an additional 25,000 shares (135,000 total shares allowed under the 2011 plan) of the Bank’s common stock to employees and directors.

In 2018, the Bank granted 250 options to an employee to acquire Bank stock at $31 per share. The 250 options granted vested ratably over four years through January 2022. The options have aten-year term.

Activity under the stock option plans described above was as follows for the year ended December 31, 2017 and the nine month period ended September 30, 2018:

   Stock
Option
Plans		   Weighted
Average
Exercise
Price		 

Outstanding at December 31, 2016

   273,704   $13.49 

Grants

   13,000    31.00 

Forfeited

   (9,025)    19.00 

Exercised

   (125)    19.00 
  

 

 

   

 

 

 

Outstanding at December 31, 2017

   277,554    14.13 

Grants

   250    31.00 

Forfeited

   (15,028)    13.10 

Exercised

   (350)    19.00 
  

 

 

   

 

 

 

Outstanding at September 30, 2018

   262,426   $14.20 
  

 

 

   

 

 

 

Exercisable at September 30, 2018

   224,451   $12.08 
  

 

 

   

 

 

 

Reserved for future grants

   46,725   
  

 

 

   

The exercise price of the options outstanding and of the options exercisable as of September 30, 2018 ranged from $10 to $31 per share.

At September 30, 2018 and December 31, 2017, options to acquire 324,451 and 245,729 shares, respectively, had vested. No options expired in 2018 or 2017. Total compensation cost related to nonvested awards not yet recognized totaled approximately $54,000 at September 30, 2018 and is expected to be recognized ratably over the next two years.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

7.

Stockholders’ Equity (Continued)

The weighted-average grant date fair values of options granted in 2018 and 2017 were $7.21 and $7.04 per share, respectively. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

   2018
Options		  2017
Options		 

Risk-free interest rate

   2.33%   2.08% 

Dividend yield

   0%   0% 

Expected volatility

   19.3%   19.4% 

Expected life

   5.4 years   5.4 years 

Stock Warrants

In January 2008, the Bank issued warrants to allow the acquisition of 135,000 shares of common stock at $10.00 per share, which is the original issue price. Warrants to acquire 15,000 and 75,000 shares were exercised for shares of common stock during fiscal years 2017 and 2016, respectively.

In the nine-month period ended September 30, 2018, warrants for 45,000 shares were net exercised at a fair market value of $30 per share, for a total of 30,000 shares.

8.

Income Taxes

The expected income tax at the federal statutory rate of 21% for the nine month period ended September 30, 2018 and 34% for the nine month period ended September 30, 2017 differs from the actual expense due to the following:

   2018  2017 

Income tax at statutory rate

   21.0%   34.0% 

Cash surrender value – bank-owned life insurance

   (1.0)   (1.0) 

State taxes, net of federal benefit

   5.8   4.7 

Other items

   2.4   (1.9) 
  

 

 

  

 

 

 
   28.2%   35.8% 
  

 

 

  

 

 

 

9.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss is comprised of the following amounts, net of taxes, at September 30, 2018 and December 31, 2017:

   2018   2017 

Unrealized loss on investment securities available for sale

  $(293,718)   $(167,512) 
  

 

 

   

 

 

 

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

9.

Accumulated Other Comprehensive Loss (Continued)

A summary of the reclassification adjustments out of accumulated other comprehensive loss for the nine month periods ended September 30, 2018 and 2017 follows:

Reclassification Adjustment

  2018   2017   

Affected Line Item in

(Unaudited) Statements of Income

Net realized gains on investment securities available for sale

  $22,911   $41,939   Net gain on sale of investments
  

 

 

   

 

 

   
   22,911    41,939   Income before income taxes

Tax effect

   (6,301)    (16,608)   Income tax expense
  

 

 

   

 

 

   
  $16,610   $25,331   Net income
  

 

 

   

 

 

   

10.

Regulatory Matters

Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certainoff-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believes, as of September 30, 2018, that the Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 2018, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Effective January 1, 2015, the Bank adopted the Basel III capital adequacy rules which, among other changes, added a new risk-weighted capital measure called Common Equity Tier 1 (CET1). The Basel III capital adequacy guidelines require all banks and bank holding companies to maintain minimum capital ratios as follows:

Common Equity Tier 1 to risk-weighted assets of 4.5%

Total risk-based capital to risk-weighted assets of 8.0%

Tier 1 capital to total risk-weighted assets of 6.0%

Tier 1 capital to average assets (Leverage Ratio) of 4.0%

In addition, the regulations establish a capital conservation buffer above the minimum capital ratios that phase in beginning January 1, 2016 at 0.625% and increases each year by 0.625% until it is fully phased in at 2.5% effective January 1, 2019. Failure to maintain the required capital conservation buffer will limit the ability of the Bank to pay dividends, repurchase shares or pay discretionary bonuses. At September 30, 2018, the Bank exceeded the regulatory requirement for the capital conservation buffer required.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

10.

Regulatory Matters (Continued)

The following tables set forth the Bank’s regulatory capital at September 30, 2018 and December 31, 2017:

  Actual  For Capital
Adequacy Purposes		  To Be Well
Capitalized
Under Prompt
Corrective Action
Provisions		 
 Amount  Ratio  Amount  Ratio  Amount  Ratio 
       (Dollars in Thousands)       

As of September 30, 2018

      

Total Capital (to risk-weighted assets)

 $36,643   10.1%  $29,045   8.0%  $36,307   10.0% 

Common Equity Tier 1 (to risk-weighted assets)

  33,313   9.2   16,338   4.5   23,599   6.5 

Tier 1 Capital (to risk-weighted assets)

  33,313   9.2   21,784   6.0   29,045   8.0 

Leverage Capital Ratio Tier 1 capital (to total average assets)

  33,313   6.6   20,324   4.0   25,406   5.0 

As of December 31, 2017

      

Total Capital (to risk-weighted assets)

 $34,529   10.3%  $26,864   8.0%  $33,580   10.0% 

Common Equity Tier 1 (to risk-weighted assets)

  31,401   9.4   15,111   4.5   21,827   6.5 

Tier 1 Capital (to risk-weighted assets)

  31,401   9.4   20,148   6.0   26,864   8.0 

Leverage Capital Ratio Tier 1 capital (to total average assets)

  31,401   6.7   18,871   4.0   23,589   5.0 

Cash Restriction

The Bank is required to maintain a certain reserve balance in the form of cash or deposits with the Federal Reserve Bank. At September 30, 2018 and December 31, 2017, the required reserve balance was approximately $1,215,000 and $653,000, respectively.

11.

Commitments

Financial Instruments withOff-Balance Sheet Risk

The Bank is a party to financial instruments withoff-balance-sheet risk. These instruments, which arise in the normal course of business, are commitments to extend credit to customers in the form of residential loans, commercial loans and home equity loans, as well as letters of credit. The commitments involve varying degrees of credit and interest rate risk in excess of the amount recognized in the balance sheets. The Bank follows the same credit policies in making commitments and conditional obligations as it does foron-balance-sheet instruments, including requiring similar collateral or other security to support financial instruments with credit risk. The Bank’s exposure to credit loss in the event of nonperformance by the customer is represented by the contractual amount of those instruments.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

11.

Commitments (Continued)

As of September 30, 2018 and December 31, 2017, financial instruments withoff-balance-sheet commitments are approximately as follows:

   2018   2017 

1 – 4 family residential construction loans

  $12,892,000   $9,756,000 

Commercial real estate construction and development loans

   11,154,000    7,672,000 

Real estate lines of credit

   15,838,000    13,344,000 

Other unused commitments

   12,031,000    10,557,000 

Standby letters of credit

   751,000    736,000 
  

 

 

   

 

 

 
  $52,666,000   $42,065,000 
  

 

 

   

 

 

 

Commitments generally have fixed expiration dates or other termination clauses. Since a portion of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Operating Leases

The Bank has an operating lease agreement for office and retail space in downtown Portsmouth, New Hampshire. The initial lease term expired in October 2017, with the Bank having four five-year renewal options. The Bank exercised their option to renew this lease through October 2022.

The Bank has a land lease for a branch location in North Hampton, New Hampshire. The lease commenced in October 2009 and has an initial term of ten years, with four five-year renewal options.

The Bank has a land lease for a branch location in Stratham, New Hampshire. The lease commenced in July 2011 and has an initial term of ten years, with four five-year renewal options.

The Bank had an operating lease agreement for a loan production office in Dover, New Hampshire. The lease expired in February 2018 and was not renewed.

The Bank has an operating lease for a branch location in the Pease International Tradeport, Portsmouth. The lease commenced in October 2013 and has an initial term of ten years, with four five-year renewal options.

The Bank has an operating lease for a branch location in Bedford, New Hampshire. The lease commenced in September 2014 and has an initial term of five years and three months, with five five-year renewal options.

In May 2016, the Bank entered into an operating lease for a branch location in Portsmouth, New Hampshire. The lease commenced in August 2016 and has an initial term of ten years, with six five-year renewal options.

In October 2016, the Bank entered into a land lease for a branch location in Dover, New Hampshire. The lease commenced in January 2018 and has an initial term of ten years, with six five-year renewal options.

The Bank recognized lease expense of approximately $597,000 and $513,000 for the nine month periods ended September 30, 2018 and 2017, respectively.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

11.

Commitments (Continued)

Future lease payments expected during the initial lease terms and the renewal options of all leases described above are approximately as follows:

2018 (October through December)

  $213,000 

2019

   861,000 

2020

   840,000 

2021

   834,000 

2022

   836,000 

Thereafter

   21,146,000 

12.

Fair Value Measurements

The Bank adopted a framework for measuring fair value under generally accepted accounting principles for all financial instruments that are being measured and reported on a fair value basis.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Bank uses various methods including market, income and cost approaches. Based on these approaches, the Bank often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Bank utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Bank is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities.

Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

In determining the appropriate levels, the Bank performs a detailed analysis of the assets and liabilities that are subject to fair value measurements. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

OPTIMA BANK & TRUST COMPANY

NOTES TO (UNAUDITED) FINANCIAL STATEMENTS

12.

Fair Value Measurements (Continued)

For the nine month period ended September 30, 2018, the application of valuation techniques applied to similar assets and liabilities has been consistent. The following is a description of the valuation methodologies used for instruments measured at fair value:

Fair Value on a Recurring Basis

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis at September 30, 2018 and December 31, 2017:

   Total   Level 1   Level 2   Level 3 

2018

        

Available-for-sale securities

  $22,843,260   $497,110   $22,346,150   $—   
  

 

 

   

 

 

   

 

 

   

 

 

 

2017

        

Available-for-sale securities

  $27,316,420   $497,846   $26,818,574   $—   
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). There were no significant assets measured at fair value on a nonrecurring basis at September 30, 2018 and December 31, 2017.

ANNEX A—AGREEMENT AND PLAN OF MERGERA

EXECUTION VERSION

 

 

AGREEMENT AND PLAN OF MERGER

DATED AS OF DECEMBER 5, 20182019

BY AND AMONG

CAMBRIDGE BANCORP,

CAMBRIDGE TRUST COMPANY,

WELLESLEY BANCORP, INC.

AND

OPTIMAWELLESLEY BANK & TRUST COMPANY

 

 

TABLE OF CONTENTS

 

      Page 

ARTICLE I THE MERGER

   A-1A-2 

Section 1.01

  Terms of the Merger   A-1A-2 

Section 1.02

  Tax Consequences   A-2 

Section 1.03

  Name of the Surviving Bank   A-2 

Section 1.04

  Charter and Bylaws of the Surviving Bank   A-2 

Section 1.05

  Directors and Officers of Cambridgethe Surviving Company and the Surviving Bank   A-2 

Section 1.06

  Effect of the Merger   A-2A-3 

Section 1.07

  Effective Date and Effective Time; Closing   A-3 

Section 1.08

  Alternative Structure   A-3 

Section 1.09

  Additional Actions   A-3 

Section 1.10

  Absence of Control   A-4 

ARTICLE II CONSIDERATION; EXCHANGE PROCEDURES

   A-4 

Section 2.01

  Merger Consideration   A-4 

Section 2.02

  Stock ConsiderationA-4

Section 2.03

Cash ConsiderationA-4

Section 2.04

Rights as Shareholders; Stock Transfers   A-4 

Section 2.052.03

  No Fractional Shares   A-4 

Section 2.06

Dissenting SharesA-5

Section 2.07

Election ProceduresA-5

Section 2.082.04

  Exchange of Certificates; Payment of the Consideration   A-7A-4 

Section 2.092.05

  Anti-Dilution Provisions   A-8A-6 

Section 2.102.06

  Reservation of Shares   A-8A-6 

Section 2.112.07

  Listing of Additional Shares   A-8A-6 

Section 2.122.08

  Treatment of Stock Options   A-9A-6

Section 2.09

Treatment of Restricted Stock AwardsA-7 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF OPTIMAWELLESLEY

   A-9A-7 

Section 3.01

  Making of Representations and Warranties   A-9A-7 

Section 3.02

  Organization, Standing and Authority of OptimaWellesley   A-9A-7 

Section 3.03

  Optima Capital StockOrganization, Standing and Authority of Wellesley Bank   A-10A-7 

Section 3.04

  SubsidiariesWellesley and Bank Capital Stock   A-10A-8 

Section 3.05

SubsidiariesA-8

Section 3.06

  Corporate Power; Minute Books   A-10A-9 

Section 3.063.07

  Execution and Delivery   A-10A-9 

Section 3.073.08

  Regulatory Approvals; No Defaults   A-11

Section 3.08

Financial StatementsA-11A-9 

Section 3.09

Financial Statements; SEC Documents; and Financial Controls and ProceduresA-10

Section 3.10

  Absence of Certain Changes or Events   A-11 

Section 3.103.11

  Financial Controls and Procedures   A-12A-11 

Section 3.113.12

  Regulatory Matters   A-12A-11 

Section 3.123.13

  Legal Proceedings; Regulatory Action   A-13A-12 

Section 3.133.14

  Compliance with Laws   A-13 

Section 3.143.15

  Material Contracts; Defaults   A-13 

Section 3.153.16

  Brokers   A-14 

Section 3.163.17

  Employee Benefit Plans   A-14 

Section 3.173.18

  Labor Matters   A-15A-16 

Section 3.183.19

  Environmental Matters   A-16 

Section 3.193.20

  Tax Matters   A-16 

Section 3.203.21

  Investment Securities   A-17A-18 

Section 3.213.22

  Derivative Transactions   A-18 

Section 3.223.23

  Loans; Nonperforming and Classified Assets   A-18 

Section 3.233.24

  Tangible Properties and Assets   A-18A-19

Section 3.25

Intellectual PropertyA-20 

 

A-i

      Page 

Section 3.243.26

  Intellectual PropertyFiduciary Accounts   A-19

Section 3.25

Trust ActivitiesA-19

Section 3.26

InsuranceA-19A-20 

Section 3.27

  InsuranceA-20

Section 3.28

Antitakeover Provisions   A-19A-20 

Section 3.283.29

  Fairness Opinion   A-20 

Section 3.293.30

Joint Proxy Statement/ProspectusA-20

Section 3.31

  CRA, Anti-money Laundering and Customer Information Security   A-20A-21 

Section 3.303.32

  Transactions with Affiliates   A-20A-21 

Section 3.313.33

  Disclosure   A-20A-21 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CAMBRIDGE

   A-20A-21 

Section 4.01

  Making of Representations and Warranties   A-20A-22 

Section 4.02

  Organization, Standing and Authority of Cambridge   A-21A-22 

Section 4.03

  Organization, Standing and Authority of Cambridge Trust   A-21A-22 

Section 4.04

  Cambridge Capital Stock   A-21A-22 

Section 4.05

  Subsidiaries   A-21A-22 

Section 4.06

  Corporate Power; Minute Books   A-21A-22 

Section 4.07

  Execution and Delivery   A-22A-23 

Section 4.08

  Regulatory Approvals; No Defaults   A-22A-23 

Section 4.09

  Absence of Certain Changes or Events   A-22A-23 

Section 4.10

  SEC Documents; Financial Reports; and Financial Controls and Procedures   A-22A-24 

Section 4.11

  Regulatory Matters   A-23A-24 

Section 4.12

  Legal Proceedings   A-24A-25 

Section 4.13

  Compliance With Laws   A-24A-25 

Section 4.14

  Brokers   A-24A-26 

Section 4.15

Tax MattersA-24

Section 4.16

  Employee Benefit Plans   A-25A-26

Section 4.16

Labor MattersA-27 

Section 4.17

  Cambridge StockEnvironmental Matters   A-25A-27 

Section 4.18

  CRA, Anti-Money Laundering and Customer Security InformationTax Matters   A-25A-27 

Section 4.19

  Sufficient FundsDerivative Transactions   A-26A-28 

Section 4.20

  Loans; Nonperforming AssetsA-28

Section 4.21

Deposit InsuranceA-28

Section 4.22

Cambridge StockA-29

Section 4.23

Antitakeover ProvisionsA-29

Section 4.24

Joint Proxy Statement/ProspectusA-29

Section 4.25

CRA, Anti-money Laundering and Customer Information SecurityA-29

Section 4.26

Disclosure   A-26A-29 

ARTICLE V COVENANTS

   A-26A-29 

Section 5.01

  

Covenants of Optima

Wellesley		   A-26A-29 

Section 5.02

  Covenants of Cambridge   A-29A-33 

Section 5.03

  Reasonable Best Efforts   A-29A-33 

Section 5.04

  Shareholder Approval   A-29A-34 

Section 5.05

  Merger Registration Statement; Joint Proxy Statement/Prospectus   A-30A-34 

Section 5.06

  Cooperation and Information Sharing   A-30A-35 

Section 5.07

  Supplements or Amendment   A-30A-35 

Section 5.08

  Regulatory Approvals   A-31A-35 

Section 5.09

  Press Releases   A-31A-35 

Section 5.10

  Access; Information   A-31A-36 

Section 5.11

  No Solicitation by OptimaWellesley   A-32A-36 

Section 5.12

  Certain Policies   A-33A-38 

Section 5.13

  Indemnification   A-34

Section 5.14

Employees; Benefit PlansA-35

Section 5.15

Notification of Certain ChangesA-36

Section 5.16

Current InformationA-37

Section 5.17

Board PackagesA-37

Section 5.18

Transition; Informational Systems ConversionA-37A-38 

 

A-ii

      Page 

Section 5.14

Employees; Benefit PlansA-40

Section 5.15

Notification of Certain ChangesA-42

Section 5.16

Current InformationA-42

Section 5.17

Board PackagesA-43

Section 5.18

Transition; Informational Systems ConversionA-43

Section 5.19

Assumption of DebtA-43

ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER

   A-38A-43 

Section 6.01

  Conditions to Obligations of the Parties to Effect the Merger   A-38A-43 

Section 6.02

  Conditions to Obligations of Cambridge   A-38A-44 

Section 6.03

  Conditions to Obligations of OptimaWellesley   A-39A-45 

Section 6.04

  Frustration of Closing Conditions   A-39A-45 

ARTICLE VII TERMINATION

   A-40A-46 

Section 7.01

  Termination   A-40A-46 

Section 7.02

  Termination Fee   A-42A-48 

Section 7.03

  Effect of Termination and Abandonment   A-42A-48 

ARTICLE VIII MISCELLANEOUS

   A-42A-48 

Section 8.01

  Survival   A-42A-48 

Section 8.02

  Waiver; Amendment   A-42A-48 

Section 8.03

  Counterparts   A-42A-49 

Section 8.04

  Governing Law   A-42A-49 

Section 8.05

  Expenses   A-42A-49 

Section 8.06

  Notices   A-43A-49 

Section 8.07

  Entire Understanding; No Third Party Beneficiaries   A-43A-49 

Section 8.08

  Severability   A-43A-50 

Section 8.09

  Enforcement of the Agreement   A-44A-50 

Section 8.10

  Interpretation   A-44A-50 

Section 8.11

  Assignment   A-44A-50 

ARTICLE IX ADDITIONAL DEFINITIONS

   A-44A-50 

Section 9.01

  Additional Definitions   A-44A-50 

EXHIBITS

    

Exhibit A

  Form of Wellesley Voting Agreement  

Exhibit B

  Form of ExecutiveCambridge Voting Agreement

Exhibit C

Form of Change in Control Agreement

Exhibit D

Plan of Bank Merger  

 

A-iii

TABLE OF DEFINITIONS

Page

Page

Acquisition Proposal

   3747 

Acquisition Transaction

   3847 

Affiliate

   3847 

Agreement

   1 

Average Closing Price

   3444

Bank Merger

1

Bank Merger Act

47 

Bank Regulator

   3848

BHC Act

1 

BOLI

   1719

Book-Entry Shares

5 

Business Day

   3848 

Cambridge

   1 

Cambridge 20172018 Form10-K

   2022 

Cambridge Benefit Plan

   3437

Cambridge Benefit Plans

24 

Cambridge Board

   3848 

Cambridge Disclosure Schedule

   3848

Cambridge ERISA Affiliate

24

Cambridge Loan Property

48 

Cambridge Measurement Price

   4 

Cambridge Meeting

32

Cambridge Pension Plan

24

Cambridge Ratio

   3444 

Cambridge SEC Documents

   2022 

Cambridge Stock

   3848 

Cambridge Trust

   1 

Cash ConsiderationCambridge Voting Agreement

   31 

Cash Election SharesCertificate

   4 

CertificateCIC Agreement

   3, 381 

Closing

   3 

Closing Date

   3 

Code

   1 

CRACommunity Reinvestment Act

   911 

Confidentiality Agreement

   2733

Continuing Employees

37 

Derivative Transaction

   3848 

Determination Date

   35

Dissenters’ Rights Laws

4

Dissenting Shares

444 

Effective Date

   23 

Effective Time

   2

Election Deadline

5

Election Form

4

Election Form Record Date

43 

Employee Stock Incentive Plan

   3848 

Environmental Law

   3848 

ERISA

   3848 

Exchange Act

   3948 

Exchange Agent

   3948 

Exchange Ratio

   3

Executive Agreements

14 

FDIC

   3948 

FHLB

   3948 

Final Index Price

   35

Finance Laws

13

FRB

39

GAAP

39

Governmental Authority

3944 

Finance Laws

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FRB

48

GAAP

48

Governmental Authority

49 

Hazardous Substance

   3949 

Indemnified Parties

   2936 

Indemnifying Party

   2936 

Index Group

   3544 

Index Price

   3544 

Index Ratio

   3444 

Informational Systems Conversion

   3140 

Insurance Policies

   1719 

Intellectual Property

   3949 

IRS

   3949

Joint Proxy Statement/Prospectus

49 

Knowledge

   3949 

Leases

   1618 

Lien

   3949 

Loans

   15

Mailing Date

417 

Material Adverse Effect

   3949 

Material Contract

   1213

MDOB

50 

Merger

   1 

Merger Consideration

   404 

Merger Registration Statement

   2632

MGCL

3 

MGL

   2

Mixed Election

43 

NASDAQ

   4050 

New Members

   2 

NHRSA

2

Non-Election Shares

4

Non-Witholding Option

8

Notice of Superior Proposal

   2935 

Notice Period

   29

Optima

1

Optima Benefit Plans

12

Optima Board

40

Optima Disclosure Schedule

40

Optima Employees

12

Optima ERISA Affiliate

12

Optima Financial Statements

9

Optima Intellectual Property

40

Optima Meeting

26

Optima Option

45

Optima Pension Plan

12

Optima Recommendation

27

Optima Representatives

28

Optima Stock

8

Optima Stock Option Plans

40

Optima Subsequent Determination

30

Option Consideration

835 

OREO

   16

Person

4017 

Per Share Consideration

   4150

Person

50

Premium Limit

37

Proceeding

36

Regulatory Approvals

22

Regulatory Order

11

Rights

50

SEC

9

Securities Act

50

Software

50

Starting Date

44

Starting Price

45

Subsidiary

50

Superior Proposal

50

Surviving Bank

2

Surviving Company

2

Tax

50 
 

 

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Page

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Premium LimitTax Returns

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Proxy Statement/ProspectusTaxes

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Regulatory ApprovalsTransactions

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Regulatory OrderWellesley

   101 

RightsWellesley 2018 Form10-K

   409 

SECWellesley Bank

   101 

Securities ActWellesley Bank Board

   4151 

Securities DocumentsWellesley Bank Stock

   217 

Shortfall NumberWellesley Benefit Plans

   513 

SoftwareWellesley Board

   4151 

Starting DateWellesley Disclosure Schedule

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Starting PriceWellesley Employees

   3513 

Stock ConsiderationWellesley Equity Plan

   351

Wellesley ERISA Affiliate

14

Wellesley Financial Statements

9 
Page

Stock Conversion NumberWellesley Intellectual Property

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Stock Election NumberWellesley Loan Property

   451 

Stock Election SharesWellesley Meeting

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SubsidiaryWellesley Option

   4151 

Superior ProposalWellesley Pension Plan

   4113 

Surviving BankWellesley Recommendation

   132 

Tax

41

Tax Returns

41

Taxes

41

Termination DateWellesley Representatives

   34 

Wellesley Restricted Stock

6

Wellesley SEC Documents

9

Wellesley Stock

7

Wellesley Stock Option Plan

51

Wellesley Subsequent Determination

35

Wellesley Voting Agreement

   1 

Willful Breach

   4151 
 

 

A-v

This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is dated as of December 5, 2018,2019, by and among Cambridge Bancorp (“Cambridge”), a Massachusetts corporation and registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (“Cambridge”(the “BHC Act”), Cambridge Trust Company, a Massachusetts-chartered trust company and wholly owned subsidiary of Cambridge (“Cambridge Trust”), Wellesley Bancorp, Inc., a Maryland corporation and Optimaregistered bank holding company under the BHC Act (“Wellesley”), and Wellesley Bank, & Trust Company, a New Hampshire-charteredMassachusetts-chartered bank and wholly owned subsidiary of Wellesley (“Optima”Wellesley Bank”).

WITNESSETH

WHEREAS, the Board of Directors of Cambridge Trust and the Board of Directors of OptimaWellesley have each (i) determined that this Agreement and the business combination and related transactions contemplated hereby are in the best interests of their respective entities and shareholders; (ii) determined that this Agreement and the transactions contemplated hereby are consistent with and in furtherance of their respective business strategies; and (iii) approved and adopted this Agreement;

WHEREAS, in accordance with the terms of this Agreement, OptimaWellesley will merge with and into Cambridge (the “Merger”), and immediately thereafter, Wellesley Bank will merge with and into Cambridge Trust (the “Merger”“Bank Merger” and with the Merger, the “Transactions”);

WHEREAS, as a material inducement to Cambridge to enter into this Agreement, each of the directors and certain executive officers of Optimaset forth on theWellesley Disclosure Schedule 6.02(d) has entered into a voting agreement with Cambridge dated as of the date hereof (a “Voting“Wellesley Voting Agreement”), substantially in the form attached hereto asExhibit A, pursuant to which each such director or executive officer has agreed, among other things, to vote all shares of OptimaWellesley Stock (as defined herein) owned by such person in favor of the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in such agreement;

WHEREAS, as a material inducement to Wellesley to enter into this Agreement, each of the directors and certain executive officers set forth on theCambridge Disclosure Schedule 6.03(c) has entered into a voting agreement with Wellesley dated as of the date hereof (a “Cambridge Voting Agreement”), substantially in the form attached hereto asExhibit B pursuant to which each such director or executive officer has agreed, among other things, to vote all shares of Cambridge Stock (as defined herein) owned by such person in favor of the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in such agreement;

WHEREAS, as a material inducement to Cambridge to enter into this Agreement, each of Daniel Morrison, Pamela Morrison and William YoungThomas J. Fontaine has entered into an offer lettera change in control agreement with Cambridge and/or the Surviving Bank dated as of the date hereof (the “Executive Agreements”“CIC Agreement”), substantially in the form attached hereto asExhibit BC, each of which shall become effective as of the Effective Time;

WHEREAS, for United States federal income tax purposes, the parties intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended and the regulations and formal guidance issued thereunder (the “Code”), and that this Agreement be and hereby is adopted as a “plan of reorganization” within the meaning of Sections 354, 361 and 361368 of the Code; and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the transactions described in this Agreement and to prescribe certain conditions thereto.

NOW, THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

THE MERGER

Section 1.01Terms of the Merger. Subject to the terms and conditions of this Agreement, at the Effective Time, OptimaWellesley shall merge with and into Cambridge, and Cambridge shall be the surviving entity (hereinafter sometimes referred to as the “Surviving Company”). Immediately thereafter, pursuant to the Plan of Bank Merger described in the following sentence, Wellesley Bank shall merge with and into Cambridge Trust, and Cambridge Trust shall be the surviving entity (hereinafter sometimes referred to as the “Surviving Bank”) and shall continue its corporate existence as a Massachusetts-chartered trust company regulatedto be governed by the Massachusetts Divisionlaws of Banksthe Commonwealth of Massachusetts. As soon as practicable after the execution of this Agreement (or on such later date as Cambridge shall specify), Cambridge will cause Cambridge Trust to, and Wellesley will cause Wellesley Bank to, execute and deliver a Plan of Bank Merger substantially in the FDIC.form attached to this Agreement asExhibit D. As part of the Merger, shares of OptimaWellesley Stock shall, at the Effective Time, be converted into the right to receive the Merger Consideration pursuant to the terms ofArticle II.

Section 1.02Tax Consequences. It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization” as that term is used in Sections 354, 361 and 361368 of the Code. From and after the date of this Agreement and until the Closing, each party hereto shall use its reasonable best efforts to cause the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act would reasonably be expected to prevent the Merger from qualifying as a reorganization under Section 368(a) of the Code. OptimaWellesley and Cambridge each hereby agree to deliver a certificate substantially in compliance with IRS published advance ruling guidelines, with customary exceptions and modifications thereto, to enable its counsel to deliver the legal opinionopinions contemplated by Section 6.01(e).

Section 1.03Name of the Surviving Bank. The name of the Surviving Company shall be “Cambridge Bancorp.” The name of the Surviving Bank shall be “Cambridge Trust Company.”

Section 1.04Charter and Bylaws of the Surviving Bank. The charter and bylaws of the Surviving Company upon consummation of the Merger shall be the charter and bylaws of Cambridge as in effect immediately prior to consummation of the Merger. The charter and bylaws of the Surviving Bank upon consummation of the Bank Merger shall be the charter and bylaws of Cambridge Trust as in effect immediately prior to consummation of the Bank Merger.

Section 1.05Directors and Officers of Cambridgethe Surviving Company and the Surviving Bank.

(a) At the Effective Time, the directors of each of Cambridgethe Surviving Company and the Surviving Bank immediately prior the Effective Time shall continue to be the directors of Cambridgethe Surviving Company and the Surviving Bank, provided that at the Effective Time, or at Cambridge’s option, immediately following the 2020 annual meeting of shareholders of Cambridge, the number of persons constituting the board of directors of Cambridgethe Surviving Company and the Surviving Bank shall each be increased by one (1) directorthree (3) directors to be selected by Cambridge upon consultation with Wellesley (the “New Member”Members”), and the New MemberMembers shall be appointed to the board of directors of both Cambridgethe Surviving Company and the Surviving Bank for terms to expire at Cambridge’s and the Surviving Bank’s next annual meeting. At the next annual meeting of shareholders of Cambridge after the Effective Date,New Members have been appointed to boards of directors of the Surviving Company and the Surviving Company, the New MemberMembers shall be nominated to the boards of directors of Cambridgethe Surviving Company and the

Surviving Bank each for a term of three (3) years and Cambridgethe Surviving Company shall recommend that its stockholders vote in favor of the election of such nominee and shall, as the sole shareholder of the Surviving Bank, vote itself in favor of each such nominee. Notwithstanding the foregoing, neither Cambridgethe Surviving Company nor the Surviving Bank shall have any obligation to appoint the New MemberMembers to serve on Cambridge’sthe Surviving Company’s or the Surviving Bank’s Boardboard of directors if such Person is not a member of the Optima’sWellesley’s board of directors immediately prior to the Effective Time. Each of the directors of Cambridgethe Surviving Company and the Surviving Bank immediately after the Effective Time shall hold office until his or her successor is elected and qualified or otherwise in accordance with the charter and bylaws of Cambridgethe Surviving Company and the Surviving Bank.

(b) At the Effective Time, the officers of Cambridgethe Surviving Company and the Surviving Bank shall consist of the officers of Cambridgethe Surviving Company and the Surviving Bank in office immediately prior to the Effective Time with the addition of Daniel MorrisonThomas J. Fontaine as the Chief ExecutiveBanking Officer of Cambridge Trust in New Hampshire and William Young as Senior Vice President ofthe Surviving Bank.

Section 1.06Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided under applicable provisions of the Massachusetts General Laws (“MGL”) and, the New Hampshire Revised Statutes AnnotatedMaryland General Corporation Law (“NHRSA”MGCL”), and the regulations respectively promulgated thereunder.

(a)    Surviving Bank. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, the separate corporate existence of OptimaWellesley shall cease and the Surviving Bank shall be considered the same business and corporate entity as each of Cambridge Trust and Optima and thereupon and thereafter all of the rights, privileges, powers, franchises, properties, assets, debts, liabilities, obligations, restrictions, disabilities and duties of OptimaWellesley shall be vested in and assumed by Cambridge Trust as the Surviving Bank. Any reference to either of Cambridge Trust or Optima in any contract, will or document; and any pending action or other judicial proceeding to which either of Cambridge Trust or Optima is a party shall not be deemed to have abated or to have been discontinued by reason of the Merger, but may be prosecuted to final judgment, order or decree in the same manner as if the Merger had not been made or the Surviving Bank may be substituted as a party to

such action or proceeding, and any judgment, order or decree may be rendered for or against it that might have been rendered for or against either of Cambridge Trust or Optima if the Merger had not occurred.

(b)    Deposits. All deposit accounts of Optima shall be and become deposit accounts in the Surviving Bank without change in their respective terms, maturity, minimum required balances or withdrawal value. Appropriate evidence of the deposit account in the Surviving Bank shall be provided by the Surviving Bank to each deposit account holder of Optima, as necessary, after consummation of the Merger. All deposit accounts of Cambridge Trust prior to consummation of the Merger shall continue to be deposit accounts in the Surviving Bank after consummation of the Merger without any change whatsoever in any of the provisions of such deposit accounts, including, without limitation, their respective terms, maturity, minimum required balances or withdrawal value.

(c)    Offices. At the Effective Time, the main office of the Surviving Bank shall be located in Cambridge, Massachusetts. The former main office and branch offices of Optima shall be operated as branches of the Surviving Bank immediately following the Effective Time.Cambridge.

Section 1.07Effective Date and Effective Time; Closing.

(a) Subject to the terms and conditions of this Agreement, Cambridge will make all such filings as may be required by applicable laws and regulations to consummate the Merger. On the Closing Date, which shall take place not more than five (5) Business Days following the receipt of all necessary regulatory, governmental and shareholder approvals and consents and the expiration of all statutory waiting periods in respect thereof and the satisfaction or waiver of all of the conditions to the consummation of the Merger specified inArticle VI of this Agreement (other than the delivery of certificates and other instruments and documents to be delivered at the Closing), or on such other date as the parties shall mutually agree to, Cambridge Trust and OptimaWellesley shall file articles of merger with the Secretary of the Commonwealth of Massachusetts in accordance with the MGL and with the SecretaryMaryland Department of the State of New HampshireAssessments and Taxation in accordance with the NHRSA.MGCL. The date of such filings is herein called the “Effective Date,”Date” and the “Effective Time” of the Merger shall be as specified in such filings.

(b) The closing (the “Closing”) shall take place remotely via the electronic exchange of documents and signatures immediately prior to the Effective Time at 10:00 a.m., Eastern time, or in person at the principal offices of Hogan Lovells US LLP in Washington, D.C., or such other place, at such other time, or on such other date as the parties may mutually agree upon (such date, the “Closing Date”). At the Closing, there shall be delivered to Cambridge and OptimaWellesley the certificates and other documents required to be delivered underArticle VI hereof.

Section 1.08Alternative Structure. Cambridge may, at any time prior to the Effective Time, change the method of effecting the combination of Cambridge and Wellesley, and Cambridge Trust and OptimaWellesley Bank, respectively, (including the provisions of thisArticle I) if and to the extent it deems such change to be necessary, appropriate or desirable;provided, however, that no such change shall (a) alter or change the Merger Consideration; (b) adversely affect the tax treatment of or Optima’sWellesley’s shareholders pursuant to this Agreement; (c) adversely affect the tax treatment of Cambridge or OptimaWellesley pursuant to this Agreement; or (d) be reasonably likely to materially impede or delay consummation of the transactions contemplated by this Agreement. In the event Cambridge makes such a change, OptimaWellesley agrees to execute an appropriate amendment to this Agreement in order to reflect such change.

Section 1.09Additional Actions. If, at any time after the Effective Time, Cambridge shall consider or be advised that any further deeds, documents, assignments or assurances in law or any other acts are necessary or

desirable to (i) vest, perfect or confirm, or record or otherwise, in Cambridge its right, title or interest in, to or under any of the rights, properties or assets of Optima,Wellesley or Wellesley Bank, or (ii) otherwise carry out the purposes of this Agreement, OptimaWellesley, Wellesley Bank and itstheir respective officers and directors shall be deemed to have granted to Cambridge an irrevocable power of attorney to execute and deliver, in such official corporate capacities, all such deeds, assignments or assurances in law or any other acts as are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in Cambridge or Cambridge Trust its right, title or interest in, to or under any of the rights, properties or assets of

Optima Wellesley or Wellesley Bank or (b) otherwise carry out the purposes of this Agreement, and the officers and directors of Cambridge or Cambridge Trust are authorized in the name of OptimaWellesley or Wellesley Bank or otherwise to take any and all such action.

Section 1.10Absence of Control. It is the intent of the parties to this Agreement that Cambridge or Cambridge Trust by reason of this Agreement shall not be deemed (until consummation of the transactions contemplated herein) to control, directly or indirectly, OptimaWellesley or Wellesley Bank and shall not exercise or be deemed to exercise, directly or indirectly, a controlling influence over the management or policies of Optima.Wellesley or Wellesley Bank.

ARTICLE II

CONSIDERATION; EXCHANGE PROCEDURES

Section 2.01Merger Consideration. Subject to the provisions of this Agreement, at the Effective Time, automatically by virtue of the Merger and without any action on the part of any Person:

(a) Each share of Cambridge Stock that is issued and outstanding immediately prior to the Effective Time shall remain outstanding following the Effective Time and shall be unchanged by the Merger.

(b) Each share of Optima Stock held as treasury stock, if any, immediately prior to Effective Time shall be cancelled and retired at the Effective Time without any conversion thereof, and no payment shall be made with respect thereto.

