# EDGAR Filing Document

**Accession Number:** 0000711772
**File Stem:** 0000950170-23-008286
**Filing Date:** 2023-3
**Character Count:** 785406
**Document Hash:** a9ee3f6059785609220a0f9ed64482af
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-008286.hdr.sgml**: 20230316

**ACCESSION NUMBER**: 0000950170-23-008286

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 145

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230316

**DATE AS OF CHANGE**: 20230316

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** CAMBRIDGE BANCORP
- **CENTRAL INDEX KEY:** 0000711772
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **IRS NUMBER:** 042777442
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38184
- **FILM NUMBER:** 23737090

**BUSINESS ADDRESS:**
- **STREET 1:** 1336 MASSACHUSETTS AVENUE
- **CITY:** CAMBRIDGE
- **STATE:** MA
- **ZIP:** 02138
- **BUSINESS PHONE:** 617-876-5500

**MAIL ADDRESS:**
- **STREET 1:** 1336 MASSACHUSETTS AVENUE
- **CITY:** CAMBRIDGE
- **STATE:** MA
- **ZIP:** 02138

?xml version="1.0" encoding="ASCII"? 10-K

**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 20549** 

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**FORM** 10-K

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**(Mark One)** 

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

**For the fiscal year ended** **December 31,** 2022

**OR** 

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

**FOR THE TRANSITION PERIOD FROM TO**

**Commission File Number** 001-38184

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CAMBRIDGE BANCORP

**(Exact name of Registrant as specified in its Charter)** 

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| | |
|:---|:---|
| Massachusetts | 04-2777442 |
| **(State or other jurisdiction of**<br>**incorporation or organization)** | **(I.R.S. Employer<br>Identification No.)** |
| 1336 Massachusetts Avenue<br>Cambridge**,** MA | 02138 |
| **(Address of principal executive offices)** | **(Zip Code)** |

---

**Registrant's telephone number, including area code: (**617**)** 876-5500

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

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

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

**None**

**(Title of class)**

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Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit). 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.

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

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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. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive oﬃcers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 726.2(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The NASDAQ Stock Market on June 30, 2022, was $528.7 million. The number of shares of Registrant's Common Stock outstanding as of March 9, 2023 was 7,834,057.

**DOCUMENTS INCORPORATED BY REFERENCE**

Portions of the Registrant's Definitive Proxy Statement relating to the Annual Meeting of Shareholders, scheduled to be held on May 15, 2023, are incorporated by reference into Part III of this Report.

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**Table of Contents**

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| | | |
|:---|:---|:---|
|  |  | **Page** |
| [**PART I**](#part_i) |  | 1 |
| &nbsp;&nbsp;Item 1. | [Business](#item_1_business) | 2 |
| &nbsp;&nbsp;Item 1A. | [Risk Factors](#item_1a_risk_factors) | 13 |
| &nbsp;&nbsp;Item 1B. | [Unresolved Staff Comments](#item_1b_unresolved_staff_comments) | 23 |
| &nbsp;&nbsp;Item 2. | [Properties](#item_2_properties) | 23 |
| &nbsp;&nbsp;Item 3. | [Legal Proceedings](#item_3_legal_proceedings) | 23 |
| &nbsp;&nbsp;Item 4. | [Mine Safety Disclosures](#item_4_mine_safety_disclosures) | 23 |
| [**PART II**](#part_ii) |  |  |
| &nbsp;&nbsp;Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#item_5_market_for_registrants_common_equ) | 24 |
| &nbsp;&nbsp;Item 6. | [Reserved](#item_6_reserved) | 25 |
| &nbsp;&nbsp;Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#item_7_managements_discussion_analysis_f) | 26 |
| &nbsp;&nbsp;Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#item_7a_quantitative_qualitative_disclos) | 51 |
| &nbsp;&nbsp;Item 8. | [Financial Statements and Supplementary Data](#item_8_financial_statements_supplementar) | 52 |
| &nbsp;&nbsp;Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](#item_9_changes_in_disagreements_with_acc) | 103 |
| &nbsp;&nbsp;Item 9A. | [Controls and Procedures](#item_9a_controls_procedures) | 103 |
| &nbsp;&nbsp;Item 9B. | [Other Information](#item_9b_or_information) | 104 |
| &nbsp;&nbsp;Item 9C. | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#item_9c_discl_regarding_foreign_jur) | 104 |
| [**PART III**](#part_iii) |  |  |
| &nbsp;&nbsp;Item 10. | [Directors, Executive Officers and Corporate Governance](#item_10_directors_executive_ficers_corpo) | 105 |
| &nbsp;&nbsp;Item 11. | [Executive Compensation](#item_11_executive_compensation) | 105 |
| &nbsp;&nbsp;Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#item_12_security_ownership_certain_benef) | 105 |
| &nbsp;&nbsp;Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#item_13_certain_relationships_related_tr) | 105 |
| &nbsp;&nbsp;Item 14. | [Principal Accounting Fees and Services](#item_14_principal_accounting_fees_servic) | 105 |
| [**PART IV**](#part_iv) |  |  |
| &nbsp;&nbsp;Item 15. | [Exhibits, Financial Statement Schedules](#item_15_exhibits_financial_statement_sch) | 106 |
| &nbsp;&nbsp;Item 16. | [Form 10-K Summary](#item_16_form_10k_summary) | 111 |
| &nbsp;&nbsp;[Signatures](#signatures) |  | 112 |

---

i

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**PART I**

Unless the context requires otherwise, all references to the "Company," "we," "us," and "our," refer to Cambridge Bancorp.

**Forward-Looking Statements** 

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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•national, regional, and local economic conditions may be less favorable than expected, resulting in, among other things, increased charge-offs of loans, higher provisions for credit losses and/or reduced demand for the Company's services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•disruptions to the credit and financial markets, either nationally or globally;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the duration and scope of COVID-19 pandemic and its impact on levels of consumer confidence;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•actions governments, businesses and individuals take in response to the COVID-19 pandemic;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the impact of the COVID-19 pandemic and actions taken in response to the COVID-19 pandemic on global and regional economies and economic activity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a prolonged resurgence in the severity of the COVID-19 pandemic due to variants and mutations of the virus;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the pace of recovery when the COVID-19 pandemic subsides;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•weakness in the real estate market, including the secondary residential mortgage market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, and profits on sales of mortgage loans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•legislative, regulatory, or accounting changes, including changes resulting from the adoption and implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which may adversely affect our business and/or competitive position, impose additional costs on the Company or cause us to change our business practices;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Dodd-Frank Act's consumer protection regulations which could adversely affect the Company's business, financial condition or results of operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•disruptions in the Company's ability to access capital markets which may adversely affect its capital resources and liquidity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Company's heavy reliance on communications and information systems to conduct its business and reliance on third parties and affiliates to provide key components of its business infrastructure, any disruptions of which could interrupt the Company's operations or increase the costs of doing business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the failure of the Company's financial reporting controls and procedures to prevent or detect all errors or fraud;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Company's dependence on the accuracy and completeness of information about clients and counterparties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the fiscal and monetary policies of the federal government and its agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the failure to satisfy capital adequacy and liquidity guidelines applicable to the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•downgrades in the Company's credit rating;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in interest rates which could affect interest rate spreads and net interest income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•decrease in net interest margin due to increasing cost of funds in a rising interest rate environment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•costs and effects of litigation, regulatory investigations or similar matters;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•inability to realize expected cost savings or to implement integration plans and other adverse consequences associated with the Company's merger (the "Northmark Merger") with Northmark Bank ("Northmark").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a failure by the Company to effectively manage the risks the Company faces, including credit, operational and cyber security risks;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•increased pressures from competitors (both banks and non-banks) and/or an inability by of the Company to remain competitive in the financial services industry, particularly in the markets which the Company serves, and keep pace with technological changes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•unpredictable natural or other disasters, which could adversely impact the Company's clients or operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a loss of client deposits, which could increase the Company's funding costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the disparate impact that can result from having loans concentrated by loan type, industry segment, borrower type or location of the borrower or collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in the creditworthiness of clients;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•increased credit losses or impairment of goodwill and other intangibles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•negative public opinion which could damage the Company's reputation and adversely impact business and revenues;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Company depends on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Company may not be able to hire or retain additional qualified personnel, including those acquired in previous acquisitions, and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact the Company's ability to implement the Company's business strategies; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in the Company's accounting policies or in accounting standards which could materially affect how the Company reports financial results and condition.

Except as required by law, 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.

**Item 1. Business.** 

**The Company**

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 bank subsidiary, Cambridge Trust Company (the "Bank"), formed in 1890. On October 18, 2017, shares of the Company's common stock commenced trading on the NASDAQ Stock Market under the symbol CATC. Prior to this date, the Company's shares traded on the over-the-counter market. As of December 31, 2022, the Company had total assets of approximately $5.6 billion. Currently, the Bank operates 22 banking offices in Eastern Massachusetts and New Hampshire. As a private bank, we focus on three core services that center around client needs. The Company's core services include Wealth Management, Commercial Banking, and Personal Banking. The Bank's clients consist primarily of consumers and small- and medium-sized businesses in these communities and surrounding areas throughout Massachusetts and New Hampshire.

The Company's Wealth Management Group has five offices, two in Massachusetts in Boston and Wellesley, and three in New Hampshire in Concord, Manchester, and Portsmouth. As of December 31, 2022, the Company had Assets under Management and Administration of approximately $4.1 billion. The Wealth Management Group offers comprehensive investment management, as well as trust administration, estate settlement, and financial planning services. The Company's wealth management clients value personal service and depend on the commitment and expertise of our experienced banking, investment, and fiduciary professionals.

The Wealth Management Group customizes investment portfolios to help clients meet their long-term financial goals. Through development of an appropriate asset allocation and disciplined investment selection, the Company's in-house research team targets long-term capital growth while seeking to minimize downside risk. The Company's internally developed, research-driven process is managed by our skilled team of portfolio managers and analysts. The Company builds portfolios consisting of its best ideas, focusing on individual global equities, fixed income securities, exchange-traded funds, and mutual funds.

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 originates commercial and industrial ("C&I") loans, commercial real estate ("CRE") loans, construction loans, consumer loans, and residential real estate loans (including one-to-four family and home equity lines of credit), and 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.

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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, and non-interest income largely from its wealth management services. The results of operations are affected by the level of income and fees from loans, the cost of deposits, operating expenses, the provision for (release of) credit losses, the impact of federal and state income taxes, 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 relationship banking. Relationship banking focuses on providing exceptional service to clients and in deepening relationships. Within the commercial loan portfolio, the Company has traditionally been a commercial real estate lender. However, in recent years the Company has diversified commercial operations within the areas of commercial and industrial lending to including both Renewable Energy and innovation banking. Through its renewable energy lending efforts, the Company provides financing for developers and operators of commercial and utility scale solar energy projects. Target clients generally include experienced borrowers who have built or managed other renewable energy facilities, and financing is provided for the construction and permanent financing of new projects, the acquisition of completed projects, or the refinancing of existing operating projects. The Innovation Banking Group has a narrow client focus for lending and provides a local banking option for technology and entrepreneurial companies across a wide range of industries within our market area. Financing includes recurring revenue based lending to support working capital, as well as growth capital term debt with borrowers that have demonstrated continued performance to plan during their growth progression.

**Cambridge Trust Company**

The Bank offers a full range of commercial and consumer banking services through its network of 22 banking offices in Eastern Massachusetts and New Hampshire. The Bank is engaged principally in the business of attracting deposits from the public and investing those deposits. The Bank invests those funds in various types of loans, including residential, CRE, commercial and industrial, and consumer loans. The Bank also invests its deposits and borrowed funds in investment securities and has two wholly owned Massachusetts security corporations, CTC Security Corporation and CTC Security Corporation III, for this purpose. Deposits at the Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC") for the maximum amount permitted by FDIC regulations.

Investment management and trust services are offered through our two wealth management offices located in Massachusetts and three wealth management offices located in New Hampshire. The Bank also utilizes its subsidiary and non-depository trust company, Cambridge Trust Company of New Hampshire, Inc., to provide specialized wealth management services in New Hampshire. The assets held for wealth management clients are not assets of the Bank and, accordingly, are not reflected in the Company's consolidated balance sheets.

The Bank is active in the communities we serve. The Bank makes contributions to various non-profits and local organizations, invests in community development lending, and invests in low-income housing. All, of which strive to improve the communities that our employees and clients call home.

**Market Area**

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

Our lending area is primarily an urban market area with a substantial number of one-to-four-unit residential properties, some of which are non-owner occupied, as well as apartment buildings, condominiums, office buildings, and retail space. As a result, our loan portfolio contains a significantly greater number of multi-family and CRE loans compared to institutions that operate in non-urban markets.

Our market area is located largely in the Boston-Cambridge-Quincy, Massachusetts/New Hampshire Metropolitan Statistical Area ("MSA"). As of February 2023, the Boston metropolitan area is estimated to be the 11th largest metropolitan area in the United States, based upon data from S & P Global Market Intelligence©. Located adjacent to major transportation corridors, the Boston metropolitan area provides a highly diversified economic base, with major employment sectors ranging from services, education, manufacturing, and wholesale/retail trade, to finance, technology, and medical care. According to the United States Department of Labor, in December 2022, the Boston-Cambridge-Newton, Massachusetts/New Hampshire MSA had an unemployment rate of 2.7% compared to the national unemployment rate of 3.5%.

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**Merger with Northmark Bank** 

On October 1, 2022, the Company completed its merger ("Northmark Merger") with Northmark Bank ("Northmark") adding three banking offices in Massachusetts. Under the terms of the Agreement and Plan of Merger with Northmark, each outstanding share of Northmark common stock was converted into 0.9950 shares of the Company's common stock. As a result of the Northmark Merger, former Northmark shareholders received an aggregate of 788,137 shares of the Company's common stock. The total consideration paid amounted to $62.8 million, based on the closing price of $79.74 of the Company's common stock and cash paid for fractional shares on October 1, 2022.

The Company accounted for the Northmark Merger using the acquisition method pursuant to Financial Accounting Standards Board ("FASB") Codification ("ASC") Topic 805, "Business Combinations" ("ASC 805") Accordingly, the Company recorded merger expenses of $1.9 million for the year ended December 31, 2022. In accordance with the Northmark Merger, the Company recorded total assets of $428.7 million, assumed total liabilities of $378.5 million, and recorded $12.6 million in goodwill. Additionally, the Company recorded $2.2 million in provision for credit losses to reflect the impact of merger related allowance for credit losses commensurate with ASC Topic 326, "Financial Instruments Credit Losses" ("ASC 326") commonly referred to as current expected credit losses ("CECL") on October 1, 2022. See Note 4 – Mergers for additional details.

**Merger with Wellesley Bancorp, Inc.** 

On June 1, 2020, the Company completed its merger (the "Wellesley Merger") with Wellesley Bancorp, Inc. ("Wellesley"), adding six banking offices in Massachusetts. Under the terms of the Agreement and Plan of Merger with Wellesley, each outstanding share of Wellesley common stock was converted into 0.580 shares of the Company's common stock. As a result of the merger, former Wellesley shareholders received an aggregate of 1,502,814 shares of the Company's common stock. The total consideration paid amounted to $88.8 million, based on the closing price of $58.00 of the Company's common stock, the value of Wellesley's exercisable options, and cash paid for fractional shares on May 31, 2020.

The Company accounted for the Wellesley Merger using the acquisition method pursuant to ASC 805. Accordingly, the Company recorded merger expenses of approximately $6.4 million for the year ended December 31, 2020. In connection with the Wellesley Merger, the Company recorded total assets of $985.6 million, assumed total liabilities of $917.6 million, and recorded $20.7 million in goodwill. Additionally, the Company recorded $8.6 million in provision for credit losses to reflect the impact of merger related allowance for CECL on June 1, 2020.

**Competition**

The financial services industry is highly competitive. The Company experiences substantial competition with other commercial banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions, and other non-bank financial service providers in attracting deposits, making loans, and attracting wealth management clients. The competing major commercial banks have greater resources that may provide them a competitive advantage by enabling them to maintain numerous branch offices, invest in technology, and mount extensive advertising campaigns. The increasingly competitive environment is the result of changes in regulation, changes in technology and product delivery systems, additional financial service providers, and the accelerating pace of consolidation among financial services providers.

The financial services industry has become even more competitive as a result of legislative, regulatory, and technological changes and continued consolidation. Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.

Some of the Company's non-banking competitors have fewer regulatory constraints and may have lower cost structures. In addition, some of the Company's competitors have assets, capital, and lending limits greater than that of the Company, greater access to capital markets, and offer a broader range of products and services than the Company. These institutions may have the ability to finance wide-ranging advertising campaigns and may also be able to offer lower rates on loans and higher rates on deposits than the Company can offer. Some of these institutions offer services, such as international banking, which the Company does not directly offer.

Various in-state market competitors and out-of-state banks continue to enter or have announced plans to enter or expand their presence in the market areas in which the Company currently operates. With the addition of new banking presences within our market, the Company expects increased competition for loans, deposits, and other financial products and services.

The Bank is a private bank and wealth management firm, stressing the holistic client relationship, and relies upon local promotional activities, the skill and personal relationships established by officers, directors, and employees with its clients, and specialized services

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tailored to meet the needs of the communities served. While the Bank's position varies by market, management believes that it can compete effectively as a result of local market knowledge, local decision making, and awareness of client needs.

**Supervision and Regulation** 

**General**

Banking is a complex, highly regulated industry. Consequently, the performance of the Company and the Bank can be affected not only by management decisions and general and local economic conditions, but also by the statutes enacted by the U.S. Congress and state legislatures, and the regulations and policies of, various governmental regulatory authorities. These authorities include, but are not limited to, the Board of Governors of the Federal Reserve System (the "Federal Reserve"), the Massachusetts Division of Banks (the "MA DOB"), the State of New Hampshire Banking Department, and the FDIC.

The primary goals of bank regulation are to maintain a safe and sound banking system, establish consumer protection standards, and to facilitate the conduct of sound monetary policy. In furtherance of these goals, the U.S. Congress and the Commonwealth of Massachusetts have created largely autonomous regulatory agencies that oversee and have enacted numerous laws that govern banks, bank holding companies, and the banking industry. The system of supervision and regulation applicable to the Company and the Bank establishes a comprehensive framework for the entities' respective operations and is intended primarily for the protection of the Bank's depositors and the public, rather than the shareholders and creditors. The following summarizes the significant laws, rules, and regulations governing banks and bank holding companies, including the Company and the Bank, but does not purport to be a complete summary of all applicable laws, rules, and regulations governing bank holding companies and banks or the Company or the Bank. The descriptions are qualified in their entirety by reference to the specific statutes, regulations, and policies discussed. Any change in applicable laws, regulations, or regulatory policies may have a material effect on our businesses, operations, and prospects. The Company is unable to predict the nature or extent of the effects that economic controls or new federal or state legislation may have on our business and earnings in the future.

In addition to the summary below, as a result of the COVID-19 pandemic, the U.S. bank regulators issued several letters and other guidance to bank holding companies and banks regarding expectations for supporting the community and certain related temporary regulatory changes or accommodations, including, for example, temporary relief for banks that may exceed certain regulatory asset thresholds due in large part to their participation in government programs established in response to the COVID-19 pandemic. The Company continues to monitor guidance and developments related to COVID-19.

**Regulatory Agencies** 

The Company is a legal entity separate and distinct from its first-tier bank subsidiary, the Bank, and its second-tier subsidiaries, Cambridge Trust Company of New Hampshire, Inc., a New Hampshire state-chartered non-depository trust company, and CTC Security Corporation and CTC Security Corporation III, which are used to invest the Bank's deposits and borrowed funds in investment securities. As a bank holding company, the Company is regulated under the Bank Holding Company Act of 1956, as amended ("BHC Act"), Massachusetts laws applying to bank holding companies and Massachusetts corporations more generally. The Company is subject to inspection, examination, and supervision by the Federal Reserve and the MA DOB.

As a Massachusetts state-chartered insured depository institution, the Bank is subject to supervision, periodic examination, and regulation by the MA DOB as its chartering authority, and by the FDIC as its primary federal regulator. The prior approval of the MA DOB and the FDIC is required, among other things, for the Bank to establish or relocate any additional branch offices, assume deposits, or engage in any merger, consolidation, purchase, or sale of all or substantially all of the assets of any insured depository institution.

Cambridge Trust Company of New Hampshire, Inc. is subject to supervision, periodic examination, and regulation by The State of New Hampshire Banking Department.

**Bank Holding Company Regulations Applicable to the Company**

The BHC Act and other federal laws and regulations subject bank holding companies to particular restrictions on the types of activities in which they may engage and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. As a Massachusetts corporation and bank holding company, the Company is also subject to certain limitations and restrictions under applicable Massachusetts law.

**Mergers & Acquisitions** 

The BHC Act, the Bank Merger Act, the laws of the Commonwealth of Massachusetts applicable to financial institutions, and other federal and state statutes regulate acquisitions of banks and their holding companies. The BHC Act generally limits acquisitions by bank holding companies to banks and companies engaged in activities that the Federal Reserve has determined to be so closely related to banking as to be a proper incident thereto. The BHC Act requires every bank holding company to obtain the prior approval of the Federal

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Reserve before (i) acquiring more than 5% of the voting stock of any bank or other bank holding company, (ii) acquiring all or substantially all the assets of any bank or bank holding company, or (iii) merging or consolidating with any other bank holding company.

In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities generally consider, among other things, the competitive effect and public benefits of the transactions, the financial and managerial resources and future prospects of the combined organization (including the capital position of the combined organization), the applicant's performance record under the Community Reinvestment Act (see —Community Reinvestment Act), fair housing laws, and the effectiveness of the subject organizations in combating money laundering activities.

**Non-bank Activities**

Generally, bank holding companies are prohibited, under the BHC Act, from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in, any activity other than (i) banking or managing or controlling banks or (ii) an activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking. The Federal Reserve has the authority to require a bank holding company to terminate an activity or terminate control of, or liquidate or divest, certain subsidiaries or affiliates when the Federal Reserve believes the activity, or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness, or stability of any of its bank subsidiaries.

A bank holding company that qualifies and elects to become a financial holding company is permitted to engage in additional activities that are financial in nature or incidental or complementary to financial activity. The Company currently has no plans to make a financial holding company election.

Bank holding companies and their non-banking subsidiaries are prohibited from engaging in activities that represent unsafe and unsound banking practices. For example, under certain circumstances the Federal Reserve's Regulation Y requires a holding company to give the Federal Reserve prior notice of any redemption or repurchase of its own equity securities if the consideration to be paid, together with the consideration paid for any other redemptions or repurchases in the preceding year, is equal to 10% or more of the bank holding company's consolidated net worth. The Federal Reserve may oppose the transaction if it believes that the transaction would constitute an unsafe or unsound practice or would violate a regulation. As another example, a bank holding company is prohibited from impairing its subsidiary bank's soundness by causing the bank to make funds available to non-bank subsidiaries or their clients if the Federal Reserve believes it is not prudent to do so. The Federal Reserve has the power to assess civil money penalties for knowing or reckless violations if the activities leading to a violation caused a substantial loss to a depository institution. Potential penalties can reach as high as almost $2.0 million for each day such activity continues.

**Source of Strength** 

In accordance with Federal Reserve policy, the Company is expected to act as a source of financial and managerial strength to the Bank. Section 616 of the Dodd-Frank Act codifies the requirement that bank holding companies serve as a source of financial strength to their subsidiary depository institutions. Under this policy, the holding company is expected to commit resources to support its bank subsidiary, including at times when the holding company may not be in a financial position to provide it. As discussed below, the Company could be required to guarantee the capital plan of the Bank if it becomes undercapitalized for purposes of banking regulations. Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. The BHC Act provides that, in the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to priority of payment.

Regulatory agencies have promulgated regulations to increase the capital requirements for bank holding companies to a level that matches those of banking institutions. See — Capital Adequacy and Prompt Corrective Action and Safety and Soundness.

**Annual Reporting & Examinations** 

The Company is required to file annual and periodic reports with the Federal Reserve and such additional information as the Federal Reserve may require. The Federal Reserve may examine a bank holding company and any of its subsidiaries and charge the Company for the cost of such an examination.

**Imposition of Liability for Undercapitalized Subsidiaries** 

Pursuant to Section 38 of the Federal Deposit Insurance Act (the "FDIA"), federal banking agencies are required to take "prompt corrective action" ("PCA") should an insured depository institution fail to meet certain capital adequacy standards. In the event an institution becomes "undercapitalized," it must submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company "having control of" the undercapitalized institution has "guaranteed" the subsidiary's compliance with

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the capital restoration plan until it has been "adequately capitalized" on average during each of four consecutive calendar quarters. For purposes of this statute, the Company has control of the Bank. Under the FDIA, the aggregate guarantee liability of all companies controlling a particular institution is limited to the lesser of 5% of the depository institution's total assets at the time it became undercapitalized or the amount necessary to bring the institution into compliance with applicable capital standards. The FDIA grants greater powers to the federal banking agencies in situations where an institution becomes "significantly" or "critically" undercapitalized or fails to submit a capital restoration plan. For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve approval of proposed distributions or might be required to consent to a merger or to divest the troubled institution or other affiliates. See — Capital Adequacy and Prompt Corrective Action and Safety and Soundness.

**Dividends** 

Dividends from the Bank are the Company's principal source of cash revenues. The Company's earnings and activities are affected by legislation, regulations, and local legislative and administrative bodies and decisions of courts in the jurisdictions in which we conduct business. These include limitations on the ability of the Bank to pay dividends to the Company and our ability to pay dividends to our shareholders. It is the policy of the Federal Reserve that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. This policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company's ability to serve as a source of strength to its bank subsidiary. Consistent with such policy, a banking organization should have comprehensive policies on dividend payments that clearly articulate the organization's objectives and approaches for maintaining a strong capital position and achieving the objectives of the policy statement. The Company has a comprehensive dividend policy in place.

The FDIC has the authority to use its enforcement powers to prohibit a bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Federal law also prohibits the payment of dividends by a bank that will result in the bank failing to meet its applicable capital requirements on a pro forma basis. Under applicable Massachusetts law, the Bank's Board of Directors may declare from net profits cash dividends annually, semi-annually, or quarterly, but not more frequently, and noncash dividends at any time, although no dividends may be declared, credited, or paid so long as there is any impairment of capital stock. The MA DOB Commissioner's approval is required in order to authorize the payment of a dividend, if the total dividends declared in a calendar year exceed that year's net profits combined with retained net profits for the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock.

**Transactions with Affiliates** 

Transactions between a bank and its affiliates are subject to certain restrictions under Sections 23A and 23B of the Federal Reserve Act (the "FRA") and the Federal Reserve's implementing Regulation W. The Company is considered an "affiliate" of the Bank under these sections. Generally, Sections 23A and 23B: (1) limit the extent to which an insured depository or its subsidiaries may engage in covered transactions (a) with an affiliate (as defined in such sections) to an amount equal to 10% of such institution's capital and surplus and (b) with all affiliates, in the aggregate, to an amount equal to 20% of such capital and surplus; and (2) require all transactions with an affiliate, whether or not covered transactions, to be on terms substantially the same, or at least as favorable to the institution or subsidiary, as the terms provided or that would be provided to a non-affiliate. The term "covered transaction" includes the making of loans to an affiliate, purchase securities issued by an affiliate, purchase of assets from an affiliate, issuance of a guarantee on behalf of an affiliate, and other similar types of transactions.

**Capital Adequacy** 

In July 2013, the Federal Reserve, the Office of the Comptroller of the Currency (the "OCC"), and the FDIC approved final rules (the "Capital Rules") establishing a new comprehensive capital framework for U.S. banking organizations. The Capital Rules generally implement the Basel Committee on Banking Supervision's December 2010 final capital framework referred to as "Basel III" for strengthening international capital standards. The Capital Rules revise the definitions and the components of regulatory capital, as well as address other issues affecting the numerator in banking institutions' regulatory capital ratios. The Capital Rules also address asset risk weights and other matters affecting the denominator in banking institutions' regulatory capital ratios and replace the existing general risk-weighting approach with a more risk-sensitive approach.

The Capital Rules: (i) include "Common Equity Tier 1" ("CET1") and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and "Additional Tier 1 capital" instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations. Under the Capital Rules, for most banking organizations, including the Company, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock, and the most common forms of Tier 2 capital are subordinated notes and a portion of the allocation for allowance for credit losses, in each case, subject to the Capital Rules' specific requirements.

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Pursuant to the Capital Rules, effective January 1, 2015, the minimum capital ratios are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•4.5% CET1 to risk-weighted assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (called "leverage ratio").

The Capital Rules also include a "capital conservation buffer," composed entirely of CET1, in addition to these minimum risk-weighted asset ratios (which are each of the first three ratios described above, but not the leverage ratio). The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions that do not hold the requisite capital conservation buffer will face constraints on dividends, capital instrument repurchases, interest payments on capital instruments and discretionary bonus payments based on the amount of the shortfall. Thus, the capital standards applicable to the Company include an additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios inclusive of the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) total capital to risk-weighted assets of at least 10.5%.

The Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing assets, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks, and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1. In November 2017, the Federal Reserve finalized a rule pausing the phase-in of these deductions and adjustments for non-advanced approaches institutions. In July 2019, the OCC, the Federal Reserve Board and the FDIC adopted a final rule intended to simplify the Capital Rules described above for non-advanced approaches rule institutions. Institutions were required to implement the provisions of the simplification rule by April 1, 2020. The transition provisions to the Capital Rules issued by these agencies in November 2017 ceased to apply to an institution in the quarter in which it adopted the simplification rule.

In addition, under the current general risk-based capital rules, the effects of accumulated other comprehensive income or loss items included in shareholders' equity (for example, mark-to-market of securities held in the available for sale portfolio) under U.S. generally accepted accounting principles ("GAAP") are reversed for the purposes of determining regulatory capital ratios. Pursuant to the Capital Rules, the effects of certain of the above items are not excluded. However, banking organizations, including the Company, that are not subject to the advanced approaches rule, could make a one-time permanent election to exclude these items. The Company made the one-time permanent election to exclude these items.

The Capital Rules also preclude certain hybrid securities, such as trust preferred securities, from inclusion in bank holding companies' Tier 1 capital, although bank holding companies that had total consolidated assets of less than $15 billion at December 31, 2009 may include trust preferred securities issued prior to May 19, 2010 as a component of Tier 1 capital.

The risk-weighting categories in the Capital Rules are standardized and include a risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 1,250% for certain credit exposures, and resulting in higher risk weights for a variety of asset classes.

In September 2019, the OCC, the Federal Reserve Board, and the FDIC adopted a final rule that is intended to further simplify the Capital Rules for depository institutions and their holding companies that have less than $10 billion in total consolidated assets, such as Cambridge Bancorp, if such institutions meet certain qualifying criteria. This final rule became effective on January 1, 2020. Under this final rule, if the Company met the qualifying criteria, including having a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of a certain size (greater than 8.5 percent through 2021 and 9 percent thereafter), the Company will be eligible to opt into the community bank leverage ratio framework. If the Company opts into this framework, the Company will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the Capital Rules (as modified pursuant to the simplification rule) and will be considered to have met the well-capitalized ratio requirements for PCA purposes. The Bank has not elected to adopt this framework.

The Company and the Bank are in compliance with the currently applicable capital requirements.

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**Prompt Corrective Action and Safety and Soundness**

Pursuant to Section 38 of the FDIA, federal banking agencies are required to take Prompt Corrective Action ("PCA") should a depository institution fail to meet certain capital adequacy standards. At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions, or prohibitions on payment of dividends, and restrictions on the acceptance of brokered deposits. For example, "well-capitalized" institutions are permitted to accept brokered deposits, but banks that are not well-capitalized are generally restricted or prohibited from accepting such deposits. Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company must guarantee the performance of that plan. Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment.

For purposes of PCA, to be: (i) well-capitalized, a bank must have a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 8%, a CET1 risk-based capital ratio of at least 6.5%, and a Tier 1 leverage ratio of at least 5%; (ii) adequately capitalized, a bank must have a total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at least 6%, a CET1 risk-based capital ratio of at least 4.5%, and a Tier 1 leverage ratio of at least 4% (but not otherwise meet all of the criteria to be considered "well-capitalized"); (iii) undercapitalized, a bank would have a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 6%, a CET1 risk-based capital ratio of less than 4.5%, or a Tier 1 leverage ratio of less than 4% (but not otherwise meet all of the criteria to be considered "significantly" or "critically" undercapitalized); (iv) significantly undercapitalized, a bank would have a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 4%, a CET1 risk-based capital ratio of less than 3%, or a Tier 1 leverage ratio of less than 3% (but not otherwise meet the criterion to be considered "critically undercapitalized"); and (v) critically undercapitalized, a bank would have a ratio of tangible equity to total assets that is less than or equal to 2%.

The Bank is currently well-capitalized, under the PCA standards.

Bank holding companies and insured banks also may be subject to potential enforcement actions of varying levels of severity by the federal banking agencies for unsafe or unsound practices in conducting their business, or for violation of any law, rule, regulation, condition imposed in writing by the agency or term of a written agreement with the agency. In more serious cases, enforcement actions may include: issuances of directives to increase capital; issuances of formal and informal agreements; impositions of civil monetary penalties; issuances of a cease and desist order that can be judicially enforced; issuances of removal and prohibition orders against officers, directors, and other institution-affiliated parties; terminations of the bank's deposit insurance; appointment of a conservator or receiver for the bank; and enforcements of such actions through injunctions or restraining orders based upon a judicial determination that the agency would be harmed if such equitable relief was not granted.

**Deposit Insurance**

The Bank's deposit accounts are fully insured by the Deposit Insurance Fund (the "DIF") of the FDIC up to the deposit insurance limit of $250,000 per depositor, per insured institution, per ownership category, in accordance with applicable laws and regulations.

The FDIC uses a risk-based assessment system that imposes insurance premiums based upon a risk matrix that accounts for a bank's capital level and supervisory rating ("CAMELS") rating. The risk matrix uses different risk categories distinguished by capital levels and supervisory ratings. The base for deposit insurance assessments is average consolidated total assets less average tangible equity. Assessment rates are calculated using formulas that take into account the risk of the institution being assessed. The FDIC may increase or decrease the assessment rate schedule in order to manage the DIF to prescribed statutory target levels. An increase in the risk category for the Bank or in the assessment rates could have an adverse effect on the Bank's, and consequently the Company's earnings. The FDIC may terminate deposit insurance if it determines the institution involved has engaged in or is engaging in unsafe or unsound banking practices, is in an unsafe or unsound condition, or has violated applicable laws, regulations, or orders. The Bank is not aware of any practice, condition, or violation that might lead to the termination of its deposit insurance.

The FDIA and FDIC regulations generally limit the ability of an insured depository institution to accept, renew or roll over any brokered deposit unless the institution's capital category is "well capitalized" or, with the FDIC's approval, "adequately capitalized." Depository institutions that have brokered deposits in excess of 10% of total assets are subject to increased FDIC deposit insurance premium assessments. However, for institutions that are well capitalized and have a CAMELS composite rating of 1 or 2, reciprocal deposits are deducted from brokered deposits. Section 202 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was enacted in 2018, amended the FDIA to exempt a capped amount of reciprocal deposits from treatment as brokered deposits for certain insured depository institutions.

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**Depositor Preference**

The FDIA provides that, in the event of the "liquidation or other resolution" of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including the parent bank holding company, with respect to any extensions of credit they have made to such insured depository institution.

**Consumer Financial Protection**

The Company and the Bank are subject to a number of federal and state consumer protection laws that govern their relationship with clients. These laws include the Consumer Financial Protection Act of 2010, Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Servicemembers Civil Relief Act, and these laws' respective state-law counterparts, as well as state usury laws and laws regarding unfair and deceptive acts and practices. These and other federal laws, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive, and abusive practices, restrict the Bank's ability to raise interest rates, and subject the Bank to substantial regulatory oversight. Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by clients, including actual damages, restitution, and attorneys' fees.

Further, the Consumer Financial Protection Bureau ("CFPB") has broad rulemaking authority for a wide range of consumer financial laws that apply to all banks, including, among other things, the authority to prohibit "unfair, deceptive or abusive" acts and practices. While there are no statutory definitions for those terms, the CFPB has found an act or practice to be "unfair" when: "(i) it causes or is likely to cause substantial injury to consumers; (ii) the injury is not reasonably avoidable by consumers; and (iii) the injury is not outweighed by countervailing benefits to consumers or to competition." "Deceptive acts or practices" occur when "(i) the act or practice misleads or is likely to mislead the consumer; (ii) the consumer's interpretation is reasonable under the circumstances; and (iii) the misleading act or practice is material." Finally, an act or practice is "abusive" when it: "(i) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or (ii) takes unreasonable advantage of (a) a consumer's lack of understanding of the material risks, costs, or conditions of the product or service; (b) a consumer's inability to protect his or her interests in selecting or using a consumer financial product or service; or (c) a consumer's reasonable reliance on a covered person to act in his or her interests."

Neither the Dodd-Frank Act, nor the individual consumer financial protection laws, prevent states from adopting stricter consumer protection standards.

**Community Reinvestment Act** 

The Community Reinvestment Act of 1977 (the "CRA") requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. The applicable federal banking agencies regularly conduct CRA examinations to assess the performance of financial institutions and assign one of four ratings to the institution's records of meeting the credit needs of its community. The Bank received a "Satisfactory" rating during its last examination in July 2020.

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**Insider Credit Transactions**

Section 22(h) of the FRA and its implementing Regulation O restricts loans to directors, executive officers, and principal shareholders of a bank or its affiliates, and companies and political or campaign committees controlled by such persons ("insiders"). Under Section 22(h), a loan by a bank to any insider may not exceed, together with all other outstanding loans to such person and any company or political or campaign committee controlled by such person, the bank's loan-to-one-borrower limit. Loans to insiders above specified amounts must receive the prior approval of the Company's Board of Directors. Further, under Section 22(h) of the FRA, loans to insiders must be made on terms substantially the same as offered in comparable transactions to other persons, except that such insiders may receive preferential loans made under a benefit or compensation program that is widely available to the bank's (or, if applicable, the bank affiliate's) employees and does not give preference to the insider over the employees. Section 22(g) of the FRA places additional limitations on loans to executive officers. A violation of these restrictions may result in the assessment of substantial civil monetary penalties on the affected bank or any officer, director, employee, agent, or other person participating in the conduct of the affairs of that bank, the imposition of a cease and desist order, and other regulatory sanctions.

**Financial Privacy** 

The Company is subject to federal laws, including the Gramm-Leach-Bliley Act (the "GLBA"), and certain state laws containing consumer privacy protection provisions. These provisions limit the ability of banks and other financial institutions to disclose nonpublic information about consumers to affiliated and non-affiliated third parties and limit the reuse of certain consumer information received from non-affiliated financial institutions. These provisions require notice of privacy policies to clients and, in some circumstances, allow consumers to prevent disclosure of certain nonpublic personal information to affiliates or non-affiliated third parties by means of "opt out" or "opt in" authorizations.

**Financial Data Security**

The GLBA requires that financial institutions implement comprehensive written information security programs that include administrative, technical, and physical safeguards to protect consumer information. Further, pursuant to interpretive guidance issued under the GLBA and certain state laws, financial institutions are required to notify clients and regulators of security breaches that result in unauthorized access to their non-public personal information ("NPPI").

**Incentive Compensation**

The Dodd-Frank Act requires the federal banking agencies and the Securities and Exchange Commission (the "SEC") to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including the Company and the Bank, with at least $1 billion in total consolidated assets that encourage inappropriate risks by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits that could lead to material financial loss to the entity. The federal banking agencies and the SEC most recently proposed such regulations in 2016, but the regulations have not yet been finalized. If the regulations are adopted in the form initially proposed, they will restrict the manner in which executive compensation is structured.

The Dodd-Frank Act also requires publicly traded companies to give shareholders a non-binding vote on executive compensation and on so-called "golden parachute" payments in connection with approvals of mergers and acquisitions.

**Anti-Money Laundering Initiatives and the USA PATRIOT Act**

Under Title III of the USA PATRIOT Act, all financial institutions are required to take certain measures to identify their clients, prevent money laundering, monitor client transactions, and report suspicious activity to U.S. law enforcement agencies. Financial institutions also are required to respond to requests for information from federal banking agencies and law enforcement agencies. Information sharing among financial institutions for the above purposes is encouraged by an exemption granted to complying financial institutions from the privacy provisions of the GLBA and other privacy laws. Financial institutions that hold correspondent accounts for foreign banks or provide private banking services to foreign individuals are required to take measures to avoid dealing with certain foreign individuals or entities, including foreign banks with profiles that raise money laundering concerns, and are prohibited from dealing with foreign "shell banks" and persons from jurisdictions of particular concern. The primary federal banking agencies and the Secretary of the U.S. Department of the Treasury have adopted regulations to implement several of these provisions. All financial institutions also are required to establish internal anti-money laundering programs. The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by the financial institution under the Bank Merger Act. The Company has a Bank Secrecy Act and USA PATRIOT Act compliance program commensurate with its risk profile.

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The Fair Credit Reporting Act's Red Flags Rule requires financial institutions with covered accounts (e.g., consumer bank accounts and loans) to develop, implement, and administer an identity theft prevention program. This program must include reasonable policies and procedures to detect suspicious patterns or practices that indicate the possibility of identity theft, such as inconsistencies in personal information or changes in account activity.

**Office of Foreign Assets Control Regulation**

The Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States. OFAC publishes lists of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers, designated under programs that are not country specific. These are typically known as the OFAC rules based on their administration by the OFAC. The OFAC-administered sanctions targeting countries take many different forms. Generally, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on "U.S. persons" engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.

**Available Information**

The SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Our Internet website is https://www.cambridgetrust.com. You can obtain on our website, free of charge, a copy of our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such reports or amendments with, or furnish them to, the SEC. Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

**Human Capital** 

As of December 31, 2022, the Company had 440 full-time and seven part-time employees. At any given time, less than 1% of our employees are temporary. The Company's employees are not represented by any collective bargaining unit.

The Company is committed to recruiting, developing and promoting a diverse workforce to meet the current and future demands of our business. In 2019, we instituted a policy which requires that all searches for positions Vice President and above include at least one racially or ethnically diverse candidate and one female candidate. All of our positions are listed on multiple job boards specifically targeted towards women, minorities, veterans, and people with disabilities. In 2017, the Company formed a Diversity, Equity and Inclusion Steering Committee, which today comprises twenty (20) members from across the organization, including three members of executive management. This committee meets no less than quarterly and has established goals to further the Company's Diversity, Equity and Inclusion efforts.

As of December 31, 2022, our overall workforce was 51% female and 22% racially or ethnically diverse. Of those employees with position titles of Vice President and above, 41% were female and 11% were racially or ethnically diverse.

To ensure we provide a rich experience for our employees, we measure organizational culture and engagement by periodically engaging independent third parties to conduct cultural assessments and employee engagement surveys. Our employee driven Engagement Committee focus on monitoring and making continuous improvements to our work environment and employee engagement.

The Company encourages employees to contribute their personal best while respecting the balance between work and personal life. To empower employees to reach their potential, we provide training and development programs including traditional classroom training and coaching and experiential learning through Company-wide initiative beyond the scope of their everyday responsibilities. We also provide access to virtual and self-directed online courses in topics ranging from compliance to management skills through our online learning system. To identify and develop our next generation of leaders, we have a robust talent and succession planning process and

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specialized programs to support the development of our talent pipeline at different levels. The Company believes that its employee relations are good.

**Item 1A. Risk Factors.** 

**<u>Risks Related to our Business and Industry</u>**

**The COVID-19 pandemic is adversely impacting us and our clients, counterparties, employees, and third-party service providers. Further, the COVID-19 pandemic could lead to an economic recession or other severe disruptions in the U.S. economy and may disrupt banking and other financial activity in the areas in which we operate and the adverse impacts on our business, financial position, results of operations and prospects could be significant.** 

The COVID-19 pandemic and related countermeasures have caused economic and financial disruptions in the areas in which we conduct our business operations. The spread of COVID-19 has caused us to modify our business practices, including employee travel, employee work locations, and reduction of physical participation in meetings, events, and conferences. In accordance with relevant public health guidance and local conditions, we conducted a phased return to our offices and facilities, implemented a hybrid remote/office working model, and resumed certain travel, but continue to closely monitor the COVID-19 pandemic to determine if additional actions or policy adjustments are required.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•demand for products and services may decline, making it difficult to grow assets and income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•if the economy is unable to substantially recover, and high levels of unemployment exist for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our allowance for credit losses may have to be increased if unemployment forecasts increase or borrowers experience financial difficulties, which will adversely affect our net income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our wealth management revenues may decline with market turmoil;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our cyber security risks are increased as the result of an increase in the number of employees working remotely; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•we rely on third-party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us.

These factors, among others, together or in combination with other events or occurrences not yet known or anticipated, could adversely affect our operations. In addition, other countries as well as the United States have experienced resurgences of the COVID-19 virus, including in the form of the Delta and Omicron variants, and the BA.4 and BA.5 subvariants, and the length and severity of such resurgence in part depends on the speed and effectiveness of vaccine and treatment developments and their deployment, including public adoption rates of COVID-19 vaccines and booster shots, and their effectiveness against emerging variants of COVID-19. If the rate of infections rise, these factors will be exacerbated.

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

The Company's success depends primarily on the general economic conditions in Eastern Massachusetts and New Hampshire 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 clients 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 clients 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 on our profitability.

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**Variations in interest rates may negatively affect our 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. Our net interest income and net interest margin may be negatively impacted during periods of rate tightening due to pressure on our funding costs, particularly if we are unable to realize higher rates on our assets at a pace that matches that of the funding. High interest rates could also affect the amount of loans that the Company can originate because higher rates could cause clients 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 client 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, then 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 results of operations, any substantial or unexpected change in, or prolonged change in market interest rates could have a material adverse effect on the Company's financial condition and results of operations.

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

Downturns in the United States or global economies or financial markets could adversely affect the demand for and income received from the Company's fee-based services. Revenues from the Wealth Management Group depend in large part on the level of assets under management and administration. Market volatility that leads clients 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.

**Our loan portfolio includes loans with a higher risk of loss.**

The Bank originates C&I loans, CRE loans, consumer loans, and residential mortgage loans primarily within our market area. Our lending strategy focuses on residential real estate lending, as well as servicing commercial clients, including increased emphasis on C&I lending, and commercial deposit relationships. C&I, CRE loans, and consumer loans may expose a lender 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, CRE and C&I loans may also involve relatively large loan balances to individual borrowers or groups of borrowers. These loans also have greater credit risk than residential real estate for the following reasons:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•CRE Loans. Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•C&I Loans. Repayment is generally dependent upon the successful operation of the borrower's business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Consumer Loans. Consumer loans are collateralized, if at all, with assets that may fluctuate in value based on market conditions or changes in interest rates.

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.

**We may experience losses and expenses if security interests granted for loans are not enforceable.** 

When the Company makes loans it sometimes obtains liens, such as real estate mortgages or other asset pledges, to provide the Company with a security interest in collateral. If there is a loan default, the Company may seek to foreclose upon collateral and enforce the security interests to obtain repayment and eliminate or mitigate the Company's loss. Drafting errors, recording errors, other defects or imperfections in the security interests granted to the Company and/or changes in law may render liens granted to the Company unenforceable. The Company may incur losses or expenses if security interests granted to the Company are not enforceable.

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

The Bank's loan clients 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 credit losses, which could have a material adverse effect on our operating results. Material additions to our allowance for credit losses 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

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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 credit losses. If our assumptions prove to be incorrect, our allowance for credit 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the ability to develop, maintain, and build upon long-term client relationships based on service quality, high ethical standards and reputation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the ability to expand the Company's market position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the scope, relevance, and pricing of products and services offered to meet client needs and demands;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the rate at which the Company introduces new products, services, and technologies relative to its competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•client satisfaction with the Company's level of service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•industry and general economic trends; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the ability to attract and retain talented employees.

Failure to perform in 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's earnings may not grow if we are unable to successfully attract core deposits and lending opportunities and execute opportunities to generate fee-based income.** 

The Company has experienced growth, and our future business strategy is to continue to expand. Historically, the growth of our loans and deposits has been the principal factor in our increase in net-interest income. In the event that we are unable to execute our business strategy of continued growth in loans and deposits, our earnings could be adversely impacted. The Company's ability to continue to grow depends, in part, upon our ability to expand our market share, to successfully attract core deposits and identify loan and investment opportunities, as well as opportunities to generate fee-based income. Our ability to manage growth successfully will also depend on whether we can continue to efficiently fund asset growth and maintain asset quality and cost controls, as well as on factors beyond our control, such as economic conditions and interest-rate trends.

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**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.

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

The purpose of the Company's liquidity management practices is to meet the cash flow obligations of its clients for both deposits and loans. One 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 decrease 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. To manage this risk, the Company has the ability to borrow from the Federal Home Loan Bank ("FHLB ") of Boston , purchase brokered 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 Company is a separate and distinct legal entity from its subsidiary, the Bank. It receives substantially all of its revenue from dividends from the Bank. 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 to 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 depositors and certain other creditors. In the event the Bank is unable to pay dividends to the Company, the Company 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 the Company's business, financial condition, and results of operations.

**The Company depends on its 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 its 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, or an inability to continue to attract or retain and motivate key personnel could adversely affect our business. We cannot provide any assurance that we will be able to retain our existing key personnel, attract additional qualified personnel, or effectively manage the succession of key personnel. Although we have change of control agreements with our actively employed named executive officers, the loss of the services of one or more of our executive officers or key personnel could impair our ability to continue to develop our business strategy.

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**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 clients 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 experience such volatility 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, climate change, epidemics / pandemics, such as COVID-19, 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•investors may have less confidence in the equity markets in general and in financial services industry stocks in particular, which could place downward pressure on the Company's stock price and resulting market valuation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•economic and market developments may further affect consumer and business confidence levels and may cause declines in credit usage and adverse changes in payment patterns, causing increases in delinquencies and default rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Company's ability to assess the creditworthiness of its clients may be impaired if the models and approaches the Company uses to select, manage, and underwrite its clients become less predictive of future behaviors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Company could suffer decreases in demand for loans or other financial products and services or decreased deposits or other investments in accounts with the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•clients of the Company's Wealth Management Group may liquidate investments, which together with lower asset values, may reduce the level of assets under management and administration, and thereby decrease the Company's investment management and administration revenues;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•competition in the financial services industry could intensify as a result of the increasing consolidation of financial services companies in connection with current market conditions or otherwise; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the value of loans and other assets or collateral securing loans may decrease.

**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. These circumstances could lead to impairments or write-downs in a bank's securities portfolio and periodic gains or losses on other investments under mark-to-market accounting treatment. We could incur additional losses to our securities portfolio in the future as a result of these issues. 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 the 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 $6.3 million as of December 31, 2022. 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 within the FHLB of Boston could

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adversely affect the value of our investment in its common stock and our ability to rely on the FHLB as a funding source and this could negatively impact our results of operations.

**<u>Risks Related to an Investment in the Company's Securities</u>**

**The Company's common stock price may fluctuate significantly.**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the political climate and whether the proposed policies of the current presidential administration in the U.S. that have affected market prices for financial institution stocks are successfully implemented;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in securities analysts' recommendations or expectations of financial performance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•volatility of stock market prices and volumes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•incorrect information or speculation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in industry valuations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•announcements regarding proposed acquisitions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•variations in operating results from general expectations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•actions taken against the Company by various regulatory agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in authoritative accounting guidance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•changes in general domestic economic conditions such as inflation rates, tax rates, unemployment rates, labor and healthcare cost trend rates, recessions, and changing government policies, laws, and regulations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•severe weather, natural disasters, climate change, epidemics / pandemics such as COVID-19, acts of war or terrorism, and other external events.

**Future issuance of our common stock may have a dilutive effect and may reduce the voting power and relative percentage interests of current common shareholders in our earnings and market value, and 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.** 

Future issuances of shares of our common stock, including for acquisitions, may have a dilutive effect and may reduce the voting power and relative percentage interests of current common shareholders in our earnings and market value. Additionally, 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.

**<u>Risks Related to Legal, Governmental and Regulatory Changes</u>**

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

The Company, primarily through the Bank, Cambridge Trust Company of New Hampshire, Inc., 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 DIF and the safety and soundness of the banking system as a whole, not shareholders. These laws and regulations affect the Company's lending practices, capital structure, investment practices, dividend policy, and growth, among other things. The U.S. Congress and federal and state banking 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.

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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, 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 will not occur.

**State and federal banking 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 are or become subject as a result of such examinations may adversely affect our business.**

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 condition 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 are unable to comply with future regulatory directives, or 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, PCA, memoranda 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 may be subject to more stringent capital requirements.** 

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, then our financial condition would be materially and adversely affected. Any changes to regulatory capital requirements 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.

**Replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations.** 

In 2017, the United Kingdom's Financial Conduct Authority ("FCA"), which regulates the London Interbank Offered Rate ("LIBOR"), announced that the FCA intends to stop persuading or compelling banks to submit the rates required to calculate LIBOR after 2021. This announcement indicated that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. The U.S. bank regulators issued a Statement on LIBOR Transition on November 30, 2020 encouraging banks to transition away from U.S. Dollar (USD) LIBOR as soon as practicable and in any event by December 31, 2021 for new contracts. LIBOR is currently anticipated to be fully phased out by June 30, 2023. At this time, it is not possible to predict whether and to what extent banks will continue to provide submissions for the calculation of LIBOR. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments. The Alternative Reference Rates Committee ("ARRC") formed by the FRB has proposed a paced market transition plan to Secured Overnight Financing Rate (SOFR) from LIBOR and organizations are continuing to work on industry wide and company-specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. The Company is monitoring this activity and evaluating the related risks. This includes identifying outstanding LIBOR-based loans without ARRC recommended fallback language, internal training and education, and working with our core provider to ensure proper integration once an alternative reference is implemented. Management is monitoring ARRC publications for best practices as the Company transitions legacy LIBOR loans by the June 30, 2023 deadline.

We have financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR, or any changes or reforms to the determination or supervision of LIBOR, could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us, could create considerable

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costs and additional risk and could have an adverse impact on or overall financial condition or results of operations. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. In 2021, we adopted Accounting Standards Update ("ASU") 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). See Note 3 – Recently Issued and Adopted Accounting Standards for additional details. The transition from LIBOR will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies. Furthermore, failure to adequately manage this transition process with our clients could adversely impact our reputation. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on our business, financial condition, and results of operations.

**Accounting standards periodically change and the application of our accounting policies and methods may require management to make estimates about matters that are uncertain.**

The regulatory bodies that establish accounting standards, including, among others, the FASB, and the SEC, periodically revise or issue new financial accounting and reporting standards that govern the preparation of our consolidated financial statements. The effect of such revised or new standards on our financial statements can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

In addition, management must exercise judgment in appropriately applying many of our accounting policies and methods so they comply with generally accepted accounting principles. In some cases, management may have to select a particular accounting policy or method from two or more alternatives. In some cases, the accounting policy or method chosen might be reasonable under the circumstances and yet might result in our reporting materially different amounts than would have been reported if we had selected a different policy or method. Accounting policies are critical to fairly presenting our financial condition and results of operations and may require management to make difficult, subjective, or complex judgments about matters that are uncertain.

**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.

**Legal proceedings to which we are subject or may become subject may have a material adverse impact on our financial position and results of operations.**

Like many banks and other financial services organizations in our industry, we are from time to time involved in various legal proceedings and subject to claims and other actions related to our business activities brought by clients, employees, and others. All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation is often expensive, time-consuming, disruptive to our operations and resources, and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition and how we operate our business. Similarly, if we settle such legal proceedings, it may affect our financial condition and how we operate our business. Future court decisions, alternative dispute resolution awards, matters arising due to business expansion, or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular verdict, judgment, or settlement that may be entered against us, that such coverage will prove to be adequate, or that such coverage will continue to remain available on acceptable terms, if at all. Legal proceedings to which we are subject or may become subject may have a material adverse impact on our financial position and results of operations.

**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.

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**<u>Risks Related to Cybersecurity and Data Privacy</u>**

**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. During the normal course of our business, we have experienced and we expect to continue to experience attempts to breach our systems, none of which has been material to the Company to date, and we may be unable to protect sensitive data and the integrity of our systems. 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 may be adversely affected by fraud.**

The Company is inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, clients, and other third parties targeting the Company and/or the Company's clients or data. Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts. During the normal course of our business, we have been subjected to and we expect to continue to be subject to theft and fraudulent activity, none of which has been material to the Company to date.

**The Company continually encounters technological change and the failure to understand and adapt to these changes could hurt its 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 clients and to reduce costs. The Company's future success depends, in part, upon its ability to address the needs of its clients by using technology to provide products and services that will satisfy client 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 clients. 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.

**<u>Risks Related to Acquisitions</u>** 

**The risks presented by acquisitions, such as the recently completed Northmark and Wellesley Mergers, could adversely affect our financial condition and results of operations.** 

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•our ability to realize anticipated cost savings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the difficulty of integrating operations and personnel, and the loss of key employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the potential disruption of our or the acquired company's ongoing business in such a way that could result in decreased revenues, the inability of our management to maximize our financial and strategic position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the inability to maintain uniform standards, controls, procedures, and policies; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the impairment of relationships with the acquired company's employees and clients as a result of changes in ownership and management.

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.

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

The benefits and synergies expected to result from the Northmark Merger will depend in part on whether the operations of Northmark can be integrated in a timely and efficient manner with those of the Company. The Company will face challenges in consolidating its functions with those of Northmark, and integrating the organizations, procedures, and operations of the two businesses. The integration

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of the Company and Northmark will be complex and time-consuming, and the management teams of both companies will have to dedicate substantial time and resources to it. These efforts could divert management's focus and resources from serving existing clients or other strategic opportunities and from day-to-day operational matters during the integration process. Failure to successfully integrate operations of the Company and Northmark could result in the failure to achieve some of the anticipated benefits from the transaction, including cost savings and other operating efficiencies, and the Company may not be able to capitalize on the existing relationships of Northmark to the extent anticipated, or it may take longer, or be more difficult or expensive than expected to achieve these goals. This could have an adverse effect on the business, results of operations, financial condition, or prospects of the Company and/or the Bank after the transaction.

**Unanticipated costs relating to the Northmark Merger could reduce the Company's future earnings per share.**

The Company and the Bank believe that each has reasonably estimated the likely costs of integrating the operations of the Bank and Northmark, and the incremental costs of operating as a combined company. However, it is possible that unexpected transaction costs such as taxes, fees or professional expenses or unexpected future operating expenses such as increased personnel costs or increased taxes, as well as other types of unanticipated adverse developments, could have a material adverse effect on the results of operations and financial condition of the combined company. If unexpected costs are incurred, the Northmark Merger could have a dilutive effect on the Company's earnings per share. In other words, after the completion of the Northmark Merger, the earnings per share of the Company's common stock could be less than anticipated or even less than if the Northmark Merger had not been completed.

