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), and (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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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.

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 ~~November 6, 2017,~~April 30, 2020, the registrant had ~~4,082,188~~5,416,875 shares of common stock, $1.00 par value per share, outstanding.

~~The accompanying notes are an integral part of these unaudited consolidated financial statements.~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(dollars in thousands, except share data)

Interest and dividend income

Interest on taxable loans

$
13,038

$
12,322

$
37,966

$
35,796

Interest on tax-exempt loans

121

116

391

293

Interest on taxable investment securities

1,712

1,115

4,762

3,979

Interest on tax-exempt investment securities

641

688

1,966

2,071

Dividends on FHLB of Boston stock

107

52

192

132

Interest on overnight investments

54

22

170

94

Total interest and dividend income

15,673

14,315

45,447

42,365

Interest expense

Interest on deposits

809

769

2,183

2,526

Interest on borrowed funds

225

26

434

66

Total interest expense

1,034

795

2,617

2,592

Net interest and dividend income

14,639

13,520

42,830

39,773

Provision for loan losses

310

113

360

338

Net interest and dividend income after provision for
loan losses

14,329

13,407

42,470

39,435

Noninterest income

Wealth management revenue

6,131

5,481

17,077

15,026

Deposit account fees

768

766

2,387

2,134

ATM/Debit card income

334

285

879

852

Bank owned life insurance income

139

149

448

474

Gain (loss) on disposition of investment securities

—

3

(3
)

438

Gain on loans held for sale

39

305

324

591

Loan related derivative income

284

392

647

1,191

Other income

282

234

890

677

Total noninterest income

7,977

7,615

22,649

21,383

Noninterest expense

Salaries and employee benefits

9,066

8,620

27,211

25,431

Occupancy and equipment

2,358

2,278

6,936

7,029

Data processing

1,111

1,279

3,830

3,744

Professional services

954

654

2,650

1,857

Marketing

355

463

1,098

1,388

FDIC Insurance

154

176

466

628

Other expenses

604

693

2,089

2,078

Total noninterest expense

14,602

14,163

44,280

42,155

Income before income taxes

7,704

6,859

20,839

18,663

Income tax expense

2,694

2,284

6,987

6,190

Net income

$
5,010

$
4,575

$
13,852

$
12,473

Share data

Weighted average number of shares outstanding, basic

4,037,026

3,996,687

4,027,378

3,982,696

Weighted average number of shares outstanding, diluted

4,070,332

4,043,651

4,062,743

4,029,281

Basic earnings per share

$
1.23

$
1.13

$
3.40

$
3.09

Diluted earnings per share

$
1.22

$
1.13

$
3.37

$
3.09

	March 31, 2020			December 31, 2019
	(dollars in thousands, except par value)
Assets
Cash and cash equivalents	$	42,989		$	61,335
Investment securities
Available for sale, at fair value (amortized cost $115,485 and $141,109, respectively)		117,947			140,330
Held to maturity, at amortized cost (fair value $256,860 and $264,114, respectively)		246,906			258,172
Total investment securities		364,853			398,502
Loans held for sale, at lower of cost or fair value		2,875			1,546
Loans
Residential mortgage		917,103			917,566
Commercial mortgage		1,089,796			1,060,574
Home equity		83,066			80,675
Commercial & Industrial		127,648			133,236
Consumer		38,189			34,677
Total loans		2,255,802			2,226,728
Less: allowance for credit losses on loans		(20,163	)		(18,180	)
Net loans		2,235,639			2,208,548
Federal Home Loan Bank of Boston Stock, at cost		6,268			7,854
Bank owned life insurance		37,479			37,319
Banking premises and equipment, net		14,593			14,756
Right-of-use asset operating leases		32,312			33,587
Deferred income taxes, net		3,721			8,229
Accrued interest receivable		6,872			7,052
Goodwill		31,206			31,206
Merger related intangibles, net		3,248			3,338
Other assets		70,574			42,291
Total assets	$	2,852,629		$	2,855,563
Liabilities
Deposits
Demand	$	608,240		$	630,593
Interest bearing checking		506,654			450,098
Money market		175,158			181,406
Savings		880,944			914,499
Certificates of deposit		219,363			182,282
Total deposits		2,390,359			2,358,878
Short-term borrowings		75,147			135,691
Long-term borrowings		—			—
Operating lease liabilities		33,813			35,054
Other liabilities		55,551			39,379
Total liabilities		2,554,870			2,569,002
Shareholders’ Equity
Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 5,417,983 shares and 5,400,868 shares, respectively		5,418			5,401
Additional paid-in capital		137,186			136,766
Retained earnings		150,891			146,875
Accumulated other comprehensive income (loss)		4,264			(2,481	)
Total shareholders’ equity		297,759			286,561
Total liabilities and shareholders’ equity	$	2,852,629		$	2,855,563

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(dollars in thousands)

Net income

$
5,010

$
4,575

$
13,852

$
12,473

Other comprehensive income, net of tax:

Unrealized gains (losses) on available for sale securities

Unrealized holding gains (losses) arising during period

286

(402
)

968

2,991

Less: reclassification adjustment for (gains) losses
included in net income

-

(2
)

1

(281
)
Total unrealized gains (losses) on securities

286

(404
)

969

2,710

Defined benefit retirement plans

Change in unfunded retirement liability

133

117

398

351

Other comprehensive income (loss)

419

(287
)

1,367

3,061

Comprehensive income

$
5,429

$
4,288

$
15,219

$
15,534

	Three Months Ended
	March 31,		March 31,
	2020		2019
	(dollars in thousands, except share data)
Interest and dividend income
Interest on taxable loans	$	23,338	$	16,284
Interest on tax-exempt loans		198		89
Interest on taxable investment securities		1,723		1,980
Interest on tax-exempt investment securities		595		571
Dividends on FHLB of Boston stock		101		76
Interest on overnight investments		140		118
Total interest and dividend income		26,095		19,118
Interest expense
Interest on deposits		3,129		2,501
Interest on borrowed funds		566		356
Total interest expense		3,695		2,857
Net interest and dividend income		22,400		16,261
Provision (Release) for Credit Losses		2,000		(93	)
Net interest and dividend income after provision (release) for credit losses		20,400		16,354
Noninterest income
Wealth management revenue		6,627		6,124
Deposit account fees		791		738
ATM/Debit card income		307		276
Bank owned life insurance income		160		127
Loss on disposition of investment securities		—		(87	)
Gain on loans sold		119		16
Loan related derivative income		510		436
Other income		304		327
Total noninterest income		8,818		7,957
Noninterest expense
Salaries and employee benefits		13,016		10,827
Occupancy and equipment		2,807		2,330
Data processing		1,685		1,346
Professional services		859		807
Marketing		256		404
FDIC insurance		179		—
Nonoperating expenses		253		91
Other expenses		870		568
Total noninterest expense		19,925		16,373
Income before income taxes		9,293		7,938
Income tax expense		2,061		1,740
Net income	$	7,232		6,198
Share data:
Weighted average number of shares outstanding, basic		5,397,040		4,072,805
Weighted average number of shares outstanding, diluted		5,432,099		4,106,658
Basic earnings per share	$	1.34	$	1.51
Diluted earnings per share	$	1.33	$	1.49

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UNAUDITED CONSOLIDATED STATEMENTS OF ~~CHANGES IN SHAREHOLDERS’ EQUITY~~COMPREHENSIVE INCOME

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Shareholders’
Equity

(dollars in thousands, except per share data)

Balance at December 31, 2015

$
4,000

$
30,427

$
99,064

$
(8,428
)

$
125,063

Net income

—

—

12,473

—

12,473

Other comprehensive income

—

—

—

3,061

3,061

Share based compensation

13

657

—

—

670

Exercise of stock options

36

1,148

—

—

1,184

Shares issued to ESOP and Directors

16

762

—

—

778

Dividends declared ($1.38 per share)

—

—

(5,570
)

—

(5,570
)
Shares repurchased

(30
)

(238
)

(1,163
)

—

(1,431
)
Balance at September 30, 2016

$
4,035

$
32,756

$
104,804

$
(5,367
)

$
136,228

Balance at December 31, 2016

$
4,037

$
33,253

$
107,262

$
(9,881
)

$
134,671

Net income

—

—

13,852

—

13,852

Other comprehensive income

—

—

—

1,367

1,367

Share based compensation

15

757

—

—

772

Exercise of stock options

25

740

—

—

765

Shares issued to ESOP and Directors

12

745

—

—

757

Dividends declared ($1.39 per share)

—

—

(5,663
)

—

(5,663
)
Shares repurchased

(7
)

(60
)

(403
)

—

(470
)
Balance at September 30, 2017

$
4,082

$
35,435

$
115,048

$
(8,514
)

$
146,051

	Three Months Ended March 31,
	2020			2019
	(dollars in thousands)
Net income	$	7,232		$	6,198
Other comprehensive income, net of tax:
Unrealized gains on available for sale securities
Unrealized holding gains		2,500			1,095
Less: reclassification adjustment for losses included in net income		—			66
Total unrealized gains on securities		2,500			1,161
Derivatives
Change in interest rate contracts		4,246			(30	)
Defined benefit retirement plans
Change in retirement liabilities		(1	)		26
Other comprehensive income		6,745			1,157
Comprehensive income	$	13,977		$	7,355

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UNAUDITED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN SHAREHOLDERS’ EQUITY

Nine Months Ended September 30,

2017

2016

(dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$
13,852

$
12,473

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

Provision for loan losses

360

338

Amortization of deferred charges and fees, net

720

1,232

Depreciation and amortization

1,470

1,554

Bank owned life insurance income

(448
)

(474
)
Loss/(gain) on disposition of investment securities

3

(438
)
Compensation expense from stock option and restricted stock grants

772

670

Change in accrued interest receivable

(272
)

47

Change in deferred income taxes

301

1,107

Change in unrealized (gain)/loss of securities available for sale, net of taxes

(557
)

(1,575
)
Change in unfunded pension liability

398

351

Change in other assets

(1,679
)

(2,905
)
Change in other liabilities

1,597

4,172

Change in loans held for sale

5,946

(3,268
)
Other, net

(1
)

38

Net cash provided by operating activities

22,462

13,322

CASH FLOWS FROM INVESTING ACTIVITIES

Origination of loans

(257,931
)

(234,039
)
Proceeds from principal payments of loans

222,187

113,837

Proceeds from calls/maturities of securities available for sale

41,982

140,336

Proceeds from sales of securities available for sale and held to maturity

77,369

18,070

Purchase of securities available for sale

(5,091
)

(129,733
)
Proceeds from calls/maturities of securities held to maturity

27,100

8,521

Purchase of securities held to maturity

(164,684
)

(10,719
)
(Purchase) sale of FHLB of Boston stock

(840
)

1,451

Purchase of banking premises and equipment

(521
)

(1,091
)
Net cash used by investing activities

(60,429
)

(93,367
)
CASH FLOWS FROM FINANCING ACTIVITIES

Change in demand, interest bearing, money market and savings accounts

3,144

64,519

Change in certificates of deposit

(12,323
)

2,460

Change in short-term borrowings

11,500

12,600

Repayment of long-term borrowings

(125
)

(123
)
Cash dividends paid on common stock

(5,663
)

(5,570
)
Repurchase of common stock

(470
)

(1,432
)
Proceeds from issuance of common stock

1,522

1,962

Net cash provided by financing activities

(2,415
)

74,416

Net decrease in cash and cash equivalents

(40,382
)

(5,629
)
Cash and cash equivalents at beginning of period

54,050

24,645

Cash and cash equivalents at end of period

$
13,668

$
19,016

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest

$
2,626

$
2,612

Income taxes

$
7,305

$
6,550

	Three Months Ended March 31,
	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) / Income			Total Shareholders’ Equity
	(dollars in thousands, except per share data)
Balance at December 31, 2018	$	4,107	$	38,271		$	131,135		$	(6,487	)	$	167,026
Net income		—		—			6,198			—			6,198
Other comprehensive income		—		—			—			1,157			1,157
Share based compensation		17		(32	)		—			—			(15	)
Dividends declared ($0.51 per share)		—		—			(2,098	)		—			(2,098	)
Balance at March 31, 2019	$	4,124	$	38,239		$	135,235		$	(5,330	)	$	172,268

Balance at December 31, 2019	$	5,401	$	136,766		$	146,875		$	(2,481	)	$	286,561
Cumulative effect of accounting changes (Note 4)		—		—			(347	)		—			(347	)
Net income		—		—			7,232			—			7,232
Other comprehensive income		—		—			—			6,745			6,745
Share based compensation		17		420			—			—			437
Dividends declared ($0.53 per share)		—		—			(2,869	)		—			(2,869	)
Balance at March 31, 2020	$	5,418	$	137,186		$	150,891		$	4,264		$	297,759

The accompanying notes are an integral part of these unaudited consolidated financial statements.

	For the Three Months Ended March 31,
	2020			2019
	(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,232		$	6,198
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		2,000			(93	)
Amortization of deferred charges and fees, net		51			199
Depreciation and amortization		78			393
Bank owned life insurance income		(160	)		(127	)
Loss/(gain) on disposition of investment securities		—			87
Share based compensation		437			(15	)
Change in accrued interest receivable		180			(250	)
Deferred income tax expense/(benefit)		2,265			1,202
Change in other assets, net		(23,741	)		(35,439	)
Change in other liabilities, net		19,613			30,638
Change in loans held for sale		(1,329	)		—
Net cash provided by operating activities		6,626			2,793
CASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans		(158,477	)		(107,949	)
Proceeds from principal payments of loans		127,572			112,585
Proceeds from calls/maturities of securities available for sale		25,559			8,825
Proceeds from sales of securities available for sale and held to maturity		—			15,913
Proceeds from calls/maturities of securities held to maturity		11,139			14,882
Purchase of securities held to maturity		—			(30,966	)
Redemption of FHLB of Boston stock		1,586			4,172
Purchase of banking premises and equipment		(364	)		(534	)
Net cash (used in) provided by investing activities		7,015			16,928
CASH FLOWS FROM FINANCING ACTIVITIES
Change in demand, interest bearing, money market and savings accounts		(5,600	)		43,128
Change in certificates of deposit		37,026			47,825
Change in short-term borrowings		(60,544	)		(90,000	)
Repayment of long-term borrowings		—			(43	)
Cash dividends paid on common stock		(2,869	)		(2,098	)
Net cash provided by (used in) financing activities		(31,987	)		(1,188	)
Net (decrease)/increase in cash and cash equivalents		(18,346	)		18,533
Cash and cash equivalents at beginning of period		61,335			18,473
Cash and cash equivalents at end of period	$	42,989		$	37,006
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	3,696		$	2,763
Income taxes		—			970
Significant non-cash transactions
Right-of-use assets for lessee operating leases		—			31,975
Right-of-use liabilities for lessee operating leases		—			33,263
Transfer of other real estate owned		2,293			—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

The unaudited consolidated financial statements include the accounts of Cambridge Bancorp (the “Company”) and its wholly owned subsidiary, Cambridge Trust Company (the “Bank”), and the Bank’s wholly owned subsidiaries, Cambridge Trust Company of New Hampshire Inc., CTC Security Corporation, and CTC Security Corporation III. References to the Company herein relate to the consolidated group of companies. All significant intercompany accounts and transactions have been eliminated in preparation of the consolidated financial statements.

The Company is a state-chartered, federally registered bank holding company headquartered in Cambridge, Massachusetts and was incorporated in 1983. The Company is the sole shareholder of the Bank, a Massachusetts trust company chartered in 1890, which is a ~~private~~commercial bank. The ~~Company’s lines~~Company operates as a private bank offering a full range of ~~business consisting of~~private banking and wealth management services ~~commercial~~to its clients. The private banking ~~and consumer banking are~~business, the Company’s only reportable operating segment is managed as a single strategic unit.

The unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) and disclosures necessary to present fairly the Company’s financial position, as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively, and the results of operations and cash flows for the interim periods presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Interim results are not necessarily reflective of the results of the entire year.

For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), filed with the Securities and Exchange Commission on March 16, 2020.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for ~~loan~~credit losses, the fair values of financial instruments, and the valuation of deferred tax assets are particularly subject to change.

~~Changes to retirement plans. On October 23, 2017, the Company announced the decision to freeze the accrual of benefits effective December 31, 2017, within the defined benefit pension plan.~~

Management has reviewed events occurring through ~~November~~May 8, ~~2017,~~2020, the date the unaudited consolidated financial statements were available to be issued and determined that no ~~other~~ subsequent events occurred requiring adjustment to or disclosure in these financial statements.

Accounting ~~Standard~~Standards Update ~~No. 2017-12~~2020-04 - ~~Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities~~ Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU ~~2017-12”~~2020-04”). On ~~August 28, 2017, t~~heMarch 12, 2020, the Financial Accounting Standards Board ~~(the “FASB”~~(“FASB”) issue~~d a n~~ew standar~~d th~~at allows companiesissued Update 2020-04 to better ali~~gn th~~ei~~r h~~edge accounting and ris~~k m~~anage~~ment~~ activities~~. The new standard will also re~~duceease the cost and complexit~~y of~~ applying hedge accounting. The standard requires companie~~s to~~ chan~~ge t~~he recognition a~~nd p~~resentation of t~~he ef~~fect~~s of~~ hedge accounting by:

~~The standard also permits hedge~~potential burden in accounting for ~~strategies for which hedge accounting is not permitted today~~reference rate reform. The amendments in Update 2020-04 are elective and ~~includes new alternatives for measuring the hedged item for fair value hedges of interest~~apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate risk. Furthermore, the standard eases the requirements for effectiveness testing, hedge documentation, applying the critical terms match method, and introduces new alternatives that will permit companiesexpected to ~~reduce the risk of material error corrections if they misapply the shortcut method. The new accounting standard is effective on January 1, 2019 for the Company, and early adoption is permitted.~~

The new standard requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption.

~~While the Company continues~~be discontinued due to ~~assess all potential impacts of the standard, we currently expect adoption to have an immaterial impact on our consolidated financial statements.~~

~~Accounting Standards Update No. 2017-08 -~~ ~~Premium Amortization on Purchased Callable Debt Securities~~ ~~(“ASU 2017-08”). On March 30, 2017, the FASB issued guidance to amend the amortization period for certain purchased callable debt securities held at a premium.~~reference rate reform. The new guidance ~~requires~~provides the following optional expedients:

The amendments are effective for all entities ~~to amortize premium on callable debt securities to~~from the ~~earliest call date. Shortening~~beginning of an interim period that includes the amortization period is generally expected to more closely align the interest income recognition with the expectations incorporated in the market pricing on the underlying securities. Under GAAP, entities generally amortize the premium as an adjustment of yield over the contractual lifeissuance date of the ~~instrument. Debt securities held at a discount will continue~~ASU. An entity may elect to ~~be amortized to maturity. The amended guidance is effective on January 1, 2020 for~~apply the Company, and early adoption is permitted. This guidance should be applied using a modified retrospective transition method. Additionally, in the period of adoption, we will provide disclosures about a change in accounting principle.amendments prospectively through December 31, 2022. We are currently assessing the impact the adoption of this guidance will have on our consolidated balance sheets, statements of income, and cash flows.

~~Accounting Standards Update No. 2017-07 -~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~ (“ASU 2017-07”). On March 10, 2017, the FASB issued amended guidance primarily to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost, as discussed below. The new guidance will require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The amended guidance is effective on January 1, 2020 for the Company. This guidance should be applied using a modified retrospective transition method. We are currently assessing the impact that the adoption of this guidance will have on our consolidated balance sheets, statements of income, and cash flows.

Accounting Standards Update ~~No. 2016-18~~2018-15 - ~~Restricted Cash~~ (“Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU ~~2016-18”~~2018-15”). On ~~November 17, 2016,~~August 29, 2018, the FASB issued amended guidance to ~~require~~align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a ~~statement of cash flows explain~~service contract with the ~~change during~~requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The Company adopted the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Theamended guidance ~~is effective~~ on January 1, ~~2018 for~~2020, using the ~~Company,~~prospective method, and ~~early adoption is permitted. This guidance should be applied using a retrospective transition method to each period presented. The adoption of this guidance will~~it did not have a material impact on ~~our~~the consolidated ~~balance sheets, statements of income, and cash flows.~~financial statements.

Accounting Standards Update ~~No. 2016-15~~2018-14 - ~~Classification of Certain Cash Receipts and Cash Payments~~ (“Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU ~~2016-15”~~2018-14”).On August ~~26, 2016,~~28, 2018, the FASB issued ~~amendments~~guidance to remove, add, and clarify ~~guidance on the classification of~~ certain cash receipts and payments in the statement of cash flows. This guidance is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified on the statement of cash flows. This guidancedisclosures for defined benefit plans. The ASU is effective for ~~the Company for interim and annual periods beginning on January 1, 2018, and~~fiscal years ending after December 15, 2020; early adoption is ~~permitted. This guidance~~permitted and should be applied using athe retrospective ~~transition~~ method to ~~each period~~all periods presented. ~~The adoption of this guidance will not have a material impact on our consolidated balance sheets, statements of income, and cash flows.~~

~~Accounting Standards Update No. 2016-13 -~~ ~~Financial Instruments - Measurement of Credit Losses on Financial Instruments~~ (“ASU 2016-13”). On June 16, 2016, the FASB issued ASU 2016-13, which will significantly change how entities measure and recognize credit impairment for many financial assets. Under this standard, the new current expected credit loss model will require entities to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are in the scope of the standard. This new guidance also made targeted amendments to the current impairment model for available for sale debt securities. This guidance will be effective for the Company for the fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption for fiscal years and interim periods beginning after December 15, 2018 is permitted. We are in the process of evaluating this guidance and its effect on our consolidated balance sheets, statements of income, and cash flows.

~~Accounting Standards Update No. 2016-09 -~~ ~~Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”). On March 30, 2016, the FASB issued ASU 2016-09 as part of the initiative to reduce the complexity in accounting standards. The updated guidance addresses several areas for simplification, including accounting for employee share-based payment transactions and the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted the guidance on January 1, 2017 using the prospective method and recorded a tax benefit of $219,000 for the nine months ended September 30, 2017.

~~Accounting Standards Update No. 2016-02 -~~ ~~Leases~~ (“ASU 2016-02”). On February 25, 2016, the FASB issued guidance that requires recognition of lease assets and lease liabilities on the statement of condition and disclosure of key information about leasing arrangements. In particular, this guidance requires a lessee of operating or finance leases to recognize on the statement of condition a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. However, for leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and

lease liabilities. Under previous GAAP, a lessee was not required to recognize lease assets and lease liabilities arising from operating leases on the statement of condition. The guidance becomes effective for the Company for the interim and annual periods beginning on January 1, 2019, and early adoption is permitted. We are currently assessing the impact the adoption of this guidance will have on our consolidated balance sheets, statements of income, and cash flows.

Accounting Standards Update ~~No. 2016-01~~2018-13 - ~~Recognition and~~Changes to the Disclosure Requirements for Fair Value Measurement ~~of Financial Assets and Financial Liabilities~~ (“(“ASU ~~2016-01”~~2018-13”). On ~~January 5, 2016,~~August 28, 2018, the FASB issued guidance to remove, add, and clarify certain disclosures for fair value measurement. The Company adopted the amended guidance on ~~certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance includes, but is not limited to, the following:~~

~~This guidance becomes effective for the Company for the interim and annual periods beginning on~~ January 1, ~~2018,~~2020 using the prospective method and early adoption is only permitted for certain provisions. The amendments, in general, are required to be applied by means of a cumulative-effect adjustment on the statement of condition as of the beginning of the period of adoption. The adoption of this guidance isit did not ~~expected to~~ have ~~a material~~an impact on our consolidated balance sheets, statements of income, ~~and~~or cash flows.

Accounting Standards Update ~~No. 2014-09~~2016-13 - ~~Revenue from Contracts with Customers~~ (“Financial Instruments - Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments (“ASU ~~2014-09”~~2016-13”). ~~In May 2014,~~ASU 2016-13, which has been codified under Topic 326, replaced the ~~FASB issued 2014-09 as~~previous GAAP method of calculating loan losses. Previously, GAAP required the use of the incurred loss methodology versus ASU 2016-13 which utilizes an expected loss methodology. The CECL methodology incorporates forecasting in addition to historical and current measures. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables, held to maturity and available for sale debt securities. The Company adopted ASU 2016-13 and related amendments on January 1, 2020 using a ~~joint project between the FASB~~modified-retrospective approach for all financial assets measured at amortized cost and ~~the International Accounting Standards Board to clarify the principles~~off-balance- sheet (OBS) credit exposures and recorded a decrease in retained earnings of ~~recognizing revenue and to develop a common revenue standard~~$347,000, net of taxes. Results for ~~GAAP and International Financial Reporting Standards. ASU 2014-09 is effective for annual~~ reporting periods beginning after ~~December 15, 2016, including interim periods within~~January 1, 2020 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company’s CECL methodology consists of quantitative and qualitative components. The quantitative component of the allowance for credit losses (“ACL”) is model based and utilizes a single forward-looking macroeconomic forecast, complemented by qualitative components in estimating expected credit losses. The qualitative components of the ACLconsider (i) the uncertainty of forward-looking scenarios; (ii) certain portfolio characteristics, such as portfolio concentrations, real estate values, changes in the number and amount of nonaccrual and past due loans; and (iii) model limitations; among others.

ASU 2016-13 also applies to off-balance sheet credit exposure not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees and other similar investment) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases.

The CECL methodology reflects the Company’s view of the state of the economy and forecasted macroeconomic conditions and their impact on the Company’s loan and investment portfolios as of the adoption date.

Investment securities are classified as either ‘held to maturity’ or ‘available for sale’ in accordance with the FASB Accounting Standards Codification (“ASC”) 320, Investments – Debt and Equity Securities. Debt securities that ~~reporting period. Early adoption~~management has the positive intent and ability to hold to maturity are classified as held to maturity. Held to maturity securities are carried at cost and adjusted for the amortization of premiums and the accretion of discounts using the effective-yield or straight-line method.

Debt and equity securities not classified as held to maturity are classified as available for sale and carried at fair value with unrealized after-tax gains and losses reported net as a separate component of shareholders’ equity. The Company classifies its securities based on its intention at the time of purchase.

The Company measures expected credit losses on held to maturity debt securities on a collective basis by security type and risk rating where available. The reserve for each pool is calculated based on a Probability of Default/Loss Given Default (PD/LGD) basis taking into consideration the expected life of each security. Held to maturity securities which are issued by the United States of America or are guaranteed by US federal agencies do not currently have an allowance for credit loss as the Company determined these securities are either backed by the full faith and credit of the U.S. government and/or there is an unconditional commitment to make interest payments and to return the principal investment in full to investors when a debt security reaches maturity. The Company will evaluate this position no less than annually, however, certain items which may cause the Company to change this methodology include legislative changes that remove a GSE’s ability to draw funds from the US government, or legislative changes to housing policy that reduce or eliminate the U.S. government’s implicit guarantee on such securities. For securities which are not U.S. treasury or agency backed, risk ratings are generally sourced from Moody’s or Standard & Poor’s (“S&P”). The Company updates loss given default, probability of default, and recovery rates for each security as that information becomes available but no less than annually. The expected remaining life to maturity of each applicable security is updated quarterly. Any expected credit losses on held to maturity securities would be presented as an allowance rather than as a direct write-down through the income statement if the Company does not intend to sell or believes that it is more-likely-than-not that the Company will be required to sell the security.