(c)    All remaining shares of OptimaWellesley Stock issued and outstanding immediately prior to the Effective Time (other than treasury stock and Dissenting Shares)stock) shall become and be converted into, as provided in and subject to the limitations set forth in this Agreement, the right to the Merger Consideration, pursuant to the termsreceive 0.580 shares (the “Exchange Ratio”) of thisArticle IICambridge Stock (the “Merger Consideration”).

Section 2.02Stock Consideration. Each outstanding share of Optima Stock that under the terms ofSection 2.07 is to be converted into the right to receive shares of Cambridge Stock (the “Stock Consideration”) shall be converted into and become the right to receive from Cambridge 0.3468 shares of Cambridge Stock (the “Exchange Ratio”).

Section 2.03    Cash Consideration. Each outstanding share of Optima Stock that under the terms ofSection 2.07 is to be converted into the right to receive cash (the “Cash Consideration”) shall be converted into the right to receive a cash payment of $32.00.

Section 2.04    Rights as Shareholders; Stock Transfers. All shares of OptimaWellesley Stock, when converted as provided inSection 2.01(c)2.01(b), shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each certificate (a “Certificate”) previously evidencing such shares shall thereafter represent only the right to receive for each such share of OptimaWellesley Stock, the Merger Consideration and, if applicable, any cash in lieu of fractional shares of Cambridge Stock in accordance withSection 2.052.03. At the Effective Time, holders of the OptimaWellesley Stock shall cease to be, and shall have no rights as, shareholders of OptimaWellesley other than the right to receive the Merger Consideration and cash in lieu of fractional shares of Cambridge Stock as provided under thisArticle II. After the Effective Time, there shall be no transfers on the stock transfer books of OptimaWellesley of shares of the OptimaWellesley Stock.

Section 2.05    2.03No Fractional Shares. Notwithstanding any other provision hereof, no fractional shares of Cambridge Stock and no certificates or scrip therefor, or other evidence of ownership thereof, will be issued in the Merger. In lieu thereof, Cambridge shall pay to each holder of a fractional share of Cambridge Stock an amount of cash (without interest) determined by multiplying the fractional share interest to which such holder would otherwise be entitled by the average of the daily closing prices during the regular session of Cambridge Stock as reported on NASDAQ for the five (5) consecutive trading days ending on the third Business Day immediately prior to the Closing Date, rounded to the nearest whole cent (the “Cambridge Measurement Price”). No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional share.

Section 2.06    Dissenting Shares. Each outstanding share of Optima Stock the holder of which has perfected his or her right to dissent from the Merger under Chapter293-A of the NHRSA (the “Dissenters’ Rights Laws”) and has not effectively withdrawn or lost such rights as of the Effective Time (the “Dissenting Shares”) shall not be converted into the right to receive the Merger Consideration, and the holder thereof shall be entitled only to such rights as are granted by such provisions of the Dissenters’ Rights Laws. If any holder of Dissenting Shares shall fail to perfect or shall have effectively withdrawn or lost the right to dissent, the Dissenting Shares held by such holder shall thereupon be treated as though such Dissenting Shares had been converted into the right to receive the Merger Consideration to which such holder would be entitled pursuant toSection 2.07 hereof. Optima shall give Cambridge prompt notice upon receipt by Optima of any such written demands for payment of the fair value of shares of the Optima Stock and of withdrawals of such demands and any other instruments provided pursuant to the Dissenters’ Rights Laws. Any payments made in respect of Dissenting Shares shall be made by Cambridge.

Section 2.07    Election Procedures.

(a)    Holders of Optima Stock may elect to receive shares of Cambridge Stock or cash (in either case without interest) in exchange for their shares of Optima Stock in accordance with the following procedures, provided that, in the aggregate, ninety-five percent (95%) of the total number of shares of Optima Stock issued and outstanding at the Effective Time, including any Dissenting Shares (the “Stock Conversion Number”), shall be converted into the Stock Consideration and the remaining outstanding shares of Optima Stock shall be converted into the Cash Consideration. Shares of Optima Stock as to which a holder of Optima Stock has elected to receive the Cash Consideration (including, pursuant to a Mixed Election) are referred to herein as “Cash Election Shares.” Shares of Optima Stock as to which a holder of Optima Stock has elected to receive the Stock Consideration (including, pursuant to a Mixed Election) are referred to herein as “Stock Election Shares.” Shares of Optima Stock as to which no election has been made (or as to which an Election Form is not returned properly completed) are referred to herein as“Non-Election Shares.” The aggregate number of Stock Election Shares is referred to herein as the “Stock Election Number.”

(b)    An election form and other appropriate and customary transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of such Certificates to the Exchange Agent), in such form as Optima and Cambridge shall mutually agree (“Election Form”), shall be mailed no more than forty (40) Business Days and no less than twenty (20) Business Days prior to the anticipated Effective Date or on such earlier date as Optima and Cambridge shall mutually agree (the “Mailing Date”) to each holder of record of Optima Stock as of five (5) Business Days prior to the Mailing Date (the “Election Form Record Date”). Each Election Form shall permit such holder, subject to the allocation and election procedures set forth in thisSection 2.07, (i) to elect to receive all cash with respect to each share of Optima Stock held by such holder, (ii) to elect to receive all Cambridge Stock with respect to each share of Optima Common Stock held by such holder, (iii) to elect to receive cash with respect to a part of such holder’s Optima Stock and Cambridge Stock with respect to the remaining part of such holder’s Optima Stock (a “Mixed Election”), or (iv) to indicate that such record holder has no preference as to the receipt of cash or Cambridge Stock for such shares. A holder of record of shares of Optima Stock who holds such shares as nominee, trustee or in another representative capacity may submit multiple Election Forms, provided that each such Election Form covers all the shares of Optima Stock held by such nominee, trustee or held in another representative capacity for a particular beneficial owner. Any shares of Optima Stock with respect to which the holder thereof shall not, as of the Election Deadline, have made an election by submission to the Exchange Agent of an effective, properly completed Election Form shall be deemedNon-Election Shares. All Dissenting Shares shall be deemed Cash Election Shares, and with respect to such shares the holders thereof shall in no event receive consideration comprised of Cambridge Stock, subject toSection 2.06; provided, however, that for purposes of making the proration calculations provided for in thisSection 2.07 only Dissenting Shares as existing at the Effective Time shall be deemed Cash Election Shares.

(c)    To be effective, a properly completed Election Form shall be submitted to the Exchange Agent on or before 5:00 p.m., Eastern time, on the twenty-fifth (25th) day following the Mailing Date (or such other time and

date as Optima and Cambridge may mutually agree) (the “Election Deadline”);provided, however, that the Election Deadline may not occur on or after the Closing Date. Optima shall make available such additional Election Forms as Cambridge may permit, to all Persons who become holders (or beneficial owners) of Optima Stock between the Election Form Record Date and the close of business on the Business Day prior to the Election Deadline. Optima shall provide to the Exchange Agent all information reasonably necessary for it to perform as specified herein. An election shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline. An Election Form shall be deemed properly completed only if accompanied by one or more Certificates (or customary affidavits and indemnification regarding the loss or destruction of such Certificates or the guaranteed delivery of such Certificates) representing all shares of Optima Stock covered by such Election Form, together with duly executed transmittal materials included with the Election Form. If an Optima shareholder either (i) does not submit a properly completed Election Form in a timely fashion or (ii) revokes its Election Form prior to the Election Deadline (without later submitting a properly completed Election Form prior to the Election Deadline), the shares of Optima Stock held by such shareholder shall be designated asNon-Election Shares. Any Election Form may be revoked or changed by the Person submitting such Election Form to the Exchange Agent by written notice to the Exchange Agent only if such notice of revocation or change is actually received by the Exchange Agent at or prior to the Election Deadline. Cambridge shall cause the Certificate or Certificates relating to any revoked Election Form to be promptly returned without charge to the Person submitting the Election Form to the Exchange Agent. Subject to the terms of this Agreement and of the Election Form, the Exchange Agent shall have discretion to determine when any election, modification or revocation is received and whether any such election, modification or revocation has been properly made.

(d)    If the Stock Election Number exceeds the Stock Conversion Number, then all Cash Election Shares and allNon-Election Shares shall be converted into the right to receive the Cash Consideration, and each holder of Stock Election Shares will be entitled to receive the Stock Consideration only with respect to that number of Stock Election Shares held by such holder (rounded to the nearest whole share) equal to the product obtained by multiplying (x) the number of Stock Election Shares held by such holder by (y) a fraction, the numerator of which is the Stock Conversion Number and the denominator of which is the Stock Election Number, with the remaining number of such holder’s Stock Election Shares being converted into the right to receive the Cash Consideration.

(e)    If the Stock Election Number is less than the Stock Conversion Number (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the “Shortfall Number”), then all Stock Election Shares shall be converted into the right to receive the Stock Consideration and theNon-Election Shares and Cash Election Shares shall be treated in the following manner:

(i)    if the Shortfall Number is less than or equal to the number ofNon-Election Shares, then all Cash Election Shares shall be converted into the right to receive the Cash Consideration and each holder ofNon-Election Shares shall receive the Stock Consideration in respect of that number ofNon-Election Shares held by such holder (rounded to the nearest whole share) equal to the product obtained by multiplying (x) the number ofNon-Election Shares held by such holder by (y) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number ofNon-Election Shares, with the remaining number of such holder’sNon-Election Shares being converted into the right to receive the Cash Consideration; or

(ii)    if the Shortfall Number exceeds the number ofNon-Election Shares, then allNon-Election Shares shall be converted into the right to receive the Stock Consideration and each holder of Cash Election Shares shall receive the Stock Consideration in respect of that number of Cash Election Shares held by such holder (rounded to the nearest whole share) equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) a fraction, the numerator of which is the amount by which (1) the Shortfall Number exceeds (2) the total number ofNon-Election Shares and the denominator of which is the total number of Cash Election Shares, with the remaining number of such holder’s Cash Election Shares being converted into the right to receive the Cash Consideration.

Section 2.08    2.04Exchange of Certificates; Payment of the Consideration.

(a) Until the six (6) month anniversary of the Effective Time, Cambridge shall make available on a timely basis or cause to be made available to the Exchange Agent the following: (i) cash in an amount sufficient to allow the Exchange Agent to make all payments that may be required by the Exchange Agent pursuant to thisArticle II, and (ii) certificates, or at Cambridge’s

option, evidence of shares in book entry form, representing the shares of Cambridge Stock, sufficient to pay the aggregate StockMerger Consideration required pursuant to thisArticle II, and (ii) an aggregate amount of cash sufficient to pay the estimated amount of cash to be paid in lieu of fractional shares of Cambridge Stock, each to be given to the holders of OptimaWellesley Stock in exchange for Certificates pursuant to thisArticle II. Upon such six (6) month anniversary, any such cash or certificates remaining in the possession of the Exchange Agent, together with any earnings in respect thereof, shall be delivered to Cambridge. Any holder of Certificates who has not theretofore exchanged his or her Certificates for the Merger Consideration pursuant to thisArticle II and any holder of aNon-Withholding Option who has not theretofore submitted a letter of transmittal shall thereafter be entitled to look exclusively to Cambridge, and only as a general creditor thereof, for the Merger Consideration, or Option Consideration, as applicable, to which he or she may be entitled upon exchange of such Certificates, or cancellation of Optima Options, as applicable, pursuant to thisArticle II. If outstanding Certificates are not surrendered, a holder of aNon-Withholding Option does not submit a letter of transmittal or the payment for the Certificates, or the cancelled Optima Option, as applicable, is not claimed prior to the date on which such payment would otherwise escheat to or become the property of any Governmental Authority, the unclaimed items shall, to the extent permitted by abandoned property and any other applicable law, become the property of Cambridge (and to the extent not in its possession shall be delivered to it), free and clear of all Liens of any Person previously entitled to such property. Neither the Exchange Agent nor any of the parties hereto shall be liable to any holder of OptimaWellesley Stock represented by any Certificate or to any holder of aNon-Withholding Option for any consideration paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Cambridge and the Exchange Agent shall be entitled to rely upon the stock transfer books of OptimaWellesley to establish the identity of those Persons entitled to receive the Merger Consideration, or Option Consideration, as applicable, which books shall be conclusive with respect thereto.

(b) The Exchange Agent or Cambridge shall be entitled to deduct and withhold from the Merger Consideration and the Option Consideration otherwise payable pursuant to this Agreement to any holder of Certificates, or Optima Options, as applicable, such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by the Exchange Agent or Cambridge such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Certificates in respect of which such deduction and withholding was made.

(c) Promptly after the Effective Time, but in no event later than five (5) Business Days thereafter, Cambridge shall cause the Exchange Agent to mail or deliver to each Person who was, immediately prior to the Effective Time, a holder of record of OptimaWellesley Stock or a holdernotice advising such holders of aNon-Withholding Optionthe effectiveness of the Merger, including a form of letter of transmittal (which shall specify that delivery shall be effected,in a form satisfactory to Cambridge and risk of loss and title to Certificates shall pass, only upon proper delivery of such Certificates to the Exchange Agent)Wellesley containing instructions for use in effecting the surrender of Certificates in exchange for the Merger Consideration which shall specify that delivery shall be effected, and risk of loss and title to Certificates or for paymentbook-entry shares (“Book-Entry Shares”) shall pass, only upon (i) with respect to shares evidenced by Certificates, proper delivery of such Certificates to the Exchange Agent, proper delivery of the Option ConsiderationCertificates and the transmittal materials, duly, completely and validly executed in accordance with the instructions thereto, and (ii) with respect toNon-Withholding Options. Book-Entry Shares, proper delivery of an “agent’s message” regarding the book-entry transfer of Book-Entry Shares (or such other evidence (if any) of the transfer as the Exchange Agent may reasonably request). Upon surrender to the Exchange Agent of a Certificate or Book-Entry Shares for cancellation together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such Certificate or Book-Entry Shares shall promptly be provided in exchange therefor, but in no event later than ten (10)five (5) Business Days after due surrender, a checkcertificate, or at the election of Cambridge, a statement reflecting shares issued in book-entry form, representing the amount of the CashMerger Consideration to which such holder is entitled pursuant to thisArticle II, plus a check for any amounts due pursuant toSection 2.052.03 above as well as a certificate representing the Stock Considerationand any dividends or other distributions to which such holder is entitled pursuant to thisArticle IISection 2.04(e), and the Certificate or Book-Entry Share so surrendered shall forthwith be canceled. No interest will accrue or be paid with respect to any property to be delivered upon surrender of Certificates.Certificates or Book-Entry Shares.

(d)    If any cash payment is to be made in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the Person requesting such exchange

shall pay any transfer or other taxes required by reason of the making of such payment of the Cash Consideration in a name other than that of the registered holder of the Certificate surrendered, or required for any other reason relating to such holder or requesting Person, or shall establish to the reasonable satisfaction of the Exchange Agent that such tax has been paid or is not payable. If any certificate representing shares of Cambridge Stock is to be issued in the name of other than the registered holder of the Certificate surrendered in exchange therefore, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the Person requesting such exchange

shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of a certificate representing shares of Cambridge Stock in a name other than that of the registered holder of the Certificate surrendered, or required for any other reason relating to such holder or requesting Person, or shall establish to the reasonable satisfaction of the Exchange Agent that such tax has been paid or is not payable.

(e) No dividends or other distributions with a record date after the Effective Time with respect to Cambridge Stock shall be paid to the holder of any unsurrendered Certificate or Book-Entry Shares until the holder thereof shall surrender such Certificate or Book-Entry Shares in accordance with thisArticle II. After the surrender of a Certificate or Book-Entry Shares in accordance with thisArticle II, the recordholder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of Cambridge Stock.

(f) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving BankCompany or the Exchange Agent, the posting by such Person of a bond in such reasonable amount as the Surviving BankCompany or the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Surviving BankCompany or the Exchange Agent shall, in exchange for such lost, stolen or destroyed Certificate, pay or cause to be paid the Merger Consideration deliverable in respect of the shares of OptimaWellesley Stock formerly represented by such Certificate pursuant to thisArticle II. In the event of a dispute with respect to ownership of any shares of OptimaWellesley Stock represented by any Certificate or Book-Entry Share, Cambridge and the Exchange Agent shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.

Section 2.09    2.05Anti-Dilution Provisions. In the event Cambridge or OptimaWellesley changes (or establishes a record date for changing) the number of, or provides for the exchange of, shares of Cambridge Stock or OptimaWellesley Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend, recapitalization, reclassification, or similar transaction with respect to the outstanding Cambridge Stock or OptimaWellesley Stock and the record date therefor shall be prior to the Effective Time, the Exchange Ratio shall be proportionately and appropriately adjusted;provided,however, that, for the avoidance of doubt, no such adjustment shall be made with regard to Cambridge Stock if (a) Cambridge issues additional shares of Cambridge Stock and receives consideration for such shares in a bona fide third party transaction, (b) Cambridge issues additional shares of Cambridge Stock under its Employee Stock Incentive Plans, or (c) Cambridge grants employee or director stock grants or similar equity awards or shares of Cambridge Stock upon the exercise or settlement thereof.

Section 2.10    2.06Reservation of Shares. Effective upon the date of this Agreement, Cambridge shall reserve for issuance a sufficient number of shares of the Cambridge Stock for the purpose of issuing shares of Cambridge Stock to OptimaWellesley shareholders in accordance with thisArticle II.

Section 2.11    2.07Listing of Additional Shares. Prior to the Effective Time, Cambridge shall notify NASDAQ of the additional shares of Cambridge Stock to be issued by Cambridge in exchange for the shares of OptimaWellesley Stock.

Section 2.12    2.08Treatment of Stock Options.

(a) Effective as of the Effective Time, each OptimaWellesley Option, whether vested or unvested, that is outstanding as of immediately prior to the Effective Time, shall be cancelled and automatically converted into the right to receive a cash payment from Wellesley equal to (i) the number of shares of OptimaWellesley Stock subject to such OptimaWellesley Option at the Effective Time, multiplied by (ii) the amount by which the Per Share Consideration exceeds the per share exercise price of such OptimaWellesley Option, (the “Option Consideration”), less applicable taxes and withholdings and without interest. Notwithstanding the foregoing, if the per share exercise price for an OptimaWellesley Option is equal to or in excess of the Per Share Consideration, such OptimaWellesley Option shall be cancelled at the

Effective Time in exchange for no consideration. For the avoidance of doubt, Cambridge shall not assume any OptimaWellesley Options.

(b) Prior to the Effective Time, OptimaWellesley shall take all actions that may be necessary or required (under any Optima Stock OptionWellesley Equity Plan, any applicable law, the applicable award agreements or otherwise) (i) to effectuate the provisions of thisSection 2.12, 2.08, (ii) to terminate each Optima Stock OptionWellesley Equity Plan as of the Effective Time without any further obligation or liability and (iii) to ensure that, from and after the Effective Time, holders of OptimaWellesley Options shall have no rights with respect to thereto other than those rights specifically provided inSection 2.12(a) 2.08(a).

(c)    Within ten days followingSection 2.09Treatment of Restricted Stock Awards. At the Effective Time, Cambridgeany vesting restrictions on each share of restricted stock outstanding immediately prior thereto (“Wellesley Restricted Stock”) pursuant to the Wellesley Equity Plans shall cause toautomatically lapse, and each share of Wellesley Restricted Stock shall be paid: (i) through Cambridge’s ortreated as an issued and outstanding share of Wellesley Stock for the Surviving Bank’s standard payroll practices, to each holderpurposes of an Optima Option (other than any Optima Option with respect to which Optima has no Tax withholding obligations (a“Non-Withholding Option”)) the consideration specified in Section 2.12(a), if any (subject to applicable taxes and withholding and without interest); and (ii) by the Exchange Agent, to each holder of aNon-Withholding Option who has submitted a letter of transmittal, the consideration specified in Section 2.12(a), if any (without interest).this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF OPTIMAWELLESLEY

Section 3.01    Making of Representations and Warranties.

(a)    As a material inducement to Cambridge and Cambridge Trust to enter into this Agreement and to consummate the transactions contemplated hereby, OptimaWellesley and Wellesley Bank hereby makesmake to Cambridge and Cambridge Trust the representations and warranties contained in thisArticle III,.

(b)    On provided, however, that Wellesley or priorWellesley Bank shall not be deemed to have breached a representation or warranty as a consequence of the date hereof, Optimaexistence of any fact, event or circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in this Article III, has deliveredhad or is reasonably likely to Cambridgehave, a Material Adverse Effect (disregarding for purposes of this proviso any materiality or Material Adverse Effect qualification or exception contained in any representation or warranty). Notwithstanding the Optima Disclosure Schedule listing, among other things, itemsimmediately preceding sentence, the disclosure of which is necessary or appropriate in relation to any or all of Optima’s representations and warranties contained in this Article III;provided, however(x) Section 3.04(a) and(b) shall be deemed untrue and incorrect if not true and correct except to a de minimis extent, (y) Section 3.02,3.05,3.06,3.07,3.08(b),3.14(a),(c) and(d),3.16, that (i) no such item is required toand3.28 shall be deemed untrue and incorrect if not true and correct in all material respects and (z) Section 3.10(a) shall be deemed untrue and incorrect if not true and correct in all respects.

Section 3.01Making of Representations and Warranties. Except as set forth onin the OptimaWellesley Disclosure Schedule or the Wellesley SEC Documents, each of Wellesley and Wellesley Bank hereby represents and warrants to Cambridge and Cambridge Trust that the statements contained in thisArticle III are correct as an exceptionof the date of this Agreement and will be correct as of the Closing Date, except as to aany representation or warranty if its absence is not reasonably likelythat specifically relates to result in the related representation or warranty being untrue or incorrect, and (ii) the mere inclusion of an item in the Optima Disclosure Scheduleearlier date, which only need be correct as an exception to a representation or warranty shall not be deemed an admission by Optima that such item represents a material exception or fact, event or circumstance or that such item would reasonably be expected to result in a Material Adverse Effect on Optima. Any disclosure made with respect to a section of Article III shall be deemed to qualify any other section of Article III specifically referenced or cross-referenced or that contains sufficient detail to enable a reasonable Person to recognize the relevance of such disclosure to such other sections.earlier date.

Section 3.02Organization, Standing and Authority of OptimaWellesley. OptimaWellesley is a New Hampshire-chartered bankMaryland corporation duly organized, validly existing and in good standing under the laws of the State of New Hampshire. Optima’s deposits are insured byMaryland, and is duly registered as a bank holding company under the FDICBHC Act. Wellesley has full corporate power and authority to carry on its business as now conducted. Wellesley is duly licensed or qualified to do business in the manner and to the fullest extent provided by applicable law, and all premiums and assessments required to be paid in connection therewith have been paid by Optima when due. No proceedings for the revocation or termination of such deposit insurance are pending or, to the

Knowledge of Optima, threatened. Optima is a nonmember bank and its primary federal bank regulator is the FDIC. Optima is a member in good standingStates of the FHLBUnited States and ownsforeign jurisdictions where its ownership or leasing of property or the requisite amountconduct of stock of the FHLB as set forth onOptima Disclosure Schedule 3.02.its business requires such qualification. The charter and bylaws of Optima,Wellesley, copies of which have been made available to Cambridge, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.

Section 3.03OptimaOrganization, Standing and Authority of Wellesley Bank. Wellesley Bank is a Massachusetts-chartered bank duly organized, validly existing and in good standing under the laws of the

Commonwealth of Massachusetts. Wellesley Bank’s deposits are insured by the FDIC and the Massachusetts Share Insurance Fund in the manner and to the fullest extent provided by applicable law, and all premiums and assessments required to be paid in connection therewith have been paid by Wellesley Bank when due. No proceedings for the revocation or termination of such deposit insurance are pending or, except as set forth inWellesley DisclosureSchedule 3.03, to the Knowledge of Wellesley Bank, threatened. Wellesley Bank is a nonmember bank and its primary federal bank regulator is the FDIC. Wellesley Bank is a member in good standing of the FHLB and owns the requisite amount of stock of the FHLB as set forth onWellesley DisclosureSchedule 3.03. The charter and bylaws of Wellesley Bank, copies of which have been made available to Cambridge, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.

Section 3.04Wellesley and Bank Capital Stock.

(a) The authorized capital stock of OptimaWellesley consists solely of 9,000,00014,000,000 shares of common stock, par value $1.00$0.01 per share, of which 2,177,2822,569,401 shares are outstanding as of the date hereof (“OptimaWellesley Stock”) and 1,000,000 shares of preferred stock, par value $1.00$0.01 per share, of which no shares are outstanding as of the date hereof. As of the date hereof, there are no shares of OptimaWellesley Stock held in treasury by Optima.Wellesley. The outstanding shares of OptimaWellesley Stock have been duly authorized and validly issued and are fully paid andnon-assessable. Except for the OptimaWellesley Options listed onOptimaWellesley Disclosure Schedule 3.03(b)3.04(c),, OptimaWellesley does not have any Rights issued or outstanding with respect to OptimaWellesley Stock and OptimaWellesley does not have any commitment to authorize, issue or sell any OptimaWellesley Stock or Rights.

(b) The authorized capital stock of Wellesley Bank consists solely of 1,000,000 shares of common stock, par value of $1.00 per share, of which 100 shares are outstanding as of the date hereof (“Wellesley Bank Stock”) and 250,000 shares of preferred stock, par value $1.00 per share, of which no shares are outstanding as of the date hereof. The outstanding shares of Wellesley Bank Stock have been duly authorized and validly issued, are fully paid andnon-assessable, are owned by Wellesley free and clear of all clear of all Liens (except as provided under 12 U.S.C. § 55 or any comparable provision of applicable state law) and were not issued in violation of any preemptive rights. Wellesley Bank does not have any Rights issued or outstanding with respect to Wellesley Bank Stock and Wellesley Bank does not have any commitment to authorize, issue or sell any Wellesley Bank Stock or Rights.

(b)    (c)OptimaWellesley Disclosure Schedule 3.03(b)3.04(c)(i), contains a list setting forth, as of the date of this Agreement, with respect to each outstanding OptimaWellesley Option, (i) the name of the holder of such OptimaWellesley Option, (ii) whether the holder is a current or former employee, director or other individual service provider of OptimaWellesley and any of its Subsidiaries, (iii) the number of shares of OptimaWellesley Stock covered by such OptimaWellesley Option, (iv) the exercise price per share with respect to such OptimaWellesley Option, (v) the date of grant of such OptimaWellesley Option, (vi) the date of expiration of such OptimaWellesley Option, (vii) the vesting schedule applicable to such OptimaWellesley Option, including whether such OptimaWellesley Option is subject to accelerated vesting in connection with the consummation of the transactions contemplated hereby, (viii) whether such OptimaWellesley Option is an incentive stock option or a nonqualified stock option, and (ix) the applicable Optima Stock OptionWellesley Equity Plan under which such OptimaWellesley Option was granted. Upon issuance in accordance with the terms of the applicable Optima Stock OptionWellesley Equity Plans and award agreements, the shares of OptimaWellesley Stock issued pursuant to the OptimaWellesley Options have been and shall be issued in compliance with all applicable laws.Wellesley Disclosure Schedule 3.04(c)(ii) contains a list setting forth, as of the date of this Agreement, with respect to each outstanding share of Wellesley Restricted Stock, (i) the name of the holder of such Wellesley Restricted Stock, (ii) whether the holder is a current or former employee, director or other individual service provider of Wellesley and any of its Subsidiaries, (iii) the number of shares of Wellesley Stock covered by such Wellesley Restricted Stock award, (iv) the date of grant of such Wellesley Restricted Stock award, (v) the vesting schedule applicable to such Wellesley Restricted Stock, (vi) the applicable Wellesley Equity Plan under which such Wellesley Restricted Stock was granted.

Section 3.04    3.05Subsidiaries. OptimaExcept as set forth onWellesley DisclosureSchedule 3.05, Wellesley does not, directly or indirectly, own or control any Affiliate. Except as disclosed onOptimaWellesley Disclosure

Schedule 3.043.05, OptimaWellesley does not have any equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity, except as acquired through settlement of indebtedness, foreclosure, the exercise of creditors’ remedies or in a fiduciary capacity.capacity, and the business carried on by Wellesley has not been conducted through any other direct or indirect Subsidiary or Affiliate of Wellesley. No such equity investment identified inOptimaWellesley DisclosureSchedule 3.043.05 is prohibited by applicable federal or statestates laws and regulations.

Section 3.05    3.06Corporate Power; Minute Books. OptimaEach of Wellesley and Wellesley Bank has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and Optimaeach of Wellesley and Wellesley Bank has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, subject to receipt of all necessary approvals of Governmental Authorities and the approval of Optima’sWellesley’s shareholders of this Agreement. Neither Wellesley nor Wellesley Bank conducts any trust business. The minute books of OptimaWellesley contain true, complete and accurate records of all meetings and other corporate actions held or taken by shareholders of OptimaWellesley and the OptimaWellesley Board (including committees of the OptimaWellesley Board). The minute books of Wellesley Bank contain true, complete and accurate records of all meetings and other corporate actions held or taken by shareholders of Wellesley Bank and Wellesley Bank Board (including committees of Wellesley Bank Board).

Section 3.06    3.07Execution and Delivery. Subject to the approval of this Agreement by the shareholders of Optima,Wellesley, this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of OptimaWellesley, the Wellesley Board, Wellesley Bank and the OptimaWellesley Bank Board on or prior to the date hereof. The OptimaWellesley Board has directed that this Agreement be submitted to Optima’sWellesley’s shareholders for approval at a meeting of such shareholders and, except for the approval and adoption of this Agreement by the requisite affirmative vote of the holders of the outstanding shares of OptimaWellesley Stock entitled to vote thereon, no other vote of the shareholders of OptimaWellesley is required by law, the charter of Optima, theor bylaws of OptimaWellesley or otherwise to approve this Agreement and the

transactions contemplated hereby. Optima hasWellesley and Wellesley Bank have duly executed and delivered this Agreement and, assuming due authorization, execution and delivery by Cambridge, this Agreement is a valid and legally binding obligation of Optima,Wellesley and Wellesley Bank, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

Section 3.07    3.08Regulatory Approvals; No Defaults.

(a) SubjectNo consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by Wellesley or any of its Subsidiaries in connection with the receiptexecution, delivery or performance by Wellesley or Wellesley Bank of all Regulatory Approvals,this Agreement or to consummate the requiredtransactions contemplated hereby, except for (i) filings under federalof applications, notices or waiver requests, and state securities lawsconsents, approvals or waivers described inSection 4.08, and (ii) the approval of this Agreement by the requisite affirmative vote of the Optima Shares,holders of the outstanding shares of Wellesley Stock. As of the date hereof, Wellesley has no Knowledge of any reason why the approvals set forth above and referred to inSection 6.01(a) will not be received in a timely manner.

(b) Subject to receipt, or the making, of the consents, approvals, waivers and filings referred to in the preceding paragraph, and the expiration of related waiting periods, the execution, delivery and performance of this Agreement by Optima,Wellesley and Wellesley Bank, as applicable, and the consummation of the transactions contemplated hereby do not and will not (i) constitute a breach or violation of, or a default under, the charter or bylaws of Wellesley (or similar governing documents) or similar governing documents of Optima,any of its Subsidiaries, (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Optima,Wellesley or any of its Subsidiaries, or any of its properties or assets or (iii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or

lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, except as set forth inWellesley Disclosure Schedule 3.08(b)accelerate the performance required by, or result in the creation of any Lien upon any of the properties or assets of OptimaWellesley or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, contract, agreement or other instrument or obligation to which OptimaWellesley or any of its Subsidiaries is a party, or by which it or any of its properties or assets may be bound or affected

(b)    As of the date hereof, Optima has no Knowledge of any reason relating to Optima (including, without limitation, compliance with the Community Reinvestment Act of 1977, as amended (the “CRA”), or the USA Patriot Act) why any of the Regulatory Approvals shall not be received from the applicable Governmental Authorities having jurisdiction over the transactions contemplated by this Agreement.affected.

Section 3.08    3.09Financial StatementsStatements; SEC Documents; and Financial Controls and Procedures.

(a) OptimaWellesley has previously made available to Cambridge copies of the balance sheet of OptimaWellesley as of December 31 for the fiscal years 20172018 and 2016,2017, and the related statements of income, shareholders’ equity and cash flows for the fiscal years 2018, 2017 2016 and 2015,2016, in each case accompanied by the audit report of Baker NewmanWolf & Noyes, LLC,Company, P.C., the independent registered public accounting firm of OptimaWellesley (the “Optima“Wellesley Financial Statements”). The OptimaWellesley Financial Statements (including the related notes, where applicable) fairly present (subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount), the results of the operations and financial position of OptimaWellesley and its consolidated Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable) complies with applicable accounting requirements; and each of such statements (including the related notes, where applicable) has been prepared in accordance with GAAP consistently applied during the periods involved, except as indicated in the notes thereto. The books and records of OptimaWellesley have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Baker NewmanWolf & Noyes, LLCCompany, P.C. has not resigned or been dismissed as independent public accountants of OptimaWellesley as a result of or in connection with any disagreements with OptimaWellesley on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

(b) Optima is not now, nor has it ever been,Wellesley’s Annual Report on Form 10-K, as amended through the date of this Agreement, for the fiscal year ended December 31, 2018 (the “Wellesley 2018 Form 10-K”), and all other reports, registration statements, definitive proxy statements or information statements required to filebe filed or furnished by Wellesley or any of its Subsidiaries subsequent to January 1, 2018, under the Securities Act, or under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act (collectively, the “Wellesley SEC Documents”), with the Securities and Exchange Commission (the “SEC”), and all of the Wellesley SEC Documents filed with the SEC after the date of this Agreement, in the form filed or to be filed, (i) complied or will comply as to form in all material respects with the applicable requirements under the Securities Act or the Exchange Act, as the case may be, and (ii) did not and will not contain any periodicuntrue statement of a material fact or other reports pursuantomit to Section 13state a material fact required to be stated therein or Section 15(d)necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Except for those liabilities that are fully reflected or reserved against in the most recent audited consolidated balance sheet of Wellesley and its Subsidiaries contained in Wellesley 2018 Form 10-K and, except for liabilities reflected in Wellesley SEC Documents filed prior to the date of this Agreement or incurred in the ordinary course of business consistent with past practices or in connection with this Agreement, since December 31, 2018, neither Wellesley nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on its consolidated balance sheet or in the notes thereto.

(c) Wellesley and each of its Subsidiaries, officers and directors are in compliance with, and have complied in all material respects, with (1) the applicable provisions of Sarbanes-Oxley and the related rules and regulations promulgated under such act and the Exchange Act and (2) the applicable listing and corporate governance rules and regulations of NASDAQ. Wellesley (i) has established and maintained disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule13a-15 under the Exchange Act) as required by Rule13a-15 under the Exchange Act, and (ii) has disclosed based on its most recent evaluations, to its outside auditors and the audit committee of the Wellesley Board (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule13a-15(f) of the Exchange Act.Act) which are reasonably likely to adversely

affect Wellesley’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Wellesley’s internal control over financial reporting.

Section 3.09    3.10Absence of Certain Changes or Events.

(a) Since September 30, 2018,2019, there has been no change or development or combination of changes or developments which, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on Optima.Wellesley.

(b) SinceExcept as set forth inWellesley DisclosureSchedule 3.10, since September 30, 2018, Optima2019, each of Wellesley and its Subsidiaries has carried on its business only in the ordinary and usual course of business consistent with its past practices (except as disclosed to Cambridge and except for actions in connection with the transactions contemplated by this Agreement).

(c) Except as set forth inOptimaWellesley DisclosureSchedule 3.093.10, since December 31, 2017, Optima2018, none of Wellesley or any of its Subsidiaries has not (i) except in the ordinary course of business consistent with past practice, increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any employee, director or other individual service provider from the amount thereof in effect as of December 31, 2017,2018, granted any severance, termination pay, bonus, retention bonus, or change in control benefits, entered into any contract to make or grant any severance, termination pay, bonus, retention bonus, or change in control benefits, or paid any bonus or retention bonus, (ii) except as disclosed in Wellesley SEC Documents, declared, set aside or paid any dividend or other distribution (whether in cash, stock or property) with respect to any of Optima’sWellesley’s capital stock, (iii) effected or authorized any split, combination or reclassification of any of Optima’sWellesley’s capital stock or any issuance or issued any other securities in respect of, in lieu of or in substitution for shares of Optima’sWellesley’s capital stock, (iv) except as disclosed in Wellesley SEC Documents, changed any accounting methods (or underlying assumptions), principles or practices of OptimaWellesley affecting its assets, liabilities or business, including without limitation, any reserving, renewal or residual method, practice or policy, (v) made any tax election by OptimaWellesley or any settlement or compromise of any income tax liability by Optima,Wellesley, (vi) made any material change in Optima’sWellesley’s policies and procedures in connection with underwriting standards, origination, purchase and sale procedures or hedging activities with respect to any Loans, (vii) suffered any strike, work stoppage, slow-down, or other labor disturbance, (viii) been a party to a collective bargaining agreement, contract or other agreement or understanding with a labor union or organization, (ix) had any union organizing activities or (x) made any agreement or commitment (contingent or otherwise) to do any of the foregoing.

Section 3.10    3.11Financial Controls and Procedures. During the periods covered by the OptimaWellesley Financial Statements, Optimaeach of Wellesley and its Subsidiaries has had in place internal controls over financial reporting which are designed and maintained to ensure that (a) transactions are executed in accordance with management’s general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (c) access to assets is permitted only in accordance with management’s general or specific authorization and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Optima’sNone of Wellesley’s or any of its Subsidiaries’ records, systems, controls, data or information are recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of OptimaWellesley or its accountants.accountants or agents.

Section 3.11    3.12Regulatory Matters.

(a) OptimaEach of Wellesley and its Subsidiaries has timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file since December 31, 20152016 with any Governmental Authority, and has paid all fees and assessments due and payable in connection

therewith. Except for normal examinations conducted by any Governmental Authority in the regular course of the business of Optima,Wellesley, and except as set forth inOptimaWellesley DisclosureSchedule 3.113.12, no Governmental Authority has initiated any proceeding, or to the Knowledge of Optima,Wellesley, investigation into the business or operations of Optima,Wellesley or any of its Subsidiaries, since December 31, 2015. Optima2016. Other than as set forth inWellesley DisclosureSchedule 3.12, there is “well capitalized”no unresolved violation, criticism, or exception by any Governmental Authority with respect to any report or statement relating to any examinations of Wellesley. Wellesley is “well-capitalized” as defined in applicable laws and regulations, and OptimaWellesley has a CRACommunity Reinvestment Act of 1977, as amended (the “Community Reinvestment Act”), rating of “satisfactory” or better.

(b) Other than as set forth inOptimaWellesley DisclosureSchedule 3.113.12, Optimasince December 31, 2016, Wellesley has timely filed with the SEC and NASDAQ all documents required by the Securities Act and the Exchange Act, and such documents, as the same may have been amended, complied, at the time filed with the SEC, in all material respects with the Securities Act and the Exchange Act.

