425

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 5, 2019

CAMBRIDGE BANCORP

(Exact name of Registrant as Specified in Its Charter)

Massachusetts	001-38184	04-2777442
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1336 Massachusetts Avenue

Cambridge, MA 02138

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 876-5500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☒ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

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

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01. Entry into a Material Definitive Agreement.

On December 5, 2019, Cambridge Bancorp, a Massachusetts corporation (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Wellesley Bancorp, Inc. (“Wellesley”), Wellesley Bank (“Wellesley Bank”), Wellesley’s subsidiary bank, and Cambridge Trust Company (“Cambridge Trust”), the Company’s subsidiary bank, pursuant to which Cambridge will acquire Wellesley.

Subject to the terms and conditions of the Merger Agreement, which has been approved by the boards of directors of each party, Wellesley will merge with and into the Company, with the Company as the surviving entity, and immediately thereafter, Wellesley Bank will merge with and into Cambridge Trust, with Cambridge Trust as the surviving bank (the “Merger”).

Under the terms of the Merger Agreement, each outstanding share of Wellesley common stock will be converted into the right to receive 0.580 shares of the Company’s common stock.

The Merger is subject to customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of Wellesley and the Company, and is expected to close in the second quarter of 2020. Following the Merger, Thomas Fontaine, currently the President and Chief Executive Officer of Wellesley, will be employed as Chief Banking Officer of Cambridge Trust. Effective at the closing of the transaction, or at the Company’s option, immediately following the Company’s 2020 annual meeting of shareholders, Mr. Fontaine and two other members of the current board of directors of Wellesley will be appointed to the board of directors of the Company and the board of directors of Cambridge Trust, to serve until the next annual meeting of the Company at which time the directors will be nominated for re-election.

Concurrently with entering into the Merger Agreement, the Company and Wellesley entered into Voting Agreements with each of the directors and certain of the executive officers of Wellesley and the Company, respectively, pursuant to which such shareholders agreed to vote their shares of Wellesley or the Company, respectively, in favor of the Merger.

If the Merger is not consummated under specified circumstances, Wellesley may be required to pay the Company a termination fee of approximately $4.1 million.

The Merger Agreement also contains customary representations and warranties that the Company and Wellesley made to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the contract between the Company and Wellesley, and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating its terms. Moreover, the representations and warranties are subject to a contractual standard of materiality that may be different from what may be viewed as material to shareholders, and the representations and warranties may have been used to allocate risk between the Company and Wellesley rather than establishing matters as facts.

The foregoing is not a complete description of the Merger Agreement and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and is incorporated herein by reference. For additional information, reference is made to the joint press release dated December 5, 2019, which is included as Exhibit 99.1 and is incorporated herein by reference.

Important Additional Information and Where to Find It

In connection with the proposed transaction, the Company expects to file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that will include a joint proxy statement of the Company and Wellesley that also constitutes a prospectus of the Company, which joint proxy statement/prospectus will be mailed or otherwise disseminated to the Company’s shareholders and Wellesley’s shareholders when it becomes available. The Company and Wellesley also plan to file other relevant documents with the SEC regarding the proposed transaction. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the joint proxy statement/prospectus (if and when it becomes available) and other relevant documents filed by the Company and Wellesley with the SEC at the SEC’s website at www.sec.gov. Copies of the documents filed by the Company with the SEC will be available free of charge on the Company’s website at ir.cambridge.com or by directing a request to Cambridge Bancorp, 1336 Massachusetts Avenue, Cambridge, MA 02138, attention: Corporate Secretary (617) 876-5500. Copies of the documents filed by Wellesley with the SEC will be available free of charge on Wellesley’s website at www.wellesleybank.com or by directing a request to Wellesley Bancorp, Inc., 100 Worcester Street, Suite 300, Wellesley, MA 02481, attention: Corporate Secretary (781) 235-2550.

No Offer

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Participants in Solicitation

The Company and Wellesley and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. You can find information about the Company’s executive officers and directors in the Company’s definitive proxy statement filed with the SEC on March 19, 2019. You can find information about Wellesley’s executive officers and directors in Wellesley’s definitive proxy statement filed with the SEC on April 10, 2019. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC if and when they become available. You may obtain free copies of these documents from the Company or Wellesley using the sources indicated above.

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 Cambridge Bancorp (together with its bank subsidiary unless the context otherwise requires, “Cambridge”) and Wellesley Bancorp, Inc. (together with its bank subsidiary unless the context otherwise requires, “Wellesley”) and their industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding Cambridge’s or Wellesley’s future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to Cambridge or Wellesley, 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 are described within Cambridge’s and Wellesley’s filings with the Securities and Exchange Commission.

Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements include, but are not limited to the following: (1) the businesses of Cambridge and Wellesley may not be combined successfully, or such combination may take longer to accomplish than expected; (2) the cost savings from the merger may not be fully realized or may take longer to realize than expected; (3) operating costs, customer loss and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; (4) governmental approvals of the merger may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger; (5) the stockholders of Cambridge or Wellesley may fail to approve the merger; (6) changes to interest rates, (7) the ability to control costs and expenses, (8) general economic conditions, (9) the success of Cambridge’s efforts to diversify its revenue base by developing additional sources of non-interest income while continuing to manage its existing fee-based business, and (10) risks associated with the quality of Cambridge’s assets and the ability of its borrowers to comply with repayment terms. Further information about these and other relevant risks and uncertainties may be found in Cambridge’s and Wellesley’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2018 and in subsequent filings with the Securities and Exchange Commission.

Cambridge and Wellesley do 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 8.01. Other Events.

On December 5, 2019, the Company issued a press release to announce the signing of the Merger Agreement, which is attached hereto as Exhibit 99.1 and incorporated herein by reference. Beginning on December 5, 2019, the Company will conduct investor presentations. A copy of the presentation is attached as Exhibit 99.2 and is incorporated herein by reference.

The Company has also prepared a document describing certain risk factors related to the Merger Agreement, which is attached hereto as Exhibit 99.3 and incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

In connection with the Merger, the following financial statements are to be filed as part of this report:

(a) Financial Statements of Business Acquired

i. Audited condensed consolidated financial statements of Wellesley Bancorp Inc. as of and for the years ended December 31, 2018 and 2017, the notes related thereto, and the Independent Registered Public Accounting Firm Report of Wolf &

Company, P.C., dated March 29, 2019, are filed herewith as Exhibit 99.4 and are incorporated into this Item 9.01(a) by reference.

ii. Unaudited condensed consolidated financial statements of Wellesley Bancorp Inc. as of and for the nine months ended September 30, 2019 and 2018, and the notes related thereto, are filed herewith as Exhibit 99.5 and are incorporated into this Item 9.01(a) by reference.

(b) Pro Forma Financial Information. The following pro forma financial statements giving effect to the merger with Optima Bank & Trust Company and the merger with Wellesley are filed herewith as Exhibit 99.6 and are incorporated into this Item 9.01(b) by reference:

i. Cambridge Bancorp unaudited pro forma combined consolidated financial statements as of and for the year ended December 31, 2018 and the nine months ended September 30, 2019.

(d) Exhibits

Exhibit Number	Description
2.1*	Agreement and Plan of Merger, dated December 5, 2019, by and among Cambridge Bancorp, Cambridge Trust Company, Wellesley Bancorp, Inc. and Wellesley Bank.
23.1	Consent of Wolf & Company, P.C.
99.1	Press Release, dated December 5, 2019.
99.2	Investor Presentation, dated December 5, 2019.
99.3	Risk Factors
99.4	Wellesley Bancorp Inc. – Audited consolidated financial statements as of and for the years ended December 31, 2018 and 2017, the notes related thereto, and the Independent Registered Public Accounting Firm Report of Wolf & Company, P.C., dated March 29, 2019.
99.5	Wellesley Bancorp Inc. – Unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2019 and 2018, and the notes related thereto.
99.6	Cambridge Bancorp – Unaudited pro forma combined consolidated financial statements as of and for the year ended December 31, 2018, and the nine months ended September 30, 2019.

* Cambridge Bancorp has omitted certain schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K and shall furnish supplementally to the SEC copies of any of the omitted schedules and exhibits upon request by the SEC.

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
December 5, 2019
	By:	/s/ Michael F. Carotenuto
		Michael F. Carotenuto
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

EX-2.1

Exhibit 2.1

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER

DATED AS OF DECEMBER 5, 2019

BY AND AMONG

CAMBRIDGE BANCORP,

CAMBRIDGE TRUST COMPANY,

WELLESLEY BANCORP, INC.

AND

WELLESLEY BANK

TABLE OF CONTENTS

		Page
ARTICLE I THE MERGER			2
Section 1.01	Terms of the Merger		2
Section 1.02	Tax Consequences		2
Section 1.03	Name of the Surviving Bank		2
Section 1.04	Charter and Bylaws of the Surviving Bank		2
Section 1.05	Directors and Officers of the Surviving Company and the Surviving Bank		2
Section 1.06	Effect of the Merger		3
Section 1.07	Effective Date and Effective Time; Closing		3
Section 1.08	Alternative Structure		3
Section 1.09	Additional Actions		3
Section 1.10	Absence of Control		3
ARTICLE II CONSIDERATION; EXCHANGE PROCEDURES			4
Section 2.01	Merger Consideration		4
Section 2.02	Rights as Shareholders; Stock Transfers		4
Section 2.03	No Fractional Shares		4
Section 2.04	Exchange of Certificates; Payment of the Consideration		4
Section 2.05	Anti-Dilution Provisions		6
Section 2.06	Reservation of Shares		6
Section 2.07	Listing of Additional Shares		6
Section 2.08	Treatment of Stock Options		6
Section 2.09	Treatment of Restricted Stock Awards		6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF WELLESLEY			6
Section 3.01	Making of Representations and Warranties		7
Section 3.02	Organization, Standing and Authority of Wellesley		7
Section 3.03	Organization, Standing and Authority of Wellesley Bank		7
Section 3.04	Wellesley and Bank Capital Stock		7
Section 3.05	Subsidiaries		8
Section 3.06	Corporate Power; Minute Books		8
Section 3.07	Execution and Delivery		8
Section 3.08	Regulatory Approvals; No Defaults		8
Section 3.09	Financial Statements; SEC Documents; and Financial Controls and Procedures		9
Section 3.10	Absence of Certain Changes or Events		10
Section 3.11	Financial Controls and Procedures		10
Section 3.12	Regulatory Matters		11
Section 3.13	Legal Proceedings; Regulatory Action		11
Section 3.14	Compliance with Laws		12
Section 3.15	Material Contracts; Defaults		12
Section 3.16	Brokers		13
Section 3.17	Employee Benefit Plans		13
Section 3.18	Labor Matters		15
Section 3.19	Environmental Matters		15
Section 3.20	Tax Matters		15
Section 3.21	Investment Securities		17
Section 3.22	Derivative Transactions		17
Section 3.23	Loans; Nonperforming and Classified Assets		17
Section 3.24	Tangible Properties and Assets		18
Section 3.25	Intellectual Property		18
Section 3.26	Fiduciary Accounts		19
Section 3.27	Insurance		19

i

Section 3.28	Antitakeover Provisions	19
Section 3.29	Fairness Opinion	19
Section 3.30	Joint Proxy Statement/Prospectus	19
Section 3.31	CRA, Anti-money Laundering and Customer Information Security	19
Section 3.32	Transactions with Affiliates	20
Section 3.33	Disclosure	20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CAMBRIDGE		20
Section 4.01	Making of Representations and Warranties	20
Section 4.02	Organization, Standing and Authority of Cambridge	20
Section 4.03	Organization, Standing and Authority of Cambridge Trust	20
Section 4.04	Cambridge Capital Stock	21
Section 4.05	Subsidiaries	21
Section 4.06	Corporate Power; Minute Books	21
Section 4.07	Execution and Delivery	21
Section 4.08	Regulatory Approvals; No Defaults	21
Section 4.09	Absence of Certain Changes or Events	22
Section 4.10	SEC Documents; Financial Reports; and Financial Controls and Procedures	22
Section 4.11	Regulatory Matters	23
Section 4.12	Legal Proceedings	23
Section 4.13	Compliance With Laws	24
Section 4.14	Brokers	24
Section 4.15	Employee Benefit Plans	24
Section 4.16	Labor Matters	25
Section 4.17	Environmental Matters	25
Section 4.18	Tax Matters	25
Section 4.19	Derivative Transactions	26
Section 4.20	Loans; Nonperforming Assets	26
Section 4.21	Deposit Insurance	27
Section 4.22	Cambridge Stock	27
Section 4.23	Antitakeover Provisions	27
Section 4.24	Joint Proxy Statement/Prospectus	27
Section 4.25	CRA, Anti-money Laundering and Customer Information Security	27
Section 4.26	Disclosure	27
ARTICLE V COVENANTS		27
Section 5.01	Covenants of Wellesley	27
Section 5.02	Covenants of Cambridge	31
Section 5.03	Reasonable Best Efforts	31
Section 5.04	Shareholder Approval	31
Section 5.05	Merger Registration Statement; Joint Proxy Statement/Prospectus	32
Section 5.06	Cooperation and Information Sharing	32
Section 5.07	Supplements or Amendment	32
Section 5.08	Regulatory Approvals	33
Section 5.09	Press Releases	33
Section 5.10	Access; Information	33
Section 5.11	No Solicitation by Wellesley	34
Section 5.12	Certain Policies	35
Section 5.13	Indemnification	36
Section 5.14	Employees; Benefit Plans	37
Section 5.15	Notification of Certain Changes	39
Section 5.16	Current Information	39
Section 5.17	Board Packages	40
Section 5.18	Transition; Informational Systems Conversion	40
Section 5.19	Assumption of Debt	40

ii

ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER		40
Section 6.01	Conditions to Obligations of the Parties to Effect the Merger	40
Section 6.02	Conditions to Obligations of Cambridge	41
Section 6.03	Conditions to Obligations of Wellesley	42
Section 6.04	Frustration of Closing Conditions	42
ARTICLE VII TERMINATION		42
Section 7.01	Termination	42
Section 7.02	Termination Fee	45
Section 7.03	Effect of Termination and Abandonment	45
ARTICLE VIII MISCELLANEOUS		45
Section 8.01	Survival	45
Section 8.02	Waiver; Amendment	45
Section 8.03	Counterparts	45
Section 8.04	Governing Law	45
Section 8.05	Expenses	45
Section 8.06	Notices	46
Section 8.07	Entire Understanding; No Third Party Beneficiaries	46
Section 8.08	Severability	46
Section 8.09	Enforcement of the Agreement	47
Section 8.10	Interpretation	47
Section 8.11	Assignment	47
ARTICLE IX ADDITIONAL DEFINITIONS		47
Section 9.01	Additional Definitions	47
EXHIBITS
Exhibit A	Form of Wellesley Voting Agreement
Exhibit B	Form of Cambridge Voting Agreement
Exhibit C	Form of Change in Control Agreement
Exhibit D	Plan of Bank Merger

iii

TABLE OF DEFINITIONS

Page

Acquisition Proposal	47
Acquisition Transaction	47
Affiliate	47
Agreement	1
Average Closing Price	44
Bank Merger	1
Bank Merger Act	47
Bank Regulator	48
BHC Act	1
BOLI	19
Book-Entry Shares	5
Business Day	48
Cambridge	1
Cambridge 2018 Form 10-K	22
Cambridge Benefit Plan	37
Cambridge Benefit Plans	24
Cambridge Board	48
Cambridge Disclosure Schedule	48
Cambridge ERISA Affiliate	24
Cambridge Loan Property	48
Cambridge Measurement Price	4
Cambridge Meeting	32
Cambridge Pension Plan	24
Cambridge Ratio	44
Cambridge SEC Documents	22
Cambridge Stock	48
Cambridge Trust	1
Cambridge Voting Agreement	1
Certificate	4
CIC Agreement	1
Closing	3
Closing Date	3
Code	1
Community Reinvestment Act	11
Confidentiality Agreement	33
Continuing Employees	37
Derivative Transaction	48
Determination Date	44
Effective Date	3
Effective Time	3
Employee Stock Incentive Plan	48
Environmental Law	48
ERISA	48
Exchange Act	48
Exchange Agent	48
Exchange Ratio	4
FDIC	48
FHLB	48
Final Index Price	44
Finance Laws	12
FRB	48

GAAP	48
Governmental Authority	49
Hazardous Substance	49
Indemnified Parties	36
Indemnifying Party	36
Index Group	44
Index Price	44
Index Ratio	44
Informational Systems Conversion	40
Insurance Policies	19
Intellectual Property	49
IRS	49
Joint Proxy Statement/Prospectus	49
Knowledge	49
Leases	18
Lien	49
Loans	17
Material Adverse Effect	49
Material Contract	13
MDOB	50
Merger	1
Merger Consideration	4
Merger Registration Statement	32
MGCL	3
MGL	3
NASDAQ	50
New Members	2
Notice of Superior Proposal	35
Notice Period	35
OREO	17
Per Share Consideration	50
Person	50
Premium Limit	37
Proceeding	36
Regulatory Approvals	22
Regulatory Order	11
Rights	50
SEC	9
Securities Act	50
Software	50
Starting Date	44
Starting Price	45
Subsidiary	50
Superior Proposal	50
Surviving Bank	2
Surviving Company	2
Tax	50
Tax Returns	50
Taxes	50
Transactions	1
Wellesley	1

iv

Wellesley 2018 Form 10-K	9
Wellesley Bank	1
Wellesley Bank Board	51
Wellesley Bank Stock	7
Wellesley Benefit Plans	13
Wellesley Board	51
Wellesley Disclosure Schedule	51
Wellesley Employees	13
Wellesley Equity Plan	51
Wellesley ERISA Affiliate	14
Wellesley Financial Statements	9
Wellesley Intellectual Property	51
Wellesley Loan Property	51

Wellesley Meeting	31
Wellesley Option	51
Wellesley Pension Plan	13
Wellesley Recommendation	32
Wellesley Representatives	34
Wellesley Restricted Stock	6
Wellesley SEC Documents	9
Wellesley Stock	7
Wellesley Stock Option Plan	51
Wellesley Subsequent Determination	35
Wellesley Voting Agreement	1
Willful Breach	51

v

This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is dated as of December 5, 2019, by and among Cambridge Bancorp (“Cambridge”), a Massachusetts corporation and registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”), Cambridge Trust Company, a Massachusetts-chartered trust company and wholly owned subsidiary of Cambridge (“Cambridge Trust”), Wellesley Bancorp, Inc., a Maryland corporation and registered bank holding company under the BHC Act (“Wellesley”), and Wellesley Bank, a Massachusetts-chartered bank and wholly owned subsidiary of Wellesley (“Wellesley Bank”).

WITNESSETH

WHEREAS, the Board of Directors of Cambridge and the Board of Directors of Wellesley have each (i) determined that this Agreement and the business combination and related transactions contemplated hereby are in the best interests of their respective entities and shareholders; (ii) determined that this Agreement and the transactions contemplated hereby are consistent with and in furtherance of their respective business strategies; and (iii) approved and adopted this Agreement;

WHEREAS, in accordance with the terms of this Agreement, Wellesley will merge with and into Cambridge (the “Merger”), and immediately thereafter, Wellesley Bank will merge with and into Cambridge Trust (the “Bank Merger” and with the Merger, the “Transactions”);

WHEREAS, as a material inducement to Cambridge to enter into this Agreement, each of the directors and certain executive officers set forth on the Wellesley Disclosure Schedule 6.02(d) has entered into a voting agreement with Cambridge dated as of the date hereof (a “Wellesley Voting Agreement”), substantially in the form attached hereto as Exhibit A pursuant to which each such director or executive officer has agreed, among other things, to vote all shares of Wellesley Stock (as defined herein) owned by such person in favor of the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in such agreement;

WHEREAS, as a material inducement to Wellesley to enter into this Agreement, each of the directors and certain executive officers set forth on the Cambridge Disclosure Schedule 6.03(c) has entered into a voting agreement with Wellesley dated as of the date hereof (a “Cambridge Voting Agreement”), substantially in the form attached hereto as Exhibit B pursuant to which each such director or executive officer has agreed, among other things, to vote all shares of Cambridge Stock (as defined herein) owned by such person in favor of the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in such agreement;

WHEREAS, as a material inducement to Cambridge to enter into this Agreement, Thomas J. Fontaine has entered into a change in control agreement with Cambridge and/or the Surviving Bank dated as of the date hereof (the “CIC Agreement”), substantially in the form attached hereto as Exhibit C, which shall become effective as of the Effective Time;

WHEREAS, for United States federal income tax purposes, the parties intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended and the regulations and formal guidance issued thereunder (the “Code”), and that this Agreement be and hereby is adopted as a “plan of reorganization” within the meaning of Sections 354, 361 and 368 of the Code; and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the transactions described in this Agreement and to prescribe certain conditions thereto.

NOW, THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1

ARTICLE I

THE MERGER

Section 1.01 Terms of the Merger. Subject to the terms and conditions of this Agreement, at the Effective Time, Wellesley shall merge with and into Cambridge, and Cambridge shall be the surviving entity (hereinafter sometimes referred to as the “Surviving Company”). Immediately thereafter, pursuant to the Plan of Bank Merger described in the following sentence, Wellesley Bank shall merge with and into Cambridge Trust, and Cambridge Trust shall be the surviving entity (hereinafter sometimes referred to as the “Surviving Bank”) and shall continue to be governed by the laws of the Commonwealth of Massachusetts. As soon as practicable after the execution of this Agreement (or on such later date as Cambridge shall specify), Cambridge will cause Cambridge Trust to, and Wellesley will cause Wellesley Bank to, execute and deliver a Plan of Bank Merger substantially in the form attached to this Agreement as Exhibit D. As part of the Merger, shares of Wellesley Stock shall, at the Effective Time, be converted into the right to receive the Merger Consideration pursuant to the terms of Article II.

Section 1.02 Tax Consequences. It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization” as that term is used in Sections 354, 361 and 368 of the Code. From and after the date of this Agreement and until the Closing, each party hereto shall use its reasonable best efforts to cause the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act would reasonably be expected to prevent the Merger from qualifying as a reorganization under Section 368(a) of the Code. Wellesley and Cambridge each hereby agree to deliver a certificate substantially in compliance with IRS published advance ruling guidelines, with customary exceptions and modifications thereto, to enable its counsel to deliver the legal opinions contemplated by Section 6.01(e).

Section 1.03 Name of the Surviving Bank. The name of the Surviving Company shall be “Cambridge Bancorp.” The name of the Surviving Bank shall be “Cambridge Trust Company.”

Section 1.04 Charter and Bylaws of the Surviving Bank. The charter and bylaws of the Surviving Company upon consummation of the Merger shall be the charter and bylaws of Cambridge as in effect immediately prior to consummation of the Merger. The charter and bylaws of the Surviving Bank upon consummation of the Bank Merger shall be the charter and bylaws of Cambridge Trust as in effect immediately prior to consummation of the Bank Merger.

Section 1.05 Directors and Officers of the Surviving Company and the Surviving Bank.

(a) At the Effective Time, the directors of each of the Surviving Company and the Surviving Bank immediately prior the Effective Time shall continue to be the directors of the Surviving Company and the Surviving Bank, provided that at the Effective Time, or at Cambridge’s option, immediately following the 2020 annual meeting of shareholders of Cambridge, the number of persons constituting the board of directors of the Surviving Company and the Surviving Bank shall each be increased by three (3) directors to be selected by Cambridge upon consultation with Wellesley (the “New Members”), and the New Members shall be appointed to the board of directors of both the Surviving Company and the Surviving Bank for terms to expire at Cambridge’s and the Surviving Bank’s next annual meeting. At the next annual meeting of shareholders of Cambridge after the New Members have been appointed to boards of directors of the Surviving Company and the Surviving Company, the New Members shall be nominated to the boards of directors of the Surviving Company and the Surviving Bank each for a term of three (3) years and the Surviving Company shall recommend that its stockholders vote in favor of the election of such nominee and shall, as the sole shareholder of the Surviving Bank, vote itself in favor of each such nominee. Notwithstanding the foregoing, neither the Surviving Company nor the Surviving Bank shall have any obligation to appoint the New Members to serve on the Surviving Company’s or the Surviving Bank’s board of directors if such Person is not a member of Wellesley’s board of directors immediately prior to the Effective Time. Each of the directors of the Surviving Company and the Surviving Bank immediately after the Effective Time shall hold office until his or her successor is elected and qualified or otherwise in accordance with the charter and bylaws of the Surviving Company and the Surviving Bank.

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(b) At the Effective Time, the officers of the Surviving Company and the Surviving Bank shall consist of the officers of the Surviving Company and the Surviving Bank in office immediately prior to the Effective Time with the addition of Thomas J. Fontaine as Chief Banking Officer of the Surviving Bank.

Section 1.06 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided under applicable provisions of the Massachusetts General Laws (“MGL”), the Maryland General Corporation Law (“MGCL”) and the regulations respectively promulgated thereunder. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, the separate corporate existence of Wellesley shall cease and all of the rights, privileges, powers, franchises, properties, assets, debts, liabilities, obligations, restrictions, disabilities and duties of Wellesley shall be vested in and assumed by Cambridge.

Section 1.07 Effective Date and Effective Time; Closing.

(a) Subject to the terms and conditions of this Agreement, Cambridge will make all such filings as may be required by applicable laws and regulations to consummate the Merger. On the Closing Date, which shall take place not more than five (5) Business Days following the receipt of all necessary regulatory, governmental and shareholder approvals and consents and the expiration of all statutory waiting periods in respect thereof and the satisfaction or waiver of all of the conditions to the consummation of the Merger specified in Article VI of this Agreement (other than the delivery of certificates and other instruments and documents to be delivered at the Closing), or on such other date as the parties shall mutually agree to, Cambridge and Wellesley shall file articles of merger with the Secretary of the Commonwealth of Massachusetts in accordance with the MGL and with the Maryland Department of Assessments and Taxation in accordance with the MGCL. The date of such filings is herein called the “Effective Date” and the “Effective Time” of the Merger shall be as specified in such filings.

(b) The closing (the “Closing”) shall take place remotely via the electronic exchange of documents and signatures immediately prior to the Effective Time at 10:00 a.m., Eastern time, or in person at the principal offices of Hogan Lovells US LLP in Washington, D.C., or such other place, at such other time, or on such other date as the parties may mutually agree upon (such date, the “Closing Date”). At the Closing, there shall be delivered to Cambridge and Wellesley the certificates and other documents required to be delivered under Article VI hereof.

Section 1.08 Alternative Structure. Cambridge may, at any time prior to the Effective Time, change the method of effecting the combination of Cambridge and Wellesley, and Cambridge Trust and Wellesley Bank, respectively, (including the provisions of this Article I) if and to the extent it deems such change to be necessary, appropriate or desirable; provided, however, that no such change shall (a) alter or change the Merger Consideration; (b) adversely affect the tax treatment of Wellesley’s shareholders pursuant to this Agreement; (c) adversely affect the tax treatment of Cambridge or Wellesley pursuant to this Agreement; or (d) be reasonably likely to materially impede or delay consummation of the transactions contemplated by this Agreement. In the event Cambridge makes such a change, Wellesley agrees to execute an appropriate amendment to this Agreement in order to reflect such change.

Section 1.09 Additional Actions. If, at any time after the Effective Time, Cambridge shall consider or be advised that any further deeds, documents, assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect or confirm, or record or otherwise, in Cambridge its right, title or interest in, to or under any of the rights, properties or assets of Wellesley or Wellesley Bank, or (ii) otherwise carry out the purposes of this Agreement, Wellesley, Wellesley Bank and their respective officers and directors shall be deemed to have granted to Cambridge an irrevocable power of attorney to execute and deliver, in such official corporate capacities, all such deeds, assignments or assurances in law or any other acts as are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in Cambridge or Cambridge Trust its right, title or interest in, to or under any of the rights, properties or assets of Wellesley or Wellesley Bank or (b) otherwise carry out the purposes of this Agreement, and the officers and directors of Cambridge or Cambridge Trust are authorized in the name of Wellesley or Wellesley Bank or otherwise to take any and all such action.

Section 1.10 Absence of Control. It is the intent of the parties to this Agreement that Cambridge or Cambridge Trust by reason of this Agreement shall not be deemed (until consummation of the transactions contemplated herein) to control, directly or indirectly, Wellesley or Wellesley Bank and shall not

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exercise or be deemed to exercise, directly or indirectly, a controlling influence over the management or policies of Wellesley or Wellesley Bank.

ARTICLE II

CONSIDERATION; EXCHANGE PROCEDURES

Section 2.01 Merger Consideration. Subject to the provisions of this Agreement, at the Effective Time, automatically by virtue of the Merger and without any action on the part of any Person:

(a) Each share of Cambridge Stock that is issued and outstanding immediately prior to the Effective Time shall remain outstanding following the Effective Time and shall be unchanged by the Merger.

(b) All remaining shares of Wellesley Stock issued and outstanding immediately prior to the Effective Time (other than treasury stock) shall become and be converted into, as provided in and subject to the limitations set forth in this Agreement, the right to receive 0.580 shares (the “Exchange Ratio”) of Cambridge Stock (the “Merger Consideration”).

Section 2.02 Rights as Shareholders; Stock Transfers. All shares of Wellesley Stock, when converted as provided in Section 2.01(b), shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each certificate (a “Certificate”) previously evidencing such shares shall thereafter represent only the right to receive for each such share of Wellesley Stock, the Merger Consideration and, if applicable, any cash in lieu of fractional shares of Cambridge Stock in accordance with Section 2.03. At the Effective Time, holders of the Wellesley Stock shall cease to be, and shall have no rights as, shareholders of Wellesley other than the right to receive the Merger Consideration and cash in lieu of fractional shares of Cambridge Stock as provided under this Article II. After the Effective Time, there shall be no transfers on the stock transfer books of Wellesley of shares of the Wellesley Stock.

Section 2.03 No Fractional Shares. Notwithstanding any other provision hereof, no fractional shares of Cambridge Stock and no certificates or scrip therefor, or other evidence of ownership thereof, will be issued in the Merger. In lieu thereof, Cambridge shall pay to each holder of a fractional share of Cambridge Stock an amount of cash (without interest) determined by multiplying the fractional share interest to which such holder would otherwise be entitled by the average of the daily closing prices during the regular session of Cambridge Stock as reported on NASDAQ for the five (5) consecutive trading days ending on the third Business Day immediately prior to the Closing Date, rounded to the nearest whole cent (the “Cambridge Measurement Price”). No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional share.

Section 2.04 Exchange of Certificates; Payment of the Consideration.

(a) Until the six (6) month anniversary of the Effective Time, Cambridge shall make available on a timely basis or cause to be made available to the Exchange Agent the following: (i) certificates, or at Cambridge’s option, evidence of shares in book entry form, representing the shares of Cambridge Stock, sufficient to pay the aggregate Merger Consideration required pursuant to this Article II, and (ii) an aggregate amount of cash sufficient to pay the estimated amount of cash to be paid in lieu of fractional shares of Cambridge Stock, each to be given to the holders of Wellesley Stock in exchange for Certificates pursuant to this Article II. Upon such six (6) month anniversary, any such cash or certificates remaining in the possession of the Exchange Agent, together with any earnings in respect thereof, shall be delivered to Cambridge. Any holder of Certificates who has not theretofore exchanged his or her Certificates for the Merger Consideration pursuant to this Article II who has not theretofore submitted a letter of transmittal shall thereafter be entitled to look exclusively to Cambridge, and only as a general creditor thereof, for the Merger Consideration, as applicable, to which he or she may be entitled upon exchange of such Certificates, as applicable, pursuant to this Article II. If outstanding Certificates are not surrendered, or the payment for the Certificates, as applicable, is not claimed prior to the date on which such payment would otherwise escheat to or become the property of any Governmental Authority, the unclaimed items shall, to the extent permitted by abandoned property and any other applicable law, become the property of Cambridge (and to the extent not in its possession shall be delivered to it), free and clear of all Liens of any Person previously entitled to such property.

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Neither the Exchange Agent nor any of the parties hereto shall be liable to any holder of Wellesley Stock represented by any Certificate for any consideration paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Cambridge and the Exchange Agent shall be entitled to rely upon the stock transfer books of Wellesley to establish the identity of those Persons entitled to receive the Merger Consideration, which books shall be conclusive with respect thereto.

(b) The Exchange Agent or Cambridge shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of Certificates, as applicable, such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by the Exchange Agent or Cambridge such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Certificates in respect of which such deduction and withholding was made.

(c) Promptly after the Effective Time, but in no event later than five (5) Business Days thereafter, Cambridge shall cause the Exchange Agent to mail or deliver to each Person who was, immediately prior to the Effective Time, a holder of record of Wellesley Stock notice advising such holders of the effectiveness of the Merger, including a form of letter of transmittal in a form satisfactory to Cambridge and Wellesley containing instructions for use in effecting the surrender of Certificates in exchange for the Merger Consideration which shall specify that delivery shall be effected, and risk of loss and title to Certificates or book-entry shares (“Book-Entry Shares”) shall pass, only upon (i) with respect to shares evidenced by Certificates, proper delivery of such Certificates to the Exchange Agent, proper delivery of the Certificates and the transmittal materials, duly, completely and validly executed in accordance with the instructions thereto, and (ii) with respect to Book-Entry Shares, proper delivery of an “agent’s message” regarding the book-entry transfer of Book-Entry Shares (or such other evidence (if any) of the transfer as the Exchange Agent may reasonably request). Upon surrender to the Exchange Agent of a Certificate or Book-Entry Shares for cancellation together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such Certificate or Book-Entry Shares shall promptly be provided in exchange therefor, but in no event later than five (5) Business Days after due surrender, a certificate, or at the election of Cambridge, a statement reflecting shares issued in book-entry form, representing the Merger Consideration to which such holder is entitled pursuant to this Article II, plus a check for any amounts due pursuant to Section 2.03 above and any dividends or other distributions to which such holder is entitled pursuant to Section 2.04(e), and the Certificate or Book-Entry Share so surrendered shall forthwith be canceled. No interest will accrue or be paid with respect to any property to be delivered upon surrender of Certificates or Book-Entry Shares.