**Following the Northmark Merger, the Company may not continue to pay dividends at or above the rate currently paid by the Company.**

Following the Northmark Merger, the Company's shareholders may not receive dividends at the same rate that they did prior to the merger for various reasons, including the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the Company may not have enough cash to pay such dividends due to changes in its cash requirements, capital spending plans, cash flow or financial position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•decisions on whether, when and in what amounts to make any future dividends will remain at all times entirely at the discretion of the Board, which reserves the right to change the Company's dividend practices at any time and for any reason; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•the amount of dividends that the Company's subsidiaries may distribute to the Company may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.

The Company's shareholders will have no contractual or other legal right to dividends that have not been declared by the Board.

**<u>General Risks</u>**

**Natural disasters, climate change, acts of war or terrorism, the impact of health epidemics and other adverse external events could detrimentally affect our financial condition and results of operations.**

Natural disasters, climate change, acts of war or terrorism, and other adverse external events could have a significant negative impact on our ability to conduct business or upon third parties who perform operational services for us or our clients. Such events also could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue or cause us to incur additional expenses.

The COVID-19 outbreak could negatively impact the ability of our employees and clients to engage in banking and other financial transactions in the geographic areas in which the Company operates. The Company also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to a COVID-19 outbreak in our market areas. Although the Company has business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective. In the event of a natural disaster, the spread of COVID-19 to our market areas or other adverse external events, our business, services, asset quality, financial condition and results of operations could be adversely affected.

**The effects of widespread public health emergencies may negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations.** 

Widespread health emergencies, such as the COVID-19 outbreak, can disrupt our operations through their impact on our employees, clients and their businesses, and the communities in which we operate. Disruptions to our clients could result in increased risk of

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delinquencies, defaults, foreclosures, and losses on our loans, negatively impact regional economic conditions, result in a decline in local loan demand, loan originations and deposit availability and negatively impact the implementation of our growth strategy. Any one or more of these developments could have a material adverse effect on our business, financial condition, and results of operations.

**Item 1B. Unresolved Staff Comments.** 

None.

**Item 2. Properties.** 

The Company conducts its business through 22 banking offices, including its main banking office and headquarters in Cambridge, Massachusetts. The Company also has operations centers in Burlington and Wellesley, Massachusetts, and Portsmouth, New Hampshire, and five wealth management offices.

**Item 3. Legal Proceedings.** 

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.

**Item 4. Mine Safety Disclosures.**

None.

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**PART II**

**Item 5. Market for Registrant's Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities.** 

**Market Information** 

On October 18, 2017, shares of the Company's common stock commenced trading on the NASDAQ Stock Market under the symbol "CATC". Prior to this date, the Company's shares traded on the over-the-counter market.

As of March 9, 2023, there were 7,834,057 shares of the Company's common stock outstanding held by 509 holders of record. The number of record-holders may not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms, and other nominees. The closing price of the Company's common stock on December 31, 2022 was $83.06. The Company declared cash dividends of $2.56 and $2.38 per share in 2022 and 2021, respectively.

The continued payment of dividends depends upon our profitability, debt and equity structure, earnings, financial condition, need for capital and other factors, including economic conditions, regulatory restrictions, and tax considerations. We cannot guarantee the payment of dividends or that, if paid, that dividends will not be reduced or eliminated in the future.

The only funds available for the payment of dividends on our capital stock will be cash and cash equivalents held by us, dividends paid to us by the Bank, and borrowings. The Bank will be prohibited from paying cash dividends to us to the extent that any such payment would reduce the Bank's capital below required capital levels.

The Company's primary source of funds for dividends paid to shareholders is the receipt of dividends from the Bank. A discussion of the restrictions on the advance of funds or payments of dividends by the Bank to the Company is included in "Supervision and Regulation – Dividends."

**Stock Performance Graph**

The following compares the cumulative total shareholder return on the Company's common stock against the cumulative total return of the KBW NASDAQ Bank Index and the S&P U.S. BMI Banks Index from December 31, 2017 to December 31, 2022. The results presented assume that the value of the Company's common stock and each index was $100.00 on December 31, 2017. The total return assumes reinvestment of dividends.

![img73022653_0.jpg](img73022653_0.jpg)

![img73022653_1.jpg](img73022653_1.jpg)

Source: Standard & Poor's Global Market Intelligence© 2022

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This performance graph shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing by us under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as shall be expressly set forth by specific reference in such filing.

**Issuer Purchase of Equity Securities**

The following table sets forth the information regarding the Company's repurchases of its common stock during the three months ended December 31, 2022:

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| | | |
|:---|:---|:---|
|  | **Total Number of<br>Shares Repurchased (1)** | **Weighted Average<br>Price Paid Per Share** |
| Period |  |  |
| &nbsp;&nbsp;&nbsp;October 1 to October 31, 2022 |  | $— |
| &nbsp;&nbsp;&nbsp;November 1 to November 30, 2022 | 331 | $90.00 |
| &nbsp;&nbsp;&nbsp;December 1 to December 31, 2022 | 194 | $83.06 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 525 |  |

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(1)Shares repurchased by the Company relate to shares tendered by employees to pay their income tax liability on current period equity award vesting.

On March 14, 2022, the Company's Board of Directors authorized a share repurchase program (the "2022 Repurchase Program") to acquire from time to time up to 5.0% of the total number of outstanding shares of the Company's common stock as of December 31, 2021, with such purchases occurring prior to March 14, 2023, provided that the aggregate purchase price does not exceed $32.0 million. The timing and amount of any shares of the Company's common stock repurchased under the 2022 Repurchase Program will be determined by the Company's management based on its evaluation of market conditions and other factors. The 2022 Repurchase Program may be suspended or discontinued at any time. The 2022 Repurchase Program replaced the 2021 Repurchase Program which expired on March 15, 2022. The Company did not repurchase any shares under the 2021 Repurchase Program during the year ended December 31, 2022.

On March 13, 2023, the Company's Board of Directors authorized a share repurchase program (the "2023 Repurchase Program") to acquire from time to time up to 5.0% of the total number of outstanding shares of the Company's common stock as of December 31, 2022, with such purchases occurring prior to March 13, 2024, provided that the aggregate purchase price does not exceed $32.4 million. The timing and amount of any shares of the Company's common stock repurchased under the 2023 Repurchase Program will be determined by the Company's management based on its evaluation of market conditions and other factors. The 2023 Repurchase Program may be suspended or discontinued at any time. The 2023 Repurchase Program replaces the 2022 Repurchase Program which expired on March 14, 2023. The Company did not repurchase any shares under the 2022 Repurchase Program during the year ended December 31, 2022.

**Recent Sales of Unregistered Securities**

There were no unregistered sales of equity securities during the year ended December 31, 2022.

**Item 6. Reserved**

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**Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.**

**OVERVIEW** 

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, Cambridge Trust Company (the "Bank"), formed in 1890. At December 31, 2022, the Company had total assets of approximately $5.6 billion. Currently, the Bank operates 22 banking offices in Eastern Massachusetts and New Hampshire. The Company's Wealth Management Group has five offices, one in Boston and Wellesley, Massachusetts and three in New Hampshire in Concord, Manchester, and Portsmouth. The Company's Assets under Management and Administration as of December 31, 2022 were approximately $4.1 billion. The Bank's clients consist primarily of small- and medium-sized businesses and retail clients in these communities and surrounding areas throughout Massachusetts and New Hampshire.

The Company's results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income and fees earned from wealth management services and loans, operating expenses, the provision for (release of) credit losses, the impact of federal and state income taxes, and the relative levels of interest rates and economic activity.

**Critical Accounting Estimates**

Estimates and assumptions are necessary in the application of certain accounting policies and can be susceptible to significant change. Critical accounting policies are defined as those that involve a significant level of estimation uncertainty and have had, or could have a material impact on the Company's financial condition or results of operations. The Company considers the allowance for credit losses and income taxes to be its critical accounting estimates.

**Allowance for Credit Losses** 

The Company evaluates the need for an allowance for credit losses on all financial assets measured at amortized cost, including loans receivable and held to maturity securities, in accordance with FASB ASC Topic 326, Financial Instruments – Credit Losses ("ASC Topic 326"), on a quarterly basis. ASC Topic 326 requires a methodology to estimate current expected credit losses ("CECL") over the life of a loan, which incorporates applying a reasonable and supportable forecast period before reverting back to historical data. ASC Topic 326 also applies to off-balance sheet credit exposures not accounted for as insurance (i.e. loan commitments, standby letters of credit, financial guarantees, and other similar investments) and net investments in leases recognized by a lessor in accordance with ASU 2016-02 – Leases (Topic 842).

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's methodology for calculating the allowance for credit losses ("ACL") on loans consists of quantitative and qualitative components.

The quantitative component of the ACL on loans is model-based and utilizes a forward-looking macroeconomic forecast. 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, to estimate expected credit losses. This process includes estimates which involve modeling loss projections attributable to existing loan balances, and considering historical experience, current conditions, and future expectations for homogeneous pools of loans over a reasonable and supportable forecast period. 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.

The reasonable and supportable forecast period is primarily determined based upon the stability of current economic conditions at each measurement date. Management considers the accuracy level of historical loss forecast estimates, the specific loan level models and methodology utilized, and considers material changes in growth, credit strategy, and its business which may not be applicable within the current environment. For periods beyond the reasonable and supportable forecast period, we revert to historical information over a period for which comparable data is available.

The qualitative component of the ACL considers (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 non-accrual and past due loans; and (iii) model limitations; among other factors. Qualitative adjustments are considered when management believes expected credit losses are not representative of historical loss experience alone, and should be adjusted to reflect the current conditions and characteristics of the Company's own portfolio. They are made at the segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, and other relevant data shifts over time.

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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 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 reflect management's best estimate of model assumptions and forecasted conditions at that time. Changes in such estimates can significantly affect the allowance and provision for credit losses. It is possible and likely that we will experience credit losses that are different from our current estimates. Charge-offs are deducted from the allowance for 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.

Because the methodology is based upon historical experience and trends, current economic data, reasonable and supportable forecasts, as well as management's judgment, factors may arise that result in different estimations. Deteriorating conditions or assumptions could lead to increases in the ACL on loans; conversely, improving conditions or assumptions could lead to further reductions in the ACL on loans.

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.

**Income Taxes**

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, the Commonwealth of Massachusetts, the State of New Hampshire, the State of Maine, and other states as required. Income taxes are accounted for under the asset and liability method. 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 income tax expense. 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.

**Recent Accounting Developments** 

See Note 3 – Recently Issued and Adopted Accounting Standards for additional details on recently issued and adopted accounting pronouncements and their expected impact on the Company's financial statements.

**COVID-19** 

The COVID-19 pandemic and countermeasures taken to contain its spread have caused economic and financial disruptions globally.

The impact of the pandemic on the Company's business, financial condition, results of operations, and its clients had not fully manifested in 2021 or 2022. The fiscal stimulus and relief programs appear to have delayed any materially adverse financial impact to the Company. Once these stimulus programs have been exhausted, loan credit metrics may worsen, and credit losses may ultimately materialize. The magnitude of future credit losses may be affected by the impact of COVID-19 on individuals and businesses in the long and short term. However, the COVID-19 situation remains dynamic, and the duration and severity of its impact on the Company's business and results of operations in future periods remains uncertain. The extent of the continued impact of COVID-19 on the operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, actions taken in response to the pandemic, the speed and effectiveness of vaccine and treatment developments and their deployment, including public adoption rates of COVID-19 vaccines and booster shots, and their effectiveness against emerging variants of COVID-19, such as BA.4 and BA.5 subvariants, a potential resurgence following a decline in the outbreak, and impact on the Company's clients, employees, and vendors, all of which are uncertain and cannot be predicted.

If the COVID-19 pandemic or its adverse effects become more severe or prevalent or are prolonged in the locations where we conduct business, or we experience more pronounced disruptions in our business or operations, or in economic activity and demand for our products and services generally, our business and results of operations in future periods could be materially adversely affected. Please see Item 1A. - Risk Factors above for more detail on risks related to COVID-19.

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**Selected Financial Highlights**

The selected consolidated financial highlights set forth below do not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information including the Consolidated Financial Statements and related Notes and within this section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** |
|  | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** |
| **Operating Data** |  |  |  |  |  |
| Interest Income | $159993 | $133514 | $129378 | $96339 | $69055 |
| Interest Expense | 16778 | 5533 | 9145 | 17643 | 5467 |
| Net Interest and Dividend Income | 143215 | 127981 | 120233 | 78696 | 63588 |
| Provision for (Release of) Credit Losses | 3881 | (1294) | 18310 | 3004 | 1502 |
| Noninterest Income | 43009 | 44324 | 39525 | 36401 | 32989 |
| Noninterest Expense | 110382 | 100484 | 98085 | 78175 | 63987 |
| Income Before Taxes | 71961 | 73115 | 43363 | 33918 | 31088 |
| Income Taxes | 19052 | 19091 | 11404 | 8661 | 7207 |
| Net Income (a GAAP Measure) | $52909 | $54024 | $31959 | $25257 | $23881 |
| Operating Net Income (a non-GAAP measure)\* | $56549 | $54828 | $43870 | $29156 | $24024 |
| Average shares outstanding, basic | 7163223 | 6926257 | 6289481 | 4629255 | 4061529 |
| Average shares outstanding, diluted | 7213913 | 6990603 | 6344409 | 4661720 | 4098633 |
| Total shares outstanding | 7796440 | 6968192 | 6926728 | 5400868 | 4107051 |
| Basic Earnings Per Share | $7.35 | $7.76 | $5.07 | $5.41 | $5.82 |
| Diluted Earnings Per Share | $7.30 | $7.69 | $5.03 | $5.37 | $5.77 |
| Operating Diluted Earnings Per Share (a non-GAAP measure)\* | $7.80 | $7.81 | $6.90 | $6.20 | $5.80 |
| Dividends Declared Per Share | $2.56 | $2.38 | $2.12 | $2.04 | $1.96 |
| Dividend payout ratio (1) | 35% | 31% | 42% | 38% | 34% |
| **Financial Condition Data** |  |  |  |  |  |
| Total Assets | $5559737 | $4891544 | $3949297 | $2855563 | $2101384 |
| Total Deposits | $4815376 | $4331152 | $3403083 | $2358878 | $1811410 |
| Total Loans | $4062856 | $3319106 | $3153648 | $2226728 | $1559772 |
| Shareholders' Equity | $517552 | $437837 | $401732 | $286561 | $167026 |
| Book Value Per Share | $66.38 | $62.83 | $58.00 | $53.06 | $40.67 |
| Tangible Book Value Per Share (a non-GAAP measure)\* | $57.15 | $55.01 | $50.07 | $46.66 | $40.57 |
| **Performance Ratios** |  |  |  |  |  |
| Return on Average Assets | 1.03% | 1.24% | 0.91% | 0.97% | 1.21% |
| Operating Return on Average Assets (a non-GAAP measure)\* | 1.10% | 1.26% | 1.25% | 1.12% | 1.21% |
| Return on Average Shareholders' equity | 11.56% | 12.93% | 9.09% | 11.40% | 15.35% |
| Operating Return on Tangible Common Equity (a non-GAAP measure)\* | 14.18% | 15.10% | 14.38% | 14.80% | 15.49% |
| Total Shareholders' Equity to Total Assets | 9.31% | 8.95% | 10.17% | 10.04% | 7.95% |
| Interest rate spread (2) | 2.72% | 3.05% | 3.52% | 2.93% | 3.19% |
| Net Interest Margin, taxable equivalent (3) | 2.92% | 3.12% | 3.65% | 3.22% | 3.33% |
| Efficiency ratio \* | 59.27% | 58.32% | 61.40% | 67.92% | 66.25% |
| Operating Efficiency Ratio (a non-GAAP measure)\* | 57.99% | 57.67% | 56.66% | 63.78% | 66.05% |
| **Wealth Management Assets** |  |  |  |  |  |
| Market Value of Assets Under Management & Administration | $4059819 | $4853119 | $4167903 | $3452852 | $2876702 |
| **Asset Quality** |  |  |  |  |  |
| Non-Performing Loans | $6542 | $5386 | $8962 | $5651 | $642 |
| Non-Performing Loans/Total Loans | 0.16% | 0.16% | 0.28% | 0.25% | 0.04% |
| Net Loan (Charge-Offs) Recoveries | $53 | $154 | $(439) | $(1592) | $(54) |
| Allowance/Total Loans | 0.93% | 1.04% | 1.14% | 0.82% | 1.08% |
| **Capital Ratios (4):** |  |  |  |  |  |
| Total capital | 13.52% | 13.56% | 13.93% | 13.61% | 13.25% |
| Tier 1 capital | 12.45% | 12.40% | 12.68% | 12.70% | 12.07% |
| Common Equity Tier 1 | 12.45% | 12.40% | 12.68% | 12.70% | 12.07% |
| Tier 1 leverage capital | 8.51% | 8.31% | 8.89% | 8.98% | 8.49% |
| **Other Data:** |  |  |  |  |  |
| Number of full-service offices | 22 | 19 | 21 | 16 | 10 |
| Full time equivalent employees | 440 | 384 | 372 | 303 | 252 |

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\* See "GAAP to Non-GAAP Reconciliations" section below

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

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

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

(4)Capital ratios are for Cambridge Bancorp.

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**Results of Operations** 

**Results of Operations for the years ended December 31, 2022 and 2021** 

**General.** Net income decreased by $1.1 million, or 2.1%, to $52.9 million for the year ended December 31, 2022, from $54.0 million for the year ended December 31, 2021, primarily due to a $9.9 million increase in noninterest expenses including $1.9 million in merger expenses, and a $5.2 million increase in the provision for (release of) credit losses, partially offset by a $15.2 million increase in net interest and dividend income before the provision for (release of) credit losses.

Diluted earnings per share were $7.30 for the year ended December 31, 2022, representing a 5.1% decrease over diluted earnings per share of $7.69 for the year ended December 31, 2021.

**Net Interest and Dividend Income.** Net interest and dividend income before the provision for (release of) credit losses increased by $15.2 million, or 11.9%, to $143.2 million for the year ended December 31, 2022, as compared to $128.0 million for the year ended December 31, 2021. This increase was primarily due to an increase in average earning assets (both organic and as a result of the Northmark Merger) and higher asset yields, partially offset by a decrease in Paycheck Protection Program ("PPP") loan income, lower loan accretion associated with merger accounting, and higher costs of funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Interest on loans increased by $16.2 million, or 13.4%, as a result of loan growth, partially offset by lower PPP loan income and lower loan accretion associated with merger accounting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Interest on investment securities increased by $9.9 million, or 82.2%, primarily due to growth in the investment portfolio.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Interest on deposits increased by $9.6 million, or 193.5%, primarily due to an increase in the cost of deposits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Interest on borrowings increased by $1.6 million, or 290.0%, primarily due to an increase in other borrowed funds during the year.

Average interest earning assets increased by $810.7 million, or 19.6%, to $4.94 billion for the year ended December 31, 2022 from $4.13 billion in 2021, primarily due to the Northmark Merger combined with organic growth within the loan and investment securities portfolios. The Company's net interest margin, on a fully tax equivalent basis, decreased 20 basis points to 2.92% for the year ended December 31, 2022, as compared to 3.12% in 2021.

Average interest-bearing liabilities increased by $516.4 million, or 19.7%, to $3.14 billion for the year ended December 31, 2022 from $2.63 billion in 2021, primarily due to the Northmark Merger. The Company experienced an increase in average money market accounts of $400.8 million, an increase in average checking account balances of $77.2 million, an increase in average borrowed funds of $67.1 million, and an increase in retail certificates of deposit of $31.2 million, partially offset by a decrease in average savings deposit balances of $59.9 million. The average cost of funds increased to 0.34% for the year ended December 31, 2022, as compared to 0.13% for the year ended December 31, 2021.

**Interest and Dividend Income.** Total interest and dividend income increased by $26.5 million, or 19.8%, to $160.0 million for the year ended December 31, 2022, as compared to $133.5 million in 2021, primarily due to growth within the loans and investment securities portfolios, partially offset by lower PPP loan related income and lower loan accretion associated with merger accounting.

**Interest Expense.** Interest expense increased by $11.2 million, or 203.2% to $16.8 million for the year ended December 31, 2022, as compared to $5.5 million in 2021, primarily driven by an increase in the cost of deposits and higher borrowing expense.

**Provision for (Release of) Credit Losses.** The Company recorded a provision for credit losses of $3.9 million for the year ended December 31, 2022, as compared to a release of credit losses of $1.3 million for the year ended December 31, 2021, which included $2.2 million for the recognition of the CECL merger accounting impact as a result of the Northmark merger, inclusive of unfunded commitments.

The Company recorded net recoveries of $53,000 or 0.00% of total loans, for the year ended December 31, 2022, as compared to net recoveries of $154,000, or 0.00% of total loans for the year ended December 31, 2021.

The allowance for credit losses for loans was $37.8 million, or 0.93% of total loans outstanding at December 31, 2022, as compared to $34.5 million, or 1.04% of total loans outstanding at December 31, 2021.

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**Noninterest Income.** Inclusive of the Northmark Merger, total noninterest income decreased by $1.3 million, or 3.0%, to $43.0 million for the year ended December 31, 2022, as compared to $44.3 million the year ended December 31, 2021. This was primarily the result of lower wealth management revenue, lower loan related derivative income, and lower gains on loans sold. These items were partially offset by higher bank owned life insurance income, higher deposit account fees, and higher other income. Noninterest income was 23.1% and 25.7% of total revenue for the year ended December 31, 2022 and 2021, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Wealth Management revenue decreased by $2.0 million, or 5.7%, to $33.0 million for the year ended December 31, 2022, as compared to $35.0 million for the year ended December 31, 2021, primarily due to decline in both the bond and equity markets. Wealth Management Assets Under Management and Administration were $4.1 billion at December 31, 2022, as compared to $4.9 billion at December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Loan related derivative income decreased by $1.5 million, or 70.6%, to $625,000 for the year ended December 31, 2022, as compared to $2.1 million for the year ended December 31, 2021, primarily as a result of lower floating rate loan volume.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Gain on loans sold decreased by $734,000, or 88.2%, to $98,000 for the twelve months ended December 31, 2022, as compared to $832,000 for the twelve months ended December 31, 2021, primarily due to lower refinance activity and the corresponding lower sales of residential mortgages.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Bank owned life insurance ("BOLI") income increased by $1.0 million, or 125.7%, to $1.8 million for the twelve months ended December 31, 2022, as compared to $801,000 for the twelve months ended December 31, 2021, primarily a result of a $1.2 million gain related to a death benefit claim and policy surrender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Deposit account fees increased by $974,000, or 50.2%, to $2.9 million for the year ended December 31, 2022, as compared to $1.9 million for the year ended December 31, 2021, primarily due to increased fee revenue from commercial deposit sweep products resulting from higher interest rates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Other income increased by $844,000, or 41.7%, to $2.9 million for the twelve months ended December 31, 2022, as compared to $2.0 million for the twelve months ended December 31, 2021, primarily due to equity warrant revenue and success fees associated with Innovation Banking loans, in addition to gains recognized on a community development fund investment.

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

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| | | |
|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Wealth Management revenues: |  |  |
| &nbsp;&nbsp;&nbsp;Trust and investment advisory fees | $31992 | $34092 |
| &nbsp;&nbsp;&nbsp;Financial planning fees and other service fees | 1042 | 945 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total wealth management revenues | $33034 | $35037 |

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

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| | | |
|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Wealth management assets under management |  |  |
| Balance at the beginning of the period | $4656183 | $3994152 |
| &nbsp;&nbsp;&nbsp;Acquired wealth management assets |  |  |
| &nbsp;&nbsp;&nbsp;Gross client asset inflows | 699466 | 532507 |
| &nbsp;&nbsp;&nbsp;Gross client asset outflows | (917636) | (442679) |
| &nbsp;&nbsp;&nbsp;Net market impact | (562266) | 572203 |
| Balance at the end of the period | $3875747 | $4656183 |
| Weighted average management fee | 0.78% | 0.79% |

---

There were no significant changes to the average fee rates and fee structure during the years ended December 31, 2022 or 2021.

**Noninterest Expense.** Total noninterest expense, inclusive of the Northmark Merger, increased by $9.9 million, or 9.9%, to $110.4 million for the year ended December 31, 2022, as compared to $100.5 million for the year ended December 31, 2021, primarily driven by increases in salaries and employee benefits expense, data processing expense, nonoperating expenses, and FDIC expense, partially offset by decreases in professional services and marketing expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Salaries and employee benefits increased by $5.0 million, or 7.6%, to $70.1 million for the twelve months ended December 31, 2022, from $65.1 million for the twelve months ended December 31, 2021, primarily due to increased staffing related

------

to the Northmark Merger, normal merit increases, additions to support business initiatives, and increases in employee benefit costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Data processing fees increased by $1.9 million, or 21.3%, to $10.7 million for the twelve months ended December 31, 2022, from $8.8 million for the twelve months ended December 31, 2021, primarily as a result of the full year impact of a new wealth management system and the partial year impact of higher data processing fees associated the Northmark merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Non-operating expenses increased by $1.9 million, or 173.6%, to $3.1 million for the twelve months ended December 31, 2022, from $1.1 million for the twelve months ended December 31, 2021, primarily due to merger expenses and contractual termination costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•FDIC insurance increased by $527,000, or 40.0%, to $1.8 million for the twelve months ended December 31, 2022, from $1.3 million for the twelve months ended December 31, 2021, primarily due to balance sheet growth.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Professional services decreased by $663,000<u>,</u> or 12.3%, to $4.7 million for the twelve months ended December 31, 2022, from $5.4 million for the twelve months ended December 31, 2021, primarily due to lower recruiting and temporary help expenses as well as lower consulting fees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Marketing expense decreased by $235,000, or 9.3%, to $2.3 million for the twelve months ended December 31, 2022, from $2.5 million for the twelve months ended December 31, 2021.

**Income Tax Expense.** The Company recorded a provision for income taxes of $19.1 million for both the years ended December 31, 2022, and December 31, 2021. The effective tax rate was 26.5%, for the year ended December 31, 2022, as compared to 26.1% for the year ended December 31, 2021. The increase was primarily due to the tax effects of a BOLI policy surrender and death benefit claim during the second fiscal quarter of 2022 and the impact of non-deductible merger related expenses.

**Results of Operations for the years ended December 31, 2021 and 2020** 

**General.** Net income increased by $22.1 million, or 69.0%, to $54.0 million for the year ended December 31, 2021, from $32.0 million for the year ended December 31, 2020, primarily due to a $19.6 million decrease in the provision for (release of) credit losses, a $7.7 million increase in net interest and dividend income before the provision for (release of) credit losses, and a $4.8 million increase in noninterest income, which were partially offset by a $2.4 million increase in noninterest expenses and a $7.7 million increase in income tax expense. Diluted earnings per share were $7.69 for 2021, representing a 52.9% increase over diluted earnings per share of $5.03 for the year ended December 31, 2020.

**Net Interest and Dividend Income.** Net interest and dividend income before the provision for (release of) credit losses increased by $7.7 million, or 6.4%, to $128.0 million for the year ended December 31, 2021, as compared to $120.2 million for the year ended December 31, 2020. This increase was primarily due to higher interest on investment securities, higher PPP loan income recognized on PPP loans forgiven by the SBA during the year, and a lower cost of funds, partially offset by lower loan accretion associated with merger accounting and lower yields on interest-earning assets during the period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Interest on investment securities increased by $3.6 million, or 41.7%, primarily due to growth in the investment portfolio as the Company reinvested excess cash.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Interest on deposits decreased by $2.3 million, or 31.8%, primarily due to a decrease in the cost of deposits, partially offset by deposit growth.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Interest on loans increased by $897,000, or 0.7%, as a result of loan growth combined with accelerated PPP loan related income, partially offset by lower loan accretion associated with merger accounting and lower loan yields.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Interest on borrowings decreased by $847,000, or 60.2%, primarily due to a decrease in borrowings outstanding during the year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•The Company did not incur any interest on subordinated debt during 2021, as the Company redeemed the $10.0 million in subordinated debt assumed in the Wellesley Merger during the fourth quarter of 2020.

Average interest earning assets increased by $822.0 million, or 24.9%, to $4.13 billion for the year ended December 31, 2021 from $3.31 billion in 2020, primarily due to the Wellesley Merger coupled with organic growth within the loan and investment portfolios. The Company's net interest margin, on a fully tax equivalent basis, decreased 53 basis points to 3.12% for the year ended December 31, 2021, as compared to 3.65% in 2020.

Average interest-bearing liabilities increased by $395.6 million, or 17.7%, to $2.63 billion for the year ended December 31, 2021 from $2.23 billion in 2020, primarily related to the Wellesley Merger coupled with organic core deposit growth. The increase in interest-bearing liabilities was primarily driven by an increase in average money market accounts of $414.9 million, an increase in average checking account balances of $121.8 million, and an increase in average savings account balances of $19.8 million, partially offset by a decrease in average borrowed funds of $105.2 million, and a decrease in average certificate of deposit balances of $50.3 million. The average cost of funds decreased to 0.13% for the year ended December 31, 2021 from 0.28% for the year ended December 31, 2020.

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**Interest and Dividend Income.** Total interest and dividend income increased by $4.1 million, or 3.2%, to $133.5 million for the year ended December 31, 2021, as compared to $129.4 million in 2020, primarily due to investment portfolio growth, loan growth, and increased PPP loan related income, partially offset by lower loan accretion associated with merger accounting and lower asset yields.

**Interest Expense.** Interest expense decreased by $3.6 million, or 39.5% to $5.5 million for the year ended December 31, 2021, as compared to $9.1 million in 2020, primarily driven by a decrease in the cost of deposits and lower borrowing expense, partially offset by deposit growth.

**Provision for (Release of) Credit Losses.** The Company recorded a release of credit losses of $1.3 million for the year ended December 31, 2021, as compared to a provision of credit losses of $18.3 million for the year ended December 31, 2020, which included $9.3 million associated with the expected impact of the COVID-19 pandemic on future loan losses and $8.6 million for the recognition of the non-operating impact of merger related CECL accounting during the year ended December 31, 2020. The Company's release of credit losses during 2021 was driven by improved economic assumptions and the resulting decrease in loss expectations in the Company's allowance for credit losses modeling.

The Company recorded net recoveries of $154,000 or 0.00% of total loans, for the year ended December 31, 2021, as compared to net charge-offs of $439,000, or 0.01% of total loans for the year ended December 31, 2020.

The allowance for credit losses was $34.5 million, or 1.05% of total loans outstanding (excluding PPP loans) at December 31, 2021, as compared to $36.0 million, or 1.19% of total loans outstanding (excluding PPP loans) at December 31, 2020.

**Noninterest Income.** Total noninterest income increased by $4.8 million, or 12.1%, to $44.3 million for the year ended December 31, 2021, as compared to $39.5 million the year ended December 31, 2020. This change was primarily a result of increases in wealth management revenue and loan related derivative income, partially offset by decreases in gain on loans sold, net and deposit account fees. Noninterest income was 25.7% and 24.7% of total revenue for the year ended December 31, 2021 and 2020, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Wealth Management revenue increased by $5.3 million, or 17.8%, to $35.0 million for the year ended December 31, 2021, as compared to $29.8 million for the year ended December 31, 2020, primarily due to appreciation within the equity markets and positive net client asset flows. Wealth Management Assets Under Management and Administration were $4.9 billion at December 31, 2021, as compared to $4.2 billion at December 31, 2020.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Loan related derivative income increased by $645,000, or 43.6%, to $2.1 million for the year ended December 31, 2021, as compared to $1.5 million for the year ended December 31, 2020, due to increased loan volume combined with fair value adjustments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Gain on loans sold, net decreased by $1.0 million, or 55.0%, to $832,000 at December 31, 2021, as compared to $1.9 million for the year ended December 31, 2020 primarily due to decreased sales of residential mortgages.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Deposit account fees decreased by $656,000, or 25.3%, to $1.9 million for the year ended December 31, 2021, as compared to $2.6 million for the year ended December 31, 2020, primarily due to a decrease in fee revenue from commercial deposit sweep products as a result of lower interest rates.

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

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| | | |
|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Wealth Management revenues: |  |  |
| Trust and investment advisory fees | $34092 | $28599 |
| Financial planning fees and other service fees | 945 | 1152 |
| Total wealth management revenues | $35037 | $29751 |

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

---

| | | |
|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Wealth management assets under management |  |  |
| Balance at the beginning of the period | $3994152 | $3287371 |
| Acquired wealth management assets |  | 338676 |
| Gross client asset inflows | 532507 | 314032 |
| Gross client asset outflows | (442679) | (383059) |
| Net market impact | 572203 | 437132 |
| Balance at the end of the period | $4656183 | $3994152 |
| Weighted average management fee | 0.79% | 0.81% |

---

There were no significant changes to the average fee rates and fee structure during the years ended December 31, 2021 or 2020.

**Noninterest Expense.** Total noninterest expense increased by $2.4 million, or 2.4%, to $100.5 million for the year ended December 31, 2021, as compared to $98.1 million for the year ended December 31, 2020, primarily driven by increases in salaries and employee benefits expense, professional services fees, data processing fees, and occupancy and equipment expenses, partially offset by a decrease in non-operating expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Salaries and employee benefits increased by $6.2 million, or 10.4%, primarily related to the full year impact of the Wellesley Merger in the second quarter of 2020, additions to support business initiatives, normal merit increases, and increases in employee benefit costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Professional services fees increased by $1.2 million<u>,</u> or 28.7%, primarily due to increased consulting fees associated with the wealth management system conversion completed in the fourth quarter of 2021 and employment agency costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Data processing fees increased by $1.2 million, or 15.2%, primarily due to the full year impact of new client usage of our banking systems as a result of Wellesley Merger and higher data processing fees associated with the wealth management system conversion completed during the fourth quarter of 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Occupancy and equipment expense increased by $894,000, or 6.9%, primarily as a result of the full year impact of additional branches and office space acquired from the Wellesley Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Non-operating expenses decreased by $6.5 million, or 85.3%, primarily due to one-time non-operating costs associated with the Wellesley merger that were incurred in 2020, partially offset by previously communicated branch closures and the wealth management system conversion expenses.

**Income Tax Expense.** The Company recorded a provision for income taxes of $19.1 million for the year ended December 31, 2021, as compared to $11.4 million for the same period in 2020. The effective tax rate was 26.1%, for the year ended December 31, 2021, as compared to 26.3% for the year ended December 31, 2020.

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**Changes in Financial Condition**

**Total Assets.** Total assets, inclusive of the Northmark Merger, increased by $668.2 million, or 13.7%, from $4.89 billion at December 31, 2021, and were $5.56 billion as of December 31, 2022.

**Loans.** Total loans increased by $743.8 million, or 22.4%, to $4.06 billion at December 31, 2022, from $3.32 billion at December 31, 2021, inclusive of the Northmark Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Residential real estate loans increased by $233.8 million to $1.65 billion at December 31, 2022, from $1.42 billion at December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Commercial real estate loans increased by $403.4 million to $1.91 billion at December 31, 2022, from $1.51 billion at December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Commercial and industrial loans increased by $81.2 million to $350.7 million at December 31, 2022, from $269.4 million at December 31, 2021.

Excluding the net loans acquired as a result of the Northmark Merger, total loans grew by $440.5 million, or 13.3% from December 31, 2021. Please see the Organic Loan and Deposit table for more details.

**Bank-Owned Life Insurance.** The Company invests in BOLI to help offset the costs of our employee benefit plan obligations. BOLI also generally provides noninterest income that is nontaxable. At December 31, 2022, our investment in BOLI decreased by $12.5 million, or 26.6%, to $34.5 million, from $47.0 million at December 31, 2021, primarily due to the surrender of a policy and a death benefit claim during the second quarter of 2022.

**Goodwill and Merger Related intangibles**. The Company recorded goodwill of $12.6 million associated with the Northmark Merger. The Company recorded core deposit intangible assets of $5.3 million associated with the Northmark merger during the year ended December 31, 2022. Goodwill and merger related intangible assets totaled $72.0 million at December 31, 2022 and $54.5 million at December 31, 2021.

**Other Assets**. Other assets increased by $28.9 million, or 37.9% to $105.3 million at December 31, 2022, from $76.4 million at December 31, 2021, primarily due to the change in fair value of loan level derivative assets.

**Deposits.** Total deposits, inclusive of the Northmark Merger, increased by $484.2 million, or 11.2%, to $4.82 billion at December 31, 2022, from $4.33 billion at December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Core deposits, which the Company defines as all deposits other than certificates of deposit, increased by $59.7 million, or 1.4%, to $4.23 billion at December 31, 2022, from $4.17 billion at December 31, 2021, primarily due to the Northmark Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Excluding the impact of the Northmark Merger, organic core deposits decreased $216.8 million, or 5.2%, as the rapidly increasing interest rate environment saw clients use funds for investment opportunities, spend down historically high balances, and seek additional return.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Certificates of deposit totaled $586.6 million at December 31, 2022, an increase of $424.6 million, or 262.0%, from $162.1 million at December 31, 2021, primarily due to increases in brokered certificates of deposit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Total brokered certificates of deposit, which are included within certificates of deposit, were $381.6 million at December 31, 2022 and $2.7 million at December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Inclusive of the Northmark Merger, the cost of total deposits for the year ended December 31, 2022 was 0.32%, as compared to 0.13% for the year ended December 31, 2021, an increase of 19 basis points. The cost of total deposits excluding brokered deposits was 0.26% for the year ended December 31, 2022, as compared to 0.13% for the year ended December 31, 2021, an increase of 13 basis points. At December 31, 2022, the spot cost of non-brokered deposits was 0.80%, an increase of 62 basis points as compared to 0.18% at December 31, 2021.

**Borrowings.** At December 31, 2022 and December 31, 2021, borrowings consisted primarily of advances from the FHLB of Boston. Total borrowings increased by $88.7 million, or 537.3%, to $105.2 million at December 31, 2022, from $16.5 million at December 31, 2021, primarily due to fluctuations in liquidity.

**Shareholders' Equity.** Total shareholders' equity increased $79.7 million, or 18.2%, to $517.6 million at December 31, 2022, from $437.8 million at December 31, 2021, primarily due to $62.8 million of equity issued as a result of the Northmark Merger and net income of $52.9 million, partially offset by an increase in unrealized losses on the available for sale investment portfolio of $18.7 million and dividend payments of $18.4 million.

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The Company's book value per share increased $3.55 to $66.38 at December 31, 2022, as compared to $62.83 at December 31, 2021. The Company's ratio of tangible common equity to tangible assets increased 20 basis points to 8.12% at December 31, 2022, as compared to 7.92% at December 31, 2021. Tangible book value per share grew by $2.14, or 3.9%, to $57.15 as of December 31, 2022, as compared to $55.01 as of December 31, 2021.

**Organic Loan and Deposit Growth/(Decline) (dollars in thousands)**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  |  | **Northmark** | **December 2022 vs December 2021** | **December 2022 vs December 2021** |
|  | **December 31, 2022** | **December 31, 2021** | **Balance Acquired** | **Organic Growth/(Decline) $** | **Organic Growth/(Decline) %** |
|  | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) |
| Loans |  |  |  |  |  |
| &nbsp;&nbsp;Residential mortgage | $1648838 | $1415079 | $114775 | $118984 | 8.4% |
| &nbsp;&nbsp;Commercial mortgage | 1914423 | 1511002 | 155848 | 247573 | 16.4% |
| &nbsp;&nbsp;Home equity | 111351 | 87960 | 15466 | 7925 | 9.0% |
| &nbsp;&nbsp;Commercial & Industrial | 350650 | 269446 | 16122 | 65082 | 24.2% |
| &nbsp;&nbsp;Consumer | 37594 | 35619 | 1004 | 971 | 2.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total loans | $4062856 | $3319106 | $303215 | $440535 | 13.3% |
| Deposits |  |  |  |  |  |
| &nbsp;&nbsp;Demand | $1366395 | $1393935 | $137651 | $(165191) | (11.9%) |
| &nbsp;&nbsp;Interest bearing checking | 908961 | 763188 | 17831 | 127942 | 16.8% |
| &nbsp;&nbsp;Money market | 1162773 | 1104238 | 67942 | (9407) | (0.9%) |
| &nbsp;&nbsp;Savings | 790628 | 907722 | 53002 | (170096) | (18.7%) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Core deposits | 4228757 | 4169083 | 276426 | (216752) | (5.2%) |
| &nbsp;&nbsp;Certificates of deposit | 205060 | 159367 | 96703 | (51010) | (32.0%) |
| &nbsp;&nbsp;Brokered Certificates of Deposits | 381559 | 2702 |  | 378857 | 14,023.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Certificate of Deposits | 586619 | 162069 | 96703 | 327847 | 202.3% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | $4815376 | $4331152 | $373129 | $111095 | 2.6% |

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**GAAP to Non-GAAP Reconciliations** (dollars in thousands except per share data)

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 following table summarizes the calculation of the Company's operating net income and operating diluted earnings per share:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
| **<u>Operating Net Income / Operating Diluted Earnings Per Share</u>** |  |  |  |  |  |
|  | **2022** | **2021** | **2020** | **2019** | **2018** |
|  | **(dollars in thousands, except share data)** | **(dollars in thousands, except share data)** | **(dollars in thousands, except share data)** | **(dollars in thousands, except share data)** | **(dollars in thousands, except share data)** |
| Net Income (a GAAP measure) | $52909 | $54024 | $31959 | $25257 | $23881 |
| &nbsp;&nbsp;&nbsp;&nbsp;Add: Merger expenses | 1941 |  | 6368 | 4721 | 201 |
| &nbsp;&nbsp;&nbsp;&nbsp;Add: Provision for credit losses for acquired loans | 2239 |  | 8638 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Add: Contractual termination expenses | 1118 | 1118 | 1244 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Add: (Gain) loss disposition of investment securities |  |  | (69) | 79 | (2) |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Tax effect of non-operating expenses (1) | (1237) | (314) | (4270) | (901) | (56) |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Death benefit on bank owned life insurance ("BOLI") and policy surrender | (1157) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Add: Tax effect of BOLI policy surrender | 736 |  |  |  |  |
| Operating Net Income (a non-GAAP measure) | $56549 | $54828 | $43870 | $29156 | $24024 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Dividends and Undistributed Earnings<br> Allocated to Participating Securities (a non-GAAP measure) | (273) | (252) | (64) | (243) | (239) |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating Net Income Applicable to Common<br> Shareholders (a non-GAAP measure) | $56276 | $54576 | $43806 | $28913 | $23785 |
| Weighted Average Diluted Shares | 7213913 | 6990603 | 6344409 | 4661720 | 4098633 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating Diluted Earnings Per Share<br> (a non-GAAP measure) | $7.80 | $7.81 | $6.90 | $6.20 | $5.80 |

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(1) The net tax benefit associated with non-operating items is determined by assessing whether each non-operating item is included or excluded from net taxable income and applying the Company's combined marginal tax rate to only those items included in net taxable income.

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The following tables summarize the calculation of the Company's tangible common equity ratio and tangible book value per share for the periods indicated:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** | **December 31, 2020** | **December 31, 2019** | **December 31, 2018** |
|  | (in thousands, except share data) | (in thousands, except share data) | (in thousands, except share data) | (in thousands, except share data) | (in thousands, except share data) |
| **<u>Tangible Common Equity:</u>** |  |  |  |  |  |
| Shareholders' equity (GAAP) | $517552 | $437837 | $401732 | $286561 | $167026 |
| Less: Goodwill and acquisition related intangibles (GAAP) | (71982) | (54529) | (54889) | (34544) | (412) |
| Tangible Common Equity (a non-GAAP measure) | $445570 | $383308 | $346843 | $252017 | $166614 |
| Total assets (GAAP) | $5559737 | $4891544 | $3949297 | $2855563 | $2101384 |
| Less: Goodwill and acquisition related intangibles (GAAP) | (71982) | (54529) | (54889) | (34544) | (412) |
| Tangible assets (a non-GAAP measure) | $5487755 | $4837015 | $3894408 | $2821019 | $2100972 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tangible Common Equity Ratio (a non-GAAP measure) | 8.12% | 7.92% | 8.91% | 8.93% | 7.93% |
| **<u>Tangible Book Value Per Share:</u>** |  |  |  |  |  |
| Tangible Common Equity (a non-GAAP measure) | $445570 | $383308 | $346843 | $252017 | $166614 |
| Common shares outstanding | 7796440 | 6968192 | 6926728 | 5400868 | 4107051 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tangible Book Value Per Share (a non-GAAP measure) | $57.15 | $55.01 | $50.07 | $46.66 | $40.57 |

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The following tables summarize the calculation of the Company's efficiency and operating ratios for the periods indicated:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** |
|  | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) |
| **<u>Efficiency Ratio: (1)</u>** |  |  |  |  |  |
| Noninterest expense | $110382 | $100484 | $98085 | $78175 | $63987 |
| Net interest and dividend income | $143215 | $127981 | $120233 | $78696 | $63588 |
| Total noninterest income | 43009 | 44324 | 39525 | 36401 | 32989 |
| &nbsp;&nbsp;Total revenue | $186224 | $172305 | $159758 | $115097 | $96577 |
| &nbsp;&nbsp;&nbsp;&nbsp;Efficiency Ratio | 59.27% | 58.32% | 61.40% | 67.92% | 66.25% |
| **<u>Operating Efficiency Ratio: (2)</u>** |  |  |  |  |  |
| Noninterest expense | $110382 | $100484 | $98085 | $78175 | $63987 |
| Merger expenses (Pretax) | (1941) |  | (6368) | (4721) | (201) |
| Contractual termination expenses (Pretax) | (1118) | (1118) | (1244) |  |  |
| &nbsp;&nbsp;Operating expense (a non-GAAP measure) | $107323 | $99366 | $90473 | $73454 | $63786 |
| Total revenue | $186224 | $172305 | $159758 | $115097 | $96577 |
| Add:(gain) loss on disposition of investment securities |  |  | $(69) | $79 | $(2) |
| Death benefit on bank owned life insurance ("BOLI") and policy surrender (Pretax) | (1157) |  |  |  |  |
| Operating revenue (a non-GAAP measure) | $185067 | $172305 | $159689 | $115176 | $96575 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating Efficiency Ratio (a non-GAAP measure) | 57.99% | 57.67% | 56.66% | 63.78% | 66.05% |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** |
| **<u>Operating Return on Tangible Common Equity: (3)</u>** |  |  |  |  |  |
| Operating Net Income (a non-GAAP measure) | $56549 | $54828 | $43870 | $29156 | $24024 |
| Average common equity | $457540 | $417768 | $351477 | $221617 | $155546 |
| Average goodwill and merger related intangibles | (58859) | (54707) | (46476) | (24577) | (412) |
| &nbsp;&nbsp;Average tangible common equity (a non-GAAP measure) | $398681 | $363061 | $305001 | $197040 | $155134 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating Return on Tangible Common Equity (a non-GAAP measure) | 14.18% | 15.10% | 14.38% | 14.80% | 15.49% |
| **<u>Operating Return on Average Assets: (4)</u>** |  |  |  |  |  |
| Operating Net Income (a non-GAAP measure) | $56549 | $54828 | $43870 | $29156 | $24024 |
| Average assets | $5150336 | $4343873 | $3523249 | $2600316 | $1980580 |
| Operating Return on Average Assets (a non-GAAP measure) | 1.10% | 1.26% | 1.25% | 1.12% | 1.21% |

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

(2)Operating efficiency ratio represents operating expense as a percentage of operating revenue.

(3)Operating return on tangible common equity represents operating net income as a percentage of average tangible common equity.

(4)Operating return on average assets represents operating net income as a percentage of average assets.

**Investment Securities** 

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. Government Sponsored Enterprises ("GSE") obligations, U.S. GSE mortgage-backed securities, and corporate debt securities. These securities are carried at fair value, and 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 $153.4 million and included gross unrealized gains of $7,000 and gross unrealized losses of $28.6 million at December 31, 2022. At December 31, 2021, the fair value of securities available for sale totaled $197.8 million and included gross unrealized gains of $1.2 million and gross unrealized losses of $4.7 million.

Securities classified as held to maturity consist of certain U.S. GSE mortgage-backed securities, corporate debt securities, U.S. Treasury Notes, and state, county, and municipal securities. Securities held to maturity as of December 31, 2022 are carried at their amortized cost of $1.05 billion. At December 31, 2021, the amortized cost of securities held to maturity totaled $977.1 million.

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

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2022** | **2021** | **2021** |
|  | **Amount** | **Percent** | **Amount** | **Percent** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Available for sale securities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. GSE obligations | $19733 | 13% | $23011 | 12% |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 132683 | 86% | 173028 | 87% |
| &nbsp;&nbsp;&nbsp;Corporate debt securities | 1000 | 1% | 1764 | 1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total securities available for sale | $153416 | 100% | $197803 | 100% |
| Held to maturity securities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Treasury Notes | $3970 | —% | $— | —% |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 951372 | 91% | 864983 | 88% |
| &nbsp;&nbsp;&nbsp;Corporate debt securities | 250 | —% | 6997 | 1% |
| &nbsp;&nbsp;&nbsp;Municipal securities | 96405 | 9% | 105081 | 11% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total securities held to maturity | $1051997 | 100% | $977061 | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $1205413 |  | $1174864 |  |

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The following table sets forth the composition and maturities of 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.

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Within One Year** | **Within One Year** | **After One, But <br>Within Five Years** | **After One, But <br>Within Five Years** | **After Five, But <br>Within Ten Years** | **After Five, But <br>Within Ten Years** | **After Ten Years** | **After Ten Years** | **Total** | **Total** |
|  | **Amortized Cost** | **Weighted<br>Average<br>Yield (1)** | **Amortized Cost** | **Weighted<br>Average<br>Yield (1)** | **Amortized Cost** | **Weighted<br>Average<br>Yield (1)** | **Amortized Cost** | **Weighted<br>Average<br>Yield (1)** | **Amortized Cost** | **Weighted<br>Average<br>Yield (1)** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Available for sale<br> securities |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. GSE<br> obligations | $— |  | $9997 | 0.5% | $5000 | 2.3% | $8000 | 2.6% | $22997 | 1.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed<br> securities |  |  | 10680 | 2.0% | 41622 | 1.5% | 105732 | 1.5% | 158034 | 1.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt<br> securities | 996 | 5.1% |  |  |  |  |  |  | 996 | 5.1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total available<br> for sale<br> securities | $996 | 5.1% | $20677 | 1.3% | $46622 | 1.6% | $113732 | 1.5% | $182027 | 1.5% |
| Held to maturity<br> securities |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. treasury Notes | $987 | 4.3% | $2983 | 4.2% | $— | 0.0% | $— | 0.0% | $3970 | 4.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed<br> securities |  |  | 19572 | 2.3% | 48731 | 1.9% | 883069 | 1.8% | 951372 | 1.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt<br> securities |  |  | 250 | 2.0% |  |  |  |  | 250 | 2.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal<br> securities | 6987 | 3.9% | 18657 | 3.5% | 26441 | 3.3% | 44320 | 2.7% | 96405 | 3.1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total held to<br> maturity<br> securities | $7974 | 3.9% | $41462 | 3.0% | $75172 | 2.4% | $927389 | 1.9% | $1051997 | 2.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $8970 | 4.1% | $62139 | 2.4% | $121794 | 2.1% | $1041121 | 1.8% | $1234024 | 1.9% |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Weighted Average Yield is shown on a fully taxable equivalent basis using a federal tax rate of 21% for 2022.

The Company did not record an allowance for credit losses on its investment securities as of December 31, 2022 or 2021. The Company regularly reviews debt securities for expected credit loss using both qualitative and quantitative criteria, as necessary based on the composition of the portfolio at period end.

**Loans** 

The Company's lending activities are conducted principally in Eastern Massachusetts and Southern New Hampshire. The Company grants single- and multi-family residential loans, C&I loans, CRE loans, construction loans, and a variety of consumer loans. Most of the loans granted by the Company are secured by real estate collateral. Repayment of the Company's residential loans is 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

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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. For renewable energy loans, cash flow is dependent on energy output and is generated from the contracted sale of energy credits or wholesale energy sales as well as state mandated incentive programs. For PPP loans, the SBA generally guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower's PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount subject to program requirements. 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 shows the composition of the loan portfolio at the dates indicated:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **% of<br>Total** | **2021** | **% of<br>Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Residential mortgage** |  |  |  |  |
| Mortgages - fixed rate | $902968 | 22% | $716456 | 22% |
| Mortgages - adjustable rate | 703958 | 17% | 679675 | 21% |
| Construction | 35299 | 1% | 13012 | 0% |
| Deferred costs, net of unearned fees | 6613 | 0% | 5936 | 0% |
| Total residential mortgages | 1648838 | 40% | 1415079 | 43% |
| **Commercial mortgage** |  |  |  |  |
| Mortgages - non-owner occupied | 1592732 | 39% | 1272135 | 38% |
| Mortgages - owner occupied | 183591 | 5% | 150632 | 4% |
| Construction | 135782 | 3% | 86246 | 3% |
| Deferred costs, net of unearned fees | 2318 | 0% | 1989 | 0% |
| Total commercial mortgages | 1914423 | 47% | 1511002 | 45% |
| **Home equity** |  |  |  |  |
| Home equity - lines of credit | 108961 | 3% | 85639 | 3% |
| Home equity - term loans | 2098 | 0% | 2017 | 0% |
| Deferred costs, net of unearned fees | 292 | 0% | 304 | 0% |
| Total home equity | 111351 | 3% | 87960 | 3% |
| **Commercial and industrial** |  |  |  |  |
| Commercial and industrial | 349026 | 9% | 247024 | 7% |
| PPP loans | 1384 | 0% | 22856 | 1% |
| Unearned fees, net of deferred costs | 240 | 0% | (434) | 0% |
| Total commercial and industrial | 350650 | 9% | 269446 | 8% |
| **Consumer** |  |  |  |  |
| Secured | 35679 | 1% | 34308 | 1% |
| Unsecured | 1897 | 0% | 1303 | 0% |
| Deferred costs, net of unearned fees | 18 | 0% | 8 | 0% |
| Total consumer | 37594 | 1% | 35619 | 1% |
| **Total loans** | $4062856 | 100% | $3319106 | 100% |

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**Residential Mortgage.** Residential real estate loans held in portfolio were to $1.65 billion at December 31, 2022, an increase of $233.8 million, or 16.5%, from $1.42 billion at December 31, 2021 and consisted of one-to-four family residential mortgage loans, or for the construction thereof. The residential mortgage portfolio represented 40% and 43% of total loans at December 31, 2022 and December 31, 2021, respectively.

The average loan balance outstanding in the residential portfolio was $517,000 and the largest individual residential mortgage loan outstanding was $5.5 million as of December 31, 2022. At December 31, 2022, this loan was performing in accordance with its original terms.

The Bank offers fixed and adjustable-rate residential mortgage and construction loans with maturities up to 30 years. One-to-four family residential mortgage loans are generally underwritten according to Federal National Mortgage Association ("Fannie Mae") or Federal

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Home Loan Mortgage Corporation ("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 increased to $647,200 in 2022 from $548,250 in 2021, for one-unit properties. In addition, the Bank also offers loans above conforming lending limits typically referred to as "jumbo" loans and interest only loans. These loans are typically underwritten to jumbo conforming 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 CRA requirements. Purchases have historically been made to satisfy CRA requirements for lending to low- and 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 residence. 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 does it 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 the loan, resulting in an increased principal balance during the life of the loan. The Company does 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 client preference.

Indemnification. In general, the Company does not sell loans with recourse, except to the extent that it arises from standard loan-sale contract provisions. These provisions cover violations of representations and warranties and, under certain circumstances, first payment default by borrowers. These indemnifications may include the repurchase of loans by the Company and are considered customary provisions in the secondary market for conforming mortgage loan sales. Repurchases and losses have been rare, and no provision is made for losses at the time of sale. There were no such repurchases for the year ended December 31, 2022.

The Company was servicing mortgage loans sold to others without recourse of approximately $191.9 million at December 31, 2022 and $170.8 million at December 31, 2021.

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

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Originations for retention in portfolio | $432008 | $556715 | $378247 |
| Originations for sale to the secondary market | 4515 | 22583 | 82620 |
| &nbsp;&nbsp;&nbsp;Total | $436523 | $579298 | $460867 |

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

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Loans sold with servicing rights retained | $5834 | $25361 | $60453 |
| Loans sold with servicing rights released |  | 2465 | 18024 |
| &nbsp;&nbsp;&nbsp;Total | $5834 | $27826 | $78477 |

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Loans sold with the retention of servicing typically result in the capitalization of servicing rights. Loan servicing rights are included in other assets and subsequently amortized as an offset to other income over the estimated period of servicing. The net balance of capitalized servicing rights totaled $1.7 million and $1.1 million at December 31, 2022 and 2021, respectively.

**Commercial Mortgage.** CRE loans were $1.91 billion as of December 31, 2022, an increase of $403.4 million, or 26.7%, from $1.51 billion at December 31, 2021. The CRE loan portfolio represented 47% and 45% of total loans at December 31, 2022 and December 31, 2021, respectively. The average loan balance outstanding in this portfolio was $1.7 million and the largest individual CRE loan

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outstanding was $29.0 million as of December 31, 2022. At December 31, 2022, this commercial mortgage was performing in accordance with its original terms.

CRE loans are secured by a variety of property types inclusive of multi-family dwellings, retail facilities, office buildings, commercial mixed use, lodging, industrial and warehouse properties, and other specialized properties.

Generally, our CRE loans are for terms of up to 10 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 typically 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 one-to-four family and multifamily properties.

**Home Equity.** The home equity portfolio totaled $111.4 million and $88.0 million at December 31, 2022 and 2021, respectively. The home equity portfolio represented 3% of total loans at both December 31, 2022 and 2021. At December 31, 2022, the largest home equity line of credit was a $3.0 million line of credit and had an outstanding balance of $3.0 million at December 31, 2022. At December 31, 2022, 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 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 10 years. Our 15-year lines of credit are interest only during the first 10 years and amortize on a five-year basis thereafter. Our 20-year lines of credit are interest only during the first 10 years and amortize on a 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 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 $1.0 million generally will not exceed combined loan-to-value of 75%. Rates are adjusted monthly based on changes in a designated market index. 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 five and 20 years.

**Commercial and Industrial ("C&I").** The C&I portfolio totaled $350.7 million at December 31, 2022, an increase of $81.2 million, or 30.1%, from $269.4 million at December 31, 2021. C&I loans represented 9% and 8% of total loans at December 31, 2022 and 2021, respectively. The average loan balance outstanding in this portfolio was $577,000, and the largest individual commercial and industrial loan outstanding was $18.9 million as of December 31, 2022. At December 31, 2022, this loan was performing in accordance with its original terms.