(c) Other than as set forth inWellesley DisclosureSchedule 3.12, neither Wellesley nor Wellesley Bank, nor any of their properties is not a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter (each a “Regulatory Order”) from, any Governmental Authority charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits or the supervision or regulation of it. Optima hasWellesley and Wellesley Bank have not been advised by, or has any Knowledge of facts which could give rise to an advisory notice by, any Governmental Authority that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any Regulatory Order.

Section 3.12    3.13Legal Proceedings; Regulatory Action.

(a) Other than as set forth inOptimaWellesley DisclosureSchedule 3.123.13, (i) there are no pending or, to Optima’sWellesley’s Knowledge, threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Optima.Wellesley or any of its Subsidiaries and (ii) to Wellesley’s Knowledge, there are no facts which would reasonably be expected to give rise to such litigation, claim, suit, investigation or other proceeding.

(b) OptimaNeither Wellesley nor Wellesley Bank is not a party to any, nor are there any pending or, to Optima’sWellesley’s Knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against OptimaWellesley or Wellesley Bank in which, to the Knowledge of Optima,Wellesley, there is a reasonable probability of any material recovery against or other Material Adverse Effect on OptimaWellesley or which challenges the validity or propriety of the transactions contemplated by this Agreement.

(c) There is no injunction, order, judgment or decree imposed upon Optima,Wellesley or any of its Subsidiaries, or their respective assets, and none of OptimaWellesley or any of its Subsidiaries has been advised of, or is aware of, the threat of any such action.

(d) OptimaNone of Wellesley or any of its Subsidiaries is a party to or subject to any assistance agreement, board resolution, order, decree, supervisory agreement, memorandum of understanding, condition or similar arrangement with, or a commitment letter or similar submission to, any Governmental Authority charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits (including, without limitation, the MDOB, the FRB and the FDIC) or the supervision or regulation of Wellesley or Wellesley Bank. None of Wellesley or any of its Subsidiaries has not been subject to any order or directive by, or been ordered to pay any civil money penalty by, or has been since January 1, 2015,2017, a recipient of any supervisory letter from, or since January 1, 2015,2017, has adopted any policies, procedures or board resolutions at the request or suggestion of, any Governmental Authority that currently regulates in any material respect the conduct of its business or that in any manner relates to its capital adequacy, its ability to pay dividends, its credit

or risk management policies, its management or its business, other than those of general application that apply to similarly-situated bankbanks or financial holding companies or their subsidiaries.

(e) Neither Wellesley nor Wellesley Bank has been advised by a Governmental Authority that it will issue, or has Knowledge of any facts which would reasonably be expected to give rise to the issuance by any Governmental Authority or has Knowledge that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting), any such order, decree, agreement, board resolution, memorandum of understanding, supervisory letter, commitment letter, condition or similar submission.

Section 3.13    3.14Compliance with Laws.

(a) OptimaEach of Wellesley and its Subsidiaries is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, (i) applicable federal and state banking laws and regulations, (ii) state usury laws, the Truth in LendingInvestment Company Act the Real Estate Settlement Procedures Act, the Consumer Credit Protection Act,of 1940, as amended, the Equal Credit Opportunity Act, the Fair Credit Reporting Act,as amended, the Fair Housing Act, as amended, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Homeowners Ownership and Equity ProtectionBank Secrecy Act of 1970, as amended, the Fair Debt Collection PracticesUSA PATRIOT Act, and all other federal, state, localapplicable fair lending and foreignfair housing laws regulating lending (together, the “Finance Laws”), and (iii) all applicable origination, servicing and collection practices with respector other laws relating to any loan or credit extension by such entity;discrimination;

(b) OptimaEach of Wellesley and its Subsidiaries has all permits, licenses, authorizations, orders and approvals of, and have made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to Optima’sWellesley’s Knowledge, no suspension or cancellation of any of them is threatened; and

(c) Other than as set forth inOptimaWellesley DisclosureSchedule 3.133.14, Optimanone of Wellesley or any Subsidiary has not received, since January 1, 2015,2017, any notification or communication from any Governmental Authority (i) asserting that it is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces or (ii) threatening to revoke any license, franchise, permit or governmental authorization (nor, to Optima’sWellesley’s Knowledge, do any grounds for any of the foregoing exist).; and

(d) Since January 1, 2017, Wellesley has conducted any finance activities (including, without limitation, mortgage banking and mortgage lending activities and consumer finance activities) in all material respects in compliance with all applicable statutes and regulations regulating the business of consumer lending, including, without limitation, state usury laws, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Homeowners Ownership and Equity Protection Act, the Fair Debt Collection Practices Act and other federal, state, local and foreign laws regulating lending (“Finance Laws”), and with all applicable origination, servicing and collection practices with respect to any loan or credit extension by such entity. In addition, there is no pending or, to the Knowledge of Wellesley, threatened charge by any Governmental Authority that Wellesley has violated, nor any pending or, to Wellesley’s Knowledge, threatened investigation by any Governmental Authority with respect to possible violations of, any applicable Finance Laws.

Section 3.14    3.15Material Contracts; Defaults.

(a) Other than as set forth inOptimaWellesley DisclosureSchedule 3.143.15, Optima or as filed with Wellesley SEC Documents, none of Wellesley or any of its Subsidiaries is not a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral): (i) with respect to the employment or service of any current or former employees, or directors of Wellesley or other individual service

providersany of Optima;its Subsidiaries; (ii) which would entitle any current or former employee, director, other individual service provider or agent of OptimaWellesley or any of its Subsidiaries to indemnification from OptimaWellesley or such Subsidiaries; (iii) any agreement,

arrangement, or commitment (whether written or oral) which, upon the consummation of the transactions contemplated by this Agreement would result in any payment (whether of change in control, bonus, retention bonus, severance pay or otherwise) becoming due from OptimaWellesley or any of its Subsidiaries to any employee, director, or other individual service provider thereof; (iv) which is a consulting agreement (including data processing, software programming and licensing contracts) not terminable on sixty (60) days or less notice and involving the payment of more than $25,000 per annum; (v) any agreement, arrangement, or commitment that is material to the financial condition, results of operations or business of Optima;Wellesley or any of its Subsidiaries; or (vi) which materially restricts the conduct of any business by Optima. OptimaWellesley. Wellesley has previously delivered or made available to Cambridge true, complete and correct copies of each such document. Each contract, arrangement, commitment or understanding of the type of described in thisSection 3.14(a)3.15(a), whether or not set forth onOptimaWellesley DisclosureSchedule 3.143.15 is referred to herein as a “Material Contract.”

(b) To its Knowledge, Optimanone of Wellesley or any of its Subsidiaries is not in default under any material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its assets, business, or operations receives benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. No power of attorney or similar authorization given directly or indirectly by OptimaWellesley or any of its Subsidiaries is currently outstanding.

Section 3.15    3.16Brokers. Neither OptimaWellesley nor any of its Subsidiaries nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with any of the transactions contemplated by this Agreement, except that OptimaWellesley has engaged, and will pay a fee or commission to, Sandler O’Neill & Partners, L.P. A true, complete and correct copy of the engagement letter with Sandler O’Neill & Partners, L.P. has been provided to Cambridge.

Section 3.16    3.17Employee Benefit Plans.

(a) All benefit and compensation plans, contracts, policies or arrangements maintained, sponsored or contributed to by Wellesley or Wellesley Bank covering current or former employees of OptimaWellesley or Wellesley Bank (the “Optima“Wellesley Employees”) and current or former directors and other individual service providers of OptimaWellesley or Wellesley Bank or the dependents or beneficiaries of any of them including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of ERISA, and deferred compensation, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans (the “Optima“Wellesley Benefit Plans”), are identified inOptimaWellesley Disclosure Schedule 3.16(a)3.17(a). True and complete copies of all OptimaWellesley Benefit Plans including, but not limited to, any trust instruments and insurance contracts forming a part of any OptimaWellesley Benefit Plans and all amendments thereto, have been provided to Cambridge.

(b) All OptimaWellesley Benefit Plans covering OptimaWellesley Employees, to the extent subject to ERISA, are in substantial compliance with ERISA in all material respects.ERISA. Each OptimaWellesley Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (an “Optima(a “Wellesley Pension Plan”) and which is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the IRS, and to the Knowledge of Optima, nothing has occurred that would reasonably be expectedWellesley, there are no circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such OptimaWellesley Pension Plan under Section 401(a) of the Code. There is no pending or, to Optima’sWellesley’s Knowledge, threatened litigation relating to the OptimaWellesley Benefit Plans. OptimaWellesley has not engaged in a transaction with respect to any OptimaWellesley Benefit Plan or OptimaWellesley Pension Plan that, assuming the taxable period of such transaction expired as of the date hereof, wouldcould subject OptimaWellesley to a material tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

(c) No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by Optima or any Optima ERISA Affiliate (as defined below)Wellesley with respect to any ongoing, frozen or terminated “single employer plan,” within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by Optima,Wellesley or Wellesley Bank, or the single-employer plan of any entity which is considered one employer with OptimaWellesley or Wellesley Bank under

Section 4001 of ERISA or Section 414 of the Code (an “Optima(a “Wellesley ERISA Affiliate”). OptimaWellesley has not incurred, and

does not expect to incur, any withdrawal liability with respect to a multiemployer plan under Subtitle E of Title IV of ERISA (regardless of whether based on contributions of an OptimaWellesley ERISA Affiliate). No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the30-day reporting requirement has not been waived, or a safe harbor is not available, has been required to be filed for any OptimaWellesley Pension Plan or by any OptimaWellesley ERISA Affiliate within the 12 month period ending on the date hereof or will be required to be filed in connection with the transactions contemplated by this Agreement. Neither Optima nor any Optima ERISA Affiliate has maintained an “employee stock ownership plan,” as defined in Section 4975(e)(7) of the Code or an Optima Benefit Plan that otherwise invests in “employer securities” as defined in Section 409(l) of the Code.

(d) All contributions, payments, and other obligations required to be made under the terms of any OptimaWellesley Benefit Plan or an agreement with any OptimaWellesley Employee have been timely made or have been reflected on the financial statements of Optima.Wellesley. No OptimaWellesley Pension Plan or single-employer plan of an Optimaa Wellesley ERISA Affiliate has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and no OptimaWellesley ERISA Affiliate has an outstanding funding waiver. OptimaNeither Wellesley nor Wellesley Bank has not provided, and is not required to provide, security to any OptimaWellesley Pension Plan or to any single-employer plan of an OptimaWellesley ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

(e) Other than as identified inOptimaWellesley Disclosure Schedule 3.16(e)3.17(e), Optimaneither Wellesley nor Wellesley Bank has noany obligations for retiree health and life benefits under any OptimaWellesley Benefit Plan, other than coverage as may be required under Section 4980B of the Code or Part 6 of Title I of ERISA, or under the continuation of coverage provisions of the applicable laws of any state or locality. OptimaWellesley or Wellesley Bank may amend or terminate any such OptimaWellesley Benefit Plan at any time without incurring any liability thereunder.

(f) Other than as set forth inOptimaWellesley Disclosure Schedule 3.16(f)3.17(f), the execution of this Agreement, shareholder approval of this Agreement or consummation of any of the transactions contemplated by this Agreement will not (i) entitle any OptimaWellesley Employees to severance pay or any increase in severance pay upon any termination of employment after the date hereof, (ii) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the OptimaWellesley Benefit Plans, (iii) result in any breach or violation of, or a default under, any of the Wellesley Benefit Plans, (iv) result in any payment that would be a “parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code, without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future, or (v) limit or restrict the right of Optima,Wellesley or Wellesley Bank, or after the consummation of the transactions contemplated hereby, Cambridge, the Surviving Company or the Surviving Bank, to merge, amend, or terminate any of the OptimaWellesley Benefit Plans, or (vi) result in payments that would not be deductible under Section 162(m) of the Code.Wellesley Disclosure Schedule 3.17(f) contains a schedule showing the present value of the monetary amounts payable as of the date specified in such schedule, whether individually or in the aggregate (including good faith estimates of all amounts not subject to precise quantification as of the date of this Agreement), under any employment,change-in-control, severance or similar contract, plan or arrangement with or which covers any present or former director, officer or employee of Wellesley or Wellesley Bank who may be entitled to any such amount and identifying the types and estimated amounts of thein-kind benefits due under any Wellesley Benefit Plans (other than a plan qualified under Section 401(a) of the Code) for each such person, specifying the assumptions in such schedule together with such detail as is needed to ensure that no such payment or benefit would result in a parachute payment to a disqualified individual within the meaning of Section 280G of the Code.

(g) Each OptimaWellesley Benefit Plan that is a “nonqualified” deferred compensation plan (as defined for purposes ofsubject to Section 409A(d)(1)409A of the Code)Code and any deferral elections thereunder are in documentary compliance with, and have been maintained and operated in compliance with Section 409A of the Code and the regulations thereunder.thereunder, to the extent applicable.

(h) Each OptimaWellesley Option (i) was granted in compliance with all applicable laws and all of the terms and conditions of the applicable plan pursuant to which it was issued, (ii) has an exercise price per share equal to or greater than the fair market value of a share of OptimaWellesley Stock on the date of such grant, (iii) has a grant date identical to

that is no earlier than the date on which the OptimaWellesley Board or the Optima’sWellesley’s compensation committee actually awarded it, (iv) is exempt from the Section 409A of the Code, and (v) qualifies for the tax and accounting treatment afforded to such award in the OptimaWellesley Tax Returns and the OptimaWellesley Financial Statements, respectively.

Section 3.17    3.18Labor Matters. OptimaNone of Wellesley or any of its Subsidiaries is not a party to or bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is OptimaWellesley or any of its Subsidiaries the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the

National Labor Relations Act, as amended) or seeking to compel OptimaWellesley or any of its Subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to Optima’sWellesley’s Knowledge, threatened, nor is OptimaWellesley or any of its Subsidiaries aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity.

Section 3.18    3.19Environmental Matters.

(a) EachExcept as set forth inWellesley Disclosure Schedule 3.19(a), each property owned, leased or operated by Optima is,Wellesley and hasits Subsidiaries are, and have been, in material compliance with all Environmental Laws. Optima is not awareNeither Wellesley nor any of its Subsidiaries has Knowledge of, nor has OptimaWellesley or any of its Subsidiaries received notice of, any past, present, or future conditions, events, activities, practices or incidents that may interfere with or prevent the material compliance of OptimaWellesley or Wellesley Bank with all Environmental Laws.

(b) Optima hasWellesley and its Subsidiaries have obtained all material permits, licenses and authorizations that are required for its operations under all Environmental Laws.

(c) No Hazardous Substance exists on, about or within any of the owned real properties, nor to Optima’sWellesley’s Knowledge hashave any Hazardous Substance previously existed on, about or within or been used, generated, stored, transported, disposed of, on or released from any of its properties. The use that OptimaWellesley or any of its Subsidiaries makes and intends to make of any of its properties shall not result in the use, generation, storage, transportation, accumulation, disposal or release of any Hazardous MaterialSubstance on, in or from any of those properties.

(d) There is no action, suit, proceeding, investigation, or inquiry before any court, administrative agency or other governmental authority pending or to Optima’sWellesley’s Knowledge threatened against OptimaWellesley or Wellesley Bank relating in any way to any Environmental Law. Optima does not haveNone of Wellesley or any of its Subsidiaries has a liability for remedial action under any Environmental Law. OptimaNone of Wellesley or any of its Subsidiaries has not received any request for information by any governmental authority with respect to the condition, use or otheroperation of any of its owned real properties or Wellesley Loan Properties nor has Wellesley or any of its Subsidiaries received any notice of any kind from any governmental authority or other person with respect to any violation of or claimed or potential liability of any kind under any Environmental Law with respect to any of theits owned real properties or OptimaWellesley Loan Property.Properties.

Section 3.19    3.20Tax Matters. Except as set forth in on Optima Disclosure Schedule 3.19:

(a) Optima hasWellesley and its Subsidiaries have filed all income and other material Tax Returns that they were required to file under applicable laws and regulations, other than Tax Returns that are not yet due or for which a request for extension was filed. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable laws and regulations. All Taxes due and owing by OptimaWellesley and its Subsidiaries (whether or not shown on any Tax Return) have been paid other than Taxes that have been reserved or accrued on the balance sheet of OptimaWellesley or such Subsidiary is contesting in good faith. OptimaNone of Wellesley or any of its Subsidiaries is not the beneficiary of any extension of time within which to file any Tax Return.Return, and other than as set forth onWellesley DisclosureSchedule 3.20, neither Wellesley nor any its

Subsidiaries currently has any open tax years. No claim has ever been made by an authority in a jurisdiction where OptimaWellesley or any of its Subsidiaries does not file material Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Optima.Wellesley or any Subsidiary.

(b) OptimaEach of Wellesley and its Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party.

(c) No foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are being conducted or to the Knowledge of OptimaWellesley are pending with respect to Optima. OptimaWellesley or any of its Subsidiaries. None of Wellesley or any of its Subsidiaries has not received from any foreign, federal, state, or local taxing authority (including jurisdictions where OptimaWellesley or any Subsidiary has not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against Optima.Wellesley or any of its Subsidiaries.

(d) OptimaWellesley has provided Cambridge with true and complete copies of the United States federal, state, local, and foreign income Tax Returns filed with respect to OptimaWellesley and its Subsidiaries for taxable periods ended December 31,

2018, 2017 2016 and 2015. Optima2016. Wellesley has delivered to Cambridge correct and complete copies of all statements of deficiencies assessed against or agreed to by OptimaWellesley or any of its Subsidiaries filed for the years ended December 31, 2018, 2017 2016 and 2015. Optima2016. Each of Wellesley and its Subsidiaries has timely and properly taken such actions in response to and in compliance with notices OptimaWellesley or any Subsidiary has received from the IRS in respect of information reporting and backup and nonresident withholding as are required by law.

(e) OptimaNone of Wellesley or any of its Subsidiaries has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(f) OptimaNone of Wellesley or any of its Subsidiaries has not been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). OptimaEach of Wellesley and its Subsidiaries has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662. OptimaExcept as set for inWellesley DisclosureSchedule 3.20, none of Wellesley or any of its Subsidiaries is not a party to or bound by any Tax allocation or sharing agreement. OptimaNone of Wellesley or any of its Subsidiaries (i) has not been a member of anany consolidated, affiliated or unitary group filing a consolidated federal incomeof corporations for any Tax Return,purposes, and (ii) has any liability for the Taxes of any individual, bank, corporation, partnership, association, joint stock company, business trust, limited liability company, or unincorporated organization (other than Optima)Wellesley or such Subsidiary) under Reg.Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(g) The unpaid Taxes of OptimaWellesley and its Subsidiaries (i) did not, as of the end of the most recent period covered by Optima’sWellesley’s or such Subsidiary’s call reports filed on or prior to the date hereof, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the financial statements included in Optima’sWellesley’s or such Subsidiary’s call reports filed on or prior to the date hereof (rather than in any notes thereto), and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of OptimaWellesley and its Subsidiaries in filing its Tax Returns. Since the end of the most recent period covered by Optima’sWellesley’s or such Subsidiary’s call reports filed prior to the date hereof, Optimanone of Wellesley or any of its Subsidiaries has not incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.

(h) OptimaNone of Wellesley or any of its Subsidiaries shall not be required to include any material item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after

the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) intercompany transactions or any excess loss account described in Treasury Regulations under Code Section 1502 (or any corresponding or similar provision of state, local or foreign income Tax law); (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date.

(i) OptimaNone of Wellesley or any of its Subsidiaries has not distributed stock of another Person or had its stock distributed by another Person in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.

(j) OptimaNone of Wellesley or any of its Subsidiaries has not participated in a listed transaction within the meaning of Reg.Section 1.6011-4 (or any predecessor provision) and OptimaWellesley has not been notified of, or to Optima’sWellesley’s Knowledge has participated in, a transaction that is described as a “reportable transaction” within the meaning of Reg.Section 1.6011-4(b)(1).

(k) None of Wellesley or any of its Subsidiaries is subject to any private letter ruling of the IRS or comparable rulings of any Governmental Authority.

(l) None of Wellesley or any of its Subsidiaries has, or to Wellesley’s Knowledge has ever had, a permanent establishment in any country other than the United States, or has not engaged in a trade or business in any country other than the United States that subjected it to tax in such country.

Section 3.20    3.21Investment Securities.OptimaWellesley DisclosureSchedule 3.203.21 sets forth the book and market value as of September 30, 20182019 of the investment securities, mortgage backed securities and securities held for sale of Optima,Wellesley and its Subsidiaries, as well as, with respect to such securities, descriptions thereof, CUSIP numbers, book values, fair values and coupon rates. OptimaEach of Wellesley and its Subsidiaries has good title to all securities owned by it (except those sold under repurchase agreements or held in any fiduciary or agency capacity), free and clear of any Liens, except to the extent such securities are pledged in the ordinary course of business to secure obligations of Optima.Wellesley or any Subsidiary.

Section 3.21    3.22Derivative Transactions. Optima has notAll Derivative Transactions entered into any Derivative Transactions (as defined below), including for the account ofby Wellesley or any of its customers. For purposes of thisSection 3.21, “Derivative Transactions” shall mean any swap transaction, option, warrant, forward purchase or forward sale transaction, futures transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, credit related events or conditions or any indexes, or any other similar transaction or combinationSubsidiaries were entered into in all material respects in accordance with applicable rules, regulations and policies of any Governmental Authority, and in accordance with the investment, securities, commodities, risk management and other policies, practices and procedures employed by Wellesley and its Subsidiaries, and were entered into with counterparties believed at the time to be financially responsible and able to understand (either alone or in consultation with their advisers) and to bear the risks of these transactions, including collateralized mortgagesuch Derivative Transactions. Wellesley and its Subsidiaries have duly performed all of their obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and, to the Knowledge of Wellesley, there are no material breaches, violations or other similar instrumentsdefaults or allegations or assertions of such by any debt or equity instruments evidencing or embedding any such typesparty thereunder. Wellesley and its Subsidiaries have adopted policies and procedures consistent with the publications of transactions, and any related credit support, collateral or other similar arrangements relatedGovernmental Authorities with respect to such transactions.their derivatives program.

Section 3.22    3.23Loans; Nonperforming and Classified Assets.

(a) Except as set forth inOptimaWellesley Disclosure Schedule 3.22(a)3.23(a), as of the date hereof, Optimanone of Wellesley or any of its Subsidiaries is not a party to any written or oral (i) loan, loan agreement, note or borrowing arrangement (including, without limitation, leases, credit enhancements, commitments, guarantees and interest-bearing assets) (collectively, “Loans”), under the terms of which the obligor was, as of September 30, 2018,2019, over sixty (60) days delinquent in payment of principal or interest or in default of any other material provision, or (ii) Loan with any director, executive officer or five percent or greater shareholder of Optima,Wellesley or any of its Subsidiaries, or to the

Knowledge of Optima,Wellesley, any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing.OptimaWellesley Disclosure Schedule 3.22(a)3.23(a) identifies (x) each Loan that as of September 30, 20182019 was classified as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import by OptimaWellesley or any of its Subsidiaries or any bank examiner, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, and (y) each asset of OptimaWellesley that as of September 30, 20182019 was classified as other real estate owned (“OREO”) and the book value thereof.

(b) Each Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to the Knowledge of Optima,Wellesley, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) The loan documents with respect to each Loan were in compliance with applicable laws and regulations and Optima’sWellesley’s or the applicable Subsidiary’s lending policies at the time of origination of such Loans and are complete and correct.

(d) Except as set forth inOptimaWellesley Disclosure Schedule 3.22(d)3.23(d), Optimanone of Wellesley or any of its Subsidiaries is not a party to any agreement or arrangement with (or otherwise obligated to) any Person which obligates OptimaWellesley or any of its Subsidiaries to repurchase from any such Person any Loan or other asset of Optima.Wellesley or any of its Subsidiaries.

Section 3.23    3.24Tangible Properties and Assets.

(a)OptimaWellesley Disclosure Schedule 3.23(a)3.24(a) sets forth a true, correct and complete list of all real property owned by Optima.Wellesley or any of its Subsidiaries. Except as set forth inOptimaWellesley Disclosure Schedule 3.23(a)3.24(a), and except for properties and assets either held as OREO, disposed of in the ordinary course of business or as permitted by this Agreement, OptimaWellesley or any of its Subsidiaries has good title to, valid leasehold interests in or otherwise legally enforceable rights to use all of the real property, personal property and other assets (tangible or intangible), used, occupied and operated or held for use by it in connection with its business as presently conducted in each case, free and clear of any Lien, except for (i) statutory Liens for amounts not yet delinquent and (ii) Liens incurred in the ordinary course of business or imperfections of title, easements and encumbrances, if any, that, individually and in the aggregate, are not material in character, amount or extent, and do not materially detract from the value and do not materially interfere with the present use, occupancy or operation of any material asset.

(b)OptimaWellesley Disclosure Schedule 3.23(b)3.24(b) sets forth a true, correct and complete schedule of all leases, subleases, licenses and other agreements under which OptimaWellesley or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, real property (the “Leases”). Each of the Leases is valid, binding and in full force and effect and, as of the date hereof, Optimanone of Wellesley or any of its Subsidiaries has not received a written notice of, and otherwise has no Knowledge of any, default or termination with respect to any Lease. There has not occurred any event and, to Wellesley’s Knowledge, no condition exists that would constitute a termination event or a material breach by OptimaWellesley or any of its Subsidiaries of, or material default by OptimaWellesley or any of its Subsidiaries in, the performance of any covenant, agreement or condition contained in any Lease, and to Optima’sWellesley’s Knowledge, no lessor under a Lease is in material breach or default in the performance of any material covenant, agreement or condition contained in such Lease. Except as set forth onOptimaWellesley Disclosure Schedule 3.23(b)3.24(b), there is no pending or, to Optima’sWellesley’s Knowledge, threatened proceeding, action or governmental or regulatory investigation of any nature by any Governmental Authority with respect to the real property that OptimaWellesley or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, including without limitation a pending or threatened taking of any of such real property by eminent domain. OptimaEach of Wellesley and its Subsidiaries has paid all rents and other charges to the extent due under the Leases.

Section 3.24    3.25Intellectual Property.OptimaWellesley DisclosureSchedule 3.243.25 sets forth a true, complete and correct list of all OptimaWellesley Intellectual Property owned or purported to be owned by Optima that has been issued by, or registered, or are the subject of an application filed with, as applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office or any similar office, registry or agency anywhere in the world. OptimaWellesley. Wellesley owns or has a valid license to use all OptimaWellesley Intellectual Property, necessary to conduct the business of Optima, free and clear of all Liens, royalty or other payment obligations (except for royalties or payments with respect tooff-the-shelf Software at standard commercial rates). OptimaWellesley Intellectual Property constitutes all of the Intellectual Property necessary to carry on the business of OptimaWellesley and its Subsidiaries as currently conducted. ToWellesley Intellectual Property owned by Wellesley or any of its Subsidiaries, and to the Knowledge of Optima,Wellesley, all Optimaother Wellesley Intellectual Property, is valid and enforceable and has not been cancelled, forfeited, expired or abandoned, and Optimanone of Wellesley or any of its Subsidiaries has not received notice challenging the validity or enforceability of OptimaWellesley Intellectual Property. To the Knowledge of Optima,Wellesley, the conduct of the business of OptimaWellesley and its Subsidiaries does not violate, misappropriate or infringe upon the Intellectual Property rights of any third party. The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of the right of OptimaWellesley or any of its Subsidiaries to own or use any of the OptimaWellesley Intellectual Property.

Section 3.25    3.26Trust ActivitiesFiduciary Accounts. Optima does not engage in any trust business, nor does it administer or maintainSince December 31, 2016, each of Wellesley and its Subsidiaries has properly administered all accounts for which it acts asis or was a fiduciary, including but not limited to accounts for which it serves or served as a trustee, agent, custodian, agent, personal representative, guardian, conservator or conservator.investment advisor, in accordance with the terms of the governing documents and applicable laws and regulations. Neither Wellesley nor any of its Subsidiaries nor any of their respective directors, officers or employees, has committed any breach of trust with respect to any fiduciary account and the records for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.

Section 3.26    3.27Insurance.

(a)OptimaWellesley Disclosure Schedule 3.26(a)3.27(a) identifies all of the material insurance policies, binders, or bonds currently maintained by Optima,Wellesley or any of its Subsidiaries, other than credit-life policies (the “Insurance Policies”), including the insurer, policy numbers, amount of coverage, effective and termination dates and any pending claims thereunder involving incurred losses of more than $100,000. Optima$50,000. Each of Wellesley and its Subsidiaries is insured, and during each of the past three (3) calendar years has been insured against such risks and in such amounts as the management of OptimaWellesley reasonably has determined to be prudent in accordance with industry practices and its Knowledge, and has maintained all insurance required by applicable laws and regulations. All claims under the Insurance Policies for which Optima has sought coverage have been filed in due and timely fashion, all the Insurance Policies are in full force and effect, and Optimanone of Wellesley or any of its Subsidiaries is not in material default thereunder.thereunder and all claims thereunder have been filed in due and timely fashion.

(b)OptimaWellesley Disclosure Schedule 3.26(b)3.27(b) identifiessets forth a true, correct and complete description of all bank owned life insurance (“BOLI”) owned by Optima,Wellesley or any of its Subsidiaries, including the value of BOLI as of the end of the most recent month for which a statement is available prior to the date hereof. The value of such BOLI as of the date hereof is fairly and accurately reflected in the OptimaWellesley Financial Statements in accordance with GAAP.

Section 3.27    3.28Antitakeover Provisions. No “control share acquisition,” “business combination moratorium,” “fair price” or other form of antitakeover statute or regulation is applicable to this Agreement and the transactions contemplated hereby.

Section 3.28    3.29Fairness Opinion. The OptimaWellesley Board has received the written opinion of Sandler O’Neill & Partners, L.P. to the effect that as of the date hereof the Merger ConsiderationExchange Ratio is fair to the holders of OptimaWellesley Stock from a financial point of view.

Section 3.29    3.30Joint Proxy Statement/Prospectus. As of the date of the Joint Proxy Statement/Prospectus and the dates of the meeting of the shareholders of Wellesley to which such Joint Proxy Statement/Prospectus relates, the Joint Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they

were made, not misleading, provided that information as of a later date shall be deemed to modify information as of an earlier date, and further provided that no representation and warranty is made with respect to information relating to Cambridge and its Subsidiaries included in the Joint Proxy Statement/Prospectus.

Section 3.31CRA, Anti-money Laundering and Customer Information Security. OptimaNeither Wellesley or Wellesley Bank is not a party to any agreement with any individual or group regarding CRA matters and Optimaneither Wellesley nor Wellesley Bank has noany Knowledge of, nor has OptimaWellesley or Wellesley Bank been advised of, or has any reason to believe (based on Optima’sWellesley’s Home Mortgage Disclosure Act data for the year ended December 31, 2017,2018, filed with the FDIC, or otherwise) that any facts or circumstances exist, which would cause Optima:Wellesley or Wellesley Bank: (a) to be deemed not to be in satisfactory compliance with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by Bank Regulators of lower than “satisfactory”; (b) to be deemed to be operating in violation of the federal Bank Secrecy Act, as amended, and its implementing regulations (31 C.F.R. Chapter X), the USA PATRIOT Act, and the regulations promulgated thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (c) to be deemed not to be in satisfactory compliance with the applicable requirements contained in any federal and state privacy or data security laws and regulations, including, without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999 and regulations promulgated thereunder, as well as the provisions of the information security program adopted by OptimaWellesley pursuant to 12 C.F.R. Part 364,208, Subpart J, Appendix B.D. Furthermore, the Wellesley Board of Directors of Optima has adopted and OptimaWellesley has implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that has not been deemed ineffective by any Governmental Authority and that meets the requirements of Sections 352 and 326 and all other applicable provisions of the USA PATRIOT Act and the regulations thereunder.

Section 3.30    3.32Transactions with Affiliates. There are no outstanding amounts payable to or receivable from, or advances by OptimaWellesley or any of its Subsidiaries to, and Optimaneither Wellesley nor any of its Subsidiaries is not otherwise a creditor or debtor to, any shareholder owning five percent (5%) or more of the outstanding OptimaWellesley Stock, director, employee or employeeAffiliate of Optima,Wellesley or any of its Subsidiaries, other than as part of the normal and customary terms of such persons’ employment or service as a director with Optima. Optima is not a party to any transactionWellesley or agreement with any of its respectiveSubsidiaries or other than in the ordinary course of Wellesley Bank’s business. All transactions, agreements and relationships between Wellesley and any Subsidiary and any Affiliates, shareholders, owning five percent (5%)directors or moreofficers of Wellesley and any Subsidiary comply, to the extent applicable, with Regulation W and Regulation O of the outstanding Optima Stock, directors or executive officers or any material transaction or agreement with any employee other than executive officers.FRB.

Section 3.31    3.33Disclosure. The representations and warranties contained in thisArticle III, as qualified in each section of this Article III, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in thisArticle III not misleading.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF CAMBRIDGE

Section 4.01    Making of Representations and Warranties.

(a)    As a material inducement to the OptimaWellesley to enter into this Agreement and to consummate the transactions contemplated hereby, Cambridge and Cambridge Trust hereby makemakes to OptimaWellesley the representations and warranties contained in this Article IV.

(b)    On or priorIV, provided, however, that Cambridge shall not be deemed to the date hereof, Cambridge and Cambridge Trust have delivered to the Optima a schedule Cambridge Disclosure Schedule listing, among other things, items the disclosure of which is necessary or appropriate in relation to any or all of its representations and warranties;provided, however, that (a) no such item is required to be set forth on the Cambridge Disclosure Schedule as an exception tobreached a representation or warranty if its absenceas a consequence of the existence of any fact, event or circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in this Article IV, has had or is not reasonably likely to resulthave, a Material Adverse Effect (disregarding for purposes of this proviso any materiality or Material Adverse Effect qualification or exception contained in the relatedany representation or warranty beingwarranty). Notwithstanding the immediately preceding sentence, the representations and warranties contained in (x) Section 4.04 shall be deemed untrue orand incorrect if not true and

correct except to a de minimis extent, (y) Section 4.02,4.05,4.06,4.07,4.08,4.13(a) and(c),4.14, and4.23 shall be deemed untrue and (b) the mere inclusionincorrect if not true and correct in all material respects and (z) Section 4.09 shall be deemed untrue and incorrect if not true and correct in all respects.

Section 4.01Making of an itemRepresentations and Warranties. Except as set forth in the Cambridge Disclosure Schedule and the Cambridge SEC Documents, Cambridge hereby represents and warrants to Wellesley that the statements contained in thisArticle IV are correct as an exceptionof the date of this Agreement and will be correct as of the Closing Date, except as to a

any representation or warranty shall notwhich specifically relates to an earlier date, which only need be deemed an admission by Cambridge Trust that such item represents a material exception or fact, event or circumstance or that such item would reasonably be expected to result in a Material Adverse Effect to Cambridge. Any disclosure made with respect to a section of Article IV shall be deemed to qualify any other section of Article IV specifically referenced or cross-referenced or that contains sufficient detail to enable a reasonable Person to recognize the relevancecorrect as of such disclosure to such other sections.earlier date.

Section 4.02Organization, Standing and Authority of Cambridge. Cambridge is a Massachusetts corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, and is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended.BHC Act. Cambridge has full corporate power and authority to carry on its business as now conducted. Cambridge is duly licensed or qualified to do business and is in good standing in the States of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires such qualification. The Articles of Organization, as amended or restated,charter and Amended and Restated Bylawsbylaws of Cambridge, copies of which have been made available to Optima,Wellesley, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.

Section 4.03Organization, Standing and Authority of Cambridge Trust. Cambridge Trust is a Massachusetts-chartered trust company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. Cambridge Trust’s deposits are insured by the FDIC in the manner and to the fullest extent provided by applicable law, and all premiums and assessments required to be paid in connection therewith have been paid by Cambridge Trust when due. No proceedings for the revocation or termination of such deposit insurance are pending or, to the Knowledge of Cambridge, threatened. Cambridge Trust is a nonmember bank and its primary federal bank regulator is the FDIC. Cambridge Trust is a member in good standing of the FHLB and owns the requisite amount of stock of the FHLB as set forth onCambridge DisclosureSchedule 4.03. The Articles of Organizationcharter and Amended and Restated Bylawsbylaws of Cambridge Trust, copies of which have been made available to Optima,Wellesley, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.

Section 4.04Cambridge Capital Stock. The authorized capital stock of Cambridge consists of 10,000,000 shares of Cambridge Stock, par value $1.00, of which 4,107,1814,850,118 shares (including unvested shares of restricted stock) are outstanding as of the date hereof. As of the date hereof, no shares of Cambridge Stock are held in treasury by Cambridge. The outstanding shares of Cambridge Stock have been duly authorized and validly issued and are fully paid andnon-assessable. Except for (a) the Employee Stock Incentive Plan pursuant to which there are no outstanding options to acquire shares of Cambridge Stock, 7,00212,658 shares of Cambridge Stock subject to issuance and/or delivery pursuant to outstanding restricted stock units that vest solely based on time-based vesting requirements, and up to a maximum of 82,822114,512 shares of Cambridge Stock subject to issuance and/or delivery pursuant to outstanding restricted stock units that vest based on performance-based vesting requirements, and (b) the Cambridge Stock to be issued pursuant to this Agreement, Cambridge does not have any Rights issued or outstanding with respect to Cambridge Stock and Cambridge does not have any commitments to authorize, issue or sell any Cambridge Stock or Rights.

Section 4.05Subsidiaries. Except as set forth onCambridge DisclosureSchedule 4.05, Cambridge does not, directly or indirectly, own or control any Affiliate. Except as disclosed onCambridge DisclosureSchedule 4.05, Cambridge does not have any equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity, except as acquired through settlement of indebtedness, foreclosure, the exercise of creditors’ remedies or in a fiduciary capacity, and the business carried on by Cambridge has not been conducted through any other direct or indirect Subsidiary or Affiliate of Cambridge. No such equity investment identified inCambridge DisclosureSchedule 4.05 is prohibited by the applicable federal or state laws and regulations.

Section 4.06Corporate Power; Minute Books. Each of Cambridge and Cambridge Trust has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties

and assets; and each of Cambridge and Cambridge Trust has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, subject to receipt of all necessary approvals of Governmental Authorities. The minute books of Cambridge contain true, complete and accurate records of all meetings and other corporate actions held or taken by shareholders of Cambridge and the Cambridge Board (including committees of the Cambridge Board).