(d) If any certificate representing shares of Cambridge Stock is to be issued in the name of other than the registered holder of the Certificate surrendered in exchange therefore, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the Person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of a certificate representing shares of Cambridge Stock in a name other than that of the registered holder of the Certificate surrendered, or required for any other reason relating to such holder or requesting Person, or shall establish to the reasonable satisfaction of the Exchange Agent that such tax has been paid or is not payable.

(e) No dividends or other distributions with a record date after the Effective Time with respect to Cambridge Stock shall be paid to the holder of any unsurrendered Certificate or Book-Entry Shares until the holder thereof shall surrender such Certificate or Book-Entry Shares in accordance with this Article II. After the surrender of a Certificate or Book-Entry Shares in accordance with this Article II, the recordholder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of Cambridge Stock.

(f) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Company or the Exchange Agent, the posting by such Person of a bond in such reasonable amount as the Surviving Company or the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Surviving Company or the Exchange Agent shall, in exchange for such lost, stolen or

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destroyed Certificate, pay or cause to be paid the Merger Consideration deliverable in respect of the shares of Wellesley Stock formerly represented by such Certificate pursuant to this Article II. In the event of a dispute with respect to ownership of any shares of Wellesley Stock represented by any Certificate or Book-Entry Share, Cambridge and the Exchange Agent shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.

Section 2.05 Anti-Dilution Provisions. In the event Cambridge or Wellesley changes (or establishes a record date for changing) the number of, or provides for the exchange of, shares of Cambridge Stock or Wellesley Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend, recapitalization, reclassification, or similar transaction with respect to the outstanding Cambridge Stock or Wellesley Stock and the record date therefor shall be prior to the Effective Time, the Exchange Ratio shall be proportionately and appropriately adjusted; provided, however, that, for the avoidance of doubt, no such adjustment shall be made with regard to Cambridge Stock if (a) Cambridge issues additional shares of Cambridge Stock and receives consideration for such shares in a bona fide third party transaction, (b) Cambridge issues additional shares of Cambridge Stock under its Employee Stock Incentive Plans, or (c) Cambridge grants employee or director stock grants or similar equity awards or shares of Cambridge Stock upon the exercise or settlement thereof.

Section 2.06 Reservation of Shares. Effective upon the date of this Agreement, Cambridge shall reserve for issuance a sufficient number of shares of the Cambridge Stock for the purpose of issuing shares of Cambridge Stock to Wellesley shareholders in accordance with this Article II.

Section 2.07 Listing of Additional Shares. Prior to the Effective Time, Cambridge shall notify NASDAQ of the additional shares of Cambridge Stock to be issued by Cambridge in exchange for the shares of Wellesley Stock.

Section 2.08 Treatment of Stock Options.

(a) Effective as of the Effective Time, each Wellesley Option, whether vested or unvested, that is outstanding as of immediately prior to the Effective Time, shall be cancelled and automatically converted into the right to receive a cash payment from Wellesley equal to (i) the number of shares of Wellesley Stock subject to such Wellesley Option at the Effective Time, multiplied by (ii) the amount by which the Per Share Consideration exceeds the per share exercise price of such Wellesley Option, less applicable taxes and withholdings and without interest. Notwithstanding the foregoing, if the per share exercise price for an Wellesley Option is equal to or in excess of the Per Share Consideration, such Wellesley Option shall be cancelled at the Effective Time in exchange for no consideration. For the avoidance of doubt, Cambridge shall not assume any Wellesley Options.

(b) Prior to the Effective Time, Wellesley shall take all actions that may be necessary or required (under any Wellesley Equity Plan, any applicable law, the applicable award agreements or otherwise) (i) to effectuate the provisions of this Section 2.08, (ii) to terminate each Wellesley Equity Plan as of the Effective Time without any further obligation or liability and (iii) to ensure that, from and after the Effective Time, holders of Wellesley Options shall have no rights with respect to thereto other than those rights specifically provided in Section 2.08(a).

Section 2.09 Treatment of Restricted Stock Awards. At the Effective Time, any vesting restrictions on each share of restricted stock outstanding immediately prior thereto (“Wellesley Restricted Stock”) pursuant to the Wellesley Equity Plans shall automatically lapse, and each share of Wellesley Restricted Stock shall be treated as an issued and outstanding share of Wellesley Stock for the purposes of this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF WELLESLEY

As a material inducement to Cambridge to enter into this Agreement and to consummate the transactions contemplated hereby, Wellesley and Wellesley Bank hereby make to Cambridge the representations and warranties contained in this Article III, provided, however, that Wellesley or Wellesley Bank shall not be deemed to have breached a representation or warranty as a consequence of the existence of any fact, event or circumstance unless

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such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in this Article III, has had or is reasonably likely to have, a Material Adverse Effect (disregarding for purposes of this proviso any materiality or Material Adverse Effect qualification or exception contained in any representation or warranty). Notwithstanding the immediately preceding sentence, the representations and warranties contained in (x) Section 3.04(a) and (b) shall be deemed untrue and incorrect if not true and correct except to a de minimis extent, (y) Section 3.02, 3.05, 3.06, 3.07, 3.08(b), 3.14(a), (c) and (d), 3.16, and 3.28 shall be deemed untrue and incorrect if not true and correct in all material respects and (z) Section 3.10(a) shall be deemed untrue and incorrect if not true and correct in all respects.

Section 3.01 Making of Representations and Warranties. Except as set forth in the Wellesley Disclosure Schedule or the Wellesley SEC Documents, each of Wellesley and Wellesley Bank hereby represents and warrants to Cambridge and Cambridge Trust that the statements contained in this Article III are correct as of the date of this Agreement and will be correct as of the Closing Date, except as to any representation or warranty that specifically relates to an earlier date, which only need be correct as of such earlier date.

Section 3.02 Organization, Standing and Authority of Wellesley. Wellesley is a Maryland corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, and is duly registered as a bank holding company under the BHC Act. Wellesley has full corporate power and authority to carry on its business as now conducted. Wellesley is duly licensed or qualified to do business in the States of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires such qualification. The charter and bylaws of Wellesley, copies of which have been made available to Cambridge, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.

Section 3.03 Organization, Standing and Authority of Wellesley Bank. Wellesley Bank is a Massachusetts-chartered bank duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. Wellesley Bank’s deposits are insured by the FDIC and the Massachusetts Share Insurance Fund in the manner and to the fullest extent provided by applicable law, and all premiums and assessments required to be paid in connection therewith have been paid by Wellesley Bank when due. No proceedings for the revocation or termination of such deposit insurance are pending or, except as set forth in Wellesley Disclosure Schedule 3.03, to the Knowledge of Wellesley Bank, threatened. Wellesley Bank is a nonmember bank and its primary federal bank regulator is the FDIC. Wellesley Bank is a member in good standing of the FHLB and owns the requisite amount of stock of the FHLB as set forth on Wellesley Disclosure Schedule 3.03. The charter and bylaws of Wellesley Bank, copies of which have been made available to Cambridge, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.

Section 3.04 Wellesley and Bank Capital Stock.

(a) The authorized capital stock of Wellesley consists solely of 14,000,000 shares of common stock, par value $0.01 per share, of which 2,569,401 shares are outstanding as of the date hereof (“Wellesley Stock”) and 1,000,000 shares of preferred stock, par value $0.01 per share, of which no shares are outstanding as of the date hereof. As of the date hereof, there are no shares of Wellesley Stock held in treasury by Wellesley. The outstanding shares of Wellesley Stock have been duly authorized and validly issued and are fully paid and non-assessable. Except for the Wellesley Options listed on Wellesley Disclosure Schedule 3.04(c), Wellesley does not have any Rights issued or outstanding with respect to Wellesley Stock and Wellesley does not have any commitment to authorize, issue or sell any Wellesley Stock or Rights.

(b) The authorized capital stock of Wellesley Bank consists solely of 1,000,000 shares of common stock, par value of $1.00 per share, of which 100 shares are outstanding as of the date hereof (“Wellesley Bank Stock”) and 250,000 shares of preferred stock, par value $1.00 per share, of which no shares are outstanding as of the date hereof. The outstanding shares of Wellesley Bank Stock have been duly authorized and validly issued, are fully paid and non-assessable, are owned by Wellesley free and clear of all clear of all Liens (except as provided under 12 U.S.C. § 55 or any comparable provision of applicable state law) and were not issued in violation of any preemptive rights. Wellesley Bank does not have any Rights issued or outstanding with respect to Wellesley Bank Stock and Wellesley Bank does not have any commitment to authorize, issue or sell any Wellesley Bank Stock or Rights.

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(c) Wellesley Disclosure Schedule 3.04(c)(i) contains a list setting forth, as of the date of this Agreement, with respect to each outstanding Wellesley Option, (i) the name of the holder of such Wellesley Option, (ii) whether the holder is a current or former employee, director or other individual service provider of Wellesley and any of its Subsidiaries, (iii) the number of shares of Wellesley Stock covered by such Wellesley Option, (iv) the exercise price per share with respect to such Wellesley Option, (v) the date of grant of such Wellesley Option, (vi) the date of expiration of such Wellesley Option, (vii) the vesting schedule applicable to such Wellesley Option, including whether such Wellesley Option is subject to accelerated vesting in connection with the consummation of the transactions contemplated hereby, (viii) whether such Wellesley Option is an incentive stock option or a nonqualified stock option, and (ix) the applicable Wellesley Equity Plan under which such Wellesley Option was granted. Upon issuance in accordance with the terms of the applicable Wellesley Equity Plans and award agreements, the shares of Wellesley Stock issued pursuant to the Wellesley Options have been and shall be issued in compliance with all applicable laws. Wellesley Disclosure Schedule 3.04(c)(ii) contains a list setting forth, as of the date of this Agreement, with respect to each outstanding share of Wellesley Restricted Stock, (i) the name of the holder of such Wellesley Restricted Stock, (ii) whether the holder is a current or former employee, director or other individual service provider of Wellesley and any of its Subsidiaries, (iii) the number of shares of Wellesley Stock covered by such Wellesley Restricted Stock award, (iv) the date of grant of such Wellesley Restricted Stock award, (v) the vesting schedule applicable to such Wellesley Restricted Stock, (vi) the applicable Wellesley Equity Plan under which such Wellesley Restricted Stock was granted.

Section 3.05 Subsidiaries. Except as set forth on Wellesley Disclosure Schedule 3.05, Wellesley does not, directly or indirectly, own or control any Affiliate. Except as disclosed on Wellesley Disclosure Schedule 3.05, Wellesley does not have any equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity, except as acquired through settlement of indebtedness, foreclosure, the exercise of creditors’ remedies or in a fiduciary capacity, and the business carried on by Wellesley has not been conducted through any other direct or indirect Subsidiary or Affiliate of Wellesley. No such equity investment identified in Wellesley Disclosure Schedule 3.05 is prohibited by applicable federal or states laws and regulations.

Section 3.06 Corporate Power; Minute Books. Each of Wellesley and Wellesley Bank has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and each of Wellesley and Wellesley Bank has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, subject to receipt of all necessary approvals of Governmental Authorities and the approval of Wellesley’s shareholders of this Agreement. Neither Wellesley nor Wellesley Bank conducts any trust business. The minute books of Wellesley contain true, complete and accurate records of all meetings and other corporate actions held or taken by shareholders of Wellesley and the Wellesley Board (including committees of the Wellesley Board). The minute books of Wellesley Bank contain true, complete and accurate records of all meetings and other corporate actions held or taken by shareholders of Wellesley Bank and Wellesley Bank Board (including committees of Wellesley Bank Board).

Section 3.07 Execution and Delivery. Subject to the approval of this Agreement by the shareholders of Wellesley, this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of Wellesley, the Wellesley Board, Wellesley Bank and Wellesley Bank Board on or prior to the date hereof. The Wellesley Board has directed that this Agreement be submitted to Wellesley’s shareholders for approval at a meeting of such shareholders and, except for the approval and adoption of this Agreement by the requisite affirmative vote of the holders of the outstanding shares of Wellesley Stock entitled to vote thereon, no other vote of the shareholders of Wellesley is required by law, the charter or bylaws of Wellesley or otherwise to approve this Agreement and the transactions contemplated hereby. Wellesley and Wellesley Bank have duly executed and delivered this Agreement and, assuming due authorization, execution and delivery by Cambridge, this Agreement is a valid and legally binding obligation of Wellesley and Wellesley Bank, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

Section 3.08 Regulatory Approvals; No Defaults.

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(a) No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by Wellesley or any of its Subsidiaries in connection with the execution, delivery or performance by Wellesley or Wellesley Bank of this Agreement or to consummate the transactions contemplated hereby, except for (i) filings of applications, notices or waiver requests, and consents, approvals or waivers described in Section 4.08, and (ii) the approval of this Agreement by the requisite affirmative vote of the holders of the outstanding shares of Wellesley Stock. As of the date hereof, Wellesley has no Knowledge of any reason why the approvals set forth above and referred to in Section 6.01(a) will not be received in a timely manner.

(b) Subject to receipt, or the making, of the consents, approvals, waivers and filings referred to in the preceding paragraph, and the expiration of related waiting periods, the execution, delivery and performance of this Agreement by Wellesley and Wellesley Bank, as applicable, and the consummation of the transactions contemplated hereby do not and will not (i) constitute a breach or violation of, or a default under, the charter or bylaws of Wellesley (or similar governing documents) or similar governing documents of any of its Subsidiaries, (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Wellesley or any of its Subsidiaries, or any of its properties or assets or (iii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, except as set forth in Wellesley Disclosure Schedule 3.08(b) accelerate the performance required by, or result in the creation of any Lien upon any of the properties or assets of Wellesley or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, contract, agreement or other instrument or obligation to which Wellesley or any of its Subsidiaries is a party, or by which it or any of its properties or assets may be bound or affected.

Section 3.09 Financial Statements; SEC Documents; and Financial Controls and Procedures.

(a) Wellesley has previously made available to Cambridge copies of the balance sheet of Wellesley as of December 31 for the fiscal years 2018 and 2017, and the related statements of income, shareholders’ equity and cash flows for the fiscal years 2018, 2017 and 2016, in each case accompanied by the audit report of Wolf & Company, P.C., the independent registered public accounting firm of Wellesley (the “Wellesley Financial Statements”). The Wellesley Financial Statements (including the related notes, where applicable) fairly present (subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount), the results of the operations and financial position of Wellesley and its consolidated Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth; each of such statements (including the related notes, where applicable) complies with applicable accounting requirements; and each of such statements (including the related notes, where applicable) has been prepared in accordance with GAAP consistently applied during the periods involved, except as indicated in the notes thereto. The books and records of Wellesley have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Wolf & Company, P.C. has not resigned or been dismissed as independent public accountants of Wellesley as a result of or in connection with any disagreements with Wellesley on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

(b) Wellesley’s Annual Report on Form 10-K, as amended through the date of this Agreement, for the fiscal year ended December 31, 2018 (the “Wellesley 2018 Form 10-K”), and all other reports, registration statements, definitive proxy statements or information statements required to be filed or furnished by Wellesley or any of its Subsidiaries subsequent to January 1, 2018, under the Securities Act, or under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act (collectively, the “Wellesley SEC Documents”), with the Securities and Exchange Commission (the “SEC”), and all of the Wellesley SEC Documents filed with the SEC after the date of this Agreement, in the form filed or to be filed, (i) complied or will comply as to form in all material respects with the applicable requirements under the Securities Act or the Exchange Act, as the case may be, and (ii) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Except for those liabilities that are fully reflected or reserved against in the most recent audited consolidated balance sheet of Wellesley and its Subsidiaries contained in Wellesley 2018 Form 10-K and, except for

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liabilities reflected in Wellesley SEC Documents filed prior to the date of this Agreement or incurred in the ordinary course of business consistent with past practices or in connection with this Agreement, since December 31, 2018, neither Wellesley nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on its consolidated balance sheet or in the notes thereto.

(c) Wellesley and each of its Subsidiaries, officers and directors are in compliance with, and have complied in all material respects, with (1) the applicable provisions of Sarbanes-Oxley and the related rules and regulations promulgated under such act and the Exchange Act and (2) the applicable listing and corporate governance rules and regulations of NASDAQ. Wellesley (i) has established and maintained disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act, and (ii) has disclosed based on its most recent evaluations, to its outside auditors and the audit committee of the Wellesley Board (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Wellesley’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Wellesley’s internal control over financial reporting.

Section 3.10 Absence of Certain Changes or Events.

(a) Since September 30, 2019, there has been no change or development or combination of changes or developments which, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on Wellesley.

(b) Except as set forth in Wellesley Disclosure Schedule 3.10, since September 30, 2019, each of Wellesley and its Subsidiaries has carried on its business only in the ordinary and usual course of business consistent with its past practices (except for actions in connection with the transactions contemplated by this Agreement).

(c) Except as set forth in Wellesley Disclosure Schedule 3.10, since December 31, 2018, none of Wellesley or any of its Subsidiaries has (i) except in the ordinary course of business consistent with past practice, increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any employee, director or other individual service provider from the amount thereof in effect as of December 31, 2018, granted any severance, termination pay, bonus, retention bonus, or change in control benefits, entered into any contract to make or grant any severance, termination pay, bonus, retention bonus, or change in control benefits, or paid any bonus or retention bonus, (ii) except as disclosed in Wellesley SEC Documents, declared, set aside or paid any dividend or other distribution (whether in cash, stock or property) with respect to any of Wellesley’s capital stock, (iii) effected or authorized any split, combination or reclassification of any of Wellesley’s capital stock or any issuance or issued any other securities in respect of, in lieu of or in substitution for shares of Wellesley’s capital stock, (iv) except as disclosed in Wellesley SEC Documents, changed any accounting methods (or underlying assumptions), principles or practices of Wellesley affecting its assets, liabilities or business, including without limitation, any reserving, renewal or residual method, practice or policy, (v) made any tax election by Wellesley or any settlement or compromise of any income tax liability by Wellesley, (vi) made any material change in Wellesley’s policies and procedures in connection with underwriting standards, origination, purchase and sale procedures or hedging activities with respect to any Loans, (vii) suffered any strike, work stoppage, slow-down, or other labor disturbance, (viii) been a party to a collective bargaining agreement, contract or other agreement or understanding with a labor union or organization, (ix) had any union organizing activities or (x) made any agreement or commitment (contingent or otherwise) to do any of the foregoing.

Section 3.11 Financial Controls and Procedures. During the periods covered by the Wellesley Financial Statements, each of Wellesley and its Subsidiaries has had in place internal controls over financial reporting which are designed and maintained to ensure that (a) transactions are executed in accordance with management’s general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (c) access to assets is permitted only in accordance with management’s general or specific authorization and (d) the recorded

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accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. None of Wellesley’s or any of its Subsidiaries’ records, systems, controls, data or information are recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of Wellesley or its accountants or agents.

Section 3.12 Regulatory Matters.

(a) Each of Wellesley and its Subsidiaries has timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file since December 31, 2016 with any Governmental Authority, and has paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by any Governmental Authority in the regular course of the business of Wellesley, and except as set forth in Wellesley Disclosure Schedule 3.12, no Governmental Authority has initiated any proceeding, or to the Knowledge of Wellesley, investigation into the business or operations of Wellesley or any of its Subsidiaries, since December 31, 2016. Other than as set forth in Wellesley Disclosure Schedule 3.12, there is no unresolved violation, criticism, or exception by any Governmental Authority with respect to any report or statement relating to any examinations of Wellesley. Wellesley is “well-capitalized” as defined in applicable laws and regulations, and Wellesley has a Community Reinvestment Act of 1977, as amended (the “Community Reinvestment Act”), rating of “satisfactory” or better.

(b) Other than as set forth in Wellesley Disclosure Schedule 3.12, since December 31, 2016, Wellesley has timely filed with the SEC and NASDAQ all documents required by the Securities Act and the Exchange Act, and such documents, as the same may have been amended, complied, at the time filed with the SEC, in all material respects with the Securities Act and the Exchange Act.

(c) Other than as set forth in Wellesley Disclosure Schedule 3.12, neither Wellesley nor Wellesley Bank, nor any of their properties is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter (each a “Regulatory Order”) from, any Governmental Authority charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits or the supervision or regulation of it. Wellesley and Wellesley Bank have not been advised by, or has any Knowledge of facts which could give rise to an advisory notice by, any Governmental Authority that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any Regulatory Order.

Section 3.13 Legal Proceedings; Regulatory Action.

(a) Other than as set forth in Wellesley Disclosure Schedule 3.13, (i) there are no pending or, to Wellesley’s Knowledge, threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Wellesley or any of its Subsidiaries and (ii) to Wellesley’s Knowledge, there are no facts which would reasonably be expected to give rise to such litigation, claim, suit, investigation or other proceeding.

(b) Neither Wellesley nor Wellesley Bank is a party to any, nor are there any pending or, to Wellesley’s Knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Wellesley or Wellesley Bank in which, to the Knowledge of Wellesley, there is a reasonable probability of any material recovery against or other Material Adverse Effect on Wellesley or which challenges the validity or propriety of the transactions contemplated by this Agreement.

(c) There is no injunction, order, judgment or decree imposed upon Wellesley or any of its Subsidiaries, or their respective assets, and none of Wellesley or any of its Subsidiaries has been advised of, or is aware of, the threat of any such action.

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(d) None of Wellesley or any of its Subsidiaries is a party to or subject to any assistance agreement, board resolution, order, decree, supervisory agreement, memorandum of understanding, condition or similar arrangement with, or a commitment letter or similar submission to, any Governmental Authority charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits (including, without limitation, the MDOB, the FRB and the FDIC) or the supervision or regulation of Wellesley or Wellesley Bank. None of Wellesley or any of its Subsidiaries has been subject to any order or directive by, or been ordered to pay any civil money penalty by, or has been since January 1, 2017, a recipient of any supervisory letter from, or since January 1, 2017, has adopted any policies, procedures or board resolutions at the request or suggestion of, any Governmental Authority that currently regulates in any material respect the conduct of its business or that in any manner relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business, other than those of general application that apply to similarly-situated banks or financial holding companies or their subsidiaries.

(e) Neither Wellesley nor Wellesley Bank has been advised by a Governmental Authority that it will issue, or has Knowledge of any facts which would reasonably be expected to give rise to the issuance by any Governmental Authority or has Knowledge that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting), any such order, decree, agreement, board resolution, memorandum of understanding, supervisory letter, commitment letter, condition or similar submission.

Section 3.14 Compliance with Laws.

(a) Each of Wellesley and its Subsidiaries is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the Investment Company Act of 1940, as amended, the Equal Credit Opportunity Act, as amended, the Fair Housing Act, as amended, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act of 1970, as amended, the USA PATRIOT Act, and all other applicable fair lending and fair housing laws or other laws relating to discrimination;

(b) Each of Wellesley and its Subsidiaries has all permits, licenses, authorizations, orders and approvals of, and have made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to Wellesley’s Knowledge, no suspension or cancellation of any of them is threatened;

(c) Other than as set forth in Wellesley Disclosure Schedule 3.14, none of Wellesley or any Subsidiary has received, since January 1, 2017, any notification or communication from any Governmental Authority (i) asserting that it is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces or (ii) threatening to revoke any license, franchise, permit or governmental authorization (nor, to Wellesley’s Knowledge, do any grounds for any of the foregoing exist); and

(d) Since January 1, 2017, Wellesley has conducted any finance activities (including, without limitation, mortgage banking and mortgage lending activities and consumer finance activities) in all material respects in compliance with all applicable statutes and regulations regulating the business of consumer lending, including, without limitation, state usury laws, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Homeowners Ownership and Equity Protection Act, the Fair Debt Collection Practices Act and other federal, state, local and foreign laws regulating lending (“Finance Laws”), and with all applicable origination, servicing and collection practices with respect to any loan or credit extension by such entity. In addition, there is no pending or, to the Knowledge of Wellesley, threatened charge by any Governmental Authority that Wellesley has violated, nor any pending or, to Wellesley’s Knowledge, threatened investigation by any Governmental Authority with respect to possible violations of, any applicable Finance Laws.

Section 3.15 Material Contracts; Defaults.

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(a) Other than as set forth in Wellesley Disclosure Schedule 3.15 or as filed with Wellesley SEC Documents, none of Wellesley or any of its Subsidiaries is a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral): (i) with respect to the employment or service of any current or former employees, or directors of Wellesley or any of its Subsidiaries; (ii) which would entitle any current or former employee, director, other individual service provider or agent of Wellesley or any of its Subsidiaries to indemnification from Wellesley or such Subsidiaries; (iii) any agreement, arrangement, or commitment (whether written or oral) which, upon the consummation of the transactions contemplated by this Agreement would result in any payment (whether of change in control, bonus, retention bonus, severance pay or otherwise) becoming due from Wellesley or any of its Subsidiaries to any employee, director, or other individual service provider thereof; (iv) which is a consulting agreement (including data processing, software programming and licensing contracts) not terminable on sixty (60) days or less notice and involving the payment of more than $25,000 per annum; (v) any agreement, arrangement, or commitment that is material to the financial condition, results of operations or business of Wellesley or any of its Subsidiaries; or (vi) which materially restricts the conduct of any business by Wellesley. Wellesley has previously delivered or made available to Cambridge true, complete and correct copies of each such document. Each contract, arrangement, commitment or understanding of the type of described in this Section 3.15(a), whether or not set forth on Wellesley Disclosure Schedule 3.15 is referred to herein as a “Material Contract.”

(b) To its Knowledge, none of Wellesley or any of its Subsidiaries is in default under any material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its assets, business, or operations receives benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. No power of attorney or similar authorization given directly or indirectly by Wellesley or any of its Subsidiaries is currently outstanding.

Section 3.16 Brokers. Neither Wellesley nor any of its Subsidiaries nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with any of the transactions contemplated by this Agreement, except that Wellesley has engaged, and will pay a fee or commission to, Sandler O’Neill & Partners, L.P. A true, complete and correct copy of the engagement letter with Sandler O’Neill & Partners, L.P. has been provided to Cambridge.

Section 3.17 Employee Benefit Plans.

(a) All benefit and compensation plans, contracts, policies or arrangements maintained, sponsored or contributed to by Wellesley or Wellesley Bank covering current or former employees of Wellesley or Wellesley Bank (the “Wellesley Employees”) and current or former directors and other individual service providers of Wellesley or Wellesley Bank or the dependents or beneficiaries of any of them including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of ERISA, and deferred compensation, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans (the “Wellesley Benefit Plans”), are identified in Wellesley Disclosure Schedule 3.17(a). True and complete copies of all Wellesley Benefit Plans including, but not limited to, any trust instruments and insurance contracts forming a part of any Wellesley Benefit Plans and all amendments thereto, have been provided to Cambridge.

(b) All Wellesley Benefit Plans covering Wellesley Employees, to the extent subject to ERISA, are in substantial compliance with ERISA. Each Wellesley Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “Wellesley Pension Plan”) and which is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the IRS, and to the Knowledge of Wellesley, there are no circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such Wellesley Pension Plan under Section 401(a) of the Code. There is no pending or, to Wellesley’s Knowledge, threatened litigation relating to the Wellesley Benefit Plans. Wellesley has not engaged in a transaction with respect to any Wellesley Benefit Plan or Wellesley Pension Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject Wellesley to a material tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

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(c) No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by Wellesley with respect to any ongoing, frozen or terminated “single employer plan,” within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by Wellesley or Wellesley Bank, or the single-employer plan of any entity which is considered one employer with Wellesley or Wellesley Bank under Section 4001 of ERISA or Section 414 of the Code (a “Wellesley ERISA Affiliate”). Wellesley has not incurred, and does not expect to incur, any withdrawal liability with respect to a multiemployer plan under Subtitle E of Title IV of ERISA (regardless of whether based on contributions of an Wellesley ERISA Affiliate). No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Wellesley Pension Plan or by any Wellesley ERISA Affiliate within the 12 month period ending on the date hereof or will be required to be filed in connection with the transactions contemplated by this Agreement.

(d) All contributions, payments, and other obligations required to be made under the terms of any Wellesley Benefit Plan or an agreement with any Wellesley Employee have been timely made or have been reflected on the financial statements of Wellesley. No Wellesley Pension Plan or single-employer plan of a Wellesley ERISA Affiliate has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and no Wellesley ERISA Affiliate has an outstanding funding waiver. Neither Wellesley nor Wellesley Bank has provided, and is not required to provide, security to any Wellesley Pension Plan or to any single-employer plan of an Wellesley ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

(e) Other than as identified in Wellesley Disclosure Schedule 3.17(e), neither Wellesley nor Wellesley Bank has any obligations for retiree health and life benefits under any Wellesley Benefit Plan, other than coverage as may be required under Section 4980B of the Code or Part 6 of Title I of ERISA, or under the continuation of coverage provisions of the applicable laws of any state or locality. Wellesley or Wellesley Bank may amend or terminate any such Wellesley Benefit Plan at any time without incurring any liability thereunder.

(f) Other than as set forth in Wellesley Disclosure Schedule 3.17(f), the execution of this Agreement, shareholder approval of this Agreement or consummation of any of the transactions contemplated by this Agreement will not (i) entitle any Wellesley Employees to severance pay or any increase in severance pay upon any termination of employment after the date hereof, (ii) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Wellesley Benefit Plans, (iii) result in any breach or violation of, or a default under, any of the Wellesley Benefit Plans, (iv) result in any payment that would be a “parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code, without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future, or (v) limit or restrict the right of Wellesley or Wellesley Bank, or after the consummation of the transactions contemplated hereby, Cambridge, the Surviving Company or the Surviving Bank, to merge, amend, or terminate any of the Wellesley Benefit Plans, or (vi) result in payments that would not be deductible under Section 162(m) of the Code. Wellesley Disclosure Schedule 3.17(f) contains a schedule showing the present value of the monetary amounts payable as of the date specified in such schedule, whether individually or in the aggregate (including good faith estimates of all amounts not subject to precise quantification as of the date of this Agreement), under any employment, change-in-control, severance or similar contract, plan or arrangement with or which covers any present or former director, officer or employee of Wellesley or Wellesley Bank who may be entitled to any such amount and identifying the types and estimated amounts of the in-kind benefits due under any Wellesley Benefit Plans (other than a plan qualified under Section 401(a) of the Code) for each such person, specifying the assumptions in such schedule together with such detail as is needed to ensure that no such payment or benefit would result in a parachute payment to a disqualified individual within the meaning of Section 280G of the Code.

(g) Each Wellesley Benefit Plan that is a deferred compensation plan subject to Section 409A of the Code and any deferral elections thereunder are in compliance with Section 409A of the Code and the regulations thereunder, to the extent applicable.

(h) Each Wellesley Option (i) was granted in compliance with all applicable laws and all of the terms and conditions of the applicable plan pursuant to which it was issued, (ii) has an exercise price per share equal to or greater than the fair market value of a share of Wellesley Stock on the date of such grant, (iii) has a grant date that is

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no earlier than the date on which the Wellesley Board or Wellesley’s compensation committee actually awarded it, (iv) is exempt from the Section 409A of the Code, and (v) qualifies for the tax and accounting treatment afforded to such award in the Wellesley Tax Returns and the Wellesley Financial Statements, respectively.

Section 3.18 Labor Matters. None of Wellesley or any of its Subsidiaries is a party to or bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is Wellesley or any of its Subsidiaries the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act, as amended) or seeking to compel Wellesley or any of its Subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to Wellesley’s Knowledge, threatened, nor is Wellesley or any of its Subsidiaries aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity.

Section 3.19 Environmental Matters.

(a) Except as set forth in Wellesley Disclosure Schedule 3.19(a), each property owned, leased or operated by Wellesley and its Subsidiaries are, and have been, in material compliance with all Environmental Laws. Neither Wellesley nor any of its Subsidiaries has Knowledge of, nor has Wellesley or any of its Subsidiaries received notice of, any past, present, or future conditions, events, activities, practices or incidents that may interfere with or prevent the material compliance of Wellesley or Wellesley Bank with all Environmental Laws.

(b) Wellesley and its Subsidiaries have obtained all material permits, licenses and authorizations that are required for its operations under all Environmental Laws.

(c) No Hazardous Substance exists on, about or within any of the owned real properties, nor to Wellesley’s Knowledge have any Hazardous Substance previously existed on, about or within or been used, generated, stored, transported, disposed of, on or released from any of its properties. The use that Wellesley or any of its Subsidiaries makes and intends to make of any of its properties shall not result in the use, generation, storage, transportation, accumulation, disposal or release of any Hazardous Substance on, in or from any of those properties.

(d) There is no action, suit, proceeding, investigation, or inquiry before any court, administrative agency or other governmental authority pending or to Wellesley’s Knowledge threatened against Wellesley or Wellesley Bank relating in any way to any Environmental Law. None of Wellesley or any of its Subsidiaries has a liability for remedial action under any Environmental Law. None of Wellesley or any of its Subsidiaries has received any request for information by any governmental authority with respect to the condition, use or operation of any of its owned real properties or Wellesley Loan Properties nor has Wellesley or any of its Subsidiaries received any notice of any kind from any governmental authority or other person with respect to any violation of or claimed or potential liability of any kind under any Environmental Law with respect to any of its owned real properties or Wellesley Loan Properties.