The Company's C&I loan clients represent various small- and middle-market established businesses involved in professional and financial services, accommodation and food services, utilities, health care, wholesale trade, manufacturing, distribution, retailing, and non-profits. Most clients are privately owned businesses 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, where regional economic strength or weakness impacts the relative risks in this loan category, in addition to renewable energy lending which is more specialized in nature. The Company has expanded its exposure within renewable energy lending but otherwise there are no significant concentrations in any one business sector, and loan risks are generally diversified among many borrowers.

Loans under the SBA's PPP program, net of associated deferred PPP processing fees, totaled $1.3 million at December 31, 2022 and $22.2 million at December 31, 2021, respectively, and are included in the C&I portfolio.

At December 31, 2022, commercial solar loans totaled $113.0 million and the average loan balance outstanding in this portfolio was $2.2 million. The largest individual loan outstanding was $7.5 million, and this loan was performing in accordance with its original terms at December 31, 2022.

**Consumer Loans.** The consumer loan portfolio totaled $37.6 million at December 31, 2022, an increase of $2.0 million, or 5.5%, from $35.6 million at December 31, 2021. Consumer loans represented 1% of the total loan portfolio at both December 31, 2022 and December 31, 2021. The average loan balance outstanding in this portfolio was $12,000 and the largest individual consumer loan outstanding was $2.5 million as of December 31, 2022. At December 31, 2022, this loan was performing in accordance with its original terms.

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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 our portfolio based on their loan type and contractual terms to maturity at December 31, 2022. 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.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **One Year<br>or Less** | **One to<br>Five Years** | **After Five Years through Fifteen Years** | **After Fifteen Years** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Residential mortgage | $7031 | $8971 | $133771 | $1499065 | $1648838 |
| Commercial mortgage | 3318 | 470996 | 1340429 | 99680 | 1914423 |
| Home equity | 442 | 7921 | 82033 | 20955 | 111351 |
| Commercial and industrial | 16363 | 100176 | 197932 | 36179 | 350650 |
| Consumer | 36812 | 329 | 453 |  | 37594 |
| &nbsp;&nbsp;&nbsp;Total | $63966 | $588393 | $1754618 | $1655879 | $4062856 |

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**Loan Portfolio by Interest Rate Type.** The following table summarizes the dollar amount of loans maturing over one year in our portfolio based on whether the loan has a fixed, adjustable, or floating rate of interest at December 31, 2022. Floating rate loans are tied to a market index while adjustable-rate loans are adjusted based on the contractual terms of the loan.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Fixed** | **Adjustable** | **Floating** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Residential mortgage | $855202 | $793636 | $— | $1648838 |
| Commercial mortgage | 856842 | 454969 | 602612 | 1914423 |
| Home equity | 2626 |  | 108725 | 111351 |
| Commercial and industrial | 53576 | 32329 | 264745 | 350650 |
| Consumer | 971 |  | 36623 | 37594 |
| &nbsp;&nbsp;&nbsp;Total | $1769217 | $1280934 | $1012705 | $4062856 |

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**Nonperforming Loans and TROUBLED DEBT RESTRUCTURINGS ("TDRs")**

The composition of nonperforming loans is as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Non-accrual loans | $5839 | $4628 | $7744 | $4160 | $525 |
| Loans past due > 90 days, but still accruing |  |  | 407 | 1264 |  |
| Troubled debt restructurings | 703 | 758 | 811 | 227 | 117 |
| Total non-performing loans | $6542 | $5386 | $8962 | $5651 | $642 |
| Nonperforming loans as a percentage of gross loans | 0.16% | 0.16% | 0.28% | 0.25% | 0.04% |
| Nonperforming loans as a percentage of total assets | 0.12% | 0.11% | 0.23% | 0.20% | 0.03% |

---

Total non-performing loans increased by $1.2 million at December 31, 2022 as compared to December 31, 2021, primarily due to higher residential and home equity loans on nonaccrual offset by a decrease in commercial real estate loans on nonaccrual.

The Company continues to closely monitor the portfolio of non-performing 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 December 31, 2022 and December 31, 2021, although such values may fluctuate with changes in the economy and the real estate market. In addition to the monitoring and review of loan performance internally, the Company has contracted

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with an independent organization to review the Company's commercial and CRE loan portfolios. This independent review was performed in each of the past five years.

**Non-accrual Loans.** Loans are typically placed on non-accrual 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. The status of delinquent loans, as well as situations identified as potential problems, is reviewed on a regular basis by 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.

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 status at the time of the restructuring generally remain on non-accrual status for approximately six months or longer before management considers such loans for return to accruing status. Accruing restructured loans are placed into 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. Troubled debt restructurings are individually evaluated for credit losses.

Pursuant to Section 4013 of the CARES Act, financial institutions were allowed to suspend the requirements under U.S. GAAP related to TDRs for modifications made before December 31, 2020 to loans that were current as of December 31, 2019. On January 3, 2021, the President signed into law the Consolidated Appropriations Act, 2021 (the "CAA"). As a result of the CAA, the suspension of TDR accounting was extended to the earlier of January 1, 2022, or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic declared by the President of the United States of America terminates. As of December 31, 2022, the Company had no loans in deferral.

**Allowance for CREDIT Losses** 

The following table summarizes the ratios related to the Company's allowance for credit losses and certain asset quality indicators for the years indicated:

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Period-end loans outstanding (net of unearned fees and deferred costs) | $4062856 | $3319106 | $3153648 |
| Average loans outstanding (net of unearned fees and deferred costs) | $3600815 | $3240876 | $2856631 |
| Loans on non-accrual | $5839 | $4628 | $7744 |
| Allowance for credit losses balance at end of period | $37774 | $34496 | $36016 |
| Net (charge-offs) recoveries to average loans outstanding- Total | 0.00% | 0.00% | (0.02)% |
| Non-accrual loans to loans outstanding at year end | 0.14% | 0.14% | 0.25% |
| Allowance for credit losses to total loans (ex. PPP) | 0.93% | 1.05% | 1.19% |
| Ratio of allowance for credit losses on loans to loans on non-accrual | 646.93% | 745.38% | 465.08% |
| Ratio of allowance for credit losses to loans outstanding | 0.93% | 1.04% | 1.14% |

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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. 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 credit losses is adequate.

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The following table presents the ratio of net charge-offs to average loans outstanding within each loan category:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** | **2020** | **2020** | **2020** |
|  | **Average Balance** | **Net (Charge-offs) Recoveries** | **Net (Charge-offs) Recoveries to Total Average Loans** | **Average Balance** | **Net (Charge-offs) Recoveries** | **Net (Charge-offs) Recoveries to Total Average Loans** | **Average Balance** | **Net (Charge-offs) Recoveries** | **Net (Charge-offs) Recoveries to Total Average Loans** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Residential mortgages | $1508546 | 4 | 0.00% | $1343112 | (4) | 0.00% | $1160998 |  | 0.00% |
| Commercial mortgages | 1661235 |  | 0.00 | 1424126 | 30 | 0.00 | 1253401 | (264) | (0.01) |
| Home equity | 95441 |  | 0.00 | 94949 |  | 0.00 | 97574 |  | 0.00 |
| Commercial and industrial | 292872 | 66 | 0.00 | 338494 | 140 | 0.00 | 304194 | (150) | (0.01) |
| Consumer | 42721 | (17) | 0.00 | 40195 | (12) | 0.00 | 40465 | (25) | 0.00 |
| **Total** | $3600815 | 53 | 0.00% | $3240876 | 154 | 0.00% | $2856632 | (439) | (0.02)% |

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The following table presents the allocation of the allowance for credit losses for loans by loan category:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **Allowance Amount** | **% of Allowance** | **% of Total Loans** | **Allowance Amount** | **% of Allowance** | **% of Total Loans** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Residential mortgages | $13321 | 35% | 40% | $13383 | 39% | 43% |
| Commercial mortgages | 19086 | 50 | 47 | 17133 | 49 | 46 |
| Home equity | 573 | 2 | 3 | 406 | 1 | 2 |
| Commercial and industrial | 4153 | 11 | 9 | 2989 | 9 | 8 |
| Consumer | 641 | 2 | 1 | 585 | 2 | 1 |
| **Total Allowance** | $37774 | 100% | 100% | $34496 | 100% | 100% |

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See additional discussion regarding the allowance for credit losses, in Item 7 under the caption "Critical Accounting Estimates" and in Note 7 to the Audited Consolidated Financial Statements.

**Sources of Funds** 

**General.** Deposits traditionally have been our primary source of funds for our investment and lending activities. The Company also borrows from the FHLB of Boston or the Federal Reserve Bank of Boston ("FRB of Boston"), and utilizes repurchase agreements and brokered deposits to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management purposes, and to manage our cost of funds. The Company's additional sources of funds are scheduled payments and prepayments of principal and interest on loans and investment securities, fee income, and proceeds from the sales of loans and securities.

**Deposits.** The Company accepts deposits primarily from clients in the communities in which its branches and offices are located, as well as from small- and medium-sized businesses and other clients throughout its lending area. We rely on competitive pricing and products, convenient locations, and 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.

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The following table sets forth the Company's deposits for the periods indicated:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
|  | **Amount** | **Percent** | **Amount** | **Percent** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Demand deposits (non-interest bearing) | $1366395 | 28.4% | $1393935 | 32.1% |
| Interest-bearing checking | 908961 | 18.9% | 763188 | 17.6% |
| Money market | 1162773 | 24.1% | 1104238 | 25.5% |
| Savings | 790628 | 16.4% | 907722 | 21.0% |
| Retail certificates of deposit under $250,000 | 117532 | 2.5% | 99196 | 2.3% |
| Retail certificates of deposit of $250,000 or greater | 87528 | 1.8% | 60171 | 1.4% |
| Brokered certificates of deposit | 381559 | 7.9% | 2702 | 0.1% |
| &nbsp;&nbsp;&nbsp;Total | $4815376 | 100.0% | $4331152 | 100.0% |

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At December 31, 2022, the Company had a total of $205.1 million in certificates of deposit, excluding brokered deposits, of which $151.7 million had remaining maturities of one year or less. The Company had total brokered deposits of $381.6 million and $2.7 million at December 31, 2022 and 2021, respectively.

The amount of deposits above the FDIC's limit of $250,000 was $2.50 billion and $2.19 billion as of December 31, 2022 and 2021, respectively.

Retail certificates of deposit of $250,000 or greater by maturity are as follows:

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Within three months | $32560 | $30889 |
| Over 3 months, within six months | 16162 | 5243 |
| Over six months, within twelve months | 18152 | 11142 |
| Over twelve months. | 20654 | 12897 |
| Total | $87528 | $60171 |

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Interest expense on retail certificates of deposit of $250,000 or greater was $385,000, $551,000, and $832,000 for the years ended December 31, 2022, 2021, and 2020, respectively.

The following table sets forth certificates of deposit, excluding brokered deposits, classified by interest rate as of the dates indicated:

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| **Interest Rate:** |  |  |
| &nbsp;&nbsp;&nbsp;0.00% to 0.50% | $101559 | $107025 |
| &nbsp;&nbsp;&nbsp;0.51% to 1.00% | 26606 | 37265 |
| &nbsp;&nbsp;&nbsp;1.00% to 1.99% | 28736 | 5152 |
| &nbsp;&nbsp;&nbsp;2.00% to 2.99% | 11009 | 9925 |
| &nbsp;&nbsp;&nbsp;3.00% to 3.99% | 19493 |  |
| &nbsp;&nbsp;&nbsp;4.00% to 4.99% | 17657 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $205060 | $159367 |

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**Borrowings.** Total borrowings were $105.2 million, an increase of $88.7 million as compared to $16.5 million at December 31, 2021. The Company's borrowings consisted of advances from the FHLB of Boston and repurchase agreements. FHLB of Boston advances are collateralized by a blanket pledge agreement on the Company's FHLB of Boston stock and residential mortgages held in the Bank's portfolios. The Company pledged investment securities as collateral for its repurchase agreements.

The Company's remaining borrowing capacity at the FHLB of Boston at December 31, 2022 was approximately $639.0 million. In addition, the Company has a $10.0 million line of credit with the FHLB of Boston and a $10.0 million line of credit with a correspondent bank.

The Company had no borrowings outstanding with the FRB of Boston at both December 31, 2022 and 2021. The Company's remaining borrowing capacity at the FRB of Boston at December 31, 2022 was approximately $680.4 million.

See Note 12 - Borrowings, for a schedule, including related interest rates and other information.

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**Net Interest MargiN**

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 table sets forth the distribution of the Company's daily average assets, liabilities and shareholders' equity, and average rates earned or paid on a fully taxable equivalent basis for each of the periods indicated:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** |
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2020** | **December 31, 2020** | **December 31, 2020** |
|  | **Average<br>Balance** | **Interest<br>Income/<br>Expenses(1)** | **Rate<br>Earned/<br>Paid (1)** | **Average<br>Balance** | **Interest<br>Income/<br>Expenses (1)** | **Rate<br>Earned/<br>Paid (1)** | **Average<br>Balance** | **Interest<br>Income/<br>Expenses (1)** | **Rate<br>Earned/<br>Paid (1)** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| ASSETS |  |  |  |  |  |  |  |  |  |
| Interest-earning assets |  |  |  |  |  |  |  |  |  |
| Loans (2) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Taxable | $3552934 | $135965 | 3.83% | $3203126 | $120019 | 3.75% | $2832796 | $119447 | 4.22% |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax-exempt | 47881 | 1832 | 3.83 | 37750 | 1525 | 4.04 | 23835 | 1115 | 4.68 |
| Securities available for sale (3) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Taxable | 194612 | 2680 | 1.38 | 217096 | 2617 | 1.21 | 136776 | 2337 | 1.71 |
| Securities held to maturity |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Taxable | 978321 | 16875 | 1.72 | 424499 | 6847 | 1.61 | 152789 | 3711 | 2.43 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax-exempt | 100057 | 3135 | 3.13 | 104114 | 3329 | 3.20 | 89841 | 3145 | 3.50 |
| Cash and cash equivalents | 64790 | 262 | 0.40 | 141278 | 150 | 0.11 | 69783 | 187 | 0.27 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-earning assets (4) | 4938595 | 160749 | 3.25% | 4127863 | 134487 | 3.26% | 3305820 | 129942 | 3.93% |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-interest-earning assets | 246813 |  |  | 251652 |  |  | 245316 |  |  |
| Allowance for credit losses | (35072) |  |  | (35642) |  |  | (27887) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total assets | $5150336 |  |  | $4343873 |  |  | $3523249 |  |  |
| LIABILITIES AND SHAREHOLDERS'<br> EQUITY |  |  |  |  |  |  |  |  |  |
| Interest-bearing deposits |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Checking accounts | $753001 | $1285 | 0.17% | $675753 | $265 | 0.04% | $554000 | $682 | 0.12% |
| &nbsp;&nbsp;&nbsp;&nbsp;Savings accounts | 897146 | 1554 | 0.17 | 957039 | 861 | 0.09 | 937247 | 3378 | 0.36 |
| &nbsp;&nbsp;&nbsp;&nbsp;Money market accounts | 1165793 | 7999 | 0.69 | 765021 | 2769 | 0.36 | 350117 | 1277 | 0.36 |
| &nbsp;&nbsp;&nbsp;&nbsp;Certificates of deposit | 240468 | 3760 | 1.56 | 209311 | 1079 | 0.52 | 259568 | 1958 | 0.75 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | 3056408 | 14598 | 0.48% | 2607124 | 4974 | 0.19% | 2100932 | 7295 | 0.35% |
| Subordinated debt |  |  |  |  |  |  | 5408 | 444 | 8.21 |
| Other borrowed funds | 85580 | 2180 | 2.55 | 18466 | 559 | 3.03 | 123693 | 1406 | 1.14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing liabilities | 3141988 | 16778 | 0.53% | 2625590 | 5533 | 0.21% | 2230033 | 9145 | 0.41% |
| Non-interest-bearing liabilities |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Demand deposits | 1446745 |  |  | 1197056 |  |  | 838653 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other liabilities | 104063 |  |  | 103459 |  |  | 103086 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 4692796 |  |  | 3926105 |  |  | 3171772 |  |  |
| Shareholders' equity | 457540 |  |  | 417768 |  |  | 351477 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities & shareholders' equity | $5150336 |  |  | $4343873 |  |  | $3523249 |  |  |
| Net interest income on a fully taxable equivalent<br> basis |  | 143971 |  |  | 128954 |  |  | 120797 |  |
| Less taxable equivalent adjustment |  | (1043) |  |  | (1019) |  |  | (895) |  |
| Net interest income |  | $142928 |  |  | $127935 |  |  | $119902 |  |
| Net interest spread (5) |  |  | 2.72% |  |  | 3.05% |  |  | 3.52% |
| Net interest margin (6) |  |  | 2.92% |  |  | 3.12% |  |  | 3.65% |

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(1)Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% for 2022, 2021, and 2020.

(2)Non-accrual loans are included in average amounts outstanding.

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

(4)FHLB stock balance is excluded from interest-earning assets and dividend income is excluded from interest income.

(5)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets, inclusive of PPP loans originated during 2022 and 2021, and the weighted average cost of interest-bearing liabilities.

(6)Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets, inclusive of PPP loans originated during 2022 and 2021.

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**Rate/Volume Analysis**

The following 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), (ii) changes attributable to changes in rate (change in average interest rate multiplied by prior year average balance), and (iii) changes attributable to the combined impact of volumes and rates have been allocated proportionately to separate volume and rate categories.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** |
|  | **Compared with** | **Compared with** | **Compared with** | **Compared with** | **Compared with** | **Compared with** |
|  | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2020** | **Year Ended December 31, 2020** | **Year Ended December 31, 2020** |
|  | **Increase/(Decrease)<br>Due to Change in** | **Increase/(Decrease)<br>Due to Change in** | **Increase/(Decrease)<br>Due to Change in** | **Increase/(Decrease)<br>Due to Change in** | **Increase/(Decrease)<br>Due to Change in** | **Increase/(Decrease)<br>Due to Change in** |
|  | **Volume** | **Rate** | **Total** | **Volume** | **Rate** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Interest income |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Loans |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxable | $13341 | $2605 | $15946 | $14676 | $(14104) | $572 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax-exempt | 391 | (84) | 307 | 579 | (169) | 410 |
| &nbsp;&nbsp;&nbsp;Securities available for sale |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxable | (287) | 350 | 63 | 1103 | (823) | 280 |
| &nbsp;&nbsp;&nbsp;Securities held to maturity |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxable | 9522 | 506 | 10028 | 4735 | (1599) | 3136 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax-exempt | (128) | (66) | (194) | 472 | (288) | 184 |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | (118) | 230 | 112 | 119 | (156) | (37) |
| Total interest income | $22721 | $3541 | $26262 | $21684 | $(17139) | $4545 |
| Interest expense |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Checking accounts | 34 | 986 | 1020 | 125 | (542) | (417) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Savings accounts | (57) | 750 | 693 | 70 | (2587) | (2517) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money market accounts | 1930 | 3300 | 5230 | 1502 | (10) | 1492 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certificates of deposit | 183 | 2498 | 2681 | (334) | (545) | (879) |
| Total interest-bearing deposits | 2090 | 7534 | 9624 | 1363 | (3684) | (2321) |
| &nbsp;&nbsp;&nbsp;Subordinated debt |  |  |  | (444) |  | (444) |
| &nbsp;&nbsp;&nbsp;Other borrowed funds | 1723 | (102) | 1621 | (1869) | 1022 | (847) |
| Total interest expense | $3813 | $7432 | $11245 | $(950) | $(2662) | $(3612) |
| Change in net interest income | $18908 | $(3891) | $15017 | $22634 | $(14477) | $8157 |

---

Excluding the impact of merger-related loan accretion, the adjusted net interest margin for the year ended December 31, 2022, was 2.87%, representing a six basis points decrease over the adjusted net interest margin for the year ended December 31, 2021 of 2.93%.

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended** | **Year Ended** | **Year Ended** |
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Average<br>Balance** | **Interest<br>Income/<br>Expenses** | **Rate<br>Earned/<br>Paid** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Total interest-earning assets (GAAP) | $4938595 |  |  |
| Net interest income on a fully taxable equivalent basis (GAAP) |  | $143971 |  |
| Net interest margin on a fully taxable equivalent basis (GAAP) |  |  | 2.92% |
| Less: Accretion of loan fair value adjustments (GAAP) |  | (2259) | -0.05% |
| Adjusted net interest margin on a fully taxable equivalent basis (non-GAAP) | $4938595 | $141712 | 2.87% |

---

------

Excluding the impact of merger-related loan accretion and the impact of PPP loans, the adjusted net interest margin for the year ended December 31, 2021 was 2.93%, representing a 43 basis points decrease over the adjusted net interest margin for the year ended December 31, 2020 of 3.36%.

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended** | **Year Ended** | **Year Ended** |
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Average<br>Balance** | **Interest<br>Income/<br>Expenses** | **Rate<br>Earned/<br>Paid** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Total interest-earning assets (GAAP) | $4127863 |  |  |
| Net interest income on a fully taxable equivalent basis (GAAP) |  | $128954 |  |
| Net interest margin on a fully taxable equivalent basis (GAAP) |  |  | 3.12% |
| Less: Paycheck Protection Program loan impact (GAAP) | (102979) | (6089) | -0.07% |
| Less: Accretion of loan fair value adjustments (GAAP) |  | (4771) | -0.12% |
| Adjusted net interest margin on a fully taxable equivalent basis (non-GAAP) | $4024884 | $118094 | 2.93% |

---

**Market Risk and Asset Liability Management** 

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 investment, borrowing, lending and deposit gathering 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. Responsibility for the management of the Company's interest rate sensitivity position falls under the authority of the Board of Directors (the "Board") which, in turn, has assigned authority for its formulation, revision and administration to the Risk Committee of the Board of Directors who reviews, approves and reports on information provided by the Investment and Asset/Liability Committee (the "ALCO" or the "Committee"). 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 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 FRB 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 table demonstrates the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or "instantaneous 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 and 24 months.

As of December 31, 2022:

------

---

| | | |
|:---|:---|:---|
|  | **Year 1** | **Year 2** |
| **Change in Interest<br>Rates (in Basis Points)** | **Percentage Change<br>in Net Interest<br>Income** | **Percentage Change<br>in Net Interest<br>Income** |
| Parallel rate shocks |  |  |
| +300 | (1.8) | 16.6 |
| +200 | (1.3) | 13.8 |
| +100 | (0.5) | 11.7 |
| –100 | 1.6 | 6.6 |
| –200 | 0.8 | 1.3 |

---

The following table demonstrates the annualized result of an interest rate simulation 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 and 24 months.

As of December 31, 2022:

---

| | | |
|:---|:---|:---|
|  | **Year 1** | **Year 2** |
| **Change in Interest<br>Rates (in Basis Points)** | **Percentage Change<br>in Net Interest<br>Income** | **Percentage Change<br>in Net Interest<br>Income** |
| Gradual rate shifts |  |  |
| +200 | 0.4 | 12.8 |
| –100 | 1.3 | 7.9 |
| –200 | 1.5 | 4.3 |

---

These simulations assume that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 and 24 months. The changes to net interest income shown above are in compliance with the Company's policy guidelines.

These estimates of changes in the Company's net interest income require us to make certain assumptions including loan- and mortgage-related investment prepayment speeds, reinvestment rates, deposit cost, deposit repricing, 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 net interest income. Although our 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 and will differ from actual results.

**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 December 31, 2022, estimated that, in the event of an instantaneous 200 basis point increase in interest rates, the Bank would experience a 5.6% decrease in the economic value of equity for the next 12 months, resulting in an economic value of equity ratio of 11.9%. 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 1.3% increase in the economic value of equity, resulting in an economic value of equity ratio of 11.7%. 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 December 31, 2022. 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 client 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 mortgage-related investment prepayment speeds, reinvestment rates, deposit costs, deposit repricing, 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.

**LIQUIDITY AND CAPITAL RESOURCES** 

**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 and contractual 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 of Boston, entering into repurchase agreements, and purchasing wholesale certificates of deposit as its secondary sources. At December 31, 2022, the Company had access to funds totaling $1.5 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 Risk Committee reviews the Company's liquidity needs and reports any findings (if required) to the Board of Directors.

**Capital Adequacy.** Total shareholders' equity was $517.6 million at December 31, 2022, as compared to $437.8 million at December 31, 2021. The Company's equity increased primarily due to $62.9 million of equity issued as a result of the Northmark Merger and net income of $52.9 million, partially offset by an increase in unrealized losses on the available for sale investment portfolio of $18.7 million and dividend payments of $18.4 million. Based on past performance and current expectations, the Company believes that cash from operations, cash, cash equivalents, investments, and other sources of liquidity will satisfy its currently anticipated working capital needs, capital expenditures, and other liquidity requirements associated with its operations through the next 12 months and the reasonably foreseeable future.

The Company and the Bank are subject to various regulatory capital requirements. As of December 31, 2022, the Company and the Bank exceeded the regulatory minimum levels to be considered "well capitalized." See Note 18 – Shareholders' Equity to the Consolidated Financial Statements for additional discussion of regulatory capital requirements.

**Contractual Obligations, Commitments, and Contingencies**

As of December 31, 2022 and December 31, 2021, the Company had outstanding commitments to extend credit of $1.07 billion and $809.4 million, respectively, and commitments associated with outstanding letters of credit of $24.2 million and $18.9 million, respectively. Since commitments associated with commitments to extend credit and outstanding letters of credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

As of December 31, 2022, the Company had cash and cash equivalents of $30.7 million, as compared with $180.2 million at December 31, 2021, a decrease of $149.4 million, or 82.9%.

In the ordinary course of business, the Company has entered into numerous contractual obligations and commitments. The following table summarizes the Company's contractual cash obligations by maturity at December 31, 2022:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Payments Due — By Period as of December 31, 2022** | **Payments Due — By Period as of December 31, 2022** | **Payments Due — By Period as of December 31, 2022** | **Payments Due — By Period as of December 31, 2022** | **Payments Due — By Period as of December 31, 2022** |
| **CONTRACTUAL OBLIGATIONS** | **Total** | **Less Than<br>One Year** | **One to<br>Three<br>Years** | **Three to<br>Five<br>Years** | **After Five<br>Years** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| FHLBB advances | $105212 | $105212 | $— | $— | $— |
| Retirement benefit obligations | 31220 | 2759 | 5721 | 6006 | 16734 |
| Lease obligations | 30132 | 7085 | 11203 | 5961 | 5883 |
| Certificates of deposit | 586619 | 533513 | 45130 | 7976 |  |
| &nbsp;&nbsp;&nbsp;Total contractual cash<br> obligations | $753183 | $648569 | $62054 | $19943 | $22617 |

---

Further discussion regarding commitments and contingencies can be found in Note 16 – financial instruments with off-balance sheet risk and Note 17 – Commitments and Contingencies to the Consolidated Financial Statements.

**Financial Instruments with Off-Balance-Sheet Risk** 

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its clients. 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 of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•commitments to originate and sell loans,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•standby and commercial letters of credit,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•unused lines of credit,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•unadvanced portions of construction loans,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•unadvanced portions of other loans,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•loan related derivatives, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•risk participation agreements.

Off-balance-sheet arrangements are more fully discussed in Note 16 – Financial Instruments with Off-Balance-Sheet Risk to the Consolidated Financial Statements.

**Item 7A. Quantitative and Qualitative Disclosures About Market Risk.** 

The information required by this item is included in Item 7 of this report under "Market Risk and Asset Liability Management."

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**Item 8. Financial Statements and Supplementary Data.**

**CAMBRIDGE BANCORP AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
|  | **(dollars in thousands, except share information)** | **(dollars in thousands, except share information)** |
| **Assets** |  |  |
| Cash and cash equivalents | $30719 | $180153 |
| Investment securities |  |  |
| &nbsp;&nbsp;&nbsp;Available for sale, at fair value (amortized cost $182,027 and $201,270, respectively) | 153416 | 197803 |
| &nbsp;&nbsp;&nbsp;Held to maturity, at amortized cost (fair value $885,586 and $971,092, respectively) | 1051997 | 977061 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investment securities | 1205413 | 1174864 |
| Loans held for sale, at lower of cost or fair value |  | 1490 |
| Loans |  |  |
| &nbsp;&nbsp;&nbsp;Residential mortgage | 1648838 | 1415079 |
| &nbsp;&nbsp;&nbsp;Commercial mortgage | 1914423 | 1511002 |
| &nbsp;&nbsp;&nbsp;Home equity | 111351 | 87960 |
| &nbsp;&nbsp;&nbsp;Commercial and industrial | 350650 | 269446 |
| &nbsp;&nbsp;&nbsp;Consumer | 37594 | 35619 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total loans | 4062856 | 3319106 |
| &nbsp;&nbsp;&nbsp;Less: allowance for credit losses on loans | (37774) | (34496) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loans | 4025082 | 3284610 |
| Federal Home Loan Bank of Boston Stock, at cost | 6264 | 4816 |
| Bank owned life insurance | 34484 | 46970 |
| Banking premises and equipment, net | 23297 | 17326 |
| Right-of-use asset operating leases | 25098 | 31273 |
| Deferred income taxes, net | 17990 | 9985 |
| Accrued interest receivable | 14118 | 9162 |
| Goodwill | 64539 | 51912 |
| Merger-related intangibles, net | 7443 | 2617 |
| Other assets | 105290 | 76366 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $5559737 | $4891544 |
| **Liabilities** |  |  |
| Deposits |  |  |
| &nbsp;&nbsp;&nbsp;Demand | $1366395 | $1393935 |
| &nbsp;&nbsp;&nbsp;Interest-bearing checking | 908961 | 763188 |
| &nbsp;&nbsp;&nbsp;Money market | 1162773 | 1104238 |
| &nbsp;&nbsp;&nbsp;Savings | 790628 | 907722 |
| &nbsp;&nbsp;&nbsp;Certificates of deposit | 586619 | 162069 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 4815376 | 4331152 |
| Borrowings | 105212 | 16510 |
| Operating lease liabilities | 27413 | 33871 |
| Other liabilities | 94184 | 72174 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 5042185 | 4453707 |
| **Shareholders' Equity** |  |  |
| Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 7,796,440 shares and 6,968,192 shares, respectively | 7796 | 6968 |
| Additional paid-in capital | 293186 | 229205 |
| Retained earnings | 237369 | 202874 |
| Accumulated other comprehensive loss | (20799) | (1210) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | 517552 | 437837 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $5559737 | $4891544 |

---

Auditor

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

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**CAMBRIDGE BANCORP AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF INCOME**

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands, except per share information)** | **(dollars in thousands, except per share information)** | **(dollars in thousands, except per share information)** |
| Interest and dividend income |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest on taxable loans | $135965 | $120019 | $119447 |
| &nbsp;&nbsp;&nbsp;Interest on tax-exempt loans | 1447 | 1205 | 880 |
| &nbsp;&nbsp;&nbsp;Interest on taxable investment securities | 19555 | 9464 | 6048 |
| &nbsp;&nbsp;&nbsp;Interest on tax-exempt investment securities | 2477 | 2630 | 2485 |
| &nbsp;&nbsp;&nbsp;Dividends on FHLB of Boston stock | 287 | 46 | 331 |
| &nbsp;&nbsp;&nbsp;Interest on overnight investments | 262 | 150 | 187 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest and dividend income | 159993 | 133514 | 129378 |
| Interest expense |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest on deposits | 14598 | 4974 | 7295 |
| &nbsp;&nbsp;&nbsp;Interest on subordinated debt |  |  | 444 |
| &nbsp;&nbsp;&nbsp;Interest on borrowed funds | 2180 | 559 | 1406 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | 16778 | 5533 | 9145 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest and dividend income | 143215 | 127981 | 120233 |
| Provision for (Release of) credit losses | 3881 | (1294) | 18310 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest and dividend income after provision for (release of) credit losses | 139334 | 129275 | 101923 |
| Noninterest income |  |  |  |
| &nbsp;&nbsp;&nbsp;Wealth management revenue | 33034 | 35037 | 29751 |
| &nbsp;&nbsp;&nbsp;Deposit account fees | 2913 | 1939 | 2595 |
| &nbsp;&nbsp;&nbsp;ATM/Debit card income | 1663 | 1567 | 1308 |
| &nbsp;&nbsp;&nbsp;Bank owned life insurance income | 1808 | 801 | 747 |
| &nbsp;&nbsp;&nbsp;Gain on loans sold, net | 98 | 832 | 1850 |
| &nbsp;&nbsp;&nbsp;Loan related derivative income | 625 | 2124 | 1479 |
| &nbsp;&nbsp;&nbsp;Other income | 2868 | 2024 | 1726 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | 43009 | 44324 | 39525 |
| Noninterest expense |  |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | 70109 | 65127 | 58975 |
| &nbsp;&nbsp;&nbsp;Occupancy and equipment | 14364 | 13898 | 13004 |
| &nbsp;&nbsp;&nbsp;Data processing | 10706 | 8829 | 7662 |
| &nbsp;&nbsp;&nbsp;Professional services | 4728 | 5391 | 4190 |
| &nbsp;&nbsp;&nbsp;Marketing | 2301 | 2536 | 1818 |
| &nbsp;&nbsp;&nbsp;FDIC insurance | 1845 | 1318 | 992 |
| &nbsp;&nbsp;&nbsp;Non-operating expenses | 3059 | 1118 | 7612 |
| &nbsp;&nbsp;&nbsp;Other expenses | 3270 | 2267 | 3832 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | 110382 | 100484 | 98085 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 71961 | 73115 | 43363 |
| Income tax expense | 19052 | 19091 | 11404 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income | $52909 | $54024 | $31959 |
| Share data: |  |  |  |
| &nbsp;&nbsp;&nbsp;Weighted average shares outstanding, basic | 7163223 | 6926257 | 6289481 |
| &nbsp;&nbsp;&nbsp;Weighted average shares outstanding, diluted | 7213913 | 6990603 | 6344409 |
| &nbsp;&nbsp;&nbsp;Basic earnings per share | $7.35 | $7.76 | $5.07 |
| &nbsp;&nbsp;&nbsp;Diluted earnings per share | $7.30 | $7.69 | $5.03 |

---

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

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**CAMBRIDGE BANCORP AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME** 

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Net income | $52909 | $54024 | $31959 |
| Other comprehensive income (loss), net of tax: |  |  |  |
| &nbsp;&nbsp;&nbsp;Available for sale securities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized holding gains (losses) | (18736) | (4622) | 2800 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: reclassification adjustment for losses realized<br> in net income |  |  | (57) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total unrealized losses on available for sale<br> securities | (18736) | (4622) | 2743 |
| &nbsp;&nbsp;&nbsp;Interest rate swaps designated as cash flow hedges |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized holding gains (losses) | (1563) | (959) | 4758 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: reclassification adjustment for gains (losses) realized in net income | (600) | (1864) | (1354) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total unrealized losses on interest rate swaps | (2163) | (2823) | 3404 |
| &nbsp;&nbsp;&nbsp;Defined benefit retirement plans |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in retirement liabilities | 1310 | 3801 | (1232) |
| Other comprehensive income (loss) | (19589) | (3644) | 4915 |
| Comprehensive income | $33320 | $50380 | $36874 |

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

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**CAMBRIDGE BANCORP AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **Common<br>Stock** | **Additional<br>Paid-In<br>Capital** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive<br>Income<br>(Loss)** | **Total<br>Shareholders'<br>Equity** |
|  | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** |
| Balance at December 31, 2019 | $5401 | $136766 | $146875 | $(2481) | $286561 |
| Cumulative effect of accounting changes |  |  | (347) |  | (347) |
| Net income |  |  | 31959 |  | 31959 |
| Other comprehensive income |  |  |  | 4915 | 4915 |
| Share based compensation and other share-based activity | 23 | 4541 |  |  | 4564 |
| Dividends declared ($2.12 per share) |  |  | (13083) |  | (13083) |
| Common stock issued for Wellesley merger | 1503 | 85660 |  |  | 87163 |
| Balance at December 31, 2020 | $6927 | $226967 | $165404 | $2434 | $401732 |
| Balance at December 31, 2020 | $6927 | $226967 | $165404 | $2434 | $401732 |
| Net income |  |  | 54024 |  | 54024 |
| Other comprehensive loss |  |  |  | (3644) | (3644) |
| Share based compensation and other share-based activity | 41 | 2238 |  |  | 2279 |
| Dividends declared ($2.38 per share) |  |  | (16554) |  | (16554) |
| Balance at December 31, 2021 | $6968 | $229205 | $202874 | $(1210) | $437837 |
| Balance at December 31, 2021 | $6968 | $229205 | $202874 | $(1210) | $437837 |
| Net income |  |  | 52909 |  | 52909 |
| Other comprehensive loss |  |  |  | (19589) | (19589) |
| Share based compensation and other share-based activity | 39 | 1920 |  |  | 1959 |
| Dividends declared ($2.56 per share) |  |  | (18414) |  | (18414) |
| Common stock issued for Northmark merger | 789 | 62061 |  |  | 62850 |
| Balance at December 31, 2022 | $7796 | $293186 | $237369 | $(20799) | $517552 |

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

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**CAMBRIDGE BANCORP AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |
| Net income | $52909 | $54024 | $31959 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Provision for (Release of) credit losses | 3881 | (1294) | 18310 |
| &nbsp;&nbsp;&nbsp;Amortization (accretion) of deferred charges and fees, net | 2282 | (1434) | (780) |
| &nbsp;&nbsp;&nbsp;Depreciation (accretion), and amortization, net | 726 | (1838) | (8134) |
| &nbsp;&nbsp;&nbsp;Bank owned life insurance income | (1808) | (801) | (747) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) loss on disposition of investment securities |  |  | (69) |
| &nbsp;&nbsp;&nbsp;Share-based compensation and other share-based activity | 1959 | 2279 | 4564 |
| &nbsp;&nbsp;&nbsp;Change in accrued interest receivable | (4280) | 352 | 253 |
| &nbsp;&nbsp;&nbsp;Deferred income tax expense | 587 | 2899 | (665) |
| &nbsp;&nbsp;&nbsp;Change in loans held for sale | 1490 | 5419 | (5363) |
| &nbsp;&nbsp;&nbsp;Change in other assets, net | (32056) | 5473 | (22863) |
| &nbsp;&nbsp;&nbsp;Change in other liabilities, net | 26260 | 429 | 20332 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 51950 | 65508 | 36797 |
| CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |
| &nbsp;&nbsp;&nbsp;Origination of loans | (1265305) | (1327044) | (1070321) |
| &nbsp;&nbsp;&nbsp;Proceeds from principal payments of loans | 850886 | 1170430 | 1022516 |
| &nbsp;&nbsp;&nbsp;Purchase of loans | (23655) |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from calls/maturities of securities available for sale | 29040 | 42169 | 47087 |
| &nbsp;&nbsp;&nbsp;Purchase of securities available for sale | (10170) | (9927) | (140570) |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of securities | 19018 |  | 10821 |
| &nbsp;&nbsp;&nbsp;Proceeds from calls/maturities of securities held to maturity | 132173 | 70800 | 56007 |
| &nbsp;&nbsp;&nbsp;Purchase of securities held to maturity | (205137) | (801775) | (33818) |
| &nbsp;&nbsp;&nbsp;Death benefit on bank-owned life insurance | 4025 |  |  |
| &nbsp;&nbsp;&nbsp;Redemption on bank-owned life insurance | 10759 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Purchase) redemption of FHLB of Boston stock | (1215) | 918 | 8505 |
| &nbsp;&nbsp;&nbsp;Purchase of banking premises and equipment | (1776) | (2033) | (2218) |
| &nbsp;&nbsp;&nbsp;Net cash acquired in business combinations | 82174 |  | 43063 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (379183) | (856462) | (58928) |
| CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |
| &nbsp;&nbsp;&nbsp;Change in demand, interest-bearing, money market and savings accounts | (216751) | 1020821 | 422866 |
| &nbsp;&nbsp;&nbsp;Change in certificates of deposit | 327938 | (92552) | (138213) |
| &nbsp;&nbsp;&nbsp;Change in short term borrowings | 85026 | (16393) | (224989) |
| &nbsp;&nbsp;&nbsp;Redemption of subordinated debt |  |  | (10000) |
| &nbsp;&nbsp;&nbsp;Cash dividends paid on common stock | (18414) | (16554) | (13083) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 177799 | 895322 | 36581 |
| Net change in cash and cash equivalents | (149434) | 104368 | 14450 |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents at beginning of period | 180153 | 75785 | 61335 |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents at end of period | $30719 | $180153 | $75785 |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid during the period for: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest | $15805 | $5656 | $9172 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes | 21822 | 9054 | 14628 |
| &nbsp;&nbsp;&nbsp;Significant non-cash transactions |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transfer of other real estate owned |  |  | 2293 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock issued to shareholders due to merger | 62850 |  | 87163 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of assets acquired, net of cash acquired | 346501 |  | 961668 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of liabilities assumed | 378453 |  | 917569 |

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

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**CAMBRIDGE BANCORP AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2022**

**1.** **THE BUSINESS**

The accompanying 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 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, incorporated in 1983. The Company is the sole shareholder of the Bank, a Massachusetts trust company chartered in 1890 which is a commercial bank. The Company is a private bank offering a full range of private banking and wealth management services to its clients. The private banking business, the Company's only reportable operating segment, is managed as a single strategic unit.

As a private bank, the Company focuses on four core services that center around client needs. The core services include Wealth Management, Commercial Banking, Residential Lending, and Personal Banking. The Bank offers a full range of commercial and consumer banking services through its network of 22 banking offices in Massachusetts and New Hampshire. The Bank is engaged principally in the business of attracting deposits from the public and investing those deposits. The Bank invests those funds in various types of loans, including residential and commercial real estate, and a variety of commercial and consumer loans. The Bank also invests its deposits and borrowed funds in investment securities and has two wholly owned Massachusetts security corporations, CTC Security Corporation and CTC Security Corporation III, for this purpose. Deposits at the Bank are insured by the Federal Deposit Insurance Corporation ("FDIC") for the maximum amount permitted by FDIC Regulations.

Trust and investment management services are offered through the Bank's private banking offices in Massachusetts and New Hampshire, and its wealth management offices located in Boston and Wellesley, Massachusetts and Concord, Manchester, and Portsmouth, New Hampshire. The Bank also has a non-depository trust company, Cambridge Trust Company of New Hampshire, Inc., which allows non-New Hampshire residents the opportunity to take advantage of the state's favorable trust laws. The assets held for wealth management clients are not assets of the Bank and, accordingly, are not reflected in the accompanying consolidated balance sheets.

**2.** **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Basis of Presentation**

The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP").

**Use of Estimates**

The preparation of consolidated 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 consolidated financial statements. Actual results could differ from those estimates. The allowance for credit losses, the valuation of deferred tax assets, and the valuation of assets acquired and liabilities assumed in business combinations are particularly subject to change.

**Reclassifications**

Certain amounts in the prior year's financial statements may have been reclassified to conform with the current year's presentation.

**Cash and Cash Equivalents**

Cash and cash equivalents consist of cash on hand, amounts due from banks, and overnight investments.

**Investment Securities**

Investment securities are classified as either "held to maturity" or "available for sale" in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 320, Investments – Debt Securities. Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amortized cost.

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Debt 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.

Purchase premiums and discounts are recognized in interest income using the effective yield or straight-line method over the term of the securities, except for callable debt securities for which the purchase premiums are recognized through the earliest call date. Gains and losses on the sale of debt securities are recorded on the trade date and determined using the specific identification method.

Allowance for Credit Losses - Held to Maturity Securities

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 ("U.S.") or are guaranteed by U.S. 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 government-sponsored enterprise's ("GSE") ability to draw funds from the U.S. 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. 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 consolidated statements of income 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.

Allowance for Credit Losses - Available for Sale Securities

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 more likely than not that the Company will be required to sell the security before recovery of the Company's 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 compliance with the 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 recover the entire amortized cost basis of the security, an allowance for credit losses would be recorded, with a related charge to 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**

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.

Allowance for Credit Losses - Loans

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's methodology for calculating the allowance for credit losses ("ACL") on loans consists of quantitative and qualitative components. 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. 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. For periods 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, the Company reassesses the

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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 homogeneous 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 the Company determines that the credit no longer retains the same risk characteristics. To the extent that there are a multitude of these loans with new similar risk 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 not included in the 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 the collateral at the reporting date, adjusted for selling costs as appropriate.

The qualitative component of the ACL considers (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 non-accrual and past due loans; and (iii) model limitations; among other factors. Qualitative adjustments are considered when management believes expected credit losses are not representative of historical loss experience alone, and should be adjusted to reflect the current conditions and characteristics of the Company's own portfolio. They are made at the segment level, considering any required adjustments for differences in underwriting standards, portfolio mix, and other relevant data shifts over time.

The Company evaluates the allowance for credit losses on loans quarterly. The Company regularly reviews its collection experience (including delinquencies and net charge-offs) in determining its 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 assumption estimates and assessments the Company uses to estimate the allowance for credit losses reflects the Company's best estimate of model assumptions and forecasted conditions at that time. Changes in such estimates can significantly affect the allowance and provision for (release of) credit losses. It is possible and likely that the Company will experience credit losses that are different from the current estimates.

The provision for (release of) credit losses charged to income is based on management's judgment of the amount necessary to maintain the allowance at a level to provide for expected credit losses for the life of the loan balances as of the evaluation date. When management believes that the collectability of a loan's principal balance, or portions thereof, is unlikely, the principal amount is charged against the allowance for credit losses. Recoveries on loans that have been previously charged off are credited to the allowance for credit losses, generally at the time cash is received on a charged-off account. The allowance is an estimate, and ultimate losses may vary from current estimates. As adjustments become necessary, they are reported in the results of operations through the provision for (release of) credit losses in the period in which they become known.

Risk characteristics relevant to each portfolio segment are as follows:

Residential mortgage and home equity loans – The Company generally does not originate loans in these segments with a loan-to-value ratio greater than 80%, unless covered by private mortgage insurance, and in all cases not greater than a loan-to-value ratio of 97%. The Company does not originate subprime loans. Loans in these segments are secured by one-to-four family residential real estate, and repayment is primarily dependent on the credit quality of the individual borrower.

Commercial mortgage loans – This includes multi-family properties and construction. The Company generally does not originate loans in this segment with a loan-to-value ratio greater than 75%. Loans in this segment are secured by owner-occupied and nonowner-occupied commercial real estate ("CRE"), and repayment is primarily dependent on the cash flows of the property (if nonowner-occupied) or of the business (if owner-occupied).

Commercial and industrial loans ("C&I") – Loans in this segment are made to businesses and are generally secured by equipment, accounts receivable, or inventory, as well as the personal guarantees of the principal owners of the business, and repayment is primarily dependent on the cash flows generated by the business. In addition, this segment includes certain loans issued under the U. S. Small Business Administration's ("SBA") Paycheck Protection Program ("PPP"). These loans are guaranteed and are not evaluated for an allowance for credit losses because the Company expects the guarantees will be effective, if necessary.

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Consumer loans – Loans in this segment are made to individuals and can be secured or unsecured. Repayment is primarily dependent on the credit quality of the individual borrower.

The majority of the Company's loans are concentrated in Eastern Massachusetts and Southern New Hampshire and therefore the overall health of the local economy, including unemployment rates, vacancy rates, and consumer spending levels, can have a material effect on the credit quality of all of these portfolio segments.

The process to determine the allowance for credit losses requires management to exercise considerable judgment regarding the risk characteristics of the loan portfolio segments and the effect of relevant internal and external factors.

Allowance for Credit Losses - Unfunded Commitments

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.

Acquired Loans

Acquired loans are recorded at fair value at the date of acquisition based on a discounted cash flow methodology that considers various factors, including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and a discount rate reflecting the Company's assessment of risk inherent in the cash flow estimates. Purchased loans are grouped together according to similar risk characteristics and are treated in the aggregate when applying various valuation techniques. These cash flow evaluations are inherently subjective as they may be susceptible to significant change.

Effective January 1, 2020, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated ("PCD") loans. The Company evaluates acquired loans for deterioration in credit quality based on, but not limited to, the following: (1) non-accrual status; (2) troubled debt restructured designation; (3) risk ratings of special mention, substandard or doubtful; (4) watchlist credits; and (5) delinquency status, including loans that are current on acquisition date, but had been previously delinquent. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans.

For acquired loans not deemed PCD at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. At the acquisition date, an initial allowance for expected credit losses is estimated and recorded as provision for credit losses. The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans.

Allowance for Loan Losses

Prior to the adoption of ASC Topic 326 – Financial Instruments – Credit Losses ("CECL") on January 1, 2020, the Company calculated its provision for loan losses and the level of the allowance for loan losses to reflect management's estimate of probable loan losses inherent in the loan portfolio at the balance sheet date. Management used a systematic process and methodology to establish the allowance for loan losses each quarter. To determine the total allowance for loan losses, an estimate was made by management of the allowance needed for each of the following segments of the loan portfolio: (a) residential mortgage loans, (b) commercial mortgage loans, (c) home equity loans, (d) C&I loans, and (e) consumer loans. Portfolio segments were further disaggregated into classes of loans. The establishment of the allowance for each portfolio segment was based on a process that evaluated the risk characteristics relevant to each portfolio segment and took into consideration multiple internal and external factors. Internal factors included, but were not limited to, (a) historic levels and trends in charge-offs, delinquencies, risk ratings, and foreclosures, (b) level and changes in industry, geographic, and credit concentrations, (c) underwriting policies and adherence to such policies, (d) the growth and vintage of the portfolios, and (e) the experience of, and any changes in, lending and credit personnel. External factors included, but were not limited to, (a) conditions and trends in the local and national economy and (b) levels and trends in national delinquent and non-performing loans.

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The Company evaluated certain loans individually for specific impairment. A loan was considered impaired when, based on current information and events, it was probable that the Company would be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as impaired. Loans were selected for evaluation based upon internal risk rating, delinquency status, or non-accrual status. A specific allowance amount was allocated to an individual loan when such loan had been deemed impaired and when the amount of the probable loss was able to be estimated. Estimates of loss were 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 was collateral dependent.

**Loans Held for Sale**

Residential mortgage loans originated and intended for sale in the secondary market are classified as held for sale at the time of their origination and are carried at the lower of cost or fair value on an individual loan basis. Changes in fair value relating to loans held for sale below the loans cost basis are charged against gain on loans sold. Gains and losses on the actual sale of the residential loans are recorded in earnings as gains on loans sold, net on the consolidated statements of income.

**Bank Owned Life Insurance**

Bank owned life insurance ("BOLI") represents life insurance on the lives of certain active and former employees who have provided positive consent allowing the Company to be the beneficiary of such policies. Since the Company is the primary beneficiary of the insurance policies, increases in the cash value of the policies, as well as insurance proceeds received in excess of cash surrender value, are recorded in noninterest income, and are not subject to income taxes. Applicable regulations generally limit the Company's investment in BOLI to 25% of its Tier 1 capital plus its allowance for credit losses. The Company reviews the financial strength of the insurance carriers prior to the purchase of BOLI and at least annually thereafter.

**Banking Premises and Equipment**

Land is stated at cost. Buildings, leasehold improvements, and equipment are stated at cost, less accumulated depreciation, and amortization, which is computed using the straight-line method over the estimated useful lives of the assets or the terms of the leases, if shorter. The cost of ordinary maintenance and repairs is charged to expense when incurred.

**Leases**

The Company leases office space and certain branch locations under noncancelable operating leases, several of which have renewal options to extend lease terms. Upon commencement of a new lease, the Company will recognize a right-of-use ("ROU") asset and corresponding lease liability. The Company makes the decision on whether to renew an option to extend a lease by considering various factors. The Company will recognize an adjustment to its ROU asset and lease liability when lease agreements are amended and executed. The discount rate used in determining the present value of lease payments is based on the Company's incremental borrowing rate for borrowings with terms similar to each lease at commencement date. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance, are not included in the measurement of the lease liability since they are generally able to be segregated.

**Marketing Expense**

Advertising costs are expensed as incurred.

**Other Real Estate Owned**

Other real estate owned consists of properties formerly pledged as collateral to loans, which have been acquired by the Company through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Upon transfer of a loan to foreclosure status, an appraisal is obtained and any excess of the loan balance over the fair value, less estimated costs to sell, is charged against the allowance for credit losses. Expenses and subsequent adjustments to the fair value are treated as noninterest expense through other expenses.

**Goodwill, Core Deposit Intangibles, and Other Intangible Assets**

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Core deposit intangible ("CDI") represents a premium paid to acquire the core deposits of an institution and is recorded as an intangible asset. Goodwill and intangible assets that are not amortized are tested for impairment, based on their fair values, at least annually. There was no goodwill impairment recognized during 2022, 2021, or 2020. Identifiable intangible assets that are subject to amortization are also reviewed for impairment based on their fair value. Any impairment is recognized as a charge to earnings and the adjusted carrying

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amount of the intangible asset becomes its new accounting basis. The remaining useful life of an intangible asset that is being amortized is also evaluated each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. The Company is amortizing the CDI on a straight-line basis over a ten-year period.

Mortgage servicing rights ("MSR") are recognized as separate assets when rights are acquired through purchase or through sale of financial assets with servicing rights retained. The fair value of the servicing rights is determined by estimating the present value of future net cash flows, taking into consideration market loan prepayment speeds, discount rates, servicing costs, and other economic factors. For purposes of measuring impairment, the underlying loans are generally stratified into relatively homogeneous pools based on predominant risk characteristics. Because of the small size of this asset class, and its relative homogeneity, only one stratum is used. If the aggregate carrying value of the capitalized mortgage servicing rights for this stratum exceeds its fair value, MSR impairment is recognized in earnings through a valuation allowance for the difference. As the loans are repaid and net servicing revenue is earned, the MSR asset is amortized as an offset to loan servicing income. Servicing revenues are expected to exceed this amortization expense. However, if actual prepayment experience or defaults exceed what was originally anticipated, net servicing revenues may be less than expected and mortgage servicing income may be negative.

**Income Taxes**

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, the Commonwealth of Massachusetts, the state of New Hampshire, the state of Maine, and other states as required. For the tax year ended December 31, 2022, the Company expects to file taxes in Massachusetts, New Hampshire, and Maine.

Income taxes are accounted for under the asset and liability method. 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 income tax expenses in the period of enactment. 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.

**Wealth Management Fee Revenue** 

The Company earns wealth management fees for providing investment management, trust administration, and financial planning services to clients. The Company's performance obligation under these contracts is satisfied over time as the wealth management services are provided. Fees are recognized monthly based on the monthly value of the assets under management and the applicable fee rate, or at a fixed annual rate, depending on the terms of the contract. No performance-based incentives are earned on wealth management contracts.

The Company also earns trust fees for servicing as trustee for certain clients. As trustee, the Company serves as a fiduciary, administers the client's trust, and in some cases, manages the assets of the trust. The Company's performance obligation under these agreements is satisfied over time as the administrative and management services are provided. Fees are recognized monthly based on a percentage of the market value of the account or at a fixed annual rate as outlined in the agreement. The Company also earns fees for trust related activities. The Company's performance obligation under these agreements is satisfied at a point in time and recognized when these services have been performed.

**Other Banking Fee Income**

The Company charges a variety of fees to its clients for services provided on the deposit and deposit management related accounts. Each fee is either transaction-based or assessed monthly. The types of fees include service charges on accounts, wire transfer fees, maintenance fees, ATM fee charges, and other miscellaneous charges related to the accounts. These fees are not governed by individual contracts with clients. They are charged to clients based on disclosures presented to these clients upon opening these accounts, along with updated disclosures when changes are made to the fee structures. The transaction-based fees are recognized in revenue when charged to the client based on specific activity on the client's account. Monthly service and maintenance charges are recognized in the month they are earned and are charged directly to the client's account.

**Pension and Retirement Plans**

The Company sponsors a defined benefit pension plan (the "Pension Plan") and a postretirement health care plan covering substantially all employees hired before May 2, 2011. Effective December 31, 2017, the accrual of benefits for all participants in the Pension Plan was frozen. Benefits for the postretirement health care plan are based on years of service. Expenses for the postretirement health care plan are recognized over the employee's service life utilizing the projected unit credit actuarial cost method. Effective November 7, 2019, the postretirement health care plan was frozen for employees hired after that date.

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The Company also sponsors non-qualified retirement programs that provide supplemental retirement benefits to certain current and former executives. Prior to 2016, the Company provided individual non-qualified defined benefit supplemental executive retirement plans ("DB SERPs") to certain executives. The DB SERPs generally provide for an annual benefit payable in equal monthly installments following the executive's retirement and continuing for at least the remainder of his or her lifetime, with such annual benefit generally based on the executive's years of service and his or her highest three consecutive years of base salary and bonus. In 2016, the Company's Board of Directors discontinued the use of DB SERPs for new entrants to the Company's non-qualified retirement programs. Instead, new entrants are provided with individual non-qualified defined contribution supplemental executive retirement plans ("DC SERPs"). Under the DC SERPs, the Company may contribute an amount equal to 10% of the executive's base salary and bonus to his or her account under the Company's non-qualified deferred compensation plan, the Executive Deferred Compensation Plan. Expense for the DB SERPs is recognized over the executive's service life utilizing the projected unit credit actuarial cost method. Expense for the DC SERPs is recognized as incurred.

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 4% of each participant's salary, eligible bonus, and eligible incentive. Each year, the Company may also make a discretionary contribution to the PSP based on eligible salary, bonus, and incentive. Employees are eligible to participate in the PSP on the first day of their initial date of service. Employees are also eligible to participate in the discretionary contribution portion of the PSP on the first date of their initial date of service. The employee must be employed on the last day of the calendar year or retire at the normal retirement age of 65 during the calendar year to receive the discretionary contribution.

**Share-Based Compensation**

Share-based compensation plans provide for stock option awards, restricted stock awards, time-based restricted stock units ("RSUs"), and performance-based restricted stock units ("PRSUs").

Compensation expense for restricted stock awards is recognized over the vesting period based on the fair value at the date of grant. RSUs and PRSUs are valued at the fair market value of the Company's common stock as of the award date. PRSUs' compensation expense is based on the most recent performance assumption available and is adjusted as assumptions change. If the goals are not met, vesting does not occur, no compensation cost will be recognized and any recognized compensation costs will be reversed. Stock-based awards that do not require future service are expensed in the year of grant.

**Derivative Instruments and Hedging Activities**

Derivatives are recognized as either assets or liabilities on the consolidated balance sheets and are measured at fair value. The accounting for changes in the fair value of such derivatives depends on the intended use of the derivative and resulting designation. For derivatives not designated as hedges, changes in fair value of the derivative instruments are recognized in earnings in noninterest income.

