UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

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

For the quarterly period ended ~~March 31,~~September 30, 2020.

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

Commission file number:

0-15752

CENTURY BANCORP, INC.

(Exact name of registrant as specified in its charter)


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

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

(781)

391-4000

(Registrant’s telephone number, including area code)

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

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

S-T (§

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

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

non-accelerated

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

12b-2

of the Exchange Act.

(Check one):


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 13(a) of the Exchange Act. ☐

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

12b-2

of the Exchange Act). ☐ Yes ☒

As of ~~April 30,~~October 31, 2020, the Registrant had outstanding:


Class A Common Stock, $1.00 par value		~~3,652,349~~3,655,469 Shares
Class B Common Stock, $1.00 par value		~~1,915,560~~1,912,440 Shares

Table of Contents

Century Bancorp, Inc.

Index


		Page Number
Part I		~~Number~~
~~Part I~~	Financial Information Forward Looking Statements		3
Item 1.	~~Forward Looking~~Financial Statements (unaudited)

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

	Consolidated Balance Sheets: ~~March 31,~~ September 30, 2020 and December 31, 2019		4
	Consolidated Statements of Income: Three Months and Nine Months Ended ~~March 31,~~September 30, 2020 and 2019		5
	Consolidated Statements of Comprehensive Income: Three Months and Nine Months Ended ~~March 31,~~September 30, 2020 and 2019		6
	Consolidated Statements of Changes in Stockholders’ Equity: Three Months Ended ~~March 31,~~September 30, 2020 and 2019		7
	Consolidated Statements of ~~Cash Flows:~~ ~~Three~~Changes in Stockholders’ Equity: Nine Months Ended ~~March 31,~~September 30, 2020 and 2019		8
	Consolidated Statements of Cash Flows: Nine Months Ended September 30, 2020 and 2019		9
	Notes to Consolidated Financial Statements		~~9 - 29~~10-33

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		~~29 - 40~~33-46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		47
Item 4.	Controls and Procedures		47

~~Item 3.~~ Part II.	~~Quantitative and Qualitative Disclosures About Market Risk~~		40

~~Item 4.~~	~~Controls and Procedures~~		40

~~Part II.~~	Other Information

Item 1.	Legal Proceedings		4148-49
Item 1A.	Risk Factors		4148-49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		4148-49
Item 3.	Defaults Upon Senior Securities		4148-49
Item 4.	Mine Safety Disclosures		4148-49
Item 5.	Other Information		4148-49
Item 6.	Exhibits		4148-49

Signatures			50

~~Signatures~~ Exhibits			42

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

Table of Contents

Forward Looking Statements

Except for the historical information contained herein, this Quarterly Report on

Form 10-Q

may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, (i) the fact that the Company’s success is dependent to a significant extent upon general economic conditions in New England, (ii) the fact that the Company’s earnings depend to a great extent upon the level of net interest income (the difference between interest income earned on loans and investments and the interest expense paid on deposits and other borrowings) generated by the Bank and thus the Bank’s results of operations may be adversely affected by increases or decreases in interest rates, (iii) the fact that the banking business is highly competitive and the profitability of the Company depends upon the Bank’s ability to attract loans and deposits within its market area, where the Bank competes with a variety of traditional banking and other institutions such as credit unions and finance companies, and (iv) the fact that a significant portion of the Company’s loan portfolio is comprised of commercial loans, exposing the Company to the risks inherent in loans based upon analyses of credit risk, the value of underlying collateral, including real estate, and other more intangible factors, which are considered in making commercial loans. Accordingly, the Company’s profitability may be negatively impacted by errors in risk analyses, and by loan defaults, and the ability of certain borrowers to repay such loans may be adversely affected by any downturn in general economic conditions, (v) the fact that the ~~the~~ Company’s business, financial condition and results of operation have been or may be negatively impacted by the extent and duration of the

COVID-19

pandemic. These factors, as well as general economic and market conditions, may materially and adversely affect the market price of shares of the Company’s common stock. Because of these and other factors, past financial performance should not be considered an indicator of future performance. The forward-looking statements contained herein represent the Company’s judgment as of the date of this

Form 10-Q,

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

Page 3 of 42

Table of Contents

PART I – Item 1

Century Bancorp, Inc.

Consolidated Balance Sheets (unaudited)

(In thousands, except share data)

   March 31, December 31,
   2020 2019
Assets
Cash and due from banks
   $ 64,523 $ 44,420
Federal funds sold and interest-bearing deposits in other banks
   218,488 214,273


Total cash and cash equivalents
   283,011 258,693
Securitiesavailable-for-sale, amortized cost $280,520 and $260,924, respectively
   278,019 260,502
Securitiesheld-to-maturity, fair value $2,365,027 and $2,361,304, respectively
   2,304,074 2,351,120
Federal Home Loan Bank of Boston, stock at cost
   17,241 19,471
Equity securities, amortized cost $1,635 and $1,635, respectively
   1,609 1,688
Loans, net:

Construction and land development
   6,493 8,992
Commercial and industrial
   867,599 812,417
Municipal
   141,588 120,455
Commercial real estate
   761,464 786,102
Residential real estate
   393,338 371,897
Consumer and overdrafts
   21,039 21,893
Home equity
   307,373 304,363


Total loans, net
   2,498,894 2,426,119
Less: allowance for loan losses
   30,804 29,585


Net loans
   2,468,090 2,396,534
Bank premises and equipment
   36,238 33,952
Accrued interest receivable
   12,998 13,110
Goodwill
   2,714 2,714
Other assets
   158,292 154,640


Total assets
   $ 5,562,286 $ 5,492,424


Liabilities
Deposits:

Demand deposits
   $ 797,570 $ 712,842
Savings and NOW deposits
   1,662,414 1,678,250
Money market accounts
   1,489,679 1,453,572
Time deposits
   612,849 555,447


Total deposits
   4,562,512 4,400,111
Securities sold under agreements to repurchase
   219,995 266,045
Other borrowed funds
   312,120 370,955
Subordinated debentures
   36,083 36,083
Due to broker
   5,500 —
Other liabilities
   85,389 86,649


Total liabilities
   5,221,599 5,159,843
Stockholders’ Equity
Preferred Stock – $1.00 par value; 100,000 shares authorized; no shares issued and outstanding
   —   —
Common stock, Class A, $1.00 par value per share; authorized 10,000,000 shares; issued 3,652,349 shares and 3,650,949 shares, respectively
   3,652 3,651
Common stock, Class B, $1.00 par value per share; authorized 5,000,000 shares; issued 1,915,560 shares and 1,916,960 shares respectively
   1,916 1,917
Additionalpaid-in capital
   12,292 12,292
Retained earnings
   348,093 338,980


   365,953 356,840
Unrealized losses on securitiesavailable-for-sale, net of taxes
   (1,839 ) (308 )
Unrealized losses on securities transferred toheld-to-maturity, net of taxes
   (1,648 ) (1,812 )
Pension liability, net of taxes
   (21,779 ) (22,139 )


Total accumulated other comprehensive loss, net of taxes
   (25,266 ) (24,259 )


Total stockholders’ equity
   340,687 332,581


Total liabilities and stockholders’ equity
   $ 5,562,286 $ 5,492,424


Assets	September 30, 2020			December 31, 2019
Cash and due from banks	$	101,679		$	44,420
Federal funds sold and interest-bearing deposits in other banks		310,901			214,273

Total cash and cash equivalents		412,580			258,693
Securities available-for-sale, amortized cost $291,440 and $260,924, respectively		291,632			260,502
Securities held-to-maturity, fair value $2,484,947 and $2,361,304, respectively		2,407,176			2,351,120
Federal Home Loan Bank of Boston, stock at cost		13,361			19,471
Equity securities, cost $1,635 and $1,635, respectively		1,645			1,688
Loans, net:
Construction and land development		9,116			8,992
Commercial and industrial		1,315,407			812,417
Municipal		130,047			120,455
Commercial real estate		784,895			786,102
Residential real estate		443,703			371,897
Consumer and overdrafts		19,866			21,893
Home equity		287,099			304,363

Total loans, net		2,990,133			2,426,119
Less: allowance for loan losses		33,394			29,585

Net loans		2,956,739			2,396,534
Bank premises and equipment		37,340			33,952
Accrued interest receivable		13,223			13,110
Goodwill		2,714			2,714
Other assets		159,016			154,640

Total assets	$	6,295,426		$	5,492,424


Liabilities
Deposits:
Demand deposits	$	991,590		$	712,842
Savings and NOW deposits		1,932,339			1,678,250
Money market accounts		1,906,676			1,453,572
Time deposits		581,866			555,447

Total deposits		5,412,471			4,400,111
Securities sold under agreements to repurchase		231,030			266,045
Other borrowed funds		152,248			370,955
Subordinated debentures		36,083			36,083
Due to broker		9,977			—
Other liabilities		90,183			86,649

Total liabilities		5,931,992			5,159,843

Stockholders’ Equity
Preferred Stock – $1.00 par value; 100,000 shares authorized; 0 shares issued and outstanding		—			—
Common stock, Class A, $1.00 par value per share; authorized 10,000,000 shares; issued 3,655,469 shares and 3,650,949 shares, respectively		3,656			3,651
Common stock, Class B, $1.00 par value per share; authorized 5,000,000 shares; issued 1,912,440 shares and 1,916,960 shares respectively		1,912			1,917
Additional paid-in capital		12,292			12,292
Retained earnings		367,836			338,980

		385,696			356,840
Unrealized gains(losses) on securities available-for-sale, net of taxes		137			(308	)
Unrealized losses on securities transferred to held-to-maturity, net of taxes		(1,341	)		(1,812	)
Pension liability, net of taxes		(21,058	)		(22,139	)

Total accumulated other comprehensive loss, net of taxes		(22,262	)		(24,259	)

Total stockholders’ equity		363,434			332,581

Total liabilities and stockholders’ equity	$	6,295,426		$	5,492,424

See accompanying notes to unaudited consolidated interim financial statements.

Page 4 of 42

Table of Contents

Century Bancorp, Inc.

Consolidated Statements of Income (unaudited)

(In thousands, except share data)

   Three months ended
   March 31,
   2020    2019
Interest income

Loans
   $ 22,199    $ 21,309
Securitiesheld-to-maturity
   15,293    13,788
Securitiesavailable-for-sale
   1,693    2,631
Federal funds sold and interest-bearing deposits in other banks
   610    1,349




Total interest income
   39,795    39,077




Interest expense

Savings and NOW deposits
   3,725    5,466
Money market accounts
   5,572    5,343
Time deposits
   3,172    2,793
Securities sold under agreements to repurchase
   626    385
Other borrowed funds and subordinated debentures
   1,499    1,652




Total interest expense
   14,594    15,639




Net interest income
   25,201    23,438
Provision for loan losses
   1,075    375




Net interest income after provision for loan losses
   24,126    23,063
Other operating income

Service charges on deposit accounts
   2,296    2,209
Lockbox fees
   930    1,089
Gains on sales of mortgage loans
   —      15
Other income
   1,084    1,114




Total other operating income
   4,310    4,427




Operating expenses

Salaries and employee benefits
   11,371    11,035
Occupancy
   1,515    1,701
Equipment
   837    783
FDIC Assessments
   —      373
Other
   4,450    4,298




Total operating expenses
   18,173    18,190




Income before income taxes
   10,263    9,300
(Benefit) Provision for income taxes
   597    (118 )




Net income
   $ 9,666    $ 9,418




Share data:

Weighted average number of shares outstanding, basic

Class A
   3,652,349    3,610,329
Class B
   1,915,560    1,957,580
Weighted average number of shares outstanding, diluted

Class A
   5,567,909    5,567,909
Class B
   1,915,560    1,957,580
Basic earnings per share:

Class A
   $ 2.10    $ 2.05
Class B
   $ 1.05    $ 1.03
Diluted earnings per share

Class A
   $ 1.74    $ 1.69
Class B
   $ 1.05    $ 1.03


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Interest income
Loans	$	21,431	$	22,117	$	63,478	$	65,106
Securities held-to-maturity		14,186		14,623		44,701		43,006
Securities available-for-sale		818		2,184		3,493		7,305
Federal funds sold and interest-bearing deposits in other banks		69		928		747		3,204

Total interest income		36,504		39,852		112,419		118,621

Interest expense
Savings and NOW deposits		1,726		5,445		7,569		16,788
Money market accounts		3,056		5,050		12,090		15,805
Time deposits		2,858		3,038		9,141		8,724
Securities sold under agreements to repurchase		241		697		1,176		1,572
Other borrowed funds and subordinated debentures		1,292		1,852		4,093		5,274

Total interest expense		9,173		16,082		34,069		48,163

Net interest income		27,331		23,770		78,350		70,458
Provision for loan losses		900		75		3,675		700

Net interest income after provision for loan losses		26,431		23,695		74,675		69,758
Other operating income
Service charges on deposit accounts		2,239		2,310		6,558		6,801
Lockbox fees		996		937		2,850		3,018
Net gains on sales of securities		—		53		—		61
Gains on sales of mortgage loans		—		—		—		154
Other income		934		986		3,112		3,676

Total other operating income		4,169		4,286		12,520		13,710

Operating expenses
Salaries and employee benefits		11,362		10,670		33,020		32,621
Occupancy		1,477		1,463		4,448		4,686
Equipment		809		862		2,608		2,440
FDIC assessments		410		—		720		723
Other		4,109		4,467		12,586		13,447

Total operating expenses		18,167		17,462		53,382		53,917

Income before income taxes		12,433		10,519		33,813		29,551
Provision for income taxes		1,546		435		3,204		584

Net income	$	10,887	$	10,084	$	30,609	$	28,967

Share data:
Weighted average number of shares outstanding, basic
Class A		3,655,469		3,650,449		3,653,429		3,627,076
Class B		1,912,440		1,917,460		1,914,480		1,940,833
Weighted average number of shares outstanding, diluted
Class A		5,567,909		5,567,909		5,567,909		5,567,909
Class B		1,912,440		1,917,460		1,914,480		1,940,833
Basic earnings per share:
Class A	$	2.36	$	2.19	$	6.64	$	6.30
Class B	$	1.18	$	1.09	$	3.32	$	3.15
Diluted earnings per share
Class A	$	1.96	$	1.81	$	5.50	$	5.20
Class B	$	1.18	$	1.09	$	3.32	$	3.15

See accompanying notes to unaudited consolidated interim financial statements.

Page 5 of 42

Table of Contents

Century Bancorp, Inc.

Consolidated Statements of Comprehensive Income (unaudited)

(In thousands)

   Three months ended March 31,
   2020 2019
Net income
   $ 9,666 $ 9,418
Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on securities:

Unrealized (losses) gains arising during period
   (1,531 ) (462 )
Less: reclassification adjustment for gains included in net income
   —   —


Total unrealized (losses) gains on securities
   (1,531 ) (462 )
Accretion of net unrealized losses transferred
   164 216
Defined benefit pension plans:

Amortization of prior service cost and loss included in net periodic benefit cost
   360 263


Other comprehensive (loss) income
   (1,007 ) 17


Comprehensive income
   $ 8,659 $ 9,435


	Three months ended September 30,
	2020		2019
Net income	$	10,887	$	10,084
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized gains arising during period		486		113
Less: reclassification adjustment for gains included in net income		—		(39	)

Total unrealized gains on securities		486		74
Accretion of net unrealized losses transferred		145		155
Defined benefit pension plans:
Amortization of prior service cost and loss included in net periodic benefit cost		360		263

Other comprehensive income		991		492

Comprehensive income	$	11,878	$	10,576


	Nine months ended September 30,
	2020		2019
Net income	$	30,609	$	28,967
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Unrealized gains (losses) arising during period		445		(112	)
Less: reclassification adjustment for gains included in net income		—		(44	)

Total unrealized gains (losses) on securities		445		(156	)
Accretion of net unrealized losses transferred		471		574
Defined benefit pension plans:
Amortization of prior service cost and loss included in net periodic benefit cost		1,081		790

Other comprehensive income		1,997		1,208

Comprehensive income	$	32,606	$	30,175

See accompanying notes to unaudited consolidated interim financial statements.

Page 6 of 42

Table of Contents

Century Bancorp, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

For the Three Months Ended ~~March 31,~~September 30, 2020 and 2019

         Accumulated
   Class A    Class B Additional    Other Total
   Common    Common Paid-In    Retained Comprehensive Stockholders’
   Stock    Stock Capital    Earnings Income (Loss) Equity
   (In thousands)
Balance at December 31, 2018
   $ 3,608    $ 1,960 $ 12,292    $ 301,488 $ (18,909 ) $ 300,439
Net income
   —      —   —      9,418 —   9,418
Other comprehensive income, net of tax:
         —
Unrealized holding (losses) gains arising during period, net of $166 in taxes
   —      —   —      —   (462 ) (462 )
Accretion of unrealized losses on securities transferred toheld-to-maturity, net of $78 in taxes
   —      —   —      —   216 216
Pension liability adjustment, net of $103 in taxes
   —      —   —      —   263 263
Conversion of Class B Common Stock to Class A Common Stock, 2,300 shares
   2    (2 ) —      —   —   —
Cash dividends paid, Class A common stock, $0.12 per share
   —      —   —      (433 ) —   (433 )
Cash dividends paid, Class B common stock, $0.06 per share
   —      —   —      (117 ) —   (117 )






Balance at March 31, 2019
   $ 3,610    $ 1,958 $ 12,292    $ 310,356 $ (18,892 ) $ 309,324






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

Unrealized holding (losses) gains arising during period, net of $548 in taxes
   —      —   —      —   (1,531 ) (1,531 )
Accretion of unrealized losses on securities transferred toheld-to-maturity, net of $58 in taxes
   —      —   —      —   164 164
Pension liability adjustment, net of $141 in taxes
   —      —   —      —   360 360
Conversion of Class B Common Stock to Class A Common Stock, 1,400 shares
   1    (1 ) —      —   —   —
Cash dividends paid, Class A common stock, $0.12 per share
   —      —   —      (438 ) —   (438 )
Cash dividends paid, Class B common stock, $0.06 per share
   —      —   —      (115 ) —   (115 )






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


	Class A Common Stock		Class B Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	(In thousands)
Balance at June 30, 2019	$	3,620	$	1,948		$	12,292	$	319,270		$	(18,193	)	$	318,937
Net income		—		—			—		10,084			—			10,084
Other comprehensive income, net of tax:
Unrealized holding (losses) gains arising during period, net of $23 in taxes and $53 in realized gains		—		—			—		—			74			74
Accretion of unrealized losses on securities transferred to held-to-maturity, net of $54 in taxes		—		—			—		—			155			155
Pension liability adjustment, net of $103 in taxes		—		—			—		—			263			263
Conversion of Class B Common Stock to Class A Common Stock, 30,000 shares		30		(30	)		—		—			—			—
Cash dividends paid, Class A common stock, $.12 per share		—		—			—		(438	)		—			(438	)
Cash dividends paid, Class B common stock, $.06 per share		—		—			—		(115	)		—			(115	)

Balance at September 30, 2019	$	3,650	$	1,918		$	12,292	$	328,801		$	(17,701	)	$	328,960


Balance at June 30, 2020	$	3,653	$	1,915		$	12,292	$	357,595		$	(23,253	)	$	352,202
Net income		—		—			—		10,887						10,887
Other comprehensive income, net of tax:
Unrealized holding (losses) gains arising during period, net of $181 in taxes		—		—			—		—			486			486
Accretion of unrealized losses on securities transferred to held-to-maturity, net of $51 in taxes		—		—			—		—			145			145
Pension liability adjustment, net of $142 in taxes		—		—			—		—			360			360
Conversion of Class B Common Stock to Class A Common Stock, 3,000 shares		3		(3	)		—		—			—			—
Cash dividends paid, Class A common stock, $0.14 per share		—		—			—		(512	)		—			(512	)
Cash dividends paid, Class B common stock, $0.07 per share		—		—			—		(134	)		—			(134	)

Balance at September 30, 2020	$	3,656	$	1,912		$	12,292	$	367,836		$	(22,262	)	$	363,434

See accompanying notes to unaudited consolidated interim financial statements.

Page 7 of 42

Table of Contents

Century Bancorp, Inc.