Section 4.07Execution and Delivery. ThisSubject to the approval of the Agreement by the shareholders of Cambridge, this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of Cambridge and Cambridge Trust and each of their respective Boards of Directors on or prior to the date hereof. NoThe Cambridge Board has directed that this Agreement be submitted to Cambridge’s shareholders for approval at a meeting of such shareholders and, except for the approval and adoption of this Agreement by the requisite affirmative vote of the holders of the outstanding shares of Cambridge Stock entitled to vote thereon, no other vote of the shareholders of Cambridge is required by law, the Articles of Organization of Cambridge,charter and Amended and Restated Bylawsbylaws of Cambridge or otherwise to approve this Agreement and the transactions contemplated hereby. Each of Cambridge and Cambridge Trust has duly executed and delivered this Agreement and, assuming due authorization, execution and delivery by Optima,Wellesley, this Agreement is a valid and legally binding obligation of each of Cambridge and Cambridge Trust, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

Section 4.08Regulatory Approvals; No Defaults.

(a) Subject to the receipt of all consents, approvals, waiver ornon-objections of a Governmental Authority required to consummate the transactions contemplated by this Agreement, including, without limitation, waiver or approval of the FRB, approval of the FDIC, approval of the Massachusetts Commissioner of Banks, the notification from the Massachusetts Housing Partnership that satisfactory arrangements have been made consistent with the MGL and the affordable housing loan program of the Massachusetts Housing Partnership, and the notification of theCo-Operative Central Bank and Depositors Insurance Fund that satisfactory arrangements have been made for the Bank Merger (“Regulatory Approvals,Approvals”), and the required filings under federal and state securities laws, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby (including, without limitation, the Merger) by Cambridge and Cambridge Trust do not and will not (i) constitute a breach or violation of, or a default under, result in a right of termination, or the acceleration of any right or obligation under, any law, rule or regulation or any judgment, decree, order, permit, license, credit agreement, indenture, loan, note, bond, mortgage, reciprocal easement agreement, lease, instrument, concession, franchise or other agreement of Cambridge or of any of its Subsidiaries or to which Cambridge or any of its Subsidiaries, properties or assets is subject or bound, (ii) constitute a breach or violation of, or a default under, Cambridge’s Articlesthe charter of Organizationbylaws of Cambridge or Amended and Restated Bylaws, or the Articles of Organization and Amended or Restated Bylaws of Cambridge Trust, or (iii) require the consent or approval of any third party or Governmental Authority under any such law, rule, regulation, judgment, decree, order, permit, license, credit agreement, indenture, loan, note, bond, mortgage, reciprocal easement agreement, lease, instrument, concession, franchise or other agreement.

(b) As of the date of this Agreement, Cambridge has no Knowledge of any reasons relating to Cambridge or Cambridge Trust (including, without limitation, compliance with the CRA or the USA PATRIOT Act) why any of the Regulatory Approvals shall not be received from the applicable Governmental Authorities having jurisdiction over the transactions contemplated by this Agreement.

Section 4.09Absence of Certain Changes or Events. Since September 30, 2018,2019, there has been no change or development or combination of changes or developments which, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on Cambridge and its Subsidiaries taken as a whole.

Section 4.10SEC Documents; Financial Reports; and Financial Controls and Procedures.

(a) Cambridge’s Annual Report on Form10-K, as amended through the date of this Agreement, for the fiscal year ended December 31, 20172018 (the “Cambridge 20172018 Form10-K”), and all other reports, registration statements, definitive proxy statements or information statements required to be filed or furnished by Cambridge or any of its Subsidiaries subsequent to January 1, 2017,2018, under the Securities Act, or under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act (collectively, the “Cambridge SEC Documents”), with the SEC, and all of the Cambridge SEC Documents filed with the SEC after the date of this Agreement, in the form filed or to be filed, (i) complied or will comply as to form in all material respects with the applicable requirements under the Securities Act or the Exchange Act, as the case may be, and (ii) did not and will not contain any untrue statement

of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; and each of the balance sheets contained in or incorporated by reference into any such Cambridge SEC Document (including the related notes and schedules thereto) fairly presents and will fairly present the financial position of the entity or entities to which such balance sheet relates as of its date, and each of the statements of income and changes in stockholders’ equity and cash flows or equivalent statements in such Cambridge SEC Documents (including any related notes and schedules thereto) fairly presents and will fairly present the results of operations, changes in stockholders’ equity and changes in cash flows, as the case may be, of the entity or entities to which such statement relates for the periods to which it relates, in each case in accordance with GAAP consistently applied during the periods involved, except in each case as may be noted therein, subject to normal year endyear-end audit adjustments in the case of unaudited financial statements. Except for those liabilities that are fully reflected or reserved against in the most recent audited consolidated balance sheet of Cambridge and its Subsidiaries contained in Cambridge 20172018 Form10-K and, except for liabilities reflected in Cambridge SEC Documents filed prior to the date of this Agreement or incurred in the ordinary course of business consistent with past practices or in connection with this Agreement, since December 31, 2017,2018, neither Cambridge nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on its consolidated balance sheet or in the notes thereto. The books and records of Cambridge have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. KPMG LLP has not resigned or been dismissed as independent public accountants of Cambridge as a result of or in connection with any disagreements with Cambridge on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

(b) Cambridge and each of its Subsidiaries, officers and directors are in compliance with, and have complied in all material respects, with (1) the applicable provisions of Sarbanes-Oxley and the related rules and regulations promulgated under such act and the Exchange Act and (2) the applicable listing and corporate governance rules and regulations of NASDAQ. Cambridge (i) has established and maintained disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule13a-15 under the Exchange Act) as required by Rule13a-15 under the Exchange Act, and (ii) has disclosed based on its most recent evaluations, to its outside auditors and the audit committee of the Cambridge Board (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Cambridge’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Cambridge’s internal control over financial reporting.

Section 4.11Regulatory Matters.

(a) Each of Cambridge and Cambridge Trust has timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file since December 31, 20152016 with any Governmental Authority, and has paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by any Governmental Authority in the regular course of the business of Cambridge and/or Cambridge Trust, no Governmental Authority has initiated any

proceeding, or to the Knowledge of Cambridge, investigation into the business or operations of Cambridge and/or Cambridge Trust, since December 31, 2016. There is no unresolved violation, criticism, or exception by any Governmental Authority with respect to any report or statement relating to any examinations of Cambridge Trust. Cambridge Trust is “well capitalized”“well-capitalized” as defined in applicable laws and regulations, and Cambridge Trust has a CRACommunity Reinvestment Act rating of “satisfactory” or better.

(b) Other than as set forth inCambridge DisclosureSchedule 4.11, since December 31, 2016, Cambridge has timely filed with the SEC and NASDAQ all reports, offering circulars, proxy statements, registration statements and all similar documents filed pursuant to applicable securities laws (“Securities Documents”) required by applicable securities laws,the Securities Act and the Exchange Act, and such Securities Documents,documents, as the same may have been amended, complied, at the time filed with the SEC, in all material respects with the securities laws.Securities Act and the Exchange Act.

(c) Neither Cambridge, Cambridge Trust nor any of their respective Subsidiariesproperties is a party to or is subject to any Regulatory Order from any Governmental Authority charged with the supervision or regulation of

financial institutions or issuers of securities or engaged in the insurance of deposits or the supervision or regulation of it. Neither Cambridge nor Cambridge Trust has been advised by, or has any Knowledge of facts which could give rise to an advisory notice by, any Governmental Authority that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any Regulatory Order.

Section 4.12Legal Proceedings.

(a) Other than as set forth inCambridge DisclosureSchedule 4.12, there are no pending or, to the Knowledge of Cambridge, threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Cambridge.

(b) Cambridge is not a party to any, nor are there any pending or, to Cambridge’s Knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Cambridge in which, to the Knowledge of Cambridge, there is a reasonable probability of any material recovery against or other Material Adverse Effect on Cambridge or any of its Subsidiaries or which challenges the validity or propriety of the transactions contemplated by this Agreement.

(c) There is no injunction, order, judgment or decree imposed upon Cambridge, nor on any of the assets of Cambridge, and Cambridge has not been advised of, or is aware of, the threat of any such action.

Section 4.13Compliance With Laws.

(a) Cambridge is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, (i)the Investment Company Act of 1940, as amended, the Equal Credit Opportunity Act, as amended, the Fair Housing Act, as amended, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act of 1970, as amended, the USA PATRIOT Act, and all other applicable federalfair lending and state bankingfair housing laws and regulations, (ii) the Finance Laws, and (iii) all applicable origination, servicing and collection practices with respector other laws relating to any loan or credit extension by such entity;discrimination;

(b) Cambridge has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to Cambridge’s Knowledge, no suspension or cancellation of any of them is threatened; and

(c) Cambridge has not received, since December 31, 2015,2016, notification or communication from any Governmental Authority (i) asserting that it is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces, or (ii) threatening to revoke any license, franchise, permit or governmental authorization (nor, to Cambridge’s Knowledge, do any grounds for any of the foregoing exist).

(d) Since January 1, 2017, Cambridge has conducted any finance activities (including, without limitation, mortgage banking and mortgage lending activities and consumer finance activities) in all material respects in compliance with all applicable statutes and regulations regulating the business of consumer lending, including, without limitation, the Finance Laws, and with all applicable origination, servicing and collection practices with respect to any loan or credit extension by such entity. In addition, there is no pending or, to the Knowledge of Cambridge, threatened charge by any Governmental Authority that Cambridge has violated, nor any pending or, to Cambridge’s Knowledge, threatened investigation by any Governmental Authority with respect to possible violations of, any applicable Finance Laws.

Section 4.14Brokers. Neither Cambridge nor any of its officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with any of the transactions contemplated by this Agreement, except that Cambridge has engaged, and will pay a fee or commission to, Keefe, Bruyette & Woods, Inc.

Section 4.15Employee Benefit Plans.

(a) All benefit and compensation plans, contracts, policies or arrangements maintained, sponsored or contributed to by Cambridge covering current or former employees of Cambridge and current or former directors (collectively, the “Cambridge Benefit Plans”) are in compliance with all applicable laws in all material respects.

(b) Each Cambridge Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “Cambridge Pension Plan”) and which is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the IRS, and to the Knowledge of Cambridge, there are no circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such Cambridge Pension Plan under Section 401(a) of the Code. There is no pending or, to Cambridge’s Knowledge, threatened litigation relating to the Cambridge Benefit Plans. Cambridge has not engaged in a transaction with respect to any Cambridge Benefit Plan or Cambridge Pension Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject Cambridge to a material tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

(c) No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by Cambridge with respect to any ongoing, frozen or terminated “single employer plan,” within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by Cambridge, or the single-employer plan of any entity which is considered one employer with Cambridge under Section 4001 of ERISA or Section 414 of the Code (a “Cambridge ERISA Affiliate”). Cambridge has not incurred, and does not expect to incur, any withdrawal liability with respect to a multiemployer plan under Subtitle E of Title IV of ERISA (regardless of whether based on contributions of an Cambridge ERISA Affiliate). No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Cambridge Pension Plan or by any Cambridge ERISA Affiliate within the 12 month period ending on the date hereof or will be required to be filed in connection with the transactions contemplated by this Agreement.

(d) All contributions, payments, and other obligations required to be made under the terms of any Cambridge Benefit Plan or an agreement with any Cambridge employee have been timely made or have been reflected on the financial statements of Cambridge. No Cambridge Pension Plan or single-employer plan of a Cambridge ERISA Affiliate has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and no Cambridge ERISA Affiliate has an outstanding funding waiver. Cambridge has not provided, and is not required to provide, security to any Cambridge Pension Plan or to any single-employer plan of a Cambridge ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

(e) Each Cambridge Benefit Plan that is a deferred compensation plan subject to Section 409A of the Code and any deferral elections thereunder are in compliance with Section 409A of the Code and the regulations thereunder, to the extent applicable.

Section 4.16Labor Matters. None of Cambridge or any of its Subsidiaries is a party to or bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is Cambridge or any of its Subsidiaries the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act, as amended) or seeking to compel Cambridge or any of its Subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to Cambridge’s Knowledge, threatened, nor is Cambridge or any of its Subsidiaries aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity.

Section 4.17Environmental Matters.

(a) To Cambridge’s Knowledge each property owned, leased or operated by Cambridge and its Subsidiaries are, and have been, in material compliance with all Environmental Laws. Neither Cambridge nor any of its Subsidiaries has Knowledge of, nor has Cambridge or any of its Subsidiaries received notice of, any past, present, or future conditions, events, activities, practices or incidents that may interfere with or prevent the material compliance of Cambridge with all Environmental Laws.

(b) Cambridge and its Subsidiaries have obtained all material permits, licenses and authorizations that are required for its operations under all Environmental Laws.

(c) No Hazardous Substance exists on, about or within any of the owned real properties, nor to Cambridge’s Knowledge have any Hazardous Substance previously existed on, about or within or been used, generated, stored, transported, disposed of, on or released from any of its properties. The use that Cambridge or any of its Subsidiaries makes and intends to make of any of its properties shall not result in the use, generation, storage, transportation, accumulation, disposal or release of any Hazardous Substance on, in or from any of those properties.

(d) There is no action, suit, proceeding, investigation, or inquiry before any court, administrative agency or other governmental authority pending or to Cambridge’s Knowledge threatened against Cambridge relating in any way to any Environmental Law. None of Cambridge or any of its Subsidiaries has a liability for remedial action under any Environmental Law. None of Cambridge or any of its Subsidiaries has received any request for information by any governmental authority with respect to the condition, use or operation of any of its owned real properties or Cambridge Loan Properties nor has Cambridge or any of its Subsidiaries received any notice of any kind from any governmental authority or other person with respect to any violation of or claimed or potential liability of any kind under any Environmental Law with respect to any of its owned real properties or Cambridge Loan Properties.

Section 4.18Tax Matters.

(a) Cambridge has filed all income and other material Tax Returns that it was required to file under applicable laws and regulations, other than Tax Returns that are not yet due or for which a request for extension was filed. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable laws and regulations. All Taxes due and owing by Cambridge (whether or not shown on any Tax

Return) have been paid other than Taxes that have been reserved or accrued on the balance sheet of Cambridge and which Cambridge is contesting in good faith. Cambridge is not the beneficiary of any extension of time within which to file any Tax Return.Return, and neither Cambridge nor any of its Subsidiaries currently has any open tax years. No claim has ever been made by an authority in a jurisdiction where Cambridge does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Cambridge.

(b) Cambridge has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party.

(c) No foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are being conducted or to the Knowledge of Cambridge are pending with respect to Cambridge. Cambridge has not received from any foreign, federal, state, or local taxing authority (including jurisdictions where Cambridge has not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against Cambridge.

Section 4.16    4.19Employee Benefit PlansDerivative Transactions.

(a) All benefits and compensation plans, contracts, policies or arrangements sponsored, maintained by or contributed to by Cambridge (the “Cambridge Benefit Plans”), are in compliance with all applicable laws in all material respects.

(b)    There is no pending or, to Cambridge’s Knowledge, threatened litigation relating to the Cambridge Benefit Plans.

(c)    No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurredDerivative Transactions entered into by Cambridge or any of its Subsidiaries were entered into in all material respects in accordance with applicable rules, regulations and policies of any Governmental Authority, and in accordance with the investment, securities, commodities, risk management and other policies, practices and procedures employed by Cambridge ERISA Affiliate (as defined below)and its Subsidiaries, and were entered into with counterparties believed at the time to be financially responsible and able to understand (either alone or in consultation with their advisers) and to bear the risks of such Derivative Transactions. Cambridge and its Subsidiaries have duly performed all of their obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and, to the Knowledge of Cambridge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder. Cambridge and its Subsidiaries have adopted policies and procedures consistent with the publications of Governmental Authorities with respect to any ongoing, frozen or terminated “single employer plan,” withintheir derivatives program.

Section 4.20Loans; Nonperforming Assets.

(a) Except as set forth inCambridge Disclosure Schedule 4.20(a), as of the meaningdate hereof, none of Section 4001(a)(15) of ERISA, currently or formerly maintained by Cambridge or any of its Subsidiaries is a party to any written or oral (i) Loan under the single-employer planterms of which the obligor was, as of September 30, 2019, over sixty (60) days delinquent in payment of principal or interest or in default of any entity which is considered one employerother material provision, or (ii) Loan with any director, executive officer or five percent or greater shareholder of Cambridge or any of its Subsidiaries, or to the Knowledge of Cambridge, any person, corporation or enterprise controlling, controlled by or under Section 4001 of ERISA or Section 414common control with any of the Code (a “Cambridge ERISA Affiliate”). foregoing.Cambridge Disclosure Schedule 4.20(a) identifies (x) each Loan that as of September 30, 2019 was classified as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import by Wellesley or any of its Subsidiaries or any bank examiner, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, and (y) each asset of Cambridge that as of September 30, 2019 was classified as OREO and the book value thereof.

(b) Each Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has not incurred,been secured by valid Liens which have been perfected and does not expect(iii) to incur, any withdrawal liabilitythe Knowledge of Wellesley, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) The loan documents with respect to a multiemployer plan under Subtitle Eeach Loan were in compliance with applicable laws and regulations and Cambridge’s or the applicable Subsidiary’s lending policies at the time of Title IVorigination of ERISA (regardless of whether based on contributions of an Cambridge ERISA Affiliate).such Loans and are complete and correct.

Section 4.17    4.21Deposit Insurance. The deposits of Cambridge Trust are insured by the FDIC in accordance with the Federal Deposit Insurance Act to the fullest extent permitted by law, and Cambridge Trust has paid all premiums and assessments and filed all reports required by the Federal Deposit Insurance Act. No proceedings for the revocation or termination of such deposit insurance are pending or, to the Knowledge of Cambridge, threatened.

Section 4.22Cambridge Stock. The shares of Cambridge Stock to be issued pursuant to this Agreement, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid andnon-assessable and subject to no preemptive rights.

Section 4.18    4.23Antitakeover Provisions. No “control share acquisition,” “business combination moratorium,” “fair price” or other form of antitakeover statute or regulation is applicable to this Agreement and the transactions contemplated hereby.

Section 4.24Joint Proxy Statement/Prospectus. As of the date of the Joint Proxy Statement/Prospectus, the Joint Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that information as of a later date shall be deemed to modify information as of an earlier date, and further provided that no representation and warranty is made with respect to information relating to Wellesley and its Subsidiaries included in the Joint Proxy Statement/Prospectus.

Section 4.25CRA, Anti-MoneyAnti-money Laundering and CustomerCustomer Information Security Information. Cambridge is not a party to any agreement with any individual or group regarding CRA matters and Cambridge has nodoes not have any Knowledge of, nor has Cambridge been advised of, or has any reason to believe (based on Cambridge’s Home Mortgage Disclosure Act data for the year ended December 31, 2017,2018, filed with the FDIC, or otherwise) that any facts or circumstances exist, which would cause Cambridge: (a) to be deemed not to be in satisfactory compliance with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by Bank Regulators of lower than “satisfactory”; (b) to be deemed to be operating in violation of the federal Bank Secrecy Act, as amended, and its implementing regulations (31 C.F.R. Chapter X), the USA PATRIOT Act, and the regulations promulgated thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (c) to be deemed not to be in satisfactory compliance with the applicable requirements contained in any federal and state privacy or data security laws and regulations, including, without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999 and regulations promulgated thereunder, as well as the provisions of the information security program adopted by Cambridge pursuant to 12 C.F.R. Part 364,

208, Subpart J, Appendix B.D. Furthermore, the Cambridge Board of Directors of Cambridge has adopted and Cambridge has implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that has not been deemed ineffective by any Governmental Authority and that meets the requirements of Sections 352 and 326 and all other applicable provisions of the USA PATRIOT Act and the regulations thereunder.

Section 4.19    Sufficient Funds. Cambridge has, and will have as of the Closing, sufficient funds to consummate the transactions contemplated by this Agreement, subject to the terms and conditions of this Agreement.

Section 4.20    4.26Disclosure. The representations and warranties contained in thisArticle IV, as qualified in each section of this Article IV, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in thisArticle IV not misleading.

ARTICLE V

COVENANTS

Section 5.01Covenants of OptimaWellesley. During the period from the date of this Agreement and continuing until the Effective Time, except as expressly contemplated or permitted by this Agreement or with the prior written consent of Cambridge, OptimaWellesley and Wellesley Bank shall carry on itstheir respective business in the ordinary course consistent with past practice and consistent with prudent banking practice and in compliance in all material respects with all applicable laws and regulations. OptimaWellesley and Wellesley Bank will use itstheir respective reasonable best efforts to (i) preserve itstheir business organizationorganizations intact, (ii) keep available to itself and Cambridge the present services of the current officers, employees, directors and other key individual service

providers of OptimaWellesley and any of its Subsidiaries and (iii) preserve for itselfthemselves and Cambridge the goodwill of the customers of OptimaWellesley and Wellesley Bank and others with whom business relationships exist. Without limiting the generality of the foregoing, and except as set forth in the OptimaWellesley Disclosure Schedule or as otherwise expressly contemplated or permitted by this Agreement or consented to in writing by Cambridge, OptimaWellesley and Wellesley Bank shall not:

(a)Capital Stock. Other than pursuant to OptimaWellesley Options outstanding as of the date hereof and listed in the OptimaWellesley Disclosure Schedules, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation or reservation of, any additional shares of capital stock or any Rights, (ii) permit any additional shares of capital stock to become subject to grants of employee, director or other stock options, warrants or other Rights, or (iii) redeem, retire, purchase or otherwise acquire, directly or indirectly, any OptimaWellesley Stock, or obligate itself to purchase, retire or redeem, any of its shares of OptimaWellesley Stock (except to the extent necessary to effect a cashless exercise of OptimaWellesley Options outstanding on the date hereof and listed in the OptimaWellesley Disclosure Schedules, in accordance with the terms applicable to such OptimaWellesley Options as of the date hereof).

(b)Dividends; Etc. (i) Make,Except for Wellesley’s regular quarterly dividends of $0.06 per share per quarter, make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of OptimaWellesley Stock or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its capital stock. After the date hereof, Wellesley shall coordinate with Cambridge regarding the declaration of any dividends in respect of Wellesley Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of Wellesley Stock shall receive exactly one (1) dividend for the calendar quarter in which the Merger is consummated with respect to their shares of Wellesley Stock and any shares of Cambridge Stock that such holders receive in exchange therefor in the Merger.

(c)Compensation; Employment Agreements, Etc. EnterExcept as provided for onWellesley Disclosure Schedule 5.01(c), enter into or amend or renew any employment, consulting, severance or similar agreements or arrangements with any director, officer, employee or employeeother individual service provider of OptimaWellesley or Wellesley Bank or grant any salary or wage increase or increase any employee benefit or pay any incentive or bonus payments, except (i) for normal increases in compensation tonon-executive employees in the ordinary course of business consistent with past practice, provided that no such increase shall be more than ten percent (10%) with respect to any individualnon-executive employee and all such increases in the aggregate shall not exceed threefour percent (3%(4%) of total compensation, and provided further that any increases, either singularly or in the aggregate, shall be consistent with Optima’s 2018Wellesley’s 2019 budget, a copy of which has been made available to Cambridge, (ii) OptimaWellesley shall

be permitted to make cash contributions to the OptimaWellesley 401(k) Plan and Wellesley Bank ESOP in the ordinary course of business consistent with past practice and shall be permitted to make apro-rated ESOP contribution for 2020 in accordance with Section 5.14(f) and shall be permitted to make normal accruals under the Wellesley Bank Supplemental Executive Retirement Plan consistent with past practice, and (iii) OptimaWellesley shall be permitted to pay 2019 bonuses consistent with past practice and shall be permitted to pay 2020 accrued bonuses, prorated through the Closing Date, at the Closing, consistent with past practice, prorated through the Closing Date.practice.

(d)Hiring. Hire any person as an employee of OptimaWellesley or any of its Subsidiaries or promote any employee to a position of Vice President or above or to the extent such hire or promotion would increase any severance obligation, except (i) to satisfy contractual obligations existing as of the date hereof and set forth onOptimaWellesley Disclosure Schedule 5.01(d) and (ii) persons hired to fill any vacancies arising after the date hereof at an annual salary of less than $75,000$100,000 and whose employment is terminable at the will of Optima,Wellesley, as applicable.applicable,provided, however, that Wellesley or Wellesley Bank must provide notice to Cambridge within three (3) days following the hiring of any persons hired to fill a vacancy.

(e)Benefit Plans. EnterExcept as provided for onWellesley Disclosure Schedule 5.01(e), enter into, establish, adopt, amend, modify or terminate any OptimaWellesley Benefit Plan or adopt an arrangement that would constitute a Wellesley Benefit Plan, except (i) as may be required by applicable law or the terms of this Agreement, subject

to the provision of prior written notice and consultation with respect thereto to Cambridge, or (ii) to satisfy contractual obligations existing as of the date hereof and set forth onOptimaWellesley Disclosure Schedule 5.01(e)).

(f)Transactions with Affiliates. Except pursuant to agreements or arrangements in effect on the date hereof, pay, loan or advance any amount to, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible) to, or enter into any agreement or arrangement with, any of its officers or directors or any of their immediate family members or any affiliates or associates (as such terms are defined under the Exchange Act) of any of its officers or directors other than compensation in the ordinary course of business consistent with past practice;

(g)Dispositions. Sell, transfer, mortgage, pledge, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except in the ordinary course of business consistent with past practice and in a transaction that, together with all other such transactions, is not material to OptimaWellesley taken as a whole.

(h)Acquisitions. Acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of the assets, business, deposits or properties of any other entity.

(i)Capital Expenditures. Make any capital expenditures other than capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $25,000 individually or $100,000 in the aggregate.

(j)Governing Documents. Amend Optima’sthe charter of bylaws of Wellesley or bylaws.Wellesley Bank.

(k)Accounting Methods. Implement or adopt any change in its accounting principles, practices or methods, other than as may be required by applicable laws or regulations or GAAP.

(l)Contracts. Except in the ordinary course of business consistent with past practice or as otherwise expressly permitted by this Agreement, enter into, amend, modify or terminate any contract that involves the payment of, or incurs fees, in excess of $25,000$50,000 per annum, any Lease or any Insurance Policy.

(m)Claims. Enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation to which OptimaWellesley or Wellesley Bank is or becomes a party after the date of this Agreement, which settlement, agreement or action involves payment by OptimaWellesley or Wellesley Bank of an amount which exceeds $25,000$100,000 and/or would impose any material restriction on the business of Optima.Wellesley or Wellesley Bank;provided, however, that Wellesley or Wellesley Bank may not enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation for which Wellesley or Wellesley Bank has not provided notice to Cambridge of the existence of such action, suit, proceeding, order or investigation.

(n)Banking Operations. Enter into any new material line of business; change its material lending, investment, underwriting, risk and asset liability management and other material banking and operating policies, except as required by applicable law, regulation or policies imposed by any Governmental Authority; or file any application or make any contract with respect to branching or site location or branching or site relocation.

(o)Derivative Transactions. EnterExcept in the ordinary course of business consistent with past practice, enter into any Derivative Transactions.

(p)Indebtedness. Incur any indebtedness for borrowed money or other liabilities (including brokered deposits and wholesale funding), federal funds purchased, borrowings from the FHLB and securities sold under agreements to repurchase, each with a duration exceeding one (1) year, other than in the ordinary course of

business consistent with past practice, or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person, other than in the ordinary course of business consistent with past practice.

(q)Investment Securities. Acquire (other than by way of foreclosures or acquisitions in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary course of business consistent with past practice) (i) any debt security or equity investment of a type or in an amount that is not in accordance with Optima’sWellesley’s investment policy or (ii) any debt security, including mortgage-backed and mortgage related securities, other than U.S. government and U.S. government agency securities with final maturities not greater than five years or mortgage-backed or mortgage related securities which would not be considered “high risk” securities under applicable regulatory pronouncements, in each case purchased in the ordinary course of business consistent with past practice; or restructure or materially change its investment securities portfolio, through purchases, sales or otherwise, or the manner in which such portfolio or any securities therein are classified under GAAP or reported for regulatory purposes.

(r)Loans. Except to satisfy contractual obligations existing as of the date hereof and set forth onOptimaWellesley Disclosure Schedule 5.01(r), make, renegotiate, renew, increase, extend, modify or purchase any Loan, other than in accordance with Optima’sWellesley’s loan policies and procedures in effect as of the date hereof;provided,however, that the prior notification and approval of Cambridge is required for any new origination (i) in excess of $2,000,000$4,000,000 or (ii) not made in accordance with Optima’sWellesley’s loan policies as in effect on the date hereof. For purposes of thisSection 5.01(r), consent shall be deemed given unless Cambridge objects within 48 hours of notification.receiving a notification from Wellesley.

(s)Investments in Real Estate. Make any equity investment or equity commitment to invest in real estate or in any real estate development project (other than by way of foreclosure or acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith, in each case in the ordinary course of business consistent with past practice).

(t)Taxes. Make or change any material Tax election, file any material amended Tax Return, enter into any material closing agreement, settle or compromise any material liability with respect to Taxes, agree to any adjustment of any material Tax attribute, file any material claim for a refund of Taxes, or consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment.

(u)Compliance with Agreements. Commit any act or omission which constitutes a material breach or default by OptimaWellesley or Wellesley Bank under any agreement with any Governmental Authority or under any Material Contract, Lease or other material agreement or material license to which it is a party or by which it or its properties is bound.

(v)Environmental Assessments. Foreclose on or take a deed or title to any commercial real estate without first conducting a Phase I environmental assessment of the property or foreclose on any commercial real estate if such environmental assessment indicates the presence of a Hazardous Substance in amounts which, if such foreclosure were to occur, would be material.

(w)Insurance. Cause or allow the loss of insurance coverage maintained by OptimaWellesley that would have a Material Adverse Effect to Optima,on Wellesley, unless replaced with coverage which is substantially similar (in amount and insurer) to that now in effect.

(x)Liens. Discharge or satisfy any Lien or pay any obligation or liability, whether absolute or contingent, due or to become due, except in the ordinary course of business consistent with normal banking practices.

(y)Adverse Actions. Take any action or fail to take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any

material respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth inArticle VI not being satisfied, (iii) a material violation of any provision of this Agreement, except, in each case, as may be required by applicable law or regulation or (iv) a material delay of the approval or completion of the Merger.

(z)Commitments. Enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

Section 5.02Covenants of Cambridge. From the date hereof until the Effective Time, except as expressly contemplated or permitted by this Agreement, without the prior written consent of Optima,Wellesley, Cambridge will not, and will cause each of its Subsidiaries not to:

(a)Adverse Actions. Take any action or fail to take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth inArticle VI not being satisfied or (iii) a material violation of any provision of this Agreement except, in each case, as may be required by applicable law or regulation.

(b)Dividend Record Date. Change its record date for payment of its quarterly dividend from the record date established in the prior year’s quarter in a manner that is inconsistent with past practice.

(c)Commitments. Enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

(d)    Capital Stock. Grant,Except as set forth inCambridge Disclosure Schedule 5.02(c), grant, issue, deliver or sell any additional shares of capital stock or Rights; provided,, however,, that Cambridge may (i) grant equity awards pursuant to its employee benefit plans as required by any Cambridge employee benefit plan or in the ordinary course consistent with past practice, (ii) issue capital stock upon the vesting or exercise of any equity awards granted pursuant to a Cambridge employee benefits plan outstanding as of the date hereof in accordance with the terms and conditions thereof as in effect on the date hereof, including in connection with “net settling” any outstanding awards, and (iii) issue Cambridge capital stock in connection with the transactions contemplated hereby.

(e)    (d)Dividends; EtcEtc.. (i) Other than in the ordinary course of business consistent with past practice or in connection with the transactions contemplated hereby, make, declare, pay or set aside for payment any stock dividend on or in respect of, or declare or make any distribution on any shares of Cambridge Stock or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its capital stock.

(e)Amending Charter or Bylaws. Amend its charter or bylaws in a manner that would materially and adversely affect the holders of Wellesley Stock, as prospective holders of Cambridge Stock, relative to other holders of Cambridge Stock.

(f)Acquiring Financial Institutions. Enter into any binding definitive agreement, or publicly announce its intent to enter into any binding definitive agreement, to acquire any other depository institution (as defined in 12 U.S.C. § 1813(c)(1)) or credit union prior to the receipt of all Regulatory Approvals.

(g)Adopt Plan of Liquidation. Adopt or publicly propose a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, in each case, of Cambridge Trust.

(h)Commitments. Enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

Section 5.03Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each of the parties to the Agreement agrees to use its reasonable best efforts in good faith to take, or cause to be taken, all

actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws, so as to permit consummation of the transactions contemplated hereby as promptly as practicable, and otherwise to enable consummation of the transactions contemplated by this Agreement, including the satisfaction of the conditions set forth inArticle VI hereof, and shall cooperate fully with the other parties hereto to that end.

Section 5.04Shareholder Approval. Optima

(a) Wellesley agrees to take, in accordance with applicable law, the charter and bylaws of Optima,Wellesley, all action necessary to convene a special meeting of its shareholders to consider and vote upon the approval of this Agreement and any other matters required to be approved by Optima’sWellesley’s shareholders in order to permit consummation of the transactions contemplated by this Agreement (including any adjournment or postponement, the “Optima“Wellesley Meeting”) and, subject toSection 5.05 andSection 5.11, shall take all lawful action to solicit such approval by such shareholders. OptimaWellesley agrees to use its best efforts to convene the OptimaWellesley Meeting

within thirty-five (35)forty (40) days after the initial mailing of the Joint Proxy Statement/Prospectus to shareholders of Optima pursuant toSection 5.05, and in any event shall convene the Optima Meeting within forty-five (45) days after such mailing.Wellesley. Except with the prior approval of Cambridge, no other matters shall be submitted for the approval of OptimaWellesley shareholders at the OptimaWellesley Meeting. The OptimaWellesley Board shall at all times prior to and during the OptimaWellesley Meeting recommend adoption of this Agreement by the shareholders of OptimaWellesley (the “Optima“Wellesley Recommendation”) and shall not withhold, withdraw, amend or modify such recommendation in any manner adverse to Cambridge or take any other action or make any other public statement inconsistent with such recommendation, except as and to the extent expressly permitted bySection 5.11.

(b) Cambridge agrees to take, in accordance with applicable law, the charter and bylaws of Cambridge, all action necessary to convene a special meeting of its shareholders to consider and vote upon the approval of this Agreement, the issuance of shares of Cambridge Stock in connection with the Merger, and any other matters required to be approved by Cambridge’s shareholders in order to permit consummation of the transactions contemplated by this Agreement (including any adjournment or postponement, the “Cambridge Meeting”) and, subject toSection 5.05, shall take all lawful action to solicit such approval by such shareholders. Cambridge agrees to use its best efforts to convene the Cambridge Meeting within forty (40) days after the initial mailing of the Joint Proxy Statement/Prospectus to shareholders of Cambridge. Except with the prior approval of Wellesley, no other matters shall be submitted for the approval of Cambridge shareholders at the Cambridge Meeting. The Cambridge Board shall at all times prior to and during the Cambridge Meeting recommend adoption of this Agreement by the shareholders of Cambridge and shall not withhold, withdraw, amend or modify such recommendation in any manner adverse to Wellesley or take any other action or make any other public statement inconsistent with such recommendation.

Section 5.05Merger Registration Statement; Joint Proxy Statement/Prospectus. For the purposes of (x) registering Cambridge Stock to be offered to holders of OptimaWellesley Stock in connection with the Merger with the SEC under the Securities Act and applicable state securities laws and (y) holding the OptimaWellesley Meeting and the Cambridge Meeting, Cambridge shall draft and prepare, and OptimaWellesley shall cooperate in the preparation of, a registration statement on FormS-4 for the registration of the shares to be issued by Cambridge in the Merger (the “Merger Registration Statement”), including the Joint Proxy Statement/Prospectus. Cambridge shall provide OptimaWellesley and its counsel with appropriate opportunity to review and comment on the Merger Registration Statement and Joint Proxy Statement/Prospectus prior to the time they are initially filed with the SEC or any amendments are filed with the SEC. Cambridge shall file the Merger Registration Statement with the SEC. Each of Cambridge and OptimaWellesley shall causeuse its reasonable best efforts to have the Merger Registration Statement to be filed within forty-five (45) days the date hereof and to be declared effective under the Securities Act as promptly as practicable after such filing.filing and shall thereafter promptly mail the Joint Proxy Statement/Prospectus to their shareholders. Cambridge shall also use its reasonable best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and OptimaWellesley shall furnish to Cambridge all information concerning OptimaWellesley and the holders of OptimaWellesley Stock as may be reasonably requested in connection with such action. As of the date of the Proxy Statement/Prospectus and the dates of the meeting of the shareholders of Optima to which such Proxy Statement/Prospectus relates, the Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that information as of a later date shall be deemed to modify information as of an earlier date.

Section 5.06Cooperation and Information Sharing. OptimaWellesley shall provide Cambridge with any information concerning OptimaWellesley that Cambridge may reasonably request in connection with the drafting and preparation of the Merger Registration Statement and Joint Proxy Statement/Prospectus. CambridgeProspectus, and each party shall notify Optimathe other promptly of the receipt of any comments of the SEC with respect to the Merger Registration Statement or Joint Proxy Statement/Prospectus and of any requests by the SEC for any amendment or supplement thereto or for additional information andinformation. Cambridge shall promptly provide to Optima promptlyWellesley copies of all correspondence between it or any of its representatives and the SEC. Cambridge shall provide OptimaWellesley and its counsel with appropriate opportunity to review and comment on all amendments and supplements to the Merger Registration Statement and Joint Proxy Statement/Prospectus and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of Cambridge and OptimaWellesley agrees to use all reasonable efforts, after consultation with the other party hereto, to respond promptly to all such comments of and requests by the SEC. Optima agreesSEC, and to cause the Joint Proxy Statement/Prospectus and all required amendments and supplements thereto, to be mailed to the holders of OptimaWellesley Stock entitled to vote at the OptimaWellesley Meeting as soon as and the holders of Cambridge Stock entitled to vote at the Cambridge Meeting, respectively, at the earliest practicable following the date that the Merger Registration Statement is declared effective under the Securities Act.time.

Section 5.07Supplements or Amendment. OptimaWellesley and Cambridge shall promptly notify the other party if at any time it becomes aware that the Joint Proxy Statement/Prospectus or the Merger Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, the partiesWellesley shall cooperate with Cambridge in the preparation of a supplement or amendment to such Joint Proxy Statement/Prospectus which corrects such misstatement or omission, and Cambridge shall file an amended Merger Registration Statement with the SEC, and Optimaeach of Cambridge and Wellesley shall mail an amended Joint Proxy Statement/Prospectus to itstheir respective shareholders.