For derivatives designated as fair value hedges, changes in the fair value of such derivatives are recognized in earnings together with the changes in the fair value of the related hedged item. The net amount, if any, represents hedge ineffectiveness and is reflected in earnings.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded in other comprehensive income (loss) and recognized in earnings when the hedged transaction affects earnings. The ineffective portion of changes in the fair value of cash flow hedges is recognized directly in earnings.

**Fair Value Measurements**

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company measures the fair values of its financial instruments in accordance with accounting guidance that requires an entity to base fair value on exit price and maximize the use of observable inputs and minimize the use of unobservable inputs to determine the exit price.

ASC 820, "Fair Value Measurements and Disclosures" establishes a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires fair value measurements to be disclosed by level within the hierarchy. The three broad levels defined by the fair value hierarchy are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The type of financial instruments included in Level 1 are highly liquid cash instruments with quoted prices such as government or agency securities, listed equities, and money market securities, as well as listed derivative instruments.

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Level 2 – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these financial instruments includes cash instruments for which quoted prices are available but traded less frequently, derivative instruments whose fair value has been derived using a model where inputs to the model are directly observable in the market or can be derived principally from or corroborated by observable market data, and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed. Instruments which are generally included in this category are corporate bonds and loans, mortgage whole loans, municipal bonds, and over-the-counter derivatives.

Level 3 – Instruments that have little to no pricing observability as of the reported date. These financial instruments do not have two-way markets and are measured using management's best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Instruments that are included in this category generally include certain commercial mortgage loans, certain private equity investments, distressed debt, non-investment grade residual interests in securitizations, as well as certain highly structured over-the-counter derivative contracts.

**Earnings per Common Share**

Earnings per common share is computed using the more dilutive two-class method prescribed under ASC Topic 260, "Earnings Per Share." ASC Topic 260 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company has determined that its outstanding non-vested stock awards are participating securities.

Under the two-class method, basic earnings per common share is computed by dividing net earnings allocated to common stock by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of common stock equivalents. A reconciliation of the weighted-average shares used in calculating basic earnings per common share and the weighted average common shares used in calculating diluted earnings per common share for the reported periods is provided in Note 20 - Earnings Per Share.

**Subsequent Events**

Management has reviewed events occurring through March 16, 2023, the date the consolidated financial statements were issued and determined that no subsequent events occurred requiring adjustment to or disclosure in these consolidated financial statements.

**3.** **Recently Issued and Adopted Accounting Standards** 

Accounting Pronouncements Adopted in 2022

In December 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendments in this ASU defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The ASU is effective upon issuance. The FASB had previously issued 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting and related amendments in 2020 to ease the potential burden in accounting for reference rate reform. The amendments in ASU 2020-04 were elective and applied to all entities that have contracts, hedging relationships, and other transactions that reference the London Inter-bank Offer Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. The adoption of the new ASU did not have an impact on the Company's consolidated financial statements.

Accounting Pronouncements Yet to be Adopted

In March 2022, the FASB issued Accounting Standards Update ("ASU") 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU eliminate the accounting guidance for troubled debt restructurings ("TDRs") by creditors in Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. For public business entities, the amendments in this ASU require an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption was permitted. The Company plans to adopt this guidance in January of 2023. The adoption of the new ASU is not expected to have an impact on the Company's consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method. The amendments in this ASU allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. The amendments in this ASU also clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers. These amendments are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The

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adoption of the new ASU is not expected to have an impact on the Company's consolidated financial statements. As of December 31, 2022, the Company has no hedge relationships designated as fair value hedges.

**4.** **Mergers**

**Northmark Bank** 

On October 1, 2022, the Company completed its merger (the "Northmark Merger") with Northmark Bank. ("Northmark"), adding three banking offices in Massachusetts. Under the terms of the Agreement and Plan of Merger, each outstanding share of Northmark common stock was converted into 0.9950 shares of the Company's common stock. As a result of the merger, former Northmark stockholders received an aggregate of 788,137 shares of the Company's common stock. The total consideration paid amounted to $62.8 million, based on the closing price of $79.74 of the Company's common stock and cash paid for fractional shares on October 1, 2022.

The Company recorded total assets of $428.7 million, assumed total liabilities of $378.5 million, and recorded $12.6 million in goodwill.

The Company accounted for the merger using the acquisition method pursuant to ASC Topic 805, "Business Combinations." Accordingly, the Company recorded merger expenses of $1.9 million during the year ended at December 31, 2022. Additionally, on October 1, 2022, the Company recorded $2.2 million in provision for credit losses to reflect the impact of CECL on the acquired loans.

The acquisition method requires the acquirer to recognize the assets acquired and the liabilities assumed at their fair values as of the acquisition date. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed as of the date of the acquisition:

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| | |
|:---|:---|
|  | **At October 1, 2022** |
|  | **Net Assets Acquired at Fair Value** |
|  | **(dollars in thousands)** |
| Total Purchase Price | $62850 |
| Assets |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $82174 |
| &nbsp;&nbsp;&nbsp;Investments | 22929 |
| &nbsp;&nbsp;&nbsp;Gross loans | 303215 |
| &nbsp;&nbsp;&nbsp;Allowance for loan loss |  |
| &nbsp;&nbsp;&nbsp;Premises and equipment | 6856 |
| &nbsp;&nbsp;&nbsp;Core deposit intangible | 5320 |
| &nbsp;&nbsp;&nbsp;Other assets | 8181 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets acquired | 428675 |
| Liabilities |  |
| &nbsp;&nbsp;&nbsp;Deposits | 373129 |
| &nbsp;&nbsp;&nbsp;Repurchase agreements | 3745 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 1579 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities assumed | 378453 |
| &nbsp;&nbsp;&nbsp;Net assets acquired | $50222 |
| &nbsp;&nbsp;&nbsp;**Goodwill** | $12628 |

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Fair value adjustments to assets acquired and liabilities assumed are generally amortized using either an effective yield or straight-line basis over periods consistent with the average life, useful life, and/or contractual term of the related assets and liabilities.

Fair values of the major categories of assets acquired and liabilities assumed were determined as follows:

Cash and Cash Equivalents

The fair values of cash and cash equivalents approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities.

Investments

The fair values of securities were based on quoted market prices for identical securities received from an independent, nationally recognized, third-party pricing service. Prices provided by the independent pricing service were based on recent trading activity and

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other observable information including, but not limited to, market interest rate curves, referenced credit spreads, and estimated prepayment rates where applicable.

Loans

Fair value was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of default rate and prepayments, and then applying a market-based discount rate to those cash flows.

Premises and Equipment

The fair value of premises was determined based upon appraisals by licensed real estate appraisers. The appraisal was based upon the best and highest use of the property with the final value determined based upon an analysis of the cost, sales comparison, and income capitalization approaches for the property appraised.

Core Deposit Intangible

The fair value of the core deposit intangible is derived by comparing the interest rate and servicing costs that the financial institution pays on the core deposit liability versus the current market rate for alternative sources of financing, while factoring in estimates over the remaining life and attrition rate of the deposit accounts. The intangible asset represents the stable and relatively low cost source of funds that the deposits and accompanying relationships provide the Company, when compared to alternative funding sources.

Deposits

The fair value of acquired savings and transaction deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits was determined based on the present value of the contractual cash flows over the remaining period to maturity using a market interest rate.

Selected Pro Forma Results

The following summarizes the pro forma results of operations as if the Company merged with Northmark on January 1, 2022 (2021 amounts represent combined results for the Company and Northmark). The selected pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the acquisition actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period.

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| | | |
|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Net interest and dividend income after provision for loan losses | $169606 | $111753 |
| Net Income | 69839 | 29182 |

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Excluded from the pro forma results of operations for the year ended December 31, 2022 are merger-related costs of approximately $1.9 million recognized by the Company. There were no merger related expenses for the year ended December 31, 2021. These costs primarily consisted of contract terminations arising due to the merger, the acceleration of certain compensation and benefit costs, and other merger expenses. The provision for credit losses recorded on acquired loans of $2.2 million was also excluded as a non-recurring adjustment.

**Wellesley Bancorp, Inc.** 

The Company completed its merger (the "Wellesley Merger") with Wellesley Bancorp, Inc. ("Wellesley") on June 1, 2020. Under the terms of the Agreement and Plan of Merger, each outstanding share of Wellesley common stock was converted into 0.580 shares of the Company's common stock. As a result of the merger, former Wellesley stockholders received an aggregate of 1,502,814 shares of the Company's common stock. The total consideration paid amounted to $88.8 million, based on the closing price of $58.00 of the Company's common stock, the value of Wellesley's exercisable options, and cash paid for fractional shares.

The Company accounted for the merger using the acquisition method and recorded total assets of $985.6 million, including $20.7 million in goodwill, and assumed total liabilities of $917.6 million.

**5.** **CASH AND CASH EQUIVALENTS**

At December 31, 2022 and December 31, 2021, cash and due from banks totaled $30.7 million and $180.2 million, respectively. There were no amounts required to be maintained at the Federal Reserve Bank of Boston ("FRB of Boston") at December 31, 2022 and December 31, 2021. At December 31, 2022 and December 31, 2021, the Company pledged $500,000 to the New Hampshire Banking

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Department relating to Cambridge Trust Company of New Hampshire, Inc.'s operations in that state. The Company did not have any cash pledged as collateral to derivative counterparties at December 31, 2022, as compared to $13.3 million at December 31, 2021. See Note 21 - Derivatives and Hedging Activities for a discussion of the Company's derivative and hedging activities.

**6.** **INVESTMENT SECURITIES**

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

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Fair<br>Value** | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Fair<br>Value** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Available for sale securities |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Government Sponsored<br> Enterprise obligations | $22997 | $— | $(3264) | $19733 | $22996 | $246 | $(231) | $23011 |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 158034 | 3 | (25354) | 132683 | 176531 | 959 | (4462) | 173028 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 996 | 4 |  | 1000 | 1743 | 24 | (3) | 1764 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $182027 | $7 | $(28618) | $153416 | $201270 | $1229 | $(4696) | $197803 |
| Held to maturity securities |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury Notes | $3970 | $— | $(18) | $3952 | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 951372 | 4 | (157208) | 794168 | 864983 | 3981 | (13258) | 855706 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 250 |  | (6) | 244 | 6997 | 26 |  | 7023 |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal securities | 96405 | 88 | (9271) | 87222 | 105081 | 3798 | (516) | 108363 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total held to maturity securities | $1051997 | $92 | $(166503) | $885586 | $977061 | $7805 | $(13774) | $971092 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $1234024 | $99 | $(195121) | $1039002 | $1178331 | $9034 | $(18470) | $1168895 |

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

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The amortized cost and fair value of investment securities, aggregated by the contractual maturity, are shown below. Municipal securities are aggregated by the earliest of call date or contractual maturity. 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.

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Within One Year** | **Within One Year** | **After One, But <br>Within Five Years** | **After One, But <br>Within Five Years** | **After Five, But <br>Within Ten Years** | **After Five, But <br>Within Ten Years** | **After Ten Years** | **After Ten Years** | **Total** | **Total** |
|  | **Amortized<br>Cost** | **Fair<br>Value** | **Amortized<br>Cost** | **Fair<br>Value** | **Amortized<br>Cost** | **Fair<br>Value** | **Amortized<br>Cost** | **Fair<br>Value** | **Amortized<br>Cost** | **Fair<br>Value** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Available for sale securities |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Government Sponsored Enterprise obligations | $— | $— | $9997 | $9012 | $5000 | $4346 | $8000 | $6375 | $22997 | $19733 |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities |  |  | 10680 | 9966 | 41622 | 34934 | 105732 | 87783 | 158034 | 132683 |
| &nbsp;&nbsp;&nbsp;Corporate debt securities | 996 | 1000 |  |  |  |  |  |  | 996 | 1000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $996 | $1000 | $20677 | $18978 | $46622 | $39280 | $113732 | $94158 | $182027 | $153416 |
| Held to maturity securities |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Treasury Notes | $987 | $983 | $2983 | $2969 | $— | $— | $— | $— | $3970 | $3952 |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities |  |  | 19572 | 18355 | 48731 | 42866 | 883069 | 732947 | 951372 | 794168 |
| &nbsp;&nbsp;&nbsp;Corporate debt securities |  |  | 250 | 244 |  |  |  |  | 250 | 244 |
| &nbsp;&nbsp;&nbsp;Municipal securities | 6987 | 6997 | 18657 | 18602 | 26441 | 26028 | 44320 | 35595 | 96405 | 87222 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total held to maturity securities | $7974 | $7980 | $41462 | $40170 | $75172 | $68894 | $927389 | $768542 | $1051997 | $885586 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $8970 | $8980 | $62139 | $59148 | $121794 | $108174 | $1041121 | $862700 | $1234024 | $1039002 |

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The following tables show the Company's investment securities with gross unrealized losses, for which an allowance for credit losses has not been recorded at December 31, 2022 or at December 31, 2021, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Less than 12 months** | **Less than 12 months** | **12 months or longer** | **12 months or longer** | **Total** | **Total** |
|  | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Available for sale securities |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Government Sponsored Enterprise<br> obligations | $10722 | $(2278) | $9012 | $(986) | $19734 | $(3264) |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 41832 | (3097) | 90545 | (22257) | 132377 | (25354) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $52554 | $(5375) | $99557 | $(23243) | $152111 | $(28618) |
| Held to maturity securities |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Treasury Notes | $3952 | $(18) | $— | $— | $3952 | $(18) |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 230708 | (22362) | 562835 | (134846) | 793543 | (157208) |
| &nbsp;&nbsp;&nbsp;Corporate debt securities | 243 | (6) |  |  | 243 | (6) |
| &nbsp;&nbsp;&nbsp;Municipal securities | 51969 | (4388) | 13714 | (4883) | 65683 | (9271) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total held to maturity securities | $286872 | $(26774) | $576549 | $(139729) | $863421 | $(166503) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $339426 | $(32149) | $676106 | $(162972) | $1015532 | $(195121) |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Less than 12 months** | **Less than 12 months** | **12 months or longer** | **12 months or longer** | **Total** | **Total** |
|  | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Available for sale securities |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Government Sponsored Enterprise<br> obligations | $4881 | $(115) | $4884 | $(116) | $9765 | $(231) |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | 74724 | (2253) | 47871 | (2209) | 122595 | (4462) |
| &nbsp;&nbsp;&nbsp;Corporate debt securities | 760 | (3) |  |  | 760 | (3) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $80365 | $(2371) | $52755 | $(2325) | $133120 | $(4696) |
| Held to maturity securities |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities | $740966 | $(12509) | $15345 | $(749) | $756311 | $(13258) |
| &nbsp;&nbsp;&nbsp;Municipal securities | 12607 | (194) | 5716 | (322) | 18323 | (516) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total held to maturity securities | $753573 | $(12703) | $21061 | $(1071) | $774634 | $(13774) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $833938 | $(15074) | $73816 | $(3396) | $907754 | $(18470) |

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As of December 31, 2022, 432 debt securities had gross unrealized losses, with an aggregate depreciation of 16.1% from the Company's amortized cost basis. The largest unrealized dollar loss of any single security was $2.0 million, or 21.5% of its amortized cost. The largest unrealized loss percentage of any single security was 35.0% of its amortized cost, or $823,000.

The Company believes that the nature and duration of unrealized losses 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) it is more likely than not that the Company will not be required to sell these securities before recovery, the Company does not expect to suffer a credit loss as of December 31, 2022.

U.S. Government obligations with an amortized cost of $9.1 million and a fair value of $8.0 million were pledged as collateral for repurchase agreements at December 31, 2022. There were no investment securities pledged as collateral for repurchase agreements at December 31, 2021.

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

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Amortized cost of securities sold | $19018 | $— | $10752 |
| Gross gains realized on securities sold |  |  | 111 |
| Gross losses realized on securities sold |  |  | (42) |
| &nbsp;&nbsp;&nbsp;Net proceeds from securities sold | $19018 | $— | $10821 |

---

The Company monitors the credit quality of certain debt securities through the use of credit rating among other factors on a quarterly basis. Credit ratings are opinions about the credit quality of a security and are utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and are generally considered to be of low risk. At December 31, 2022 and 2021 respectively, the Company's debt securities portfolio did not contain any securities below investment grade, as reported by major credit rating agencies. At December 31, 2022 and 2021, respectively, none of the Company's investment securities were delinquent or in non-accrual status.

The following tables summarize the credit rating of the Company's debt securities portfolio at December 31, 2022 and December 31, 2021.

------

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Mortgage-backed Securities (1)** | **Corporate Debt Securities** | **Municipal Securities** | **U.S. GSE Obligations** | **U.S. Treasury Notes** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Available for sale securities, at fair value |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;AAA/AA/A | $132683 | $— | $— | $19733 | $— | $152416 |
| &nbsp;&nbsp;&nbsp;BBB/BB/B |  | 1000 |  |  |  | 1000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $132683 | $1000 | $— | $19733 | $— | $153416 |
| Held to maturity securities, at amortized cost |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;AAA/AA/A | $951372 | $250 | $96405 | $— | $3970 | $1051997 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total held to maturity securities | $951372 | $250 | $96405 | $— | $3970 | $1051997 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Mortgage-backed Securities (1)** | **Corporate Debt Securities** | **Municipal Securities** | **U.S. GSE Obligations** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Available for sale securities, at fair value |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;AAA/AA/A | $173028 | $759 | $— | $23011 | $196798 |
| &nbsp;&nbsp;&nbsp;BBB/BB/B |  | 1005 |  |  | 1005 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total available for sale securities | $173028 | $1764 | $— | $23011 | $197803 |
| Held to maturity securities, at amortized cost |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;AAA/AA/A | $864983 | $6997 | $105081 | $— | $977061 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total held to maturity securities | $864983 | $6997 | $105081 | $— | $977061 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.Includes Agency mortgage-backed pass-through securities and collateralized mortgage obligations issued by U.S. Government Sponsored enterprises ("GSEs") and U.S. government agencies, such as FNMA, FHLMC, and GNMA that are not rated by Moody's or Standard & Poor's. Each security contains a guarantee by the issuing GSE or agency and therefore carries an implicit guarantee of the U.S. government. These have been categorized as AAA/AA/A.

------

**7.** **LOANS AND ALLOWANCE FOR CREDIT LOSSES**

Loans outstanding are detailed by category as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Residential mortgage |  |  |
| &nbsp;&nbsp;&nbsp;Mortgages - fixed rate | $902968 | $716456 |
| &nbsp;&nbsp;&nbsp;Mortgages - adjustable rate | 703958 | 679675 |
| &nbsp;&nbsp;&nbsp;Construction | 35299 | 13012 |
| &nbsp;&nbsp;&nbsp;Deferred costs, net of unearned fees | 6613 | 5936 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total residential mortgages | 1648838 | 1415079 |
| Commercial mortgage |  |  |
| &nbsp;&nbsp;&nbsp;Mortgages - non-owner occupied | 1592732 | 1272135 |
| &nbsp;&nbsp;&nbsp;Mortgages - owner occupied | 183591 | 150632 |
| &nbsp;&nbsp;&nbsp;Construction | 135782 | 86246 |
| &nbsp;&nbsp;&nbsp;Deferred costs, net of unearned fees | 2318 | 1989 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total commercial mortgages | 1914423 | 1511002 |
| Home equity |  |  |
| &nbsp;&nbsp;&nbsp;Home equity - lines of credit | 108961 | 85639 |
| &nbsp;&nbsp;&nbsp;Home equity - term loans | 2098 | 2017 |
| &nbsp;&nbsp;&nbsp;Deferred costs, net of unearned fees | 292 | 304 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total home equity | 111351 | 87960 |
| Commercial and industrial |  |  |
| &nbsp;&nbsp;&nbsp;Commercial and industrial | 349026 | 247024 |
| &nbsp;&nbsp;&nbsp;PPP loans | 1384 | 22856 |
| &nbsp;&nbsp;&nbsp;Unearned fees, net of deferred costs | 240 | (434) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total commercial and industrial | 350650 | 269446 |
| Consumer |  |  |
| &nbsp;&nbsp;&nbsp;Secured | 35679 | 34308 |
| &nbsp;&nbsp;&nbsp;Unsecured | 1897 | 1303 |
| &nbsp;&nbsp;&nbsp;Deferred costs, net of unearned fees | 18 | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total consumer | 37594 | 35619 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total loans | $4062856 | $3319106 |

---

The Coronavirus Aid, Relief, and Economic Security Act, (the "CARES Act"), was signed into law on March 27, 2020, and provided emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. Among other things, the CARES Act authorized the Small Business Administration ("SBA") to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program ("PPP"). As a qualified SBA lender, the Company was authorized to originate PPP loans.

PPP loans have: (a) an interest rate of 1.0%, (b) a two year or five-year loan term to maturity; and (c) principal and interest payments deferred until the SBA remits the forgiven amount to the Company or 10 months from the end of the covered period, as defined. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower's PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expense, with the remaining 40% of the loan proceeds used for other qualifying expenses. The Company did not record a provision for credit losses for PPP loans in 2022, 2021 or 2020 due to the SBA guarantee.

Directors and officers of the Company and their associates are clients 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.

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**Asset Quality**

The Company's philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. The Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. As a general rule, loans more than 90 days past due with respect to principal or interest are classified as non-accrual loans. The Company may use discretion regarding other loans over 90 days past due if the loan is well secured and/or in process of collection.

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

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Residential<br>Mortgage** | **Commercial<br>Mortgage** | **Home<br>Equity** | **Commercial and<br>Industrial** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Non-performing loans: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-accrual loans | $4733 | $311 | $722 | $73 | $5839 |
| &nbsp;&nbsp;&nbsp;Troubled debt restructurings | 622 |  |  | 81 | 703 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $5355 | $311 | $722 | $154 | $6542 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Residential<br>Mortgage** | **Commercial<br>Mortgage** | **Home<br>Equity** | **Commercial and<br>Industrial** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Non-performing loans: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-accrual loans | $3777 | $517 | $223 | $111 | $4628 |
| &nbsp;&nbsp;&nbsp;Troubled debt restructurings | 652 |  |  | 106 | 758 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $4429 | $517 | $223 | $217 | $5386 |

---

It is the Company's policy to reverse any accrued interest when a loan is put on non-accrual status; as such, the Company did not record any interest income on non-accrual loans during the years ended December 31, 2022 and December 31, 2021.

There were no significant commitments to lend additional funds to borrowers whose loans were on non-accrual status at December 31, 2022 and December 31, 2021.

**Troubled Debt Restructurings ("TDRs")**

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.

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 status at the time of the restructuring generally remain on non-accrual 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 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 individually evaluated for credit losses.

There were no new TDRs during the years ended December 31, 2022 or December 31, 2021. At December 31, 2022, four loans were TDRs with a total carrying value of $704,000. There were no TDR defaults during the year ended December 31, 2022. As of December 31, 2021, four loans were TDRs with a total carrying value of $758,000. There were no TDR defaults during the year ended December 31, 2021.

The allowance for credit losses includes a specific reserve for TDRs of approximately $60,000 and $85,000 as of December 31, 2022 and December 31, 2021, respectively. As of December 31, 2022 and December 31, 2021, there were no significant commitments to lend additional funds to borrowers whose loans were restructured.

------

Pursuant to Section 4013 of the CARES Act, financial institutions could suspend the requirements under U.S. GAAP related to TDRs for modifications made before December 31, 2020 to loans that were current as of December 31, 2019. As a result of the enactment of the Consolidated Appropriations Act, 2021, in January 2021, the suspension of TDR accounting was extended to, and expired on January 1, 2022. The requirement that a loan be not more than 30 days past due as of December 31, 2019 was still applicable. In response to the COVID-19 pandemic and its economic impact to clients, a short-term modification program that complied with the CARES Act was implemented to provide temporary payment relief to those borrowers directly impacted by COVID-19. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. Under issued guidance, provided that these loans were current as of either year end or the date of the modification, these loans were not considered TDR loans at December 31, 2022 and will not be reported as past due during the deferral period. The Company had no loans in deferral as of December 31, 2022.

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

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** | **Prior** | **Revolving loans amortized cost basis** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Residential Mortgage:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | $314599 | $511217 | $276698 | $113251 | $77620 | $350098 | $— | $1643483 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-performing |  |  | 206 | 315 | 684 | 4150 |  | 5355 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $314599 | $511217 | $276904 | $113566 | $78304 | $354248 | $— | $1648838 |
| **Home equity:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | $3611 | $— | $— | $58 | $360 | $481 | $106119 | $110629 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-performing |  |  |  |  |  |  | 722 | 722 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $3611 | $— | $— | $58 | $360 | $481 | $106841 | $111351 |
| **Consumer:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | $13214 | $8482 | $5353 | $444 | $2078 | $7424 | $599 | $37594 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-performing |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $13214 | $8482 | $5353 | $444 | $2078 | $7424 | $599 | $37594 |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** | **Credit Quality Indicator - by Origination Year as of December 31, 2022** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** | **Prior** | **Revolving loans amortized cost basis** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Commercial Mortgage:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Credit risk profile by internally<br> assigned grade: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;1-6 (Pass) | $411927 | $330593 | $222073 | $260588 | $125398 | $489564 | $— | $1840143 |
| &nbsp;&nbsp;&nbsp;&nbsp;7 (Special Mention) |  |  | 4562 | 41578 | 21697 | 6132 |  | 73969 |
| &nbsp;&nbsp;&nbsp;&nbsp;8 (Substandard) |  |  |  |  |  | 311 |  | 311 |
| &nbsp;&nbsp;&nbsp;&nbsp;9 (Doubtful) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;10 (Loss) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $411927 | $330593 | $226635 | $302166 | $147095 | $496007 | $— | $1914423 |
| **Commercial and Industrial:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Credit risk profile by internally<br> assigned grade: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;1-6 (Pass) | $128301 | $67727 | $62025 | $28557 | $18794 | $36836 | $475 | $342715 |
| &nbsp;&nbsp;&nbsp;&nbsp;7 (Special Mention) |  | 4211 | 130 | 161 | 407 | 121 | 10 | 5040 |
| &nbsp;&nbsp;&nbsp;&nbsp;8 (Substandard) |  |  | 628 | 2102 | 81 | 84 |  | 2895 |
| &nbsp;&nbsp;&nbsp;&nbsp;9 (Doubtful) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;10 (Loss) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $128301 | $71938 | $62783 | $30820 | $19282 | $37041 | $485 | $350650 |

---

------

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** |
|  | **2021** | **2020** | **2019** | **2018** | **2017** | **Prior** | **Revolving loans amortized cost basis** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Residential Mortgage:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | $535071 | $329501 | $135139 | $101108 | $77702 | $232129 | $— | $1410650 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-performing |  | 151 |  | 330 | 54 | 3894 |  | 4429 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $535071 | $329652 | $135139 | $101438 | $77756 | $236023 | $— | $1415079 |
| **Home equity:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | $— | $719 | $3088 | $4469 | $5060 | $5475 | $68926 | $87737 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-performing |  |  | 223 |  |  |  |  | 223 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $— | $719 | $3311 | $4469 | $5060 | $5475 | $68926 | $87960 |
| **Consumer:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current | $14427 | $8758 | $1544 | $3168 | $1838 | $5357 | $527 | $35619 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-performing |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $14427 | $8758 | $1544 | $3168 | $1838 | $5357 | $527 | $35619 |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** | **Credit Quality Indicator - by Origination Year as of December 31, 2021** |
|  | **2021** | **2020** | **2019** | **2018** | **2017** | **Prior** | **Revolving loans amortized cost basis** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Commercial Mortgage:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Credit risk profile by internally<br> assigned grade: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;1-6 (Pass) | $319633 | $248691 | $320189 | $158462 | $93016 | $298791 | $— | $1438782 |
| &nbsp;&nbsp;&nbsp;&nbsp;7 (Special Mention) |  | 1096 | 40879 | 22471 | 2913 | 4131 |  | 71490 |
| &nbsp;&nbsp;&nbsp;&nbsp;8 (Substandard) |  |  |  |  |  | 730 |  | 730 |
| &nbsp;&nbsp;&nbsp;&nbsp;9 (Doubtful) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;10 (Loss) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $319633 | $249787 | $361068 | $180933 | $95929 | $303652 | $— | $1511002 |
| **Commercial and Industrial:** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Credit risk profile by internally<br> assigned grade: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;1-6 (Pass) | $83614 | $77073 | $38299 | $34360 | $19727 | $4622 | $353 | $258048 |
| &nbsp;&nbsp;&nbsp;&nbsp;7 (Special Mention) | 318 | 350 | 5523 | 406 | 161 | 859 | 10 | 7627 |
| &nbsp;&nbsp;&nbsp;&nbsp;8 (Substandard) |  | 792 | 2331 | 504 |  | 144 |  | 3771 |
| &nbsp;&nbsp;&nbsp;&nbsp;9 (Doubtful) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;10 (Loss) |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $83932 | $78215 | $46153 | $35270 | $19888 | $5625 | $363 | $269446 |

---

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Performing – These loans are accruing and are considered having low to moderate risk.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Non-performing – These loans are on non-accrual or are past due more than 90 days but are still accruing or are restructured. These loans may contain greater than average risk.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Loans rated 1-6 (Pass) – These loans are considered "pass" rated with low to moderate risk.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Loans rated 7 (Special Mention) – These loans have potential weaknesses warranting close attention, which, if left uncorrected, may result in deterioration of the credit at some future date.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Loans rated 8 (Substandard) – These loans have well-defined weaknesses that jeopardize the orderly liquidation of the debt under the original loan terms. Loss potential exists but is not identifiable in any one client.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Loans rated 9 (Doubtful) – These loans have pronounced weaknesses that make full collection highly questionable and improbable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Loans rated 10 (Loss) – These loans are considered uncollectible and continuance as a bankable asset is not warranted.

**Delinquencies** 

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:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **30-59 Days** | **60-89 Days** | **90 Days or greater** | **Total Past Due** | **Current Loans** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Residential mortgage | $11359 | $1454 | $1809 | $14622 | $1634216 | $1648838 |
| Commercial mortgage |  |  |  |  | 1914423 | 1914423 |
| Home equity | 962 | 393 | 214 | 1569 | 109782 | 111351 |
| Commercial and industrial | 65 | 269 |  | 334 | 350316 | 350650 |
| Consumer | 81 |  |  | 81 | 37513 | 37594 |
| Total | $12467 | $2116 | $2023 | $16606 | $4046250 | $4062856 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **30-59 Days** | **60-89 Days** | **90 Days <br>or Greater** | **Total<br>Past Due** | **Current<br>Loans** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Residential mortgage | $8470 | $415 | $1488 | $10373 | $1404706 | $1415079 |
| Commercial mortgage | 476 |  |  | 476 | 1510526 | 1511002 |
| Home equity | 314 | 643 |  | 957 | 87003 | 87960 |
| Commercial and industrial | 5 | 437 |  | 442 | 269004 | 269446 |
| Consumer |  |  |  |  | 35619 | 35619 |
| Total | $9265 | $1495 | $1488 | $12248 | $3306858 | $3319106 |

---

There were no loans 90 days or more past due and still accruing at December 31, 2022 or December 31, 2021.

------

**Allowance for Credit Losses**

The following tables contain changes in the allowance for credit losses disaggregated by loan category:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** |
|  | **Residential<br>Mortgage** | **Commercial<br>Mortgage** | **Home<br>Equity** | **Commercial &<br>Industrial** | **Consumer** | **Unfunded Commitments** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Allowance for credit loss:** |  |  |  |  |  |  |  |
| Allowance for credit losses - loan<br> portfolio: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31, 2021 | $13383 | $17133 | $406 | $2989 | $585 | $— | $34496 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for acquired loans | 527 | 1337 | 117 | 113 | 8 |  | 2102 |
| &nbsp;&nbsp;&nbsp;&nbsp;Initial allowance for PCD | 19 | 37 |  |  |  |  | 56 |
| &nbsp;&nbsp;&nbsp;&nbsp;Charge-offs |  |  |  | (23) | (29) |  | (52) |
| &nbsp;&nbsp;&nbsp;&nbsp;Recoveries | 4 |  |  | 89 | 12 |  | 105 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for (release of) credit<br> losses - loan portfolio | (612) | 579 | 50 | 985 | 65 |  | 1067 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses - loan portfolio | $13321 | $19086 | $573 | $4153 | $641 | $— | $37774 |
| Allowance for credit losses -<br> unfunded commitments: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31, 2021 | $— | $— | $— | $— | $— | $1384 | $1384 |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquired loan commitments |  |  |  |  |  | 137 | 137 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for (release of) credit<br> losses - unfunded commitments |  |  |  |  |  | 575 | 575 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses-<br> unfunded commitments | $— | $— | $— | $— | $— | $2096 | $2096 |
| **Total allowance for credit loss** | $13321 | $19086 | $573 | $4153 | $641 | $2096 | $39870 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** |
|  | **Residential<br>Mortgages** | **Commercial<br>Mortgages** | **Home<br>Equity** | **Commercial &<br>Industrial** | **Consumer** | **Unfunded Commitments** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Allowance for credit loss:** |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses - loan portfolio: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31, 2020 | $13067 | $18564 | $552 | $3309 | $524 | $— | $36016 |
| &nbsp;&nbsp;&nbsp;&nbsp;Charge-offs | (4) |  |  | (41) | (42) |  | (87) |
| &nbsp;&nbsp;&nbsp;&nbsp;Recoveries |  | 30 |  | 181 | 30 |  | 241 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for (release of) credit<br> losses - loan portfolio | 320 | (1461) | (146) | (460) | 73 |  | (1674) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses - loan portfolio | $13383 | $17133 | $406 | $2989 | $585 | $— | $34496 |
| &nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses - unfunded commitments: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31, 2020 | $— | $— | $— | $— | $— | $1004 | $1004 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for credit<br> losses - unfunded commitments |  |  |  |  |  | 380 | 380 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses-unfunded commitments |  |  |  |  |  | 1384 | 1384 |
| **Total allowance for credit loss** | $13383 | $17133 | $406 | $2989 | $585 | $1384 | $35880 |

---

**8.** **FEDERAL HOME LOAN BANK ("FHLB") OF BOSTON STOCK**

As a voluntary member of the FHLB of Boston, the Company is required to invest in stock of the FHLB of Boston (which is considered a restricted equity security) in an amount based upon its outstanding advances from the FHLB of Boston. At December 31, 2022 and 2021, the Company's investment in FHLB of Boston stock totaled $6.3 million and $4.8 million, respectively. No market exists for shares of this stock. The Company'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 Company'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 December 31, 2022 and December 31, 2021, no impairment has been recognized.

------

**9.** **BANKING PREMISES AND EQUIPMENT**

A summary of the cost and accumulated depreciation and amortization of property, leasehold improvements, and equipment is presented below:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **Estimated** |
|  | **2022** | **2021** | **Useful Lives** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |  |
| Land | $3396 | $1516 |  |
| Building and leasehold improvements | 25588 | 20254 | 3-30 years |
| Equipment, including vaults | 20165 | 18592 | 3-20 years |
| Work in process | 22 | 19 |  |
| &nbsp;&nbsp;&nbsp;Subtotal | 49171 | 40381 |  |
| Accumulated depreciation and amortization | (25874) | (23055) |  |
| &nbsp;&nbsp;&nbsp;Total | $23297 | $17326 |  |

---

Total depreciation expense for the years ended December 31, 2022, 2021, and 2020 amounted to $2.7 million, $2.6 million, and $2.5 million, and is included in occupancy and equipment expenses in the accompanying consolidated statements of income.

**10.** **INTANGIBLE ASSETS**

**Core deposit intangible ("CDI")**. At December 31, 2022 and December 31, 2021, the carrying value of CDI assets totaled $7.4 million and $2.6 million, respectively. The Company recorded CDI assets of $5.3 million associated with the Northmark merger during the year ended December 31, 2022. The Company recorded amortization expense of CDI assets totaling $494,000, $361,000, and $361,000 for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively. The weighted-average remaining amortization period for CDI was 8.7 years and 7.3 years at December 31, 2022 and December 31, 2021, respectively.

**Mortgage servicing rights.** Periodically, the Company sells certain residential mortgage loans to the secondary market. Generally, these loans are sold without recourse or other credit enhancements.

The Company sells loans and either releases or retains the servicing rights. For loans sold with servicing rights retained, the Company provides the servicing for the loans on a per-loan fee basis. Mortgage loans sold with servicing rights retained during the years ended December 31, 2022, December 31, 2021, and December 31, 2020 were $5.8 million, $25.3 million, and $60.5 million, respectively.

The following table provides an analysis of mortgage servicing rights, which are included in other assets:

---

| | | | |
|:---|:---|:---|:---|
|  | **Mortgage<br>Servicing<br>Rights** | **Valuation<br>Allowance** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Balance at December 31, 2019 | $1347 | $(26) | $1321 |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights acquired as a result of the Wellesley merger | 50 |  | 50 |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights capitalized | 536 |  | 536 |
| &nbsp;&nbsp;&nbsp;Amortization charged against servicing income | (572) |  | (572) |
| &nbsp;&nbsp;&nbsp;Change in impairment reserve |  | (116) | (116) |
| Balance at December 31, 2020 | $1361 | $(142) | $1219 |
| Balance at December 31, 2020 | $1361 | $(142) | $1219 |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights capitalized | 281 |  | 281 |
| &nbsp;&nbsp;&nbsp;Amortization charged against servicing income | (559) |  | (559) |
| &nbsp;&nbsp;&nbsp;Change in impairment reserve |  | 142 | 142 |
| Balance at December 31, 2021 | $1083 | $— | $1083 |
| Balance at December 31, 2021 | $1083 | $— | $1083 |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights acquired as a result of the Northmark merger | 785 |  | 785 |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights capitalized | 71 |  | 71 |
| &nbsp;&nbsp;&nbsp;Amortization charged against servicing income | (274) |  | (274) |
| &nbsp;&nbsp;&nbsp;Change in impairment reserve |  |  |  |
| Balance at December 31, 2022 | $1665 | $— | $1665 |

---

------

The fair value of the Company's mortgage servicing rights portfolio was $2.3 million and $1.5 million as of December 31, 2022 and 2021, 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.

The weighted-average amortization period for mortgage servicing rights portfolio was 7.1 years and 5.7 years at December 31, 2022 and 2021, respectively.

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

---

| | |
|:---|:---|
|  | **Future Amortization Expense** |
|  | **(dollars in thousands)** |
| 2023 | $217 |
| 2024 | 192 |
| 2025 | 170 |
| 2026 | 150 |
| 2027 | 132 |
| Thereafter | 804 |
| Total | $1665 |

---

**11.** **DEPOSITS** 

Deposits are summarized as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Demand deposits (non-interest bearing) | $1366395 | $1393935 |
| Interest bearing checking | 908961 | 763188 |
| Money market | 1162773 | 1104238 |
| Savings | 790628 | 907722 |
| Retail certificates of deposit under $250,000 | 117532 | 99196 |
| Retail certificates of deposit $250,000 or greater | 87528 | 60171 |
| Brokered certificates of deposit | 381559 | 2702 |
| &nbsp;&nbsp;&nbsp;Total deposits | $4815376 | $4331152 |

---

Certificates of deposit had the following schedule of maturities:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| 2022 | $— | $132212 |
| 2023 | 533513 | 19062 |
| 2024 | 39753 | 4443 |
| 2025 | 5377 | 2182 |
| 2026 | 6021 | 4170 |
| 2027 and after | 1955 |  |
| &nbsp;&nbsp;&nbsp;Total certificates of deposit | $586619 | $162069 |

---

**Related Party Deposits**

Deposit accounts of directors, executive officers, and their respective affiliates totaled $2.7 million and $7.5 million as of December 31, 2022 and 2021, respectively.

**12.** **BORROWINGS**

**Federal Home Loan Bank Advances**

At December 31, 2022 the Company had $100.0 million of short-term advances from the FHLB of Boston, with a weighted average rate of 4.38%. At December 31, 2021, the Company did not have any short-term advances outstanding from the FHLB of Boston.

------

Information relating to long-term borrowings from the FHLB of Boston is presented below:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
|  | **Amount** | **Rate** | **Amount** | **Rate** |
| Stated Maturity | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| 2022 | $— |  | $221 | 1.84% |
| 2023\* | 176 | 2.36 | 16221 | 3.69 |
|  | $176 | 2.36% | $16442 | 3.67% |

---

\* December 31, 2021 totals includes a $15 million advance with an interest rate of 3.80%, that was callable by the FHLB of Boston on January 27, 2022.

**Securities Sold Under Agreements to Repurchase**

The Company periodically enters into repurchase agreements with its larger deposit and commercial clients as part of its cash management services which are typically overnight borrowings. Repurchase agreements with clients totaled $5.0 million as of December 31, 2022. The daily average balance of securities sold under agreements to repurchase during the year ended December 31, 2022 was $1.2 million. There were no repurchase agreements with clients outstanding as of December 31, 2021. The Company retains control of the securities underlying these agreements.

**Federal Reserve Bank PPP Loan Facility ("PPPLF") Advances**

During the years ended December 31, 2022 and December 31, 2021, the Company did not borrow funds from the Federal Reserve Bank's PPPLF.

During the year ended December 31, 2020, in order to fund a portion of the Company's PPP loan originations, the Company borrowed $85.4 million from the Federal Reserve Bank's PPPLF, which carried a rate of 0.35% fixed for the term of the corresponding PPP loan. The Company pledged eligible PPP loans as collateral for the borrowings. As of December 31, 2020, all of the Company's borrowings under the PPPLF were repaid.

**Subordinated Debt**

In the fourth quarter of 2020, the Company redeemed $10.0 million in subordinated debt, bearing a 6.0% coupon, which was assumed as part of the Wellesley Merger.

**Unused Borrowing Capacity with the FHLB of Boston and FRB of Boston**

All short- and long-term borrowings with the FHLB of Boston are secured by the Company's stock in the FHLB of Boston and a blanket lien on "qualified collateral" defined principally as 60% - 70% 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 December 31, 2022 was approximately $639.0 million.

The Company also has a line of credit with the FRB of Boston. The Banks did not have any outstanding FRB borrowings as of December 31, 2022 and 2021. At December 31, 2022 and 2021, the Company had pledged investment securities, CRE, and C&I loans with aggregate principal balances of approximately $970.1 million and $652.3 million, respectively, as collateral for this line of credit. Based upon the collateral pledged, the Company's unused borrowing capacity with the FRB of Boston at December 31, 2022 and 2021 was approximately $680.4 million and $419.6 million, respectively.

------

**13.** **INCOME TAXES**

The components of income tax expense were as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Current tax expense |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal | $12906 | $11330 | $7877 |
| &nbsp;&nbsp;&nbsp;State | 5559 | 4862 | 4192 |
|  | 18465 | 16192 | 12069 |
| Deferred tax expense (benefit) |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal | 455 | 1840 | (250) |
| &nbsp;&nbsp;&nbsp;State | 132 | 1059 | (415) |
|  | 587 | 2899 | (665) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total income tax expense | $19052 | $19091 | $11404 |

---

The following is a reconciliation of the total income tax expense, calculated at statutory federal income tax rates, to the income tax provision in the consolidated statements of income:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Income tax expense at statutory rate of 21.0% | $15112 | $15354 | $9106 |
| Increase/(decrease) resulting from: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;State tax, net of federal tax benefit | 4496 | 4678 | 2984 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax-exempt income | (814) | (795) | (694) |
| &nbsp;&nbsp;&nbsp;&nbsp;ESOP dividends | (150) | (145) | (125) |
| &nbsp;&nbsp;&nbsp;&nbsp;Bank owned life insurance | (133) | (165) | (157) |
| &nbsp;&nbsp;&nbsp;&nbsp;Compensation limited under 162(m) | 193 | 226 | 511 |
| &nbsp;&nbsp;&nbsp;&nbsp;Benefit from stock compensation | (81) | (46) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-deductible acquisition costs | 182 |  | 186 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-deductible expenses | 44 | 55 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Impact of CARES Act |  |  | (539) |
| &nbsp;&nbsp;&nbsp;&nbsp;BOLI surrender, death benefit | 310 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | (107) | (71) | 132 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total income tax expense | $19052 | $19091 | $11404 |

---

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%. The effect of the Act allowed the Company to recognize lower tax expense associated with NOL carryforwards from 2018 and 2019 (as a result of the Optima Bank and Trust merger) and resulted in a benefit of $539,000 during the year ended December 31, 2020.

------

The Company's 2022 and 2021 net deferred tax assets were measured using a 27.95% and 27.92% tax rate, respectively, and consisted of the following components:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Gross deferred tax assets |  |  |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses | $11142 | $10019 |
| &nbsp;&nbsp;&nbsp;Unrealized losses on available for sale securities | 7390 | 982 |
| &nbsp;&nbsp;&nbsp;Incentive compensation | 1819 | 1905 |
| &nbsp;&nbsp;&nbsp;Equity based compensation | 1298 | 1347 |
| &nbsp;&nbsp;&nbsp;Lease liabilities | 7661 | 9458 |
| &nbsp;&nbsp;&nbsp;ESOP dividends | 200 | 193 |
| &nbsp;&nbsp;&nbsp;Intangibles and fair value marks (merger related) | 2322 | 658 |
| &nbsp;&nbsp;&nbsp;Other | 931 | 265 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total gross deferred tax assets | 32763 | 24827 |
| Gross deferred tax liabilities |  |  |
| &nbsp;&nbsp;&nbsp;Deferred loan origination costs | (2886) | (2324) |
| &nbsp;&nbsp;&nbsp;Retirement benefits | (1745) | (535) |
| &nbsp;&nbsp;&nbsp;Depreciation of premises and equipment | (2551) | (1997) |
| &nbsp;&nbsp;&nbsp;Right-of-use asset | (7014) | (8733) |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights | (465) | (303) |
| &nbsp;&nbsp;&nbsp;Goodwill | (115) | (115) |
| &nbsp;&nbsp;&nbsp;Derivative transactions | 3 | (835) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total gross deferred tax liabilities | (14773) | (14842) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax asset | $17990 | $9985 |

---

It is management's belief that it is more likely than not that the reversal of deferred tax liabilities and results of future operations will generate sufficient taxable income to realize the deferred tax assets. Therefore, no valuation allowance was required at either December 31, 2022 and December 31, 2021 for the deferred tax assets. It should be noted, however, that factors beyond management's control, such as the general state of the economy and real estate values, can affect future levels of taxable income and that no assurance can be given that sufficient taxable income will be generated in future periods to fully absorb deductible temporary differences.

At December 31, 2022 and December 31, 2021, 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.

The Company's federal income tax returns are open and subject to examination from the 2019 through 2022 tax return years. The Company's state income tax returns are open from the 2019 through 2022 tax return years based on individual states' statute of limitations.

**14.** **PENSION AND RETIREMENT PLANS**

The Company has a noncontributory, defined benefit pension plan ("Pension Plan") covering substantially all employees hired before May 2, 2011. The Company also provides supplemental retirement benefits to certain current and former executive officers of the Company under the terms of Supplemental Executive Retirement Agreements ("Supplemental Retirement Plan"). 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. Effective November 7, 2019, the postretirement health care plan was frozen for employees hired after that date. The Company froze the accrual of benefits on the qualified defined benefit pension plan in 2017. The Company did not make any contributions to the qualified defined benefit pension plan during the year ended December 31, 2022. The Company uses a December 31<sup>st</sup> measurement date each year to determine the benefit obligations for these plans.

------

Projected benefit obligations and funded status were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Pension Plan** | **Pension Plan** | **Supplemental <br>Retirement Plan** | **Supplemental <br>Retirement Plan** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Change in projected benefit obligation |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Obligation at beginning of year | $47875 | $50117 | $10075 | $10505 |
| &nbsp;&nbsp;&nbsp;Service cost |  |  | 399 | 400 |
| &nbsp;&nbsp;&nbsp;Interest cost | 1309 | 1211 | 260 | 223 |
| &nbsp;&nbsp;&nbsp;Actuarial (gain) loss | (11754) | (1838) | (2057) | (451) |
| &nbsp;&nbsp;&nbsp;Benefits paid | (1832) | (1615) | (617) | (602) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obligation at end of year | 35598 | 47875 | 8060 | 10075 |
| Change in plan assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Fair value at beginning of year | 60638 | 55802 |  |  |
| &nbsp;&nbsp;&nbsp;Actual return on plan assets | (8457) | 6451 |  |  |
| &nbsp;&nbsp;&nbsp;Employer contribution |  |  | 617 | 602 |
| &nbsp;&nbsp;&nbsp;Benefits paid | (1832) | (1615) | (617) | (602) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value at end of year | 50349 | 60638 |  |  |
| Funded status at end of year | $14751 | $12763 | $(8060) | $(10075) |

---

The funded status of the Company's Pension Plan is included within other assets and the funded status of the Company's Supplemental Retirement Plan is included within other liabilities on the Company's consolidated balance sheets at December 31, 2022 and 2021.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Pension Plan** | **Pension Plan** | **Supplemental <br>Retirement Plan** | **Supplemental <br>Retirement Plan** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Accumulated benefit obligation | $35598 | $47875 | $7627 | $9472 |

---

Amounts recognized in accumulated other comprehensive income (loss) consisted of:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Pension Plan** | **Pension Plan** | **Supplemental <br>Retirement Plan** | **Supplemental <br>Retirement Plan** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Net actuarial (gain) loss | $373 | $(206) | $(617) | $1468 |
| Prior service credit |  |  |  |  |
| Total | $373 | $(206) | $(617) | $1468 |

---

The components of net periodic benefit cost and amounts recognized in other comprehensive income (loss) were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Pension Plan** | **Pension Plan** | **Supplemental <br>Retirement Plan** | **Supplemental <br>Retirement Plan** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Net periodic benefit cost |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Service cost | $— | $— | $399 | $400 |
| &nbsp;&nbsp;&nbsp;Interest cost | 1309 | 1211 | 260 | 223 |
| &nbsp;&nbsp;&nbsp;Expected return on assets | (3876) | (3566) |  |  |
| &nbsp;&nbsp;&nbsp;Amortization of prior service credit |  | (3) |  |  |
| &nbsp;&nbsp;&nbsp;Amortization of net actuarial loss |  |  | 28 | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net periodic expense (benefit) | (2567) | (2358) | 687 | 663 |
| Amounts recognized in other comprehensive income (loss) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net actuarial loss/(gain) | 579 | (4723) | (2057) | (451) |
| &nbsp;&nbsp;&nbsp;Amortization of prior service credit |  | 3 |  |  |
| &nbsp;&nbsp;&nbsp;Amortization of net actuarial loss |  |  | (28) | (40) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total recognized in other comprehensive income (loss) | 579 | (4720) | (2085) | (491) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total recognized in net periodic expense (benefit) and other<br> comprehensive income (loss) | $(1988) | $(7078) | $(1398) | $172 |

---

------

Weighted-average assumptions used to determine projected benefit obligations are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Pension Plan** | **Pension Plan** | **Supplemental <br>Retirement Plan** | **Supplemental <br>Retirement Plan** |
|  | **2022** | **2021** | **2022** | **2021** |
| Discount rate | 5.22% | 2.79% | 5.15% | 2.63% |
| Rate of compensation increase | N/A | N/A | 4.00% | 4.00% |

---

Weighted-average assumptions used to determine the net periodic benefit cost in each year were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Pension Plan** | **Pension Plan** | **Supplemental <br>Retirement Plan** | **Supplemental <br>Retirement Plan** |
|  | **2022** | **2021** | **2022** | **2021** |
| Discount rate | 2.79% | 2.45% | 2.63% | 2.21% |
| Expected long-term return on plan assets | 6.50% | 6.50% | N/A | N/A |
| Rate of compensation increase | N/A | N/A | 4.00% | 4.00% |

---

To develop the expected long-term rate of return on assets assumption for the Pension Plan, the Company considered the historical returns and the future expectations for returns for each asset class, as well as target asset allocations of the pension portfolio.

The Company maintains an Investment Policy for its Pension Plan. The objective of this policy is to seek a balance between capital appreciation, current income, and preservation of capital, with a longer-term weighting towards equities because of the extended time horizon of the Pension Plan.

The Investment Policy guidelines suggest that the target asset allocation percentages are from 30% to 60% in domestic large cap equities, from 5% to 20% in domestic small/mid cap equities, from 0% to 20% in international and emerging equities, and from 20% to 60% in cash and fixed income.

The Company's Pension Plan weighted-average asset allocations by asset category were as follows:

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Equity securities | 60% | 68% |
| Debt securities | 33 | 29 |
| Other |  |  |
| Cash and equivalents | 7 | 3 |
| &nbsp;&nbsp;&nbsp;Total | 100% | 100% |

---

The three broad levels of fair values used to measure the Pension Plan assets are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 1 – Quoted prices for identical assets in active markets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 2 – Quoted prices for similar assets in active markets; quoted prices for identical or similar assets in inactive markets; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 3 – Valuations derived from techniques in which one or more significant inputs or significant value drivers are unobservable in the markets and which reflect the Company's market assumptions.

The following table summarizes the various categories of the Pension Plan's assets:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Fair Value as of December 31, 2022** | **Fair Value as of December 31, 2022** | **Fair Value as of December 31, 2022** | **Fair Value as of December 31, 2022** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Asset category |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $3676 | $— | $— | $3676 |
| &nbsp;&nbsp;&nbsp;Fixed income |  | 12347 |  | 12347 |
| &nbsp;&nbsp;&nbsp;Equity securities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mutual funds |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Domestic equity | 24201 |  |  | 24201 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International | 3942 |  |  | 3942 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Domestic fixed income | 6183 |  |  | 6183 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $38002 | $12347 | $— | $50349 |

---

------

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Fair Value as of December 31, 2021** | **Fair Value as of December 31, 2021** | **Fair Value as of December 31, 2021** | **Fair Value as of December 31, 2021** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Asset category |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $1689 | $— | $— | $1689 |
| &nbsp;&nbsp;&nbsp;Fixed income |  | 13338 |  | 13338 |
| &nbsp;&nbsp;&nbsp;Equity securities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Large cap core | 16940 |  |  | 16940 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Small cap core | 2359 |  |  | 2359 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mutual funds |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Domestic equity | 10413 |  |  | 10413 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International | 6579 |  |  | 6579 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Domestic fixed income | 9320 |  |  | 9320 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $47300 | $13338 | $— | $60638 |

---

There were no transfers between fair value levels during the years ended December 31, 2022 and December 31, 2021.

The Company offers postretirement health care benefits for current and future retirees of the Bank. 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 obligation for this plan. On November 7, 2019, the Company announced its decision to freeze the accrual of benefits to new hires within the plan. The plan is unfunded and plan obligations were $424,000 and $729,000 at December 31, 2022 and December 31, 2021, respectively.

Benefits expected to be paid in the next ten years are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Pension <br>Plan** | **Supplemental<br>Retirement Plan** | **Postretirement<br>Healthcare Plan** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| <u>Year-ended December 31,</u> |  |  |  |  |
| &nbsp;&nbsp;&nbsp;2023 | $2124 | $611 | $24 | $2759 |
| &nbsp;&nbsp;&nbsp;2024 | 2197 | 606 | 23 | 2826 |
| &nbsp;&nbsp;&nbsp;2025 | 2270 | 602 | 23 | 2895 |
| &nbsp;&nbsp;&nbsp;2026 | 2394 | 597 | 23 | 3014 |
| &nbsp;&nbsp;&nbsp;2027 | 2378 | 592 | 22 | 2992 |
| &nbsp;&nbsp;&nbsp;2028-2032 | 12695 | 3916 | 123 | 16734 |
| &nbsp;&nbsp;&nbsp;Total | $24058 | $6924 | $238 | $31220 |

---

**Employee Profit Sharing and 401(k) Plan** 

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 4% of each participant's salary, eligible bonus, and eligible incentive. Employees are eligible to participate in the PSP on the first day of their initial date of service. The Company may also make discretionary contributions to the PSP.

**Employee Stock Ownership Plan**

The Company has an Employee Stock Ownership Plan ("ESOP") for its eligible employees. Employees are eligible to participate upon the attainment of age 21 and the completion of 12 months of service consisting of at least 1,000 hours. Purchases of the Company's stock by the ESOP will be funded by employer contributions or reinvestment of cash dividends.

Total expenses related to the Profit Sharing and ESOP Plans for the years ended December 31, 2022, 2021, and 2020 amounted to $4.5 million, $4.0 million, and $3.6 million, respectively.

------

**Defined Contribution SERP Plan**

For executives participating in the Defined Contribution SERP Plan ("DC SERP") plan, the Company made a contribution of 10% of each executive's base salary and bonus to his or her account under the Company's DC SERP. Total expenses related to the Company's DC SERP for the years ended December 31, 2022, 2021, and 2020 amounted to $271,000, $201,000, and $209,000, respectively.

**15.** **SHARE-BASED COMPENSATION** 

In 2017, the Company adopted the 2017 Equity and Cash Incentive Plan (the "2017 Plan") and all future awards from date of adoption are anticipated to be made under the 2017 Plan. The 2017 Plan permits the issuance of restricted stock, restricted stock units (both time and performance-based), stock options, and stock appreciation rights.

Restricted stock awards time-vest either over a three-year or five-year period and are fair valued as of the date of grant. The holders of restricted stock awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. A summary of restricted stock outstanding as of December 31, 2022 and 2021, and changes during the years ended on those dates, is presented below:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
|  | **Number<br>of Shares** | **Weighted<br>Average<br>Grant Value** | **Number<br>of Shares** | **Weighted<br>Average<br>Grant Value** |
| Restricted stock |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-vested at beginning of year | 34622 | $78.20 | 31649 | $73.07 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted | 14380 | 87.10 | 18781 | 82.06 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vested | (11450) | 76.50 | (11691) | 71.27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited | (2980) | 81.43 | (4117) | 75.97 |
| &nbsp;&nbsp;&nbsp;Non-vested at end of year | 34572 | $82.19 | 34622 | $78.20 |

---

Performance-based restricted stock units vest based upon the Company's performance over a three-year period and are fair valued as of the date of grant. The holders of performance-based restricted stock units do not participate in the rewards of stock ownership of the Company until vested. A summary of non-vested performance-based restricted stock units outstanding as of December 31, 2022 and 2021, and changes during the years ended on those dates, is presented below:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
|  | **Number<br>of Units** | **Weighted<br>Average<br>Grant Value** | **Number<br>of Units** | **Weighted<br>Average<br>Grant Value** |
| Performance-based restricted stock units |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-vested at beginning of year | 74699 | $73.59 | 75246 | $73.41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted | 37263 | 88.18 | 32697 | 77.00 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vested (Performance achieved) | (34248) | 70.36 | (30059) | 76.56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited | (5580) | 79.92 | (3185) | 75.06 |
| &nbsp;&nbsp;&nbsp;Non-vested at end of year | 72134 | $80.83 | 74699 | $73.59 |

---

Time-based restricted stock units vest over a three-year-period and have been fair valued as of the date of the grant. The holders of time-based restricted stock units do not participate in the rewards of stock ownership of the Company until vested. A summary of non-vested time-based restricted stock units outstanding as of December 31, 2022 and 2021, and changes during the years ended on those dates, is presented below:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
|  | **Number<br>of Shares** | **Weighted<br>Average<br>Grant Value** | **Number<br>of Shares** | **Weighted<br>Average<br>Grant Value** |
| Time-based restricted stock units |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-vested at beginning of year | 13836 | $75.91 | 14968 | $74.84 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted | 8796 | 88.18 | 7464 | 77.00 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vested | (7417) | 75.94 | (7899) | 74.95 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited | (1664) | 84.40 | (697) | 75.64 |
| &nbsp;&nbsp;&nbsp;Non-vested at end of year | 13551 | $82.81 | 13836 | $75.91 |

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------

The following table presents the amounts recognized in the consolidated statements of income for restricted stock, time-based restricted stock units, and performance-based restricted stock units:

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Share-based compensation expense | $2875 | $3476 | $4923 |
| Related income tax benefit | $804 | $970 | $1375 |

---

The 2017 Plan allows Directors of the Company to receive their annual retainer fee in the form of stock in the Company. Total shares issued under the 2017 Plan in the years ended December 31, 2022 and 2021 were 7,386 and 5,941, respectively.

