Table of Contents
 
 
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 June 30, 2020.March 31, 2021.
or
 
☐
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    ☒  No
As of July 31, 2020,April 30, 2021, the Registrant had outstanding:
 
Class A Common Stock, $1.00 par value
   3,655,4693,658,569 Shares 
Class B Common Stock, $1.00 par value
   1,912,4401,909,340 Shares 
 
 
 
Table of Contents
Century Bancorp, Inc.
Index
 
Page
Number
Part I
Financial Information
Financial Information
4
Forward Looking Statements
Item 1.
Financial Statements (unaudited)
3
 
  
Item 1.
Financial Statements (unaudited)
Consolidated Balance Sheets:
March 31, 2021 and December 31, 2020
  4
 
Consolidated Balance Sheets:
June 30, 2020 and December 31, 2019
4
Consolidated Statements of Income:

Three Months Ended March 31, 2021 and Six Months Ended June 30, 2020 and 2019
5
 
Consolidated Statements of Comprehensive Income:

Three Months Ended March 31, 2021 and Six Months Ended June 30, 2020 and 2019
6
 
Consolidated Statements of Changes in Stockholders’ Equity:

Three Months Ended June 30,March 31, 2021 and 2020 and 2019
7
 
Consolidated Statements of Changes in Stockholders’ Equity:
Six Months Ended June 30, 2020 and 2019
8
Consolidated Statements of Cash Flows:
Six
Three Months Ended June 30,March 31, 2021 and 2020 and 2019
9
8
 
Notes to Consolidated Financial Statements
10 - 32
  9 - 30
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
32 - 45
  31 - 41
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
46
  41
Item 4.
Controls and Procedures
46
41
   
Part II.
Other Information
Other Information
 
Item 1.
Legal Proceedings
42
Item 1A.
Risk Factors
4642-43
Item 1A.
Risk Factors
46
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
46
44
Item 3.
Defaults Upon Senior Securities
46
44
Item 4.
Mine Safety Disclosures
46
44
Item 5.
Other Information
46
44
Item 6.
Exhibits
47
44
  
Signatures
48
45
Exhibits
Ex-31.1
Ex-2.1
 
 
Ex-31.2
Ex-10.1
 
 
Ex-32.1
Ex-10.2
 
 
Ex-32.2
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 Reportquarterly report on Form
Form 10-Q
may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, (i) the fact that the Company’s business, financial condition and results of operation have been or may be negatively impacted by the extent and duration of the
COVID-19
pandemic, (iii) the fact that consumer behavior may change due to changing political, business and economic conditions, including increased unemployment, or legislative or regulatory initiatives, (iv) the fact that the Company’s success is dependent to a significant extent upon general economic conditions in New England, (ii)(v) 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)(vi) failure to obtain the approval of our shareholders in connection with our proposed merger with Eastern Bankshares, Inc. (“Eastern”); (vii) the timing to consummate the proposed merger; (viii) the risk that a condition to closing of the proposed merger may not be satisfied; (ix) the risk that a regulatory approval that may be required for the proposed merger is not obtained or is obtained subject to conditions that are not anticipated; (x) the effect of the announcement of the proposed merger on our ability to maintain relationships with our key partners, customers and employees, and on our operating results and business generally; (xi) the fact that the Bank’s participation in the Paycheck Protection Program involves reputational risks, (xii) the fact that the banking business is highly competitive and the profitability of the Company depends upon the Bank’s ability to attract loans and deposits within its market area, where the Bank competes with a variety of traditional banking and other institutions such as credit unions and finance companies, (xiii) the fact that our operations are subject to risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and (iv)future pandemics, (xiv) the fact that future credit losses may be higher than currently expected due to changes in economic assumptions and adverse economic developments, and (xvi) 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 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. Thesethese factors, as well as general economic and market conditions, may materially and adversely affect the market price of shares of the Company’s common stock. Because of these and other factors, past financial performance should not be considered an indicator of future performance. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control. The forward-looking statements contained herein represent the Company’s judgment as of the date of this quarterly report on from
Form 10-Q,
and the Company cautions readers not to place undue reliance on such statements.
 
Page 3 of 4845
Table of Contents
PART I – Item 1
Century Bancorp, Inc.
Consolidated Balance Sheets (unaudited)
(In thousands, except share data)
 
Assets
  
June 30,
2020
  December 31,
2019		 
Cash and due from banks
  
$
 
78,159
 
 $
 
44,420 
Federal funds sold and interest-bearing deposits in other banks
  
 
150,139
 
  214,273 
  
 
 
  
 
 
 
Total cash and cash equivalents
  
 
228,298
 
  258,693 
Securities
available-for-sale,
amortized cost $301,686 and $260,924, respectively
  
 
301,213
 
  260,502 
Securities
held-to-maturity,
fair value $2,511,229 and $2,361,304, respectively
  
 
2,427,422
 
  2,351,120 
Federal Home Loan Bank of Boston, stock at cost
  
 
13,371
 
  19,471 
Equity securities, amortized cost $1,635 and $1,635, respectively
  
 
1,669
 
  1,688 
Loans, net:
   
Construction and land development
  
 
6,513
 
  8,992 
Commercial and industrial
  
 
1,155,592
 
  812,417 
Municipal
  
 
153,017
 
  120,455 
Commercial real estate
  
 
764,886
 
  786,102 
Residential real estate
  
 
400,867
 
  371,897 
Consumer and overdrafts
  
 
19,857
 
  21,893 
Home equity
  
 
297,355
 
  304,363 
  
 
 
  
 
 
 
Total loans, net
  
 
2,798,087
 
  2,426,119 
Less: allowance for loan losses
  
 
32,516
 
  29,585 
  
 
 
  
 
 
 
Net loans
  
 
2,765,571
 
  2,396,534 
Bank premises and equipment
  
 
36,290
 
  33,952 
Accrued interest receivable
  
 
12,090
 
  13,110 
Goodwill
  
 
2,714
 
  2,714 
Other assets
  
 
158,356
 
  154,640 
  
 
 
  
 
 
 
Total assets
  
$
5,946,994
 
 $5,492,424 
  
 
 
  
 
 
 
Liabilities
   
Deposits:
   
Demand deposits
  
$
985,491
 
 $712,842 
Savings and NOW deposits
  
 
1,967,783
 
  1,678,250 
Money market accounts
  
 
1,548,198
 
  1,453,572 
Time deposits
  
 
610,496
 
  555,447 
  
 
 
  
 
 
 
Total deposits
  
 
5,111,968
 
  4,400,111 
Securities sold under agreements to repurchase
  
 
204,972
 
  266,045 
Other borrowed funds
  
 
152,485
 
  370,955 
Subordinated debentures
  
 
36,083
 
  36,083 
Due to broker
  
 
2,078
 
  —   
Other liabilities
  
 
87,206
 
  86,649 
  
 
 
  
 
 
 
Total liabilities
  
 
5,594,792
 
  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 3,652,469 shares and 3,650,949 shares, respectively
  
 
3,653
 
  3,651 
Common stock, Class B, $1.00 par value per share; authorized 5,000,000 shares; issued 1,915,440 shares and 1,916,960 shares respectively
  
 
1,915
 
  1,917 
Additional
paid-in
capital
  
 
12,292
 
  12,292 
Retained earnings
  
 
357,595
 
  338,980 
  
 
 
  
 
 
 
  
 
375,455
 
  356,840 
Unrealized losses on securities
available-for-sale,
net of taxes
  
 
(349
) 
  (308) 
Unrealized losses on securities transferred to
held-to-maturity,
net of taxes
  
 
(1,486
) 
  (1,812) 
Pension liability, net of taxes
  
 
(21,418
) 
  (22,139) 
  
 
 
  
 
 
 
Total accumulated other comprehensive loss, net of taxes
  
 
(23,253
) 
  (24,259) 
  
 
 
  
 
 
 
Total stockholders’ equity
  
 
352,202
 
  332,581 
  
 
 
  
 
 
 
Total liabilities and stockholders’ equity
  
$
5,946,994
 
 $5,492,424 
  
 
 
  
 
 
 
   
March 31,
2021
   December 31,
2020		 
Assets
        
Cash and due from banks
  
$
116,242
 
  $136,735 
Federal funds sold and interest-bearing deposits in other banks
  
 
500,521
 
   237,265 
           
Total cash and cash equivalents
  
 
616,763
 
   374,000 
Securities
available-for-sale,
amortized cost $263,089 and $282,273, respectively
  
 
263,898
 
   282,448 
Securities
held-to-maturity,
fair value $3,222,903 and $2,579,103, respectively
  
 
3,217,176
 
   2,509,088 
Federal Home Loan Bank of Boston, stock at cost
  
 
13,361
 
   13,361 
Equity securities, amortized cost $1,635 and $1,635, respectively
  
 
1,722
 
   1,668 
Loans, net:
          
Construction and land development
  
 
7,854
 
   10,909 
Commercial and industrial
  
 
1,315,295
 
   1,314,245 
Municipal
  
 
137,073
 
   137,607 
Commercial real estate
  
 
796,660
 
   789,836 
Residential real estate
  
 
460,123
 
   448,436 
Consumer and overdrafts
  
 
19,987
 
   20,439 
Home equity
  
 
255,770
 
   274,357 
           
Total loans, net
  
 
2,992,762
 
   2,995,829 
Less: allowance for loan losses
  
 
34,952
 
   35,486 
           
Net loans
  
 
2,957,810
 
   2,960,343 
Bank premises and equipment
  
 
39,750
 
   39,062 
Accrued interest receivable
  
 
13,981
 
   13,283 
Goodwill
  
 
2,714
 
   2,714 
Other assets
  
 
162,149
 
   162,867 
           
Total assets
  
$
7,289,324
 
  $6,358,834 
           
Liabili1ties
        
Deposits:
          
Demand deposits
  
$
1,321,084
 
  $1,103,878 
Savings and NOW deposits
  
 
2,269,617
 
   1,728,092 
Money market accounts
  
 
2,324,557
 
   2,074,108 
Time deposits
  
 
480,784
 
   546,143 
           
Total deposits
  
 
6,396,042
 
   5,452,221 
Securities sold under agreements to repurchase
  
 
228,755
 
   232,090 
Other borrowed funds
  
 
151,769
 
   177,009 
Subordinated debentures
  
 
36,083
 
   36,083 
Due to broker
  
 
1,310
 
   
—
 
 
Other liabilities
  
 
94,033
 
   91,022 
           
Total liabilities
  
 
6,907,992
 
   5,988,425 
Stockholders’ Equity
        
Preferred Stock – $1.00 par value; 100,000 shares authorized;
0 shares issued and outstanding
  
 
0—  
 
   0—   
Common stock, Class A, $1.00 par value per share; authorized
10,000,000 shares; issued 3,656,469 shares and 3,655,469 shares, respectively
  
 
3,657
 
   3,656 
Common stock, Class B, $1.00 par value per share; authorized
5,000,000 shares; issued 1,911,440 shares and 1,912,440 shares respectively
  
 
1,911
 
   1,912 
Additional
paid-in
capital
  
 
12,292
 
   12,292 
Retained earnings
  
 
388,638
 
   378,699 
           
   
406,498
   396,559 
Unrealized
gains
on securities
available-for-sale,
net of taxes
  
 
594
 
   130 
Unrealized losses on securities transferred to
held-to-maturity,
net of taxes
  
 
(1,107
) 
   (1,221) 
Pension liability, net of taxes
  
 
(24,653
) 
   (25,059) 
           
Total accumulated other comprehensive loss, net of taxes
  
 
(25,166
) 
   (26,150) 
           
Total stockholders’ equity
  
 
381,332
 
   370,409 
           
Total liabilities and stockholders’ equity
  
$
7,289,324
 
  $6,358,834 
           
See accompanying notes to unaudited consolidated interim financial statements.
 
Page 4 of 4845
Table of Contents
Century Bancorp, Inc.
Consolidated Statements of Income (unaudited)
(In thousands, except share data)
 
   
Three months ended
June 30,
   
Six months ended
June 30,
 
   
2020
   2019   
2020
   2019 
Interest income
        
Loans
  
$
19,848
 
  $21,680   
$
42,047
 
  $42,989 
Securities
held-to-maturity
  
 
15,222
 
   14,595   
 
30,515
 
   28,383 
Securities
available-for-sale
  
 
982
 
   2,490   
 
2,675
 
   5,121 
Federal funds sold and interest-bearing deposits in other banks
  
 
68
 
   927   
 
678
 
   2,276 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total interest income
  
 
36,120
 
   39,692   
 
75,915
 
   78,769 
  
 
 
   
 
 
   
 
 
   
 
 
 
Interest expense
        
Savings and NOW deposits
  
 
2,118
 
   5,877   
 
5,843
 
   11,342 
Money market accounts
  
 
3,462
 
   5,412   
 
9,034
 
   10,756 
Time deposits
  
 
3,111
 
   2,893   
 
6,283
 
   5,686 
Securities sold under agreements to repurchase
  
 
309
 
   490   
 
935
 
   875 
Other borrowed funds and subordinated debentures
  
 
1,302
 
   1,770   
 
2,801
 
   3,422 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total interest expense
  
 
10,302
 
   16,442   
 
24,896
 
   32,081 
  
 
 
   
 
 
   
 
 
   
 
 
 
Net interest income
  
 
25,818
 
   23,250   
 
51,019
 
   46,688 
Provision for loan losses
  
 
1,700
 
   250   
 
2,775
 
   625 
  
 
 
   
 
 
   
 
 
   
 
 
 
Net interest income after provision for loan losses
  
 
24,118
 
   23,000   
 
48,244
 
   46,063 
Other operating income
        
Service charges on deposit accounts
  
 
2,023
 
   2,282   
 
4,319
 
   4,491 
Lockbox fees
  
 
924
 
   992   
 
1,854
 
   2,081 
Net gains on sales of securities
  
 
—  
 
   7   
 
—  
 
   7 
Gains on sales of mortgage loans
  
 
—  
 
   139   
 
—  
 
   154 
Other income
  
 
1,094
 
   1,577   
 
2,178
 
   2,691 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total other operating income
  
 
4,041
 
   4,997   
 
8,351
 
   9,424 
  
 
 
   
 
 
   
 
 
   
 
 
 
Operating expenses
        
Salaries and employee benefits
  
 
10,287
 
   10,916   
 
21,658
 
   21,951 
Occupancy
  
 
1,456
 
   1,522   
 
2,971
 
   3,223 
Equipment
  
 
962
 
   795   
 
1,799
 
   1,578 
FDIC assessments
  
 
310
 
   349   
 
310
 
   722 
Other
  
 
4,027
 
   4,682   
 
8,477
 
   8,980 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
  
 
17,042
 
   18,264   
 
35,215
 
   36,454 
  
 
 
   
 
 
   
 
 
   
 
 
 
Income before income taxes
  
 
11,117
 
   9,733   
 
21,380
 
   19,033 
Provision for income taxes
  
 
1,061
 
   267   
 
1,658
 
   149 
  
 
 
   
 
 
   
 
 
   
 
 
 
Net income
  
$
10,056
 
  $9,466   
$
19,722
 
  $18,884 
  
 
 
   
 
 
   
 
 
   
 
 
 
Share data:
        
Weighted average number of shares outstanding, basic
        
Class A
  
 
3,652,469
 
   3,620,449   
 
3,652,409
 
   3,615,389 
Class B
  
 
1,915,440
 
   1,947,460   
 
1,915,500
 
   1,952,520 
Weighted average number of shares outstanding, diluted
        
Class A
  
 
5,567,909
 
   5,567,909   
 
5,567,909
 
   5,567,909 
Class B
  
 
1,915,440
 
   1,947,460   
 
1,915,500
 
   1,952,520 
Basic earnings per share:
        
Class A
  
$
2.18
 
  $2.06   
$
4.28
 
  $4.11 
Class B
  
$
1.09
 
  $1.03   
$
2.14
 
  $2.06 
Diluted earnings per share
        
Class A
  
$
1.81
 
  $1.70   
$
3.54
 
  $3.39 
Class B
  
$
1.09
 
  $1.03   
$
2.14
 
  $2.06 
   
Three months ended
March 31,
 
   
2021
   2020 
Interest income
          
Loans
  
$
21,605
 
  $22,199 
Securities
held-to-maturity
  
 
13,117
 
   15,293 
Securities
available-for-sale
  
 
630
 
   1,693 
Federal funds sold and interest-bearing deposits in other banks
  
 
179
 
   610 
           
Total interest income
  
 
35,531
 
   39,795 
           
Interest expense
          
Savings and NOW deposits
  
 
1,118
 
   3,725 
Money market accounts
  
 
2,886
 
   5,572 
Time deposits
  
 
1,581
 
   3,172 
Securities sold under agreements to repurchase
  
 
141
 
   626 
Other borrowed funds and subordinated debentures
  
 
1,238
 
   1,499 
           
Total interest expense
  
 
6,964
 
   14,594 
           
Net interest income
  
 
28,567
 
   25,201 
(Credit) provision for loan losses
  
 
(550
) 
   1,075 
           
Net interest income after (credit) provision for loan losses
  
 
29,117
 
   24,126 
Other operating income
          
Service charges on deposit accounts
  
 
2,218
 
   2,296 
Lockbox fees
  
 
996
 
   930 
Other income
  
 
989
 
   1,084 
           
Total other operating income
  
 
4,203
 
   4,310 
           
Operating expenses
          
Salaries and employee benefits
  
 
12,250
 
   11,371 
Occupancy
  
 
1,702
 
   1,515 
Equipment
  
 
949
 
   837 
Other
  
 
5,970
 
   4,450 
           
Total operating expenses
  
 
20,871
 
   18,173 
           
Income before income taxes
  
 
12,449
 
   10,263 
Provision for income taxes
  
 
1,679
 
   597 
           
Net income
  
$
10,770
 
  $9,666 
           
Share data:
          
Weighted average number of shares outstanding, basic
          
Class A
  
 
3,656,469
 
   3,652,349 
Class B
  
 
1,911,440
 
   1,915,560 
Weighted average number of shares outstanding, diluted
          
Class A
  
 
5,567,909
 
   5,567,909 
Class B
  
 
1,911,440
 
   1,915,560 
Basic earnings per share:
          
Class A
  
$
2.34
 
  $2.10 
Class B
  
$
1.17
 
  $1.05 
Diluted earnings per share
          
Class A
  
$
1.93
 
  $1.74 
Class B
  
$
1.17
 
  $1.05 
See accompanying notes to unaudited consolidated interim financial statements.
 
Page 5 of 4845
Table of Contents
Century Bancorp, Inc.
Consolidated Statements of Comprehensive Income (unaudited)
(In thousands)
 
   
Three months ended
June 30,
 
   
2020
  2019 
Net income
  
$
10,056
 
 $9,466 
Other comprehensive income, net of tax:
   
Unrealized gains on securities:
   
Unrealized gains arising during period
  
 
1,490
 
  227 
Less: reclassification adjustment for gains included in net income
  
 
—
 
  5 
  
 
 
  
 
 
 
Total unrealized gains on securities
  
 
1,490
 
  232 
Accretion of net unrealized losses transferred
  
 
162
 
  203 
Defined benefit pension plans:
   
Amortization of prior service cost and loss included in net periodic benefit cost
  
 
361
 
  264 
  
 
 
  
 
 
 
Other comprehensive income
  
 
2,013
 
  699 
  
 
 
  
 
 
 
Comprehensive income
  
$
12,069
 
 $
 
10,165 
  
 
 
  
 
 
 
   
Six months ended
June 30,
 
   
2020
  2019 
Net income
  
$
19,722
 
 $18,884 
Other comprehensive income (loss), net of tax:
   
Unrealized gains (losses) on securities:
   
Unrealized (losses) gains arising during period
  
 
(41
) 
  (235) 
Less: reclassification adjustment for gains included in net income
  
 
—   
 
  5 
Total unrealized (losses) gains on securities
  
 
(41
) 
  (230) 
Accretion of net unrealized losses transferred
  
 
326
 
  419 
Defined benefit pension plans:
   
Amortization of prior service cost and loss included in net periodic benefit cost
  
 
721
 
  527 
Other comprehensive income
  
 
1,006
 
  716 
Comprehensive income
  
$
 
20,728
 
 $
 
19,600 
   
Three months ended
March 31,
 
   
2021
   2020 
Net income
  
$
10,770
 
  $9,666 
Other comprehensive income
,
 net of tax:
          
Unrealized gains (losses) on securities:
          
Unrealized gains (losses) arising during period
  
 
464
 
   (1,531) 
Less: reclassification adjustment for gains included in net income
  
 
—  
 
   —   
           
Total unrealized gains (losses) on securities
  
 
464
 
   (1,531) 
Accretion of net unrealized losses transferred
  
 
114
 
   164 
Defined benefit pension plans:
          
Amortization of prior service cost and loss included
in net periodic benefit cost
  
 
406
 
   360 
           
Other comprehensive income (loss)
  
 
984
 
   (1,007) 
           
Comprehensive income
  
$
11,754
 
  $8,659 
           
See accompanying notes to unaudited consolidated interim financial statements.
 