Section 3.20 Tax Matters.

(a) Wellesley and its Subsidiaries have filed all income and other material Tax Returns that they were required to file under applicable laws and regulations, other than Tax Returns that are not yet due or for which a request for extension was filed. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable laws and regulations. All Taxes due and owing by Wellesley and its Subsidiaries (whether or not shown on any Tax Return) have been paid other than Taxes that have been reserved or accrued on the balance sheet of Wellesley or such Subsidiary is contesting in good faith. None of Wellesley or any of its Subsidiaries is the beneficiary of any extension of time within which to file any Tax Return, and other than as set forth on Wellesley Disclosure Schedule 3.20, neither Wellesley nor any its Subsidiaries currently has any open tax years. No claim has ever been made by an authority in a jurisdiction where Wellesley or any of its Subsidiaries does not file material Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Wellesley or any Subsidiary.

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(b) Each of Wellesley and its Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party.

(c) No foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are being conducted or to the Knowledge of Wellesley are pending with respect to Wellesley or any of its Subsidiaries. None of Wellesley or any of its Subsidiaries has received from any foreign, federal, state, or local taxing authority (including jurisdictions where Wellesley or any Subsidiary has not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against Wellesley or any of its Subsidiaries.

(d) Wellesley has provided Cambridge with true and complete copies of the United States federal, state, local, and foreign income Tax Returns filed with respect to Wellesley and its Subsidiaries for taxable periods ended December 31, 2018, 2017 and 2016. Wellesley has delivered to Cambridge correct and complete copies of all statements of deficiencies assessed against or agreed to by Wellesley or any of its Subsidiaries filed for the years ended December 31, 2018, 2017 and 2016. Each of Wellesley and its Subsidiaries has timely and properly taken such actions in response to and in compliance with notices Wellesley or any Subsidiary has received from the IRS in respect of information reporting and backup and nonresident withholding as are required by law.

(e) None of Wellesley or any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(f) None of Wellesley or any of its Subsidiaries has been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). Each of Wellesley and its Subsidiaries has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662. Except as set for in Wellesley Disclosure Schedule 3.20, none of Wellesley or any of its Subsidiaries is a party to or bound by any Tax allocation or sharing agreement. None of Wellesley or any of its Subsidiaries (i) has been a member of any consolidated, affiliated or unitary group of corporations for any Tax purposes, and (ii) has any liability for the Taxes of any individual, bank, corporation, partnership, association, joint stock company, business trust, limited liability company, or unincorporated organization (other than Wellesley or such Subsidiary) under Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(g) The unpaid Taxes of Wellesley and its Subsidiaries (i) did not, as of the end of the most recent period covered by Wellesley’s or such Subsidiary’s call reports filed on or prior to the date hereof, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the financial statements included in Wellesley’s or such Subsidiary’s call reports filed on or prior to the date hereof (rather than in any notes thereto), and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Wellesley and its Subsidiaries in filing its Tax Returns. Since the end of the most recent period covered by Wellesley’s or such Subsidiary’s call reports filed prior to the date hereof, none of Wellesley or any of its Subsidiaries has incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.

(h) None of Wellesley or any of its Subsidiaries shall be required to include any material item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) intercompany transactions or any excess loss account described in Treasury Regulations under Code Section 1502 (or any corresponding or similar provision of state, local or foreign income Tax law); (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date.

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(i) None of Wellesley or any of its Subsidiaries has distributed stock of another Person or had its stock distributed by another Person in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.

(j) None of Wellesley or any of its Subsidiaries has participated in a listed transaction within the meaning of Reg. Section 1.6011-4 (or any predecessor provision) and Wellesley has not been notified of, or to Wellesley’s Knowledge has participated in, a transaction that is described as a “reportable transaction” within the meaning of Reg. Section 1.6011-4(b)(1).

(k) None of Wellesley or any of its Subsidiaries is subject to any private letter ruling of the IRS or comparable rulings of any Governmental Authority.

(l) None of Wellesley or any of its Subsidiaries has, or to Wellesley’s Knowledge has ever had, a permanent establishment in any country other than the United States, or has not engaged in a trade or business in any country other than the United States that subjected it to tax in such country.

Section 3.21 Investment Securities. Wellesley Disclosure Schedule 3.21 sets forth the book and market value as of September 30, 2019 of the investment securities, mortgage backed securities and securities held for sale of Wellesley and its Subsidiaries, as well as, with respect to such securities, descriptions thereof, CUSIP numbers, book values, fair values and coupon rates. Each of Wellesley and its Subsidiaries has good title to all securities owned by it (except those sold under repurchase agreements or held in any fiduciary or agency capacity), free and clear of any Liens, except to the extent such securities are pledged in the ordinary course of business to secure obligations of Wellesley or any Subsidiary.

Section 3.22 Derivative Transactions. All Derivative Transactions entered into by Wellesley or any of its Subsidiaries were entered into in all material respects in accordance with applicable rules, regulations and policies of any Governmental Authority, and in accordance with the investment, securities, commodities, risk management and other policies, practices and procedures employed by Wellesley and its Subsidiaries, and were entered into with counterparties believed at the time to be financially responsible and able to understand (either alone or in consultation with their advisers) and to bear the risks of such Derivative Transactions. Wellesley and its Subsidiaries have duly performed all of their obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and, to the Knowledge of Wellesley, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder. Wellesley and its Subsidiaries have adopted policies and procedures consistent with the publications of Governmental Authorities with respect to their derivatives program.

Section 3.23 Loans; Nonperforming and Classified Assets.

(a) Except as set forth in Wellesley Disclosure Schedule 3.23(a), as of the date hereof, none of Wellesley or any of its Subsidiaries is a party to any written or oral (i) loan, loan agreement, note or borrowing arrangement (including, without limitation, leases, credit enhancements, commitments, guarantees and interest-bearing assets) (collectively, “Loans”), under the terms of which the obligor was, as of September 30, 2019, over sixty (60) days delinquent in payment of principal or interest or in default of any other material provision, or (ii) Loan with any director, executive officer or five percent or greater shareholder of Wellesley or any of its Subsidiaries, or to the Knowledge of Wellesley, any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing. Wellesley Disclosure Schedule 3.23(a) identifies (x) each Loan that as of September 30, 2019 was classified as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import by Wellesley or any of its Subsidiaries or any bank examiner, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, and (y) each asset of Wellesley that as of September 30, 2019 was classified as other real estate owned (“OREO”) and the book value thereof.

(b) Each Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to the Knowledge of Wellesley, is a legal, valid and binding obligation of the obligor named

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therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) The loan documents with respect to each Loan were in compliance with applicable laws and regulations and Wellesley’s or the applicable Subsidiary’s lending policies at the time of origination of such Loans and are complete and correct.

(d) Except as set forth in Wellesley Disclosure Schedule 3.23(d), none of Wellesley or any of its Subsidiaries is a party to any agreement or arrangement with (or otherwise obligated to) any Person which obligates Wellesley or any of its Subsidiaries to repurchase from any such Person any Loan or other asset of Wellesley or any of its Subsidiaries.

Section 3.24 Tangible Properties and Assets.

(a) Wellesley Disclosure Schedule 3.24(a) sets forth a true, correct and complete list of all real property owned by Wellesley or any of its Subsidiaries. Except as set forth in Wellesley Disclosure Schedule 3.24(a), and except for properties and assets disposed of in the ordinary course of business or as permitted by this Agreement, Wellesley or any of its Subsidiaries has good title to, valid leasehold interests in or otherwise legally enforceable rights to use all of the real property, personal property and other assets (tangible or intangible), used, occupied and operated or held for use by it in connection with its business as presently conducted in each case, free and clear of any Lien, except for (i) statutory Liens for amounts not yet delinquent and (ii) Liens incurred in the ordinary course of business or imperfections of title, easements and encumbrances, if any, that, individually and in the aggregate, are not material in character, amount or extent, and do not materially detract from the value and do not materially interfere with the present use, occupancy or operation of any material asset.

(b) Wellesley Disclosure Schedule 3.24(b) sets forth a true, correct and complete schedule of all leases, subleases, licenses and other agreements under which Wellesley or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, real property (the “Leases”). Each of the Leases is valid, binding and in full force and effect and, as of the date hereof, none of Wellesley or any of its Subsidiaries has received a written notice of, and otherwise has no Knowledge of any, default or termination with respect to any Lease. There has not occurred any event and, to Wellesley’s Knowledge, no condition exists that would constitute a termination event or a material breach by Wellesley or any of its Subsidiaries of, or material default by Wellesley or any of its Subsidiaries in, the performance of any covenant, agreement or condition contained in any Lease, and to Wellesley’s Knowledge, no lessor under a Lease is in material breach or default in the performance of any material covenant, agreement or condition contained in such Lease. Except as set forth on Wellesley Disclosure Schedule 3.24(b), there is no pending or, to Wellesley’s Knowledge, threatened proceeding, action or governmental or regulatory investigation of any nature by any Governmental Authority with respect to the real property that Wellesley or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, including without limitation a pending or threatened taking of any of such real property by eminent domain. Each of Wellesley and its Subsidiaries has paid all rents and other charges to the extent due under the Leases.

Section 3.25 Intellectual Property. Wellesley Disclosure Schedule 3.25 sets forth a true, complete and correct list of all Wellesley Intellectual Property owned or purported to be owned by Wellesley. Wellesley owns or has a valid license to use all Wellesley Intellectual Property, free and clear of all Liens, royalty or other payment obligations (except for royalties or payments with respect to off-the-shelf Software at standard commercial rates). Wellesley Intellectual Property constitutes all of the Intellectual Property necessary to carry on the business of Wellesley and its Subsidiaries as currently conducted. Wellesley Intellectual Property owned by Wellesley or any of its Subsidiaries, and to the Knowledge of Wellesley, all other Wellesley Intellectual Property, is valid and enforceable and has not been cancelled, forfeited, expired or abandoned, and none of Wellesley or any of its Subsidiaries has received notice challenging the validity or enforceability of Wellesley Intellectual Property. To the Knowledge of Wellesley, the conduct of the business of Wellesley and its Subsidiaries does not violate, misappropriate or infringe upon the Intellectual Property rights of any third party. The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of the right of Wellesley or any of its Subsidiaries to own or use any of the Wellesley Intellectual Property.

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Section 3.26 Fiduciary Accounts. Since December 31, 2016, each of Wellesley and its Subsidiaries has properly administered all accounts for which it is or was a fiduciary, including but not limited to accounts for which it serves or served as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable laws and regulations. Neither Wellesley nor any of its Subsidiaries nor any of their respective directors, officers or employees, has committed any breach of trust with respect to any fiduciary account and the records for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.

Section 3.27 Insurance.

(a) Wellesley Disclosure Schedule 3.27(a) identifies all of the material insurance policies, binders, or bonds currently maintained by Wellesley or any of its Subsidiaries, other than credit-life policies (the “Insurance Policies”), including the insurer, policy numbers, amount of coverage, effective and termination dates and any pending claims thereunder involving incurred losses of more than $50,000. Each of Wellesley and its Subsidiaries is insured, and during each of the past three (3) calendar years has been insured against such risks and in such amounts as the management of Wellesley reasonably has determined to be prudent in accordance with industry practices and has maintained all insurance required by applicable laws and regulations. All the Insurance Policies are in full force and effect, none of Wellesley or any of its Subsidiaries is in material default thereunder and all claims thereunder have been filed in due and timely fashion.

(b) Wellesley Disclosure Schedule 3.27(b) sets forth a true, correct and complete description of all bank owned life insurance (“BOLI”) owned by Wellesley or any of its Subsidiaries, including the value of BOLI as of the end of the most recent month for which a statement is available prior to the date hereof. The value of such BOLI as of the date hereof is fairly and accurately reflected in the Wellesley Financial Statements in accordance with GAAP.

Section 3.28 Antitakeover Provisions. No “control share acquisition,” “business combination moratorium,” “fair price” or other form of antitakeover statute or regulation is applicable to this Agreement and the transactions contemplated hereby.

Section 3.29 Fairness Opinion. The Wellesley Board has received the written opinion of Sandler O’Neill & Partners, L.P. to the effect that as of the date hereof the Exchange Ratio is fair to the holders of Wellesley Stock from a financial point of view.

Section 3.30 Joint Proxy Statement/Prospectus. As of the date of the Joint Proxy Statement/Prospectus and the dates of the meeting of the shareholders of Wellesley to which such Joint Proxy Statement/Prospectus relates, the Joint Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that information as of a later date shall be deemed to modify information as of an earlier date, and further provided that no representation and warranty is made with respect to information relating to Cambridge and its Subsidiaries included in the Joint Proxy Statement/Prospectus.

Section 3.31 CRA, Anti-money Laundering and Customer Information Security. Neither Wellesley or Wellesley Bank is a party to any agreement with any individual or group regarding CRA matters and neither Wellesley nor Wellesley Bank has any Knowledge of, nor has Wellesley or Wellesley Bank been advised of, or has any reason to believe (based on Wellesley’s Home Mortgage Disclosure Act data for the year ended December 31, 2018, filed with the FDIC, or otherwise) that any facts or circumstances exist, which would cause Wellesley or Wellesley Bank: (a) to be deemed not to be in satisfactory compliance with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by Bank Regulators of lower than “satisfactory”; (b) to be deemed to be operating in violation of the federal Bank Secrecy Act, as amended, and its implementing regulations (31 C.F.R. Chapter X), the USA PATRIOT Act, and the regulations promulgated thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (c) to be deemed not to be in satisfactory compliance with the applicable requirements contained in any federal and state privacy or data security laws and regulations, including, without limitation, in Title V of the Gramm-Leach-Bliley

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Act of 1999 and regulations promulgated thereunder, as well as the provisions of the information security program adopted by Wellesley pursuant to 12 C.F.R. Part 208, Subpart J, Appendix D. Furthermore, the Wellesley Board has adopted and Wellesley has implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that has not been deemed ineffective by any Governmental Authority and that meets the requirements of Sections 352 and 326 and all other applicable provisions of the USA PATRIOT Act and the regulations thereunder.

Section 3.32 Transactions with Affiliates. There are no outstanding amounts payable to or receivable from, or advances by Wellesley or any of its Subsidiaries to, and neither Wellesley nor any of its Subsidiaries is otherwise a creditor or debtor to, any shareholder owning five percent (5%) or more of the outstanding Wellesley Stock, director, employee or Affiliate of Wellesley or any of its Subsidiaries, other than as part of the normal and customary terms of such persons’ employment or service as a director with Wellesley or any of its Subsidiaries or other than in the ordinary course of Wellesley Bank’s business. All transactions, agreements and relationships between Wellesley and any Subsidiary and any Affiliates, shareholders, directors or officers of Wellesley and any Subsidiary comply, to the extent applicable, with Regulation W and Regulation O of the FRB.

Section 3.33 Disclosure. The representations and warranties contained in this Article III, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Article III not misleading.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF CAMBRIDGE

As a material inducement to Wellesley to enter into this Agreement and to consummate the transactions contemplated hereby, Cambridge hereby makes to Wellesley the representations and warranties contained in this Article IV, provided, however, that Cambridge shall not be deemed to have breached a representation or warranty as a consequence of the existence of any fact, event or circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in this Article IV, has had or is reasonably likely to have, a Material Adverse Effect (disregarding for purposes of this proviso any materiality or Material Adverse Effect qualification or exception contained in any representation or warranty). Notwithstanding the immediately preceding sentence, the representations and warranties contained in (x) Section 4.04 shall be deemed untrue and incorrect if not true and correct except to a de minimis extent, (y) Section 4.02, 4.05, 4.06, 4.07, 4.08, 4.13(a) and (c), 4.14, and 4.23 shall be deemed untrue and incorrect if not true and correct in all material respects and (z) Section 4.09 shall be deemed untrue and incorrect if not true and correct in all respects.

Section 4.01 Making of Representations and Warranties. Except as set forth in the Cambridge Disclosure Schedule and the Cambridge SEC Documents, Cambridge hereby represents and warrants to Wellesley that the statements contained in this Article IV are correct as of the date of this Agreement and will be correct as of the Closing Date, except as to any representation or warranty which specifically relates to an earlier date, which only need be correct as of such earlier date.

Section 4.02 Organization, Standing and Authority of Cambridge. Cambridge is a Massachusetts corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, and is duly registered as a bank holding company under the BHC Act. Cambridge has full corporate power and authority to carry on its business as now conducted. Cambridge is duly licensed or qualified to do business in the States of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires such qualification. The charter and bylaws of Cambridge, copies of which have been made available to Wellesley, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.

Section 4.03 Organization, Standing and Authority of Cambridge Trust. Cambridge Trust is a Massachusetts-chartered trust company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. Cambridge Trust’s deposits are insured by the FDIC in the manner and to the fullest extent provided by applicable law, and all premiums and assessments required to be paid in connection therewith have been paid by Cambridge Trust when due. Cambridge Trust is a nonmember bank and its

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primary federal bank regulator is the FDIC. Cambridge Trust is a member in good standing of the FHLB and owns the requisite amount of stock of the FHLB as set forth on Cambridge Disclosure Schedule 4.03. The charter and bylaws of Cambridge Trust, copies of which have been made available to Wellesley, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement.

Section 4.04 Cambridge Capital Stock. The authorized capital stock of Cambridge consists of 10,000,000 shares of Cambridge Stock, par value $1.00, of which 4,850,118 shares (including unvested shares of restricted stock) are outstanding as of the date hereof. As of the date hereof, no shares of Cambridge Stock are held in treasury by Cambridge. The outstanding shares of Cambridge Stock have been duly authorized and validly issued and are fully paid and non-assessable. Except for (a) 12,658 shares of Cambridge Stock subject to issuance and/or delivery pursuant to outstanding restricted stock units that vest solely based on time-based vesting requirements, and up to a maximum of 114,512 shares of Cambridge Stock subject to issuance and/or delivery pursuant to outstanding restricted stock units that vest based on performance-based vesting requirements, and (b) the Cambridge Stock to be issued pursuant to this Agreement, Cambridge does not have any Rights issued or outstanding with respect to Cambridge Stock and Cambridge does not have any commitments to authorize, issue or sell any Cambridge Stock or Rights.

Section 4.05 Subsidiaries. Except as set forth on Cambridge Disclosure Schedule 4.05, Cambridge does not, directly or indirectly, own or control any Affiliate. Except as disclosed on Cambridge Disclosure Schedule 4.05, Cambridge does not have any equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity, except as acquired through settlement of indebtedness, foreclosure, the exercise of creditors’ remedies or in a fiduciary capacity, and the business carried on by Cambridge has not been conducted through any other direct or indirect Subsidiary or Affiliate of Cambridge. No such equity investment identified in Cambridge Disclosure Schedule 4.05 is prohibited by the applicable federal or state laws and regulations.

Section 4.06 Corporate Power; Minute Books. Each of Cambridge and Cambridge Trust has the corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and each of Cambridge and Cambridge Trust has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, subject to receipt of all necessary approvals of Governmental Authorities. The minute books of Cambridge contain true, complete and accurate records of all meetings and other corporate actions held or taken by shareholders of Cambridge and the Cambridge Board (including committees of the Cambridge Board).

Section 4.07 Execution and Delivery. Subject to the approval of the Agreement by the shareholders of Cambridge, this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of Cambridge and Cambridge Trust and each of their respective Boards of Directors on or prior to the date hereof. The Cambridge Board has directed that this Agreement be submitted to Cambridge’s shareholders for approval at a meeting of such shareholders and, except for the approval and adoption of this Agreement by the requisite affirmative vote of the holders of the outstanding shares of Cambridge Stock entitled to vote thereon, no other vote of the shareholders of Cambridge is required by law, the charter and bylaws of Cambridge or otherwise to approve this Agreement and the transactions contemplated hereby. Each of Cambridge and Cambridge Trust has duly executed and delivered this Agreement and, assuming due authorization, execution and delivery by Wellesley, this Agreement is a valid and legally binding obligation of each of Cambridge and Cambridge Trust, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

Section 4.08 Regulatory Approvals; No Defaults.

(a) Subject to the receipt of all consents, approvals, waiver or non-objections of a Governmental Authority required to consummate the transactions contemplated by this Agreement, including, without limitation, waiver or approval of the FRB, approval of the FDIC, approval of the Massachusetts Commissioner of Banks, the notification from the Massachusetts Housing Partnership that satisfactory arrangements have been made consistent with the MGL and the affordable housing loan program of the Massachusetts Housing Partnership, and the

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notification of the Co-Operative Central Bank and Depositors Insurance Fund that satisfactory arrangements have been made for the Bank Merger (“Regulatory Approvals”), and the required filings under federal and state securities laws, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby (including, without limitation, the Merger) by Cambridge and Cambridge Trust do not and will not (i) constitute a breach or violation of, or a default under, result in a right of termination, or the acceleration of any right or obligation under, any law, rule or regulation or any judgment, decree, order, permit, license, credit agreement, indenture, loan, note, bond, mortgage, reciprocal easement agreement, lease, instrument, concession, franchise or other agreement of Cambridge or of any of its Subsidiaries or to which Cambridge or any of its Subsidiaries, properties or assets is subject or bound, (ii) constitute a breach or violation of, or a default under, the charter of bylaws of Cambridge or Cambridge Trust, or (iii) require the consent or approval of any third party or Governmental Authority under any such law, rule, regulation, judgment, decree, order, permit, license, credit agreement, indenture, loan, note, bond, mortgage, reciprocal easement agreement, lease, instrument, concession, franchise or other agreement.

(b) As of the date of this Agreement, Cambridge has no Knowledge of any reasons relating to Cambridge or Cambridge Trust (including, without limitation, compliance with the CRA or the USA PATRIOT Act) why any of the Regulatory Approvals shall not be received from the applicable Governmental Authorities having jurisdiction over the transactions contemplated by this Agreement.

Section 4.09 Absence of Certain Changes or Events. Since September 30, 2019, there has been no change or development or combination of changes or developments which, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on Cambridge and its Subsidiaries taken as a whole.

Section 4.10 SEC Documents; Financial Reports; and Financial Controls and Procedures.

(a) Cambridge’s Annual Report on Form 10-K, as amended through the date of this Agreement, for the fiscal year ended December 31, 2018 (the “Cambridge 2018 Form 10-K”), and all other reports, registration statements, definitive proxy statements or information statements required to be filed or furnished by Cambridge or any of its Subsidiaries subsequent to January 1, 2018, under the Securities Act, or under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act (collectively, the “Cambridge SEC Documents”), with the SEC, and all of the Cambridge SEC Documents filed with the SEC after the date of this Agreement, in the form filed or to be filed, (i) complied or will comply as to form in all material respects with the applicable requirements under the Securities Act or the Exchange Act, as the case may be, and (ii) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; and each of the balance sheets contained in or incorporated by reference into any such Cambridge SEC Document (including the related notes and schedules thereto) fairly presents and will fairly present the financial position of the entity or entities to which such balance sheet relates as of its date, and each of the statements of income and changes in stockholders’ equity and cash flows or equivalent statements in such Cambridge SEC Documents (including any related notes and schedules thereto) fairly presents and will fairly present the results of operations, changes in stockholders’ equity and changes in cash flows, as the case may be, of the entity or entities to which such statement relates for the periods to which it relates, in each case in accordance with GAAP consistently applied during the periods involved, except in each case as may be noted therein, subject to normal year-end audit adjustments in the case of unaudited financial statements. Except for those liabilities that are fully reflected or reserved against in the most recent audited consolidated balance sheet of Cambridge and its Subsidiaries contained in Cambridge 2018 Form 10-K and, except for liabilities reflected in Cambridge SEC Documents filed prior to the date of this Agreement or incurred in the ordinary course of business consistent with past practices or in connection with this Agreement, since December 31, 2018, neither Cambridge nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on its consolidated balance sheet or in the notes thereto. The books and records of Cambridge have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. KPMG LLP has not resigned or been dismissed as independent public accountants of Cambridge as a result of or in connection with any disagreements with Cambridge on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

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(b) Cambridge and each of its Subsidiaries, officers and directors are in compliance with, and have complied in all material respects, with (1) the applicable provisions of Sarbanes-Oxley and the related rules and regulations promulgated under such act and the Exchange Act and (2) the applicable listing and corporate governance rules and regulations of NASDAQ. Cambridge (i) has established and maintained disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act, and (ii) has disclosed based on its most recent evaluations, to its outside auditors and the audit committee of the Cambridge Board (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Cambridge’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Cambridge’s internal control over financial reporting.

Section 4.11 Regulatory Matters.

(a) Each of Cambridge and Cambridge Trust has timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file since December 31, 2016 with any Governmental Authority, and has paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by any Governmental Authority in the regular course of the business of Cambridge and/or Cambridge Trust, no Governmental Authority has initiated any proceeding, or to the Knowledge of Cambridge, investigation into the business or operations of Cambridge and/or Cambridge Trust, since December 31, 2016. There is no unresolved violation, criticism, or exception by any Governmental Authority with respect to any report or statement relating to any examinations of Cambridge Trust. Cambridge Trust is “well-capitalized” as defined in applicable laws and regulations, and Cambridge Trust has a Community Reinvestment Act rating of “satisfactory” or better.

(b) Other than as set forth in Cambridge Disclosure Schedule 4.11, since December 31, 2016, Cambridge has timely filed with the SEC and NASDAQ all documents required by the Securities Act and the Exchange Act, and such documents, as the same may have been amended, complied, at the time filed with the SEC, in all material respects with the Securities Act and the Exchange Act.

(c) Neither Cambridge, Cambridge Trust nor any of their respective properties is a party to or is subject to any Regulatory Order from any Governmental Authority charged with the supervision or regulation of financial institutions or issuers of securities or engaged in the insurance of deposits or the supervision or regulation of it. Neither Cambridge nor Cambridge Trust has been advised by, or has any Knowledge of facts which could give rise to an advisory notice by, any Governmental Authority that such Governmental Authority is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any Regulatory Order.

Section 4.12 Legal Proceedings.

(a) Other than as set forth in Cambridge Disclosure Schedule 4.12, there are no pending or, to the Knowledge of Cambridge, threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Cambridge.

(b) Cambridge is not a party to any, nor are there any pending or, to Cambridge’s Knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Cambridge in which, to the Knowledge of Cambridge, there is a reasonable probability of any material recovery against or other Material Adverse Effect on Cambridge or any of its Subsidiaries or which challenges the validity or propriety of the transactions contemplated by this Agreement.

(c) There is no injunction, order, judgment or decree imposed upon Cambridge, nor on any of the assets of Cambridge, and Cambridge has not been advised of, or is aware of, the threat of any such action.

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Section 4.13 Compliance With Laws.

(a) Cambridge is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the Investment Company Act of 1940, as amended, the Equal Credit Opportunity Act, as amended, the Fair Housing Act, as amended, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act of 1970, as amended, the USA PATRIOT Act, and all other applicable fair lending and fair housing laws or other laws relating to discrimination;

(b) Cambridge has all permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to Cambridge’s Knowledge, no suspension or cancellation of any of them is threatened; and

(c) Cambridge has not received, since December 31, 2016, notification or communication from any Governmental Authority (i) asserting that it is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces, or (ii) threatening to revoke any license, franchise, permit or governmental authorization (nor, to Cambridge’s Knowledge, do any grounds for any of the foregoing exist).

(d) Since January 1, 2017, Cambridge has conducted any finance activities (including, without limitation, mortgage banking and mortgage lending activities and consumer finance activities) in all material respects in compliance with all applicable statutes and regulations regulating the business of consumer lending, including, without limitation, the Finance Laws, and with all applicable origination, servicing and collection practices with respect to any loan or credit extension by such entity. In addition, there is no pending or, to the Knowledge of Cambridge, threatened charge by any Governmental Authority that Cambridge has violated, nor any pending or, to Cambridge’s Knowledge, threatened investigation by any Governmental Authority with respect to possible violations of, any applicable Finance Laws.

Section 4.14 Brokers. Neither Cambridge nor any of its officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with any of the transactions contemplated by this Agreement, except that Cambridge has engaged, and will pay a fee or commission to, Keefe, Bruyette & Woods, Inc.

Section 4.15 Employee Benefit Plans.

(a) All benefit and compensation plans, contracts, policies or arrangements maintained, sponsored or contributed to by Cambridge covering current or former employees of Cambridge and current or former directors (collectively, the “Cambridge Benefit Plans”) are in compliance with all applicable laws in all material respects.

(b) Each Cambridge Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “Cambridge Pension Plan”) and which is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the IRS, and to the Knowledge of Cambridge, there are no circumstances likely to result in revocation of any such favorable determination letter or the loss of the qualification of such Cambridge Pension Plan under Section 401(a) of the Code. There is no pending or, to Cambridge’s Knowledge, threatened litigation relating to the Cambridge Benefit Plans. Cambridge has not engaged in a transaction with respect to any Cambridge Benefit Plan or Cambridge Pension Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject Cambridge to a material tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

(c) No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by Cambridge with respect to any ongoing, frozen or terminated “single employer plan,” within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by Cambridge, or the single-employer plan of any entity which is considered one employer with Cambridge under Section 4001 of ERISA or Section 414 of the Code (a “Cambridge ERISA Affiliate”). Cambridge has not incurred, and does not expect to incur, any withdrawal liability with respect to a multiemployer plan under Subtitle E of Title IV of ERISA (regardless of whether based on

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contributions of an Cambridge ERISA Affiliate). No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Cambridge Pension Plan or by any Cambridge ERISA Affiliate within the 12 month period ending on the date hereof or will be required to be filed in connection with the transactions contemplated by this Agreement.

(d) All contributions, payments, and other obligations required to be made under the terms of any Cambridge Benefit Plan or an agreement with any Cambridge employee have been timely made or have been reflected on the financial statements of Cambridge. No Cambridge Pension Plan or single-employer plan of a Cambridge ERISA Affiliate has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and no Cambridge ERISA Affiliate has an outstanding funding waiver. Cambridge has not provided, and is not required to provide, security to any Cambridge Pension Plan or to any single-employer plan of a Cambridge ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

(e) Each Cambridge Benefit Plan that is a deferred compensation plan subject to Section 409A of the Code and any deferral elections thereunder are in compliance with Section 409A of the Code and the regulations thereunder, to the extent applicable.

Section 4.16 Labor Matters. None of Cambridge or any of its Subsidiaries is a party to or bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is Cambridge or any of its Subsidiaries the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act, as amended) or seeking to compel Cambridge or any of its Subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to Cambridge’s Knowledge, threatened, nor is Cambridge or any of its Subsidiaries aware of any activity involving its employees seeking to certify a collective bargaining unit or engaging in other organizational activity.

Section 4.17 Environmental Matters.

(a) To Cambridge’s Knowledge each property owned, leased or operated by Cambridge and its Subsidiaries are, and have been, in material compliance with all Environmental Laws. Neither Cambridge nor any of its Subsidiaries has Knowledge of, nor has Cambridge or any of its Subsidiaries received notice of, any past, present, or future conditions, events, activities, practices or incidents that may interfere with or prevent the material compliance of Cambridge with all Environmental Laws.

(b) Cambridge and its Subsidiaries have obtained all material permits, licenses and authorizations that are required for its operations under all Environmental Laws.

(c) No Hazardous Substance exists on, about or within any of the owned real properties, nor to Cambridge’s Knowledge have any Hazardous Substance previously existed on, about or within or been used, generated, stored, transported, disposed of, on or released from any of its properties. The use that Cambridge or any of its Subsidiaries makes and intends to make of any of its properties shall not result in the use, generation, storage, transportation, accumulation, disposal or release of any Hazardous Substance on, in or from any of those properties.

(d) There is no action, suit, proceeding, investigation, or inquiry before any court, administrative agency or other governmental authority pending or to Cambridge’s Knowledge threatened against Cambridge relating in any way to any Environmental Law. None of Cambridge or any of its Subsidiaries has a liability for remedial action under any Environmental Law. None of Cambridge or any of its Subsidiaries has received any request for information by any governmental authority with respect to the condition, use or operation of any of its owned real properties or Cambridge Loan Properties nor has Cambridge or any of its Subsidiaries received any notice of any kind from any governmental authority or other person with respect to any violation of or claimed or potential liability of any kind under any Environmental Law with respect to any of its owned real properties or Cambridge Loan Properties.

Section 4.18 Tax Matters.

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(a) Cambridge has filed all income and other material Tax Returns that it was required to file under applicable laws and regulations, other than Tax Returns that are not yet due or for which a request for extension was filed. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable laws and regulations. All Taxes due and owing by Cambridge (whether or not shown on any Tax Return) have been paid other than Taxes that have been reserved or accrued on the balance sheet of Cambridge and which Cambridge is contesting in good faith. Cambridge is not the beneficiary of any extension of time within which to file any Tax Return, and neither Cambridge nor any of its Subsidiaries currently has any open tax years. No claim has ever been made by an authority in a jurisdiction where Cambridge does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Cambridge.

(b) Cambridge has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party.

(c) No foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are being conducted or to the Knowledge of Cambridge are pending with respect to Cambridge. Cambridge has not received from any foreign, federal, state, or local taxing authority (including jurisdictions where Cambridge has not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against Cambridge.