**16.** **FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK**

To meet the financing needs of its clients, 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 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.

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 included the following:

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| Financial instruments whose contractual amount represents credit risk: |  |  |
| &nbsp;&nbsp;&nbsp;Commitments to extend credit: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unused portion of existing lines of credit | $1073567 | $809383 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Origination of new loans | 25411 | 70633 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Standby letters of credit | 24234 | 18880 |
| Financial instruments whose notional amount exceeds the amount of credit risk: |  |  |
| &nbsp;&nbsp;&nbsp;Commitments to sell residential mortgage loans | 250 | 3920 |

---

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of a client to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. Most guarantees extend for one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients. The collateral supporting those commitments varies and may include real property, accounts receivable, or inventory.

Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each client's creditworthiness on a case-by-case basis. The amount of collateral obtained upon extension of the credit is based on management's credit evaluation of the client. Collateral held varies, but may include primary residences, accounts receivable, inventory, property, plant and equipment, and income-producing CRE.

See Note 21 - Derivatives and Hedging Activities for a discussion of the Company's derivatives and hedging activities.

**17.** **COMMITMENTS AND CONTINGENCIES**

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 2022 and 2032 and, in some instances, contain options to renew for periods up to 25 years.

The Company recognizes its operating leases on its consolidated balance sheet by recording a lease liability, representing the Company's legal obligation to make lease payments, and a ROU asset, representing the Company's legal right to use the leased office space and

------

banking centers. The Company, by policy, does not include renewal options for leases as part of its ROU assets and lease liabilities unless they are deemed reasonably certain to exercise. The Company does not have any material sub-lease agreements.

Operating lease expenses are comprised of operating lease costs and variable lease costs, net of sublease income, and are recognized over the lease term.

Variable lease payments that are not dependent on an index or a rate or changes in variable payments based on an index or rate after the commencement date are excluded from the measurement of the lease liability, recognized in the period incurred and included within variable lease costs below.

The Company determines whether a contract contains a lease based on whether a contract, or a part of a contract, conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The discount rate is determined as either the rate implicit in the lease or, when a rate cannot be readily determined, the Company's incremental borrowing rate. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term.

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

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Operating lease cost | $6965 | $6976 | $6691 |
| Variable lease cost (cost excluded from lease payments) | 38 | 13 | 2 |
| Sublease income | (316) | (65) | (65) |
| Total operating lease cost | $6687 | $6924 | $6628 |
| **Other Information** |  |  |  |
| Cash paid for amounts included in the measurement of lease liabilities - operating cash flows for operating leases | $7263 | $7259 | $6547 |
| Operating Lease - operating cash flows (liability reduction) | 6401 | 6252 | 5430 |
| Weighted average lease term - operating leases | 5.45 Years | 6.13 Years | 6.90 Years |
| Weighted average discount rate - operating leases | 3.01% | 2.94% | 2.98% |

---

The total minimum lease payments due in future periods under these agreements in effect at December 31, 2022 and December 31, 2021 were as follows:

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| | |
|:---|:---|
|  | **Future Minimum** |
| **December 31, 2022** | **Lease Payments** |
|  | **(dollars in thousands)** |
| 2023 | $7085 |
| 2024 | 6085 |
| 2025 | 5118 |
| 2026 | 3882 |
| 2027 | 2079 |
| Thereafter | 5883 |
| Total minimum lease payments | $30132 |
| Less: interest | (2719) |
| Total lease liability | $27413 |

---

Several 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 $7.6 million, $7.3 million, and $7.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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Change in Control Agreements. The Company has entered into agreements with its Chief Executive Officer and with certain other senior officers, whereby, following the occurrence of a change in control of the Company, if employment is terminated (except because of death, retirement, disability, or for "cause" as defined in the agreements) or is voluntarily terminated for "good reason," as defined in the agreements, said officers will be entitled to receive additional compensation, as defined in the agreements.

**18.** **SHAREHOLDERS' EQUITY** 

Capital guidelines issued by the Federal Reserve Bank 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 measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.

The Capital Rules: (i) include "Common Equity Tier 1" ("CET1") and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and "Additional Tier 1 capital" instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations. Under the Capital Rules, for most banking organizations, including the Company, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock, and the most common forms of Tier 2 capital are subordinated notes and a portion of the allowance for credit losses, in each case, subject to the Capital Rules' specific requirements.

Pursuant to the Capital Rules, effective January 1, 2015, the minimum capital ratios are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•4.5% CET1 to risk-weighted assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (called "leverage ratio").

Additionally, the Company is required to maintain additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios inclusive of the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) total capital to risk-weighted assets of at least 10.5%.

Management believes that as of December 31, 2022 and 2021, the Company and the Bank met all applicable minimum capital requirements and were considered "well-capitalized" by both the Federal Reserve Board 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 phase-in the effects of the CECL accounting standard in their regulatory capital, over a three-year period from January 1, 2022 through December 31, 2024. The Company did not elect to delay the adoption of CECL and did not adopt the transition period for regulatory capital.

------

The Company's and the Bank's actual and required capital measures were as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Actual** | **Actual** | **Minimum Capital<br>Required For<br>Capital Adequacy Plus<br>Capital Conservation<br>Buffer** | **Minimum Capital<br>Required For<br>Capital Adequacy Plus<br>Capital Conservation<br>Buffer** | **Minimum To Be<br>Well-Capitalized<br>Under<br>Prompt Corrective<br>Action Provisions** | **Minimum To Be<br>Well-Capitalized<br>Under<br>Prompt Corrective<br>Action Provisions** |
|  | **Amount** | **Ratio** | **Amount** | **Ratio** | **Amount** | **Ratio** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **At December 31, 2022** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cambridge Bancorp: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total capital (to risk-weighted assets) | $506239 | 13.5% | $393285 | 10.5% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital (to risk-weighted assets) | 466369 | 12.5% | 318373 | 8.5% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common equity tier I capital (to risk-weighted assets) | 466369 | 12.5% | 262190 | 7.0% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital (to average assets) | 466369 | 8.5% | 219309 | 4.0% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;Cambridge Trust Company: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total capital (to risk-weighted assets) | $490175 | 13.1% | $393246 | 10.5% | $374520 | 10.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital (to risk-weighted assets) | 450305 | 12.0% | 318342 | 8.5% | 299616 | 8.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common equity tier I capital (to risk-weighted assets) | 450305 | 12.0% | 262164 | 7.0% | 243438 | 6.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital (to average assets) | 450305 | 8.2% | 219296 | 4.0% | 274120 | 5.0% |

---

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Actual** | **Actual** | **Minimum Capital<br>Required For<br>Capital Adequacy Plus<br>Capital Conservation<br>Buffer** | **Minimum Capital<br>Required For<br>Capital Adequacy Plus<br>Capital Conservation<br>Buffer** | **Minimum To Be<br>Well-Capitalized<br>Under<br>Prompt Corrective<br>Action Provisions** | **Minimum To Be<br>Well-Capitalized<br>Under<br>Prompt Corrective<br>Action Provisions** |
|  | **Amount** | **Ratio** | **Amount** | **Ratio** | **Amount** | **Ratio** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **At December 31, 2021** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cambridge Bancorp: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total capital (to risk-weighted assets) | $420398 | 13.6% | $325617 | 10.5% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital (to risk-weighted assets) | 384518 | 12.4% | 263595 | 8.5% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common equity tier I capital (to risk-weighted assets) | 384518 | 12.4% | 217078 | 7.0% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital (to average assets) | 384518 | 8.3% | 185015 | 4.0% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;Cambridge Trust Company: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total capital (to risk-weighted assets) | $409806 | 13.2% | $325587 | 10.5% | $310082 | 10.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital (to risk-weighted assets) | 373926 | 12.1% | 263570 | 8.5% | 248066 | 8.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common equity tier I capital (to risk-weighted assets) | 373926 | 12.1% | 217058 | 7.0% | 201554 | 6.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tier 1 capital (to average assets) | 373926 | 8.1% | 185003 | 4.0% | 231254 | 5.0% |

---

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**19.** **COMPREHENSIVE INCOME (LOSS)**

Comprehensive income (loss) is defined as all changes to shareholders' equity except investments by and distributions to shareholders. Net income is a component of comprehensive income (loss), with all other components referred to in the aggregate as "other comprehensive income (loss)." The Company's other comprehensive income (loss) consists of unrealized gains or losses on securities held at year-end classified as available for sale and, cash flow hedges, and the component of the unfunded retirement liability computed in accordance with the requirements of ASC Topic 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:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended <br>December 31, 2022** | **For the Year Ended <br>December 31, 2022** | **For the Year Ended <br>December 31, 2022** | **For the Year Ended <br>December 31, 2021** | **For the Year Ended <br>December 31, 2021** | **For the Year Ended <br>December 31, 2021** | **For the Year Ended <br>December 31, 2020** | **For the Year Ended <br>December 31, 2020** | **For the Year Ended <br>December 31, 2020** |
|  | **Before<br>Tax<br>Amount** | **Tax<br>(Expense)<br>or Benefit** | **Net-of-<br>tax<br>Amount** | **Before<br>Tax<br>Amount** | **Tax<br>(Expense)<br>or Benefit** | **Net-of-<br>tax<br>Amount** | **Before<br>Tax<br>Amount** | **Tax<br>(Expense)<br>or Benefit** | **Net-of-<br>tax<br>Amount** |
|  |  |  |  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |  |  |  |
| Available for sale securities |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized holding gains (losses) | $(25144) | $6408 | $(18736) | $(6245) | $1623 | $(4622) | $3630 | $(830) | $2800 |
| &nbsp;&nbsp;&nbsp;&nbsp;Reclassification adjustment for (gains) losses realized in net income (1) |  |  |  |  |  |  | (73) | 16 | (57) |
| Interest rate swaps designated as cash flow hedges |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized holding gains (losses) | (2170) | 607 | (1563) | (1329) | 370 | (959) | 6602 | (1844) | 4758 |
| &nbsp;&nbsp;&nbsp;&nbsp;Reclassification adjustment for (gains) losses recognized in net income (2) | (832) | 232 | (600) | (2587) | 723 | (1864) | (1879) | 525 | (1354) |
| Defined benefit retirement plans |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net change in retirement liability | 1818 | (508) | 1310 | 5273 | (1472) | 3801 | (1695) | 463 | (1232) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other comprehensive income (loss) | $(26328) | $6739 | $(19589) | $(4888) | $1244 | $(3644) | $6585 | $(1670) | $4915 |

---

(1) Reported in gain (loss) on disposition of investment securities line item in the Consolidated Statements of Income.

(2) Reported in interest on payable loans line item in the Consolidated Statements of Income.

The components of accumulated other comprehensive income are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Before Tax Amount** | **Deferred (tax) benefit** | **Net-of-tax Amount** | **Before Tax Amount** | **Deferred (tax) benefit** | **Net-of-tax Amount** |
|  | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) | (dollars in thousands) |
| Available for sale securities | $(28611) | $7390 | $(21221) | $(3467) | $982 | $(2485) |
| Interest Rate swaps designated as cash flow hedges | (14) | 4 | (10) | 2988 | (836) | 2152 |
| Defined benefit retirement plans | 600 | (168) | 432 | (1218) | 341 | (877) |
| Total accumulated other comprehensive income | $(28025) | $7226 | $(20799) | $(1697) | $487 | $(1210) |

---

------

**20.** **EARNINGS PER SHARE**

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

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** | **(dollars in thousands, except per share data)** |
| **Earnings per common share - basic:** |  |  |  |
| Numerator: |  |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $52909 | $54024 | $31959 |
| &nbsp;&nbsp;&nbsp;Less dividends and undistributed earnings allocated<br> to participating securities | (257) | (250) | (47) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to common shareholders | $52652 | $53774 | $31912 |
| Denominator: |  |  |  |
| &nbsp;&nbsp;&nbsp;Weighted average common shares outstanding | 7163 | 6926 | 6289 |
| &nbsp;&nbsp;&nbsp;Earnings per common share - basic | $7.35 | $7.76 | $5.07 |
| **Earnings per common share - diluted:** |  |  |  |
| Numerator: |  |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $52909 | $54024 | $31959 |
| &nbsp;&nbsp;&nbsp;Less dividends and undistributed earnings allocated<br> to participating securities | (257) | (250) | (47) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income applicable to common shareholders | $52652 | $53774 | $31912 |
| Denominator: |  |  |  |
| &nbsp;&nbsp;&nbsp;Weighted average common shares outstanding | 7163 | 6926 | 6289 |
| &nbsp;&nbsp;&nbsp;Dilutive effect of common stock equivalents | 51 | 65 | 55 |
| &nbsp;&nbsp;&nbsp;Weighted average diluted common shares outstanding | 7214 | 6991 | 6344 |
| &nbsp;&nbsp;&nbsp;Earnings per common share - diluted | $7.30 | $7.69 | $5.03 |

---

**21.** **DERIVATIVES and Hedging Activities** 

The Company utilizes interest rate swaps and floors to mitigate exposure to interest rate risk and to facilitate the needs of its clients. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company's known or expected cash receipts principally related to the Company's assets.

The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's existing credit derivatives result from participations loan participation arrangements, therefore, are not used to manage interest rate risk in the Company's assets or liabilities

**Cash Flow Hedges of Interest Rate Risk**

The Company uses interest 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.

The Company's objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate floors as part of its interest rate risk management strategy. 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. During 2022, such derivatives were used to hedge the variable cash flows associated with variable-rate assets.

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For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI 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 AOCI related to derivatives will be reclassified to interest income as interest payments are received on the Company's variable-rate assets.

During fiscal year 2023, the Company estimates that $539,000 will be reclassified out of AOCI into earnings, as a decrease to interest income.

**Non-designated Hedges** 

Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain clients. For the Company's clients, 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 interest rate risk. The interest rate swap contracts with commercial loan borrowers allow them to convert floating-rate loan payments to fixed rate loan payments. When the Company enters into an interest rate swap contract with a commercial loan borrower, it simultaneously enters into a "mirror" swap contract with a third party. The third party exchanges the client's fixed-rate loan payments for floating-rate loan payments. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings. Because these derivatives have mirror-image contractual terms, the changes in fair value substantially offset each other through earnings. Fees earned in connection with the execution of derivatives related to this program are recognized in earnings through loan related derivative 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.

**Risk Participation Agreements.** The Company 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. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

Under a risk participation-out agreement, a derivative 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, a derivative 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.

The following tables present the notional amount, the location, and fair values of derivative instruments in the Company's consolidated balance sheets:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Derivative Assets** | **Derivative Assets** | **Derivative Assets** | **Derivative Liabilities** | **Derivative Liabilities** | **Derivative Liabilities** |
|  | **Notional Amount** | **Balance Sheet<br>Location** | **Fair Value** | **Notional Amount** | **Balance Sheet<br>Location** | **Fair Value** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Derivatives designated as hedging instruments** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate contracts | $250000 | Other Assets | $1966 | $— | Other Liabilities | $— |
| Total derivatives designated as hedging instruments |  |  | $1966 |  |  | $— |
| **Derivatives not designated as hedging instruments** |  |  |  |  |  |  |
| &nbsp;&nbsp;Loan related derivative contracts |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate contracts | $499619 | Other Assets | $50784 | $499619 | Other Liabilities | $50784 |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk participation agreements-out to counterparties | 46604 | Other Assets | 23 |  | Other Liabilities |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk participation agreements-in with counterparties |  | Other Assets |  | 71046 | Other Liabilities | 43 |
| Total derivatives not designated as hedging instruments |  |  | $50807 |  |  | $50827 |

---

------

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Derivative Assets** | **Derivative Assets** | **Derivative Assets** | **Derivative Liabilities** | **Derivative Liabilities** | **Derivative Liabilities** |
|  | **Notional Amount** | **Balance Sheet<br>Location** | **Fair Value** | **Notional Amount** | **Balance Sheet<br>Location** | **Fair Value** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| **Derivatives designated as hedging instruments** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate contracts | $150000 | Other Assets | $3513 | $— | Other Liabilities | $— |
| Total derivatives designated as hedging instruments |  |  | $3513 |  |  | $— |
| **Derivatives not designated as hedging instruments** |  |  |  |  |  |  |
| &nbsp;&nbsp;Loan related derivative contracts |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate contracts | $522581 | Other Assets | $23431 | $522581 | Other Liabilities | $23431 |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk participation agreements-out to counterparties | 47988 | Other Assets | 107 |  | Other Liabilities |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk participation agreements-in with counterparties |  | Other Assets |  | 109510 | Other Liabilities | 293 |
| Total derivatives not designated as hedging instruments |  |  | $23538 |  |  | $23724 |

---

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

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Twelve Months Ended December 31, 2022** | **Twelve Months Ended December 31, 2022** | **Twelve Months Ended December 31, 2022** | **Twelve Months Ended December 31, 2022** | **Twelve Months Ended December 31, 2022** | **Twelve Months Ended December 31, 2022** | **Twelve Months Ended December 31, 2022** |
|  | **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 AOCL into Income** | **Amount of Gain or (Loss) Reclassified from AOCL into Income Included Component** | **Amount of Gain or (Loss) Reclassified from AOCL into Income Excluded Component** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Interest rate contracts | $(2170) | $607 | $(1563) | Interest Income | $832 | $1026 | $(194) |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Twelve Months Ended December 31, 2021** | **Twelve Months Ended December 31, 2021** | **Twelve Months Ended December 31, 2021** | **Twelve Months Ended December 31, 2021** | **Twelve Months Ended December 31, 2021** | **Twelve Months Ended December 31, 2021** | **Twelve Months Ended December 31, 2021** |
|  | **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** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Interest rate contracts | $(1329) | $370 | $(959) | Interest Income | $2587 | $2782 | $(195) |

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The following table presents the effect of the Company's derivative financial instruments that are not designated as hedging instruments on the consolidated statements of income as of the periods presented:

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| | | | | |
|:---|:---|:---|:---|:---|
|  |  | **Amount of Gain or (Loss) Recognized in Income** | **Amount of Gain or (Loss) Recognized in Income** | **Amount of Gain or (Loss) Recognized in Income** |
|  |  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  |  | **2022** | **2021** | **2020** |
|  | **Location of Gain or (Loss)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Other contracts | Loan-related derivative income | $(166) | $(124) | $155 |

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**Credit-risk-related Contingent Features** 

By entering into derivative transactions, 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.

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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.

**Balance Sheet Offsetting**

Certain financial instruments may be eligible for offset in the consolidated balance 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 of December 31, 2022 and 2021:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  | **Gross Amounts Not Offset** | **Gross Amounts Not Offset** |  |
|  | **Gross Amounts Recognized** | **Gross Amounts Offset** | **Net Amounts Recognized** | **Financial Instruments** | **Collateral Pledged (Received)** | **Net Amount** |
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| <u>Offsetting of Derivative Assets</u> |  |  |  |  |  |  |
| Derivative Assets | $52773 | $— | $52773 | $48 | $(52130) | $595 |
| <u>Offsetting of Derivative Liabilities</u> |  |  |  |  |  |  |
| Derivative Liabilities | $50827 | $— | $50827 | $48 | $— | $50875 |
|  |  |  |  | **Gross Amounts Not Offset** | **Gross Amounts Not Offset** |  |
|  | **Gross Amounts Recognized** | **Gross Amounts Offset** | **Net Amounts Recognized** | **Financial Instruments** | **Collateral Pledged (Received)** | **Net Amount** |
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| <u>Offsetting of Derivative Assets</u> |  |  |  |  |  |  |
| Derivative Assets | $27051 | $— | $27051 | $6365 | $— | $20686 |
| <u>Offsetting of Derivative Liabilities</u> |  |  |  |  |  |  |
| Derivative Liabilities | $23724 | $— | $23724 | $6365 | $14011 | $3348 |

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At December 31, 2022, there were no derivatives in a net liability position related to these financial instruments. At December 31, 2021, 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 $14.0 million. At December 31, 2021, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted cash collateral of $13.3 million against these agreements. If the Company had breached any of these provisions at December 31, 2021, it could have been required to settle its obligations under the agreements at their termination value of $14.0 million.

**22.** **FAIR VALUE MEASUREMENTS** 

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:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
|  | **Carrying <br>Value** | **Estimated <br>Fair Value** | **Carrying <br>Value** | **Estimated <br>Fair Value** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Financial assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $30719 | $30719 | $180153 | $180153 |
| &nbsp;&nbsp;&nbsp;Securities available for sale | 153416 | 153416 | 197803 | 197803 |
| &nbsp;&nbsp;&nbsp;Securities held to maturity | 1051997 | 885586 | 977061 | 971092 |
| &nbsp;&nbsp;&nbsp;Loans, net | 4025082 | 3783051 | 3284610 | 3230339 |
| &nbsp;&nbsp;&nbsp;Loans held for sale |  |  | 1490 | 1528 |
| &nbsp;&nbsp;&nbsp;FHLB of Boston stock | 6264 | 6264 | 4816 | 4816 |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable | 14118 | 14118 | 9162 | 9162 |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights | 1665 | 2336 | 1083 | 1518 |
| &nbsp;&nbsp;&nbsp;Interest rate contracts | 1966 | 1966 | 3513 | 3513 |
| &nbsp;&nbsp;&nbsp;Loan level interest rate swaps | 50784 | 50784 | 23431 | 23431 |
| &nbsp;&nbsp;&nbsp;Risk participation agreements out to counterparties | 23 | 23 | 107 | 107 |
| Financial liabilities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 4815376 | 4810695 | 4331152 | 4330991 |
| &nbsp;&nbsp;&nbsp;Borrowings | 105212 | 105202 | 16510 | 16523 |
| &nbsp;&nbsp;&nbsp;Loan level interest rate swaps | 50784 | 50784 | 23431 | 23431 |
| &nbsp;&nbsp;&nbsp;Risk participation agreements in with counterparties | 43 | 43 | 293 | 293 |

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The Company follows ASC Topic 820, Fair Value Measurements and Disclosures, for financial assets and liabilities. ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements about fair value measurements. ASC Topic 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 Topic 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 1 – Quoted prices for identical assets or liabilities in active markets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Level 3 – Valuations derived from techniques in which one or more significant inputs or significant value drivers are unobservable in the markets and which reflect the Company's market assumptions.

Under ASC Topic 820, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When available, the Company uses quoted market prices to determine fair value. If quoted prices are not available, fair value is based upon valuation techniques, such as matrix pricing or other models that use, where possible, current market-based or independently sourced market parameters, such as interest rates. If observable market-based inputs are not available, the Company uses unobservable inputs to determine appropriate valuation adjustments using methodologies applied consistently over time.

Valuation techniques based on unobservable inputs are highly subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows and the selection of discount rates that may appropriately reflect market and credit risks.

------

Changes in these judgments often have a material impact on the fair value estimates. In addition, since these estimates are as of a specific point in time, they are susceptible to material near-term changes. The fair values disclosed do not reflect any premium or discount that could result from offering significant holdings of financial instruments at bulk sale, nor do they reflect the possible tax ramifications or estimated transaction costs. Changes in economic conditions may also dramatically affect the estimated fair values.

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, 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 loans held for sale, mortgage servicing rights, other real estate owned, and collateral dependent impaired loans. The Company uses an exit price notion for its fair value disclosures.

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

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Fair Value as of December 31, 2022** | **Fair Value as of December 31, 2022** | **Fair Value as of December 31, 2022** | **Fair Value as of December 31, 2022** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Measured on a recurring basis |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Securities available for sale |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. GSE obligations | $— | $19733 | $— | $19733 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities |  | 132683 |  | 132683 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities |  | 1000 |  | 1000 |
| &nbsp;&nbsp;&nbsp;Other assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest rate swaps with clients |  | 50784 |  | 50784 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk participation agreements-out to counterparties |  | 23 |  | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rate contracts |  | 1966 |  | 1966 |
| &nbsp;&nbsp;&nbsp;Other liabilities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest rate swaps with counterparties |  | 50784 |  | 18161 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk participation agreements-in with counterparties |  | 43 |  | 43 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Fair Value as of December 31, 2021** | **Fair Value as of December 31, 2021** | **Fair Value as of December 31, 2021** | **Fair Value as of December 31, 2021** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Measured on a recurring basis |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Securities available for sale |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. GSE obligations | $— | $23011 | $— | $23011 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities |  | 173028 |  | 173028 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities |  | 1764 |  | 1764 |
| &nbsp;&nbsp;&nbsp;Other assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps with clients |  | 23431 |  | 23431 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk participation agreements-out to counterparties |  | 107 |  | 107 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rate contracts |  | 3513 |  | 3513 |
| &nbsp;&nbsp;&nbsp;Other liabilities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rate swaps with counterparties |  | 23431 |  | 23431 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk participation agreements-in with counterparties |  | 293 |  | 293 |

---

The following table presents the carrying value of assets held at December 31, 2022 and 2021, which were measured at fair value on a non-recurring basis:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Items recorded at fair value on a non-recurring basis |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Individually evaluated collateral dependent loans | $— | $— | $103 | $103 |
| &nbsp;&nbsp;&nbsp;Total | $— | $— | $103 | $103 |

---

------

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Items recorded at fair value on a non-recurring basis |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans held for sale | $1490 | $— | $— | $1490 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Individually evaluated collateral dependent loans |  |  | 130 | 130 |
| &nbsp;&nbsp;&nbsp;Total | $1490 | $— | $130 | $1620 |

---

Individually evaluated collateral dependent 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 certain adjustments depending on the nature, quality, and type of collateral securing the loan.

Loans held for sale. Loans held for sale are carried at the lower of fair value or carrying value (unpaid principal and unamortized loans fees).

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

Mortgage servicing rights. These assets are carried at the fair value determined by estimating the present value of future net cash flows, taking into consideration market loan prepayment speeds, discount rates, servicing costs, and other economic factors.

There were no transfers between fair value levels for the years ended December 31, 2022 and 2021.

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

**Investment Securities** 

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.

**Loans Held for Sale**

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.

**Loans**

For most categories of loans, fair values are estimated using projected future cash flows, discounted at rates based upon 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 in accordance with ASC Topic 310, Receivables, are valued based upon the lower of cost or fair value of the underlying collateral.

**FHLB of Boston Stock**

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

**Deposits**

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 Company'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.

------

**Borrowings**

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.

**Other Financial Assets** 

Cash and cash equivalents and accrued interest receivable 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.

**Derivative Instruments and Hedges**

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 Company 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 Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings.

**Off-Balance-Sheet Financial Instruments**

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

**Values Not Determined**

In accordance with ASC Topic 820, the Company has not estimated fair values for non-financial assets such as banking premises and equipment, goodwill, the intangible value of the Company's portfolio of loans serviced for itself, and the intangible value inherent in the Company'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.

**23. Condensed Financial Statements of Parent Company** 

The condensed balance sheets of Cambridge Bancorp, the Parent Company, as of December 31, 2022 and December 31, 2021 and the condensed statements of income and cash flows for each of the years in the three-year period ended December 31, 2022 are presented below. The statements of changes in shareholders' equity are identical to the consolidated statements of changes in shareholders' equity and are therefore not presented here.

**Condensed Balance Sheet**

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
|  | **(dollars in thousands)** | **(dollars in thousands)** |
| ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $15747 | $10303 |
| &nbsp;&nbsp;&nbsp;Goodwill | 33 | 33 |
| &nbsp;&nbsp;&nbsp;Other assets | 318 | 289 |
| &nbsp;&nbsp;&nbsp;Investment in subsidiary | 501454 | 427212 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $517552 | $437837 |
| SHAREHOLDERS' EQUITY |  |  |
| &nbsp;&nbsp;&nbsp;Shareholders' equity | $517552 | $437837 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | $517552 | $437837 |

---

------

**Condensed Statements of Income**

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| Income |  |  |  |
| &nbsp;&nbsp;&nbsp;Dividends from subsidiary | $24734 | $25995 | $21639 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total income | 24734 | 25995 | 21639 |
| Expenses |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense |  |  | 444 |
| &nbsp;&nbsp;&nbsp;Other expenses | 148 | 150 | 110 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 148 | 150 | 554 |
| Income before income taxes and equity in undistributed income of subsidiary | 24586 | 25845 | 21085 |
| Income tax benefit | (40) | (42) | (153) |
| Income of parent company | 24626 | 25887 | 21238 |
| Equity in undistributed income of subsidiary | 28283 | 28137 | 10721 |
| &nbsp;&nbsp;&nbsp;Net income | $52909 | $54024 | $31959 |

---

**Condensed Statements of Cash Flows**

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** | **2020** |
|  | **(dollars in thousands)** | **(dollars in thousands)** | **(dollars in thousands)** |
| CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $52909 | $54024 | $31959 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided<br> by operating activities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income tax benefit | (40) | (42) | (153) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in other assets, net | 12 |  | 3032 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in other liabilities, net |  | 13 | 444 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undistributed income of subsidiary | (28283) | (28137) | (10721) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 24598 | 25858 | 24561 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid in business combinations |  |  | (534) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities |  |  | (534) |
| CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from the issuance of common stock | 580 | 519 | 452 |
| &nbsp;&nbsp;&nbsp;Repurchase of common stock | (1320) | (1440) | (556) |
| &nbsp;&nbsp;&nbsp;Redemption of subordinate debt |  |  | (10600) |
| &nbsp;&nbsp;&nbsp;Cash dividends paid on common stock | (18414) | (16554) | (13083) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by/(used in) financing activities | (19154) | (17475) | (23787) |
| &nbsp;&nbsp;&nbsp;Net increase (decrease) in cash | 5444 | 8383 | 240 |
| &nbsp;&nbsp;&nbsp;Cash at beginning of year | 10303 | 1920 | 1680 |
| &nbsp;&nbsp;&nbsp;Cash at end of year | $15747 | $10303 | $1920 |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |  |  |  |
| &nbsp;&nbsp;&nbsp;Significant non-cash transactions |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common Stock issued to shareholders due to merger | $62850 | $— | $87163 |

---

------

**Report of Independent Registered Public Accounting Firm**

To the Shareholders and the Board of Directors of Cambridge Bancorp:

**Opinion on the Consolidated Financial Statements** 

We have audited the accompanying consolidated balance sheets of Cambridge Bancorp and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, "the financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in 2013, and our report dated March 16, 2023 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

**Basis for Opinion** 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Company's Audit Committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

<u>Allowance for Credit Losses – Qualitative Factors</u>

Critical Audit Matter Description

As described in Notes 2 and 7 to the financial statements, the Company has recorded an allowance for credit losses for its loan portfolio in the amount of $37.8 million as of December 31, 2022, representing management's estimate of credit losses over the remaining expected life of the Company's loan portfolio as of that date. Management determined this amount, and corresponding provision for credit loss expense, pursuant to the application of Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses.

The Company's methodology to determine its allowance for credit losses incorporates qualitative assessments of its current loan portfolio and economic conditions, and the application of forecasted economic conditions. We determined that performing procedures relating to these components of the Company's methodology is a critical audit matter.

The principal considerations for our determination are (i) the application of significant judgment and estimation on the part of management, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence obtained, and (ii) significant audit effort was necessary in evaluating management's methodology, significant assumptions and calculations.

How the Critical Audit Matter was Addressed in the Audit

------

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to the Company's determination of qualitative factors and forecasted economic conditions. These procedures also included, among others, testing management's process for determining the qualitative reserve component, evaluating the appropriateness of management's methodology relating to the qualitative reserve component and testing the completeness and accuracy of data utilized by management.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 16, 2023

We have served as the Company's auditor since 2020.

------

**Report of Independent Registered Public Accounting Firm**

To the Shareholders and the Board of Directors of Cambridge Bancorp:

**Opinion on the Internal Control Over Financial Reporting**

We have audited Cambridge Bancorp and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the December 31, 2022 consolidated financial statements of the Company and our report dated March 16, 2023 expressed an unqualified opinion.

**Basis for Opinion**

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

**Definition and Limitations of Internal Control Over Financial Reporting**

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 16, 2023

------

**Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.** 

None

**Item 9A. Controls and Procedures.** 

Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, as of the end of the period covered by this report, the effectiveness of the design and operation of its disclosure controls and procedures.

Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures were effective as of December 31, 2022 in ensuring that material information required to be disclosed by the Company, including its consolidated subsidiaries:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)was made known to the certifying officers by others within the Company and its consolidated subsidiaries in the reports that it files or submits under the Exchange Act; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)is recorded, processed, summarized, and reported within the time periods specified in the Securities Exchange Commission rules and forms.

On a quarterly basis, the Company evaluates the disclosure controls and procedures and may, from time to time, make changes aimed at enhancing their effectiveness and to ensure that the Company's systems evolve with its business.

Changes in Internal Controls over Financial Reporting

The Company completed the Northmark Merger during the fourth quarter of 2022 and implemented certain controls and procedures in connection with the merger including financial reviews, policies and procedures, disclosure controls and procedures, and organization integration. We believe these controls and procedures mitigate the risk of weaknesses in internal control over financial reporting.

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 in 2022.

Management's Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) over financial reporting. The Company's internal control over financial reporting is a process designed to provide reasonable assurance to the Company's Chief Executive Officer and Chief Financial Officer regarding the reliability of financial reporting and preparation of the Company's financial statements in accordance with accounting principles generally accepted in the U.S.

In designing and evaluating the Company's disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in 2013. Based on management's assessment, the Company believes that, as of December 31, 2022, the Company's internal control over financial reporting is effective based on the criteria established by Internal Control—Integrated Framework issued by COSO in 2013.

------

Wolf & Company, P.C, an independent registered public accounting firm, has audited the Company's consolidated financial statements included in this Annual Report on Form 10-K and, as part of its audit, has issued its report, included herein on page 102, on the effectiveness of the Company's internal control over financial reporting.

**Item 9B. Other Information.** 

None.

**Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.** 

Not applicable.

------

**PART III** 

**Item 10. Directors, Executive Officers and Corporate Governance.** 

The information required by this Item is incorporated herein by reference to the captions "Proposal 1: Election of Directors," "Committees of the Board of Directors – Audit Committee," "Information about the Company's Executive Officers Who are not Directors," and "Code of Ethics" in the Company's definitive proxy statement for the 2023 Annual Meeting of Shareholders (the "Proxy Statement"), which will be filed with the SEC no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

**Item 11. Executive Compensation.** 

The information required by this Item is incorporated herein by reference to the captions "Compensation Discussion and Analysis," "Director Compensation," "Executive Compensation Tables," "Compensation Committee Interlocks and Insider Participation," and "Compensation Committee Report" in the Proxy Statement, which are incorporated herein by reference.

**Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.**

The information required by this Item is incorporated herein by reference to the caption "Security Ownership of Certain Beneficial Owners and Management" and "Securities Authorized for Issuance Under Equity Compensation Plans" in the Proxy Statement.

**Item 13. Certain Relationships and Related Transactions, and Director Independence.** 

The information required by this Item is incorporated herein by reference to the captions "Transactions with Related Persons" and "Board of Directors Independence" in the Proxy Statement.

**Item 14. Principal Accounting Fees and Services.** 

Our independent registered public accounting firm is Wolf & Company, P.C., Boston, Massachusetts, (PCAOB ID No.: 392).

The information required by this Item is incorporated herein by reference to the caption "Independent Registered Public Accounting Firm Fees and Services" in the Proxy Statement.

------

**PART IV** 

**Item 15. Exhibits, Financial Statement Schedules.** 

**(a) Documents filed as a Part of this Annual Report on Form 10-K:**

**(1) Financial Statements**—Included in Item 8 of this Annual Report on Form 10-K.

**Audited Consolidated Financial Statements**

---

| | |
|:---|:---|
| [Consolidated Balance Sheets as of December 31, 2022 and 2021](#consolidated_balance_sheets) | 52 |
| [Consolidated Statements of Income for the Years Ended December 31, 2022, 2021, and 2020](#consolidated_statements_income) | 53 |
| [Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021, and 2020](#consolidated_statements_comprehensive_in) | 54 |
| [Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2022, 2021, and 2020](#consolidated_statements_changes_in_share) | 55 |
| [Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020](#consolidated_statements_cash_flows) | 56 |
| [Notes to Consolidated Financial Statements](#notes_to_consolidated_financial_statemen) | 57 |
| [Report of Independent Registered Public](#report_of_independent_registered_public) Accounting Firm | 100 |

---

**(2) Financial Statement Schedules**

1. **Financial Statements**. The financial statements of the Company required in response to this item are listed in response to Part II, Item 8 of this Annual Report on Form 10-K.

2. **Financial Statement Schedules**. There are no financial statement schedules that are required to be filed as part of this form since they are not applicable, or the information is included in the consolidated financial statements.

3. **Exhibits**. The following exhibits are included as part of this Form 10-K.

**(3) Index to Exhibits.** 

---

| | |
|:---|:---|
| **Exhibit**<br>**Number** | **Description** |
| &nbsp;&nbsp;&nbsp;&nbsp;2.1 | [Agreement and Plan of Merger, dated December 5, 2018, by and between Cambridge Bancorp, Cambridge Trust Company and Optima Bank & Trust Company (incorporated by reference to Exhibit 2.1 of the Form 8-K filed with the SEC on December 6, 2018)](https://www.sec.gov/Archives/edgar/data/711772/000156459018030525/catc-ex21_119.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;2.2 | [Agreement and Plan of Merger, dated December 5, 2019, by and between Cambridge Bancorp, Cambridge Trust Company, Wellesley Bancorp, Inc., and Wellesley Bank (incorporated by reference to Exhibit 2.1 of the Form 8-K filed with the SEC on December 5, 2019)](https://www.sec.gov/Archives/edgar/data/711772/000119312519307304/d841825dex21.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;2.3 | Agreement and Plan of Merger, dated May 23, 2022, by and among Cambridge Bancorp, Cambridge Trust Company and Northmark Bank (incorporated by reference to Exhibit 2.1 of the Form 8-K filed with the SEC on May 23, 2022) |
| &nbsp;&nbsp;&nbsp;&nbsp;3.1 | [Articles of Organization (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the SEC on June 19, 2018)](https://www.sec.gov/Archives/edgar/data/711772/000095012317006934/catc-ex31_131.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;3.2 | [Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of Amendment No. 2 of the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)](https://www.sec.gov/Archives/edgar/data/711772/000095012317008793/catc-ex32_35.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;4.1 | [Specimen stock certificate (incorporated by reference to Exhibit 4.1 of Amendment No. 2 of the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)](https://www.sec.gov/Archives/edgar/data/711772/000095012317006934/catc-ex41_120.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;4.2 | [Description of Cambridge Bancorp Securities Registered under Section 12 of the Securities Exchange Act of 1934](https://www.sec.gov/Archives/edgar/data/711772/000095017022003598/catc-ex4_2.htm)(incorporated by reference to Exhibit 4.2 of the Form 10-K filed with the SEC on March 14, 2022) |
| &nbsp;&nbsp;&nbsp;&nbsp;10.1\*\* | [Cambridge Bancorp 2017 Equity and Cash Incentive Plan (incorporated by reference to Exhibit 10.2 of Amendment No. 2 to the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)](https://www.sec.gov/Archives/edgar/data/711772/000095012317006934/catc-ex102_128.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;10.2\*\* | [Cambridge Bancorp Director Stock Plan, amended as of April 25, 2011 (incorporated by reference to Exhibit 10.3 of Amendment No. 2 of the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)](https://www.sec.gov/Archives/edgar/data/711772/000095012317006934/catc-ex103_132.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;10.4\*\* | [The Executive Nonqualified Excess Plan of Cambridge Trust Company (incorporated by reference to Exhibit 10.5 of Amendment No. 2 to the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)](https://www.sec.gov/Archives/edgar/data/711772/000095012317006934/catc-ex105_118.htm) |

---

------

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;10.5\*\* | [Cambridge Trust Company Amended and Restated Supplemental Executive Retirement Agreement for Denis K. Sheahan, dated July 7, 2017 (incorporated by reference to Exhibit 10.6 of Amendment No. 2 to the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)](https://www.sec.gov/Archives/edgar/data/711772/000095012317006934/catc-ex106_121.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;10.6\*\* | [Cambridge Trust Company Supplemental Executive Retirement Agreement for Martin B. Millane, Jr., dated January 1, 2016 (incorporated by reference to Exhibit 10.11 of Amendment No. 2 to the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)](https://www.sec.gov/Archives/edgar/data/711772/000095012317006934/catc-ex1011_135.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;10.7\*\* | [Change in Control Agreement with Denis K. Sheahan, dated December 21, 2015 (incorporated by reference to Exhibit 10.12 of Amendment No. 2 to the Registration Statement File No. 1-38184 on Form 10 filed with the SEC on October 4, 2017)](https://www.sec.gov/Archives/edgar/data/711772/000095012317006934/catc-ex1012_139.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;10.8\*\* | [<u>Change in Control Agreement with Mr. Michael Carotenuto, dated April 26, 2019 (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the SEC on April 29, 2019)</u>](https://www.sec.gov/Archives/edgar/data/711772/000156459019013524/catc-ex101_6.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;10.9\*\* | [<u>Change in Control Agreement with Mr. Martin Millane, dated April 26, 2019 (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the SEC on April 29, 2019)</u>](https://www.sec.gov/Archives/edgar/data/711772/000156459019013524/catc-ex102_7.htm) |
| 10.10\*\* | [<u>Change in Control Agreement with Ms. Jennifer Pline, dated April 26, 2019 (incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the SEC on April 29, 2019)</u>](https://www.sec.gov/Archives/edgar/data/711772/000156459019013524/catc-ex103_8.htm) |
| 10.11\*\* | [Cambridge Trust Company Supplemental Executive Retirement Agreement for Jennifer A. Pline, dated January 30, 2017 (incorporated by reference to Exhibit 10.22 of the Form 10-K filed with the SEC on March 18, 2019)](https://www.sec.gov/Archives/edgar/data/711772/000156459019008340/catc-ex1022_454.htm) |
| 10.12\*\* | [<u>Cambridge Trust Company Supplemental Executive Retirement Agreement for Michael F. Carotenuto, dated February 7, 2022 (incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 9, 2022)</u>](https://www.sec.gov/Archives/edgar/data/711772/000095017022000986/catc-ex10_1.htm) |
| 10.13# | [<u>Transition Agreement and General Release with Thomas J. Fontaine, dated December 9, 2022</u>](catc-ex10_13.htm) |
| 10.14# | [<u>Transition Agreement and General Release with Jennifer A. Pline, dated December 30, 2022</u>](catc-ex10_14.htm) |
| 10.15# | [<u>Nonqualified Deferred Compensation Plan Adoption Agreement</u>](catc-ex10_15.htm) |
| 10.16# | [<u>Nonqualified Deferred Compensation Plan Basic Plan Document</u>](catc-ex10_16.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;21# | [<u>Subsidiaries of the Registrant</u>](catc-ex21.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;23.1# | [<u>Consent of Wolf & Company P.C. dated March 16, 2023</u>](catc-ex23_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;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](catc-ex31_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;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](catc-ex31_2.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;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](catc-ex32_1.htm) |
| &nbsp;&nbsp;&nbsp;&nbsp;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](catc-ex32_2.htm) |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive data File because XBRL tags are embedded within the Inline XBRL |
| 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  | Cover page interactive data file (formatted as Inline XBRL and contained in Exhibit 101) |

---

------

# Filed herewith.

\*\* Management Compensatory plans or arrangements.

**Item 16. Form 10-K Summary.**

None.

------

**SIGNATURES**

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

---

| | | |
|:---|:---|:---|
|  | **CAMBRIDGE BANCORP** | **CAMBRIDGE BANCORP** |
| March 16, 2023 | By: | /s/ Denis K. Sheahan |
|  |  | Denis K. Sheahan |
|  |  | Chairman, President & Chief Executive Officer  |
| March 16, 2023 |  |  |
|  | By: | /s/ Michael F. Carotenuto |
|  |  | Michael F. Carotenuto |
|  |  | Executive Vice President, Chief Financial Officer  |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **Name** | **Title** | **Date** |
| /s/ Denis K. Sheahan | Chairman, President & Chief Executive Officer  | March 16, 2023 |
| Denis K. Sheahan | (Principal Executive Officer) |  |
| /s/ Michael F. Carotenuto | Executive Vice President, Chief Financial Officer | March 16, 2023 |
| Michael F. Carotenuto | (Principal Financial Officer and Principal Accounting Officer) |  |
| /s/ Jeanette G. Clough | Director | March 16, 2023 |
| Jeanette G. Clough |  |  |
| /s/ Christine Fuchs | Director | March 16, 2023 |
| Christine Fuchs |  |  |
| /s/ Simon R. Gerlin | Director | March 16, 2023 |
| Simon R. Gerlin |  |  |
| /s/ Pamela A. Hamlin | Director | March 16, 2023 |
| Pamela A. Hamlin |  |  |
| /s/ Kathryn M. Hinderhofer | Director | March 16, 2023 |
| Kathryn M. Hinderhofer |  |  |
| /s/ Hambleton Lord | Director | March 16, 2023 |
| Hambleton Lord |  |  |
| /s/ Thalia M. Meehan | Director | March 16, 2023 |
| Thalia M. Meehan |  |  |
| /s/ Daniel R. Morrison | Director | March 16, 2023 |
| Daniel R. Morrison |  |  |
| /s/ Leon A. Palandjian | Director | March 16, 2023 |
| Leon A. Palandjian |  |  |
| /s/ Laila S. Partridge | Director | March 16, 2023 |
| Laila S. Partridge |  |  |
| /s/ Jody A. Rose | Director | March 16, 2023 |
| Jody A. Rose |  |  |
| /s/ Cathleen A. Schmidt | Director | March 16, 2023 |
| Cathleen A. Schmidt |  |  |
| /s/ R. Gregg Stone | Director | March 16, 2023 |
| R. Gregg Stone |  |  |
| /s/ Jane C. Walsh | Director | March 16, 2023 |
| Jane C. Walsh |  |  |
| /s/ Andargachew S. Zelleke | Director | March 16, 2023 |
| Andargachew S. Zelleke |  |  |

---

------

## Ex-10

**Exhibit 10.13**

**TRANSITION AGREEMENT AND GENERAL RELEASE**

This Transition Agreement and General Release (this "**Agreement**") is being entered into by and between Cambridge Trust Company, a Massachusetts-chartered trust company (the "**Company**"), Cambridge Bancorp, a Massachusetts corporation **("Cambridge**"), and Thomas J. Fontaine ("**Employee**"). The Company, Cambridge and Employee may hereafter be referred to individually as a "**Party**" or collectively as the "**Parties**."

**WHEREAS,** Employee is currently serving as the Company's Chief Banking Officer, President of the Cambridge Trust Charitable Foundation ("**Foundation**") and a member of the boards of directors of the Company and Cambridge (collectively the "**Board**");

**WHEREAS,** Employee will be separating from employment with the Company on December 31, 2022. In addition as of December 31, 2022, Employee will resign his position as President of the Foundation and a director of the Board;

**WHEREAS**, the Company and Employee are parties to the Company's standard Employee Proprietary Information and Restrictive Covenants Agreement (the "**NDA**"), the Cambridge Trust Company Supplemental Retirement Agreement dated December 5, 2019 ("**DC SERP**"), a Life Insurance Endorsement Method Split Dollar Plan Agreement effective December 19, 2001 and a Joint Beneficiary Designation Agreement effective January 17, 2006 (collectively, the "**BOLI Agreements**") and certain performance share unit agreements and restricted stock unit agreements (collectively the "**Equity Incentive Agreements**");

**WHEREAS**, the purpose of this Transition Agreement is, in part, to establish transition benefits payable to Employee following his separation from service from the Company, Cambridge and Foundation; and

**WHEREAS**, Employee acknowledges that he is receiving benefits under the terms of this Agreement that he would not otherwise be entitled to under his existing agreements with the Company, including but not limited to the Equity Incentive Agreements and DC SERP.

**NOW, THEREFORE**, for and in consideration of the mutual promises contained herein, and for other good and sufficient consideration, receipt of which is hereby acknowledged, and intending to be legally bound, the Parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **Transition Date; Accrued Benefits.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Employee's employment with the Company will terminate effective December 31, 2022 (the "**Transition Date**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)In connection with his separation from service with the Company and Cambridge, Employee will resign all officer positions with the Company and Cambridge and will resign from his position as President of the Foundation and as a member of the Board effective as of December 31, 2022 or such earlier date agreed to by the Parties. Employee agrees to sign separate resignation letters or other evidence of resignation if and as requested by the Company or Cambridge.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Employee understands that whether or not Employee executes this Agreement and

------

to the extent not already paid or provided: (i) Employee shall receive his current base salary through the Transition Date; (ii) Employee shall receive a cash payment equal to his accrued and unused vacation leave as of his Transition Date, subject to the terms and limits of the Company policy; (iii) Employee shall be entitled to any fully vested and non-forfeitable benefits under the terms and conditions of applicable benefit plans or programs as of the Transition Date (including without limitation, vested benefits under the Equity Incentive Agreements, BOLI Agreements and DC SERP); (iv) Employee shall be entitled to elect, at his expense, continuation of medical and dental insurance following the Transition Date to the extent Employee is eligible under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("**COBRA**") or similar law, and to convert any other insurance to an individual policy(ies) at Employee's expense to the extent Employee has such right under the terms of the applicable insurance plan(s); and (v) Employee shall be reimbursed for approved expenses that Employee has submitted in Employee's final expense report, if any, and that the Company determines are reimbursable under applicable Company policies and procedures, and Employee acknowledges that the Company does not owe him any other expense reimbursements. Employee's final expense report must be submitted to the Company within three (3) business days following the Transition Date.

As of the Transition Date, all salary payments to Employee will cease and any benefits Employee had as of the Transition Date under Company or Cambridge provided benefit plans, programs, or practices will terminate, except as required by federal or state law or as otherwise specifically set forth in this Agreement. Other than the accrued obligations noted above, Employee will not be eligible for, nor shall he have a right to receive, any payments or benefits from the Company, Cambridge or the Foundation following the Transition Date, other than as set forth in the Equity Incentive Agreements, BOLI Agreements, DC SERP and any tax-qualified plan sponsored by Cambridge or the Company in which the Employee is a participant as of the Transition Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **Transition Benefits.**

In exchange for Employee executing, delivering and not revoking this Agreement and the Bring-Down Release described below and Employee complying with their terms, including continued compliance with the Restrictive Covenants, Employee shall be provided with the following "**Transition Benefits**":

(a) The Company shall continue to pay Employee his base salary, subject to applicable withholdings, for one year following the Transition Date, payable on Cambridge's regularly scheduled payroll dates, provided that the first payment will not be made until the first regularly scheduled payroll date following the Bring-Down Release Effective Date (as defined in Section 12) of this Agreement, and will include any payments that otherwise would have been paid between the Transition Date and the Bring-Down Release Effective Date.

(b) Should any annual bonus payments be made for calendar year 2022, Employee will be eligible to receive a bonus payment in the amount, if any, that he would have received had he remained employed with the Company and Cambridge through the date on which the Company pays such bonuses, based on the Board's determination, in its sole discretion. The Board shall exercise its discretion after considering both Employee's individual performance and the Company's overall corporate performance. (For the avoidance of doubt, Executive is currently eligible for a target annual bonus of 50% of his current base salary, but such bonus, if any, may be higher or lower in the Board's sole discretion.) Any payment made pursuant to this Section 2(b) shall be subject to applicable taxes and withholdings, and made to Employee in accordance with Cambridge's regularly scheduled payroll at the same time that the Company pays such bonuses to active and similarly situated executives who are eligible to receive such payments, but by no later than March 15, 2023.

(c) If Employee elects to continue medical and dental insurance following the Transition Date under COBRA, the Company shall continue to pay the employer-paid portion of Employee's, and as applicable,

------

his dependents' COBRA premiums for a period of twelve (12) months following the Transition Date; <u>provided</u>, <u>however</u>, that in the event Employee becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment, such subsidization of COBRA continuation coverage by the Company shall immediately cease.

Employee acknowledges and agrees that the payments and benefits referred to in Section 1(c) of this Agreement represent all compensation and benefits due and owing to Employee as a result of Employee's service with the Company, Cambridge and the Foundation. Employee further agrees that the Transition Benefits referred to in this Section 2 are consideration for Employee's promises contained in this Agreement and that the Transition Benefits are above and beyond any wages, salary, or other sums or benefits to which Employee is entitled from the Company, Cambridge and/or the Foundation under the terms of Employee's employment or any other source of entitlement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **General Release.** 

Employee on his own behalf and on the behalf of his agents, heirs, executors, administrators, representatives, attorneys, successors and assigns, hereby releases and forever discharges the Company, Cambridge, the Foundation, and any and all of their respective past, present, or future affiliates, components, sections, entities to whom they provide services, benefit plans, officers, directors, members, employees, agents, counsel, consultants, contractors, successors and assigns (the "**Releasees**"), from any and all complaints, claims, demands, damages, lawsuits, and causes of action, whether known, unknown or unforeseen, arising out of or in connection with any event, transaction or matter occurring or existing on or before the date of Employee's execution of this Agreement, which Employee has or may have against any of them for any reason whatsoever in law or in equity, under federal, state, local or other law, whether the same be based upon a statutory, common-law, or administrative claim, contract, tort or other basis, including without limitation any and all claims arising from or relating to his employment or the termination of his employment; any and all claims relating to wages, bonuses, other compensation, expenses, benefits, leave, discrimination, harassment or retaliation or other wrongful conduct; and any and all claims relating to any employment contract, express or implied. Without limiting the generality of the foregoing, this release covers any and all claims under the Civil Rights Acts of 1866 and 1964, the Americans with Disabilities Act, the Equal Pay Act, the Age Discrimination in Employment Act (29 U.S.C. § 621 <u>et</u> <u>seq</u>. ("**ADEA**")), Older Workers Benefit Protection Act, the National Labor Relations Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Massachusetts Fair Employment Practices Act, the Massachusetts Wage Act, the Massachusetts Civil Rights Act, and the Massachusetts Equal Rights Act, all as amended, and any other federal, state or local statutes related to employment. This release covers both claims Employee knows about and those Employee may not know about, but it does not waive or release any claims or rights that arise after Employee executes this Agreement. Employee agrees, without limiting the generality of the above release, not to file any claim or lawsuit seeking monetary recovery or other relief for Employee based on any claims that are lawfully released in this Agreement, and Employee represents and warrants that no such claims are pending. Employee further hereby irrevocably and unconditionally waives any and all rights to recover, and will not accept, any monetary or other relief for Employee concerning the claims that are lawfully released in this Section. Notwithstanding the foregoing, Employee are not releasing (a) any right to enforce this Agreement or (b) any claims for unemployment compensation, workers compensation benefits or other rights or claims that may not be released by this Agreement as a matter of law. Employee shall not make any statement, publicly or privately, disparaging any of the Releases or their business practices.

Notwithstanding the generality of the foregoing Release, nothing herein constitutes a release or waiver by Employee of, or prevents Employee from making or asserting: (i) any claim or right Employee may have under COBRA; (ii) any claim or right Employee may have for unemployment insurance or workers' compensation benefits (other than for retaliation under workers' compensation laws); (iii) any claim to vested benefits under the written terms of a qualified employee pension benefit plan; (iv) any claim

------

for indemnity under the Company's certificate of incorporation and bylaws or to coverage under any directors' and officers' insurance policies; (v) any medical claim incurred during Employee's employment that is payable under applicable medical plans or an employer-insured liability plan; (vi) any claim or right that may arise after the execution of this Agreement; (vii) any claim or right that is not otherwise able to be waived under applicable law.

In addition, nothing herein shall prevent Employee from filing a charge or complaint with the Equal Employment Opportunity Commission ("**EEOC**") or similar federal or state fair employment practices agency or interfere with Employee's ability to participate in any investigation or proceeding conducted by such agency; provided, however, that Employee hereby waives any right to recover monetary damages or any other form of personal relief from the Releasees to the extent any such charge, complaint, investigation or proceeding asserts a claim subject to the release in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **No Admission.** The Parties agree that nothing contained in this Agreement shall constitute or be treated as an admission of liability or wrongdoing by either of them or any of the other Releasees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **Confidential and/or Proprietary Information**. Employee acknowledge that during employment, Employee learned and came into contact with certain confidential and/or proprietary information and trade secrets of the Company, Cambridge, and their respective affiliates and subsidiaries (collectively, "**Confidential Information**"). Employee acknowledges that Confidential Information includes, without limitation, trade secrets, client lists and information, personnel information, financial data, long range or short range plans, or other data and information concerning the Company or its affairs that the Company has not previously disclosed to the public, and any confidential information of others provided to the Company. Confidential Information includes information in any form, whether tangible or intangible, including without limitation all notes, records, drawings, handbooks, manuals, policies, contracts, memoranda, other documents, software, electronic files, discs, drives, other electronic data and tapes. Employee agrees that Confidential Information is and shall remain the exclusive property of the Company, and Employee shall not disclose to any person or entity, use for his own benefit, copy, or make notes of any Confidential Information, except as and only to the extent expressly authorized by an officer of the Company, in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **Return of Information and Property.** By or before the Transition Date, or earlier upon the request of the Company, Employee agrees to and represents he has returned to the Company all information, property, and supplies belonging to the Company, including without limitation any keys, laptop, computer and related equipment, cell phone, security card, corporate credit card, and the originals and all copies of all files, materials, or documents (whether in tangible or electronic form) containing proprietary or Confidential Information or otherwise relating to the Company's business, as well as any log-in credentials needed to access websites or accounts relating to the Company's business..