The Company measures expected credit losses on available for sale securities based upon the gain or loss position of the security. For available-for sale debt securities in an unrealized loss position, which the Company does not intend to sell, or it is not ~~permitted. Additionally,~~more likely than not that the Company will be required to sell the security before recovery of our amortized cost, the Company evaluates qualitative

criteria to determine any expected loss. This includes among other items the financial health of, and specific prospects for the issuer, including whether the issuer is in ~~August 2015,~~compliance with the ~~FASB issued Accounting Standards Update No. 2015-14~~terms and covenants of the security. The Company also evaluates quantitative criteria including determining whether there has been an adverse change in expected future cash flows of the security. If the Company does not expect to ~~defer~~recover the ~~effective date~~entire amortized cost basis of ~~ASU 2014-09~~the security, an allowance for credit losses would be recorded, with a related charge to ~~annual reporting~~earnings, limited by the amount of the fair value of the security less its amortized cost. If the Company intends to sell the security or it is more likely than not that the Company will be required to sell the debt security before recovery of its amortized cost basis, the Company recognizes the entire difference between the security’s amortized cost basis and its fair value in earnings.

Loans are reported at the amount of their outstanding principal, including deferred loan origination fees and costs, reduced by unearned discounts, and the allowance for credit losses. Loans are considered delinquent when a payment of principal and/or interest becomes past due 30 days following its scheduled payment due date. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Loans are removed from non-accrual when they become less than 90 days past due and when concern no longer exists as to the collectability of principal or interest.

Losses on loan receivables are estimated and recognized upon origination of the loan, based on expected credit losses for the life of the loan balance as of the period end date. The Company uses a discounted cash flow method incorporating probability of default and loss given default forecasted based on statistically derived economic variable loss drivers combined with qualitative factors to estimate expected credit losses. This process includes estimates which involve modeling loss projections attributable to existing loan balances, considering historical experience, current conditions and future expectations for homogeneous pools of loans over the reasonable and supportable forecast period. As stated above, we also perform a qualitative assessment beyond model estimates, and apply qualitative adjustments as management deems necessary. The reasonable and supportable forecast period is determined based upon the accuracy level of historical loss forecast estimates, the specific loan level models and methodology utilized, and considers material changes in growth and credit strategy, and business changes which may not be applicable within the current environment. For periods ~~beginning after December 15, 2017. We~~beyond a reasonable and supportable forecast interval, the Company reverts to historical information over a period for which comparable data is available. The historical information either experienced by the Company, or by a selection of peer banks when appropriate, is derived from a combination of recessionary and non-recessionary performance periods for which data is available. Similar to the reasonable and supportable forecast period, we reassess the reversion period at the segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, and other relevant data shifts over time.

The Company generally segments its loan receivable population into homogeneous pools of loans. Consistent with the Company’s other assumptions, the Company regularly reviews segmentation to determine whether the segmentation pools remain relevant as risk characteristics change. When a loan no longer meets the criteria of its initial pooling as a result of credit deterioration or other changes, the Company may evaluate the credit for estimated losses on an individual basis if it determines that they no longer retain the same risk characteristics. To the extent that there are a multitude of these loans with new similar credit characteristics, the Company would anticipate a change to the pooling methodology. Loans that do not share risk characteristics are evaluated on an individual basis and are also not included in the ~~process~~collective evaluation. For loans with real estate collateral, when management determines that foreclosure is probable, expected credit losses are based on the fair value of ~~evaluating this guidance,~~the collateral at the reporting date, adjusted for selling costs as appropriate.

The Company evaluates the loan allowance for credit losses quarterly. The Company regularly reviews our collection experience (including delinquencies and net charge-offs) in determining our allowance for credit losses. The Company also considers its historical loss experience to date based on actual defaulted loans and overall portfolio indicators including delinquent and non-accrual loans, trends in loan volume and lending terms, credit policies and other observable environmental factors such as unemployment and interest rate changes.

The underlying assumptions, estimates and assessments we use to estimate the allowance for credit losses reflects the Company’s best estimate of model assumptions and forecasted conditions at ~~this~~that time. Changes in such estimates can significantly affect the allowance and provision for credit losses. It is possible and likely that the Company will experience credit losses that are different from the current estimates. Charge-offs are deducted from the allowance for credit losses when the Company considers the principal to be uncollectible, and subsequent recoveries are added to the allowance, generally at the time docash is received on a charged-off account.

assumptions for estimated funding rates based on historical rates, and factors such as portfolio growth, changes to organizational structure, economic conditions, borrowing habits, or any other factor which could impact the likelihood that funding will occur. The Company does not ~~expect its adoption will have a material impact~~reserve for unfunded commitments which are unconditionally cancellable.

See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies to our 2019 annual consolidated financial statements in our 2019 Form 10-K, for additional information on our ~~consolidated balance sheets, statements~~other significant accounting policies.

See Note 7 - LOANS AND THE ALLOWANCE FOR CREDIT LOSSES for a detailed discussion of ~~income, and cash flows.~~the Company’s allowance for credit losses.

At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, cash and ~~due from banks~~cash equivalents totaled ~~$13.7~~$43.0 million and ~~$54.1~~$61.3 million, respectively. Of this amount, ~~$12.9 million~~$0 and ~~$11.2~~$12.7 million, respectively, were maintained to satisfy the reserve requirements of the Federal Reserve Bank of Boston (“FRB Boston”). Additionally, at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company pledged $500,000 ~~and $500,000, respectively,~~ to the New Hampshire Banking Department relating to Cambridge Trust Company of New Hampshire, Inc.’s operations in that state. The Company also pledged cash collateral to derivative counterparties totaling $24.2 million and $10.4 million at March 31, 2020 and December 31, 2019, respectively. See Note 17- Derivatives and Hedging Activities for a discussion of the Company’s derivative and hedging activities.

Investment securities have been classified in the unaudited consolidated balance sheets according to management’s intent. The carrying amounts of securities and their approximate fair values were as follows:

	September 30, 2017									December 31, 2016									March 31, 2020									December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(dollars in thousands)																		(dollars in thousands)
Available for sale securities
U.S. GSE obligations	$	90,024	$	—	$	(844	)	$	89,180	$	140,026	$	23	$	(1,340	)	$	138,709	$	18,000	$	590	$	—		$	18,590	$	38,000	$	—	$	(152	)	$	37,848
Mortgage-backed securities		119,272		299		(1,950	)		117,621		183,974		479		(3,154	)		181,299		97,485		2,084		(212	)		99,357		103,109		231		(858	)		102,482
Corporate debt securities		5,039		24		(18	)		5,045		5,054		13		(38	)		5,029
Mutual funds		672		—		(69	)		603		672		—		(68	)		604
Total available for sale securities	$	215,007	$	323	$	(2,881	)	$	212,449	$	329,726	$	515	$	(4,600	)	$	325,641	$	115,485	$	2,674	$	(212	)	$	117,947	$	141,109	$	231	$	(1,010	)	$	140,330

Held to maturity securities
U.S. GSE obligations	$	29,998	$	2	$	(41	)	$	29,959	$	—	$	—	$	—		$	—	$	5,000	$	7	$	—		$	5,007	$	5,000	$	—	$	—		$	5,000
Mortgage-backed securities		107,762		128		(245	)		107,645		696		23		—			719		152,159		6,579		(41	)		158,697		161,759		2,751		(111	)		164,399
Corporate debt securities		1,997		29		—			2,026		—		—		—			—		6,982		135		—			7,117		6,980		116		—			7,096
Municipal securities		80,113		2,673		(165	)		82,621		81,806		1,894		(664	)		83,036		82,765		3,359		(85	)		86,039		84,433		3,252		(66	)		87,619
Total held to maturity securities	$	219,870	$	2,832	$	(451	)	$	222,251	$	82,502	$	1,917	$	(664	)	$	83,755	$	246,906	$	10,080	$	(126	)	$	256,860	$	258,172	$	6,119	$	(177	)	$	264,114
Total	$	434,877	$	3,155	$	(3,332	)	$	434,700	$	412,228	$	2,432	$	(5,264	)	$	409,396	$	362,391	$	12,754	$	(338	)	$	374,807	$	399,281	$	6,350	$	(1,187	)	$	404,444

All of the Company’s mortgage-backed securities have been issued by, or are collateralized by securities issued by, either Government National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae), or Federal Home Loan Mortgage Corporation (Freddie Mac).

The following tables show the Company’s securities with gross unrealized losses for which an allowance for credit losses has not been recorded at March 31, 2020 and temporarily impaired at December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position:

	December 31, 2016															December 31, 2019
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(dollars in thousands)															(dollars in thousands)
Temporarily Impaired Securities
Available for sale securities
U.S. GSE obligations	$	118,686	$	(1,340	)	$	—	$	—		$	118,686	$	(1,340	)	$	12,912	$	(88	)	$	24,936	$	(64	)	$	37,848	$	(152	)
Mortgage-backed securities		149,859		(2,795	)		14,422		(359	)		164,281		(3,154	)		33,381		(265	)		50,766		(593	)		84,147		(858	)
Corporate debt securities		4,016		(38	)		—		—			4,016		(38	)		—		—			—		—			—		—
Mutual funds		—		—			604		(68	)		604		(68	)
Total available for sale securities	$	272,561	$	(4,173	)	$	15,026	$	(427	)	$	287,587	$	(4,600	)	$	46,293	$	(353	)	$	75,702	$	(657	)	$	121,995	$	(1,010	)

Held to maturity securities
U.S. GSE obligations																$	—	$	—		$	5,000	$	—		$	5,000	$	—
Mortgage-backed securities	$	1	$	—		$	3	$	—		$	4	$	—			14,838		(27	)		12,928		(84	)		27,766		(111	)
Corporate debt securities																	—		—			—		—			—		—
Municipal securities		18,626		(664	)		—		—			18,626		(664	)		4,934		(66	)		—		—			4,934		(66	)
Total held to maturity securities	$	18,627	$	(664	)	$	3	$	—		$	18,630	$	(664	)	$	19,772	$	(93	)	$	17,928	$	(84	)	$	37,700	$	(177	)
Total temporarily impaired securities	$	291,188	$	(4,837	)	$	15,029	$	(427	)	$	306,217	$	(5,264	)	$	66,065	$	(446	)	$	93,630	$	(741	)	$	159,695	$	(1,187	)

~~Management evaluates~~The Company adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) on January 1, 2020 and did not record an allowance for credit losses on its investment securities during the quarter ended March 31, 2020. The Company regularly reviews debt securities for ~~other-than-temporary impairment~~expected credit loss using both qualitative and quantitative criteria, as necessary based on ~~at least a quarterly basis, and more frequently, when economic or market conditions warrant such evaluation. Consideration is given to: (1)~~ the ~~length of time and the extent to which the fair value has been less than cost; (2) the financial condition and near-term prospects~~composition of the ~~issuer; and (3) the intent and ability of the Company to retain its investment in the issuer for a~~portfolio at period ~~of time sufficient to allow for any anticipated recovery in fair value.~~end.

As of ~~September 30, 2017, 104~~March 31, 2020, 17 debt securities ~~and one equity security~~ had gross unrealized losses, with an aggregate depreciation of ~~1.04%~~3.43% from the Company’s amortized cost basis. The largest unrealized loss percentage and largest unrealized loss dollar amount of any single security was 3.82%, or $76,000, of its amortized cost.

As of December 31, 2019, 68 debt securities had gross unrealized losses, with an aggregate depreciation of 0.74% from the Company’s amortized cost basis. The largest unrealized loss percentage of any single security was ~~10.21%~~3.15%, or ~~$69,000~~$63,000 of its amortized cost. The largest unrealized dollar loss of any single security was ~~$150,000,~~$96,000, or ~~3.01% of its amortized cost.~~

As of December 31, 2016, 132 debt securities and one equity security had gross unrealized losses, with an aggregate depreciation of 1.69% from the Company’s amortized cost basis. The largest unrealized loss percentage of any single security was 10.16%1.93%, ~~or $51,000 of its amortized cost. The largest unrealized dollar loss of any single security was $189,000, or 3.79%~~ of its amortized cost.

The Company believes that the nature and duration of impairment on its debt security positions are primarily a function of interest rate movements and changes in investment spreads and does not consider full repayment of principal on the reported debt obligations to be at risk. Since nearly all of these securities are rated “investment grade” and (a) the Company does not intend to sell these securities before recovery and (b) that it is more likely than not that the Company will not be required to sell these securities before recovery, and the Company does not ~~consider these securities~~expect to ~~be other-than-temporarily impaired~~suffer a credit loss as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016.~~2019.

The amortized cost and fair value of debt securities, aggregated by the earlier of guaranteed call date or contractual maturity, are shown below. Maturities of mortgage-backed securities do not take into consideration scheduled amortization or prepayments. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Within One Year				After One, But Within Five Years				After Five, But Within Ten Years				After Ten Years				Total				Within One Year				After One, But Within Five Years				After Five, But Within Ten Years				After Ten Years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
At September 30, 2017	(dollars in thousands)
At March 31, 2020																					(dollars in thousands)
Available for sale securities
U.S. GSE obligations	$	5,000	$	4,987	$	85,024	$	84,193	$	—	$	—	$	—	$	—	$	90,024	$	89,180	$	—	$	—	$	5,000	$	5,063	$	5,000	$	5,140	$	8,000	$	8,387	$	18,000	$	18,590
Mortgage-backed securities		154		157		148		155		19,607		19,464		99,363		97,845		119,272		117,621
Corporate debt securities		—		—		4,039		4,021		1,000		1,024		—		—		5,039		5,045
Total available for sale Securities	$	5,154	$	5,144	$	89,211	$	88,369	$	20,607	$	20,488	$	99,363	$	97,845	$	214,335	$	211,846
Mortgage-backed Securities																						—		—		29		30		34,726		35,792		62,730		63,535		97,485		99,357
Total available for sale securities																					$	—	$	—	$	5,029	$	5,093	$	39,726	$	40,932	$	70,730	$	71,922	$	115,485	$	117,947

Held to maturity securities
U.S. GSE obligations	$	—	$	—	$	29,998	$	29,959	$	—	$	—	$	—	$	—	$	29,998	$	29,959	$	5,000	$	5,007	$	—	$	—	$	—	$	—	$	—	$	—	$	5,000	$	5,007
Mortgage-backed securities		24		25		330		339		23,447		23,391		83,961		83,890		107,762		107,645
Mortgage-backed Securities																						—		—		2		2		46,317		49,273		105,840		109,422		152,159		158,697
Corporate debt securities		—		—		1,997		2,026		—		—		—		—		1,997		2,026		—		—		6,982		7,117		—		—		—		—		6,982		7,117
Municipal securities		3,960		3,985		13,714		14,086		33,389		34,789		29,050		29,761		80,113		82,621		2,770		2,785		11,669		11,998		44,816		47,074		23,510		24,182		82,765		86,039
Total held to maturity Securities	$	3,984	$	4,010	$	46,039	$	46,410	$	56,836	$	58,180	$	113,011	$	113,651	$	219,870	$	222,251	$	7,770	$	7,792	$	18,653	$	19,117	$	91,133	$	96,347	$	129,350	$	133,604	$	246,906	$	256,860
Total	$	9,138	$	9,154	$	135,250	$	134,779	$	77,443	$	78,668	$	212,374	$	211,496	$	434,205	$	434,097	$	7,770	$	7,792	$	23,682	$	24,210	$	130,859	$	137,279	$	200,080	$	205,526	$	362,391	$	374,807

The following table sets forth information regarding sales of investment securities and the resulting gains (losses) from such sales:

	Three Months Ended September 30,				Nine Months Ended September 30,					For the Three Months Ended March 31,
	2017		2016		2017			2016		2020		2019
	(dollars in thousands)									(dollars in thousands)
Amortized cost of securities sold	$	—	$	250	$	77,372		$	17,632	$	—	$	16,000
Gain/(loss) realized on securities sold		—		3		(3	)		438
Gross gains realized on securities sold											—		—
Gross losses realized on securities sold											—		(87	)
Net proceeds from securities sold	$	—	$	253	$	77,369		$	18,070	$	—	$	15,913

The Company monitors the credit quality of certain debt securities through the use of credit rating among other factors. The Company monitors the credit rating of applicable debt securities quarterly. The following table summarizes the credit rating of the Company’s debt securities portfolio at March 31, 2020.

The Company’s lending activities are conducted ~~principally~~primarily in Eastern ~~Massachusetts.~~Massachusetts and Southern New Hampshire. The Company grants ~~single-family~~single- and multi-family residential loans, commercial ~~and~~& industrial (“C&I”), commercial real estate (“CRE”), construction loans, and a variety of consumer loans. Most of the loans granted by the Company are secured by real estate collateral. The Company’s commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. In the event of a default, the liquidation of the underlying real estate collateral is typically viewed as the primary source of repayment. The borrowers’ cash flow may be difficult to predict, and collateral securing these loans may fluctuate in value. The repayment of commercial business loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral provided by the borrower. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment. Repayment of the Company’s residential loans are generally dependent on the health of the employment market in the borrowers’ geographic areas and that of the general economy with liquidation of the underlying real estate collateral being typically viewed as the primary source of repayment in the event of borrower default. The repayment of C&I loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral provided by the borrower. As borrower cash flow may be difficult to predict, liquidation of the underlying collateral securing these loans is typically viewed as the primary source of repayment in the event of borrower default. However, collateral typically consists of equipment, inventory, accounts receivable, or other business assets that may fluctuate in value, so the liquidation of collateral in the event of default is often an insufficient source of repayment. The Company’s CRE loans are primarily made based on the cash flow from the collateral property and secondarily on the underlying collateral provided by the borrower, with liquidation of the underlying real estate collateral typically being viewed as the primary source of repayment in the event of borrower default. The Company’s construction loans are primarily made based on the borrower’s expected ability to execute and the future completed value of the collateral property, with sale of the underlying real estate collateral typically being viewed as the primary source of repayment.

	September 30, 2017		December 31, 2016		March 31, 2020			December 31, 2019
	(dollars in thousands)				(dollars in thousands)
Residential mortgage
Mortgages - fixed rate	$	300,071	$	305,403	$	430,067		$	430,877
Mortgages - adjustable rate		236,323		228,028		469,025			467,139
Construction						15,209			17,374
Deferred costs net of unearned fees		1,031		973		2,802			2,176
Total residential mortgages		537,425		534,404		917,103			917,566

Commercial mortgage
Mortgages - nonowner occupied		560,254		513,578
Mortgages - non-owner occupied						897,612			870,047
Mortgages - owner occupied		36,287		43,932		112,807			114,095
Construction		35,031		58,406		79,214			76,288
Deferred costs net of unearned fees		180		224		163			144
Total commercial mortgages		631,752		616,140		1,089,796			1,060,574

Home equity
Home equity - lines of credit		72,083		70,883		76,359			73,880
Home equity - term loans		3,670		3,925		6,469			6,555
Deferred costs net of unearned fees		254		243		238			240
Total home equity		76,007		75,051		83,066			80,675

Commercial & industrial
Commercial & industrial		65,818		59,638		127,683			133,337
Deferred costs net of unearned fees		43		68
Deferred costs (fees) net of unearned fees						(35	)		(101	)
Total commercial & industrial		65,861		59,706		127,648			133,236

Consumer
Secured		43,695		33,386		37,100			33,453
Unsecured		1,151		1,451		1,065			1,199
Deferred costs net of unearned fees		17		16		24			25
Total consumer		44,863		34,853		38,189			34,677
Total loans	$	1,355,908	$	1,320,154	$	2,255,802		$	2,226,728

Directors and officers of the Company and their associates are customers of, and have other transactions with, the Company in the normal course of business. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collection or present other unfavorable features. At September 30, 2017 and December 31, 2016, total loans outstanding to such directors and officers were $632,000 and $690,000, respectively. During the nine months ended September 30, 2017, $97,000 of additions and $155,000 of repayments were made to these loans. There were $355,000 of additions and $406,000 of repayments during the year ended December 31, 2016. At September 30, 2017 and December 31, 2016, all of the loans to directors and officers were performing according to their original terms.

The following tables set forth information regarding non-performing loans disaggregated by loan category:

	September 30, 2017												March 31, 2020
	Residential Mortgages		Commercial Mortgages		Home Equity		Commercial & Industrial		Consumer		Total
.													Residential Mortgages		Commercial Mortgages		Home Equity		Commercial & Industrial		Consumer		Total
	(dollars in thousands)												(dollars in thousands)
Non-performing loans:
Non-accrual loans	$	1,031	$	216	$	3	$	21	$	—	$	1,271	$	1,427	$	114	$	12	$	121	$	—	$	1,674
Loans past due >90 days, but still accruing		—		—		—		—		—		—		109		1,334		—		—		—		1,443
Troubled debt restructurings		123		—		—		308		—		431		137		—		—		125		—		262
Total	$	1,154	$	216	$	3	$	329	$	—	$	1,702	$	1,673	$	1,448	$	12	$	246	$	—	$	3,379

	December 31, 2016												December 31, 2019
	Residential Mortgages		Commercial Mortgages		Home Equity		Commercial & Industrial		Consumer		Total		Residential Mortgages		Commercial Mortgages		Home Equity		Commercial & Industrial		Consumer		Total
	(dollars in thousands)												(dollars in thousands)
Non-performing loans:
Non-accrual loans	$	998	$	—	$	—	$	24	$	1	$	1,023	$	1,298	$	2,800	$	12	$	50	$	—	$	4,160
Loans past due >90 days, but still accruing		—		232		—		—		—		232		527		486		—		251		—		1,264
Troubled debt restructurings		132		—		—		289		—		421		99		—		—		128		—		227
Total	$	1,130	$	232	$	—	$	313	$	1	$	1,676	$	1,924	$	3,286	$	12	$	429	$	—	$	5,651

Loans are considered restructured in a troubled debt restructuring ~~(“TDR”)~~ when the Company has granted concessions to a borrower due to the borrower’s financial condition that it otherwise would not have considered. These concessions may include modifications of the terms of the debt such ~~as;~~as deferral of payments, extension of maturity, reduction of principal balance, reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions. Debt may be bifurcated with separate terms for each tranche of the restructured debt. Restructuring a loan in lieu of aggressively enforcing the collection of the loan may benefit the Company by increasing the ultimate probability of collection.

Restructured loans are classified as accruing or non-accruing based on management’s assessment of the collectability of the loan. Loans which are already on ~~non-accrual~~nonaccrual status at the time of the restructuring generally remain on ~~non-accrual~~nonaccrual status for approximately six months or longer before management considers such loans for return to accruing status. Accruing restructured loans are placed into ~~non-accrual~~nonaccrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term.

TDRs are ~~classified as impaired loans. The Company identifies loss allocations~~individually evaluated for ~~impaired loans on an individual loan basis.~~ credit losses.

There were no0 new TDRs during the three months ended September 30, 2017. During the nine months ended September 30, 2017, the Company modified one loan as a TDR with a pre-modification carrying value (which consists of the unpaid principal balance, net of charge-offs, and unamortized deferred loan origination fees and costs, at the time of the restructuring) of $65,000 and a post-modification carrying value of $48,000.March 31, 2020. At ~~September 30, 2017, five~~March 31, 2020, 3 loans were determined to be TDRs with a total carrying value of ~~$431,000.~~$262,000. There were no0 TDR defaults during the three months ~~and nine months~~ ended ~~September 30, 2017.~~March 31, 2020.

The allowance for credit losses includes a specific reserve for these TDRs of approximately $87,000 as of March 31, 2020.

During the ~~three months and nine months~~year ended ~~September 30, 2016,~~December 31, 2019, the Company modified ~~one~~1 loan with a ~~pre- and post-modification~~ carrying value of ~~$247,000.~~$128,000. At December 31, 2019, 3 loans were determined to be TDRs with a total carrying value of $227,000 as of December 31, 2019. There were no0 TDR defaults during the ~~three months and nine months~~year ended ~~September 30, 2016.~~ December 31, 2019.

The allowance for loan losses includes a specific reserve for these TDRs of approximately ~~$259,000 and $117,000~~$87,000 as of ~~September 30, 2017~~December 31, 2019.

~~As of September 30, 2017,~~2019, there were no significant commitments to lend additional funds to borrowers whose loans were restructured.

Loans by Credit Quality Indicator. The following tables contain period-end balances of loans receivable disaggregated by credit quality indicator:

September 30, 2017

Residential
Mortgages

Home
Equity

Consumer

(dollars in thousands)

Credit risk profile based on payment activity:

Performing

$
536,271

$
76,004

$
44,863

Non-performing

1,154

3

—

Total

$
537,425

$
76,007

$
44,863

Commercial
Mortgages

Commercial &
Industrial

Credit risk profile by internally assigned grade:

1-6 (Pass)

$
620,847

$
62,332

7 (Special Mention)

10,688

2,776

8 (Substandard)

217

753

9 (Doubtful)

—

—

10 (Loss)

—

—

Total

$
631,752

$
65,861

	Credit Quality Indicator - by Origination Year as of March 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Total
	(in thousands)
Residential:
Current	$	35,560	$	222,923	$	165,049	$	132,202	$	96,869	$	262,827	$	—	$	915,430
Non-performing		—		—		812		62		—		799		—		1,673
Total	$	35,560	$	222,923	$	165,861	$	132,264	$	96,869	$	263,626	$	—	$	917,103

Home equity:
Current	$	259	$	836	$	1,806	$	618	$	125	$	884	$	78,526	$	83,054
Non-performing		—		—		—		—		—		—		12		12
Total	$	259	$	836	$	1,806	$	618	$	125	$	884	$	78,538	$	83,066

Consumer:
Current	$	4,341	$	12,641	$	2,044	$	3,447	$	5,019	$	9,962	$	735	$	38,189
Non-performing		—		—		—		—		—		—		—		—
Total	$	4,341	$	12,641	$	2,044	$	3,447	$	5,019	$	9,962	$	735	$	38,189

	December 31, 2016						Credit Quality Indicator - by Origination Year as of March 31, 2020
	Residential Mortgages		Home Equity		Consumer		2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
	(dollars in thousands)						(in thousands)
Credit risk profile based on payment activity:
Performing	$	533,273	$	75,051	$	34,852
Non-performing		1,131		—		1
Total	$	534,404	$	75,051	$	34,853

			Commercial Mortgages		Commercial & Industrial
Commercial:
Credit risk profile by internally assigned grade:
1-6 (Pass)			$	612,636	$	56,310	$	48,730	$	327,775	$	207,019	$	92,843	$	120,266	$	285,756	$	—	$	—	$	1,082,389
7 (Special Mention)				2,861		1,431		—		—		292		1,776		89		4,580		—		—		6,737
8 (Substandard)				643		1,965		—		—		—		—		221		449		—		—		670
9 (Doubtful)				—		—		—		—		—		—		—		—		—		—		—
10 (Loss)				—		—		—		—		—		—		—		—		—		—		—
Total			$	616,140	$	59,706	$	48,730	$	327,775	$	207,311	$	94,619	$	120,576	$	290,785	$	—	$	—	$	1,089,796
Commercial & Industrial:
Credit risk profile by internally assigned grade:
1-6 (Pass)							$	3,756	$	42,404	$	48,301	$	12,123	$	3,456	$	9,649	$	635	$	—	$	120,324
7 (Special Mention)								119		531		467		471		198		390		20		—		2,196
8 (Substandard)								—		1,489		340		—		3,248		51		—		—		5,128
9 (Doubtful)								—		—		—		—		—		—		—		—		—
10 (Loss)								—		—		—		—		—		—		—		—		—
Total							$	3,875	$	44,424	$	49,108	$	12,594	$	6,902	$	10,090	$	655	$	—	$	127,648

With respect to residential real estate mortgages, home equity, and consumer loans, the ~~Bank~~Company utilizes the following categories as indicators of credit quality:

With respect to commercial real estate mortgages and commercial loans, the ~~Bank~~Company utilizes a 10 grade internal loan rating system as an indicator of credit quality. The grades are as follows:

The past due status of a loan is determined in accordance with its contractual repayment terms. All loan types are reported past due when one scheduled payment is due and unpaid for 30 days or more. Loan delinquencies can be attributed to many factors, such as but not limited to, a continuing weakness in, or deteriorating, economic conditions in the region in which the collateral is located, the loss of a tenant or lower lease rates for commercial borrowers, or the loss of income for consumers and the resulting liquidity impacts on the borrowers.