Section 4.19 Derivative Transactions. All Derivative Transactions entered into by Cambridge or any of its Subsidiaries were entered into in all material respects in accordance with applicable rules, regulations and policies of any Governmental Authority, and in accordance with the investment, securities, commodities, risk management and other policies, practices and procedures employed by Cambridge and its Subsidiaries, and were entered into with counterparties believed at the time to be financially responsible and able to understand (either alone or in consultation with their advisers) and to bear the risks of such Derivative Transactions. Cambridge and its Subsidiaries have duly performed all of their obligations under the Derivative Transactions to the extent that such obligations to perform have accrued, and, to the Knowledge of Cambridge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder. Cambridge and its Subsidiaries have adopted policies and procedures consistent with the publications of Governmental Authorities with respect to their derivatives program.

Section 4.20 Loans; Nonperforming Assets.

(a) Except as set forth in Cambridge Disclosure Schedule 4.20(a), as of the date hereof, none of Cambridge or any of its Subsidiaries is a party to any written or oral (i) Loan under the terms of which the obligor was, as of September 30, 2019, over sixty (60) days delinquent in payment of principal or interest or in default of any other material provision, or (ii) Loan with any director, executive officer or five percent or greater shareholder of Cambridge or any of its Subsidiaries, or to the Knowledge of Cambridge, any person, corporation or enterprise controlling, controlled by or under common control with any of the foregoing. Cambridge Disclosure Schedule 4.20(a) identifies (x) each Loan that as of September 30, 2019 was classified as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import by Wellesley or any of its Subsidiaries or any bank examiner, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, and (y) each asset of Cambridge that as of September 30, 2019 was classified as OREO and the book value thereof.

(b) Each Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to the Knowledge of Wellesley, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

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(c) The loan documents with respect to each Loan were in compliance with applicable laws and regulations and Cambridge’s or the applicable Subsidiary’s lending policies at the time of origination of such Loans and are complete and correct.

Section 4.21 Deposit Insurance. The deposits of Cambridge Trust are insured by the FDIC in accordance with the Federal Deposit Insurance Act to the fullest extent permitted by law, and Cambridge Trust has paid all premiums and assessments and filed all reports required by the Federal Deposit Insurance Act. No proceedings for the revocation or termination of such deposit insurance are pending or, to the Knowledge of Cambridge, threatened.

Section 4.22 Cambridge Stock. The shares of Cambridge Stock to be issued pursuant to this Agreement, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and subject to no preemptive rights.

Section 4.23 Antitakeover Provisions. No “control share acquisition,” “business combination moratorium,” “fair price” or other form of antitakeover statute or regulation is applicable to this Agreement and the transactions contemplated hereby.

Section 4.24 Joint Proxy Statement/Prospectus. As of the date of the Joint Proxy Statement/Prospectus, the Joint Proxy Statement/Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that information as of a later date shall be deemed to modify information as of an earlier date, and further provided that no representation and warranty is made with respect to information relating to Wellesley and its Subsidiaries included in the Joint Proxy Statement/Prospectus.

Section 4.25 CRA, Anti-money Laundering and Customer Information Security. Cambridge is not a party to any agreement with any individual or group regarding CRA matters and Cambridge does not have any Knowledge of, nor has Cambridge been advised of, or has any reason to believe (based on Cambridge’s Home Mortgage Disclosure Act data for the year ended December 31, 2018, filed with the FDIC, or otherwise) that any facts or circumstances exist, which would cause Cambridge: (a) to be deemed not to be in satisfactory compliance with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by Bank Regulators of lower than “satisfactory”; (b) to be deemed to be operating in violation of the federal Bank Secrecy Act, as amended, and its implementing regulations (31 C.F.R. Chapter X), the USA PATRIOT Act, and the regulations promulgated thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (c) to be deemed not to be in satisfactory compliance with the applicable requirements contained in any federal and state privacy or data security laws and regulations, including, without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999 and regulations promulgated thereunder, as well as the provisions of the information security program adopted by Cambridge pursuant to 12 C.F.R. Part 208, Subpart J, Appendix D. Furthermore, the Cambridge Board has adopted and Cambridge has implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that has not been deemed ineffective by any Governmental Authority and that meets the requirements of Sections 352 and 326 and all other applicable provisions of the USA PATRIOT Act and the regulations thereunder.

Section 4.26 Disclosure. The representations and warranties contained in this Article IV, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Article IV not misleading.

ARTICLE V

COVENANTS

Section 5.01 Covenants of Wellesley. During the period from the date of this Agreement and continuing until the Effective Time, except as expressly contemplated or permitted by this Agreement or with the prior written consent of Cambridge, Wellesley and Wellesley Bank shall carry on their respective business in the ordinary course consistent with past practice and consistent with prudent banking practice and in compliance in all material respects with all applicable laws and regulations. Wellesley and Wellesley Bank will use their respective

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reasonable best efforts to (i) preserve their business organizations intact, (ii) keep available to itself and Cambridge the present services of the current officers, employees, directors and other key individual service providers of Wellesley and any of its Subsidiaries and (iii) preserve for themselves and Cambridge the goodwill of the customers of Wellesley and Wellesley Bank and others with whom business relationships exist. Without limiting the generality of the foregoing, and except as set forth in the Wellesley Disclosure Schedule or as otherwise expressly contemplated or permitted by this Agreement or consented to in writing by Cambridge, Wellesley and Wellesley Bank shall not:

(a) Capital Stock. Other than pursuant to Wellesley Options outstanding as of the date hereof and listed in the Wellesley Disclosure Schedules, (i) issue, sell or otherwise permit to become outstanding, or authorize the creation or reservation of, any additional shares of capital stock or any Rights, (ii) permit any additional shares of capital stock to become subject to grants of employee, director or other stock options, warrants or other Rights, or (iii) redeem, retire, purchase or otherwise acquire, directly or indirectly, any Wellesley Stock, or obligate itself to purchase, retire or redeem, any of its shares of Wellesley Stock (except to the extent necessary to effect a cashless exercise of Wellesley Options outstanding on the date hereof and listed in the Wellesley Disclosure Schedules, in accordance with the terms applicable to such Wellesley Options as of the date hereof).

(b) Dividends; Etc. (i) Except for Wellesley’s regular quarterly dividends of $0.06 per share per quarter, make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of Wellesley Stock or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its capital stock. After the date hereof, Wellesley shall coordinate with Cambridge regarding the declaration of any dividends in respect of Wellesley Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of Wellesley Stock shall receive exactly one (1) dividend for the calendar quarter in which the Merger is consummated with respect to their shares of Wellesley Stock and any shares of Cambridge Stock that such holders receive in exchange therefor in the Merger.

(c) Compensation; Employment Agreements, Etc. Except as provided for on Wellesley Disclosure Schedule 5.01(c), enter into or amend or renew any employment, consulting, severance or similar agreements or arrangements with any director, officer, employee or other individual service provider of Wellesley or Wellesley Bank or grant any salary or wage increase or increase any employee benefit or pay any incentive or bonus payments, except (i) for normal increases in compensation to non-executive employees in the ordinary course of business consistent with past practice, provided that no such increase shall be more than ten percent (10%) with respect to any individual non-executive employee and all such increases in the aggregate shall not exceed four percent (4%) of total compensation, and provided further that any increases, either singularly or in the aggregate, shall be consistent with Wellesley’s 2019 budget, a copy of which has been made available to Cambridge, (ii) Wellesley shall be permitted to make cash contributions to the Wellesley 401(k) Plan and Wellesley Bank ESOP in the ordinary course of business consistent with past practice and shall be permitted to make a pro-rated ESOP contribution for 2020 in accordance with Section 5.14(f) and shall be permitted to make normal accruals under the Wellesley Bank Supplemental Executive Retirement Plan consistent with past practice, and (iii) Wellesley shall be permitted to pay 2019 bonuses consistent with past practice and shall be permitted to pay 2020 accrued bonuses, prorated through the Closing Date, at Closing, consistent with past practice.

(d) Hiring. Hire any person as an employee of Wellesley or any of its Subsidiaries or promote any employee to a position of Vice President or above or to the extent such hire or promotion would increase any severance obligation, except (i) to satisfy contractual obligations existing as of the date hereof and set forth on Wellesley Disclosure Schedule 5.01(d) and (ii) persons hired to fill any vacancies arising after the date hereof at an annual salary of less than $100,000 and whose employment is terminable at the will of Wellesley, as applicable, provided, however, that Wellesley or Wellesley Bank must provide notice to Cambridge within three (3) days following the hiring of any persons hired to fill a vacancy.

(e) Benefit Plans. Except as provided for on Wellesley Disclosure Schedule 5.01(e), enter into, establish, amend, modify or terminate any Wellesley Benefit Plan or adopt an arrangement that would constitute a Wellesley Benefit Plan, except (i) as may be required by applicable law or the terms of this Agreement, subject to

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the provision of prior written notice and consultation with respect thereto to Cambridge, or (ii) to satisfy contractual obligations existing as of the date hereof and set forth on Wellesley Disclosure Schedule 5.01(e).

(f) Transactions with Affiliates. Except pursuant to agreements or arrangements in effect on the date hereof, pay, loan or advance any amount to, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible) to, or enter into any agreement or arrangement with, any of its officers or directors or any of their immediate family members or any affiliates or associates (as such terms are defined under the Exchange Act) of any of its officers or directors other than compensation in the ordinary course of business consistent with past practice;

(g) Dispositions. Sell, transfer, mortgage, pledge, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except in the ordinary course of business consistent with past practice and in a transaction that, together with all other such transactions, is not material to Wellesley taken as a whole.

(h) Acquisitions. Acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of the assets, business, deposits or properties of any other entity.

(i) Capital Expenditures. Make any capital expenditures other than capital expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $25,000 individually or $100,000 in the aggregate.

(j) Governing Documents. Amend the charter of bylaws of Wellesley or Wellesley Bank.

(k) Accounting Methods. Implement or adopt any change in its accounting principles, practices or methods, other than as may be required by applicable laws or regulations or GAAP.

(l) Contracts. Except in the ordinary course of business consistent with past practice or as otherwise expressly permitted by this Agreement, enter into, amend, modify or terminate any contract that involves the payment of, or incurs fees, in excess of $50,000 per annum, any Lease or any Insurance Policy.

(m) Claims. Enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation to which Wellesley or Wellesley Bank is or becomes a party after the date of this Agreement, which settlement, agreement or action involves payment by Wellesley or Wellesley Bank of an amount which exceeds $100,000 and/or would impose any material restriction on the business of Wellesley or Wellesley Bank; provided, however, that Wellesley or Wellesley Bank may not enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation for which Wellesley or Wellesley Bank has not provided notice to Cambridge of the existence of such action, suit, proceeding, order or investigation.

(n) Banking Operations. Enter into any new material line of business; change its material lending, investment, underwriting, risk and asset liability management and other material banking and operating policies, except as required by applicable law, regulation or policies imposed by any Governmental Authority; or file any application or make any contract with respect to branching or site location or branching or site relocation.

(o) Derivative Transactions. Except in the ordinary course of business consistent with past practice, enter into any Derivative Transactions.

(p) Indebtedness. Incur any indebtedness for borrowed money or other liabilities (including brokered deposits and wholesale funding), federal funds purchased, borrowings from the FHLB and securities sold under agreements to repurchase, each with a duration exceeding one (1) year, other than in the ordinary course of business consistent with past practice, or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person, other than in the ordinary course of business consistent with past practice.

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(q) Investment Securities. Acquire (other than by way of foreclosures or acquisitions in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary course of business consistent with past practice) (i) any debt security or equity investment of a type or in an amount that is not in accordance with Wellesley’s investment policy or (ii) any debt security, including mortgage-backed and mortgage related securities, other than U.S. government and U.S. government agency securities with final maturities not greater than five years or mortgage-backed or mortgage related securities which would not be considered “high risk” securities under applicable regulatory pronouncements, in each case purchased in the ordinary course of business consistent with past practice; or restructure or materially change its investment securities portfolio, through purchases, sales or otherwise, or the manner in which such portfolio or any securities therein are classified under GAAP or reported for regulatory purposes.

(r) Loans. Except to satisfy contractual obligations existing as of the date hereof and set forth on Wellesley Disclosure Schedule 5.01(r), make, renegotiate, renew, increase, extend, modify or purchase any Loan, other than in accordance with Wellesley’s loan policies and procedures in effect as of the date hereof; provided, however, that the prior notification and approval of Cambridge is required for any new origination (i) in excess of $4,000,000 or (ii) not made in accordance with Wellesley’s loan policies as in effect on the date hereof. For purposes of this Section 5.01(r), consent shall be deemed given unless Cambridge objects within 48 hours of receiving a notification from Wellesley.

(s) Investments in Real Estate. Make any equity investment or equity commitment to invest in real estate or in any real estate development project (other than by way of foreclosure or acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith, in each case in the ordinary course of business consistent with past practice).

(t) Taxes. Make or change any material Tax election, file any material amended Tax Return, enter into any material closing agreement, settle or compromise any material liability with respect to Taxes, agree to any adjustment of any material Tax attribute, file any material claim for a refund of Taxes, or consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment.

(u) Compliance with Agreements. Commit any act or omission which constitutes a material breach or default by Wellesley or Wellesley Bank under any agreement with any Governmental Authority or under any Material Contract, Lease or other material agreement or material license to which it is a party or by which it or its properties is bound.

(v) Environmental Assessments. Foreclose on or take a deed or title to any commercial real estate without first conducting a Phase I environmental assessment of the property or foreclose on any commercial real estate if such environmental assessment indicates the presence of a Hazardous Substance in amounts which, if such foreclosure were to occur, would be material.

(w) Insurance. Cause or allow the loss of insurance coverage maintained by Wellesley that would have a Material Adverse Effect on Wellesley, unless replaced with coverage which is substantially similar (in amount and insurer) to that now in effect.

(x) Liens. Discharge or satisfy any Lien or pay any obligation or liability, whether absolute or contingent, due or to become due, except in the ordinary course of business consistent with normal banking practices.

(y) Adverse Actions. Take any action or fail to take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth in Article VI not being satisfied, (iii) a material violation of any provision of this Agreement, except, in each case, as may be required by applicable law or regulation or (iv) a material delay of the approval or completion of the Merger.

(z) Commitments. Enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

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Section 5.02 Covenants of Cambridge. From the date hereof until the Effective Time, except as expressly contemplated or permitted by this Agreement, without the prior written consent of Wellesley, Cambridge will not, and will cause each of its Subsidiaries not to:

(a) Adverse Actions. Take any action or fail to take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth in Article VI not being satisfied or (iii) a material violation of any provision of this Agreement except, in each case, as may be required by applicable law or regulation.

(b) Dividend Record Date. Change its record date for payment of its quarterly dividend from the record date established in the prior year’s quarter in a manner that is inconsistent with past practice.

(c) Capital Stock. Except as set forth in Cambridge Disclosure Schedule 5.02(c), grant, issue, deliver or sell any additional shares of capital stock or Rights; provided, however, that Cambridge may (i) grant equity awards pursuant to its employee benefit plans as required by any Cambridge employee benefit plan or in the ordinary course consistent with past practice, (ii) issue capital stock upon the vesting or exercise of any equity awards granted pursuant to a Cambridge employee benefits plan outstanding as of the date hereof in accordance with the terms and conditions thereof as in effect on the date hereof, including in connection with “net settling” any outstanding awards, and (iii) issue Cambridge capital stock in connection with the transactions contemplated hereby.

(d) Dividends; Etc. (i) Other than in the ordinary course of business consistent with past practice or in connection with the transactions contemplated hereby, make, declare, pay or set aside for payment any stock dividend on or in respect of, or declare or make any distribution on any shares of Cambridge Stock or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its capital stock.

(e) Amending Charter or Bylaws. Amend its charter or bylaws in a manner that would materially and adversely affect the holders of Wellesley Stock, as prospective holders of Cambridge Stock, relative to other holders of Cambridge Stock.

(f) Acquiring Financial Institutions. Enter into any binding definitive agreement, or publicly announce its intent to enter into any binding definitive agreement, to acquire any other depository institution (as defined in 12 U.S.C. § 1813(c)(1)) or credit union prior to the receipt of all Regulatory Approvals.

(g) Adopt Plan of Liquidation. Adopt or publicly propose a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, in each case, of Cambridge Trust.

(h) Commitments. Enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

Section 5.03 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each of the parties to the Agreement agrees to use its reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws, so as to permit consummation of the transactions contemplated hereby as promptly as practicable, and otherwise to enable consummation of the transactions contemplated by this Agreement, including the satisfaction of the conditions set forth in Article VI hereof, and shall cooperate fully with the other parties hereto to that end.

Section 5.04 Shareholder Approval.

(a) Wellesley agrees to take, in accordance with applicable law, the charter and bylaws of Wellesley, all action necessary to convene a special meeting of its shareholders to consider and vote upon the approval of this Agreement and any other matters required to be approved by Wellesley’s shareholders in order to permit consummation of the transactions contemplated by this Agreement (including any adjournment or postponement, the “Wellesley Meeting”) and, subject to Section 5.05 and Section 5.11, shall take all lawful action to solicit such approval by such shareholders. Wellesley agrees to use its best efforts to convene the Wellesley Meeting within forty (40) days after the initial mailing of the Joint Proxy Statement/Prospectus to shareholders of Wellesley. Except with the prior approval of Cambridge, no other matters shall be submitted for the approval of Wellesley

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shareholders at the Wellesley Meeting. The Wellesley Board shall at all times prior to and during the Wellesley Meeting recommend adoption of this Agreement by the shareholders of Wellesley (the “Wellesley Recommendation”) and shall not withhold, withdraw, amend or modify such recommendation in any manner adverse to Cambridge or take any other action or make any other public statement inconsistent with such recommendation, except as and to the extent expressly permitted by Section 5.11.

(b) Cambridge agrees to take, in accordance with applicable law, the charter and bylaws of Cambridge, all action necessary to convene a special meeting of its shareholders to consider and vote upon the approval of this Agreement, the issuance of shares of Cambridge Stock in connection with the Merger, and any other matters required to be approved by Cambridge’s shareholders in order to permit consummation of the transactions contemplated by this Agreement (including any adjournment or postponement, the “Cambridge Meeting”) and, subject to Section 5.05, shall take all lawful action to solicit such approval by such shareholders. Cambridge agrees to use its best efforts to convene the Cambridge Meeting within forty (40) days after the initial mailing of the Joint Proxy Statement/Prospectus to shareholders of Cambridge. Except with the prior approval of Wellesley, no other matters shall be submitted for the approval of Cambridge shareholders at the Cambridge Meeting. The Cambridge Board shall at all times prior to and during the Cambridge Meeting recommend adoption of this Agreement by the shareholders of Cambridge and shall not withhold, withdraw, amend or modify such recommendation in any manner adverse to Wellesley or take any other action or make any other public statement inconsistent with such recommendation.

Section 5.05 Merger Registration Statement; Joint Proxy Statement/Prospectus. For the purposes of (x) registering Cambridge Stock to be offered to holders of Wellesley Stock in connection with the Merger with the SEC under the Securities Act and applicable state securities laws and (y) holding the Wellesley Meeting and the Cambridge Meeting, Cambridge shall draft and prepare, and Wellesley shall cooperate in the preparation of, a registration statement on Form S-4 for the registration of the shares to be issued by Cambridge in the Merger (the “Merger Registration Statement”), including the Joint Proxy Statement/Prospectus. Cambridge shall provide Wellesley and its counsel with appropriate opportunity to review and comment on the Merger Registration Statement and Joint Proxy Statement/Prospectus prior to the time they are initially filed with the SEC or any amendments are filed with the SEC. Cambridge shall file the Merger Registration Statement with the SEC. Each of Cambridge and Wellesley shall use its reasonable best efforts to have the Merger Registration Statement declared effective under the Securities Act as promptly as practicable after such filing and shall thereafter promptly mail the Joint Proxy Statement/Prospectus to their shareholders. Cambridge shall also use its reasonable best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and Wellesley shall furnish to Cambridge all information concerning Wellesley and the holders of Wellesley Stock as may be reasonably requested in connection with such action.

Section 5.06 Cooperation and Information Sharing. Wellesley shall provide Cambridge with any information concerning Wellesley that Cambridge may reasonably request in connection with the drafting and preparation of the Merger Registration Statement and Joint Proxy Statement/Prospectus, and each party shall notify the other promptly of the receipt of any comments of the SEC with respect to the Merger Registration Statement or Joint Proxy Statement/Prospectus and of any requests by the SEC for any amendment or supplement thereto or for additional information. Cambridge shall promptly provide to Wellesley copies of all correspondence between it or any of its representatives and the SEC. Cambridge shall provide Wellesley and its counsel with appropriate opportunity to review and comment on all amendments and supplements to the Merger Registration Statement and Joint Proxy Statement/Prospectus and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of Cambridge and Wellesley agrees to use all reasonable efforts, after consultation with the other party hereto, to respond promptly to all such comments of and requests by the SEC, and to cause the Joint Proxy Statement/Prospectus and all required amendments and supplements thereto, to be mailed to the holders of Wellesley Stock entitled to vote at the Wellesley Meeting and the holders of Cambridge Stock entitled to vote at the Cambridge Meeting, respectively, at the earliest practicable time.

Section 5.07 Supplements or Amendment. Wellesley and Cambridge shall promptly notify the other party if at any time it becomes aware that the Joint Proxy Statement/Prospectus or the Merger Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they

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were made, not misleading. In such event, Wellesley shall cooperate with Cambridge in the preparation of a supplement or amendment to such Joint Proxy Statement/Prospectus which corrects such misstatement or omission, and Cambridge shall file an amended Merger Registration Statement with the SEC, and each of Cambridge and Wellesley shall mail an amended Joint Proxy Statement/Prospectus to their respective shareholders.

Section 5.08 Regulatory Approvals. Each of Wellesley and Cambridge will cooperate with the other and use all reasonable efforts to promptly prepare all necessary documentation, to affect all necessary filings and to obtain all necessary permits, consents, approvals, waivers and authorizations of all third parties and Governmental Authorities necessary to consummate the transactions contemplated by this Agreement. Wellesley and Cambridge will furnish each other and each other’s counsel with all information concerning themselves, their subsidiaries, directors, officers and shareholders and such other matters as may be necessary or advisable in connection with the filing of the Joint Proxy Statement/Prospectus and any application, petition or any other statement or application made by or on behalf of Cambridge or Wellesley to any Governmental Authority in connection with the Merger and the other transactions contemplated by this Agreement. Each party hereto shall have the right to review and approve in advance all characterizations of the information relating to such party and any of its Subsidiaries that appear in any filing made in connection with the transactions contemplated by this Agreement with any Governmental Authority. In addition, Cambridge and Wellesley shall each furnish to the other for review a copy of each such filing made in connection with the transactions contemplated by this Agreement with any Governmental Authority prior to its filing.

Section 5.09 Press Releases. Wellesley and Cambridge shall consult with each other before issuing any press release with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such public statements without the prior consent of the other party, which shall not be unreasonably withheld; provided, however, that a party may, without the prior consent of the other party (but after such consultation, to the extent practicable in the circumstances), issue such press release or make such public statements as may upon the advice of outside counsel be required by law. Wellesley and Cambridge shall cooperate to develop all public announcement materials and make appropriate management available at presentations related to this Agreement as reasonably requested by the other party.

Section 5.10 Access; Information.

(a) Wellesley agrees that upon reasonable notice and subject to applicable laws relating to the exchange of information, it shall afford Cambridge and its officers, employees, counsel, accountants and other authorized representatives such reasonable access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, Tax Returns and work papers of independent auditors), minute books of directors’ (other than minutes that discuss any of the transactions contemplated by this Agreement or any confidential supervisory information), properties and personnel of Wellesley and to such other information relating to Wellesley as Cambridge may reasonably request and, during such period, it shall furnish promptly to Cambridge all information concerning the business, properties and personnel of Wellesley as Cambridge may reasonably request. Cambridge shall use commercially reasonable efforts to minimize any interference with Wellesley’s regular business operations during any such access to Wellesley’s employees, property, books and records.

(b) All information furnished to Cambridge by Wellesley pursuant to Section 5.10(a) shall be subject to, and Cambridge shall hold all such information in confidence in accordance with, the provisions of the Mutual Agreement of Confidentiality, dated as of July 11, 2019, by and between Wellesley and Cambridge (the “Confidentiality Agreement”).

(c) Notwithstanding anything to the contrary contained in this Section 5.10, in no event shall Cambridge have access to any information that, based on advice of Wellesley’s counsel, would: (a) reasonably be expected to waive any material legal privilege; (b) result in the disclosure of any trade secrets of third parties; or (c) violate any obligation of Wellesley with respect to confidentiality so long as, with respect to confidentiality, to the extent specifically requested by Cambridge, Wellesley has made commercially reasonable efforts to obtain a waiver regarding the possible disclosure from the third party to whom it owes an obligation of confidentiality. All requests made pursuant to this Section 5.10 will be directed to an executive officer of Wellesley or such Person or Persons as

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may be designated by Wellesley. No investigation by Cambridge of the business and affairs of Wellesley shall affect or be deemed to modify or waive any representation, warranty, covenant or agreement in this Agreement, or the conditions to the obligations of Cambridge to consummate the transactions contemplated by this Agreement.

Section 5.11 No Solicitation by Wellesley.

(a) Wellesley shall not, and shall cause its officers, directors, employees, investment bankers, financial advisors, attorneys, accountants, consultants, affiliates and other agents of Wellesley (collectively, the “Wellesley Representatives”) not to, directly or indirectly, (i) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an Acquisition Proposal; (ii) participate in any discussions or negotiations regarding any Acquisition Proposal or furnish, or otherwise afford access, to any Person (other than Cambridge) any confidential or non-public information or data with respect to Wellesley or otherwise relating to an Acquisition Proposal; or (iii) without the prior written consent of Cambridge, release any Person from, waive any provisions of, or fail to enforce any confidentiality agreement or standstill agreement to which Wellesley is a party. Wellesley shall, and shall cause each of the Wellesley Representatives to, (x) immediately cease and cause to be terminated any and all existing discussions, negotiations, and communications with any Persons with respect to any existing or potential Acquisition Proposal, and (y) as soon as practicable after the date hereof, request the prompt return or destruction of all confidential information made available by Wellesley or on its behalf during the past twelve months in connection with any actual or potential Acquisition Proposal.

(b) Notwithstanding Section 5.11(a), prior to the date of the Wellesley Meeting, Wellesley may take any of the actions described in clause (ii) of Section 5.11(a) if, but only if, (i) Wellesley has received a bona fide unsolicited written Acquisition Proposal that did not result from a breach of this Section 5.11; (ii) the Wellesley Board determines in good faith, (A) after consultation with its outside legal counsel and, with respect to financial matters, its independent financial advisor, that such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal and (B) after consultation with its outside legal counsel, and with respect to financial matters, it financial advisors, determines in good faith that it is required to take such actions to comply with its fiduciary duties under applicable law; (iii) Wellesley has provided Cambridge with at least twenty-four hours’ prior notice of such determination; and (iv) prior to furnishing or affording access to any information or data with respect to Wellesley or otherwise relating to an Acquisition Proposal, Wellesley receives from such Person a confidentiality agreement with terms not materially less favorable to Wellesley than those contained in the Confidentiality Agreement. In addition, if Wellesley receives an Acquisition Proposal that constitutes or is reasonably expected to result in a Superior Proposal and Wellesley has not breached any of the covenants set forth in this Section 5.11, then Wellesley, or any Wellesley Representative may, with the prior approval of the Wellesley Board at a duly called meeting, contact the Person who has submitted (and not withdrawn) such Acquisition Proposal, or any of such Person’s representatives, solely (x) to clarify the terms and conditions of such Acquisition Proposal and (y) if such Acquisition Proposal initially is made orally, to direct such Person to submit the Acquisition Proposal to Wellesley confidentially in writing. Wellesley shall promptly provide to Cambridge any non-public information regarding Wellesley provided to any other Person which was not previously provided to Cambridge, such additional information to be provided no later than the date of provision of such information to such other party.

(c) Wellesley shall promptly (and in any event orally within 24 hours and in writing within two days) notify Cambridge if any inquiries, proposals or offers are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with, Wellesley or the Wellesley Representatives, in each case in connection with any Acquisition Proposal, and such notice shall indicate the name of the Person initiating such discussions or negotiations or making such inquiry, proposal, offer or information request and the material terms and conditions of any proposals or offers (and, in the case of written materials relating to such inquiry, proposal, offer, information request, negotiations or discussion, providing copies of such materials (including e-mails or other electronic communications)). Wellesley agrees that it shall keep Cambridge informed, on a reasonably current basis (and in any event within 24 hours), of the status and terms of any material developments with respect to such inquiry, proposal, offer, information request, negotiations or discussions (including, in each case, any amendments or modifications thereto). Wellesley shall provide Cambridge with at least 24 hours’ prior notice of any meeting of the Wellesley Board at which the Wellesley Board is reasonably expected to consider any Acquisition Proposal.

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(d) Neither the Wellesley Board nor any committee thereof shall (i) withdraw, qualify, amend, modify or withhold, or propose to withdraw, qualify, amend, modify or withhold, in a manner adverse to Cambridge in connection with the transactions contemplated by this Agreement (including the Merger), the Wellesley Recommendation, fail to reaffirm the Wellesley Recommendation within five Business Days following a request by Cambridge, or make any statement, announcement or release, in connection with the Wellesley Meeting or otherwise, inconsistent with the Wellesley Recommendation (it being understood that taking a neutral position or no position with respect to an Acquisition Proposal shall be considered an adverse modification of the Wellesley Recommendation); (ii) approve or recommend, or propose to approve or recommend, any Acquisition Proposal; or (iii) enter into (or cause Wellesley to enter into) any letter of intent, agreement in principle, acquisition agreement or other agreement (A) related to any Acquisition Transaction (other than a confidentiality agreement entered into in accordance with the provisions of Section 5.11(b)) or (B) requiring Wellesley to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement.

(e) Notwithstanding anything to the contrary set forth in this Agreement, prior to the date of the Wellesley Meeting, the Wellesley Board may withdraw, qualify, amend or modify the Wellesley Recommendation in connection therewith (a “Wellesley Subsequent Determination”) and/or terminate this Agreement pursuant to Section 7.01(g)(iii) after the fourth Business Day following Cambridge’s receipt of a written notice (the “Notice of Superior Proposal”) from Wellesley advising Cambridge that the Wellesley Board intends to determine that a bona fide unsolicited written Acquisition Proposal that it received (that did not result from a breach of this Section 5.11) constitutes a Superior Proposal if, but only if, (i) the Wellesley Board has reasonably determined in good faith, after consultation with outside legal counsel, that it is required to take such actions to comply with its fiduciary duties under applicable law, (ii) during the three Business Day period after receipt of the Notice of Superior Proposal by Cambridge (the “Notice Period”), Wellesley and the Wellesley Board shall have cooperated and negotiated in good faith with Cambridge to make such adjustments, modifications or amendments to the terms and conditions of this Agreement as would enable Wellesley to proceed with the Wellesley Recommendation without a Wellesley Subsequent Determination; provided, however, that Cambridge shall not have any obligation to propose any adjustments, modifications or amendments to the terms and conditions of this Agreement, and (iii) at the end of the Notice Period, after taking into account any such adjusted, modified or amended terms as may have been proposed by Cambridge since its receipt of such Notice of Superior Proposal, the Wellesley Board in good faith makes the determination (A) in clause (i) of this Section 5.11(e) and (B) that such Acquisition Proposal constitutes a Superior Proposal. In the event of any material revisions to the Superior Proposal, Wellesley shall be required to deliver a new Notice of Superior Proposal to Cambridge and again comply with the requirements of this Section 5.11(e), except that the Notice Period shall be reduced to two Business Days. In addition to the foregoing, the Wellesley Board shall not submit to the vote of its stockholders any Acquisition Proposal other than the Merger at the Wellesley Meeting.

(f) Nothing contained in this Section 5.11 shall prohibit Wellesley or the Wellesley Board from complying with Wellesley’s obligations required under Rules 14d-9 (as if such rule were applicable to Wellesley) and 14e-2(a) (as if such rule were applicable to Wellesley) promulgated under the Exchange Act; provided, however, that any such disclosure relating to an Acquisition Proposal shall be deemed a change in the Wellesley Recommendation unless it is limited to a stop, look and listen communication or the Wellesley Board reaffirms the Wellesley Recommendation in such disclosure.

Section 5.12 Certain Policies. Prior to the Effective Date, Wellesley shall, consistent with GAAP and applicable banking laws and regulations, modify or change its loan, OREO, accrual, reserve, tax, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves) so as to be applied on a basis that is consistent with that of Cambridge; provided, however, that Wellesley shall not be obligated to take any action pursuant to this Section 5.12 unless and until Cambridge acknowledges, and Wellesley is satisfied, that all conditions to Wellesley’s obligation to consummate the Merger have been satisfied and that Cambridge shall consummate the Merger in accordance with the terms of this Agreement, and further provided that in any event, no accrual or reserve made by Wellesley pursuant to this Section 5.12 or the consequences resulting therefrom shall constitute or be deemed to be a breach, violation of or failure to satisfy any representation, warranty, covenant, agreement, condition or other provision of this Agreement or otherwise be considered in determining whether any such breach, violation or failure to satisfy shall have occurred. The recording of any such adjustments shall

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not be deemed to imply any misstatement of previously furnished financial statements or information and shall not be construed as concurrence of Wellesley or its management with any such adjustments, nor any admission that the previously furnished financial statements or information did not fully comply in all respects with GAAP or regulatory requirements.

Section 5.13 Indemnification.