Section 5.08Regulatory Approvals. Each of OptimaWellesley and Cambridge will cooperate with the other and use all reasonable efforts to promptly prepare all necessary documentation, to affect all necessary filings and to obtain all necessary permits, consents, approvals, waivers and authorizations of all third parties and Governmental Authorities necessary to consummate the transactions contemplated by this Agreement. OptimaWellesley and Cambridge will furnish each other and each other’s counsel with all information concerning themselves, their subsidiaries, directors, officers and shareholders and such other matters as may be necessary or advisable in connection with the filing of the Joint Proxy Statement/Prospectus and any application, petition or any other statement or application made by or on behalf of Cambridge or OptimaWellesley to any Governmental Authority in connection with the Merger and the other transactions contemplated by this Agreement. Each party hereto shall have the right to review and approve in advance all characterizations of the information relating to such party and any of its Subsidiaries that appear in any filing made in connection with the transactions contemplated by this Agreement with any Governmental Authority. In addition, Cambridge and OptimaWellesley shall each furnish to the other for review a copy of each such filing made in connection with the transactions contemplated by this Agreement with any Governmental Authority prior to its filing. Provided that Optima has cooperated as required above, Cambridge agrees to use its reasonable best efforts to file the requisite applications or notices to be filed by it or by Cambridge Trust with the appropriate Bank Regulators within the forty-five (45) days of the date hereof.

Section 5.09Press Releases. OptimaWellesley and Cambridge shall consult with each other before issuing any press release with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such public statements without the prior consent of the other party, which shall not be unreasonably withheld;provided, however, that a party may, without the prior consent of the other party (but after such consultation, to the extent practicable in the circumstances), issue such press release or make such public statements as may upon the advice of outside counsel be required by law. OptimaWellesley and Cambridge shall cooperate to develop all public announcement materials and make appropriate management available at presentations related to this Agreement as reasonably requested by the other party.

Section 5.10Access; Information.

(a) OptimaWellesley agrees that upon reasonable notice and subject to applicable laws relating to the exchange of information, it shall afford Cambridge and its officers, employees, counsel, accountants and other authorized representatives such reasonable access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, Tax Returns and work papers of independent auditors), minute books of directors’ (other than minutes that discuss any of the transactions contemplated by this Agreement or any confidential supervisory information), properties and personnel of OptimaWellesley and to such other information relating to OptimaWellesley as Cambridge may reasonably request and, during such period, it shall furnish promptly to Cambridge all information concerning the business, properties and personnel of OptimaWellesley as Cambridge may reasonably request. OptimaCambridge shall not be requireduse commercially reasonable efforts to provideminimize any interference with Wellesley’s regular business operations during any such access to or to disclose minutes or similar records of meetings of the board of directors or any committee that includes discussion any of the transactions contemplated by this Agreement or any information where such access jeopardizes the attorney client privilege of the institution in possession or control of such information or contravenes any law, rule, regulation, order, judgment or decree. Consistent with the foregoing, Optima agrees to make appropriate substitute disclosure arrangements under the circumstances in which the restrictions of the preceding sentence apply.Wellesley’s employees, property, books and records.

(b) All information furnished to Cambridge by OptimaWellesley pursuant toSection 5.10(a) shall be subject to, and Cambridge shall hold all such information in confidence in accordance with, the provisions of the Mutual Agreement of Confidentiality, dated as of July 31, 2018,11, 2019, by and between OptimaWellesley and Cambridge (the “Confidentiality Agreement”).

(c) Notwithstanding anything to the contrary contained in this Section 5.10, in no event shall Cambridge have access to any information that, based on advice of Wellesley’s counsel, would: (a) reasonably be expected to waive any material legal privilege; (b) result in the disclosure of any trade secrets of third parties; or (c) violate any obligation of Wellesley with respect to confidentiality so long as, with respect to confidentiality, to the extent specifically requested by Cambridge, Wellesley has made commercially reasonable efforts to obtain a waiver regarding the possible disclosure from the third party to whom it owes an obligation of confidentiality. All requests made pursuant to thisSection 5.10 will be directed to an executive officer of Wellesley or such Person or Persons as may be designated by Wellesley. No investigation by Cambridge of the business and affairs of OptimaWellesley shall affect or be deemed to modify or waive any representation, warranty, covenant or agreement in this Agreement, or the conditions to the obligations of Cambridge to consummate the transactions contemplated by this Agreement.

Section 5.11No Solicitation by OptimaWellesley.

(a) OptimaWellesley shall not, and shall cause its officers, directors, employees, investment bankers, financial advisors, attorneys, accountants, consultants, affiliates and other agents of OptimaWellesley (collectively, the “Optima“Wellesley Representatives”) not to, directly or indirectly, (i) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an Acquisition Proposal; (ii) participate in any discussions or negotiations regarding any Acquisition Proposal or furnish, or otherwise afford access, to any Person (other than Cambridge) any confidential ornon-publicinformation or data with respect to OptimaWellesley or otherwise relating to an Acquisition Proposal; or (iii) without the prior written consent of Cambridge, release any Person from, waive any provisions of, or fail to enforce any confidentiality agreement or standstill agreement to which OptimaWellesley is a party. OptimaWellesley shall, and shall cause each of the OptimaWellesley Representatives to, (x) immediately cease and cause to be terminated any and all existing discussions, negotiations, and communications with any Persons with respect to any existing or potential Acquisition Proposal, and (y) as soon as practicable after the date hereof, request the prompt return or destruction of all confidential information made available by OptimaWellesley or on its behalf during the past twelve months in connection with any actual or potential Acquisition Proposal.

(b) NotwithstandingSection 5.11(a), prior to the date of the OptimaWellesley Meeting, OptimaWellesley may take any of the actions described in clause (ii) ofSection 5.11(a) if, but only if, (i) OptimaWellesley has received a bona fide unsolicited written Acquisition Proposal that did not result from a breach of thisSection 5.11; 5.11; (ii) the OptimaWellesley Board determines in good faith, (A) after consultation with its outside legal counsel and, with respect to financial

matters, its independent financial advisor, that such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal and (B) after consultation with its outside legal counsel, and with respect to financial matters, it financial advisors, determines in good faith that it is required to take such actions to comply with its fiduciary duties under applicable law; (iii) OptimaWellesley has provided Cambridge with at least twenty-four hours’ prior notice of such determination; and (iv) prior to furnishing or affording access to any information or data with respect to OptimaWellesley or otherwise relating to an Acquisition Proposal, OptimaWellesley receives from such Person a confidentiality agreement with terms not materially less favorable to OptimaWellesley than those contained in the Confidentiality Agreement. In addition, if OptimaWellesley receives an Acquisition Proposal that constitutes or is reasonably expected to result in a Superior Proposal and OptimaWellesley has not breached any of the covenants set forth in thisSection 5.11, then Optima,Wellesley, or any OptimaWellesley Representative may, with the prior approval of the OptimaWellesley Board at a duly called meeting, contact the Person who has submitted (and not withdrawn) such Acquisition Proposal, or any of such Person’s representatives, solely (x) to clarify the terms and conditions of such Acquisition Proposal and (y) if such Acquisition Proposal initially is made orally, to direct such Person to submit the Acquisition Proposal to OptimaWellesley confidentially in writing. OptimaWellesley shall promptly provide to Cambridge anynon-public information regarding OptimaWellesley provided to any other Person which was not previously provided to Cambridge, such additional information to be provided no later than the date of provision of such information to such other party.

(c) OptimaWellesley shall promptly (and in any event orally within 24 hours)hours and in writing within two days) notify Cambridge in writing if any inquiries, proposals or offers are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with, OptimaWellesley or the OptimaWellesley Representatives, in each case in connection with any Acquisition Proposal, and such notice shall indicate the name of the Person initiating such discussions or negotiations or making such inquiry, proposal, offer or information request and the material terms and conditions of any proposals or offers (and, in the case of written materials relating to such inquiry, proposal, offer, information request, negotiations or discussion, providing copies of such materials (includinge-mails or other electronic communications)). OptimaWellesley agrees that it shall keep Cambridge informed, on a reasonably current basis (and in any event within 24 hours), of the status and terms of any material developments with respect to such inquiry, proposal, offer, information request, negotiations or discussions (including, in each case, any amendments or modifications thereto). OptimaWellesley shall provide Cambridge with at least 24 hours’ prior notice of any meeting of the OptimaWellesley Board at which the OptimaWellesley Board is reasonably expected to consider any Acquisition Proposal.

(d) Neither the OptimaWellesley Board nor any committee thereof shall (i) withdraw, qualify, amend, modify or withhold, or propose to withdraw, qualify, amend, modify or withhold, in a manner adverse to Cambridge in

connection with the transactions contemplated by this Agreement (including the Merger), the OptimaWellesley Recommendation, fail to reaffirm the OptimaWellesley Recommendation within five Business Days following a request by Cambridge, or make any statement, announcement or release, in connection with the OptimaWellesley Meeting or otherwise, inconsistent with the OptimaWellesley Recommendation (it being understood that taking a neutral position or no position with respect to an Acquisition Proposal shall be considered an adverse modification of the OptimaWellesley Recommendation); (ii) approve or recommend, or propose to approve or recommend, any Acquisition Proposal; or (iii) enter into (or cause OptimaWellesley to enter into) any letter of intent, agreement in principle, acquisition agreement or other agreement (A) related to any Acquisition Transaction (other than a confidentiality agreement entered into in accordance with the provisions ofSection 5.11(b)) or (B) requiring OptimaWellesley to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement.

(e) Notwithstanding Section 5.11(d),anything to the contrary set forth in this Agreement, prior to the date of the OptimaWellesley Meeting, the OptimaWellesley Board may withdraw, qualify, amend or modify the OptimaWellesley Recommendation in connection therewith (a “Optima“Wellesley Subsequent Determination”) and/or terminate this Agreement pursuant toSection 7.01(g)(iii) after the fourth Business Day following Cambridge’s receipt of a written notice (the “Notice of Superior Proposal”) from OptimaWellesley advising Cambridge that the OptimaWellesley Board intends to determine that a bona fide unsolicited written Acquisition Proposal that it received (that did not result from a breach of thisSection 5.11) 5.11) constitutes a Superior Proposal if, but only if, (i) the OptimaWellesley Board has reasonably determined in

good faith, after consultation with outside legal counsel, that it is required to take such actions to comply with its fiduciary duties under applicable law, (ii) during the fourthree Business Day period after receipt of the Notice of Superior Proposal by Cambridge (the “Notice Period”), OptimaWellesley and the OptimaWellesley Board shall have cooperated and negotiated in good faith with Cambridge to make such adjustments, modifications or amendments to the terms and conditions of this Agreement as would enable OptimaWellesley to proceed with the OptimaWellesley Recommendation without an Optimaa Wellesley Subsequent Determination;provided, however, that Cambridge shall not have any obligation to propose any adjustments, modifications or amendments to the terms and conditions of this Agreement, and (iii) at the end of the Notice Period, after taking into account any such adjusted, modified or amended terms as may have been proposed by Cambridge since its receipt of such Notice of Superior Proposal, the OptimaWellesley Board in good faith makes the determination (A) in clause (i) of thisSection 5.11(e) and (B) that such Acquisition Proposal constitutes a Superior Proposal. In the event of any material revisions to the Superior Proposal, OptimaWellesley shall be required to deliver a new Notice of Superior Proposal to Cambridge and again comply with the requirements of thisSection 5.11(e), except that the Notice Period shall be reduced to two Business Days.

(f)    Notwithstanding any Optima Subsequent Determination, this Agreement shall be submitted to Optima’s stockholders at the Optima Meeting for the purpose of voting on, the adoption of this Agreement and the transactions contemplated hereby (including the Merger) and nothing contained herein shall be deemed to relieve Optima of such obligation; provided, however, that if the Optima Board shall have made an Optima Subsequent Determination, then the Optima Board may submit this Agreement to Optima’s stockholders without recommendation (although the resolutions adopting this Agreement as of the date hereof may not be rescinded), in which event the Optima Board may communicate the basis for its lack of a recommendation to Optima’s stockholders in the Proxy Statement/Prospectus or an appropriate amendment or supplement thereto. In addition to the foregoing, the OptimaWellesley Board shall not submit to the vote of its stockholders any Acquisition Proposal other than the Merger at the OptimaWellesley Meeting.

(f) Nothing contained in thisSection 5.11 shall prohibit Wellesley or the Wellesley Board from complying with Wellesley’s obligations required under Rules14d-9 (as if such rule were applicable to Wellesley) and14e-2(a) (as if such rule were applicable to Wellesley) promulgated under the Exchange Act;provided, however, that any such disclosure relating to an Acquisition Proposal shall be deemed a change in the Wellesley Recommendation unless it is limited to a stop, look and listen communication or the Wellesley Board reaffirms the Wellesley Recommendation in such disclosure.

Section 5.12Certain Policies. Prior to the Effective Date, OptimaWellesley shall, consistent with GAAP and applicable banking laws and regulations, modify or change its loan, OREO, accrual, reserve, tax, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves) so as to be applied on a basis that is consistent with that of Cambridge;provided, however, that OptimaWellesley shall not be obligated to take any action pursuant to thisSection 5.12 unless and until Cambridge acknowledges, and OptimaWellesley is satisfied, that all conditions to Optima’sWellesley’s obligation to consummate the Merger have been satisfied and that Cambridge shall consummate the Merger in accordance with the terms of this Agreement, and further provided that in any event, no accrual or reserve made by OptimaWellesley pursuant to thisSection 5.12 or the consequences resulting therefrom shall constitute or be deemed to be a breach, violation of or failure to satisfy any representation, warranty, covenant, agreement, condition or other provision of this Agreement or otherwise be

considered in determining whether any such breach, violation or failure to satisfy shall have occurred. The recording of any such adjustments shall not be deemed to imply any misstatement of previously furnished financial statements or information and shall not be construed as concurrence of OptimaWellesley or its management with any such adjustments, nor any admission that the previously furnished financial statements or information did not fully comply in all respects with GAAP or regulatory requirements.

Section 5.13Indemnification.

(a) From and after the Effective Time, Cambridge (the “Indemnifying Party”) shall indemnify and hold harmless each present and former director and officer of Optima,Wellesley or Wellesley Bank, as applicable, determined as of the Effective Time (the “Indemnified Parties”) against any reasonable costs expenses or feesexpenses (including reasonable attorneys’ fees), judgments, amounts paid in settlement, fines, penalties, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, and whether formal or informal (each, a “Proceeding”), arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, arising in whole or in part out of or pertaining to the fact that he or she was a director or officer of OptimaWellesley or Wellesley Bank or is or was serving at the request of OptimaWellesley or Wellesley Bank as a director, officer, employee or other agent of any other organization or in any capacity with respect to any employee benefit plan of Optima,Wellesley or Wellesley Bank, including without limitation matters related to the negotiation,

execution and performance of this Agreement or any of the transactions contemplated hereby, to the fullest extent which such Indemnified Parties would be entitled under the charter or bylaws of OptimaWellesley or as provided in applicable lawWellesley Bank as in effect on the date hereof (subject to change as required by law). Cambridge’s obligations under thisSection 5.13(a) shall continue in full force and effect for a period of six years from the Effective Time;provided, however, that all rights to indemnification and advancement in respect of any Proceeding asserted or made within such period shall continue until the final disposition of such Proceeding. Notwithstanding any other provision of thisSection 5.13, the Indemnifying Party shall advance all reasonable costs, expenses and fees (including reasonable attorneys’ fees) incurred by or on behalf of an Indemnified Party in connection with any Proceeding within thirty (30) days after the receipt by the Indemnifying Party of a statement or statements from the Indemnified Party requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall be made in good faith and shall reasonably evidence the costs, expenses and fees incurred by the Indemnified Party (which shall include invoices in connection with such costs, fees and expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditure made that would cause the Indemnified Party to waive any privilege or protection accorded by applicable law shall not be included with the invoice), and shall include or be preceded or accompanied by a written undertaking by or on behalf of the Indemnified Party to repay any costs, expenses or fees advanced if it shall ultimately be determined that the Indemnified Party is not entitled to be indemnified against such costs, expenses or fees. Any advances and undertakings to repay pursuant to thisSection 5.13 shall be unsecured and interest free and made without regard to the Indemnified Party’s ability to repay such advances or ultimate entitlement to indemnification.

(b) Any Indemnified Party wishing to claim indemnification under thisSection 5.13, upon learning of any such Proceeding, shall promptly notify the Indemnifying Party, but the failure to so notify shall not relieve the Indemnifying Party of any liability it may have to such Indemnified Party except to the extent that such failure does actually prejudice the Indemnifying Party. In the event of any such Proceeding (whether arising before or after the Effective Time), (i) the Indemnifying Party shall have the right to assume the defense thereof with counsel which is reasonably satisfactory to the Indemnified Party and the Indemnifying Party shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if the Indemnifying Party elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise actual or potential conflicts of interest between the Indemnifying Party and the Indemnified Parties, the Indemnified Parties may retain counsel which is reasonably satisfactory to the Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements therefor are received, the reasonable costs,fees and expenses and fees of such counsel for the Indemnified Parties (which may not exceed one firm in any jurisdiction unless counsel for the Indemnified Parties advises that there are issues that raise conflicts

of interest between the Indemnified Parties), (ii) the Indemnified Parties will reasonably cooperate in the defense of any such matter, (iii) the Indemnifying Party shall not be liable for any settlement effected without its prior written consent and (iv) the Indemnifying Party shall have no obligation hereunder in the event that indemnification of an Indemnified Party in the manner contemplated hereby is prohibited by applicable laws and regulations or by a finalnon-appealable adjudication of an applicable federal or state banking agency or a court of competent jurisdiction.

(c) Prior to the Effective Time, Cambridge shall purchase an extended reporting period endorsement under Optima’sWellesley’s existing directors’ and officers’ liability insurance coverage for Optima’sWellesley’s directors and officers in a form acceptable to OptimaWellesley which shall provide such directors and officers with coverage for six years following the Effective Time for claims made against such directors and officers arising from any act, error or omission by such directors and officers existing or occurring at or prior to the Effective Time of not less than the existing coverage under, and have other terms at least as favorable to, the directors and officers than the directors’ and officers’ liability insurance coverage presently maintained by OptimaWellesley (provided that Cambridge may substitute therefor policies which are not materially less advantageous than such policy or single premium tail coverage with policy limits equal to Optima’sWellesley’s existing coverage limits), so long as the aggregate cost is not more than 250% of the annual premium currently paid by OptimaWellesley for such insurance (the “Premium Limit”).

In the event that the Premium Limit is insufficient for such coverage, Cambridge shall use its reasonable best efforts to purchase such lesser coverage as may be obtained with such amount.

(d) The rights of indemnification and advancement as provided by thisSection 5.13 shall not be deemed exclusive of any other rights to which the Indemnified Party may at any time be entitled under the charter or bylaws of OptimaWellesley or as provided in applicable law as in effect on the date hereof (subject to change as required by law), any agreement, a vote of stockholders, a resolution of directors of Optima,Wellesley, or otherwise. In the event that an Indemnified Party, pursuant to thisSection 5.13, seeks an adjudication of such person’s rights under, or to recover damages for breach of, thisSection 5.13, or to recover under any directors’ and officers’ liability insurance coverage maintained by OptimaWellesley or Cambridge, the Indemnifying Party shall pay on such Indemnified Party’s behalf, , any and all reasonable costs, expenses and fees (including reasonable attorneys’ fees) incurred by such Indemnified Party in such judicial adjudication, to the fullest extent permitted by law, only to the extent that the Indemnified Party prevails in such judicial adjudication.

(e) If Cambridge or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any other entity, then and in each case, proper provision shall be made so that the successors and assigns of Cambridge shall assume the obligations set forth in thisSection  5.13.

Section 5.14Employees; Benefit Plans.

(a) Following the Closing Date and except to the extent an alternative treatment is set forth in thisSection 5.14, Cambridge may choose to maintain any or all of the OptimaWellesley Benefit Plans in its sole discretion and OptimaWellesley and Wellesley Bank shall cooperate with Cambridge in order to effect any plan terminations to be made as of the Effective Time. For the period commencing at the Effective Time and ending 12 months after the Effective Timeon December 31, 2020 (or until the applicable Continuing Employee’s earlier termination of employment), Cambridge shall provide, or cause to be provided, to each employee of OptimaWellesley Bank and Wellesley who continues in employment with the Surviving Bank as of the Closing Date (a “Continuing Employee”(“Continuing Employees”) (i) a base salary or a base rate of pay at least equal to the base salarypay or base rate of paysalary provided to such Continuing Employee immediately prior to the Effective Time (ii) target cash bonus opportunities provided to similarly-situated employees of Cambridge or its Subsidiaries and (iii)(ii) other benefits (other than severance, termination pay or termination pay)equity compensation) at least substantially comparable in the aggregate to the benefits provided to similarly-situated employees of Cambridge or its Subsidiaries. Cambridge shall take all commercially reasonable action so thatsuch Continuing Employees shall be entitledEmployee immediately prior to participate in eachthe Effective Time. For any Wellesley Benefit Plan terminated for which there is a comparable employee benefit or compensation plan, program, policy, agreement or arrangement of Cambridge or any of its Subsidiaries (a “Cambridge Benefit Plan”) of general applicability, Cambridge shall take all commercially reasonable action so that employees of Wellesley or Wellesley Bank shall be entitled to participate in such Cambridge Benefit Plan to the same extent as similarly-situated employees of Cambridge (it being understood that inclusion of the employees of OptimaWellesley and Wellesley Bank in the Cambridge Benefit Plans may occur at different times with respect to different plans). Cambridge shall cause each Cambridge Benefit Plan in which Continuing Employeesemployees of Wellesley or Wellesley Bank are

eligible to participate to take into account for purposes of eligibility and vesting under the Cambridge Benefit Plans (but not for purposes of benefit accrual under a defined benefit plan)accrual) the service of such employees with OptimaWellesley or Wellesley Bank to the same extent as such service was credited for such purpose by Optima; Wellesley or Wellesley Bank;provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits or retroactive application.benefits. Nothing herein shall limit the ability of Cambridge to amend or terminate any of the OptimaWellesley Benefit Plans or Cambridge Benefit Plans in accordance with their terms at any time;provided, however, that Cambridge shall continue to maintain the OptimaWellesley Benefit Plans (other than cashstock-based or incentive equity or equity-based incentive, retention, change in control, severance, defined benefit, retiree welfare, or similar plans, programs, or agreements)plans) for which there is a comparable Cambridge Benefit Plan until the OptimaWellesley Employees are permitted to participate in the Cambridge Benefit Plans, unless such Cambridge Benefit Plan has been frozen or terminated with respect to similarly situated employees of Cambridge or any Subsidiary of Cambridge. Following the Closing Date, Cambridge shall honor, in accordance with Wellesley’s policies and procedures in effect as of the date hereof, any employee expense reimbursement obligations of Wellesley forout-of-pocket expenses incurred during the calendar year in which the Closing occurs by any Wellesley Employee whose employment continues after the Effective Time. In the event Cambridge elects to

terminate the Wellesley Bank 401(k) Plan prior to the Closing Date, Cambridge shall take any and all actions as may be required to permit Continuing Employees to roll over their account balances in the Wellesley Bank 401(k) Plan into Cambridge Bank 401(k) Plan.

(b) Cambridge shall honor, under the vacation policies of Optima,Wellesley and Wellesley Bank, as disclosed onOptimaWellesley DisclosureSchedule 3.165.14(b), the accrued but unused vacation time of each Continuing Employee.employees of the Surviving Company or the Surviving Bank who were employees of Wellesley or Wellesley Bank prior to the Effective Time.

(c) If a Continuing Employee becomesemployees of Wellesley or Wellesley Bank become eligible to participate in a medical, dental, vision, prescription drug or other health plan, disability plan or life insurance plan of Cambridge Benefit Plan upon termination of such plan of Optima,Wellesley or Wellesley Bank, Cambridge shall make all commercially reasonable efforts to cause each such plan to (i) waive any preexisting condition limitations to the extent such conditions are covered under the applicable medical, health or dental Cambridge Benefit Plan,plan, (ii) honorprovide credit under such planplans for any deductible,co-payment andout-of-pocket expenses incurred by such Continuing Employeethe employees and his or hertheir beneficiaries during the portion of the calendar year prior to such participation and (iii) waive any waiting period limitation,actively-at-work requirement or evidence of insurability requirement which would otherwise be applicable to such Continuing Employeeemployee on or after the Effective Time, in each case to the extent such employee had satisfied any similar limitation or requirement under an analogous OptimaWellesley Benefit Plan prior to the Effective Time.

(d) Any employeeConcurrently with the execution of Optima (excluding any employee who is party to an employment agreement,change-in-control agreement or any other agreement which provides for severance payments) whose employment is terminated (other than for cause) atthis Agreement, the request of Cambridge (but byCIC Agreement shall have been executed and be in the sole discretion of Optima) prior to the Effective Time, or is terminated by Cambridge or a Subsidiary of Cambridge within twelve (12) months following the Effective Date, shall be entitled to receive severance payments in an amount equal to two (2) weeks base pay for each full year of service (including all service with Optima, Cambridgeforce and any Subsidiary of Cambridge), with a minimum of two (2) and a maximum oftwenty-six (26) weeks of base pay.effect.

(e) Cambridge shall honor and perform under each agreement or contract set forth inOptimaWellesley Disclosure Schedule 3.16(f)5.14(e).

(f) Subject to the occurrence of the Closing, the Wellesley Bank ESOP shall be terminated by Wellesley Bank prior to the Closing Date. In connection with the termination of the Wellesley Bank ESOP, all plan accounts shall be fully vested, all outstanding indebtedness of the Wellesley Bank ESOP shall be repaid by delivering a sufficient number of unallocated shares of Wellesley Stock to Wellesley, at least five (5) Business Days prior to the Effective Time, all remaining shares of Wellesley Stock held by the Wellesley Bank ESOP shall be converted into the right to receive the Merger Consideration, and the balance of the unallocated shares and any other unallocated assets remaining in the Wellesley Bank ESOP after repayment of the Wellesley Bank ESOP loan shall be allocated as earnings to the accounts of the Wellesley Bank ESOP participants who are employed as of the date of termination of the Wellesley Bank ESOP based on their account balances under the Wellesley Bank ESOP as of the date of termination of the Wellesley Bank ESOP and distributed to Wellesley Bank ESOP participants after the receipt of a favorable determination letter from the IRS. Prior to the Effective Time, Wellesley Bank shall take all such actions as are necessary (determined in consultation with Cambridge) to submit the application for favorable determination letter in advance of the Effective Time. Wellesley Bank will adopt such amendments to the Wellesley Bank ESOP to effect the provisions of this Section 5.14(f). Promptly following the receipt of a favorable determination letter from the IRS regarding the qualified status of the Wellesley Bank ESOP upon its termination, the account balances in the Wellesley Bank ESOP shall either be distributed to participants and beneficiaries or transferred to an eligibletax-qualified retirement plan or individual retirement account as a participant or beneficiary may direct; provided however, that nothing contained herein shall delay the distribution or transfer of account balances in the Wellesley Bank ESOP in the ordinary course for reasons other than the termination of such plan. Prior to the Closing Date, Wellesley Bank shall provide Cambridge with the final documentation evidencing that the actions contemplated herein have been effectuated. Notwithstanding anything herein to the contrary, Wellesley Bank shall continue to accrue and make contributions to the Wellesley Bank ESOP trust from the date of this Agreement through the termination date of the Wellesley Bank ESOP in an amount sufficient (but not to exceed) the loan payments which become due in the ordinary course on the outstanding loans to the Wellesley Bank ESOP prior to the termination of the Wellesley Bank ESOP and shall make apro-rated payment on the Wellesley Bank ESOP loan for the 2020 plan

year through and including the end of the calendar quarter immediately preceding the Closing, prior to the termination of the Wellesley Bank ESOP.

(g) Wellesley Bank shall take all necessary action to terminate the Wellesley Bank Supplemental Executive Retirement Plan at or immediately prior to the Effective Time in accordance with Section 409A of the Code and to pay to each participant a lump sum amount equal to the benefit to which such participant is entitled pursuant to the terms of such plan. For illustrative purposes,Wellesley Disclosure Schedule 5.14(g) provides the aggregate lump sum amount payable to participants had the Wellesley Bank Supplemental Executive Retirement Plan been terminated on October 31, 2019.

(h) Wellesley Bank shall take all necessary action to terminate the Salary Continuation Agreement by and between Wellesley Bank and the President and Chief Executive Officer of Wellesley Bank at or immediately prior to the Effective Time in accordance with Section 409A of the Code and to pay the executive a lump sum amount equal to the benefit to which such participant is entitled pursuant to the terms of such plan. For illustrative purposes,Wellesley Disclosure Schedule 5.14(h) provides the lump sum amount payable to the participant had the Salary Continuation Agreement been terminated on December 31, 2019.

(i) Wellesley and Wellesley Bank shall take all necessary action to terminate the Employment Agreement by and among Wellesley, Wellesley Bank and the President and Chief Executive Officer of Wellesley and Wellesley Bank at or immediately prior to the Effective Time.

(j) To the extent necessary, Cambridge and OptimaWellesley may provide a retention pool as mutually agreed by Cambridge and OptimaWellesley to certain employees of OptimaWellesley or Wellesley Bank to be designated by Cambridge in consultation with Optima.Wellesley. Such designated employees will enter into retention agreements to be agreed upon by Cambridge and Optima.Wellesley.

(g)(k) Nothing contained in this Agreement, expressed or implied, shall (i) give any person, other than the parties hereto, any rights or remedies of any nature whatsoever, including any right to continued employment or service, under or by reason of thisSection 5.14, (ii) cause any third party beneficiary rights in any current or former employee, director, other individual service provider of OptimaWellesley or any of its Subsidiaries to enforce the provisions of thisSection 5.14 or any other matter related thereto, or (iii) be construed as an amendment to any OptimaWellesley Benefit Plan, Cambridge Benefit Plan, or other employee benefit plan of Cambridge, Cambridge Trust, OptimaWellesley or any of their respective Affiliates.Affiliates, or be construed to prohibit the amendment or termination of any such plan.

Section 5.15Notification of Certain Changes. Cambridge and OptimaWellesley shall promptly advise the other party of any change or event having, or which could be reasonably expected to have, a Material Adverse Effect on it or which it believes would, or which could reasonably be expected to, cause or constitute a material breach

of any of its representations, warranties or covenants contained herein. From time to time prior to the Effective Time, but no more frequently than monthly (and on the date prior to the Closing Date), each party will supplement or amend its Disclosure Schedules delivered in connection with the execution of this Agreement to reflect any matter which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedules or which is necessary to correct any information in such Disclosure Schedules which has been rendered inaccurate thereby. No supplement or amendment to such Disclosure Schedules shall have any effect for the purpose of determining the accuracy of the representations and warranties of the parties contained inArticle III andArticle IV in order to determine the fulfillment of the conditions set forth inSection 6.02(a) orSection 6.03(a) hereof, as the case may be, or the compliance by OptimaWellesley or Cambridge, as the case may be, with the respective covenants and agreements of such parties contained herein.

Section 5.16Current Information. During the period from the date of this Agreement to the Effective Time, OptimaWellesley will cause one or more of its designated representatives to confer on a regular and frequent basis

with representatives of Cambridge and to report the general status of the ongoing operations of Optima.Wellesley. Without limiting the foregoing, OptimaWellesley agrees to provide Cambridge (i) a copy of each report filed by OptimaWellesley with a Governmental Authority within one (1) Business Day following the filing thereof and (ii) monthly updates of the information required to be set forth inOptimaWellesley Disclosure Schedule 3.143.15.

Section 5.17Board Packages. OptimaWellesley shall distribute a copy of each OptimaWellesley Board package, including the agenda and any draft minutes, to Cambridge at the same time and in the same manner in which it distributes a copy of such packages to the OptimaWellesley Board;provided, however, that OptimaWellesley shall not be required to copy Cambridge on any documents that disclose confidential discussions of this Agreement or the transactions contemplated hereby or any third party proposal to acquire control of OptimaWellesley or any other matter that the OptimaWellesley Board has been advised of by counsel that such distribution to Cambridge may violate a confidentiality obligation or fiduciary duty or any law or regulation.

Section 5.18Transition; Informational Systems Conversion. From and after the date hereof, Cambridge and OptimaWellesley shall use their reasonable best efforts to facilitate the integration of OptimaWellesley with the business of Cambridge following consummation of the transactions contemplated by this Agreement, and shall meet on a regular basis to discuss and plan for the conversion of Optima’sWellesley’s data processing and related electronic informational systems (the “Informational Systems Conversion”) to those used by Cambridge and its Subsidiaries, which planning shall include, but not be limited to: (a) discussion of Optima’sWellesley’s third-party service provider arrangements;(b) non-renewal of personal property leases and software licenses used by OptimaWellesley in connection with its systems operations; (c) retention of outside consultants and additional employees to assist with the conversion; (d) outsourcing, as appropriate, of proprietary or self-provided system services; and (e) any other actions necessary and appropriate to facilitate the conversion, as soon as practicable following the Effective Time. OptimaWellesley shall take all action which is necessary and appropriate to facilitate the Informational Systems Conversion;provided, however, that Cambridge shall pay allout-of-pocket fees, expenses or charges that OptimaWellesley may incur as a result of taking, at the request of Cambridge, any action to facilitate the Informational Systems Conversion. If this Agreement is terminated by Cambridge and/or OptimaWellesley in accordance withSection 7.01(a),Section 7.01(b),Section 7.01(c) orSection 7.01(f), or by OptimaWellesley only in accordance withSection 7.01(d),Section 7.01(e) orSection 7.01(g)(v)(ii), Cambridge shall pay to OptimaWellesley all reasonable fees, expenses or charges related to reversing the Informational Systems Conversion within ten (10) business daysBusiness Days of OptimaWellesley providing Cambridge written evidence of such fees, expenses or charges.

Section 5.19Assumption of Debt. Cambridge agrees to execute and deliver, or cause to be executed and delivered, by or on behalf of the Surviving Company, at or prior to the Effective Time, one or more supplemental indentures, guarantees, and other instruments required for the due assumption of the Wellesley’s outstanding debt, guarantees, securities, and other agreements to the extent required by the terms of such debt, guarantees, securities, and other agreements.

Section 5.20Section 16 Matters. Prior to the Effective Time, the Cambridge Board, or a committee ofnon-employee directors thereof (as such term is defined for purposes of Rule16b-3(d) under the Exchange Act), shall take all such reasonable action as may be required to cause to be exempt from liability pursuant to Rule16b-3 under the Exchange Act, to the fullest extent permitted by applicable law, any acquisitions or dispositions of shares of Cambridge Stock (including derivative securities with respect to such shares) that are treated as acquisitions or dispositions under such rule and result from the transactions contemplated by this Agreement by each individual who is reasonably expected to become subject to the reporting requirements of Section  16(a) of the Exchange Act with respect to Cambridge immediately after the Effective Time.

ARTICLE VI

CONDITIONS TO CONSUMMATION OF THE MERGER

Section 6.01Conditions to Obligations of the Parties to Effect the Merger. The respective obligations of OptimaWellesley and Cambridge to consummate the Merger are subject to the fulfillment or, to the extent permitted

by applicable law, written waiver by the parties hereto prior to the Closing Date of each of the following conditions:

(a)Regulatory Approvals. All Regulatory Approvals shall have been obtained and shall remain in full force and effect, any requirements contained in the Regulatory Approvals to be completed on or before the Closing Date shall have been completed, and all statutory waiting periods in respect thereof shall have expired or been terminated.

(b)Merger Registration Statement Effective. The Merger Registration Statement shall have been declared effective by the SEC and no stop order with respect thereto shall be in effect.

(c)NASDAQ Listing. The shares of Cambridge Stock issuable pursuant to this Agreement shall have been approved for listing on NASDAQ, subject to official notice of issuance.

(d)No Injunctions or Restraints; Illegality. No judgment, order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of any of the transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Authority that prohibits or makes illegal the consummation of any of such transactions.

(e)Tax Opinions. Cambridge shall have received a letter setting forth the written opinion of Hogan Lovells US LLP, (or if Hogan Lovells US LLP is unable to issue such an opinion, of another nationally recognized law firm proposed by Optima that is reasonably acceptable to Cambridge), in and form and substance reasonably satisfactory to Cambridge, dated as of the Closing Date, and OptimaWellesley shall have received a letter setting forth the written opinion of Goodwin ProcterKilpatrick Townsend & Stockton LLP, (or if Goodwin Procter LLP is unable to issue such an opinion, of another nationally recognized law firm proposed by Cambridge that is reasonably acceptable to the Optima), in form and substance reasonably satisfactory to Optima,Wellesley, dated as of the Closing Date, in each case substantially to the effect that, on the basis of the facts, representations and assumptions set forth in such letter, the Merger will constitute a tax free reorganization described in Section 368(a) of the Code.

(f)    Executive Agreements. The Executive Agreements shall have been executed and delivered by Cambridge and Daniel Morrison and Pamela Morrison, concurrently with Optima’s execution and delivery of this Agreement.

Section 6.02Conditions to Obligations of Cambridge. The obligations of Cambridge to consummate the Merger also are subject to the fulfillment or written waiver by Cambridge prior to the Closing Date of each of the following conditions:

(a)Representations and Warranties. The representations and warranties of OptimaWellesley and Wellesley Bank set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date;provided, however, that for purposes of this paragraph, such representations and warranties shall be deemed to be true and correct in all material respects unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, will have or are reasonably likely to have a Material Adverse Effect on OptimaWellesley or the Surviving Bank.Company. Cambridge shall have received a certificate, dated the Closing Date, signed on behalf of OptimaWellesley by the Chief Executive Officer of OptimaWellesley to such effect.

(b)Performance of Obligations of OptimaWellesley. OptimaWellesley and Wellesley Bank shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Cambridge

shall have received a certificate, dated the Closing Date, signed on behalf of OptimaWellesley by the Chief Executive Officer of OptimaWellesley to such effect.

(c)Adverse Regulatory Conditions. No Regulatory Approvals referred to inSection 6.01(a) hereof shall contain any condition, restriction or requirement which the Cambridge Board of Directors of Cambridge reasonably determines in good faith would, individually or in the aggregate, materially reduce the benefits of the Merger to such a degree that Cambridge would not have entered into this Agreement had such condition, restriction or requirement been known at the date hereof.

(d)Voting Agreements. The Wellesley Voting Agreements shall have been executed and delivered by each director and certain executive officerofficers set forth on theWellesley Disclosure Schedule 6.02(d) of Optima Wellesley

concurrently with Optima’sWellesley’s execution and delivery of this Agreement and shall remain in effect and not have been revoked as of the Effective Time.

(e)Shareholder Approval. This Agreement shall have been duly approved by the requisite vote of the holders of outstanding shares of OptimaWellesley Stock.

(f)Other Actions. OptimaWellesley shall have furnished Cambridge with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth inSection 6.01 andSection 6.02 as Cambridge may reasonably request.

Section 6.03Conditions to Obligations of OptimaWellesley. The obligations of OptimaWellesley to consummate the Merger also are subject to the fulfillment or written waiver by OptimaWellesley prior to the Closing Date of each of the following conditions:

(a)Representations and Warranties. The representations and warranties of Cambridge set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date;provided, however, that for purposes of this paragraph, such representations and warranties shall be deemed to be true and correct in all material respects unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, will have or are reasonably likely to have a Material Adverse Effect on Cambridge. OptimaWellesley shall have received a certificate, dated the Closing Date, signed on behalf of Cambridge by the Chief Executive Officer and the Chief Financial Officer of Cambridge to such effect.