Page 6 of 4845
Table of Contents
Century Bancorp, Inc.
Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
For the Three Months Ended June 30,March 31, 2021 and 2020 and 2019
 
   
Class A
Common
Stock
   
Class B
Common
Stock
  
Additional
Paid-In

Capital
   
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  
Total
Stockholders’
Equity
 
   (In thousands) 
Balance at March 31, 2019
  $3,610   $1,958  $12,292   $310,356  $(18,892)  $309,324 
Net income
   —      —     —      9,466   —     9,466 
Other comprehensive income, net of tax:
            
Unrealized holding (losses) gains arising during period, net of $92 in taxes and $7 in realized gains
   —      —     —      —     232   232 
Accretion of unrealized losses on securities transferred to
held-to-maturity,
net of $73 in taxes
   —      —     —      —     203   203 
Pension liability adjustment, net of $103 in taxes
   —      —     —      —     264   264 
Conversion of Class B Common Stock to Class A Common Stock, 10,120 shares
   10    (10)   —      —     —     —   
Cash dividends paid, Class A common stock, $.12 per share
   —      —     —      (435)   —     (435) 
Cash dividends paid, Class B common stock, $.06 per share
   —      —     —      (117)   —     (117) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance at June 30, 2019
  $3,620   $1,948  $12,292   $319,270  $(18,193)  $318,937 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance at March 31, 2020
  
$
3,652
 
  
$
1,916
 
 
$
12,292
 
  
$
348,093
 
 
$
(25,266
) 
 
$
340,687
 
Net income
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
10,056
 
 
 
—  
 
 
 
10,056
 
Other comprehensive income, net of tax:
         
 
 
 
Unrealized holding (losses) gains arising during period, net of $538 in taxes
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
1,490
 
 
 
1,490
 
Accretion of unrealized losses on securities transferred to
held-to-maturity,
net of $57 in taxes
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
162
 
 
 
162
 
Pension liability adjustment, net of $141 in taxes
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
361
 
 
 
361
 
Conversion of Class B Common Stock to Class A Common Stock, 120 shares
  
 
1
 
  
 
(1
) 
 
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
Cash dividends paid, Class A common stock, $0.12 per share
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
(439
) 
 
 
—  
 
 
 
(439
) 
Cash dividends paid, Class B common stock, $0.06 per share
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
(115
) 
 
 
—  
 
 
 
(115
) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance at June 30, 2020
  
$
3,653
 
  
$
1,915
 
 
$
12,292
 
  
$
 
357,595
 
 
$
(23,253
) 
 
$
352,202
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
   
Class A
Common
Stock
   
Class B
Common
Stock
  
Additional
Paid-In

Capital
   
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  
Total
Stockholders’
Equity
 
   (In thousands) 
Balance at December 31, 2019
  $3,651   $1,917  $12,292   $338,980  $(24,259)  $332,581 
Net income
   —      —     —      9,666   —     9,666 
Other comprehensive income, net of tax:
                           
Unrealized holding gains (losses) arising during period, net of $548 in taxes
   —      —     —      —     (1,531)   (1,531) 
Accretion of unrealized losses on securities transferred to
held-to-maturity,
net of $58 in taxes
   —      —     —      —     164   164 
Pension liability adjustment, net of $141 in taxes
   —      —     —      —     360   360 
Conversion of Class B Common Stock to Class A Common Stock, 1,400 shares
   1    (1)   —      —     —     —   
Cash dividends paid, Class A common stock, $.12 per share
   —      —     —      (438)   —     (438) 
Cash dividends paid, Class B common stock, $.06 per share
   —      —     —      (115)   —     (115) 
                            
Balance at March 31, 2020
  $3,652   $1,916  $12,292   $348,093  $(25,266)  $340,687 
                            
Balance at December 31, 2020
  $3,656   $1,912  $12,292   $378,699  $(26,150)  $370,409 
Net income
   —      —     —      10,770   —     10,770 
Other comprehensive income, net of tax:
                           
Unrealized holding
gains (losses) 
arising during period, net of $170 in taxes
   —      —     —      —     464   464 
Accretion of unrealized losses on securities transferred to
held-to-maturity,
net of $41 in taxes
   —      —     —      —     114   114 
Pension liability adjustment, net of $159 in taxes
   —      —     —      —     406   406 
Conversion of Class B Common Stock to Class A Common Stock, 1,000 shares
   1    (1)   —      —     —     —   
Cash dividends paid, Class A common stock, $0.18 per share
   —      —     —      (658)   —     (658) 
Cash dividends paid, Class B common stock, $0.09 per share
   —      —     —      (173)   —     (173) 
                            
Balance at March 31, 2021
  
$
3,657
 
  
$
1,911
 
 
$
12,292
 
  
$
388,638
 
 
$
(25,166
) 
 
$
381,332
 
                            
See accompanying notes to unaudited consolidated interim financial statements.
 
Page 7 of 4845
Table of Contents
 
Century Bancorp, Inc.
Consolidated Statements of Changes in Stockholders’ EquityCash Flows (unaudited)
For the Six Months Ended June 30, 2020 and 2019
 
   
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
   —      —     —      18,884   —     18,884 
Other comprehensive income, net of tax:
          —   
Unrealized holding (losses) gains arising during period, net of $75 in taxes and $7 in realized gains
   —      —     —      —     (230)   (230) 
Accretion of unrealized losses on securities transferred to
held-to-maturity,
net of $151 in taxes
   —      —     —      —     419   419 
Pension liability adjustment, net of $206 in taxes
   —      —     —      —     527   527 
Conversion of Class B Common Stock to Class A Common Stock, 12,120 shares
   12    (12)   —      —     —     —   
Cash dividends paid, Class A common stock, $.24 per share
   —      —     —      (867)   —     (867) 
Cash dividends paid, Class B common stock, $.12 per share
   —      —     —      (235)   —     (235) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance at June 30, 2019
  $3,620   $1,948  $12,292   $319,270  $(18,193)  $318,937 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance at December 31, 2019
  
$
3,651
 
  
$
1,917
 
 
$
12,292
 
  
$
338,980
 
 
$
(24,259
) 
 
$
332,581
 
Net income
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
19,722
 
 
 
—  
 
 
 
19,722
 
Other comprehensive income, net of tax:
         
 
—  
 
Unrealized holding (losses) gains arising during period, net of
$10 in taxes
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
(41
) 
 
 
(41
) 
Accretion of unrealized losses on securities transferred to
held-to-maturity,
net of $115 in taxes
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
326
 
 
 
326
 
Pension liability adjustment, net of $281 in taxes
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
—  
 
 
 
721
 
 
 
721
 
Conversion of Class B Common Stock to Class A Common Stock, 1,520 shares
  
 
2
 
  
 
(2
) 
 
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
Cash dividends paid, Class A common stock, $0.24 per share
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
(877
) 
 
 
—  
 
 
 
(877
) 
Cash dividends paid, Class B common stock, $0.12 per share
  
 
—  
 
  
 
—  
 
 
 
—  
 
  
 
(230
) 
 
 
—  
 
 
 
(230
) 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance at June 30, 2020
  
$
3,653
 
  
$
1,915
 
 
$
12,292
 
  
$
 
357,595
 
 
$
(23,253
) 
 
$
352,202
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
  
For the Three Months
 
Ended
 
March 31,
 
   
2021
   2020 
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
  
$
10,770
 
  $9,666 
Adjustments to reconcile net income to net cash provided by operating activities:
          
Net (gain) loss on equity securities
  
 
(54
) 
   79 
(Credit) provision for loan losses
  
 
(550
) 
   1,075 
Deferred income taxes
  
 
(1,007
) 
   (114) 
Net depreciation and amortization (accretion)
  
 
528
 
   (578) 
(Increase) decrease in accrued interest receivable
  
 
(699
) 
   112 
Decrease in other assets
  
 
898
 
   2,359 
Increase (decrease) in other liabilities
  
 
5,325
 
   (336) 
           
Net cash provided by operating activities
  
 
15,211
 
   12,263 
           
CASH FLOWS FROM INVESTING ACTIVITIES:
          
Proceeds from redemptions of Federal Home Loan Bank of Boston stock
  
 
—  
 
   6,831 
Purchase of Federal Home Loan Bank of Boston stock
  
 
—  
 
   (4,601) 
Proceeds from calls/maturities of securities
available-for-sale
  
 
25,993
 
   20,734 
Purchase of securities
available-for-sale
  
 
(6,770
) 
   (39,719) 
Proceeds from calls/maturities of securities
held-to-maturity
  
 
257,255
 
   123,723 
Purchase of securities
held-to-maturity
  
 
(964,868
) 
   (70,171) 
Net decrease (increase) in loans
  
 
3,092
 
   (72,621) 
Bank owned life insurance purchases
  
 
—  
 
   (6,000) 
Capital expenditures
  
 
(1,565
) 
   (3,084) 
           
Net cash used in investing activities
  
 
(686,863
) 
   (44,908) 
           
CASH FLOWS FROM FINANCING ACTIVITIES:
          
Net (decrease) increase in time deposits
  
 
(65,359
) 
   57,402 
Net increase in demand, savings, money market and NOW deposits
  
 
1,009,180
 
   104,999 
Cash dividends
  
 
(831
) 
   (553) 
Net decrease in securities sold under agreements to repurchase
  
 
(3,335
) 
   (46,050) 
Net decrease in other borrowed funds
  
 
(25,240
) 
   (58,835) 
           
Net cash provided by financing activities
  
 
914,415
 
   56,963 
           
Net increase in cash and cash equivalents
  
 
242,763
 
   24,318 
Cash and cash equivalents at beginning of period
  
 
374,000
 
   258,693 
           
Cash and cash equivalents at end of period
  
$
616,763
 
  $283,011 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
          
Cash paid (received) during the period for:
          
Interest
  
$
7,127
 
  $14,711 
Income taxes
  
 
1,075
 
   300 
Change in unrealized gains (losses) on securities
available-for-sale,
net of taxes
  
 
464
 
   (1,531) 
Change in unrealized losses on securities transferred to
held-to-maturity,
net of taxes
  
 
114
 
   164 
Pension liability adjustment, net of taxes
  
 
406
 
   360 
Change in due to broker
  
 
1,310
 
   5,500 
See accompanying notes to unaudited consolidated interim financial statements.
 
Page 8 of 4845
Table of Contents
Century Bancorp, Inc.
Consolidated Statements of Cash Flows (unaudited)
For the Six Months Ended June 30, 2020 and 2019
   
Six months ended

June 30,
 
   
2020
  2019 
CASH FLOWS FROM OPERATING ACTIVITIES:
   
Net income
  
$
19,722
 
 $18,884 
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
  
 
—  
 
  (7) 
Net loss (gain) on equity securities
  
 
19
 
  (85) 
Provision for loan losses
  
 
2,775
 
  625 
Deferred income taxes
  
 
(795
)
 
  (351) 
Net depreciation and amortization
  
 
(1,029
)
 
  (1,051) 
Decrease (increase) in accrued interest receivable
  
 
1,020
 
  (249) 
Decrease in other assets
  
 
3,337
 
  (1,192) 
Increase in other liabilities
  
 
850
 
  138 
  
 
 
  
 
 
 
Net cash provided by operating activities
  
 
25,899
 
  16,558 
  
 
 
  
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
   
Proceeds from redemptions of Federal Home Loan Bank of Boston stock
  
 
10,701
 
  5,558 
Purchase of Federal Home Loan Bank of Boston stock
  
 
(4,601
)
 
  (8,723) 
Proceeds from calls/maturities of securities
available-for-sale
  
 
34,603
 
  86,367 
Proceeds from sales of securities
available-for-sale
  
 
—  
 
  12,330 
Purchase of securities
available-for-sale
  
 
(73,093
) 
  (52,822) 
Proceeds from calls/maturities of securities
held-to-maturity
  
 
319,328
 
  196,131 
Purchase of securities
held-to-maturity
  
 
(392,637
)
 
  (324,893) 
Proceeds from life insurance policies
  
 
—  
 
  5,124 
Net increase in loans
  
 
(371,792
) 
  (35,787) 
Bank owned life insurance purchases
  
 
(6,000
) 
  —   
Proceeds from sales of portfolio loans
  
 
—  
 
  8,871 
Capital expenditures
  
 
(4,010
)
 
  (2,896) 
  
 
 
  
 
 
 
Net cash used in investing activities
  
 
(487,501
) 
  (110,740) 
  
 
 
  
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
   
Net increase (decrease) in time deposits
  
 
55,049
 
  (70,631) 
Net increase (decrease) in demand, savings, money market and NOW deposits
  
 
656,808
 
  (240,173) 
Cash dividends
  
 
(1,107
) 
  (1,102) 
Net (decrease) increase in securities sold under agreements to repurchase
  
 
(61,073
)
 
  65,270 
Net (decrease) increase in other borrowed funds
  
 
(218,470
) 
  249,041 
  
 
 
  
 
 
 
Net cash provided by financing activities
  
 
431,207
 
  2,405 
  
 
 
  
 
 
 
Net decrease in cash and cash equivalents
  
 
(30,395
)
 
  (91,777) 
Cash and cash equivalents at beginning of period
  
 
258,693
 
  342,503 
  
 
 
  
 
 
 
Cash and cash equivalents at end of period
  
$
228,298
 
 $250,726 
  
 
 
  
 
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   
Cash paid (received) during the period for:
   
Interest
  
$
25,153
 
 $31,947 
Income taxes
  
 
750
 
  (990) 
Change in unrealized gains (losses) on securities
available-for-sale,
 
net of taxes
  
 
(41
)
 
  (230) 
Change in unrealized losses on securities transferred to
held-to-maturity,
 
net of taxes
  
 
326
 
  419 
Pension liability adjustment, net of taxes
  
 
721
 
  527 
See accompanying notes to unaudited consolidated interim financial statements.
Page 9 of 48
Century Bancorp, Inc.
Notes to Unaudited Consolidated Interim Financial Statements
Three Months Ended March 31, 2021 and 2020
Six Months Ended June 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, New York, Virginia, Washington D.C, and New York.Pennsylvania. As a bank holding company, the Company is subject to the regulation and supervision of the Board of Governors of the Federal Reserve Board.System (the “Federal Reserve Board”). The Bank, a state chartered financial institution, is subject to supervision and regulation by applicable state and federal banking agencies, including the Federal Reserve Board, the Federal Deposit Insurance Corporation (the “FDIC”) and the 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 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 reportQuarterly 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, 2019,2020, as filed with the Securities and Exchange Commission and which provides a summary of the Company’s significant accounting principles. The interim results of consolidated operations are not necessarily indicative of the results for the entire year. On March 27, 2020,Certain reclassifications are made to prior-year amounts whenever necessary to conform with 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,current-year presentation.
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.
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.
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 and second quarters 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 109 of 4845
Table of Contents
Note 2. Securities
Available-for-Sale
 
   
June 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
  
$
48,639
 
  
$
—  
 
  
$
268
 
  
$
48,371
 
  $54,331   $23   $143   $54,211 
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
  
 
200,341
 
  
 
359
 
  
 
572
 
  
 
200,128
 
   184,580    139    532    184,187 
Privately Issued Residential Mortgage-Backed Securities
  
 
367
 
  
 
—  
 
  
 
17
 
  
 
350
 
   397    1    2    396 
Obligations Issued by States and Political Subdivisions
  
 
48,739
 
  
 
—  
 
  
 
—  
 
  
 
48,739
 
   18,016    60    —      18,076 
Other Debt Securities
  
 
3,600
 
  
 
34
 
  
 
9
 
  
 
3,625
 
   3,600    51    19    3,632 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                
Total
  
$
 
301,686
 
  
$
393
 
  
$
866
 
  
$
 
301,213
 
  $
 
260,924   $274   $696   $
 
260,502 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
March 31, 2021
   December 31, 2020 
   
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
  
$
43,154
 
  
$
0  
 
  
$
299
 
  
$
42,855
 
  $44,328   $0     $289   $44,039 
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
  
 
165,846
 
  
 
1,097
 
  
 
132
 
  
 
166,811
 
   177,239    819    317    177,741 
Privately Issued Residential Mortgage-Backed Securities
  
 
321
 
  
 
5
 
  
 
0  
 
  
 
326
 
   330    2    4    328 
Obligations Issued by States and Political Subdivisions
  
 
45,668
 
  
 
0  
 
  
 
0  
 
  
 
45,668
 
   52,276    0      0      52,276 
Other Debt Securities
  
 
8,100
 
  
 
178
 
  
 
40
 
  
 
8,238
 
   8,100    24    60    8,064 
                                         
Total
  
$
263,089
 
  
$
1,280
 
  
$
471
 
  
$
263,898
 
  $282,273   $845   $670   $282,448 
                                         
Included in SBA Backed Securities, and U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities are securities at fair value pledged to secure public deposits and repurchase agreements amounting to $218,000,000$172,427,000 and $186,245,000$183,269,000 at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. Also included in securities
available-for-sale
are securities at fair value pledged for borrowing at the Federal Home Loan Bank of Boston (“FHLBB”) amounting to $30,499,000$28,830,000 and $32,297,000$29,885,000 at June 30, 2020March 31, 2021 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 $9,697,000 and $0 at June 30, 2020, and December 31, 2019, respectively. There were 0 sales of
available-for-sale
securities for the sixthree months ended June 30, 2020. The Company realized gross gains of $7,000 from the proceeds of $12,330,000 from the sales of
available-for-sale
securities for the six months ended June 30, 2019.March 31, 2021 and March 31, 2020, respectively.
Debt securities of U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities primarily refer to debt securities of Fannie Mae and Freddie Mac.
The following table shows the maturity distribution of the Company’s securities
available-for-sale
at June 30, 2020.March 31, 2021.
 
   
Amortized
Cost
   
Fair
Value
 
   
(in thousands)
 
Within one year
  
$
52,541
 
  
$
52,515
 
After one but within five years
  
 
145,459
 
  
 
145,342
 
After five but within ten years
  
 
93,714
 
  
 
93,453
 
More than 10 years
  
 
9,972
 
  
 
9,903
 
  
 
 
   
 
 
 
Total
  
$
 
301,686
 
  
$
 
301,213
 
  
 
 
   
 
 
 
   
Amortized
Cost
   
Fair
Value
 
   
(in thousands)
 
Within one year
  
$
48,041
 
  
$
48,047
 
After one but within five years
  
 
104,714
 
  
 
105,250
 
After five but within ten years
  
 
89,033
 
  
 
89,484
 
More than 10 years
  
 
21,301
 
  
 
21,117
 
           
Total
  
$
263,089
 
  
$
263,898
 
           
The weighted average remaining life of investment securities
available-for-sale
at June 30, 2020March 31, 2021 was 4.55.0 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 $249,704,000$210,125,000 of the securities are floating rate or adjustable rate and reprice prior to maturity.
As of June 30, 2020March 31, 2021 and December 31, 2019,2020, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not more likely than not that it will be required to sell these debt securities before the anticipated recovery of its remaining amortized cost. In making its other-than-temporary impairment evaluation, the Company considered that the principal and interest on these securities are from issuers that are investment grade.
The unrealized loss on SBA Backed Securities, U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities related primarily to interest rates and not credit quality, and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2020March 31, 2021 or December 31, 2019.2020.
Page 10 of 45
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
Page 11 of 48
issued mortgage-backed securities, the performance of the underlying loans is analyzed as deemed necessary to determine the estimated future cash flows of the securities. Factors considered include the level of subordination, current and estimated future default rates, current and estimated prepayment rates, estimated loss severity rates, geographic concentrations and origination dates of underlying loans.
The following table shows the temporarily impaired securities of the Company’s
available-for-sale
portfolio at June 30,March 31, 2021. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 3 and 27 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 151 holdings at March 31, 2021.
   
March 31, 2021
 
   
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  
 
  
$
42,856
 
  
$
299
 
  
$
42,856
 
  
$
299
 
U.S. Government Agency and Sponsored Enterprise
Mortgage-Backed
Securities
  
 
346
 
  
 
5
 
  
 
17,288
 
  
 
127
 
  
 
17,634
 
  
 
132
 
Privately Issued Residential
Mortgage-Backed
Securities
  
 
—  
 
  
 
—  
 
  
 
0  
 
  
 
0  
 
  
 
0  
 
  
 
0  
 
Obligations Issued by States and Political Subdivisions
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Other Debt Securities
  
 
2,461
 
  
 
39
 
  
 
1,299
 
  
 
1
 
  
 
3,760
 
  
 
40
 
                               
Total temporarily impaired securities
  
$
 2,807
 
  
$
 44
 
  
$
 61,443
 
  
$
 427
 
  
$
 64,250
 
  
$
 471
 
                               
The following table shows the temporarily impaired securities of the Company’s
available-for-sale
portfolio at December 31, 2020. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 3013 and 2921 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 138153 holdings at June 30,December 31, 2020.
 