(a) From and after the Effective Time, Cambridge (the “Indemnifying Party”) shall indemnify and hold harmless each present and former director and officer of Wellesley or Wellesley Bank, as applicable, determined as of the Effective Time (the “Indemnified Parties”) against any costs or expenses (including reasonable attorneys’ fees), judgments, amounts paid in settlement, fines, penalties, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, and whether formal or informal (each, a “Proceeding”) arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, arising in whole or in part out of or pertaining to the fact that he or she was a director or officer of Wellesley or Wellesley Bank or is or was serving at the request of Wellesley or Wellesley Bank as a director, officer, employee or other agent of any other organization or in any capacity with respect to any employee benefit plan of Wellesley or Wellesley Bank, including without limitation matters related to the negotiation, execution and performance of this Agreement or any of the transactions contemplated hereby, to the fullest extent which such Indemnified Parties would be entitled under the charter or bylaws of Wellesley or Wellesley Bank as in effect on the date hereof (subject to change as required by law). Cambridge’s obligations under this Section 5.13(a) shall continue in full force and effect for a period of six years from the Effective Time; provided, however, that all rights to indemnification and advancement in respect of any Proceeding asserted or made within such period shall continue until the final disposition of such Proceeding. Notwithstanding any other provision of this Section 5.13, the Indemnifying Party shall advance all reasonable costs, expenses and fees (including reasonable attorneys’ fees) incurred by or on behalf of an Indemnified Party in connection with any Proceeding within thirty (30) days after the receipt by the Indemnifying Party of a statement or statements from the Indemnified Party requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall be made in good faith and shall reasonably evidence the costs, expenses and fees incurred by the Indemnified Party (which shall include invoices in connection with such costs, fees and expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditure made that would cause the Indemnified Party to waive any privilege or protection accorded by applicable law shall not be included with the invoice), and shall include or be preceded or accompanied by a written undertaking by or on behalf of the Indemnified Party to repay any costs, expenses or fees advanced if it shall ultimately be determined that the Indemnified Party is not entitled to be indemnified against such costs, expenses or fees. Any advances and undertakings to repay pursuant to this Section 5.13 shall be unsecured and interest free and made without regard to the Indemnified Party’s ability to repay such advances or ultimate entitlement to indemnification.

(b) Any Indemnified Party wishing to claim indemnification under this Section 5.13, upon learning of any such Proceeding, shall promptly notify the Indemnifying Party, but the failure to so notify shall not relieve the Indemnifying Party of any liability it may have to such Indemnified Party except to the extent that such failure does actually prejudice the Indemnifying Party. In the event of any such Proceeding (whether arising before or after the Effective Time), (i) the Indemnifying Party shall have the right to assume the defense thereof with counsel which is reasonably satisfactory to the Indemnified Party and the Indemnifying Party shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if the Indemnifying Party elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise actual or potential conflicts of interest between the Indemnifying Party and the Indemnified Parties, the Indemnified Parties may retain counsel which is reasonably satisfactory to the Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements therefor are received, the reasonable fees and expenses of such counsel for the Indemnified Parties (which may not exceed one firm in any jurisdiction unless counsel for the Indemnified Parties advises that there are issues that raise conflicts of interest between the Indemnified Parties), (ii) the Indemnified Parties will reasonably cooperate in the defense of any such matter, (iii) the Indemnifying Party shall not be liable for any settlement effected without its prior written consent and (iv) the Indemnifying Party shall have no obligation hereunder in the event that indemnification of an Indemnified Party in the manner contemplated hereby is prohibited by applicable

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laws and regulations or by a final non-appealable adjudication of an applicable federal or state banking agency or a court of competent jurisdiction.

(c) Prior to the Effective Time, Cambridge shall purchase an extended reporting period endorsement under Wellesley’s existing directors’ and officers’ liability insurance coverage for Wellesley’s directors and officers in a form acceptable to Wellesley which shall provide such directors and officers with coverage for six years following the Effective Time for claims made against such directors and officers arising from any act, error or omission by such directors and officers existing or occurring at or prior to the Effective Time of not less than the existing coverage under, and have other terms at least as favorable to, the directors and officers than the directors’ and officers’ liability insurance coverage presently maintained by Wellesley (provided that Cambridge may substitute therefor policies which are not materially less advantageous than such policy or single premium tail coverage with policy limits equal to Wellesley’s existing coverage limits), so long as the aggregate cost is not more than 250% of the annual premium currently paid by Wellesley for such insurance (the “Premium Limit”). In the event that the Premium Limit is insufficient for such coverage, Cambridge shall use its reasonable best efforts to purchase such lesser coverage as may be obtained with such amount.

(d) The rights of indemnification and advancement as provided by this Section 5.13 shall not be deemed exclusive of any other rights to which the Indemnified Party may at any time be entitled under the charter or bylaws of Wellesley or as provided in applicable law as in effect on the date hereof (subject to change as required by law), any agreement, a vote of stockholders, a resolution of directors of Wellesley, or otherwise. In the event that an Indemnified Party, pursuant to this Section 5.13, seeks an adjudication of such person’s rights under, or to recover damages for breach of, this Section 5.13, or to recover under any directors’ and officers’ liability insurance coverage maintained by Wellesley or Cambridge, the Indemnifying Party shall pay on such Indemnified Party’s behalf, any and all reasonable costs, expenses and fees (including reasonable attorneys’ fees ) incurred by such Indemnified Party in such judicial adjudication, to the fullest extent permitted by law, only to the extent that the Indemnified Party prevails in such judicial adjudication.

(e) If Cambridge or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any other entity, then and in each case, proper provision shall be made so that the successors and assigns of Cambridge shall assume the obligations set forth in this Section 5.13.

Section 5.14 Employees; Benefit Plans.

(a) Following the Closing Date and except to the extent an alternative treatment is set forth in this Section 5.14, Cambridge may choose to maintain any or all of the Wellesley Benefit Plans in its sole discretion and Wellesley and Wellesley Bank shall cooperate with Cambridge in order to effect any plan terminations to be made as of the Effective Time. For the period commencing at the Effective Time and ending on December 31, 2020 (or until the applicable Continuing Employee’s earlier termination of employment), Cambridge shall provide, or cause to be provided, to each employee of Wellesley Bank and Wellesley who continues in employment with the Surviving Bank as of the Closing Date (“Continuing Employees”) (i) base salary or a base rate of pay at least equal to the base pay or base rate of salary provided to such Continuing Employee immediately prior to the Effective Time and (ii) other benefits (other than severance, termination pay or equity compensation) at least substantially comparable in the aggregate to the benefits provided to such Continuing Employee immediately prior to the Effective Time. For any Wellesley Benefit Plan terminated for which there is a comparable employee benefit or compensation plan, program, policy, agreement or arrangement of Cambridge or any of its Subsidiaries (a “Cambridge Benefit Plan”) of general applicability, Cambridge shall take all commercially reasonable action so that employees of Wellesley or Wellesley Bank shall be entitled to participate in such Cambridge Benefit Plan to the same extent as similarly-situated employees of Cambridge (it being understood that inclusion of the employees of Wellesley and Wellesley Bank in the Cambridge Benefit Plans may occur at different times with respect to different plans). Cambridge shall cause each Cambridge Benefit Plan in which employees of Wellesley or Wellesley Bank are eligible to participate to take into account for purposes of eligibility and vesting under the Cambridge Benefit Plans (but not for purposes of benefit accrual) the service of such employees with Wellesley or Wellesley Bank to the same extent as such service was credited for such purpose by Wellesley or Wellesley Bank; provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits.

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Nothing herein shall limit the ability of Cambridge to amend or terminate any of the Wellesley Benefit Plans or Cambridge Benefit Plans in accordance with their terms at any time; provided, however, that Cambridge shall continue to maintain the Wellesley Benefit Plans (other than stock-based or incentive plans) for which there is a comparable Cambridge Benefit Plan until the Wellesley Employees are permitted to participate in the Cambridge Benefit Plans, unless such Cambridge Benefit Plan has been frozen or terminated with respect to similarly situated employees of Cambridge or any Subsidiary of Cambridge. Following the Closing Date, Cambridge shall honor, in accordance with Wellesley’s policies and procedures in effect as of the date hereof, any employee expense reimbursement obligations of Wellesley for out-of-pocket expenses incurred during the calendar year in which the Closing occurs by any Wellesley Employee whose employment continues after the Effective Time. In the event Cambridge elects to terminate the Wellesley Bank 401(k) Plan prior to the Closing Date, Cambridge shall take any and all actions as may be required to permit Continuing Employees to roll over their account balances in the Wellesley Bank 401(k) Plan into Cambridge Bank 401(k) Plan.

(b) Cambridge shall honor, under the vacation policies of Wellesley and Wellesley Bank, as disclosed on Wellesley Disclosure Schedule 5.14(b), the accrued but unused vacation time of employees of the Surviving Company or the Surviving Bank who were employees of Wellesley or Wellesley Bank prior to the Effective Time.

(c) If employees of Wellesley or Wellesley Bank become eligible to participate in a medical, dental, vision, prescription drug or other health plan, disability plan or life insurance plan of Cambridge upon termination of such plan of Wellesley or Wellesley Bank, Cambridge shall make all commercially reasonable efforts to cause each such plan to (i) waive any preexisting condition limitations to the extent such conditions are covered under the applicable Cambridge plan, (ii) provide credit under such plans for any deductible, co-payment and out-of-pocket expenses incurred by the employees and their beneficiaries during the portion of the calendar year prior to such participation and (iii) waive any waiting period limitation, actively-at-work requirement or evidence of insurability requirement which would otherwise be applicable to such employee on or after the Effective Time, in each case to the extent such employee had satisfied any similar limitation or requirement under an analogous Wellesley Benefit Plan prior to the Effective Time.

(d) Concurrently with the execution of this Agreement, the CIC Agreement shall have been executed and be in full force and effect.

(e) Cambridge shall honor and perform under each agreement or contract set forth in Wellesley Disclosure Schedule 5.14(e).

(f) Subject to the occurrence of the Closing, the Wellesley Bank ESOP shall be terminated by Wellesley Bank prior to the Closing Date. In connection with the termination of the Wellesley Bank ESOP, all plan accounts shall be fully vested, all outstanding indebtedness of the Wellesley Bank ESOP shall be repaid by delivering a sufficient number of unallocated shares of Wellesley Stock to Wellesley, at least five (5) Business Days prior to the Effective Time, all remaining shares of Wellesley Stock held by the Wellesley Bank ESOP shall be converted into the right to receive the Merger Consideration, and the balance of the unallocated shares and any other unallocated assets remaining in the Wellesley Bank ESOP after repayment of the Wellesley Bank ESOP loan shall be allocated as earnings to the accounts of the Wellesley Bank ESOP participants who are employed as of the date of termination of the Wellesley Bank ESOP based on their account balances under the Wellesley Bank ESOP as of the date of termination of the Wellesley Bank ESOP and distributed to Wellesley Bank ESOP participants after the receipt of a favorable determination letter from the IRS. Prior to the Effective Time, Wellesley Bank shall take all such actions as are necessary (determined in consultation with Cambridge) to submit the application for favorable determination letter in advance of the Effective Time. Wellesley Bank will adopt such amendments to the Wellesley Bank ESOP to effect the provisions of this Section 5.14(f). Promptly following the receipt of a favorable determination letter from the IRS regarding the qualified status of the Wellesley Bank ESOP upon its termination, the account balances in the Wellesley Bank ESOP shall either be distributed to participants and beneficiaries or transferred to an eligible tax-qualified retirement plan or individual retirement account as a participant or beneficiary may direct; provided however, that nothing contained herein shall delay the distribution or transfer of account balances in the Wellesley Bank ESOP in the ordinary course for reasons other than the termination of such plan. Prior to the Closing Date, Wellesley Bank shall provide Cambridge with the final documentation evidencing that the actions contemplated herein have been effectuated. Notwithstanding anything herein to the contrary, Wellesley Bank

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shall continue to accrue and make contributions to the Wellesley Bank ESOP trust from the date of this Agreement through the termination date of the Wellesley Bank ESOP in an amount sufficient (but not to exceed) the loan payments which become due in the ordinary course on the outstanding loans to the Wellesley Bank ESOP prior to the termination of the Wellesley Bank ESOP and shall make a pro-rated payment on the Wellesley Bank ESOP loan for the 2020 plan year through and including the end of the calendar quarter immediately preceding the Closing, prior to the termination of the Wellesley Bank ESOP.

(g) Wellesley Bank shall take all necessary action to terminate the Wellesley Bank Supplemental Executive Retirement Plan at or immediately prior to the Effective Time in accordance with Section 409A of the Code and to pay to each participant a lump sum amount equal to the benefit to which such participant is entitled pursuant to the terms of such plan. For illustrative purposes, Wellesley Disclosure Schedule 5.14(g) provides the aggregate lump sum amount payable to participants had the Wellesley Bank Supplemental Executive Retirement Plan been terminated on October 31, 2019.

(h) Wellesley Bank shall take all necessary action to terminate the Salary Continuation Agreement by and between Wellesley Bank and the President and Chief Executive Officer of Wellesley Bank at or immediately prior to the Effective Time in accordance with Section 409A of the Code and to pay the executive a lump sum amount equal to the benefit to which such participant is entitled pursuant to the terms of such plan. For illustrative purposes, Wellesley Disclosure Schedule 5.14(h) provides the lump sum amount payable to the participant had the Salary Continuation Agreement been terminated on December 31, 2019.

(i) Wellesley and Wellesley Bank shall take all necessary action to terminate the Employment Agreement by and among Wellesley, Wellesley Bank and the President and Chief Executive Officer of Wellesley and Wellesley Bank at or immediately prior to the Effective Time.

(j) To the extent necessary, Cambridge and Wellesley may provide a retention pool as mutually agreed by Cambridge and Wellesley to certain employees of Wellesley or Wellesley Bank to be designated by Cambridge in consultation with Wellesley. Such designated employees will enter into retention agreements to be agreed upon by Cambridge and Wellesley.

(k) Nothing contained in this Agreement, expressed or implied, shall (i) give any person, other than the parties hereto, any rights or remedies of any nature whatsoever, including any right to continued employment or service, under or by reason of this Section 5.14, (ii) cause any third party beneficiary rights in any current or former employee, director, other individual service provider of Wellesley or any of its Subsidiaries to enforce the provisions of this Section 5.14 or any other matter related thereto, or (iii) be construed as an amendment to any Wellesley Benefit Plan, Cambridge Benefit Plan, or other employee benefit plan of Cambridge, Cambridge Trust, Wellesley or any of their respective Affiliates, or be construed to prohibit the amendment or termination of any such plan.

Section 5.15 Notification of Certain Changes. Cambridge and Wellesley shall promptly advise the other party of any change or event having, or which could be reasonably expected to have, a Material Adverse Effect on it or which it believes would, or which could reasonably be expected to, cause or constitute a material breach of any of its representations, warranties or covenants contained herein. From time to time prior to the Effective Time, but no more frequently than monthly (and on the date prior to the Closing Date), each party will supplement or amend its Disclosure Schedules delivered in connection with the execution of this Agreement to reflect any matter which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedules or which is necessary to correct any information in such Disclosure Schedules which has been rendered inaccurate thereby. No supplement or amendment to such Disclosure Schedules shall have any effect for the purpose of determining the accuracy of the representations and warranties of the parties contained in Article III and Article IV in order to determine the fulfillment of the conditions set forth in Section 6.02(a) or Section 6.03(a) hereof, as the case may be, or the compliance by Wellesley or Cambridge, as the case may be, with the respective covenants and agreements of such parties contained herein.

Section 5.16 Current Information. During the period from the date of this Agreement to the Effective Time, Wellesley will cause one or more of its designated representatives to confer on a regular and frequent basis with representatives of Cambridge and to report the general status of the ongoing operations of

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Wellesley. Without limiting the foregoing, Wellesley agrees to provide Cambridge (i) a copy of each report filed by Wellesley with a Governmental Authority within one (1) Business Day following the filing thereof and (ii) monthly updates of the information required to be set forth in Wellesley Disclosure Schedule 3.15.

Section 5.17 Board Packages. Wellesley shall distribute a copy of each Wellesley Board package, including the agenda and any draft minutes, to Cambridge at the same time and in the same manner in which it distributes a copy of such packages to the Wellesley Board; provided, however, that Wellesley shall not be required to copy Cambridge on any documents that disclose confidential discussions of this Agreement or the transactions contemplated hereby or any third party proposal to acquire control of Wellesley or any other matter that the Wellesley Board has been advised of by counsel that such distribution to Cambridge may violate a confidentiality obligation or fiduciary duty or any law or regulation.

Section 5.18 Transition; Informational Systems Conversion. From and after the date hereof, Cambridge and Wellesley shall use their reasonable best efforts to facilitate the integration of Wellesley with the business of Cambridge following consummation of the transactions contemplated by this Agreement, and shall meet on a regular basis to discuss and plan for the conversion of Wellesley’s data processing and related electronic informational systems (the “Informational Systems Conversion”) to those used by Cambridge and its Subsidiaries, which planning shall include, but not be limited to: (a) discussion of Wellesley’s third-party service provider arrangements; (b) non-renewal of personal property leases and software licenses used by Wellesley in connection with its systems operations; (c) retention of outside consultants and additional employees to assist with the conversion; (d) outsourcing, as appropriate, of proprietary or self-provided system services; and (e) any other actions necessary and appropriate to facilitate the conversion, as soon as practicable following the Effective Time. Wellesley shall take all action which is necessary and appropriate to facilitate the Informational Systems Conversion; provided, however, that Cambridge shall pay all out-of-pocket fees, expenses or charges that Wellesley may incur as a result of taking, at the request of Cambridge, any action to facilitate the Informational Systems Conversion. If this Agreement is terminated by Cambridge and/or Wellesley in accordance with Section 7.01(a), Section 7.01(b), Section 7.01(c) or Section 7.01(f), or by Wellesley only in accordance with Section 7.01(d), Section 7.01(e) or Section 7.01(g)(ii), Cambridge shall pay to Wellesley all reasonable fees, expenses or charges related to reversing the Informational Systems Conversion within ten (10) Business Days of Wellesley providing Cambridge written evidence of such fees, expenses or charges.

Section 5.19 Assumption of Debt. Cambridge agrees to execute and deliver, or cause to be executed and delivered, by or on behalf of the Surviving Company, at or prior to the Effective Time, one or more supplemental indentures, guarantees, and other instruments required for the due assumption of the Wellesley’s outstanding debt, guarantees, securities, and other agreements to the extent required by the terms of such debt, guarantees, securities, and other agreements.

Section 5.20 Section 16 Matters. Prior to the Effective Time, the Cambridge Board, or a committee of non-employee directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall take all such reasonable action as may be required to cause to be exempt from liability pursuant to Rule 16b-3 under the Exchange Act, to the fullest extent permitted by applicable law, any acquisitions or dispositions of shares of Cambridge Stock (including derivative securities with respect to such shares) that are treated as acquisitions or dispositions under such rule and result from the transactions contemplated by this Agreement by each individual who is reasonably expected to become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Cambridge immediately after the Effective Time.

ARTICLE VI

CONDITIONS TO CONSUMMATION OF THE MERGER

Section 6.01 Conditions to Obligations of the Parties to Effect the Merger. The respective obligations of Wellesley and Cambridge to consummate the Merger are subject to the fulfillment or, to the extent permitted by applicable law, written waiver by the parties hereto prior to the Closing Date of each of the following conditions:

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(a) Regulatory Approvals. All Regulatory Approvals shall have been obtained and shall remain in full force and effect, any requirements contained in the Regulatory Approvals to be completed on or before the Closing Date shall have been completed, and all statutory waiting periods in respect thereof shall have expired or been terminated.

(b) Merger Registration Statement Effective. The Merger Registration Statement shall have been declared effective by the SEC and no stop order with respect thereto shall be in effect.

(c) NASDAQ Listing. The shares of Cambridge Stock issuable pursuant to this Agreement shall have been approved for listing on NASDAQ, subject to official notice of issuance.

(d) No Injunctions or Restraints; Illegality. No judgment, order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of any of the transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Authority that prohibits or makes illegal the consummation of any of such transactions.

(e) Tax Opinions. Cambridge shall have received a letter setting forth the written opinion of Hogan Lovells US LLP, in and form and substance reasonably satisfactory to Cambridge, dated as of the Closing Date, and Wellesley shall have received a letter setting forth the written opinion of Kilpatrick Townsend & Stockton LLP, in form and substance reasonably satisfactory to Wellesley, dated as of the Closing Date, in each case substantially to the effect that, on the basis of the facts, representations and assumptions set forth in such letter, the Merger will constitute a tax free reorganization described in Section 368(a) of the Code.

Section 6.02 Conditions to Obligations of Cambridge. The obligations of Cambridge to consummate the Merger also are subject to the fulfillment or written waiver by Cambridge prior to the Closing Date of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of Wellesley and Wellesley Bank set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; provided, however, that for purposes of this paragraph, such representations and warranties shall be deemed to be true and correct in all material respects unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, will have or are reasonably likely to have a Material Adverse Effect on Wellesley or the Surviving Company. Cambridge shall have received a certificate, dated the Closing Date, signed on behalf of Wellesley by the Chief Executive Officer of Wellesley to such effect.

(b) Performance of Obligations of Wellesley. Wellesley and Wellesley Bank shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Cambridge shall have received a certificate, dated the Closing Date, signed on behalf of Wellesley by the Chief Executive Officer of Wellesley to such effect.

(c) Adverse Regulatory Conditions. No Regulatory Approvals referred to in Section 6.01(a) hereof shall contain any condition, restriction or requirement which the Cambridge Board reasonably determines in good faith would, individually or in the aggregate, materially reduce the benefits of the Merger to such a degree that Cambridge would not have entered into this Agreement had such condition, restriction or requirement been known at the date hereof.

(d) Voting Agreements. The Wellesley Voting Agreements shall have been executed and delivered by each director and certain executive officers set forth on the Wellesley Disclosure Schedule 6.02(d) of Wellesley concurrently with Wellesley’s execution and delivery of this Agreement and shall remain in effect and not have been revoked as of the Effective Time.

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(e) Shareholder Approval. This Agreement shall have been duly approved by the requisite vote of the holders of outstanding shares of Wellesley Stock.

(f) Other Actions. Wellesley shall have furnished Cambridge with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in Section 6.01 and Section 6.02 as Cambridge may reasonably request.

Section 6.03 Conditions to Obligations of Wellesley. The obligations of Wellesley to consummate the Merger also are subject to the fulfillment or written waiver by Wellesley prior to the Closing Date of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of Cambridge set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; provided, however, that for purposes of this paragraph, such representations and warranties shall be deemed to be true and correct in all material respects unless the failure or failures of such representations and warranties to be so true and correct, either individually or in the aggregate, will have or are reasonably likely to have a Material Adverse Effect on Cambridge. Wellesley shall have received a certificate, dated the Closing Date, signed on behalf of Cambridge by the Chief Executive Officer and the Chief Financial Officer of Cambridge to such effect.

(b) Performance of Obligations of Cambridge. Cambridge shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Wellesley shall have received a certificate, dated the Closing Date, signed on behalf of Cambridge by the Chief Executive Officer and the Chief Financial Officer of Cambridge to such effect.

(c) Voting Agreements. The Cambridge Voting Agreements shall have been executed and delivered by each director and certain executive officers set forth on the Cambridge Disclosure Schedule 6.03(c) of Cambridge concurrently with Cambridge’s execution and delivery of this Agreement and shall remain in effect and not have been revoked as of the Effective Time.

(d) Shareholder Approval. This Agreement and the issuance of shares of Cambridge Stock in connection with the Merger shall have been duly approved by the requisite vote of the holders of outstanding shares of Cambridge Stock.

(e) Other Actions. Cambridge shall have furnished Wellesley with such certificates of its respective officers or others and such other documents to evidence fulfillment of the conditions set forth in Section 6.01 and Section 6.03 as Wellesley may reasonably request.

Section 6.04 Frustration of Closing Conditions. Neither Cambridge nor Wellesley may rely on the failure of any condition set forth in Section 6.01, Section 6.02 or Section 6.03, as the case may be, to be satisfied if such failure was caused by such party’s failure to use reasonable best efforts to consummate any of the transactions contemplated by this Agreement, as required by and subject to this Article VI.

ARTICLE VII

TERMINATION

Section 7.01 Termination. This Agreement may be terminated, and the transactions contemplated by this Agreement may be abandoned:

(a) Mutual Consent. At any time prior to the Effective Time, by the mutual consent of Cambridge and Wellesley if the Board of Directors of each so determines by vote of a majority of the members of its entire Board of Directors.

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(b) No Regulatory Approval. By Cambridge or Wellesley, if its Board of Directors so determines by a vote of a majority of the members of its entire board, in the event the approval of any Governmental Authority required for consummation of the transactions contemplated by this Agreement shall have been denied by final, nonappealable action by such Governmental Authority or an application therefor shall have been permanently withdrawn at the request of a Governmental Authority.

(c) Shareholder Approval. By either Cambridge or Wellesley (provided that if Wellesley is the terminating party it shall not be in material breach of any of its obligations under Section 5.04), if the approval of the shareholders required to satisfy either of the conditions set forth in Section 6.02(e) or Section 6.03(d) for the consummation of the transactions contemplated by this Agreement shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of such Wellesley shareholders in the case of the Wellesley Meeting or such Cambridge shareholders in the case of the Cambridge Meeting, or at any adjournment or postponement of the Wellesley Meeting or the Cambridge Meeting.

(d) Breach of Representations and Warranties. By either Cambridge or Wellesley (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the representations or warranties set forth in this Agreement by the other party, which breach is not cured within thirty (30) days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the Closing; provided, however, that neither party shall have the right to terminate this Agreement pursuant to this Section 7.01(d) unless the breach of representation or warranty, together with all other such breaches, would entitle the party receiving such representation or warranty not to consummate the Merger under Section 6.02(a) (in the case of a breach of a representation or warranty by Cambridge) or Section 6.03(a) (in the case of a breach of a representation or warranty by Wellesley or Wellesley Bank).

(e) Breach of Covenants. By either Cambridge or Wellesley (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach of any of the covenants or agreements set forth in this Agreement on the part of the other party, which breach shall not have been cured within thirty (30) days following receipt by the breaching party of written notice of such breach from the other party hereto, or which breach, by its nature, cannot be cured prior to the Closing, provided, however, that neither party shall have the right to terminate this Agreement pursuant to this Section 7.01(e) unless the breach of covenant or agreement, together with all other such breaches, would entitle the party receiving the benefit of such covenant or agreement not to consummate the Merger under Section 6.02(b) (in the case of a breach of a covenant or agreement by Wellesley or Wellesley Bank) or Section 6.03(b) (in the case of a breach of a representation or warranty by Cambridge).

(f) Delay. By either Cambridge or Wellesley if the Merger shall not have been consummated on or before September 30, 2020, unless the failure of the Closing to occur by such date shall be due to a material breach of this Agreement by the party seeking to terminate this Agreement.

(g) Failure to Recommend; Third-Party Acquisition Transaction; Etc.

(i) By Cambridge, if (i) Wellesley shall have breached its obligations under Section 5.11, (ii) the Wellesley Board shall have failed to make its recommendation referred to in Section 5.04, withdrawn such recommendation or modified or changed such recommendation in a manner adverse in any respect to the interests of Cambridge, (iii) the Wellesley Board shall have recommended, proposed, or publicly announced its intention to recommend or propose, to engage in an Acquisition Transaction with any Person other than Cambridge or a Subsidiary of Cambridge or (iv) Wellesley shall have materially breached its obligations under Section 5.04 by failing to call, give notice of, convene and hold the Wellesley Meeting in accordance with Section 5.04.

(ii) By Wellesley, if (i) the Cambridge Board shall have failed to make its recommendation referred to in Section 5.04, withdrawn such recommendation or modified or changed such recommendation in a manner adverse in any respect to the interests of Wellesley, or (ii) Cambridge shall have materially

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breached its obligations under Section 5.04 by failing to call, give notice of, convene and hold the Cambridge Meeting in accordance with Section 5.04.

(iii) By Wellesley, subject to Wellesley’s compliance with Section 7.02(a) if Wellesley has received a Superior Proposal, and in accordance with Section 5.11 of this Agreement, the Wellesley Board has made a determination to accept such Superior Proposal.

(h) Decrease in Cambridge Stock Price. By Wellesley, if the Wellesley Board so determines by a vote of the majority of the members of the entire Wellesley Board, at any time during the five-day period commencing with the Determination Date (as defined below), if both of the following conditions are satisfied:

(A) The quotient obtained by dividing the Average Closing Price by the Starting Price (as defined below) (the “Cambridge Ratio”) shall be less than 0.80; and

(B) (x) the Cambridge Ratio shall be less than (y) the quotient obtained by dividing the Final Index Price by the Index Price on the Starting Date (each as defined below) and subtracting 0.20 from the quotient in this clause (B)(y) (such number in this clause (B)(y) that results from dividing the Final Index Price by the Index Price on the Starting Date being referred to herein as the “Index Ratio”);

subject, however, to the following three sentences. If Wellesley elects to exercise its termination right pursuant to this Section 7.01(h), it shall give written notice to Cambridge promptly, and in any event within the five-day period commencing with the Determination Date. During the five-day period commencing with its receipt of such notice, Cambridge shall have the option to increase the consideration to be received by the holders of Wellesley Stock hereunder, by adjusting the Exchange Ratio (calculated to the nearest one one-thousandth) to equal the lesser of (x) a number (rounded to the nearest one one-thousandth) obtained by dividing (A) the product of the Starting Price, 0.80 and the Exchange Ratio (as then in effect) by (B) the Average Closing Price and (y) a number (rounded to the nearest one one-thousandth) obtained by dividing (A) the product of the Index Ratio, 0.80 and the Exchange Ratio (as then in effect) by (B) the Cambridge Ratio. If Cambridge so elects within such five-day period, it shall give prompt written notice to Wellesley of such election and the revised Exchange Ratio, whereupon no termination shall have occurred pursuant to this Section 7.01(h) and this Agreement shall remain in effect in accordance with its terms (except as the Exchange Ratio shall have been so modified.)

For purposes of this Section 7.01(h) the following terms shall have the meanings indicated:

“Average Closing Price” shall mean the average of the daily closing prices for the shares of Cambridge Stock for the 20 consecutive full trading days on which such shares are actually traded on NASDAQ (as reported by Bloomberg or, if not reported thereby, any other authoritative source) ending at the close of trading on the Determination Date.

“Determination Date” shall mean the 10th day prior to the Closing Date, provided that if shares of the Cambridge Stock are not actually traded on NASDAQ on such day, the Determination Date shall be the immediately preceding day to the 10th day prior to the Closing Date on which shares of Cambridge Stock actually trade on NASDAQ.

“Final Index Price” shall mean the average of the Index Prices for the 20 consecutive full trading days ending on the trading day prior to the Determination Date.

“Index Group” shall mean the Nasdaq Bank Index.

“Index Price” shall mean the closing price on such date of the Index Group.

“Starting Date” shall mean the last trading day immediately preceding the date of the first public announcement of entry into this Agreement.

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“Starting Price” shall mean the closing price of a share of Cambridge Stock on NASDAQ (as reported by Bloomberg, or if not reported therein, in another authoritative source) on the Starting Date.

Section 7.02 Termination Fee. In recognition of the efforts, expenses and other opportunities foregone by Cambridge while structuring and pursuing the Merger, the parties hereto agree that Wellesley shall pay to Cambridge a termination fee of $4,100,000 within three (3) Business Days after written demand for payment is made by Cambridge, following the occurrence of any of the events set forth below:

(a) Cambridge or Wellesley terminates this Agreement pursuant to Section 7.01(g)(i) or Section 7.01(g)(iii); or

(b) Wellesley or Wellesley Bank enters into a definitive agreement relating to an Acquisition Proposal or the consummation of an Acquisition Proposal involving Wellesley or Wellesley Bank within twelve (12) months following the termination of this Agreement by Cambridge pursuant to Section 7.01(d) or Section 7.01(e) because of a Willful Breach by Wellesley or Wellesley Bank after an Acquisition Proposal has been publicly announced or otherwise made known Wellesley.

Section 7.03 Effect of Termination and Abandonment. In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VII, no party to this Agreement shall have any liability or further obligation to any other party hereunder except (i) as set forth in Section 7.01 and Section 8.01 and (ii) that termination will not relieve a breaching party from liability for money damages for any Willful Breach of any covenant, agreement, representation or warranty of this Agreement giving rise to such termination. Nothing in Section 7.02 or this Section 7.03 shall be deemed to preclude either party from seeking specific performance in equity to enforce the terms of this Agreement.

ARTICLE VIII

MISCELLANEOUS

Section 8.01 Survival. No representations, warranties, agreements and covenants contained in this Agreement shall survive the Effective Time (other than agreements or covenants contained herein that by their express terms are to be performed after the Effective Time) or the termination of this Agreement if this Agreement is terminated prior to the Effective Time (other than Section 5.10(b), Section 7.02 and this Article VIII, which shall survive any such termination). Notwithstanding anything in the foregoing to the contrary, no representations, warranties, agreements and covenants contained in this Agreement shall be deemed to be terminated or extinguished so as to deprive a party hereto or any of its affiliates of any defense at law or in equity which otherwise would be available against the claims of any Person, including without limitation any shareholder or former shareholder.