(b)Performance of Obligations of Cambridge. Cambridge shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and OptimaWellesley shall have received a certificate, dated the Closing Date, signed on behalf of Cambridge by the Chief Executive Officer and the Chief Financial Officer of Cambridge to such effect.

(c)Voting Agreements. The Cambridge Voting Agreements shall have been executed and delivered by each director and certain executive officers set forth on theCambridge Disclosure Schedule 6.03(c)of Cambridge concurrently with Cambridge’s execution and delivery of this Agreement and shall remain in effect and not have been revoked as of the Effective Time.

(d)Shareholder Approval. This Agreement and the issuance of shares of Cambridge Stock in connection with the Merger shall have been duly approved by the requisite vote of the holders of outstanding shares of Cambridge Stock.

(e)Other Actions. Cambridge shall have furnished OptimaWellesley with such certificates of its respective officers or others and such other documents to evidence fulfillment of the conditions set forth inSection 6.01 andSection 6.03 as OptimaWellesley may reasonably request.

Section 6.04Frustration of Closing Conditions. Neither Cambridge nor OptimaWellesley may rely on the failure of any condition set forth inSection 6.01,Section 6.02 orSection 6.03, as the case may be, to be satisfied if such failure was caused by such party’s failure to use reasonable best efforts to consummate any of the transactions contemplated by this Agreement, as required by and subject to thisArticle VI.

ARTICLE VII

TERMINATION

Section 7.01Termination. This Agreement may be terminated, and the transactions contemplated by this Agreement may be abandoned:

(a)Mutual Consent. At any time prior to the Effective Time, by the mutual consent of Cambridge and OptimaWellesley if the Board of Directors of each so determines by vote of a majority of the members of its entire Board.Board of Directors.

(b)No Regulatory Approval. By Cambridge or Optima,Wellesley, if its Board of Directors so determines by a vote of a majority of the members of its entire board, in the event the approval of any Governmental Authority required for consummation of the transactions contemplated by this Agreement shall have been denied by final, nonappealable action by such Governmental Authority or an application therefor shall have been permanently withdrawn at the request of a Governmental Authority.

(c)No Shareholder Approval. By either Cambridge or OptimaWellesley (provided that if OptimaWellesley is the terminating party it shall not be in material breach of any of its obligations underSection 5.04), if the approval of the shareholders required to satisfy either of the conditions set forth inSection 6.02(e) orSection 6.03(d) for the consummation of the transactions contemplated by this Agreement shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of such Wellesley shareholders in the case of the Wellesley Meeting or such Cambridge shareholders in the case of the Cambridge Meeting, or at any adjournment or postponement thereof.of the Wellesley Meeting or the Cambridge Meeting.

(d)Breach of Representations and Warranties. By either Cambridge or OptimaWellesley (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the representations or warranties set forth in this Agreement by the other party, which breach is not cured within thirty (30) days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the Closing;provided, however, that neither party shall have the right to terminate this Agreement pursuant to thisSection 7.01(d) unless the breach of representation or warranty, together with all other such breaches, would entitle the party receiving such representation or warranty not to consummate the Merger underSection 6.02(a) (in the case of a breach of a representation or warranty by Cambridge) orSection 6.03(a) (in the case of a breach of a representation or warranty by Optima)Wellesley or Wellesley Bank).

(e)Breach of Covenants. By either Cambridge or OptimaWellesley (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the covenants or agreements set forth in this Agreement on the part of the other party, which breach shall not have been cured within thirty (30) days following receipt by the breaching party of written notice of such breach from the other party hereto, or which breach, by its nature, cannot be cured prior to the Closing,provided, however, that neither party shall have the right to terminate this Agreement pursuant to thisSection 7.01(e) unless the breach of covenant or agreement, together with all other such breaches, would entitle the party receiving the benefit of such covenant or agreement not to consummate the Merger underSection 6.02(b) (in the case of a breach of a covenant or agreement by Optima)Wellesley or Wellesley Bank) orSection 6.03(b) in(in the case of a breach of a representation or warranty by Cambridge).

(f)Delay. By either Cambridge or OptimaWellesley if the Merger shall not have been consummated on or before September 30, 2019 (the “Termination Date”),2020, unless the failure of the Closing to occur by such date shall be due to a material breach of this Agreement by the party seeking to terminate this Agreement.

(g)Failure to Recommend; Third-Party Acquisition Transaction; Etc.

(i) By Cambridge, or Optima, if (i) OptimaWellesley shall have materially breached its obligations underSection 5.11, (ii) the OptimaWellesley Board shall have failed to make its recommendation referred to inSection 5.04, withdrawn such

recommendation or modified or changed such recommendation in a manner adverse in any respect to the interests of Cambridge, (iii) the Wellesley Board shall have recommended, proposed, or publicly announced its intention to recommend or propose, to engage in an Acquisition Transaction with any Person other than Cambridge or a Subsidiary of Cambridge or (iv) Wellesley shall have materially breached its obligations underSection 5.04 by failing to call, give notice of, convene and hold the Wellesley Meeting in accordance withSection 5.04.

(ii) By Wellesley, if (i) the Cambridge Board shall have failed to make its recommendation referred to inSection 5.04, withdrawn such recommendation or modified or changed such recommendation in a manner adverse in any respect to the interests of Cambridge, (iii) the Optima Board shall have recommended, proposed,Wellesley, or publicly announced its intention to recommend or propose, to

engage in an Acquisition Transaction with any Person other than(ii) Cambridge or a Subsidiary of Cambridge or (iv) Optima shall have materially breached its obligations underSection 5.04 by failing to call, give notice of, convene and hold the OptimaCambridge Meeting in accordance withSection 5.04.

(iii) By Wellesley, subject to Wellesley’s compliance withSection 7.02(a) if Wellesley has received a Superior Proposal, and in accordance withSection 5.11 of this Agreement, the Wellesley Board has made a determination to accept such Superior Proposal.

(h)Decrease in Cambridge Stock Price. By Optima,Wellesley, if the OptimaWellesley Board so determines by a vote of the majority of the members of the entire OptimaWellesley Board, at any time during thefive-day period commencing with the Determination Date (as defined below), if both of the following conditions are satisfied:

(A) The quotient obtained by dividing the Average Closing Price by the Starting Price (as defined below) (the “Cambridge Ratio”) shall be less than 0.80; and

(B) (x) the Cambridge Ratio shall be less than (y) the quotient obtained by dividing the Final Index Price by the Index Price on the Starting Date (each as defined below) and subtracting 0.20 from the quotient in this clause (B)(y) (such number in this clause (B)(y) that results from dividing the Final Index Price by the Index Price on the Starting Date being referred to herein as the “Index Ratio”);

subject, however, to the following three sentences. If OptimaWellesley elects to exercise its termination right pursuant to thisSection 7.01(h), it shall give written notice to Cambridge promptly, and in any event within thefive-day period commencing with the Determination Date. During thefive-day period commencing with its receipt of such notice, Cambridge shall have the option to increase the consideration to be received by the holders of OptimaWellesley Stock hereunder, by adjusting the Exchange Ratio (calculated to the nearest oneone-thousandth) to equal the lesser of (x) a number (rounded to the nearest oneone-thousandth) obtained by dividing (A) the product of the Starting Price, 0.80 and the Exchange Ratio (as then in effect) by (B) the Average Closing Price and (y) a number (rounded to the nearest oneone-thousandth) obtained by dividing (A) the product of the Index Ratio, 0.80 and the Exchange Ratio (as then in effect) by (B) the Cambridge Ratio. If Cambridge so elects within suchfive-day period, it shall give prompt written notice to OptimaWellesley of such election and the revised Exchange Ratio, whereupon no termination shall have occurred pursuant to this Section 7.01(h) and this Agreement shall remain in effect in accordance with its terms (except as the Exchange Ratio shall have been so modified.)

For purposes of thisSection 7.01(h) the following terms shall have the meanings indicated:

“Average Closing Price” shall mean the average of the daily closing prices for the shares of Cambridge Stock for the 20 consecutive full trading days on which such shares are actually traded on NASDAQ (as reported by Bloomberg or, if not reported thereby, any other authoritative source) ending at the close of trading on the Determination Date.

“Determination Date” shall mean the 10th day prior to the Closing Date, provided that if shares of the Cambridge Stock are not actually traded on NASDAQ on such day, the Determination Date shall be the immediately preceding day to the 10th day prior to the Closing Date on which shares of Cambridge Stock actually trade on NASDAQ.

“Final Index Price” shall mean the average of the Index Prices for the 20 consecutive full trading days ending on the trading day prior to the Determination Date.

“Index Group” shall mean the Nasdaq Bank Index.

“Index Price” shall mean the closing price on such date of the Index Group.

“Starting Date” shall mean the last trading day immediately preceding the date of the first public announcement of entry into this Agreement.

“Starting Price” shall mean the closing price of a share of Cambridge Stock on NASDAQ (as reported by Bloomberg, or if not reported therein, in another authoritative source) on the Starting Date.

Section 7.02Termination Fee. In recognition of the efforts, expenses and other opportunities foregone by Cambridge while structuring and pursuing the Merger, the parties hereto agree that OptimaWellesley shall pay to Cambridge a termination fee of $2,500,000$4,100,000 within three (3) Business Days after written demand for payment is made by Cambridge, following the occurrence of any of the events set forth below:

(a) Cambridge or OptimaWellesley terminates this Agreement pursuant toSection 7.01(g)(i) orSection 7.01(g)(iii); or

(b) OptimaWellesley or Wellesley Bank enters into a definitive agreement relating to an Acquisition Proposal or the consummation of an Acquisition Proposal involving OptimaWellesley or Wellesley Bank within twelve (12) months following the termination of this Agreement by Cambridge pursuant toSection 7.01(d) orSection 7.01(e) because of a Willful Breach by OptimaWellesley or Wellesley Bank after an Acquisition Proposal has been publicly announced or otherwise made known Optima.Wellesley.

Section 7.03Effect of Termination and Abandonment. In the event of termination of this Agreement and the abandonment of the Merger pursuant to thisArticle VII, no party to this Agreement shall have any liability or further obligation to any other party hereunder except (i) as set forth inSection 7.01 andSection 8.01 and (ii) that termination will not relieve a breaching party from liability for money damages for any Willful Breach of any covenant, agreement, representation or warranty of this Agreement giving rise to such termination. Nothing inSection 7.02 or thisSection 7.03 shall be deemed to preclude either party from seeking specific performance in equity to enforce the terms of this Agreement.

ARTICLE VIII

MISCELLANEOUS

Section 8.01Survival. No representations, warranties, agreements and covenants contained in this Agreement shall survive the Effective Time (other than agreements or covenants contained herein that by their express terms are to be performed after the Effective Time) or the termination of this Agreement if this Agreement is terminated prior to the Effective Time (other thanSection 5.10(b),Section 7.02 and thisArticle VIII,, which shall survive any such termination). Notwithstanding anything in the foregoing to the contrary, no representations, warranties, agreements and covenants contained in this Agreement shall be deemed to be terminated or extinguished so as to deprive a party hereto or any of its affiliates of any defense at law or in equity which otherwise would be available against the claims of any Person, including without limitation any shareholder or former shareholder.

Section 8.02Waiver; Amendment. Prior to the Effective Time, any provision of this Agreement may be (a) waived by the party benefited by the provision or (b) amended or modified at any time, by an agreement in writing among the parties hereto executed in the same manner as this Agreement, except that after the OptimaWellesley Meeting and Cambridge Meeting no amendment shall be made which by law requires further approval by the shareholders of OptimaWellesley or Cambridge, respectively, without obtaining such approval.

Section 8.03Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to constitute an original.

Section 8.04Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without regard for conflict of law provisions.

Section 8.05Expenses. Each party hereto will bear all expenses incurred by it in connection with this Agreement and the transactions contemplated by this Agreement, including fees and expenses of its own financial consultants, accountants and counsel, except that printing expenses and SEC filing and registration fees shall be shared equally between Cambridge and Optima;Wellesley;provided, however, that nothing contained herein shall limit either party’s rights to recover any liabilities or damages arising out of the other party’s Willful Breach of any provision of this Agreement.

Section 8.06Notices. All notices, requests and other communications hereunder to a party shall be in writing and shall be deemed given if personally delivered, mailed by registered or certified mail (return receipt requested) or sent by reputable courier service to such party at its address set forth below or such other address as such party may specify by notice to the parties hereto.

If to Cambridge:

Cambridge Bancorp

1336 Massachusetts Avenue

Cambridge, MA 02138

Attention:   Denis K. Sheahan

Email:         Denis.Sheahan@cambridgetrust.com

Telephone:617-441-1533

With a copy to:

Hogan Lovells US LLP

555 Thirteenth Street, N.W.

Washington, DC 20004

Attention:    Richard A. Schaberg

Email:          richard.schaberg@hoganlovells.com

Telephone:202-637-5671

If to Optima:Wellesley:

Optima Bank & Trust CompanyWellesley Bancorp, Inc.

Two Harbour Place100 Worcester Street, Suite 300

Portsmouth, NH 03801Wellesley, MA 02481

Attention:    Daniel R. MorrisonThomas J. Fontaine

Email:          dmorrison@optimabank.com

Telephone:603-433-9600tom@wellesleybank.com

With a copy to:

Goodwin Procter LLPKilpatrick Townsend & Stockton

100 Northern Avenue607 14th Street, NW Suite 900

Boston, MA 02210Washington, DC 20005

Attention: Samantha M. KirbyGary R. Bronstein and William P. MayerEdward G. Olifer

Email:          Skirby@goodwinlaw.com and wmayer@goodwinlaw.comgbronstein@kilpatricktownsend.com

Telephone:617-523-1231eolifer@kilatricktownsend.com

Section 8.07Entire Understanding; No Third Party Beneficiaries. This Agreement, the Plan of Bank Merger, the Wellesley Voting Agreements, the Cambridge Voting Agreements and the Confidentiality Agreement represent the entire understanding of the parties hereto and thereto with reference to the transactions,

and this Agreement, the Plan of Bank Merger, the Wellesley Voting Agreements, the Cambridge Voting Agreements and the Confidentiality Agreement supersede any and all other oral or written agreements heretofore made. Except for the Indemnified Parties’ right to enforce Cambridge’s obligation underSection 5.13, which are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives, nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

Section 8.08Severability. In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.

Section 8.09Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

Section 8.10Interpretation. When a reference is made in this Agreement to sections, exhibits or schedules, such reference shall be to a section of, or exhibit or schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

Section 8.11Assignment. No party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

ARTICLE IX

ADDITIONAL DEFINITIONS

Section 9.01Additional Definitions. In addition to any other definitions contained in this Agreement, the following words, terms and phrases shall have the following meanings when used in this Agreement:

“Acquisition Proposal” means any proposal or offer with respect to any of the following (other than the transactions contemplated hereunder) involving Optima:Wellesley or Wellesley Bank: (a) any merger, consolidation, share exchange, business combination or other similar transactions; (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets and/or liabilities that constitute a substantial portion of the net revenues, net income or assets of OptimaWellesley or Wellesley Bank in a single transaction or series of transactions; (c) any tender offer or exchange offer for 10%25% or more of the outstanding shares of its capital stock or the filing of a registration statement under the Securities Act in connection therewith; or (d) any public announcement by any Person (which shall include any regulatory application or notice, whether in draft or final form) of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

“Acquisition Transaction” means any of the following (other than the transactions contemplated hereunder): (a) a merger, consolidation, share exchange, business combination or any similar transaction, involving the

relevant companies; (b) a sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets and/or liabilities that constitute a substantial portion of the net revenues, net income or assets of the relevant companies in a single transaction or series of transactions; (c) a tender offer or exchange offer for 10%25% or more of the outstanding shares of the capital stock of the relevant companies or the filing of a registration statement under the Securities Act in connection therewith; or (d) an agreement or commitment by the relevant companies to take any action referenced above.

“Affiliate” means, with respect to any Person, any person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person and, without limiting the generality of the foregoing, includes any executive officer, director, manager or Person who beneficially owns more than ten percent of the equity or voting securities of such Person.

“Bank Merger Act” means the Bank Merger Act, within the Federal Deposit Insurance Act and applicable regulations thereunder.

“Bank Regulator” shall mean any Federal or state banking regulator, including but not limited to the FDIC, the FRB,MGL, the Massachusetts Commissioner of BanksMDOB, the FHLB and the New Hampshire Bank Commissioner,FRB, which regulates Cambridge, Cambridge Trust, Wellesley or Optima,Wellesley Bank, or any of their respective subsidiaries, as the case may be.

“Business Day” means Monday through Friday of each week, except a legal holiday recognized as such by the U.S. government or any day on which banking institutions in the Commonwealth of Massachusetts are authorized or obligated to close.

“Cambridge Board” means the Board of Directors of Cambridge.

“Cambridge Disclosure Schedule” means the disclosure schedule delivered by Cambridge to OptimaWellesley on or prior to the date hereof setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express provision of this Agreement or as an exception to one or more of its representations and warranties inArticle IV or its covenants inArticle V.

“Cambridge Loan Property” means any property in which Cambridge or Cambridge Trust holds a security interest, and, where required by the context (as a result of foreclosure), said term includes any property owned or operated by Cambridge or Cambridge Trust.

“Cambridge Stock” means the common stock, par value $1.00 per share, of Cambridge.

“Certificate” means any certificate that immediately prior to the Effective Time represents shares of Optima Stock.

“Derivative Transaction” means any swap transactions,transaction, option, warrant, forward purchase or forward sale transactions,transaction, futures transactions,transaction, cap transactions,transaction, floor transactionstransaction or collar transactionstransaction relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, catastrophe events, weather-related events,credit-related events or conditions or any indexes, or any other similar transactionstransaction (including any option with respect to any of these transactions) or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions.

“Employee Stock Incentive Plan” means, with respect to Cambridge, the Amended 1993 Stock Option Plan, the 2017 Equity and Cash Incentive Plan, the Director Stock Plan and the 2016 Annual Incentive Plan.

“Environmental Law” means any federal, state or local law, regulation, order, decree, permit, authorization, opinion or agency requirement relating to: (a) the protection or restoration of the environment, health, safety, or natural resources, (b) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (c) wetlands, indoor air, pollution, contamination or any injury or threat of injury to persons or property in connection with any Hazardous Substance.Substance, in each case as amended and as now in effect.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“Exchange Agent” means such exchange agent as may be designated by Cambridge and reasonably acceptable to OptimaWellesley to act as agent for purposes of conducting the exchange procedures described inArticle II.

“FDIC” means the Federal Deposit Insurance Corporation.

“FHLB” means the Federal Home Loan Bank of Boston, or any successor thereto.

“FRB” means the Board of Governors of the Federal Reserve System.

“GAAP” means accounting principles generally accepted in the United States of America.

“Governmental Authority” means any federal, state or local court, administrative agency or commission or other governmental authority or instrumentality.

“Hazardous Substance” means any and all substances (whether solid, liquid or gas) defined, currently or hereafter listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, mold, mycotoxins, microbial matter and airborne pathogens (naturally occurring or otherwise), but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purposes of cleaning or other maintenance or operations.

“Intellectual Property” means (a) trademarks, service marks, trade names, Internet domain names, designs, logos, slogans, and general intangibles of like nature, together with all goodwill associated therewith, registrations and applications related to the foregoing; (b) patents and industrial designs (including any continuations, divisionals,continuations-in-part, renewals, reissues, and applications for any of the foregoing); (c) copyrights in both published and unpublished works (including any registrations and applications for any of the foregoing); (d) Software; and (e) technology, trade secrets and other confidential information,know-how, proprietary processes, formulae, algorithms, models, and methodologies; and (f) claims of infringement against third parties.methodologies.

“IRS” means the Internal Revenue Service.

“Joint Proxy Statement/Prospectus” means the joint proxy statement and prospectus, satisfying all applicable requirements of applicable state securities and banking laws, and of the Securities Act, and the rules and regulations thereunder, together with any amendments and supplements thereto, as prepared by Cambridge and Wellesley and as delivered to holders of Wellesley Stock and Cambridge Stock in connection with the solicitation of their approval of this Agreement.

“Knowledge” shall mean,as used with respect to any fact, event or occurrence, (i) in the casea Person (including references to such Person being aware of Optima,a particular matter) means the actual knowledge after reasonable inquiry of those certain executive officers of Optima listed onOptima Disclosure Schedule 9.01, or (ii)the President and Chief Executive Officer, the Chief Financial Officer, the Chief Lending Officer and the Chief Client Experience Officer in the case of CambridgeWellesley, and its Subsidiaries, the actual knowledge after reasonable inquiryPresident, the Chief Executive Officer, the Chief Lending Officer and the Chief Financial Officer in the case of one or more of Cambridge’s executive officers, all of whom are listed onCambridge Disclosure Schedule 9.01.Cambridge.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any

conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or preemptive right, right of first refusal or similar right of a third party with respect to such securities.

“Material Adverse Effect” means, with respect to Cambridge or Optima,Wellesley, respectively, any effect that (i) is material and adverse to the financial condition, results of operations or business of Cambridge and its Subsidiaries taken as a whole, or OptimaWellesley and its Subsidiaries taken as a whole, respectively, or (ii) materially impairs the ability of either Cambridge or Cambridge Trust, on the one hand, or Optima,Wellesley or Wellesley Bank, on the other hand, to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the transactions contemplated by this Agreement;provided that “Material��Material Adverse Effect” shall not be deemed to include the impact of (A) changes, after the date hereof, in GAAP or applicable regulatory accounting requirements, (B) changes, after the date hereof, in laws, rules or regulations of general applicability to financial institutions and/or their holding companies, or interpretations thereof by courts or any Bank Regulator or Governmental Authorities, (C) changes, after the date hereof, in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in economic or market (including equity, credit and debt markets, as well as changes in interest rates) conditions affecting the financial services industry generally and not specifically relating to such party or its Subsidiaries, (D) public disclosure of the execution of this Agreement, public disclosure or consummation of the transactions contemplated hereby (including any effect on a party’s relationships with its customers or employees) or actions expressly required by this Agreement or actions or omissions that are taken with the prior written consent of the other party in contemplation of the transactions contemplated hereby, (E) a decline in the trading price of a party’s common stock or the failure, in and of itself, to meet earnings projections or internal financial forecasts (it being understood that the underlying cause of such decline or failure may be taken into account in determining whether a Material Adverse Effect has occurred), (F) actions and omissions of either party taken with the prior written consent, or at the request, of the other, (G) any failure by either party to meet any internal projections or forecasts or estimates of revenues or earnings for any period, (H) the expenses incurred by either party in investigating, negotiating, documenting, effecting and consummating the transactions contemplated by this Agreement, or (G) any failure by the to meet any internal projections or

forecasts or estimates of revenues or earnings for any period;Agreement; except, with respect to subclauses (A), (B), or (C), to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its Subsidiaries, taken as a whole, as compared to other companies in the financial services industry.

“Merger Consideration”MDOB” means the cash or Cambridge Stock, or combination thereof, in an aggregate per share amount to be paid by Cambridge for each shareMassachusetts Division of Optima Stock, pursuant to the terms ofArticle II.Banks.

“NASDAQ” means The NASDAQ Stock Market LLC.

“Optima Board” means the Board of Directors of Optima.

“Optima Disclosure Schedule” means the disclosure schedule delivered by Optima to Cambridge on or prior to the date hereof setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express provision of this Agreement or as an exception to one or more of its representations and warranties inArticle III or its covenants inArticle V.

“Optima Intellectual Property” means the Intellectual Property used in or held for use in the conduct of the business of Optima.

“Optima Loan Property” means any property in which Optima holds a security interest, and, where required by the context (as a result of foreclosure), said term includes any property owned or operated by Optima.

“Optima Option” means an option to purchase shares of Optima Stock including, but not limited to, an option to purchase shares of Optima Stock under an Optima Stock Option Plan.

“Optima Stock Option Plan” means, with respect to Optima, the Optima Bank & Trust Company 2008 Stock Option and Incentive Plan and the Optima Bank & Trust Company Amended and Restated 2011 Stock Option and Incentive Plan.

“Per Share Consideration” means the sumproduct of (a) the product of (i) the Exchange Ratio (ii)and (b) the Cambridge Measurement Price, and (iii) 0.95, plus (b) the product of (i) 0.05 and (ii) the Cash Consideration per share of Optima Stock.Price.

“Person” means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability company, unincorporated organization or other organization or firm of any kind or nature.

“Proxy Statement/Prospectus” means the proxy statement and prospectus, satisfying all applicable requirements of applicable state securities and banking laws, and of the Securities Act, and the rules and regulations thereunder, together with any amendments and supplements thereto, as prepared by Cambridge and Optima and as delivered to holders of Optima Stock in connection with the solicitation of their approval of this Agreement.

“Regulatory Approvals” means any approval, waiver or anynon-objection from any Governmental Authority necessary to consummating the Merger and the other transactions contemplated by this Agreement, including, without limitation, (a) the waiver or approval of the FRB, (b) the approval of the FDIC, (c) the approval of the Massachusetts Commissioner of Banks, and (d) the approval of the New Hampshire Banks Commissioner.

“Rights” means, with respect to any Person, warrants, options, rights, convertible securities and other arrangements or commitments which obligate the Person to issue or dispose of any of its capital stock or other ownership interests.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Software” means computer programs, whether in source code or object code form (including any and all software implementation of algorithms, models and methodologies), databases and compilations (including any and all data and collections of data), and all documentation (including user manuals and training materials) related to the foregoing.

“Subsidiary” means, with respect to any party, any corporation or other entity of which a majority of the capital stock or other ownership interest having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such party.

“Superior Proposal” means any bona fide written proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 25% of the combined voting power of the shares of OptimaWellesley Stock then outstanding or all or substantially all of the assets of OptimaWellesley and otherwise (a) on terms which the OptimaWellesley Board determines in good faith, after consultation with its financial advisor, to be more favorable from a financial point of view to Optima’sWellesley’s shareholders than the transactions contemplated by this Agreement, and (b) that constitutes a transaction that, in the OptimaWellesley Board’s good faith judgment, is reasonably likely to be consummated on the terms set forth, taking into account all legal, financial, regulatory and other aspects of such proposal.

“Tax” and “Taxes” mean all federal, state, local or foreign income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, custom duties, unemployment or other taxes of any kind whatsoever, together with any interest, additions or penalties thereto and any interest in respect of such interest and penalties.

“Tax Returns” means any return, declaration or other report (including elections, declarations, schedules, estimates and information returns) with respect to any Taxes.

“Wellesley Bank Board” means the Board of Directors of Wellesley Bank.

“Wellesley Board” means the Board of Directors of Wellesley.

“Wellesley Disclosure Schedule” means the disclosure schedule delivered by Wellesley to Cambridge on or prior to the date hereof setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express provision of this Agreement or as an exception to one or more of its representations and warranties inArticle III or its covenants inArticle V.

“Wellesley Equity Plan” means the Wellesley Bancorp, Inc. 2012 Equity Incentive Plan or the Wellesley Bancorp, Inc. 2016 Equity Incentive Plan.

“Wellesley Intellectual Property” means the Intellectual Property used in or held for use in the conduct of the business of Wellesley or any of its Subsidiaries.

“Wellesley Loan Property” means any property in which Wellesley or Wellesley Bank holds a security interest, and, where required by the context (as a result of foreclosure), said term includes any property owned or operated by Wellesley or Wellesley Bank.

“Wellesley Option” means an option to purchase shares of Wellesley Stock including, but not limited to, an option to purchase shares of Wellesley Stock under a Wellesley Stock Option Plan.

“Wellesley Stock Option Plan” means, with respect to Wellesley, the Wellesley Bancorp, Inc. 2012 Equity Incentive Plan.

“Willful Breach” means a deliberate act or a deliberate failure to act, taken or not taken if the Person reasonably should have known or had actual Knowledge that such act or failure to act would result in or constitute a material breach of this Agreement, regardless of whether breaching was the object of the act or failure to act.

(Remainder of page intentionally left blank.)

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in counterparts by their duly authorized officers, all as of the day and year first above written.

 

CAMBRIDGE BANCORP
By: 

 /s//s/ Denis K. Sheahan

Name: Denis K. Sheahan
Title: Chairman and Chief Executive Officer

CAMBRIDGE TRUST COMPANY
By: 

 /s//s/ Denis K. Sheahan

Name: Denis K. Sheahan
Title: Chairman and Chief Executive Officer

OPTIMA BANK & TRUST COMPANYWELLESLEY BANCORP, INC.
By: 

 /s/ Daniel R. Morrison/s/ Thomas J. Fontaine

Name: Daniel R. MorrisonThomas J. Fontaine
Title: Chairman, President and Chief Executive Officer
WELLESLEY BANK
By:

/s/ Thomas J. Fontaine

Name:Thomas J. Fontaine
Title:President and Chief Executive Officer

[Signature Page to Agreement and Plan of Merger]

Exhibit A

Form of Wellesley Voting Agreement

VOTING AGREEMENT

This VOTING AGREEMENT(this “Agreement”) is dated as of December     , 2018,2019, by and between the undersigned holder (“Shareholder”) of common stock, par value $1.00$0.01 per share (“OptimaWellesley Common Stock”) of OptimaWellesley Bancorp, Inc., a Maryland corporation and registered bank holding company under the Bank & TrustHolding Company a New Hampshire-chartered bankAct of 1956, as amended (“OptimaWellesley”), and Cambridge Bancorp, a Massachusetts corporation (“Cambridge”). All terms used herein and not defined herein shall have the meanings assigned thereto in the Merger Agreement (as defined below).

WHEREAS,concurrently with the execution of this Agreement, Cambridge, Cambridge Trust, a Massachusetts-chartered trust company and wholly owned subsidiary of Cambridge (“Cambridge Trust”), Wellesley and OptimaWellesley Bank, a Massachusetts-chartered bank and wholly owned subsidiary of Wellesley (“Wellesley Bank”), are entering into an Agreement and Plan of Merger (as such agreement may be subsequently amended or modified, the “Merger Agreement”), pursuant to which OptimaWellesley shall merge with and into Cambridge, and Wellesley Bank shall merge with and into Cambridge Trust, and in connection therewith, each outstanding share of OptimaWellesley Common Stock will be converted into the right to receive the Merger Consideration;

WHEREAS,Shareholder beneficially owns and has sole or shared voting power with respect to the number of shares of OptimaWellesley Stock identified onExhibit A hereto (such shares, together with all shares of OptimaWellesley Stock with respect to which Shareholder subsequently acquires beneficial ownership during the term of this Agreement, including the right to acquire beneficial ownership (as defined in Rule13d-3 under the Securities Exchange Act of 1934, as amended) through the exercise of any stock options, warrants or similar instruments, being referred to as the “Shares”); and

WHEREAS,it is a condition to the willingness of Cambridge to enter into the Merger Agreement that Shareholder execute and deliver this Agreement.

NOW, THEREFORE,in consideration of the promises, representations, warranties and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.Agreement to Vote Shares. Shareholder agrees that, while this Agreement is in effect, at any meeting of shareholders of Optima,Wellesley, however called, or at any adjournment thereof, or in any other circumstances in which Shareholder is entitled to vote, consent or give any other approval, except as otherwise agreed to in writing in advance by Cambridge, Shareholder shall:

 

 (a)

appear at each such meeting or otherwise cause the Shares to be counted as present thereat for purposes of calculating a quorum; and

 

 (b)

vote (or cause to be voted), in person or by proxy, all the Shares (whether acquired heretofore or hereafter) that are beneficially owned by Shareholder or as to which Shareholder has, directly or indirectly, the right to vote or direct the voting, (i) in favor of adoption and approval of the Merger Agreement and the transactions contemplated thereby; (ii) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of OptimaWellesley contained in the Merger Agreement or of Shareholder contained in this Agreement; and (iii) against any Acquisition Proposal or any other action, agreement or transaction that is intended, or could reasonably be expected, to materially impede, interfere or be inconsistent with, delay, postpone, discourage or materially and adversely affect consummation of the transactions contemplated by the Merger Agreement or of this Agreement.Agreement;provided, however, that, if the manner in which the Shares (or any portion thereof) are owned is such that the Shareholder does not have the right to cause the Shares to be so voted, the Shareholder shall use the Shareholder’s reasonable best efforts to cause the Shares to be so voted.

Section 2.No Transfers. While this Agreement is in effect, Shareholder agrees not to, directly or indirectly, sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option, commitment or other

arrangement or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, any of the Shares, except the following transfers shall be permitted: (a) transfers by will or operation of law, in which case this Agreement shall bind the transferee, (b) transfers pursuant to any pledge agreement, subject to the pledgee agreeing in writing to be bound by the terms of this Agreement, (c) transfers in connection with estate and tax planning purposes, including transfers to relatives, trusts and charitable organizations, subject to the transferee agreeing in writing to be bound by the terms of this Agreement, (d) a transfer of the Shares by the Shareholder to Wellesley in connection with the vesting, settlement, or exercise of Wellesley equity awards granted pursuant to a Wellesley employee benefits plan outstanding as of the date hereof, and (d)(e) such transfers as Cambridge may otherwise permit in its sole discretion. Any transfer or other disposition in violation of the terms of this Section 2 shall be null and void.

Section 3.Representations and Warranties of Shareholder. Shareholder represents and warrants to and agrees with Cambridge as follows:

 

 (a)

Shareholder has all requisite capacity and authority to enter into and perform his, her or its obligations under this Agreement.

 

 (b)

This Agreement has been duly executed and delivered by Shareholder, and assuming the due authorization, execution and delivery by Cambridge, constitutes the valid and legally binding obligation of Shareholder enforceable against Shareholder in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

 

 (c)

The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of his, her or its obligations hereunder and the consummation by Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which Shareholder is a party or by which Shareholder is bound, or any statute, rule or regulation to which Shareholder is subject or, in the event that Shareholder is a corporation, partnership, trust or other entity, any charter, bylaw or other organizational document of Shareholder.

 

 (d)

Except as set forth on Schedule 1, Shareholder is the record and beneficial owner of, or is the trustee that is the record holder of, and whose beneficiaries are the beneficial owners of, and has good title to all of the Shares set forth onExhibit A hereto, and the Shares are so owned free and clear of any liens, security interests, charges or other encumbrances. Shareholder does not own, of record or beneficially, any shares of capital stock of OptimaWellesley other than the Shares (other than shares of capital stock subject to stock options or warrants over which Shareholder will have no voting rights until the exercise of such stock options or warrants). Shareholder has the right to vote the Shares and none of the Shares are subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of the Shares, except as contemplated by this Agreement.

Section 4.Irrevocable Proxy. Subject to the last sentence of this Section 4, by execution of this Agreement, Shareholder does hereby appoint Cambridge with full power of substitution and resubstitution, as Shareholder’s true and lawful attorney and irrevocable proxy, to the full extent of Shareholder’s rights with respect to the Shares, to vote, if Shareholder is unable to perform his, her or its obligations under this Agreement, each of such Shares that Shareholder shall be entitled to so vote with respect to the matters set forth in Section 1 hereof at any meeting of the shareholders of Optima,Wellesley, and at any adjournment or postponement thereof, and in connection with any action of the shareholders of OptimaWellesley taken by written consent. The Shareholder intends this proxy to be irrevocable and coupled with an interest hereafter until the termination of this Agreement pursuant to the terms of Section 7 hereof and hereby revokes any proxy previously granted by Shareholder with respect to the Shares. Notwithstanding anything contained herein to the contrary, this irrevocable proxy shall automatically terminate upon the termination of this Agreement.

Section 5.No Solicitation. From and after the date hereof until the termination of this Agreement pursuant to Section 7 hereof, Shareholder, in his, her or its capacity as a shareholder of Optima,Wellesley, shall not, nor shall such

Shareholder authorize any partner, officer, director, advisor or representative of, such Shareholder or any of his,

her or its affiliates to (and, to the extent applicable to Shareholder, such Shareholder shall use reasonable best efforts to prohibit any of his, her or its representatives or affiliates to), (a) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (b) participate in any discussions or negotiations regarding any Acquisition Proposal, or furnish, or otherwise afford access, to any person (other than Cambridge) any information or data with respect to OptimaWellesley or Wellesley Bank or otherwise relating to an Acquisition Proposal, (c) enter into any agreement, agreement in principle or letter of intent with respect to an Acquisition Proposal (other than the Merger Agreement), (d) solicit proxies or become a “participant” in a “solicitation” (as such terms are defined in Regulation 14A under the Exchange Act) with respect to an Acquisition Proposal (other than the Merger Agreement) or otherwise encourage or assist any party in taking or planning any action that would compete with, restrain or otherwise serve to interfere with or inhibit the timely consummation of the Merger in accordance with the terms of the Merger Agreement, (e) initiate a shareholders’ vote or action by consent of Optima’sWellesley’s shareholders with respect to an Acquisition Proposal, or (f) except by reason of this Agreement, become a member of a “group” (as such term is used in Section 13(d) of the Exchange Act) with respect to any voting securities of OptimaWellesley that takes any action in support of an Acquisition Proposal.

Section 6.Specific Performance and Remedies. Shareholder acknowledges that it will be impossible to measure in money the damage to Cambridge if Shareholder fails to comply with the obligations imposed by this Agreement and that, in the event of any such failure, Cambridge will not have an adequate remedy at law or in equity. Accordingly, Shareholder agrees that injunctive relief or other equitable remedy, in addition to remedies at law or in damages, is the appropriate remedy for any such failure and will not oppose the granting of such relief on the basis that Cambridge has an adequate remedy at law. Shareholder agrees that Shareholder will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with Cambridge’s seeking or obtaining such equitable relief.

Section 7.Term of Agreement; Termination. The term of this Agreement shall commence on the date hereof. This Agreement may be terminated at any time prior to consummation of the transactions contemplated by the Merger Agreement by the written consent of the parties hereto, and shall be automatically terminated upon the earlier to occur of: (a) the Effective Time or (b) in the event that the Merger Agreement is terminated in accordance with its terms. Upon any such termination, no party shall have any further obligations or liabilities hereunder; provided, however, such termination shall not relieve any party from liability for any willful breach of this Agreement prior to such termination.

Section 8.Entire Agreement; Amendments. This Agreement supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.

Section 9.Severability. In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.

Section 10.Capacity as Shareholder. The covenants contained herein shall apply to Shareholder solely in his or her capacity as a shareholder of Optima,Wellesley, and no covenant contained herein shall apply to Shareholder in his or her capacity as a director, officer or employee of OptimaWellesley or in any other capacity. Nothing contained in this Agreement shall be deemed to apply to, or limit in any manner, the obligations of Shareholder to comply with his or her fiduciary duties as a director of Optima.Wellesley.

Section 11.Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without regard for conflict of law provisions.