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **Restrictive Covenants.** Employee agrees that he remains subject to the terms of the restrictive covenants in the NDA as well as any other restrictive covenants and agreements entered into in connection with Employee's equity awards and the DC SERP (the "**Restrictive Covenants**") and that all such Restrictive Covenants survive Employee's termination of employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **Non-Disclosure of Agreement.** Employee agrees to keep confidential and not disclose the existence and terms of this Agreement, except (i) as authorized in writing by an officer of the Company; (ii) to his attorneys as may be necessary to secure advice concerning this Agreement; (iii) to his tax advisors as may be necessary for the preparation of tax returns or other reports required by law; or (iv) to members of his immediate family. Employee further agrees that prior to disclosing such information under parts (ii), (iii) or (iv) of this subsection, Employee will inform the recipients that they are bound by these confidentiality limitations, and subsequent disclosure of such information by any such recipient shall be deemed to be a disclosure by Employee in breach of this Agreement.

------

 **9. Non-disparagement.** Employee agrees that he will not make any oral or written statement or take any other action that disparages or criticizes the Company, Cambridge, their employees, directors, or management practices, that damages or could damage the Company's good reputation, or that impairs its normal operations. Employee understands that this non-disparagement provision does not apply on occasions when he is subpoenaed or ordered by a court or other governmental authority to testify or give evidence and must, of course, respond truthfully; to conduct otherwise protected by the Sarbanes-Oxley Act; or to conduct or testimony in the context of enforcing the terms of this Agreement or other rights, powers, privileges, or claims not released by this Agreement. Employee also understands that the foregoing non-disparagement provision does not apply on occasions when Employee provides truthful information in good faith to any federal, state, or local governmental body, agency, or official investigating an alleged violation of any antidiscrimination or other employment-related law or otherwise gathering information or evidence pursuant to any official investigation, hearing, trial, or proceeding. Nothing in this non-disparagement provision is intended in any way to intimidate, coerce, deter, persuade, or compensate Employee with respect to providing, withholding, or restricting any communication whatsoever to the extent prohibited under 18 U.S.C. §§ 201, 1503, or 1512 or under any similar or related provision of state or federal law. In addition, nothing in this provision is intended to require Employee to provide notice to the Company or its attorneys before reporting any possible violations of federal law or regulation to any governmental agency or entity ("**Whistleblower Disclosures**"), and Employee is not required to notify the Company or its attorneys that Employee has made any such Whistleblower Disclosures. Employee understands that the foregoing does not apply to discussions and information Employee provides to his attorney, immediate family members, or financial advisors, all of whom Employee agrees to instruct to keep discussions and information confidential and or to make disclosures only as required by law. The Company agrees that it will notify its Board of Directors and senior executives not to knowingly make any oral or written statement that disparages the Employee.

 **10. Rights Not Subject to Limitation.** Notwithstanding Sections 3, 5, and 8 or any other provision of this Agreement, this Agreement does not limit any right Employee or the Company may have: (a) to provide any information in response to a valid subpoena, court order, other legal process or as otherwise required to be provided by law; (b) to participate in an investigation or proceeding conducted by a federal, state or local government agency (collectively "**Government Agency**") authorized to enforce or administer laws within the Agency's jurisdiction, including any laws against unlawful conduct, including discrimination, or to otherwise provide information to or file a charge with such a Government Agency; (c) receive a reward paid by the Securities and Exchange Commission for providing information; or (d) to exercise any other right to the extent such right as a matter of law may not be limited by this Agreement; provided that Section 3 of this Agreement does waive any right of Employee to seek, recover or accept any monetary payments or other individual relief connected to any Government Agency proceeding or any other action related to claims that are lawfully released in this Agreement. Employee acknowledges that pursuant to 18 U.S.C. § 1833(b), an individual may not be held liable under any criminal or civil federal or state trade secret law for disclosure of a trade secret: (i) made in confidence to a government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, an individual suing an employer for retaliation based on the reporting of a suspected violation of law may disclose a trade secret to his or her attorney and use the trade secret information in the court proceeding, so long as any document containing the trade secret is filed under seal and the individual does not disclose the trade secret except pursuant to court order.

 **11. Acknowledgment and Affirmations.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Employee affirms that Employee has not filed, caused to be filed, or presently is a party to any claim against Releasees (excepting any whistleblower claim that Employee is not legally required to disclose).

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Employee also affirms that Employee has received all compensation, wages, bonuses, commissions, and/or benefits which are due and payable as of the date Employee signs this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Employee acknowledges that Section 3 of this Agreement contains a release of any and all claims Employee may have under the Massachusetts Wage Act and that this Agreement is intended to resolve any and all disputes related to wages, commissions, or other compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)Employee affirms that Employee has been granted any leave to which Employee was entitled from Employer under the Family and Medical Leave Act or related state or local leave or disability accommodation laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)Employee further affirms that Employee has no known workplace injuries or occupational diseases.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Employee also affirms that Employee has not divulged any financial, proprietary or confidential information of Employer and will continue to maintain the confidentiality of such information consistent with Employer's policies, Employee's agreement(s) with Employer and/or any applicable common law. This Agreement does not limit Employee from providing any documents to the U.S. Securities and Exchange Commission as part of a whistleblower action and/or a report of possible violations of any federal securities law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)Employee further affirms that Employee has not been retaliated against for reporting any allegations of wrongdoing by Employer, its officers or any other Releasees identified in this Agreement, including any allegations of corporate fraud.

 **12. Consideration Period.** Since Employee is 40 years of age or older, he is hereby informed that he has or may have specific rights and/or claims under the ADEA.

(a) Employee acknowledges that he has been given at least twenty-one (21) days to consider this Transition Agreement, and that he is advised to consult with an attorney of his own choosing prior to signing this Transition Agreement. If Employee wishes to accept the terms of this Agreement, he must sign and return the Agreement to **Pilar Pueyo** via email at pilar.pueyo@cambridgetrust.com or by overnight delivery to Ms. Pueyo at 78 Blanchard Road, 4<sup>th</sup> Floor, Burlington, MA 02451 **by no later than December 14, 2022**.

(b) Employee is hereby advised that he may revoke his agreement for a period of seven (7) days after he signs it, and the release provided in Section 3 shall not be effective or enforceable until the expiration of such seven (7) day revocation period. The consideration period will not be affected or extended by any revisions, whether material or immaterial, that have been, or in the future might be, made to this Transition Agreement.

(c) Employee understands that any rights or claims under the ADEA which may arise after the date this Transition Agreement is executed are not waived by him.

(d) Employee acknowledges that he has carefully read and fully understands all of the provisions of this Transition Agreement, and he knowingly and voluntarily agrees to all of the terms set forth in this Transition Agreement.

(e) In entering into this Transition Agreement, Employee is not relying on any representation, promise or inducement made by the Releasees or their attorneys with the exception of those promises described in this document.

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(f) If Employee signs this Agreement prior to the end of the consideration period, he has done so voluntarily and has seven (7) calendar days after executing this Agreement to revoke it by providing written notice of revocation either via email to Pilar Pueyo at pilar.pueyo@cambridgetrust.com or by overnight delivery to Ms. Pueyo at 78 Blanchard Road, 4<sup>th</sup> Floor, Burlington, MA 02451 no later than 11:59 p.m. on the seventh (7th) calendar date after Employee has signed this Agreement. Employee further understand that if he revokes this Agreement, it shall be null and void and of no force or effect on either Employee or the Company. This Agreement is not effective or enforceable until after the seven (7)-day period expires without revocation (the "**Effective Date**"), and the Company's promises under this Agreement will arise only after this time. Further, as detailed in Section 15 below, the Company's obligation to provide Employee with the benefits described in Section 2 of this Agreement will arise only after the Bring-Down Release Effective Date.

 **13. Additional Provisions.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)The Parties represent and acknowledge that in executing this Agreement they do not rely and have not relied upon any representation or statement, other than those contained in this Agreement, made by the other Party or their respective agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise. This Agreement contains the entire agreement between the Parties relating to the subject matter of this Agreement and may not be altered or amended except by an instrument in writing signed by both Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)Neither the waiver by either Party of a breach of or default under any of the provisions of this Agreement, nor the failure of such Party, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any provisions, rights or privileges hereunder. If any part, term or provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, unenforceable or otherwise in conflict with law, the validity of the remaining parts, terms or provisions shall not be affected, provided that if a court finds that the release language is unenforceable, the Parties shall, in good faith, rewrite (or, if they cannot agree, ask the court to rewrite) the offending language to cure the defect in a reasonable manner that maintains the intended status quo as closely as possible. This Agreement shall extend to, be binding upon, and inure to the benefit of the Parties, and their respective successors, heirs, and assigns, provided that this Agreement may not be assigned by Employee without the Company's written consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)This Agreement shall be governed and conformed in accordance with the laws of the Commonwealth of Massachusetts. In the event of a breach of any provision of this Agreement, either party may institute an action specifically to enforce any term or terms of this Agreement and/or to seek any damages for the breach. Should any provision of this Agreement be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release language, such provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. If the general release language is found to be illegal or unenforceable, Employee agrees to execute a binding replacement release.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) This Agreement may be executed electronically and may be executed in counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same written agreement, which shall be binding and effective as to all Parties.

 **14. Section 409A**. It is intended that all payments made under the terms of this Transition Agreement come within exceptions to Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A") as short-term deferrals or as payments of separation pay upon an involuntary separation of service. The Transition Agreement and all related documents shall be interpreted and administered in accordance with that intention. However, if any amount payable under this Transition Agreement is

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determined to be subject to Section 409A then such payments shall be administered in accordance with Section 409A, provided that the Company and Cambridge shall not be liable for any failures under this Section 12 that result in any taxes or other amounts due under the terms of Section 409A. Each payment under this Agreement shall be considered a separate payment for purposes of Section 409A. To the extent that any payment or benefit described in this Transition Agreement constitutes "non-qualified deferred compensation" under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Employee's termination of employment, then such payments or benefits shall be payable only upon the Employee's "separation from service." The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A 1(h). To the extent any amount subject to Section 409A is to be paid or provided to the Employee in connection with a separation from service at a time when he is considered a specified employee within the meaning of Section 409A then such payment shall not be made until the date that is six months and one day following such separation from service, or in a lump sum upon his earlier death.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15. Bring-down Release**. Employee agrees to extend (the "**Extension**") his release and waiver of claims hereunder (and the related representations, acknowledgements, and covenants as set forth herein) effective as of his last day of employment with the Company (the "**Bring-Down Release**"), in each case, to include all claims not otherwise excluded from such release arising through and including his last day of employment. The Extension shall be effected by Employee re-executing (but not earlier than his last day of employment with the Company) the signature page to this Agreement where indicated (such date of re-execution, the "**Bring-Down Release Effective Date**"). The Company's promises under this Agreement, including but not limited to its obligation to provide Employee with the benefits described in Section 2 of this Agreement will arise only after the Bring-Down Release Effective Date.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS HEREOF, THE PARTIES HAVE AGREED AND AFFIXED THEIR SIGNATURES BELOW:

CAMBRIDGE TRUST COMPANY

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| | |
|:---|:---|
| &nbsp;&nbsp;By: /s/ Pilar Pueyo | &nbsp;&nbsp;Date: 12/9/2022 |

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CAMBRIDGE BANCORP

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| | |
|:---|:---|
| &nbsp;&nbsp;By: /s/ Michael Carotenuto | &nbsp;&nbsp;Date: 12/9/2022 |

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&nbsp;&nbsp; <br>EMPLOYEE<br>

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| | |
|:---|:---|
| &nbsp;&nbsp;/s/ Thomas J. Fontaine | &nbsp;&nbsp;Date: 12/9/2022 |
| &nbsp;&nbsp;Thomas J. Fontaine |  |

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BRING-DOWN RELEASE

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| | |
|:---|:---|
| &nbsp;&nbsp;/s/ Thomas J. Fontaine | &nbsp;&nbsp;Date: 12/9/2022 |
| &nbsp;&nbsp;Thomas J. Fontaine |  |

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## Ex-10

**Exhibit 10.14**

**TRANSITION AGREEMENT AND GENERAL RELEASE**

This Transition Agreement and General Release (this "**Agreement**") is being entered into by and between Cambridge Trust Company, a Massachusetts-chartered trust company (the "**Company**"), Cambridge Bancorp, a Massachusetts corporation **("Cambridge**"), and Jennifer A. Pline ("**Employee**"). The Company, Cambridge and Employee may hereafter be referred to individually as a "**Party**" or collectively as the "**Parties**."

**WHEREAS,** Employee is currently serving as Executive Vice President and Head of Wealth Management at the Company and a member of the board of directors of Cambridge Trust Charitable Foundation ("**Foundation**");

**WHEREAS,** Employee will be retiring from her employment with the Company on June 30, 2023 or such other date mutually agreed in writing to by the Parties ("**Separation Date**"), unless the Company terminates Employee's employment for Cause or Employee voluntarily terminates her employment prior to the Separation Date (the Separation Date or, if applicable, her earlier termination date, is referred to as her "**Termination Date**");

**WHEREAS**, for the period commencing on the date of this Agreement and ending on her Termination Date, referred to herein as the "**Transition Period**," the Company and Employee desire that she be engaged with the transition of her duties;

**WHEREAS**, the Company and Employee are parties to the Company's standard Employee Proprietary Information and Restrictive Covenants Agreement (the "**NDA"**);

**WHEREAS**, Employee participates in the Cambridge Trust Company Executive Deferred Compensation Plan ("**DC SERP**") and has executed a supplemental executive retirement agreement ("**SERP Agreement**") in connection with her participation in the DC SERP (collectively referred to herein as the "**SERP**");

**WHEREAS**, the Company and Employee are parties to certain performance share unit agreements and restricted stock unit agreements (collectively the "**Equity Incentive Agreements**");

**WHEREAS**, the Company and Employee are also parties to a Change in Control Severance letter agreement dated April 26, 2019 ("**Change in Control Agreement**");

**WHEREAS**, the purpose of this Agreement is, in part, to memorialize the agreement between the Parties and to resolve any and all claims, disputes and other matters that may exist between them, if any, whether they have been raised or not; and

**WHEREAS**, Employee acknowledges that she is receiving benefits under the terms of this Agreement that she would not otherwise be entitled to under her existing agreements with the Company, including but not limited to the Equity Incentive Agreements and the SERP.

**NOW, THEREFORE**, for and in consideration of the mutual promises contained herein, and for other good and sufficient consideration, receipt of which is hereby acknowledged, and intending to be legally bound, the Parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **Transition Period; Separation from Service and Accrued Benefits.**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Employee shall separate from her employment with the Company on the Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)In connection with her separation from service, Employee will resign all positions she may have with the Company and its affiliates including any officer positions and any positions on any committees and will resign from the Foundation. Employee agrees to sign separate resignation letters or other evidence of resignation if and as requested by the Company or Cambridge.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Employee shall continue to serve in her current capacity until the Termination Date. During the Transition Period, Employee shall diligently work to transition her knowledge, duties and responsibility to Mr. Denis Sheahan or his designee. Additionally, Employee shall have such other duties as may be reasonably assigned by the Mr. Sheahan from time to time. Employee shall be permitted to work remotely at times as she transitions her duties to Mr. Sheahan, subject to her notification to Mr. Sheahan of her schedule.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)During the Transition Period, Employee shall continue to receive (i) her base salary at her current rate; and (ii) any fringe benefits which are now or may be or become applicable to the Company's executive employees. For the avoidance of doubt, this shall include a full 2022 SERP Contribution, as long as she remains employed through December 31, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Employee understands that whether or not Employee executes this Agreement and to the extent not already paid or provided: (i) Employee shall receive her current base salary through her Termination Date; (ii) Employee shall receive a cash payment equal to her accrued and unused vacation leave as of her Termination Date, subject to the terms and limits of the Company policy; (iii) Employee shall be entitled to any fully vested and non-forfeitable benefits under the terms and conditions of applicable benefit plans or programs as of her Termination Date; (iv) Employee shall be entitled to elect, at her expense, continuation of medical and dental insurance following her separation from service to the extent Employee is eligible under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("**COBRA**") or similar law, and to convert any other insurance to an individual policy(ies) at Employee's expense to the extent Employee has such right under the terms of the applicable insurance plan(s); and (v) Employee shall be reimbursed for approved expenses that Employee has submitted in Employee's final expense report, if any, and that the Company determines are reimbursable under applicable Company policies and procedures, and Employee acknowledges that the Company does not owe her any other expense reimbursements. Employee's final expense report must be submitted to the Company within three (3) business days following her separation from service.

As of her Termination Date, all salary payments to Employee will cease and any benefits Employee had as of her Termination Date under Company or Cambridge provided benefit plans, programs, or practices will terminate, except as required by federal or state law or as otherwise specifically set forth in this Agreement. Other than the accrued obligations noted above, Employee will not be eligible for, nor shall she have a right to receive, any payments or benefits from the Company following her separation from service, other than as set forth in the Equity Incentive Agreements, the SERP and any tax-qualified plan sponsored by Cambridge or the Company in which the Employee is a participant as of her separation from service with the Company.

The Change in Control Agreement will terminate on the Termination Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **Post-Employment Benefits.**

In exchange for Employee executing, delivering and not revoking this Agreement and the Supplemental Release attached as Exhibit A and Employee not breaching their terms, including not having voluntarily resigned or been terminated for Cause (as defined below) by the Company prior to the

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Separation Date and continued compliance with the Restrictive Covenants (as defined in Section 7 herein), Employee shall be provided with the following benefits:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The Company shall pay Employee a lump sum cash payment equal to $462,584 subject to applicable withholdings, payable on the Company's first regularly scheduled payroll date that falls at least five (5) business days following the effective date of the Supplemental Release (as defined in Section 15 below).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Employee shall not be granted any short or long term incentive awards for the 2023 calendar year.

Employee acknowledges and agrees that the payments and benefits referred to in Section 1(e) of this Agreement represent all compensation and benefits due and owing to Employee as a result of Employee's service with the Company, Cambridge and the Foundation. Employee further agrees that the additional benefits referred to in this Section 2 are consideration for Employee's promises contained in this Agreement and that the additional benefits are above and beyond any wages, salary, or other sums or benefits to which Employee is entitled from the Company, Cambridge and/or the Foundation under the terms of Employee's employment or any other source of entitlement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Employee's termination of employment shall be deemed a termination other than for Cause under the terms of the Equity Incentive Agreements.

For purposes of this Agreement, "Cause" shall have the meaning set forth in the SERP Agreement. For the avoidance of doubt, if the Company chooses to terminate Employee prior to the Separation Date for any other reason than Cause, Employee shall be entitled to all payments and benefits under Sections 1 and 2 of this Agreement as if her employment had continued until the Separation Date and been terminated other than for Cause for purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **General Release.** 

Employee on her own behalf and on the behalf of her agents, heirs, executors, administrators, representatives, attorneys, successors and assigns, hereby releases and forever discharges the Company, Cambridge, the Foundation, and any and all of their respective past, present, or future affiliates, components, sections, entities to whom they provide services, benefit plans, officers, directors, members, employees, agents, counsel, consultants, contractors, successors and assigns (the "**Releasees**"), from any and all complaints, claims, demands, damages, lawsuits, and causes of action, whether known, unknown or unforeseen, arising out of or in connection with any event, transaction or matter occurring or existing on or before the date of Employee's execution of this Agreement, which Employee has or may have against any of them for any reason whatsoever in law or in equity, under federal, state, local or other law, whether the same be based upon a statutory, common-law, or administrative claim, contract, tort or other basis, including without limitation any and all claims arising from or relating to her employment or the termination of her employment; any and all claims relating to wages, bonuses, other compensation, expenses, benefits, leave, discrimination, harassment or retaliation or other wrongful conduct; and any and all claims relating to any employment contract, express or implied. Without limiting the generality of the foregoing, this release covers any and all claims under the Civil Rights Acts of 1866 and 1964, the Americans with Disabilities Act, the Equal Pay Act, the Age Discrimination in Employment Act (29 U.S.C. § 621 <u>et</u> <u>seq</u>. ("**ADEA**")), Older Workers Benefit Protection Act, the National Labor Relations Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Massachusetts Fair Employment Practices Act, the Massachusetts Wage Act, the Massachusetts Civil Rights Act, and the Massachusetts Equal Rights Act, all as amended, and any other federal, state or local statutes related to employment. This release covers both claims Employee knows about and those Employee may not know about, but it does not waive or release any claims or rights that arise after Employee executes this Agreement. Employee agrees, without limiting the generality of the above release,

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not to file any claim or lawsuit seeking monetary recovery or other relief for Employee based on any claims that are lawfully released in this Agreement, and Employee represents and warrants that no such claims are pending. Employee further hereby irrevocably and unconditionally waives any and all rights to recover, and will not accept, any monetary or other relief for Employee concerning the claims that are lawfully released in this Section. Notwithstanding the foregoing, Employee are not releasing (a) any right to enforce this Agreement (b) any claims for unemployment compensation, workers compensation benefits or other rights or claims that may not be released by this Agreement as a matter of law.

Notwithstanding the generality of the foregoing Release, nothing herein constitutes a release or waiver by Employee of, or prevents Employee from making or asserting: (i) any claim or right Employee may have under COBRA; (ii) any claim or right Employee may have for unemployment insurance or workers' compensation benefits (other than for retaliation under workers' compensation laws); (iii) any claim to vested benefits under the written terms of a qualified defined benefit or defined contribution employee pension plan, non-qualified deferred compensation plan or equity incentive plan in which Employee participated in as of her Termination Date; (iv) any claim for indemnity under the Company's certificate of incorporation and bylaws or to coverage under any directors' and officers' insurance policies; (v) any medical claim incurred during Employee's employment that is payable under applicable medical plans or an employer-insured liability plan; (vi) any claim or right that may arise after the execution of this Agreement; (vii) any claim or right that is not otherwise able to be waived under applicable law.

In addition, nothing herein shall prevent Employee from filing a charge or complaint with the Equal Employment Opportunity Commission ("**EEOC**") or similar federal or state fair employment practices agency or interfere with Employee's ability to participate in any investigation or proceeding conducted by such agency; provided, however, that Employee hereby waives any right to recover monetary damages or any other form of personal relief from the Releasees to the extent any such charge, complaint, investigation or proceeding asserts a claim subject to the release in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **No Admission.** The Parties agree that nothing contained in this Agreement shall constitute or be treated as an admission of liability or wrongdoing by either of them or any of the other Releasees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **Confidential and/or Proprietary Information**. Employee acknowledge that during employment, Employee learned and came into contact with certain confidential and/or proprietary information and trade secrets of the Company, Cambridge, and their respective affiliates and subsidiaries (collectively, "**Confidential Information**"). Employee acknowledges that Confidential Information includes, without limitation, trade secrets, client lists and information, personnel information, financial data, long range or short range plans, or other data and information concerning the Company or its affairs that the Company has not previously disclosed to the public, and any confidential information of others provided to the Company. Confidential Information includes information in any form, whether tangible or intangible, including without limitation all notes, records, drawings, handbooks, manuals, policies, contracts, memoranda, other documents, software, electronic files, discs, drives, other electronic data and tapes. Employee agrees that Confidential Information is and shall remain the exclusive property of the Company, and Employee shall not disclose to any person or entity, use for her own benefit, copy, or make notes of any Confidential Information, except as and only to the extent expressly authorized by an officer of the Company, in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **Return of Information and Property.** No later than the Separation Date, or earlier upon the request of the Company, Employee agrees to promptly return and represent she has returned to the Company all information, property, and supplies belonging to the Company, including without limitation any keys, laptop, computer and related equipment, cell phone, security card, corporate credit card, and the originals and all copies of all files, materials, or documents (whether in tangible or electronic form) containing proprietary or Confidential Information or otherwise relating to the Company's business, as well as any log-in credentials needed to access websites or accounts relating to the Company's business.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **Restrictive Covenants.** Employee agrees that she remains subject to the terms of the restrictive covenants in the NDA as well as any other restrictive covenants and agreements entered into in connection with Employee's equity awards and SERP benefits (the "**Restrictive Covenants**") and that all such Restrictive Covenants survive Employee's termination of employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **Communications Plan.** The Company, Cambridge, the Foundation and Employee will collaborate on a communication plan to team members, customers and other stakeholders to reinforce a smooth transition following Employee's retirement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.** **Non-disparagement.** Employee agrees that she will not knowingly make any oral or written statement or take any other action that disparages or criticizes the Company, Cambridge, their employees, directors, or management practices, that damages or could damage the Company's good reputation, or that impairs its normal operations. Employee understands that this non-disparagement provision does not apply on occasions when she is subpoenaed or ordered by a court or other governmental authority to testify or give evidence and must, of course, respond truthfully; to conduct otherwise protected by the Sarbanes-Oxley Act; or to conduct or testimony in the context of enforcing the terms of this Agreement or other rights, powers, privileges, or claims not released by this Agreement. Employee also understands that the foregoing non-disparagement provision does not apply on occasions when Employee provides truthful information in good faith to any federal, state, or local governmental body, agency, or official investigating an alleged violation of any antidiscrimination or other employment-related law or otherwise gathering information or evidence pursuant to any official investigation, hearing, trial, or proceeding. Nothing in this non-disparagement provision is intended in any way to intimidate, coerce, deter, persuade, or compensate Employee with respect to providing, withholding, or restricting any communication whatsoever to the extent prohibited under 18 U.S.C. §§ 201, 1503, or 1512 or under any similar or related provision of state or federal law. In addition, nothing in this provision is intended to require Employee to provide notice to the Company or its attorneys before reporting any possible violations of federal law or regulation to any governmental agency or entity ("**Whistleblower Disclosures**"), and Employee is not required to notify the Company or its attorneys that Employee has made any such Whistleblower Disclosures. Employee understands that the foregoing does not apply to discussions and information Employee provides to her attorney, immediate family members, or financial advisors, all of whom Employee agrees to instruct to keep discussions and information confidential and or to make disclosures only as required by law The Company agrees that it will notify its Board of Directors and Senior Executives not to knowingly make any oral or written statement or take any other action that disparages the Employee

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.** **Rights Not Subject to Limitation.** Notwithstanding Sections 3, 5, and 9 or any other provision of this Agreement, this Agreement does not limit any right Employee or the Company may have: (a) to provide any information in response to a valid subpoena, court order, other legal process or as otherwise required to be provided by law; (b) to participate in an investigation or proceeding conducted by a federal, state or local government agency (collectively "**Government Agency**") authorized to enforce or administer laws within the Agency's jurisdiction, including any laws against unlawful conduct, including discrimination, or to otherwise provide information to or file a charge with such a Government Agency; (c) receive a reward paid by the Securities and Exchange Commission for providing information; or (d) to exercise any other right to the extent such right as a matter of law may not be limited by this Agreement; provided that Section 3 of this Agreement does waive any right of Employee to seek, recover or accept any monetary payments or other individual relief connected to any Government Agency proceeding or any other action related to claims that are lawfully released in this Agreement. Employee acknowledges that pursuant to 18 U.S.C. § 1833(b), an individual may not be held liable under any criminal or civil federal or state trade secret law for disclosure of a trade secret: (i) made in confidence to a government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, an individual suing an employer for retaliation based on the reporting of a suspected violation of law may disclose a trade secret to his or her attorney and use the trade secret information in the court proceeding, so long as any document containing the trade secret is filed under seal

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and the individual does not disclose the trade secret except pursuant to court order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.** **Acknowledgment and Affirmations.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Employee affirms that Employee has not filed, caused to be filed, or presently is a party to any claim against Releasees (excepting any Whistleblower Disclosures that Employee is not legally required to disclose).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)Employee also affirms that Employee has received all compensation, wages, bonuses, commissions, and/or benefits which are due and payable as of the date Employee signs this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)Employee acknowledges that Section 3 of this Agreement contains a release of any and all claims Employee may have under the Massachusetts Wage Act through the date that Employee signs this Agreement and then again through the effective date of the Supplemental Release and that this Agreement is intended to resolve any and all disputes related to wages, commissions, or other compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)Employee affirms that Employee has been granted any leave to which Employee was entitled from Employer under the Family and Medical Leave Act or related state or local leave or disability accommodation laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)Employee further affirms that Employee has no known workplace injuries or occupational diseases.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)Employee also affirms that Employee has not misappropriated or improperly disclosed any financial, proprietary or confidential information of Employer and will continue to maintain the confidentiality of such information consistent with Employer's policies, Employee's agreement(s) with Employer and/or any applicable common law. This Agreement does not limit Employee from providing any documents to the U.S. Securities and Exchange Commission as part of a whistleblower action and/or a report of possible violations of any federal securities law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)Employee further affirms that Employee has not been retaliated against for reporting any allegations of wrongdoing by Employer, its officers or any other Releasees identified in this Agreement, including any allegations of corporate fraud.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.** **Consideration Period.** Since Employee is 40 years of age or older, she is hereby informed that she has or may have specific rights and/or claims under the ADEA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)Employee acknowledges that she has been given at least **twenty-one (21)** days to consider this Transition Agreement, and that she is advised to consult with an attorney of her own choosing prior to signing this Transition Agreement. If Employee wishes to accept the terms of this Agreement, she must sign and return the Agreement to **Pilar Pueyo** via email at pilar.pueyo@cambridgetrust.com <u>or by overnight delivery to Ms. Pueyo at 78 Blanchard Road, 4</u><sup>th</sup> <u>Floor, Burlington, MA 02451</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)Employee is hereby advised that she may revoke this Agreement for a period of seven (7) days after she signs it, and the release provided in Section 3 shall not be effective or enforceable until the expiration of such seven (7) day revocation period. The twenty-one (21) day review period will not be affected or extended by any revisions, whether material or immaterial, that have been, or in the future might be, made to this Transition Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)Employee understands that any rights or claims under the ADEA which may arise after the date this Transition Agreement is executed are not waived by her.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)Employee acknowledges that she has carefully read and fully understands all of the provisions of this Transition Agreement, and she knowingly and voluntarily agrees to all of the terms set forth in this Transition Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)In entering into this Transition Agreement, Employee is not relying on any representation, promise or inducement made by the Releasees or their attorneys with the exception of those promises described in this document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)If Employee signs this Agreement prior to the end of the twenty-one day period, she has done so voluntarily; and has seven (7) calendar days after executing this Agreement to revoke it by providing written notice of revocation either via email to **Pilar Pueyo** at pilar.pueyo@cambridgetrust.com or by overnight delivery to Ms. Pueyo at 78 Blanchard Road, 4<sup>th</sup> Floor, Burlington, MA 02451 no later than 11:59 p.m. on the seventh (7th) calendar date after Employee has signed this Agreement. Employee further understands that if she revokes the Agreement, it shall be null and void and of no force or effect on either Employee or the Company. This Agreement is not effective or enforceable until after the seven (7)-day period expires without revocation (the "**Effective Date**"), and the Company's promises under this Agreement will arise only after this time. Further, as detailed in Section 15 below, the Company's obligation to provide Employee with the benefits described in Section 2 of this Agreement will arise only after the Supplemental Release is effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.** **Additional Provisions.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)The Parties represent and acknowledge that in executing this Agreement they do not rely and have not relied upon any representation or statement, other than those contained in this Agreement, made by the other Party or their respective agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise. This Agreement contains the entire agreement between the Parties relating to the subject matter of this Agreement and may not be altered or amended except by an instrument in writing signed by both Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)Neither the waiver by either Party of a breach of or default under any of the provisions of this Agreement, nor the failure of such Party, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any provisions, rights or privileges hereunder. If any part, term or provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, unenforceable or otherwise in conflict with law, the validity of the remaining parts, terms or provisions shall not be affected, provided that if a court finds that the release language is unenforceable, the Parties shall, in good faith, rewrite (or, if they cannot agree, ask the court to rewrite) the offending language to cure the defect in a reasonable manner that maintains the intended status quo as closely as possible. This Agreement shall extend to, be binding upon, and inure to the benefit of the Parties, and their respective successors, heirs, and assigns, provided that this Agreement may not be assigned by Employee without the Company's written consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)This Agreement shall be governed and conformed in accordance with the laws of the Commonwealth of Massachusetts. In the event of a breach of any provision of this Agreement, either party may institute an action specifically to enforce any term or terms of this Agreement and/or to seek any damages for the breach. Should any provision of this Agreement be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release language, such provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. If the general release language is found to be illegal or unenforceable, Employee agrees to execute a binding replacement release.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) This Agreement may be executed electronically and may be executed in counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same written agreement, which shall be binding and effective as to all Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.** **Section 409A**. It is intended that all payments made under the terms of this Transition Agreement come within exceptions to Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A") as short-term deferrals or as payments of separation pay upon an involuntary separation of service. The Transition Agreement and all related documents shall be interpreted and administered in accordance with that intention. However, if any amount payable under this Transition Agreement is determined to be subject to Section 409A then such payments shall be administered in accordance with Section 409A, provided that the Company and Cambridge shall not be liable for any failures under this Section 12 that result in any taxes or other amounts due under the terms of Section 409A. Each payment under this Agreement shall be considered a separate payment for purposes of Section 409A. To the extent that any payment or benefit described in this Transition Agreement constitutes "non-qualified deferred compensation" under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Employee's termination of employment, then such payments or benefits shall be payable only upon the Employee's "separation from service." The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A 1(h). To the extent any amount subject to Section 409A is to be paid or provided to the Employee in connection with a separation from service at a time when she is considered a specified employee within the meaning of Section 409A then such payment shall not be made until the date that is six months and one day following such separation from service, or in a lump sum upon her earlier death.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.** **<u>Supplemental Release</u>.** In consideration of the payments described in Section 2, Employee agrees to sign and return to **Pilar Pueyo at pilar.pueyo@cambridgetrust.com** or by overnight delivery to Ms. Pueyo at 78 Blanchard Road, 4<sup>th</sup> Floor, Burlington, MA 02451 the Supplemental Release Agreement attached hereto as Exhibit A on her Termination Date. Employee agrees that the Company may delay payment of payments due and payable to Employee after her Termination Date until after the effective date of the Supplemental Release.

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IN WITNESS HEREOF, THE PARTIES HAVE AGREED AND AFFIXED THEIR SIGNATURES BELOW:

CAMBRIDGE TRUST COMPANY

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| | |
|:---|:---|
| &nbsp;&nbsp;By: /s/ Pilar Pueyo | &nbsp;&nbsp;Date: 12/30/2022 |

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CAMBRIDGE BANCORP

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| | |
|:---|:---|
| &nbsp;&nbsp;By: /s/ Michael Carotenuto | &nbsp;&nbsp;Date: 12/30/2022 |

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EMPLOYEE

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| | |
|:---|:---|
| &nbsp;&nbsp;/s/ Jennifer A. Pline | &nbsp;&nbsp;Date: 12/30/2022 |
| &nbsp;&nbsp;Jennifer A. Pline |  |

---

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## Ex-10

**Exhibit: 10.15**

**NONQUALIFIED DEFERRED COMPENSATION PLAN**

**ADOPTION AGREEMENT**

(Including Code §409A provisions)

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

**NONQUALIFIED DEFERRED COMPENSATION PLAN**

**ADOPTION AGREEMENT**

The undersigned <u>Cambridge Trust Company</u> 

("Employer") by execution of this Adoption Agreement hereby establishes this Nonqualified Deferred Compensation Plan ("Plan") consisting of the Basic Plan Document, this Adoption Agreement and all other Exhibits and documents to which they refer. The Employer makes the following elections concerning this Plan. All capitalized terms used in the Adoption Agreement have the same meaning given in the Basic Plan Document. References to "Section" followed by a number in this Adoption Agreement are references to the Basic Plan Document.

**PREAMBLE**

**ERISA/Code Plan Type**: The Employer establishes this Plan as (choose one of (a) or (b)):

**[X]** (a) **Nonqualified Deferred Compensation Plan**. An unfunded nonqualified deferred compensation plan which is (choose only one of (i), (ii), (iii) or (iv)):

**[ X ]** (i) **Excess benefit plan.** An "excess benefit plan" under ERISA§3(36) and exempt from Title I of ERISA.

**[ ]** (ii) **Top-hat plan.** A "SERP" or other plan primarily for a "select group of management or highly compensated employees" under ERISA and partially exempt from Title I of ERISA.

**[ ]** (iii) **Contractors only.** A plan benefiting only Contractors (non-Employees) and exempt from Title I of ERISA.

**[ ]** (iv) **Church plan**. A church plan as described in Code §414(e) and ERISA §3(33) and maintained by a church or church controlled organization under Code §3121(w)(3) and exempt from Title I of ERISA..

**[ ]** (b) **Ineligible 457 Plan**. An ineligible 457 Plan subject to Code §457(f). The Employer is (choose only one of (i), (ii) or (iii)):

**[ ]** (i) **Governmental Plan.** A State.

**[ ]** (ii) **Tax-Exempt Plan.** A Tax-Exempt Organization. The Plan is intended to be a "top-hat" plan or an excess benefit plan as described in (a)(ii) and (a)(ii) above or the Plan benefits only Contractors.

**[ ]** (iii) **Church plan**. A church plan as described in Code §414(e) and ERISA §3(33) but which is not maintained by a church or church controlled organization under Code §3121(w)(3).

Note: If the Employer elects (a)(i), the Plan benefits only Employees. If the Employer elects (a)(ii), the Plan generally may not benefit Contractors based on the "primarily" requirement. If the Employer elects (a)(iii), the Plan benefits only Contractors. If the Employer elects (a)(iv), (b)(i), or (b)(iii) the Plan may benefit Employees and Contractors. If the Employer elects (b)(ii), the plan is either a top-hat plan, an excess benefit plan or benefits only Contractors.© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan Adoption Agreement**

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

**409A Plan Type:** The Employer establishes this Plan (choose one of (a) or (b)):

**[X]** (a) **Account Balance Plan.** As the following type(s) of Account Balance Plan(s) under Section 1.02 (choose one of (i), (ii) or (iii)):

**[ ]** (i) **Elective Deferral Account Balance Plan**. See Section 2.02.

**[ ]** (ii) **Employer Contribution Account Balance Plan.** See Sections 2.03 and 2.04.

**[X]** (iii) **Both.** Both an Elective Deferral Account Balance Plan and an Employer Contribution Account Balance Plan.

Note: For purposes of aggregation under Section 1.05, a Separation Pay Plan based only on Voluntary Separation from Service is treated as an Account Balance Plan. Nevertheless, if the Employer maintains this Plan as any type of Separation Pay Plan, the Employer should elect (b) below.

**[ ]** (b) **Separation Pay Plan.** As the following type(s) of Separation Pay Plan(s) under Section 1.42 (choose one of (i) through (iv)):

**[ ]** (i) **Involuntary Separation**. **[ ]** (ii) **Window Program**.

**[ ]** (iii) **Voluntary Separation.**

**[ ]** (iv) **Combination**: (specify)

Note: Under a Separation Pay Plan, the Employer must limit its payment election to Separation from Service but it may also include death. Electing death as a separate payment event would permit a different payment election for death versus any other Separation from Service.

**Uniformity or Nonuniformity:** The nonuniformity provisions described in the Preamble to the Basic Plan Document (choose one of (a) or (b)):

**[X]** (a) **Do not apply.** All Adoption Agreement elections and Plan provisions apply to all Participants.

**[ ]** (b) **Apply**. See Exhibit A to the Adoption Agreement.

**ARTICLE I DEFINITIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 **Change in Control.** Change in Control means (choose (a) or choose one of (b), (c) or (d)):

**[ ]** (a) **Not applicable.** Change in Control does not apply for purposes of this Plan.

**[X]** (b) **All events.** Change in Control means all events under Section 1.11.

**[ ]** (c) **Limited events.** Change in Control means only the following events under Section 1.11 (choose one or two of (i), (ii) and (iii)):© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

**[ ]** (i) Change in ownership of the Employer.

**[ ]** (ii) Change in the effective control of the Employer.

**[ ]** (iii) Change in the ownership of a substantial portion of the Employer's assets.

**[ ]** (d) (Specify): .

Note: The Employer may not use the blank in (d) to specify events not described in Treas. Reg. §1.409A- 3(i)(5). However, the Employer may increase the percentages required to trigger a Change in Control under one or all three of the listed events.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15 **Compensation.** The Employer makes the following modifications to the "gross W-2" definition of Compensation (choose (a) or at least one of (b) – (e)):

**[ ]** (a) **No modifications**.

**[ ]** (b) **Net Compensation.** Exclude all elective deferrals to other plans of the Employer described in Section 1.15.

**[ ]** (c) **Base Salary only.** Exclude all Compensation other than Base Salary.

**[ ]** (d) **Bonus only.** Exclude all Compensation other than Bonus.

**[X]** (e) (Specify): <u>Exclude all Compensation other than Base Salary and Performance-Based</u> <u>Compensation earned in a period of 12 months or more</u>.

Note: See Section 1.15(B) as to Contractor Compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17 **Disability.** Disability means (choose one of (a) or (b)):

**[X]** (a) **All impairments.** All impairments constituting Disability.

**[ ]** (b) **Limited.** Only the following impairments constituting Disability: .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.20 **Effective Date.** The effective date of the Plan is (choose one of (a) or (b)):

**[ ]** (a) **New Plan.** This Plan is a new Plan and is effective .

Note: The effective date should be no earlier than January 1, 2009.

**[X]** (b) **Restated Plan.** This Plan is a restated Plan and is restated effective as of <u>April 1, 2018</u> The Plan is complies with Code §409A. The Plan was originally effective <u>January 1, 1994.</u>

Note: If the Plan (whether or not in written form) was in effect before January 1, 2009, the Plan is a restated Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.38**Plan Name**. The name of the Plan as adopted by the Employer is: <u>Cambridge Trust Company</u> <u>Executive Deferred Compensation Plan</u>.© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.39**Retirement Age.** A Participant's Retirement Age under the Plan is (choose only one of (a)-(d)):

**[ ]** (a) **Not applicable.** Retirement Age does not apply for purposes of this Plan.

**[X]** (b) **Age.** The Participant's attainment of age <u>65</u>.

**[ ]** (c) **Age and service.** The Participant's attainment of age with Years of Service (defined under 1.57) with the Employer.

**[ ]** (d) (Specify): .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.40**Separation from Service.** In determining whether a Participant has incurred a Separation from Service under the Plan (choose one or both or (a) and (b)):

**[X]** (a) **Determination of "Employer."** In determining the "Employer" under Section 1.40(E) and Code

§§414(b) and (c), apply the following percentage: <u>80</u> (specify percentage).

Note: The specified percentage may not be more than 80% and may not be less than 20%. If the percentage is less than 50%, there must be legitimate business criteria.

**[ ]** (b) **Collectively Bargained Multiple Employer Plan.** Under Section 1.40(H), the following reasonable definition of Separation from Service applies: (specify).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.44 **Specified Employees-Elections.** The Employer makes the following elections relating to the determination of Specified Employees (choose (a) or choose one or more of (b)-(e)):

**[X]** (a) **Not applicable.** The Employer does not have any Specified Employees or none which benefit under the Plan. Alternatively, the Employer makes no special elections under Section 1.44.

**[ ]** (b) **Alternative Code §415 Compensation.** The Employer elects the following alternative definition of Code §415 Compensation: (specify).

**[ ]** (c) **Alternative Specified Employee identification date.** The Employer elects the following alternative Specified Employee identification date: (specify).

**[ ]** (d) **Alternative Specified Employee effective date.** The Employer elects the following alternative Specified Employee effective date: (specify).

**[ ]** (e) **Other elections.** The Employer makes the following other elections relating to Specified Employees: (specify).

Note: See Treas. Reg. 1.409A-1(i)(8) as to uniformity requirements affecting the above Specified Employee elections.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.51 **Unforeseeable Emergency.** Unforeseeable Emergency means (choose (a) or choose one of (b) or (c)):

**[ ]** (a) **Not applicable.** Unforeseeable Emergency does not apply for purposes of this Plan.© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan Adoption Agreement**

**[X]** (b) **All events.** All events constituting Unforeseeable Emergency.

**7** 7/08

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

**[ ]** (c) **Limited.** Only the following events constituting Unforeseeable Emergency:

.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.56**Wraparound Election.** The Plan (choose one of (a) or (b)):

**[ ]** (a) **Permits.** Permits Participants who participate in a 401(k) or 403(b) plan of the Employer to make Wraparound Elections.

**[X]** (b) **Not permitted.** Does not permit Wraparound Elections (or the Employer does not maintain a 401(k) or 403(b) plan covering any Participants).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.57**Year of Service.** The following apply in determining credit for a Year of Service under the Plan (choose (a) or choose one or more of (b) – (e)):

**[ ]** (a) **Not applicable.** Year of Service does not apply for purposes of this Plan.

**[X]** (b) **Year of continuous service.** To receive credit for one Year of Service, the Participant must remain in continuous employment with the Employer (or render contract service to the Employer) for the Participant's entire Taxable Year.

**[ ]** (c) **Service on any day.** To receive credit for one Year of Service, the Participant only need be employed by the Employer (or render contract service to the Employer) on any day of the Participant's Taxable Year.

**[ ]** (d) **Pre-Plan service.** The Employer will treat service before the Plan's Effective Date for determining Years of Service as follows (choose one of (i) or (ii)):

**[ ]** (i) **Include.**

**[ ]** (ii) **Disregard.**

**[ ]** (e) (Specify): .

**ARTICLE II PARTICIPATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.01**Participant Designation.** The Employer designates the following Employees or Contractors as Participants in the Plan (choose one of (a), (b) or (c)):

**[ ]** (a) **All top-hat Employees.** All Employees whom the Employer from time to time designates in writing as part of a select group of management or highly compensated employees.

**[ ]** (b) **All Employees with maximum qualified plan additions or benefits.** All Employees who have reached or will reach their limit under Code §§415(b) or (c) in the Employer's qualified plan for the Taxable Year, or for the 415 limitation year ending in the Taxable Year.

**[X]** (c) **Specified Employees/Contractors by name, job title or classification:** <u>Employees specified in</u> <u>Exhibit B</u>.© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

Note: An Employer might elect (c) and reference Exhibit B to maintain confidentiality within the workforce as to the identity of some or all Participants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.02**Elective Deferrals.** Elective Deferrals by Participants are (choose one of (a), (b) or (c)):

**[X]** (a) **Permitted.** Participants may make Elective Deferrals.

**[ ]** (b) **Not permitted.** Participants may not make Elective Deferrals.

**[ ]** (c) **Frozen Elective Deferrals.** The Plan does not permit Elective Deferrals as of:

.

2.02(A) **Amount limitation/conditions.** A Participant's Elective Deferrals for a Taxable Year are subject to the following amount limitation(s) or other conditions (choose (a) or choose at least one of (b) – (d)):

**[ ]** (a) **No limitation.**

**[X]** (b) **Maximum Elective Deferral amount:** <u>50% of Base Salary and up to 100% of Performance-</u> <u>Based Compensation.</u>.

**[ ]** (c) **Minimum Elective Deferral amount:** .

**[ ]** (d) (Specify): .

2.02(B) **Election timing.** A Participant must provide the Elective Deferral election under Section 2.02 to the Employer (choose one of (a) or (b)):

**[X]** (a) **By the deadline.** No later than the applicable election deadline under Section 2.02(B).

**[ ]** (b) **Specified date.** No later than days before the applicable election deadline under Section 2.02(B).

2.02(B)(6) **Final payroll period.** The Plan treats final payroll period Compensation under Section 2.02(B)(6) as (choose one of (a) or (b)):

**[ ]** (a) **Current Year.** As Compensation for the current Taxable Year in which the payroll period commenced.

**[X]** (b) **Subsequent Year.** As Compensation for the subsequent Taxable Year in which the Employer pays the Compensation.

2.02(C) **Election changes/Irrevocability.** A Participant who makes an Elective Deferral election before the applicable deadline under Section 2.02(B) (choose one of (a) or (b)):

**[X]** (a) **May change.** May change the election until the applicable election deadline.

**[ ]** (b) **May not change.** May not change the election as to the first Taxable Year to which the election applies.© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

Note: A payment election under Section 4.02(A) or (B) is a separate election which is not controlled by this Section 2.02(C). See Section 4.06(B).

2.02(D) **Election duration.** A Participant's Elective Deferral election (choose one of (a) or (b)):

**[ ]** (a) **Taxable Year(s) only.** Applies only to the Participant's Compensation for the Taxable Year or Taxable Years for which the Participant makes the election.

**[X]** (b) **Continuing.** Applies to the Participant's Compensation for all Taxable Years, commencing with the Taxable Year for which the Participant makes the election, unless the Participant makes a new election or revokes or modifies an existing election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.03**Nonelective Contributions.** During each Taxable Year the Employer will contribute a Nonelective Contribution for each Participant equal to (choose (a) or (f) or choose one or more of (b) – (e)):

**[ ]** (a) **None.** The Employer will not make Nonelective Contributions to the Plan.

**[ ]** (b) **Fixed percentage.** % of the Participant's Compensation.

**[ ]** (c) **Fixed dollar amount.** $ per Participant.

**[X]** (d) **Discretionary.** Such Nonelective Contributions (or additional Nonelective Contributions) as the Employer may elect, including zero.

**[ ]** (e) (Specify): .

**[ ]** (f) **Frozen Nonelective Contributions.** The Employer will not make any Nonelective Contributions as of: .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.04**Matching Contributions.** During each Taxable Year, the Employer will contribute a Matching Contribution equal to (choose (a) or (i) or choose one or more of (b) – (h)):

**[X]** (a) **None.** The Employer will not make Matching Contributions to the Plan.

**[ ]** (b) **Fixed match-flat.** An amount equal to % of each Participant's Elective Deferrals for each Taxable Year.

**[ ]** (c) **Fixed match-tiered.** An amount equal to the following percentages for each specified level of a Participant's Elective Deferrals or Years of Service for each Taxable Year:

Elective Deferrals Matching Percentage

 <u>%</u>

 <u>%</u>

 <u>%</u>

 <u>%</u>

Note: Specify Elective Deferrals subject to match as a percentage of Compensation or a dollar amount.© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan Adoption Agreement**

Years of Service Matching Percentage

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

 <u>%</u>

 <u>%</u>

 <u>%</u>

 <u>%</u>

**[ ]** (d) **No other caps.** The Employer in applying the Matching Contribution formula under 2.04(b) or (c) above will not limit the Participant's Elective Deferrals taken into account (except as indicated above) and otherwise will not limit the amount of the match.

**[ ]** (e) **Limit on Elective Deferrals matched.** The Employer in making Matching Contributions will disregard a Participant's Elective Deferrals exceeding (specify percentage or dollar amount of Compensation) for the Taxable Year.

**[ ]** (f) **Limit on matching amount.** The Matching Contribution for any Participant for a Taxable Year may not exceed: (specify percentage or dollar amount of Compensation).

**[ ]** (g) **Discretionary.** Such Matching Contributions as the Employer may elect, including zero.

**[ ]** (h) (Specify): .

**[ ]** (i) **Frozen Matching Contributions.** The Employer will not make any Matching Contributions as of: .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.05**Actual or Notional Contribution**. The Employer's Contributions will be (choose one of (a) or

(b) and choose (c) as applicable):

**[X]** (a) **Actual.** Made in cash or property to Participant Accounts or to the Trust.

**[ ]** (b) **Notional.** Credited to Participant Accounts only as a bookkeeping entry.

**[ ]** (c) (Specify): .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.06**Allocation Conditions.** To receive an allocation of Employer Contributions, a Participant must satisfy the following conditions during the Taxable Year (choose (a) or choose one or both of (b) and (c)):

**[X]** (a) **No allocation conditions.**

**[ ]** (b) **Year of continuous service.** The Participant must remain in continuous employment with the Employer (or render contract service to the Employer) for the entire Taxable Year.

**[ ]** (c) (Specify): .

**ARTICLE III**

**VESTING AND SUBSTANTIAL RISK OF FORFEITURE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.01**Vesting Schedule/Other Substantial Risk of Forfeiture.** The following vesting schedule or other Substantial Risk of Forfeiture applies to a Participant's Accrued Benefit (choose (a) or choose one or more of (b) – (f)):© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

**[ ]** (a) **Not applicable.** The Plan does not apply a vesting schedule or other Substantial Risk of Forfeiture.

**[X]** (b) **Immediate vesting.** 100% Vested at all times with respect to the entire Accrued Benefit.

**[ ]** (c) **Immediate vesting (Elective Deferrals)/vesting schedule (Employer Contributions)**. A Participant's Elective Deferral Account is 100% Vested at all times. A Participant's Nonelective Contributions Account and/or Matching Contributions Account are subject to the following vesting schedule:

<u>Years of Service</u> <u>Vesting %</u>

or less 0 %

%

%

%

or more 100 %

**[ ]** (d) **Vesting schedule - entire Accrued Benefit.** The Participant's entire Accrued Benefit is subject to the following vesting schedule:

<u>Years of Service</u> <u>Vesting %</u>

or less 0%

%

%

%

%

%

or more 100%

**[ ]** (e) **Vesting schedule – class year or all years.** The Plan's vesting schedule applies as follows (Choose one of (i) or (ii)):

**[ ]** (i) **Class year.** Apply the vesting schedule separately to the Deferred Compensation for each Taxable Year.

**[ ]** (ii) **All years.** Apply the vesting schedule to all Deferred Compensation.

**[ ]** (f) **Other Substantial Risk of Forfeiture.** (Specify):

.

Note: An Employer may elect both a vesting schedule and an additional Substantial Risk of Forfeiture. In such event, a Participant failing to satisfy the conditions resulting in a Substantial Risk of Forfeiture will forfeit his/her Account, even if 100% Vested under any vesting schedule. If the Plan is an Ineligible 457 Plan, the Employer must specify a Substantial Risk of Forfeiture, which may be a vesting schedule provided that under any "graded" vesting schedule, an Ineligible 457 Plan Participant will be taxed as and when each portion of his/her Deferred Compensation vests.© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.02**Immediate Vesting upon Specified Events.** A Participant's entire Accrued Benefit is 100% Vested without regard to Years of Service if the Participant's Separation from Service with the Employer on or following or as a result of (choose (a) or choose one or more of (b) – (e)):

**[X]** (a) **Not Applicable.** Participant is always 100% vested. **[ ]** (b) **Retirement Age.** On or following Retirement Age. **[ ]** (c) **Death.** As a result of death.

**[ ]** (d) **Disability.** As a result of Disability.

**[ ]** (e) (Specify): .

Note: An early vesting provision generally does not result in prohibited acceleration of benefits under Code

§409A. See Section 4.02(C)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.03**Application of Forfeitures.** The Employer will (choose only one of (a) – (d)):

**[ ]** (a) **Not Applicable.** Not apply any provision regarding allocation of forfeitures since there are no Plan forfeitures.

**[X]**(b) **Retain.** Keep all forfeitures for the Employer's account.

**[ ]** (c) **Allocate.** Allocate (in the year in which the forfeiture occurs) any forfeiture to the Accounts of the remaining (nonforfeiting) Participants, in accordance with one of the following methods (choose one of

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)or (ii)):

**[ ]** (i) **Per Compensation.** In the same ratio each Participant's Compensation for the Taxable Year bears to the total Compensation of all Participants sharing in the forfeiture allocation for the Taxable Year.

**[ ]** (ii) **Per Account balances.** In the same ratio each Participant's Account balance at the beginning of the Taxable Year bears to the total Account balances of all Participants sharing in the forfeiture allocation for the Taxable Year.

**[ ]** (d) (Specify): .

Note: If the Employer elects to create the Trust under Section 5.03, the Employer should coordinate its forfeiture application elections with the provisions of the Trust.

**ARTICLE IV BENEFIT PAYMENTS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.01**Payment Events/Elections.** The Plan payment events are (choose one or more of (a) through (i) as applicable):© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan Adoption Agreement**

Note: The Employer must elect the Plan permitted payment events. The Employer may elect all of the 409A permitted events or limit the payment events, but the Employer must elect at least one payment event. If the Plan is a separation pay plan, the Employer must elect 4.01(a) and the Employer also may elect 4.01(b). If the

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

Plan permits initial payment elections, change payment elections, or both, as to any or all of the Plan permitted payment events, the Employer should elect 4.01(d)(iv), (e)(ii) and (i) as applicable. The Employer also should elect under 4.02(A) and 4.02(B) as to who has election rights and to specify any limitations on such rights. If the Plan will not offer any initial or change payment elections, the Employer should not elect 4.01(d)(iv), (e)(ii) or (i). If the Plan will not offer any initial payment elections the Employer also should elect 4.02(A)(a). If the Plan will not offer change payment elections, the Employer also should elect 4.02(B)(a).

**[X]** (a) **Separation from Service.**

**[X]** (b) **Death.**

**[X]** (c) **Disability.**

**[ ]** (d) **Specified Time.** The Plan permits payment to a Participant at a Specified Time (choose one of

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) - (iv)):

**[ ]** (i) **Forfeiture Lapse**. At the time that the Deferred Compensation no longer is subject to a Substantial Risk of Forfeiture.

**[ ]** (ii) **Stated Age**. Upon attainment of age: (specify age).

**[ ]** (iii) (Specify): On: (e.g., January 1, 2015).

**[ ]** (iv) **Election**. In accordance with a Participant or Employer election under 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06. Payment at a Specified Time will be a lump-sum payment.

**[ ]** (e) **Fixed Schedule.** The Plan Permits payment to a Participant in accordance with the following Fixed Schedule (choose one of (i) or (ii)):

**[ ]** (i) **Schedule**: .

**[ ]** (ii) **Election.** In accordance with a Participant or Employer election under 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06. Payment pursuant to a Fixed Schedule will be installments or an annuity commencing at a specific time.

**[ ]** (f) **Change in Control.** The Plan permits payment to a Participant based on a Change in Control.

**[X]** (g) **Unforeseeable Emergency.** The Plan permits payment to a Participant who has an Unforeseeable Emergency.

**[X]** (h) (Specify): <u>Each Year a Participant may designate on their Elective Deferral Agreement elective</u> <u>deferrals that they would like distributed while they are still employed ("In-Service) two years or more</u> <u>after the first day of the year in which the elective deferrals are credited to their account</u> (e.g., based on Unforeseeable Emergency, but only as the Elective Deferral Accounts).© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan Adoption Agreement**

Note: The Employer in (h) may modify any of (a)-(g) but only if such modifications are consistent with Code

§409A.

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

**[ ]** (i) **Election.** As to 4.01 (a), (b), (c), (f), (g) and/or (h), in accordance with a Participant or Employer election under 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06.

4.01(E) **Contractor deemed Separation from Service.** In making any payment to a Contractor based on Separation from Service, the Plan (choose (a) or choose one of (b) or (c)):

**[X]** (a) **Not applicable.** Only Employees are Participants in the Plan.

**[ ]** (b) **Applies deemed Separation from Service.** Applies the deemed Separation from Service provisions of Section 4.01(E).

**[ ]** (c) **Does not apply.** Does not apply the deemed Separation from Service provisions of Section 4.01(E).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.02**Timing, Form and Medium of Payment/Elections.** The Plan will pay a Participant's Vested Accrued Benefit as follows (complete (a), (b) and (c)):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Timing.** Payment will commence or be made (choose only one of (i) - (vi)):

**[X]** (i) **60 days.** On a date which is not later than 60 days following the payment event, unless otherwise made at a Specified Time or in accordance with a Fixed Schedule.