   
June 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
  
$
28,000
 
  
$
96
 
  
$
20,371
 
  
$
172
 
  
$
48,371
 
  
$
268
 
U.S. Government Agency and Sponsored Enterprise Mortgage-
 
Backed Securities
  
 
59,948
 
  
 
274
 
  
 
65,270
 
  
 
298
 
  
 
125,218
 
  
 
572
 
Privately Issued Residential Mortgage-Backed Securities
  
 
350
 
  
 
17
 
  
 
—  
 
  
 
—  
 
  
 
350
 
  
 
17
 
Obligations Issued by States and Political Subdivisions
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Other Debt Securities
  
 
100
 
  
 
1
 
  
 
1,190
 
  
 
8
 
  
 
1,290
 
  
 
9
 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total temporarily impaired securities
  
$
 
88,398
 
  
$
388
 
  
$
 
86,831
 
  
$
478
 
  
$
 
175,229
 
  
$
866
 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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, 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
  $13,839   $42   $30,200   $247   $44,039   $289 
U.S. Government Agency and Sponsored Enterprise
Mortgage-Backed
Securities
   18,188    50    33,617    267    51,805    317 
Privately Issued Residential Mortgage-Backed Securities
   —      —      210    4    210    4 
Obligations Issued by States and Political Subdivisions
   —      —      —      —      —      —   
Other Debt Securities
   3,942    58    1,298    2    5,240    60 
                               
Total temporarily impaired securities
  $ 35,969   $ 150   $ 65,325   $ 520   $ 101,294   $ 670 
                               
 
   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 11 of 45
Table of Contents
Note 3. Investment Securities
Held-to-Maturity
 
   
June 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
  
$
181,158
 
  
$
870
 
  
$
—  
 
  
$
182,028
 
  $98,867   $527   $96   $99,298 
SBA Backed Securities
  
 
40,796
 
  
 
2,110
 
  
 
—  
 
  
 
42,906
 
   44,379    182    303    44,258 
U.S. Government Sponsored Enterprises Mortgage-Backed Securities
  
 
2,205,468
 
  
 
81,202
 
  
 
375
 
  
 
2,286,295
 
   2,207,874    20,720    10,846    2,217,748 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  
$
2,427,422
 
  
$
84,182
 
  
$
375
 
  
$
 
2,511,229
 
  $
 
2,351,120   $21,429   $11,245   $2,361,304 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Page 12 of 48
   
March 31, 2021
   December 31, 2020 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Estimated
Fair Value
   Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   
Estimated
Fair
 
Value
 
   (in thousands) 
U.S. Government Sponsored Enterprises
  
$
381,077
 
  
$
218
 
  
$
9,017
 
  
$
372,278
 
  $244,220   $389   $866   $243,743 
SBA Backed Securities
  
 
36,330
 
  
 
1,142
 
  
 
0  
 
  
 
37,472
 
   37,783    2,002    —      39,785 
U.S. Government Sponsored Enterprises
Mortgage- Backed 
Securities
  
 
2,799,769
 
  
 
45,772
 
  
 
32,388
 
  
 
2,813,153
 
   2,227,085    69,522    1,032    2,295,575 
                                         
Total
  
$
 3,217,176
 
  
$
 47,132
 
  
$
 41,405
 
  
$
 3,222,903
 
  $ 2,509,088   $ 71,913   $ 1,898   $ 2,579,103 
                                         
Included in total investment securities
held-to-maturity
are securities pledged to secure public deposits and repurchase agreements at fair value amounting to $2,067,628,000$2,038,453,000 and $1,776,399,000$1,866,989,000 at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. Also included are securities pledged for borrowing at the Federal Home Loan Bank of BostonFHLBB at fair value amounting to $386,531,000$484,029,000 and $399,646,000$537,367,000 at June 30, 2020March 31, 2021 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 $177,662,000 and $0 at June 30, 2020, and December 31, 2019, respectively. There were 0 sales of
held-to-maturity
securities for the sixthree months ended June 30,March 31, 2021 or March 31, 2020, and June 30, 2019, respectively.
At June 30, 2020March 31, 2021 and December 31, 2019,2020, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises. Debt securities of U.S. Government Sponsored Enterprises and U.S. Government Sponsored Enterprises Mortgage-Backed Securities primarily refer to debt securities of Fannie Mae and Freddie Mac.
The following table shows the maturity distribution of the Company’s securities
held-to-maturity
at June 30, 2020.March 31, 2021.
 
   
Amortized
Cost
   
Fair
Value
 
   
(in thousands)
 
Within one year
  
$
154,030
 
  
$
156,097
 
After one but within five years
  
 
1,869,471
 
  
 
1,937,424
 
After five but within ten years
  
 
400,901
 
  
 
414,263
 
More than ten years
  
 
3,020
 
  
 
3,445
 
  
 
 
   
 
 
 
Total
  
$
 
2,427,422
 
  
$
 
2,511,229
 
  
 
 
   
 
 
 
   
Amortized
Cost
   
Fair
Value
 
   
(in thousands)
 
Within one year
  
$
84,709
 
  
$
85,698
 
After one but within five years
  
 
1,707,454
 
  
 
1,738,266
 
After five but within ten years
  
 
1,425,013
 
  
 
1,398,939
 
More than ten years
  
 
0  
 
  
 
0  
 
           
Total
  
$
 3,217,176
 
  
$
 3,222,903
 
           
The weighted average remaining life of investment securities
held-to-maturity
at June 30, 2020March 31, 2021 was 3.43.6 years. Included in the weighted average remaining life calculation at June 30, 2020March 31, 2021 were $135,700,000$320,611,000 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 $98,000$81,000 of the securities are floating rate or adjustable rate and reprice prior to maturity.
As of June 30, 2020March 31, 2021 and December 31, 2019,2020, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not more likely than not that it will be required to sell these debt securities before the anticipated recovery of their remaining amortized costs. In making its other-than-temporary impairment evaluation, the Company considered the fact that the principal and interest on these securities are from issuers that are investment grade.
Page 12 of 45
Table of Contents
The unrealized loss on U.S. Government Sponsored Enterprises, SBA Backed Securities, and U.S. Government Sponsored Enterprises Mortgage-Backed Securities related primarily to interest rates and not credit quality, and because the Company does not intend to sell any of these securities and it is not more likely than not that it will be required to sell these securities before the anticipated recovery of the remaining amortized cost, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2020March 31, 2021 or December 31, 2019.
2020. In evaluating the underlying credit quality of a security, management considers several factors such as the credit rating of the obligor and the issuer, if applicable. Internal reviews of issuer financial statements are performed as deemed necessary.
The following table shows the temporarily impaired securities of the Company’s
held-to-maturity
portfolio June 30, 2020.March 31, 2021. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months or longer. There are 16156 and 40 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 566655 holdings at June 30, 2020.March 31, 2021.
 
  
June 30, 2020
   
March 31, 2021
 
  
Less Than 12 Months
   
12 Months or Longer
   
Total
   
Less Than 12 Months
   
12 Months or Longer
   
Total
 
Temporarily Impaired Investments
  
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
  
(in thousands)
   
(in thousands)
 
US Government Sponsored Enterprises
  
$
346,560
 
  
$
9,017
 
  
$
 0  
 
  
$
0  
 
  
$
346,560
 
  
$
9,017
 
SBA Backed Securities
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
 
0  
 
  
 
0  
 
  
 
0  
 
  
 
0  
 
  
 
0  
 
  
 
0  
 
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
  
 
111,172
 
  
 
319
 
  
 
6,819
 
  
 
56
 
  
 
117,991
 
  
 
375
 
  
 
1,332,059
 
  
 
32,388
 
  
 
0  
 
  
 
0  
 
  
 
1,332,059
 
  
 
32,388
 
  
 
   
 
   
 
   
 
   
 
   
 
                         
Total temporarily impaired securities
  
$
 
111,172
 
  
$
319
 
  
$
 
6,819
 
  
$
56
 
  
$
 
117,991
 
  
$
375
 
  
$
 1,678,619
 
  
$
 41,405
 
  
$
 0  
 
  
$
 0  
 
  
$
 1,678,619
 
  
$
 41,405
 
  
 
   
 
   
 
   
 
   
 
   
 
                         
Page 13 of 48
The following table shows the temporarily impaired securities of the Company’s
held-to-maturity
portfolio at December 31, 2019.2020. 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 11453 and 1030 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 531600 holdings at December 31, 2019.2020.
 
  December 31, 2019   December 31, 2020 
  Less Than 12 Months   12 Months or Longer   Total   Less Than 12 Months   12 Months or Longer   Total 
Temporarily Impaired Investments  Fair
Value		   Unrealized
Losses		   Fair
Value		   Unrealized
Losses		   Fair
Value		   Unrealized
Losses		   Fair
Value		   Unrealized
Losses		   Fair
Value		   Unrealized
Losses		   Fair
Value		   Unrealized
Losses		 
  (in thousands)   (in thousands) 
U.S. Treasury
  $—     $—     $—     $—     $—     $—   
U.S. Government Sponsored Enterprises
   24,420    72    9,976    24    34,396    96   $ 162,870   $866   $0     $ 0     $162,870   $866 
SBA Backed Securities
   25,251    303    —      —      25,251    303    0      0      0      0      0      0   
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities
   613,905    3,949    389,919    6,897    1,003,824    10,846    302,401    1,032    0      0      302,401    1,032 
  
 
   
 
   
 
   
 
   
 
   
 
                         
Total temporarily impaired securities
  $
 
663,576   $4,324   $
 
399,895   $6,921   $
 
1,063,471   $11,245   $    465,271   $   1,898   $ 0     $0     $    465,271   $   1,898 
  
 
   
 
   
 
   
 
   
 
   
 
                         
Page 13 of 45
Table of Contents
Note 4. Allowance for Loan Losses
The Company maintains an allowance for loan losses in an amount determined by management on the basis of the character of the loans, loan performance, financial condition of borrowers, the value of collateral securing loans and other relevant factors.
The following table summarizes the changes in the Company’s allowance for loan losses for the periods indicated.
 
  Three months ended
June 30,		   Six months ended
June 30,		   Three months ended
March 31,		 
  
2020
   2019   
2020
   2019   
2021
   2020 
  (in thousands)   (in thousands)   (in thousands) 
Allowance for loan losses, beginning of period
  
$
30,804
 
  $28,848   
$
29,585
 
  $28,543   
$
 35,486
 
  $ 29,585 
Loans charged off
  
 
(17
) 
   (75)   
 
(79
) 
   (218)   
 
(67
) 
   (62) 
Recoveries on loans previously
charged-off
  
 
29
 
   47   
 
235
 
   120   
 
83
 
   206 
  
 
   
 
   
 
   
 
         
Net recoveries (charge-offs)
  
 
12
 
   (28)   
 
156
 
   (98)   
 
16
 
   144 
Provision charged to expense
  
 
1,700
 
   250   
 
2,775
 
   625 
(Credit) provision charged to expense
  
 
(550
) 
   1,075 
  
 
   
 
   
 
   
 
         
Allowance for loan losses, end of period
  
$
 
32,516
 
  $
 
29,070   
$
 
32,516
 
  $
 
29,070   
$
34,952
 
  $30,804 
  
 
   
 
   
 
   
 
         
Further information pertaining to the allowance for loan losses for the three months ending March 31, 2021 is as follows:
  
Construction
and Land
Development
  
Commercial
and
Industrial
  
Municipal
  
Commercial
Real Estate
  
Residential
Real Estate
  
Consumer
  
Home
Equity
  
Unallocated
  
Total
 
  
(in thousands)
 
Allowance for loan losses:
    
Balance at December 31, 2020
 
$
429
 
 
$
16,713
 
 
$
2,804
 
 
$
11,751
 
 
$
2,111
 
 
$
241
 
 
$
1,208
 
 
$
229
 
 
$
35,486
 
Charge-offs
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(67
) 
 
 
—  
 
 
 
—  
 
 
 
(67
) 
Recoveries
 
 
—  
 
 
 
3
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
80
 
 
 
—  
 
 
 
—  
 
 
 
83
 
(Credit) provision
 
 
(136
) 
 
 
(246
) 
 
 
33
 
 
 
(96
) 
 
 
(44
) 
 
 
(60
) 
 
 
(159
) 
 
 
158
 
 
 
(550
) 
                                     
Ending balance at
 
March 31, 2021
 
$
293
 
 
$
16,470
 
 
$
2,837
 
 
$
11,655
 
 
$
2,067
 
 
$
194
 
 
$
1,049
 
 
$
387
 
 
$
34,952
 
                                     
Amount of allowance for loan losses
for loans deemed to be impaired
 
$
—  
 
 
$
125
 
 
$
—  
 
 
$
74
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
199
 
                                     
Amount of allowance for loan losses
for loans not deemed to be impaired
 
$
293
 
 
$
16,345
 
 
$
2,837
 
 
$
11,581
 
 
$
2,067
 
 
$
194
 
 
$
1,049
 
 
$
 387
 
 
$
34,753
 
                                     
Loans:
                                    
Ending balance
 
$
 7,854
 
 
$
 1,315,295
 
 
$
 137,073
 
 
$
 796,660
 
 
$
 460,123
 
 
$
 19,987
 
 
$
 255,770
 
 
$
—  
 
 
$
 2,992,762
 
                                     
Loans deemed to be impaired
 
$
—  
 
 
$
357
 
 
$
—  
 
 
$
2,300
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
2,657
 
                                     
Loans not deemed to be impaired
 
$
7,854
 
 
$
1,314,938
 
 
$
137,073
 
 
$
794,360
 
 
$
460,123
 
 
$
19,987
 
 
$
255,770
 
 
$
—  
 
 
$
2,990,105
 
                                     
 
Page 14 of 4845
Table of Contents
Further information pertaining to the allowance for loan losses for the three months ending June 30,March 31, 2020 is as follows:
 
 
Construction
and Land
Development
 
Commercial
and
Industrial
 
Municipal
 
Commercial
Real Estate
 
Residential
Real Estate
 
Consumer
 
Home
Equity
 
Unallocated
 
Total
  Construction
and Land
Development		 Commercial
and
Industrial		 Municipal Commercial
Real Estate		 Residential
Real Estate		 Consumer Home
Equity		 Unallocated Total 
 
(in thousands)
  (in thousands) 
Allowance for loan losses:
             
Balance at March 31, 2020
 
$
246
 
 
$
12,428
 
 
$
2,889
 
 
$
11,121
 
 
$
2,449
 
 
$
296
 
 
$
1,137
 
 
$
238
 
 
$
30,804
 
Balance at December 31, 2019
 $331  $11,596  $2,566  $11,464  $2,194  $312  $1,065  $57  $29,585 
Charge-offs
 
 
—  
 
 
 
(6
) 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(11
) 
 
 
—  
 
 
 
—  
 
 
 
(17
) 
  —     (5)   —     —     —     (57)   —     —     (62) 
Recoveries
 
 
—  
 
 
 
6
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
23
 
 
 
—  
 
 
 
—  
 
 
 
29
 
  —     164   —     —     —     37   5   —     206 
Provision
 
 
43
 
 
 
693
 
 
 
(21
) 
 
 
182
 
 
 
645
 
 
 
(19
) 
 
 
328
 
 
 
(151
) 
 
 
1,700
 
  (85)   673   323   (343)   255   4   67   181   1,075 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
                            
Ending balance at June 30,
2020
 
$
289
 
 
$
13,121
 
 
$
2,868
 
 
$
11,303
 
 
$
3,094
 
 
$
289
 
 
$
1,465
 
 
$
87
 
 
$
32,516
 
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
 
$
—  
 
 
$
15
 
 
$
—  
 
 
$
80
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
95
 
 $—    $—    $—    $85  $—    $—    $—    $—    $85 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
                            
Amount of allowance for loan
losses for loans not deemed to be
impaired
 
$
289
 
 
$
13,106
 
 
$
2,868
 
 
$
11,223
 
 
$
3,094
 
 
$
289
 
 
$
1,465
 
 
$
87
 
 
$
32,421
 
 $246  $12,428  $2,889  $11,036  $2,449  $296  $1,137  $ 238  $30,719 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
                            
Loans:
                    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
 
$
6,513
 
 
$
1,155,592
 
 
$
153,017
 
 
$
764,886
 
 
$
400,867
 
 
$
19,857
 
 
$
297,355
 
 
$
—  
 
 
$
2,798,087
 
 $ 6,493  $ 867,599  $ 141,588  $ 761,464  $ 393,338  $ 21,039  $ 307,373  $—    $ 2,498,894 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
                                                      
Loans deemed to be impaired
 
$
—  
 
 
$
180
 
 
$
—  
 
 
$
2,716
 
 
$
235
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
3,131
 
 $—    $623  $—    $2,322  $—    $—    $—    $—    $2,945 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
                            
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans not deemed to be
impaired
 
$
6,513
 
 
$
 
1,155,412
 
 
$
 
153,017
 
 
$
762,170
 
 
$
400,632
 
 
$
19,857
 
 
$
 
297,355
 
 
$
—  
 
 
$
 
2,794,956
 
 $6,493  $866,976  $141,588  $759,142  $393,338  $21,039  $307,373  $—    $2,495,949 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
                            
Further information pertainingThere was a credit to the provision for losses of $550,000 for the quarter ended March 31, 2021, compared to a provision of $1,075,000 for the quarter ended March 31, 2020. The credit provision for the first quarter of 2021 was primarily attributable to a decline in loan balances exclusive of U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans and a reduction in specific allocations to the allowance for loan losses for the six months ending June 30, 2020 is as follows:
  
Construction
and Land
Development
  
Commercial
and
Industrial
  
Municipal
  
Commercial
Real Estate
  
Residential
Real
 
Estate
  
Consumer
  
Home
Equity
  
Unallocated
  
Total
 
  
(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
 
 
—  
 
 
 
(11
) 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(68
) 
 
 
—  
 
 
 
—  
 
 
 
(79
) 
Recoveries
 
 
—  
 
 
 
170
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
60
 
 
 
5
 
 
 
—  
 
 
 
235
 
Provision
 
 
(42
) 
 
 
1,366
 
 
 
302
 
 
 
(161
) 
 
 
900
 
 
 
(15
) 
 
 
395
 
 
 
30
 
 
 
2,775
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance at June 30,
2020
 
$
289
 
 
$
13,121
 
 
$
2,868
 
 
$
11,303
 
 
$
3,094
 
 
$
289
 
 
$
1,465
 
 
$
87
 
 
$
32,516
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Amount of allowance for loan
losses for loans deemed to be
impaired
 
$
—  
 
 
$
15
 
 
$
—  
 
 
$
80
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
95
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Amount of allowance for loan
losses for loans not deemed to be
impaired
 
$
289
 
 
$
13,106
 
 
$
2,868
 
 
$
11,223
 
 
$
3,094
 
 
$
289
 
 
$
1,465
 
 
$
87
 
 
$
32,421
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
                                  
Loans:
                                  
 
                                  
Ending balance
 
$
6,513
 
 
$
1,155,592
 
 
$
153,017
 
 
$
764,886
 
 
$
400,867
 
 
$
19,857
 
 
$
297,355
 
 
$
—  
 
 
$
2,798,087
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
                                    
Loans deemed to be impaired
 
$
—  
 
 
$
180
 
 
$
—  
 
 
$
2,716
 
 
$
235
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
3,131
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
                                    
Loans not deemed to be
 
impaired
 
$
6,513
 
 
$
 
1,155,412
 
 
$
 
153,017
 
 
$
762,170
 
 
$
400,632
 
 
$
19,857
 
 
$
 
297,355
 
 
$
—  
 
 
$
 
2,794,956
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
The allocations for the provision for loan losses increased for the three and six months ended June 30, 2020, primarily as a result of the economic uncertainties associated with the novel coronavirus disease (COVID–19) pandemic and increased loan balances.losses. As of June 30, 2020, the Company’s U.S. Small Business Administration (SBA) Payroll Protection Program (PPP)March 31, 2021, PPP loans totaled approximately 1,2701,117 loans for approximately $230 million.$213,000,000. 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 15 The provision for the first quarter of 48
Further information pertaining2020 was primarily the result of provisions related to the allowance for loan losses foronset of the three months ending June 30, 2019 is as follows:
COVID-19
pandemic
  Construction
and Land
Development		  Commercial
and
Industrial		  Municipal  Commercial
Real Estate		  Residential
Real Estate		  Consumer  Home
Equity		  Unallocated  Total 
  (in thousands) 
Allowance for loan losses:
         
Balance at March 31, 2019
 $1,011  $11,156  $1,998  $10,767  $2,135  $342  $1,101  $338  $28,848 
Charge-offs
  —     (8)   —     —     —     (67)   —     —     (75) 
Recoveries
  —     7   —     —     —     40   —     —     47 
Provision
  41   183   (166)   81   75   65   19   (48)   250 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance at June 30, 2019
 $1,052  $11,338  $1,832  $10,848  $2,210  $380  $1,120  $290  $29,070 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Amount of allowance for loan losses for loans deemed to be impaired
 $—    $248  $—    $85  $—    $—    $—    $—    $333 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Amount of allowance for loan losses for loans not deemed to be impaired
 $1,052  $11,090  $1,832  $10,763  $2,210  $380  $1,120  $290  $28,737 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Loans:
                                  
                                     
Ending balance
 $13,751  $764,492  $95,682  $758,242  $346,585  $22,609  $311,210  $—    $2,312,571 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Loans deemed to be impaired
 $—    $548  $—    $3,365  $—    $—    $—    $—    $3,913 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Loans not deemed to be impaired
 $13,751  $763,944  $
 
95,682  $754,877  $
 
346,585  $
 
22,609  $
 
311,210  $—    $
 
2,308,658 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Further information pertaining to the allowance for loan losses for the six months ending June 30, 2019 is as follows:
  Construction
and Land
Development		  Commercial
and
Industrial		  Municipal  Commercial
Real Estate		  Residential
Real Estate		  Consumer  Home
Equity		  Unallocated  Total 
  (in thousands) 
Allowance for loan losses:
         
Balance at December 31, 2018
 $1,092  $10,998  $1,838  $10,663  $2,190  $365  $1,111  $286  $28,543 
Charge-offs
  —     (51)   —     —     —     (167)   —     —     (218) 
Recoveries
  —     25   —     —     —     95   —     —     120 
Provision
  (40)   366   (6)   185   20   87   9   4   625 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance at June 30, 2019
 $1,052  $11,338  $1,832  $10,848  $2,210  $380  $1,120  $290  $29,070 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Amount of allowance for loan losses for loans deemed to be impaired
 $—    $248  $—    $85  $—    $—    $—    $—    $333 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Amount of allowance for loan losses for loans not deemed to be impaired
 $1,052  $11,090  $1,832  $10,763  $2,210  $380  $1,120  $290  $28,737 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Loans:
                                  
Ending balance
 $13,751  $764,492  $95,682  $758,242  $346,585  $22,609  $311,210  $—    $2,312,571 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
                                     
Loans deemed to be impaired
 $—    $548  $—    $3,365  $—    $—    $—    $—    $3,913 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Loans not deemed to be impaired
 $13,751  $763,944  $95,682  $754,877  $346,585  $22,609  $
 
311,210  $—    $
 
2,308,658 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Page 16 of 48
The Company utilizes a six grade internal loan rating system for commercial real estate, construction, commercial, and commercialmunicipal 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 June 30, 2020March 31, 2021 and December 31, 2019.2020.
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 June 30, 2020March 31, 2021 and December 31, 2019.2020.
Loans rated 6 (Doubtful):
Doubtful loans represent classified loans that management is closely monitoring for credit quality. These loans had more significant credit quality deterioration as of June 30, 2020March 31, 2021 and December 31, 20192020 and full collectability is doubtful.
Impaired:
Impaired loans represent classified loans that management is closely monitoring for credit quality. A loan is classified as impaired when it is probable that the Company will be unable to collect all amounts due.
Page 15 of 45
Table of Contents
The following table presents the Company’s loans by risk rating at June 30, 2020.March 31, 2021.
 