The following tables contain period-end balances of loans receivable disaggregated by past due status:

	September 30, 2017												March 31, 2020
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current Loans		Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current Loans		Total
	(dollars in thousands)												(dollars in thousands)
Residential Mortgages	$	3,889	$	371	$	65	$	4,325	$	533,100	$	537,425	$	7,227	$	2,873	$	700	$	10,800	$	906,303	$	917,103
Commercial Mortgages		1,979		—		—		1,979		629,773		631,752		5,484		721		1,334		7,539		1,082,257		1,089,796
Home Equity		—		—		3		3		76,004		76,007		288		—		—		288		82,778		83,066
Commercial & Industrial		15		22		—		37		65,824		65,861		79		506		190		775		126,873		127,648
Consumer loans		37		1		—		38		44,825		44,863		—		2		—		2		38,187		38,189
Total	$	5,920	$	394	$	68	$	6,382	$	1,349,526	$	1,355,908	$	13,078	$	4,102	$	2,224	$	19,404	$	2,236,398	$	2,255,802

	December 31, 2016												December 31, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current Loans		Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current Loans		Total
	(dollars in thousands)												(dollars in thousands)
Residential Mortgages	$	698	$	179	$	602	$	1,479	$	532,925	$	534,404	$	8,710	$	1,089	$	1,047	$	10,846	$	906,720	$	917,566
Commercial Mortgages		—		250		232		482		615,658		616,140		811		—		3,161		3,972		1,056,602		1,060,574
Home Equity		4		—		—		4		75,047		75,051		57		12		—		69		80,606		80,675
Commercial & Industrial		173		—		1		174		59,532		59,706		272		226		251		749		132,487		133,236
Consumer loans		6		5		—		11		34,842		34,853		4		5		—		9		34,668		34,677
Total	$	881	$	434	$	835	$	2,150	$	1,318,004	$	1,320,154	$	9,854	$	1,332	$	4,459	$	15,645	$	2,211,083	$	2,226,728

~~Allowance for Loan Losses.~~ There were 0 significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2020 and December 31, 2019.

As of March 31, 2020, the Company recorded other real estate owned assets of $2.5 million. OREO consists of real estate properties, which have primarily served as collateral to secure loans that are controlled or owned by the Bank. These properties are recorded at fair value less estimated costs to sell at the date control is established, resulting in a new cost basis. The ~~Company maintains an allowance for~~amount by which the recorded investment in the loan ~~losses in an amount determined by management on~~exceeds the ~~basis~~fair value (net of estimated costs to sell) of the character of the loans, loan performance, financial condition of borrowers, the value of collateral securing loans, and other relevant factors. We provide for loan losses based upon the consistent application of our documented allowance for loan loss methodology. All loan losses areforeclosed asset is charged to the allowance for credit losses. Subsequent declines in the fair value of the foreclosed asset below the new cost basis are recorded through the use of a

valuation allowance. Subsequent increases in the fair value are recorded as reductions in the valuation allowance, but not below zero. All costs incurred thereafter in maintaining the property are generally charged to noninterest expense.

As of March 31, 2020 and December 31, 2019, one loan ~~losses and all recoveries are credited~~secured by one- to ~~it. Additions~~four-family residential property amounting to $344,000 was in process of foreclosure.

The following table presents changes in the allowance for ~~loan~~credit losses are provided by charges to income based on various factors which, in our judgment, deserve current recognition in estimating probable losses. We regularly review the loan portfolio, including a review of our classified assets, and make provisions for loan losses in order to maintain the allowance for loan losses in accordance with GAAP. The allowance for loan losses consists primarily of two components:

~~Actual loan losses may be significantly more than the allowance for loan losses we have established, which could have a material negative effect on our financial results.~~

~~The adjustments to historical loss experience are based on our evaluation of several quantitative, qualitative, and environmental factors, including:~~

~~In addition, we may establish an unallocated allowance to provide for probable losses that have been incurred as of the reporting date but are not reflected in the allocated allowance.~~

We evaluate the allowance for loan losses based upon the combined total of the specific and general components. Generally, when the loan portfolio increases, absent other factors, the allowance for loan loss methodology results in a higher dollar amount of estimated probable losses than would be the case without the increase. Generally, when the loan portfolio decreases, absent other factors, the allowance for loan losses methodology results in a lower dollar amount of estimated probable losses than would be the case without the decrease. Periodically, management conducts an analysis to estimate the loss emergence period for various loan categories based on samples of historical charge-offs. Model outputdisaggregated by loan ~~category is reviewed to evaluate the reasonableness of the reserve levels in comparison to the estimated loss emergence period applied to historical loss experience.~~category:

We evaluate the loan portfolio on a quarterly basis and the allowance is adjusted accordingly. While we use the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, will periodically review the allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on their analysis of information available to them at the time of their examination.

	For the Three Months Ended March 31, 2020
	Residential Mortgages		Commercial Mortgages			Home Equity			Commercial & Industrial			Consumer			Unfunded Commitments			Total
	(dollars in thousands)
Allowance for credit loss:
Allowance for credit losses - loan portfolio:								��
Balance at December 31, 2019	$	5,141	$	10,905		$	461		$	1,475		$	198		$	—		$	18,180
Adoption of ASC 326		2,061		(1,447	)		(205	)		(492	)		288			—			205
Charge-offs		—		(187	)		—			(89	)		(14	)		—			(290	)
Recoveries		—		—			—			12			13			—			25
Provision for (Release of)-loan portfolio		275		1,610			54			40			64			—			2,043
Allowance for credit losses - loan portfolio		7,477		10,881			310			946			549			—			20,163
Allowance for credit losses - unfunded commitments:
Balance at December 31, 2019	$	—	$	—		$	—		$	—		$	—		$	50		$	50
Adoption of ASC 326		—		—			—			—			—			276			276
Provision for (Release of) - unfunded commitments		—		—			—			—			—			(43	)		(43	)
Allowance for credit losses-unfunded commitments		—		—			—			—			—			283			283
Total allowance for credit loss	$	7,477	$	10,881		$	310		$	946		$	549		$	283		$	20,446

The following ~~tables contain~~table presents changes in the allowance for loan losses disaggregated by loan ~~category at September 30, 2017:~~category:

For the Three Months Ended September 30, 2017

Residential
Mortgages

Commercial
Mortgages

Home
Equity

Commercial &
Industrial

Consumer

Unallocated

Impaired

Total

(dollars in thousands)

Allowance for loan losses:

Balance at June 30, 2017

$
4,783

$
8,449

$
632

$
758

$
324

$
—

$
357

$
15,303

Charge-offs

—

—

—

—

(1
)

—

—

(1
)
Recoveries

—

—

—

6

2

—

—

8

Provision

303

(126
)

(4
)

94

43

—

—

310

Balance at September 30, 2017

$
5,086

$
8,323

$
628

$
858

$
368

$
—

$
357

$
15,620

	For the Three Months Ended March 31, 2019
	Residential Mortgages		Commercial Mortgages			Home Equity		Commercial & Industrial			Consumer			Impaired		Total
	(dollars in thousands)
Allowance for credit losses:
Balance at December 31, 2018	$	4,946	$	9,626		$	517	$	1,415		$	264		$	—	$	16,768
Charge-offs		—		—			—		(30	)		(9	)		—		(39	)
Recoveries		—		—			—		12			4			—		16
Provision for (Release of)		310		(257	)		17		(152	)		(11	)		—		(93	)
Balance at March 31, 2019	$	5,256	$	9,369		$	534	$	1,245		$	248		$	—	$	16,652

~~The following tables contain changes in the allowance for loan losses disaggregated by loan category at September 30, 2016:~~

The following tables contain period-end balances of the allowance for loan losses and related loans receivable disaggregated by impairment method:

	September 30, 2017												December 31, 2019
	Residential Mortgages		Commercial Mortgages		Home Equity		Commercial & Industrial		Consumer		Total		Residential Mortgages		Commercial Mortgages		Home Equity		Commercial & Industrial		Consumer		Total
	(dollars in thousands)												(dollars in thousands)
Allowance for loan losses
Individually evaluated for impairment	$	98	$	—	$	—	$	259	$	—	$	357	$	—	$	—	$	—	$	87	$	—	$	87
Collectively evaluated for impairment		5,086		8,323		628		858		368		15,263		5,141		10,905		461		1,388		198		18,093
Total	$	5,184	$	8,323	$	628	$	1,117	$	368	$	15,620	$	5,141	$	10,905	$	461	$	1,475	$	198	$	18,180

Loans receivable
Individually evaluated for impairment	$	1,056	$	217	$	98	$	307	$	—	$	1,678	$	764	$	3,161	$	92	$	128	$	—	$	4,145
Collectively evaluated for impairment		536,369		631,535		75,909		65,554		44,863		1,354,230		916,802		1,057,413		80,583		133,108		34,677		2,222,583
Total	$	537,425	$	631,752	$	76,007	$	65,861	$	44,863	$	1,355,908	$	917,566	$	1,060,574	$	80,675	$	133,236	$	34,677	$	2,226,728

For the Three Months Ended September 30, 2017

Carrying
Value

Average
Carrying
Value

Unpaid
Principal
Balance

Related Allowance

Interest
Income
Recognized

(dollars in thousands)

With no required reserve recorded:

Commercial and industrial

$
38

$
40

$
38

$
—

$
1

Commercial real estate

217

221

229

—

—

Residential real estate

991

997

1,187

—

—

Home equity

98

99

128

—

—

Total

1,344

1,357

1,582

—

1

With required reserve recorded:

Commercial and industrial

269

273

281

259

—

Commercial real estate

—

—

—

—

—

Residential real estate

65

65

65

98

—

Home equity

—

—

—

—

—

Total

334

338

346

357

-

Total:

Commercial and industrial

307

313

319

259

1

Commercial real estate

217

221

229

—

—

Residential real estate

1,056

1,062

1,252

98

—

Home equity

98

99

128

—

—

Total

$
1,678

$
1,695

$
1,928

$
357

$
1

For the Nine Months Ended September 30, 2017

Carrying
Value

Average
Carrying
Value

Unpaid
Principal
Balance

Related Allowance

Interest
Income
Recognized

(dollars in thousands)

With no required reserve recorded:

Commercial and industrial

$
38

$
38

$
38

$
—

$
2

Commercial real estate

217

227

229

—

3

Residential real estate

991

1,012

1,187

—

—

Home equity

98

102

128

—

—

Total

1,344

1,379

1,582

—

5

With required reserve recorded:

Commercial and industrial

269

279

281

259

—

Commercial real estate

—

—

—

—

—

Residential real estate

65

66

65

98

1

Home equity

—

—

—

—

—

Total

334

345

346

357

1

Total:

Commercial and industrial

307

317

319

259

2

Commercial real estate

217

227

229

—

3

Residential real estate

1,056

1,078

1,252

98

1

Home equity

98

102

128

—

—

Total

$
1,678

$
1,724

$
1,928

$
357

$
6

For the Three Months Ended September 30, 2016

Carrying
Value

Average
Carrying
Value

Unpaid
Principal
Balance

Related Allowance

Interest
Income
Recognized

(dollars in thousands)

With no required reserve recorded:

Commercial and industrial

$
—

$
—

$
—

$
—

$
—

Commercial real estate

293

293

390

—

—

Residential real estate

714

716

883

—

1

Home equity

78

78

101

—

—

Consumer

1

1

1

—

—

Total

1,086

1,088

1,375

—

1

With required reserve recorded:

Commercial and industrial

458

459

462

179

—

Commercial real estate

—

—

—

—

—

Residential real estate

—

—

—

—

—

Home equity

—

—

—

—

—

Total

458

459

462

179

—

Total:

Commercial and industrial

458

459

462

179

—

Commercial real estate

293

293

390

—

—

Residential real estate

714

716

883

—

1

Home equity

78

78

101

—

—

Consumer

1

1

1

—

—

Total

$
1,544

$
1,547

$
1,837

$
179

$
1

For the Nine Months Ended September 30, 2016

Carrying
Value

Average
Carrying
Value

Unpaid
Principal
Balance

Related Allowance

Interest
Income
Recognized

(dollars in thousands)

With no required reserve recorded:

Commercial and industrial

$
—

$
—

$
—

$
—

$
—

Commercial real estate

293

295

390

—

—

Residential real estate

714

729

883

—

3

Home equity

78

80

101

—

—

Consumer

1

1

1

—

—

Total

1,086

1,105

1,375

—

3

With required reserve recorded:

Commercial and industrial

458

461

462

179

—

Commercial real estate

—

—

—

—

—

Residential real estate

—

—

—

—

—

Home equity

—

—

—

—

—

Total

458

461

462

179

—

Total:

Commercial and industrial

458

461

462

179

—

Commercial real estate

293

295

390

—

—

Residential real estate

714

729

883

—

3

Home equity

78

80

101

—

—

Consumer

1

1

1

—

—

Total

$
1,544

$
1,566

$
1,837

$
179

$
3

Goodwill.As ~~a voluntary member~~ of the Federal Home Loan Bank (“FHLB”) of Boston, the Bank is required to invest in stock of the FHLB of Boston in an amount based upon its outstanding advances from the FHLB of Boston. At September 30, 2017March 31, 2020 and December 31, 2016, the Bank’s investment in FHLB of Boston stock totaled $4.9 million and $4.1 million, respectively. No market exists for shares of this stock. The Bank’s cost for FHLB of Boston stock is equal to its par value. Upon redemption of the stock, which is at the discretion of the FHLB of Boston, the Bank would receive an amount equal to the par value of the stock. At its discretion, the FHLB of Boston may also declare dividends on its stock.

The Bank’s investment in FHLB of Boston stock is reviewed for impairment at each reporting date based on the ultimate recoverability of the cost basis of the stock. As of September 30, 2017 and December 31, 2016, no impairment has been recognized.

~~Goodwill. At September 30, 2017 and December 31, 2016,~~2019, the carrying value of goodwill ~~which is included in other assets,~~ totaled ~~$412,000 and $412,000, respectively.~~$31.2 million. Goodwill is tested for impairment, based on its fair value, at least annually. As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, no~~2019, 0 goodwill impairment has been recognized.

Core deposit intangibles. In connection with the Company’s merger with Optima Bank & Trust Company completed in April 2019, the Company recorded an asset for the core deposit intangible (“CDI”) of $3.6 million. Amortization of CDI totaled $90,000 for the three ended March 31, 2020. As of March 31, 2020 and December 31, 2019, the carrying value of CDI assets totaled $3.2 million and $3.3 million respectively. The weighted-average remaining amortization period for CDI was approximately nine years at March 31, 2020.

Mortgage servicing ~~rights. Certain~~rights. Periodically, the Company sells certain residential mortgage loans ~~are periodically sold by the Company~~ to the secondary market. ~~Loans held for sale totaled $560,000 and $6.5 million at September 30, 2017 and December 31, 2016, respectively.~~ Generally, these loans are sold without ~~recourse.~~ recourse or other credit enhancements. As of March 31, 2020 and December 31, 2019, loans held for sale totaled $2.9 million and 0, respectively.

The Company ~~sells loans and~~ either releases or retains the servicing ~~rights.~~rights on sold loans. For loans sold with servicing rights retained, ~~we provide~~the Company provides the servicing for the loans on a per-loan fee basis. Mortgage loans sold and servicing rights retained during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~September 30, 2016~~the year ended December 31, 2019 were ~~$11.5~~$5.7 million and ~~$25.9~~$1.8 million, ~~respectively, with net gains recognized in~~respectively. Total gain on loans ~~held~~sold were $73,000 and $19,000 for ~~sale~~the three months ended March 31, 2020 and March 31, 2019, respectively.

An analysis of ~~$172,000 and $607,000, respectively.~~mortgage servicing rights, which are included in other assets, follows:

The fair value of our mortgage servicing rights (“MSR”) portfolio was ~~$1.1~~$1.3 million and ~~$1.0~~$0.9 million ~~at September 30, 2017~~as of March 31, 2020 and ~~December~~March 31, ~~2016,~~2019, respectively. The fair value of mortgage servicing rights is estimated based on the present value of expected cash flows, incorporating assumptions for discount rate, prepayment speed, and servicing cost.

~~An analysis of mortgage servicing rights, which are included in other assets, follows:~~

The weighted-average amortization period for the mortgage servicing rights portfolio was ~~7.3~~4.2 years and ~~8.0~~5.2 years at ~~September 30, 2017 and September 30, 2016, respectively.~~

Interest expense on retail certificates of deposit $100,000 or greater was $112,000 and $125,000 for the three months ended September 30, 2017 and September 30, 2016, respectively. Interest expense on retail certificates of deposit $100,000 or greater was $335,000 and $347,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively.

~~The aggregate amount of certificates of deposit in denominations that meet or exceed the Federal Deposit Insurance Corporation (the “FDIC”) insurance limit of $250,000 at September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019, respectively.

The estimated aggregate future amortization expense for mortgage servicing rights for each of the next five years and thereafter is as follows:

The Company’s effective tax rate was ~~$43.9~~22.2% for the quarter ended March 31, 2020, as compared to 21.9% for the quarter ended March 31, 2019.

Net deferred tax assets totaled $3.7 million at March 31, 2020 and ~~$46.0~~$8.2 million ~~respectively.~~

~~Deposit accounts of directors, executive officers and their respective affiliates totaled $8.3 million and $7.2 million as of September 30, 2017 and~~at December 31, ~~2016, respectively.~~

~~Information relating to short-term borrowings is presented below:~~2019. The Company did 0t record a valuation allowance for deferred tax assets at March 31, 2020 or December 31, 2019.

All short- and long-term borrowings with the FHLB of Boston are secured by the Bank’s stock in the FHLB of Boston and a blanket lien on “qualified collateral” defined principally as 90% of the market value of certain U.S. Government and GSE obligations and 75% of the carrying value of certain residential mortgage loans. Based upon collateral pledged, the Bank’s unused borrowing capacity with the FHLB of Boston at September 30, 2017 and December 31, 2016 was approximately $292.8 million and $306.8 million, respectively.

The Bank also has a line of credit with the FRB Boston. At September 30, 2017, the Bank had pledged commercial real estate and commercial & industrial loans with aggregate principal balances of approximately $301.6 million as collateral for this line of credit. Based upon the collateral pledged, the Bank’s unused borrowing capacity with the FRB Boston at September 30, 2017 was $165.1 million and $159.6 million as of December 31, 2016.

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
	(dollars in thousands)												(dollars in thousands)
Current
Current income tax expense (benefit)
Federal	$	2,651		$	2,295		$	5,966		$	5,592		$	(478	)	$	371
State		690			624			1,552			1,310			274			167
Total current expense		3,341			2,919			7,518			6,902
Total current income tax expense (benefit)														(204	)		538

Deferred
Deferred income tax expense
Federal		(504	)		(495	)		(414	)		(555	)		1,600			818
State		(143	)		(140	)		(117	)		(157	)		665			384
Total deferred		(647	)		(635	)		(531	)		(712	)
Total deferred income tax expense														2,265			1,202
Total income tax expense	$	2,694		$	2,284		$	6,987		$	6,190		$	2,061		$	1,740

One of the ~~total income~~business tax ~~provision, calculated~~provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) included allowing net operating losses (“NOLs”) generated by the Company in tax years 2018 and 2019 to be carried back up to five years at ~~statutory federal income~~the tax rates in effect during those periods, rather than carried forward at current federal tax rates of 21%. This allowed the Company to ~~the income~~recognize lower tax expense associated with NOL and, combined with adjustments to state NOL rates, resulted in a benefit of $372,000 during the ~~consolidated statements~~first quarter of ~~income:~~2020.

The effective tax rate for the three months ended September 30, 2017 and September 30, 2016 was 34.97% and 33.30%, respectively. The effective tax rate for the nine months ended September 30, 2017 and September 30, 2016 was 33.53% and 33.17%, respectively.

At September 30, 2017 and December 31, 2016, the Company had no unrecognized tax benefits or any uncertain tax positions. The Company does not expect the total amount of unrecognized tax benefits to significantly increase in the next 12 months.

~~We did not record any interest or penalties for the three months and nine months ended September 30, 2017 and September 30, 2016.~~

The Company’s federal income tax returns are open and subject to examination from the 2014 tax return year and forward. The Company’s state income tax returns are generally open from the 2014 and later tax return years based on individual state statute of limitations.

On January 1, 2017, we adopted Accounting Standards Update No. 2016-09 - “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 requires that excess tax benefits or tax deficiencies be recognized as income tax benefit or expense in earnings in the period that they occur. For the three months and nine months ended September 30, 2017, the Company recognized a tax benefit of $0 and $219,000, respectively, resulting from share-based compensation.

The Company has a noncontributory, defined benefit pension plan (“Pension Plan”) covering substantially all employees hired before May 2, 2011. Employees in positions requiring at least 1,000 hours of service per year were eligible to participate upon the attainment of age 21 and the completion of one year of service. Benefits are based primarily on years of service and the employee’s average monthly pay during the five highest consecutive plan years of the employee’s final ten years. The Company also provides supplemental retirement benefits to certain executive officers of the Company under the terms of Supplemental Executive Retirement Agreements (“Supplemental Retirement Plan”). The Supplemental Retirement Plan became effective on October 1, 1989. Benefits to be paid under the plan are contractually agreed upon and detailed in individual agreements with the executives. The Company also offers postretirement health care benefits for current and future retirees of the Bank. Certain employees receive a fixed monthly benefit at age 65 toward the purchase of postretirement medical coverage. The benefit received is based on the employee’s years of active service. The Company uses a December 31 measurement date each year to determine the benefit obligations for these plans.

	Nine Months Ended September 30,																Three Months Ended March 31,
	Pension Plan						Supplemental Retirement Plan				Retirement Healthcare Plan						Pension Plan						Supplemental Retirement Plan				Retirement Healthcare Plan
	2017			2016			2017		2016		2017			2016			2020			2019			2020		2019		2020			2019
	(dollars in thousands)																(dollars in thousands)
Net periodic benefit cost
Service cost	$	1,162		$	1,162		$	200	$	209	$	12		$	19		$	—		$	—		$	71	$	68	$	6		$	5
Interest cost		1,413			1,319			273		271		15			25			420			426			87		90		6			6
Expected return on assets		(2,122	)		(2,113	)		—		—		—			—			(680	)		(709	)		—		—		—			—
Amortization of prior service credit		(3	)		(3	)		—		47		—			(5	)
Amortization of net actuarial loss		614			664			—		—		(6	)		(9	)
Net periodic benefit cost	$	1,064		$	1,029		$	473	$	527	$	21		$	30
Amortization of prior service cost (credit)																		(1	)		(1	)		—		��		—			—
Amortization of net actuarial (gain) loss																		39			—			—		—		(1	)		(1	)
Net periodic benefit cost (credit)																	$	(222	)	$	(284	)	$	158	$	158	$	11		$	10

The Company ~~does not intend to contribute~~did 0t make any contributions to the ~~Pension Plan in 2017.~~qualified defined benefit pension plan during the three months ended March 31, 2020, 0r does it expect to make any contributions to the qualified defined benefit plan during the remainder of 2020.

The Company maintains a Profit Sharing Plan (“PSP”) that provides for deferral of federal and state income taxes on employee contributions allowed under Section 401(k) of federal law. The Company matches employee contributions up to 100% of the first 3%4% of each participant’s ~~salary.~~salary, eligible bonus, and eligible incentive. Employees are eligible to participate in the PSP on the first day of their initial date of service. Each year, the Company may also make a discretionary contribution to the PSP. ~~Employees~~Effective in 2019, employees are eligible to participate in the ~~401(k) feature~~discretionary contribution portion of the PSP on the first ~~business~~ day of ~~the quarter following~~ their initial date of ~~service and attainment of age 21. Employees are eligible to participate in discretionary contribution feature~~service. Additionally, employees must be employed on the last day of the ~~PSP on January 1 and July 1 of each~~calendar year ~~provided they have attained~~or retire at the normal retirement age of ~~21 and~~65 during the ~~completion of 12 months of service consisting of at least 1,000 hours.~~calendar year to receive the discretionary contribution.

The Company has an Employee Stock Ownership Plan (“ESOP”) for its eligible employees. Employees are eligible to participate ~~upon~~in the ~~attainment of age 21 and~~ESOP on January 1 or July 1 following the completion of 12 months of service consisting of at least 1,000 ~~hours. Historically,~~hours and upon the ~~ESOP would purchase from the Company shares presently authorized but unissued at a price determined by an independent appraiser and certified by a committee~~attainment of ~~the trustees of the ESOP.~~age 21. Purchases of the Company’s stock by the ESOP ~~are~~will be funded by employer contributions ~~to the plan and proceeds from dividends paid to the plan participants.~~or reinvestment of cash dividends.

Total expenses related to the PSP and ESOP for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~September 30, 2016~~March 31, 2019 amounted to ~~approximately $238,000~~$966,000 and ~~$238,000,~~$586,000, respectively.

For executives participating in the DC SERP, the Company made a discretionary contribution of 10% of each executive’s base salary and bonus to his or her account under the Company’s DC SERP, the Executive Deferred Compensation Plan. Total expenses related to the ~~PSP and ESOP~~DC SERP for both the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~September 30, 2016~~March 31, 2019 amounted to ~~$713,000~~$43,000.

Time Vested Restricted Stock Awards (“RSAs”) and ~~$713,000, respectively.~~Time Vested Restricted Stock Units (“RSUs”)

During the three months ended March 31, 2020, the Company issued the following RSAs and RSUs from the 2017 Equity and Cash Incentive Plan. The fair value of RSAs and RSUs is based upon the Company’s common stock closing share price on the date of the grant. The holders of RSAs participate fully in the rewards of stock ownership of the Company, including voting and dividend rights.

The following table presents the pre-tax expense associated with all outstanding non-vested ~~restricted stock awards and non-vested performance based restricted stock units (share-based compensation)~~RSAs, RSUs, PRSUs, and the related tax benefits recognized:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2020		2019
	(dollars in thousands)								(dollars in thousands)
Stock based compensation expense	$	253	$	251	$	805	$	688	$	980	$	618
Related tax benefits	$	103	$	103	$	329	$	281	$	273	$	174

To meet the financing needs of its customers, the Company is a party to financial instruments with off-balance-sheet risk in the normal course of business. These financial instruments are primarily comprised of commitments to extend credit, commitments to sell residential ~~real estate~~ mortgage loans, derivatives contracts, risk participation agreements, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. See Note 17 – Derivatives and Hedging Activities for a discussion of the Company’s derivatives and hedging activities.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments assuming that the amounts are fully advanced and that collateral, or other security, is of no value. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Off-balance-sheet financial instruments with contractual amounts that present credit risk include the following:

	September 30, 2017		December 31, 2016		March 31, 2020		December 31, 2019
	(dollars in thousands)				(dollars in thousands)
Financial instruments whose contractual amount represents credit risk:
Commitments to extend credit:
Unused portion of existing lines of credit	$	282,008	$	256,767	$	417,193	$	428,020
Origination of new loans		65,313		26,024		82,755		24,413
Standby letters of credit		8,298		7,763		9,516		9,150

Financial instruments whose notional amount exceeds the amount of credit risk:
Commitments to sell residential mortgage loans		1,623		9,622		12,984		3,909
Customer related derivative contracts:
Interest rate swaps with customers		83,155		68,372
Mirror swaps with counterparties		83,155		68,372
Risk participation agreements with counterparties		28,467		16,378

Lease Commitments. The Company is obligated under various lease agreements covering its main office, branch offices, and other locations. These agreements are accounted for as operating leases and their terms expire between 2020 and 2030 and, in some instances, contain options to renew for periods up to 30 years.

The following table summarizes information related to the Company’s right-of-use asset and net lease liability:

The components of operating lease cost and other related information are as follows:

The total minimum lease payments due in future periods for lease agreements in effect at March 31, 2020 were as follows:

Several of the Company’s lease agreements contain clauses calling for escalation of minimum lease payments contingent on increases in real estate taxes, gross income adjustments, percentage increases in the consumer price index, and certain ancillary maintenance costs. Total rental expense was $1.5 million and $1.3 million for the quarter ended March 31, 2020 and March 31, 2019, respectively.