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

For the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2020 and 2019

   Three months ended March 31,
   2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income
   $ 9,666 $ 9,418
Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Gain on sales of mortgage loans
   —   (15 )
Net loss (gain) on equity securities
   79 (53 )
Provision for loan losses
   1,075 375
Deferred income taxes
   (114 ) 104
Net depreciation and amortization
   (578 ) (468 )
Decrease (increase) in accrued interest receivable
   112 (58 )
(Increase) decrease in other assets
   2,359 2,187
Increase in other liabilities
   (336 ) (458 )


Net cash provided by operating activities
   12,263 11,032


CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from redemptions of Federal Home Loan Bank of Boston stock
   6,831 4,777
Purchase of Federal Home Loan Bank of Boston stock
   (4,601 ) (1,047 )
Proceeds from calls/maturities of securitiesavailable-for-sale
   20,734 34,927
Purchase of securitiesavailable-for-sale
   (39,719 ) (34,031 )
Proceeds from calls/maturities of securitiesheld-to-maturity
   123,723 88,027
Purchase of securitiesheld-to-maturity
   (70,171 ) (148,500 )
Net increase in loans
   (72,621 ) (25,811 )
Proceeds from sales of portfolio loans
   —   685
Bank owned life insurance purchases
   (6,000 ) —
Capital expenditures
   (3,084 ) (1,344 )


Net cash used in investing activities
   (44,908 ) (82,317 )


CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in time deposits
   57,402 (18,500 )
Net increase in demand, savings, money market and NOW deposits
   104,999 61,163
Cash dividends
   (553 ) (550 )
Net (decrease) increase in securities sold under agreements to repurchase
   (46,050 ) 10,260
Net (decrease) increase in other borrowed funds
   (58,835 ) 54,770


Net cash provided by financing activities
   56,963 107,143


Net increase in cash and cash equivalents
   24,318 35,858
Cash and cash equivalents at beginning of period
   258,693 342,503


Cash and cash equivalents at end of period
   $ 283,011 $ 378,361


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid (received) during the period for:

Interest
   $ 14,711 $ 15,462
Income taxes
   300 (1,265 )
Change in unrealized gains (losses) on securitiesavailable-for-sale, net of taxes
   (1,531 ) (462 )
Change in unrealized losses on securities transferred toheld-to-maturity, net of taxes
   164 216
Pension liability adjustment, net of taxes
   360 263
Change in due to (from) to broker
   5,500 11,740


	Class A Common Stock		Class B Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	(In thousands)
Balance at December 31, 2018	$	3,608	$	1,960		$	12,292	$	301,488		$	(18,909	)	$	300,439	��
Net income		—		—			—		28,967			—			28,967
Other comprehensive income, net of tax:
Unrealized holding (losses) gains arising during period, net of $52 in taxes and $61 in realized gains		—		—			—		—			(156	)		(156	)
Accretion of unrealized losses on securities transferred to held-to-maturity, net of $205 in taxes		—		—			—		—			574			574
Pension liability adjustment, net of $309 in taxes		—		—			—		—			790			790
Conversion of Class B Common Stock to Class A Common Stock, 42,120 shares		42		(42	)		—		—			—			—
Cash dividends paid, Class A common stock, $.36 per share		—		—			—		(1,304	)		—			(1,304	)
Cash dividends paid, Class B common stock, $.18 per share		—		—			—		(350	)		—			(350	)

Balance at September 30, 2019	$	3,650	$	1,918		$	12,292	$	328,801		$	(17,701	)	$	328,960


Balance at December 31, 2019	$	3,651	$	1,917		$	12,292	$	338,980		$	(24,259	)	$	332,581
Net income		—		—			—		30,609						30,609
Other comprehensive income, net of tax:
Unrealized holding (losses) gains arising during period, net of $169 in taxes		—		—			—		—			445			445
Accretion of unrealized losses on securities transferred to held-to-maturity, net of $166 in taxes		—		—			—		—			471			471
Pension liability adjustment, net of $422 in taxes		—		—			—		—			1,081			1,081
Conversion of Class B Common Stock to Class A Common Stock, 4,520 shares		5		(5	)		—		—			—			—
Cash dividends paid, Class A common stock, $0.38 per share		—		—			—		(1,389	)		—			(1,389	)
Cash dividends paid, Class B common stock, $0.19 per share		—		—			—		(364	)		—			(364	)

Balance at September 30, 2020	$	3,656	$	1,912		$	12,292	$	367,836		$	(22,262	)	$	363,434

See accompanying notes to unaudited consolidated interim financial statements.

Page 8 of 42

Table of Contents

Century Bancorp, Inc.

Consolidated Statements of Cash Flows (unaudited)

For the Nine Months Ended September 30, 2020 and 2019

Nine months ended
September 30,


2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
30,609

$ 28,967
Adjustments to reconcile net income to net cash provided by operating activities:

Gain on sales of mortgage loans


—

(154 )
Net gains on sales of securities


—

(61 )
Net loss (gain) on equity securities


43

(76 )
Provision for loan losses


3,675

700
Deferred income taxes


(1,487
)
(593 )
Net depreciation and amortization


(1,167
)
(1,693 )
(Increase) decrease in accrued interest receivable


(113
)
1,131
Decrease (increase) in other assets


3,897

(1,037 )
Increase in other liabilities


3,396

2,029


Net cash provided by operating activities


38,853

29,213


CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from redemptions of Federal Home Loan Bank of Boston stock


10,836

13,801
Purchase of Federal Home Loan Bank of Boston stock


(4,726
)
(9,852 )
Proceeds from calls/maturities of securities
available-for-sale


57,493

115,574
Proceeds from sales of securities
available-for-sale


—

16,285
Purchase of securities
available-for-sale


(87,751
)
(57,005 )
Proceeds from calls/maturities of securities
held-to-maturity


596,043

313,358
Purchase of securities
held-to-maturity


(638,023
)
(427,124 )
Proceeds from sales of securities
held-to-maturity


—

1,194
(Purchases) proceeds from life insurance policies


(6,000
)
5,124
Net increase in loans


(563,850
)
(98,915 )
Proceeds from sales of portfolio loans


—

8,871
Capital expenditures


(5,873
)
(9,962 )


Net cash used in investing activities


(641,851
)
(128,651 )


CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in time deposits


26,419

(27,505 )
Net increase (decrease) in demand, savings, money market and NOW deposits


985,941

(39,606 )
Cash dividends


(1,753
)
(1,654 )
Net (decrease) increase in securities sold under agreements to repurchase


(35,015
)
152,995
Net (decrease) increase in other borrowed funds


(218,707
)
6,810


Net cash provided by financing activities


756,885

91,040


Net increase (decrease) in cash and cash equivalents


153,887

(8,398 )
Cash and cash equivalents at beginning of period


258,693

342,503


Cash and cash equivalents at end of period

$
412,580

$ 334,105


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid (received) during the period for:

Interest

$
34,384

$ 48,127
Income taxes


1,750

(6,604 )
Change in unrealized gains (losses) on securities
available-for-sale,
net of taxes


445

(156 )
Change in unrealized gains (losses) on securities transferred to
held-to-maturity,
net of taxes


471

574
Pension liability adjustment, net of taxes


1,081

790
Change in due to broker


9,977

—
See accompanying notes to unaudited consolidated interim financial statements.
Page 9 of 50

Table of Contents

Century Bancorp, Inc.

Notes to Unaudited Consolidated Interim Financial Statements

~~Three~~

Nine Months Ended ~~March 31,~~September 30, 2020 and 2019

Note 1. Basis of Financial Statement Presentation

The consolidated financial statements include the accounts of Century Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Century Bank and Trust Company (the “Bank”). The consolidated financial statements also include the accounts of the Bank’s wholly owned subsidiaries, Century Subsidiary Investments, Inc. (“CSII”), Century Subsidiary Investments, Inc. II (“CSII II”), Century Subsidiary Investments, Inc. III (“CSII III”) and Century Financial Services Inc. (“CFSI”). CSII, CSII II, and CSII III are engaged in buying, selling and holding investment securities. CFSI has the power to engage in financial agency, securities brokerage, and investment and financial advisory services and related securities credit. The Company also owns 100% of Century Bancorp Capital Trust II (“CBCT II”). The entity is an unconsolidated subsidiary of the Company.

All significant intercompany accounts and transactions have been eliminated in consolidation. The Company provides a full range of banking services to individual, business and municipal customers in Massachusetts, New Hampshire, Rhode Island, Connecticut, and New York. As a bank holding company, the Company is subject to the regulation and supervision of the Federal Reserve Board. The Bank, a state chartered financial institution, is subject to supervision and regulation by applicable state and federal banking agencies, including the Federal Reserve Board, the Federal Deposit Insurance Corporation (the “FDIC”) and the Commonwealth of Massachusetts Commissioner of Banks. The Bank is also subject to various requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. All aspects of the Company’s business are highly competitive. The Company faces aggressive competition from other lending institutions and from numerous other providers of financial services. The Company has ~~one~~1 reportable operating segment.

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

10-Q

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

10-K

for the fiscal year ended December 31, 2019, as filed with the Securities and Exchange ~~Commission.~~ Commission and which provides a summary of the Company’s significant accounting principles. The interim results of consolidated operations are not necessarily indicative of the results for the entire year. Certain reclassifications are made to prior-year amounts whenever necessary to conform with the current-year presentation.

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

2016-13,

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

2016-13.

Material estimates that are susceptible to change in the near term relate to the allowance for loan losses. Management believes that the allowance for loan losses is adequate based on a review of factors, including historical

charge-off

rates with additional allocations based on qualitative risk factors for each category and general economic factors. While management uses available information to recognize loan losses, future additions to the allowance for loan losses may be necessary based on changes in economic conditions. Certain risks and uncertainties remain in the allowance for loan losses as a result of the

COVID-19

pandemic that occurred during ~~the first quarter of~~ 2020. Future provision levels will be dependent upon the length of the economic disruption and the effectiveness of government programs to mitigate the economic impact. In addition, regulatory agencies periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examination. ~~Certain reclassifications are made to prior-year amounts whenever necessary to conform with the current-year presentation.~~

Page 910 of 42

Table of Contents

Note 2. Securities

Available-for-Sale

   March 31, 2020    December 31, 2019
      Gross    Gross          Gross    Gross
   Amortized    Unrealized    Unrealized    Fair    Amortized    Unrealized    Unrealized    Fair
   Cost    Gains    Losses    Value    Cost    Gains    Losses    Value
   (in thousands)
SBA Backed Securities
   $ 50,722    $ 25    $ 132    $ 50,615    $ 54,331    $ 23    $ 143    $ 54,211
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
   208,596    157    2,538    206,215    184,580    139    532    184,187
Privately Issued Residential Mortgage-Backed Securities
   378    —      44    334    397    1    2    396
Obligations Issued by States and Political Subdivisions
   17,224    —      —      17,224    18,016    60    —      18,076
Other Debt Securities
   3,600    42    11    3,631    3,600    51    19    3,632
















Total
   $ 280,520    $ 224    $ 2,725    $ 278,019    $ 260,924    $ 274    $ 696    $ 260,502


	September 30, 2020								December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
SBA Backed Securities	$	46,147	$	0	$	282	$	45,865	$	54,331	$	23	$	143	$	54,211
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		189,531		767		394		189,904		184,580		139		532		184,187
Privately Issued Residential Mortgage-Backed Securities		347		1		7		341		397		1		2		396
Obligations Issued by States and Political Subdivisions		48,815		0		—		48,815		18,016		60		—		18,076
Other Debt Securities		6,600		113		6		6,707		3,600		51		19		3,632

Total	$	291,440	$	881	$	689	$	291,632	$	260,924	$	274	$	696	$	260,502

Included in SBA Backed Securities, and U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities are securities at fair value pledged to secure public deposits and repurchase agreements amounting to ~~$185,943,000~~$196,225,000 and $186,245,000 at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. Also included in securities

available-for-sale

are securities at fair value pledged for borrowing at the Federal Home Loan Bank of Boston amounting to ~~$30,619,000~~$30,112,000 and $32,297,000 at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. Also included in securities

available-for-sale

are securities at fair value pledged for borrowing at the Federal Reserve Bank discount window ~~$9,706,000~~$9,433,000 and $0 at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. There were no0 sales of

available-for-sale

securities for the ~~three~~nine months ended ~~March 31, 2020 and March 31, 2019, respectively.~~

September 30, 2020. The Company realized gross gains of $13,000 from the proceeds of $16,285,000 from the sales of

available-for-sale

securities for the nine months ended September 30, 2019.

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

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

available-for-sale

at ~~March 31,~~September 30, 2020.

   Amortized    Fair
   Cost    Value
   (in thousands)
Within one year
   $ 18,618    $ 18,568
After one but within five years
   149,846    148,675
After five but within ten years
   107,266    105,995
More than 10 years
   4,790    4,781




Total
   $ 280,520    $ 278,019


	Amortized Cost		Fair Value
	(in thousands)
Within one year	$	52,775	$	52,763
After one but within five years		124,574		125,000
After five but within ten years		97,505		97,430
More than 10 years		16,586		16,439

Total	$	291,440	$	291,632

The weighted average remaining life of investment securities

available-for-sale

at ~~March 31,~~September 30, 2020 was ~~5.0~~4.7 years. The contractual maturities, which were used in the table above, of mortgage-backed securities, will differ from the actual maturities, due to the ability of the issuers to prepay underlying obligations. Also ~~$260,560,000~~$236,600,000 of the securities are floating rate or adjustable rate and reprice prior to maturity.

As of ~~March 31,~~September 30, 2020 and December 31, 2019, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not more likely than not that it will be required to sell these debt securities before the anticipated recovery of its remaining amortized cost. In making its other-than-temporary impairment evaluation, the Company considered that the principal and interest on these securities are from issuers that are investment grade.

The unrealized loss on SBA Backed Securities, U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities related primarily to interest rates and not credit quality, and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at ~~March 31,~~September 30, 2020 or December 31, 2019.

Page 11 of 50

Table of Contents

In evaluating the underlying credit quality of a security, management considers several factors such as the credit rating of the obligor and the issuer, if applicable. Internal reviews of issuer financial statements are performed as deemed necessary. In the case of privately issued mortgage-backed securities, the performance of the underlying loans is analyzed as deemed necessary to determine the estimated future cash flows of the securities. Factors considered include the level of subordination, current and estimated future default rates, current and estimated prepayment rates, estimated loss severity rates, geographic concentrations and origination dates of underlying loans.

~~Page 10 of 42~~

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

available-for-sale

portfolio at ~~March 31,~~September 30, 2020. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 5614 and 2520 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of ~~124~~148 holdings at ~~March 31,~~September 30, 2020.

   March 31, 2020
   Less than 12 months    12 months or longer    Total
   Fair    Unrealized    Fair    Unrealized    Fair    Unrealized
Temporarily Impaired Investments    Value    Losses    Value    Losses    Value    Losses
         (in thousands)
SBA Backed Securities
   $ 12,806    $ 25    $ 20,687    $ 107    $ 33,493    $ 132
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
   131,960    1,846    43,274    692    175,234    2,538
Privately Issued Residential Mortgage-Backed Securities
   334    44    —      —      334    44
Obligations Issued by States and Political Subdivisions
               —       —
Other Debt Securities
   800    —      489    11    1,289    11












Total temporarily impaired securities
   $ 145,900    $ 1,915    $ 64,450    $ 810    $ 210,350    $ 2,725


	September 30, 2020
	Less than 12 months				12 months or longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
SBA Backed Securities	$	16,625	$	50	$	29,240	$	232	$	45,865	$	282
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		29,870		156		33,686		238		63,556		394
Privately Issued Residential Mortgage-Backed Securities		219		7		—		—		219		7
Obligations Issued by States and Political Subdivisions		—		—		—		—		—		—
Other Debt Securities		—		—		1,294		6		1,294		6

Total temporarily impaired securities	$	46,714	$	213	$	64,220	$	476	$	110,934	$	689

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

available-for-sale

portfolio at December 31, 2019. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 45 and 18 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 122 holdings at December 31, 2019.

   December 31, 2019
   Less than 12 months    12 months or longer    Total
   Fair    Unrealized    Fair    Unrealized    Fair    Unrealized
Temporarily Impaired Investments    Value    Losses    Value    Losses    Value    Losses
         (in thousands)
SBA Backed Securities
   $ 14,560    $ 30    $ 22,092    $ 113    $ 36,652    $ 143
U.S. Government Agency and Sponsored Enterprise Mortgage- Backed Securities
   108,806    379    29,178    153    137,984    532
Privately Issued Residential Mortgage-Backed Securities
   252    2    —      —      252    2
Obligations Issued by States and Political Subdivisions
   —      —      —      —      —      —
Other Debt Securities
   800    1    481    18    1,281    19












Total temporarily impaired securities
   $ 124,418    $ 412    $ 51,751    $ 284    $ 176,169    $ 696

   December 31, 2019
   Less than 12 months    12 months or longer    Total
Temporarily Impaired Investments    Fair
Value    Unrealized
Losses    Fair
Value    Unrealized
Losses    Fair
Value    Unrealized
Losses
   (in thousands)
SBA Backed Securities
   $ 14,560    $ 30    $ 22,092    $ 113    $ 36,652    $ 143
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
   108,806    379    29,178    153    137,984    532
Privately Issued Residential Mortgage-Backed Securities
   252    2    —      —      252    2
Obligations Issued by States and Political Subdivisions
   —      —      —      —      —      —
Other Debt Securities
   800    1    481    18    1,281    19












Total temporarily impaired securities
   $ 124,418    $ 412    $ 51,751    $ 284    $ 176,169    $ 696












Page 12 of 50
Table of Contents

Note 3. Investment Securities

Held-to-Maturity

March 31, 2020 December 31, 2019
Gross Gross Gross Gross
Amortized Unrealized Unrealized Estimated Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value Cost Gains Losses Fair Value
(in thousands)
U.S. Government Sponsored Enterprises
$ 89,419 $ 1,113 $ — $ 90,532 $ 98,867 $ 527 $ 96 $ 99,298
SBA Backed Securities
42,856 492 69 43,279 44,379 182 303 44,258
U.S. Government Sponsored Enterprises Mortgage-Backed Securities
2,171,799 61,037 1,620 2,231,216 2,207,874 20,720 10,846 2,217,748

Total
$ 2,304,074 $ 62,642 $ 1,689 $ 2,365,027 $ 2,351,120 $ 21,429 $ 11,245 $ 2,361,304


	September 30, 2020								December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
U.S. Government Sponsored Enterprises	$	248,211	$	594	$	494	$	248,311	$	98,867	$	527	$	96	$	99,298
SBA Backed Securities		39,384		2,375		0		41,759		44,379		182		303		44,258
U.S. Government Sponsored Enterprises Mortgage- Backed Securities		2,119,581		76,185		889		2,194,877		2,207,874		20,720		10,846		2,217,748
					��
Total	$	2,407,176	$	79,154	$	1,383	$	2,484,947	$	2,351,120	$	21,429	$	11,245	$	2,361,304

Included in total investment securities

held-to-maturity

are securities pledged to secure public deposits and repurchase agreements at fair value amounting to ~~$1,916,047,000~~$1,722,363,000 and $1,776,399,000 at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. Also included are securities pledged for borrowing at the Federal Home Loan Bank of Boston at fair value amounting to ~~$383,904,000~~$597,810,000 and $399,646,000 at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. Also included in investment securities~~available-for-sale~~

held-to-maturity

are securities at fair value pledged for borrowing at the Federal Reserve Bank discount window ~~$196,469,000~~of $156,360,000 and $0 at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. There were no0 sales of

held-to-maturity

securities for the ~~three~~nine months ended ~~March 31, 2020 and March 31, 2019, respectively.~~

~~Page 11~~September 30, 2020. The Company realized gross gains of 42

$48,000 from the proceeds of $1,194,000 from the sales of

held-to-maturity

securities for the nine months ended September 30, 2019. The sales of securities

held-to-maturity

relate to certain mortgage backed securities for which the company has previously collected a substantial portion of its principal investment.

At ~~March 31,~~September 30, 2020 and December 31, 2019, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises. Debt securities of U.S. Government Sponsored Enterprises and U.S. Government Sponsored Enterprises Mortgage-Backed Securities primarily refer to debt securities of Fannie Mae and Freddie Mac.

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

held-to-maturity

at ~~March 31,~~September 30, 2020.

   Amortized    Fair
   Cost    Value
   (in thousands)
Within one year
   $ 90,437    $ 91,896
After one but within five years
   1,921,419    1,971,224
After five but within ten years
   280,016    289,074
More than ten years
   12,202    12,833




Total
   $ 2,304,074    $ 2,365,027


	Amortized Cost		Fair Value
	(in thousands)
Within one year	$	64,436	$	64,929
After one but within five years		1,954,304		2,018,674
After five but within ten years		385,428		397,910
More than ten years		3,008		3,434

Total	$	2,407,176	$	2,484,947

The weighted average remaining life of investment securities

held-to-maturity

at ~~March 31,~~September 30, 2020 was ~~3.4~~3.6 years. Included in the weighted average remaining life calculation at ~~March 31,~~September 30, 2020 were ~~$19,000,000~~$207,730,000 of U.S. Government Sponsored Enterprises obligations that are callable at the discretion of the issuer. The contractual maturities, which were used in the table above, of mortgage-backed securities, will differ from the actual maturities, due to the ability of the issuers to prepay underlying obligations. Also ~~$102,000~~$89,000 of the securities are floating rate or adjustable rate and reprice prior to maturity.

As of ~~March 31,~~September 30, 2020 and December 31, 2019, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not more likely than not that it will be required to sell these debt securities before the anticipated recovery of their remaining amortized costs. In making its other-than-temporary impairment evaluation, the Company considered the fact that the principal and interest on these securities are from issuers that are investment grade.

The unrealized loss on U.S. Government Sponsored Enterprises, SBA Backed Securities, and U.S. Government Sponsored Enterprises Mortgage-Backed Securities related primarily to interest rates and not credit quality, and because the Company does not intend to sell any of these securities and it is not more likely than not that it will be required to sell these securities before the anticipated recovery of the remaining amortized cost, the Company does not consider these investments to be other-than-temporarily impaired at ~~March 31,~~September 30, 2020 or December 31, 2019.

Page 13 of 50

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

held-to-maturity

portfolio ~~March 31,~~September 30, 2020. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months or longer. There are 3430 and 193 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of ~~533~~576 holdings at ~~March 31,~~September 30, 2020.