   
Construction
and Land
Development
   
Commercial
and
Industrial
   
Municipal
   
Commercial
Real Estate
 
   
(in thousands)
 
Grade:
        
1-3
(Pass)
  
$
6,513
 
  
$
1,151,462
 
  
$
153,017
 
  
$
738,181
 
4 (Monitor)
  
 
—  
 
  
 
3,950
 
  
 
—  
 
  
 
23,989
 
5 (Substandard)
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
6 (Doubtful)
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Impaired
  
 
—  
 
  
 
180
 
  
 
—  
 
  
 
2,716
 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
  
$
6,513
 
  
$
1,155,592
 
  
$
153,017
 
  
$
764,886
 
  
 
 
   
 
 
   
 
 
   
 
 
 
   
Construction and
Land Development
   
Commercial
and Industrial
   
Municipal
   
Commercial
Real Estate
 
Grade:
  
(in thousands)
 
1-3
(Pass)
  
$
 7,854
 
  
$
 1,310,993
 
  
$
 137,073
 
  
$
 770,872
 
4 (Monitor)
  
 
—  
 
  
 
3,945
 
  
 
—  
 
  
 
23,488
 
5 (Substandard)
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
6 (Doubtful)
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Impaired
  
 
—  
 
  
 
357
 
  
 
—  
 
  
 
2,300
 
                     
Total
  
$
7,854
 
  
$
1,315,295
 
  
$
137,073
 
  
$
796,660
 
                     
The following table presents the Company’s loans by risk rating at December 31, 2019.2020.
 
   Construction
and Land
Development		   Commercial
and
Industrial		   Municipal   Commercial
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 
  
 
 
   
 
 
   
 
 
   
 
 
 
Page 17 of 48
   Construction and
Land Development		   Commercial
and Industrial		   Municipal   Commercial
Real Estate		 
Grade:  (in thousands) 
1-3
(Pass)
  $ 10,909   $ 1,309,861   $ 137,607   $ 761,101 
4 (Monitor)
   —      3,945    —      23,795 
5 (Substandard)
   —      —      —      —   
6 (Doubtful)
   —      —      —      —   
Impaired
   —      439    —      4,940 
                     
Total
  $ 10,909   $1,314,245   $137,607   $789,836 
                     
Credit ratings issued by national organizations were utilized as credit quality indicators as presented in the following table at June 30, 2020March 31, 2021 and are included within the total loan portfolio.
 
   
Commercial
and
Industrial
   
Municipal
   
Commercial
Real Estate
   
Total
 
   
(in thousands)
 
Credit Rating:
        
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aaa – Aa3
  
$
619,107
 
  
$
86,385
 
  
$
38,628
 
  
$
744,120
 
A1 – A3
  
 
185,303
 
  
 
7,229
 
  
 
146,162
 
  
 
338,694
 
Baa1 – Baa3
  
 
—  
 
  
 
51,133
 
  
 
141,897
 
  
 
193,030
 
Ba2
  
 
—  
 
  
 
5,470
 
  
 
—  
 
  
 
5,470
 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
  
$
804,410
 
  
$
150,217
 
  
$
326,687
 
  
$
1,281,314
 
  
 
 
   
 
 
   
 
 
   
 
 
 
   
Commercial
and Industrial
   
Municipal
   
Commercial
Real Estate
   
Total
 
   
(in thousands)
 
Credit Rating:
                    
Aaa – Aa3
  
$
705,387
 
  
$
73,758
 
  
$
36,519
 
  
$
815,664
 
A1 – A3
  
 
182,559
 
  
 
7,103
 
  
 
145,096
 
  
 
334,758
 
Baa1 – Baa3
  
 
50,000
 
  
 
51,132
 
  
 
146,930
 
  
 
248,062
 
Ba2
  
 
—  
 
  
 
5,080
 
  
 
—  
 
  
 
5,080
 
                     
Total
  
$
 937,946
 
  
$
 137,073
 
  
$
 328,545
 
  
$
 1,403,564
 
                     
Credit ratings issued by national organizations were utilized as credit quality indicators as presented in the following table at December 31, 2019.2020.
 
  Commercial
and
Industrial		   Municipal   Commercial
Real Estate		   Total   Commercial
and Industrial		   Municipal   Commercial
Real Estate		   Total 
  (in thousands)   (in thousands) 
Credit Rating:
             
Aaa – Aa3
  $523,644   $53,273   $40,437   $617,354   $710,955   $74,291   $38,035   $823,281 
A1 – A3
   186,044    7,354    148,346    341,744    183,123    7,103    145,583    335,809 
Baa1 – Baa3
   —      51,133    144,711    195,844    50,000    51,133    140,905    242,038 
Ba2
   —      5,895    —      5,895    —      5,080    —      5,080 
  
 
   
 
   
 
   
 
                 
Total
  $709,688   $117,655   $333,494   $1,160,837   $ 944,078   $ 137,607   $ 324,523   $ 1,406,208 
  
 
   
 
   
 
   
 
                 
Page 16 of 45
Table of Contents
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 June 30, 2020March 31, 2021 follows:
 
  
Accruing
30-89 Days

Past Due
   
Non
Accrual
   
Accruing
Greater
than
90 Days
   
Total
Past
Due
   
Current
Loans
   
Total
   
Accruing
30-89 Days

Past Due
   
Non
Accrual
   
Accruing
Greater than
90 Days
   
Total
Past Due
   
Current
Loans
   
Total
 
  
(in thousands)
   
(in thousands)
 
Construction and land development
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
6,513
 
  
$
6,513
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
7,854
 
  
$
7,854
 
Commercial and industrial
  
 
454
 
  
 
33
 
  
 
—  
 
  
 
487
 
  
 
1,155,105
 
  
 
1,155,592
 
  
 
0  
 
  
 
297
 
  
 
0  
 
  
 
297
 
  
 
1,314,998
 
  
 
1,315,295
 
Municipal
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
153,017
 
  
 
153,017
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
137,073
 
  
 
137,073
 
Commercial real estate
  
 
1,337
 
  
 
613
 
  
 
—  
 
  
 
1,950
 
  
 
762,936
 
  
 
764,886
 
  
 
—  
 
  
 
261
 
  
 
—  
 
  
 
261
 
  
 
796,399
 
  
 
796,660
 
Residential real estate
  
 
1,064
 
  
 
512
 
  
 
—  
 
  
 
1,576
 
  
 
399,291
 
  
 
400,867
 
  
 
1,373
 
  
 
188
 
  
 
—  
 
  
 
1,561
 
  
 
458,562
 
  
 
460,123
 
Consumer and overdrafts
  
 
10
 
  
 
16
 
  
 
—  
 
  
 
26
 
  
 
19,831
 
  
 
19,857
 
  
 
12
 
  
 
7
 
  
 
—  
 
  
 
19
 
  
 
19,968
 
  
 
19,987
 
Home equity
  
 
1,307
 
  
 
364
 
  
 
—  
 
  
 
1,671
 
  
 
295,684
 
  
 
297,355
 
  
 
1,325
 
  
 
189
 
  
 
—  
��
  
 
1,514
 
  
 
254,256
 
  
 
255,770
 
  
 
   
 
   
 
   
 
   
 
   
 
                         
Total
  
$
4,172
 
  
$
1,538
 
  
$
—  
 
  
$
5,710
 
  
$
2,792,377
 
  
$
2,798,087
 
  
$
 2,710
 
  
$
 942
 
  
$
 0  
 
  
$
 3,652
 
  
$
2,989,110
 
  
$
2,992,762
 
  
 
   
 
   
 
   
 
   
 
   
 
                         
Page 18 of 48
Further information pertaining to the allowance for loan losses at December 31, 20192020 follows:
 
   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 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   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
  $—     $—     $—     $—     $10,909   $10,909 
Commercial and industrial
   56    297    90    443    1,313,802    1,314,245 
Municipal
   —      —      —      —      137,607    137,607 
Commercial real estate
   —      2,881    —      2,881    786,955    789,836 
Residential real estate
   390    527    —      917    447,519    448,436 
Consumer and overdrafts
   21    1    —      22    20,417    20,439 
Home equity
   1,001    290    —      1,291    273,066    274,357 
                               
Total
  $ 1,468   $ 3,996   $ 90   $ 5,554   $ 2,990,275   $ 2,995,829 
                               
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, 2019.2020.
 
Page 1917 of 4845
Table of Contents
The following is information pertaining to impaired loans for June 30, 2020:March 31, 2021:
 
   
Carrying
Value
   
Unpaid
Principal
Balance
   
Required
Reserve
   
Average
Carrying
Value
for 3 Months
Ending
6/30/20
   
Interest
Income
Recognized
for 3 Months
Ending
6/30/20
   
Average
Carrying
Value
for 6 Months
Ending
6/30/20
   
Interest
Income
Recognized
for 6 Months
Ending
6/30/20
 
   
(in thousands)
         
With no required reserve recorded:
              
Construction and land development
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
Commercial and industrial
  
 
77
 
  
 
97
 
  
 
—  
 
  
 
213
 
  
 
1
 
  
 
380
 
  
 
2
 
Municipal
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Commercial real estate
  
 
612
 
  
 
645
 
  
 
—  
 
  
 
346
 
  
 
—  
 
  
 
266
 
  
 
—  
 
Residential real estate
  
 
235
 
  
 
235
 
  
 
—  
 
  
 
118
 
  
 
—  
 
  
 
67
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
Total
  
$
924
 
  
$
977
 
  
$
—  
 
  
$
677
 
  
$
1
 
  
$
713
 
  
$
2
 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
With required reserve recorded:
                 
Construction and land development
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
Commercial and industrial
  
 
103
 
  
 
103
 
  
 
15
 
  
 
78
 
  
 
1
 
  
 
94
 
  
 
2
 
Municipal
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Commercial real estate
  
 
2,104
 
  
 
2,227
 
  
 
80
 
  
 
2,147
 
  
 
22
 
  
 
2,161
 
  
 
44
 
Residential real estate
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
Total
  
$
2,207
 
  
$
2,330
 
  
$
95
 
  
$
2,225
 
  
$
23
 
  
$
2,255
 
  
$
46
 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
Total:
              
Construction and land development
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
Commercial and industrial
  
 
180
 
  
 
200
 
  
 
15
 
  
 
291
 
  
 
2
 
  
 
474
 
  
 
4
 
Municipal
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Commercial real estate
  
 
2,716
 
  
 
2,872
 
  
 
80
 
  
 
2,493
 
  
 
22
 
  
 
2,427
 
  
 
44
 
Residential real estate
  
 
235
 
  
 
235
 
  
 
—  
 
  
 
118
 
  
 
—  
 
  
 
67
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
Total
  
$
3,131
 
  
$
3,307
 
  
$
95
 
  
$
2,902
 
  
$
24
 
  
$
2,968
 
  
$
48
 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
Carrying
Value
   
Unpaid
Principal
Balance
   
Required
Reserve
   
Average
Carrying
 Value
for 3
 Months
Ending 3/31/21
   
Interest
 Income
Recognized
for 3 
Months
Ending 3/31/21
 
   
(in thousands)
 
With no required reserve recorded:
                         
Construction and land development
  
$
—  
 
  
$
—  
 
  
$
0  
 
  
$
—  
 
  
$
 —  
 
Commercial and industrial
  
 
4
 
  
 
5
 
  
 
0  
 
  
 
7
 
  
 
0  
 
Municipal
  
 
—  
 
  
 
—  
 
  
 
0  
 
  
 
—  
 
  
 
—  
 
Commercial real estate
  
 
261
 
  
 
296
 
  
 
0  
 
  
 
267
 
  
 
—  
 
Residential real estate
  
 
—  
 
  
 
—  
 
  
 
0  
 
  
 
0  
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
0  
 
  
 
—  
 
  
 
—  
 
Home equity
  
 
—  
 
  
 
—  
 
  
 
0  
 
  
 
—  
 
  
 
—  
 
                          
Total
  
$
265
 
  
$
301
 
  
$
0  
 
  
$
274
 
  
$
0  
 
                          
With required reserve recorded:
     
Construction and land development
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
Commercial and industrial
  
 
353
 
  
 
373
 
  
 
125
 
  
 
374
 
  
 
1
 
Municipal
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Commercial real estate
  
 
2,039
 
  
 
2,169
 
  
 
74
 
  
 
3,354
 
  
 
20
 
Residential real estate
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
                          
Total
  
$
 2,392
 
  
$
 2,542
 
  
$
 199
 
  
$
 3,728
 
  
$
 21
 
                          
Total:
                         
Construction and land development
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
  
$
—  
 
Commercial and industrial
  
 
357
 
  
 
378
 
  
 
125
 
  
 
381
 
  
 
1
 
Municipal
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Commercial real estate
  
 
2,300
 
  
 
2,465
 
  
 
74
 
  
 
3,621
 
  
 
20
 
Residential real estate
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
0  
 
  
 
—  
 
Consumer
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
Home equity
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
                          
Total
  
$
2,657
 
  
$
2,843
 
  
$
199
 
  
$
4,002
 
  
$
21
 
                          
 
Page 2018 of 4845
Table of Contents
The following is information pertaining to impaired loans for June 30, 2019:March 31, 2020:
 
   Carrying
Value		   Unpaid
Principal
Balance		   Required
Reserve		   Average
Carrying
Value
for 3 Months
Ending
6/30/19		   Interest
Income
Recognized
for 3 Months
Ending
6/30/19		   Average
Carrying
Value
for 6 Months
Ending
6/30/19		   Interest
Income
Recognized
for 6 Months
Ending
6/30/19		 
   (in thousands)         
With no required reserve recorded:
       
Construction and land development
  $—     $—     $—     $—     $—     $—     $—   
Commercial and industrial
   78    283    —      83    1    84    2 
Municipal
   —      —      —      —      —      —      —   
Commercial real estate
   1,441    1,585    —      812    5    545    11 
Residential real estate
   —      —      —      —      —      —      —   
Consumer
   —      —      —      —      —      —      —   
Home equity
   —      —      —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
Total
  $1,519   $1,868   $—     $895   $6   $629   $13 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
With required reserve recorded:
                  
Construction and land development
  $—     $—     $—     $—     $—     $—     $—   
Commercial and industrial
   470    470    248    349    3    317    6 
Municipal
   —      —      —      —      —      —      —   
Commercial real estate
   1,924    1,924    85    2,213    17    2,409    34 
Residential real estate
   —      —      —      —      —      —      —   
Consumer
   —      —      —      —      —      —      —   
Home equity
   —      —      —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
Total
  $2,394   $2,394   $333   $2,562   $20   $2,726   $40 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total:
                  
Construction and land development
  $—     $—     $—     $—     $—     $—     $—   
Commercial and industrial
   548    753    248    432    4    401    8 
Municipal
   —      —      —      —      —      —      —   
Commercial real estate
   3,365    3,509    85    3,025    22    2,954    45 
Residential real estate
   —      —      —      —      —      —      —   
Consumer
   —      —      —      —      —      —      —   
Home equity
   —      —      —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
  
Total
  $3,913   $4,262   $333   $3,457   $26   $3,355   $53 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   Carrying
Value		   Unpaid
Principal
Balance		   Required
Reserve		   
Average
Carrying 
Value
for 3 
Months
Ending
3/31/20
   
Interest
 Income
Recognized
for 3
 Months
Ending
3/31/20
 
   (in thousands) 
With no required reserve recorded:
     
Construction and land development
  $—     $—     $ 0     $—     $ —   
Commercial and industrial
   623    641    0      582    1 
Municipal
   —      —      0      —      —   
Commercial real estate
   155    185    0      157    —   
Residential real estate
   —      —      0      —      —   
Consumer
   —      —      0      —      —   
Home equity
   —      —      0      —      —   
                          
Total
  $778   $826   $0     $739   $1 
                          
With required reserve recorded:
     
Construction and land development
  $—     $—     $—     $—     $—   
Commercial and industrial
   0      0      0      113    1 
Municipal
   —      —      —      —      —   
Commercial real estate
   2,167    2,290    85    2,176    22 
Residential real estate
   —      —      —      —      —   
Consumer
   —      —      —      —      —   
Home equity
   —      —      —      —      —   
                          
Total
  $ 2,167   $ 2,290   $85   $2,289   $23 
                          
Total:
                         
Construction and land development
  $—     $—     $—     $—     $—   
Commercial and industrial
   623    641    0      695    2 
Municipal
   —      —      —      —      —   
Commercial real estate
   2,322    2,475    85    2,333    22 
Residential real estate
   —      —      —      0      0   
Consumer
   —      —      —      —      —   
Home equity
   —      —      —      —      —   
                          
Total
  $2,945   $3,116   $ 85   $ 3,028   $ 24 
                          
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 modificationmodifications did not result in an increase in the allowance for these loans beyond any previously established allocations.
There was no TDR that occurredmade during the
six-month
three-month period ended June 30, 2020.March 31, 2021. Also, there were no commitments to lend additional funds to troubled debt restructuringTDR borrowers. There were no troubled debt restructuringsTDRs that subsequently defaulted during the first sixthree months of 2020.2021.
Under Section 4013 of the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for
COVID-19
modifications. The Company can then suspend the requirements under GAAP for loan modifications related to
COVID-19
that would otherwise be categorized as a TDR and suspend any determination of a loan modified as a result of
COVID-19
as being a TDR, including the requirement to determine impairment for accounting purposes.
 
Page 2119 of 4845
Table of Contents
As of June 30, 2020,March 31, 2021, and as a result of
COVID-19
loan modifications, the Company hashad modifications of 1498 loans aggregating $93,889,000,$36,152,000, primarily consisting of the deferral of principal and/or the extension of the maturity date.short-term payment deferrals. Of these modifications, $93,889,000,$36,152,000, or 100%, were performing in accordance with their modified terms.
There was no troubled debt restructuring that occurredTDR made during the
six-month
three-month period ended June 30, 2019.March 31, 2020. Also, there were no commitments to lend additional funds to troubled debt restructuringTDR borrowers. There were no troubled debt restructuringsTDRs that subsequently defaulted during the first sixthree months of 2019.2020.
Note 5. Reclassifications Out of Accumulated Other Comprehensive Income (a)
(a)
Amount Reclassified from Accumulated Other Comprehensive Income
Details about Accumulated Other
Comprehensive Income Components
  
Three
Months Ended
June 30, 2020
  Three
Months Ended
June 30, 2019		  Affected Line Item in the
Statement where Net Income is Presented
  (in thousands)   
Unrealized gains and losses on
available-for-sale
securities
  
$
—  
 
 $7  
Net gains on sales of investments
Tax (expense) or benefit
  
 
—  
 
  (2)  
Provision for income taxes
  
 
 
  
 
 
  
Net of tax
  
$
—  
 
 $5  
Net income
  
 
 
  
 
 
  
  
Accretion of unrealized losses transferred
  
$
(219
) 
 $(276)  
Interest on securities
held-to-maturity
Tax (expense) or benefit
  
 
57
 
  73  
Provision for income taxes
  
 
 
  
 
 
  
Net of tax
  
$
(162
) 
 $(203)  
Net income
  
 
 
  
 
 
  
  
Amortization of defined benefit pension items
      
Prior-service costs
  
$
(29
)
 (b) 		 $(29) (b)  
Salaries and employee benefits
Actuarial gains (losses)
  
 
(473
)
 (b) 		  (338) (b)  
Salaries and employee benefits
  
 
 
  
 
 
  
Total before tax
  
 
(502
) 
  (367)  
Income before taxes
  
 
 
  
 
 
  
Tax (expense) or benefit
  
 
141
 
  103  
Provision for income taxes
  
 
 
  
 
 
  
Net of tax
  
$
(361
) 
 $(264)  
Net income
  
 
 
  
 
 
  
 
Details about Accumulated Other
Comprehensive Income Components		  
Six
Months Ended
June 30, 2020
  Six
Months Ended
June 30, 2019		  Affected Line Item in the
Statement where Net Income is Presented		 
  (in thousands)   
Unrealized gains and losses on
available-for-sale
securities
  
$
—  
 
 $7  
Net gains on sales of investments
Tax (expense) or benefit
  
 
—  
 
  (2)  
Provision for income taxes
  
 
 
 
      
Net of tax
  
$
—  
 
 $5  
Net income
  
 
 
 
      
  
Accretion of unrealized losses transferred
  
$
(441
) 
 $(570)  
Interest on securities
held-to-maturity
Tax (expense) or benefit
  
 
115
 
  151  
Provision for income taxes
  
 
 
 
      
Net of tax
  
$
(326
) 
 $(419)  
Net income
  
 
 
 
      
  
Amortization of defined benefit pension items
      
Prior-service costs
  
$
(58
)
 (b) 		 $(58) (b)  
Salaries and employee benefits
Actuarial gains (losses)
  
 
(944
)
 (b) 		  (675) (b)  
Salaries and employee benefits
  
 
 
 
      
Total before tax
  
 
(1,002
) 
  (733)  
Income before taxes
  
 
 
  
 
 
  
Tax (expense) or benefit
  
 
281
 
  206  
Provision for income taxes
  
 
 
  
 
 
  
Net of tax
  
$
(721
) 
 $(527)  
Net income
  
 
 
  
 
 
  
Details about Accumulated Other
Comprehensive Income
Components
  
Three
Months Ended
March 31, 2021
  Three
Months Ended
March 31, 2020		  
Affected Line Item in the Statement
where Net Income is Presented
   (in thousands) 
Accretion of unrealized losses transferred
  $(155)  $(222)  
Interest on securities
held-to-maturity
    41   58  Provision for income taxes
            
   
$
(114
) 
 $(164)  Net income
            
Amortization of defined benefit pension items
           
Prior-service costs
  $(54
)
(b)
 $(29)(b) Salaries and employee benefits
Actuarial gains (losses)
   (511
)
(b)
  (472)(b) Salaries and employee benefits
            
Total before tax
  
 
(565
) 
  (501)  Income before taxes
            
Tax (expense) or benefit
  
 
159
 
  141  Provision for income taxes
            
Net of tax
  
$
(406
) 
 $(360)  Net income
            
 
(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 (seecost(see Employee Benefits footnote (Note 7) for additional details).
Page 22 of 48
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 June 30, 2020March 31, 2021 and 2019.2020.
Page 20 of 45
Table of Contents
The following table is a reconciliation of basic EPS and diluted EPS.
 