Under the terms of a sublease agreement, the Company will receive minimum annual rental payments of approximately $32,000 through July 31, 2020. Total rental income was $16,000 for both the quarters ended March 31, 2020 and March 31, 2019.

Capital guidelines issued by the Federal Reserve Bank (the “FRB”) and by the FDIC require that the Company and the Bank maintain minimum capital levels for capital adequacy purposes. These regulations also require banks and their holding companies to maintain higher capital levels to be considered “well-capitalized.” Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, there are specific capital guidelines that involve quantitative measuresAs of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The risk-based capital rules are designed to make regulatory capital more sensitive to differences in risk profiles among bank and bank holding companies to account for off-balance-sheet exposure and to minimize disincentives for holding liquid assets.

On July 2, 2013, the FRB approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III Capital Rules”). On July 9, 2013, the FDIC also approved, as an interim final rule, the regulatory capital requirements for U.S. banks, following the actions of the FRB. On April 8, 2014, the FDIC adopted as final its interim final rule, which is identical in substance to the final rules issued by the FRB in July 2013. Under the final rules, minimum requirements increased for both the quantity and quality of capital held by the Bank. The rules include a new common equity Tier 1 capital risk-weighted assets minimum ratio of 4.5%, raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, require a minimum ratio of Total capital to risk-weighted assets of 8.0%, and require a minimum Tier 1 leverage ratio of 4.0%.

The Basel III Capital Rules became effective for the Company and the Bank on January 1, 2015 (subject to a phase-in period for the capital conservation buffer discussed below). Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1 capital, Tier 1 capital, Total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted quarterly average assets (as defined).

When fully phased in on January 1, 2019, the Basel III Capital Rules will require the Company and the Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% Common Equity Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 7.0% upon full implementation), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation), (iii) a minimum ratio of Total capital (that is, Tier 1 plus Tier 2) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation), and (iv) a minimum leverage ratio of 4.0% calculated as the ratio of Tier 1 capital to average quarterly assets.

The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will be phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019). The capital conservation buffer is designed to absorb losses during periods of economic stress and, as detailed above, effectively increases the minimum required risk-weighted capital ratios. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets below the effective minimum (4.5% plus the capital conservation buffer) will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.

~~Management believes that as of September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company and the Bank met all applicable minimum capital requirements and were considered “well-capitalized” by both the FRB and the FDIC.

The Company adopted ASU 2016-13 on January 1, 2020. The joint federal bank regulatory agencies issued an interim final rule that allows banking organizations to mitigate the effects of the CECL accounting standard in their regulatory capital. Banking organizations that are required under U.S. accounting standards to adopt CECL this year can elect to mitigate the estimated cumulative regulatory capital effects of CECL for up to two years, after which, the effects will be phased-in over a three-year period from January 1, 2022 through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period includes both the initial impact of our adoption of CECL at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during each quarter of the two-year period ended December 31, 2021. The Company did not elect to delay the adoption of CECL, nor adopt the transition period for regulatory capital.

	Actual				Minimum Capital Required For Capital Adequacy				Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Basel III Phase-In Schedule				Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Basel III Fully Phased In				Minimum To Be Well-Capitalized Under Prompt Corrective Action Provisions				Actual					Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer					Minimum To Be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio			Amount		Ratio
	(dollars in thousands)																				(dollars in thousands)
At September 30, 2017
At March 31, 2020
Cambridge Bancorp:
Total capital (to risk-weighted assets)	$	169,487		13.7%	$	99,005		8.0%	$	114,474		9.25%	$	129,944		10.5%	N/A		N/A		$	279,487		13.6	%	$	215,500		10.5	%	N/A		N/A
Tier I capital (to risk-weighted assets)		154,015		12.4%		74,253		6.0%		89,723		7.25%		105,192		8.5%	N/A		N/A			259,041		12.6	%		174,452		8.5	%	N/A		N/A
Common equity tier I capital (to risk-weighted assets)		154,015		12.4%		55,690		4.5%		71,160		5.75%		86,629		7.0%	N/A		N/A			259,041		12.6	%		143,666		7.0	%	N/A		N/A
Tier I capital (to average assets)		154,015		8.1%		75,897		4.0%		75,897		4.00%		75,897		4.0%	N/A		N/A			259,041		9.2	%		112,520		4.0	%	N/A		N/A
Cambridge Trust Company:
Total capital (to risk-weighted assets)	$	165,751		13.4%	$	99,005		8.0%	$	114,474		9.25%	$	129,944		10.5%	$	123,756		10.0%	$	273,807		13.3	%	$	215,498		10.5	%	$	205,236		10.0	%
Tier I capital (to risk-weighted assets)		150,279		12.1%		74,253		6.0%		89,723		7.25%		105,192		8.5%		99,005		8.0%		253,361		12.3	%		174,451		8.5	%		164,189		8.0	%
Common equity tier I capital (to risk-weighted assets)		150,279		12.1%		55,690		4.5%		71,160		5.75%		86,629		7.0%		80,441		6.5%		253,361		12.3	%		143,665		7.0	%		133,403		6.5	%
Tier I capital (to average assets)		150,279		7.9%		75,897		4.0%		75,897		4.00%		75,897		4.0%		94,871		5.0%		253,361		9.0	%		112,519		4.0	%		140,649		5.0	%

At December 31, 2016
Cambridge Bancorp:
Total capital (to risk-weighted assets)	$	159,141		13.1%	$	96,873		8.0%	$	104,441		8.625%	$	127,145		10.5%	N/A		N/A
Tier I capital (to risk-weighted assets)		144,003		11.9%		72,654		6.0%		80,223		6.625%		102,927		8.5%	N/A		N/A
Common equity tier I capital (to risk-weighted assets)		144,003		11.9%		54,491		4.5%		62,059		5.125%		84,763		7.0%	N/A		N/A
Tier I capital (to average assets)		144,003		7.9%		72,488		4.0%		72,488		4.000%		72,488		4.0%	N/A		N/A
Cambridge Trust Company:
Total capital (to risk-weighted assets)	$	156,928		13.0%	$	96,873		8.0%	$	104,441		8.625%	$	127,145		10.5%	$	121,091		10.0%
Tier I capital (to risk-weighted assets)		141,790		11.7%		72,654		6.0%		80,223		6.625%		102,927		8.5%		96,873		8.0%
Common equity tier I capital (to risk-weighted assets)		141,790		11.7%		54,491		4.5%		62,059		5.125%		84,763		7.0%		78,709		6.5%
Tier I capital (to average assets)		141,790		7.8%		72,488		4.0%		72,488		4.000%		72,488		4.0%		90,610		5.0%

The following table presents the changes in accumulated other comprehensive income (loss) (“AOCI”) during the period, by component, net of tax:

Reclassifications out of AOCI that have an impact on net income are presented below:

Comprehensive income is defined as all changes to equity except investments by and distributions to shareholders. Net income is a component of comprehensive income, with all other components referred to in the aggregate as ‘other comprehensive income.’ The Company’s other comprehensive income consists of unrealized gains or losses on securities classified as available for sale and the component of the unfunded retirement liability computed in accordance with the requirements of ASC 715, ~~“Compensation – Retirement Benefits.”~~ ~~The before-tax and after-tax amount of each of these categories, as well as the tax (expense)/benefit of each, is summarized as follows:~~

~~Reclassifications out of Accumulated Other Comprehensive Income (“AOCI”) are presented below:~~

The following represents a reconciliation between basic and diluted earnings per share:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
	(dollars in thousands, except per share data)												(dollars in thousands, except per share data)
Earnings per common share - basic:
Numerator:
Net income	$	5,010		$	4,575		$	13,852		$	12,473		$	7,232		$	6,198
Less dividends and undistributed earnings allocated to participating securities		(53	)		(53	)		(148	)		(154	)		(16	)		(61	)
Net income applicable to common shareholders	$	4,957		$	4,522		$	13,704		$	12,319		$	7,216		$	6,137

Denominator:
Weighted average common shares outstanding		4,037			3,997			4,027			3,983			5,397			4,073
Earnings per common share - basic	$	1.23		$	1.13		$	3.40		$	3.09
Earnings per common share – basic													$	1.34		$	1.51

Earnings per common share - diluted:
Numerator:
Net income	$	5,010		$	4,575		$	13,852		$	12,473		$	7,232		$	6,198
Less dividends and undistributed earnings allocated to participating securities		(53	)		—			(148	)		—			(16	)		(61	)
Net income applicable to common shareholders	$	4,957		$	4,575		$	13,704		$	12,473		$	7,216		$	6,137

Denominator:
Weighted average common shares outstanding		4,037			3,997			4,027			3,983			5,397			4,073
Dilutive effect of common stock equivalents		33			47			36			46			35			34
Weighted average diluted common shares outstanding		4,070			4,044			4,063			4,029			5,432			4,107
Earnings per common share - diluted	$	1.22		$	1.13		$	3.37		$	3.09
Earnings per common share – diluted													$	1.33		$	1.49

The Company ~~enters into~~utilizes interest rate ~~derivatives~~swaps and floors to ~~accommodate~~mitigate exposure to interest rate risk and to facilitate the ~~business requirements~~needs of ~~its~~our customers. ~~Derivatives~~The Company’s derivative financial instruments are ~~recognized as either assets or liabilities and reported in other assets or other liabilities on the balance sheet and are measured at fair value. The accounting for changes~~used to manage differences in the ~~fair value of derivatives depends on the intended use~~amount, timing, and duration of the ~~derivative and resulting designation.~~Company’s known or expected cash receipts principally related to the Company’s assets.

The Company ~~has entered~~uses interest rate floors to manage its exposure to interest rate movements. Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up-front premium.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest income in the same period(s) during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis. The earnings recognition of excluded components is presented in interest income. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest income as interest payments are received on the Company’s variable-rate assets.

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. For the Company’s customers, these are interest rate swaps and risk participation agreements.

Interest Rate Swaps. The Company enters into interest rate swap contracts to help commercial loan borrowers manage their interestrate risk. The interest rate swap contracts with commercial loan borrowers allow them to convert floating-rate loan payments to ~~fixed-rate~~ fixed rateloan payments. When the Bank enters into an interest rate swap contract with a commercial loan borrower, it simultaneouslyenters into a “mirror” swap contract with a third party. The third party exchanges the client’s ~~fixed‑rate~~fixed-rate loan payments for floating-rateloan payments. As of September 30, 2017 and December 31, 2016, the Bank had interest rate swap contracts with commercial loan borrowers with notional amounts of $83.2 million and $68.4 million, respectively, and equal amounts of “mirror” swap contracts with third-party financial institutions. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings. Becausethese derivatives have mirror-image contractual terms, the changes in fair value substantially offset each other through earnings. Feesearned in connection with the execution of derivatives related to this program are recognized in earnings through other loan relatedderivative income.

The credit risk associated with swap transactions is the risk of default by the counterparty. To minimize this risk, the Company enters into interest rate agreements only with highly rated counterparties that management believes to be creditworthy. The notional amounts of these agreements do not represent amounts exchanged by the parties and, thus, are not a measure of the potential loss exposure.

Agreements. The Company ~~has entered~~enters into risk participation agreements (“RPAs”) with other banks participating in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. RPAs are derivative financial instruments and are recorded at fair ~~value and reported in other assets or other liabilities.~~value. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings with a corresponding offset within other assets or other liabilities.

Under a risk participation-out agreement, (aa derivative ~~asset),~~asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank. Under a risk participation-in agreement, (aa derivative ~~liability),~~liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

~~As of September 30, 2017, the notional amounts of the risk participation-in agreements and risk participation-out agreements were $28.5 million and $0, respectively.~~

The following ~~table presents~~tables present the notional amount, the location, and fair values of derivative instruments in the Company’s ~~unaudited~~Consolidated Balance Sheets:

The following tables present the effect of cash flow hedge accounting on AOCI as of the periods presented:

The Company estimates that an additional $2.3 million will be reclassified out of AOCI into earnings, as a reduction to interest income over the next twelve months.

The following table presents the effect of the Company’s derivative financial instruments on the Consolidated Income Statement for the periods presented:

The following table presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Consolidated Income Statement as of the periods presented:

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. Institutional counterparties must have an investment grade credit rating and be approved by the Company’s Board of Directors. As such, management believes the risk of incurring credit losses on derivative contracts with institutional counterparties is remote.

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. In addition, the Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well- capitalized institution, then the counterparty could terminate the derivative position(s) and the Company would be required to settle its obligations under the agreements.

As of March 31, 2020 and December 31, 2019, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $23.9 million and $9.6 million, respectively. As of March 31, 2020, and December 31, 2019, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted cash collateral of $24.1 million and $10.4 million, respectively. If the Company had breached any of these provisions at March 31, 2020 or December 31, 2019, it could have been required to settle its obligations under the agreements at their termination value of $23.9 million and $9.6 million, respectively.

Certain financial instruments may be eligible for offset in the consolidated balance ~~sheets:~~sheet and/or subject to master netting arrangements or similar agreements. The Company’s derivative transactions with institutional counterparties are generally executed under International Swaps and Derivative Association (“ISDA”) master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts and there may be an intention to settle such amounts on a net basis. Generally, the Company does not offset such financial instruments for financial reporting purposes.

The following tables present the information about financial instruments that are eligible for offset in the Consolidated Balance sheets as March 31, 2020 and December 31, 2019:

~~For the three months ended September 30, 2017 and September 30, 2016, the Company recorded $284,000 and $392,000, respectively, of loan related derivative income.~~

~~For the nine months ended September 30, 2017 and September 30, 2016, the Company recorded $647,000 and $1.2 million, respectively, of loan related derivative income.~~

The following is a summary of the carrying values and estimated fair values of the Company’s significant financial instruments as of the dates indicated:

The Company follows ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”) for financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements about fair value measurements. ASC 820, among other things, emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on the assumptions the market participants would use in pricing the asset or liability. In addition, ASC 820 specifies a hierarchy of valuation techniques based on whether the types of valuation information (“inputs”) are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, ~~and~~ derivative instruments, and hedges are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as collateral dependent impaired loans.

~~The following is a summary~~In accordance with the requirements of ASU 2016-01, the ~~carrying values and estimated~~Company uses an exit price notion for its fair ~~values of the Company’s significant financial instruments as of the dates indicated:~~value disclosures.

The following tables summarize certain assets and liabilities reported at fair value on a recurring basis:

	Fair Value as of September 30, 2017								Fair Value as of March 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(dollars in thousands)								(dollars in thousands)
Measured on a recurring basis
Securities available for sale
U.S. GSE obligations	$	—	$	89,180	$	—	$	89,180	$	—	$	18,590	$	—	$	18,590
Mortgage-backed securities		—		117,621		—		117,621		—		99,357		—		99,357
Corporate debt securities		—		5,045		—		5,045
Mutual funds		603		—		—		603
Other assets
Interest rate swaps with customers		—		1,839		—		1,839		—		32,721		—		32,721
Risk participation agreements out to counterparties										—		34		—		34
Interest rate contracts										—		8,749		—		8,749
Other liabilities
Mirror swaps with counterparties		—		1,839		—		1,839		—		32,721		—		32,721
Risk participation agreements		—		43		—		43
Risk participation agreements in with counterparties										—		537		—		537

	Fair Value as of December 31, 2016								Fair Value as of December 31, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(dollars in thousands)								(dollars in thousands)
Measured on a recurring basis
Securities available for sale
U.S. GSE obligations	$	—	$	138,709	$	—	$	138,709	$	—	$	37,848	$	—	$	37,848
Mortgage-backed securities		—		181,299		—		181,299		—		102,482		—		102,482
Corporate debt securities		—		5,029		—		5,029
Mutual funds		604		—		—		604
Other assets
Interest rate swaps with customers		—		1,632		—		1,632		—		12,980		—		12,980
Risk participation agreements out to counterparties										—		21		—		21
Interest rate contracts										—		2,911		—		2,911
Other liabilities
Mirror swaps with counterparties		—		1,632		—		1,632		—		12,980		—		12,980
Risk participation agreements		—		12		—		12
Risk participation agreements in with counterparties										—		250		—		250

The following ~~tables present~~table presents the carrying value of assets held at March 31, 2020, which were measured at fair value on a non-recurring basis:

The following table presents the carrying value of assets held at December 31, 2019, which were measured at fair value on a non-recurring basis:

	September 30, 2017								December 31, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(dollars in thousands)								(dollars in thousands)
Items recorded at fair value on a nonrecurring basis
Items recorded at fair value on a non-recurring basis
Assets
Collateral dependent impaired loans	$	—	$	—	$	10	$	10	$	—	$	—	$	2,541	$	2,541
Loans held for sale		—		—		560		560		1,546		—		—		1,546
Other real estate owned										—		—		163		163
Total	$	—	$	—	$	570	$	570	$	1,546	$	—	$	2,704	$	4,250

Collateral dependent ~~impaired~~ loans. Collateral dependent loans are carried at the lower of cost or fair value of the collateral less estimated costs to sell which approximates fair value. The Company uses the appraisal value of the collateral and applies ~~a discount rate of between 0% to 15%~~certain adjustments depending on the nature, quality, and type of collateral securing the loan.

Loans held for sale. ~~The Company uses a pricing service to calculate the fair value of loans held for sale. At September 30, 2017, the fair value of loans~~Loans held for sale ~~equals~~are carried at the lower of fair value or carrying value (unpaid ~~principle~~principal and unamortized loans fees).

Other Real Estate Owned.These properties are carried at fair value less estimated costs to sell.

There were no0 transfers between levels for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2019.

The following is a description of the principal valuation methodologies used by the Company to estimate the fair values of its financial ~~instruments:~~instruments.

For investment securities, fair values are primarily based upon valuations obtained from a national pricing service which uses matrix pricing with inputs that are observable in the market or can be derived from, or corroborated by, observable market data. When available, quoted prices in active markets for identical securities are utilized.

For loans held for sale, fair values are estimated using projected future cash flows, discounted at rates based upon either trades of similar loans or mortgage-backed securities, or at current rates at which similar loans would be made to borrowers with similar credit ratings and for similar remaining maturities.

For most categories of loans, fair values are estimated using projected future cash flows, discounted at rates based upon ~~either trades of similar loans or mortgage-backed securities, or at~~ current rates at which similar loans would be made to borrowers with similar credit ratings, and for similar remaining maturities. Projected estimated cash flows are adjusted for prepayment assumptions, liquidity premium assumptions, and credit loss assumptions. Loans that are deemed to be ~~impaired~~collateral dependent in accordance with ASC 310, ~~“Receivables,~~“Receivables,” are valued based upon the lower of cost or fair value of the underlying collateral.

The fair value of FHLB of Boston stock equals its carrying value since such stock is only redeemable at its par value.

The fair value of non-maturity deposit accounts is the amount payable on demand at the reporting date. This amount does not take into account the value of the Bank’s long-term relationships with core depositors. The fair value of fixed-maturity certificates of deposit is estimated using a replacement cost of funds approach and is based upon rates currently offered for deposits of similar remaining maturities.

For long-term borrowings, fair values are estimated using future cash flows, discounted at rates based upon current costs for debt securities with similar terms and remaining maturities.

Cash and cash equivalents, accrued interest receivable, and short-term borrowings have fair values which approximate their respective carrying values because these instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Bank incorporates credit valuation adjustments to appropriately reflect nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Bank has considered the impact of netting and any applicable credit enhancements, such as collateral postings.

In the course of originating loans and extending credit, the Bank will charge fees in exchange for its commitment. While these commitment fees have value, the Bank has not estimated their value due to the short-term nature of the underlying commitments and their immateriality.

In accordance with ASC 820, the Company has not estimated fair values for non-financial assets such as banking premises and equipment, goodwill, the intangible value of the Bank’s portfolio of loans serviced for itself, and the intangible value inherent in the Bank’s deposit relationships (i.e., core deposits), among others. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

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

The following analysis discusses the changes in financial condition and results of operation of Cambridge Bancorp (together with its bank subsidiary, unless the context otherwise requires, the “Company”), and should be read in conjunction with ~~both~~Company’s Annual Report on Form 10-K for the ~~unaudited consolidated interim financial statements~~fiscal year ended December 31, 2019, filed with the Securities and ~~notes thereto, appearing in Part 1, Item 1 of this report, as well as the Company’s Form 10 registration statement.~~Exchange Commission.

This report contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about the Company and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company’s future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, are forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following:

~~The~~ Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. You are cautioned not to place undue reliance on these forward-looking statements.

Cambridge Bancorp (together with its bank subsidiary, unless the context otherwise requires, the “Company”) is a Massachusetts state-chartered, federally registered bank holding company headquartered in Cambridge, Massachusetts. The Company is a Massachusetts corporation formed in 1983 and has one ~~banking subsidiary,~~bank subsidiary: Cambridge Trust Company (the “Bank”), formed in 1890. ~~At September 30, 2017,~~As of March 31, 2020, the Company had total assets of ~~$1.9~~approximately $2.9 billion. ~~Currently, the~~The Bank operates 1116 full-service banking offices in six cities and towns in Eastern ~~Massachusetts.~~Massachusetts and Southeastern New Hampshire. As a Private Bank, we focus on four core services that center around client needs. Our core services include Wealth Management, Commercial Banking, Residential Lending, and Personal Banking. The Bank’s ~~clients~~customers consist primarily of consumers and small- and medium-sized businesses ~~and retail clients~~ in these communities and surrounding areas throughout Massachusetts and New Hampshire. The Company’s Wealth Management Group has ~~four~~five offices, ~~one~~two in Boston, Massachusetts and three in New Hampshire in Concord, Manchester, and Portsmouth. ~~The Company’s~~As of March 31, 2020, the Company had Assets under Management and Administration as of ~~September 30, 2017, were $2.9~~approximately $3.1 billion. The ~~Bank’s~~ Wealth Management Group offers comprehensive investment management, as well as trust administration, estate settlement, and financial planning services. Our wealth management clients ~~consist primarily~~value personal service and depend on the commitment and expertise of ~~high net worth individuals, small~~our experienced banking, investment, and fiduciary professionals.

The Wealth Management Group customizes its investment portfolios to help its clients meet their long-term financial goals while moderating short-term stock market volatility. Through careful monitoring of asset allocation and disciplined security selection, the Bank’s in-house investment team provides clients with long-term capital growth while minimizing risk. Our internally developed, research-driven process is managed by our team of portfolio managers and analysts. We build discretionary portfolios consisting of our best investment ideas, focusing on individual global equities, fixed income securities, exchange-traded funds, and mutual funds. Our team-oriented approach fosters spirited discussion and rigorous evaluation of investments.

The Company offers a wide range of services to commercial enterprises, non-profit organizations, and individuals. The Company emphasizes service to consumers and small- and medium-sized businesses in its market area. The Company makes commercial loans, commercial real estate loans, construction loans, consumer loans, and ~~endowments~~real estate loans (including one-to-four family and ~~foundations in Massachusetts~~home equity lines of credit), and ~~New Hampshire.~~accepts savings, money market, time, and demand deposits. In addition, the Company offers a wide range of commercial and personal banking services which include cash management, online banking, mobile banking, and global payments.

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.~~borrowings, and non-interest income largely from its wealth management services. The results of operations are ~~also~~ affected by the level of income and fees from ~~wealth management services,~~ loans, deposits, as well as operating expenses, the provision for ~~loan~~credit losses, the impact of federal and state income taxes, ~~and~~ the relative levels of interest rates, and local and national economic activity.

Through the Bank, the Company focuses on wealth management, the commercial banking business, and private banking for clients, including residential lending and personal banking. Within the commercial loan portfolio, the Company has traditionally been a commercial real estate lender and in recent years has diversified commercial operations within the areas of commercial and industrial lending to include Innovation Banking, which specializes in working with New England-based entrepreneurs, and asset based lending that helps companies throughout New England and New York grow by borrowing against existing assets. The Innovation Banking group has a narrow client focus for lending and provides a local banking option for technology and entrepreneurial companies within our market area that are primarily serviced by out-of-market institutions. Personal banking focuses on providing exceptional service to clients and in deepening relationships.

In the fourth quarter of 2019, the Company, the Bank, Wellesley, and Wellesley Bank, Wellesley’s subsidiary bank, entered into a definitive agreement pursuant to which Wellesley will merge with and into the Company and Wellesley Bank will merge with and into the Bank in an all-stock transaction (the “Merger”). The Company’s and Wellesley’s shareholders both approved the merger at a special meeting held on March 12, 2020, and March 16, 2020, respectively. The closing of the merger is expected to occur in the second quarter of 2020, subject to customary closing conditions. Under the terms of the merger agreement, Wellesley shareholders will receive 0.580 shares of the Company’s common stock for each share of Wellesley common stock they own on the effective date of the Merger. This transaction is expected to enhance and expand the Company’s Greater Boston presence with the addition of Wellesley’s six full-service banking offices in the Norfolk, Middlesex, and Suffolk Counties of Massachusetts.

Accounting policies involving significant judgments and assumptions by management, which have, or could have, a material impact on the carrying value of certain assets and impact income, are considered critical accounting policies.

The Company considers allowance for ~~loan~~credit losses and income taxes to be its critical accounting policies.

Allowance for Credit Losses.The Company adopted ASU-2016-13 “Financial Instruments - Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) during the first quarter of 2020. ASU 2016-13, which has been codified under Topic 326, replaced the previous GAAP method of calculating loan ~~losses~~

~~Arriving at~~losses. Previously, GAAP required the use of the incurred loss methodology versus ASU 2016-13 which utilizes expected loss methodology. The use of an ~~appropriate level~~expected loss methodology, referred to as the current expected credit loss (“CECL”) methodology, requires institutions to account for potential losses that previously would not have been part of ~~allowance for loan losses involves a high degree of judgment. Management maintains an allowance for loan losses~~the calculation. The CECL methodology incorporates forecasting in addition to ~~absorb losses inherent~~historical and current measures utilized in the prior incurred loss methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan ~~portfolio. The allowance is based on assessments of~~receivables, held to maturity and available for sale debt securities.

Under the ~~probable estimated losses inherent in the loan portfolio. Management’s~~CECL methodology, for assessing the appropriateness of the allowance consists of several key elements, which include the specific allowances, if appropriate, for identified problem loans, formula allowance, and possibly an unallocated allowance.

~~The provision for loan losses and the level of~~ the allowance for ~~loan~~credit losses ~~reflects management’s estimate~~(“ACL”) consists of ~~probable loan losses inherent~~quantitative and qualitative components. The quantitative component of the ACL is model based and utilizes a single forward-looking macroeconomic forecast, complemented by a qualitative component in estimating expected credit losses. The qualitative component of the ACLconsiders (i) the uncertainty of forward-looking scenarios; (ii) certain portfolio characteristics, such as portfolio concentrations, real estate values, changes in the number and amount of nonaccrual and past due loans; and (iii) model limitations; among others.

Losses on loan ~~portfolio~~receivables are estimated and recognized upon origination of the loan, based on expected credit losses for the life of the loan balance as of the period end date. The Company uses a discounted cash flow method incorporating probability of default and loss given default forecasted based on statistically derived economic variable loss drivers combined with qualitative factors to estimate expected credit losses. This process includes estimates which involve modeling loss projections attributable to existing loan balances, considering historical experience, current conditions and future expectations for homogeneous pools of loans over the reasonable and supportable forecast period.

We also perform a qualitative assessment beyond model estimates, and apply qualitative adjustments as management deems necessary. The reasonable and supportable forecast period is determined based upon the accuracy level of historical loss forecast estimates, the specific loan level models and methodology utilized, and considers material changes in growth and credit strategy, and business changes which may not be applicable within the current environment. For periods beyond a reasonable and supportable forecast interval, we revert to historical information over a period for which comparable data is available. The historical information either experienced by the Company or by a selection of peer banks when appropriate, is derived from a combination of recessionary and non-recessionary performance periods for which data is available. Similar to the reasonable and supportable forecast period, we reassess the reversion period at the ~~balance sheet date. Management uses a systematic process~~segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, and ~~methodology~~other relevant data shifts over time.