   March 31, 2020
   Less Than 12 Months    12 Months or Longer    Total
   Fair    Unrealized    Fair    Unrealized    Fair    Unrealized
Temporarily Impaired Investments    Value    Losses    Value    Losses    Value    Losses
         (in thousands)
SBA Backed Securities
   $ 12,725    $ 69    $ —      $ —      $ 12,725    $ 69
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
   197,134    911    53,703    709    250,837    1,620












Total temporarily impaired securities
   $ 209,859    $ 980    $ 53,703    $ 709    $ 263,562    $ 1,689

~~Page 12 of 42~~


	September 30, 2020
	Less Than 12 Months				12 Months or Longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
SBA Backed Securities	$	0	$	0	$	—	$	—	$	0	$	0
US Government Sponsored Enterprises Mortgage-Backed Securities		128,240		494		—		—		128,240		494
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		129,158		840		4,176		49		133,334		889

Total temporarily impaired securities	$	257,398	$	1,334	$	4,176	$	49	$	261,574	$	1,383

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

held-to-maturity

portfolio at December 31, 2019. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 114 and 103 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 531 holdings at December 31, 2019.

   December 31, 2019
   Less Than 12 Months    12 Months or Longer    Total

   Fair    Unrealized    Fair    Unrealized    Fair    Unrealized
Temporarily Impaired Investments    Value    Losses    Value    Losses    Value    Losses
         (in thousands)
U.S. Treasury
   $ —      $ —      $ —      $ —      $ —      $ —
U.S. Government Sponsored Enterprises
   24,420    72    9,976    24    34,396    96
SBA Backed Securities
   25,251    303    —      —      25,251    303
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
   613,905    3,949    389,919    6,897    1,003,824    10,846












Total temporarily impaired securities
   $ 663,576    $ 4,324    $ 399,895    $ 6,921    $ 1,063,471    $ 11,245


	December 31, 2019
	Less Than 12 Months				12 Months or Longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury	$	—	$	—	$	—	$	—	$	—	$	—
U.S. Government Sponsored Enterprises		24,420		72		9,976		24		34,396		96
SBA Backed Securities		25,251		303		—		—		25,251		303
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		613,905		3,949		389,919		6,897		1,003,824		10,846

Total temporarily impaired securities	$	663,576	$	4,324	$	399,895	$	6,921	$	1,063,471	$	11,245

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Note 4. Allowance for Loan Losses

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

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

   Three months ended
   March 31,
   2020    2019
   (in thousands)
Allowance for loan losses, beginning of period
   $ 29,585    $ 28,543
Loans charged off
   (62 )    (142 )
Recoveries on loans previouslycharged-off
   206    72




Net recoveries (charge-offs)
   144    (70 )
Provision charged to expense
   1,075    375




Allowance for loan losses, end of period
   $ 30,804    $ 28,848


	Three months ended						Nine months ended
	2020			2019			2020			2019
	(in thousands)
Allowance for loan losses, beginning of period	$	32,516		$	29,070		$	29,585		$	28,543
Loans charged off		(41	)		(118	)		(120	)		(336	)
Recoveries on loans previously charged-off		19			70			254			190

Net recoveries (charge-offs)		(22	)		(48	)		134			(146	)
Provision charged to expense		900			75			3,675			700

Allowance for loan losses, end of period	$	33,394		$	29,097		$	33,394		$	29,097

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

Construction Commercial
and Land and Commercial Residential Home
Development Industrial Municipal Real Estate Real Estate Consumer Equity Unallocated Total
(in thousands)
Allowance for loan losses:

Balance at December 31, 2019
$ 331 $ 11,596 $ 2,566 $ 11,464 $ 2,194 $ 312 $ 1,065 $ 57 $ 29,585
Charge-offs
—   (5 ) —   —   —   (57 ) —   —   (62 )
Recoveries
—   164 —   —   —   37 5 —   206
Provision
(85 ) 673 323 (343 ) 255 4 67 181 1,075

Ending balance at March 31, 2020
$ 246 $ 12,428 $ 2,889 $ 11,121 $ 2,449 $ 296 $ 1,137 $ 238 $ 30,804

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

Amount of allowance for loan losses for loans not deemed to be impaired
$ 246 $ 12,428 $ 2,889 $ 11,036 $ 2,449 $ 296 $ 1,137 $ 238 $ 30,719

Loans:

Ending balance
$ 6,493 $ 867,599 $ 141,588 $ 761,464 $ 393,338 $ 21,039 $ 307,373 $ —   $ 2,498,894

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

Loans not deemed to be impaired
$ 6,493 $ 866,976 $ 141,588 $ 759,142 $ 393,338 $ 21,039 $ 307,373 $ —   $ 2,495,949


	Construction and Land Development		Commercial and Industrial			Municipal			Commercial Real Estate			Residential Real Estate			Consumer			Home Equity			Unallocated		Total
Allowance for loan losses:	(in thousands)
Balance at June 30, 2020	$	289	$	13,121		$	2,868		$	11,303		$	3,094		$	289		$	1,465		$	87	$	32,516
Charge-offs		—		(20	)		—			—			—			(21	)		—			—		(41	)
Recoveries		—		12			—			—			—			7			0			—		19
Provision		76		2,731			(300	)		(522	)		(958	)		35			(200	)		38		900

Ending balance at September 30, 2020	$	365	$	15,844		$	2,568		$	10,781		$	2,136		$	310		$	1,265		$	125	$	33,394

Amount of allowance for loan losses for loans deemed to be impaired	$	—	$	12		$	—		$	75		$	—		$	—		$	—		$	—	$	87

Amount of allowance for loan losses for loans not deemed to be impaired	$	365	$	15,832		$	2,568		$	10,706		$	2,136		$	310		$	1,265		$	125	$	33,307

Loans:
Ending balance	$	9,116	$	1,315,407		$	130,047		$	784,895		$	443,703		$	19,866		$	287,099		$	—	$	2,990,133

Loans deemed to be impaired	$	—	$	160		$	—		$	2,675		$	236		$	—		$	—		$	—	$	3,071

Loans not deemed to be impaired	$	9,116	$	1,315,247		$	130,047		$	782,220		$	443,467		$	19,866		$	287,099		$	—	$	2,987,062


Further information pertaining to the allowance for loan losses for the nine months ending September 30, 2020 is as follows:
	Construction and Land Development		Commercial and Industrial			Municipal			Commercial Real Estate			Residential Real Estate			Consumer			Home Equity			Unallocated		Total
Allowance for loan losses:	(in thousands)
Balance at December 31, 2019	$	331	$	11,596		$	2,566		$	11,464		$	2,194		$	312		$	1,065		$	57	$	29,585
Charge-offs		—		(31	)		—			—			—			(89	)		—			—		(120	)
Recoveries		—		182			—			—			—			67			5			—		254
Provision		34		4,097			2			(683	)		(58	)		20			195			68		3,675

Ending balance at September 30, 2020	$	365	$	15,844		$	2,568		$	10,781		$	2,136		$	310		$	1,265		$	125	$	33,394

Amount of allowance for loan losses for loans deemed to be impaired	$	—	$	12		$	—		$	75		$	—		$	—		$	—		$	—	$	87

Amount of allowance for loan losses for loans not deemed to be impaired	$	365	$	15,832		$	2,568		$	10,706		$	2,136		$	310		$	1,265		$	125	$	33,307

Loans:
Ending balance	$	9,116	$	1,315,407		$	130,047		$	784,895		$	443,703		$	19,866		$	287,099		$	—	$	2,990,133

Loans deemed to be impaired	$	—	$	160		$	—		$	2,675		$	236		$	—		$	—		$	—	$	3,071

Loans not deemed to be impaired	$	9,116	$	1,315,247		$	130,047		$	782,220		$	443,467		$	19,866		$	287,099		$	—	$	2,987,062

The allocations for the provision for loan losses increased for the three and nine months ended September 30, 2020, primarily as a result of the economic uncertainties associated with the novel coronavirus disease (COVID–19) pandemic and increased loan balances. During the nine months ending September 30, 2020, the Company’s provision was primarily attributable to an increase in commercial and industrial, offset, somewhat, by a decrease in commercial real estate. During the three months ending September 30, 2020, the Company’s provision was primarily attributable to an increase in commercial and industrial, offset, somewhat, by a decrease in commercial real estate, residential real estate, and municipal balances. As of September 30, 2020, the Company’s U.S. Small Business Administration (SBA) Payroll Protection Program (PPP) loans totaled approximately 1,324 loans for approximately $232 million. These types of loans are categorized as commercial and industrial and are 100% guaranteed by the SBA and require 0 allowance for loan losses.

Page 1316 of 42

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Further information pertaining to the allowance for loan losses for the three months ending ~~March 31,~~September 30, 2019 is as follows:

Construction Commercial
and Land and Commercial Residential Home
Development Industrial Municipal Real Estate Real Estate Consumer Equity Unallocated Total
(in thousands)
Allowance for loan losses:

Balance at December 31, 2018
$ 1,092 $ 10,998 $ 1,838 $ 10,663 $ 2,190 $ 365 $ 1,111 $ 286 $ 28,543
Charge-offs
—   (43 ) —   —   —   (99 ) —   —   (142 )
Recoveries
—   18 —   —   —   54 —   —   72
Provision
(81 ) 183 160 104 (55 ) 22 (10 ) 52 375

Ending balance at March 31, 2019
$ 1,011 $ 11,156 $ 1,998 $ 10,767 $ 2,135 $ 342 $ 1,101 $ 338 $ 28,848

Amount of allowance for loan losses for loans deemed to be impaired
$ —   $ 6 $ —   $ 94 $ —     $ — $ —   $ —   $ 100

Amount of allowance for loan losses for loans not deemed to be impaired
$ 1,011 $ 11,150 $ 1,998 $ 10,673 $ 2,135 $ 342 $ 1,101 $ 338 $ 28,748

Loans:

Ending balance
$ 13,305 $ 767,436 $ 105,288 $ 746,703 $ 349,966 $ 22,123 $ 305,839 $ —   $ 2,310,660

Loans deemed to be impaired
$ —   $ 320 $ —   $ 2,946 $ —   $ —   $ —   $ —   $ 3,266

Loans not deemed to be impaired
$ 13,305 $ 767,116 $ 105,288 $ 743,757 $ 349,966 $ 22,123 $ 305,839 $ —   $ 2,307,394


	Construction and Land Development			Commercial and Industrial			Municipal		Commercial Real Estate		Residential Real Estate			Consumer			Home Equity			Unallocated		Total
Allowance for loan losses:	(in thousands)
Balance at June 30, 2019	$	1,052		$	11,338		$	1,832	$	10,848	$	2,210		$	380		$	1,120		$	290	$	29,070
Charge-offs		—			(57	)		—		—		—			(61	)		—			—		(118	)
Recoveries		—			23			—		—		—			47			—			—		70
Provision		(752	)		9			751		53		(24	)		(84	)		(33	)		155		75

Ending balance at September 30, 2019	$	300		$	11,313		$	2,583	$	10,901	$	2,186		$	282		$	1,087		$	445	$	29,097

Amount of allowance for loan losses for loans deemed to be impaired	$	—		$	2		$	—	$	86	$	—		$	—		$	—		$	—	$	88

Amount of allowance for loan losses for loans not deemed to be impaired	$	300		$	11,311		$	2,583	$	10,815	$	2,186		$	282		$	1,087		$	445	$	29,009

Loans:
Ending balance	$	7,824		$	783,950		$	121,802	$	765,385	$	364,317		$	21,748		$	310,635		$	—	$	2,375,661

Loans deemed to be impaired	$	—		$	203		$	—	$	2,373	$	—		$	—		$	—		$	—	$	2,576

Loans not deemed to be impaired	$	7,824		$	783,747		$	121,802	$	763,012	$	364,317		$	21,748		$	310,635		$	—	$	2,373,085


Further information pertaining to the allowance for loan losses for the nine months ending September 30, 2019 is as follows:
	Construction and Land Development			Commercial and Industrial			Municipal		Commercial Real Estate		Residential Real Estate			Consumer			Home Equity			Unallocated		Total
Allowance for loan losses:	(in thousands)
Balance at December 31, 2018	$	1,092		$	10,998		$	1,838	$	10,663	$	2,190		$	365		$	1,111		$	286	$	28,543
Charge-offs		—			(108	)		—		—		—			(228	)		—			—		(336	)
Recoveries		—			49			—		—		—			141			—			—		190
Provision		(792	)		374			745		238		(4	)		4			(24	)		159		700

Ending balance at September 30, 2019	$	300		$	11,313		$	2,583	$	10,901	$	2,186		$	282		$	1,087		$	445	$	29,097

Amount of allowance for loan losses for loans deemed to be impaired	$	—		$	2		$	—	$	86	$	—		$	—		$	—		$	—	$	88

Amount of allowance for loan losses for loans not deemed to be impaired	$	300		$	11,311		$	2,583	$	10,815	$	2,186		$	282		$	1,087		$	445	$	29,009

Loans:
Ending balance	$	7,824		$	783,950		$	121,802	$	765,385	$	364,317		$	21,748		$	310,635		$	—	$	2,375,661

Loans deemed to be impaired	$	—		$	203		$	—	$	2,373	$	—		$	—		$	—		$	—	$	2,576

Loans not deemed to be impaired	$	7,824		$	783,747		$	121,802	$	763,012	$	364,317		$	21,748		$	310,635		$	—	$	2,373,085

During the nine months ending September 30, 2019, the Company’s provision was primarily attributable to an increase in municipal, commercial and industrial, and commercial real estate balances offset, somewhat, by a decrease in construction and land development balances. During the three months ending September 30, 2019, the Company’s provision was primarily attributable to an increase in municipal balances offset, somewhat, by a decrease in construction and land development balances. The Company monitors the outlook for the industries in which our borrowers operate. Healthcare and higher education are two of the primary industries. In particular the Company utilizes outlooks and forecasts from various sources. The Company also monitors the volatility of the losses within the historical data. Overall, there were improvements in historical loss rates.

Page 17 of 50

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The Company utilizes a six grade internal loan rating system for commercial real estate, construction, commercial, and ~~commercial~~municipal loans as follows:

Loans rated

1-3

(Pass):

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

Loans rated 4 (Monitor):

These loans represent classified loans that management is closely monitoring for credit quality. These loans have had or may have minor credit quality deterioration as of ~~March 31,~~September 30, 2020 and December 31, 2019.

Loans rated 5 (Substandard):

Substandard loans represent classified loans that management is closely monitoring for credit quality. These loans have had more significant credit quality deterioration as of ~~March 31,~~September 30, 2020 and December 31, 2019.

Loans rated 6 (Doubtful):

Doubtful loans represent classified loans that management is closely monitoring for credit quality. These loans had more significant credit quality deterioration as of ~~March 31,~~September 30, 2020 and December 31, 2019 and full collectability is doubtful.

Impaired:

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

The following table presents the Company’s loans by risk rating at ~~March 31,~~September 30, 2020.

   Construction    Commercial
   and Land    and       Commercial
   Development    Industrial    Municipal    Real Estate
      (in thousands)
Grade:

1-3 (Pass)
   $ 6,493    $ 863,026    $ 141,588    $ 734,992
4 (Monitor)
   —      3,950    —      24,150
5 (Substandard)
   —      —      —      —
6 (Doubtful)
   —      —      —      —
Impaired
   —      623    —      2,322








Total
   $ 6,493    $ 867,599    $ 141,588    $ 761,464

~~Page 14 of 42~~


	Construction and Land Development		Commercial and Industrial		Municipal		Commercial Real Estate
Grade:	(in thousands)
1-3 (Pass)	$	9,116	$	1,308,693	$	130,047	$	757,953
4 (Monitor)		—		6,554		—		24,267
5 (Substandard)		—		—		—		—
6 (Doubtful)		—		—		—		—
Impaired		—		160		—		2,675

Total	$	9,116	$	1,315,407	$	130,047	$	784,895

The following table presents the Company’s loans by risk rating at December 31, 2019.

   Construction    Commercial
   and Land    and       Commercial
   Development    Industrial    Municipal    Real Estate
   (in thousands)
Grade:

1-3 (Pass)
   $ 8,992    $ 807,486    $ 120,455    $ 759,402
4 (Monitor)
   —      4,025    —      24,354
5 (Substandard)
   —      —      —      —
6 (Doubtful)
   —      —      —      —
Impaired
   —      906    —      2,346








Total
   $ 8,992    $ 812,417    $ 120,455    $ 786,102


	Construction and Land Development		Commercial and Industrial		Municipal		Commercial Real Estate
Grade:	(in thousands)
1-3 (Pass)	$	8,992	$	807,486	$	120,455	$	759,402
4 (Monitor)		—		4,025		—		24,354
5 (Substandard)		—		—		—		—
6 (Doubtful)		—		—		—		—
Impaired		—		906		—		2,346

Total	$	8,992	$	812,417	$	120,455	$	786,102

Page 18 of 50

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Credit ratings issued by national organizations were utilized as credit quality indicators as presented in the following table at ~~March 31,~~September 30, 2020 and are included within the total loan portfolio.

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

Aaa – Aa3
   $ 568,173    $ 74,406    $ 38,955    $ 681,534
A1 – A3
   185,819    7,354    147,953    341,126
Baa1 – Baa3
   —      51,133    143,302    194,435
Ba2
   —      5,895    —      5,895








Total
   $ 753,992    $ 138,788    $ 330,210    $ 1,222,990


	Commercial and Industrial		Municipal		Commercial Real Estate		Total
Credit Rating:	(in thousands)
Aaa – Aa3	$	647,056	$	64,806	$	38,365	$	750,227
A1 – A3		184,409		7,228		145,467		337,104
Baa1 – Baa3		50,000		51,133		140,486		241,619
Ba2		—		5,080		—		5,080

Total	$	881,465	$	128,247	$	324,318	$	1,334,030

Credit ratings issued by national organizations were utilized as credit quality indicators as presented in the following table at December 31, 2019.

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

Aaa – Aa3
   $ 523,644    $ 53,273    $ 40,437    $ 617,354
A1 – A3
   186,044    7,354    148,346    341,744
Baa1 – Baa3
   —      51,133    144,711    195,844
Ba2
   —      5,895    —      5,895








Total
   $ 709,688    $ 117,655    $ 333,494    $ 1,160,837

~~Page 15 of 42~~


	Commercial and Industrial		Municipal		Commercial Real Estate		Total
Credit Rating:	(in thousands)
Aaa – Aa3	$	523,644	$	53,273	$	40,437	$	617,354
A1 – A3		186,044		7,354		148,346		341,744
Baa1 – Baa3		—		51,133		144,711		195,844
Ba2		—		5,895		—		5,895

Total	$	709,688	$	117,655	$	333,494	$	1,160,837

The Company utilized payment performance as credit quality indicators for the loan types listed below. The indicators are depicted in the table “aging of past due loans,” below.

Further information pertaining to the allowance for loan losses at ~~March 31,~~September 30, 2020 follows:

         Accruing
   Accruing       Greater    Total
   30-89 Days    Non    than    Past    Current
   Past Due    Accrual    90 Days    Due    Loans    Total
         (in thousands)
Construction and land development
   $ —      $ —      $ —      $ —      $ 6,493    $ 6,493
Commercial and industrial
   337    374    —      711    866,888    867,599
Municipal
   —      —      —      —      141,588    141,588
Commercial real estate
   2,322    238    —      2,560    758,904    761,464
Residential real estate
   2,455    890    —      3,345    389,993    393,338
Consumer and overdrafts
   17    6    —      23    21,016    21,039
Home equity
   1,450    193    —      1,643    305,730    307,373












Total
   $ 6,581    $ 1,701    $ —      $ 8,282    $ 2,490,612    $ 2,498,894


	Accruing 30-89 Days Past Due		Non Accrual		Accruing Greater than 90 Days		Total Past Due		Current Loans		Total
	(in thousands)
Construction and land development	$	—	$	—	$	—	$	—	$	9,116	$	9,116
Commercial and industrial		623		3		—		626		1,314,781		1,315,407
Municipal		—		—		—		—		130,047		130,047
Commercial real estate		3,596		593		49		4,238		780,657		784,895
Residential real estate		569		532		—		1,101		442,602		443,703
Consumer and overdrafts		15		—		—		15		19,851		19,866
Home equity		1,206		291		—		1,497		285,602		287,099

Total	$	6,009	$	1,419	$	49	$	7,477	$	2,982,656	$	2,990,133

Page 19 of 50

Table of Contents

Further information pertaining to the allowance for loan losses at December 31, 2019 follows:

         Accruing
   Accruing       Greater    Total
   30-89 Days    Non    than    Past    Current
   Past Due    Accrual    90 Days    Due    Loans    Total
         (in thousands)
Construction and land development
   $ —      $ —      $ —      $ —      $ 8,992    $ 8,992
Commercial and industrial
   227    400    —      627    811,790    812,417
Municipal
   —      —      —      —      120,455    120,455
Commercial real estate
   840    492    —      1,332    784,770    786,102
Residential real estate
   1,563    683    —      2,246    369,651    371,897
Consumer and overdrafts
   18    4    —      22    21,871    21,893
Home equity
   603    435    —      1,038    303,325    304,363












Total
   $ 3,251    $ 2,014    $ —      $ 5,265    $ 2,420,854    $ 2,426,119


	Accruing 30-89 Days Past Due		Non Accrual		Accruing Greater than 90 Days		Total Past Due		Current Loans		Total
	(in thousands)
Construction and land development	$	—	$	—	$	—	$	—	$	8,992	$	8,992
Commercial and industrial		227		400		—		627		811,790		812,417
Municipal		—		—		—		—		120,455		120,455
Commercial real estate		840		492		—		1,332		784,770		786,102
Residential real estate		1,563		683		—		2,246		369,651		371,897
Consumer and overdrafts		18		4		—		22		21,871		21,893
Home equity		603		435		—		1,038		303,325		304,363

Total	$	3,251	$	2,014	$	—	$	5,265	$	2,420,854	$	2,426,119

Impaired loans

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

charged-off

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

charged-off

against the allowance for loan losses in lieu of an allocation of a specific allowance amount when such an amount has been identified definitively as uncollectible. The Company’s policy for recognizing interest income on impaired loans is contained within Note 1 of the consolidated financial statements contained in the Company’s Annual Report for the fiscal year ended December 31, 2019.