   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
(in thousands except share and per share data)  
2020
   2019   
2020
   2019 
Basic EPS Computation:
        
Numerator:
        
Net income, Class A
  
$
7,967
 
  $7,460   
$
15,618
 
  $14,867 
Net income, Class B
  
 
2,089
 
   2,006   
 
4,104
 
   4,017 
Denominator:
        
Weighted average shares outstanding, Class A
  
 
3,652,469
 
   3,620,449   
 
3,652,409
 
   3,615,389 
Weighted average shares outstanding, Class B
  
 
1,915,440
 
   1,947,460   
 
1,915,500
 
   1,952,520 
Basic EPS, Class A
  
$
2.18
 
  $2.06   
$
4.28
 
  $4.11 
Basic EPS, Class B
  
 
1.09
 
   1.03   
 
2.14
 
   2.06 
  
 
 
   
 
 
   
 
 
   
 
 
 
Diluted EPS Computation:
        
Numerator:
        
Net income, Class A
  
$
7,967
 
  $7,460   
$
15,618
 
  $14,867 
Net income, Class B
  
 
2,089
 
   2,006   
 
4,104
 
   4,017 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total net income, for diluted EPS, Class A computation
  
 
10,056
 
   9,466   
 
19,722
 
   18,884 
Denominator:
        
Weighted average shares outstanding, basic, Class A
  
 
3,652,469
 
   3,620,449   
 
3,652,409
 
   3,615,389 
Weighted average shares outstanding, Class B
  
 
1,915,440
 
   1,947,460   
 
1,915,500
 
   1,952,520 
  
 
 
   
 
 
   
 
 
   
 
 
 
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
  
 
1,915,440
 
   1,947,460   
 
1,915,500
 
   1,952,520 
Diluted EPS, Class A
  
$
1.81
 
  $1.70   
$
3.54
 
  $3.39 
Diluted EPS, Class B
  
 
1.09
 
   1.03   
 
2.14
 
   2.06 
  
 
 
   
 
 
   
 
 
   
 
 
 
   Three Months Ended
March 31,		 
(in thousands except share and per share data)  
2021
   2020 
Basic EPS Computation:
          
Numerator:
          
Net income, Class A
  
$
8,538
 
  $7,658 
Net income, Class B
  
 
2,232
 
   2,008 
Denominator:
          
Weighted average shares outstanding, Class A
  
 
3,656,469
 
   3,652,349 
Weighted average shares outstanding, Class B
  
 
1,911,440
 
   1,915,560 
Basic EPS, Class A
  
$
2.34
 
  $2.10 
Basic EPS, Class B
  
 
1.17
 
   1.05 
           
Diluted EPS Computation:
          
Numerator:
          
Net income, Class A
  
$
8,538
 
  $7,658 
Net income, Class B
  
 
2,232
 
   2,008 
           
Total net income, for diluted EPS, Class A computation
  
 
10,770
 
   9,666 
Denominator:
          
Weighted average shares outstanding, basic, Class A
  
 
3,656,469
 
   3,652,349 
Weighted average shares outstanding, Class B
  
 
1,911,440
 
   1,915,560 
           
Weighted average shares outstanding diluted, Class A
  
 
5,567,909
 
   5,567,909 
Weighted average shares outstanding, Class B
  
 
1,911,440
 
   1,915,560 
Diluted EPS, Class A
  
$
1.93
 
  $1.74 
Diluted EPS, Class B
  
 
1.17
 
   1.05 
           
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 athe Century Bancorp, Inc. Supplemental Executive Insurance/Retirement and Insurance Plan (the “Supplemental Plan”) which is limited to certain officers and employees of the Company. The Supplemental Plan is accrued on a current basis and recognizes costs over the estimated employee service period.
Executive officers of the Company and its subsidiaries who have at least one year of service may participate in the Supplemental Plan. The Supplemental Plan is voluntary, and participants are required to contribute to its cost. Life insurance policies, which are owned by the Company, are purchased covering the lives of each participant.
 
Page 2321 of 4845
Table of Contents
Components of Net Periodic Benefit Cost for the Three Months Ended June 30,March 31,
 
   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   
 
212
 
   109 
  
 
 
   
 
 
   
 
 
   
 
 
 
Net periodic benefit (credit) cost
  
$
103
 
  $159   
$
1,060
 
  $875 
  
 
 
   
 
 
   
 
 
   
 
 
 
Components of Net Periodic Benefit Cost for the Six Months Ended June 30,
   Pension Benefits   Supplemental Insurance/
Retirement Plan		 
   
2020
   2019   
2020
   2019 
   (in thousands) 
Service cost
  
$
688
 
  $552   
$
706
 
  $512 
Interest
  
 
900
 
   946   
 
932
 
   964 
Expected return on plan assets
  
 
(1,904
) 
   (1,638)   
 
—  
 
   —   
Recognized prior service cost (benefit)
  
 
—  
 
   —     
 
58
 
   56 
Recognized net actuarial losses
  
 
522
 
   458   
 
422
 
   218 
  
 
 
   
 
 
   
 
 
   
 
 
 
Net periodic benefit (credit) cost
  
$
206
 
  $318   
$
2,118
 
  $1,750 
  
 
 
   
 
 
   
 
 
   
 
 
 
   Pension Benefits   Supplemental Insurance/
Retirement Plan		 
   
2021
   2020   
2021
   2020 
   (in thousands) 
Service cos
t
  
$
379  
 
  $344   
$
363
 
  $353 
Interest
  
 
434  
 
   450   
 
434
 
   466 
Expected return on plan assets
  
 
(1,062
)   (952)   
 
—  
 
   —   
Recognized prior service cost (benefit)
  
 
—  
 
  
 
—  
 
  
 
54
 
   29 
Recognized net actuarial losses
  
 
241  
 
   261   
 
269
 
   211 
                     
Net periodic benefit (credit) cost
  
$
(8
)  $103   
$
1,120
 
  $1,059 
                     
Approximately $930,000$371,000 and $1,004,000
$465,000 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 sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively.
Contributions
The Company does not intend to contributehas contributed $1,302,000 to the Defined Benefit Pension Plan in 2020.2021.
Note 8. Fair Value Measurements
The Company follows FASB ASC
820-10,
Fair Value Measurements and Disclosures and ASU
2016-1,
“Financial Instruments-Overall”
(Subtopic 825-10)
Recognition and Measurement of Financial Assets and Financial Liabilities
, which among other things, requires enhanced disclosures about assets and liabilities carried at fair value. ASC
820-10
establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring financial instruments at fair value. The three broad levels of the hierarchy are as follows:
Level I – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The type of financial instruments included in Level I are highly liquid cash instruments with quoted prices such as
G-7
government, agency securities, listed equities and money market securities, as well as listed derivative instruments.
Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these financial instruments include cash instruments for which quoted prices are available but traded less frequently, derivative instruments whose fair value have been derived using a model where inputs to the model are directly observable in the market or can be derived principally from or corroborated by observable market data, and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed. Instruments which are generally included in this category are corporate bonds and loans, mortgage whole loans, municipal bonds, and OTC derivatives.
Page 24 of 48
Level III – Instruments that have little to no pricing observability as of the reported date. These financial instruments do not have
two-way
markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. Instruments that are included in this category generally include municipal securities with no observable fair value with an average life of one year or less. The securities are carried at cost which approximates fair value. A periodic review of underlying financial statements and credit ratings is performed to assess the appropriateness of these valuations.
Page 22 of 45
Table of Contents
The results of the fair value hierarchy as of June 30,March 31, 2021, are as follows:
   
Securities AFS Fair Value Measurements Using
 
   
Carrying
Value
   
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
   
Significant
Observable
Inputs
(Level 2)
   
Significant
Other
Unobservable
Inputs
(Level 3)
 
   
(in thousands)
 
SBA Backed Securities
  
$
42,855
 
  
$
—  
 
  
$
42,855
 
  
$
—  
 
U.S. Government Agency and Sponsored Mortgage-Backed Securities
  
 
166,811
 
  
 
—  
 
  
 
166,811
 
  
 
—  
 
Privately Issued Residential
Mortgage- Backed 
Securities
  
 
326
 
  
 
—  
 
  
 
326
 
  
 
—  
 
Obligations Issued by States and Political Subdivisions
  
 
45,668
 
  
 
—  
 
  
 
—  
 
  
 
45,668
 
Other Debt Securities
  
 
8,238
 
  
 
—  
 
  
 
8,238
 
  
 
—  
 
                     
Total
  
$
263,898
 
  
$
—  
 
  
$
218,230
 
  
$
45,668
 
                     
Equity Securities
  
$
1,722
 
  
$
376
 
  
$
1,346
 
  
$
—  
 
Financial Instruments Measured at Fair Value on a Non-recurring Basis
                    
Impaired Loans
  
$
558
 
  
$
—  
 
  
$
—  
 
  
$
558
 
The results of the fair value hierarchy as of December 31, 2020, are as follows:
Financial Instruments Measured at Fair Value on a Recurring Basis:
   Securities AFS Fair Value Measurements Using 
   Carrying
Value		   
Quoted Prices
In Active
Markets for
Identical 
Assets
(Level 1)
   Significant
Observable
Inputs
(Level 2)		   Significant
Other
Unobservable
Inputs
(Level 3)		 
   (in thousands) 
Financial Instruments Measured at Fair Value on a Recurring Basis
     
SBA Backed Securities
  $44,039   $—     $44,039   $—   
U.S. Government Agency and Sponsored Mortgage-Backed Securities
   177,741    —      177,741    —   
Privately Issued Residential
Mortgage- 
Backed Securities
   328    —      328    —   
Obligations Issued by States and Political Subdivisions
   52,276    —      —      52,276 
Other Debt Securities
   8,064    —      8,064    —   
                     
Total
  $282,448   $—     $230,172   $52,276 
                     
Equity Securities
  $1,668   $303   $1,365   $—   
Financial Instruments Measured at Fair Value on a Non-recurring Basis
                    
Impaired Loans
  $3,178   $—     $—     $3,178 
 
   
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)
 
SBA Backed Securities
  
$
48,371
 
  
$
—  
 
  
$
48,371
 
  
$
—  
 
U.S. Government Agency and Sponsored Mortgage-Backed Securities
  
 
200,128
 
  
 
—  
 
  
 
200,128
 
  
 
—  
 
Privately Issued Residential Mortgage
 
-
 
Backed Securities
  
 
350
 
  
 
—  
 
  
 
350
 
  
 
—  
 
Obligations Issued by States and Political Subdivisions
  
 
48,739
 
  
 
—  
 
  
 
—  
 
  
 
48,739
 
Other Debt Securities
  
 
3,625
 
  
 
—  
 
  
 
3,625
 
  
 
—  
 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
  
$
301,213
 
  
$
—  
 
  
$
252,474
 
  
$
48,739
 
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity Securities
  
$
1,669
 
  
$
296
 
  
$
1,373
 
  
$
—  
 
Financial Instruments Measured at Fair Value on a
Non-recurring
Basis:
        
Impaired Loans
  
$
860
 
  
$
—  
 
  
$
—  
 
  
$
860
 
Page 23 of 45
Table of Contents
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 and
six-month
periodsthree-month period ended June 30, 2020March 31, 2021 amounted to $0($375,000) and ($9,000), respectively. amounted to $501,000 for the year ended December 31, 2020.
There were 0 transfers between level 1, 2 and 3 for the sixthree months ended June 30,March 31, 2021 and the year ended December 31, 2020. There were 0 liabilities measured at fair value on a recurring or nonrecurring basis during the sixthree months ended June 30, 2020.
March 31, 2021 and the year ended December 31, 2021.
Page 25 of 48
The following table presents
additional
information about assets measured at fair value on a recurring and nonrecurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands). at March 31, 2021. Management continues to monitor the assumptions used to value the assets listed below.
 
Asset
  
Fair Value
   
Valuation Technique
  
Unobservable Input
  
Unobservable Input
Value or Range
   
Fair Value
   
Valuation Technique
  
Unobservable Input
  
Unobservable Input
Value or Range
Securities AFS
 
$
48,739
 
 
Discounted cash flow
 
Discount rate
 
0%-1% (3)
Securities AFS (1)
  
$
45,668
   
Discounted cash flow
  
Discount rate
  
0% - 1.0% (2)
Impaired Loans
 
$
860
 
 
Appraisal of collateral
 (1
)
 
Appraisal adjustments
 (2)
 
0%
  
$
558
   
Appraisal of collateral (3)
  
Appraisal adjustments (4)
  
0%—22% discount
The following table presents additional information about assets measured at fair value on a recurring and nonrecurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands) at December 31, 2020. Management continues to monitor the assumptions used to value the assets listed below.
Asset
   
Fair Value
   
Valuation Technique
  
Unobservable Input
  
    Unobservable Input    
Value or Range
Securities AFS (1)  
$
52,276   Discounted cash flow  Discount rate  0% - 1.0% (2)
Impaired Loans  
$
3,178   Appraisal of collateral (3)  Appraisal adjustments (4)  0%-17% discount
(1)
Municipal securities generally have maturities of one year or less and, therefore, the amortized cost equates to the fair value.
(2) 
Weighted averages.
(3) 
Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.
(2)(4) 
Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated expenses.
Page 24 of 45
Table of Contents
(3)
Weighted averages.
The changes in Level 3 securities for the
six-month
three-month period ended June 30, 2020March 31, 2021 are shown in the table below:
 
  
Obligations
Issued by States
& Political
Subdivisions
 
Balance at December 31, 2019
 
$
13,301
 
Purchases
 
 
44,324
 
Maturities and calls
 
 
(8,879
) 
Amortization
 
 
(7
) 
 
 
 
 
Balance at June 30, 2020
 
$
48,739
 
 
 
 
 
   
Obligations 
Issued by States 
&
 
Political Subdivisions
 
Balance at December 31, 2020
  
$
52,276
 
Purchases
  
 
6,770
 
Maturities and calls
  
 
(13,353
) 
Amortization
  
 
(25
) 
      
Balance at March 31, 2021
  
$
45,668
 
      
The amortized cost of Level 3 securities was $48,739,000$45,668,000 at June 30,March 31, 2021 with an unrealized loss of $0. The securities in this category are generally municipal securities with no readily determinable fair value. Management evaluated the fair value of these securities based on an evaluation of the underlying issuer, prevailing rates and market liquidity.
The changes in Level 3 securities for the three-month period ended March 31, 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
   0   
Changes in fair value
   —   
      
Balance at March 31, 2020
  $17,224 
      
The amortized cost of Level 3 securities was $17,224,000 at March 31, 2020 with an unrealized loss of $0. The securities in this category are generally municipal securities with no readily determinable fair value. Management evaluated the fair value of these securities based on an evaluation of the underlying issuer, prevailing rates and market liquidity.
The fair value of impaired loans decreased by $2,624,000, for the first three months of 2021, mainly attributable to one loan that was paid down. The fair value of impaired loans decreased by $269,000, for the first sixthree months of 2020, mainly attributable to one loan that was paid down. There were 0 liabilities measured at fair value on a recurring or nonrecurring basis during the
six-month
three-month period ended June 30,March 31, 2020.
The changes in Level 3 securities for the
six-month
period ended June 30, 2019, are shown in the table below:
   Obligations
Issued by States
& Political
Subdivisions		 
Balance at December 31, 2018
  $88,728 
Purchases
   10,007 
Maturities and calls
   (61,488) 
Amortization
   (20) 
Changes in fair value
   —   
  
 
 
 
Balance at June 30, 2019
  $37,227 
  
 
 
 
The amortized cost of Level 3 securities was $37,227,000 at June 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. The fair value of other real estate owned was reduced by $125,000 for the first six months of 2019. The fair value of impaired loans increased by $1,142,000, for the first six months of 2019, mainly attributable to two loans added to impaired loans. There were 0 liabilities measured at fair value on a recurring or nonrecurring basis during the six month period ended June 30, 2019.
 
Page 2625 of 4845
The resultsTable 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 
   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) 
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 0 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.
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.
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
Contents
(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 27 of 48
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 2826 of 4845
Table of Contents
Subordinated Debentures
The fair value of subordinated debentures is based on the discounted value of contractual cash flows. The discount rate used is estimated based on the rates currently offered for other subordinated debentures of similar remaining maturities.
The following presents (in thousands) the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, 2020March 31, 2021 and December 31, 2019.2020. This table excludes financial instruments for which the carrying amount approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, short-term investments, FHLBB stock and accrued interest receivable. Financial liabilities for which the fair value approximates carrying value include
non-maturity
deposits, short-term borrowings and accrued interest payable.
 
June 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
 
$
2,427,422
 
 
$
2,511,229
 
 
 
$
—  
 
 
$
2,511,229
 
 
$
—  
 
Loans (1)
 
 
2,765,571
 
 
 
2,704,842
 
 
 
 
—  
 
 
 
—  
 
 
 
2,704,842
 
Financial liabilities:
     
Time deposits
 
 
610,496
 
 
 
618,932
 
 
 
 
—  
 
 
 
618,932
 
 
 
—  
 
Other borrowed funds
 
 
152,485
 
 
 
160,599
 
 
 
 
—  
 
 
 
160,599
 
 
 
—  
 
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   —   
March 31, 2021
  
Carrying
Amount
   
Estimated
Fair Value
   
Fair Value
Measurements
Level 1 Inputs
   
Level 2
Inputs
   
Level 3
Inputs
 
   
(in thousands)
 
Financial assets:
                         
Securities
held-to-maturity
  
$
3,217,176
 
  
$
3,222,903
 
  
$
—  
 
  
$
3,222,903
 
  
$
—  
 
Loans (1)
  
 
2,957,810
 
  
 
2,877,220
 
  
 
—  
 
  
 
—  
 
  
 
2,877,220
 
Financial liabilities:
                         
Time deposits
  
 
480,784
 
  
 
479,087
 
  
 
—  
 
  
 
479,087
 
  
 
—  
 
Other borrowed funds
  
 
151,769
 
  
 
155,001
 
  
 
—  
 
  
 
155,001
 
  
 
—  
 
Subordinated debentures
  
 
36,083
 
  
 
36,083
 
  
 
—  
 
  
 
36,083
 
  
 
—  
 
      
December 31, 2020
                    
Financial assets:
                         
Securities held-to-maturity
  $2,509,088   $2,579,103   $—     $2,579,103   $—   
Loans (1)
   2,960,343    2,902,390    —      —      2,902,390 
Financial liabilities:
                         
Time deposits
   546,143    556,470    —      556,470    —   
Other borrowed funds
   177,009    183,000    —      183,000    —   
Subordinated debentures
   36,083    36,083    —      36,083    —   
 
(1)
Comprised of loans (including collateral dependent impaired loans), net of deferred loan costs and the allowance for loan losses.loanlosses.
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 27 of 45
Table of Contents
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.
Page 29 of 48
In certain cases, other parties are involved with providing products and services to our customers. If the Company is a principal in the transaction (providing goods or services itself), revenues are reported based on the gross consideration received from the customer and any related expenses are reported gross in noninterest expense. If the Company is an agent in the transaction (arranging for another party to provide goods or services), the Company reports its net fee or commission retained as revenue.
Waivers and reversals are recorded as a reduction of revenue either when the revenue is recognized by the Company or at the time the waiver or reversal is earned by the customer.
 
A.
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.
 
a.
Revenue earned at a point in time – Examples of revenue earned at a point in time are ATM transaction fees, wire transfer fees, NSF
“non-sufficient
funds” fees, credit and debit card interchange fees and foreign exchange transaction fees. Revenue is generally derived from transactional information accumulated by our systems and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction. The Company is the principal in each of these contracts, with the exception of credit and debit card interchange fees, in which case we are acting as the agent and record revenue net of expenses paid to the principal.
 
b.
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
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.
 
   
Six
Months
Ended

6/30/2020
   
Revenue from
Contracts in
Scope of
Topic 606
   Six
Months
Ended
6/30/2019		   Revenue from
Contracts in
Scope of
Topic 606		 
   (dollars in thousands) 
Total net interest income
  
$
51,019
 
  
$
—  
 
  $46,688   $—   
  
 
 
   
 
 
   
 
 
   
 
 
 
Noninterest income:
        
Service charges on deposit accounts
  
 
4,319
 
  
 
4,319
 
   4,491    4,491 
Lockbox fees
  
 
1,854
 
  
 
1,854
 
   2,081    2,081 
Net gains on sales of securities
  
 
—
 
 
 
  
 
—
 
 
 
   7    —
 
 
 
Gains on sales of mortgage loans
  
 
—
 
 
 
  
 
—
 
 
 
   154    —
 
 
 
Other income
  
 
2,178
 
  
 
1,158
 
   2,691    1,610 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total noninterest income
  
 
8,351
 
  
 
7,331
 
   9,424    8,182 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
  
$
59,370
 
  
$
7,331
 
  $56,112   $8,182 
  
 
 
   
 
 
   
 
 
   
 
 
 
   
Three Months
Ended
3/31/2021
   
Revenue from
Contracts in Scope
of Topic 606
   Three Months
Ended
3/31/2020		   Revenue from
Contracts in Scope
of Topic 606		 
   (dollars in thousands) 
Total net interest income
  
$
28,567
 
  
$
—  
 
  $25,201   $—   
                     
Noninterest income:
                    
Service charges on deposit accounts
  
 
2,218
 
  
 
2,218
 
   2,296    2,296 
Lockbox fees
  
 
996
 
  
 
996
 
   930    930 
Other income
  
 
989
 
  
 
695
 
   1,084    599 
                     
Total noninterest income
  
 
4,203
 
  
 
3,909
 
   4,310    3,825 
                     
Total net revenues
  
$
32,770
 
  
$
3,909
 
  $29,511   $3,825 
                     
 
Page 3028 of 4845
   
Three
Months
Ended

6/30/2020
   
Revenue from
Contracts in
Scope of
Topic 606
   Three
Months
Ended
6/30/2019		   Revenue from
Contracts in
Scope of
Topic 606		 
   (dollars in thousands) 
Total interest income
  
$
25,818
 
  
$
—  
 
  $23,250   $—   
  
 
 
   
 
 
   
 
 
   
 
 
 
Noninterest income:
        
Service charges on deposit accounts
  
 
2,023
 
  
 
2,023
 
   2,282    2,282 
Lockbox fees
  
 
924
 
  
 
924
 
   992    992 
Net gains on sales of securities
  
 
—  
 
  
 
—  
 
   7    —   
Gains on sales of mortgage loans
  
 
—  
 
  
 
—  
 
   139    —   
Other income
  
 
1,094
 
  
 
559
 
   1,577    810 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total noninterest income
  
 
4,041
 
  
 
3,506
 
   4,997    4,084 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
  
$
29,859
 
  
$
3,506
 
  $28,247   $4,084 
  
 
 
   
 
 
   
 
 
   
 
 
 
Table of Contents
The following table provides information about receivables with customers.
 