We evaluate the loan allowance for credit losses quarterly. We regularly review our collection experience (including delinquencies and net charge-offs) in determining our allowance for credit losses. We also consider our historical loss experience to ~~establish~~date based on actual defaulted loans and overall portfolio indicators including delinquent and non-accrual loans, trends in loan volume and lending terms, credit policies and other observable environmental factors such as unemployment and interest rate changes.

The underlying assumptions, estimates and assessments we use to estimate the allowance for ~~loan~~credit losses ~~each quarter. To determine the total allowance for loan losses, management~~reflect Management’s best estimate of model assumptions and forecasted conditions at that time. Changes in such estimates can significantly affect the allowance ~~needed~~and provision for ~~each of the following segments of the loan portfolio: (a) residential mortgage loans, (b) commercial mortgage loans, including multifamily loans~~credit losses. It is possible and ~~construction loans, (c) home equity loans and lines of~~likely that we will experience credit ~~(d) commercial & industrial loans, and (e) consumer loans.~~

~~The establishment of~~losses that are different from our current estimates. Charge-offs are deducted from the allowance for ~~each portfolio segment~~credit losses when we judge the principal to be uncollectible, and subsequent recoveries are added to the allowance, generally at the time cash is received on a charged-off account.

The expected credit losses for unfunded commitments are measured over the contractual period of the Company’s exposure to credit risk. The estimate of credit loss incorporates assumptions for both the likelihood and amount of funding over the estimated life of the commitments, for the risk of loss, and current conditions and expectations. Management periodically reviews and updates its assumptions for estimated funding rates based on historical rates, and factors such as portfolio growth, changes to organizational structure, economic conditions, borrowing habits, or any other factor which could impact the likelihood that funding will occur. The Company does not reserve for unfunded commitments which are unconditionally cancellable.

See “Management’s Discussion and Analysis—Critical Accounting Policies” in our 2019 Form 10-K, for a ~~process that evaluates~~detailed discussion of the ~~risk characteristics relevant~~Company’s other critical accounting estimates and policies.

There have been no other significant changes to ~~each portfolio segment and takes into consideration multiple internal and external factors.~~

~~(a) historic levels and trends in charge-offs, delinquencies, risk ratings, and foreclosures,~~

~~(c) underwriting~~the Company’s critical accounting policies and ~~adherence to such policies,~~

~~(d)~~estimates from those disclosed in our Annual Report on Form 10-K for the ~~growth and vintage of the portfolios, and~~

The Bank evaluates certain loans individually for specific impairment. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Loans are selected for evaluation based upon internal risk rating, delinquency status, or non-accrual status. A specific allowance amount is allocated to an individual loan when such loan has been deemed impaired and when the amount of the probable loss is able to be estimated. Estimates of loss may be determined by the present value of anticipated future cash flows, the loan’s observable fair market value, or the fair value of the collateral, if the loan is collateral dependent.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, the Commonwealth of Massachusetts, and other states as required. The Company uses the liability (or balance sheet) method for accounting for income taxes. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Deferred tax assets are reviewed quarterly and reduced by a valuation allowance if, based upon the information available, it is more likely than not that some or all of the deferred tax assets will not be realized. Interest and penalties related to unrecognized tax benefits, if incurred, are recognized as a component of income tax expense.fiscal year ended December 31, 2019.

See Note 24 to the Unaudited Consolidated Financial Statements for details of recently issued and adopted accounting pronouncements and their expected impact on the ~~Corporation’s~~Company’s financial statements.

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” The COVID-19 outbreak is disrupting supply chains and affecting production and sales across a range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers, employees and vendors all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain.

During the first quarter of 2020, the Company announced a range of initiatives to help clients, communities, and employees navigate the many financial challenges caused by the COVID-19 pandemic. As a result of the COVID-19 crisis, the Company has taken the following steps to provide support to any client experiencing a hardship during this uncertain time.

The Company’s wealth management team is closely monitoring the economy and financial markets and continues to actively manage clients’ portfolios through the current volatility. We have urged clients to reach out to their Relationship Manager directly with any questions or concerns.

In addition to the 250 plus organizations the Company supports through its annual charitable giving, the Company is donating an additional $250,000 to organizations supporting those most impacted by COVID-19.

The Company is taking precautions to protect the health and safety of its staff, while continuing to provide uninterrupted service to clients. Efforts include:

Forbearance/Modifications. The Company has instituted payment deferral programs to aid existing borrowers with payment forbearance. For commercial and consumer borrowers, we have endeavored to provide payment relief for 90 days for borrowers who have been impacted by the COVID-19 virus and have requested payment assistance. We expect to continue to accrue interest on these loans during the payment deferral period. As of April 30, 2020, the Company has approved 120 commercial loan payment relief requests totaling $53.6 million and 99 consumer loan payment relief requests totaling $34.8 million.

On April 20, 2020, the governor of Massachusetts signed into law Chapter 65 of the Act of 2020, An Act Providing for a Moratorium on Evictions and Foreclosures During the COVID-19 Emergency (“Chapter 65”). Chapter 65, which will remain in effect until the earlier of August 18, 2020 or forty-five (45) days after the Massachusetts’ governor’s COVID-19 emergency declaration has been lifted, provides for, among other things, the right of residential mortgage borrowers that have experienced a financial impact from COVID-19 to obtain a forbearance on their mortgage payments for up to 180 days if requested by the borrower. Subsequent guidance provided by the Massachusetts Division of Banks on May 1, 2020 provided information regarding the length of the forbearance period. The Company is currently evaluating the impact of Chapter 65 but expects to grant 180 day forbearances to eligible borrowers who request a forbearance and to extend the forbearance period to 180 total days for any eligible borrowers previously granted forbearances who request it.

For a further discussion of the risks and uncertainties relating to COVID-19 for our results of operations and business condition, see Item 1A. Risk Factors.

Results of Operations for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~September 30, 2016~~March 31, 2019

General. Net income increased ~~$435,000,~~$1.0 million, or ~~9.5%~~16.7%, to ~~$5.0~~$7.2 million for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2020, as compared to net income of ~~$4.6~~$6.2 million for the ~~three months~~quarter ended ~~September 30, 2016. The increase was~~March 31, 2019, primarily due to a ~~$922,000~~$4.0 million increase in net interest and dividend income after the provision for ~~loan~~credit losses, and a ~~$362,000~~$861,000 increase in ~~non-interest~~noninterest income, which ~~was~~were partially offset by a ~~$439,000~~$3.6 million increase in noninterest ~~expense~~expenses, and ~~a $410,000 increase in~~higher income tax ~~expense.~~expense of $321,000. Diluted earnings per share were $1.33 for the first quarter of 2020, representing a 10.7% decrease over diluted earnings per share of $1.49 for the same quarter last year. The Company completed its merger with Optima in the second quarter of 2019.

Excluding nonoperating expenses, operating net income was $7.4 million for the quarter ended March 31, 2020, an increase of $1.1 million, or 17.5%, compared to operating net income of $6.3 million for the quarter ended March 31, 2019. Operating diluted earnings per share were $1.37 for the first quarter of 2020, representing a 10.5% decrease over operating diluted earnings per share of $1.53 for the same quarter last year.

Net Interest and Dividend Income. Net interest and dividend income ~~after~~before the provision for ~~loan~~credit losses increased by ~~$922,000,~~$6.1 million, or ~~6.9%~~37.8%, to ~~$14.3~~$22.4 million, as compared to $16.3 million for the ~~three months~~quarter ended ~~September 30, 2017, as compared to $13.4 million for the three months ended September 30, 2016. The increase was~~March 31, 2019, primarily due to ~~an increase~~loan growth.

Total average ~~interest-earning assets. Average interest-earning~~interest earning assets increased by ~~$101.5~~$640.2 million, or ~~5.9%~~31.5%, to ~~$1.8~~$2.7 billion ~~for~~as of March 31, 2020, from $2.0 billion as of March 31, 2019, primarily due to the ~~three months ended September 30, 2017, as compared to $1.7 billion for the three months ended September 30, 2016.~~merger with Optima and strong loan growth. The Company’s net interest margin, on a fully ~~tax~~taxable equivalent basis, increased ~~four~~13 basis points to ~~3.23%~~3.39% for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2020, as compared to 3.26% for the quarter ended March 31, 2019. Net interest margin, on a fully taxable equivalent basis, increased 20 basis points to 3.39% for the quarter ended March 31, 2020, as compared to 3.19% for ~~three months~~the quarter ended September 30, 2016, and the net interest rate spread increased three basis points to 3.13% for the three months ended September 30, 2017, as compared to 3.10% for the three months ended September 30, 2016.December 31, 2019.

Interest and Dividend Income. Total interest and dividend income increased ~~$1.4~~$7.0 million, or ~~9.5%~~36.5%, to ~~$15.7~~$26.1 million for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2020, as compared to ~~$14.3~~$19.1 million for the ~~three months~~quarter ended ~~September 30, 2016. The increase in interest and dividend income was~~March 31, 2019, primarily due to a ~~$721,000~~$7.2 million increase in interest income onfrom loans, ~~due to loan growth and~~partially offset by a ~~$550,000 increase~~$233,000 decrease in interest on investment securities.

Interest Expense.Interest expense increased ~~$239,000,~~$838,000, or ~~30.1%~~29.3%, to ~~$1.0~~$3.7 million for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2020, as compared to ~~$795,000~~$2.9 million for the ~~three months~~quarter ended ~~September 30, 2016. The increase was~~March 31, 2019, primarily as result of the merger with Optima and strong core deposit growth during 2019.

Average interest-bearing liabilities increased $435.5 million to $1.9 billion at March 31, 2020, primarily driven by an increase in average savings balances of $200.0 million, a ~~$58.7~~$65.3 million increase in average checking accounts balances, an increase in average money market accounts of $62.8 million, an increase in average certificates of deposit balances of $34.1 million, and in increase in average other borrowed funds ~~which contributed~~of $73.3 million. The aforementioned increases were primarily due to the merger with Optima and core deposit growth.

We experienced a ~~four~~two basis points ~~increase~~decrease in the average cost of ~~funds~~interest-bearing liabilities for the quarter ended March 31, 2020, as compared to ~~0.22% from 0.18%.~~the quarter ended March 31, 2019, as the Company took steps to reduce the cost of deposits and mitigate the impact of falling interest rates on the net interest margin during the first quarter of 2020.

Provision for ~~Loan~~Credit Losses. The Company recorded a$2.0 million in provision for ~~loan~~credit losses ~~of $310,000~~ for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2020, as compared to ~~$113,000~~a release of the provision for credit losses of $93,000 for the ~~three months~~quarter ended ~~September 30, 2016.~~ March 31, 2019. The increase is primarily due to the expected impact of the COVID-19 pandemic within the current expected credit losses (“CECL”) methodology. The Company adopted ASU 2016-13 - Measurement of Credit Losses on Financial Instruments, in the first quarter of 2020 and recorded a one-time transition amount of $347,000, net of taxes, as a decrease to retained earnings. This amount represents additional reserves for loans and unfunded commitments that existed upon adopting the new guidance.

We recorded net ~~recoveries~~charge-offs of ~~$7,000~~$265,000 for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2020, as compared to ~~recoveries~~a net charge-off of ~~$13,000 for the three months ended September 30, 2016.~~$23,000 in 2019. The allowance for ~~loan~~credit losses was ~~$15.6~~$20.2 million, or ~~1.15%~~0.89% of total loans at ~~September 30, 2017~~March 31, 2020, as compared to ~~$15.5~~$18.2 million, or ~~1.18%~~0.82% of total loans at ~~September 30, 2016.~~ March 31, 2019.

Total noninterest income increased by ~~$362,000,~~$861,000, or ~~4.8%~~10.8%, to $8.8 million for the quarter ended March 31, 2020, as compared to $8.0 million for the ~~three months~~quarter ended ~~September 30, 2017, as compared to $7.6 million for the three months ended September 30, 2016~~March 31, 2019, primarily as a result of ~~increased Wealth Management revenue.~~increases in Wealth Management revenue, ~~increased by $650,000, or 11.9%,~~loan related derivative income and higher gains on loans sold. Noninterest income was 28.2% of total revenue for the ~~three months~~quarter ended September 30, 2017, as compared to the three months ended September 30, 2016 due to market appreciation and new business. Wealth Management Assets under Management increased by $284.3 million, or 11.2%, to $2.8 billion as of September 30, 2017, as compared to $2.5 billion as of September 30, 2016.March 31, 2020.

The following table presents the changes in Wealth Management assets under ~~management~~:management:

	Three Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2020			2019
	(dollars in thousands)						(dollars in thousands)
Wealth Management assets under management
Wealth Management Assets under Management
Balance at the beginning of the period	$	2,751,182		$	2,458,854		$	3,287,371		$	2,759,547
Gross client asset inflows		67,114			137,748			99,247			60,313
Gross client asset outflows		(60,429	)		(73,762	)		(73,054	)		(72,818	)
Net investment appreciation & income		69,117			19,837
Net market impact								(381,171	)		243,333
Balance at the end of the period	$	2,826,984		$	2,542,677		$	2,932,393		$	2,990,375
Weighted average management fee		0.79	%		0.79	%		0.81	%		0.84	%

There were no significant changes to the average fee rates and fee structure for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~

Noninterest income increases were partially offset by lower gains on loans held for sale and lower loan related derivative income of $266,000 and $108,000, respectively, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016.2019.

Noninterest Expense.Total noninterest expense increased by ~~$439,000,~~$3.6 million, or ~~3.1%~~21.7%, to ~~$14.6~~$19.9 million for the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2020, as compared to ~~$14.2~~$16.4 million for the ~~three months~~quarter ended ~~September 30, 2016~~March 31, 2019, primarily driven by ~~higher salaries and employee benefit expense and higher professional services expense. The increase~~increases in salaries and benefits ~~of $446,000 is primarily due to annual merit increases~~expense, occupancy and ~~the impact of additional staff to support business initiatives. The increase of $300,000 in professional services is mainly due to legal~~equipment expense, and ~~consulting services primarily related to registration with the U.S. Securities and Exchange Commission (the “SEC”).~~data processing expense.

Noninterest expense increases were partially offset by decreases in data processing and lower marketing costs of $168,000 and $108,000, respectively, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016.

Income Tax Expense. The Company recorded a provision for income taxes of ~~$2.7~~$2.1 million for the ~~three months~~quarter ended September 30, 2017, as compared to a provision for income taxes of $2.3 million for the three months ended September 30, 2016, reflecting effective tax rates of 34.97% and 33.30%, respectively. The increase in the effective tax rate is primarily the result of higher state income tax expense offset by lower tax-exempt income.

~~Results of Operations for~~ ~~the nine months ended September 30, 2017 and~~ ~~September 30, 2016~~

~~General~~. Net income increased $1.4 million to $13.9 million, or 11.1% for the nine months ended September 30, 2017, as compared to net income of $12.5 million for the nine months ended September 30, 2016. The increase was primarily due to a $3.0 million increase in net interest and dividend income after the provision for loan losses and a $1.3 million ~~increase~~ ~~in non-interest income, which was partially offset by a $2.1 million increase in noninterest expense and a $797,000 increase in income tax expense.~~

~~Net Interest and Dividend Income~~. Net interest and dividend income after the provision for loan losses increased by $3.0 million, or 7.7%, to $42.5 million for the nine months ended September 30, 2017, as compared to $39.4 million for the nine months ended September 30, 2016. The increase was primarily due to an increase in average interest-earning assets and the ability to keep the cost of core deposits low. Average interest-earning assets increased by $101.9 million, or 6.0%, to $1.8 billion for the nine months ended September 30, 2017,March 31, 2020, as compared to $1.7 billion for the nine months ended September 30, 2016. Interest on loans increased by $2.3 million, or 6.3%, primarily driven by the impact of loan growth. The Company’s net interest margin, on a fully tax equivalent basis, increased four basis points to 3.24% for the nine months ended September 30, 2017, as compared to 3.20% for the nine months ended September 30, 2016.

~~Interest and Dividend Income~~. ~~Total interest and dividend income increased $3.1 million, or 7.3%, to $45.5~~ million for the ~~nine months ended September 30, 2017 from $42.4 million for the nine months ended September 30, 2016.~~same quarter in 2019. The ~~increase in interest and dividend income was primarily due to a $2.3 million increase in interest income on loans and a $678,000 increase in interest on investment securities.~~

~~Interest Expense.~~ ~~Interest expense increased $25,000, or 1.0%, to $2.6 million for the ninemonths ended September 30, 2017, as compared to $2.6 million for the nine months ended September 30, 2016.~~

~~Provision for Loan Losses.~~ The Company recorded a provision for loan losses of $360,000 for the nine months ended September 30, 2017, as compared to $338,000 for the nine months ended September 30, 2016. We recorded net charge-offs of $1,000 for the nine months ended September 30, 2017, compared to recoveries of $8,000 for the nine months ended September 30, 2016. The allowance for loan losses was $15.6 million, or 1.15% of total loans at September 30, 2017, as compared to $15.5 million, or 1.18% of total loans at September 30, 2016.

~~Noninterest Income.~~ Noninterest income increased $1.3 million to $22.7 million, or 5.9% for the nine months ended September 30, 2017 compared $21.4 million for the nine months ended September 30, 2016 as a result of increased Wealth Management revenue.Wealth management revenue increased by $2.1 million, or 13.6%, to $17.1 million, as compared to $15.0 million for the nine months ended September 30, 2016 due to market appreciation and new business. Wealth Management Assets under Management increased by $284.3 million, or 11.2%, to $2.8 billion as of September 30, 2017, as compared to $2.5 billion as of September 30, 2016.

~~The categories of Wealth Management revenues are shown in the following table:~~

~~The following table presents the changes in wealth management assets under management:~~

~~There were no significant changes to the average fee rates and fee structure for the nine months ended September 30, 2017 and 2016.~~

Deposit account fee income was $2.4 million for the nine months ended September 30, 2017, an increase of $253,000, or 11.9%, from $2.1 million for the nine months ended September 30, 2016, primarily due to greater commercial cash management income.

Noninterest income increases were partially offset by lower loan related derivative income, lower gains on disposition of investment securities and lower gains on loans held for sale of $544,000, $441,000, and $267,000 respectively, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016.

~~Noninterest Expense.~~ Noninterest expense increased $2.1 million to $44.3 million for the nine months ended September 30, 2017 compared to $42.2 million for the nine months ended September 30, 2016 primarily driven by higher salaries and employee benefit expense and higher professional services expense. The increase in salaries and benefits of $1.8 million is primarily due to normal annual merit increases and the impact of strategic hires to support business initiatives. The increase of $793,000 in professional services is primarily the result of costs associated with outside marketing support, recruitment fees, benefits and compliance consulting, and the costs associated with the SEC registration.

~~Increases in noninterest expense were partially offset by lower marketing expense and lower FDIC insurance expense of $290,000 and $162,000, respectively.~~

~~Income Tax Expense.~~ The Company recorded a provision for income taxes of $7.0 million for the nine months ended September 30, 2017, as compared to a provision for income taxes of $6.2 million for the nine months September 30, 2016, reflecting effective tax rates of 33.53% and 33.17%, respectively. TheCompany’s effective tax rate was ~~reduced~~22.2% for the quarter ended March 31, 2020, as compared to 21.9% for the quarter ended March 31, 2019.

The Coronavirus Aid, Relief, and Economic Security (the “CARES Act”) was signed into law on March 27, 2020, to help stimulate the United States economy. One of the business tax provisions of the CARES Act included allowing net operating losses (“NOL”) generated by the Company in tax years 2018 and 2019 to be carried back up to five years at the tax rates in effect during those periods, rather than carried forward at current federal tax rates of 21%. This allowed the Company to recognize lower tax expense associated with NOL carryforwards from ~~the statutory federal income tax rate of 35% largely as~~2018 and 2019 (as a result of the ~~benefits~~Optima merger) and, combined with adjustments to state NOL rates, resulted in a benefit of ~~tax-exempt income and~~$372,000 in the ~~adoption~~first quarter of 2020. Additionally, the ~~new~~Company recognized $21,000 of tax benefit resulting from the accounting ~~guidance~~ for ~~stock-based compensation, partially offset by state income tax expense.~~share-based payments during the first quarter of 2020.

Total Assets. Total assets ~~increased $15.2 million, or 0.8%, to $1.9 billion at September 30, 2017,~~remained stable from ~~$1.8 billion at~~ December 31, ~~2016. The increase was primarily the result~~2019 and were $2.9 billion as of ~~a $35.8 million increase in loans, a $24.2 million increase in investment securities partially offset by a decrease in cash and cash equivalents of $40.4 million.~~March 31, 2020.

Cash and Cash Equivalents. Cash and cash equivalents decreased by ~~$40.4~~$18.3 million to ~~$13.7~~$43.0 million at ~~September 30, 2017~~March 31, 2020 from ~~$54.1~~$61.3 million at December 31, ~~2016.~~2019.

Investment Securities. The ~~carrying value of~~Company’s total investment securities ~~increased~~portfolio decreased by ~~$24.2~~$33.6 million, ~~to $432.3 million at September 30, 2017,~~or 8.4%, from ~~$408.1~~$398.5 million at December 31, ~~2016. The increase in investment securities was driven by an increase of $137.4 million in held~~2019 to ~~maturity investment securities, partially offset by a decrease of $113.2 million in available for sale investment securities.~~

~~Loans Held for Sale~~. ~~Loans held for sale decreased by $6.0 million to $560,000 at September 30, 2017 from $6.5~~$364.9 million at March 31, 2020 as the Company used investment cash flow to pay down wholesale funding.

Loans. Total loans increased by $29.1 million, or 1.3%, from December 31, ~~2016. The balance~~2019 and stood at $2.3 billion as of loans held for sale usually relates to the timing and volume of residential loans originated for sale and the ultimate sale transaction which is typically executed within a short-time following the loan origination.March 31, 2020.

~~Loans.~~ Net loans increased $35.4 million, or 2.7%, to $1.3 billion at September 30, 2017 from $1.3 billion at December 31, 2016. The growth in total loans is primarily due to the increase in commercial real estate loans of $15.6 million, from $616.1 million at December 31, 2016 to $631.8 million at September 30, 2017 and the increase in consumer loans of $10.0 million, from $34.9 million at December 31, 2016 to $44.9 million at September 30, 2017.

Bank-Owned Life Insurance. The Company invests in bank-owned life insurance to help offset the costs of our employee benefit plan obligations. Bank-owned life insurance also generally provides noninterest income that is nontaxable. At ~~September 30, 2017,~~March 31, 2020, our investment in bank-owned life insurance was ~~$30.9~~$37.5 million, representing an increase of ~~$448,000~~$160,000 from ~~$30.5~~$37.3 million at December 31, ~~2016,~~2019, primarily due to increases in the cash surrender value of the ~~policies.~~policies during the first quarter of 2020.

~~Deposits.~~ ~~Deposits decreased $9.1~~Other assets. Other assets increased $28.3 million to ~~$1.7 billion~~$70.6 million at ~~September 30, 2017~~March 31, 2020, from ~~$1.7 billion~~$42.3 million at December 31, ~~2016. The decrease in deposits was~~2019, primarily due to ~~a decrease~~an increase in ~~commercial interest-bearing checking accounts and~~the fair value of derivatives.

Deposits. Total deposits grew by $31.5 million, or 1.3%, to $2.4 billion at March 31, 2020.

Certificates of deposit totaled $219.4 million at March 31, 2020, an increase of $37.1 million from $182.3 million at December 31, 2019, primarily due to an increase in short-term brokered certificates of deposit. Total brokered certificates of deposit, which are included within certificates of ~~$43.4~~deposit, were $58.8 million and ~~$12.3~~$7.1 million ~~respectively, partially offset by an increase of $61.3 million in saving accounts. During the second~~at March 31, 2020 and ~~third quarters of 2017, the Bank ran promotional saving campaigns to attract and deepen client relationships.~~December 31, 2019, respectively.

Borrowings. At ~~September 30, 2017,~~March 31, 2020, borrowings consisted of advances from the FHLB of Boston and the FRB Boston. Total borrowings ~~increased $11.4 million~~decreased to ~~$15.1~~$75.1 million at ~~September 30, 2017,~~March 31, 2020, from ~~$3.7~~$135.7 million at December 31, ~~2016.~~2019. During the ~~nine months ended September 30, 2017,~~first quarter, the Company utilized ~~short-term borrowings~~cash flow and maturities from the investment portfolio to ~~fulfill its funding needs.~~reduce wholesale funding.

Shareholders’ Equity. Total shareholders’ equity increased ~~$11.4~~$11.2 million, or ~~8.5%~~3.9%, to ~~$146.1~~$297.8 million at ~~September 30, 2017,~~March 31, 2020, from ~~$134.7~~$286.6 million at December 31, ~~2016. The increase is the result of~~2019, primarily due to net income of ~~$13.9~~$7.2 million, increases in the value of the Company’s interest rate derivative positions of $4.2 million and ~~an increase~~increases in the value of ~~$2.2~~the available for sale investment portfolio of $2.5 million, ~~in additional paid-in capital related to stock-based compensation,~~ partially offset by regular dividend payments of ~~$5.7~~$2.9 million.

The Company’s total shareholders’ equity to total assets ratio increased by 40 basis points to 10.44% as of March 31, 2020, as compared to 10.04% as of December 31, 2019. Book value per share grew by $1.90, or 3.58%, to $54.96 as of March 31, 2020, as compared to $53.06 as of December 31, 2019.

The Company’s ratio of tangible common equity to tangible assets increased 4.6%, to 9.34%, at March 31, 2020, from 8.93% at December 31, 2019, primarily due to the Company’s earnings combined with increased valuations of interest rate derivative positions and available for sale investment securities. Tangible book value per share grew by $1.94, or 4.2%, to $48.60 as of March 31, 2020, as compared to $46.66 as of December 31, 2019.

Statement on Non-GAAP Measures: The Company believes the presentation of the following non-GAAP financial measures provides useful supplemental information that is essential to an investor’s proper understanding of the results of operations and financial condition of the Company. Management uses non-GAAP financial measures in its analysis of the Company’s performance. These non-GAAP measures should not be viewed as substitutes for the financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The Company’s securities portfolio consists of securities available for sale (“AFS”) and securities held to maturity (“HTM”). The largest component of the securities portfolio is mortgage-backed securities, all of which are issued by U.S. government agencies or U.S. government-sponsored enterprises.

Securities available for sale consist of certain U.S. ~~Treasury, U.S.~~ Government Sponsored Enterprises (“GSE”) and U.S. GSE mortgage-backed securities and corporate debt ~~securities, and mutual funds.~~securities. These securities are carried at fair value, ~~and~~with unrealized gains and losses, net of applicable income taxes, are recognized as a separate component of shareholders’ equity.

The fair value of securities available for sale totaled ~~$212.4~~$117.9 million and included gross unrealized gains of ~~$323,000~~$2.7 million and gross unrealized losses of ~~$2.9 million~~$212,000 at ~~September 30, 2017.~~March 31, 2020. At December 31, ~~2016,~~2019, the fair value of securities available for sale totaled ~~$325.6~~$140.3 million and included gross unrealized gains of ~~$515,000~~$231,000 and gross unrealized losses of ~~$4.6~~$1.0 million.

Securities classified as held to maturity consist of certain U.S. ~~Treasury, U.S.~~ GSE and U.S. GSE mortgage-backed securities, corporate debt securities, and state, county, and municipal securities. Securities held to maturity as of ~~September 30, 2017~~March 31, 2020 are carried at their amortized cost of ~~$219.9~~$246.9 million. At December 31, ~~2016,~~2019, securities held to maturity totaled ~~$82.5~~$258.2 million.