**[ ]** (ii) **90 days**. On a date which is within 90 days following the payment event, unless otherwise made at a Specified Time or in accordance with a Fixed Schedule.

Note: A Participant may not designate the Taxable Year of Payment under (a)(ii).

**[ ]** (iii) **6 months.** On a date that is 6 months following the payment event, unless otherwise made at a Specified Time or in accordance with a Fixed Schedule.

**[ ]** (iv) **Specified Time/Fixed Schedule.** At the Specified Time under Section 4.01(d) or pursuant to the Fixed Schedule under Section 4.01(e).

**[ ]** (v) (Specify): .

**[ ]** (vi) **Election.** In accordance with a Participant or Employer election under Sections 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06(C). Note: See Section 4.01(D) as to restrictions on timing of payments to Specified Employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Form.** The Plan will make payment in the form of (choose one or more of (i) – (v)):

**[X]** (i) **Lump-sum**. A single payment.© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

**[X]** (ii) **Installments.** <u>Participants with distributions on account of Disability may also elect Annual</u> <u>Installments over not more than 5 years.</u>

**[ ]** (iii) **Annuity.** An immediate annuity contract.

**[X]** (iv) **Installments**. <u>Participants with distributions on account of separation from service on or after</u> <u>age 55 and 5 years of service may also elect Annual Installments over not more than 10 years.</u>

**[ ]** (v) **Election.** In accordance with a Participant or Employer election under Sections 4.02(A) or (B).

Note: The Employer must approve any Participant payment election. See Section 4.06.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)**Medium.** The form of payment will be (choose only one of (i) - (iv)):

**[X]** (i) **Cash only.**

**[ ]** (ii) **Property only.**

**[ ]** (iii) **Property or cash (**or both).

**[ ]** (iv) **Election.** In accordance with a Participant or Employer election under 4.02(A) or (B).

Note: The Employer must approve all Participant payment elections. See Section 4.06.

Note: A choice between cash or property is not subject to Code §409A. See Treas. Reg. §1.409A-2(a)(1). The Plan treats this election as not being subject to the timing rules applicable to payment elections.

4.02(A) **Initial payment elections.** The Plan (choose only one of (a) - (d)):

**[ ]** (a) **No initial payment elections.** The Plan and Adoption Agreement specify the payment events and the timing, form and medium of payment. If there are multiple payment events, the Plan will make payment based on the earliest event to occur except as follows:

(indicate no exceptions or specify sequencing).

**[X]** (b) **Participant initial payment election.** Permits a Participant initially to elect the payment event and the timing, form and medium of payment of his/her Deferred Compensation in accordance with Section 4.02(A) (choose only one of (i) or (ii)):

**[ ]** (i) **All Accounts.** The Plan applies a Participant's elections to all of the Participant's Accounts under the Plan.

**[X]** (ii) **Elective Deferral Account.** The Plan applies a Participant's elections for In-Service Distributions only to the Participant's Elective Deferral Account. The Employer will make all payment elections as to Nonelective and Matching Contribution Accounts.

Note: A Participant must elect a payment event from those which the Employer has elected under 4.01 above, which might include all of the 409A permissible payment events. A Participant in his/her election form may© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan Adoption Agreement**

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

limit the payment election to Compensation Deferred at the time of the election or also may apply the payment election to all future Deferred Compensation.

**[ ]** (c) **Employer initial payment election**. Permits the Employer (and not the Participant) initially to elect the payment events and the timing, form and medium of payment of all Participant Accounts in accordance with Section 4.02(A).

**[ ]** (d) (Specify): (e.g., the Participant may make an election only as to the Participant's Grandfathered Amounts).

Note: If a Participant or the Employer does not make an initial payment election, see Sections 4.01(B) and 4.02(A)(5).

4.02(B) **Change payment elections.** The Plan (choose only one of (a) or (b); choose (c) if (b) applies and choose (d) if applicable):

Note: Even if the Employer under 4.02(A)(a) elects not to permit any Participant or Employer initial payment elections, the Plan under Section 4.02(A)(1)treats a Plan designation of the payment events and of the timing, form and medium of payment as an initial election for purposes of applying any change election the Plan permits.

**[ ]** (a) **Change payment elections not permitted.** Does not permit a Participant, a Beneficiary or the Employer to make a change payment election in accordance with Section 4.02(B).

**[X]** (b) **Permits change payment elections.** Permits change payment elections or changes to change payment elections in accordance with Section 4.02(B) and as follows (choose one or more of (i) -(iv)):

**[X]** (i) **Participant election.** Permits a Participant to make change payment elections if the Employer consents.

**[ ]** (ii) **Employer election.** Permits the Employer to make change payment elections.

**[ ]** (iii) **Beneficiary election.** Permits a Beneficiary following the Participant's death to make change payment elections.

**[ ]** (iv) (Specify): (e.g., a Beneficiary may make a change payment election only if the Participant had the right to do so, OR a Participant may make a change payment election only after attaining age 60).

**[X]** (c) **Limit on number of change payment elections**. The number of change payment elections (as to any initial payment election) that a Participant, a Beneficiary or the Employer (as applicable) may make is (choose one of (i) or (ii)):

**[X]** (i) **Unlimited.** Not limited except as required under Section 4.02(B).

**[ ]** (ii) **Limited.** Limited to: (specify number).

**[ ]** (d) (Specify): (e.g., permits change payment elections only as to Elective Deferral Account).© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

4.02(B)(3)(b) **Installment payments.** The Plan under Section 4.02(B)(3)(b) for purposes of application of the change payment election provisions treats an installment payment as a (choose one of (a) or

(b) or choose (c) if applicable):

**[X]**(a) **Single payment.**

**[ ]** (b) **Series of payments.**

Note: If the Plan is a restated Plan, and the Employer otherwise before January 1, 2008, did not make a written designation regarding the treatment of installment payments, the installments under the Plan as to pre- 2008 deferrals must be treated as a single payment. See Treas. Reg. 1.409A-2(b)(2)(iv).

**[ ]** (c) **Not applicable.** The Plan does not permit installment payments.

4.06(B) **Election changes/Irrevocability.** A Participant who makes an initial payment election or a change payment election which the Employer has accepted (complete (a) and (b)):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)**Initial payment elections.** (choose one of (i), (ii) or (iii)):

**[X]** (i) **May change.** May change the initial payment election as to the Deferred Compensation to which the election applies, until the applicable election deadline under 4.02(A)(2)(a). Any change to an initial payment election made after the initial payment election becomes irrevocable is a change payment election.

**[ ]** (ii) **May not change.** May not change the initial election as to the Deferred Compensation to which the election applies.

**[ ]** (iii) **Not applicable.** As elected above, a Participant may not make an initial payment election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)**Change payment elections.** (choose one of (i), (ii) or (iii)):

**[X]** (i) **May change.** May change the change payment election as to the Deferred Compensation to which the election applies. Where the payment event is a Specified Time or a Fixed Schedule, the Participant may change the election until the applicable deadline under Section 4.02(B)(1)(a). Where the change payment election relates to any other payment event (not a Specified Time or a Fixed Schedule), the Participant must make the change within 30 days following the Participant's making of the change payment election which the Participant seeks to change. Any change to a change payment election made after the change payment election becomes irrevocable is a new change payment election.

**[ ]** (ii) **May not change.** May not change the change payment election as to the Deferred Compensation to which the election applies.

**[ ]** (iii) **Not applicable.** As elected above, a Participant may not make a change payment election.

Note: An Elective Deferral election under Section 2.02(C) is a separate election which is not controlled by this election 4.06(B).

**ARTICLE V**© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan Adoption Agreement**

**TRUST ELECTION AND INVESTMENTS**

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.02**No Trust.** The Employer by electing (a) or (b) below does not create the Trust described in Section 5.03. Section 5.02 applies. The Employer will credit each Participant's Account with (choose one or both of (a) or (b)):

**[X]** (a) **Actual Earnings** (choose only one of (i) through (iv)):

**[ ]** (i) **Employer direction.** As a result of the Employer's directed investment of the

Account.

**[X]** (ii) **Participant direction.** As a result of the Participant's directed investment of his/her own Account.

**[ ]** (iii) **Participant direction over Elective Deferrals.** As a result of the Participant's directed investment of his/her own Elective Deferral Account, and the Employer's directed investment of the balance of the Participant's Account.

**[ ]** (iv) (Specify): .

**[ ]** (b) **Notional Earnings.** (choose one or both of (i) or (ii)):

**[ ]** (i) **Fixed/floating interest.** Interest at the rate of and applied to

(choose only one of (A), (B) or (C)):

Note: Use blank to specify rate, fixed or floating with index, time interval, simple or compounded interest, etc.

**[ ]** (A) **Total Account.** The Participant's entire Account.

**[ ]** (B) **Deferrals only.** The Participant's Elective Deferral Account, with the balance of the Account being subject to actual Earnings as specified in 5.02(a).

**[ ]** (C) **Employer Contribution only.** The Participant's Employer Contribution Accounts with the balance of the Account being subject to actual Earnings as specified in 5.02(a).

**[ ]** (ii) (Specify): <u>.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.03**Trust.** The Employer by electing (a) or (b) below will establish the Trust described in Section 5.03 and designated as Exhibit C. The Trust will be identical in form to the Model Rabbi Trust issued by the Internal Revenue Service under Rev. Proc. 92-64 or any successor thereto. The Employer also may modify the Trust if necessary to comply with Applicable Guidance. The Employer will select among the optional and alternative features available under the Trust, and the Employer will not establish or adopt any other trust under the Plan. The version of the Trust the Employer adopts is (choose one of (a) or (b)):

**[ ]** (a) **Individually designed version**. **[ ]** (b) **Adoption agreement version.**

**EMPLOYER SIGNATURE**© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan Adoption Agreement**

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

The Employer hereby agrees to the provisions of this Plan, and in witness of its agreement, the Employer, by its duly authorized officer, has executed this Adoption Agreement on .

Name of Employer:

Employer's EIN:

Signed:

Name and Title© Copyright 2008 Sentinel

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**Nonqualified Deferred Compensation Plan**

**Adoption Agreement**

**TRUSTEE SIGNATURE**

**[If Trust created under Section 5.03]**

The Trustee(s), by executing this Adoption Agreement on , accept(s) the appointment as Trustee of the Trust created under Section 5.03 of the Plan and attached hereto as Exhibit C.

Name of

Trustee(s):

Signed:

Signed:

 <u>[Name/Title]</u>

 <u>[Name/Title]</u>© Copyright 2008 Sentinel

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## Ex-10

**Exhibit: 10.16**

**NONQUALIFIED DEFERRED COMPENSATION PLAN**

**BASIC PLAN DOCUMENT**

(Including Code §409A provisions)

------

**Nonqualified Deferred Compensation Prototype Plan**

**NONQUALIFIED DEFERRED COMPENSATION PLAN**

**BASIC PLAN DOCUMENT**

By execution of the Adoption Agreement associated with this Basic Plan Document, the Employer establishes this Nonqualified Deferred Compensation Plan ("Plan") for the benefit of certain Employees and Contractors the Employer designates in its Adoption Agreement. The primary purpose of the Plan is to provide additional compensation to Participants upon termination of employment or service with the Employer. The Employer will pay benefits under the Plan only in accordance with the terms and conditions set forth in the Plan.

**PREAMBLE**

**ERISA/Code Plan Type**. The Employer in its Adoption Agreement will specify whether it establishes the Plan as a nonqualified deferred compensation plan or as an ineligible Code §457(f) plan. A nonqualified deferred compensation plan is an unfunded plan that may be: (i) an "excess benefit plan" under ERISA §3(36);

(ii)a plan maintained "primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" ("top-hat plan") under ERISA §§201(2), 301(a)(3) and 401(a)(1); (iii) a plan only for Contractors and exempt from Title I of ERISA; or (iv) a church plan under Code

§414(e) and ERISA §3(33) and maintained by a church or church-controlled organization under Code

§3121(w)(3). A top-hat plan includes a supplemental executive retirement plan ("SERP"). A tax-exempt Code

§457(f) plan may include a church plan under Code §414(e) and ERISA §3(33) but which is not sponsored by a church or church-controlled organization under Code §3121(w)(3).

**409A Plan Type**. The Employer in its Adoption Agreement will specify whether it establishes the Plan as an Account Balance Plan or as a Separation Pay Plan.

**Possible Nonuniformity**. The Employer in its Adoption Agreement will specify such Plan terms as will apply to all Participants uniformly or as may apply to a given Participant. Except where the Plan or Applicable Guidance require uniformity in order to comply with Code §409A, the Employer need not provide the same Plan benefits or apply the same Plan terms and conditions to all Participants, even as to Participants who are of similar pay, title and other status with the Employer. The elections the Employer makes in its Adoption Agreement apply uniformly to all Participants, except to the extent the Employer adopts inconsistent provisions with respect to one or more Participants in a separate attachment designated as "Exhibit A" and attached to the Adoption Agreement. The Employer may create a separate Exhibit A for one or more Participants, specifying such terms and conditions as are applicable to a given Participant. The Employer, in Exhibit A, may modify any Plan provision or any Adoption Agreement election as to one or more Participants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**I.** **DEFINITIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.01**"Account"** means the account the Employer establishes under the Plan for each Participant and, as applicable, means a Participant's Elective Deferral Account, Nonelective Contribution Account or Matching Contribution Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.02**"Account Balance Plan"** means an Elective Deferral Account Balance Plan or an Employer Contribution Account Balance Plan, or a combination of both, as the Employer elects in its Adoption Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Elective Deferral Account Balance Plan</u>. An Elective Deferral Account Balance Plan is a plan comprised of an Elective Deferral Account as described under Treas. Reg. §1.409A-1(c)(2)(i)(A).© Copyright 2008 SunGard

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Employer Contribution Account Balance Plan</u>. An Employer Contribution Account Balance Plan is a plan comprised of Employer Nonelective Contribution Accounts, Matching Contribution Accounts, or both, as described under Treas. Reg. §1.409A-1(c)(2)(i)(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.03**"Accrued Benefit"** means the total dollar amount credited to a Participant's Account.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.04**"Adoption Agreement"** means the document the Employer executes to establish the Plan and includes all Exhibits and other documents referenced therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.05**"Aggregated Plans"** means this Plan and any other like-type plan of the Employer in which a given Participant participates and as to which the Plan (see Sections 2.02(B)(2) and 6.03(B)) or Treas. Reg.

§1.409A-1(c)(2) requires the aggregation of all such nonqualified deferred compensation in applying Code

§409A. For this purpose, the following rules apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Participants in Separate Plans</u>. The plan for a Participant is treated as a separate plan from the plan for any other Participant, even though such plans may be incorporated into a single written plan in this Plan and covering all Participants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Plan Types</u>. The following plans under clauses (i), (ii) and (iii) are not "like-type plans" and are treated as separate from each other: (i) all Elective Deferral Account Balance Plans (including for aggregation purposes only, Separation Pay Plans based on Voluntary Separation from Service); (ii) all Employer Contribution Account Balance Plans (including for aggregation purposes only, Separation Pay Plans based on Voluntary Separation from Service); and (iii) all Separation Pay Plans based on Involuntary Separation from Service or under a Window Program.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Dual Status</u>. If a Participant in two like-type plans participates in one plan as an Employee and in the other as a Contractor, the plans are not Aggregated Plans. If an Employee also serves on the Employer's board of directors (or in a similar capacity with regard to a non-corporate entity) and participates in like-type plans but participates in one plan as an Employee and in the other as a director (or similar capacity with regard to a non-corporate entity) [a "director plan"], the plans are not Aggregated Plans provided that the director plan is substantially similar to a plan the maintains for non-employee directors. If the director plan is not substantially similar, for purposes of aggregation, the director plan is treated as a plan for Employees. Director plans and plans for Contractors are subject to aggregation under this Section 1.05.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.06**"Applicable Guidance"** means as the context requires Code §§83, 409A and 457, Treas. Reg.

§1.83, Treas. Reg. §§1.409A-1 through -6, Treas. Reg. §1.457-11, or other written Treasury or IRS guidance regarding or affecting Code §§83, 409A or 457(f), including, as applicable, any Code §409A guidance in effect prior to January 1, 2009.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.07**"Base Salary"** means a Participant's Compensation consisting only of regular salary and excluding any other Compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.08**"Basic Plan Document"** means this Nonqualified Deferred Compensation Plan document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.09**"Beneficiary"** means the person or persons entitled to receive Plan benefits in the event of a Participant's death.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10**"Bonus"** means a Participant's Compensation consisting only of bonus and excluding any other Compensation. A Bonus also may be Performance-Based Compensation under Section 1.37.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11**"Change in Control"** means, as to an Employer which is a corporation, a change: (i) in the ownership of the Employer (acquisition by one or more persons acting as a group of more than 50% of the total voting power or fair market value of the Employer); (ii) in the effective control of the Employer (acquisition or acquisition during a 12-month period ending on the date of the latest acquisition, by one or more persons acting as a group of 30% or more of the total voting power of the Employer or replacement of a majority of the members of the board of directors of the Employer [described below, but including only the entity for which no other corporation is a majority shareholder] during any 12-month period by directors not endorsed by a majority of the board before the appointment or election); or (iii) in the ownership of a substantial portion of the assets of the Employer (acquisition or acquisition during a 12-month period ending on the date of the latest acquisition, by one or more persons [other than related persons described in Treas. Reg. §1.409A- 3(i)(5)(vii)(B)] acting as a group of assets with a total gross fair market value of 40% or© Copyright 2008 SunGard

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more of the total gross fair market value of all assets of the Employer immediately before such acquisition or acquisitions), each within the meaning of Treas. Reg. §1.409A-3(i)(5) or in Applicable Guidance. For this purpose, the Employer includes the Employer, the corporation which is liable for the payment of the Deferred Compensation, a

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**Nonqualified Deferred Compensation Prototype Plan**

majority shareholder (more than 50% of total fair market value and voting power) of the foregoing or a corporation in a chain of corporations in which each is a majority owner of another corporation in the chain, ending in the Employer or in the corporation that is liable for payment of the Deferred Compensation, all in accordance with Treas. Reg. §1.409A-3(i)(5)(ii). An event constituting a Change in Control must be objectively determinable and any certification thereof by the Employer or its agents may not subject to the discretion of such person. For purposes of applying this Section 1.11, stock ownership is determined in accordance with Code §318(a) as modified under Treas. Reg. §1.409A-3(i)(5)(iii). The Employer in its Adoption Agreement will elect whether a Change in Control includes any or all the events described in clauses (i), (ii) or (iii) and also may elect to increase the percentage change required under any such event to constitute a Change in Control. Pending the issuance of Applicable Guidance as to the application of the Change in Control provisions to partnerships (or other non-corporate entities), if the Employer elects in its Adoption Agreement to permit Change in Control as a payment event, the Employer will apply clauses (i) and (iii) and clause (ii) as it relates to a change in the composition of the board of directors by analogy in accordance with Treas. Reg. §1.409A, Preamble, III.G and Notice 2007-86.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12**"Change in the Employer's Financial Health"** means an adverse change in the Employer's financial condition as described in Applicable Guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13**"Code"** means the Internal Revenue Code of 1986, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14**"Commissions"** means Compensation or portions of Compensation consisting of Sales Commissions or of Investment Commissions. See Section 2.02(B)(5).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Sales Commissions</u>. Sales Commissions means Compensation or portions of Compensation a Participant earns if: (i) a substantial portion of Participant's services to the Employer consists of the direct sale of a product or a service to a customer that is not related or treated as related to the Employer or to the Participant (under Treas. Reg. §§1.409A-1(f)(2)(ii) and (iv)); (ii) the Compensation the Employer pays to the Participant consists either of a portion of the purchase price for the product or service or of an amount substantially all of which is calculated by reference to volume of sales; and (iii) payment is either contingent upon the Employer receiving payment from an unrelated customer (as described in clause (i) above) for the product or services or, if consistently applied as to all similarly situated service providers, is contingent upon the closing of a sales transaction and such other requirements as the Employer may specify before the closing of the sales transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Investment Commissions</u>. Investment Commissions means Compensation or portions of Compensation a Participant earns if: (i) a substantial portion of the Participant's services to the Employer to which the Compensation relates consists of sales of financial products or other direct customer services to a customer that is not related or treated as related to the Employer or to the Participant (under Treas. Reg.

§§1.409A-1(f)(2)(ii) and (iv)) as to customer assets or customer asset accounts; (ii) the customer retains the right to terminate the relationship and to move or liquidate the assets or asset accounts without undue delay (but subject to a reasonable notice period); (iii) the Compensation is based on a portion of the value of the overall assets or asset account balance, substantially all of the Compensation is calculated by reference to the increase in value of the overall assets of account balance, or both; and (iv) the value of the overall assets or account balance and Investment Commissions are determined at least annually.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Related Customer Commissions</u>. This Section 1.14 also applies to Sales Commissions and to Investment Commissions involving a related customer provided: (i) the Employer as to unrelated customers makes substantial sales or provides substantial services giving rise to Commissions; and (ii) the sales, service and Commission arrangements with the related customer are bona fide, arise from the Employer's ordinary course of business and are substantially the same, in terms and in practice, as those terms and practices that apply to unrelated customers to which substantial sales are made or substantial services are rendered.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15**"Compensation"**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Employees</u>. Compensation means as to an Employee, gross W-2 compensation. "W-2 Compensation" means wages for Federal income tax withholding purposes, as defined under Code© Copyright 2008 SunGard

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§3401(a), plus all other payments to an Employee in the course of the Employer's trade or business, for which the Employer must furnish the Employee a written statement under Code §§6041, 6051 and 6052, disregarding

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**Nonqualified Deferred Compensation Prototype Plan**

any rules limiting the remuneration included as wages under this definition based on the nature or location of the employment or service performed. "Gross W-2 compensation" means W-2 compensation plus all amounts excludible from a Participant's gross income under Code §§125,132(f)(4), 402(e)(3), 402(h)(2), 403(b), and 408(p), contributed by the Employer, at the Participant's election, to a cafeteria plan, a qualified transportation fringe benefit plan, a 401(k) arrangement, a SEP, a tax sheltered annuity, or a SIMPLE plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Contractors</u>. Compensation as to a Contractor means all payments by the Employer to the Contractor for services during a Taxable Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Modifications</u>. The Employer in its Adoption Agreement will elect whether to modify the definition of Compensation. The Employer may modify the definition of Compensation or may specify a different definition of Compensation either as to Employees, as to Contractors or both.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.16**"Contractor"** means a person or entity providing services to the Employer (not as an Employee) as described in Treas. Reg. §1.409A-1(f)(1) and which for any Taxable Year of the Contractor that the Contractor is on the cash receipts and disbursements method of accounting for Federal income tax purposes. A person serving on a board of directors is a Contractor as to Compensation for such service without regard to whether the person is an Employee for other purposes. A Contractor is not subject to this Plan or to Code

§409A if in the Taxable Year in which the Legally Binding Right to Compensation arises: (i) the Contractor is actively engaged in the trade or business of performing services other than as an Employee or as a director (or similar position as to a non-corporate Employer); (ii) the Contractor provides significant services to the Employer and to at least one other unrelated service recipient, where the Contractor, the Employer and the other service recipient(s) are all unrelated to each other within the meaning of Treas. Reg. §§1.409A- 1(f)(2)(i)(B) and (C) as applicable; and (iii) the services are not "management services" within the meaning of Treas. Reg. §1.409A-1(f)(2)(iv). For purposes of clause (ii), "significant services" means as described in Treas. Reg. §1.409A-1(f)(2)(iii). This Plan and Code §409A also do not apply to certain other "related" Contractor services as described in Treas. Reg. §1.409A-1(f)(2)(v).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17**"Disability"** except as the Plan otherwise provides means a condition of a Participant who by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months: (i) is unable to engage in any substantial gainful activity; or (ii) is receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering Employees. The Employer in its Adoption Agreement will elect whether Disability includes all impairments constituting Disability under this Section 1.17, or only certain specified Disabilities which satisfy the foregoing definition. The Employer will determine whether a Participant has incurred a Disability based on its own good faith determination and may require a Participant to submit to reasonable physical and mental examinations for this purpose. A Participant will be deemed to have incurred a Disability if: (i) the Social Security Administration or Railroad Retirement Board determines that the Participant is totally disabled; or (ii) the applicable insurance company providing disability insurance to the Participant under an Employer sponsored disability program determines that a Participant is disabled under the insurance contract definition of disability, provided such definition complies with the definition in this Section 1.17.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.18. **"Deferred Compensation"** means the Participant's Account Balance attributable to Elective Deferrals and Employer Contributions and includes Earnings on such amounts except where the Plan otherwise provides. "Compensation Deferred" is Compensation that the Participant or the Employer has deferred under this Plan. Compensation is Deferred Compensation if: (i) under the terms of the Plan and the relevant facts and circumstances, the Participant has a Legally Binding Right to Compensation during a Taxable Year that the Participant has not actually or constructively received and included in gross income; and (ii) pursuant to the Plan terms, the Compensation is or may be payable to or on behalf of the Participant in a later Taxable Year. Deferred Compensation <u>includes</u> Separation Pay paid pursuant to a Separation Pay Plan except as otherwise described in Treas. Reg. §1.409A-1(b)(9) relating to certain excluded Involuntary or Voluntary Separation from Service or Window Programs and certain reimbursements, medical benefits, in-kind benefits and limited payments. Deferred Compensation <u>excludes</u> certain "short-term deferrals" and all other items described in Treas. Reg. §§1.409A-1(b)(3), (4), (5), (6), (8), (10), (11) and (12) or in other Applicable Guidance.© Copyright 2008 SunGard

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.19**"Earnings"** means earnings, gain or loss applicable to a Participant's Account provided that such amounts reflect actual predetermined investments or notional amounts which do not exceed a reasonable

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rate of interest. Amounts credited to an Account that do not reflect actual predetermined investments or a reasonable rate of interest are Deferred Compensation and are not Earnings. For purposes of making the determination of whether an amount is Earnings or is Deferred Compensation, the principles of Treas. Reg.

§31.3121(v)(2)-1(d)(2) apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.20**"Effective Date"** of the Plan is the date the Employer specifies in the Adoption Agreement, but which is not earlier than January 1, 2009 unless the Employer specifies an earlier date. If this Plan restates a Plan (written or otherwise) which was in effect before January 1, 2009, for periods before January 1, 2009, as to 409A Amounts, the standards and transition rules in effect under Applicable Guidance applies. See for example, Notice 2007-86.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.21**"Elective Deferral"** means Compensation a Participant elects to defer into the Participant's Account under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.22**"Elective Deferral Account"** means the portion of a Participant's Account attributable to Elective Deferrals and Earnings thereon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.23**"Employee"** means a person providing services to the Employer as a common law employee (and not as a Contractor) as described in Treas. Reg. §1.409A-1(f)(1) and who, for any Taxable Year of the Employee, is on the cash receipts and disbursements method of accounting for Federal income tax purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.24**"Employer"** means the person or entity: (i) receiving the services of the Participant (even if another person pays the Deferred Compensation); (ii) with respect to whom the Legally Binding Right to Compensation arises; and (iii) who or which executes an Adoption Agreement establishing the Plan. The Employer includes all persons with whom the Employer would be considered a single employer under Code

§§414(b) or (c). In the case of an Ineligible 457 Plan, Employer means a State or a Tax-Exempt Organization. For purposes of this Plan, "Employer" means "service recipient" as that term in used in Treas. Reg. §1.409A-1 through -6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.25**"Employer Contribution"** means amounts the Employer contributes or credits to an Account under the Plan, including Nonelective Contributions and Matching Contributions but not including Elective Deferrals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.26**"Employer Contribution Account"** means the portion of a Participant's Account attributable to Employer Contributions and Earnings thereon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.27**"ERISA"** means the Employee Retirement Income Security Act of 1974, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.28**"409A Amount"** means: (i) any Compensation Deferred prior to January 1, 2005, unless such Deferred Compensation is a Grandfathered Amount; and (ii) any Compensation Deferred in Taxable Years beginning after December 31, 2004. In determining 409A Amounts, the rules of Section 1.05 regarding Aggregated Plans apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.29**"Grandfathered Amount"** means an amount of Deferred Compensation hereunder as to which, prior to January 1, 2005, a Participant: (i) had a Legally Binding Right to be paid Deferred Compensation; and

(ii) was Vested. However, if the Employer after October 3, 2004, materially modifies the Plan as described in Treas. Reg. 1.409A-6(a)(4), then such amount ceases to be a Grandfathered Amount. In determining Grandfathered Amounts, the rules of Section 1.05 regarding Aggregated Plans apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.30**"Ineligible 457 Plan"** means this Plan which is subject to Code §457(f) and that is not an eligible 457 plan under Code §457(b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.31**"Legally Binding Right"** means, in reference to Compensation, the grant by the Employer to the Participant of an enforceable right (under contract, statute or other applicable law) to Compensation where, after the Participant has performed the services which created the Legally Binding Right, the© Copyright 2008 SunGard

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Compensation is not subject to unilateral reduction or elimination by the Employer or any other person. The Employer, based on the facts and circumstances and in accordance with Treas. Reg. §1.409A-1(b)(1), will determine: (i) whether a

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Legally Binding Right exists; or (ii) whether a Legally Binding Right does not exist on account of the existence of negative discretion which has substantive significance to reduce or eliminate the Compensation. Negative discretion does not exist where the Participant has effective control over the person with the negative discretion, has effective control over any portion of compensation of the decision maker or is a family member of the decision maker (within the meaning of Code §267(c)(4) applied as if the family of an individual includes the spouse of any member of the family). Compensation is not subject to unilateral reduction or elimination merely because: (i) it may be reduced or eliminated by operation of objective Plan terms, such as a Substantial Risk of Forfeiture; (ii) the Compensation is determined under a formula that provides for an offset based on benefits provided under another plan, including a qualified plan; or (iii) benefits are reduced on account of actual or notional investment losses, or, in a final average pay plan, because of subsequent decreases in compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.32**"Matching Contribution"** means a fixed or discretionary Employer contribution made with respect to a Participant's Elective Deferral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.33**"Matching Contribution Account"** means the portion of a Participant's Account attributable to Matching Contributions and Earnings thereon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.34**"Nonelective Contribution"** means a fixed or discretionary Employer Contribution that is unrelated to a Participant's Elective Deferrals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.35**"Nonelective Contribution Account"** means the portion of a Participant's Account attributable to Nonelective Contributions and Earnings thereon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.36"**Participant"** means an Employee or Contractor the Employer designates under Adoption Agreement Section 2.01 or in Exhibit "B" to the Adoption Agreement to participate in the Plan. For purposes of this Plan, "Participant" means a "service provider" as that term is used in Treas. Reg. 1.409A-1 through-6, who is a participant in the Plan. A reference herein to "service provider" means another service provider to the Employer, whether or not that person is a Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.37**"Performance-Based Compensation"** means Compensation (including a Bonus) where the amount of, or entitlement to, the Compensation is contingent on satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least 12 consecutive months. The Employer must establish the organizational or individual performance criteria in writing not later than 90 days after commencement of the performance period and the outcome must be substantially uncertain at the time that the Employer establishes the performance criteria. The Employer may establish performance criteria without the necessity of action by its shareholders, board of directors, compensation committee or similar entities in the case of a non-corporate Employer. Performance-Based Compensation does not include any amount that will be paid regardless of performance or that will be paid based on a level of performance that is substantially certain to be met at the time the criteria are established. If the Plan will pay the Participant's Performance-Based Compensation in the event of the Participant's death or disability or if a Change in Control occurs, without regard to whether the performance criteria have been satisfied, the Compensation is not Performance-Based Compensation (and therefore is not entitled to the election timing under Section 2.02(B)(4)) if payment occurs as a result of any of such events. "Disability" for purposes of this Section 1.37 means any medically determinable physical or mental impairment resulting from the Participant's inability to perform the duties of his/her position or of any substantially similar position, where such impairment can be expected to result in death or to last for a continuous period of not less than 6 months. Performance-Based Compensation does not include an amount of Compensation which is based on a specified number of shares of stock multiplied by the share price at the end of the performance period, but may include an amount of Compensation based on an increase in share price over the performance period or which is not payable unless the share price is at or above a specified price. Performance-Based Compensation may be based on subjective performance criteria provided: (i) the criteria are bona fide and relate the Participant's performance, a group of service providers that includes the Participant or a business unit for which the Participant provides services which may include the Employer; and (ii) the person who decides whether the subjective performance criteria have been met is someone other than the Participant, the Participant's family member (within the meaning of Code §267(c)(4) applied as if the family of an individual includes the spouse of any member of the family), or a© Copyright 2008 SunGard

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person under the effective control of the Participant or such a family member. In addition, the decision maker's compensation may not be controlled in whole or in part by the Participant or such a family member.

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The Employer will determine the status of Compensation as Performance-Based Compensation in accordance with Treas. Reg. §1.409A-1(e) and Applicable Guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.38"**Plan"** means the Nonqualified Deferred Compensation Plan of the Employer established by and including the Adoption Agreement, the Basic Plan Document, the Trust, if any, and all notices, forms, elections and other written documentation to which the Plan refers. The Employer will set forth the name of the Plan in its Adoption Agreement**.** For purposes of applying Code §409A requirements this Plan, as the Employer elects in its Adoption Agreement, is an Elective Deferral Account Balance Plan, an Employer Contribution Account Balance Plan or both, or is a Separation Pay Plan. This Plan does not constitute: (i) a Code §401(a) plan with an exempt trust under Code §501(a); (ii) a Code §403(a) annuity plan; (iii) a Code

§403(b) annuity; (iv) a Code §408(k) SEP; (v) a Code §408(p) Simple IRA; (vi) a Code §501(c)(18) trust to which an active participant makes deductible contributions; (vii) a Code §457(b) plan; or (viii) a Code §415(m) plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.39**"Retirement Age"** means the date (if any) the Employer elects in the Adoption Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.40**"Separation from Service"**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Employees</u>. Separation from Service means in the case of an Employee, the Employee's termination of employment with the Employer whether on account of death, retirement, Disability or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)<u>Insignificant or Significant Service/Presumptions</u>. The Employer will determine whether an Employee has terminated employment (and incurred a Separation from Service) based on whether the facts and circumstances as described in Treas. Reg. §1.409A-1(h)(1)(ii). An Employee incurs a Separation from Service if the parties reasonably anticipate, based on the facts and circumstances, the Employee will not perform any additional services after a certain date or that the level of bona fide services (whether performed as an Employee or as a Contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed (whether performed as an Employee or as a Contractor) over the immediately preceding 36-month period (or, if less, the period the employee has rendered service to the Employer) ("average prior service"). An Employee is presumed to have incurred a Separation from Service if the Employee's service level decreases to 20% or less than the average prior service and an Employee is presumed to not have incurred a Separation from Service if the Employee's service level continues at a rate which is 50% or more of the average prior service. No presumption applies where the Employee's service level is more than 20% and less than 50% of the average prior service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)<u>Effect of Leave</u>. An Employee does not incur a Separation from Service if the Employee is on military leave, sick leave, or other bona fide leave of absence if such leave does not exceed a period of 6 months, or if longer, the period for which a statute or contract provides the Employee with the right to reemployment with the Employer. If a Participant's leave exceeds 6 months but the Participant is not entitled to reemployment under a statute or contract, the Participant incurs a Separation from Service on the next day following the expiration of 6 months. A leave of absence constitutes a bona fide leave of absence for this Section 1.40 only if there is a reasonable expectation that the Employee will return to perform services for the Employer. Where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of at least 6 months, and where the Participant cannot perform his/her duties or the duties of any substantially similar position, in determining when a Separation from Service occurs, the above 6-month period is 29 months unless the Employer or the Employee terminate the leave sooner. For purposes of determining average prior service under Section 1.40 (A)(1), during a paid leave of absence which is not a Separation From Service, the Employee is treated as rendering bona fide services at a level that would have been required to earn the amount paid during the leave. If the leave of absence is unpaid, the leave period is disregarded in determining average prior service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)<u>Alternative Definition</u>. In lieu of applying Section 1.40(A)(1), the Employer or Participant in an initial payment election or in a change payment election may elect a percentage of reduced bona fide services resulting in a Separation from Service which percentage must be greater than 20% and© Copyright 2008 SunGard

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less than 50% of prior average service, determined over the immediately preceding 36 months.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Contractors</u>. Separation from Service, in the case of a Contractor, means the expiration of the contract (or all contracts) under which the Contractor performs services for the Employer provided that the expiration constitutes a good-faith and complete termination of the contractual relationship between the Contractor and the Employer. A good-faith and complete termination does not occur if the Employer anticipates a renewal of the service contract or the Employer anticipates the Contractor becoming an Employee. The Employer anticipates the renewal of the contract if the Employer intends to contract again for the services provided under the expired contract and neither the Employer nor the Contractor has eliminated the Contractor as a possible provider of such additional services. The Employer is deemed to intend renewal of the Contractor's expired contract if renewal is conditioned only upon incurring a need for services, the Employer's ability to pay for the services, or both. See Section 4.01(E) as to Contractor "deemed" Separation from Service provisions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Involuntary Separation from Service (including for "good reason")</u>. "Involuntary Separation from Service" means a Separation from Service due to the Employer's independent exercise of unilateral authority to terminate the Participant's services (other than due the Participant's implicit or explicit request), where the Participant was willing and able to continue performing services for the Employer. Involuntary Separation from Service may include the Employer's failure to renew the service contract at the time the contract expires provided that the Participant was willing and able to execute a new contract on substantially the same terms and conditions as the expiring contract and to continue providing such services. The Employer will make the determination as to whether an Involuntary Separation from Service has occurred based on all of the facts and circumstances and in accordance with Treas. Reg. §1.409A-1(n). For this purpose, a Participant's voluntary Separation from Service is treated as an Involuntary Separation from Service if it is for "good reason" as described in Treas. Reg. §§1.409A-1(n)(2). A Separation from Service is deemed to be for a good reason if it occurs during a limited period not to exceed 2 years following the initial existence of the following without the Participant's consent: (i) a material reduction in the Participant's base compensation (including Base Salary); (ii) a material reduction in the Participant's authority, duties or responsibilities; (iii) a material reduction in the authority, duties or responsibilities of the Participant's supervisor, including a change in the Participant's reporting responsibilities to a lower level than the board of directors or similar authority in a non- corporate entity; (iv) a material reduction in the Participant's budget; (v) a material change in the location at which the Participant renders service; or (vi) any other action or inaction that constitutes the Employer's material breach of the agreement under which the Participant provides services to the Employer. In addition, to be a deemed "good reason" the amount, time and form of payment upon Separation from Service must be substantially identical to the amount payable upon an actual Involuntary Separation from Service, if such right exists, and the Participant must provide notice to the Employer within 90 days of the initial existence of the condition and afford the Employer at least 30 days to remedy the condition without having to pay the Compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)<u>Voluntary Separation from Service</u>. "Voluntary Separation from Service" means a Separation from Service which is not an Involuntary Separation from Service under Section 1.40(C).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)<u>"Employer" for Purposes of Separation Rules</u>. The "Employer" for purposes of applying this Section 1.40 (determining Separation from Service under the Plan) means as defined under Section 1.24 but by applying 50% in lieu of 80% in applying Code §§414(b) and (c). The Employer in lieu of applying the previous sentence may elect in its Adoption Agreement to use a percentage equal to not less than 20% and not more than 80% in determining related employers under Code §§414(b) and (c); provided that the Employer may not elect to apply a percentage which is less than 50% unless there are legitimate business criteria for doing so.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)<u>Dual Capacity</u>. If a Participant renders service to the Employer both in the capacity as an Employee and as a Contractor (or changes status from Employee to Contractor or vice versa), the Participant must incur a Separation from Service in both capacities to constitute a Separation from Service. For this purpose, if a Participant renders service both as an Employee and as a member of the Employer's board of directors (or an analogous position in the case of a non-corporate Employer) the director services (or the Employee services if this Plan relates to director services) are disregarded in determining whether the Participant has incurred a Separation from Service as to this Plan provided that the plans are not Aggregated Plans.© Copyright 2008 SunGard

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G)<u>Certain Asset Sales</u>. In accordance with and subject to Treas. Reg. §1.409A-1(h)(4), if the Employer sells its assets to an unrelated party purchaser where the Participants otherwise would incur a Separation from Service and where such Participants will provide services to the purchaser after the sale closing, the Employer and the purchaser retain discretion no later than the asset sale closing date to specify in writing whether the Participants will incur a Separation from Service. In making such determination, the Employer and the purchaser must treat all affected Participants consistently.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H)<u>Collectively Bargained Multiple Employer Plan</u>. If the Plan is established pursuant to a bona fide collective bargaining agreement covering services rendered for multiple employers, the Employer (which for this purpose means the employer which executes the Adoption Agreement) in its Adoption Agreement may elect to define Separation from Service in a reasonable manner that treats an Employee as not having separated during periods in which the Employee is not providing services covered by the collective bargaining agreement but is available to do so for one or more employers. However, such alternative definition must also provide that the Employee is deemed to have incurred a Separation from Service at a specified date not later than the end of any period of at least 12 consecutive months during which time the Employee has not provided any service covered by the collective bargaining agreement to any participating employer. The Employer will apply this section in accordance with the requirements of Treas. Reg. §1.409A-1(h)(6).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.41"**Separation Pay"** means any Deferred Compensation (applied before application of any exclusion applicable to Separation Pay Plans under Treas. Reg. §1.409A-1(b)(9)) that will not be paid under any circumstances unless the Participant incurs a Separation from Service, whether voluntary or involuntary, including payments in the form of reimbursements for expenses incurred and provision of in-kind benefits. Deferred Compensation that a Participant may receive without incurring a Separation from Service is not Separation Pay merely because the Participant elects to receive or receives payment upon or after Separation from Service. Deferred Compensation does not fail to constitute Separation Pay merely because the Participant must execute a release of claims, noncompetition agreement or nondisclosure agreement or is subject to similar requirements. Any amount or entitlement that acts as a substitute for, or replacement of, Deferred Compensation is a payment of Deferred Compensation and is not Separation Pay.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.42**"Separation Pay Plan"** means any plan that provides for Separation Pay, including the portion of any plan that provides for Separation Pay, under Treas. Reg. §§1.409A-1(m). The Employer in its Adoption Agreement will elect whether this Plan is a Separation Pay Plan and will elect whether the plan pays benefits in the event of Involuntary Separation from Service, Voluntary Separation from Service, pursuant to a Window Program or a combination thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.43**"Service Year"** means a Participant's Taxable Year in which the Participant performs services which give rise to Compensation. A "service period" or "performance period" means a Service Year or such other period in which a Participant performs services for the Employer giving rise to Compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.44**"Specified Employee"** means a Participant who is a key employee as described in Code

§416(i)(1)(A), disregarding paragraph (5) thereof and using compensation as defined under Treas. Reg.

§1.415(c)-2(a). However, a Participant is not a Specified Employee unless any stock of the Employer is publicly traded on an established securities market or otherwise and the Participant is a Specified Employee on the date of his/her Separation from Service. If a Participant is a key employee at any time during the 12 months ending on the Specified Employee identification date, the Participant is a Specified Employee for the 12 month period commencing on the Specified Employee effective date. The Specified Employee identification date is December 31. The Specified Employee effective date is the April 1 following the Specified Employee identification date. The Employer, in determining whether this Section 1.44 and all related Plan provisions apply, will determine whether the Employer has any publicly traded stock as of the date of a Participant's Separation from Service. In the case of certain corporate transactions (a merger, acquisition, spin-off or initial public offering), or in the case of nonresident alien Employees, the Employer will apply the Specified Employee provisions of the Plan in accordance with Treas. Reg. §1.409A-1(i) and other Applicable Guidance. Notwithstanding the foregoing, the Employer in its Adoption Agreement, and in accordance with Treas. Reg.

§1.409A-1(i) and other Applicable Guidance, may make the following elections: (i) use of any Code §415© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

definition of compensation for Specified Employee determination; (ii) designation of an alternative Specified Employee identification date; (iii) designation of an alternative Specified Employee effective date; (iv) use of an alternative method to identify Participants who will be subject to the 6 month delay rule in Section 4.01(D);

(v) certain elections in the context of corporate transactions; and (vi) certain elections regarding nonresident

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alien Employees. The Employer's election under clauses (ii) or (iii) regarding an identification date or effective date made on or before December 31, 2007, applies to any Separation from Service occurring on or after January 1, 2005, unless the Employer subsequently changes the identification date and/or effective date. Such elections are effective as of the date that all necessary corporate action has been taken to make the election binding as to all nonqualified deferred compensation plans in which service providers of the Employer who would become a Specified Employees participate. The Employer must apply all such elections consistently as to all service providers. The Employer will apply the Specified Employee provisions of the Plan, including the elections described in this Section 1.44, in accordance with Treas. Reg. §1.409A-1(i) and other Applicable Guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.45**"Specified Time or Fixed Schedule"** means, in reference to a payment of Deferred Compensation, the Employer, at the time of the deferral of the Compensation can objectively determine: (i) the amount payable; and (ii) the payment date or dates. An amount is objectively determinable if the deferral election specifically identifies the amount or if the Employer can determine the amount at the time it is due pursuant to an objective, nondiscretionary formula specified at the time of deferral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Dates and Period(s)</u>. A payment is scheduled to occur at a specified time if it is a lump sum payment on a specific date, or a specific, objectively determinable date, including following the lapse of a substantial risk of forfeiture. A payment is scheduled to occur on a fixed schedule if it is a series of payments (which may include an annuity or a series of installments) payable on specific dates or on objectively determinable specific dates including following the lapse of a substantial risk of forfeiture. The designation of a Taxable Year of the Participant, or a defined period within a Taxable Year of the Participant, in which payment will occur is adequate designation of a specific date. For purposes of Sections 4.02 and 4.05, if the date specified is only a designated Taxable Year of the Participant, or a period of time during such a Taxable Year, the date specified under the plan is treated as the first day of such Taxable Year or the first day of the period of time, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Limitations and Link to Employer Receipts</u>. A Fixed Schedule may include certain: (i) limitations on the amount payable at a specified time of during a specified period expressed either as a stated limit or based on an objective nondiscretionary formula; and (ii) payment schedules based on the timing of payments received by the Employer as described in Treas. Reg. §§1.409A-3(i)(1)(ii) and (iii) and other Applicable Guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Tax Gross-Up Payments</u>. A Specified Time or Fixed Schedule may include tax gross-up payments made by the end of the Participant's Taxable Year which follows the Taxable Year in which the Participant remits the related taxes resulting from compensation paid or made available to the Participant by the Employer, as described in Treas. Reg. §1.409A-3(i)(1)(v) and other Applicable Guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.46**"State"** means: (i) one of the fifty states of the United States or the District of Columbia, or (ii) a political subdivision of a State, or any agency or instrumentality of a State or its political subdivision. A State does not include the Federal government or an agency or instrumentality thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.47**"Substantial Risk of Forfeiture"**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>409A Amounts</u>. Substantial Risk of Forfeiture means as to 409A Amounts, and other than for purposes of application of Code §457(f), Compensation which is payable conditioned: (i) on the performance of substantial future services by any person including the Participant; or (ii) on the occurrence of a condition related to a purpose of the Compensation, and where under clause (i) or (ii) the possibility of forfeiture is substantial. A condition related to the purpose of the Compensation relates to the Participant's performance for the Employer or to the Employer's business activities or organizational goals. A Substantial Risk of Forfeiture includes conditioning payment on the Participant's Involuntary Separation from Service without cause provided the possibility of not incurring such a Separation from Service is substantial. Except as to payment of Compensation related to a Change in Control, a Substantial Risk of Forfeiture does not include any addition of a condition after a Legally Binding Right to the Compensation arises or any extension of a period during which the Compensation is subject to a Substantial Risk of Forfeiture. Compensation is not subject to a Substantial Risk of Forfeiture merely because payment is conditioned on the Participant's refraining from performing services. Compensation is not subject to a© Copyright 2008 SunGard

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Substantial Risk of Forfeiture beyond the date or time that the

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Participant otherwise could have elected to receive the Compensation unless the present value of the amount subject to the Substantial Risk of Forfeiture (determined without regard to the Substantial Risk of Forfeiture) is materially greater than the present value of the amount that the Participant otherwise could have elected to receive, absent the Substantial Risk of Forfeiture. As such, a Participant's Elective Deferrals generally may not be made subject to a Substantial Risk of Forfeiture if the Participant could have elected to receive an equivalent amount in cash. In addition, Compensation the Participant would receive for continuing to perform service for the Employer (such as through the extension of an employment contract) is disregarded in determining whether the present value of such nonvested payment amount is materially greater than the Compensation which the Participant could have elected to receive presently. In determining whether the possibility of forfeiture is substantial in the case of rights to Compensation granted to a Participant who owns significant voting power or value in the Employer, the Employer in accordance with Treas. Reg. §1.409A- 1(d)(3) and Applicable Guidance, will take into account all relevant facts and circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Grandfathered Amounts</u>. A Substantial Risk of Forfeiture for Grandfathered Amounts is defined in Treas. Reg. §1.83-3(c) and in Notice 2005-1, Q/A-16(b) or in Applicable Guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Ineligible 457 Plan</u>. A Substantial Risk of Forfeiture for purposes of application of Code §457(f) under an Ineligible 457 Plan is described in Code §457(f)(3)(B), Treas. Reg. §1.83-3(c) and Applicable Guidance, including any such Guidance which may apply the same or a substantially similar definition as under Section 1.47(A)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.48**"Tax-Exempt Organization"** means any tax-exempt organization other than: (i) a governmental unit; or (ii) a church or a qualified church-controlled organization within the meaning of Code

§§3121(w)(3)(A) and 3121(w)(3)(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.49"**Taxable Year"** means as to the Participant, the Participant's taxable year and means as to the Employer, the Employer's taxable year, in each case as the Plan provides or as the context otherwise requires.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.50"**Trust"** means the trust, if any, described in Section 5.03 of the Basic Plan Document and which the Employer in its Adoption Agreement elects to create.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.51**"Unforeseeable Emergency"** means: (i) a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant's spouse, a Beneficiary or the Participant's dependent (as defined in Code §152 but without regard to Code §§152(b)(1), (b)(2) and (d)(1)(B)); (ii) loss of the Participant's property due to casualty; or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. The Employer in its Adoption Agreement will elect whether to permit payment based on a Participant's Unforeseeable Emergency. The Employer will determine whether a Participant incurs an Unforeseeable Emergency based on the relevant facts and circumstances and in accordance with Treas. Reg. §1.409A-3(i)(3) or Applicable Guidance, but in any case, the Plan may not make payment to the extent that the Unforeseeable Emergency may be relieved: (i) through reimbursement or compensation from insurance or otherwise; (ii) by liquidation of the Participant's assets to the extent that such liquidation of assets would not itself cause severe financial hardship; or (iii) by the Participant's cessation of Elective Deferrals under the Plan. The Plan must limit the amount of any payment based on Unforeseeable Emergency to the amount that is reasonably necessary to satisfy the emergency need, which may include amounts necessary to pay any Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the payment. The Employer in making the determination as to the amount of payment must take into account any additional Compensation available to the Participant upon cancellation of an Elective Deferral election under Section 2.02(D). However, the Employer in determining "necessity" may disregard amounts available as a hardship distribution or a loan from a qualified plan or as an unforeseeable emergency distribution from another nonqualified plan, regardless of whether such amount is 409A Amount or is a Grandfathered Amount. If the Employer in its Adoption Agreement elects to permit payment based on Unforeseeable Emergency, the Employer further will elect whether to permit payment based on all events that will constitute an Unforeseeable Emergency or to limit such events to a subset of specific events which© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

will so qualify. The Employer will not pay a Participant any Deferred Compensation based an Unforeseeable Emergency unless the Participant requests such payment on a form the Employer provides for this purpose, the Employer determines that the payment would qualify under the Plan terms as being based on the Participant's Unforeseeable Emergency, and the Employer in its sole discretion otherwise approves the

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payment. Neither a Participant's request, or failure to request, an Unforeseeable Emergency payment, nor the Employer's acceptance or rejection of such a request is a change payment election under Section 4.02(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.52**"USERRA"** means the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.53"**Valuation Date"** means the last day of each of the Employer's Taxable Year and such other dates as the Employer may determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.54**"Vested"** means an amount of Deferred Compensation which is not subject to a Substantial Risk of Forfeiture or to a requirement to perform further services for the Employer. For purposes of determining whether an amount satisfies the vesting requirement for Grandfathered Amounts under Article VII, the definition of Substantial Risk of Forfeiture in Section 1.47(B) applies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.55**"Window Program"** means a program the Employer establishes in connection with an impending Separation from Service to provide Separation Pay to separated Participants and which program is available only for a period of up to 12 months for Participants who separate during such period or who separate during such period under specified circumstances. A Window Program does not include a program the Employer establishes under which there is a pattern of repeated provision of similar Separation Pay in similar situations for substantially consecutive limited periods of time. Whether a recurrent program constitutes such a pattern depends upon all of the facts and circumstances, including whether the benefits are account of a specific event or condition, the degree to which the separation pay relates to the event or condition and whether the event or condition is temporary or discrete or is a permanent aspect of the Employer's business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.56**"Wraparound Election"** means as to a Participant who also is a participant in a 401(k) or 403(b) plan of the Employer, an election (or elections, if made separately) to defer compensation under both plans with the result that the Participant will achieve under the 401(k) or 403(b) plan, the maximum amount of elective deferrals and matching contributions, if any, as is permissible under the 401(k) or 403(b) plan terms and under Code §§402(g), 401(k)(3), 401(m), 415 and 414(v). For any Participant's Taxable Year, the maximum amount of Elective Deferrals the Plan will transfer as to the Participant (and corresponding decrease in amounts of Compensation Deferred to this Plan) may not exceed the Code §402(g) limit (but increased by catch-up contributions under Code §§414(v) and 402(g)(7) for any year in which the Participant is catch-up eligible). For any Participant's Taxable Year, the maximum amount of Matching Contributions the Plan will transfer as to the Participant (and corresponding decrease in amounts of Compensation Deferred to this Plan) may not exceed the maximum amount of matching contributions that would be provided under the 401(k) or 403(b) plan absent any plan-based restrictions which reflect Code limits on qualified plan or 403(b) contributions. Under a Wraparound Election, the Plan promptly following completion of 401(k) or 403(b) plan testing and within any time required under Applicable Guidance, will transfer from the Participant's Account such Elective Deferrals and related Matching Contributions for the Taxable Year (but without Earnings thereon) as are consistent with the Wraparound Election, to the Participant's account under the 401(k) or 403(b) plan to be held and administered in accordance with the 401(k) or 403(b) plan. Any remaining amounts not transferred to the 401(k) or 403(b) plan will remain in and be administered in accordance with this Plan. The Employer in its Adoption Agreement will specify whether a participant may make a Wraparound Election. A Participant will make a Wraparound Election subject to any timing requirements of Applicable Guidance and on a form the Employer provides for this purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.57**"Year of Service"** means the requirements, if any, the Employer specifies in its Adoption Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**II.** **PARTICIPATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.01<u>Participants Designated</u>. The Employer will designate from time to time in its Adoption Agreement those Employees or Contractors (by name, job title or other classification) who are Participants in the Plan.© Copyright 2008 SunGard

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.02<u>Elective Deferrals</u>. The Employer will specify in its Adoption Agreement whether Participants may elect to make Elective Deferrals to their Accounts.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Limitations</u>. The Employer will specify in its Adoption Agreement any amount limitations or conditions applicable to Elective Deferrals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Election Form and Timing</u>. A Participant must make his/her Elective Deferral election on an election form the Employer provides for that purpose. The Participant must make the election no later than the latest of the applicable times specified below. The Employer in its Adoption Agreement will elect that a Participant must make and deliver his/her election to the Employer no later than: (i) such applicable time; or

(ii)the number of days prior to such applicable time as the Employer sets forth in its Adoption Agreement. The Employer will disregard any Elective Deferral election which is not timely under this Section 2.02(B). See Section 6.04.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)<u>General Timing Rule</u>. Except as otherwise provided in this Section 2.02(B), a Participant must deliver to the Employer his/her Elective Deferral election regarding Service Year Compensation no later than the end of the Participant's Taxable Year which is prior to the Service Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)<u>New Participant/New Plan</u>. As to the Service Year in which an Employee or a Contractor first becomes a Participant (a "newly eligible Participant"), the Participant must make and deliver an Elective Deferral election for that Service Year not later than 30 days after the Employee or Contractor becomes a Participant. All Participants who are eligible to participate on the Effective Date of a new plan are newly eligible Participants as of the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Participant status</u>. For purposes of this Section 2.02(B)(2), an Employee or Contractor is eligible to participate in the Plan at any time during which, under the Plan terms and without further amendment or action by the Employer, the Employee or Contractor is eligible to accrue Deferred Compensation under the Plan (other than Earnings on prior Deferred Compensation), even if the Employee or Contractor has elected not to accrue any such Deferred Compensation (or has made no election).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Changes in status</u>. For purposes of this Section 2.02(B)(2), if a Participant has been paid all Deferred Compensation and on or before the last payment ceases to be eligible to participate in the Plan, but thereafter becomes eligible to participate, the Employee or Contractor is treated as a newly eligible Participant. If a Participant ceases to be eligible to participate, other than as to Earnings, regardless of whether the Participant has been fully paid all Deferred Compensation under the Plan, and subsequently becomes eligible to participate, the Employee or Contractor is treated as a newly eligible Participant provided that the period during which the Employee or Contractor was ineligible was at least 24 months.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Compensation to which election applies</u>. Under this Section 2.02(B)(2), a Participant's election may apply only to Compensation for services the Participant performs subsequent to the date the Participant delivers the election to the Employer. For Compensation that is earned for a specified performance period, including an annual bonus, if the newly eligible Participant makes an Elective Deferral election after the performance period commences, the Employer will pro rate the election by multiplying the performance period Compensation by the ratio of the number of days left in the performance period at the time of the election, over the total number of days in the entire performance period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Excess benefit plan</u>. For purposes of this Section 2.02(B)(2), if this Plan is an excess benefit plan, an Employee is a newly eligible Participant in the Plan as of the first day of the Employee's Taxable Year immediately following the first year in which he or she accrues a benefit under the Plan. Any election the Employee makes within 30 days following such date applies to any benefits accrued for services provided before the election. An excess benefit plan for purposes of this Section 2.02(B)(2)(d) means a plan under which all Deferred Compensation is attributable to Employer Contributions and is based on the amount the Participant would have accrued under the Employer's qualified plan(s) but for one or more Code limits which apply to the qualified plan(s) over the benefits the Participant actually accrues in such plan(s). Once a Participant has accrued a benefit or deferred Compensation in any year, the Participant is not eligible to use the delayed election in this Section 2.02(B)(2)(d).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<u>Aggregated Plans</u>. All references to the Plan in this Section 2.02(B)(2) include© Copyright 2008 SunGard

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Aggregated Plans. As such, an Employee or Contractor who participates in an Aggregated Plan is not a newly eligible Participant and this Section 2.02(B)(2) does not apply.