Section 8.02 Waiver; Amendment. Prior to the Effective Time, any provision of this Agreement may be (a) waived by the party benefited by the provision or (b) amended or modified at any time, by an agreement in writing among the parties hereto executed in the same manner as this Agreement, except that after the Wellesley Meeting and Cambridge Meeting no amendment shall be made which by law requires further approval by the shareholders of Wellesley or Cambridge, respectively, without obtaining such approval.

Section 8.03 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to constitute an original.

Section 8.04 Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without regard for conflict of law provisions.

Section 8.05 Expenses. Each party hereto will bear all expenses incurred by it in connection with this Agreement and the transactions contemplated by this Agreement, including fees and expenses of its own financial consultants, accountants and counsel, except that printing expenses and SEC filing and registration fees shall be shared equally between Cambridge and Wellesley; provided, however, that nothing

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contained herein shall limit either party’s rights to recover any liabilities or damages arising out of the other party’s Willful Breach of any provision of this Agreement.

Section 8.06 Notices. All notices, requests and other communications hereunder to a party shall be in writing and shall be deemed given if personally delivered, mailed by registered or certified mail (return receipt requested) or sent by reputable courier service to such party at its address set forth below or such other address as such party may specify by notice to the parties hereto.

If to Cambridge:

Cambridge Bancorp

1336 Massachusetts Avenue

Cambridge, MA 02138

Attention:    Denis K. Sheahan

Email:         Denis.Sheahan@cambridgetrust.com

With a copy to:

Hogan Lovells US LLP

555 Thirteenth Street, N.W.

Washington, DC 20004

Attention:    Richard A. Schaberg

Email:          richard.schaberg@hoganlovells.com

If to Wellesley:

Wellesley Bancorp, Inc.

100 Worcester Street, Suite 300

Wellesley, MA 02481

Attention:    Thomas J. Fontaine

Email:          tom@wellesleybank.com    

With a copy to:

Kilpatrick Townsend & Stockton

607 14^th Street, NW Suite 900

Washington, DC 20005

Attention: Gary R. Bronstein and Edward G. Olifer

Email:          gbronstein@kilpatricktownsend.com

                     eolifer@kilatricktownsend.com

Section 8.07 Entire Understanding; No Third Party Beneficiaries. This Agreement, the Plan of Bank Merger, the Wellesley Voting Agreements, the Cambridge Voting Agreements and the Confidentiality Agreement represent the entire understanding of the parties hereto and thereto with reference to the transactions, and this Agreement, the Plan of Bank Merger, the Wellesley Voting Agreements, the Cambridge Voting Agreements and the Confidentiality Agreement supersede any and all other oral or written agreements heretofore made. Except for the Indemnified Parties’ right to enforce Cambridge’s obligation under Section 5.13, which are expressly intended to be for the irrevocable benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives, nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

Section 8.08 Severability. In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties

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shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.

Section 8.09 Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.

Section 8.10 Interpretation. When a reference is made in this Agreement to sections, exhibits or schedules, such reference shall be to a section of, or exhibit or schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

Section 8.11 Assignment. No party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

ARTICLE IX

ADDITIONAL DEFINITIONS

Section 9.01 Additional Definitions. In addition to any other definitions contained in this Agreement, the following words, terms and phrases shall have the following meanings when used in this Agreement:

“Acquisition Proposal” means any proposal or offer with respect to any of the following (other than the transactions contemplated hereunder) involving Wellesley or Wellesley Bank: (a) any merger, consolidation, share exchange, business combination or other similar transactions; (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets and/or liabilities that constitute a substantial portion of the net revenues, net income or assets of Wellesley or Wellesley Bank in a single transaction or series of transactions; (c) any tender offer or exchange offer for 25% or more of the outstanding shares of its capital stock or the filing of a registration statement under the Securities Act in connection therewith; or (d) any public announcement by any Person (which shall include any regulatory application or notice, whether in draft or final form) of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

“Acquisition Transaction” means any of the following (other than the transactions contemplated hereunder): (a) a merger, consolidation, share exchange, business combination or any similar transaction, involving the relevant companies; (b) a sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets and/or liabilities that constitute a substantial portion of the net revenues, net income or assets of the relevant companies in a single transaction or series of transactions; (c) a tender offer or exchange offer for 25% or more of the outstanding shares of the capital stock of the relevant companies or the filing of a registration statement under the Securities Act in connection therewith; or (d) an agreement or commitment by the relevant companies to take any action referenced above.

“Affiliate” means, with respect to any Person, any person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person and, without limiting the generality of the foregoing, includes any executive officer, director, manager or Person who beneficially owns more than ten percent of the equity or voting securities of such Person.

“Bank Merger Act” means the Bank Merger Act, within the Federal Deposit Insurance Act and applicable regulations thereunder.

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“Bank Regulator” shall mean any Federal or state banking regulator, including but not limited to the FDIC, the MGL, the MDOB, the FHLB and the FRB, which regulates Cambridge, Cambridge Trust, Wellesley or Wellesley Bank, or any of their respective subsidiaries, as the case may be.

“Business Day” means Monday through Friday of each week, except a legal holiday recognized as such by the U.S. government or any day on which banking institutions in the Commonwealth of Massachusetts are authorized or obligated to close.

“Cambridge Board” means the Board of Directors of Cambridge.

“Cambridge Disclosure Schedule” means the disclosure schedule delivered by Cambridge to Wellesley on or prior to the date hereof setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express provision of this Agreement or as an exception to one or more of its representations and warranties in Article IV or its covenants in Article V.

“Cambridge Loan Property” means any property in which Cambridge or Cambridge Trust holds a security interest, and, where required by the context (as a result of foreclosure), said term includes any property owned or operated by Cambridge or Cambridge Trust.

“Cambridge Stock” means the common stock, par value $1.00 per share, of Cambridge.

“Derivative Transaction” means any swap transaction, option, warrant, forward purchase or forward sale transaction, futures transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, catastrophe events, weather-related events, credit-related events or conditions or any indexes, or any other similar transaction (including any option with respect to any of these transactions) or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions.

“Employee Stock Incentive Plan” means, with respect to Cambridge, the Amended 1993 Stock Option Plan, the 2017 Equity and Cash Incentive Plan, the Director Stock Plan and the 2016 Annual Incentive Plan.

“Environmental Law” means any federal, state or local law, regulation, order, decree, permit, authorization, opinion or agency requirement relating to: (a) the protection or restoration of the environment, health, safety, or natural resources, (b) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (c) wetlands, indoor air, pollution, contamination or any injury or threat of injury to persons or property in connection with any Hazardous Substance, in each case as amended and as now in effect.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“Exchange Agent” means such exchange agent as may be designated by Cambridge and reasonably acceptable to Wellesley to act as agent for purposes of conducting the exchange procedures described in Article II.

“FDIC” means the Federal Deposit Insurance Corporation.

“FHLB” means the Federal Home Loan Bank of Boston, or any successor thereto.

“FRB” means the Board of Governors of the Federal Reserve System.

“GAAP” means accounting principles generally accepted in the United States of America.

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“Governmental Authority” means any federal, state or local court, administrative agency or commission or other governmental authority or instrumentality.

“Hazardous Substance” means any and all substances (whether solid, liquid or gas) defined, currently or hereafter listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present Environmental Laws, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, mold, mycotoxins, microbial matter and airborne pathogens (naturally occurring or otherwise), but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purposes of cleaning or other maintenance or operations.

“Intellectual Property” means (a) trademarks, service marks, trade names, Internet domain names, designs, logos, slogans, and general intangibles of like nature, together with all goodwill associated therewith, registrations and applications related to the foregoing; (b) patents and industrial designs (including any continuations, divisionals, continuations-in-part, renewals, reissues, and applications for any of the foregoing); (c) copyrights (including any registrations and applications for any of the foregoing); (d) Software; and (e) technology, trade secrets and other confidential information, know-how, proprietary processes, formulae, algorithms, models, and methodologies.

“IRS” means the Internal Revenue Service.

“Joint Proxy Statement/Prospectus” means the joint proxy statement and prospectus, satisfying all applicable requirements of applicable state securities and banking laws, and of the Securities Act, and the rules and regulations thereunder, together with any amendments and supplements thereto, as prepared by Cambridge and Wellesley and as delivered to holders of Wellesley Stock and Cambridge Stock in connection with the solicitation of their approval of this Agreement.

“Knowledge” as used with respect to a Person (including references to such Person being aware of a particular matter) means the actual knowledge after reasonable inquiry of the President and Chief Executive Officer, the Chief Financial Officer, the Chief Lending Officer and the Chief Client Experience Officer in the case of Wellesley, and the President, the Chief Executive Officer, the Chief Lending Officer and the Chief Financial Officer in the case of Cambridge.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or preemptive right, right of first refusal or similar right of a third party with respect to such securities.

“Material Adverse Effect” means, with respect to Cambridge or Wellesley, respectively, any effect that (i) is material and adverse to the financial condition, results of operations or business of Cambridge and its Subsidiaries taken as a whole, or Wellesley and its Subsidiaries taken as a whole, respectively, or (ii) materially impairs the ability of either Cambridge or Cambridge Trust, on the one hand, or Wellesley or Wellesley Bank, on the other hand, to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the transactions contemplated by this Agreement; provided that “Material Adverse Effect” shall not be deemed to include the impact of (A) changes, after the date hereof, in GAAP or applicable regulatory accounting requirements, (B) changes, after the date hereof, in laws, rules or regulations of general applicability to financial institutions and/or their holding companies, or interpretations thereof by courts or any Bank Regulator or Governmental Authorities, (C) changes, after the date hereof, in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in economic or market (including equity, credit and debt markets, as well as changes in interest rates) conditions affecting the financial services industry generally and not specifically relating to such party or its Subsidiaries, (D) public disclosure of the execution of this Agreement, public disclosure or consummation of the transactions contemplated hereby (including any effect on a party’s relationships with its customers or employees) or actions expressly required by this Agreement or actions or omissions that are taken with the prior written consent of the other party in contemplation of the transactions

49

contemplated hereby, (E) a decline in the trading price of a party’s common stock or the failure, in and of itself, to meet earnings projections or internal financial forecasts (it being understood that the underlying cause of such decline or failure may be taken into account in determining whether a Material Adverse Effect has occurred), (F) actions and omissions of either party taken with the prior written consent, or at the request, of the other, (G) any failure by either party to meet any internal projections or forecasts or estimates of revenues or earnings for any period, (H) the expenses incurred by either party in investigating, negotiating, documenting, effecting and consummating the transactions contemplated by this Agreement; except, with respect to subclauses (A), (B), or (C), to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such party and its Subsidiaries, taken as a whole, as compared to other companies in the financial services industry.

“MDOB” means the Massachusetts Division of Banks.

“NASDAQ” means The NASDAQ Stock Market LLC.

“Per Share Consideration” means the product of (a) the Exchange Ratio and (b) the Cambridge Measurement Price.

“Person” means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability company, unincorporated organization or other organization or firm of any kind or nature.

“Rights” means, with respect to any Person, warrants, options, rights, convertible securities and other arrangements or commitments which obligate the Person to issue or dispose of any of its capital stock or other ownership interests.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Software” means computer programs, whether in source code or object code form (including any and all software implementation of algorithms, models and methodologies), databases and compilations (including any and all data and collections of data), and all documentation (including user manuals and training materials) related to the foregoing.

“Subsidiary” means, with respect to any party, any corporation or other entity of which a majority of the capital stock or other ownership interest having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such party.

“Superior Proposal” means any bona fide written proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 25% of the combined voting power of the shares of Wellesley Stock then outstanding or all or substantially all of the assets of Wellesley and otherwise (a) on terms which the Wellesley Board determines in good faith, after consultation with its financial advisor, to be more favorable from a financial point of view to Wellesley’s shareholders than the transactions contemplated by this Agreement, and (b) that constitutes a transaction that, in the Wellesley Board’s good faith judgment, is reasonably likely to be consummated on the terms set forth, taking into account all legal, financial, regulatory and other aspects of such proposal.

“Tax” and “Taxes” mean all federal, state, local or foreign income, gross income, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, custom duties, unemployment or other taxes of any kind whatsoever, together with any interest, additions or penalties thereto and any interest in respect of such interest and penalties.

“Tax Returns” means any return, declaration or other report (including elections, declarations, schedules, estimates and information returns) with respect to any Taxes.

50

“Wellesley Bank Board” means the Board of Directors of Wellesley Bank.

“Wellesley Board” means the Board of Directors of Wellesley.

“Wellesley Disclosure Schedule” means the disclosure schedule delivered by Wellesley to Cambridge on or prior to the date hereof setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express provision of this Agreement or as an exception to one or more of its representations and warranties in Article III or its covenants in Article V.

“Wellesley Equity Plan” means the Wellesley Bancorp, Inc. 2012 Equity Incentive Plan or the Wellesley Bancorp, Inc. 2016 Equity Incentive Plan.

“Wellesley Intellectual Property” means the Intellectual Property used in or held for use in the conduct of the business of Wellesley or any of its Subsidiaries.

“Wellesley Loan Property” means any property in which Wellesley or Wellesley Bank holds a security interest, and, where required by the context (as a result of foreclosure), said term includes any property owned or operated by Wellesley or Wellesley Bank.

“Wellesley Option” means an option to purchase shares of Wellesley Stock including, but not limited to, an option to purchase shares of Wellesley Stock under a Wellesley Stock Option Plan.

“Wellesley Stock Option Plan” means, with respect to Wellesley, the Wellesley Bancorp, Inc. 2012 Equity Incentive Plan.

“Willful Breach” means a deliberate act or a deliberate failure to act, taken or not taken if the Person reasonably should have known or had actual Knowledge that such act or failure to act would result in or constitute a material breach of this Agreement, regardless of whether breaching was the object of the act or failure to act.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in counterparts by their duly authorized officers, all as of the day and year first above written.

CAMBRIDGE BANCORP
By:	/s/ Denis K. Sheahan
Name:	Denis K. Sheahan
Title:	Chairman and Chief Executive Officer
CAMBRIDGE TRUST COMPANY
By:	/s/ Denis K. Sheahan
Name:	Denis K. Sheahan
Title:	Chairman and Chief Executive Officer
WELLESLEY BANCORP, INC.
By:	/s/ Thomas J. Fontaine
Name:	Thomas J. Fontaine
Title:	President and Chief Executive Officer
WELLESLEY BANK
By:	/s/ Thomas J. Fontaine
Name:	Thomas J. Fontaine
Title:	President and Chief Executive Officer

[Signature Page to Agreement and Plan of Merger]

Exhibit A

Form of Wellesley Voting Agreement

VOTING AGREEMENT

This VOTING AGREEMENT (this “Agreement”) is dated as of December ___, 2019, by and between the undersigned holder (“Shareholder”) of common stock, par value $0.01 per share (“Wellesley Common Stock”) of Wellesley Bancorp, Inc., a Maryland corporation and registered bank holding company under the Bank Holding Company Act of 1956, as amended (“Wellesley”), and Cambridge Bancorp, a Massachusetts corporation (“Cambridge”). All terms used herein and not defined herein shall have the meanings assigned thereto in the Merger Agreement (as defined below).

WHEREAS, concurrently with the execution of this Agreement, Cambridge, Cambridge Trust, a Massachusetts-chartered trust company and wholly owned subsidiary of Cambridge (“Cambridge Trust”), Wellesley and Wellesley Bank, a Massachusetts-chartered bank and wholly owned subsidiary of Wellesley (“Wellesley Bank”), are entering into an Agreement and Plan of Merger (as such agreement may be subsequently amended or modified, the “Merger Agreement”), pursuant to which Wellesley shall merge with and into Cambridge, and Wellesley Bank shall merge with and into Cambridge Trust, and in connection therewith, each outstanding share of Wellesley Common Stock will be converted into the right to receive the Merger Consideration;

WHEREAS, Shareholder beneficially owns and has sole or shared voting power with respect to the number of shares of Wellesley Stock identified on Exhibit A hereto (such shares, together with all shares of Wellesley Stock with respect to which Shareholder subsequently acquires beneficial ownership during the term of this Agreement, including the right to acquire beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) through the exercise of any stock options, warrants or similar instruments, being referred to as the “Shares”); and

WHEREAS, it is a condition to the willingness of Cambridge to enter into the Merger Agreement that Shareholder execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the promises, representations, warranties and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Agreement to Vote Shares. Shareholder agrees that, while this Agreement is in effect, at any meeting of shareholders of Wellesley, however called, or at any adjournment thereof, or in any other circumstances in which Shareholder is entitled to vote, consent or give any other approval, except as otherwise agreed to in writing in advance by Cambridge, Shareholder shall:

(a) appear at each such meeting or otherwise cause the Shares to be counted as present thereat for purposes of calculating a quorum; and

(b) vote (or cause to be voted), in person or by proxy, all the Shares (whether acquired heretofore or hereafter) that are beneficially owned by Shareholder or as to which Shareholder has, directly or indirectly, the right to vote or direct the voting, (i) in favor of adoption and approval of the Merger Agreement and the transactions contemplated thereby; (ii) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or

agreement of Wellesley contained in the Merger Agreement or of Shareholder contained in this Agreement; and (iii) against any Acquisition Proposal or any other action, agreement or transaction that is intended, or could reasonably be expected, to materially impede, interfere or be inconsistent with, delay, postpone, discourage or materially and adversely affect consummation of the transactions contemplated by the Merger Agreement or of this Agreement; provided, however, that, if the manner in which the Shares (or any portion thereof) are owned is such that the Shareholder does not have the right to cause the Shares to be so voted, the Shareholder shall use the Shareholder’s reasonable best efforts to cause the Shares to be so voted.

Section 2. No Transfers. While this Agreement is in effect, Shareholder agrees not to, directly or indirectly, sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option, commitment or other arrangement or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, any of the Shares, except the following transfers shall be permitted: (a) transfers by will or operation of law, in which case this Agreement shall bind the transferee, (b) transfers pursuant to any pledge agreement, subject to the pledgee agreeing in writing to be bound by the terms of this Agreement, (c) transfers in connection with estate and tax planning purposes, including transfers to relatives, trusts and charitable organizations, subject to the transferee agreeing in writing to be bound by the terms of this Agreement, (d) a transfer of the Shares by the Shareholder to Wellesley in connection with the vesting, settlement, or exercise of Wellesley equity awards granted pursuant to a Wellesley employee benefits plan outstanding as of the date hereof, and (e) such transfers as Cambridge may otherwise permit in its sole discretion. Any transfer or other disposition in violation of the terms of this Section 2 shall be null and void.

Section 3. Representations and Warranties of Shareholder. Shareholder represents and warrants to and agrees with Cambridge as follows:

(a) Shareholder has all requisite capacity and authority to enter into and perform his, her or its obligations under this Agreement.

(b) This Agreement has been duly executed and delivered by Shareholder, and assuming the due authorization, execution and delivery by Cambridge, constitutes the valid and legally binding obligation of Shareholder enforceable against Shareholder in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of his, her or its obligations hereunder and the consummation by Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which Shareholder is a party or by which Shareholder is bound, or any statute, rule or regulation to which Shareholder is subject or, in the event that Shareholder is a corporation, partnership, trust or other entity, any charter, bylaw or other organizational document of Shareholder.

(d) Except as set forth on Schedule 1, Shareholder is the record and beneficial owner of, or is the trustee that is the record holder of, and whose beneficiaries are the beneficial owners of, and has good title to all of the Shares set forth on Exhibit A hereto, and the Shares are so owned free and clear of any liens, security interests, charges or other encumbrances. Shareholder does not own, of record or beneficially, any shares of capital stock of Wellesley other than the Shares (other than shares of capital stock subject to stock options or warrants over which Shareholder will have no voting rights until the exercise of such stock options or warrants). Shareholder has the right to vote

the Shares and none of the Shares are subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of the Shares, except as contemplated by this Agreement.

Section 4. Irrevocable Proxy. Subject to the last sentence of this Section 4, by execution of this Agreement, Shareholder does hereby appoint Cambridge with full power of substitution and resubstitution, as Shareholder’s true and lawful attorney and irrevocable proxy, to the full extent of Shareholder’s rights with respect to the Shares, to vote, if Shareholder is unable to perform his, her or its obligations under this Agreement, each of such Shares that Shareholder shall be entitled to so vote with respect to the matters set forth in Section 1 hereof at any meeting of the shareholders of Wellesley, and at any adjournment or postponement thereof, and in connection with any action of the shareholders of Wellesley taken by written consent. The Shareholder intends this proxy to be irrevocable and coupled with an interest hereafter until the termination of this Agreement pursuant to the terms of Section 7 hereof and hereby revokes any proxy previously granted by Shareholder with respect to the Shares. Notwithstanding anything contained herein to the contrary, this irrevocable proxy shall automatically terminate upon the termination of this Agreement.

Section 5. No Solicitation. From and after the date hereof until the termination of this Agreement pursuant to Section 7 hereof, Shareholder, in his, her or its capacity as a shareholder of Wellesley, shall not, nor shall such Shareholder authorize any partner, officer, director, advisor or representative of, such Shareholder or any of his, her or its affiliates to (and, to the extent applicable to Shareholder, such Shareholder shall use reasonable best efforts to prohibit any of his, her or its representatives or affiliates to), (a) initiate, solicit, induce or knowingly encourage, or take any action to facilitate the making of, any inquiry, offer or proposal which constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (b) participate in any discussions or negotiations regarding any Acquisition Proposal, or furnish, or otherwise afford access, to any person (other than Cambridge) any information or data with respect to Wellesley or Wellesley Bank or otherwise relating to an Acquisition Proposal, (c) enter into any agreement, agreement in principle or letter of intent with respect to an Acquisition Proposal (other than the Merger Agreement), (d) solicit proxies or become a “participant” in a “solicitation” (as such terms are defined in Regulation 14A under the Exchange Act) with respect to an Acquisition Proposal (other than the Merger Agreement) or otherwise encourage or assist any party in taking or planning any action that would compete with, restrain or otherwise serve to interfere with or inhibit the timely consummation of the Merger in accordance with the terms of the Merger Agreement, (e) initiate a shareholders’ vote or action by consent of Wellesley’s shareholders with respect to an Acquisition Proposal, or (f) except by reason of this Agreement, become a member of a “group” (as such term is used in Section 13(d) of the Exchange Act) with respect to any voting securities of Wellesley that takes any action in support of an Acquisition Proposal.

Section 6. Specific Performance and Remedies. Shareholder acknowledges that it will be impossible to measure in money the damage to Cambridge if Shareholder fails to comply with the obligations imposed by this Agreement and that, in the event of any such failure, Cambridge will not have an adequate remedy at law or in equity. Accordingly, Shareholder agrees that injunctive relief or other equitable remedy, in addition to remedies at law or in damages, is the appropriate remedy for any such failure and will not oppose the granting of such relief on the basis that Cambridge has an adequate remedy at law. Shareholder agrees that Shareholder will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with Cambridge’s seeking or obtaining such equitable relief.

Section 7. Term of Agreement; Termination. The term of this Agreement shall commence on the date hereof. This Agreement may be terminated at any time prior to consummation of the transactions contemplated by the Merger Agreement by the written consent of the parties hereto, and shall be automatically terminated upon the earlier to occur of: (a) the Effective Time or (b) in the event that the Merger Agreement is terminated in accordance with its terms. Upon any such termination, no party shall have any further obligations or

liabilities hereunder; provided, however, such termination shall not relieve any party from liability for any willful breach of this Agreement prior to such termination.

Section 8. Entire Agreement; Amendments. This Agreement supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.

Section 9. Severability. In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.

Section 10. Capacity as Shareholder. The covenants contained herein shall apply to Shareholder solely in his or her capacity as a shareholder of Wellesley, and no covenant contained herein shall apply to Shareholder in his or her capacity as a director, officer or employee of Wellesley or in any other capacity. Nothing contained in this Agreement shall be deemed to apply to, or limit in any manner, the obligations of Shareholder to comply with his or her fiduciary duties as a director of Wellesley.

Section 11. Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without regard for conflict of law provisions.

Section 12. Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Cambridge in accordance with Section 8.06 of the Merger Agreement and to each Shareholder at its address set forth on Exhibit A attached hereto (or at such other address for a party as shall be specified by like notice).

(Remainder of page intentionally left blank.)

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.

CAMBRIDGE BANCORP
By:
Name:	Denis K. Sheahan
Title:	Chairman and Chief Executive Officer

SHAREHOLDER

Name:

EXHIBIT A

NAME AND ADDRESS OF SHAREHOLDER SHARES OF WELLESLEY COMMON STOCK BENEFICIALLY OWNED

Exhibit B

Form of Cambridge Voting Agreement

VOTING AGREEMENT

This VOTING AGREEMENT (this “Agreement”) is dated as of December ___, 2019, by and between the undersigned holders (“Shareholders”) of common stock, par value $1.00 per share (“Cambridge Common Stock”) of Cambridge Bancorp, a Massachusetts corporation and registered bank holding company under the Bank Holding Company Act of 1956, as amended (“Cambridge”), and Wellesley Bancorp, Inc., a Maryland corporation (“Wellesley”). All terms used herein and not defined herein shall have the meanings assigned thereto in the Merger Agreement (as defined below).

WHEREAS, concurrently with the execution of this Agreement, Cambridge, Cambridge Trust, a Massachusetts-chartered trust company and wholly owned subsidiary of Cambridge (“Cambridge Trust”), Wellesley and Wellesley Bank, a Massachusetts-chartered bank and wholly owned subsidiary of Wellesley (“Wellesley Bank”), are entering into an Agreement and Plan of Merger (as such agreement may be subsequently amended or modified, the “Merger Agreement”), pursuant to which Wellesley shall merge with and into Cambridge, and Wellesley Bank shall merge with and into Cambridge Trust, and in connection therewith, each outstanding share of Wellesley Common Stock will be converted into the right to receive the Merger Consideration;

WHEREAS, each Shareholder beneficially owns and has sole or shared voting power with respect to the number of shares of Cambridge Stock identified opposite such Shareholder’s name on Exhibit A hereto (such shares, together with all shares of Cambridge Stock with respect to which such Shareholder subsequently acquires beneficial ownership during the term of this Agreement, including the right to acquire beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) through the exercise of any stock options, warrants or similar instruments, being referred to as the “Shares”); and

WHEREAS, it is a condition to the willingness of Wellesley to enter into the Merger Agreement that the Shareholders execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the promises, representations, warranties and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Agreement to Vote Shares. Each Shareholder agrees that, while this Agreement is in effect, at any meeting of shareholders of Cambridge, however called, or at any adjournment thereof, or in any other circumstances in which such Shareholder is entitled to vote, consent or give any other approval, except as otherwise agreed to in writing in advance by Wellesley, such Shareholder shall:

(c) appear at each such meeting or otherwise cause such Shareholder’s Shares to be counted as present thereat for purposes of calculating a quorum; and

(d) vote (or cause to be voted), in person or by proxy, all the Shares (whether acquired heretofore or hereafter) that are beneficially owned by such Shareholder or as to which such Shareholder has, directly or indirectly, the right to vote or direct the voting, (i) in favor of adoption and approval of the Merger Agreement and the transactions contemplated thereby; (ii) in favor of the issuance of shares of Cambridge Common Stock in connection with the Merger; and (iii) against any action or

agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Cambridge contained in the Merger Agreement or of such Shareholder contained in this Agreement; provided, however, that, if the manner in which such Shareholder’s Shares (or any portion thereof) are owned is such that such Shareholder does not have the right to cause such Shares to be so voted, such Shareholder shall use such Shareholder’s reasonable best efforts to cause such Shares to be so voted.

Section 2. No Transfers. While this Agreement is in effect, each Shareholder agrees not to, directly or indirectly, sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option, commitment or other arrangement or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, any of such Shareholder’s Shares, except the following transfers shall be permitted: (a) transfers by will or operation of law, in which case this Agreement shall bind the transferee, (b) transfers pursuant to any pledge agreement, subject to the pledgee agreeing in writing to be bound by the terms of this Agreement, (c) transfers in connection with estate and tax planning purposes, including transfers to relatives, trusts and charitable organizations, subject to the transferee agreeing in writing to be bound by the terms of this Agreement, (d) a transfer of such Shares by such Shareholder to Cambridge in connection with the vesting, settlement, or exercise of Cambridge equity awards granted pursuant to a Cambridge employee benefits plan outstanding as of the date hereof, and (e) such transfers as Wellesley may otherwise permit in its sole discretion. Any transfer or other disposition in violation of the terms of this Section 2 shall be null and void.

Section 3. Representations and Warranties of Shareholder. Each Shareholder severally represents and warrants to and agrees with Wellesley as follows:

(e) Such Shareholder has all requisite capacity and authority to enter into and perform his, her or its obligations under this Agreement.

(f) This Agreement has been duly executed and delivered by such Shareholder, and assuming the due authorization, execution and delivery by Wellesley, constitutes the valid and legally binding obligation of such Shareholder enforceable against such Shareholder in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(g) The execution and delivery of this Agreement by such Shareholder does not, and the performance by such Shareholder of his, her or its obligations hereunder and the consummation by such Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which such Shareholder is a party or by which such Shareholder is bound, or any statute, rule or regulation to which such Shareholder is subject or, in the event that such Shareholder is a corporation, partnership, trust or other entity, any charter, bylaw or other organizational document of such Shareholder.

(h) Except as set forth on Schedule 1, such Shareholder is the record and beneficial owner of, or is the trustee that is the record holder of, and whose beneficiaries are the beneficial owners of, and has good title to all of the Shares set forth opposite such Shareholder’s name on Exhibit A hereto, and such Shares are so owned free and clear of any liens, security interests, charges or other encumbrances. Such Shareholder does not own, of record or beneficially, any shares of capital stock of Cambridge other than such Shares (other than shares of capital stock subject to stock options or warrants over which such Shareholder will have no voting rights until the exercise of such stock options or warrants). Such Shareholder has the right to vote such Shares and none of

such Shares are subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares, except as contemplated by this Agreement.

Section 4. Irrevocable Proxy. Subject to the last sentence of this Section 4, by execution of this Agreement, each Shareholder does hereby appoint Wellesley with full power of substitution and resubstitution, as such Shareholder’s true and lawful attorney and irrevocable proxy, to the full extent of such Shareholder’s rights with respect to such Shareholder’s Shares, to vote, if such Shareholder is unable to perform his, her or its obligations under this Agreement, each of such Shares that such Shareholder shall be entitled to so vote with respect to the matters set forth in Section 1 hereof at any meeting of the shareholders of Cambridge, and at any adjournment or postponement thereof, and in connection with any action of the shareholders of Cambridge taken by written consent. Such Shareholder intends this proxy to be irrevocable and coupled with an interest hereafter until the termination of this Agreement pursuant to the terms of Section 6 hereof and hereby revokes any proxy previously granted by such Shareholder with respect to such Shares. Notwithstanding anything contained herein to the contrary, this irrevocable proxy shall automatically terminate upon the termination of this Agreement.

Section 5. Specific Performance and Remedies. Each Shareholder acknowledges that it will be impossible to measure in money the damage to Wellesley if such Shareholder fails to comply with the obligations imposed by this Agreement and that, in the event of any such failure, Wellesley will not have an adequate remedy at law or in equity. Accordingly, such Shareholder agrees that injunctive relief or other equitable remedy, in addition to remedies at law or in damages, is the appropriate remedy for any such failure and will not oppose the granting of such relief on the basis that Wellesley has an adequate remedy at law. Each Shareholder agrees that such Shareholder will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with Wellesley’s seeking or obtaining such equitable relief.

Section 6. Term of Agreement; Termination. The term of this Agreement shall commence on the date hereof. This Agreement may be terminated at any time prior to consummation of the transactions contemplated by the Merger Agreement by the written consent of the parties hereto, and shall be automatically terminated upon the earlier to occur of: (a) the Effective Time or (b) in the event that the Merger Agreement is terminated in accordance with its terms. Upon any such termination, no party shall have any further obligations or liabilities hereunder; provided, however, such termination shall not relieve any party from liability for any willful breach of this Agreement prior to such termination.

Section 7. Entire Agreement; Amendments. This Agreement supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.

Section 8. Severability. In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.

Section 9. Capacity as Shareholder. The covenants contained herein shall apply to each Shareholder solely in his or her capacity as a shareholder of Cambridge, and no covenant contained herein shall apply to such Shareholder in his or her capacity as a director, officer or employee of Cambridge or in any other

capacity. Nothing contained in this Agreement shall be deemed to apply to, or limit in any manner, the obligations of such Shareholder to comply with his or her fiduciary duties as a director of Cambridge.

Section 10. Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without regard for conflict of law provisions.

Section 11. Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Cambridge in accordance with Section 8.06 of the Merger Agreement and to each Shareholder at its address set forth on Exhibit A attached hereto (or at such other address for a party as shall be specified by like notice).

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.

WELLESLEY BANCORP, INC.
By:
Name:	Thomas J. Fontaine
Title:	President and Chief Executive Officer

SHAREHOLDERS

Name: Jeanette G. Clough

Name: Christine Fuchs

Name: Sarah G. Green

Name: Pamela H. Hamlin

Name: Edward F. Jankowski

Name: Hambleton D. Lord

Name: Thalia M. Meehan

Name: Daniel R. Morrison

Name: Leon A. Palandjian

Name: Laila Partridge

Name: Jody A. Rose

Name: Cathleen A. Schmidt

Name: Denis K. Sheahan

Name: R. Gregg Stone

Name: Mark D. Thompson

Name: Linda A. Whitlock

Name: Michael F. Carotenuto

Name: Martin B. Millane, Jr.