The following table sets forth the fair value of available for sale investment securities, the amortized costs of held to maturity investment securities, and the percentage distribution at the dates indicated:

	September 30,					December 31,					March 31,					December 31,
	2017					2016					2020					2019
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
	(dollars in thousands)										(dollars in thousands)
Available for sale securities
U.S. GSE obligations	$	89,180		42	%	$	138,709		43	%	$	18,590		16	%	$	37,848		27	%
Mortgage-backed securities		117,621		56	%		181,299		55	%		99,357		84	%		102,482		73	%
Corporate debt securities		5,045		2	%		5,029		2	%
Mutual funds		603		0	%		604		0	%
Total securities available for sale	$	212,449		100	%	$	325,641		100	%	$	117,947		100	%	$	140,330		100	%
Held to maturity securities
U.S. GSE obligations	$	29,998		14	%	$	-		0	%	$	5,000		2	%	$	5,000		2	%
Mortgage-backed securities		107,762		49	%		696		1	%		152,159		62	%		161,759		63	%
Corporate debt securities		1,997		1	%		-		0	%		6,982		3	%		6,980		3	%
Municipal securities		80,113		36	%		81,806		99	%		82,765		33	%		84,433		32	%
Total securities held to maturity	$	219,870		100	%	$	82,502		100	%	$	246,906		100	%	$	258,172		100	%
Total	$	432,319		100	%	$	408,143		100	%	$	364,853		100	%	$	398,502		100	%

The following tables set forth the composition and maturities of debt investment securities. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Within One Year					After One, But Within Five Years					After Five, But Within Ten Years					After Ten Years					Total					Within One Year					After One, But Within Five Years					After Five, But Within Ten Years					After Ten Years					Total
	Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)
At September 30, 2017	(dollars in thousands)
At March 31, 2020																										(dollars in thousands)
Available for sale securities
U.S. GSE obligations	$	5,000		1.1	%	$	85,024		1.3	%	$	—		—		$	—		—		$	90,024		1.3	%	$	—		—		$	5,000		1.4	%	$	5,000		2.3	%	$	8,000		2.6	%	$	18,000		2.2	%
Mortgage-backed securities		154		4.7	%		148		5.4	%		19,607		1.7	%		99,363		1.9	%		119,272		1.9	%		—		—			29		5.4	%		34,726		1.9	%		62,730		2.0	%		97,485		1.9	%
Corporate debt securities		—		—			4,039		1.7	%		1,000		2.3	%		—		—			5,039		1.8	%
Total available for sale securities	$	5,154		1.2	%	$	89,211		1.3	%	$	20,607		1.7	%	$	99,363		1.9	%	$	214,335		1.6	%	$	—		—		$	5,029		1.4	%	$	39,726		1.9	%	$	70,730		2.0	%	$	115,485		2.0	%

Held to maturity securities
U.S. GSE obligations	$	—		—		$	29,998		2.2	%	$	—		—		$	—		—		$	29,998		2.2	%	$	5,000		1.6	%	$	—		—		$	—		—		$	—		—		$	5,000		1.6	%
Mortgage-backed securities		24		4.5	%		330		4.4	%		23,447		2.1	%		83,961		2.4	%		107,762		2.3	%		—		—			2		5.6	%		46,317		2.7	%		105,840		2.5	%		152,159		2.6	%
Corporate debt securities		—		—			1,997		2.5	%		—		—			—		—			1,997		2.5	%		—		—			6,982		2.6	%		—		—			—		—			6,982		2.6	%
Municipal securities		3,960		6.1	%		13,714		5.7	%		33,389		4.7	%		29,050		4.6	%		80,113		4.9	%		2,770		4.5	%		11,669		4.1	%		44,816		3.7	%		23,510		3.3	%		82,765		3.7	%
Total held to maturity securities	$	3,984		6.0	%	$	46,039		3.3	%	$	56,836		3.6	%	$	113,011		2.9	%	$	219,870		3.2	%	$	7,770		2.6	%	$	18,653		3.5	%	$	91,133		3.2	%	$	129,350		2.6	%	$	246,906		2.9	%
Total	$	9,138		3.3	%	$	135,250		2.0	%	$	77,443		3.1	%	$	212,374		2.4	%	$	434,205		2.4	%	$	7,770		2.6	%	$	23,682		3.1	%	$	130,859		2.8	%	$	200,080		2.4	%	$	362,391		2.6	%

	Within One Year					After One, But Within Five Years					After Five, But Within Ten Years					After Ten Years					Total					Within One Year					After One, But Within Five Years					After Five, But Within Ten Years					After Ten Years					Total
	Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)			Amortized Cost		Weighted Average Yield (1)
December 31, 2016	(dollars in thousands)
At December 31, 2019																										(dollars in thousands)
Available for sale securities
U.S. GSE obligations	$	15,016		1.1	%	$	125,010		1.3	%	$	—		—		$	—		—		$	140,026		1.3	%	$	5,000		1.4	%	$	20,000		1.5	%	$	5,000		2.3	%	$	8,000		2.6	%	$	38,000		1.8	%
Mortgage-backed securities		17		4.8	%		789		5.2	%		28,693		1.8	%		154,475		1.8	%		183,974		1.8	%
Corporate debt securities		—		—			4,054		1.7	%		1,000		2.0	%		—		—			5,054		1.7	%
Mortgage-backed Securities																											—		—			37		5.4	%		36,393		1.9	%		66,679		2.1	%		103,109		2.0	%
Total available for sale securities	$	15,033		1.1	%	$	129,853		1.3	%	$	29,693		1.8	%	$	154,475		1.8	%	$	329,054		1.6	%	$	5,000		1.4	%	$	20,037		1.5	%	$	41,393		1.9	%	$	74,679		2.1	%	$	141,109		2.0	%

Held to maturity securities
Mortgage-backed securities	$	1		6.1	%	$	630		4.5	%	$	3		4.8	%	$	62		7.1	%	$	696		4.7	%
U.S. GSE obligations																										$	5,000		1.6	%	$	—		—		$	—		—		$	—		—		$	5,000		1.6	%
Mortgage-backed Securities																											—		—			2		5.6	%		48,088		2.7	%		113,669		2.6	%		161,759		2.6	%
Corporate debt securities																											—		—			6,980		2.6	%		—		—			—		—			6,980		2.6	%
Municipal securities		1,605		6.3	%		15,996		5.9	%		29,563		4.7	%		34,642		4.3	%		81,806		4.8	%		3,270		4.6	%		10,606		4.2	%		45,201		3.7	%		25,356		3.4	%		84,433		3.7	%
Total held to maturity securities	$	1,606		6.3	%	$	16,626		5.8	%	$	29,566		4.7	%	$	34,704		4.3	%	$	82,502		4.8	%	$	8,270		2.8	%	$	17,588		3.6	%	$	93,289		3.2	%	$	139,025		2.8	%	$	258,172		3.0	%
Total	$	16,639		1.6	%	$	146,479		1.9	%	$	59,259		3.2	%	$	189,179		2.3	%	$	411,556		2.2	%	$	13,270		2.3	%	$	37,625		2.4	%	$	134,682		2.8	%	$	213,704		2.5	%	$	399,281		2.6	%

Management evaluates securities for ~~other-than-temporary impairment~~credit loss on at least a quarterly basis and more frequently when economic or market conditions warrant such evaluation. Consideration is given to: (1) ~~the length of time and the extent to which~~whether the fair value ~~has been~~is less than cost; (2) the financial condition and near-term prospects of the issuer; and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The Company’s lending activities are conducted principally in Eastern ~~Massachusetts.~~Massachusetts and Southern New Hampshire. The Company grants ~~single-family~~single- and multi-family residential loans, commercial & industrial (“C&I”), commercial real estate (“CRE”), construction loans, and a variety of consumer loans. Most of the loans granted by the Company are secured by real estate collateral. The Company’s commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower, with liquidation of the underlying real estate collateral typically being viewed as the primary source of repayment in the event of borrower default. The borrowers’ cash flow may be difficult to predict and collateral securing these loans may fluctuate in value. The repayment of commercial business loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral provided by the borrower. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment. Repayment of the Company’s residential loans are generally dependent on the health of the employment market in the borrowers’ geographic areas and that of the general economy with liquidation of the underlying real estate collateral being typically viewed as the primary source of repayment in the event of borrower default. The repayment of C&I loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral provided by the borrower. As borrower cash flow may be difficult to predict, liquidation of the underlying collateral securing these loans is typically viewed as the primary source of repayment in the event of borrower default. However, collateral typically consists of equipment, inventory, accounts receivable, or other business assets that may fluctuate in value, so the liquidation of collateral in the event of default is often an insufficient source of repayment. The Company’s CRE loans are primarily made based on the cash flow from the collateral property and secondarily on the underlying collateral provided by the borrower, with liquidation of the underlying real estate collateral typically being viewed as the primary source of repayment in the event of borrower default. The Company’s construction loans are primarily made based on the borrower’s expected ability to execute and the future completed value of the collateral property, with sale of the underlying real estate collateral typically being viewed as the primary source of repayment.

The following ~~summary~~table shows the composition of the loan portfolio at the dates indicated:

	September 30,				December 31,				March 31, 2020						December 31, 2019
	2017		% of Total		2016		% of Total		Amount			% of Total			Amount			% of Total
	(dollars in thousands)								(dollars in thousands)
Residential mortgage
Mortgages - fixed rate	$	300,071		23%	$	305,403		23%	$	430,067			19	%	$	430,877			19	%
Mortgages - adjustable rate		236,323		17%		228,028		17%		469,025			21	%		467,139			21	%
Construction										15,209			1	%		17,374			1	%
Deferred costs net of unearned fees		1,031		0%		973		0%		2,802			0	%		2,176			0	%
Total residential mortgages		537,425		40%		534,404		40%		917,103			41	%		917,566			41	%
Commercial mortgage
Mortgages - nonowner occupied		560,254		41%		513,578		39%
Mortgages - non-owner occupied										897,612			39	%		870,047			40	%
Mortgages - owner occupied		36,287		3%		43,932		3%		112,807			5	%		114,095			5	%
Construction		35,031		3%		58,406		4%		79,214			4	%		76,288			3	%
Deferred costs net of unearned fees		180		0%		224		0%		163			0	%		144			0	%
Total commercial mortgages		631,752		47%		616,140		46%		1,089,796			48	%		1,060,574			48	%
Home equity
Home equity - lines of credit		72,083		5%		70,883		6%		76,359			3	%		73,880			3	%
Home equity - term loans		3,670		0%		3,925		0%		6,469			1	%		6,555			1	%
Deferred costs net of unearned fees		254		0%		243		0%		238			0	%		240			0	%
Total home equity		76,007		5%		75,051		6%		83,066			4	%		80,675			4	%
Commercial & industrial
Commercial & industrial		65,818		5%		59,638		5%		127,683			6	%		133,337			6	%
Deferred costs net of unearned fees		43		0%		68		0%		(35	)		0	%		(101	)		0	%
Total commercial & industrial		65,861		5%		59,706		5%		127,648			6	%		133,236			6	%
Consumer
Secured		43,695		3%		33,386		3%		37,100			1	%		33,453			1	%
Unsecured		1,151		0%		1,451		0%		1,065			0	%		1,199			0	%
Deferred costs net of unearned fees		17		0%		16		0%		24			0	%		25			0	%
Total Consumer		44,863		3%		34,853		3%
Total consumer										38,189			1	%		34,677			1	%
Total loans	$	1,355,908		100%	$	1,320,154		100%	$	2,255,802			100	%	$	2,226,728			100	%

Residential Mortgage.Residential real estate loans held in portfolio amounted to ~~$537.4~~$917.1 million at ~~September 30, 2017, an increase~~March 31, 2020, a decrease of ~~$3.0 million,~~$463,000, or ~~0.6%~~0.1%, from $917.6 million at December 31, ~~2016~~2019, and consisted of one-to-four family residential mortgage loans. The residential mortgage portfolio represented ~~40% and 40%~~41% of total loans at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, respectively.~~2019.

The average loan balance outstanding in the residential portfolio was $393,000 and the largest individual residential mortgage loan outstanding was $9.0 million as of March 31, 2020. At March 31, 2020, this loan was performing in accordance with its original terms.

The Bank offers fixed and adjustable rate residential mortgage loans with maturities up to 30 years. One-to-four family residential mortgage loans are generally underwritten according to Fannie Mae and Freddie Mac guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” The Bank generally originates and purchases both fixed and adjustable rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which ~~is generally $417,000 (increased~~increased to ~~$424,100~~$510,400 in ~~2017)~~2020 from $484,350, for one-unit properties. In addition, the Bank also offers loans above conforming lending limits typically referred to as “jumbo” loans. These loans are typically underwritten to jumbo conforming ~~guidelines;~~guidelines, however, the Bank may choose to hold a jumbo loan within its portfolio with underwriting criteria that does not exactly match conforming guidelines. The Bank may also, from time to time, purchase residential loans that are either jumbo, conforming, or meet our Community Reinvestment Act (“CRA”) requirements. Purchases have historically been made to satisfy ~~Community Reinvestment Act~~CRA requirements for lending to ~~Low~~low and ~~Moderate~~moderate income borrowers within the Bank’s CRA Assessment Area.

Generally, our residential construction loans are based on complete value per plans and specifications, with loan proceeds used to construct the house for single family primary and secondary residences. Loans are provided for terms up to 12 months during the construction phase, with loan-to-values that generally do not exceed 80% on as complete basis. The loans then convert to permanent financing at terms up to 360 months.

The Company does not offer reverse mortgages, nor do we offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on ~~his~~the loan, resulting in an increased principal balance during the life of the loan. We do not offer “subprime loans” (loans that are made with low down payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (defined as loans having less than full documentation).

Residential real estate loans are originated both for sale to the secondary market, as well as for retention in the Bank’s loan portfolio. The decision to sell a loan to the secondary market or retain within the portfolio is determined based on a variety of factors including but not limited to the Bank’s asset/liability position, the current interest rate environment, and customer preference.

The Company ~~was~~is servicing mortgage loans sold to others without recourse of approximately ~~$101.9~~$157.5 million at ~~September 30, 2017~~March 31, 2020 and ~~$95.7~~$159.6 million at December 31, ~~2016.~~2019.

The table below presents residential real estate loan origination activity for the periods indicated:

	Nine Months Ended September 30,		December 31,		For the Three Months Ended March 31,
	2017		2016		2020		2019
	(dollars in thousands)				(dollars in thousands)
Originations for retention in portfolio	$	74,525	$	78,787	$	76,944	$	22,867
Originations for sale to the secondary market		13,189		65,283		9,095		2,201
Total	$	87,714	$	144,070	$	86,039	$	25,068

Loans are sold with servicing retained or released. The table below presents residential real estate loan sale activity for the periods indicated:

	Nine Months Ended September 30,		December 31,		For the Three Months Ended March 31,
	2017		2016		2020		2019
	(dollars in thousands)				(dollars in thousands)
Loans sold with servicing rights retained	$	11,536	$	50,022	$	5,736	$	426
Loans sold with servicing rights released		7,677		8,646		6,597		1,772
Total	$	19,213	$	58,668	$	12,333	$	2,198

Loans sold with the retention of servicing typically result in the capitalization of servicing rights. Loan servicing rights are included in other assets and are subsequently amortized as an offset to other income over the estimated period of servicing. The net balance of capitalized servicing rights amounted to ~~$828,000~~$1.2 million and ~~$812,000~~$1.3 million as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019, respectively.

Commercial Mortgage. Commercial real estate loans were $1.09 billion as of March 31, 2020, an increase of $29.2 million, or 2.8%, from $1.06 billion at December 31, 2019. The commercial real estate loans portfolio represented ~~47% and 46%~~48% of total loans at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016. Commercial~~2019.The average loan balance outstanding in this portfolio was $1.4 million, and the largest individual commercial real estate ~~loans were $631.8~~loan outstanding was $25.3 million as of ~~September 30, 2017, an increase of $15.6 million, or 2.5% from $616.1 million at December~~March 31, ~~2016.~~2020. At March 31, 2020, this commercial mortgage was performing in accordance with its original terms.

Commercial real estate loans are secured by a variety of property types, with approximately ~~90.2%~~89.5% of the total at ~~September 30, 2017~~March 31, 2020 composed of multi-family dwellings, retail facilities, office buildings, commercial mixed use, lodging, and industrial and warehouse properties. The average loan balance outstanding in this portfolio was $1.6 million and the largest individual commercial real estate loan outstanding was $16.8 million as of September 30, 2017. At September 30, 2017, this commercial mortgage was performing in accordance with its original terms.

~~Our~~Generally, our commercial real estate loans are ~~generally~~ for terms of up to ten years, with loan-to-values that generally do not exceed 75%. Amortization schedules are long term, and thus, a balloon payment is generally due at maturity. Under most circumstances, the Bank will offer to rewrite or otherwise extend the loan at prevailing interest rates.

Generally, our commercial construction loans are speculative in nature, with loan proceeds used to acquire and develop real estate property for sale or rental. Loans are provided for terms up to 36 months during the construction phase, with loan-to-values that generally do not exceed 75% on both an ‘as is’ and ‘as complete and stabilized’ basis. Construction projects are primarily for the development of residential property types, inclusive of 1-4 family and multifamily properties.

Home Equity.The home equity portfolio totaled ~~$76.0~~$83.1 million and ~~$75.1~~$80.7 million at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively. The home equity portfolio represented ~~5% and 6%~~4% of total loans at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016.~~2019. At March 31, 2020, the largest home equity line of credit was $2.1 million and had an outstanding balance of $1.5 million. At March 31, 2020, this line of credit was performing in accordance with its original terms.

Home equity lines of credit are extended as both first and second mortgages on owner-occupied residential and one-to-four family investment properties in the Bank’s market area. Home equity lines of credit are generally underwritten with the same criteria that we use to underwrite one-to-four family residential mortgage loans.

Our home equity lines of credit are revolving lines of credit, which generally have a term between 15 and 20 years, with draws available for the first ~~ten~~10 years. Our ~~15 year~~15-year lines of credit are interest only during the first ~~ten~~10 years and amortize on a ~~five year~~five-year basis thereafter. Our ~~20 year~~20-year lines of credit are interest only during the first ~~ten~~10 years and amortize on a ~~ten year~~10-year basis thereafter. We generally originate home equity lines of credit with loan-to-value ratios of up to 80% when combined with the principal balance of the existing first mortgage loan, although loan-to-value ratios may occasionally exceed 80% on a ~~case by case~~case-by-case basis. Maximum combined loan-to-values are determined based on an applicant’s loan/line amount and the estimated property value. Lines of credit above $1$1.0 million generally will

not exceed a combined ~~loan-to-values~~loan-to-value of 75%. Rates are adjusted monthly based on changes in a designated market index. At September 30, 2017, our largest home equity line of credit was a $2.0 million line of credit and had an outstanding balance of $1.5 million. At September 30, 2017, this line of credit was performing in accordance with its original terms.

We also offer home equity term loans, which are extended as second mortgages on owner-occupied residential properties in our market area. Our home equity term loans are fixed-rate second mortgage loans, which generally have a term between 5 and 20 years.

Commercial ~~and~~& Industrial (C&I). The commercial and industrial portfolio totaled ~~$65.9~~$127.6 million and ~~$59.7~~$133.2 million at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, respectively, and~~2019, respectively. The C&I portfolio represented ~~5% and 5%~~6% of total loans at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, respectively.~~2019. The average loan balance outstanding in this portfolio was $252,000 and the largest individual commercial and industrial loan outstanding was $10.9 million as of March 31, 2020. At March 31, 2020, this loan was performing in accordance with its original terms.

The Company’s Innovation Banking and asset-based loans are reported within the C&I portfolio.

The Company’s C&I loan customers represent various small- and ~~middle- market~~middle-market established businesses involved in professional services, accommodation and food services, health care, wholesale trade, manufacturing, distribution, retailing, and non-profits. Most clients are privately owned with markets that range from local to national in scope. Many of the loans to this segment are secured by liens on corporate assets and the personal guarantees of the principals. The Company also makes loans to entrepreneurial and

technology businesses. The regional economic strength or weakness impacts the relative risks in this loan category. There is little concentration in any one business sector, and loan risks are generally diversified among many borrowers.

Consumer Loans. The consumer loan portfolio totaled ~~$44.9~~$38.2 million at ~~September 30, 2017, an increase of $10.0 million, or 28.7%,~~March 31, 2020 from ~~$34.9~~$34.7 million at December 31, ~~2016.~~2019. Consumer loans represented ~~3% and 3%~~1% of the total ~~loans~~loan portfolio at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, respectively.~~2019. Consumer loans include secured and unsecured loans, lines of credit, and personal installment loans. Unsecured consumer loans generally have greater risk compared to longer-term loans secured by improved, owner-occupied real estate,particularly consumer loans that are secured by rapidly depreciable assets. The secured consumer loans and lines portfolio are generally fully secured by pledged assets such as bank accounts or investments.

Loan Portfolio Maturities. The following table summarizes the dollar amount of loans maturing in the portfolio based on their loan type and contractual terms to maturity at ~~September 30, 2017.~~March 31, 2020. The table does not include any estimate of prepayments, which can significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

	September 30, 2017								March 31, 2020
	One Year or Less		One to Five Years		Over Five Years		Total		One Year or Less		One to Five Years		Over Five Years		Total
	(dollars in thousands)								(dollars in thousands)
Residential mortgage	$	1,165	$	13,703	$	522,557	$	537,425	$	1,337	$	11,815	$	903,951	$	917,103
Commercial mortgage		29,052		166,435		436,265		631,752		68,049		296,131		725,616		1,089,796
Home equity		491		1,977		73,539		76,007		259		908		81,899		83,066
Commercial & Industrial		28,380		31,695		5,786		65,861		43,782		66,077		17,789		127,648
Consumer		44,802		61		-		44,863		37,995		105		89		38,189
Total	$	103,890	$	213,871	$	1,038,147	$	1,355,908	$	151,422	$	375,036	$	1,729,344	$	2,255,802

Loan Portfolio by Interest Rate Type.The following table summarizes the dollar amount of loans ~~maturing~~ in our portfolio based on whether the loan has a fixed, adjustable, or ~~variable~~floating rate of interest ~~and their~~at March 31, 2020. Floating rate loans are tied to a market index while adjustable rate loans are adjusted based on the contractual terms ~~to maturity at September 30, 2017. The table does not include any estimate~~ of ~~prepayments, which can significantly shorten~~ the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.loan.

	September 30,			December 31			March 31,			December 31,
	2017			2016			2020			2019
	(dollars in thousands)						(dollars in thousands)
Nonaccruals	$	1,271		$	1,023		$	1,674		$	4,160
Loans past due > 90 days, but still accruing		-			232			1,443			1,264
Troubled debt restructurings		431			421			262			227
Total nonperforming loans	$	1,702		$	1,676		$	3,379		$	5,651
Accruing troubled debt restructured loans							$	—		$	—
Nonperforming loans as a percentage of gross loans		0.13	%		0.13	%
Nonperforming loans as a percentage of total loans								0.15	%		0.25	%
Nonperforming loans as a percentage of total assets		0.09	%		0.09	%		0.12	%		0.20	%

~~At September 30, 2017 and December 31, 2016, impaired loans had specific reserves of $357,000 and $190,000, respectively.~~

~~Non-accrual~~Nonaccrual Loans. Loans are typically placed on ~~non-accrual~~nonaccrual status when any payment of principal and/or interest is 90 days or more past due, unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. The Company monitors closely the performance of its loan portfolio. In addition to the monitoring and review of loan performance internally, the Company has contracted with an independent organization to review the Company’s commercial and commercial real estate loan portfolios. This independent review was performed in each of the past five years. The status of delinquent loans, as well as situations identified as potential problems, is reviewed on a regular basis by senior management.

Troubled Debt Restructurings.Loans are considered restructured in a troubled debt restructuring when the Company has granted concessions to a borrower due to the borrower’s financial condition that it otherwise would not have considered. These concessions may include modifications of the terms of the debt such as deferral of payments, extension of maturity, reduction of principal balance, reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions. Debt may be bifurcated with separate terms for each tranche of the restructured debt. Restructuring a loan in lieu of aggressively enforcing the collection of the loan may benefit the Company by increasing the ultimate probability of collection.

Troubled debt restructurings are ~~classified as impaired loans. The Company identifies loss allocations~~individually evaluated for ~~impaired loans on an individual loan basis.~~credit losses.

Total nonperforming loans ~~increased slightly~~decreased $2.3 million during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020 as compared to December 31, ~~2016,~~2019, primarily due to ~~an increase in residential and~~lower commercial ~~mortgage non-accrual loans.~~loans on non-accrual.

The Company continues to closely monitor ~~closely~~ the portfolio of nonperforming loans for which management has concerns regarding the ability of the borrowers to perform. The majority of the loans are secured by real estate and are considered to have adequate collateral value to cover the loan balances at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, although such values may fluctuate with changes in the economy and the real estate market.

We evaluate the loan portfolio on a quarterly basis and the allowance is adjusted accordingly. While we use the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, will periodically review the allowance for ~~loan~~credit losses. Such agencies may require us to recognize additions to the allowance based on their analysis of information available to them at the time of their examination.

Actual loan losses may be significantly more than the allowance for credit losses we have established, which could have a material negative effect on our financial results.

We also perform a qualitative assessment beyond model estimates, and apply qualitative adjustments as management deems necessary. The reasonable and supportable forecast period is determined based upon the accuracy level of historical loss forecast estimates, the specific loan level models and methodology utilized, and considers material changes in growth and credit strategy, and business changes which may not be applicable within the current environment. For periods beyond a reasonable and supportable forecast interval, we revert to historical information over a period for which comparable data is available. The historical information either experienced by the Company or by a selection of peer banks when appropriate, is derived from a combination of recessionary and non-recessionary performance periods for which data is available. Similar to the reasonable and supportable forecast period, we reassess the reversion period at the segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, and other relevant data shifts over time.

See additional discussion regarding the allowance for loan losses, in Item 7 under the caption “Critical Accounting Policies” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in Note 7 to the Unaudited Consolidated Financial Statements.

The following table summarizes the changes in the Company’s allowance for ~~loan~~credit losses on loans for the periods indicated:

	Nine Months Ended September 30,			Year ended December 31,						March 31,			December 31,
	2017			2016			2015			2020			2019
	(dollars in thousands)									(dollars in thousands)
Period-end loans outstanding (net of unearned discount and deferred loan fees)	$	1,355,908		$	1,320,154		$	1,192,214		$	2,255,802		$	2,226,728
Average loans outstanding (net of unearned discount and deferred loan fees)	$	1,328,349		$	1,262,497		$	1,144,965		$	2,228,467		$	1,969,696
Balance of allowance for loan losses at the beginning of year	$	15,261		$	15,191		$	14,269
Balance of allowance for credit losses at the beginning of year - loans										$	18,180		$	16,768
Loans charged-off:
Commercial and industrial		(1	)		(71	)		(124	)		(89	)		(338	)
Commercial mortgage		—			—			—			(187	)		(1,270	)
Residential mortgage		—			—			(37	)		—			—
Home Equity		—			—			(1	)		—			—
Consumer		(14	)		(33	)		(16	)		(14	)		(48	)
Total loans charged-off	$	(15	)	$	(104	)	$	(178	)	$	(290	)	$	(1,656	)
Recovery of loans previously charged-off:
Commercial and industrial		8			14			4			12			53
Commercial mortgage		—			7			8			—			—
Residential mortgage		—			13			—			—			—
Home Equity		—			1			—			—			—
Consumer		6			7			13			13			11
Total recoveries of loans previously charged-off:		14			42			25			25			64
Net loan (charge-offs) recoveries	$	(1	)	$	(62	)	$	(153	)	$	(265	)	$	(1,592	)
Provision charged to operating expense		360			132			1,075
Adoption of accounting standard - loans										$	205		$	—
Provision											2,043			3,004
Balance at end of period	$	15,620		$	15,261		$	15,191		$	20,163		$	18,180
Ratio of net (charge-offs) recoveries during the year to average loans outstanding		0.00	%		0.00	%		(0.01	)%
Ratio of allowance for loan losses to loans outstanding		1.15	%		1.16	%		1.27	%
Ratio of net (charge-offs) recoveries to average loans outstanding											(0.01	)%		(0.08	)%
Ratio of allowance for credit losses to loans outstanding											0.89	%		0.82	%

The level of charge-offs depends on many factors, including the national and regional economy. Cyclical lagging factors may result in charge-offs being higher than historical levels. ~~The dollar amount of the allowance for loan losses increased primarily as a result of loan growth and changes in the portfolio composition.~~ Although the allowance is allocated between categories, the entire allowance is available to absorb losses attributable to all loan categories. Management believes that the allowance for ~~loan~~credit losses is adequate.