Section 12.Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Cambridge in accordance with Section 8.06 of the Merger Agreement and to each Shareholder at its address set forth onExhibit A attached hereto (or at such other address for a party as shall be specified by like notice).

(Remainder of page intentionally left blank.)

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.

 

CAMBRIDGE BANCORP
By: 

 

Name: Denis K. Sheahan
Title: Chairman and Chief Executive Officer

SHAREHOLDER

 

Name: 

EXHIBIT A

 

NAME AND ADDRESS

OF SHAREHOLDER

 

SHARES OF OPTIMA
WELLESLEY COMMON STOCK

BENEFICIALLY
OWNED

 

Exhibit B

Form of ExecutiveCambridge Voting Agreement

VOTING AGREEMENT

This VOTING AGREEMENT(this “Agreement”) is dated as of December     , 2019, by and between the undersigned holders (“Shareholders”) of common stock, par value $1.00 per share (“Cambridge Common Stock”) of Cambridge Bancorp,

1336 a Massachusetts Avenue

Cambridge, Massachusetts 02138

December 5, 2018

[EMPLOYEE]

Optimacorporation and registered bank holding company under the Bank & TrustHolding Company

Two Harbour Place

Portsmouth, NH 03801

Dear [EMPLOYEE]:

As you know, Cambridge Bancorp Act of 1956, as amended (“Cambridge”), and Wellesley Bancorp, Inc., a Maryland corporation (“Wellesley”). All terms used herein and not defined herein shall have the meanings assigned thereto in the Merger Agreement (as defined below).

WHEREAS,concurrently with the execution of this Agreement, Cambridge, Cambridge Trust, Company (the “a Massachusetts-chartered trust company and wholly owned subsidiary of Cambridge (“CompanyCambridge Trust”), Wellesley and OptimaWellesley Bank, & Trust Companya Massachusetts-chartered bank and wholly owned subsidiary of Wellesley (“OptimaWellesley Bank”) have entered, are entering into negotiations for Cambridge’s acquisition of Optima pursuant to an Agreement and Plan of Merger (such acquisition, the “Transaction” and any(as such agreement may be subsequently amended or modified, the “Merger Agreement”)., pursuant to which Wellesley shall merge with and into Cambridge, and Wellesley Bank shall merge with and into Cambridge Trust, and in connection therewith, each outstanding share of Wellesley Common Stock will be converted into the right to receive the Merger Consideration;

The following termsWHEREAS,eachShareholder beneficially owns and conditions of employment will completely replace and supersede any previous employment, compensation, change in control,has sole or severance agreement executed between you and Optima (including but not limitedshared voting power with respect to the Employmentnumber of shares of Cambridge Stock identified opposite such Shareholder’s name onExhibit A hereto (such shares, together with all shares of Cambridge Stock with respect to which such Shareholder subsequently acquires beneficial ownership during the term of this Agreement, by and between you and Optima, dated [DATE OF EMPLOYMENT AGREEMENT]including the right to acquire beneficial ownership (as defined in Rule13d-3 under the Securities Exchange Act of 1934, as amended) through the exercise of any stock options, warrants or similar instruments, being referred to as the “Shares”); provided, however, that nothing hereinand

WHEREAS,it is intendeda condition to impact the terms and conditionswillingness of the Settlement Agreement by and among Cambridge, the Company, Optima, and you, delivered concurrently herewith. Contingent on the successful consummation of the Transaction, the following terms and conditions of employment will become effective as of the “Effective Date” as defined inWellesley to enter into the Merger Agreement (the “Effective Date”).that the Shareholders execute and deliver this Agreement.

Commencing asNOW, THEREFORE,in consideration of the Effective Date, I am pleased to offer you employment withpromises, representations, warranties and agreements contained herein, and for other good and valuable consideration, the Company. You will serve as [TITLE]. This letter confirms our offer of employmentreceipt and includes details of the financial arrangements.

Your office will be located in Portsmouth, New Hampshire. You will report to [●]. You will be expected to devote your full business time and attention to your duties and responsibilities on behalf of the Company.

For your services, we will provide you with the following compensation and benefits, alladequacy of which shall be subjectare hereby acknowledged, the parties hereto agree as follows:

Section 1.Agreement to all applicable taxes and withholdings.Vote Shares. Each Shareholder agrees that, while this Agreement is in effect, at any meeting of shareholders of Cambridge, however called, or at any adjournment thereof, or in any other circumstances in which such Shareholder is entitled to vote, consent or give any other approval, except as otherwise agreed to in writing in advance by Wellesley, such Shareholder shall:

 

1.(c)

Base Salary. You willappear at each such meeting or otherwise cause such Shareholder’s Shares to be paidcounted as present thereat for purposes of calculating a base salary at the annualized rate of $[●]. The base salary will be paid in accordance with our regular payroll practices.quorum; and

 

2.(d)

Bonus. You willvote (or cause to be eligiblevoted), in person or by proxy, all the Shares (whether acquired heretofore or hereafter) that are beneficially owned by such Shareholder or as to receive an annual performance-based cash bonuswhich such Shareholder has, directly or indirectly, the right to vote or direct the voting, (i) in favor of up to $[●] (your “Target Incentive Opportunity”) based upon achievement of targeted, agreed-upon goals, both Company-wideadoption and individual. Your actual annual performance-based cash bonus shall be determined by the Company and may range from no payout for not achieving threshold performance to amounts in excessapproval of the Target Incentive Opportunity for stretch performance. Any actual annual performance-based bonus earned by you for a calendar year will be paid or settled no later than March 15thMerger Agreement and the transactions contemplated thereby; (ii) in favor of the following year.issuance of shares of Cambridge Common Stock in connection with the Merger; and (iii) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Cambridge contained in the Merger Agreement or of such Shareholder contained in this Agreement;provided, however, that, if the manner in which such Shareholder’s Shares (or any portion thereof) are owned is such that such Shareholder does not have the right to cause such Shares to be so voted, such Shareholder shall use such Shareholder’s reasonable best efforts to cause such Shares to be so voted.

Section 2.No Transfers. While this Agreement is in effect, each Shareholder agrees not to, directly or indirectly, sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option, commitment or other arrangement or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, any of such Shareholder’s Shares, except the following transfers shall be permitted: (a) transfers by will or operation of law, in which case this Agreement shall bind the transferee, (b) transfers pursuant to any pledge agreement, subject to the pledgee agreeing in writing to be bound by the terms of this Agreement, (c) transfers in connection with estate and tax planning purposes, including transfers to relatives, trusts and charitable organizations, subject to the transferee agreeing in writing to be bound by the terms of this Agreement, (d) a transfer of such Shares by such Shareholder to Cambridge in connection with the vesting, settlement, or exercise of Cambridge equity awards granted pursuant to a Cambridge employee benefits plan outstanding as of the date hereof, and (e) such transfers as Wellesley may otherwise permit in its sole discretion. Any transfer or other disposition in violation of the terms of this Section 2 shall be null and void.

Section 3.Representations and Warranties of Shareholder. Each Shareholder severally represents and warrants to and agrees with Wellesley as follows:

(e)

Such Shareholder has all requisite capacity and authority to enter into and perform his, her or its obligations under this Agreement.

 

3.(f)

This Agreement has been duly executed and delivered by such Shareholder, and assuming the due authorization, execution and delivery by Wellesley, constitutes the valid and legally binding obligation of such Shareholder enforceable against such Shareholder in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(g)

The execution and delivery of this Agreement by such Shareholder does not, and the performance by such Shareholder of his, her or its obligations hereunder and the consummation by such Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which such Shareholder is a party or by which such Shareholder is bound, or any statute, rule or regulation to which such Shareholder is subject or, in the event that such Shareholder is a corporation, partnership, trust or other entity, any charter, bylaw or other organizational document of such Shareholder.

(h)

Except as set forth on Schedule 1, such Shareholder is the record and beneficial owner of, or is the trustee that is the record holder of, and whose beneficiaries are the beneficial owners of, and has good title to all of the Shares set forth opposite such Shareholder’s name onEquity IncentiveExhibit A hereto, and such Shares are so owned free and clear of any liens, security interests, charges or other encumbrances. Such Shareholder does not own, of record or beneficially, any shares of capital stock of Cambridge other than such Shares (other than shares of capital stock subject to stock options or warrants over which such Shareholder will have no voting rights until the exercise of such stock options or warrants). SubjectSuch Shareholder has the right to the approvalvote such Shares and none of Cambridge’s Compensation Committee, you will be eligible for grants of equity incentive awardssuch Shares are subject to any voting trust or other agreement, arrangement or restriction with respect to Cambridge at a level comparable to similarly-situated employeesthe voting of the Company. Any such awards will be granted in the sole discretion of Cambridge’s Compensation Committee and will be subject to the terms and conditions of the applicable plan documents and award agreements.

EXECUTION VERSION

4.

Benefits. You will be eligible to participate in the various employee benefit plans, programs, and arrangements that the Company may offer to similarly-situated employees from time to time, in accordance with the terms and conditions of those plans, programs, and arrangements.Shares, except as contemplated by this Agreement.

The foregoing describesSection 4.Irrevocable Proxy. Subject to the compensationlast sentence of this Section 4, by execution of this Agreement, each Shareholder does hereby appoint Wellesley with full power of substitution and resubstitution, as such Shareholder’s true and lawful attorney and irrevocable proxy, to the full extent of such Shareholder’s rights with respect to such Shareholder’s Shares, to vote, if such Shareholder is unable to perform his, her or its obligations under this Agreement, each of such Shares that yousuch Shareholder shall be entitled to so vote with respect to the matters set forth in Section 1 hereof at any meeting of the shareholders of Cambridge, and at any adjournment or postponement thereof, and in connection with any action of the shareholders of Cambridge taken by written consent. Such Shareholder intends this proxy to be irrevocable and coupled with an interest hereafter until the termination of this Agreement pursuant to the terms of Section 6 hereof and hereby revokes any proxy previously granted by such Shareholder with respect to such Shares. Notwithstanding anything contained herein to the contrary, this irrevocable proxy shall automatically terminate upon the termination of this Agreement.

Section 5.Specific Performance and Remedies. Each Shareholder acknowledges that it will receive during your employmentbe impossible to measure in money the damage to Wellesley if such Shareholder fails to comply with the Company, butobligations imposed by this letterAgreement and that, in the event of any such failure, Wellesley will not have an adequate remedy at law or in equity. Accordingly, such Shareholder agrees that injunctive relief or other equitable remedy, in addition to remedies at law or in damages, is not a contract or guarantee of employmentthe appropriate remedy for any particular periodsuch failure and will not oppose the granting of time. At all times yousuch relief on the basis that Wellesley has an adequate remedy at law. Each Shareholder agrees that such Shareholder will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with Wellesley’s seeking or obtaining such equitable relief.

Section 6.Term of Agreement; Termination. The term of this Agreement shall commence on the date hereof. This Agreement may be an employee at will, which means that you and the Company are each free to terminate your employmentterminated at any time prior to consummation of the transactions contemplated by the Merger Agreement by the written consent of the parties hereto, and shall be automatically terminated upon the earlier to occur of: (a) the Effective Time or (b) in the event that the Merger Agreement is terminated in accordance with its terms. Upon any such termination, no party shall have any further obligations or liabilities hereunder; provided, however, such termination shall not relieve any party from liability for any willful breach of this Agreement prior to such termination.

Section 7.Entire Agreement; Amendments. This Agreement supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no reason.

Onprovisions hereof may be modified or after the Effective Date, you willwaived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by either party shall be presented with and asked to execute acknowledgements of receipt and/or agreements to be bound by various Company policies including, without limitation, our Code of Ethics and our Securities Trade and Insider Trading Policy.

You agree that you will not, at any time during or after your employment by the Company, without the Company’s prior consent, reveal or disclose to any person outside of the Company, or use for your own benefit or the benefitdeemed a waiver of any other personprovisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.

Section 8.Severability. In the event that any one or entity, any confidential information concerning the business or affairs of the Company or its affiliates, or concerning the business or affairs of the Company or its affiliates, or concerning any of their customers, clients, or employees (“Confidential Information”). For purposesmore provisions of this letter, Confidential informationAgreement shall include, butfor any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not be limited to: financial informationaffect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.

Section 9.Capacity as Shareholder. The covenants contained herein shall apply to each Shareholder solely in his or plans; salesher capacity as a shareholder of Cambridge, and marketing informationno covenant contained herein shall apply to such Shareholder in his or plans; businessher capacity as a director, officer or strategic plans; salary, bonus,employee of Cambridge or other personnel information of any type; information concerning methods of operation; proprietary systems or software; legal or regulatory information; cost and pricing information or policies; information concerning new or potential products or markets; investment models, practices, procedures, strategies, or related information; research and/or analysis; and information concerning new or potential customers. Confidential Information shall not include information falling within the description of Confidential Information that already is available to the public through no unauthorized act of yours and salary, bonus, or other personnel information specific to you, nor should the paragraph be construed so as to interfere with your right to use your general knowledge, experience, memory, and skills, whenever or wherever acquired, in any future employment. Notwithstandingother capacity. Nothing contained in this Agreement shall be deemed to apply to, or limit in any manner, the foregoing, you may comply with legal process; provided however, that if you anticipate makingobligations of such a disclosureShareholder to comply with legal process, you agree to provide the Company with ten (10) days advance written noticehis or if such notice is not practicable under the circumstances, withher fiduciary duties as much written notices as is practicable.a director of Cambridge.

By accepting this offer of employment, you acknowledge that your continued employment with the Company is subject to a successful background check.

Because Federal law requires that you provide us with documentation of your eligibility to work in the United States, this offer is conditioned upon your providing such documentation within three (3) business days of your commencing work.

Section 10.Governing Law. This offer is also conditioned upon your acceptance of the attached Employee Proprietary Information and Restrictive Covenants Agreement on or prior to the Effective Date (see the attached document).

The interpretation, construction, and performance of this offer letter shall be governed by, and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, excluding laws pertainingwithout regard for conflict of law provisions.

Section 11.Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to conflictsCambridge in accordance with Section 8.06 of law.the Merger Agreement and to each Shareholder at its address set forth onExhibit A attached hereto (or at such other address for a party as shall be specified by like notice).

By accepting this offer(Remainder of employment, you represent that you are not under any contractual or other obligation to any other person or entity that would prevent you from performing all of your duties and responsibilities to the Company. To indicate your acceptance of this offer, please sign and date this offer letter in the space below and return a copy to me by mail or email.page intentionally left blank.)

InIN WITNESS WHEREOF, the event thatparties hereto have executed and delivered this Agreement as of the Transaction does not close, this offer letter will automatically terminate and have no further force or effect.date first written above.

*    *    *    *    *

WELLESLEY BANCORP, INC.
By:

Name:Thomas J. Fontaine
Title:President and Chief Executive Officer

SHAREHOLDERS
Name: Jeanette G. Clough
Name: Christine Fuchs
Name: Sarah G. Green
Name: Pamela H. Hamlin
Name: Edward F. Jankowski
Name: Hambleton D. Lord
Name: Thalia M. Meehan
Name: Daniel R. Morrison

Name: Leon A. Palandjian

Name: Laila Partridge

Name: Jody A. Rose

Name: Cathleen A. Schmidt

Name: Denis K. Sheahan

Name: R. Gregg Stone

Name: Mark D. Thompson

Name: Linda A. Whitlock

Name: Michael F. Carotenuto
Name: Martin B. Millane, Jr.
Name: Jennifer A. Pline

Sincerely,

Pilar Pueyo

Senior Vice President, Human Resources Director

I accept employment with Cambridge Trust Company on the terms and conditions stated above.EXHIBIT A

 

NAME AND ADDRESS

OF SHAREHOLDER

  

SHARES OF CAMBRIDGE COMMON STOCK

BENEFICIALLY OWNED

[EMPLOYEE]Jeanette G. Clough  Date
Christine Fuchs
Sarah G. Green
Pamela H. Hamlin
Edward F. Jankowski
Hambleton D. Lord
Thalia M. Meehan
Daniel R. Morrison
Leon A. Palandjian
Laila Partridge
Jody A. Rose
Cathleen A. Schmidt
Denis K. Sheahan
R. Gregg Stone
Mark D. Thompson
Linda A. Whitlock
Michael F. Carotenuto
Martin B. Millane, Jr.
Jennifer A. Pline

Attachment: Cambridge Trust Company Employee Proprietary Information and Restrictive Covenants Agreement

ANNEX B—OPINION OF SANDLER, O’NEILL & PARTNERS, L.P.B

 

LOGOLOGO

December 5, 20182019

Board of Directors

Optima Bank & Trust CompanyWellesley Bancorp, Inc.

Two Harbour Place100 Worcester Street, Suite 300

Portsmouth, NH 03801Wellesley, MA 02481

Ladies and Gentlemen:

OptimaWellesley Bancorp, Inc. (“Wellesley”), Wellesley Bank, & Trust Companya wholly-owned subsidiary of Wellesley (“Optima”Wellesley Bank”), Cambridge Bancorp (“Cambridge”) and Cambridge Trust Company, a wholly ownedwholly-owned subsidiary of Cambridge (“Cambridge Trust”), are proposing to enter into an Agreement and Plan of Merger (the “Agreement”) pursuant to which OptimaWellesley will merge with and into Cambridge Trust with Cambridge Trust being the surviving entitycorporation (the “Merger”). Pursuant to the terms and conditions of the Agreement, at the Effective Time, each share of Wellesley common stock, $1.00 par value $0.01 per share of Optima (“OptimaWellesley Common Stock”), issued and outstanding immediately prior to the Effective Time, except for certain shares of OptimaWellesley Common Stock as specified in the Agreement, shall become and be converted into as provided in and subject to the limitations set forth in the Agreement, the right to receive at the election of the holder of such share of Optima Stock either: (i) $32.00 in cash0.580 shares (the “Cash Consideration”“Exchange Ratio”), or (ii) 0.3468 shares of Cambridge Stock (the “Stock Consideration”common stock, par value $1.00 per share (“Cambridge Common Stock”). The Cash Consideration and the Stock Consideration are collectively referred to herein as the “Merger Consideration.” The Agreement provides, generally, that ninety-five percent (95%) of the total number of shares of Optima Stock issued and outstanding immediately prior to the Effective Time shall be converted into the Stock Consideration and five percent (5%) of such shares of Optima Stock shall be converted into the Cash Consideration in accordance with the election and allocation procedures set forth in the Agreement. Capitalized terms used herein without definition shall have the meanings assigned to them in the Agreement. The terms and conditions of the Merger are more fully set forth in the Agreement. You have requested our opinion as to the fairness, from a financial point of view, of the Merger ConsiderationExchange Ratio to the holders of OptimaWellesley Common Stock.

Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”, “we” or “our”), as part of its investment banking business, is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. In connection with this opinion, we have reviewed and considered, among other things: (i) a draft of the Agreement, dated December 4, 2018;3, 2019; (ii) certain publicly available financial statements and other historical financial information of OptimaWellesley and Wellesley Bank that we deemed relevant; (iii) certain publicly available financial statements and other historical financial information of Cambridge and Cambridge Trust that we deemed relevant; (iv) certain internal financial projections for OptimaWellesley for the years ending December 31, 20182019 through December 31, 2022,2021, as provided by the senior management of Optima; (v) internalWellesley, as well as an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023 and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Wellesley; (v) publicly available median analyst earnings per share estimates for Cambridge for the years ending December 31, 20182019 and December 31, 2019,2020, as well as an estimated long-term earnings per share andannual net income growth ratesrate for the years thereafterending December 31, 2021 through December 31, 2023 and estimated dividends per share for the years

LOGO

LOGO

ending December 31, 20182019 through December 31, 2022,2023, as provided by the senior management of Cambridge; (vi) the pro forma financial impact of the Merger on Cambridge based on certain assumptions relating to transaction expenses, purchase accounting adjustments, and cost savings as well as net income projections for Optima for the years ending December 31, 2018 through December 31, 2022,and transaction expenses, as provided by the senior management of Cambridge, (collectively,as well as estimated net income for Wellesley for the “Pro Forma Assumptions”);years ending December 31, 2020 and December 31, 2021 with an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023, as provided by the senior management of Cambridge; (vii) the publicly reported historical price and trading activity for Wellesley Common Stock and Cambridge Common Stock, including a comparison of certain

stock tradingmarket information for Wellesley Common Stock and Cambridge Common Stock and certain stock indices as well as similar publicly available information for certain other similar companies, the securities of which are publicly traded; (viii) a comparison of certain financial information for OptimaWellesley and Cambridge with similar financial institutions for which information is publicly available; (ix) the financial terms of certain recent business combinations in the bank and thrift industry (on a regional and nationwide basis), to the extent publicly available; (x) the current market environment generally and the banking environment in particular; and (xi) such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant. We also discussed with certain members of the senior management of OptimaWellesley and its representatives the business, financial condition, results of operations and prospects of OptimaWellesley and held similar discussions with certain members of the senior management of Cambridge and its representatives regarding the business, financial condition, results of operations and prospects of Cambridge.

In performing our review, we have relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by us from public sources, that was provided to us by OptimaWellesley or Cambridge or their respective representatives, or that was otherwise reviewed by us, and we have assumed such accuracy and completeness for purposes of rendering this opinion without any independent verification or investigation. We have relied on the assurances of the respective senior managements of OptimaWellesley and Cambridge that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading.misleading in any material respect. We have not been asked to and have not undertaken an independent verification of any of such information and we do not assume any responsibility or liability for the accuracy or completeness thereof. We did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Optima orWellesley, Cambridge or any of their respective subsidiaries, nor have we been furnished with any such evaluations or appraisals. We render no opinion or evaluation on the collectability of any assets or the future performance of any loans of OptimaWellesley, Cambridge or Cambridge.their respective subsidiaries. We did not make an independent evaluation of the adequacy of the allowance for loan losses of OptimaWellesley, Cambridge or Cambridge,their respective subsidiaries, or of the combined entity after the Merger, and we have not reviewed any individual credit files relating to OptimaWellesley, Cambridge or Cambridge.their respective subsidiaries. We have assumed, with your consent, that the respective allowances for loan losses for both OptimaWellesley, Cambridge and Cambridgetheir respective subsidiaries are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used certain internal financial projections for OptimaWellesley for the years ending December 31, 20182019 through December 31, 2022,2021, as provided by the senior management of Optima.Wellesley, as well as an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023 and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Wellesley. In addition, Sandler O’Neill used internal net income and

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publicly available median analyst earnings per share estimates for Cambridge for the years ending December 31, 20182019 and December 31, 2019,2020, as well as an estimated long-term earnings per share andannual net income growth ratesrate for the years thereafterending December 31, 2021 through December 31, 2023 and estimated dividends per share for the years ending December 31, 20182019 through December 31, 2022,2023, as provided by the senior management of Cambridge. Sandler O’Neill also received and used in its pro forma analyses certain assumptions relating to purchase accounting adjustments, cost savings and transaction expenses, as provided by the Pro Forma Assumptions,senior management of Cambridge, as well as estimated net income for Wellesley for the years ending December 31, 2020 and December 31, 2021 with an estimated long-term annual net income growth rate for the years ending December 31, 2022 and December 31, 2023, as provided by the senior management of Cambridge. With respect to the foregoing information, the respective senior managements of OptimaWellesley and Cambridge confirmed to us that such information reflected (or, in the case of the publicly available analyst estimates referred to above, were consistent with) the best currently available projections, estimates and judgments of those respective senior managements as to the future financial performance of OptimaWellesley and Cambridge, respectively, and the other matters covered thereby, and we assumed that the future financial performance reflected in such information would be achieved. We express no opinion as to such information, or the assumptions on which such information is based. We have also assumed that there has been no material change in the respective assets, financial condition, results of operations, business or prospects of OptimaWellesley, Cambridge or Cambridgeany of their respective subsidiaries since the date of the most recent financial statements made available to us. We have assumed in all respects material to our analysisanalyses that OptimaWellesley and Cambridge will remain as going concerns for all periods relevant to our analysis.analyses.

We have also assumed, with your consent, that (i) each of the parties to the Agreement will comply in all material respects with all material terms and conditions of the Agreement and all related agreements, that all of the representations and warranties contained in such agreements are true and correct in all material respects, that each of the parties to such agreements will perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in

such agreements are not and will not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Optima,Wellesley, Cambridge, or the Merger or any related transactions, and (iii) the Merger and any related transactions will be consummated in accordance with the terms of the Agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with your consent, we have relied upon the advice that OptimaWellesley has received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the Merger and the other transactions contemplated by the Agreement. We express no opinion as to any such matters.

Our opinion is necessarily based on financial, economic, regulatory, economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Events occurring after the date hereof could materially affect this opinion. We have not undertaken to update, revise, reaffirm or withdraw this opinion or otherwise comment upon events occurring after the date hereof. We express no opinion as to the trading value of Wellesley Common Stock or Cambridge Common Stock at any time or what the value of Cambridge Common Stock will be once it is actually received by the holders of OptimaWellesley Common Stock.

We have acted as Optima’sWellesley’s financial advisor in connection with the Merger and will receive a fee for our services, which transaction fee is contingent upon the closing of the Merger. We will also receive a fee for rendering this

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opinion, which opinion fee will be credited in full towards the transactionadvisory fee which will become payable to Sandler O’Neill on the day of closing of the Merger. OptimaWellesley has also agreed to indemnify us against certain claims and liabilities arising out of our engagement and to reimburse us for certain of ourout-of-pocket expenses incurred in connection with our engagement. Sandler O’Neill did not provide any other investment banking services to OptimaWellesley in the two years preceding the date hereof;provided, however, an affiliate of Sandler O’Neill, Sandler O’Neill Mortgage Finance L.P., acted as introducing broker to Optima in connection with the sale of certain loans during the two years preceding the date hereof. Sandler O’Neill did not provide any investment banking services to Cambridge in the two years preceding the date of this opinion.hereof. In the ordinary course of our business as a broker-dealer, we may purchase securities from and sell securities to Optima, CambridgeWellesley and their respective affiliates.Cambridge. We may also actively trade the equity and debt securities of CambridgeWellesley and its affiliatesCambridge for our own account and for the accounts of our customers.

Our opinion is directed to the Board of Directors of OptimaWellesley in connection with its consideration of the Agreement and the Merger and does not constitute a recommendation to any shareholder of OptimaWellesley as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the Agreement and the Merger. Our opinion is directed only to the fairness, from a financial point of view, of the Merger ConsiderationExchange Ratio to the holders of OptimaWellesley Common Stock and does not address the underlying business decision of OptimaWellesley to engage in the Merger, the form or structure of the Merger or any other transactions contemplated in the Agreement, the relative merits of the Merger as compared to any other alternative transactions or business strategies that might exist for OptimaWellesley or the effect of any other transaction in which OptimaWellesley might engage. We also do not express any opinion as to the fairness of the amount or nature of the compensation to be received in the Merger by any officer, director or employee of Optima or Cambridge,Wellesley, or any class of such persons, if any, relative to the compensation to be received in the Merger by any other shareholder. This opinion has been approved by Sandler O’Neill’s fairness opinion committee. This opinion shallmay not be reproduced without Sandler O’Neill’s prior written consent;provided, however, Sandler O’Neill will provide its consent for thethis opinion to be included in any regulatory filings to be completed in connection with the Merger.

Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Merger ConsiderationExchange Ratio is fair to holders of OptimaWellesley Common Stock from a financial point of view.

Very truly yours,

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Very truly yours,
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ANNEX C—NEW HAMPSHIRE LAW CONCERNING DISSENTERS’ RIGHTSC

CHAPTER293-A

NEW HAMPSHIRE BUSINESS CORPORATION ACTLOGO

Dissenters’ RightsDecember 5, 2019

Section 293-A:13.01 et seq.The Board of Directors

293-A:13.01 Definitions. –Cambridge Bancorp

(a)1336 Massachusetts Avenue

Cambridge, MA 02138

Members of the Board:

You have requested the opinion of Keefe, Bruyette & Woods, Inc. (“KBW” or “we”) as investment bankers as to the fairness, from a financial point of view, to Cambridge Bancorp (“Cambridge”) of the Exchange Ratio (as defined below) in the proposed merger (the “Merger”) of Wellesley Bancorp, Inc. (“Wellesley”) with and into Cambridge, pursuant to the Agreement and Plan of Merger (the “Agreement”) to be entered into by and among Cambridge, Cambridge Trust Company, a wholly owned subsidiary of Cambridge (“Cambridge Trust”), Wellesley and Wellesley Bank, a wholly owned subsidiary of Wellesley. Pursuant to the Agreement and subject to the terms, conditions and limitations set forth therein, at the Effective Time (as defined in the Agreement), automatically by virtue of the Merger and without any action on the part of any Person (as defined in the Agreement), each share of common stock, par value $0.01 per share, of Wellesley (“Wellesley Common Stock”) issued and outstanding immediately prior to the Effective Time (other than treasury stock) shall become and be converted into the right to receive 0.580 of a share of common stock, par value $1.00 per share, of Cambridge (“Cambridge Common Stock”). The ratio of 0.580 of a share of Cambridge Common Stock for one share of Wellesley Common Stock is referred to herein as the “Exchange Ratio.” The terms and conditions of the Merger are more fully set forth in the Agreement.

The Agreement further provides that, subject to the terms thereof, immediately after the Effective Time, Wellesley Bank will merge with and into Cambridge Trust, pursuant to a separate plan of bank merger to be entered into between Wellesley Bank and Cambridge Trust (such transaction, the “Bank Merger”). In this subdivision:

(1) “Affiliate” means a personaddition, representatives of Cambridge have advised us that, directly or indirectly through one or more intermediaries controls, is controlled by, or is under common controlconcurrently with another person or is a senior executive thereof. Forthe public announcement of the Merger, Cambridge expects to consummate an overnight offering of Cambridge Common Stock (the “Concurrent Cambridge Common Stock Offering”). With the consent of Cambridge, we have assumed for purposes of RSA293-A:13.02(b)(4), a person is deemed to be an affiliatecertain of its senior executives.

(2) “Beneficial shareholder” means a person who isour analyses the beneficial owner of shares held in a voting trust or by a nominee on the beneficial owner’s behalf.

(3) “Corporation” means the issueroccurrence of the shares held byConcurrent Cambridge Common Stock Offering.

KBW has acted as financial advisor to Cambridge and not as an advisor to or agent of any other person. As part of our investment banking business, we are continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, we have experience in, and knowledge of, the valuation of banking enterprises. Further to certain existing sales and trading relationships between Cambridge and each of KBW and a shareholder demanding appraisalKBW broker-dealer affiliate and otherwise in the ordinary course of KBW’s and its affiliates’ broker-dealer businesses, KBW and its affiliates may from time to time purchase securities from, and sell securities to, Cambridge and Wellesley. In addition, as market makers in securities, we and our affiliates may from time to time have a long or short position in, and buy or sell, debt or equity securities of Cambridge or Wellesley for our and their own accounts and for matters covered in RSA293-A:13.22 through RSA293-A:13.31, includes the surviving entity in a merger.

(4) “Fair value” means the valueaccounts of the corporation’s shares determined:

(i) immediately before the effectuation of the corporate action to which the shareholder objects;

(ii) using customaryour and current valuation conceptstheir respective customers and techniques generally employedclients. We have acted exclusively for similar businesses in the context of the transaction requiring appraisal; and

(iii) without discounting for lack of marketability or minority status except, if appropriate, for amendments to the articles pursuant to RSA293-A:13.02(a)(5).

(5) “Interest” means interest from the effective date of the corporate action until the date of payment, at the rate of interest on judgments in this state on the effective date of the corporate action.

(6) “Interested transaction” means a corporate action described in RSA293-A:13.02(a), other than a merger pursuant to RSA293-A:11.05, involving an interested person in which any of the shares or assets of the corporation are being acquired or converted.

(7) “Interested person” means a person, or an affiliate of a person, who at any time during theone-year period immediately preceding approval by the board of directors of Cambridge (the “Board”) in rendering this opinion and will receive a fee from Cambridge for our services. A portion of our fee is payable upon the corporate action:

(i) wasrendering of this opinion, and a significant portion is contingent upon the beneficial owner of 20 percent or moresuccessful completion of the voting powerMerger. In addition, Cambridge has agreed to indemnify us for certain liabilities arising out of the corporation, other than as owner of excluded shares;

(ii) had the power, contractually or otherwise, other than as owner of excluded shares, to cause the appointment or election of 25 percent or more of the directors to the board of directors of the corporation; or

(iii) was a senior executive or director of the corporation or a senior executive of any affiliate thereof, and that senior executive or director will receive, as a result of the corporate action, a financial benefit not generally available to other shareholders as such, other than:

(A) employment, consulting, retirement, or similar benefits established separately and not as part of or in contemplation of the corporate action; orour engagement.

(B) employment, consulting, retirement,The Board of Directors – Cambridge Bancorp

December 5, 2019

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In addition to this present engagement, in the past two years, KBW has provided investment banking and financial advisory services to Cambridge and received compensation for such services. KBW acted as financial advisor to Cambridge in connection with its April 2019 acquisition of Optima Bank & Trust Company. In addition, KBW is currently expected to act as lead underwriter in connection with the Concurrent Cambridge Common Stock Offering. In the past two years, KBW has not provided investment banking or similar benefits establishedfinancial advisory services to Wellesley. We may in contemplationthe future provide investment banking and financial advisory services to Cambridge or Wellesley and receive compensation for such services.

In connection with this opinion, we have reviewed, analyzed and relied upon material bearing upon the financial and operating condition of or as partCambridge and Wellesley and bearing upon the Merger, including among other things, the following: (i) a draft of the corporate actionAgreement dated November 18, 2019 (the most recent draft made available to us); (ii) the audited financial statements and the Annual Reports on Form10-K for the two fiscal years ended December 31, 2018 of Cambridge and the audited financial statements for the fiscal year ended December 31, 2016 of Cambridge; (iii) the unaudited quarterly financial statements and the Quarterly Reports on Form10-Q for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 of Cambridge; (iv) the audited financial statements and the Annual Reports on Form10-K for the three fiscal years ended December 31, 2018 of Wellesley; (v) the unaudited quarterly financial statements and the Quarterly Reports on Form10-Q for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 of Wellesley; (vi) certain regulatory filings of Cambridge, Cambridge Trust, Wellesley and Wellesley Bank, including, as applicable, the quarterly reports on Form FRY-9C and quarterly call reports that were filed with respect to each quarter during the three year period ended December 31, 2018 as well as the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019; (vii) certain other interim reports and other communications of Cambridge and Wellesley to their respective shareholders; and (viii) other financial information concerning the respective businesses and operations of Cambridge and Wellesley that was furnished to us by Cambridge and Wellesley or which we were otherwise directed to use for purposes of our analysis. Our consideration of financial information and other factors that we deemed appropriate under the circumstances or relevant to our analyses included, among others, the following: (i) the historical and current financial position and results of operations of Cambridge and Wellesley; (ii) the assets and liabilities of Cambridge and Wellesley; (iii) the nature and terms of certain other merger transactions and business combinations in the banking industry; (iv) a comparison of certain financial and stock market information of Cambridge and Wellesley with similar information for certain other companies, the securities of which are not more favorable than those existing beforepublicly traded; (v) financial and operating forecasts and projections of Wellesley that were prepared by Cambridge management, provided to and discussed with us by such management, and used and relied upon by us at the corporate action or, if more favorable, that have been approved on behalfdirection of such management and with the consent of the corporationBoard; (vi) publicly available consensus “street estimates” of Cambridge, as well as assumed Cambridge long-term growth rates that were provided to us by Cambridge management, all of which information was discussed with us by such management and used and relied upon by us at the direction of such management and with the consent of the Board; and (vii) estimates regarding certain pro forma financial effects of the Merger on Cambridge (including without limitation the cost savings and related expenses expected to result or be derived from the Merger) that were prepared by Cambridge management, provided to and discussed with us by such management, and used and relied upon by us at the direction of such management and with the consent of the Board. We have also performed such other studies and analyses as we considered appropriate and have taken into account our assessment of general economic, market and financial conditions and our experience in other transactions, as well as our experience in securities valuation and knowledge of the same mannerbanking industry generally. We have also participated in discussions that were held by the managements of Cambridge and Wellesley regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as iswe have deemed relevant to our inquiry.

The Board of Directors – Cambridge Bancorp

December 5, 2019

Page 3 of 6

In conducting our review and arriving at our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information provided in RSA293-A:8.62;to us or

(C) that was publicly available and we have not independently verified the accuracy or completeness of any such information or assumed any responsibility or liability for such verification, accuracy or completeness. We have relied upon the management of Cambridge, as to the reasonableness and achievability of the financial and operating forecasts and projections of Wellesley, the publicly available consensus “street estimates” of Cambridge, the assumed Cambridge long-term growth rates, and the estimates regarding certain pro forma financial effects of the Merger on Cambridge (including, without limitation, the cost savings and related expenses expected to result or be derived from the Merger), all as referred to above (and the assumptions and bases for all such information), and we, and we have assumed that such information has been reasonably prepared and represents, or in the case of a directorthe publicly available consensus “street estimates” of Cambridge referred to above that such estimates are consistent with, the best currently available estimates and judgments of Cambridge management and that the forecasts, projections and estimates reflected in such information will be realized in the amounts and in the time periods currently estimated.

It is understood that the portion of the corporation who will,foregoing financial information of Cambridge and Wellesley that was provided to and discussed with us was not prepared with the expectation of public disclosure and that all of the foregoing financial information, including the publicly available consensus “street estimates” of Cambridge referred to above, is based on numerous variables and assumptions that are inherently uncertain (including, without limitation, factors related to general economic and competitive conditions) and, accordingly, actual results could vary significantly from those set forth in such information. We have assumed, based on discussions with the respective managements of Cambridge and Wellesley and with the consent of the Board, that all such information provides a reasonable basis upon which we could form our opinion and we express no view as to any such information or the assumptions or bases therefor. We have relied on all such information without independent verification or analysis and do not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

We also have assumed that there have been no material changes in the corporate action, become a directorassets, liabilities, financial condition, results of the acquiring entity in the corporate actionoperations, business or oneprospects of its affiliates, rights and benefits as a director that are provided on the same basis as those afforded by the acquiring entity generally to other directors of such entityeither Cambridge or such affiliate.

(8) “Beneficial owner” means any person who, directly or indirectly, through any contract, arrangement, or understanding, other than a revocable proxy, has or shares the power to vote, or to direct the voting of, shares; except that a member of a national securities exchange is not deemed to be a beneficial owner of securities held directly or indirectly by it on behalf of another person solely because the member is the record holder of the securities if the member is precluded by the rules of the exchange from voting without instruction on contested matters or matters that may affect substantially the rights or privileges of the holders of the securities to be voted. When 2 or more persons agree to act together for the purpose of voting their shares of the corporation, each member of the group formed thereby is deemed to have acquired beneficial ownership, as ofWellesley since the date of the agreement,last financial statements of all voting shareseach such entity that were made available to us and that we were directed to use. We are not experts in the independent verification of the corporation beneficially owned byadequacy of allowances for loan and lease losses and we have assumed, without independent verification and with your consent, that the aggregate allowances for loan and lease losses for each of Cambridge and Wellesley are adequate to cover such losses. In rendering our opinion, we have not made or obtained any memberevaluations or appraisals or physical inspection of the group.