   
June 30, 2020
   December 31, 2019 
(dollars in thousands)        
Receivables, which are included in “Other assets”
  
$
1,280
 
  $1,200 
(dollars in thousands)  
March 31, 2021
   December 31, 2020 
Receivables, which are included in “Other assets”
  
$
1,393
 
  $1,397 
Note 11. Leases
The Company has operating leases primarily for branch locations as well as data processing centers. The Company’s operating leases have remaining lease terms of 1 year to 3231 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$10,000 for the sixthree months ended June 30, 2020.March 31, 2021. Variable lease costs include costs that are not included in the lease liability.
The components of lease expense were as follows:
 
   
Three
Months
Ended

6/30/2020
   
Six
Months
Ended

6/30/2020
   Three
Months
Ended
6/30/2019		   Six
Months
Ended
6/30/2019		 
(in thousands)
                
Operating lease cost
  
$
546
 
  
$
1,092
 
  $563   $1,126 
Variable lease cost
  
 
173
 
  
 
307
 
   136    284 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total lease cost
  
$
719
 
  
$
1,399
 
  $699   $1,410 
  
 
 
   
 
 
   
 
 
   
 
 
 
(in thousands)
  
Three Months
Ended
3/31/2021
   Three Months
Ended
3/31/2020		 
Operating lease cost
  
$
560
 
  $546 
           
Variable lease cost
  
 
153
 
   133 
           
Total lease cost
  
$
713
 
  $679 
           
Supplemental cash flow information related to leases was as follows:
 
   
Three
Months
Ended

6/30/2020
   
Six
Months
Ended

6/30/2020
   Three
Months
Ended
6/30/2019		   Six
Months
Ended
6/30/2019		 
(in thousands)                
Cash paid for amounts included in the measurement of lease liabilities:
        
Operating cash flows from operating leases
  
$
529
 
  
$
1,057
 
  $539   $1,077 
  
 
 
   
 
 
   
 
 
   
 
 
 
Right-of-use
assets obtained in exchange for lease obligations:
        
Operating leases
  
$
434
 
  
$
875
 
  $442   $885 
  
 
 
   
 
 
   
 
 
   
 
 
 
Page 31 of 48
(in thousands)  
(in
thousands) 
Three
Months
Ended
3/31/2021
   Three Months
Ended
3/31/2020		 
Cash paid for amounts included in the measurement of lease liabilities:
          
Operating cash flows from operating leases
  
$
541
 
  $529 
           
Right-of-use
assets obtained in exchange for new lease obligations:
          
Operating leases
  
$
0  
 
  $0   
           
Supplemental balance sheet information related to leases was as follows:
 
  
6/30/2020
 12/31/2019   
3/31/2021
 12/31/2020 
(in thousands, except lease term and discount rate)            
Operating Leases:
        
Operating lease
right-of-use
assets
  $
13,205
 
 $ 12,521   
$
13,262
 
 $13,713 
Operating lease liabilities
  $
 13,399
 
 $ 12,690   
$
13,496
 
 $13,935 
Weighted Average Remaining Lease Term:
        
Operating Leases
  
 
10 Years
 
  11 Years   
 
10 Years
 
  10 Years 
Weighted Average Discount Rate:
        
Operating Leases
  
 
3.3
%
  3.5%  
 
3.1
% 
  3.1% 
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Table of Contents
The Company has payment obligations under a number of
non-cancelable
operating leases for premises and equipment expiring in various years through 2030. Total lease expense approximated $713,000 and $679,000 for the quarters ended March 31, 2021 and 2020, respectively. Included in lease expense are amounts paid to a company affiliated with Barry R. Sloane, Chairman, President and CEO, and Linda Sloane Kay, Vice Chair, amounting to $111,000 and $109,000, respectively. Rental income approximated $165,000 and $168,000 in 2021 and 2020, respectively.
A summary of future minimum rental payments under such leases as the dates indicated follows:
 
   Minimum Rental Payments 
   
June 30, 2020
   December 31, 2019 
   (in thousands) 
Year Ending December 31,
    
2020
  
$
926
 
  $2,030 
2021
  
 
2,073
 
   1,754 
2022
  
 
1,921
 
   1,603 
2023
  
 
1,865
 
   1,545 
2024
  
 
1,611
 
   1,277 
Thereafter
  
 
7,305
 
   7,312 
  
 
 
   
 
 
 
Total lease payments
  
$
 15,701
 
  $ 15,521 
  
 
 
   
 
 
 
Less imputed interest
  
 
(2,302
) 
  
 
(2,831) 
  
 
 
   
 
 
 
Present value of lease liability
  
$
13,399
 
  
$
12,690 
  
 
 
   
 
 
 
   Minimum Rental Payments 
   
March 31, 2021
   December 31, 2020 
Year Ending December 31,  (in thousands) 
2021  
$
1,612
 
  $2,156 
2022
  
 
1,995
 
   1,995 
2023
  
 
1,962
 
   1,962 
2024
  
 
1,692
 
   1,692 
2025
  
 
1,471
 
   1,471 
Thereafter
  
 
7,394
 
   7,394 
           
Total lease payments
  
$
16,126
 
  $16,670 
           
Less imputed interest
  
 
(2,630
) 
   (2,735) 
           
Present value of lease liability
  
$
13,496
 
  $13,935 
           
June 30, 2020March 31, 2021 minimum rental payments represent sixnine months of rental payments remaining in calendar year 2020.2021.
Note 12. Subsequent Events
Proposed Transaction with Eastern Bankshares, Inc.
On April 7, 2021, the Company and Eastern Bankshares, Inc. (“Eastern” ) (NASDAQ: EBC) entered into an Agreement and Plan of Merger pursuant to which, through a series of transactions, Eastern will acquire the Company in a cash transaction for total consideration valued at approximately $642 million. Under the terms of the Agreement and Plan of Merger, (i) each holder of Class A common stock will receive a cash payment of $115.28 per share of Class A common stock and (ii) each holder of Class B common stock will receive a cash payment of $115.28 per share of Class B common stock. The transaction is expected to close in the fourth quarter of 2021 and is subject to customary closing conditions, including approval by the shareholders of the Company and required regulatory approvals.
Page 30 of 45
Table of Contents
Item
2.
Management
’
s 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 June 30, 2020,March 31, 2021, the Company had total assets of $5.9$7.3 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, New York, Virginia, Washington D.C., and New York.Pennsylvania.
The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income and fees from loans, deposits, as well as operating expenses, the provision for loan losses, the impact of federal and state income taxes and the relative levels of interest rates and economic activity. The Company offers a wide range of services to commercial enterprises, state and local governments and agencies,
non-profit
organizations and individuals. It emphasizes service to small and medium sized businesses and retail customers in its market area. In recent years, the Company has increased business to larger institutions, specifically, healthcare and higher education. The Company makes commercial loans, real estate and construction loans and consumer loans, and accepts savings, time, and demand deposits. In addition, the Company offers its corporate and institutional customers
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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 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 comprisingcomposed of approximately 302 government entities.
Net income for the three months ended March 31, 2021, was $10,770,000 or $1.93 per Class A share diluted, an increase of 11.4% compared to net income of $9,666,000, or $1.74 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, 
   
2021
   2020 
Basic EPS – Class A common
  
$
2.34
 
  $2.10 
Basic EPS – Class B common
  
$
1.17
 
  $1.05 
Diluted EPS – Class A common
  
$
1.93
 
  $1.74 
Diluted EPS – Class B common
  
$
1.17
 
  $1.05 
Net interest income totaled $28,567,000 for the three months ended March 31, 2021 compared to $25,201,000 for the same period in 2020. The 13.4% increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. The net interest margin decreased from 2.11% on a fully
tax-equivalent
basis for the first three months of 2020 to 1.80% for the same period in 2021. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve.
The average balances of earning assets increased for the first three months of 2021 compared to the same period last year, by $1,608,721,000 or 31.0%, combined with an average yield decrease of 1.03%, resulting in a decrease in interest income of $4,264,000. The average balance of interest-bearing liabilities increased for the first three months of 2021 compared to the same period last year, by $1,191,116,000 or 27.9%, combined with an average interest-bearing liabilities interest cost decrease of 0.86%, resulting in a decrease in interest expense of $7,630,000.
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Table of Contents
The trends in the net interest margin are illustrated in the graph below:
During
The net interest margin decreased during the first quarter of 2020 mainly as a result of decreases in rates on earning assets. This was partially offset by prepayment penalties collected of $874,000 and contributed approximately seven basis points to the net interest margin. The net interest margin decreased during the second, third, and fourth quarters of 2020 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 employeesprimarily as a result. Unemployment hasresult of increased significantly,margin pressure during the recent decrease in interest rates across the yield curve. This was partially offset by prepayment penalties collected of $453,000 and GDP declined significantly. This may cause loan defaultscontributed approximately three basis points to the net interest margin during the fourth quarter of 2020. The net interest margin decreased during the first quarter of 2021 primarily as a result of increased margin pressure during the recent decrease in interest rates across the futureyield 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 customers are unablethe prepayment of loans and changes in market interest rates, will positively impact the net interest margin.
There was a credit to make their contractual loan payments. The Company has increased itsthe provision for loan losses of $550,000 for the quarter ended March 31, 2021, compared to a provision of $1,075,000 for the quarter ended March 31, 2020. The credit provision for the first quarter of 2021 was primarily attributable to a decline in responseloan balances exclusive of PPP loans and a reduction in specific allocations to this increased risk. Futurethe allowance for loan losses. The provision levels will be dependent uponfor the lengthfirst quarter of 2020 was primarily as a result of provisions related to the onset of the economic disruption and the effectiveness of government programs to mitigate the economic impact of the shutdowns.
COVID-19
pandemic.
The Company’s revenue has been and will continueeffective tax rate increased from 5.8% for the quarter ended March 31, 2020 to be negatively impacted13.5% for the same period in 2021. This was primarily as transaction fees has declined duea result of an increase in taxable income relative to decreased volume.total income.
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 second quarter of 2021. During the second quarter of 2020, the Company executed a lease for a future branch location in Needham, Massachusetts. The Company plans to open this branch during the third quarter of 2021.
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Table of Contents
Recent Market Developments
In response to the pandemic, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES)Act (“CARES Act”), Families First Coronavirus Response Act (“FFCRA”), and Coronavirus Response and Relief Supplemental Appropriations Act of 2021
On March 18, 2020, the FFCRA was signed into law and on March 27, 2020, the CARES Act was signed into law. The FFCRA and the CARES Act provide relief for families and businesses impacted by the coronavirus pandemic. The provisions in this legislation include, among other things, loan programs for businesses, expanded unemployment insurance benefits, stimulus payments to certain taxpayers, new provisions on sick leave and family leave, and funding for a variety of health-related efforts and government programs. Also, as a result of the CARES Act, the full balance of the Company’s AMT credit was refunded in 2020.
The CARES Act, among other things, provides cash payments to certain individuals and has various programs for businesses. In particular, it includes the Payroll Protection Program (PPP)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).SBA. If utilized primarily for payroll, subject to certain other conditions, the loans may be forgiven, in whole or in part, and repaid by the SBA. During 2020 and 2021, the Company participated in the PPP. Since the inception of the program, PPP originations totaled approximately 1,860 loans for approximately $325 million. As of June 30, 2020,March 31, 2021, Century Bank’s PPP loans totaled approximately 1,2701,117 loans for approximately $230$213 million. The fees collected, from the SBA, amount to approximately $7.9$11.9 million. The amount of fees recognized during the first quarter of 2021 amounted to approximately $2.2 million. Total cost deferrals amounted to approximately $1.7 million, since inception. The fees and costs 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. 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 six months ended June 30, 2020, was $19,722,000 or $3.54 per Class A share diluted, an increase of 4.4% compared to net income of $18,884,000, or $3.39 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
June 30,
 
 
  
2020
 
  
2019
 
Basic EPS – Class A common
  
$
2.18
 
  
$
2.06
 
Basic EPS – Class B common
  
$
1.09
 
  
$
1.03
 
Diluted EPS – Class A common
  
$
1.81
 
  
$
1.70
 
Diluted EPS – Class B common
  
$
1.09
 
  
$
1.03
 
  
 
  
Six Months Ended
June 30,
 
 
  
2020
 
  
2019
 
Basic EPS – Class A common
  
$
4.28
 
  
$
4.11
 
Basic EPS – Class B common
  
$
2.14
 
  
$
2.06
 
Diluted EPS – Class A common
  
$
3.5
4
 
  
$
3.39
 
Diluted EPS – Class B common
  
$
2.14
 
  
$
2.06
 
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Net interest income totaled $51,019,000 for the six months ended June 30, 2020 compared to $46,688,000 for the same period in 2019. The 9.3% 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 $874,000 for the first six months of 2020 compared to $13,000 for the same period last year. The net interest margin decreased from 2.09% on a fully
tax-equivalent
basis for the first six months of 2019 to 2.04% 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 for the first six months of 2020 compared to the same period last year, by $456,916,000 or 9.2%, combined with an average yield decrease of 0.42%, resulting in a decrease in interest income of $2,854,000. The average balance of interest-bearing liabilities increased for the first six months of 2020 compared to the same period last year, by $373,148,000 or 9.3%, combined with an average interest-bearing liabilities interest cost decrease of 0.47%, resulting in a decrease in interest expense of $7,185,000.
The trends in the net interest margin are illustrated in the graph below:
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 quarter 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 positively impact the net interest margin.
The provision for loan losses increased by $2,150,000 from $625,000 for the six months ended June 30, 2019 to $2,775,000 for the same period in 2020, primarily as a result of the economic uncertainties associated with the novel coronavirus disease (COVID–19) pandemic and increased loan balances. Refer to the allowance for loan loss section of the management discussion and analysis for additional discussion.
Non-performing
assets totaled $1,538,000 at June 30, 2020, compared to $2,014,000 at December 31, 2019.
The Company’s effective tax rate increased from 0.8% for the six months ended June 30, 2019 to 7.8% 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 underUnder 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 result4013 of the CARES Act, from March 1, 2020 through the full balanceearlier of January 1, 2022 or 60 days after the termination date of the AMT credit willnational emergency declared by the President on March 13, 2020 concerning the
COVID-19
outbreak (the “national emergency”), a financial institution may elect to suspend the requirements under U.S. GAAP for loan modifications related to the
COVID-19
pandemic that would otherwise be utilized in 2020.
Duringcategorized as a troubled debt restructured, including impairment accounting. This troubled debt restructuring relief applies for the third quarterterm of 2019, the Company purchased the existing Brookline branch locationloan modification that the Company was leasing. Also,occurs 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 first quarter of 2021. During the second quarter of 2020, the Company executed a leaseapplicable period for a future branch location in Needham, Massachusetts. The Company plans to open this branch during the first quarter of 2021.
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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
Actloan that 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 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). Effective October 1, 2020, further amendments to the Rule will take effect, which will modify existing exemptions from the definition of covered fund, 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 utilized in 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.
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 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 issued30 days past due as of December 31, 2019.
As of March 31, 2021, and as a final rule, effective January 1, 2020, which would setresult of
COVID-19
loan modifications, the minimum ratio at 9%. Qualifying banks that exceed the minimum community bank leverage ratio will be deemed to beCompany has modifications of 8 loans aggregating approximately $36.2 million, primarily consisting of short-term payment deferrals. Of these modifications, $36.2 million, or 100%, were performing in complianceaccordance 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.their modified terms.
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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 ASUallows companies to delay Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU)
2016-13,
Measurement of Credit Losses on Financial Instruments.Instruments (CECL), including the current expected credit losses methodology for estimating allowances for credit losses. The Company has elected to deferdelay FASB ASU
2016-13.
Also, as a resultThis ASU was delayed until the earlier of the CARESdate on which the national emergency concerning the
COVID-19
outbreak declared by the President on March 15, 2020 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020. On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 was signed into law. The law changed the full balancedelayed implementation date to the earlier of the AMT credit will be utilized in 2020.Company’s fiscal year that begins after the date on which the national emergency terminates or January 1, 2022.
Recent Accounting Developments
Recently Adopted Accounting Standards Updates
In August 2018, Financial Accounting Standards Board (FASB)FASB issued Accounting Standards Update (ASU)ASU
2018-15,2018-14,
Intangibles-Goodwill“Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic
715-20)”(“ASU
2018-14”),
to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. ASU
2018-14
is effective for fiscal years beginning after December 15, 2020, for public business entities and Other-Internal Use Software (Subtopicfor fiscal years beginning after December 15, 2021, for all other entities. Early adoption is permitted. Management has evaluated ASU
350-40)2018-14
and as of March 31, 2021, the Company has adopted ASU
2018-14
and determined the impact to be immaterial.
In December 2019, the FASB issued ASU
2019-12,
Income Taxes (Topic 740):
Customer’s Simplifying the Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).Income Taxes. The amendments in this ASU alignsimplify the requirementsaccounting for capitalizing implementation costs incurredincome taxes by removing certain exceptions to the general principles in a hosting arrangement that is a service contract with the requirementsTopic 740. The amendments also improve consistent application of and simplify GAAP for capitalizing implementation costs incurred to develop or obtain
internal-use
software (and hosting arrangements that include an internal use software license). Thisother areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU isare effective for annual reportingfiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.2020. 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
Page 33 of costs and benefits. This ASU is effective for annual reporting periods beginning after December 15, 2019. The effect45
Table of this update did not have a material impact on the Company’s disclosures.Contents
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.derivatives at any period as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020 up to the date that the financial statements are available to be issued. The ASU simplifies the accounting analyses for contract modifications and simplifies the hedge effectiveness assessment and allows hedging relationships impacted by the LIBOR transition to continue. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is assessing the impact of this standard but does not expect that it will have a material impact on the Company’s consolidated financial statements, or results of operations.
In 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.
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.
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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,life cycle, behavioral attributes and the economic environment. During the fourth quarter of 2019 and during 2020, the Company tested the two CECL credit models in parallel with the existing incurred loss models. The securities
held-to-maturity
include U.S. Treasury, U.S. Government Sponsored Enterprises, SBA Backed Securities and U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities. The CECL standard allows assumption of zero expected credit losses where expectation of
non-payment
is zero for these types of securities. The Company expects no impact from ASU
2016-13
to arise from this portfolio.
Since ASU
2016-13,
the FASB has issued amendments intended on improving the clarification of the amendment, ASU
2018-19
Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU
2019-04
Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging. The amendment in ASU
2018-19
was issued in November 2018 and was intended to clarify that receivables arising from operating leases are not within the scope of Subtopic
326-20.
Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The amendment in ASU
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
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
ASU 2016-13.
In November 2019, the FASB issued ASU
2019-11,
Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The amendments in this ASU affect a variety of Topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance. This ASU is effective for annual reporting periods beginning after December 15, 2019. See discussion below of the deferral of the amendments in this ASU.
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Table of Contents
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act allows certain companies to delay FASB ASU
2016-13,
Measurement of Credit Losses on Financial Instruments (CECL), and subsequent amendments to the ASU noted above, including the current expected credit losses methodology for estimating allowances for credit losses. The Company has elected to delay FASB ASU
2016-13.
This ASU will bewas delayed until the earlier of the date on which the national emergency concerning the COVID–19
COVID-19
outbreak declared by the President on March 15, 2020 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020. On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 was signed into law. The effectslaw changed the delayed implementation date to the earlier of these ASUs will not have a material impact onthe first day of the Company’s consolidated financial position atfiscal year that begins after the date on which the national emergency terminates or January 1, 2020 upon retroactive adoption.2022. The Company does not believe the impact of adoption would have been material to the Company’s consolidated financial positionstatements as of June 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.March 31, 2021.
Financial Condition
Loans
On June 30, 2020,March 31, 2021, total loans outstanding were $2,798,087,000, up$2,992,762,000, down by $371,968,000$3,067,000 from the total on December 31, 2019.2020. At June 30, 2020,March 31, 2021, commercial real estate loans accounted for 27.3%26.6%, commercial and industrial accounted for 41.3%43.9%, and residential real estate loans, including home equity loans, accounted for 25.0%23.9% of total loans.
Commercial and industrial loans increased to $1,155,592,000 at June 30, 2020$1,315,295,000 on March 31, 2021 from $812,417,000$1,314,245,000 at December 31, 2019, primarily as a result2020. The Company originated approximately $92,800,000 of PPP loans during the first quarter of 2021 and received approximately $230,000,000$76,200,000 of SBA PPP loan balances.payoffs, primarily from loan forgiveness, during the first quarter of 2021. Commercial real estate loans decreasedincreased to $764,886,000$796,660,000 on March 31, 2021 from $786,102,000$789,836,000 on December 31, 20192020 primarily as a result of loan payoffs.originations. Construction loans decreased to $6,513,000$7,854,000 at June 30, 2020March 31, 2021 from $8,992,000$10,909,000 on December 31, 2019,2020, primarily as a result of loan payoffs. Residential real estate loans increased to
Page 37 of 48
$400,867,000 $460,123,000 on June 30, 2020March 31, 2021 from $371,897,000$448,436,000 on December 31, 2019,2020, primarily as a result of loan originations. Home equity loans decreased to $297,355,000$255,770,000 on June 30, 2020March 31, 2021 from $304,363,000 at$274,357,000 on December 31, 2019,2020, primarily as a result of a home equity loan payoffs. Municipal loans increaseddecreased slightly to $153,017,000$137,073,000 from $120,455,000, primarily as a result of loan originations.$137,607,000.
In recent years, the Company has increased business to larger institutions, specifically, healthcare, higher education, and municipal organizations. Further discussion relating to changes in portfolio composition is discussedprovided 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 June 30, 2020March 31, 2021 was $32,516,000$34,952,000 as compared to $29,585,000$35,486,000 at December 31, 2019.2020. The level of the allowance for loan losses to total loans was 1.16%1.17% at June 30, 2020March 31, 2021 and 1.22%1.18% at December 31, 2019.2020. The ratio of the allowance for loan losses to loans outstanding has decreased slightly from December 31, 2019,2020, primarily from approximately $230 millionthe payoff of PPP loans that are guaranteed by the SBA, which require no allowance forone large loan losses. This was offset, somewhat, by increased allocations forand a decrease in general economic factors associated with the
COVID-19
pandemic.factor allocations. 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 June 30, 2020.March 31, 2021.
Credit ratings issued by national organizations were utilized as credit quality indicators as presented in the following table at June 30, 2020March 31, 2021 and are included within the total loan portfolio.
 