General. Deposits traditionally have been ~~the Company’s~~our primary source of funds for our investment and lending activities. The Company also borrows from the FHLB of Boston to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management purposes, and to manage ~~the~~our cost of funds. ~~The Company’s~~Our additional sources of funds are scheduled payments and prepayments of principal and interest on loans and investment securities and fee income and proceeds from the sales of loans and securities.

Deposits. The Company accepts deposits primarily from customers in the communities in which our branches and offices are located, as well as from ~~small~~small- and medium-sized businesses and other customers throughout our lending area. We rely on our competitive pricing and products, convenient locations, and ~~quality customer~~client service to attract and retain deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Our deposit accounts consist of relationship checking for consumers and businesses, statement savings accounts, certificates of deposit, money market accounts, interest on lawyer trust accounts, commercial and regular checking accounts, and individual retirement accounts. Deposit rates and terms are based primarily on current business strategies, market interest rates, liquidity requirements, and our deposit growth goals. The Bank may also access the brokered deposit market for funding.

The following table set forth the average balances of the Bank’s deposits for the periods indicated:

At ~~September 30, 2017,~~March 31, 2020, we had a total of ~~$108.7~~$160.6 million in certificates of deposit, excluding brokered deposits, of which ~~$69.9~~$128.4 million had remaining maturities of one year or less. Based on historical experience and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity. As of ~~September 30, 2017,~~March 31, 2020, we had a total of ~~$50.2~~$78.8 million of brokered deposits and ~~$56.3~~$7.1 million of brokered deposits at December 31, ~~2016.~~2019.

~~The following tables set forth the average balances of the Bank’s deposits for the periods indicated:~~

~~Retail certificates of deposit of $100,000 or greater totaled $68.8 million and $72.4 million at September 30, 2017 and December 31, 2016, respectively.~~

~~The following table sets forth certificates of deposit classified by interest rate as of the dates indicated:~~

Borrowings. The Bank’s borrowings consisted ~~primarily~~ of FHLB of Boston and FRB Boston advances. FHLB of Boston advances are collateralized by a blanket pledge agreement on the Bank’s FHLB of Boston stock and residential mortgages held in the Bank’s portfolios. FRB Boston advances are collateralized by pledged commercial loans and pledged investment securities. The Bank’s borrowings with the FHLB of Boston totaled ~~$15.1~~$64.6 million at ~~September 30, 2017, an increase~~March 31, 2020, a decrease of ~~$11.4~~$71.0 million, as compared to ~~$3.7~~$135.7 million at December 31, ~~2016.~~ 2019. The Bank’s remaining borrowing capacity at the FHLB of Boston at ~~September 30, 2017~~March 31, 2020 was approximately ~~$292.8~~$423.1 million. In addition, the Bank has a $10.0 million line of credit with the FHLB of Boston. ~~See Note 11, “Borrowings” for a schedule, including related interest rates~~The Bank’s borrowings with FRB Boston totaled $10.5 million and ~~other information.~~$0 at March 31, 2020 and December 31, 2019, respectively. The Bank’s remaining borrowing capacity at the FRB Boston at March 31, 2020 was approximately $476.9 million.

Net interest income represents the difference between interest earned, primarily on loans and investments, and interest paid on funding sources, primarily deposits and borrowings. Interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate paid on total interest-bearing liabilities. Net interest margin is the amount of net interest income, on a fully taxable-equivalent basis, expressed as a percentage of average interest-earning assets. The average rate earned on earning assets is the amount of annualized taxable equivalent interest income expressed as a percentage of average earning assets. The average rate paid on interest-bearing liabilities is equal to annualized interest expense as a percentage of average interest-bearing liabilities.

The following ~~tables set~~table sets forth the distribution of the Company’s average assets, liabilities and shareholders’ equity, and average rates earned or paid on a fully taxable equivalent basis for each of the periods indicated:

	Three Months Ended																		Three Months Ended
	September 30, 2017									September 30, 2016									March 31, 2020									December 31, 2019									March 31, 2019
	Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses ⁽¹⁾			Rate Earned/ Paid ⁽¹⁾			Average Balance			Interest Income/ Expenses ⁽¹⁾			Rate Earned/ Paid ⁽¹⁾			Average Balance			Interest Income/ Expenses ⁽¹⁾			Rate Earned/ Paid ⁽¹⁾
	(dollars in thousands)																		(dollars in thousands)
ASSETS
Interest-earning assets
Loans (2)
Taxable	$	1,330,390		$	13,038			3.89	%	$	1,279,457		$	12,322			3.83	%	$	2,204,862		$	23,338			4.26	%	$	2,201,984		$	23,463			4.23	%	$	1,543,585		$	16,284			4.28	%
Tax-exempt		14,950			186			4.94			18,147			179			3.92			23,605			250			4.26			25,344			253			3.96			9,743			112			4.66
Securities available for sale (3)
Taxable		226,164			902			1.58			322,032			1,105			1.37			133,402			660			1.99			147,852			722			1.94			164,607			712			1.75
Securities held to maturity
Taxable		154,129			810			2.08			900			10			4.42			169,433			1,063			2.52			187,584			1,167			2.47			209,347			1,268			2.46
Tax-exempt		80,717			986			4.85			84,235			1,058			5.00			83,193			754			3.65			78,172			734			3.73			73,851			723			3.97
Cash and due from banks		28,863			54			0.74			28,898			22			0.30
Cash and cash equivalents																				59,845			140			0.94			57,036			175			1.22			33,025			118			1.45
Total interest-earning assets (4)		1,835,213			15,976			3.45	%		1,733,669			14,696			3.37	%		2,674,340			26,205			3.94	%		2,697,972			26,514			3.90	%		2,034,158			19,217			3.83	%
Non interest-earning assets		75,753									75,204									192,184									188,557									114,505
Allowance for loan losses		(15,451	)								(15,456	)
Allowance for credit losses																				(18,423	)								(18,373	)								(16,688	)
Total assets	$	1,895,515								$	1,793,417								$	2,848,101								$	2,868,156								$	2,131,975
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Checking accounts	$	381,652		$	46			0.05	%	$	365,012		$	15			0.02	%	$	457,189		$	159			0.14	%	$	427,475		$	121			0.11	%	$	391,863		$	82			0.08	%
Savings accounts		573,332			376			0.26			543,069			346			0.25			888,973			1,772			0.80			916,575			2,420			1.05			688,951			1,486			0.87
Money market accounts		69,437			26			0.15			86,572			33			0.15			193,048			449			0.94			216,858			678			1.24			130,226			380			1.18
Certificates of deposit		164,547			361			0.87			176,412			375			0.85			187,318			749			1.61			204,654			933			1.81			153,257			553			1.46
Total interest-bearing deposits		1,188,968			809			0.27			1,171,065			769			0.26			1,726,528			3,129			0.73			1,765,562			4,152			0.93			1,364,297			2,501			0.74
Other borrowed funds		67,126			225			1.33			8,428			26			1.23			127,389			566			1.79			125,368			655			2.07			54,124			356			2.67
Total interest-bearing liabilities		1,256,094			1,034			0.33	%		1,179,493			795			0.27	%		1,853,917			3,695			0.80	%		1,890,930			4,807			1.01	%		1,418,421			2,857			0.82	%
Non-interest-bearing liabilities
Demand deposits		470,016									455,365									622,892									645,807									484,068
Other liabilities		25,775									23,924									80,089									76,876									60,810
Total liabilities		1,751,885									1,658,782									2,556,898									2,613,613									1,963,299
Shareholders’ equity		143,630									134,635									291,203									254,543									168,676
Total liabilities & shareholders’ equity	$	1,895,515								$	1,793,417								$	2,848,101								$	2,868,156								$	2,131,975
Net interest income on a fully taxable equivalent basis					14,942									13,901									22,510									21,707									16,360
Less taxable equivalent adjustment					(410	)								(433	)								(211	)								(208	)								(175	)
Net interest income				$	14,532								$	13,468								$	22,299								$	21,499								$	16,185
Net interest spread (5)								3.13	%								3.10	%								3.14	%								2.89	%								3.01	%
Net interest margin (6)								3.23	%								3.19	%								3.39	%								3.19	%								3.26	%

Nine Months Ended

September 30, 2017

September 30, 2016

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)

Taxable

$
1,312,432

$
37,966

3.87
%

$
1,230,571

$
35,796

3.89
%
Tax-exempt

15,917

601

5.05

14,928

450

4.03

Securities available for sale (3)

Taxable

261,106

3,158

1.62

340,355

3,942

1.55

Securities held to maturity

Taxable

101,819

1,604

2.11

1,047

37

4.72

Tax-exempt

82,023

3,024

4.93

82,763

3,186

5.14

Cash and due from banks

35,746

170

0.64

37,514

94

0.33

Total interest-earning assets (4)

1,809,043

46,523

3.44
%

1,707,178

43,505

3.40
%
Non interest-earning assets

73,733

73,801

Allowance for loan losses

(15,352
)

(15,321
)

Total assets

$
1,867,424

$
1,765,658

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing deposits

Checking accounts

$
395,759

$
84

0.03
%

$
362,373

$
66

0.02
%
Savings accounts

557,442

951

0.23

536,182

1,252

0.31

Money market accounts

71,044

79

0.15

78,584

100

0.17

Certificates of deposit

168,136

1,069

0.85

176,123

1,108

0.84

Total interest-bearing deposits

1,192,381

2,183

0.24

1,153,262

2,526

0.29

Other borrowed funds

45,970

434

1.26

6,169

66

1.43

Total interest-bearing liabilities

1,238,351

2,617

0.28
%

1,159,431

2,592

0.30
%
Non-interest-bearing liabilities

Demand deposits

464,217

453,251

Other liabilities

25,032

21,968

Total liabilities

1,727,600

1,634,650

Shareholders’ equity

139,824

131,008

Total liabilities & shareholders’ equity

$
1,867,424

$
1,765,658

Net interest income on a fully taxable equivalent basis

43,906

40,913

Less taxable equivalent adjustment

(1,268
)

(1,272
)

Net interest income

$
42,638

$
39,641

Net interest spread (5)

3.16
%

3.11
%
Net interest margin (6)

3.24
%

3.20
%

The following ~~tables describe~~table describes the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volumes (changes in average balance multiplied by prior year average rate) and (ii) changes attributable to changes in rate (change in average interest rate multiplied by prior year average balance), while (iii) changes attributable to the combined impact of volumes and rates have been allocated proportionately to separate volume and rate categories.

	Three Months Ended September 30, 2017									Nine Months Ended September 30, 2017									Three Months Ended March 31, 2020
	Compared with									Compared with									Compared with
	Three Months Ended September 30, 2016									Nine Months Ended September 30, 2016									Three Months Ended March 31, 2019
	Increase/(Decrease) Due to Change in									Increase/(Decrease) Due to Change in									Increase/(Decrease) Due to Change in
	Volume			Rate			Total			Volume			Rate			Total			Volume			Rate			Total
	(dollars in thousands)																		(dollars in thousands)
Interest income
Loans
Taxable	$	565		$	151		$	716		$	2,441		$	(271	)	$	2,170		$	7,134		$	(80	)	$	7,054
Tax-exempt		1			6			7			27			124			151			148			(10	)		138
Securities available for sale
Taxable		(52	)		(151	)		(203	)		(435	)		(349	)		(784	)		(143	)		91			(52	)
Securities held to maturity
Taxable		758			42			800			636			931			1,567			(240	)		35			(205	)
Tax-exempt		111			(183	)		(72	)		108			(270	)		(162	)		91			(60	)		31
Cash and due from banks		1			31			32			4			72			76
Cash and cash equivalents																				74			(52	)		22
Total interest income	$	1,384		$	(104	)	$	1,280		$	2,781		$	237		$	3,018		$	7,064		$	(76	)	$	6,988
Interest expense
Deposits
Checking accounts	$	1		$	30		$	31		$	5		$	13		$	18			16			61			77
Savings accounts		21			9			30			121			(422	)		(301	)		416			(130	)		286
Money market accounts		(2	)		(5	)		(7	)		3			(24	)		(21	)		160			(91	)		69
Certificates of deposit		(9	)		(5	)		(14	)		(33	)		(6	)		(39	)		136			60			196
Total interest-bearing deposits		11			29			40			96			(439	)		(343	)		728			(100	)		628
Other borrowed funds		84			115			199			184			184			368			359			(149	)		210
Total interest expense		95			144			239			280			(255	)		25		$	1,087		$	(249	)	$	838
Change in net interest income	$	1,289		$	(248	)	$	1,041		$	2,501		$	492		$	2,993		$	5,977		$	173		$	6,150

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest rate risk inherent in its lending and deposit-taking activities. To that end, management actively monitors and manages its interest rate risk exposure.

The Company’s profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact the Company’s earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent, or on the same basis. The Company monitors the impact of changes in interest rates on its net interest income using several tools.

The Company’s primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company’s net interest income and capital, while structuring the Company’s asset-liability structure to obtain the maximum yield-cost spread on that structure. The Company relies primarily on its asset-liability structure to control interest rate risk.

Interest Rate Sensitivity. The Company actively manages its interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income to risks associated with interest rate movements and to achieve sustainable growth in net interest income. The Company’s Asset Liability Committee (“ALCO”), using policies and procedures approved by the Company’s board of directors, is responsible for the management of the Company’s interest rate sensitivity position. The Company manages interest rate sensitivity by changing the mix, pricing, and re-pricing characteristics of its assets and liabilities, through the management of its investment portfolio, its offerings of ~~loans,~~loan and selected deposit terms, and through wholesale funding. Wholesale funding consists of, but is not limited to, multiple sources including borrowings with the FHLB of Boston, the Federal Reserve Bank of Boston’s discount window, and certificates of deposit from institutional brokers.

The Company uses several tools to manage its interest rate risk including interest rate sensitivity analysis, or gap analysis, market value of portfolio equity analysis, interest rate simulations under various rate scenarios, and net interest margin reports. The results of these reports are compared to limits established by the Company’s ALCO policies and appropriate adjustments may be made if the results are outside the established limits.

The following ~~tables demonstrate~~table demonstrates the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock,” in the yield curve and subjective adjustments in deposit pricing might have on the Company’s projected net interest income over the next 12 months.

The following table demonstrates the annualized result of an interest rate simulation ~~assumes~~and the estimated effect that a gradual interest rate shift in the yield curve and subjective adjustments in deposit pricing might have on the Company’s projected net interest income over the next 12 months.

These simulations assume that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months. The changes to net interest income shown ~~below~~above are in compliance with the Company’s policy guidelines.

Economic Value of Equity Analysis. The Company also analyzes the sensitivity of the Bank’s financial condition to changes in interest rates through our economic value of equity model. This analysis measures the difference between estimated changes in the present value of the Bank’s assets and estimated changes in the present value of the Bank’s liabilities assuming various changes in current interest rates.

The Bank’s economic value of equity analysis as of ~~September 30, 2017~~March 31, 2020 estimated that, in the event of an instantaneous 200 basis point increase in interest rates, the Bank would experience a ~~9.9%~~3.7% increase in the economic value of ~~equity.~~ equity for the next 12 months, and a 11.5% increase in the economic value of equity for the next 24 months.

At the same date, our analysis estimated that, in the event of an instantaneous 100 basis point decrease in interest rates, the Bank would experience a ~~23.5% decrease~~7.7% increase in the economic value of ~~equity.~~ equity over the next 12 months, and a 11.3% increase in the economic

value of equity for the next 24 months. The estimates within the economic value of equity calculation are significantly impacted by management’s assumption that the value of non-maturity deposits do not fall below their stated balance as of March 31, 2020. This assumption has the impact of increasing the Bank’s economic value of equity in the falling rate scenario as lower market rates increase the value of the loan and investment portfolios while the value of the non-maturity deposit base remains static. The Company believes retaining customer relationships is the most desirable strategy over the long term.

The estimates of changes in the economic value of our equity require us to make certain assumptions including ~~loan-and~~loan- and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain and, as a result, we cannot precisely predict the impact of changes in interest rates on the economic value of our equity. Although our economic value of equity analysis provides an indication of our interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on the economic value of our equity and will differ from actual results.

Impact of Inflation and Changing Prices. Our Consolidated Financial Statements and related notes have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

Liquidity. Liquidity is defined as the Company’s ability to generate adequate cash to meet its needs for day-to-day operations and material long- and short-term commitments. Liquidity risk is the risk of potential loss if the Company were unable to meet its funding requirements at a reasonable cost. The Company manages its liquidity based on demand and specific events and uncertainties to meet current and future financial obligations of a short-term nature. The Company’s objective in managing liquidity is to respond to the needs of depositors and borrowers, as well as increase to earnings enhancement opportunities in a changing marketplace.

The Company’s liquidity position is managed on a daily basis as part of the daily settlement function and continuously as part of the formal asset liability management process. The Bank’s liquidity is maintained by managing its core deposits as the primary source, selling investment securities, selling loans in the secondary market, borrowing from the FHLB of Boston and FRB Boston, and purchasing wholesale certificates of deposit as its secondary sources. At March 31, 2020, the Company had access to funds totaling $1.3 billion.

The sources of funds for dividends paid by the Company are dividends received from the Bank and liquid funds held by the Company. The Company and the Bank are regulated enterprises and their abilities to pay dividends are subject to regulatory review and restriction. Certain regulatory and statutory restrictions exist regarding dividends, loans, and advances from the Bank to the Company. Generally, the Bank has the ability to pay dividends to the Company subject to minimum regulatory capital requirements.

Quarterly, the ALCO reviews the Company’s liquidity needs and reports any findings (if required) to the ~~board~~Board of ~~directors.~~Directors.

Capital Adequacy. Total shareholders’ equity was ~~$146.1~~$297.8 million at ~~September 30, 2017,~~March 31, 2020, as compared to ~~$134.7~~$286.6 million at December 31, ~~2016. The Company’s equity increased~~2019, primarily ~~as a result of~~due to an increase in ~~earnings.~~earnings and increases in the value of the Company’s interest rate derivative positions and the available for sale investment portfolio. The ratio of total equity to total assets amounted to 10.44% at March 31, 2020 and 10.04% at December 31, 2019. Book value per share at March 31, 2020 and December 31, 2019 amounted to $54.96 and $53.06, respectively.

The Company and the Bank are subject to various regulatory capital requirements. As of ~~September 30, 2017,~~March 31, 2020, the Company and the Bank exceeded the regulatory minimum levels to be considered “well-capitalized.” See Item 1 - Notes to Unaudited Consolidated Financial Statements - – Note 1613 – Shareholders’ Equity. to the Consolidated Financial Statements for additional discussion of regulatory capital requirements.

The Company is party to financial instruments with off-balance-sheet risk in the ~~ordinary~~normal course of business to meet the financing needs of its customers. These financial instruments primarily include commitments to originate and sell loans, standby letters of credit, unused lines of credit, and unadvanced portions of construction loans. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in these particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments, standby letters of credit and unadvanced portions of construction loans is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Off-Balance-Sheet Arrangements. Our significant off-balance-sheet arrangements ~~consist:~~consist of the following:

For the nine months ended September 30, 2017, we did not engage in off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations, or cash flows. Off-balance-sheet arrangements are more fully discussed within ~~Item 1 - Notes to Unaudited Consolidated~~Note 11 – Financial ~~Statements - Note 15 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK.~~ Instruments with Off-Balance-Sheet Risk.

The information required by this item is included in Item 2 of this report under “Market Risk and Liability Management.”

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures. As of ~~September 30, 2017,~~March 31, 2020, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the ~~Company's~~Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934). Based on this evaluation, the ~~Company's~~Company’s Chief Executive Officer and Chief Financial Officer concluded that the ~~Company's~~Company’s disclosure controls and procedures were effective as of ~~September 30, 2017~~March 31, 2020 for recording, processing, summarizing, and reporting the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in SEC rules and forms.

The effectiveness of a system of disclosure controls and procedures is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Due to such inherent limitations, there can be no assurance that any system of disclosure controls and procedures will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

~~During~~Changes in Internal Controls over Financial Reporting. The Company adopted ASU 2016-13 and related amendments during the ~~period~~quarter ended ~~September 30, 2017, there~~March 31, 2020 and implemented additional controls for calculating the allowance for credit losses. There were no other changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

From time to time, the Company and its subsidiaries may be parties to various claims and lawsuits arising in the ordinary course of their normal business activities. Although the ultimate outcome of these suits, if any, cannot be ascertained at this time, it is the opinion of management that none of these matters, even if it resolved adversely to the Company, will have a material adverse effect on the Company’s consolidated financial position. The Company is not currently party to any material pending legal proceedings.

~~Deterioration in local economic conditions may negatively impact our financial performance.~~

The ~~Company’s success depends primarily on~~COVID-19 pandemic is adversely impacting us and our customers, counterparties, employees and third-party service providers. Further, the ~~general~~COVID-19 pandemic could lead to an economic ~~conditions~~recession or other severe disruptions in ~~Eastern Massachusetts~~the U.S. economy and may disrupt banking and other financial activity in the areas in which we operate and the specific local markets in which the Company operates. Unlike larger national or other regional banks that are more geographically diversified, the Company provides banking and financial services to customers primarily in Massachusetts and New Hampshire. The local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources.

~~A downturn in our local economy may limit funds available for deposit and may negatively affect our borrowers’ ability to repay their loans on a timely basis, both of which could have an impact~~adverse impacts on our ~~profitability.~~

~~Variations in interest rates may negatively affect our~~business, financial ~~performance.~~

The Company’s earnings and financial condition are largely dependent upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads could adversely affect the Company’s earnings and financial condition. The Company cannot predict with certainty, or control, changes in interest rates. Regional and local economic conditions and the policies of regulatory authorities, including monetary policies of the Federal Reserve, affect interest income and interest expense. High interest rates could also affect the amount of loans that the Company can originate because higher rates could cause customers to apply for fewer mortgages or cause depositors to shift funds from accounts that have a comparatively lower cost to accounts with a higher cost. The Company may also experience customer attrition due to competitor pricing. If the cost of interest-bearing deposits increases at a rate greater than the yields on interest-earning assets increase, net interest income will be negatively affected. Changes in the asset and liability mix may also affect net interest income. Similarly, lower interest rates cause higher yielding assets to prepay and floating or adjustable rate assets to reset to lower rates. If the Company is not able to reduce its funding costs sufficiently, due to either competitive factors or the maturity schedule of existing liabilities, then the Company’s net interest margin will decline.

~~Although management believes it has implemented effective asset and liability management strategies to mitigate the potential adverse effects of changes in interest rates on the Company’s~~position, results of operations ~~any substantial or unexpected change in, or prolonged change in market interest rates~~and prospects could ~~have a material adverse effect on the Company’s financial condition and results~~be significant.

~~Changes in the economy or the financial markets could materially affect our financial performance.~~

~~Downturns~~COVID-19 has caused significant economic dislocation in the United States ~~or global economies or~~as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 outbreak, more than 22 million people have filed claims for unemployment, and stock markets have declined in value and in particular bank stocks have significantly declined in value. In response to the COVID-19 pandemic, the Federal Reserve has reduced the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10-year and 30-year treasury notes have declined to historic lows. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). In addition, the federal banking agencies have encouraged financial ~~markets could adversely affect~~institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the ~~demand for~~COVID-19 outbreak. Certain industries have been particularly hard-hit, including the travel and ~~income received from~~hospitality industry, the ~~Company's fee-based services. Revenues from~~restaurant industry and the ~~Wealth Management Group depends~~retail industry. Finally, the spread of COVID-19 has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in ~~large part on the level of assets under management~~meetings, events and administration. Market volatility that leads customers to liquidate investments, as well as lower asset values, can reduce our level of assets under management and administration and thereby decrease our investment management and administration revenues.

~~The Bank originates commercial and industrial loans, commercial real estate loans, consumer loans, and residential mortgage loans primarily within our market area.~~conferences. We have ~~developed~~many employees working remotely and ~~implemented a lending strategy~~may take further actions as may be required by government authorities or that ~~focuses~~we determine is in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on ~~residential real estate lending as well as servicing commercial customers,~~our business. The extent of such impact will depend on future developments, which are highly uncertain, including ~~increased emphasis on commercial~~when COVID-19 can be controlled and ~~industrial lending,~~abated and ~~commercial deposit relationships. Commercial~~when and ~~industrial loans, commercial real estate loans,~~how the economy may be reopened. As the result of the COVID-19 pandemic and ~~consumer loans may expose a lender~~the related adverse local and national economic consequences, we could be subject to greater credit risk than loans secured by residential real estate because the collateral securing these loans may not be sold as easily as residential real estate. In addition, commercial real estate and commercial and industrial loans may also involve relatively large loan balances to individual borrowers or groupsany of ~~borrowers. These loans also have greater credit risk than residential real estate for~~ the following ~~reasons:~~

Any downturn in the real estate market or local economy could adversely affect the value of the properties securing the loans or revenues from the borrowers’ businesses thereby increasing the risk of non-performing loans.

~~If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings will decrease.~~

The Bank’s loan customers may not repay their loans according to their terms and the collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. The Bank therefore may experience significant loan losses, which could have a material adverse effect on our operating results. Material additions to our allowance for loan losses also would materially decrease our net income, and the charge-off of loans may cause us to increase the allowance. The Bank makes various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We rely on our loan quality reviews, our experience, and our evaluation of economic conditions, among other factors, in determining the amount of the allowance for loan losses. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance.

~~Strong competition within our industry and market area could hurt our performance and slow our growth.~~

The Company operates in a competitive market for both attracting deposits, which is our primary source of funds, and originating loans. Historically, our most direct competition for deposits has come from savings and commercial banks. Our competition for loans comes principally from commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, mutual funds, insurance companies, and investment banking firms. We also face additional competition from internet-based institutions and brokerage firms. Competition for loan originations and deposits may limit our future growth and earnings prospects.

~~The Company’s ability to compete successfully depends on a number of factors, including, among other things:~~

~~Failure to perform in~~risks, any of these areas could significantly weaken the Company’s competitive position, which could adversely affect the Company’s growth and profitability, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations.

~~The Company is subject to extensive government regulation and supervision, which may interfere with our ability to conduct our business and may negatively impact our financial results.~~

The Company, primarily through the Bank and certain non-bank subsidiaries, are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, the ~~Depositors Insurance Fund (“DIF”)~~ and the safety and soundness of the banking system as a whole, not shareholders. These regulations affect the Company’s lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Company in substantial and unpredictable ways. Such changes could subject the Company to additional costs, limit the types of financial services and products the Company may offer, and/or limit the pricing the Company may charge on certain banking services, among other things. Compliance personnel and resources may increase our costs of operations and adversely impact our earnings.

~~Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage,~~ which could have a material, adverse effect on our business, financial condition, liquidity, and results of ~~operations. While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations~~operations:

These factors, among others, together or in combination with other events or occurrences not ~~occur.~~

State and federal regulatory agencies periodically conduct examinations of our business, including for compliance with laws and regulations, and our failure to comply with any supervisory actions to which we areyet known or ~~become subject as a result of such examinations may~~anticipated, could adversely affect our ~~business.~~operations.