Page 1620 of 42

Table of Contents

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

            Average    Interest
            Carrying    Income
            Value    Recognized
            for 3    for 3
      Unpaid       Months    Months
   Carrying    Principal    Required    Ending    Ending
   Value    Balance    Reserve    3/31/20    3/31/20
         (in thousands)
With no required reserve recorded:

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










Total
   $ 778    $ 826    $ —      $ 739    $ 1










With required reserve recorded:

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










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










Total:

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










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


	Carrying Value		Unpaid Principal Balance		Required Reserve		Average Carrying Value for 3 Months Ending 9/30/20		Interest Income Recognized for 3 Months Ending 9/30/20		Average Carrying Value for 9 Months Ending 9/30/20		Interest Income Recognized for 9 Months Ending 9/30/20
With no required reserve recorded:		(in thousands)
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		67		88		—		73		0		288		2
Municipal		—		—		—		—		—		—		—
Commercial real estate		592		624		—		601		—		365		—
Residential real estate		236		236		—		236		—		118		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	895	$	948	$	—	$	910	$	0	$	771	$	2


With required reserve recorded:
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		93		93		12		100		1		95		3
Municipal		—		—		—		—		—		—		—
Commercial real estate		2,083		2,209		75		2,094		21		2,140		65
Residential real estate		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	2,176	$	2,302	$	87	$	2,194	$	22	$	2,235	$	68


Total:
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		160		181		12		173		1		383		5
Municipal		—		—		—		—		—		—		—
Commercial real estate		2,675		2,833		75		2,695		21		2,505		65
Residential real estate		236		236		—		236		—		118		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	3,071	$	3,250	$	87	$	3,104	$	22	$	3,006	$	70

Page 1721 of 42

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The following is information pertaining to impaired loans for ~~March 31,~~September 30, 2019:

            Average    Interest
            Carrying    Income
            Value    Recognized
      Unpaid       for 3 Months    for 3 Months
   Carrying    Principal    Required    Ending    Ending
   Value    Balance    Reserve    3/31/19    3/31/19
   (in thousands)
With no required reserve recorded:

Construction and land development
   $ —      $ —      $ —      $ —      $ —
Commercial and industrial
   93    306    —      87    2
Municipal
   —      —      —      —      —
Commercial real estate
   182    206    —      188    —
Residential real estate
   —      —      —      —      —
Consumer
   —      —      —      —      —
Home equity
   —      —      —      —      —










Total
   $ 275    $ 512    $ —      $ 275    $ 2










With required reserve recorded:

Construction and land development
   $ —      $ —      $ —      $ —      $ —
Commercial and industrial
   227    228    6    262    3
Municipal
   —      —      —      —      —
Commercial real estate
   2,764    2,881    94    2,694    24
Residential real estate
   —      —      —      —      —
Consumer
   —      —      —      —      —
Home equity
   —      —      —      —      —










Total
   $ 2,991    $ 3,109    $ 100    $ 2,956    $ 27










Total:

Construction and land development
   $ —      $ —      $ —      $ —      $ —
Commercial and industrial
   320    534    6    349    5
Municipal
   —      —      —      —      —
Commercial real estate
   2,946    3,087    94    2,882    24
Residential real estate
   —      —      —      —      —
Consumer
   —      —      —      —      —
Home equity
   —      —      —      —      —










Total
   $ 3,266    $ 3,621    $ 100    $ 3,231    $ 29


	Carrying Value		Unpaid Principal Balance		Required Reserve		Average Carrying Value for 3 Months Ending 9/30/19		Interest Income Recognized for 3 Months Ending 9/30/19		Average Carrying Value for 9 Months Ending 9/30/19		Interest Income Recognized for 9 Months Ending 9/30/19
With no required reserve recorded:		(in thousands)
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		87		306		—		89		2		87		6
Municipal		—		—		—		—		—		—		—
Commercial real estate		167		194		—		729		0		529		0
Residential real estate		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	254	$	500	$	—	$	818	$	2	$	616	$	6


With required reserve recorded:
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		116		116		2		310		2		299		6
Municipal		—		—		—		—		—		—		—
Commercial real estate		2,206		2,326		86		2,140		23		2,350		67
Residential real estate		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	2,322	$	2,442	$	88	$	2,450	$	25	$	2,649	$	73


Total:
Construction and land development	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		203		422		2		399		4		386		12
Municipal		—		—		—		—		—		—		—
Commercial real estate		2,373		2,520		86		2,869		23		2,879		67
Residential real estate		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	2,576	$	2,942	$	88	$	3,268	$	27	$	3,265	$	79

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

There was no TDR that occurred during the ~~three-month~~nine-month period ended ~~March 31,~~September 30, 2020. Also, there were no commitments to lend additional funds to troubled debt restructuring borrowers. There were no troubled debt restructurings that subsequently defaulted during the first ~~three~~nine months of 2020.

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

COVID-19

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

COVID-19

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

COVID-19

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

Page 22 of 50

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As of ~~March 31,~~September 30, 2020, and as a result of

COVID-19

loan ~~modification,~~modifications, the Company ~~had modified 58~~has modifications of 33 loans aggregating ~~$32,073,000,~~$37,987,000, primarily consisting of ~~the deferral of principal and/or the extension of the maturity date.~~short-term payment deferrals. Of these modifications, ~~$32,073,000,~~$37,987,000, or 100%, were performing in accordance with their modified terms.

~~Page 18 of 42~~

There was no troubled debt restructuring that occurred during the ~~three-month~~nine-month period ended ~~March 31,~~September 30, 2019. Also, there were no commitments to lend additional funds to troubled debt restructuring borrowers. There were no troubled debt restructurings that subsequently defaulted during the first ~~three~~nine months of 2019.

Note 5. Reclassifications Out of Accumulated Other Comprehensive Income(a)

Amount Reclassified from Accumulated Other Comprehensive Income

   Three Three Affected Line Item in the
Details about Accumulated Other    Months Ended Months Ended Statement where Net Income is
Comprehensive Income Components
   March 31, 2020 March 31, 2019
Presented
(in thousands)
Accretion of unrealized losses transferred
   $ (222 ) $ (294 ) Securitiesheld-to-maturity
Tax (expense) or benefit
   58 78 Provision for income taxes


Net of tax
   $ (164 ) $ (216 ) Net income


Amortization of defined benefit pension items

Prior-service costs
   $ (29 )(b) $ (29 )(b) Salaries and employee benefits
Actuarial gains (losses)
   (472 )(b) (337 )(b) Salaries and employee benefits


Total before tax
   (501 ) (366 ) Income before taxes


Tax (expense) or benefit
   141 103 Provision for income taxes


Net of tax
   $ (360 ) $ (263 ) Net income


Details about Accumulated Other Comprehensive Income Components	Three Months Ended September 30, 2020				Three Months Ended September 30, 2019				Affected Line Item in the Statement where Net Income is Presented
(in thousands)
Unrealized gains and losses on available-for-sale securities	$	—			$	54			Net gains on sales of investments
		—				(15	)		Provision for income taxes

	$	—			$	39			Net income


Accretion of unrealized losses transferred	$	(196	)		$	(209	)		Interest on securities held-to-maturity
		51				54			Provision for income taxes

	$	(145	)		$	(155	)		Net income


Amortization of defined benefit pension items
Prior-service costs	$	(29	)	(b)	$	(29	)	(b)	Salaries and employee benefits
Actuarial gains (losses)		(472	)	(b)		(337	)	(b)	Salaries and employee benefits

Total before tax		(501	)			(366	)		Income before taxes

Tax (expense) or benefit		141				103			Provision for income taxes

Net of tax	$	(360	)		$	(263	)		Net income


Details about Accumulated Other Comprehensive Income Components	Nine Months Ended September 30, 2020				Nine Months Ended September 30, 2019				Affected Line Item in the Statement where Net Income is Presented
(in thousands)
Unrealized gains and losses on available-for-sale securities	$	—			$	61			Net gains on sales of investments
		—				(17	)		Provision for income taxes

	$	—			$	44			Net income


Accretion of unrealized losses transferred	$	(637	)		$	(779	)		Interest on securities held-to-maturity
		166				205			Provision for income taxes

	$	(471	)		$	(574	)		Net income


Amortization of defined benefit pension items
Prior-service costs	$	(86	)	(b)	$	(86	)	(b)	Salaries and employee benefits
Actuarial gains (losses)		(1,417	)	(b)		(1,013	)	(b)	Salaries and employee benefits

Total before tax		(1,503	)			(1,099	)		Income before taxes

Tax (expense) or benefit		422				309			Provision for income taxes

Net of tax	$	(1,081	)		$	(790	)		Net income

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

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

Page 1923 of 42

Table of Contents

Note 6. Earnings per Share (“EPS”)

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

Diluted EPS includes the dilutive effect of common stock equivalents and assumes the conversion of all Class B common stock; basic EPS excludes all common stock equivalents. The Company had no common stock equivalents outstanding for the periods ended ~~March 31,~~September 30, 2020 and 2019.

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

   Three Months Ended
   March 31,
(in thousands except share and per share data)    2020    2019
Basic EPS Computation:

Numerator:

Net income, Class A
   $ 7,658    $ 7,409
Net income, Class B
   2,008    2,009
Denominator:

Weighted average shares outstanding, Class A
   3,652,349    3,610,329
Weighted average shares outstanding, Class B
   1,915,560    1,957,580
Basic EPS, Class A
   $ 2.10    $ 2.05
Basic EPS, Class B
   1.05    1.03




Diluted EPS Computation:

Numerator:

Net income, Class A
   $ 7,658    $ 7,409
Net income, Class B
   2,008    2,009




Total net income, for diluted EPS, Class A computation
   9,666    9,418
Denominator:

Weighted average shares outstanding, basic, Class A
   3,652,349    3,610,329
Weighted average shares outstanding, Class B
   1,915,560    1,957,580




Weighted average shares outstanding diluted, Class A
   5,567,909    5,567,909
Weighted average shares outstanding, Class B
   1,915,560    1,957,580
Diluted EPS, Class A
   $ 1.74    $ 1.69
Diluted EPS, Class B
   1.05    1.03


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands except share and per share data)	2020		2019		2020		2019
Basic EPS Computation:
Numerator:
Net income, Class A	$	8,630	$	7,986	$	24,254	$	22,853
Net income, Class B		2,257		2,098		6,355		6,114
Denominator:
Weighted average shares outstanding, Class A		3,655,469		3,650,449		3,653,429		3,627,076
Weighted average shares outstanding, Class B		1,912,440		1,917,460		1,914,480		1,940,833
Basic EPS, Class A	$	2.36	$	2.19	$	6.64	$	6.30
Basic EPS, Class B		1.18		1.09		3.32		3.15


Diluted EPS Computation:
Numerator:
Net income, Class A	$	8,630	$	7,986	$	24,254	$	22,853
Net income, Class B		2,257		2,098		6,355		6,114

Total net income, for diluted EPS, Class A computation		10,887		10,084		30,609		28,967
Denominator:
Weighted average shares outstanding, basic, Class A		3,655,469		3,650,449		3,653,429		3,627,076
Weighted average shares outstanding, Class B		1,912,440		1,917,460		1,914,480		1,940,833

Weighted average shares outstanding diluted, Class A		5,567,909		5,567,909		5,567,909		5,567,909
Weighted average shares outstanding, Class B		1,912,440		1,917,460		1,914,480		1,940,833
Diluted EPS, Class A	$	1.96	$	1.81	$	5.50	$	5.20
Diluted EPS, Class B		1.18		1.09		3.32		3.15

Note 7. Employee Benefits

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

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

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

Page 2024 of 42

Table of Contents

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

         Supplemental Insurance/
   Pension Benefits    Retirement Plan
   2020    2019    2020    2019
      (in thousands)
Service cost
   $ 344    $ 276    $ 353    $ 256
Interest
   450    473    466    482
Expected return on plan assets
   (952 )    (819 )    —      —
Recognized prior service cost (benefit)
   —      —      29    28
Recognized net actuarial losses
   261    229    211    109








Net periodic benefit (credit) cost
   $ 103    $ 159    $ 1,059    $ 875

September 30,


	Pension Benefits						Supplemental Insurance/ Retirement Plan
	2020			2019			2020		2019
	(in thousands)
Service cost	$	344		$	276		$	353	$	256
Interest		450			473			466		482
Expected return on plan assets		(952	)		(819	)		—		—
Recognized prior service cost (benefit)		—			—			29		28
Recognized net actuarial losses		261			229			211		109

Net periodic benefit (credit) cost	$	103		$	159		$	1,059	$	875

Components of Net Periodic Benefit Cost for the Nine Months Ended September 30,


	Pension Benefits						Supplemental Insurance/ Retirement Plan
	2020			2019			2020		2019
	(in thousands)
Service cost	$	1,032		$	828		$	1,059	$	768
Interest		1,350			1,419			1,398		1,445
Expected return on plan assets		(2,856	)		(2,457	)		—		—
Recognized prior service cost (benefit)		—			—			87		86
Recognized net actuarial losses		783			687			633		326

Net periodic benefit (credit) cost	$	309		$	477		$	3,177	$	2,625

Approximately ~~$465,000~~$1,395,000 and ~~$502,000~~$1,506,000 of costs other than service costs, from the table above, are included in other expenses with the remaining cost included in salaries and employee benefits, for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019, respectively.

Contributions

The Company does not intend to contribute to the Defined Benefit Pension Plan in 2020.

Note 8. Fair Value Measurements

The Company follows FASB ASC

820-10,

Fair Value Measurements and Disclosures and ASU

2016-1, ~~“Financial~~

“Financial Instruments-Overall”

(Subtopic 825-10)

Recognition and Measurement of Financial Assets and Financial Liabilities

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

820-10

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

Level I – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The type of financial instruments included in Level I are highly liquid cash instruments with quoted prices such as

G-7

government, agency securities, listed equities and money market securities, as well as listed derivative instruments.

Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these financial instruments include cash instruments for which quoted prices are available but traded less frequently, derivative instruments whose fair value have been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data, and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed. Instruments which are generally included in this category are corporate bonds and loans, mortgage whole loans, municipal bonds, and OTC derivatives.

Page 25 of 50

Table of Contents

Level III – Instruments that have little to no pricing observability as of the reported date. These financial instruments do not have

two-way

markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. Instruments that are included in this category generally include municipal securities with no observable fair value with an average life of one year or less. The securities are carried at cost which approximates fair value. A periodic review of underlying financial statements and credit ratings is performed to assess the appropriateness of these valuations.

~~Page 21 of 42~~

The results of the fair value hierarchy as of ~~March 31,~~September 30, 2020, are as follows:

~~Financial Instruments Measured at Fair Value on a Recurring Basis:~~

   Securities AFS Fair Value Measurements Using
      Quoted Prices
      In Active       Significant
      Markets for    Significant    Other
      Identical    Observable    Unobservable
   Carrying    Assets    Inputs    Inputs
   Value    (Level 1)    (Level 2)    (Level 3)
      (in thousands)
SBA Backed Securities
   $ 50,615    $ —      $ 50,615    $ —
U.S. Government Agency and Sponsored Mortgage-Backed Securities
   206,215    —      206,215    —
Privately Issued Residential Mortgage- Backed Securities
   334    —      334    —
Obligations Issued by States and Political Subdivisions
   17,224    —      —      17,224
Other Debt Securities
   3,631    —      3,631    —








Total Debt Securities
   $ 278,019    $ —      $ 260,795    $ 17,224








Equity Securities
   $ 1,609    $ 243    $ 1,366    $ —
Financial Instruments Measured at Fair Value on aNon-recurring Basis

Impaired Loans
   $ 608    $ —      $ —      $ 608


	Fair Value Measurements Using
	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
	(in thousands)
Financial Instruments Measured at Fair Value on a Recurring Basis
Securities AFS
SBA Backed Securities	$	45,865	$	—	$	45,865	$	—
U.S. Government Agency and Sponsored Mortgage-Backed Securities		189,904		—		189,904		—
Privately Issued Residential Mortgage- Backed Securities		341		—		341		—
Obligations Issued by States and Political Subdivisions		48,815		—		—		48,815
Other Debt Securities		6,707		—		6,707		—

Total	$	291,632	$	—	$	242,817	$	48,815

Equity Securities	$	1,645	$	276	$	1,369	$	—
Financial Instruments Measured at Fair Value on a Non-recurring Basis
Impaired Loans	$	828	$	—	$	—	$	828

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

Appraisals, discounted cash flows and real estate tax assessments are reviewed quarterly. There is no specific policy regarding how frequently appraisals will be updated. Adjustments are made to appraisals and real estate tax assessments based on management’s estimate of changes in real estate values. All impaired loans have been reviewed during the past quarter using either a discounted cash flow analysis, appraisal of collateral or other type of real estate tax assessment. The types of adjustments that are made to specific provisions (credits) related to impaired loans recognized for the ~~three-month period~~three and nine month periods ended ~~March 31,~~September 30, 2020 amounted to $0 and ($9,000).

, respectively.

There were 0 transfers between level 1, 2 and 3 for the nine months ended September 30, 2020. There were 0 liabilities measured at fair value on a recurring or nonrecurring basis during the nine months ended September 30, 2020.

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

assumptions used to value the assets listed below.

            Unobservable Input
Asset
   Fair Value
Valuation Technique

Unobservable Input
   Value or Range
Securities AFS
   $ 17,224
Discounted cash flow

Discount rate
   0%-1% (3)
Impaired Loans
   $ 608
Appraisal of collateral (1)

Appraisal adjustments (2)
   0%


Asset	Fair Value		Valuation Technique	Unobservable Input	Unobservable Input Value or Range
Securities AFS	$	48,815	Discounted cash flow	Discount rate	0%-1% (3)
Impaired Loans	$	828	Appraisal of collateral (1)	Appraisal adjustments (2)	0%

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

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

(3)	Weighted averages.

~~Page 22 of 42~~

The changes in Level 3 securities for the ~~three-month~~nine month period ended ~~March 31,~~September 30, 2020 are shown in the table below:

   Obligations
   Issued by States
   & Political
   Subdivisions
Balance at December 31, 2019
   $ 13,301
Purchases
   9,372
Maturities and calls
   (5,449 )
Amortization
   —


Balance at March 31, 2020
   $ 17,224


	Obligations Issued by States & Political Subdivisions
Balance at December 31, 2019	$	13,301
Purchases		53,903
Maturities and calls		(18,357	)
Amortization		(32	)

Balance at September 30, 2020	$	48,815

The amortized cost of Level 3 securities was ~~$17,224,000~~$48,815,000 at ~~March 31,~~September 30, 2020 with an unrealized loss of $0. The securities in this category are generally municipal securities with no readily determinable fair value. Management evaluated the fair value of these securities based on an evaluation of the underlying issuer, prevailing rates and market liquidity.

The fair value of impaired loans decreased by ~~$269,000,~~$49,000, for the first ~~three~~nine months of 2020, mainly attributable to one loan that was paid down. ~~There were no liabilities measured at fair value on a recurring or nonrecurring basis during the three-month period ended March 31, 2020.~~

The changes in Level 3 securities for the ~~three-month~~nine month period ended ~~March 31,~~September 30, 2019, are shown in the table below:

   Obligations
   Issued by States
   & Political
   Subdivisions
Balance at December 31, 2018
   $ 88,728
Purchases
   970
Maturities and calls
   (26,352 )
Amortization
   (14 )
Changes in fair value
   —


Balance at March 31, 2019
   $ 63,332

~~Page 23 of 42~~


	Obligations Issued by States & Political Subdivisions
Balance at December 31, 2018	$	88,728
Purchases		13,290
Maturities and calls		(78,196	)
Amortization		(21	)
Changes in fair value		—

Balance at September 30, 2019	$	23,801

The amortized cost of Level 3 securities was ~~$63,332,000~~$23,801,000 at ~~March 31,~~September 30, 2019 with an unrealized loss of $0. The securities in this category are generally municipal securities with no readily determinable fair value. Management evaluated the fair value of these securities based on an evaluation of the underlying issuer, prevailing rates and market liquidity. ~~There was no change in the fair value of other real estate owned for the first three months of 2019.~~

The fair value of impaired loans decreased by ~~$56,000,~~$78,000, for the first ~~three~~nine months of 2019, mainly ~~as a result of acharge-off~~ ofattributable to one ~~loan.~~loan that was removed from impaired loans. There were no0 liabilities measured at fair value on a recurring or nonrecurring basis during the ~~three~~nine month period ended ~~March 31,~~September 30, 2019.