Name: Jennifer A. Pline

EXHIBIT A

NAME AND ADDRESS OF SHAREHOLDER	SHARES OF CAMBRIDGE COMMON STOCK BENEFICIALLY OWNED
Jeanette G. Clough
Christine Fuchs
Sarah G. Green
Pamela H. Hamlin
Edward F. Jankowski
Hambleton D. Lord
Thalia M. Meehan
Daniel R. Morrison
Leon A. Palandjian
Laila Partridge
Jody A. Rose

Cathleen A. Schmidt

Denis K. Sheahan

R. Gregg Stone

Mark D. Thompson

Linda A. Whitlock

Michael F. Carotenuto

Martin B. Millane, Jr.

Jennifer A. Pline

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 333-225720) and the Registration Statement on Form S-3 (File No. 333-234286) of Cambridge Bancorp therein of our report dated March 29, 2019, with respect to the consolidated financial statements of Wellesley Bancorp, Inc. included in its Annual Report on Form 10-K for the year ended December 31, 2018.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

December 5, 2019

EX-99.1

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

CAMBRIDGE BANCORP AND WELLESLEY BANCORP, INC. TO MERGE

EXPANDING COMMERCIAL BANKING, PRIVATE BANKING AND WEALTH MANAGEMENT PRESENCE IN GREATER BOSTON

CAMBRIDGE, MASSACHUSETTS and WELLESLEY, MASSACHUSETTS – December 5, 2019 – Cambridge Bancorp (Nasdaq: CATC) (the “Company” or “Cambridge”), the holding company for Cambridge Trust Company (“Cambridge Trust”), and Wellesley Massachusetts-based Wellesley Bancorp, Inc. (“Wellesley”), the holding company for Wellesley Bank, are pleased to jointly announce entry into a definitive agreement pursuant to which Wellesley will merge with and into Cambridge in an all-stock transaction. Under the terms of the agreement, each share of Wellesley common stock will be exchanged for 0.580 shares of Cambridge common stock. The transaction is presently valued at $45.54 per Wellesley common share, or approximately $122 million in the aggregate, based upon Cambridge Bancorp’s 10 day average closing price of $78.53 as of December 4, 2019. On a pro forma basis the transaction is expected to be approximately 4.4% accretive to Cambridge’s 2021 earnings per share and approximately 1.6% dilutive to tangible book value per share with an expected earnback period of approximately 2.2 years.

This strategically compelling merger is expected to enhance and expand Cambridge’s Greater Boston presence with the addition of Wellesley’s six full service banking offices in Norfolk, Middlesex, and Suffolk Counties. Cambridge and Wellesley share similar service-oriented business models and each provide their clients with banking and wealth management services. The combined company will benefit from enhanced scale and an expanded client base, and be well-positioned to capitalize on future growth opportunities. Thomas Fontaine, Chairman, President and CEO of Wellesley, will join the combined company in the role of Chief Banking Officer and Director.

As of September 30, 2019 Wellesley had approximately $986 million of total assets, $833 million of gross loans, $759 million of deposits, and $363 million of wealth management assets. Based on financial metrics as of September 30, 2019, the combined company is expected to have over $3.8 billion in assets, $3.0 billion in gross loans, $3.2 billion in deposits, and $3.6 billion of wealth management assets upon completion of the transaction.

Denis Sheahan, CEO of Cambridge Trust, commented, “We are pleased to announce the strategic combination of Cambridge Trust and Wellesley Bank, who are both dedicated to providing individuals, families, and businesses with exceptional personal attention and custom financial solutions.” Sheahan added, “Wellesley Bank is a well-managed, financially strong and growing company located in attractive markets. The combination strengthens the position of

Cambridge Trust in Greater Boston and is a logical extension of our market. We look forward to welcoming the talented Wellesley Bank team to Cambridge Trust.”

“We are excited about the opportunity to partner with Cambridge Trust,” said Thomas J. Fontaine, President and CEO of Wellesley Bank. “Cambridge Trust, much like Wellesley Bank, has a genuine commitment to its clients and the community. Together, we’ll build a premier private banking and wealth management company in Greater Boston and Southern New Hampshire.”

The transaction has been approved by the Boards of Directors of both companies and is expected to be completed during the second quarter of 2020, subject to regulatory approval, approval by Cambridge and Wellesley shareholders, and other customary closing conditions. Upon closing, three Wellesley directors will join the Board of Directors of Cambridge, including Mr. Fontaine.

A presentation with additional information regarding the merger can be accessed by visiting the Cambridge Bancorp investor relations site at “ir.cambridgetrust.com”. Keefe, Bruyette & Woods, Inc. served as financial advisor and provided a fairness opinion to Cambridge Bancorp and Hogan Lovells US LLP served as its legal counsel. Sandler O’Neill + Partners, L.P. served as financial advisor and provided a fairness opinion to Wellesley and Kilpatrick Townsend & Stockton LLP served as its legal counsel.

About Cambridge Bancorp

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 129-year-old Massachusetts chartered commercial bank with approximately $2.8 billion in assets and a total of 16 banking offices in Massachusetts and New Hampshire. Cambridge Trust Company is one of New England’s leaders in private banking and wealth management with $3.3 billion in client assets under management and administration. The Wealth Management group maintains offices in Boston, Massachusetts; Concord, Manchester, and Portsmouth, New Hampshire.

For more details on Cambridge Bancorp visit: www.cambridgetrust.com

About Wellesley Bancorp, Inc.

Wellesley Bank and its wholly-owned wealth management company, Wellesley Investment Partners, LLC, are subsidiaries of Wellesley Bancorp, Inc. Wellesley Bank provides personal, customized, premier banking services to successful people, families, businesses and Non-profit organizations. The bank has six full-service banking offices in Wellesley, Newton, Needham, and Boston. Wellesley Investment Partners, a subsidiary of Wellesley Bank, provides

wealth management services to individuals and families, private foundations and endowments. Wellesley Bank has been serving the Greater Boston Area for over 108 years.

For more details on Wellesley Bancorp, Inc., please visit: www.wellesleybank.com

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 Cambridge Bancorp (together with its bank subsidiary unless the context otherwise requires, “Cambridge”) and Wellesley Bancorp, Inc. (together with its bank subsidiary unless the context otherwise requires, “Wellesley”) and their industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding Cambridge’s or Wellesley’s future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to Cambridge or Wellesley, 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 are described within Cambridge’s and Wellesley’s filings with the Securities & Exchange Commission. Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements include, but are not limited to the following: (1) the businesses of Cambridge and Wellesley may not be combined successfully, or such combination may take longer to accomplish than expected; (2) the cost savings from the merger may not be fully realized or may take longer to realize than expected; (3) operating costs, customer loss and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; (4) governmental approvals of the merger may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger; (5) the stockholders of Cambridge or Wellesley may fail to approve the merger; (6) changes to interest rates, (7) the ability to control costs and expenses, (8) general economic conditions, (9) the success of Cambridge’s efforts to diversify its revenue base by developing additional sources of non-interest income while continuing to manage its existing fee-based business, and (10) risks associated with the quality of Cambridge’s assets and the ability of its borrowers to comply with repayment terms. Further information about these and other relevant risks and uncertainties may be found in Cambridge’s and Wellesley’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2018 and in subsequent filings with the Securities and Exchange Commission. Cambridge and Wellesley do 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.

Additional Information and Where to Find it

In connection with the proposed transaction, Cambridge expects to file with the SEC a registration statement on Form S-4 that will include a joint proxy statement of Cambridge and Wellesley that also constitutes a prospectus of Cambridge. Cambridge and Wellesley also plan to file other relevant documents with the SEC regarding the proposed transaction. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER

RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the joint proxy statement/prospectus (if and when it becomes available) and other relevant documents filed by Cambridge and Wellesley with the SEC at the SEC’s website at www.sec.gov. Copies of the documents filed by Cambridge with the SEC will be available free of charge on Cambridge’s website at ir.cambridge.com or by directing a request to Cambridge Bancorp, 1336 Massachusetts Avenue, Cambridge, MA 02138, attention: Corporate Secretary (617) 876-5500. Copies of the documents filed by Wellesley with the SEC will be available free of charge on Wellesley’s website at www.wellesleybank.com or by directing a request to Wellesley Bancorp, Inc., 100 Worcester Street, Suite 300, Wellesley, MA 02481, attention: Corporate Secretary (781) 235-2550.

Participants in Solicitation

Cambridge and Wellesley and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. You can find information about Cambridge’s executive officers and directors in Cambridge’s definitive proxy statement filed with the SEC on March 19, 2019. You can find information about Wellesley’s executive officers and directors in Wellesley’s definitive proxy statement filed with the SEC on April 10, 2019. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC if and when they become available. You may obtain free copies of these documents from Cambridge or Wellesley using the sources indicated above.

Cambridge Bancorp:

Denis K. Sheahan, Chairman and CEO

Michael F. Carotenuto, SVP, Treasurer & CFO

(617) 520-5520

Wellesley Bancorp, Inc.:

Thomas J. Fontaine, Chairman, President & CEO

(781) 489-7609

EX-99.2

Cambridge Bancorp Announces Common Equity Offering and Merger with Wellesley Bancorp, Inc. December 5, 2019 NASDAQ: CATC Parent of Cambridge Trust Company Exhibit 99.2

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 Cambridge Bancorp (together with its bank subsidiary unless the context otherwise requires, “Cambridge”) and Wellesley Bancorp, Inc. (together with its bank subsidiary unless the context otherwise requires, “Wellesley”) and their industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding Cambridge’s or Wellesley’s future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to Cambridge or Wellesley, 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 are described within Cambridge’s and Wellesley’s filings with the Securities & Exchange Commission. Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements include, but are not limited to the following: (1) the businesses of Cambridge and Wellesley may not be combined successfully, or such combination may take longer to accomplish than expected; (2) the cost savings from the merger may not be fully realized or may take longer to realize than expected; (3) operating costs, customer loss and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; (4) governmental approvals of the merger may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger; (5) the stockholders of Cambridge or Wellesley may fail to approve the merger; (6) changes to interest rates, (7) the ability to control costs and expenses, (8) general economic conditions, (9) the success of Cambridge’s efforts to diversify its revenue base by developing additional sources of non-interest income while continuing to manage its existing fee-based business, and (10) risks associated with the quality of Cambridge’s assets and the ability of its borrowers to comply with repayment terms. Further information about these and other relevant risks and uncertainties may be found in Cambridge’s and Wellesley’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2018 and in subsequent filings with the Securities and Exchange Commission. Cambridge and Wellesley do 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.

Additional Disclosures Important Additional Information on the Merger and Where to Find It In connection with the proposed transaction, Cambridge expects to file with the SEC a registration statement on Form S-4 that will include a joint proxy statement of Cambridge and Wellesley that also constitutes a prospectus of Cambridge. Cambridge and Wellesley also plan to file other relevant documents with the SEC regarding the proposed transaction. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHERRELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the joint proxy statement/prospectus (if and when it becomes available) and other relevant documents filed by Cambridge and Wellesley with the SEC at the SEC’s website at www.sec.gov. Copies of the documents filed by Cambridge with the SEC will be available free of charge on Cambridge's website at ir.cambridge.com or by directing a request to Cambridge Bancorp, 1336 Massachusetts Avenue, Cambridge, MA 02138, attention: Corporate Secretary (617) 876-5500. Copies of the documents filed by Wellesley with the SEC will be available free of charge on Wellesley's website at www.wellesleybank.com or by directing a request to Wellesley Bancorp, Inc., 100 Worcester Street, Suite 300, Wellesley, MA 02481, attention: Corporate Secretary (781) 235-2550. Participants in Solicitation Cambridge and Wellesley and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. You can find information about Cambridge's executive officers and directors in Cambridge's definitive proxy statement filed with the SEC on March 19, 2019. You can find information about Wellesley's executive officers and directors in Wellesley’s definitive proxy statement filed with the SEC on April 10, 2019. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC if and when they become available. You may obtain free copies of these documents from Cambridge or Wellesley using the sources indicated above. Important Additional Information on the Common Equity Offering and Where to Find It Cambridge has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and the prospectus supplement, when available, and other documents Cambridge has filed with the SEC for more complete information about Cambridge and this offering. You may obtain a free copy of these documents at the SEC’s website at www.sec.gov. Copies of the documents filed by Cambridge with the SEC will be available free of charge on Cambridge's website at ir.cambridge.com or by directing a request to Cambridge Bancorp, 1336 Massachusetts Avenue, Cambridge, MA 02138, attention: Corporate Secretary (617) 876-5500. Alternatively, Keefe, Bruyette & Woods, Inc., the underwriter of this offering, will arrange to send you the prospectus if you request it by calling toll-free 1-800-966-1559 or by sending an email to kbwsyndicatedesk@kbw.com. Market Data Market data and industry forecasts are used in this Investor Presentation, including data obtained from publicly available sources. These sources generally state that the information they provide has been obtained from sources believed to be the reliable, but the accuracy and completeness of the information is not assured. The Company has not independently verified any such information.

Offering Summary Issuer: Cambridge Bancorp Exchange / Listing: NASDAQ: CATC Offering Format: Follow-On (100% Primary) Security: Common Stock Base Deal Value: $35 million Overallotment: 15% Use of Proceeds: General corporate purposes, including funding organic growth and potential acquisitions Lock-Up Period: 90 Days Bookrunner: Keefe, Bruyette & Woods General corporate purposes including providing capital to support growth organically or through strategic acquisitions

Cambridge Bancorp Investment Highlights High-performing, commercially-oriented private bank operating throughout attractive and affluent markets in Greater Boston and southern New Hampshire Greater Boston and southern New Hampshire offer significant growth prospects Low-cost core deposit base with 27% of balances in non-interest accounts supporting a 91% loan / deposit ratio Deep and experienced management team Financially compelling acquisition of Wellesley Bancorp, Inc. will strategically enhance scale and support future growth opportunities The combined company would have 10th largest deposit market share in Boston MSA as of 6/30/2019, among Massachusetts-based institutions Pro forma assets of $3.8 billion, pro forma loans of $3.0 billion and pro forma deposits of $3.2 billion Diversified revenue and growth opportunities driven by wealth management focus $3.3 billion assets under management and administration ($3.6 billion pro forma) Fee income contributes ~32% of revenue Strong asset quality metrics reflecting proactive risk management, experienced lending teams and a strong underwriting culture History of demonstrated value creation for shareholders reflecting strong price performance and consistent dividend growth

Overview of Cambridge Bancorp Branch Footprint Company Profile– as of 9/30/2019 Headquarters: Founded: Assets: Wealth Management Assets: Gross Loans: Deposits: Tangible Common Equity (1): TCE / TA (1): Market Cap (2): Branches: Wealth Offices: Cambridge, MA 1890 $2.8 bn $3.3 bn $2.2 bn $2.4 bn $209 mm 7.4% $370 mm 16 4 Company Description CATC provides a full range of banking and wealth management services to consumers and small- and medium-sized businesses in Greater Boston and New Hampshire. CATC’s Wealth Management Group offers customized and comprehensive investment management, financial planning, trust administration and estate settlement services. Cambridge Trust Branches (16) Wealth Management Offices (4) See Appendix on pages 30 – 34 for GAAP to non-GAAP reconciliation Market data as of December 4, 2019 Boston Cambridge Lexington Concord Weston North Hampton Stratham Portsmouth Manchester Bedford Concord Dover

Overview of Merger with Wellesley Bancorp, Inc. Transaction Overview Announcement Date: Transaction Value (1): Price / Tang. Book Value (1): Price / LTM Core Earnings per Share (1): 2021 EPS Impact: Tang. Book Value Impact: Tang. Book Value Earnback (Crossover): Pro Forma TCE / TA: 12/5/2019 $122 mm 163% 18.3x 4.4% Accr. 1.6% Dil. 2.2 Years 8.1% Transaction Rationale Expands banking presence in Greater Boston and improves pro forma deposit market share position to #10 among MA-based institutions. Immediately accretive to Cambridge earnings per share, with a reasonable tangible book value earnback period. Pro forma assets of $4 billion provide opportunities to achieve scale-based efficiencies and higher legal lending limit enhances future growth potential. Shared lending philosophies and contiguous market limit execution risk and provide meaningful cost save opportunities. Boston MSA Branch Footprint Based on CATC 10 day average closing price of $78.53 as of December 4, 2019 Wellesley Bancorp, Inc. information per GAAP data as of 9/30/2019, included in CATC Form 8-K filed on December 5, 2019 Wellesley Profile (2) Headquarters: Assets: Wealth Mgmt. Assets (ex. Bank Portfolio): Gross Loans: Deposits: Common Equity: LTM Net Income: Wellesley, MA $986 mm $363 mm $833 mm $759 mm $72 mm $6.4 mm CATC MA Branches (10) CATC MA Wealth Offices (1) WEBK (6) Boston Cambridge Lexington Concord Weston Wellesley Needham Newton

Executive Management Name Title Joined CATC Years in Industry Previous Experience Denis K. Sheahan Chairman & CEO 2015 30+ Mr. Sheahan previously spent 19 years at Independent Bank Corp. and Rockland Trust in various capacities including Chief Operating Officer, Chief Financial Officer, and Controller. Thomas J. Fontaine Chief Banking Officer To join 2020 30+ Mr. Fontaine will join Cambridge as Chief Banking Officer following the merger with Wellesley Bancorp, Inc. Mr. Fontaine has served as Chairman, Chief Executive Officer and President of Wellesley since 2009. Mark D. Thompson President 2017 35+ Mr. Thompson previously spent 22 years at Boston Private in various capacities including Chief Executive Officer. Prior to joining Boston Private, Mr. Thompson was an Executive Vice President and a founding officer at Wainwright Bank & Trust Company. Michael F. Carotenuto CFO, Treasurer & Corporate Secretary 2016 10+ Mr. Carotenuto previously served as SVP at Belmont Savings Bank. Prior to that, Mr. Carotenuto worked at People’s United Financial, Inc. and Ernst & Young, LLP. Martin B. Millane Chief Lending Officer 2004 25+ Prior to joining Cambridge Trust, Mr. Millane was an SVP in Commercial Lending at Century Bank. Jennifer A. Pline Head of Wealth Management 2017 35+ Ms. Pline previously worked as Managing Director, Chief Trusts & Gifts Officer at Harvard Management Company. Prior to that, Ms. Pline worked at Standish Mellon Asset Management as the Director of Client Services and was a Vice President at Standish, Ayer & Wood, Inc. Kerri Mooney Director of Banking Offices 2018 20+ Ms. Mooney previously worked as the Director of Branches for HarborOne Bank. Prior to that, she was First Vice President and District Manager at Rockland Trust where she led Rockland Trust’s Greater Boston Banking Offices. John J. Sullivan Director of Consumer Lending 2018 35+ Mr. Sullivan previously was a member of the Boston Private Executive Leadership Committee and served as EVP, Residential Lending, and EVP, Wealth Management and Trust at Boston Private.

Strategic Focus & Recent Milestones Strategic Focus Be recognized as the premier private bank in the Greater Boston & New Hampshire region Leverage private banking model in highly attractive markets Increase brand awareness Expand Wealth Management assets under management Grow and diversify Commercial Banking relationships Deepen client relationships to grow deposit base Recent Milestones Announced completion of merger with Optima Bank & Trust effective April 17, 2019, with successful systems conversion on July 22 Addition of 6 banking office locations in New Hampshire to complement over $1 billion of Wealth Management assets in this important market Generated record operating earnings in 2018 and 2019 year-to-date Launched new brand identity, bank website and brand awareness campaign Named in the Top 25 Independent Investment Advisors in Massachusetts for second consecutive year (1) Increased resources to support expansion of business development and Innovation Banking initiatives Added six (6) accomplished board members According to Boston Business Journal

Deposit Market Share Boston MSA - Mass. HQ Banks Only (1) New Hampshire Source: S&P Global Market Intelligence; Deposit market share data as of 6/30/2019 (1) Deposit market share includes only banks with headquarters in Massachusetts

Dynamic and Affluent Markets of Operations Source: S&P Global Market Intelligence and Bureau of Labor Statistics as of September 2019 Unemployment Rate Median Household Income ($000s) Proj. Household Income Change (’20 – ’25) Cambridge Trust’s focused private banking model caters to entrepreneurial local communities Wealth Management capability is well-suited to the highly affluent Boston and southern New Hampshire markets Healthcare, education, professional service firms and innovation companies support the diverse local economies of Boston and southern New Hampshire

Strong and Consistent Financial Performance Net Income ($mm) Earnings Per Share ($) Fee Income / Revenue (%) Return on Average Assets (%) (1) (2) See Appendix on pages 30 – 34 for GAAP to non-GAAP reconciliation 2019 YTD is as of September 30, 2019 (2) Operating CAGR: 13% (1) (1) (1) (2) (1) (1) (1) (2) (1) (1) Operating adjustments described in GAAP to non-GAAP reconciliation (1)

Well-Diversified Loan Portfolio Historical Gross Loans ($M) Loan Composition Recent Results and Growth Initiatives Total CAGR: 15.9% Organic CAGR: 10.1% Year-to-date organic CRE loan growth of $145 million, or 19% Year-to-date organic C&I loan growth of $14 million, or 15% Ongoing expansion of commercial services including loan level swaps Selectively expanding business development team to drive additional organic growth opportunities Continuing to invest in Innovation Banking: Dedicated lending team focusing on the financial needs of the many growth stage companies operating in greater Boston These companies tend to operate in the technology and life science industries CAGR: 16% CAGR ex. Acquisition: 10% Total Loans: $2.2bn QTD Yield on Loans (1): 4.38% QTD as of September 30, 2019

Asset Quality Review NPAs / Assets (%) NPLs / Loans (%) NCOs / Average Loans (%) Reserves / Loans (%) (1) 2019 YTD is as of September 30, 2019 2019 YTD reflects the impact of loans acquired in connection with the acquisition of Optima Bank & Trust Company; These acquired loans are recorded at fair value, including an adjustment for estimated credit losses, and without carryover of the respective portfolio’s historical allowance for loan losses (1) (1) (1) (2) SNL 2019 NPA/Assets .13 SNL 2019YTD NCOs / avg Loans 0.10% SNL 2016 NPL/Loans is .11 11.75 year average NCOs / average loans of 0.01%

Deposit Profile Historical Total Deposits ($M) Historical Non-Interest Bearing Deposits Deposit Composition CAGR: 13% CAGR ex. Acquisitions: 7.5% Total Deposits: $2.4bn YTD Cost of Deposits (1): 0.71% Update for 2019 2019 YTD is as of September 30, 2019

Wealth Management Historical Wealth Assets ($M) Historical Wealth Mgmt. Revenue ($M) CAGR: 7% CAGR: 9% Wealth Management Group offers customized and comprehensive investment management, financial planning, trust administration and estate settlement services. Massachusetts assets under management of $2.2 billion, or 64% of total New Hampshire assets under management of $1.1 billion or 36% of total Strong equity performance versus market benchmarks in 2019 Introducing wealth management product suite to legacy Optima Bank & Trust customers Continue to invest in business development and technology platform to drive AUM growth Recent Results and Growth Initiatives

Long-Term Value Creation Book Value Per Share (Last 10 Years) (1) Annual Dividend (Last 10 Years) 20 Consecutive Years of Increased Dividends (1999-2019) Tangible Book Value CAGR (2009-2019 Q3): 7.2% See Appendix on pages 30 – 34 for GAAP to non-GAAP reconciliation

Cambridge Bancorp Announces Merger with Wellesley Bancorp, Inc.

Strategic Transaction Rationale Strategic merger with a familiar $1 billion institution operating in greater Boston Compatible business models, commercial lending focus, wealth management operations and cultures The combined company would have 10th largest deposit market share in Boston MSA as of 6/30/2019, among Massachusetts-based institutions Enhances scale and supports future growth opportunities Pro forma assets of $4 billion provides opportunities to achieve additional scale-based efficiencies Higher legal lending limit and capital resources to support post-transaction growth Financially compelling transaction (1) Approximately 4.4% accretive to Cambridge earnings per share in first year of fully phased-in cost savings Approximately 1.6% dilutive to tangible book value with an earnback period of approximately 2.2 years Improved pro forma profitability metrics and capital ratios Low integration and execution risk Institutional familiarity and geographic overlap with identifiable opportunities for cost savings Shared lending discipline and conservative approach to banking Established track record of strong asset quality metrics Inclusive of estimated CECL adjustments and $35 million common equity offering

Overview of Wellesley Bancorp, Inc. Financial Snapshot – As of 9/30/2019 Headquarters: Founded: Branches: Assets: Wealth Management Assets (1): Gross Loans: Deposits: Tangible Common Equity: Market Cap (2): Net Income (LTM, $mm) LTM ROAA (%) NPAs / Assets (%) Wellesley, MA 1911 6 $986 mm $363 mm $833 mm $759 mm $72 mm $83 mm $6.4 mm 0.70% 0.16% Boston MSA - Mass. HQ Banks Only (3) Source: S&P Global Market Intelligence; Financial data of Wellesley from CATC Form 8-K filed December 5, 2019 Exclusive of bank securities portfolio Market data as of December 4, 2019 Deposit market share data as of 6/30/2019 and includes only banks with headquarters in Massachusetts

Pro Forma Franchise Overview Source: S&P Global Market Intelligence; Branch data as of 6/30/2019 Pro forma financial highlights excluding purchase accounting adjustments Boston Cambridge Lexington Concord Weston Wellesley Needham Newton CATC Branches (16) CATC Wealth Offices (4) WEBK (6) Portsmouth Dover Concord Manchester Hampton Exeter Pro Forma Financial Highlights (1): Total Assets:$3.8bn Gross Loans:$3.0bn Total Deposits:$3.2bn Wealth AUM:$3.6bn

Cambridge Wellesley Pro Forma Pro Forma Loan & Deposit Composition Confirm Time Deposit Breakouts - CATC Loan Mix Deposit Mix Total Loans: $2,180mm Total Loans: $833mm Total Loans: $3,013mm Total Deposits: $2,408mm Total Deposits: $759mm Total Deposits: $3,167mm Source: S&P Global Market Intelligence Note: Cambridge loan and deposit data per GAAP filings as of 9/30/2019. Wellesley loan and deposit data per GAAP filings as of 9/30/2019, included in CATC Form 8-K dated December 5, 2019

Key Transaction Terms Acquirer / Target: Cambridge Bancorp (Nasdaq: CATC) / Wellesley Bancorp, Inc. (Nasdaq: WEBK) Transaction Value (1): $122mm, or $45.54 per WEBK share Structure: 100% stock consideration at 0.580 fixed exchange ratio Pro Forma Ownership: ~77% Cambridge / ~23% Wellesley Price / Tangible Book Value (1): 163% Price / LTM Core EPS (1): 18.3x Core Deposit Premium (1): 8.2% Management: Mr. Fontaine has waived certain change-in-control benefits and will join Cambridge in the role of Chief Banking Officer and Director Board Representation: Three (3) directors of Wellesley will join the Cambridge Board of Directors, including Mr. Fontaine Approvals: Customary regulatory approvals and approvals of both sets of shareholders Due Diligence: Comprehensive financial, business, legal and loan diligence completed, including third party loan review Based on CATC 10 day average closing price of $78.53 as of December 4, 2019

Transaction Assumptions Est. Transaction Expenses: $13mm pre-tax Est. Expense Savings: 35% of Wellesley G&A expenses 75% 2020 phase-in, 100% thereafter Gross Credit Mark / CECL: Total gross credit mark of $7.2mm (0.87% of total loans) $0.8mm on purchased credit deteriorated (“PCD”) loans $6.4mm on non-PCD loans, requiring establishment of additional loan loss allowance Core Deposit Intangible: 1.50% Capital Raise: Common equity raise of approximately $35 million, launched concurrently with announcement of the Wellesley acquisition Expected Close: Second quarter 2020

Estimated Pro Forma Financial Metrics

Strategic Focus of Cambridge Bancorp Helps achieve long-term goal to be recognized as the premier private bank in Greater Boston & Southern New Hampshire Increase long-term shareholder returns / profitability metrics Grow and diversify commercial banking opportunities and relationships Expand client base and deepen existing relationships to grow deposit base Expand wealth management assets under management Merger with Wellesley

Transaction Summary Strategic combination with a familiar institution sharing a similar business model will provide additional scale in the dynamic and affluent greater Boston market Compelling in-market merger limits integration risk Immediately accretive to Cambridge earnings per share and profitability metrics, with an attractive tangible book value dilution earnback period Common equity offering improves capital ratios and strengthens pro forma balance sheet Expanded client base, enhanced scale, and simultaneous capital raise will position the combined company for strong post-transaction growth Cultural compatibility highlighted by a conservative banking approach and strategy limits execution risk

Appendix

CATC Financial Snapshot Doesn’t Tie: 2019YTD NPA/ Assets. SNL is 0.13 2017, 2018 and 2019 Net income and EPS doesn’t tie because DTL and other adjustments 2016 and 2019 Loans don’t match IP 2019 YTD NIM off by 1 bp 2016 Reserves to Loans off by 1 bp 2019 NCOs to Avg. Loans off to IP (0.07) Doesn’t Tie: 2017 and 2019 YTD ROAA and ROTCE doesn’t match because DTL and other Efficiency doesn’t match because of adjustments Per IP Efficiency ratio doesn’t match Non interest inc/ op rev doesn’t match. Is calc Need info for TCE, TBVPS, NPA/Assets, NCOs / Average Loans YTD NIM does not match SNL YTD ROAA is calc but matches SNL See pages 30 – 34 for GAAP to non-GAAP reconciliation (1) (1) (1) (1) (1) (1) (1) (1) (1)

Appendix – FY GAAP to Non-GAAP Reconciliations

Appendix – FY GAAP to Non-GAAP Reconciliations

Appendix – YTD GAAP to Non-GAAP Reconciliations

Appendix – YTD GAAP to Non-GAAP Reconciliations

Appendix – YTD GAAP to Non-GAAP Reconciliations

Cambridge Bancorp Parent of Cambridge Trust Company Denis K. Sheahan Chairman and Chief Executive Officer 617-441-1533 Michael F. Carotenuto Senior Vice President and Chief Financial Officer 617-520-5520

EX-99.3

Exhibit 99.3

RISK FACTORS

The following risks and uncertainties could have a material adverse effect on our business, financial condition and results of operations. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operation, financial condition or results.

Unless otherwise stated or the context otherwise indicates, references in these Risk Factors to “Cambridge,” the “Company,” “we,” “us” or “our” refer to Cambridge Bancorp and its consolidated subsidiaries, references to “Wellesley” refer to Wellesley Bancorp, Inc., references to the “merger agreement” refer to that certain Agreement Plan of Merger, dated as of December 5, 2019, by and among Cambridge, Cambridge Trust Company, Wellesley and Wellesley Bank and references to the “merger” refer to the merger of Wellesley with and into Cambridge, with Cambridge as the surviving entity.

Risks Related to the Merger

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

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

Failure to consummate the merger as currently contemplated or at all could adversely affect the price of our common stock and our future business and financial results.

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

• our shareholders may be prevented from realizing the anticipated benefits of the merger;

• the market price of our common stock could decline significantly;

• reputational harm due to the adverse perception of any failure to successfully complete the merger;

• incurrence of substantial costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and

• our management’s and employees’ attention may be diverted from our day-to-day business and operational matters as a result of efforts relating to attempting to consummate the merger.

Any delay in the consummation of the merger or any uncertainty about the consummation of the merger on terms other than those contemplated by the merger agreement, or if the merger is not completed, could materially adversely affect our business, financial results and share price.

Unanticipated costs relating to the merger could reduce our future earnings per share.

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

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

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

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

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

Upon the consummation of the merger, each share of common stock, par value $0.01 per share, of Wellesley (other than shares of treasury stock) will be converted into 0.580 shares (the “Exchange Ratio”) of common stock, par value $1.00 per share, of the Company. The Exchange Ratio is fixed in the merger agreement and will not be adjusted for changes in the market price of either our common stock or Wellesley common stock. Changes in the market price of shares of our common stock prior to the merger will affect the market value of the consideration that Wellesley shareholders will receive on the closing date of the merger. Stock price changes may result from a variety of factors (many of which are beyond our control), including the following factors:

• market reaction to the announcement of the merger;

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

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

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

• interest rates, general market and economic conditions and other factor generally affecting the market prices of our common stock and Wellesley common stock;

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

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

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

The market price of our common shares at the closing of the merger may vary from its price on the date the merger agreement was executed, on the date of the joint proxy statement/prospectus to be filed in connection with the merger and on the dates of our and Wellesley’s special meetings. As a result, the market value of the consideration for the merger represented by the Exchange Ratio also will vary.

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

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

The merger cannot be completed unless (i) Wellesley’s shareholders approve the merger and the other transactions contemplated by the merger agreement by the affirmative vote of the holders of at least a majority of all votes entitled to be cast on the matter, (ii) our shareholders approve the merger and the other transactions contemplated by the merger agreement by the affirmative vote of the holders of at least two-thirds of all shares of our common stock entitled to vote on the matter and (iii) our shareholders approve the issuance of shares of our common stock proposed to be issued in the merger by the affirmative vote of a majority of the votes cast. If shareholder approval is not obtained by Wellesley’s or our shareholders, the merger and related transactions cannot be completed.

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

The market price of our common stock may decline as a result of the merger if we do not achieve the perceived benefits of the merger or the effect of the merger on our financial results is not consistent with the expectations of financial or industry analysts.