Federal and state regulatory agencies periodically conduct examinations of our business, including our compliance with laws and regulations. If, as a result of an examination, an agency were to determine that the financial, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or violates any law or regulation, such agency may take certain remedial or enforcement actions it deems appropriate to correct any deficiency. Remedial or enforcement actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced against a bank, to direct an increase in the bank’s capital, to restrict the bank’s growth, to assess civil monetary penalties against a bank’s officers or directors, and to remove officers and directors. In the event that the FDIC concludes that, among other things, our financial conditions cannot be corrected or that there is an imminent risk of loss to our depositors, it may terminate our deposit insurance. The CFPB also has authority to take enforcement actions, including cease-and desist orders or civil monetary penalties, if it finds that we offer consumer financial products and services in violation of federal consumer financial protection laws.

If we were unable to comply with future regulatory directives, or if we were unable to comply with the terms of any future supervisory requirements to which we may become subject, then we could become subject to a variety of supervisory actions and orders, including cease and desist orders, prompt corrective actions, Memorandum of Understanding and other regulatory enforcement actions. Such supervisory actions could, among other things, impose greater restrictions on our business, as well as our ability to develop any new business. The Company could also be required to raise additional capital, or dispose of certain assets and liabilities within a prescribed time period, or both. Failure to implement remedial measures as required by financial regulatory agencies could result in additional orders or penalties from federal and state regulators, which could trigger one or more of the remedial actions described above. The terms of any supervisory action and associated consequences with any failure to comply with any supervisory action could have a material negative effect on our business, operating flexibility and overall financial condition.

~~The Company is subject to liquidity risk which could adversely affect net interest income and earnings.~~

The purpose of the Company’s liquidity management is to meet the cash flow obligations of its customers for both deposits and loans. The primary liquidity measurement the Company utilizes is called basic surplus, which captures the adequacy of the Company’s access to reliable sources of cash relative to the stability of its funding mix of average liabilities. This approach recognizes the importance of balancing levels of cash flow liquidity from short- and long-term securities with the availability of dependable borrowing sources which can be accessed when necessary. However, competitive pressure on deposit pricing could result in a decreasePlease read Item 1A. “Risk Factors” in the Company’s ~~deposit base or an increase in funding costs. In addition, liquidity will come under additional pressure if loan growth exceeds deposit growth.~~2019 Form 10-K. There have been no other material changes since the 2019 10-K was filed. These ~~scenarios could lead to a decrease in~~risks are not the Company’s basic surplus measure below the minimum policy level of 5%. To manage this risk, the Company has the ability to purchase brokered certificates of deposit, borrow against established borrowing facilities with other banks (Federal funds) and enter into repurchase agreements with investment companies. Depending on the level of interest rates, the Company’s net interest income, and therefore earnings, could be adversely affected.

~~Our ability to service our debt, pay dividends and otherwise pay our obligations as they come due is substantially dependent on capital distributions from our subsidiary.~~

The holding company is a separate and distinct legal entity from its subsidiary. It receives substantially all of its revenue from dividends from its subsidiary, Cambridge Trust Company. These dividends are the principal source of funds to pay dividends on the Company’s common stock. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay toonly ones facing the Company. Also, the Company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividendsAdditional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may ~~not be able to service debt, pay obligations or pay dividends on the Company’s common stock. The inability to receive dividends from the Bank could have a material adverse effect on~~materially adversely affect the Company’s business, financial condition, and ~~results of operations.~~operating results.

~~A breach of information security, including cyber-attacks, could disrupt our business and impact our earnings.~~

The Company depends upon data processing, communication and information exchange on a variety of computing platforms and networks and over the internet. In addition, we rely on the services of a variety of vendors to meet our data processing and communication needs. Despite existing safeguards, we cannot be certain that all of our systems are free from vulnerability to attack or other technological difficulties or failures. If information security is breached or difficulties or failures occur, despite the controls we and our third party vendors have instituted, information can be lost or misappropriated, resulting in financial loss or costs to us, reputational harm or damages to others. Such costs or losses could exceed the amount of insurance coverage, if any, which would adversely affect our earnings.

The Company is inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, customers, and other third parties targeting the Company and/or the Company’s customers or data. Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts.

Although the Company devotes substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the increasing sophistication of possible perpetrators, the Company may experience financial losses or reputational harm as a result of fraud.

~~The Company continually encounters technological change and the failure to understand and adapt to these changes could hurt our business.~~

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’s competitors have substantially greater resources to invest in technological improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on the Company’s business and, in turn, the Company’s financial condition and results of operations.

~~The Company relies on third parties to provide key components of its business infrastructure.~~

The Company relies on third parties to provide key components for its business operations, such as data processing and storage, recording and monitoring transactions, online banking interfaces and services, internet connections, and network access. While the Company selects these third-party vendors carefully, it does not control their actions. Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason, or poor performance of services by a vendor, could adversely affect the Company’s ability to deliver products and services to its customers and otherwise conduct its business. Financial or operational difficulties of a third-party vendor could also hurt the Company’s operations if those difficulties interfere with the vendor's ability to serve the Company. Replacing these third party vendors could create significant delays and expense that adversely affect the Company’s business and performance.

The possibility of the economy’s return to recessionary conditions and the possibility of further turmoil or volatility in the financial markets would likely have an adverse effect on our business, financial position and results of operations.

The economy in the United States and globally has experienced volatility in recent years and may continue to do so for the foreseeable future. There can be no assurance that economic conditions will not worsen. Unfavorable or uncertain economic conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, the timing and impact of changing governmental policies, natural disasters, terrorist attacks, acts of war or a combination of these or other factors. A worsening of business and economic conditions could have adverse effects on our business, including the following:

~~The Company is subject to other-than-temporary impairment risk which could negatively impact our financial performance.~~

The Company recognizes an impairment charge when the decline in the fair value of equity, debt securities and cost-method investments below their cost basis are judged to be other-than-temporary. Significant judgment is used to identify events or circumstances that would likely have a significant adverse effect on the future use of the investment. The Company considers various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, forecasted recovery, the financial condition and near-term prospects of the investee, whether the Company has the intent to sell and whether it is more likely than not it will be forced to sell the security in question. Information about unrealized gains and losses is subject to changing conditions. The values of securities with unrealized gains and losses will fluctuate, as will the values of securities that we identify as potentially distressed. Our current evaluation of other-than-temporary impairments reflects our intent to hold securities for a reasonable period of time sufficient for a forecasted recovery of fair value. However, our intent to hold certain of these securities may change in future periods as a result of facts and circumstances impacting a specific security. If our intent to hold a security with an unrealized loss changes and we do not expect the security to fully recover prior to the expected time of disposition, we will write down the security to its fair value in the period that our intent to hold the security changes.

~~The risks presented by acquisitions could adversely affect our financial condition and results of operations.~~

The business strategy of the Company may include growth through acquisition. Any future acquisitions will be accompanied by the risks commonly encountered in acquisitions. These risks may include, among other things:

The Company cannot provide any assurance that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions. Our inability to overcome these risks could have an adverse effect on the achievement of our business strategy and results of operations.

~~There are substantial risks and uncertainties associated with the introduction or expansion of lines of business or new products and services within existing lines of business.~~

From time to time, the Company may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, the Company may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove attainable. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of the Company’s system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, results of operations, and financial condition.

~~Our controls and procedures may fail or be circumvented, which may result in a material adverse effect on our business.~~

Management regularly reviews and updates our internal controls, disclosure controls and procedures and corporate governance policies. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulations related to could have a material adverse effect on our business, results of operations and financial condition.

~~The Company is exposed to risk of environmental liabilities with respect to properties to which we obtain title.~~

A significant portion of our loan portfolio is secured by real estate. In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties. The Company may be held liable to a government entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation and remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect our business, results of operations and prospects.

~~The Company may be adversely affected by the soundness of other financial institutions including the FHLB of Boston.~~

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty or other relationships. The Company has exposure to different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated if the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect our business, financial condition or results of operations.

The Company owns common stock of FHLB of Boston in order to qualify for membership in the FHLB system, which enables it to borrow funds under the FHLB of Boston’s advance program. The carrying value and fair market value of our FHLB of Boston common stock was $4.9 million as of ~~September 30, 2017~~. There are 11 branches of the FHLB, including Boston, which are jointly liable for the consolidated obligations of the FHLB system. To the extent that one FHLB branch cannot meet its obligations to pay its share of the system’s debt, other FHLB branches can be called upon to make the payment. Any adverse effects on the FHLB of Boston could adversely affect the value of our investment in its common stock and negatively impact our results of operations.

~~The market price of the Company’s common stock may fluctuate significantly in response to a number of factors including, but not limited to:~~

~~There may be future sales or other dilution of the Company’s equity, which may adversely affect the market price of the Company’s stock.~~

The Company is not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The Company also grants shares of common stock to employees and directors under the Company’s incentive plan each year. The issuance of any additional shares of the Company’s common stock or securities convertible into, exchangeable for or that represent the right to receive common stock, or the exercise of such securities could be substantially dilutive to shareholders of the Company’s common stock. Holders of the Company’s common stock have no preemptive rights that entitle such holders to purchase their pro rata share of any offering of shares or any class or series. Because the Company’s decision to issue securities in any future offering will depend on market conditions, its acquisition activity and other factors, the Company cannot predict or estimate the amount, timing or nature of its future offerings. Thus, the Company’s shareholders bear the risk of the Company’s future offerings reducing the market price of the Company’s common stock and diluting their stock holdings in the Company.

~~The Company depends on our executive officers and key personnel to continue the implementation of our long-term business strategy and could be harmed by the loss of their services.~~

The Company believes that our continued growth and future success will depend in large part upon the skills of our management team. The competition for qualified personnel in the financial services industry is intense, and the loss of our key personnel, an inability to continue to attract or retain and motivate key personnel could adversely affect our business. We cannot assure that we will be able to retain our existing key personnel, attract additional qualified personnel, or effectively manage the succession of key personnel. We have change of control agreements with our actively employed named executive officers, and the loss of the services of one or more of our executive officers and key personnel could impair our ability to continue to develop our business strategy.

Any future action by the U.S. Congress lowering the federal corporate income tax rate and/or eliminating the federal corporate alternative minimum tax could result in the reduction of the net deferred tax asset and a corresponding charge against earnings.

The net deferred tax asset reported on the Company’s balance sheet represents the net amount of income taxes expected to be received upon the reversal of temporary differences between the bases of assets and liabilities as measured by enacted tax laws, and their bases as reported in the financial statements. As of December 31, 2016, the Company’s net deferred tax asset was computed using the federal statutory rate of 35%. The President of the United States and members of Congress have announced plans to lower the federal corporate income tax rate from its current level of 35% and to eliminate the corporate alternative minimum tax. If these plans ultimately result in the enactment of new laws lowering the corporate income tax rate and/or eliminating the corporate alternative minimum tax, then the Company’s net deferred tax asset would be re-measured. This would result in a reduction of the deferred tax asset in the period of the law change and a corresponding charge against earnings.

The Bank and the Company are each subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which each of the Bank and the Company must maintain. From time to time, the regulators implement changes to these regulatory capital adequacy guidelines. If we fail to meet these minimum capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected. In light of proposed changes to regulatory capital requirements contained in the Dodd-Frank Act and the regulatory accords on international banking institutions formulated by the Basel Committee and implemented by the Federal Reserve and the ~~Office of the Comptroller of the Currency (“~~OCC”), we may be required to satisfy additional, more stringent, capital adequacy standards. The ultimate impact of the revised capital and liquidity standards on us cannot be determined at this time and will depend on a number of factors, including the treatment and implementation by the U.S. banking regulators. These requirements, however, and any other new regulations, could adversely affect our ability to pay dividends, or could require us to reduce business levels or to raise capital, including in ways that may adversely affect our financial condition or results of operations.

The ~~Company issues from time to time, (i)~~ ~~shares~~following table sets forth the information regarding the Company’s repurchases of its common stock ~~under the Company’s employee stock ownership plan (“ESOP”) to our officers and employees, (ii) restricted stock units (~~“~~RSU~~”)⁽¹⁾ ~~that are settled in shares of common stock under our~~ ~~1993 Stock Option Plan and 2017 Equity and Cash Incentive Plan~~ ~~to our officers and employees, (iii) restricted stock awards (“RSA”)~~ ~~in the form of fully vested shares under our~~ ~~1993 Stock Option Plan and 2017 Equity and Cash Incentive Plan~~ ~~to our officers and employees~~ ~~and (iv) shares of our common stock to our directors as part of their annual retainer. The following table shows the securities issued by the Company in the foregoing four categories for~~during the three months ended ~~September 30, 2017:~~March 31, 2020:

Shares granted under the ESOP were acquired by the ESOP for cash from the Company pursuant to transactions consummated on March 27, 2017 (8,795 shares). All transactions disclosed were exempt from registration in reliance on Rule 701.

The Company ~~did~~does not currently have a stock repurchase ~~any shares during the third quarter of 2017~~.program or plan in place.

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).

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.

Massachusetts	04-2777442
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1336 Massachusetts Avenue Cambridge, MA	02138
(Address of principal executive offices)	(Zip Code)

Large accelerated filer	☐		Accelerated filer	☐☒
Non-accelerated filer	☒☐	~~(Do not check if a small reporting company)~~	Small reporting company	☐
			Emerging growth Company	☐

Common Stock	CATC	NASDAQ
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)

		~~Page~~
~~PART I.~~	~~FINANCIAL INFORMATION~~	1
~~Item 1.~~	~~Financial Statements (Unaudited)~~	1
	~~Unaudited Consolidated Balance Sheets~~	1
	~~Unaudited Consolidated Statements of Income~~	2
	~~Unaudited Consolidated Statements of Comprehensive Income (Loss)~~	3
	~~Unaudited Consolidated Statements of Changes in Shareholders’ Equity~~	4
	~~Unaudited Consolidated Statements of Cash Flows~~	5
	~~Notes to Unaudited Consolidated Financial Statements~~	6
~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	34
~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	53
~~Item 4.~~	~~Controls and Procedures~~	53
~~PART II.~~	~~OTHER INFORMATION~~	54
~~Item 1.~~	~~Legal Proceedings~~	54
~~Item 1A.~~	~~Risk Factors~~	54
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	61
~~Item 3.~~	~~Defaults Upon Senior Securities~~	61
~~Item 4.~~	~~Mine Safety Disclosures~~	61
~~Item 5.~~	~~Other Information~~	61
~~Item 6.~~	~~Exhibits~~	62
~~Signatures~~		63

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Unaudited Consolidated Balance Sheets	1
	Unaudited Consolidated Statements of Income	2
	Unaudited Consolidated Statements of Comprehensive Income	3
	Unaudited Consolidated Statements of Changes in Shareholders’ Equity	4
	Unaudited Consolidated Statements of Cash Flows	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
PART II.	OTHER INFORMATION	59
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
Signatures		62

	January 1, 2020
	As reported under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
	(dollars in thousands)
ASSETS
Loans
Residential mortgage	$	7,202	$	5,141	$	2,061
Commercial mortgage		9,545		10,992		(1,447	)
Home equity		256		461		(205	)
Commercial & Industrial		896		1,388		(492	)
Consumer		486		198		288
Allowance for credit losses on loans	$	18,385	$	18,180	$	205
LIABILITIES
Allowance for credit losses on OBS credit exposure	$	326	$	50	$	276

	For the Three Months Ended September 30, 2017
	Carrying Value		Average Carrying Value		Unpaid Principal Balance		Related Allowance		Interest Income Recognized
	(dollars in thousands)
With no required reserve recorded:
Commercial and industrial	$	38	$	40	$	38	$	—	$	1
Commercial real estate		217		221		229		—		—
Residential real estate		991		997		1,187		—		—
Home equity		98		99		128		—		—
Total		1,344		1,357		1,582		—		1
With required reserve recorded:
Commercial and industrial		269		273		281		259		—
Commercial real estate		—		—		—		—		—
Residential real estate		65		65		65		98		—
Home equity		—		—		—		—		—
Total		334		338		346		357		-
Total:
Commercial and industrial		307		313		319		259		1
Commercial real estate		217		221		229		—		—
Residential real estate		1,056		1,062		1,252		98		—
Home equity		98		99		128		—		—
Total	$	1,678	$	1,695	$	1,928	$	357	$	1

	For the Nine Months Ended September 30, 2017
	Carrying Value		Average Carrying Value		Unpaid Principal Balance		Related Allowance		Interest Income Recognized
	(dollars in thousands)
With no required reserve recorded:
Commercial and industrial	$	38	$	38	$	38	$	—	$	2
Commercial real estate		217		227		229		—		3
Residential real estate		991		1,012		1,187		—		—
Home equity		98		102		128		—		—
Total		1,344		1,379		1,582		—		5
With required reserve recorded:
Commercial and industrial		269		279		281		259		—
Commercial real estate		—		—		—		—		—
Residential real estate		65		66		65		98		1
Home equity		—		—		—		—		—
Total		334		345		346		357		1
Total:
Commercial and industrial		307		317		319		259		2
Commercial real estate		217		227		229		—		3
Residential real estate		1,056		1,078		1,252		98		1
Home equity		98		102		128		—		—
Total	$	1,678	$	1,724	$	1,928	$	357	$	6

	Mortgage Servicing Rights			Valuation Allowance			Total
	(dollars in thousands)
Balance at December 31, 2018	$	666		$	—		$	666
Mortgage servicing rights capitalized		4			—			4
Amortization charged against servicing income		(23	)		—			(23	)
Change in impairment reserve		—			—			—
Balance at March 31, 2019	$	647		$	—		$	647

Balance at December 31, 2019	$	1,347		$	(26	)	$	1,321
Mortgage servicing rights capitalized		32			—			32
Amortization charged against servicing income		(100	)		—			(100	)
Change in impairment reserve		—			(12	)		(12	)
Balance at March 31, 2020	$	1,279		$	(38	)	$	1,241

	Future Amortization Expense
	(dollars in thousands)
Remainder of 2020	$	216
2021		237
2022		187
2023		147
2024		115
Thereafter		377
Total	$	1,279

	For the Nine Months Ended September 30, 2017			For the Year Ended December 31, 2016
	(dollars in thousands)
FHLB of Boston short-term advances
Ending balance	$	11,500		$	—
Average daily balance		42,293			3,668
Highest month-end balance		110,000			21,000
Weighted average interest rate		1.20	%		0.54	%

	March 31, 2020
	Operating Leases		Balance Sheet Location
	(dollars in thousands)
Right-of-use asset	$	32,312	Right-of-use asset operating leases
Lease liability	$	33,813	Operating lease liabilities

	December 31, 2019
	Operating Leases		Balance Sheet Location
	(dollars in thousands)
Right-of-use asset	$	33,587	Right-of-use asset operating leases
Lease liability	$	35,054	Operating lease liabilities

Year Ended	Future Minimum
March 31, 2020	Lease Payments
	(dollars in thousands)
Remainder of 2020	$	5,478
2021		5,523
2022		5,371
2023		5,021
2024		4,355
Thereafter		14,553
Total minimum lease payments		40,301
Less: interest		(6,488	)
Total lease liability	$	33,813

	Three Months Ended March 31, 2020									Three Months Ended March 31, 2019
	Before Tax Amount			Tax Expense			Net-of-tax Amount			Before Tax Amount			Tax (Expense) or Benefit			Net-of-tax Amount
	(dollars in thousands)
Unrealized (losses)/gains on available for sale securities
Unrealized holding (losses)/gains	$	3,241		$	(741	)	$	2,500		$	1,425		$	(330	)	$	1,095
Reclassification adjustment for (gains)/losses recognized in net income		—			—			—			87			(21	)		66
Derivatives
Change in interest rate contracts		5,886			(1,640	)		4,246			(42	)		12			(30	)
Defined benefit retirement plans
Change in retirement liability		(1	)		—			(1	)		36			(10	)		26
Total Other Comprehensive (Loss)/Income	$	9,126		$	(2,381	)	$	6,745		$	1,506		$	(349	)	$	1,157

Three Months Ended March 31,
Details about Accumulated Other Comprehensive Income Components	2020		2019			Affected Line Item in the Statement where Net Income is Presented
	(dollars in thousands)
Unrealized gains and losses on available for sale securities	$	—	$	(87	)	Loss on disposition of investment securities
Tax benefit		—		21		Income taxes expense
Net of tax	$	—	$	(66	)	Net income

	March 31, 2020
	Derivative Assets					Derivative Liabilities
	Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value
	(dollars in thousands)					(dollars in thousands)
Derivatives designated as hedging instruments
Interest rate contracts		150,000	Other Assets	$	8,749	$	—	Other Liabilities	$	—
Total derivatives designated as hedging instruments				$	8,749				$	—

Derivatives not designated as hedging instruments
Loan related derivative contracts
Interest rate swaps with customers		281,284	Other Assets	$	32,721		—	Other Liabilities	$	—
Mirror swaps with counterparties		—	Other Assets		—		281,284	Other Liabilities		32,721
Risk participation agreements-out to counterparties		19,000	Other Assets		34		—	Other Liabilities		—
Risk participation agreements-in with counterparties		—	Other Assets		—		101,075	Other Liabilities		537
Total derivatives not designated as hedging instruments				$	32,755				$	33,258

	Amount of Gain or (Loss) Recognized in OCI		Amount of Gain or (Loss) Recognized in OCI Included Component		Amount of Gain or (Loss) Recognized in OCI Excluded Component			Location of Gain or (Loss)	Amount of Gain or (Loss) Reclassified from AOCI into Income		Amount of Gain or (Loss) Reclassified from AOCI into Income Included Component		Amount of Gain or (Loss) Reclassified from AOCI into Income Excluded Component
	For the Three Months Ended March 31, 2020								For the Three Months Ended March 31, 2020
	(dollars in thousands)								(dollars in thousands)
Interest rate contracts	$	5,998	$	6,634	$	(636	)	Interest Income	$	112	$	161	$	(49	)

		Amount of Gain or (Loss) Recognized in Income on Derivative
		Three Months Ended March 31,		Three Months Ended March 31,
		2020		2019
	Location of Gain or (Loss)	(dollars in thousands)
Other contracts	Other income	$	178	$	74
Total		$	178	$	74

								Gross Amounts Not Offset
		Gross Amounts of Recognized		Gross Amounts Offset		Net Amounts Recognized		Financial Instruments		Collateral Pledged (Received)		Net Amount
	March 31, 2020
	(dollars in thousands)
Offsetting of Derivative Assets
Derivative Assets		$	41,504	$	—	$	41,504	$	8,841	$	—	$	32,663

Offsetting of Derivative Liabilities
Derivative Liabilities		$	33,258	$	—	$	33,258	$	8,841	$	23,558	$	859

								Gross Amounts Not Offset
		Gross Amounts of Recognized		Gross Amounts Offset		Net Amounts Recognized		Financial Instruments		Collateral Pledged (Received)		Net Amount
	December 31, 2019
	(dollars in thousands)
Offsetting of Derivative Assets
Derivative Assets		$	15,912	$	—	$	15,912	$	3,128	$	-	$	12,784

Offsetting of Derivative Liabilities
Derivative Liabilities		$	13,230	$	—	$	13,230	$	3,128	$	9,645	$	457

	For the Nine Months Ended September 30,
	2017		2016
	(dollars in thousands)
Wealth Management revenues:
Trust and investment advisory fees	$	16,106	$	14,187
Asset-based revenues		16,106		14,187
Financial planning fees and other service fees		971		839
Total wealth management revenues	$	17,077	$	15,026

	September 30, 2017
	One Year or Less		One to Five Years		Over Five Years		Total
	(dollars in thousands)
Predetermined interest rates	$	30,614	$	135,760	$	493,100	$	659,474
Floating or adjustable interest rates		73,276		78,110		545,048		696,434
Total	$	103,890	$	213,870	$	1,038,148	$	1,355,908

	March 31, 2020
	Fixed		Adjustable		Floating		Total
	(dollars in thousands)
Residential mortgage	$	444,242	$	470,915	$	1,946.00	$	917,103
Commercial mortgage		409,878		283,342		396,576		1,089,796
Home equity		6,686		—		76,380		83,066
Commercial & Industrial		40,531		5,852		81,265		127,648
Consumer		676		551		36,962		38,189
Total	$	902,013	$	760,660	$	593,129	$	2,255,802

	Nine Months Ended
	September 30, 2017									September 30, 2016
	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)
Taxable	$	1,312,432		$	37,966			3.87	%	$	1,230,571		$	35,796			3.89	%
Tax-exempt		15,917			601			5.05			14,928			450			4.03
Securities available for sale (3)
Taxable		261,106			3,158			1.62			340,355			3,942			1.55
Securities held to maturity
Taxable		101,819			1,604			2.11			1,047			37			4.72
Tax-exempt		82,023			3,024			4.93			82,763			3,186			5.14
Cash and due from banks		35,746			170			0.64			37,514			94			0.33
Total interest-earning assets (4)		1,809,043			46,523			3.44	%		1,707,178			43,505			3.40	%
Non interest-earning assets		73,733									73,801
Allowance for loan losses		(15,352	)								(15,321	)
Total assets	$	1,867,424								$	1,765,658
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Checking accounts	$	395,759		$	84			0.03	%	$	362,373		$	66			0.02	%
Savings accounts		557,442			951			0.23			536,182			1,252			0.31
Money market accounts		71,044			79			0.15			78,584			100			0.17
Certificates of deposit		168,136			1,069			0.85			176,123			1,108			0.84
Total interest-bearing deposits		1,192,381			2,183			0.24			1,153,262			2,526			0.29
Other borrowed funds		45,970			434			1.26			6,169			66			1.43
Total interest-bearing liabilities		1,238,351			2,617			0.28	%		1,159,431			2,592			0.30	%
Non-interest-bearing liabilities
Demand deposits		464,217									453,251
Other liabilities		25,032									21,968
Total liabilities		1,727,600									1,634,650
Shareholders’ equity		139,824									131,008
Total liabilities & shareholders’ equity	$	1,867,424								$	1,765,658
Net interest income on a fully taxable equivalent basis					43,906									40,913
Less taxable equivalent adjustment					(1,268	)								(1,272	)
Net interest income				$	42,638								$	39,641
Net interest spread (5)								3.16	%								3.11	%
Net interest margin (6)								3.24	%								3.20	%

	Year 1	Year 2
Change in Interest Rates (in Basis Points)	Percentage Change in Net Interest Income	Percentage Change in Net Interest Income
Parallel rate shocks
+400	(4.5)	6.0
+300	(3.7)	3.9
+200	(3.1)	1.4
+100	(2.2)	(1.0)
–100	(2.0)	(8.5)

	Total Number of Shares Repurchased ⁽¹⁾		Weighted Average Price Paid Per Share
Period
January 1 to January 31, 2020		4,397	$	75.53
February 1 to February 29, 2020		196	$	72.25
March 1 to March 31, 2020		2,563	$	56.68
Total		7,156

(1)	~~Three Months Ended September 30, 2017~~ ⁽¹⁾

~~RSUs under~~Shares repurchased by the ~~1993 Plan and 2017 Equity and Cash Incentive Plan~~		~~3,897~~
~~RSAs under the 1993 Plan and 2017 Equity and Cash Incentive Plan~~		~~3,724~~	Company relate to shares tendered by employees to pay their income tax liability on current period RSA, RSU, or PRSU vestings.

Exhibit Number		Description


31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal 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		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page for the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, has been formatted in Inline XBRL.

	CAMBRIDGE BANCORP

~~November 9, 2017~~May 8, 2020	By:	/s/ Denis K. Sheahan
		Denis K. Sheahan
		Chairman, Chief Executive Officer (Principal Executive Officer)

~~November 9, 2017~~May 8, 2020
	ByBy:	/s/ Michael F. Carotenuto
		Michael F. Carotenuto
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)