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The results of the fair value hierarchy as of December 31, 2019, are as follows:

~~Financial Instruments Measured at Fair Value on a Recurring Basis:~~

   Securities AFS Fair Value Measurements Using
      Quoted Prices
      In Active       Significant
      Markets for    Significant    Other
      Identical    Observable    Unobservable
   Carrying    Assets    Inputs    Inputs
   Value    (Level 1)    (Level 2)    (Level 3)
      (in thousands)
SBA Backed Securities
   $ 54,211    $ —      $ 54,211    $ —
U.S. Government Agency and Sponsored Mortgage-Backed Securities
   184,187    —      184,187    —
Privately Issued Residential Mortgage-Backed Securities
   396    —      396    —
Obligations Issued by States and Political Subdivisions
   18,076    —      4,775    13,301
Other Debt Securities
   3,632       3,632    —








Total
   $ 260,502    $ —      $ 247,201    $ 13,301








Financial Instruments Measured at Fair Value on a Recurring Basis Equity Securities
   $ 1,688    $ 343    $ 1,345    $ —
Financial Instruments Measured at Fair Value on aNon-recurring Basis Impaired Loans
   $ 877    $ —      $ —      $ 877


	Securities AFS Fair Value Measurements Using
	Carrying Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
	(in thousands)
Financial Instruments Measured at Fair Value on a Recurring Basis:
SBA Backed Securities	$	54,211	$	—	$	54,211	$	—
U.S. Government Agency and Sponsored Mortgage-Backed Securities		184,187		—		184,187		—
Privately Issued Residential Mortgage- Backed Securities		396		—		396		—
Obligations Issued by States and Political Subdivisions		18,076		—		4,775		13,301
Other Debt Securities		3,632				3,632		—

Total	$	260,502	$	—	$	247,201	$	13,301

Financial Instruments Measured at Fair Value on a Recurring Basis Equity Securities	$	1,688	$	343	$	1,345	$	—
Financial Instruments Measured at Fair Value on a Non-recurring Basis Impaired Loans	$	877	$	—	$	—	$	877

Impaired loan balances in the table above represent those collateral dependent loans where management has estimated the credit loss by comparing the loan’s carrying value against the expected realizable fair value of the collateral. Fair value is generally determined through a review process that includes independent appraisals, discounted cash flows, or other external assessments of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. The Company discounts the fair values, as appropriate, based on management’s observations of the local real estate market for loans in this category.

Appraisals, discounted cash flows and real estate tax assessments are reviewed quarterly. There is no specific policy regarding how frequently appraisals will be updated. Adjustments are made to appraisals and real estate tax assessments based on management’s estimate of changes in real estate values. Within the past twelve months there have been no updated appraisals, however, all impaired loans have been reviewed during the past quarter using either a discounted cash flow analysis or other type of real estate tax assessment. The types of adjustments that are made to specific provisions relate to impaired loans recognized for 2019 for the estimated credit loss amounted to $79,000.

There were no0 transfers between level 1, 2 and 3 for the year ended December 31, 2019. There were no liabilities measured at fair value on a recurring or nonrecurring basis during the year ended December 31, 2019.

~~Page 24 of 42~~

            Unobservable Input
Asset
   Fair Value
Valuation Technique

Unobservable Input

Value or Range
Securities AFS
   $ 13,301
Discounted cash flow

Discount rate
   1.5%-3.2% (3)
Impaired Loans
   $ 877
Appraisal of collateral (1)

Appraisal adjustments (2)

0%-30% discount


Asset	Fair Value		Valuation Technique	Unobservable Input	Unobservable Input Value or Range
Securities AFS	$	13,301	Discounted cash flow	Discount rate	1.5%-3.2% (3)
Impaired Loans	$	877	Appraisal of collateral (1)	Appraisal adjustments (2)	0%-30% discount

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

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

(3)	Weighted averages.

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Note 9. Fair Values of Financial Instruments

The following methods and assumptions were used by the Company in estimating fair values of its financial instruments. Excluded from this disclosure are all

non-financial

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

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

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

Securities

Held-to-Maturity

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

Loans

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

non-performing

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

Time Deposits

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

Other Borrowed Funds

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

~~Page 25 of 42~~

Subordinated Debentures

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

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The following presents (in thousands) the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of ~~March 31,~~September 30, 2020 and December 31, 2019. This table excludes financial instruments for which the carrying amount approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, short-term investments, FHLBB stock and accrued interest receivable. Financial liabilities for which the fair value approximates carrying value include

non-maturity

deposits, short-term borrowings and accrued interest payable.

         Fair Value
   Carrying    Estimated    Measurements    Level 2    Level 3
March 31, 2020
   Amount    Fair Value    Level 1 Inputs    Inputs    Inputs
         (in thousands)
Financial assets:

Securitiesheld-to-maturity
   $ 2,304,074    $ 2,365,027    $ —      $ 2,365,027    $ —
Loans (1)
   2,468,090    2,437,099    —      —      2,437,099
Financial liabilities:

Time deposits
   612,849    621,553    —      621,553    —
Other borrowed funds
   312,120    320,830    —      320,830    —
Subordinated debentures
   36,083    36,083    —      36,083    —
December 31, 2019

Financial assets:

Securitiesheld-to-maturity
   $ 2,351,120    $ 2,361,304    $ —      $ 2,361,304    $ —
Loans (1)
   2,396,534    2,424,770    —      —      2,424,770
Financial liabilities:

Time deposits
   555,447    560,746    —      560,746    —
Other borrowed funds
   370,955    374,531    —      374,531    —
Subordinated debentures
   36,083    36,083    —      36,083    —


September 30, 2020	Carrying Amount		Estimated Fair Value		Fair Value Measurements Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
	(in thousands)
Financial assets:
Securities held-to-maturity	$	2,407,176	$	2,484,947	$	—	$	2,484,947	$	—
Loans (1)		2,956,739		2,885,187		—		—		2,885,187
Financial liabilities:
Time deposits		581,866		596,675		—		596,675		—
Other borrowed funds		152,248		159,690		—		159,690		—
Subordinated debentures		36,083		36,083		—		36,083		—

December 31, 2019
Financial assets:
Securities held-to-maturity	$	2,351,120	$	2,361,304	$	—	$	2,361,304	$	—
Loans (1)		2,396,534		2,424,770		—		—		2,424,770
Financial liabilities:
Time deposits		555,447		560,746		—		560,746		—
Other borrowed funds		370,955		374,531		—		374,531		—
Subordinated debentures		36,083		36,083		—		36,083		—

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

Limitations

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

Note 10. Revenue from Contracts with Customers

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

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

~~Page 26 of 42~~

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

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

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

~~A. Nature of goods and services~~

Nature of goods and services

The vast majority of the Company’s revenue is specifically

out-of-scope

of Topic 606. For the revenue

in-scope,

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

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

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

~~B. Disaggregation of revenue~~

Disaggregation of revenue

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

   Three    Revenue from    Three    Revenue from
   Months    Contracts in    Months    Contracts in
   Ended    Scope of    Ended    Scope of
   3/31/2020    Topic 606    3/31/2019    Topic 606
      (dollars in thousands)
Total interest income
   $ 25,201    $ —      $ 23,438    $ —








Noninterest income:

Service charges on deposit accounts
   2,296    2,296    2,209    2,209
Lockbox fees
   930    930    1,089    1,089
Gains on sales of mortgage loans
   —      —      15    —
Other income
   1,084    599    1,114    800








Total noninterest income
   4,310    3,825    4,427    4,098








Total revenues
   $ 29,511    $ 3,825    $ 27,865    $ 4,098


	Nine Months Ended 9/30/2020		Revenue from Contracts in Scope of Topic 606		Nine Months Ended 9/30/2019		Revenue from Contracts in Scope of Topic 606
	Nine Months Ended 9/30/2020		Revenue from Contracts in Scope of Topic 606		Nine Months Ended 9/30/2019		Revenue from Contracts in Scope of Topic 606
	(dollars in thousands)
Total net interest income	$	78,350	$	—	$	70,458	$	—

Noninterest income:
Service charges on deposit accounts		6,558		6,558		6,801		6,801
Lockbox fees		2,850		2,850		3,018		3,018
Net gains on sales of securities		—		—		61		—
Gains on sales of mortgage loans		—		—		154		—
Other income		3,112		1,738		3,676		2,338

Total noninterest income		12,520		11,146		13,710		12,157

Total revenues	$	90,870	$	11,146	$	84,168	$	12,157

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	Three Months Ended 9/30/2020		Revenue from Contracts in Scope of Topic 606		Three Months Ended 9/30/2019		Revenue from Contracts in Scope of Topic 606
	Three Months Ended 9/30/2020		Revenue from Contracts in Scope of Topic 606		Three Months Ended 9/30/2019		Revenue from Contracts in Scope of Topic 606
	(dollars in thousands)
Total interest income	$	27,331	$	—	$	23,770	$	—

Noninterest income:
Service charges on deposit accounts		2,239		2,239		2,310		2,310
Lockbox fees		996		996		937		937
Net gains on sales of securities		—		—		53		—
Gains on sales of mortgage loans		—		—		0		—
Other income		934		580		986		728

Total noninterest income		4,169		3,815		4,286		3,975

Total revenues	$	31,500	$	3,815	$	28,056	$	3,975

The following table provides information about receivables with customers.

   March 31, 2020    December 31, 2019
(dollars in thousands)
Receivables, which are included in “Other assets”
   $ 1,236    $ 1,200

September 30, 2020
   December 31, 2019
(dollars in thousands)
Receivables, which are included in “Other assets”

$
1,362

   $ 1,200

Note 11. Leases

The Company has operating leases primarily for branch locations as well as data processing centers. The Company’s operating leases have remaining lease terms of 1 year to 32 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. The Company also has one sublease for part of a data processing center that the Company currently leases from a lessor. The sublease expires in 2022 with an option to terminate and no option to extend. Lease income, for the sublease, totaled approximately ~~$9,900~~$30,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. Variable lease costs include costs that are not included in the lease liability.

The components of lease expense were as follows:

      Three
   Three Months    Months
   Ended    Ended
   3/31/2020    3/31/2019
(in thousands)
Operating lease cost
   $ 546    $ 563
Variable lease cost
   133    148




Total lease cost
   $ 679    $ 711


	Three Months Ended 9/30/2020		Nine Months Ended 9/30/2020		Three Months Ended 9/30/2019		Nine Months Ended 9/30/2019
	Three Months Ended 9/30/2020		Nine Months Ended 9/30/2020		Three Months Ended 9/30/2019		Nine Months Ended 9/30/2019
(in thousands)
Operating lease cost	$	546	$	1,638	$	550	$	1,676
Variable lease cost		135		441		121		405

Total lease cost	$	681	$	2,079	$	671	$	2,081

Supplemental cash flow information related to leases was as follows:

      Three
   Three Months    Months
   Ended    Ended
   3/31/2020    3/31/2019
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases
   $ 529    $ 538




Right-of-use assets obtained in exchange for lease obligations:

Operating leases
   $ 421    $ 443


	Three Months Ended 9/30/2020		Nine Months Ended 9/30/2020		Three Months Ended 9/30/2019		Nine Months Ended 9/30/2019
	Three Months Ended 9/30/2020		Nine Months Ended 9/30/2020		Three Months Ended 9/30/2019		Nine Months Ended 9/30/2019
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	529	$	1,586	$	528	$	1,605

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	431	$	1,306	$	433	$	1,318

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Supplemental balance sheet information related to leases was as follows:

   3/31/2020 12/31/2019
(in thousands, except lease term and discount rate)
Operating Leases:

Operating leaseright-of-use assets
   $ 12,085 $ 12,521
Operating lease liabilities
   $ 12,267 $ 12,690
Weighted Average Remaining Lease Term:

Operating Leases
   11 years 11 years
Weighted Average Discount Rate:

Operating Leases
   3.5 % 3.5 %

~~Page 28 of 42~~


	9/30/2020		12/31/2019
(in thousands, except lease term and discount rate)
Operating Leases:
Operating lease right-of-use assets	$	14,124	$	12,521
Operating lease liabilities	$	14,332	$	12,690
Weighted Average Remaining Lease Term:
Operating Leases		11 Years		11 Years
Weighted Average Discount Rate:
Operating Leases		3.1%		3.5%

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

   Minimum Rental Payments
   March 31, 2020    December 31, 2019
   (in thousands)
Year Ending December 31,

2020
   $ 1,502    $ 2,030
2021
   1,754    1,754
2022
   1,603    1,603
2023
   1,545    1,545
2024
   1,277    1,277
Thereafter
   7,311    7,312




Total lease payments
   $ 14,992    $ 15,521




Less imputed interest
   (2,725 )    (2,831 )




Present value of lease liability
   $ 12,267    $ 12,690

~~March 31,~~


	Minimum Rental Payments
	September 30, 2020			December 31, 2019
	(in thousands)
Year Ending December 31, 2020	$	397		$	2,030
2021		2,127			1,754
2022		1,975			1,603
2023		1,920			1,545
2024		1,666			1,277
Thereafter		8,565			7,312

Total lease payments	$	16,650		$	15,521

Less imputed interest		(2,318	)		(2,831	)

Present value of lease liability	$	14,332		$	12,690

September 30, 2020 minimum rental payments represent ~~nine~~three months of rental payments remaining in calendar year 2020.

~~Item 2.~~

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

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

Executive Overview

Century Bancorp, Inc. (together with its bank subsidiary, unless the context otherwise requires, the “Company”) is a Massachusetts state-chartered bank holding company headquartered in Medford, Massachusetts. The Company is a Massachusetts corporation formed in 1972 and has one banking subsidiary (the “Bank”): Century Bank and Trust Company formed in 1969. At ~~March 31,~~September 30, 2020, the Company had total assets of ~~$5.6~~$6.3 billion. Currently, the Company operates 27 banking offices in 20 cities and towns in Massachusetts, ranging from Braintree in the south to Andover in the north. The Bank’s customers consist primarily of small and

medium-sized

businesses and retail customers in these communities and surrounding areas, as well as local governments and large healthcare and higher educational institutions primarily throughout Massachusetts, New Hampshire, Rhode Island, Connecticut and New York.

The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income and fees from loans, deposits, as well as operating expenses, the provision for loan losses, the impact of federal and state income taxes and the relative levels of interest rates and economic activity. The Company offers a wide range of services to commercial enterprises, state and local governments and agencies,

non-profit

organizations and individuals. It emphasizes service to small and medium sized businesses and retail customers in its market area. In recent years, the Company has increased business to larger institutions, specifically, healthcare and higher education. The Company makes commercial loans, real estate and construction loans and ~~consumer loans,~~consumerloans, and accepts savings, time, and demand deposits. In addition, the Company offers its corporate and institutional customers

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automated lock box collection services, cash management services and account reconciliation services, and actively promotes the marketing of these services to the municipal market. Also, the Company provides ~~full service~~full-service securities brokerage services through a program called Investment Services at Century Bank, which is supported by LPL Financial, a third party full-service securities brokerage business.

The Company has municipal cash management client engagements in Massachusetts, New Hampshire and Rhode Island ~~comprising~~composed of approximately ~~298~~302 government entities.

~~During the first quarter of 2020, theCOVID-19~~ pandemic caused economic turmoil for individuals and businesses throughout the country and, in particular, our market area. Many businesses were required to fully or partially shut down. Many businesses laid off and/or furloughed employees as a result. Unemployment is expected to increase significantly, and GDP is expected to decline significantly. This may cause loan defaults in the future as customers are unable to make their contractual loan payments. The Company has increased its provision for loan losses in response to this increased risk. Future provision levels will be dependent upon the length of the economic disruption and the effectiveness of government programs to mitigate the economic impact of the shutdowns. We also anticipate the Company’s revenue may be negatively impacted as transaction fees will decline due to decreased volume.

In response to the pandemic, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act, among other things, provides cash payments to certain individuals and has various programs for businesses. In particular, it includes the Payroll Protection Program which provides forgivable loans to qualified small businesses, primarily to allow these businesses to continue to pay their employees. The original amount allocated to the program was $349 billion, which was

~~Page 29 of 42~~

exhausted on April 16, 2020. On April 24, 2020, an additional allocation of $310 billion was signed into law. These loans are funded by participating banks and are 100% guaranteed by the SBA. If utilized primarily for payroll, subject to certain other conditions, the loans may be forgiven, in whole or in part, and repaid by the SBA. Subsequent to March 31, 2020, Century Bank received SBA approvals for 1,215 loans totaling approximately $232 million. The fees expected to be collected, from the SBA, should all of the loans close, amount to approximately $7.8 million. The fees will be amortized over the lives of the loans utilizing the level-yield method.

The Company is considered an essential business based on criteria set by the Governor of the Commonwealth of Massachusetts. However, the Company has been and may continue to be affected by a work stoppage, forced quarantine, or other interruption or the unavailability of key employees.

Net income for the ~~three~~nine months ended ~~March 31,~~September 30, 2020, was ~~$9,666,000~~$30,609,000 or ~~$1.74~~$5.50 per Class A share diluted, an increase of ~~2.6%~~5.7% compared to net income of ~~$9,418,000,~~$28,967,000, or ~~$1.69~~$5.20 per Class A share diluted, for the same period a year ago.

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

   Three Months Ended
   March 31,
   2020    2019
Basic EPS – Class A common
   $ 2.10    $ 2.05
Basic EPS – Class B common
   $ 1.05    $ 1.03
Diluted EPS – Class A common
   $ 1.74    $ 1.69
Diluted EPS – Class B common
   $ 1.05    $ 1.03


	Three Months Ended September 30,
	2020		2019
Basic EPS – Class A common	$	2.36	$	2.19
Basic EPS – Class B common	$	1.18	$	1.09
Diluted EPS – Class A common	$	1.96	$	1.81
Diluted EPS – Class B common	$	1.18	$	1.09

	Nine Months Ended September 30,
	2020		2019
Basic EPS – Class A common	$	6.64	$	6.30
Basic EPS – Class B common	$	3.32	$	3.15
Diluted EPS – Class A common	$	5.50	$	5.20
Diluted EPS – Class B common	$	3.32	$	3.15

Net interest income totaled ~~$25,201,000~~$78,400,000 for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2020 compared to ~~$23,438,000~~$70,500,000 for the same period in 2019. The ~~7.5%~~11.2% increase in net interest income for the period is primarily due to ~~an increase~~a decrease in ~~average earning assets and prepayment penalties collected.~~interest expense as a result of falling interest rates. Prepayment penalties collected amounted to approximately ~~$874,000~~$946,000 for the first ~~quarter~~nine months of 2020 compared to ~~$12,000~~$18,000 for the same period last year. The net interest margin ~~remained stable at 2.11%~~decreased from 2.08% on a fully ~~taxable equivalent~~

tax-equivalent

basis for the first nine months of 2019 to 2.01% for the same period in ~~2019 and~~ 2020.

This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve.

The average balances of earning assets increased for the first nine months of 2020 compared to the same period last year, by ~~$244,641,000~~$609,000,000 or ~~4.9%~~12.3%, combined with an average yield decrease of ~~0.14%~~0.55%, resulting in ~~an increase~~a decrease in interest income of ~~$718,000.~~$6,200,000. The average balance of interest-bearing liabilities increased for the first nine months of 2020 compared to the same period last year, by ~~$265,767,000~~$486,900,000 or ~~6.6%~~12.1%, combined with an average interest-bearing liabilities interest cost decrease of ~~0.21%~~0.59%, resulting in a decrease in interest expense of ~~$1,045,000.~~

$14,100,000.

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

below

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The margin remained relatively stable for the first three quarters of 2018. During the fourth quarter of 2018 and first and second quarters of 2019, the Company increased its average interest-bearing deposits and average earning assets. This increased net interest income but decreased the net interest margin. During the third quarter of 2019, the net interest margin increased mainly as a result of deposit rate decreases. These deposits increased net interest income and the net interest margin. During the fourth quarter of 2019, the net interest margin increased mainly as a result of prepayment penalties collected. Prepayment penalties collected amounted to $1.4 million and contributed approximately eleven basis points to the net interest margin for the fourth quarter of 2019. The net interest margin decreased during the first quarter of 2020 mainly as a result of decreases in rates on earning assets. This was partially offset by prepayment penalties collected of $874,000 and contributed approximately seven basis points to the net interest margin. The net interest margin decreased during the second and third quarters of 2020 primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. While management will continue its efforts to improve the net interest margin, there can be no assurance that certain factors beyond its control, such as the prepayment of loans and changes in market interest rates, will ~~continue to~~ positively impact the net interest margin.

~~Page 30 of 42~~

The provision for loan losses increased by ~~$700,000~~$2,975,000 from ~~$375,000~~$700,000 for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2019 to ~~$1,075,000~~$3,675,000 for the same period in 2020, primarily ~~due to the increase in economic factors~~ as a result of of the economic ~~impact of~~uncertainties associated with the novel coronavirus disease (COVID–19) ~~pandemic.~~pandemic and increased loan balances, offset by decreases in historical loss rates. Refer to the allowance for loan loss section of the management discussion and analysis for additional discussion.~~Non-performing~~ Nonperforming assets totaled ~~$1,701,000~~$1,400,000 at ~~March 31,~~September 30, 2020, compared to $2,014,000 at December 31, 2019.

The Company’s effective tax rate increased from ~~(1.3%)~~2.0% for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2019 to ~~5.8%~~9.5% for the same period in 2020. This was primarily as a result of an increase in taxable income relative to total income and a reduction in tax accruals, during 2019, related to sequestration of the refundable portion of our alternative minimum tax (AMT) credit carryforward. On January 14, 2019, the IRS updated its announcement “Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations” to clarify that refundable AMT credits under Section 53(e) of the Internal Revenue Code are not subject to sequestration for taxable years beginning after December 31, 2017. On March 27, 2020, the Coronavirus, Aid, Relief and Economic Security (CARES) Act was signed into law. As a result of the CARES Act, the full balance of the AMT credit ~~will be~~was refunded induring 2020.