  
Commercial
and
Industrial
   
Municipal
   
Commercial
Real
Estate
   
Total
   
Commercial
and
Industrial
   
Municipal
   
Commercial
Real
Estate
   
Total
 
  
(in thousands)
   
(in thousands)
 
Credit Rating:
                
Aaa – Aa3
  
$
619,107
 
  
$
86,385
 
  
$
38,628
 
  
$
744,120
 
  
$
705,387
 
  
$
73,758
 
  
$
36,519
 
  
$
815,664
 
A1 – A3
  
 
185,303
 
  
 
7,229
 
  
 
146,162
 
  
 
338,694
 
  
 
182,559
 
  
 
7,103
 
  
 
145,096
 
  
 
334,758
 
Baa1 – Baa3
  
 
—  
 
  
 
51,133
 
  
 
141,897
 
  
 
193,030
 
  
 
50,000
 
  
 
51,133
 
  
 
146,930
 
  
 
248,063
 
Ba2
  
 
—  
 
  
 
5,470
 
  
 
—  
 
  
 
5,470
 
  
 
—  
 
  
 
5,080
 
  
 
—  
 
  
 
5,080
 
  
 
   
 
   
 
   
 
 
  
 
   
 
   
 
   
 
 
Total
  
$
804,410
 
  
$
150,217
 
  
$
326,687
 
  
$
1,281,314
 
  
$
937,946
 
  
$
137,074
 
  
$
328,545
 
  
$
1,403,565
 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Page 35 of 45
Table of Contents
Credit ratings issued by national organizations are presented in the following table at December 31, 2019.2020.
 
   Commercial
and
Industrial		   Municipal   Commercial
Real
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 
  
 
 
   
 
 
   
 
 
   
 
 
 
   Commercial
and
Industrial		   Municipal   Commercial
Real
Estate		   Total 
   (in thousands) 
Credit Rating:
        
Aaa – Aa3
  $710,955   $74,291   $38,035   $823,281 
A1 – A3
   183,123    7,103    145,583    335,809 
Baa1 – Baa3
   50,000    51,133    140,905    242,038 
Ba2
   —      5,080    —      5,080 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $944,078   $137,607   $324,523   $1,406,208 
  
 
 
   
 
 
   
 
 
   
 
 
 
The 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.
Page 38 of 48
The following table summarizes the changes in the Company’s allowance for loan losses for the periods indicated.
 
   Three months ended
June 30,		   Six months ended
June 30,		 
   
2020
   2019   
2020
   2019 
   (in thousands)   (in thousands) 
Allowance for loan losses, beginning of period
  
$
30,804
 
  $28,848   
$
29,585
 
  $28,543 
Loans charged off
  
 
(17
) 
   (75)   
 
(79
) 
   (218) 
Recoveries on loans previously
charged-off
  
 
29
 
   47   
 
235
 
   120 
  
 
 
   
 
 
   
 
 
   
 
 
 
Net recoveries (charge-offs)
  
 
12
 
   (28)   
 
156
 
   (98) 
Provision charged to expense
  
 
1,700
 
   250   
 
2,775
 
   625 
  
 
 
   
 
 
   
 
 
   
 
 
 
Allowance for loan losses, end of period
  
$
32,516
 
  $29,070   
$
32,516
 
  $29,070 
  
 
 
   
 
 
   
 
 
   
 
 
 
   Three months ended
March 31,		 
   
2021
   2020 
   (in thousands) 
Allowance for loan losses, beginning of period
  
$
35,486
 
  $29,585 
Loans charged off
  
 
(67
) 
   (62) 
Recoveries on loans previously
charged-off
  
 
83
 
   206 
  
 
 
   
 
 
 
Net recoveries
  
 
16
 
   144 
Provision (credit) charged to expense
  
 
(550
) 
   1,075 
  
 
 
   
 
 
 
Allowance for loan losses, end of period
  
$
34,952
 
  $30,804 
  
 
 
   
 
 
 
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:
 
   
June 30,
2020
  December 31,
2019		 
   (dollars in thousands) 
Nonaccruing loans
  
$
1,538
 
 $2,014 
Total nonperforming assets
  
$
1,538
 
 $2,014 
Loans past due 90 days or more and still accruing
  
$
—  
 
 $—   
Nonaccruing loans as a percentage of total loans
  
 
0.05
% 
  0.08% 
Nonperforming assets as a percentage of total assets
  
 
0.03
% 
  0.04% 
Accruing troubled debt restructures
  
$
2,271
 
 $2,361 
   
March 31,
  December 31, 
   
2021
  2020 
   (dollars in thousands) 
Nonaccruing loans
  
$
942
 
 $3,996 
Total nonperforming assets
  
$
942
 
 $3,996 
Loans past due 90 days or more and still accruing
  
$
—  
 
 $90 
Nonaccruing loans as a percentage of total loans
  
 
0.03
% 
  0.13% 
Nonperforming assets as a percentage of total assets
  
 
0.01
% 
  0.06% 
Accruing troubled debt restructures
  
$
2,099
 
 $2,202 
Investments
Management continually evaluates its investment alternatives in order to properly manage the overall balance sheet mix. The timing of purchases, sales and reinvestments, if any, will be based on various factors including expectation of movements in market interest rates, deposit flows and loan demand. Notwithstanding these events, it is the intent of management to grow the earning asset base mainly through loan originations while funding this growth through a mix of retail deposits, FHLB advances, and retail repurchase agreements.
Page 36 of 45
Table of Contents
Securities
Available-for-Sale
(at Fair Value)
The securities
available-for-sale
portfolio totaled $301,213,000$263,898,000 at June 30, 2020, an increaseMarch 31, 2021, a decrease of 15.6%6.6% from December 31, 2019.2020. The portfolio increaseddecreased mainly as a result of purchasesmaturities of securities
available-for-sale
totaling $75,171,000. The purchases include $44,324,000 of securities that are obligations issued by States and Political Subdivisions. This was$25,993,000 offset, somewhat by calls/maturities and scheduled principal paymentspurchases of $34,603,000.$6,770,000. 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 4.55.0 years.
At June 30, 2020, 83.8%March 31, 2021, 82.7% of the Company’s securities
available-for-sale
are classified as Level 2. The fair values of these securities are generally obtained from a pricing service, which provides the Company with a description of the inputs generally utilized for each type of security. These inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads,
two-sided
markets, benchmark securities, bids, offers and reference data. Market indicators and industry and economic events are also monitored.
Securities
available-for-sale
totaling $48,739,000$45,668,000 or 16.2%17.3% of securities
available-for-sale
are classified as Level 3. These securities are generally municipal securities with no observable fair value with an average life of one year or less. The securities are carried at cost which approximates fair value. A periodic review of underlying financial statements and credit ratings is performed to assess the appropriateness of these valuations.
Page 39 of 48
During the first sixthree months of 2020,2021, net unrealized lossgains on the securities
available-for-sale
increased to $473,000$809,000 from a net unrealized lossgain of $422,000$175,000 at December 31, 2019.2020. This was primarily the result of a decreasean increase in the value of floating rate securities.
The following table sets forth the fair value of securities
available-for-sale
at the dates indicated.
 
   
June 30,
2020
   December 31,
2019		 
   (in thousands) 
Small Business Administration
  
$
48,371
 
  $54,211 
U.S Government Agency and Sponsored Enterprise Mortgage-backed Securities
  
 
200,128
 
   184,187 
Privately Issued Residential Mortgage-backed Securities
  
 
350
 
   396 
Obligations issued by States and Political Subdivisions
  
 
48,739
 
   18,076 
Other Debt Securities
  
 
3,625
 
   3,632 
  
 
 
   
 
 
 
Total Securities
Available–for-Sale
  
$
301,213
 
  $260,502 
  
 
 
   
 
 
 
   
March 31,
   December 31, 
   
2021
   2020 
   (in thousands) 
Small Business Administration
  
$
42,855
 
  $44,039 
U.S Government Agency and Sponsored Enterprise Mortgage-backed Securities
  
 
166,811
 
   177,741 
Privately Issued Residential Mortgage-backed Securities
  
 
326
 
   328 
Obligations issued by States and Political Subdivisions
  
 
45,668
 
   52,276 
Other Debt Securities
  
 
8,238
 
   8,064 
           
Total Securities
Available–for-Sale
  
$
263,898
 
  $282,448 
           
There were no sales of
available-for-sales
securities for the sixthree months ended June 30, 2020.March 31, 2021.
Securities
Held-to-Maturity
(at Amortized Cost)
The securities
held-to-maturity
portfolio totaled $2,427,422,000$3,217,176,000 on June 30, 2020,March 31, 2021, an increase of 3.2%28.2% from December 31, 2019.2020. Purchases of
held-to-maturity
securities totaled $392,637,000$964,868,000 for the sixthree months ended June 30, 2020.March 31, 2021. The purchases were offset somewhat, by maturities and scheduled principal payments of $319,328,000.$257,255,000. The portfolio is concentrated in United States Government Sponsored Enterprises and Mortgage-backed Securities and had an estimated weighted average remaining life of 3.44.7 years.
The following table sets forth the amortized cost of securities
held-to-maturity
at the dates indicated.
 
   
June 30,
2020
   December 31,
2019		 
   (in thousands) 
U.S. Government Sponsored Enterprises
  
$
181,158
 
  $98,867 
SBA Backed Securities
  
 
40,796
 
   44,379 
U.S. Government Agency and Sponsored Enterprise Mortgage-backed Securities
  
 
2,205,468
 
   2,207,874 
  
 
 
   
 
 
 
Total Securities
Held-to-Maturity
  
$
2,427,422
 
  $2,351,120 
  
 
 
   
 
 
 
   
March 31,
2021
   December 31,
2020		 
   (in thousands) 
U.S. Government Sponsored Enterprises
  
$
381,077
 
  $244,220 
SBA Backed Securities
  
 
36,330
 
   37,783 
U.S. Government Agency and Sponsored Enterprise Mortgage-backed Securities
  
 
2,799,769
 
   2,227,085 
           
Total Securities
Held-to-Maturity
  
$
3,217,176
 
  $2,509,088 
           
There were no sales of
held-to-maturity
securities for the sixthree months ended June 30, 2020.March 31, 2021.
Page 37 of 45
Table of Contents
The net unrealized gains on investment securities
held-to-maturity
was $83,807,000$5,727,000 or 3.5%0.2% of the total at June 30, 2020March 31, 2021 and the net unrealized gains of $10,184,000was $70,015,000 or 0.4%2.8% of the total at December 31, 2019.2020. The increasedecrease in the net unrealized gains on securities
held-to-maturity
related primarily to a decreasean increase in interest rates. The gross unrealized losses relate primarily to interest rates and not credit quality, and because the Company does not intend to sell any of these securities and it is not likely that it will be required to sell these securities before the anticipated recovery of the remaining amortized cost, the Company does not consider these investments to be other-than-temporarily impaired as of June 30, 2020March 31, 2021 and December 31, 2019.2020.
At June 30, 2020March 31, 2021 and December 31, 2019,2020, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises. Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac.
Federal Home Loan Bank of Boston Stock
The Bank, as a member of the Federal Home Loan Bank of Boston (“FHLBB”), is required to maintain an investment in capital stock of the FHLBB. Based on redemption provisions, the stock has no quoted market value and is carried at cost. At its discretion, the FHLBB may declare dividends on the stock. The Company reviews this investment for impairment based on the ultimate recoverability of the cost basis in the stock. During the first six months of 2020, the FHLBB redeemed $10,701,000 of FHLBB stock and the Company purchased $4,601,000 of FHLBB stock. As of June 30, 2020,March 31, 2021, there have been no indicators of impairment that would require further consideration of potential impairment.
Page 40 of 48
Equity Securities
At June 30, 2020
On March 31, 2021 equity securities totaled $1,669,000$1,722,000 compared to $1,688,000$1,668,000 at December 31, 2019.2020, the increase is primarily the result of changes in fair values.
Deposits and Borrowed Funds
On June 30, 2020,March 31, 2021, deposits totaled $5,111,968,000$6,396,042,000 representing a 16.2%17.3% increase from December 31, 2019.2020. Total deposits increased primarily as a result of an increase in savings and NOW deposits, demand deposits, and money market accounts, and time deposits.accounts. These types of deposits increased primarily from an increased customer base and the cyclical nature of the municipal deposit base. Savings and NOW deposits increased mainly as a result of an increase in municipal NOW accounts, and corporate savings accounts. Demand deposits increased mainly as a result of increased corporate checking balances as a result of PPP loan proceed deposits. Money market accounts increased mainly as a result of an increase in municipal and corporate money market accounts. Time deposits increaseddecreased primarily as a result of increased personal, corporate anddecreased municipal time deposits.
Borrowed funds totaled $357,457,000$380,524,000 at June 30, 2020March 31, 2021 compared to $637,000,000$409,099,000 at December 31, 2019.2020. Borrowed funds decreased mainly as a result of a decrease in borrowings from the FHLBB and a decrease in repurchase agreements. 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 June 30, 2020,March 31, 2021, total equity was $352,202,000$381,332,000 compared to $332,581,000$370,409,000 on December 31, 2019.2020. The Company’s equity increased primarily as a result of earnings, partially offset somewhat, by dividends paid. The Company’s leverage ratio stood at 6.92%6.16% on June 30, 2020,March 31, 2021, compared to 7.25%6.64% at December 31, 2019.2020. The decrease in the leverage ratio was due to an increase in quarterly average assets, offset somewhat by an increase in stockholders’ equity. Book value as of June 30, 2020,March 31, 2021, was $63.26$68.49 as compared to $59.73$66.53 on December 31, 2019.2020.
 
Page 4138 of 4845
Table of Contents
Results of Operations
The following table sets forth the distribution of the Company’s average assets, liabilities and stockholders’ equity, and average annualized rates earned or paid on a fully taxable equivalent basis for each of the three-month periods indicated.
 
   Three Months Ended 
   
June 30, 2020
  June 30, 2019 
   
Average
Balance
  
Interest
Income/
Expenses (1)
  
Rate
Earned/
Paid (1)
  Average
Balance		  Interest
Income/
Expenses (1)		  Rate
Earned/
Paid (1)		 
   (dollars in thousands) 
ASSETS
       
Interest-earning assets:
       
Loans (2)
       
Loans taxable
  
$
1,501,889
 
 
$
13,270
 
 
 
3.55
% 
 $1,201,052  $13,354   4.46% 
Loans
tax-exempt
  
 
1,204,389
 
 
 
8,374
 
 
 
2.80
% 
  1,118,523   10,542   3.78% 
Securities
available-for-sale
(5):
       
Taxable
  
 
280,834
 
 
 
938
 
 
 
1.34
% 
  280,421   2,187   3.12% 
Tax-exempt
  
 
11,378
 
 
 
54
 
 
 
1.90
% 
  49,161   368   2.99% 
Securities
held-to-maturity:
       
Taxable
  
 
2,370,522
 
 
 
15,222
 
 
 
2.57
% 
  2,162,993   14,595   2.70% 
Interest-bearing deposits in other banks
  
 
266,089
 
 
 
68
 
 
 
0.10
% 
  153,665   927   2.41% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-earning assets
  
 
5,635,101
 
 
 
37,926
 
 
 
2.69
% 
  4,965,815   41,973   3.38% 
Non interest-earning assets
  
 
290,228
 
    247,292   
Allowance for loan losses
  
 
(31,477
) 
    (29,018)   
  
 
 
    
 
 
   
Total assets
  
$
5,893,852
 
   $5,184,089   
  
 
 
    
 
 
   
LIABILITIES AND STOCKHOLDERS’ EQUITY
       
Interest-bearing deposits:
       
NOW accounts
  
$
1,143,571
 
 
$
1,320
 
 
 
0.46
% 
 $976,801  $2,533   1.04% 
Savings accounts
  
 
803,135
 
 
 
798
 
 
 
0.40
% 
  879,393   3,344   1.53% 
Money market accounts
  
 
1,580,486
 
 
 
3,462
 
 
 
0.88
% 
  1,270,205   5,412   1.71% 
Time deposits
  
 
607,942
 
 
 
3,111
 
 
 
2.06
% 
  502,717   2,893   2.31% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-bearing deposits
  
 
4,135,134
 
 
 
8,691
 
 
 
0.85
% 
  3,629,116   14,182   1.57% 
Securities sold under agreements to repurchase
  
 
206,764
 
 
 
309
 
 
 
0.60
% 
  193,915   490   1.01% 
Other borrowed funds and subordinated debentures
  
 
192,843
 
 
 
1,302
 
 
 
2.72
% 
  230,887   1,770   3.07% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-bearing liabilities
  
 
4,534,741
 
 
 
10,302
 
 
 
0.91
% 
  4,053,918   16,442   1.63% 
   
 
 
  
 
 
   
 
 
  
 
 
 
Non-interest-bearing
liabilities
       
Demand deposits
  
 
924,506
 
    736,766   
Other liabilities
  
 
87,756
 
    79,723   
  
 
 
    
 
 
   
Total liabilities
  
 
5,547,003
 
    4,870,407   
  
 
 
    
 
 
   
Stockholders’ equity
  
 
346,849
 
    313,682   
Total liabilities & stockholders’ equity
  
$
5,893,852
 
   $5,184,089   
  
 
 
    
 
 
   
Net interest income on a fully taxable equivalent basis
   
 
27,624
 
    25,531  
Less taxable equivalent adjustment
   
 
(1,806
) 
    (2,281)  
   
 
 
    
 
 
  
Net interest income
   
$
25,818
 
   $23,250  
   
 
 
  
 
 
   
 
 
  
 
 
 
Net interest spread (3)
    
 
1.78
% 
    1.75% 
    
 
 
    
 
 
 
Net interest margin (4)
    
 
1.97
% 
    2.06% 
    
 
 
    
 
 
 
   Three Months Ended 
   
March 31, 2021
  March 31, 2020 
   
Average
Balance
  
Interest
Income/
Expenses (1)
  
Rate
Earned/
Paid (1)
  Average
Balance		  Interest
Income/
Expenses (1)		  Rate
Earned/
Paid (1)		 
   (dollars in thousands) 
ASSETS
       
Interest-earning assets:
       
Loans (2)
       
Loans taxable
  
$
1,740,943
 
 
$
15,636
 
 
 
3.64
% 
 $1,275,999  $13,481   4.25% 
Loans
tax-exempt
  
 
1,241,051
 
 
 
7,582
 
 
 
2.48
% 
  1,171,963   10,789   3.70% 
Securities
available-for-sale
(5):
       
Taxable
  
 
240,695
 
 
 
539
 
 
 
0.90
% 
  262,332   1,582   2.41% 
Tax-exempt
  
 
48,274
 
 
 
110
 
 
 
0.91
% 
  9,640   137   5.68% 
Securities
held-to-maturity:
       
Taxable
  
 
2,816,215
 
 
 
13,117
 
 
 
1.86
% 
  2,299,750   15,293   2.66% 
Interest-bearing deposits in other banks
  
 
715,155
 
 
 
179
 
 
 
0.10
% 
  173,928   610   1.40% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-earning assets
  
 
6,802,333
 
 
 
37,163
 
 
 
2.19
% 
  5,193,612   41,892   3.23% 
Non interest-earning assets
  
 
362,917
 
    285,422   
Allowance for loan losses
  
 
(35,734
) 
    (29,765)   
  
 
 
    
 
 
   
Total assets
  
$
7,129,516
 
   $5,449,269   
  
 
 
    
 
 
   
LIABILITIES AND STOCKHOLDERS’ EQUITY
       
Interest-bearing deposits:
       
NOW accounts
  
$
1,159,180
 
 
$
647
 
 
 
0.23
% 
 $1,016,266  $2,252   0.89% 
Savings accounts
  
 
1,068,525
 
 
 
471
 
 
 
0.18
% 
  716,569   1,473   0.83% 
Money market accounts
  
 
2,296,286
 
 
 
2,886
 
 
 
0.51
% 
  1,480,399   5,572   1.51% 
Time deposits
  
 
510,287
 
 
 
1,581
 
 
 
1.26
% 
  589,396   3,172   2.16% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-bearing deposits
  
 
5,034,278
 
 
 
5,585
 
 
 
0.45
% 
  3,802,630   12,469   1.32% 
Securities sold under agreements to repurchase
  
 
234,810
 
 
 
141
 
 
 
0.24
% 
  246,272   626   1.02% 
Other borrowed funds and subordinated debentures
  
 
188,769
 
 
 