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**Nonqualified Deferred Compensation Prototype Plan**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)<u>Certain Forfeitable Rights</u>. If payment of Deferred Compensation is subject to a condition requiring the Participant to perform services for the Employer for at least 12 months after the Participant obtains the Legally Binding Right to the Compensation to avoid forfeiture of the payment, the Participant may make an Elective Deferral election no later than 30 days after the Participant obtains the Legally Binding Right to the Compensation, provided the Participant makes the election at least 12 months prior to the earliest date on which the service forfeiture condition could lapse. If the Plan provides for a waiver of the service condition upon the Participant's death, Disability or upon a Change in Control, and such event occurs before the end of the 12 month minimum service period, the Participant's elective Deferral election is valid only if the election is timely under the Plan without regard to this Section 2.02(B)(3).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)<u>Performance-Based Compensation</u>. As to any Performance-Based Compensation, a Participant may elect no later than 6 months before the end of the performance period to defer such Compensation, provided that the Participant: (i) continuously performs services from the later of the beginning of the performance period or the date the Employer establishes the performance criteria and at least through the date of the Participant's election; and (ii) may not make an election after the Compensation has become readily ascertainable. For purposes of this Section 2.02(B)(4), if the Performance-Based Compensation is a specified or calculable amount, the Compensation is readily ascertainable if and when the amount is first substantially certain to be paid. If the Performance-Based Compensation is not a specified or calculable amount, the Compensation or any portion thereof is readily ascertainable when the amount is first both calculable and substantially certain to be paid. In applying this Section 2.02(B)(4), the Employer will bifurcate any right to payment as between amounts which are readily ascertainable and amounts which are not readily ascertainable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)<u>Commissions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Sales Commissions</u>. For purposes of election timing under this Section 2.02(B), if Compensation consists of Sales Commissions, the Participant is treated as providing the services giving rise to the Commissions in the Participant's Taxable Year in which the customer remits payment to the Employer, or, if applied consistently to all similarly situated service providers, the Participant's Taxable Year in which the sale occurs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Investment Commissions</u>. For purposes of election timing under this Section 2.02(B), if Compensation consists of Investment Commissions, the Participant is treated as providing the services giving rise to the Commissions over the 12 months preceding the date as of which the overall value of the assets or the asset accounts is determined for purposes of calculation of the Investment Commissions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)<u>Final Payroll Period</u>. If Compensation is payable after the last day of the Participant's Taxable Year, but is Compensation for the Participant's services during the final payroll period within the meaning of Code §3401(b) (or, as to a Contractor, a period not longer than such period) which contains the last day of the Participant's Taxable Year, the Compensation is treated for purposes of an election under this Section 2.02(B), as Compensation: (i) for the current Taxable Year in which the final payroll period commenced; or (ii) for the subsequent Taxable Year in which the Employer pays the Compensation, as the Employer elects in its Adoption Agreement. This Section 2.02(B)(6) does not apply to Compensation for services performed over any period other than the final payroll period as described herein, including an annual bonus. If the Employer amends its Adoption Agreement after December 31, 2007, to alter the timing rule of this Section 2.02(B)(6), any such amendment may not take effect until 12 months after the later of the date the amendment is executed and is effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)<u>Separation Pay/Window Program</u>. If the Participant's election relates to Separation Pay (based on voluntary or involuntary Separation from Service) and the Separation Pay is the subject of bona-fide, arm's length negotiations at the time of Separation from Service, the Participant may make an election under this Section 2.02(B) at any time up to the time that the Participant has a Legally Binding Right to the Separation Pay. This Section 2.02(B)(7) does not apply to any Separation Pay to which the Participant obtained a Legally Binding Right before the negotiations at the time of Separation from Service, including a right to payment subject to a condition. If the Separation Pay results from a Window Program, the Participant may make the election at any time up to the time that the Participant's election to participate© Copyright 2008 SunGard

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in the Window Program becomes irrevocable.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8)<u>Fiscal Year Employer</u>. In the event that the Employer's Taxable Year is a not the same as the Participant's Taxable Year, a Participant may elect to defer Compensation which is co-extensive with one or more of the Employer's consecutive Taxable Years, and no amount of which is paid or payable during the Employer's Taxable Year or Years constituting the period of service, by making an election no later than the end of the Employer's Taxable Year which precedes the Employer's first Taxable Year in which the Participant performs the service for which the Compensation is payable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Election Changes/ Irrevocability</u>. The Employer in its Adoption Agreement will elect whether a Participant's Elective Deferral election made prior to the Section 2.02(B) deadline becomes irrevocable as to a Taxable Year: (i) following the last day on which a Participant may make an election under Section 2.02(B) for such Taxable Year; or (ii) if earlier, when the Participant makes the election for a Taxable Year. For this purpose, a Participant's Elective Deferral election is considered made when the Employer accepts the election. If the Employer elects to permit changes to an election up to the Section 2.02(B) election deadline, a Participant may make any number of changes to his/her Elective Deferral election during the period prior to the election becoming irrevocable. If the Employer elects in its Adoption Agreement and under Section 2.02(D) that a Participant's election is continuing, the Participant is deemed to have made an irrevocable election as to each Taxable Year on the last day that the Participant could have made an election under Section 2.02(B). As such, the Participant may revoke or modify a continuing election for a Taxable Year up to the date that such election is deemed made and irrevocable for that Taxable Year. A change payment election under Section 4.02(B) or a permissible acceleration under Section 4.02(C)(3) does not render an Elective Deferral election and an accompanying initial payment election under Section 4.02(A) revocable within the meaning of this Section 2.02(C).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)<u>Election Duration/Cancellation</u>. As the Employer elects in its Adoption Agreement, a Participant's Elective Deferral election remains in effect: (i) only for the duration of the Taxable Year or Taxable Years for which the Participant makes the election; or (ii) for the duration of the Taxable Year for which the Participant makes the election and for all subsequent Taxable Years unless the Participant executes a subsequent timely election, modification or revocation. A Participant, subject to Plan requirements regarding election timing, may make a new election, or may revoke or modify an existing election effective no earlier than for the next Taxable Year, provided that under Section 4.02(C)(3), the Employer may cancel an existing and otherwise irrevocable election for a Taxable Year at any time following the Participant's receipt of an Unforeseeable Emergency distribution or of a distribution from the Employer's 401(k) plan based upon hardship within the meaning of Treas. Reg. §1.401(k)-1(d)(3).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)<u>"Non-Elections" or Deemed Compliance</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>(1)</u> <u>Linkage to Qualified or Certain Foreign Plans</u>. The following as described in Treas. Reg.

§1.409A-2(a)(9) are not elections under Section 2.02(B): (i) the amount of Compensation Deferred under this Plan is determined under a formula for determining benefits under the Employer's qualified plan or broad- based foreign retirement plan (but applied without regard to Code or foreign law imposed limitations); or (ii) the amount of Compensation Deferred under this Plan is offset by some or all benefits provided under the Employer's qualified plan or broad-based foreign plan and where in either case the amount of Compensation Deferred under the Plan increases on account of changes in the Code or foreign law imposed benefit limitations applicable to the qualified plan or foreign plan, provided in either case such operation does not result in a change in the time or form for payment under this Plan and that the change in the amounts of Compensation Deferred do not exceed the change in amounts deferred under the qualified plan or foreign plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>(2)</u><u>Actions/Inactions (including Wraparound Elections)</u>. As described in Treas. Reg.

§1.409A-2(a)(9), the following Participant actions or in actions are not elections under Section 2.02(B), even if they result in an increase in Compensation Deferred under the Plan: (i) election or non-election under the Employer's qualified plan or broad-based foreign plan as to receipt of a subsidized or ancillary benefit under such plans; (ii) an amendment of such other plans' benefits to add or remove a subsidized or ancillary benefit or to freeze or limit future accruals under the qualified plan or foreign plan or to reduce existing benefits under the foreign plan; or (iii) a Participant's Wraparound Election, provided in all cases such action or inaction does not result in a change in the time or form for payment under this Plan and that under clauses (i) and (ii) above, the change in the amounts of Compensation Deferred do not exceed the change in amounts deferred under the qualified plan or foreign plan.© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>(3)</u><u>Elections under a Cafeteria (125) Plan</u>. As described in Treas. Reg. §1.409A-2(a)(10), -if a Participant who is also a participant in a cafeteria (Code §125) plan of the Employer, changes an election under the cafeteria plan with the result that the amount of Compensation Deferred under this Plan changes on account of an increase or decrease in Compensation under this Plan as a result of the cafeteria plan election, the cafeteria plan election is not an election for purposes of Section 2.02(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>(4)</u><u>USERRA Rights</u>. The requirements of Section 2.02(B) are deemed satisfied as to any Elective Deferral election (including an initial payment election) which the Plan provides to satisfy the requirements of USERRA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>(5)</u><u>Annualizing Recurrent Partial Year Compensation</u>. If a Participant is receiving recurring part-year Compensation, the Participant's election to defer all or a portion of such Compensation to be earned during a particular service period is deemed to satisfy the requirements of Section 2.02(B) if the Participant makes the election before the services giving rise to the Compensation begin and the election does not defer payment of any of such Compensation to a date beyond the last day of the 13<sup>th</sup> month following the first date of the service period. For purposes of this Section 2.02(E)(5), recurring part-year Compensation means Compensation paid for services rendered as to a position the Participant and the Employer reasonably anticipate will continue on similar terms and on similar conditions in subsequent years, and will require services to be provided in successive service periods, each of which comprises less than 12 months and each of which begins in one Taxable Year of the Participant and ends in the next Taxable Year. This Section 2.02(E)(5) applies only once to Compensation Deferred such that the same amount may not again be treated as recurring part-year Compensation and subject to a second deferral election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.03<u>Nonelective Contributions</u>. The Employer will specify in its Adoption Agreement whether the Employer will or may make Nonelective Contributions to the Plan, and the terms and conditions applicable to any Nonelective Contributions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.04<u>Matching Contributions</u>. The Employer will specify in its Adoption Agreement whether the Employer will or may make Matching Contributions to the Plan, and the terms and conditions applicable to any Matching Contributions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.05<u>Actual or Notional Contribution</u>. The Employer will specify in its Adoption Agreement whether it will make any Employer Contribution as a notional contribution or as an actual contribution. If the Employer establishes the Trust, any Employer Contributions to the Trust will be actual contributions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.06<u>Allocation Conditions</u>. The Employer will specify in its Adoption Agreement any employment or other condition applicable to the allocation of Employer Contributions for a Taxable Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.07<u>Timing</u>. The Employer may elect to make any Employer Contribution for a Taxable Year at such times as Code §409A or Applicable Guidance may permit. The Employer is not required to contribute any actual contribution (or to post any notional contribution) to an Account at the time that the Employer makes its contribution election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.08<u>Administration</u>. The Employer will administer all Employer Contributions in the same manner as Elective Deferrals, and will treat the Employer's election to make Employer Contributions as an Elective Deferral election, except as the Plan otherwise provides. If the Employer establishes the Trust, the Employer will remit any Elective Deferrals to the Trust and will make any Employer Contributions to the Trust. Any Employer Contribution is not subject to an immediate Participant right to elect a cash payment in lieu of the Employer Contribution and such amounts are payable only in accordance with the Plan terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**III.** **VESTING AND SUBSTANTIAL RISK OF FORFEITURE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.01<u>Vesting Schedule or other Substantial Risk of Forfeiture</u>. The Employer will specify in its Adoption Agreement any vesting schedule or other Substantial Risk of Forfeiture applicable to Participant Accounts. If the Plan is an Ineligible 457 Plan, the Employer must specify a Substantial Risk of Forfeiture.© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.02<u>Immediate Vesting on Specified Events</u>. The Employer will specify in its Adoption Agreement whether a Participant's Account is Vested without regard to Years of Service if the Participant Separates from Service on or following Retirement Age, or as a result of death, Disability, or other events.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.03<u>Application of Forfeitures</u>. A Participant will forfeit any non-Vested Accrued Benefit (where vesting is based on a service condition) upon Separation from Service. A Participant will forfeit any other non- Vested Accrued Benefit when the condition constituting a Substantial Risk of Forfeiture can no longer be satisfied, such as its expiration date. The Employer will specify in its Adoption Agreement how it will apply Participant forfeitures under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**IV.** **BENEFIT PAYMENTS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.01<u>Payment Events</u>. The Employer in its Adoption Agreement will specify the Plan permissible payment events as all or some of the following payment events affecting a Participant: (i) Separation from Service; (ii) death; (iii) Disability; (iv) a Specified Time or pursuant to a Fixed Schedule; (v) Change in Control; or (vi) Unforeseeable Emergency. As to payment events (i), (ii),(iii), (v) and (vi), the Plan will pay to the Participant the Vested Accrued Benefit held in the Participant's Account on the applicable payment event or on another specified payment date as provided in Section 4.01(A). Payment will commence at the time and payment will be made in the form and medium specified under Section 4.02. See Section 4.02 as to payment elections, including as to payment events under this Section 4.01.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Payment on Objective and Nondiscretionary (Specified) Payment Date(s)</u>. The Plan or an initial payment election or change payment election must provide for a payment date that the Employer, at the time of the payment event, can determine objectively and without the exercise of discretion. Such payment date may, but need not, coincide with a payment event, but any payment date must be on or following and must relate to a Plan payment event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)<u>Payment Schedule as Payment Date</u>. A specified payment date as required under this Section 4.01(A) may include a payment schedule which is objectively determinable and nondiscretionary based on the date of the payment event and that would qualify as a Fixed Schedule if the payment event were a fixed date. An election of a payment schedule must be made at the time of the election of the payment event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)<u>Designation of Year or Other Period</u>. A specified payment date or a specified payment schedule as required under this Section 4.01(A) with regard to any payment event other than a Specified Time or pursuant to a Fixed Schedule may include: (i) a Participant's Taxable Year or Years; or (ii) a designated period of time but only if the designated period both begins and ends within one Taxable Year of the Participant or the designated period is not more than 90 days and the Participant does not have the right to designate the Taxable Year of payment except under a change payment election under Section 4.02(B). For purposes of clause (ii), this includes designation of payment on or before the last date of the designated (maximum 90 day) period but after the payment event occurs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Deemed Payment Date. If the Adoption Agreement or any such election provides for payment only in a designated Taxable Year or Years, the payment date is deemed to be January 1 of that Taxable Year or Years. If the Adoption Agreement or any such election provides for payment only in a designated period, the payment date is deemed to be the first day in the relevant period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Payment Event Default.</u> This Section 4.01(B) applies if the Employer in its Adoption Agreement fails to elect one or more payment events described in this Section 4.01, if a Participant or the Employer under Section 4.<u>02</u> fails to elect one of more payment events where the Adoption Agreement affords them such an election, or if the Employer under Section 4.06 rejects the election and the Participant does not timely file a new election the Employer accepts. In such event, the Plan will pay the affected Participant's Vested Benefit held in the Participant's Account following the earlier of the Participant's Separation from Service or death. See Section 4.02(A)(5) as to the applicable default for the time, form and medium of such payments. If this default provision applies, the default payment is deemed to be an initial payment election under the Plan.© Copyright 2008 SunGard

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Multiple Payment Events; Sequencing</u>. The Plan or an initial payment election or a change payment election may provide for more than one permissible payment event and may provide for payment upon the earliest or latest of more than one permissible payment event. See Section 4.02(A)(4) as to limitations

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**Nonqualified Deferred Compensation Prototype Plan**

on the number of time and form of payment elections which may apply to a single payment event. In a Separation Pay Plan, the Plan or any election may provide for any payment only upon Separation from Service (including as a result of death or Disability).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)<u>Payment to Specified Employees</u>. Notwithstanding anything to the contrary in the Plan or in a Participant or Employer payment election, the Plan may not make payment based on Separation from Service to a Participant who, on the date of Separation from Service is a Specified Employee, earlier than 6 months following Separation from Service (or if earlier, upon the Specified Employee's death), except as permitted under this Section 4.01(D). This limitation applies regardless of the Participant's status as a Specified Employee or otherwise on any other date including the next Specified Employee effective date had the Participant continued to render services through such date. The Employer, operationally and without any direct or indirect Participant election, will elect whether any payments that otherwise would be payable to the Specified Employee during the foregoing 6 month period: (i) will be accumulated and payment delayed until the first day of the seventh month that is after the 6 month period; or (ii) will be delayed by 6 months as to each installment otherwise payable during the 6 month period. This Section 4.01(D) does not apply to payments made on account of a domestic relations order, payments made because of a conflict of interest, or payment of employment taxes, all as described in Treas. Reg. §1.409A-3(i)(2)(i). This Section 4.01(D) also does not apply to any reimbursement or in-kind benefit which is Separation Pay but which is not Deferred Compensation under Section 1.18.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)<u>Deemed Separation of Contractor</u>. The Employer in its Adoption Agreement may elect to apply the special payment timing rules in this Section 4.01(E) as to Contractors. Compliance with this Section 4.01(E) results in the Contractor being deemed to have incurred a Separation from Service under Section 1.40. Under this Section 4.01(E): (i) the Plan will not pay a Contractor's Account, or any portion thereof, before a date that is at least 12 months after the expiration of the contract (or all contracts) under which the Contractor performs services for the Employer; and (ii) no amount payable under clause (i) will be paid to the Contractor if the Contractor (whether as a Contractor or an Employee) performs services for the Employer after the contract(s)' expiration and before the payment date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.02<u>Timing, Form and Medium/ Payment Elections</u>. Unless the Employer under Section 4.02(A) and/or 4.02(B) permits Employer or Participant elections, the Employer (in addition to its election of permissible payment events under Section 4.01) will elect in its Adoption Agreement the permissible: (i) payment timing; (ii) payment form (lump-sum, installments, annuity or other form, including a combination thereof); and (iii) payment medium (cash or property) applicable to Plan Accounts (all of which elections are collectively, "payment elections"). Until the Plan pays a Participant's entire Vested Accrued Benefit, the Plan will continue to credit the Participant's Account with Earnings, in accordance with Section 5.02(A) or Section 5.03(B) as applicable. A permissible payment medium election may, but is not required to be, made at the same time as the initial payment election or change payment election, but must be made a reasonable time before any payment date. No election as to payment medium may change the time or form of payment except in accordance with Section 4.02(B) .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Initial Payment Election</u>. The Employer will elect in its Adoption Agreement: (i) whether a Participant or the Employer may make an initial payment election from the payment events, timing, form and medium options available under the Adoption Agreement or whether there are no Participant or Employer initial payment elections; and (ii) whether any Participant payment election applies to all Account types or only applies to a Participant's Elective Deferral Account. A Participant must make any permissible initial payment election on a form the Employer provides for that purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)<u>No elections are a Deemed Initial Election</u>. If the Employer elects in its Adoption Agreement not to provide any Participant or Employer initial payment elections, the elected Adoption Agreement and applicable Plan provisions constitute an initial payment election under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)<u>Timing</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Participant Election</u>. A Participant must make an initial payment election at the time of the Participant's Elective Deferral election under Section 2.02(B), or in the absence of such an Elective Deferral election but where the Participant may make an initial payment election as to Employer© Copyright 2008 SunGard

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Contributions, within the same time period as such an Elective Deferral election would be permitted.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Employer Election</u>. The Employer must make an initial payment election as to a Participant at the time that the Employer grants a Legally Binding Right to Deferred Compensation to the Participant, or, if later, by the time that the Participant would have had to make such election, if the Plan had permitted the Participant to make such an election. In the case of a newly eligible Participant or a new Plan described under Section 2.02(B)(2), the Employer must make the initial payment election no later than 30 days after the date the Employee or Contractor becomes a Participant and the proration provisions of Section 2.02(B)(2)(c) do not apply to such Employer election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)<u>Future Deferred Compensation and Earnings</u>. A payment election may apply only to the Deferred Compensation that is the subject of the Elective Deferral election or the Employer Contribution or may apply to such Deferred Compensation and to all future Deferred Compensation, as the payment election indicates. A payment election separately may apply to Deferred Compensation and to the Earnings thereon provided that the Plan credits Earnings at least annually.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)<u>Limitations on Payment Time and Form; Multiple Payment Events</u>. Except as otherwise provided in this Section 4.02(A)(4), the Plan or a payment election may designate only one time and form of payment for each of the following payment events: Separation from Service, Disability, death or Change in Control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Disability, Death or Change in Control</u>. In the case of payment in the event of Disability, death or Change in Control, the Plan or payment election may provide for one time and/or method of payment if the event occurs on or before one specified date and may provide for an alternative time and form of payment if the event occurs after the specified date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Separation From Service</u>. In the case of payment in the event of Separation from Service, the Plan or payment election may provide for an alternative time and form of payment where: (i) Separation from Service occurs within a limited period of time not exceeding two years following a Change in Control; (ii) Separation from Service occurs before or after a specified date or Separation occurs before or after the combination of a specified date and a specified period of service determined under a predetermined, nondiscretionary objective formula or pursuant to the method for crediting service under a qualified plan of the Employer (but not both of the options under clause (ii)); and (iii) Separation from Service which is not described in clause (i) or (ii). However, neither the Plan nor a payment election may provide for a different time and form of payment based on whether Separation from Service is Voluntary or Involuntary or based on the Participant's marital status at the time of Separation from Service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Unforeseeable Emergency</u>. If the Employer in its Adoption Agreement elects to permit Unforeseeable Emergency as a payment event, a Participant at any time may request payment based on Unforeseeable Emergency by submitting to the Employer a form the Employer provides for this purpose. The Plan will make payment to the Participant within 90 days following the Employer's acceptance of the Participant's Unforeseeable Emergency payment request. If that 90-day period spans more than one Taxable Year of the Participant, the Participant will not have any discretion over the Taxable Year of payment. See Section 1.51 as to additional requirements relating to an Unforeseeable Emergency payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Addition, Change or Deletion of Time and Form</u>. The addition, change, or deletion of an alternative time and form of payment (after the initial payment election has become irrevocable) as permitted under this Section 4.02(A)(4) is a change payment election subject to Section 4.02(B) and is subject to Section 4.02(C).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)<u>Time, Form and Medium Default</u>. If the Participant or the Employer as applicable has the right to make an initial payment election but fails to do so, or if the Employer rejects the Participant's election under Section 4.06 and the Participant does not make a new timely election the Employer accepts, the Plan will pay the affected Participant's Vested Accrued Benefit attributable to the non-election under this default provision, in a lump-sum cash payment 13 months following the earliest event permitting payment of the Participant's Account under Section 4.01 (including, if applicable, the default payment events under Section 4.01(B)). If this default provision applies, the default payment is deemed to be an initial payment election under the Plan.© Copyright 2008 SunGard

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Change Payment Election</u>. The Employer will elect in its Adoption Agreement whether the Employer or a Participant may make a change payment election under this Section 4.02(B). If the Plan permits change elections, the Employer in its Adoption Agreement will elect whether to limit the number of change payment elections. If the Plan permits a Participant or the Employer to change existing payment elections (initial or change payment elections) as to any or all Deferred Compensation, including any Plan specified initial payment election or a default payment applicable in the absence of an actual initial payment election, any such change payment election must comply with this Section 4.02(B). A change payment election may add or delete payment events, may delay payment and/or may change the form of payment, provided the change does not result in an impermissible acceleration under Section 4.02(C). The Employer in its Adoption Agreement will elect whether a Beneficiary following a Participant's death may make a change payment election under this Section 4.02(B). A Participant's change of Beneficiary is not a change payment election provided that the time and method of payment is not otherwise changed. See Section 4.02(B)(3) as to changes of Beneficiary where the payment method is a life annuity. A Participant or Beneficiary must make any change payment election on a form the Employer provides for such purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)<u>Conditions on Change Payment Elections</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Election Timing/Deferral of Payment</u>. Any change payment election: (i) may not take effect until at least 12 months following the date the change payment election is made; (ii) if the change payment election relates to a payment based on Separation from Service or on Change in Control, or if the payment is at a Specified Time or pursuant to a Fixed Schedule, the change payment election must result in payment being made not earlier than 5 years following the date upon which the payment otherwise would have been made (or, in the case of a life annuity or installment payments treated as a single payment, 5 years from the date the first amount was scheduled to be paid); and (iii) if the change payment election relates to payment at a Specified Time or pursuant to a Fixed Schedule, the Participant or Employer must make the change payment election not less than 12 months prior to the date the payment is scheduled to be made (or, in the case of a life annuity or installment payments treated as a single payment, 12 months prior to the date the first amount was scheduled to be paid).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Application of Other Rules</u>. A change payment election must satisfy the Plan provisions applicable to initial payment elections under Section 4.02(A)(4) regarding time and form elections and multiple payment events and under Section 4.02(A)(3) regarding scope and Earnings. For purposes of application of Section 4.02(A)(4), Section 4.02(B)(1)(a) applies separately as to each payment described under Section 4.02(B)(2) and due upon each payment event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Rejection</u>. If the Employer under Section 4.06 rejects a Participant or Beneficiary change payment election, the Participant's initial payment election or deemed initial payment election continues to apply unless and until the Participant makes another change payment election which the Employer accepts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>USERRA Rights</u>. The requirements of Section 4.02(B) are deemed satisfied as to any change payment election which the Plan provides to satisfy the requirements of USERRA. Such elections are not an acceleration under Section 4.02(C).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)<u>Definition of "Payment."</u> Except as otherwise provided in Section 4.02(B)(3), a "payment" for purposes of applying Section 4.02(B)(1) is each separately identified amount the Plan is obligated to pay to a Participant on a determinable date and includes amounts paid for the benefit of the Participant. An amount is "separately identified" only if the amount is objectively determinable under a nondiscretionary formula. A payment includes the provision of any taxable benefit, including payment in cash or in-kind. A payment includes, but is not limited to, the transfer, cancellation or reduction of an amount of Deferred Compensation in exchange for benefits under a welfare benefit plan, fringe benefits excludible under Code §§119 or 132, or any other benefit that is excluded from gross income. In the case of a Specified Time or a Fixed Schedule, "payment" for purposes of Section 4.02(B)(1) means as further described in Treas. Reg.

§1.409A-3(i)(1).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)<u>Life Annuities and Installment Payments</u>.© Copyright 2008 SunGard

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Life Annuities</u>. A life annuity is treated as a single payment. For purposes of this Section 4.02(B)(3), a "life annuity" is a series of substantially equal periodic payments, payable not less frequently than annually, for the life (or life expectancy) of the Participant, or the joint lives (or life expectancies) of the Participant and of his/her Beneficiary. A change of Beneficiary which occurs before the initial payment of a life annuity is not a change payment election. A change in the form of payment before any annuity payment has been made from one type of life annuity to another with the same scheduled date for the first payment is not subject to the change payment election requirements provided that the annuities are actuarially equivalent applying reasonable actuarial assumptions and that at any given time, the same actuarial assumptions and methods are used to value each annuity. The requirement of actuarial equivalence applies for the duration of the Participant's participation in the Plan such that the annuity payment must be actuarially equivalent at all times for the annuity payment options to be treated as a single time and method of payment. The Plan over time may change actuarial assumptions and methods provided such methods and assumptions are reasonable. The following features are disregarded in determining if the payment is a life annuity but are taken into account in determining if one life annuity is the actuarial equivalent of another: (i) term certain features under which payments continue for the longer of the annuitant's life or for a fixed period of time; (ii) pop-up features under which payments increase upon the death of the Beneficiary or other event which eliminates the survivor annuity; (iii) cash refund features under which there is a payment on the death of the last annuitant in an amount not greater than the excess of the present value of the annuity at the annuity starting state over the total payments before the last annuitant's death; (iv) a feature under which the annuity provides higher periodic payments before the expected commencement of Social Security or Railroad Retirement Act benefits and lower payments after the expected commencement of such benefits, such the combined payments are approximately level before and after the expected commencement date; and (v) features providing for a cost-of-living increase in the annuity payment in accordance with Treas. Reg. §1.401(a)(9)-6, Q & A-14(A)(1) or (2). A joint and survivor annuity does not fail to be actuarially equivalent to a single life annuity solely due to the value of a subsidized survivor benefit provided the annual lifetime annuity to the Participant is not greater than the annual lifetime benefit to the Participant under the single life annuity and the annual survivor annuity benefit is not greater than the annual lifetime annuity to the Participant under the joint and survivor annuity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Installments</u>. The Employer in its Adoption Agreement will elect whether to treat a series of installment payments which are not a life annuity as a single payment or as a series of separate payments. If the Employer fails to so elect, the Employer must treat the installments as a single payment. Any election to treat installments as separate payments applies at all times with respect to the amount deferred. For purposes of this Section 4.02(B)(3), a "series of installment payments" means payment of a series of substantially equal periodic amounts to be paid over a predetermined number of years, except to the extent that any increase in the payment amounts reflects reasonable Earnings through the date of payment. For this purpose, a series of installment payments over a predetermined period and: (i) a series of installments over a shorter or longer period; and (ii) a series of installments over the same period but with a difference commencement date, are different times and methods of payment and a change in the predetermined period or commencement date is subject to this Section 4.02(B). An installment payment does not fail to be an installment solely because the plan provides for an immediate payment of all remaining installments if the present value of the Deferred Compensation to be paid in the remaining installments falls below a predetermined amount, and the immediate payment in not an acceleration under Section 4.02(C) provided that the payment election establishes this feature, including the predetermined amount triggering immediate payment and that any change to the feature is subject to this Section 4.02(B). If the Plan is a restated Plan, whatever election the Employer made in writing on or before December 31, 2007, applies to any Compensation deferred for the period spanning 2005 through 2007.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)<u>Coordination with Anti-Acceleration Rule</u>. The definition of "payment" in Sections 4.02(B)(2) and (3) also applies to Section 4.02(C). A change payment election may change the form of payment to a more rapid schedule (including a change from installments to a lump-sum payment) without violating Section 4.02(C), provided any such change remains subject to the change payment election provisions under this Section 4.02(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)<u>Multiple Payment Events</u>. If the Plan permits multiple payment events, the change payment election provisions of Section 4.02(B)(1) apply separately as to each payment due upon each payment event. The addition or deletion of a permissible payment event to Deferred Compensation previously deferred is subject to the change election provisions of Section 4.02(B)(1) where the additional© Copyright 2008 SunGard

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event may cause a change

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in the time or form of payment. However the addition of death, Disability or Unforeseeable Emergency as an "earliest of" payment event is not a change payment election and is not an impermissible acceleration under Section 4.02(C<u>).</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>(6) Domestic Relations Orders</u>. An election, pursuant to or reflected in a domestic relations order under Code §414(p)(1)(B), by someone other than the Participant, as to payments to a person other than the Participant, is not a change payment election subject to this Section 4.02(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)<u>Certain Payment Delays not Subject to Change Payment Election Rules</u>. The Employer operationally will elect whether to apply the some or all of the following payment delay provisions. The Employer in applying such provisions must treat all payments to similarly situated service providers on a reasonably equivalent basis. If applicable, these provisions do not result in the Plan failing to provide for payment upon a permissible event as Code §409A requires nor are the delays treated as a change payment election under this Section 4.02(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<u>Non-deductible Payment</u>. The Plan may delay payment to a Participant if the Employer reasonably anticipates that the Employer's deduction for the scheduled payment of the Participant's Deferred Compensation will be barred under Code §162(m). In such event, the Plan (without any Participant election as to timing) will pay such Deferred Compensation either in the Participant's first Taxable Year in which the Employer reasonably anticipates or should reasonably anticipate that Code §162(m) will not apply or during the period beginning on the date the affected Participant Separates from Service and ending on the later of the last day of the Participant's Taxable Year in which the Separation occurs or the 15<sup>th</sup> day of the third month following the Separation. If the Employer fails to delay under this Section 4.02(B)(7)(a) all scheduled payments during a Taxable Year which could be so delayed, the Employer's delay of any payment is a change payment election subject to this Section 4.02(B). If the Employer delays payment until the Participant's Separation from Service, the payment is considered as made based on Separation from Service for purpose of application of Section 4.01(D) and payment to a Specified Employee will be made on the date that is six months after Separation from Service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<u>Securities or Other Laws</u>. The Plan may delay payment to a Participant if the Employer reasonably anticipates that the payment will violate Federal securities law or other applicable law. The Plan will pay such Deferred Compensation at the earliest date at which the Employer reasonably anticipates that the payment will not cause a violation of such laws. For purposes of this Section 4.02(B)(7)(b), a violation of "other applicable law" does not include a payment which would cause inclusion of the Deferred Compensation in the Participant's gross income or which would subject the Participant to any Code penalty or other Code provision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<u>Change in Control</u>. The Plan may delay payment to a Participant related to a Change in Control and that occur under the circumstances described in Treas. Reg. 1.409A-3(i)(5)(iv).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<u>Other</u>. The Plan may delay payment to a Participant upon such other events as Applicable Guidance may permit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8)<u>Extension of Short-Term Deferral</u>. A Participant who, after the deadline for an initial payment election under Section 4.02(A)(2)(a), makes an election to defer payment of an amount which, but for the election, would be a short-term deferral under Treas. Reg. 1.409A-1(b)(4) and not subject to 409A, makes a change payment election subject to this Section 4.02(B) and in applying Section 4.02(B), the Plan treats the scheduled payment date as the date the Substantial Risk of Forfeiture lapses; provided that a Participant making such an election may provide for payment upon a Change in Control without regard to the 5 year requirement under clause (ii) of Section 4.02(B)(1)(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>No Acceleration</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)<u>General Rule</u>. No person may accelerate the time or schedule of any Plan payment or amount scheduled to be paid under the Plan. For this purpose, the payment of an amount substituted for the Deferred Compensation is a payment of the Deferred Compensation, as provided in Treas. Reg. §1.409A-3(f).© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)N<u>ot an Acceleration.</u> Certain actions as described in Treas. Reg. §§1.409A-3(j)(1), (2), (3), (5) and (6) are not an acceleration including: (i) certain payments made as a result of an intervening payment event and made in accordance with Plan provisions or pursuant to an initial payment election under Section 4.02(A) or a change payment election under Section 4.02(B); (ii) the Employer's waiver or acceleration of the satisfaction of any condition constituting a Substantial Risk of Forfeiture provided that payment is made only upon a permissible payment event; (iii) the addition of death, Disability or Unforeseeable Emergency as payment events where such addition results in an earlier payment than would have occurred without the addition of such events (iv) an election to change Beneficiaries (including before the commencement of a life annuity) the if the time and form of payment does not change (except where under a life annuity a change in time of payments results solely from the different life expectancy of the new Beneficiary); (v) a decrease in the Compensation Deferred under the Plan as a result of certain linkage to qualified plans or broad-based foreign plans or certain other actions or inactions, including related to Wraparound Elections; or (vi) a change to a cafeteria plan election (under Code §125(d)) resulting in a change in the Compensation Deferred under this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)<u>Permissible Accelerations/ Including Cash-Out</u>. Notwithstanding Section 4.02(C)(1), the Employer in its sole discretion and without any Participant discretion or election, operationally may elect accelerations of the time or schedule of payment from the Plan in any or all of the circumstances described in Treas. Reg. §§1.409A-3(j)(4)(ii) through (xiv). Such circumstances include, but are not limited to, the mandatory lump-sum payment of the Participant's entire Vested Accrued Benefit at any time or only at the time payment will commence (the latter as permitted by Applicable Guidance), provided that the Employer evidences its discretion to make such payment in writing no later than the date of payment, the payment results in the termination and liquidation of the Participant's interest under the Plan and under all Aggregated Plans, and the payment amount does not exceed the applicable dollar amount under Code §402(g)(1)(B). The Employer in applying this Section 4.02(C)(3) must treat all similarly situated service providers on a reasonably equivalent basis. See Section 6.03 as to Plan termination which also results in a permissible acceleration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.03<u>Withholding</u>. The Employer will withhold from any payment made under the Plan and from any amount taxable under Code §409A, all applicable taxes, and any and all other amounts required to be withheld under Applicable Guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.04<u>Beneficiary Designation</u>. A Participant may designate a Beneficiary (including one or more primary and contingent Beneficiaries) to receive payment of any Vested Accrued Benefit remaining in the Participant's Account at death. The Employer will provide each Participant with a form for this purpose and no designation will be effective unless made on that form and delivered to the Employer. A Participant may modify or revoke an existing designation of Beneficiary by executing and delivering a new designation to the Employer. In the absence of a properly designated Beneficiary, the Employer will pay a deceased Participant's Vested Accrued Benefit to the Participant's surviving spouse and if none, to the Participant's then living lineal descendants, by right of representation, and if none, to the Participant's estate. If a Beneficiary is a minor or otherwise is a person whom the Employer reasonably determines to be legally incompetent, the Employer may cause the Plan or Trust to pay the Participant's Vested Accrued Benefit to a guardian, trustee or other proper legal representative of the Beneficiary. The Plan's or Trust's payment of the deceased Participant's Vested Accrued Benefit to the Beneficiary or proper legal representative of the Beneficiary completely discharges the Employer, the Plan and Trust of all further obligations under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.05<u>Payments Treated as Made on Payment Date</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Certain Late Payments</u>. The Plan's payment of Deferred Compensation is deemed made on the Plan required payment date or payment election required payment date even if the Plan makes payment after such date, provided the payment is made by the latest of: (i) the end of the Taxable Year in which the payment is due; (ii) the 15<sup>th</sup> day of the third calendar month following the payment due date provided that the Participant is not able, directly or indirectly, to designate the Taxable Year of payment; (iii) in case the Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Participant's control (or the control of the Participant's Beneficiary), in the first Taxable Year of the Participant in which payment is practicable; or (iv) in case the making of the payment on the specified date© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

would jeopardize the Employer's ability to continue as a going concern, in the first Taxable Year of the Participant in which the payment would not have such effect. The Employer may cause the Plan or Trust to pay a Participant's Vested Accrued Benefit on any date which satisfies this Section 4.05(A) and that is

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**Nonqualified Deferred Compensation Prototype Plan**

administratively practicable following any Plan specified payment date or the date specified in any valid payment election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>(1)</u><u>Change in Control</u>. In the case of certain Change in Control events, as described in Treas. Reg. §1.409A-3(i)(5)(iv), certain transaction based compensation paid on the same schedule and on the same terms as apply to shareholders generally with respect the Employer's stock or as the payments to the Employer, is treated as paid on the designated payment date. Further, such payments made within 5 years after the Change in Control event are deemed compliant with Sections 4.02(A) and (B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>(2)</u> <u>Disputed Payments/Other Failure to Pay</u>. In the event of a dispute between the Employer and a Participant as to whether Deferred Compensation is payable to the Participant or as to the amount thereof, or any other intentional or unintentional failure to pay, other than with the Participant's express or implied consent, payment is treated as paid on the designated payment date if such payment is made in accordance with Treas. Reg. §1.409A-3(g).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Early Payments</u>. The Employer also may cause the Plan or Trustee to pay on a date no earlier than 30 days before the specified payment date provided the Participant is not able, directly or indirectly, to designate the Taxable Year of the payment. Such "early" payments are not an accelerated payment under Section 4.02(C).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.06<u>Payment Election Requirements</u>. The term "payment election," for purposes of this Section 4.06(B) and the Plan generally, means either an initial payment election under Section 4.02(A) or a change payment election under Section 4.02(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Compliance with Plan Terms</u>. All initial payment elections and change payment elections must be consistent with the Plan and with the Adoption Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>When Election is Considered Made; Irrevocability</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)<u>Participant Elections</u>. A Participant's payment election is not considered made for any purpose under the Plan until both: (i) the Employer approves the election; and (ii) the election has become irrevocable. A Participant's payment election is always revocable until the Employer accepts the election, which acceptance must occur within the time period described in Section 4.06(C). A Participant's payment election becomes irrevocable as the Employer elects in its Adoption Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Employer Elections. The Employer's payment election is not considered made for any purpose under the Plan until the election has become irrevocable. The Employer's initial payment election is irrevocable after the last permissible date for making the election under Section 4.02(A)(2)(b). The Employer's change payment election relating to payment at a Specified Time or pursuant to a Fixed Schedule is irrevocable after the last permissible date for making the election under Section 4.02(B)(1)(a). The Employer's change payment election relating to payment based on any other payment event (not a Specified Time or Fixed Schedule) remains revocable for 30 days following the Employer's execution of the change payment election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)Effect of Changes While Election is Revocable. Any change made to a payment election while the election remains revocable is not a change payment election, either for purposes of Section 4.02(B)(1)(a) timing rules or in applying any Plan limit on the number of change payment elections a Participant may make as to any amount of Deferred Compensation. Any modification to a payment election after the election has become irrevocable is a change payment election (if made with respect to an initial payment election) or is a new change payment election (if made with respect to a change payment election).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)Continuing Elections. If an initial payment election is continuing under Section 4.02(A)(3), such that it applies to Compensation Deferred in one or more Taxable Years beginning after the first Taxable Year to which the payment election applies, the payment election is revocable as to such future Taxable Years until the last permissible date under Section 4.02(A)(2) for making the election with regard to such future Taxable Year or Years.© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Employer Approval of Participant and Beneficiary Elections</u>. The Employer expressly and in writing must approve any Participant or Beneficiary payment election (payment event, timing, form and

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**Nonqualified Deferred Compensation Prototype Plan**

medium), even if the Plan and Adoption Agreement permit such election. The Employer, in its absolute discretion, may withhold approval for any reason, including, but not limited to, non-compliance with Plan terms. However, the Employer must approve or reject any such election within the time period during which the Participant or Beneficiary would have had to make the election. If the Employer does not so approve or reject a payment election, the election is deemed rejected within such time period. With regard to initial payment elections, unless the Participant subsequently makes a timely initial payment election the Employer accepts, the Employer will pay the Participant's Vested Accrued Benefit under the payment event, timing, form and medium default provisions of Sections 4.01(B) and 4.02(A)(5).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)<u>Preservation of Pre-2009 Payment Elections</u>. If the Plan is a restatement of a Plan which was in effect before January 1, 2009, as to pre-2009 Deferred Compensation (and Earnings thereon) which is a 409A Amount, the Plan preserves any 409A permissible payment elections under the Plan which elections are not available under the Plan as to Compensation Deferred after 2008, subject to any change payment election made as to such pre-2009 Deferred Compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**V.** **TRUST ELECTION AND PLAN EARNINGS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.01<u>Unfunded Plan</u>. The Employer as it elects in its Adoption Agreement intends this Plan to be an unfunded plan that is wholly or partially exempt under ERISA. No Participant, Beneficiary or successor thereto has any legal or equitable right, interest or claim to any property or assets of the Employer, including assets held in any Account under the Plan except as the Plan otherwise permits. The Employer's obligation to pay Plan benefits is an unsecured promise to pay. Any assets held in Plan Accounts remain subject to claims of the Employer's general creditors and no Participant's or Beneficiary's claim to Plan assets has any priority over any general unsecured creditor of the Employer. Except as otherwise provided in the Plan or Trust, all Plan assets, including all incidents of ownership thereto, at all times will be the sole property of the Employer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.02<u>No Trust.</u> Except as provided in its Adoption Agreement, this Plan does not create a trust for the benefit of any Participant. If the Employer does not establish the Trust: (i) the Employer may elect to make notional contributions in lieu of actual contributions to the Plan; and (ii) the Employer may elect not to invest any actual Plan contributions. If the Employer elects to invest any actual Plan contributions, such investments may be held for the Employer's benefit in providing for the Employer's obligations under the Plan or for such other purposes as the Employer may determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Earnings</u>. If the Employer does not establish the Trust, the Employer will elect in its Adoption Agreement whether the Plan periodically will credit actual or notional Plan contributions with a determinable amount of notional Earnings (at a specified fixed or floating interest rate or other specified index) or will credit or charge each Participant's Account with the Earnings actually incurred by the Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Investment Direction</u>. If the Account is credited and charged with actual Earnings, the Employer will specify in the Adoption Agreement whether the Employer or the Participant has the right to direct the investment of the Participant's Account and also may specify any limitations on the Participant's right of investment direction. If the Adoption Agreement provides for Employer investment direction, the Employer may make any investment of Plan assets it deems reasonable or appropriate. If the Adoption Agreement provides for Participant investment direction, this right is limited strictly to investment direction and the Participant will not be entitled to the distribution of any Account asset except as the Plan otherwise permits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.03<u>Trust.</u> If the Employer elects in its Adoption Agreement to create the Trust, the applicable provisions of the Basic Plan Document continue to apply, including those of Section 5.01. The Trustee will pay Plan benefits in accordance with the Plan terms or upon the Employer's direction consistent with Plan terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Restriction on Trust Assets</u>. If an Employer establishes, directly or indirectly, the Trust (or any other arrangement Applicable Guidance may describe), the Trust and the Trust assets must be and must remain located within the United States, except with respect to a Participant who performs outside the© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

United States substantially all services giving rise to the Deferred Compensation. The Trust may not contain any provision limiting the Trust assets to the payment of Plan benefits upon a Change in the Employer's Financial Health, even if the assets remain subject to claims of the Employer's general creditors. For this purpose, the Employer, upon a Change in the Employer's Financial Health, may not transfer Deferred Compensation to the Trust. The Employer (and any member of a controlled group which includes the Employer) during the "restricted period"

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**Nonqualified Deferred Compensation Prototype Plan**

also may not transfer Deferred Compensation to the Trust and the Trust may not be restricted to payment of Plan benefits, to the extent that such transfer or restriction would violate the at-risk limitation of Code

§409A(b)(3). Any Trust the Employer establishes under this Plan shall be further subject to Applicable Guidance, compliance with which is necessary to avoid the transfer of assets to the Trust being treated as a transfer of property under Code §83.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Trust Earnings and Investment</u>. If the Employer establishes the Trust, the Trust earnings provisions apply to all Plan contributions and constitute Earnings for purposes of the Plan. The Trustee will invest the assets held in the Trust in accordance with the Trust terms but are not subject to Participant direction of investment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**VI.** **MISCELLANEOUS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.01<u>No Assignment</u>. No Participant or Beneficiary has the right to anticipate, alienate, assign, pledge, encumber, sell, transfer, mortgage or otherwise in any manner convey in advance of actual receipt, the Participant's Account. Prior to actual payment, a Participant's Account is not subject to the debts, judgments or other obligations of the Participant or Beneficiary and is not subject to attachment, seizure, garnishment or other process applicable to the Participant or Beneficiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.02<u>Not Employment Contract</u>. This Plan is not a contract for employment between the Employer and any Employee who is a Participant. This Plan does not entitle any Participant to continued employment with the Employer, and benefits under the Plan are limited to payment of a Participant's Vested Accrued Benefit in accordance with the terms of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.03<u>Amendment and Termination</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)<u>Amendment</u>. The Employer reserves the right to amend the Plan at any time to comply with Code §409A, Treas. Reg. §1.409A and other Applicable Guidance or for any other purpose, provided that such amendment will not result in taxation to any Participant under Code §409A. Except as the Plan and Applicable Guidance otherwise may require, the Employer may make any such amendments effective immediately.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)<u>Termination</u>. The Employer may terminate, but is not required to terminate and liquidate the Plan which includes the distribution of all Plan Accounts, under the following circumstances:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)<u>Dissolution/Bankruptcy</u>. The Employer may terminate and liquidate the Plan within 12 months following a dissolution of a corporate Employer taxable under Code §331 or with approval of a Bankruptcy court under 11 U.S.C. §503(b)(1)(A), provided that the Deferred Compensation is paid to the Participants and is included in the Participants' gross income in the latest of (or, if earlier, the Taxable Year in which the amount is actually or constructively received): (i) the calendar year in which the plan termination and liquidation occurs; (ii) the first calendar year in which the amounts no longer are subject to a Substantial Risk of Forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)<u>Change in Control</u>. The Employer may terminate and liquidate the Plan by irrevocable action taken within the 30 days preceding or the 12 months following a Change in Control, provided the Employer distributes all Plan Accounts (and must distribute the accounts under any Aggregated Plans which plan the Employer also must terminate and liquidate as to each Participant who has experienced the Change in Control) within 12 months following the date of Employer's irrevocable action to terminate and liquidate the Plan and Aggregated Plans. Where the Change in Control results from an asset purchase transaction, the "Employer" with discretion to terminate and liquidate the Plan is the Employer that is primarily liable after the transaction to pay the Deferred Compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)<u>Other</u>. The Employer may terminate the Plan for any other reason in the Employer's discretion provided that: (i) the termination and liquidation does not occur proximate to a downturn in the Employer's financial health; (ii) the Employer also terminates all Aggregated Plans in which any Participant also is a participant; (ii) the Plan makes no payments in the 12 months following the date of Employer's© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

irrevocable action to terminate and liquidate the Plan other than payments the Plan would have made irrespective of Plan termination; (iii) the Plan makes all payments within 24 months following the date of Employer's irrevocable action to terminate and liquidate the Plan; and (iv) the Employer within 3 years

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**Nonqualified Deferred Compensation Prototype Plan**

following the date of Employer's irrevocable action to terminate and liquidate the Plan does not adopt a new plan covering any Participant that would be an Aggregated Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)<u>Applicable Guidance</u>. The Employer may terminate and liquidate the Plan under such other circumstances as Applicable Guidance may permit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)<u>Effect on Vesting</u>. Any Plan amendment or termination will not reduce the Vested Accrued Benefit held in any Participant Account at the date of the amendment or termination and will not accelerate vesting except as the Employer may expressly provide for in connection with the amendment or termination, provided that any such vesting acceleration does not subject any Participant to taxation under Code §409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)<u>Cessation of Future Contributions</u>. The Employer in its Adoption Agreement may elect at any time to amend the Plan to cease future Elective Deferrals, Nonelective Contributions or Matching Contributions as of a specified date. In such event, the Plan remains in effect (except those provisions permitting the frozen contribution type) until all Accounts are paid in accordance with the Plan terms, or, if earlier, upon the Employer's termination of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.04<u>Fair Construction</u>. The Employer, Participants and Beneficiaries intend that this Plan in form and in operation comply with Code 409A, the regulations thereunder, and all other present and future Applicable Guidance. The Employer and any other party with authority to interpret or administer the Plan will interpret the Plan terms in a manner which is consistent with Applicable Law. However, as required under Treas. Reg. §1.409A-1(c)(1), the "interpretation" of the Plan does not permit the deletion of material terms which are expressly contrary to Code §409A and the regulations thereunder and also does not permit the addition of missing terms necessary to comply therewith. Such deletions or additions may be accomplished only be means of a Plan amendment under Section 6.03(A). Any Participant, Beneficiary or Employer permitted Elective Deferral election, initial payment election, change payment election or any other Plan permitted election, notice or designation which is not compliant with Applicable Law is not an "election" or other action under the Plan and has no effect whatsoever. In the event that a Participant, Beneficiary or the Employer fail to make an election or fail to make a compliant election, the Employer will apply the Plan's default terms under Sections 4.01(B) and 4.02(A)(5).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.05<u>Notice and Elections</u>. Any notice given or election made under the Plan must be in writing and must be delivered in person or electronically in a manner reasonably designed to ensure receipt, or mailed by certified mail, to the Employer, the Trustee or to the Participant or Beneficiary as appropriate. The Employer will prescribe the form of any Plan notice or election to be given to or made by Participants. Any notice or election will be deemed given or made as of the date of delivery, or if given or made by certified mail, as of 3 business days after mailing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.06<u>Administration/Correction</u>. The Employer will administer and interpret the Plan, including making a determination of the Vested Accrued Benefit due any Participant or Beneficiary under the Plan. As a condition of receiving any Plan benefit to which a Participant or Beneficiary otherwise may be entitled, a Participant or Beneficiary will provide such information and will perform such other acts as the Employer reasonably may request. The Employer may cause the Plan to forfeit any or all of a Participant's Vested Accrued Benefit, if the Participant fails to cooperate reasonably with the Employer in the administration of the Participant's Plan Account, provided that this provision does not apply to a bona fide dispute under Section 4.05(A)(2). The Employer may retain agents to assist in the administration of the Plan and may delegate to agents such duties as it sees fit. The decision of the Employer or its designee concerning the administration of the Plan is final and is binding upon all persons having any interest in the Plan. The Employer will indemnify, defend and hold harmless any Employee designated by the Employer to assist in the administration of the Plan from any and all loss, damage, claims, expense or liability with respect to this Plan (collectively, "claims") except claims arising from the intentional acts or gross negligence of the Employee. The Employer, to minimize or avoid any sanction or damages to a Participant or Beneficiary, to itself or to any other person resulting from a violation of Code §409A under the Plan, may undertake correction of any violation or participate in any available correction program, as described in Notice 2007-100 or other Applicable Guidance.© Copyright 2008 SunGard

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**Nonqualified Deferred Compensation Prototype Plan**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.07<u>Account Statements</u>. The Employer from time to time will provide each Participant with a statement of the Participant's Vested Accrued Benefit as of the most recent Valuation Date. The Employer also will provide Account statements to any Beneficiary of a deceased Participant with a Vested Accrued Benefit

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**Nonqualified Deferred Compensation Prototype Plan**

remaining in the Plan. Any such statements are for information purposes only prior to an actual Plan payment, are subject to adjustment or correction, and are not binding upon the Employer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.08<u>Accounting</u>. The Employer will maintain for each Participant as is necessary for proper administration of the Plan, an Elective Deferral Account, a Matching Contribution Account, a Nonelective Contribution Account, and separate sub-accounts reflecting 409A Amounts and Grandfathered Amounts in accordance with Section 7.03.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.09<u>Costs and Expenses</u>. Investment charges will be borne by the Account to which they pertain. The Employer will pay the other costs, expenses and fees associated with the operation of the Plan, excluding those incurred by Participants or Beneficiaries. The Employer will pay costs, expenses or fees charged by or incurred by the Trustee only as provided in the Trust or other agreement between the Employer and the Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10<u>Reporting</u>. The Employer will report Deferred Compensation for Employee Participants on Form W-2 for and on Form 1099-MISC for Contractor Participants in accordance with Applicable Guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11<u>ERISA Claims Procedure</u>. If this Plan is established as a "top-hat plan" within the meaning of DOL Reg. §2520.104-23, the following claims procedure under DOL Reg. §2560.503-1 applies. For purposes of the Plan's claims procedure under this Section 6.11, the "Plan Administrator" means the Employer. A Participant or Beneficiary may file with the Plan Administrator a written claim for benefits, if the Participant or Beneficiary disputes the Plan Administrator's determination regarding the Participant's or Beneficiary's Plan benefit. However, the Plan Administrator will cause the Plan to pay only such benefits as the Plan Administrator in its discretion determines a Participant or Beneficiary is entitled to receive. The Plan Administrator under this Section 6.11 will provide a separate written document to affected Participants and Beneficiaries which explains the Plan's claims procedure and which by this reference is incorporated into the Plan. If the Plan Administrator makes a final written determination denying a Participant's or Beneficiary's claim, the Participant or Beneficiary must file an action with respect to the denied claim within 180 days following the date of the Plan Administrator's final determination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**VII.** **409A AMOUNTS AND GRANDFATHERED AMOUNTS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.01<u>409A Amounts</u>. The terms of this Plan control as to any 409A Amount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.02<u>Grandfathered Amounts</u>. A Grandfathered Amount remains subject to the terms of the Plan as in effect before January 1, 2005, unless the Employer makes a material modification to the Plan as described in Treas. Reg. §1.409A-6(a)(4).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.03<u>Separate Accounting/Earnings</u>. The Employer will account separately for 409A Amounts and for Grandfathered Amounts within each Participant's Account. The Employer also will account separately for Earnings on the 409A Amounts and Earnings on the Grandfathered Amounts. Post-2004 Earnings on Grandfathered Amounts are included in the Grandfathered Amount.

\* \* \* \* \* \* \* \* \* \* \* \* \* \* \*© Copyright 2008 SunGard

7/08 **54**

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## Ex-21

**Exhibit 21**

**Subsidiaries**

**Cambridge Bancorp Subsidiary**:

---

| | |
|:---|:---|
| **Name** | **Jurisdiction of Incorporation** |
| Cambridge Trust Company | Massachusetts |

---

**Cambridge Trust Company Subsidiaries**:

---

| | |
|:---|:---|
| **Name** | **Jurisdiction of Incorporation** |
| Cambridge Trust Company of New Hampshire, Inc. | New Hampshire |
| CTC Security Corporation | Massachusetts |
| CTC Security Corporation III | Massachusetts |

---

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## Ex-23

Exhibit 23.1

**Consent of Independent Registered Public Accounting Firm**

We consent to the incorporation by reference in the Registration Statements No. 333-225720 on Form S-8 and No. 333-267930 on Form S-3 of Cambridge Bancorp of our reports dated March 16, 2023 with respect to the consolidated financial statements and the effectiveness of internal control over financial reporting as they appear in the December 31, 2022 annual report on Form 10-K of Cambridge Bancorp.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 16, 2023

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## Ex-31

**Exhibit 31.1**

**CERTIFICATION 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**

I, Denis K. Sheahan, Chief Executive Officer of Cambridge Bancorp, certify that:

1. I have reviewed this Annual Report on Form 10-K, for the period ended December 31, 2022, of Cambridge Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| March 16, 2023 | By: | &nbsp;&nbsp;&nbsp;&nbsp;/s/ Denis K. Sheahan |
|  |  | Denis K. Sheahan |
|  |  | Chairman, President & Chief Executive Officer <br>(Principal Executive Officer) |

---

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## Ex-31

**Exhibit 31.2**

**CERTIFICATION 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**

I, Michael F. Carotenuto, Chief Financial Officer of Cambridge Bancorp, certify that:

1. I have reviewed this Annual Report on Form 10-K, for the period ended December 31, 2022, of Cambridge Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| March 16, 2023 | By: | &nbsp;&nbsp;&nbsp;&nbsp;/s/ Michael F. Carotenuto |
|  |  | Michael F. Carotenuto |
|  |  | Chief Financial Officer, Executive Vice President<br>(Principal Financial Officer and Principal Accounting Officer)  |

---

------

## Ex-32

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report on Form 10-K of Cambridge Bancorp (the "Company") for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge on the date hereof:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Form 10-K Report fully complies with the requirements of section 13(a) or 15(d) as applicable, of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Form 10-K Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | | |
|:---|:---|:---|
| March 16, 2023 | By: | /s/ Denis K. Sheahan |
|  |  | Denis K. Sheahan |
|  |  | Chairman, President & Chief Executive Officer <br>(Principal Executive Officer) |

---

------

## Ex-32

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report on Form 10-K of Cambridge Bancorp (the "Company") for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge on the date hereof:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Form 10-K Report fully complies with the requirements of section 13(a) or 15(d) as applicable, of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Form 10-K Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | | |
|:---|:---|:---|
| March 16, 2023 | By: | &nbsp;&nbsp;&nbsp;&nbsp;/s/ Michael F. Carotenuto |
|  |  | Michael F. Carotenuto |
|  |  | Chief Financial Officer, Executive Vice President<br>(Principal Financial Officer and Principal Accounting Officer) |

---

------