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

Impact of

COVID-19

During the first three quarters of 2020, the

COVID-19

pandemic caused economic turmoil for individuals and businesses throughout the country and, in particular, our market area. Many businesses were required to fully or partially shut down. Many businesses laid off and/or furloughed employees as a result. Unemployment has increased significantly, and GDP declined significantly. This may cause loan defaults in the future as customers are unable to make their contractual loan payments. The Company has increased its provision for loan losses in response to this increased risk. Future provision levels will be dependent upon the length of the economic disruption and the effectiveness of government programs to mitigate the economic impact of the shutdowns. The Company’s revenue has been and may continue to be negatively impacted as transaction fees have declined due to decreased volume.

In response to the pandemic, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act, among other things, provides cash payments to certain individuals and has various programs for businesses. In particular, it includes the Payroll Protection Program (PPP) which provides forgivable loans to qualified small businesses, primarily to allow these businesses to continue to pay their employees. The original amount allocated to the program was $349 billion, which was exhausted on April 16, 2020.

On April 24, 2020, an additional allocation of $310 billion was signed into law. These loans are funded by participating banks and are 100% guaranteed by the U.S. Small Business Administration (SBA). If utilized primarily for payroll, subject to certain other conditions, the loans may be forgiven, in whole or in part, and repaid by the SBA. As of September 30, 2020, Century Bank’s PPP loans totaled approximately 1,324 loans for approximately $232 million. The fees collected, from the SBA, amount to approximately $8.0 million. The fees are being amortized over the lives of the loans utilizing the level-yield method.

The Company is considered an essential business based on criteria set by the Governor of the Commonwealth of Massachusetts. Despite being permitted to continue its operations throughout the pandemic due to its status as an essential business, the operations of the Company nevertheless have been affected as a result of remote work arrangements and the unavailability of employees from time to time. The Company may continue to be affected by a work stoppage, forced quarantine, or other interruption or the unavailability of key employees. While the effects of
COVID-19
are likely to have a
far-reaching,
long-lasting effect on the global, national, and Massachusetts, we believe we have sufficient capital and financial strength, as well as liquidity resources to mitigate the effects of the
COVID-19
pandemic on our operations and financial condition, while continuing to serve our communities and protect shareholder value.

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Recent Market Developments

Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the

“D-F

Act”) became law. The

D-F

Act was intended to address many issues arising in the recent financial crisis and is exceedingly broad in scope, affecting many aspects of bank and financial market regulation. The

D-F

Act requires, or permits by implementing regulation, enhanced prudential standards for banks and bank holding companies inclusive of capital, leverage, liquidity, concentration and exposure measures. In addition, traditional bank regulatory principles such as restrictions on transactions with affiliates and insiders were enhanced. The

D-F

Act also contains reforms of consumer mortgage lending practices and creates a Bureau of Consumer Financial Protection, which is granted broad authority over consumer financial practices of banks and others. It is expected as the specific new or incremental requirements applicable to the Company become effective that the costs and difficulties of remaining compliant with all such requirements will increase. The

D-F

Act broadened the base for FDIC assessments to average consolidated assets less tangible equity of financial institutions and also permanently raises the current standard maximum FDIC deposit insurance amount to $250,000. The Act extended unlimited deposit insurance on

non-interest-bearing

transaction accounts through December 31, 2012.

In addition, the

D-F

Act added a new Section 13 to the Bank Holding Company Act, the

so-called ~~“Volcker~~

“Volcker Rule,” (the “Rule”) which generally restricts certain banking entities such as the Company and its subsidiaries or affiliates, from engaging in proprietary trading activities and owning equity in or sponsoring any private equity or hedge fund. The Rule became effective July 21, 2012. The final implementing regulations for the Rule were issued by various regulatory agencies in December 2013 and under an extended conformance regulation compliance was required to be achieved by July 21, 2015. The conformance period for investments in and relationships with certain “legacy covered funds” was extended to July 21, 2017. Under the Rule, the Company may be restricted from engaging in proprietary trading, investing in third party hedge or private equity funds or sponsoring new funds unless it qualifies for an exemption from the rule. The Company has little involvement in prohibited proprietary trading or investment activities in covered funds and the Company does not expect that complying with the requirements of the Rule will have any material effect on the Company’s financial condition or results of operation. The federal banking agencies have issued amendments to the Rule to provide greater clarity and certainty about what activities are prohibited and to improve the effective allocation of compliance resources, and to conform the Rule to the EGRRCPA (discussed below). ~~The federal banking agencies have also issued a notice~~Effective October 1, 2020, further amendments to the Rule took effect, which modifies existing exemptions from the definition of ~~proposed rulemaking to liberalize the~~ covered fund, ~~rules.~~

add new exclusions from the definition of covered fund and provide relief in other areas.

Tax Cuts and Jobs Act

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, which represents the most comprehensive reform to the U.S. tax code in over thirty years. The majority of the provisions of the Tax Act took effect on January 1, 2018. The Tax Act lowered the Company’s federal tax rate from 34% to 21%. Also, for tax years beginning after December 31, 2017, the corporate Alternative Minimum Tax (“AMT”) has been repealed. For 2018 through 2021, the AMT credit carryforward can offset regular tax liability and is refundable in an amount equal to 50% (100% for 2021) of the excess of the minimum tax credit for the tax year over the amount of the credit allowable for the year against regular tax liability. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. As a result of the CARES Act, the full balance of the AMT credit ~~will be~~was refunded induring 2020. The Tax Act also contains other provisions that may affect the Company currently or in future years. Among these are changes to the deductibility of meals and entertainment, the deductibility of executive compensation, the dividend received deduction and net operating loss carryforwards. Tax Act changes for individuals include lower tax rates, mortgage interest and state and local tax limitations as well as an increase in the standard deduction, among others.

~~Page 31 of 42~~

Economic Growth, Regulatory Relief, and Consumer Protection Act

On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act, or the EGRRCPA, became law. This is arguably the most significant financial institution legislation since the

D-F

Act. The EGRRCPA changes certain of the regulatory requirements of the

D-F

Act and includes provisions intended to relieve the regulatory burden on “community banks.” Among other things, for qualifying community banks with less than $10 billion in total consolidated assets, the EGRRCPA contains a safe harbor from the

D-F

Act “ability to repay” mortgage requirements, an exemption from the Volcker Rule, may permit filing of simplified Call Reports, and potentially will result in some alleviation of the

D-F

Act and U.S. Basel III capital mandates. The EGRRCPA requires the federal banking agencies to develop a community bank leverage ratio (defined as the ratio of tangible equity capital to average

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total consolidated assets) for banks and holding companies with total consolidated assets of less than $10 billion and an appropriate risk profile. The required regulations must specify a minimum community bank leverage ratio of not less than 8% and not more than 10%. The federal banking agencies jointly issued a final rule, effective January 1, 2020, which would set the minimum ratio at 9%. Qualifying banks that exceed the minimum community bank leverage ratio will be deemed to be in compliance with all other capital and leverage requirements including the capital ratio requirements that are required to be considered well capitalized under Section 38 of Federal Deposit Insurance Act.

Coronavirus Aid, Relief and Economic Security (CARES) Act

and Families First Coronavirus Response Act (FFCRA)

On March 18, 2020 the Families First Coronavirus Response Act (FFCRA) was signed into law and on March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The FFCRA and the CARES Act provide relief for families and businesses impacted by the coronavirus pandemic. The provisions in this legislation include, among other things, loan programs for businesses, expanded unemployment insurance benefits, stimulus payments to certain taxpayers, new provisions on sick leave and family leave, and funding for a variety of health-related efforts and government programs. The CARES Act also allowed a temporary deferral of FASB ASU

2016-13,

Measurement of Credit Losses on Financial Instruments. The Company has elected to defer FASB ASU

2016-13.

Also, as a result of the CARES Act, the full balance of the AMT ~~credit will be~~was refunded in 2020.

Recent Accounting Developments

Recently Adopted Accounting Standards Updates

In August 2018, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

2018-15,

Intangibles-Goodwill and Other-Internal Use Software (Subtopic

350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain

internal-use

software (and hosting arrangements that include an internal use software license). This ASU is effective for annual reporting periods beginning after December 15, 2019. The effect of this ASU did not have a material impact on the Company’s consolidated financial position.

In August 2018, FASB issued ASU

2018-13,

Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. This ASU is effective for annual reporting periods beginning after December 15, 2019. The effect of this update did not have a material impact on the Company’s disclosures.

In January 2017, the FASB issued ASU

2017-04,

Intangibles—Goodwill and Other (Topic 350). This ASU was issued to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. For public entities, this ASU is effective for the fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted, and application should be on a prospective basis. The effect of this update did not have a material impact on the Company’s consolidated financial position.

Accounting Standards Issued but not yet Adopted

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

In March 2020, the FASB issued ASU

2020-04,

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

In December 2019, the FASB issued ASU

2019-12,

Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years,

beginning after December 15, 2020. The effect of this ASU is not expected to have a material impact on the Company’s consolidated financial position.

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In June 2016, the FASB issued ASU

2016-13,

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

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

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

held-to-maturity

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

non-payment

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

2016-13

to arise from this portfolio.

Since ASU

2016-13,

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

2018-19

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

2019-04

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

2018-19

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

326-20.

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

ASU 2019-04

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

2016-13.

ASU

2019-05

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

held-to-maturity

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

820-10,

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

ASU 2016-13.

In November 2019, the FASB issued ASU

2019-11,

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

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

2016-13,

2016-13.

This ASU will be delayed until the earlier of the date on which the national emergency concerning the COVID–19 outbreak declared by the President on March 15, 2020 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020. The effects of ~~these ASUs~~CECL will not have a material impact on the Company’s consolidated financial position at January 1, 2020 upon retroactive adoption. The Company does not believe the impact of adoption would have been material to the Company’s consolidated financial ~~position~~statements as of ~~March 31,~~September 30, 2020.

In August 2018, FASB issued ASU

2018-14,

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

715-20):

Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. This ASU is effective for annual reporting periods beginning after December 15, 2020. The effect of this update will not have a material impact on the Company’s consolidated financial position.

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Financial Condition

Loans

On ~~March 31,~~September 30, 2020, total loans outstanding were ~~$2,498,894,~~$2,990,133,000, up by ~~$72,775,000~~$564,014,000 from the total on December 31, 2019. At ~~March 31,~~September 30, 2020, commercial real estate loans accounted for ~~30.5%~~26.2%, commercial and industrial accounted for ~~34.7%~~44%, and residential real estate loans, including home equity loans, accounted for ~~28.0%~~24.4% of total loans.

Commercial and industrial loans increased to ~~$867,599,000~~$1,315,407,000 at ~~March 31,~~September 30, 2020 from $812,417,000 at December 31, 2019, primarily as a result of approximately $232,000,000 of SBA PPP loan balances and loan originations. Commercial real estate loans decreased to ~~$761,464,000~~$784,895,000 from $786,102,000 on December 31, 2019 primarily as a result of loan payoffs. Construction loans ~~decreased~~increased to ~~$6,493,000~~$9,116,000 at ~~March 31,~~September 30, 2020 from $8,992,000 on December 31, 2019, primarily as a result of loan ~~payoffs.~~originations. Residential real estate loans increased to ~~$393,338,000~~$443,703,000 on ~~March 31,~~September 30, 2020 from $371,897,000 on December 31, 2019, primarily as a result of loan ~~originations.~~originations and loan purchases. Home equity loans ~~increased~~decreased to ~~$307,373,000~~$287,099,000 on ~~March 31,~~September 30, 2020 from $304,363,000 at December 31, 2019, primarily as a result of a home equity loan ~~promotion.~~payoffs. Municipal loans increased to ~~$141,588,000~~$130,047,000 from $120,455,000, primarily as a result of loan originations.

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

COVID-19

upon their short-term and long-term operations.

Allowance for Loan Losses

The allowance for loan loss at ~~March 31,~~September 30, 2020 was ~~$30,804,000~~$33,394,000 as compared to $29,585,000 at December 31, 2019. The level of the allowance for loan losses to total loans was ~~1.23%~~1.12% at ~~March 31,~~September 30, 2020 and 1.22% at December 31, 2019. The ~~coverage~~ ratio of the allowance for loan losses to loans outstanding has ~~increased~~decreased from December 31, 2019, primarily ~~as a result~~from approximately $232 million of ~~increased allocations~~PPP loans that are guaranteed by the SBA, which require no allowance for ~~economic factors associated with theCOVID-19~~ ~~pandemic.~~loan losses. The Company monitors the outlook for the industries in which our borrowers operate. Healthcare and higher education are two of the primary industries. In particular the Company utilizes outlooks and forecasts from various sources. The Company also monitors the volatility of the losses within the historical data.

By combining the credit rating, the industry outlook and the loss volatility, the Company arrives at the loss factor for each credit grade. For a large loan to large institutions with publicly available credit ratings, the Company tracks these ratings. These ratings are tracked as a credit quality indicator for these loans. Credit ratings issued by national organizations were utilized as credit quality indicators as presented in the following table at ~~March 31,~~September 30, 2020.

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

Aaa – Aa3
   $ 568,173    $ 74,406    $ 38,955    $ 681,534
A1 – A3
   185,819    7,354    147,953    341,126
Baa1 – Baa3
   —      51,133    143,302    194,435
Ba2
   —      5,895    —      5,895








Total
   $ 753,992    $ 138,788    $ 330,210    $ 1,222,990


	Commercial and Industrial		Municipal		Commercial Real Estate		Total
Credit Rating:		(in thousands)
Aaa – Aa3	$	647,056	$	64,806	$	38,365	$	750,227
A1 – A3		184,409		7,228		145,467		337,104
Baa1 – Baa3		50,000		51,133		140,486		241,619
Ba2		—		5,080		—		5,080

Total	$	881,465	$	128,247	$	324,318	$	1,334,030

Page 39 of 50

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Credit ratings issued by national organizations are presented in the following table at December 31, 2019.

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

Aaa – Aa3
   $ 523,644    $ 53,273    $ 40,437    $ 617,354
A1 – A3
   186,044    7,354    148,346    341,744
Baa1 – Baa3
   —      51,133    144,711    195,844
Ba2
   —      5,895    —      5,895








Total
   $ 709,688    $ 117,655    $ 333,494    $ 1,160,837

~~Page 34 of 42~~


	Commercial and Industrial		Municipal		Commercial Real Estate		Total
Credit Rating:		(in thousands)
Aaa – Aa3	$	523,644	$	53,273	$	40,437	$	617,354
A1 – A3		186,044		7,354		148,346		341,744
Baa1 – Baa3		—		51,133		144,711		195,844
Ba2		—		5,895		—		5,895

Total	$	709,688	$	117,655	$	333,494	$	1,160,837

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

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

   Three months ended
   March 31,
           2020                    2019
   (in thousands)
Allowance for loan losses, beginning of period
   $ 29,585    $ 28,543
Loans charged off
   (62 )    (142 )
Recoveries on loans previouslycharged-off
   206    72




Net recoveries (charge-offs)
   144    (70 )
Provision charged to expense
   1,075    375




Allowance for loan losses, end of period
   $ 30,804    $ 28,848


	Three months ended						Nine months ended
	2020			2019			2020			2019
	(in thousands)
Allowance for loan losses, beginning of period	$	32,516		$	29,070		$	29,585		$	28,543
Loans charged off		(41	)		(118	)		(120	)		(336	)
Recoveries on loans previously charged-off		19			70			254			190

Net recoveries (charge-offs)		(22	)		(48	)		134			(146	)
Provision charged to expense		900			75			3,675			700

Allowance for loan losses, end of period	$	33,394		$	29,097		$	33,394		$	29,097

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

Nonperforming Assets

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

   March 31, December 31,
           2020                 2019
   (dollars in thousands)
Nonaccruing loans
   $ 1,701 $ 2,014
Total nonperforming assets
   $ 1,701 $ 2,014
Loans past due 90 days or more and still accruing
   $ —   $ —
Nonaccruing loans as a percentage of total loans
   0.07 % 0.08 %
Nonperforming assets as a percentage of total assets
   0.03 % 0.04 %
Accruing troubled debt restructures
   $ 2,337 $ 2,361


	September 30, 2020			December 31, 2019
	September 30, 2020			December 31, 2019
	(dollars in thousands)
Nonaccruing loans	$	1,419		$	2,014
Total nonperforming assets	$	1,419		$	2,014
Loans past due 90 days or more and still accruing	$	49		$	—
Nonaccruing loans as a percentage of total loans		0.05	%		0.08	%
Nonperforming assets as a percentage of total assets		0.02	%		0.04	%
Accruing troubled debt restructures	$	2,240		$	2,361

Page 40 of 50

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Investments

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

Securities

Available-for-Sale ~~(at~~

(at Fair Value)

The securities

available-for-sale

portfolio totaled ~~$278,019,000~~$291,632,000 at ~~March 31,~~September 30, 2020, an increase of ~~6.7%~~12.0% from December 31, 2019. The portfolio increased mainly as a result of purchases of securities

available-for-sale

totaling ~~$39,719,000.~~$87,751,000. The purchases include ~~$9,372,000~~$53,903,000 of securities that are obligations issued by States and Political Subdivisions. This was offset, somewhat by calls/maturities and scheduled principal payments of ~~$20,734,000.~~$57,493,000. The portfolio is concentrated in United States Government Sponsored Enterprises, Mortgage-backed Securities and Obligations issued by States and Political Subdivisions and had an estimated weighted average remaining life of ~~5.0~~4.7 years.

At ~~March 31,~~September 30, 2020, ~~93.8%~~83.3% of the Company’s securities

available-for-sale

are classified as Level 2. The fair values of these securities are generally obtained from a pricing service, which provides the Company with a description of the inputs generally utilized for each type of security. These inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads,

two-sided

markets, benchmark securities, bids, offers and reference data. Market indicators and industry and economic events are also monitored.

~~Page 35~~

Securities

available-for-sale

totaling $48,815,000 or 16.7% of 42

securities

available-for-sale

~~Securitiesavailable-for-sale~~ ~~totaling $17,224,000 or 6.2% of securitiesavailable-for-sale~~

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

During the first ~~three~~nine months of 2020, net unrealized ~~loss~~gains on the securities

available-for-sale

increased to ~~$2,501,000~~$192,000 from a net unrealized loss of $422,000 at December 31, 2019. This was primarily the result of a decrease in the value of floating rate securities.

The following table sets forth the fair value of securities

available-for-sale

at the dates indicated.

   March 31,    December 31,
           2020                    2019
   (in thousands)
Small Business Administration
   $ 50,615    $ 54,211
U.S Government Agency and Sponsored Enterprise Mortgage-backed Securities
   206,215    184,187
Privately Issued Residential Mortgage-backed Securities
   334    396
Obligations issued by States and Political Subdivisions
   17,224    18,076
Other Debt Securities
   3,631    3,632




Total SecuritiesAvailable–for-Sale
   $ 278,019    $ 260,502


	September 30,		December 31,
	2020		2019
	(in thousands)
Small Business Administration	$	45,865	$	54,211
U.S Government Agency and Sponsored Enterprise Mortgage-backed Securities		189,904		184,187
Privately Issued Residential Mortgage-backed Securities		341		396
Obligations issued by States and Political Subdivisions		48,815		18,076
Other Debt Securities		6,707		3,632

Total Securities Available–for-Sale	$	291,632	$	260,502

There were no sales of

available-for-sales

securities for the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

Securities

Held-to-Maturity ~~(at~~

(at Amortized Cost)

The securities

held-to-maturity

portfolio totaled ~~$2,304,074,000~~$2,407,176,000 on ~~March 31,~~September 30, 2020, ~~a decrease~~an increase of ~~2.0%~~2.4% from December 31, 2019. ~~Maturities and scheduled principal payments~~Purchases of

held-to-maturity

securities totaled ~~$123,723,000~~$638,023,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The purchases were offset somewhat, by maturities and scheduled principal payments ~~were offset somewhat, by purchases ofheld-to-maturity~~ ~~securities~~ of ~~$70,171,000.~~$596,043,000. The portfolio is concentrated in United States Government Sponsored Enterprises and Mortgage-backed Securities and had an estimated weighted average remaining life of ~~3.4~~3.6 years.

Page 41 of 50

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The following table sets forth the amortized cost of securities

held-to-maturity

at the dates indicated.

   March 31,    December 31,
           2020                    2019
   (in thousands)
U.S. Government Sponsored Enterprises
   $ 89,419    $ 98,867
SBA Backed Securities
   42,856    44,379
U.S. Government Agency and Sponsored Enterprise Mortgage-backed Securities
   2,171,799    2,207,874




Total SecuritiesHeld-to-Maturity
   $ 2,304,074    $ 2,351,120


	September 30, 2020		December 31, 2019
	(in thousands)
U.S. Government Sponsored Enterprises	$	248,211	$	98,867
SBA Backed Securities		39,384		44,379
U.S. Government Agency and Sponsored Enterprise Mortgage-backed Securities		2,119,581		2,207,874

Total Securities Held-to-Maturity	$	2,407,176	$	2,351,120

There were no sales of

held-to-maturity

securities for the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

The net unrealized gains on investment securities

held-to-maturity

was ~~$60,953,000~~$77,771,000 or ~~2.7%~~3.2% of the total at ~~March 31,~~September 30, 2020 and the net unrealized gains ofwas $10,184,000 or 0.4% of the total at December 31, 2019. The increase in the net unrealized gains on securities

held-to-maturity

related primarily to a decrease in interest rates. The gross unrealized losses relate primarily to interest rates and not credit quality, and because the Company does not intend to sell any of these securities and it is not likely that it will be required to sell these securities before the anticipated recovery of the remaining amortized cost, the Company does not consider these investments to be other-than-temporarily impaired as of ~~March 31,~~September 30, 2020 and December 31, 2019.