1,238
 
 
 
2.66
% 
  217,839   1,499   2.77% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-bearing liabilities
  
 
5,457,857
 
 
 
6,964
 
 
 
0.52
% 
  4,266,741   14,594   1.38% 
   
 
 
  
 
 
   
 
 
  
 
 
 
Non-interest-bearing
liabilities
       
Demand deposits
  
 
1,195,863
 
    758,173   
Other liabilities
  
 
99,787
 
    87,423   
  
 
 
    
 
 
   
Total liabilities
  
 
6,753,507
 
    5,112,337   
  
 
 
    
 
 
   
Stockholders’ equity
  
 
376,009
 
    336,932   
Total liabilities & stockholders’ equity
  
$
7,129,516
 
   $5,449,269   
  
 
 
    
 
 
   
Net interest income on a fully taxable equivalent basis
   
 
30,199
 
    27,298  
Less taxable equivalent adjustment
   
 
(1,632
) 
    (2,097)  
   
 
 
    
 
 
  
Net interest income
   
$
28,567
 
   $25,201  
   
 
 
  
 
 
   
 
 
  
 
 
 
Net interest spread (3)
    
 
1.67
% 
    1.85% 
    
 
 
    
 
 
 
Net interest margin (4)
    
 
1.80
% 
    2.11% 
    
 
 
    
 
 
 
 
(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 averageweightedaverage 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 4239 of 4845
The following table sets forth the distributionTable 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
six-month
periods indicated.
   Six Months Ended 
   
June 30, 2020
  June 30, 2019 
   
Average
Balance
  
Interest
Income/
Expenses (1)
  
Rate
Earned/
Paid (1)
  Average
Balance		  Interest
Income/
Expenses (1)		  Rate
Earned/
Paid (1)		 
   (dollars in thousands) 
ASSETS
       
Interest-earning assets:
       
Loans (2)
       
Loans taxable
  
$
1,388,944
 
 
$
26,751
 
 
 
3.87
% 
 $1,191,966  $26,448   4.47% 
Loans
tax-exempt
  
 
1,188,176
 
 
 
19,163
 
 
 
3.24
% 
  1,114,199   20,954   3.79% 
Securities
available-for-sale
(5):
       
Taxable
  
 
271,583
 
 
 
2,520
 
 
 
1.86
% 
  276,885   4,370   3.16% 
Tax-exempt
  
 
10,509
 
 
 
191
 
 
 
3.63
% 
  63,779   914   2.87% 
Securities
held-to-maturity:
       
Taxable
  
 
2,335,136
 
 
 
30,515
 
 
 
2.61
% 
  2,121,043   28,383   2.68% 
Interest-bearing deposits in other banks
  
 
220,008
 
 
 
678
 
 
 
0.62
% 
  189,568   2,276   2.40% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-earning assets
  
 
5,414,356
 
 
 
79,818
 
 
 
2.96
% 
  4,957,440   83,345   3.38% 
Non interest-earning assets
  
 
287,825
 
    247,276   
Allowance for loan losses
  
 
(30,621
) 
    (28,864)   
  
 
 
    
 
 
   
Total assets
  
$
5,671,560
 
   $5,175,852   
  
 
 
    
 
 
   
LIABILITIES AND STOCKHOLDERS’ EQUITY
       
Interest-bearing deposits:
       
NOW accounts
  
$
1,079,919
 
 
$
3,573
 
 
 
0.67
% 
 $939,767  $4,689   1.01% 
Savings accounts
  
 
759,852
 
 
 
2,270
 
 
 
0.60
% 
  894,511   6,653   1.50% 
Money market accounts
  
 
1,530,442
 
 
 
9,034
 
 
 
1.19
% 
  1,270,952   10,756   1.71% 
Time deposits
  
 
598,669
 
 
 
6,283
 
 
 
2.11
% 
  509,710   5,686   2.25% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-bearing deposits
  
 
3,968,882
 
 
 
21,160
 
 
 
1.07
% 
  3,614,940   27,784   1.55% 
Securities sold under agreements to repurchase
  
 
226,518
 
 
 
935
 
 
 
0.83
% 
  181,252   875   0.97% 
Other borrowed funds and subordinated debentures
  
 
205,341
 
 
 
2,801
 
 
 
2.74
% 
  231,401   3,422   2.98% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-bearing liabilities
  
 
4,400,741
 
 
 
24,896
 
 
 
1.14
% 
  4,027,593   32,081   1.61% 
   
 
 
  
 
 
   
 
 
  
 
 
 
Non-interest-bearing
liabilities
       
Demand deposits
  
 
841,339
 
    759,653   
Other liabilities
  
 
87,589
 
    79,440   
  
 
 
    
 
 
   
Total liabilities
  
 
5,329,669
 
    4,866,686   
  
 
 
    
 
 
   
Stockholders’ equity
  
 
341,891
 
    309,166   
Total liabilities & stockholders’ equity
  
$
5,671,560
 
   $5,175,852   
  
 
 
    
 
 
   
Net interest income on a fully taxable equivalent basis
   
 
54,922
 
    51,264  
Less taxable equivalent adjustment
   
 
(3,903
) 
    (4,576)  
   
 
 
    
 
 
  
Net interest income
   
$
51,019
 
   $46,688  
   
 
 
  
 
 
   
 
 
  
 
 
 
Net interest spread (3)
    
 
1.83
% 
    1.76% 
    
 
 
    
 
 
 
Net interest margin (4)
    
 
2.04
% 
    2.09% 
    
 
 
    
 
 
 
(1)
On a fully taxable equivalent basis calculated using a federal tax rate of 21%.
(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 43 of 48
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 June 30, 2020
Compared with
Three Months Ended June 30, 2019		  Six Months Ended June 30, 2020
Compared with
Six Months Ended June 30, 2019		 
   Increase/(Decrease)
Due to Change in		  Increase/(Decrease)
Due to Change in		 
   Volume  Rate  Total  Volume  Rate  Total 
   (in thousands)  (in thousands) 
Interest income:
       
Loans
       
Taxable
  $2,950  $(3,034)  $(84)  $4,088  $(3,785)  $303 
Tax-exempt
   756   (2,924)   (2,168)   1,345   (3,136)   (1,791) 
Securities
available-for-sale
       
Taxable
   3   (1,252)   (1,249)   (82)   (1,768)   (1,850) 
Tax-exempt
   (213)   (101)   (314)   (918)   195   (723) 
Securities
held-to-maturity
       
Taxable
   1,355   (728)   627   2,810   (678)   2,132 
Interest-bearing deposits in other banks
   397   (1,256)   (859)   317   (1,915)   (1,598) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest income
   5,248   (9,295)   (4,047)   7,560   (11,087)   (3,527) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Interest expense:
       
Deposits
       
NOW accounts
   375   (1,588)   (1,213)   628   (1,744)   (1,116) 
Savings accounts
   (268)   (2,278)   (2,546)   (880)   (3,503)   (4,383) 
Money market accounts
   1,104   (3,054)   (1,950)   1,938   (3,660)   (1,722) 
Time deposits
   557   (339)   218   960   (363)   597 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest-bearing deposits
   1,768   (7,259)   (5,491)   2,646   (9,270)   (6,624) 
Securities sold under agreements to repurchase
   31   (212)   (181)   200   (140)   60 
Other borrowed funds and subordinated debentures
   (274)   (194)   (468)   (362)   (259)   (621) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total interest expense
   1,525   (7,665)   (6,140)   2,484   (9,669)   (7,185) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Change in net interest income
  $3,723  $(1,630)  $2,093  $5,076  $(1,418)  $3,658 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   Three Months Ended March 31, 2021
Compared with
Three Months Ended March 31, 2020		 
   Increase/(Decrease)
Due to Change in		 
   Volume   Rate   Total 
   (in thousands) 
Interest income:
      
Loans
      
Taxable
  $4,371   $(2,216)   $2,155 
Tax-exempt
   599    (3,806)    (3,207) 
Securities
available-for-sale
      
Taxable
   (121)    (922)    (1,043) 
Tax-exempt
   168    (195)    (27) 
Securities
held-to-maturity
      
Taxable
   2,994    (5,170)    (2,176) 
Interest-bearing deposits in other banks
   541    (972)    (431) 
  
 
 
   
 
 
   
 
 
 
Total interest income
   8,552    (13,281)    (4,729) 
  
 
 
   
 
 
   
 
 
 
Interest expense:
      
Deposits
      
NOW accounts
   290    (1,895)    (1,605) 
Savings accounts
   512    (1,514)    (1,002) 
Money market accounts
   2,173    (4,859)    (2,686) 
Time deposits
   (370)    (1,221)    (1,591) 
  
 
 
   
 
 
   
 
 
 
Total interest-bearing deposits
   2,605    (9,489)    (6,884) 
Securities sold under agreements to repurchase
   (25)    (460)    (485) 
Other borrowed funds and subordinated debentures
   (186)    (75)    (261) 
  
 
 
   
 
 
   
 
 
 
Total interest expense
   2,394    (10,024)    (7,630) 
  
 
 
   
 
 
   
 
 
 
Change in net interest income
  $6,158   $(3,257)   $2,901 
  
 
 
   
 
 
   
 
 
 
Net Interest Income
For the three months ended June 30, 2020,March 31, 2021, net interest income on a fully taxable equivalent basis totaled $27,624,000$30,109,000 compared to $25,531,000$27,298,000 for the same period in 2019,2020, an increase of $2,093,000$2,811,000 or 8.2%10.3%. The increase in net interest income for the period is primarily due to a decrease in interest expense as a result of falling interest rates. The net interest margin decreased from 2.06%2.11% on a fully
tax-equivalent
basis for the secondfirst quarter of 20192020 to 1.97%1.80% for the same period in 2020.2021. This was primarily the result of increased margin pressure during the recent decrease in interest rates across the yield curve. The average balances of earning assets increased by $669,286,000$1,608,721,000 or 13.5%31.0%, combined with an average yield decrease of 0.69%1.03%, resulting in a decrease in interest income of $4,047,000$4,729,000 on a fully
tax-equivalent
basis. The average balance of interest-bearing liabilities increased by $480,823,000$1,191,116,000 or 11.9%27.9%, combined with an average interest-bearing liabilities interest cost decrease of 0.72%0.86%, resulting in a decrease in interest expense of $6,140,000.$7,630,000.
For the six months ended June 30, 2020, net interest income on a fully taxable equivalent basis totaled $54,922,000 compared to $51,264,000 for the same period in 2019, an increase of $3,658,000 or 7.1%. 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 $874,000 for the first six months of 2020 compared to $13,000 for the same period last year. The net interest margin decreased from 2.09% on a fully
tax-equivalent
basis for the first six months of 2019 to 2.04% 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 $456,916,000 or 9.2%, combined with an average yield decrease of 0.42%, resulting in a decrease in interest income of $3,527,000. The average balance of interest-bearing liabilities increased by $373,148,000 million or 9.3%, combined with an average interest-bearing liabilities interest cost decrease of 0.47%, resulting in a decrease in interest expense of $7,185,000 million.
Page 44 of 48
As illustrated in the table above, the main contributors to the increase in net interest income for the three and
six-month
periods werethree-month period was a decrease in rates paid on interest-bearing deposits. The Company has decreased interest rates on these products as market rates have decreased. Securities
held-to-maturity
income increased, for the three-month period, primarily as a result of an increase in volume. Securities
available-for-sale,
interest-bearing deposits in other banks, and loan income decreased primarily from a decrease in rates paid on the portfolios. The Company has a sizable floating rate
available-for-sale
and loan portfolio. These portfolios reprice as interest rates rise or fall.
Page 40 of 45
Table of Contents
Provision for Loan Losses
The provision for loan losses increaseddecreased by $2,150,000$1,625,000 from $625,000$1,075,000 for the six monthsquarter ended June 30, 2019March 31, 2020 compared to $2,775,000a credit of $550,000 for the same period in 2021. The provision for the first quarter of 2020 was primarily as athe result of provisions related to the economic uncertainties associated withonset of the novel coronavirus disease (COVID–19) pandemic
COVID-19
pandemic. The credit provision for the first quarter of 2021 was primarily attributable to a decline in loan balances exclusive of PPP loans and increaseda reduction in specific allocations to the allowance for loan balances. losses.
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 June 30, 2020March 31, 2021 decreased by $956,000$107,000 from the same period last year to $4,041,000.$4,203,000. This was mainly attributable to a decrease in other income of $490,000,$95,000 and a decrease in service charges on deposit accounts of $259,000, a decrease in gains on sales$78,000. This was offset, somewhat, by an increase of loans of $139,000, and a decrease$66,000 in lockbox fees of $68,000.fees. 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 increase modestly as
non-essential
businesses are gradually reopened. These businesses have been closed per order of the Governor of the Commonwealth of Massachusetts since March 24, 2020 and are reopening in a phased in process. Other income decreased mainly as a result of proceeds from life insurance policies during the second quarter of 2019. Also, there were no loan sales during the second quarter of 2020.
Other operating income for the six months ended June 30, 2020 decreased by $1,073,000 from the same period last year to $8,351,000. This was mainly attributable to a decrease in other income of $520,000, a decrease in service charges on deposit accounts of $172,000, a decrease in gains on sales of loans of $154,000, and a decrease in lockbox fees of $227,000. 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. Other income decreased mainly as a result of proceeds froma decrease in insurance gains on life insurance policies during the second quarterpolicies. Lockbox fees increased mainly as a result of 2019.increased customer activity.
For the quarter ended June 30, 2020,March 31, 2021, operating expenses decreasedincreased by $1,222,000$2,698,000 or 6.7%14.8% to $17,042,000,$20,871,000, from the same period last year. This was primarily attributable to decreasesan increase in other expenses of $694,000, salaries and employee benefits of $629,000, and$879,000, an increase of $187,000 in occupancy costs, $66,000. This was offset, somewhat, by increasesan increase of $112,000 in equipment expenses, an increase of $167,000. Other expenses decreased mainly as a result$472,000 in FDIC assessments, and an increase of decreases$1,048,000 in consultants’ expense, marketing expenses, and other real estate owned expenses. The decreaseincrease in salaries and employee benefits was mainly attributable to deferred origination costs associated with originating the SBA PPP loansmerit increases, bonus accruals, and other employee benefits. The increase in FDIC assessments was attributable to credits applied during the quarter. Thisfirst quarter of 2020. The increase in occupancy costs was offset, somewhat, by merit increases andmainly attributable to an increase in pension costs.building maintenance. Other expenses increased mainly as a result of expenses related to the previously announced merger, increases in bank security, and increases in contributions. Equipment expense increased mainly from an increase in depreciation expense. Occupancy costs decreased primarily as a result of decreases in rent expense.
For the six months ended June 30, 2020, operating expenses decreased by $1,239,000 or 3.4% to $35,215,000, from the same period last year. This was primarily attributable to decreases in other expenses of $915,000, salaries and employee benefits of $293,000, and occupancy costs $252,000. This was offset, somewhat, by increases in equipment expenses of $221,000. Other expenses decreased mainly as a result of decreases in consultants’ expense, FDIC deposit assessments, marketing expenses, and other real estate owned expenses. The decrease 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.
Income Taxes
For the second quarter of 2020,ended March 31, 2021, the Company’s income tax expense totaled $1,061,000$1,679,000 on pretax income of $11,117,000$12,449,000 resulting in an effective tax rate of 9.5%13.5%. For last year’s corresponding quarter, the Company’s income tax expense totaled $267,000$597,000 on pretax income of $9,733,000$10,263,000 resulting in an effective tax rate of 2.7%5.8%. This increase was primarily the result of an increase in taxable income relative to total income. For the six months ended June 30, 2020 the Company’s effective tax rate increased to 7.8% from 0.8% 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 utilized in 2020.
Page 45 of 48
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, 2019,2020, filed with the Securities and Exchange Commission. The information is contained in the
Form 10-K
within the Market Risk and Asset Liability Management section of Management’s Discussion and Analysis of Results of Operations and Financial Condition.
Item
4.
Controls and Procedures
The Company’s management, with participation of the Company’s principal executive and financial officers, has evaluated its disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, the Company’s management, with participation of its principal executive and financial officers, has concluded that the Company’s disclosure controls and procedures are effective. The disclosure controls and procedures also effectively ensure that information required to be disclosed in the Company’s filings and submissions with the Securities and Exchange Commission under the Exchange Act is accumulated and reported to Company management (including the principal executive officer and the principal financial officer) as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. In addition, the Company has evaluated its internal control over financial reporting and during the first sixthree months of 20202021 there were no changes that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Page 41 of 45
Table of Contents
Part II
–
Other Information
 
Item 1
A
A
number of legal claims against the Company arising in the normal course of business were outstanding at June 30, 2020.March 31, 2021. Management, after reviewing these claims with legal counsel, is of the opinion that their resolution will not have a material adverse effect on the Company’s consolidated financial position or results of operations.
 
Item 1A
Risk Factors – Please read “Risk Factors” in the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2019.2020. 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.
If our merger with Eastern Bankshares, Inc. is not completed, we will have incurred substantial expenses without our shareholders realizing the expected benefits.
As a resultOn April 7, 2021, we entered into an Agreement and Plan of Merger with Eastern Bankshares, Inc. pursuant to which we will merge with and into Eastern, with Eastern as the surviving corporation. Completion of the
COVID-19
pandemic, merger is subject to closing conditions including, but not limited to, various regulatory approvals and the Company’sapproval of our shareholders. We currently expect that the merger will be completed in the fourth quarter of 2021. It is possible, however, that factors outside of our control could require the parties to complete the merger at a later time, or not to complete the merger at all. In the event that the merger is not consummated for any reason, we will be subject to many risks, including the costs related to the merger, such as legal, accounting and advisory fees, which must be paid even if the merger is not completed, and, potentially, the payment of a termination fee under certain circumstances. If the merger is not consummated, the market price of our common stock could decline. We also could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against us to perform our obligations under the merger agreement.
We will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees, suppliers and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers, suppliers and others who deal with us to seek to change existing business relationships with us. Our employee retention and recruitment may be particularly challenging prior to the effective time of the merger, as employees and prospective employees may experience uncertainty about their future roles with the combined company.
The pursuit of the merger and the preparation for the integration may place a significant burden on management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect our financial conditionresults. In addition, the merger agreement generally requires that we operate in the usual, regular and ordinary course of business and restricts us from taking certain actions prior to the effective time of the merger or termination of the merger agreement without Eastern’s consent in writing. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the merger.
Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.
Before the merger may be completed, certain approvals or consents must be obtained from the various bank regulatory and other authorities. There can be no assurance as to whether regulatory approval will be received or the timing of the approvals. Eastern is not obligated to complete the merger if the regulatory approvals received in connection with the completion of the merger include any conditions or restrictions that would constitute a “Materially Burdensome Regulatory Condition” as defined in the merger agreement. There can be no assurance that regulatory approvals will not include such conditions or restrictions and such conditions or restrictions could have the effect of delaying completion of the merger.
The termination fee and the restrictions on solicitation contained in the merger agreement may discourage other companies from trying to acquire us.
Until the completion of the merger, we are prohibited from soliciting, initiating, encouraging, or with some exceptions, considering any inquiries or proposals that may lead to a proposal or offer for a merger or other business combination transaction with any person other than Eastern. In addition, we have agreed to pay a termination fee of approximately $25.7 million to Eastern in specified circumstances. These provisions could discourage other companies from trying to acquire us even though those other companies might be willing to offer greater value to our shareholders than Eastern has offered in the merger. The payment of the termination fee also could have a material adverse effect on our results of operation have been or may be, negatively impacted by the following:operations.
 
a decline
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Litigation may be filed against the board of directors the Company and/or Eastern that could prevent or delay the completion of the merger or result in the demand for products and services;payment of damages following completion of the merger.
In connection with the merger, it is possible that our shareholders may file putative class action lawsuits against the boards of directors of the Company and/or Eastern. Among other remedies, these shareholders could seek to enjoin the merger. The outcome of any such litigation would be uncertain. If a dismissal is not granted or a settlement is not reached, such potential lawsuits could prevent or delay completion of the merger and result in substantial costs to Eastern and the Company, including any costs associated with indemnification obligations of the Company and/or Eastern.
 
an increase in loan delinquencies, problem assets and foreclosures;Page 43 of 45
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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;
an increase in the allowance for loan losses has occurred and may continue to occur.
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds –
(a) – (b) Not applicable.
(c) None
 
Item 3
Defaults Upon Senior Securities – None
 
Item 4
Mine Safety Disclosures – Not applicable
 
Item 5
Other Information – None
 
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Item 6
Exhibits
 
2.1Agreement and Plan of Merger by and among Eastern Bankshares, Inc., Clarion Acquisition Corp., Century Bancorp, Inc. and Century Bank and Trust Company, dated as of April 7, 2021, incorporated by reference to the Registrant’s 8-K filed on April 8, 2021.
10.1Form of Voting Agreement, incorporated by reference to the Registrant’s 8-K filed on April 8, 2021.
10.2Employment letter, dated as of April 6, 1999, from Century Bank and Trust Company to David B. Woonton. 
31.1  Certification of Chairman, President and Chief Executive Officer of the Company Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14.
31.2  Certification of Chief Financial Officer of the Company Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14.
    +32.1+32.1  Certification of Chairman, President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    +32.2+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
on 10-Q
for the quarter ended June 30, 2020,March 31, 2021, formatted in XBRL: (i) Consolidated Balance Sheets at June 30, 2020March 31, 2021 and December 31, 2019;2020; (ii) Consolidated Statements of Income for the three and six months ended June 30, 2020March 31, 2021 and 2019;2020; (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020March 31, 2021 and 2019;2020; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended June 30, 2020March 31, 2021 and 2019;2020; (v) Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2020 and 2019; (vi) Consolidated Statements of Cash Flows for the sixthree months ended June 30, 2020March 31, 2021 and 2019;2020; and (vii)(vi) Notes to Unaudited Consolidated Interim Financial Statements.
 
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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: AugustMay 7, 20202021
  
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)
  
 
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