(9) “Excluded shares” means shares acquired pursuant to an offer for all shares having voting power ifproperty, assets or liabilities (contingent or otherwise) of Cambridge or Wellesley, the offer was made within one year prior to the corporate action for considerationcollateral securing any of the same kind and of a value equal tosuch assets or less than that paid in connection with the corporate action.

(10) “Preferred shares” means a class or series of shares whose holders have preference over any other class or series with respect to distributions.

(11) “Record shareholder” means the person in whose name shares are registered in the records of the corporationliabilities, or the beneficial ownercollectability of shares toany such assets, nor have we examined any individual loan or credit files, nor did we evaluate the extent of the rights granted by a nominee certificate on file with the corporation.

(12) “Senior executive” means the chief executive officer, chief operating officer, chiefsolvency, financial officer, and anyone in charge of a principal business unitcapability or function.

(13) “Shareholder” means both a record shareholder and a beneficial shareholder.

293-A:13.02 Right to Appraisal. –

(a) A shareholder is entitled to appraisal rights, and to obtain payment of the fair value of Cambridge or Wellesley under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, we assume no responsibility or liability for their accuracy.

We have assumed, in all respects material to our analyses, the following: (i) that shareholder’s shares,the Merger will be completed substantially in accordance with the terms set forth in the eventAgreement (the final terms of which we have assumed will not differ in any respect material to our analyses from the draft version reviewed by us and referred to above), with no adjustments to the Exchange Ratio and with no other consideration or payments in respect of Wellesley Common Stock; (ii) that any related transactions (including the following corporate actions:

(1) consummation of a merger to which the corporation is a party (i) if shareholder approval is required for the merger by RSA293-A:11.04, except that appraisal rights shall not be available to any shareholder of the corporation with respect to shares of any class or series that remain outstanding after consummation of the merger, or (ii) if the corporation is a subsidiaryBank Merger and the merger is governed by RSA293-A:11.05;

(2) consummation of a share exchange to which the corporation is a party as the corporation whose sharesConcurrent Cambridge Common Stock Offering) will be acquired, except that appraisal rights shall not be available to any shareholder ofcompleted substantially in accordance with the corporation with respect to any class or series of shares of the corporation that is not exchanged;

(3) consummation of a disposition of assets pursuant to RSA293-A:12.02, except that appraisal rights shall not be available to any shareholder of the corporation with respect to shares of any class or series if (i) under the terms of the corporate action approved by the shareholders there is to be distributed to shareholders in cash its net

assets,The Board of Directors – Cambridge Bancorp

December 5, 2019

Page 4 of 6

set forth in excessthe Agreement or as otherwise described to us by representatives of a reasonable amount reservedCambridge; (iii) that the representations and warranties of each party in the Agreement and in all related documents and instruments referred to meet claimsin the Agreement are true and correct; (iv) that each party to the Agreement or any of the type described in RSA293-A:14.06 and RSA293-A:14.07, (A) within one year after the shareholders’ approvalrelated documents will perform all of the actioncovenants and (B) in accordance with their respective interests determined atagreements required to be performed by such party under such documents; (v) that there are no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the time of distribution,Merger or any related transaction and (ii)that all conditions to the disposition of assets is not an interested transaction;

(4) an amendmentcompletion of the articles of incorporation with respect to a classMerger and any related transaction will be satisfied without any waivers or series of shares that reduces the number of shares of a class or series owned by the shareholder to a fraction of a share if the corporation has the obligation or right to repurchase the fractional share so created;

(5) any other amendmentmodifications to the articles of incorporation,Agreement or any other merger, share exchange or disposition of assets, to the extent provided by the articles of incorporation, bylaws, or a resolution of the board of directors;

(6) consummation of a domestication if the shareholder does not receive sharesrelated documents; and (vi) that in the foreign corporation resultingcourse of obtaining the necessary regulatory, contractual, or other consents or approvals for the Merger and any related transactions, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, will be imposed that will have a material adverse effect on the future results of operations or financial condition of Cambridge, Wellesley or the pro forma entity, or the contemplated benefits and effects of the Merger, including without limitation the cost savings and related expenses expected to result or be derived from the domesticationMerger. We have assumed that have terms as favorable to the shareholderMerger will be consummated in all material respects, and represent at least the same percentage interest of the total voting rights of the outstanding shares of the corporation, as the shares held by the shareholder before the domestication; or

(7) consummation of a conversion of the corporation to an unincorporated entity pursuant to RSA293-A:9.50 through RSA293-A:9.56.

(b) Notwithstanding RSA293-A:13.02(a), the availability of appraisal rights under RSA293-A:13.02(a)(1), (2), (3), (4), (6), and (7) shall be limited in accordancemanner that complies with the following provisions:

(1) Appraisal rights shall not be available for the holders of shares of any class or series of shares which is:

(i) a covered security under section 18(b)(1)(A) or (B)applicable provisions of the Securities Act of 1933, as amended;amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations. We have further been advised by representatives of Cambridge that Cambridge has relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to Cambridge, Wellesley, the Merger and any related transaction, and the Agreement. KBW has not provided advice with respect to any such matters.

(ii) traded in an organized market and has at least 1,000 shareholders andThis opinion addresses only the fairness, from a market valuefinancial point of at least $20 million (exclusiveview, as of the valuedate hereof, of the Exchange Ratio in the Merger to Cambridge. We express no view or opinion as to any other terms or aspects of the Merger or any term or aspect of any related transaction (including the Bank Merger and the Concurrent Cambridge Common Stock Offering), including without limitation, the form or structure of the Merger or any such related transaction, any consequences of the Merger or any such related transaction to Cambridge, its shareholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, retention,non-compete, consulting, voting, support, escrow, cooperation, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the Merger, any such related transaction, or otherwise. Our opinion is necessarily based upon conditions as they exist and can be evaluated on the date hereof and the information made available to us through the date hereof. It is understood that subsequent developments may affect the conclusion reached in this opinion and that KBW does not have an obligation to update, revise or reaffirm this opinion. Our opinion does not address, and we express no view or opinion with respect to, (i) the underlying business decision of Cambridge to engage in the Merger or enter into the Agreement, (ii) the relative merits of the Merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by Cambridge or the Board, (iii) any business, operational or other plans with respect to Wellesley or the pro forma entity that may be currently contemplated by Cambridge or the Board or that may be implemented by Cambridge or the Board subsequent to the closing of the Merger, (iv) the fairness of the amount or nature of any compensation to any of Cambridge’s officers, directors or employees, or any class of such shares held bypersons, relative to any compensation to the corporation’s subsidiaries, senior executives, directors and beneficial shareholders owning more than 10 percentholders of such shares);Cambridge Common Stock or

(iii) issued by an open end management investment company registered with relative to the Securities and Exchange Commission underRatio, (v) the Investment Company Act of 1940 and may be redeemed at the optioneffect of the holder at net asset value.

(2) The applicability of RSA293-A:13.02(b)(1) shall be determined as of:

(i)Merger or any related transaction on, or the record date fixed to determine the shareholders entitled to receive noticefairness of the meeting of shareholdersconsideration to act upon the corporate action requiring appraisal rights; or

(ii) the day before the effective date of such corporate action if there is no meeting of shareholders.

(3) RSA293-A:13.02(b)(1) shall not be applicable and appraisal rights shall be available pursuant to RSA293-A:13.02(a) for thereceived by, holders of any class of securities of Cambridge, Wellesley or series of shares (i) who are requiredany other party to any transaction contemplated by the Agreement, (vi) any adjustments (as provided in the Agreement) to the Exchange Ratio assumed for purposes of our opinion, (vii) the actual value of Cambridge Common Stock to be issued in connection with the Merger, (viii) the prices, trading range or volume at which Cambridge Common Stock or Wellesley Common Stock will trade following the public announcement of the Merger or the prices, trading range or volume at which Cambridge Common Stock will trade following the consummation of the Merger, (ix) any advice or opinions provided by any other advisor to any of the parties to the Merger or any other transaction contemplated by the

The Board of Directors – Cambridge Bancorp

December 5, 2019

Page 5 of 6

Agreement, or (x) any legal, regulatory, accounting, tax or similar matters relating to Cambridge, Wellesley, any of their respective shareholders, or relating to or arising out of or as a consequence of the Merger or any other related transaction, including whether or not the Merger will qualify as atax-free reorganization for United States federal income tax purposes.

This opinion is for the information of, and is directed to, the Board (in its capacity as such) in connection with its consideration of the financial terms of the corporate action requiring appraisal rightsMerger. This opinion does not constitute a recommendation to accept for such shares anything other than cashthe Board as to how it should vote on the Merger or sharesto any holder of any classCambridge Common Stock or any series of shares of any corporation, or any other proprietary interestshareholder of any other entity that satisfiesas to how to vote in connection with the standards set forth in RSA293-A:13.02(b)(1) at the time the corporate action becomes effective,Merger or (ii) in the case of the consummation of a disposition of assets pursuant to RSA293-A:12.02, unless such cash, shares or proprietary interests are, under the terms of the corporate action approved by the shareholders, to be distributed to the shareholders, as part of a distribution to shareholders of the net assets of the corporation in excess of a reasonable amount to meet claims of the type described in RSA293-A:14.06 and RSA293-A:14.07, (A) within one year after the shareholders’ approval of the action, and (B) in accordance with their respective interests determined at the time of the distribution.

(4) RSA293-A:13.02(b)(1) shall not be applicable and appraisal rights shall be available pursuant to RSA293-A:13.02(a) for the holders of any class or series of shares where the corporate action is an interested transaction.

(c) Notwithstanding any other provision of RSA293-A:13.02, the articles of incorporationmatter, nor does it constitute a recommendation as originally filedto whether or not any amendment thereto may limit or eliminate appraisal rights for any class or series of preferred shares, except that (i) no such limitation or elimination shall be effective if the class or series does not have the right to vote separately asshareholder should enter into a voting, group (alone or as part of a group) on the action or if the action is a conversion to an unincorporated entity under RSA293-A:9.50 through RSA293-A:9.56, or a merger having a similar effect, and (ii) any such limitation or elimination contained in an amendment to the articles of incorporation that limits or eliminates appraisal rights for any of such shares that are outstanding immediately prior to the effective date of such amendment or that the corporation is or may be required to issue or sell thereafter pursuant to any conversion, exchangeshareholders’, affiliates’ or other right existing immediately before the effective date of such amendment shall not apply to any corporate action that becomes effective within one year of that date if such action would otherwise afford appraisal rights.

293-A:13.03 Assertion of Rights by Nominees and Beneficial Owners. –

(a) A record shareholder may assert appraisal rights as to fewer than all the shares registered in the record shareholder’s name but owned by a beneficial shareholder only if the record shareholder objects with respect to all shares of the class or series owned by the beneficial shareholder and notifies the corporation in writing of the name and address of each beneficial shareholder on whose behalf appraisal rights are being asserted. The rights of a record shareholder who asserts appraisal rights for only part of the shares held of record in the record shareholder’s name under this subsection shall be determined as if the shares as to which the record shareholder objects and the record shareholder’s other shares were registered in the names of different record shareholders.

(b) A beneficial shareholder may assert appraisal rights as to shares of any class or series held on behalf of the shareholder only if such shareholder:

(1) submits to the corporation the record shareholder’s written consent to the assertion of such rights no later than the date referred to in RSA293-A:13.22(b)(2)(ii); and

(2) does so with respect to all shares of the class or series that are beneficially owned by the beneficial shareholder.

293-A:13.20 Notice of Appraisal Rights. –

(a) Where any corporate action specified in RSA293-A:13.02(a) is to be submitted to a vote at a shareholders’ meeting, the meeting notice must state that the corporation has concluded that the shareholders are, are not or may be entitled to assert appraisal rights under this subdivision. If the corporation concludes that appraisal rights are or may be available, a copy of this subdivision must accompany the meeting notice sent to those record shareholders entitled to exercise appraisal rights.

(b) In a merger pursuant to RSA293-A:11.05, the parent corporation must notify in writing all record shareholders of the subsidiary who are entitled to assert appraisal rights that the corporate action became effective. Such notice must be sent within 10 days after the corporate action became effective and include the materials described in RSA293-A:13.22.

(c) Where any corporate action specified in RSA293-A:13.02(a) is to be approved by written consent of the shareholders pursuant to RSA293-A:7.04:

(1) written notice that appraisal rights are, are not or may be available must be sent to each record shareholder from whom a consent is solicited at the time consent of such shareholder is first solicited and, if the corporation has concluded that appraisal rights are or may be available, must be accompanied by a copy of this subdivision; and

(2) written notice that appraisal rights are, are not or may be available must be delivered together with the notice tonon-consenting and nonvoting shareholders required by RSA293-A:7.04(e) and (f), may include the

materials described in RSA293-A:13.22 and, if the corporation has concluded that appraisal rights are or may be available, must be accompanied by a copy of this subdivision.

(d) Where corporate action described in RSA293-A:13.02(a) is proposed, or a merger pursuant to RSA293-A:11.05 is effected, the notice referred to in RSA293-A:13.20(a) or (c), if the corporation concludes that appraisal rights are or may be available, and in RSA293-A:13.20(b) shall be accompanied by:

(1) the annual financial statements specified in RSA293-A:16.20(a) of the corporation that issued the shares that may be subject to appraisal, which shall be as of a date ending not more than 16 months before the date of the notice and shall comply with RSA293-A:16.20(b); provided that, if such annual financial statements are not reasonably available, the corporation shall provide reasonably equivalent financial information; and

(2) the latest available quarterly financial statements of such corporation, if any.

(e) The right to receive the information described in RSA293-A:13.20(d) may be waived in writing by a shareholder before or after the corporate action.

293-A:13.21 Notice of Intent to Demand Payment and Consequences of Voting or Consenting. –

(a) If a corporate action specified in RSA293-A:13.02(a) is submitted to a vote at a shareholders’ meeting, a shareholder who wishes to assert appraisal rights with respect to any class or series of shares:

(1) must deliver to the corporation, before the vote is taken, written notice of the shareholder’s intent to demand payment if the proposed action is effectuated; and

(2) must not vote, or cause or permit to be voted, any shares of such class or series in favor of the proposed action.

(b) If a corporate action specified in RSA293-A:13.02(a) is to be approved by less than unanimous written consent, a shareholder who wishes to assert appraisal rights with respect to any class or series of shares must not sign a consent in favor of the proposed action with respect to that class or series of shares.

(c) A shareholder who fails to satisfy the requirements of RSA293-A:13.21(a) or (b) is not entitled to payment under this subdivision.

293-A:13.22 Appraisal Notice and Form. –

(a) If a corporate action requiring appraisal rights under RSA293-A:13.02(a) becomes effective, the corporation must send a written appraisal notice and the form required by RSA293-A:13.02(b)(1) to all shareholders who satisfy the requirements of RSA293-A:13.21(a) or RSA293-A:13.21(b). In the case of a merger under RSA293-A:11.05, the parent must deliver an appraisal notice and form to all record shareholders who may be entitled to assert appraisal rights.

(b) The appraisal notice must be delivered no earlier than the date the corporate action specified in RSA293-A:13.02(a) became effective, and no later than 10 days after such date, and must:

(1) supply a form that (i) specifies the first date of any announcement to shareholders made prior to the date the corporate action became effective of the principal terms of the proposed corporate action, and (ii) if such announcement was made, requires the shareholder asserting appraisal rights to certify whether beneficial ownership of those shares for which appraisal rights are asserted was acquired before that date, and (iii) requires the shareholder asserting appraisal rights to certify that such shareholder did not vote for or consent to the transaction;

(2) state:

(i) where the form must be sent and where certificates for certificated shares must be deposited and the date by which those certificates must be deposited, which date may not be earlier than the date for receiving the required form under RSA293-A:13.22(b)(2)(ii);

(ii) a date by which the corporation must receive the form, which date may not be fewer than 40 nor more than 60 days after the date the RSA293-A:13.22(a) appraisal notice is sent, and state that the shareholder shall have waived the right to demand appraisalagreement with respect to the shares unlessMerger or exercise any dissenters’ or appraisal rights that may be available to such shareholder.

This opinion has been reviewed and approved by our Fairness Opinion Committee in conformity with our policies and procedures established under the form is received by the corporation by such specified date;

(iii) the corporation’s estimaterequirements of Rule 5150 of the fair valueFinancial Industry Regulatory Authority.

Based upon and subject to the foregoing, it is our opinion that, as of the shares;

(iv) that, if requested in writing,date hereof, the corporation will provide, to the shareholder so requesting, within 10 days after the date specified in RSA293-A:13.22(b)(2)(ii) the number of shareholders who return the forms by the specified date and the total number of shares owned by them; and

(v) the date by which the notice to withdraw under RSA293-A:13.23 must be received, which date must be within 20 days after the date specified in RSA293-A:13.22(b)(2)(ii); and

(3) be accompanied by a copy of this subdivision.

293-A:13.23 Perfection of Rights; Right to Withdraw. –

(a) A shareholder who receives notice pursuant to RSA293-A:13.22 and who wishes to exercise appraisal rights must sign and return the form sent by the corporation and,Exchange Ratio in the caseMerger is fair, from a financial point of certificated shares, deposit the shareholder’s certificates in accordance with the terms of the notice by the date referredview, to in the notice pursuant to RSA293-A:13.22(b)(2)(ii). In addition, if applicable, the shareholder must certify on the form whether the beneficial owner of such shares acquired beneficial ownership of the shares before the date required to be set forth in the notice pursuant to RSA293-A:13.22(b)(1). If a shareholder fails to make this certification, the corporation may elect to treat the shareholder’s shares as after-acquired shares under RSA293-A:13.25. Once a shareholder deposits that shareholder’s certificates or, in the case of uncertificated shares, returns the signed forms, that shareholder loses all rights as a shareholder, unless the shareholder withdraws pursuant to RSA293-A:13.23(b).Cambridge.

(b) A shareholder who has complied with RSA293-A:13.23(a) may nevertheless decline to exercise appraisal rights and withdraw from the appraisal process by so notifying the corporation in writing by the date set forth in the appraisal notice pursuant to RSA293-A:13.22(b)(2)(v). A shareholder who fails to so withdraw from the appraisal process may not thereafter withdraw without the corporation’s written consent.

(c) A shareholder who does not sign and return the form and, in the case of certificated shares, deposit that shareholder’s share certificates where required, each by the date set forth in the notice described in RSA293-A:13. 22(b), shall not be entitled to payment under this subdivision.

293-A:13.24 Payment. –

(a) Except as provided in RSA293-A:13.25, within 30 days after the form required by RSA293-A:13.22(b)(2)(ii) is due, the corporation shall pay in cash to those shareholders who complied with RSA293-A:13.23(a) the amount the corporation estimates to be the fair value of their shares, plus interest.

(b) The payment to each shareholder pursuant to RSA293-A:13.24(a) must be accompanied by:

(1) (i) the annual financial statements specified in RSA293-A:16.20(a) of the corporation that issued the shares to be appraised, which shall be of a date ending not more than 16 months before the date of payment and shall comply with RSA293-A:16.20(b); provided that, if such annual financial statements are not reasonably available, the corporation shall provide reasonably equivalent financial information, and (ii) the latest available quarterly financial statements of such corporation, if any;

Very truly yours,
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Keefe, Bruyette & Woods, Inc.

(2) a statement of the corporation’s estimate of the fair value of the shares, which estimate must equal or exceed the corporation’s estimate given pursuant to RSA293-A:13.22(b)(2)(iii);

(3) a statement that shareholders described in RSA293-A:13.24(a) have the right to demand further payment under RSA293-A:13.26 and that if any such shareholder does not do so within the time period specified therein, such shareholder shall be deemed to have accepted such payment in full satisfaction of the corporation’s obligations under this subdivision.

293-A:13.25 After-Acquired Shares. –

(a) A corporation may elect to withhold payment required by RSA293-A:13.24 from any shareholder who was required to, but did not certify that beneficial ownership of all of the shareholder’s shares for which appraisal rights are asserted was acquired before the date set forth in the appraisal notice sent pursuant to RSA293-A:13.22(b)(1).

(b) If the corporation elected to withhold payment under RSA293-A:13.25(a), it must, within 30 days after the form required by RSA293-A:13.22(b)(2)(ii) is due, notify all shareholders who are described in RSA293-A:13.25(a):

(1) of the information required by RSA293-A:13.24(b)(1);

(2) of the corporation’s estimate of fair value pursuant to RSA293-A:13.24(b)(2);

(3) that they may accept the corporation’s estimate of fair value, plus interest, in full satisfaction of their demands or demand appraisal under RSA293-A:13.26;

(4) that those shareholders who wish to accept such offer must so notify the corporation of their acceptance of the corporation’s offer within 30 days after receiving the offer; and

(5) that those shareholders who do not satisfy the requirements for demanding appraisal under RSA293-A:13.26 shall be deemed to have accepted the corporation’s offer.

(c) Within 10 days after receiving the shareholder’s acceptance pursuant to RSA293-A:13.25(b), the corporation must pay in cash the amount it offered under RSA293-A:13.25(b)(2) to each shareholder who agreed to accept the corporation’s offer in full satisfaction of the shareholder’s demand.

(d) Within 40 days after sending the notice described in RSA293-A:13.25(b), the corporation must pay in cash the amount it offered to pay under RSA293-A:13.25(b)(2) to each shareholder described in RSA293-A:13.25(b)(5).

293-A:13.26 Procedure if Shareholder Dissatisfied With Payment or Offer. –

(a) A shareholder paid pursuant to RSA293-A:13.24 who is dissatisfied with the amount of the payment must notify the corporation in writing of that shareholder’s estimate of the fair value of the shares and demand payment of that estimate plus interest (less any payment under RSA293-A:13.24). A shareholder offered payment under RSA293-A:13.25 who is dissatisfied with that offer must reject the offer and demand payment of the shareholder’s stated estimate of the fair value of the shares plus interest.

(b) A shareholder who fails to notify the corporation in writing of that shareholder’s demand to be paid the shareholder’s stated estimate of the fair value plus interest under RSA293-A:13.26(a) within 30 days after receiving the corporation’s payment or offer of payment under RSA293-A:13.24 or RSA293-A:13.25, respectively, waives the right to demand payment under this section and shall be entitled only to the payment made or offered pursuant to those respective sections.

293-A:13.30 Court Action. –

(a) If a shareholder makes demand for payment under RSA293-A:13.26 which remains unsettled, the corporation shall commence a proceeding within 60 days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the60-day period, it shall pay in cash to each shareholder the amount the shareholder demanded pursuant to RSA293-A:13.26 plus interest.

(b) The corporation shall commence the proceeding in the appropriate court of the county where the corporation’s principal office (or, if none, its registered office) in this state is located. If the corporation is a foreign corporation without a registered office in this state, it shall commence the proceeding in the county in this state where the principal office or registered office of the domestic corporation merged with the foreign corporation was located at the time of the transaction.

(c) The corporation shall make all shareholders (whether or not residents of this state) whose demands remain unsettled parties to the proceeding as in an action against their shares, and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law.

(d) The jurisdiction of the court in which the proceeding is commenced under RSA293-A:13.30(b) is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the powers described in the order appointing them, or in any amendment to it. The shareholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings. There shall be no right to a jury trial.

(e) Each shareholder made a party to the proceeding is entitled to judgment (i) for the amount, if any, by which the court finds the fair value of the shareholder’s shares, plus interest, exceeds the amount paid by the corporation to the shareholder for such shares or (ii) for the fair value, plus interest, of the shareholder’s shares for which the corporation elected to withhold payment under RSA293-A:13.25.

293-A:13.31 Court Costs and Expenses. –

(a) The court in an appraisal proceeding commenced under RSA293-A:13.30 shall determine all court costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the court costs against the corporation, except that the court may assess court costs against all or some of the shareholders demanding appraisal, in amounts which the court finds equitable, to the extent the court finds such shareholders acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this subdivision.

(b) The court in an appraisal proceeding may also assess the expenses of the respective parties in amounts the court finds equitable:

(1) against the corporation and in favor of any or all shareholders demanding appraisal if the court finds the corporation did not substantially comply with the requirements of RSA293-A:13.20, RSA293-A:13.22, RSA293-A:13.24, or RSA293-A:13.25; or

(2) against either the corporation or a shareholder demanding appraisal, in favor of any other party, if the court finds the party against whom expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this subdivision.

(c) If the court in an appraisal proceeding finds that the expenses incurred by any shareholder were of substantial benefit to other shareholders similarly situated and that such expenses should not be assessed against the corporation, the court may direct that such expenses be paid out of the amounts awarded the shareholders who were benefited.

(d) To the extent the corporation fails to make a required payment pursuant to RSA293-A:13.24, RSA293-A:13.25, or RSA293-A:13.26, the shareholder may sue directly for the amount owed, and to the extent successful, shall be entitled to recover from the corporation all expenses of the suit.

293-A:13.40 Other Remedies Limited. –

(a) The legality of a proposed or completed corporate action described in RSA293-A:13.02(a) may not be contested, nor may the corporate action be enjoined, set aside or rescinded, in a legal or equitable proceeding by a shareholder after the shareholders have approved the corporate action.

(b) RSA293-A:13.40(a) does not apply to a corporate action that:

(1) was not authorized and approved in accordance with the applicable provisions of:

(i) subdivisions 9, 10, 11, or 12 of RSA293-A,

(ii) the articles of incorporation or bylaws, or

(iii) the resolution of the board of directors authorizing the corporate action;

(2) was procured as a result of fraud, a material misrepresentation, or an omission of a material fact necessary to make statements made, in light of the circumstances in which they were made, not misleading;

(3) is an interested transaction, unless it has been recommended by the board of directors in the same manner as is provided in RSA293-A:8.62 and has been approved by the shareholders in the same manner as is provided in RSA293-A:8.63 as if the interested transaction were a director’s conflicting interest transaction; or

(4) is approved by less than unanimous consent of the voting shareholders pursuant to RSA293-A:7.04 if:

(i) the challenge to the corporate action is brought by a shareholder who did not consent and as to whom notice of the approval of the corporate action was not effective at least 10 days before the corporate action was effected; and

(ii) the proceeding challenging the corporate action is commenced within 10 days after notice of the approval of the corporate action is effective as to the shareholder bringing the proceeding.

ANNEX D—CHARTER OF CAMBRIDGE TRUST COMPANY

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An Act to incorporate the Cambridge safe deposit and Chap.287 TRUST COMPANY. Be it enacted, etc., as follows: Section 1. William R. Ellis, Woodward Emery, Howard Sargent, James M. Brine, Archibald M. Howe, Frederick P. Fish, John M. Hubbard, William E. Rus sell, S. Lothrop Thorndike, J. M. Hilton, Walter Wood man, James L. Fisk, Moses G. Howe, Manning Emery, Edward W. Hincks and Alvin F. Sortwell, their associ ates and successors, are hereby made a corporation by the name of the Cambridge Safe Deposit and Trust Company, Cambridge Safe Deposit and Trust Company, incorporated. 246 1890. Chapters 288, 289, 290. with authority to establish and maintain a safe deposit and trust company in the city of Cambridge; with all the powers and privileges and subject to all the duties, liabili ties and restrictions set forth in all general laws which now are or may hereafter be in force relating to such corporations. Section 2. This act shall take effect upon its passage. Approved May 8, 1890.

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FORM CD-72-30M-10-79-152328 Examiner The Commonwealth of Massachusetts MICHAEL JOSEPH CONNOLLY Secretary of State ONE ASHBURTON PLACE, BOSTON, MASS. 02108 FEDERAL IDENTIFICATION 04-1145370 NO ARTICLES OF AMENDMENT General laws, Chapter 156B, Section 72 This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the amendment. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts. We, Lewis H. Clark James F. Dwinell III, Secretary, , President and, of Cambridge Trust Company, (Name of Corporation) Name Approved located at Cambridge, Massachusetts, 1336 Massachusetts Avenue do hereby certify that the following amendment to the articles of organization of the corporation was duly adopted at a meeting held on February 9,1981 , by vote of shares of Common $10 par out of 120,000 shares outstanding, { (Class of Stock) shares of out of shares outstanding, and (Class of Stock) shares of out of shares outstanding, (Class of Stock) being at least a majority of each class outstanding end entitled to vote thereon: - cross out inapplicable clause To increase the number or authorized shares or Common Stock, par value $10,00 per share, from 120,000 shares to 150,000 shares and to authorize the Directors to (i) distribute 30,000 of such additional shares as a stock dividend to stockholders of record February 27, 1981 payable March 20, 1981, and (ii) transfer from Undivided Profits to Capital the sum of $300,000 and to Surplus the sum of $300,000 C P M 1 For amendments adopted pursuant to Chapter 156B, Section 70. 2 For amendments adopted pursuant to Chapter 156B, Section 71. Note: If the space provided under any Amendment or item on this form is insufficient, additions shall be set forth on separate 81/2 x 11 sheets of paper leaving a left hand margin of at least 1 inch for binding. Additions to more than one Amendment may be continued on a single sheet so long as each Amendment requiring each such addition is clearly indicated. P.C. 74,298 02138

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FOR INCREASE IN CAPITAL FILL IN THE FOLLOWING: The total amount of capital stock already authorized is shares preferred } with par value 120,000 shares common shares preferred } without par value shares common The amount of additional capital stock authorized is shares preferred} 30,000 shares common with Par value shares common shares preferred without par value shares common

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[illegible] The foregoing amendment will become effective when these articles of amendment are filed in accor- dance with Chapter 156B, Section 6 of The General Laws unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after. such filing, in which event the amendment will become effective on such later date. IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this day of , in the year 1981 President Secretary

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33083 I hereby approve the within certificate this thirteenth day of February, 1981. Deputy Commissioner and General Counsel THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) I hereby approve the within articles of amendment and, the filing fee in the amount of $150.00 having been paid, said articles are deemed to have been filed with me this 23rd day of February,1981. A TRUE COPY ATTEST WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH DATE 1/9/19 CLERK MICHAEL JOSEPH CONNOLLY Secretary of State TO BE FILLED IN BY CORPORATION PHOTO COPY OF AMENDMENT TO BE SENT TO: Casimir de Rham, Jr., Esq. Palmer & Dodge One Beacon Street, Boston, MA 02108 Telephone 617-227-4400 Copy Mailed FEB 26 1981

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

Cambridge is a Massachusetts corporation. Massachusetts General Laws (“MGL”) Chapter 156D, Part 8, Subdivision E, provides that a corporation may, subject to certain limitations, indemnify its directors, officers, employees and other agents, and individuals serving with respect to any employee benefit plan, and must, in certain cases, indemnify a director or officer for his reasonable costs if he is wholly successful in his defense in a proceeding to which he was a party because he was a director or officer of the corporation. In certain circumstances, a court may order a corporation to indemnify its officers or directors or advance their expenses. MGL Chapter 156D, Section 8.58 allows a corporation to limit or expand its obligation to indemnify its directors, officers, employees and agents in the corporation’s articles of organization, a bylaw adopted by the shareholders, or a contract adopted by its board of directors or shareholders.

Under Cambridge’s Bylaws, Cambridge shall,will, to the extent legally permissible, indemnify each director and officer against all expenses and liabilities reasonably incurred by or imposed upon such person in connection with any threatened, pending or completed action, suit or other proceeding in which he or she may become involved by reason of having served in such capacity. Cambridge shallwill not provide indemnification (a) with respect to a proceeding voluntarily initiated by a director or officer unless he or she is successful on the merit, the proceeding was authorized by Cambridge, or the proceeding seeks a declaratory judgment regarding his or her own conduct or (b) with respect to a compromise payment made to dispose of a matter, unless the payment and indemnification thereof have been approved by Cambridge or a court of competent jurisdiction. Cambridge also shallwill not provide indemnification for any person with respect to matters as to which he or she shallwill have been finally adjudicated (a) not to have acted in good faith in the reasonable belief that his or her action was in, or at least not opposed to, the best interests of Cambridge and (b) in the case of a criminal proceeding, to have had reasonable cause to believe his or her conduct was unlawful.

Indemnification under Cambridge’s Bylaws includes payment by Cambridge of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding upon receipt from the person to be indemnified of (i) a written affirmation of his or her good faith belief that he or she has met the relevant standard of conduct described in Cambridge’s Bylaws and (ii) a written undertaking to repay such payment if such person shallwill be adjudicated to be not entitled to indemnification.

The right of indemnification under Cambridge’s Bylaws is a contractual right inuring to the benefit of the directors, officers and other persons entitled to indemnification and no amendment or repeal of the Bylaws shallwill adversely affect any right of such director, officer or other person existing at the time of such amendment or repeal

Cambridge maintains, on behalf of its directors and officers, insurance protection against certain liabilities arising out of the discharge of their duties, as well as insurance covering Cambridge for indemnification payments made to its directors and officers for certain liabilities. The premiums for such insurance are paid by Cambridge.

 

II-1

Item 21. Exhibits and Financial Statement Schedules.

 

Exhibit


Number

  

Description

2.1  Agreement and Plan of Merger, dated as of December 5, 2018,2019, by and between Cambridge Bancorp, Cambridge Trust Company, Wellesley Bancorp, Inc., and OptimaWellesley Bank & Trust Company (incorporated by reference to Annex  A of the joint proxy statement/prospectus included in this registration statement).
  4.13.1  Articles of Organization, as amended (incorporated by reference to Exhibit 3.1 of the Form8-K filed with the SEC on June 18, 2018).
  4.23.2  Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of Amendment No. 2 of the Registration Statement FileNo. 1-38184 on Form 10 filed with the SEC on October 4, 2017).
  4.34.1  Specimen stock certificate (incorporated by reference to Exhibit 4.1 of Amendment No. 2 of the Registration Statement FileNo. 1-38184 on Form 10 filed with the SEC on October 4, 2017).
  5.15.1*  Opinion of Hogan Lovells US LLP as to the validity of the shares being registered.
  8.18.1*  Opinion of Hogan Lovells US LLP as to certain federal income tax mattersmatters..
  8.28.2*  Opinion of Goodwin ProcterKilpatrick Townsend & Stockton LLP as to certain federal income tax matters.
10.110.1*  Form of Voting Agreement, dated as of September 19, 2018,December  5, 2019, by and between certain shareholders of Optima Bank & Trust Company,Wellesley Bancorp, Inc., and Cambridge Bancorp (incorporated by reference to Annex A of the joint proxy statement/prospectus included in this registration statement).
23.110.2*Form of Voting Agreement, dated as of December 5, 2019, by and between certain shareholders of Cambridge Bancorp, and Wellesley Bancorp, Inc. (incorporated by reference toAnnex A of the joint proxy statement/prospectus included in this registration statement).
23.1*  Consent of Hogan Lovells US LLP (included in Exhibit 5.1).
23.223.2*  Consent of Hogan Lovells US LLP (included in Exhibit 8.1)..
23.323.3*  Consent of Goodwin ProcterKilpatrick Townsend & Stockton LLP (included in Exhibit 8.2)..
23.423.4*  Consent of KPMG LLP, with respect to Cambridge Bancorp.
23.523.5*Consent of Wolf & Company, P.C., with respect to Wellesley Bancorp, Inc.
23.6*  Consent of Baker Newman & Noyes LLC, with respect to Optima Bank & Trust CompanyCompany..
24.124.1*  Power of Attorney (included on signature page).
99.199.1*  Consent of Piper Sandler O’Neill & Partners, L.P.Co.
99.299.2*Consent of Keefe, Bruyette & Woods, Inc.
99.3*  Consent of Director Nominee.
99.399.4  Form of Proxy Card of Optima Bank & Trust CompanyCambridge Bancorp..
99.5Form of Proxy Card of Wellesley Bancorp, Inc.

*

Previously filed.

Item 22. Undertakings.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in

II-2

the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

II-2

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change in such information in the registration statement;

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted against the registrant by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, on January 22, 2019.February 3, 2020.

 

CAMBRIDGE BANCORP
By: 

 /s//s/ Denis K. Sheahan

 Denis K. Sheahan
 Chairman and Chief Executive Officer

KNOW ALL BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints each of Denis K. Sheahan and Michael F. Carotenuto as such person’s true and lawfulattorney-in-fact and agent with full power of substitution and resubstitution, for such person in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto each saidattorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that any saidattorney-in-fact and agent, or any substitute or substitutes of any of them, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signatures

  

Title

  

Date

/s/ Denis K. Sheahan

Denis K. Sheahan

  

Chairman, Chief Executive Officer and Director

(Principal Executive Officer)

  January 22, 2019February 3, 2020

Denis K. Sheahan

/s/ Michael F. Carotenuto

Michael F. Carotenuto

  

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

  January 22, 2019February 3, 2020

/s/ Donald T. Briggs*

Donald T. BriggsJeanette G. Clough

  

Director

  January 22, 2019

February 3, 2020

/s/ Jeanette G. Clough*

Jeanette G. CloughChristine Fuchs

  

Director

  January 22, 2019

February 3, 2020

/s/ Sarah G. Green*

Sarah G. Green

  

Director

  January 22, 2019

February 3, 2020

/s/ Edward F. Jankowski*

Pamela Ann Hamlin

Director

February 3, 2020

*

Edward F. Jankowski

  

Director

  January 22, 2019

February 3, 2020

/s/ Hambleton D. Lord*

Hambleton D. Lord

  

Director

  January 22, 2019

February 3, 2020

*

Thalia M. Meehan

Director

February 3, 2020

*

Daniel R. Morrison

Chief Executive Officer New

Hampshire Market and Director

February 3, 2020

*

Leon A. Palandjian

Director

February 3, 2020

Signatures*

Laila Partridge

  

TitleDirector

  

DateFebruary 3, 2020

*

/s/ LeonJody A. Palandjian

Leon A. PalandjianRose

  

Director

Director

  

February 3, 2020

January 22, 2019

/s/ Cathleen A. Schmidt*

Cathleen A. Schmidt

  

Director

  January 22, 2019

February 3, 2020

/s/ R. Gregg Stone*

R. Gregg Stone

  

Director

  January 22, 2019

February 3, 2020

/s/ Anne M. Thomas*

Anne M. ThomasMark D. Thompson

  

President and Director

  January 22, 2019

February 3, 2020

/s/ Mark D. Thompson*

Mark D. ThompsonLinda Whitlock

  

Director

  January 22, 2019

February 3, 2020

* By:/s/ David C. Warner

David C. Warner

Michael F. Carotenuto        		  Lead DirectorAttorney-in-Fact  January 22, 2019February 3, 2020

/s/ Linda A. Whitlock

Linda A. Whitlock

         Michael F. Carotenuto		  Director  January 22, 2019

/s/ Susan R. Windham-Bannister

Susan R. Windham-Bannister

DirectorJanuary 22, 2019