At ~~March 31,~~September 30, 2020 and December 31, 2019, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises. Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac.

~~Page 36 of 42~~

Federal Home Loan Bank of Boston Stock

The Bank, as a member of the Federal Home Loan Bank of Boston (“FHLBB”), is required to maintain an investment in capital stock of the FHLBB. Based on redemption provisions, the stock has no quoted market value and is carried at cost. At its discretion, the FHLBB may declare dividends on the stock. The Company reviews this investment for impairment based on the ultimate recoverability of the cost basis in the stock. During the first ~~three~~nine months of 2020, the FHLBB redeemed ~~$6,831,000~~$10,836,000 of FHLBB stock and the Company purchased ~~$4,601,000~~$4,726,000 of FHLBB stock. As of ~~March 31,~~September 30, 2020, there have been no indicators of impairment ~~has been recognized.~~

that would require further consideration of potential impairment.

Equity Securities

At ~~March 31,~~September 30, 2020 equity securities totaled ~~$1,609,000~~$1,645,000 compared to $1,688,000 at December 31, ~~2019.~~

2019, this was primarily the result of changes in fair values.

Deposits and Borrowed Funds

On ~~March 31,~~September 30, 2020, deposits totaled ~~$4,562,512,000~~$5,412,471,000 representing a ~~3.7%~~23.0% increase from December 31, 2019. Total deposits increased primarily as a result of an increase in savings and NOW deposits, demand deposits, money market accounts, and time deposits. These types of deposits increased primarily from an increased customer base. Savings and NOW deposits increased mainly as a result of an increase in municipal NOW accounts, and corporate savings accounts. Demand deposits increased mainly as a result of increased corporate checking ~~balances. Savings and NOW deposits decreased mainly~~balances as a result of ~~a decrease in corporate and personal savings, offset somewhat, by increases in municipal NOW accounts.~~PPP loan proceed deposits. Money market accounts increased mainly as a result of an increase in corporate money market ~~accounts as well as increases in deposit gathering services~~ accounts. Time deposits increased primarily as a result of increased personal, corporate and municipal time deposits.

Borrowed funds totaled ~~$532,115,000~~$383,278,000 at ~~March 31,~~September 30, 2020 compared to $637,000,000 at December 31, 2019. Borrowed funds decreased mainly as a result of a decrease in borrowings from the FHLBB and a decrease in repurchase agreements. ~~This was offset, somewhat, by an increase of $9,400,000 in borrowings from the FRB discount window.~~ FHLBB borrowings decreased mainly as a result of an increase in deposits. Repurchase agreements decreased primarily as a result of short-term customer activity.

Stockholders’ Equity

At ~~March 31,~~September 30, 2020, total equity was ~~$340,687,000~~$363,434,000 compared to $332,581,000 on December 31, 2019. The Company’s equity increased primarily as a result of earnings, offset, somewhat, by dividends paid. The Company’s leverage ratio stood at ~~7.26%~~6.79% on ~~March 31,~~September 30, 2020, compared to 7.25% at December 31, 2019. The ~~increase~~decrease in the leverage ratio was due to an increase in ~~stockholders’ equity,~~quarterly average assets, offset somewhat by an increase in ~~quarterly average assets.~~stockholders’ equity. Book value as of ~~March 31,~~September 30, 2020, was ~~$61.19~~$65.27 as compared to $59.73 on December 31, 2019.

Page 3742 of 42

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Results of Operations

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

   Three Months Ended
   March 31, 2020 March 31, 2019
   Interest Rate Interest Rate
   Average Income/ Earned/ Average Income/ Earned/
   Balance Expenses (1) Paid (1) Balance Expenses (1) Paid (1)
   (dollars in thousands)
ASSETS

Interest-earning assets:

Loans (2)

Loans taxable
   $ 1,275,999 $ 13,481 4.25 % $ 1,182,782 $ 13,096 4.49 %
Loanstax-exempt
   1,171,963 10,789 3.70 % 1,109,824 10,411 3.80 %
Securitiesavailable-for-sale (5):

Taxable
   262,332 1,582 2.41 % 273,309 2,182 3.19 %
Tax-exempt
   9,640 137 5.68 % 78,560 545 2.77 %
Securitiesheld-to-maturity:

Taxable
   2,299,750 15,293 2.66 % 2,078,626 13,788 2.65 %
Interest-bearing deposits in other banks
   173,928 610 1.40 % 225,870 1,349 2.39 %


Total interest-earning assets
   5,193,612 41,892 3.23 % 4,948,971 41,371 3.37 %
Non interest-earning assets
   285,422 247,261
Allowance for loan losses
   (29,765 ) (28,708 )


Total assets
   $ 5,449,269 $ 5,167,524


LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest-bearing deposits:

NOW accounts
   $ 1,016,266 $ 2,252 0.89 % $ 902,321 $ 2,156 0.97 %
Savings accounts
   716,569 1,473 0.83 % 909,798 3,310 1.48 %
Money market accounts
   1,480,399 5,572 1.51 % 1,271,707 5,343 1.70 %
Time deposits
   589,396 3,172 2.16 % 516,781 2,793 2.19 %


Total interest-bearing deposits
   3,802,630 12,469 1.32 % 3,600,607 13,602 1.53 %
Securities sold under agreements to repurchase
   246,272 626 1.02 % 168,447 385 0.93 %
Other borrowed funds and subordinated debentures
   217,839 1,499 2.77 % 231,920 1,652 2.89 %


Total interest-bearing liabilities
   4,266,741 14,594 1.38 % 4,000,974 15,639 1.59 %


Non-interest-bearing liabilities

Demand deposits
   758,173 782,794
Other liabilities
   87,423 79,156


Total liabilities
   5,112,337 4,862,924


Stockholders’ equity
   336,932 304,600
Total liabilities & stockholders’ equity
   $ 5,449,269 $ 5,167,524


Net interest income on a fully taxable equivalent basis
   27,298 25,732
Less taxable equivalent adjustment
   (2,097 ) (2,294 )


Net interest income
   $ 25,201 $ 23,438


Net interest spread (3)
   1.85 % 1.79 %


Net interest margin (4)
   2.11 % 2.11 %


	Three Months Ended
	September 30, 2020									September 30, 2019
	Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)
ASSETS		(dollars in thousands)
Interest-earning assets:
Loans (2)
Loans taxable	$	1,681,573		$	15,074			3.57	%	$	1,217,324		$	13,665			4.45	%
Loans tax-exempt		1,240,668			7,997			2.56	%		1,145,136			10,704			3.71	%
Securities available-for-sale (5):
Taxable		272,475			722			1.06	%		261,312			1,969			3.01	%
Tax-exempt		43,000			110			1.02	%		32,978			262			3.18	%
Securities held-to-maturity:
Taxable		2,368,987			14,186			2.40	%		2,141,931			14,623			2.73	%
Interest-bearing deposits in other banks		275,157			69			0.10	%		173,150			928			2.14	%

Total interest-earning assets		5,881,860			38,158			2.59	%		4,971,831			42,151			3.38	%
Non interest-earning assets		306,887									248,663
Allowance for loan losses		(32,819	)								(29,079	)

Total assets	$	6,155,928								$	5,191,415


LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
NOW accounts	$	1,170,430		$	1,060			0.36	%	$	917,133		$	2,366			1.02	%
Savings accounts		794,806			666			0.33	%		868,891			3,079			1.41	%
Money market accounts		1,747,629			3,056			0.70	%		1,207,387			5,050			1.66	%
Time deposits		595,453			2,858			1.91	%		517,184			3,038			2.33	%

Total interest-bearing deposits		4,308,318			7,640			0.71	%		3,510,595			13,533			1.53	%
Securities sold under agreements to repurchase		209,477			241			0.46	%		252,270			697			1.10	%
Other borrowed funds and subordinated debentures		207,467			1,292			2.48	%		250,648			1,852			2.93	%

Total interest-bearing liabilities		4,725,262			9,173			0.77	%		4,013,513			16,082			1.59	%

Non-interest-bearing liabilities
Demand deposits		983,990									775,080
Other liabilities		88,896									79,104

Total liabilities		5,798,148									4,867,697

Stockholders’ equity		357,780									323,718
Total liabilities & stockholders’ equity	$	6,155,928								$	5,191,415

Net interest income on a fully taxable equivalent basis					28,985									26,069
Less taxable equivalent adjustment					(1,654	)								(2,299	)

Net interest income				$	27,331								$	23,770

Net interest spread (3)								1.82	%								1.79	%

Net interest margin (4)								1.96	%								2.08	%

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

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

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

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

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

Page 3843 of 42

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	Nine Months Ended
	September 30, 2020									September 30, 2019
	Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)
ASSETS		(dollars in thousands)
Interest-earning assets:
Loans (2)
Loans taxable	$	1,489,641		$	41,884			3.76	%	$	1,200,512		$	40,114			4.47	%
Loans tax-exempt		1,203,359			27,100			3.01	%		1,124,624			31,658			3.76	%
Securities available-for-sale (5):
Taxable		271,882			3,241			1.59	%		271,637			6,338			3.11	%
Tax-exempt		21,419			304			1.89	%		53,399			1,176			2.94	%
Securities held-to-maturity:
Taxable		2,346,502			44,701			2.54	%		2,128,082			43,006			2.69	%
Interest-bearing deposits in other banks		238,525			747			0.42	%		184,035			3,204			2.32	%

Total interest-earning assets		5,571,328			117,977			2.83	%		4,962,289			125,496			3.38	%
Non interest-earning assets		294,226									247,744
Allowance for loan losses		(31,359	)								(28,936	)

Total assets	$	5,834,195								$	5,181,097


LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
NOW accounts	$	1,110,309		$	4,633			0.56	%	$	932,139		$	7,057			1.01	%
Savings accounts		771,588			2,936			0.51	%		885,878			9,731			1.47	%
Money market accounts		1,603,367			12,090			1.01	%		1,249,531			15,805			1.69	%
Time deposits		597,589			9,141			2.04	%		512,228			8,724			2.28	%

Total interest-bearing deposits		4,082,853			28,800			0.94	%		3,579,776			41,317			1.54	%
Securities sold under agreements to repurchase		220,796			1,176			0.71	%		205,185			1,572			1.02	%
Other borrowed funds and subordinated debentures		206,055			4,093			2.65	%		237,887			5,274			2.96	%

Total interest-bearing liabilities		4,509,704			34,069			1.01	%		4,022,848			48,163			1.60	%

Non-interest-bearing liabilities
Demand deposits		889,237									764,852
Other liabilities		88,028									79,327

Total liabilities		5,486,969									4,867,027

Stockholders’ equity		347,226									314,070
Total liabilities & stockholders’ equity	$	5,834,195								$	5,181,097

Net interest income on a fully taxable equivalent basis					83,908									77,333
Less taxable equivalent adjustment					(5,558	)								(6,875	)

Net interest income				$	78,350								$	70,458

Net interest spread (3)								1.82	%								1.78	%

Net interest margin (4)								2.01	%								2.08	%

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

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

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

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

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

Page 44 of 50

Table of Contents

The following table presents certain information on a

fully-tax

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

   Three Months Ended March 31, 2020
   Compared with
   Three Months Ended March 31, 2019
      Increase/(Decrease)
      Due to Change in
   Volume    Rate    Total
   (in thousands)
Interest income:

Loans

Taxable
   $ 1,055    $ (670 )    $ 385
Tax-exempt
   617    (238 )    379
Securitiesavailable-for-sale

Taxable
   (85 )    (515 )    (600 )
Tax-exempt
   (707 )    298    (409 )
Securitiesheld-to-maturity

Taxable
   1,470    35    1,505
Interest-bearing deposits in other banks
   (264 )    (475 )    (739 )






Total interest income
   2,086    (1,565 )    521






Interest expense:

Deposits

NOW accounts
   269    (173 )    96
Savings accounts
   (596 )    (1,241 )    (1,837 )
Money market accounts
   842    (613 )    229
Time deposits
   401    (22 )    379






Total interest-bearing deposits
   916    (2,049 )    (1,133 )
Securities sold under agreements to repurchase
   196    45    241
Other borrowed funds and subordinated debentures
   (92 )    (61 )    (153 )






Total interest expense
   1,020    (2,065 )    (1,045 )






Change in net interest income
   $ 1,066    $ 500    $ 1,566


	Three Months Ended September 30, 2020 Compared with Three Months Ended September 30, 2019									Nine Months Ended September 30, 2020 Compared with Nine Months Ended September 30, 2019
	Increase/(Decrease) Due to Change in									Increase/(Decrease) Due to Change in
	Volume			Rate			Total			Volume			Rate			Total
Interest income:		(in thousands)									(in thousands)
Loans
Taxable	$	4,502		$	(3,093	)	$	1,409		$	8,758		$	(6,988	)	$	1,770
Tax-exempt		829			(3,536	)		(2,707	)		2,108			(6,666	)		(4,558	)
Securities available-for-sale
Taxable		81			(1,328	)		(1,247	)		6			(3,103	)		(3,097	)
Tax-exempt		63			(215	)		(152	)		(547	)		(325	)		(872	)
Securities held-to-maturity
Taxable		1,462			(1,899	)		(437	)		4,252			(2,557	)		1,695
Interest-bearing deposits in other banks		348			(1,207	)		(859	)		742			(3,199	)		(2,457	)

Total interest income		7,285			(11,278	)		(3,993	)		15,319			(22,838	)		(7,519	)

Interest expense:
Deposits
NOW accounts		526			(1,832	)		(1,306	)		1,170			(3,593	)		(2,423	)
Savings accounts		(242	)		(2,171	)		(2,413	)		(1,120	)		(5,675	)		(6,795	)
Money market accounts		1,685			(3,679	)		(1,994	)		3,735			(7,450	)		(3,715	)
Time deposits		418			(598	)		(180	)		1,366			(950	)		416

Total interest-bearing deposits		2,387			(8,280	)		(5,893	)		5,151			(17,668	)		(12,517	)
Securities sold under agreements to repurchase		(103	)		(353	)		(456	)		113			(509	)		(396	)
Other borrowed funds and subordinated debentures		(295	)		(265	)		(560	)		(662	)		(519	)		(1,181	)

Total interest expense		1,989			(8,898	)		(6,909	)		4,602			(18,696	)		(14,094	)

Change in net interest income	$	5,296		$	(2,380	)	$	2,916		$	10,717		$	(4,142	)	$	6,575

Net Interest Income

For the three months ended ~~March 31,~~September 30, 2020, net interest income on a fully taxable equivalent basis totaled ~~$27,298,000~~$28,985,000 compared to ~~$25,732,000~~$26,069,000 for the same period in 2019, an increase of ~~$1,566,000~~$2,916,000 or ~~6.1%~~11.2%. The increase in net interest income for the period is primarily due to ~~an increase~~a decrease in ~~average earning assets and prepayment penalties collected. Prepayment penalties collected amounted to approximately $874,000~~interest expense as a result of falling interest rates. The net interest margin decreased from 2.08% on a fully

tax-equivalent

basis for the ~~first~~third quarter of ~~2020 compared~~2019 to ~~$12,000~~1.96% for the same period ~~last year. The net~~in 2020. This was primarily the result of increased margin pressure during the recent decrease in interest ~~margin remained stable at 2.11% on a fully taxable equivalent basis in 2019 and 2020.~~rates across the yield curve. The average balances of earning assets increased by ~~$244,641,000~~$910,029,000 or ~~4.9%~~18.3%, combined with an average yield decrease of ~~0.14%~~0.79%, resulting in ~~an increase~~a decrease in interest income of ~~$521,000~~$3,993,000 on a fully~~tax-eqivalent~~

tax-equivalent

basis. The average balance of interest-bearing liabilities increased by ~~$265,767,000~~$711,749,000 or ~~6.6%~~17.7%, combined with an average interest-bearing liabilities interest cost decrease of ~~0.21%~~0.82%, resulting in a decrease in interest expense of ~~$1,045,000.~~

$6,909,000.

For the nine months ended September 30, 2020, net interest income on a fully taxable equivalent basis totaled $83,908,000 compared to $77,333,000 for the same period in 2019, an increase of $6,575,000 or 8.5%. The increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. Prepayment penalties collected amounted to approximately $946,000 for the first nine months of 2020 compared to $18,000 for the same period last year. The net interest margin decreased from 2.08% on a fully

tax-equivalent

basis for the first nine months of 2019 to 2.01% for the same period in 2020. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. The average balances of earning assets increased by $609,039,000 or 12.3%, combined with an average yield decrease of 0.55%, resulting in a decrease in interest income of $7,519,000 on a fully

tax-equivalent

basis. The average balance of interest-bearing liabilities increased by $486,856,000 million or 12.1%, combined with an average interest-bearing liabilities interest cost decrease of 0.59%, resulting in a decrease in interest expense of $14,094,000.

Page 45 of 50

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As illustrated in the table above, the main contributors to the increase in net interest income for the three and nine-month periods were ~~from securitiesheld-to-maturity~~ ~~and loans. Securitiesavailable-for-sale~~ ~~and~~a decrease in rates paid on interest-bearing ~~deposits in other banks~~deposits. The Company has decreased ~~during the first three months of 2020 compared to the same period last year.~~interest rates on these products as market rates have decreased. Securities

held-to-maturity

income increased, for the nine-month period, primarily as a result of an increase in volume. ~~Loan income increased primarily from an increase in volume and prepayment penalties collected.~~ Securities

available-for-sale, ~~and~~

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

available-for-sale

and loan portfolio. These ~~securities~~portfolios reprice as interest rates rise or fall. Interest-bearing deposits expense decreased primarily from a decrease in rates. This was mainly the result of decreased rates paid on interest-bearing liabilities. The Company has modestly decreased interest rates on these products as market rates have decreased.

~~Page 39 of 42~~

Provision for Loan Losses

~~For~~

The provision for loan losses increased by $2,975,000 from $700,000 for the ~~three~~nine months ended ~~March 31, 2020, the loan loss provision was $1,075,000 compared~~September 30, 2019 to ~~a provision of $375,000~~$3,675,000 for the same period ~~last year. The increase~~ in ~~the provision for the first quarter of~~ 2020, ~~compared to the same period last year was~~ primarily ~~due to the increase in economic factors~~ as a result of the economic ~~impact of~~uncertainties associated with the novel coronavirus disease (COVID–19) ~~pandemic.~~pandemic and increased loan balances. Further discussion relating to changes in portfolio composition is discussed in Note 4.

Non-Interest

Income and Expense

Other operating income for the quarter ended ~~March 31,~~September 30, 2020 decreased by $117,000 from the same period last year to ~~$4,310,000.~~$4,169,000. This was mainly attributable to a decrease in ~~lockbox fees~~other income of ~~$159,000~~$52,000, a decrease in service charges on deposit accounts of $71,000, and a decrease ~~in other income~~from net gains on sales of ~~$30,000.~~securities of $53,000. This was offset, somewhat, by an increase of $59,000 in lockbox fees. Service charges on deposit accounts decreased mainly as a result of a decrease in customer activity due in large part to the

COVID-19

pandemic. Other income decreased mainly as a result of a decrease in loan servicing fees. Lockbox fees increased mainly as a result of increased customer activity. Also, there were no loan sales during the third quarters of 2020 and 2019.

Other operating income for the nine months ended September 30, 2020 decreased by $1,190,000 from the same period last year to $12,520,000. This was mainly attributable to a decrease in other income of $564,000, a decrease in service charges on deposit accounts of ~~$87,000. Lockbox~~$243,000, a decrease in gains on sales of loans of $154,000, a decrease in lockbox fees of $168,000, and a decrease from net gains on sales of securities of $53,000. Service charges on deposit accounts and lockbox income decreased as a result of a decrease in customer activity due in large part to the

COVID-19

pandemic. ~~We anticipate that lockbox income and transaction fees will continue to decline untilnon-essential~~ businesses are reopened, which have been closed per order of the Governor of the Commonwealth of Massachusetts since March 24, 2020. Service charges on deposit accounts increased primarily as a result of an increase in customer activity prior to March 24, 2020. Other income decreased mainly as a result of ~~decreases~~a decrease in ~~gains~~loan servicing fees and a decrease in merchant sales royalties offset, somewhat, by increases on the returns of life insurance policies.

For the quarter ended ~~March 31,~~September 30, 2020, operating expenses increased by $705,000 or 4.0% to $18,167,000, from the same period last year. This was primarily attributable to an increase in salaries and employee benefits of $692,000, an increase of $410,000 in FDIC assessments, and an increase of $14,000 in occupancy costs. This was offset, somewhat, by decreases in equipment expenses of $53,000 and a decrease in other expenses of $358,000. The increase in salaries and employee benefits was mainly attributable to merit increases and other employee benefits. The increase in FDIC assessments was attributable to credits applied during the third quarter of 2019. The increase in occupancy costs was mainly attributable to an increase in depreciation. Other expenses decreased mainly as a result of decreases in marketing expenses. Equipment expense decreased mainly from a decrease in depreciation expense.

For the nine months ended September 30, 2020, operating expenses decreased by ~~$17,000~~$535,000 or ~~0.09%~~1.0% to ~~$18,173,000,~~$53,382,000, from the same period last year. This was primarily attributable to decreases in other expenses of $861,000, occupancy costs $238,000, and ~~other expenses.~~FDIC expenses of $3,000. This was offset, somewhat, by increases in salaries and employee benefits of ~~$336,000~~$399,000 and ~~an increase~~ equipment expenses of ~~$54,000.~~$168,000. Other expenses decreased mainly as a result of decreases in consultants’ expense, marketing expenses, and other real estate owned expenses, offset, somewhat, by increases in security costs. The decrease in occupancy costs was mainly attributable to a decrease in rent expense associated with the purchases of a previously leased branch. The increase in salaries and employee benefits was mainly attributable to deferred origination costs associated with originating the SBA PPP loans during the second quarter of 2020. This was offset, somewhat, by merit increases and an increase in pension costs. Equipment expense increased mainly from an increase in depreciation expense. Occupancy costs decreased primarily as a result of decreases in rent expense and a decrease in building maintenance. Other expenses decreased mainly as a result of FDIC assessment credits recognized during the quarter.

Income Taxes

For the ~~first~~third quarter of 2020, the Company’s income tax expense totaled ~~$597,000~~$1,546,000 on pretax income of ~~$10,263,000~~$12,433,000 resulting in an effective tax rate of ~~5.8%~~12.4%. For last year’s corresponding quarter, the Company’s income tax expense totaled ~~($118,000)~~$435,000 on pretax income of ~~$9,300,000~~$10,519,000 resulting in an effective tax rate of ~~(1.3%)~~4.1%. This increase was primarily the result of an increase in taxable income relative to total income. For the nine months ended September 30, 2020 the Company’s effective tax rate increased to 9.5% from 2.0% for the same period in 2019. This was primarily as a result of an increase in taxable income relative to total income and a reduction in tax accruals, during 2019, related to sequestration of the refundable portion of our alternative minimum tax (AMT) credit carryforward. On January 14, 2019, the IRS updated its announcement “Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations” to clarify that refundable AMT credits under Section 53(e) of the Internal Revenue Code are not subject to sequestration for taxable years beginning after December 31, 2017. On March 27, 2020, the Coronavirus, Aid, Relief and Economic Security (CARES) Act was signed into law. As a result of the CARES Act, the full balance of the AMT credit ~~will be~~was refunded in 2020.

Page 46 of 50

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Item 3.

Quantitative and Qualitative Disclosure about Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. To that end, management actively monitors and manages its interest rate risk exposure. The Company’s profitability is affected by fluctuations in interest rates. A sudden and substantial increase or decrease in interest rates may adversely impact the Company’s earnings to the extent that the interest rates tied to specific assets and liabilities do not change at the same speed, to the same extent, or on the same basis. The Company monitors the impact of changes in interest rates on its net interest income using several tools. The Company’s primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company’s net interest income and capital, while structuring the Company’s asset-liability structure to obtain the maximum yield-cost spread on that structure. Management believes that there has been no material changes in the interest rate risk reported in the Company’s Annual Report on

Form 10-K

for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission. The information is contained in the

Form 10-K

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

Item 4.

Controls and Procedures

The Company’s management, with participation of the Company’s principal executive and financial officers, has evaluated its disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, the Company’s management, with participation of its principal executive and financial officers, has concluded that the Company’s disclosure controls and procedures are effective. The disclosure controls and procedures also effectively ensure that information required to be disclosed in the Company’s filings and submissions with the Securities and Exchange Commission under the Exchange Act is accumulated and reported to Company management (including the principal executive officer and the principal financial officer) as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. In addition, the Company has evaluated its internal control over financial reporting and during the first ~~three~~nine months of 2020 there were no changes that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Page 4047 of 42

Table of Contents

Part II

–

Other Information

Item 1

A number of legal claims against the Company arising in the normal course of business were outstanding at ~~March 31,~~September 30, 2020. Management, after reviewing these claims with legal counsel, is of the opinion that their resolution will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

Item 1A

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

Form 10-K

for the fiscal year ended December 31, 2019. Except as noted below, there have been no material changes since this

10-K

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

As a result of the

COVID-19

pandemic, the Company’s business, financial condition and results of operation have been and may continue to be, negatively impacted. In light of the ongoing and unprecedented nature of the pandemic, it is difficult to predict its full impact on our business. Future developments, including governmental legislation and other actions, when

COVID-19

can be controlled, and when the economy may be reopened, are highly uncertain. We anticipate the

Covid-19

recession may have adverse effects on our operating results for the year ending December 31, 2020 and possibly beyond.

The following have or may ~~be, negatively impacted by the following:~~

occur:

a decline in the demand for products and ~~services;~~

services may occur due to, among other things, adverse financial impacts of the pandemic on customers, increased unemployment and temporary or permanent closures of businesses;

deposits could decline if customers need to draw on available balances as a result of the economic downturn;

an increase in loan delinquencies, problem assets and ~~foreclosures;~~

foreclosures due to, among other things, adverse financial impacts of the pandemic on customers;

a decline in collateral value;

a work stoppage, forced quarantine, or other interruption or the unavailability of key employees has occurred in various areas of the Company and may continue to occur;

the unavailability of critical services provided by third party vendors or limitations on the business capacities of our vendors for extended periods of time;

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

potential losses in our investment securities portfolio due to volatility in the financial markets;

increased cybersecurity risks and a potential loss of productivity in connection with remote work arrangements;

an increase in the allowance for loan losses has occurred and may continue to ~~occur.~~

occur to accommodate potential increased loan defaults.

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds –

(a) – (b) Not applicable.

Item 3

Defaults Upon Senior Securities – None

Item 4

Mine Safety Disclosures – Not applicable

Item 5

Other Information – None

Item 6

Exhibits



31.1		Certification of Chairman, President and Chief Executive Officer of the Company Pursuant to Securities Exchange ActRules 13a-14 and15d-14.

31.2		Certification of Chief Financial Officer of the Company Pursuant to Securities Exchange ActRules 13a-14 and15d-14.

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

Page 48 of 50

Table of Contents


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

++101.		INS XBRL Instance Document

++101.		SCH XBRL Taxonomy Extension Schema

++101.		CAL XBRL Taxonomy Extension Calculation Linkbase

++101.		LAB XBRL Taxonomy Extension Label Linkbase

++101.		PRE XBRL Taxonomy Extension Presentation Linkbase

++101.		DEF XBRL Taxonomy Definition Linkbase

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

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

As provided in Rule 406T of regulation

S-T,

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

10-Q

for the quarter ended ~~March 31,~~September 30, 2020, formatted in XBRL: (i) Consolidated Balance Sheets at ~~March 31,~~September 30, 2020 and December 31, 2019; (ii) Consolidated Statements of Income for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended ~~March 31,~~September 30, 2020 and 2019; (v) Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2020 and 2019; (vi) Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019; and ~~(vi)~~(vii) Notes to Unaudited Consolidated Interim Financial Statements.

Page 4149 of 42

Table of Contents

SIGNATURES

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


Date: ~~May 8,~~November 6, 2020				Century Bancorp, Inc.

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

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

Page 4250 of 42


	March 31,			December 31,
	2020			2019
Assets
Cash and due from banks	$	64,523		$	44,420
Federal funds sold and interest-bearing deposits in other banks		218,488			214,273

Total cash and cash equivalents		283,011			258,693
Securitiesavailable-for-sale, amortized cost $280,520 and $260,924, respectively		278,019			260,502
Securitiesheld-to-maturity, fair value $2,365,027 and $2,361,304, respectively		2,304,074			2,351,120
Federal Home Loan Bank of Boston, stock at cost		17,241			19,471
Equity securities, amortized cost $1,635 and $1,635, respectively		1,609			1,688
Loans, net:
Construction and land development		6,493			8,992
Commercial and industrial		867,599			812,417
Municipal		141,588			120,455
Commercial real estate		761,464			786,102
Residential real estate		393,338			371,897
Consumer and overdrafts		21,039			21,893
Home equity		307,373			304,363

Total loans, net		2,498,894			2,426,119
Less: allowance for loan losses		30,804			29,585

Net loans		2,468,090			2,396,534
Bank premises and equipment		36,238			33,952
Accrued interest receivable		12,998			13,110
Goodwill		2,714			2,714
Other assets		158,292			154,640

Total assets	$	5,562,286		$	5,492,424

Liabilities
Deposits:
Demand deposits	$	797,570		$	712,842
Savings and NOW deposits		1,662,414			1,678,250
Money market accounts		1,489,679			1,453,572
Time deposits		612,849			555,447

Total deposits		4,562,512			4,400,111
Securities sold under agreements to repurchase		219,995			266,045
Other borrowed funds		312,120			370,955
Subordinated debentures		36,083			36,083
Due to broker		5,500			—
Other liabilities		85,389			86,649

Total liabilities		5,221,599			5,159,843
Stockholders’ Equity
Preferred Stock – $1.00 par value; 100,000 shares authorized; no shares issued and outstanding		—			—
Common stock, Class A, $1.00 par value per share; authorized 10,000,000 shares; issued 3,652,349 shares and 3,650,949 shares, respectively		3,652			3,651
Common stock, Class B, $1.00 par value per share; authorized 5,000,000 shares; issued 1,915,560 shares and 1,916,960 shares respectively		1,916			1,917
Additionalpaid-in capital		12,292			12,292
Retained earnings		348,093			338,980

		365,953			356,840
Unrealized losses on securitiesavailable-for-sale, net of taxes		(1,839	)		(308	)
Unrealized losses on securities transferred toheld-to-maturity, net of taxes		(1,648	)		(1,812	)
Pension liability, net of taxes		(21,779	)		(22,139	)

Total accumulated other comprehensive loss, net of taxes		(25,266	)		(24,259	)

Total stockholders’ equity		340,687			332,581

Total liabilities and stockholders’ equity	$	5,562,286		$	5,492,424


	Three months ended March 31,
	2020			2019
Net income	$	9,666		$	9,418
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Unrealized (losses) gains arising during period		(1,531	)		(462	)
Less: reclassification adjustment for gains included in net income		—			—

Total unrealized (losses) gains on securities		(1,531	)		(462	)
Accretion of net unrealized losses transferred		164			216
Defined benefit pension plans:
Amortization of prior service cost and loss included in net periodic benefit cost		360			263

Other comprehensive (loss) income		(1,007	)		17

Comprehensive income	$	8,659		$	9,435


											Accumulated
	Class A		Class B			Additional					Other			Total
	Common		Common			Paid-In		Retained			Comprehensive			Stockholders’
	Stock		Stock			Capital		Earnings			Income (Loss)			Equity
	(In thousands)
Balance at December 31, 2018	$	3,608	$	1,960		$	12,292	$	301,488		$	(18,909	)	$	300,439
Net income		—		—			—		9,418			—			9,418
Other comprehensive income, net of tax:															—
Unrealized holding (losses) gains arising during period, net of $166 in taxes		—		—			—		—			(462	)		(462	)
Accretion of unrealized losses on securities transferred toheld-to-maturity, net of $78 in taxes		—		—			—		—			216			216
Pension liability adjustment, net of $103 in taxes		—		—			—		—			263			263
Conversion of Class B Common Stock to Class A Common Stock, 2,300 shares		2		(2	)		—		—			—			—
Cash dividends paid, Class A common stock, $0.12 per share		—		—			—		(433	)		—			(433	)
Cash dividends paid, Class B common stock, $0.06 per share		—		—			—		(117	)		—			(117	)

Balance at March 31, 2019	$	3,610	$	1,958		$	12,292	$	310,356		$	(18,892	)	$	309,324

Balance at December 31, 2019	$	3,651	$	1,917		$	12,292	$	338,980		$	(24,259	)	$	332,581
Net income		—		—			—		9,666			—			9,666
Other comprehensive income, net of tax:
Unrealized holding (losses) gains arising during period, net of $548 in taxes		—		—			—		—			(1,531	)		(1,531	)
Accretion of unrealized losses on securities transferred toheld-to-maturity, net of $58 in taxes		—		—			—		—			164			164

Pension liability adjustment, net of $141 in taxes		—		—			—		—			360			360

Conversion of Class B Common Stock to Class A Common Stock, 1,400 shares		1		(1	)		—		—			—			—
Cash dividends paid, Class A common stock, $0.12 per share		—		—			—		(438	)		—			(438	)
Cash dividends paid, Class B common stock, $0.06 per share		—		—			—		(115	)		—			(115	)

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


	March 31, 2020								December 31, 2019
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
	(in thousands)
SBA Backed Securities	$	50,722	$	25	$	132	$	50,615	$	54,331	$	23	$	143	$	54,211
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		208,596		157		2,538		206,215		184,580		139		532		184,187
Privately Issued Residential Mortgage-Backed Securities		378		—		44		334		397		1		2		396
Obligations Issued by States and Political Subdivisions		17,224		—		—		17,224		18,016		60		—		18,076
Other Debt Securities		3,600		42		11		3,631		3,600		51		19		3,632

Total	$	280,520	$	224	$	2,725	$	278,019	$	260,924	$	274	$	696	$	260,502


	Construction			Commercial
	and Land			and					Commercial			Residential					Home
	Development			Industrial			Municipal		Real Estate			Real Estate		Consumer			Equity		Unallocated		Total
									(in thousands)
Allowance for loan losses:
Balance at December 31, 2019	$	331		$	11,596		$	2,566	$	11,464		$	2,194	$	312		$	1,065	$	57	$	29,585
Charge-offs		—			(5	)		—		—			—		(57	)		—		—		(62	)
Recoveries		—			164			—		—			—		37			5		—		206
Provision		(85	)		673			323		(343	)		255		4			67		181		1,075

Ending balance at March 31, 2020	$	246		$	12,428		$	2,889	$	11,121		$	2,449	$	296		$	1,137	$	238	$	30,804

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

Amount of allowance for loan losses for loans not deemed to be impaired	$	246		$	12,428		$	2,889	$	11,036		$	2,449	$	296		$	1,137	$	238	$	30,719

Loans:
Ending balance	$	6,493		$	867,599		$	141,588	$	761,464		$	393,338	$	21,039		$	307,373	$	—	$	2,498,894

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

Loans not deemed to be impaired	$	6,493		$	866,976		$	141,588	$	759,142		$	393,338	$	21,039		$	307,373	$	—	$	2,495,949


	Commercial				Commercial
	and				Real
	Industrial		Municipal		Estate		Total
			(in thousands)
Credit Rating:
Aaa – Aa3	$	568,173	$	74,406	$	38,955	$	681,534
A1 – A3		185,819		7,354		147,953		341,126
Baa1 – Baa3		—		51,133		143,302		194,435
Ba2		—		5,895		—		5,895

Total	$	753,992	$	138,788	$	330,210	$	1,222,990


					Accruing
	Accruing				Greater		Total
	30-89 Days		Non		than		Past		Current
	Past Due		Accrual		90 Days		Due		Loans		Total
					(in thousands)
Construction and land development	$	—	$	—	$	—	$	—	$	6,493	$	6,493
Commercial and industrial		337		374		—		711		866,888		867,599
Municipal		—		—		—		—		141,588		141,588
Commercial real estate		2,322		238		—		2,560		758,904		761,464
Residential real estate		2,455		890		—		3,345		389,993		393,338
Consumer and overdrafts		17		6		—		23		21,016		21,039
Home equity		1,450		193		—		1,643		305,730		307,373

Total	$	6,581	$	1,701	$	—	$	8,282	$	2,490,612	$	2,498,894


							Average		Interest
							Carrying		Income
							Value		Recognized
							for 3		for 3
			Unpaid				Months		Months
	Carrying		Principal		Required		Ending		Ending
	Value		Balance		Reserve		3/31/20		3/31/20
					(in thousands)
With no required reserve recorded:
Construction and land development	$	—	$	—	$	—	$	—	$	—
Commercial and industrial		623		641		—		582		1
Municipal		—		—		—		—		—
Commercial real estate		155		185		—		157		—
Residential real estate		—		—		—		—		—
Consumer		—		—		—		—		—
Home equity		—		—		—		—		—

Total	$	778	$	826	$	—	$	739	$	1

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

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

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

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


	Three			Three			Affected Line Item in the
Details about Accumulated Other	Months Ended			Months Ended			Statement where Net Income is
Comprehensive Income Components	March 31, 2020			March 31, 2019			Presented
(in thousands)
Accretion of unrealized losses transferred	$	(222	)	$	(294	)	Securitiesheld-to-maturity
Tax (expense) or benefit		58			78		Provision for income taxes

Net of tax	$	(164	)	$	(216	)	Net income

Amortization of defined benefit pension items

Prior-service costs	$	(29	)(b)	$	(29	)(b)	Salaries and employee benefits
Actuarial gains (losses)		(472	)(b)		(337	)(b)	Salaries and employee benefits

Total before tax		(501	)		(366	)	Income before taxes

Tax (expense) or benefit		141			103		Provision for income taxes

Net of tax	$	(360	)	$	(263	)	Net income


							Supplemental Insurance/
	Pension Benefits						Retirement Plan
	2020			2019			2020		2019
				(in thousands)
Service cost	$	344		$	276		$	353	$	256
Interest		450			473			466		482
Expected return on plan assets		(952	)		(819	)		—		—
Recognized prior service cost (benefit)		—			—			29		28
Recognized net actuarial losses		261			229			211		109

Net periodic benefit (credit) cost	$	103		$	159		$	1,059	$	875


	Securities AFS Fair Value Measurements Using
			Quoted Prices
			In Active				Significant
			Markets for		Significant		Other
			Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
			(in thousands)
SBA Backed Securities	$	50,615	$	—	$	50,615	$	—
U.S. Government Agency and Sponsored Mortgage-Backed Securities		206,215		—		206,215		—
Privately Issued Residential Mortgage- Backed Securities		334		—		334		—
Obligations Issued by States and Political Subdivisions		17,224		—		—		17,224
Other Debt Securities		3,631		—		3,631		—

Total Debt Securities	$	278,019	$	—	$	260,795	$	17,224

Equity Securities	$	1,609	$	243	$	1,366	$	—

Financial Instruments Measured at Fair Value on aNon-recurring Basis

Impaired Loans	$	608	$	—	$	—	$	608


	Obligations
	Issued by States
	& Political
	Subdivisions
Balance at December 31, 2019	$	13,301
Purchases		9,372
Maturities and calls		(5,449	)
Amortization		—

Balance at March 31, 2020	$	17,224


					Fair Value
	Carrying		Estimated		Measurements		Level 2		Level 3
March 31, 2020	Amount		Fair Value		Level 1 Inputs		Inputs		Inputs
					(in thousands)
Financial assets:
Securitiesheld-to-maturity	$	2,304,074	$	2,365,027	$	—	$	2,365,027	$	—
Loans (1)		2,468,090		2,437,099		—		—		2,437,099
Financial liabilities:
Time deposits		612,849		621,553		—		621,553		—
Other borrowed funds		312,120		320,830		—		320,830		—
Subordinated debentures		36,083		36,083		—		36,083		—

December 31, 2019
Financial assets:
Securitiesheld-to-maturity	$	2,351,120	$	2,361,304	$	—	$	2,361,304	$	—
Loans (1)		2,396,534		2,424,770		—		—		2,424,770
Financial liabilities:
Time deposits		555,447		560,746		—		560,746		—
Other borrowed funds		370,955		374,531		—		374,531		—
Subordinated debentures		36,083		36,083		—		36,083		—


	Three		Revenue from		Three		Revenue from
	Months		Contracts in		Months		Contracts in
	Ended		Scope of		Ended		Scope of
	3/31/2020		Topic 606		3/31/2019		Topic 606
			(dollars in thousands)
Total interest income	$	25,201	$	—	$	23,438	$	—

Noninterest income:
Service charges on deposit accounts		2,296		2,296		2,209		2,209
Lockbox fees		930		930		1,089		1,089
Gains on sales of mortgage loans		—		—		15		—
Other income		1,084		599		1,114		800

Total noninterest income		4,310		3,825		4,427		4,098

Total revenues	$	29,511	$	3,825	$	27,865	$	4,098


			Three
	Three Months		Months
	Ended		Ended
	3/31/2020		3/31/2019
(in thousands)
Operating lease cost	$	546	$	563
Variable lease cost		133		148

Total lease cost	$	679	$	711


	Three Months Ended March 31, 2020
	Compared with
	Three Months Ended March 31, 2019
				Increase/(Decrease)
				Due to Change in
	Volume			Rate			Total
	(in thousands)
Interest income:
Loans
Taxable	$	1,055		$	(670	)	$	385
Tax-exempt		617			(238	)		379
Securitiesavailable-for-sale
Taxable		(85	)		(515	)		(600	)
Tax-exempt		(707	)		298			(409	)
Securitiesheld-to-maturity
Taxable		1,470			35			1,505
Interest-bearing deposits in other banks		(264	)		(475	)		(739	)

Total interest income		2,086			(1,565	)		521

Interest expense:
Deposits
NOW accounts		269			(173	)		96
Savings accounts		(596	)		(1,241	)		(1,837	)
Money market accounts		842			(613	)		229
Time deposits		401			(22	)		379

Total interest-bearing deposits		916			(2,049	)		(1,133	)
Securities sold under agreements to repurchase		196			45			241
Other borrowed funds and subordinated debentures		(92	)		(61	)		(153	)

Total interest expense		1,020			(2,065	)		(1,045	)

Change in net interest income	$	1,066		$	500		$	1,566