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

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

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

The merger will dilute the ownership position of our shareholders and result in Wellesley shareholders having an ownership stake in the combined company. Upon completion of the merger, each Wellesley shareholder will become a shareholder of Cambridge with a percentage ownership of the combined company that is much smaller than such shareholder’s current percentage ownership of Wellesley. It is expected that the former shareholders of Wellesley as a group will receive shares in the merger constituting approximately 23% of the outstanding shares of Cambridge common stock immediately after the merger. Furthermore, because shares of Cambridge common stock will be issued to existing Wellesley shareholders, current Cambridge shareholders will have their ownership and voting interests diluted approximately 23%. Accordingly, our shareholders will have less influence on the management and policies of the combined company than they now have on the management and policies of us.

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

Before the merger may be completed, various approvals, waivers or consents must be obtained from state and federal governmental authorities, including the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Massachusetts Commissioner of Banks. Satisfying the requirements of these governmental authorities may delay the date of completion of the merger. In addition, these governmental authorities may include conditions on the completion of the merger, or require changes to the terms of the merger. While we and Wellesley do not currently expect that any such conditions or changes would result in a material adverse effect on us, there can be no assurance that they will not, and such conditions or changes could have the effect of delaying completion of the merger, or imposing additional costs on or limiting our revenues following the merger, any of which might have a material adverse effect on us following the merger. The parties are not obligated to complete the merger should any regulatory approval contain a non-standard condition, restriction or requirement that our board of directors reasonably determines in good faith would, individually or in the aggregate, materially reduce the benefits of the merger to such a degree that we would not have entered into the merger agreement had such

condition, restriction or requirement been known at the date of the merger agreement.

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

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

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

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

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

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

• the amount of dividends that our subsidiaries may distribute to us 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.

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

The unaudited pro forma financial data included in this Current Report on Form 8-K is illustrative only, and may differ materially from Cambridge’s actual financial position and results of operations after the merger.

The unaudited pro forma financial data in this Current Report on Form 8-K is presented for illustrative purposes only and is not necessarily indicative of what Cambridge’s actual financial position or results of operations would have been had the merger been completed on the dates indicated. The pro forma financial data reflects adjustments, which are based on preliminary estimates, to record Wellesley’s identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this Current Report on Form 8-K is preliminary and final allocation of the purchase price will be based on the actual purchase price and the fair value of the assets and liabilities of Wellesley as of the date of the completion of the merger. As a result, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this Current Report on Form 8-K.

Estimates as to the future value of the combined company are inherently uncertain. You should not rely on such estimates without considering all of the information contained or incorporated by reference into this Current Report on Form 8-K.

Any estimates as to the future value of the combined company, including estimates regarding the earnings per share of the combined company, are inherently uncertain. The future value of the combined company will depend upon, among other factors, the combined company’s ability to achieve projected revenue and earnings expectations and to realize the anticipated synergies described in this Current Report on Form 8-K, all of which are subject to the risks and uncertainties described in this Current Report on Form 8-K, including these risk factors. Accordingly, you should not rely upon any estimates as to the future value of the combined company, whether made before or after the date of this Current Report on Form 8-K by Cambridge’s and Wellesley’s respective management or affiliates or others, without considering all of the information contained or incorporated by reference into this Current Report on Form 8-K.

EX-99.4

Exhibit 99.4

Index to Consolidated Financial Statements

of Wellesley Bancorp, Inc. and Subsidiary

Report of Independent Registered Public Accounting Firm	2
Consolidated Balance Sheets as of December 31, 2018 and 2017	3
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018 and 2017	4
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2018 and 2017	5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017	6
Notes to Consolidated Financial Statements	7

1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Wellesley Bancorp, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Wellesley Bancorp, Inc. and subsidiary (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the 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 audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Wolf & Company, P.C.

We have served as the Company’s auditor since 1999.

Boston, Massachusetts

March 29, 2019

2

Wellesley Bancorp, Inc. and Subsidiary

Consolidated Balance Sheets

	December 31,
	2018			2017
	(Dollars in thousands)
Assets
Cash and due from banks	$	7,678		$	4,604
Short-term investments		34,972			23,858
Total cash and cash equivalents		42,650			28,462
Certificates of deposit		100			100
Securities available for sale, at fair value		66,770			66,486
Federal Home Loan Bank of Boston stock, at cost		4,747			5,937
Loans		743,770			692,455
Less allowance for loan losses		(6,738	)		(6,153	)
Loans, net		737,032			686,302
Bank-owned life insurance		7,769			7,535
Premises and equipment, net		3,924			3,470
Accrued interest receivable		2,288			2,140
Net deferred tax asset		2,804			2,352
Other assets		3,336			2,611
Total assets	$	871,420		$	805,395
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing	$	116,926		$	104,346
Interest-bearing		601,005			512,396
Total deposits		717,931			616,742
Short-term borrowings		15,000			38,000
Long-term debt		58,528			77,174
Subordinated debentures		9,832			9,802
Accrued expenses and other liabilities		4,999			4,432
Total liabilities		806,290			746,150
Commitments and contingencies (Notes 7, 13 and 14)
Stockholders’ equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none issued		—			—
Common stock, $0.01 par value; 14,000,000 shares authorized, 2,525,611 and 2,506,532 shares issued and outstanding in 2018 and 2017, respectively		25			25
Additional paid-in capital		26,462			25,601
Retained earnings		40,203			34,736
Accumulated other comprehensive income (loss)		(533	)		39
Unearned compensation – ESOP		(1,027	)		(1,156	)
Total stockholders’ equity		65,130			59,245
Total liabilities and stockholders’ equity	$	871,420		$	805,395

See accompanying notes to consolidated financial statements.

3

Wellesley Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

	Years Ended December 31,
	2018			2017
	(Dollars in thousands, except per share data)
Interest and dividend income:
Interest and fees on loans and loans held for sale	$	31,028		$	26,251
Interest on debt securities:
Taxable		1,441			1,338
Tax-exempt		327			305
Interest on short-term investments and certificates of deposit		509			220
Dividends on FHLB stock		333			252
Total interest and dividend income		33,638			28,366
Interest expense:
Deposits		6,442			3,581
Short-term borrowings		580			293
Long-term debt		1,256			1,182
Subordinated debentures		631			632
Total interest expense		8,909			5,688
Net interest income		24,729			22,678
Provision for loan losses		585			735
Net interest income, after provision for loan losses		24,144			21,943
Noninterest income:
Customer service fees		176			149
Mortgage banking activities		99			113
Income on bank-owned life insurance		234			232
Wealth management fees		1,616			1,257
Miscellaneous		461			236
Total noninterest income		2,586			1,987
Noninterest expenses:
Salaries and employee benefits		10,842			10,094
Occupancy and equipment		3,004			2,785
Data processing		990			892
FDIC insurance		626			609
Professional fees		766			761
Advertising and marketing		323			384
Other general and administrative		2,012			1,656
Total noninterest expenses		18,563			17,181
Income before income taxes		8,167			6,749
Provision for income taxes		2,176			3,564
Net income		5,991			3,185
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities		(776	)		418
Income tax (provision) benefit		197			(150	)
Total other comprehensive income (loss), net of tax		(579	)		268
Comprehensive income	$	5,412		$	3,453
Earnings per common share:
Basic	$	2.49		$	1.34
Diluted	$	2.40		$	1.30
Weighted average shares outstanding:
Basic		2,404,371			2,369,466
Diluted		2,502,784			2,454,580

See accompanying notes to consolidated financial statements.

4

Wellesley Bancorp, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended December 31, 2018 and 2017

												Accumulated
						Additional						Other			Unearned			Total
	Common Stock					Paid-in			Retained			Comprehensive			Compensation-			Stockholders’
	Shares			Amount		Capital			Earnings			Income (Loss)			ESOP			Equity
	(Dollars in thousands, except per share data)
Balance at December 31, 2016		2,484,852		$	25	$	24,703		$	31,999		$	(229	)	$	(1,284	)	$	55,214
Comprehensive income		—			—		—			3,185			268			—			3,453
Dividends paid to common stockholders ($0.19 per share)		—			—		—			(448	)		—			—			(448	)
Share-based compensation – equity incentive plan		—			—		614			—			—			—			614
Restricted stock awards granted		15,000			—		—			—			—			—			—
Stock options exercised		10,100			—		157			—			—			—			157
Common stock repurchased in connection with restricted stock awards		(3,420	)		—		(93	)		—			—			—			(93	)
ESOP shares committed to be allocated (12,838 shares)		—			—		220			—			—			128			348
Balance at December 31, 2017		2,506,532			25		25,601			34,736			39			(1,156	)		59,245
Comprehensive income		—			—		—			5,991			(579	)		—			5,412
Reclassification related to Tax Cuts and Jobs Act (Note 12)										(7	)		7						—
Dividends paid to common stockholders ($0.215 per share)		—			—		—			(517	)		—			—			(517	)
Share-based compensation – equity incentive plan		—			—		379			—			—			—			379
Restricted stock awards granted		3,000			—		—			—			—			—			—
Restricted stock forfeitures		(400	)		—		—			—			—			—			—
Stock options exercised		19,054			—		292			—			—			—			292
Common stock repurchased in connection with restricted stock awards		(2,575	)		—		(87	)		—			—			—			(87	)
ESOP shares committed to be allocated (12,838 shares)		—			—		277			—			—			129			406
Balance at December 31, 2018		2,525,611		$	25	$	26,462		$	40,203		$	(533	)	$	(1,027	)	$	65,130

See accompanying notes to consolidated financial statements.

5

Wellesley Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2018			2017
	(In thousands)
Cash flows from operating activities:
Net income	$	5,991		$	3,185
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		585			735
Depreciation and amortization		767			746
Net amortization of securities premiums and discounts		143			237
Principal balance of loans sold		8,544			11,747
Loans originated for sale		(8,544	)		(10,293	)
Accretion of net deferred loan fees		(611	)		(570	)
Income on bank-owned life insurance		(234	)		(232	)
Amortization of subordinated debt issuance costs		30			33
Deferred income tax provision (benefit)		(255	)		240
ESOP expense		406			348
Share-based compensation		379			614
Net change in other assets and liabilities		(348	)		1,264
Net cash provided by operating activities		6,853			8,054
Cash flows from investing activities:
Activity in securities available for sale:
Maturities, prepayments and calls		11,710			5,415
Purchases		(12,914	)		(7,072	)
Redemption (purchase) of Federal Home Loan Bank stock		1,190			(179	)
Loan originations, net of principal payments		(50,704	)		(110,336	)
Additions to premises and equipment		(1,241	)		(344	)
Proceeds from sale of premises and equipment		63			47
Net cash used by investing activities		(51,896	)		(112,469	)
Cash flows from financing activities:
Net increase in deposits		101,189			93,932
Proceeds from issuance of long-term debt		36,000			39,000
Repayments of long-term debt		(54,646	)		(44,846	)
(Decrease) increase in short-term borrowings		(23,000	)		16,750
Stock options exercised		292			157
Common stock repurchased		(87	)		(93	)
Cash dividends paid		(517	)		(448	)
Net cash provided by financing activities		59,231			104,452
Net change in cash and cash equivalents		14,188			37
Cash and cash equivalents at beginning of year		28,462			28,425
Cash and cash equivalents at end of year	$	42,650		$	28,462
Supplementary information:
Interest paid	$	8,709		$	5,250
Income taxes paid		2,782			2,820

See accompanying notes to consolidated financial statements.

6

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and consolidation

The consolidated financial statements include the accounts of the Wellesley Bancorp, Inc. ( the “Company” ) and its wholly-owned subsidiary, Wellesley Bank (the “Bank”), the principal operating entity, and its wholly-owned subsidiaries: Wellesley Securities Corporation, which engages in the business of buying, selling and dealing in securities exclusively on its own behalf; Wellesley Investment Partners, LLC, formed to provide investment management services for individuals, not-for-profit entities and businesses; and Central Linden, LLC, formed to hold, manage and sell foreclosed real estate. All significant intercompany balances and transactions have been eliminated in consolidation. Assets under management at Wellesley Investment Partners, LLC are not included in these consolidated financial statements because they are not assets of the Company.

Business and operating segments

The Company provides a variety of financial services to individuals, non-profit organizations, small businesses and other entities within eastern Massachusetts. Its primary deposit products are checking, savings, money market deposits, and term certificate accounts and its primary lending products are residential and commercial real estate loans, construction loans, commercial loans, and consumer loans.

Management evaluates the Company’s performance and allocates resources based on a single segment concept.

Use of estimates

In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses.

Significant group concentrations of credit risk

Most of the Company’s lending activities are with customers located within the New England region of the country. The Company does not have any significant concentrations to any one industry or customer.

Cash equivalents

Cash equivalents include amounts due from banks and short-term investments with original maturities of three months or less, primarily balances held at the Federal Reserve Bank of Boston. The Company maintains cash balances in excess of federally insured limits.

Certificates of deposit

Certificates of deposit are carried at cost, which approximates fair value.

Fair value hierarchy

The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted market prices in active exchange markets for identical assets and liabilities. Valuations are obtained from readily available pricing sources.

7

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Valuations are obtained from readily available pricing sources.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets and liabilities include those whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as those for which the determination of fair value requires significant management judgment or estimation.

Securities available for sale

Securities classified as available for sale are carried at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income/loss.

Purchase premiums and discounts are amortized to earnings by methods which do not differ materially from the interest method. Discounts and non-callable security premiums are amortized over contractual lives of the securities. Callable security premiums are amortized over the earlier of the contractual lives or the earliest call date of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Each reporting period, the Company evaluates all securities with a fair value below amortized cost to determine whether other-than-temporary impairment (“OTTI”) exists.

OTTI is required to be recognized if (1) the Company intends to sell the security; (2) it is “more likely than not” that the Company will be required to sell the security before recovery of its amortized cost basis; or (3) for debt securities, the present value of expected cash flows is not sufficient to recover the entire amortized cost basis. For all impaired debt securities that the Company intends to sell, or more likely than not will be required to sell, the full amount of the depreciation is recognized as OTTI through earnings. Credit-related OTTI for all other impaired debt securities is recognized through earnings. Non-credit related OTTI for such debt securities is recognized in other comprehensive income, net of applicable taxes.

Federal Home Loan Bank stock

The Bank, as a member of the Federal Home Loan Bank (“FHLB”) of Boston, is required to maintain an investment in capital stock of the FHLB. Based on redemption provisions of the FHLB, the stock has no quoted market value and is carried at cost. At its discretion, the FHLB may declare dividends on the stock. The Bank reviews for impairment based on the ultimate recoverability of the cost basis in the FHLB stock. As of December 31, 2018 and 2017, no impairment has been recognized.

Loans held for sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Loans

The loan portfolio consists of real estate, commercial and other loans to the Company’s customers in its primary market areas in eastern Massachusetts. The ability of the Company’s debtors to honor their contracts is dependent upon the economy in general and the real estate and construction economic sectors within our markets.

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred loan origination fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

8

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Interest is generally not accrued on loans which are identified as impaired or loans which are ninety days or more past due. Past due status is based on the contractual terms of the loan. Interest income previously accrued on such loans is reversed against current period interest income. Interest income on non-accrual loans is recognized only to the extent of interest payments received and is first applied to the outstanding principal balance when collectibility of principal is in doubt. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured through sustained payment performance for at least six months.

Allowance for loan losses

The allowance for loan losses is established through a provision for loan losses charged to earnings as losses are estimated to occur. Loan losses are charged against the allowance when management believes the uncollectibility of the loan balance is confirmed. Subsequent recoveries are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components.

General component

The general component is based on the following loan segments: residential real estate, commercial real estate, construction, commercial, home equity lines of credit and other consumer. Management considers a rolling average of historical losses for each segment based on a time frame appropriate to capture relevant loss data for each loan segment, generally 3 and 10 years. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume, concentrations and terms of loans; level of collateral protection; effects of changes in risk selection and underwriting standards; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no significant changes to the Company’s policies or methodology pertaining to the general component of the allowance during 2018 or 2017.

The qualitative factor adjustments are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate – The Company generally does not originate loans with a loan-to-value ratio greater than 80 percent and does not originate subprime loans. Most loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality of this segment.

Commercial real estate – Loans in this segment are primarily income-producing properties in the Company’s primary market areas in eastern Massachusetts. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management typically obtains rent rolls annually and continually monitors the cash flows of these loans.

Construction – Loans in this segment include speculative construction loans primarily on residential properties for which payment is derived from sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions. Residential construction loans in this segment also include loans to build one-to-four family owner-occupied properties, which are subject to the same credit quality factors as residential real estate.

Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, may have an adverse effect on the credit quality in this segment.

9

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Home equity lines of credit – Loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality of this segment.

Other consumer – Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

Allocated component

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the fair value of the loan or, if the loan is collateral dependent, by the fair value of the collateral, less estimated costs to sell. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan are lower than the carrying value of that loan. Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify performing individual residential and consumer loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring (“TDR”). All TDRs are initially classified as impaired.

Unallocated component

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

Premises and equipment

Land is carried at cost. Buildings, leasehold improvements and equipment are stated at cost, less accumulated depreciation and amortization computed on the straight-line method over the estimated useful lives of the assets or the expected terms of the leases, if shorter. Expected terms include lease option periods to the extent that the exercise of such options is reasonably assured.

Bank-owned life insurance

Bank-owned life insurance policies are reflected on the consolidated balance sheets at cash surrender value. Changes in cash surrender value are reflected in noninterest income, and are not subject to income taxes.

Transfers of financial assets

Transfers of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company; (2) the transferee obtains the right to pledge or exchange the transferred assets; and (3) the Company does not maintain effective control over the transferred assets.

10

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

During the normal course of business, the Company may transfer a portion of a financial asset, for example, a participation loan. In order to be eligible for sales treatment, the transfer of the portion of the loan must meet the criteria of a participating interest. If it does not meet criteria of a participating interest, the transfer must be accounted for as a secured borrowing. In order to meet criteria for a participating interest, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties and no loan holder has the right to pledge or exchange the entire loan.

Derivative financial instruments

Derivative financial instruments are recognized as assets and liabilities on the consolidated balance sheets and measured at fair value.

Derivative Loan Commitments

Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. Loan commitments that are derivatives are recognized at fair value, including servicing values, on the consolidated balance sheet in other assets and other liabilities with changes in their fair values recorded in miscellaneous income. Fair values of the loan commitments are recognized based on changes in the fair value of the underlying mortgage due to interest rate changes, changes in the probability the derivative loan commitment will be exercised, and the passage of time. In estimating fair value, the Company assigns a probability to a loan commitment based on the expectation that it will be exercised and the loan will be funded.

Forward Loan Sale Commitments

To protect against the price risk inherent in derivative loan commitments, the Company utilizes “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. Forward loan sale commitments are recognized at fair value on the consolidated balance sheet in other assets and other liabilities with changes in their fair values recorded in miscellaneous income. Fair values for forward loan sale commitments are based on changes in the fair values of the underlying loans.

Interest Rate Swap Agreements

The Company has entered into financial instruments in the normal course of business to manage exposure to fluctuations in interest rates for its commercial customers. Instruments related to commercial loan swaps are considered derivatives. These derivatives are recognized on the consolidated balance sheet in other assets and other liabilities and measured at fair value with changes in their fair value recorded in miscellaneous income.

Advertising costs

Advertising costs are expensed as incurred.

Income taxes

Deferred tax assets and liabilities relate to temporary differences between the book and tax bases of certain assets and liabilities, and are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance is established against deferred tax assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company does not have any uncertain tax positions at December 31, 2018 or 2017 which require accrual or disclosure. The Company records interest and penalties as part of income tax expense. No interest or penalties were recorded for the years ended December 31, 2018 and 2017.

11

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Share-based compensation plans

The Company measures and recognizes compensation cost relating to share-based payment transactions based on the grant date fair value of the equity instruments issued. Share-based compensation is recognized over the period the employee is required to provide services for the award. Reductions in compensation expense associated with forfeited options are estimated at the date of grant, and this estimated forfeiture rate is adjusted annually based on actual forfeiture experience. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options granted.

Employee stock ownership plan

Compensation expense for the Employee Stock Ownership Plan (“ESOP”) is recorded at an amount equal to the shares allocated by the ESOP multiplied by the average fair market value of the shares during the period. The Company recognizes compensation expense ratably over the year based on the number of shares expected to be allocated by the ESOP. Unearned compensation applicable to the ESOP is reflected as a reduction of stockholders’ equity in the consolidated balance sheet. The difference between the average fair market value and the cost of the shares allocated by the ESOP is recorded as an adjustment to stockholders’ equity.

Comprehensive income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the stockholders’ equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income (loss).

The components of accumulated other comprehensive income (loss) and related tax effects are as follows:

	December 31,
	2018			2017
	(In thousands)
Net unrealized gains (losses) on securities available for sale	$	(732	)	$	44
Tax effect		199			2
Net-of- tax amount		(533	)		46
Stranded effect of tax rate change (Note 12)		—			(7	)
	$	(533	)	$	39

12

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Earnings per share

Basic earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. Under the Company’s 2012 and 2016 Equity Incentive Plans, stock awards contain non-forfeitable dividend rights. Accordingly, these shares are considered outstanding for computation of basic earnings per share. Potential common shares that may be issued by the Company relate to outstanding stock options determined using the treasury stock method.

Earnings per common share have been computed based on the following:

	Years Ended December 31,
	2018			2017
	(In thousands, except per share data)
Net income applicable to common stock	$	5,991		$	3,185
Average number of common shares issued		2,513			2,491
Less: Average unallocated ESOP shares		(109	)		(122	)
Average number of common shares outstanding used to calculate basic earnings per common share		2,404			2,369
Effect of dilutive stock options		99			86
Average number of common shares outstanding used to calculate diluted earnings per common share		2,503			2,455
Earnings per common share:
Basic	$	2.49		$	1.34
Diluted	$	2.40		$	1.30

There were no anti-dilutive options that were excluded from the computation of diluted earnings per share for the years ended December 31, 2018 and 2017. Anti-dilutive shares are common stock equivalents with exercise prices in excess of the average market value of the Company’s stock for the periods presented.

Recent accounting pronouncements

Effective January 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this update supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company’s primary source of revenue is interest income on financial assets, which is explicitly excluded from the scope of the new guidance. In addition, management determined that the timing of the Company’s recognition of wealth management fees did not change. The adoption of this update did not have an impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted FASB ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The key provision included in the ASU is that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) will be measured at fair value with changes in fair value recognized in net income and the elimination of the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost. This ASU also requires companies to use an “exit price” fair value when measuring the fair values of financial instruments. The adoption of this update did not have an impact on the consolidated financial statements, as the Company does not currently invest in equity securities.

13

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Effective January 1, 2018, the Company adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU provide cash flow statement classification guidance for certain areas where diversification existed in practice. The adoption of this update did not have an impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this update require that in the statement of cash flows, amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. The adoption of this update did not have an impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted ASU 2017-09, Compensation-Stock Compensation (Topic 718) to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change in terms or conditions of a share-based payment award. The adoption of this update did not have a significant impact on the Company’s consolidated financial statements.

In 2018, the Company adopted ASU 2018-13, Fair Value Measurement (Topic 820), which amends the disclosure requirements by adding, changing, or removing certain disclosures about recurring or non-recurring fair value measurements. The adoption of this update did not have a significant impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires a lessee to record a right-to-use asset and liability representing the obligation to make lease payments for long-term leases. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We will adopt the ASU in the first quarter of 2019, likely using the effective date option, allowing for adoption in prospective periods. The right-to-use asset and liability will be approximately $8.0 million upon adoption. The adoption of this ASU will not impact the Company’s consolidated statements of other comprehensive income based on leases in place as of January 1, 2019.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Credit losses on available-for-sale debt securities should be measured in a manner similar to current GAAP; however, recognized credit losses will be presented as an allowance rather than as a write-down. This ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has implemented a committee led by the Company’s Chief Financial Officer, which included the Chief Lending Officer, to assist in identifying, implementing and evaluating the impact of the required changes to the loan loss estimation model and processes. The Company has evaluated the portfolio segments and various methodologies and is currently evaluating potential loss modeling processes as well as related controls and procedures. Management will continue to closely monitor developments and additional guidance to determine the potential impact on the Company’s consolidated financial statements.

2. RESTRICTIONS ON CASH AND AMOUNTS DUE FROM BANKS

The Bank is required to maintain average balances on hand or with the Federal Reserve Bank. The reserve balance amounted to $5.1 million and $3.0 million at December 31, 2018 and 2017, respectively.

14

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

3. SHORT-TERM INVESTMENTS

Short-term investments are comprised of the following:

	December 31,
	2018		2017
	(In thousands)
Federal Reserve Bank deposits	$	29,856	$	22,292
Federal Home Loan Bank deposits		263		27
Money market accounts		4,853		1,539
	$	34,972	$	23,858

4. CERTIFICATES OF DEPOSIT

Certificates of deposit held by the Bank amounted to $100 thousand, mature within one year and have a weighted average rate of 2.48% at December 31, 2018 and 1.48% at December 31, 2017.

5. SECURITIES AVAILABLE FOR SALE

The amortized cost and fair value of securities available for sale, with gross unrealized gains and losses, follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
			(In thousands)
December 31, 2018
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,846	$	44	$	(43	)	$	3,847
Government-sponsored enterprises		11,382		29		(188	)		11,223
SBA and other asset-backed securities		11,720		64		(157	)		11,627
State and municipal bonds		12,908		111		(111	)		12,908
Government-sponsored enterprise obligations		8,000		—		(187	)		7,813
Corporate bonds		18,151		28		(322	)		17,857
U.S. Treasury bonds		1,495		—		—			1,495
	$	67,502	$	276	$	(1,008	)	$	66,770

15

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
			(In thousands)
December 31, 2017
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,358	$	46	$	(53	)	$	3,351
Government-sponsored enterprises		11,690		43		(84	)		11,649
SBA and other asset-backed securities		11,961		89		(87	)		11,963
State and municipal bonds		13,026		276		(15	)		13,287
Government-sponsored enterprise obligations		8,000		—		(166	)		7,834
Corporate bonds		17,166		52		(57	)		17,161
U.S. Treasury bonds		1,241		—		—			1,241
	$	66,442	$	506	$	(462	)	$	66,486

For the years ended December 31, 2018 and 2017 there were no sales of securities.

The amortized cost and fair value of debt securities by contractual maturity at December 31, 2018 are as follows below. Expected maturities may differ from contractual maturities because the issuers, in certain instances, have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In thousands)
Within 1 year	$	2,495	$	2,495
After 1 year to 5 years		22,409		21,919
After 5 years to 10 years		7,675		7,685
After 10 years		7,975		7,974
		40,554		40,073
Mortgage- and asset-backed securities		26,948		26,697
	$	67,502	$	66,770

16

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Information pertaining to securities with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than Twelve Months					Twelve Months or Greater
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
				(In thousands)
December 31, 2018
Residential mortgage-backed securities:
Government National Mortgage Association	$	—		$	—	$	(43	)	$	1,755
Government-sponsored enterprises		(1	)		103		(187	)		7,880
SBA and other asset-backed securities		—			—		(157	)		5,455
State and municipal bonds		(2	)		386		(109	)		6,257
Government-sponsored enterprise obligations		—			—		(187	)		7,813
Corporate bonds		(29	)		5,705		(293	)		11,124
	$	(32	)	$	6,194	$	(976	)	$	40,284
December 31, 2017
Residential mortgage-backed securities:
Government National Mortgage Association	$	(3	)	$	266	$	(50	)	$	1,611
Government-sponsored enterprises		(13	)		3,578		(71	)		3,110
SBA and other asset-backed securities		(8	)		2,267		(79	)		2,434
State and municipal bonds		(3	)		571		(12	)		871
Government-sponsored enterprise obligations		(27	)		1,973		(139	)		5,860
Corporate bonds		(21	)		7,399		(36	)		1,985
	$	(75	)	$	16,054	$	(387	)	$	15,871

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluations. At December 31, 2018, various debt securities have unrealized losses with aggregate depreciation of 2.1% from their aggregate amortized cost basis. These unrealized losses relate principally to the effect of interest rate changes on the fair value of debt securities and not to an increase in credit risk of the issuers. As the Company does not intend to sell the securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2018.

17

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

6. LOANS AND ALLOWANCE FOR LOAN LOSSES

A summary of the balances of loans is as follows:

	December 31,
	2018			2017
	(In thousands)
Real estate loans:
Residential – fixed	$	64,218		$	31,433
Residential – variable		318,292			297,593
Commercial		148,006			138,784
Construction		106,723			120,004
		637,239			587,814
Commercial loans:
Secured		61,563			62,333
Unsecured		5,327			5,638
		66,890			67,971
Consumer loans:
Home equity lines of credit		39,486			36,378
Other		163			214
		39,649			36,592
Total loans		743,778			692,377
Less:
Allowance for loan losses		(6,738	)		(6,153	)
Net deferred origination costs (fees)		(8	)		78
Loans, net	$	737,032		$	686,302

The Company has transferred a portion of its originated residential and commercial real estate loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying consolidated balance sheets. The Company and participating lenders share ratably in any gains or losses that may result from the borrower’s lack of compliance with contractual terms of the loans. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments (net of servicing fees) to participating lenders and disburses required escrow funds to relevant parties. At December 31, 2018 and 2017, the Company was servicing commercial real estate loans for participants aggregating $5.3 million and $4.9 million, respectively. At December 31, 2018 and 2017, the Company was servicing residential real estate loans for participants aggregating $9.5 million and $9.9 million, respectively.

Whole mortgage loans sold and serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $2.7 million and $3.2 million at December 31, 2018 and 2017, respectively.

The Company has pledged certain residential and commercial real estate loans to secure FHLB advances and available lines of credit. (See Notes 9 and 10.)

18

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

The following table summarizes the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2018 and 2017:

	Residential Real Estate		Commercial Real Estate		Construction			Commercial		Home Equity			Other Consumer			Unallocated			Total
	(In thousands)
Year Ended December 31, 2018
Allowance at December 31, 2017	$	1,722	$	1,520	$	1,661		$	917	$	237		$	2		$	94		$	6,153
Provision (credit) for loan losses		494		82		(199	)		207		20			1			(20	)		585
Allowance at December 31, 2018	$	2,216	$	1,602	$	1,462		$	1,124	$	257		$	3		$	74		$	6,738
Year Ended December 31, 2017
Allowance at December 31, 2016	$	1,422	$	1,145	$	1,827		$	703	$	211		$	3		$	121		$	5,432
Provision (credit) for loan losses		300		375		(166	)		214		37			2			(27	)		735
Loans charged off		—		—		—			—		(11	)		(3	)		—			(14	)
Allowance at December 31, 2017	$	1,722	$	1,520	$	1,661		$	917	$	237		$	2		$	94		$	6,153

Further information pertaining to the allowance for loan losses and impaired loans at December 31, 2018 and 2017 is as follows:

	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity		Other Consumer		Unallocated		Total
	(In thousands)
December 31, 2018
Allowance related to impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Allowance related to non-impaired loans		2,216		1,602		1,462		1,124		257		3		74		6,738
Total allowance	$	2,216	$	1,602	$	1,462	$	1,124	$	257	$	3	$	74	$	6,738
Impaired loan balances	$	746		2,846	$	—	$	—	$	—	$	—	$	—	$	3,592
Non-impaired loan balances		381,764		145,160		106,723		66,890		39,486		163		—		740,186
Total loans	$	382,510	$	148,006	$	106,723	$	66,890	$	39,486	$	163	$	—	$	743,778
December 31, 2017
Allowance related to impaired loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Allowance related to non-impaired loans		1,722		1,520		1,661		917		237		2		94		6,153
Total allowance	$	1,722	$	1,520	$	1,661	$	917	$	237	$	2	$	94	$	6,153
Impaired loan balances	$	172		576	$	—	$	—	$	—	$	—	$	—	$	748
Non-impaired loan balances		328,854		138,208		120,004		67,971		36,378		214		—		691,629
Total loans	$	329,026	$	138,784	$	120,004	$	67,971	$	36,378	$	214	$	—	$	692,377

19

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

The following is a summary of past due and non-accrual loans at December 31, 2018 and 2017:

	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due		Past Due 90 Days or More and Still Accruing		Non- accrual Loans
	(In thousands)
December 31, 2018
Residential real estate	$	1,551	$	—	$	—	$	1,551	$	—	$	581
Commercial real estate		—		—		556		556		—		556
Total	$	1,551	$	—	$	556	$	2,107	$	—	$	1,137
December 31, 2017
Residential real estate	$	598	$	65	$	—	$	663	$	—	$	—
Commercial real estate		—		—		576		576		—		576
Total	$	598	$	65	$	576	$	1,239	$	—	$	576

The following is a summary of impaired loans at December 31, 2018 and 2017:

	December 31, 2018				December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance
	(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	746	$	764	$	172	$	189
Commercial real estate		2,846		2,974		576		710
Total impaired loans	$	3,592	$	3,738	$	748	$	899

Further information pertaining to impaired loans follows:

	Year Ended December 31, 2018						Year Ended December 31, 2017
	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on Cash Basis
					(In thousands)
Residential real estate	$	819	$	34	$	28	$	175	$	6	$	—
Commercial real estate		2,920		89		36		581		51		51
Total	$	3,739	$	123	$	64	$	756	$	57	$	51

20

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

No additional funds are committed to be advanced in connection with impaired loans.

TDRs, which are included in impaired loans, totaled $721 thousand at December 31, 2018 and $748 thousand at December 31, 2017. There was one TDR, totaling $556 thousand and $576 thousand, on non-accrual status at December 31, 2018 and 2017, respectively.

There were no TDRs recorded during the year ended December 31, 2018.

The following is a summary of troubled debt restructurings recorded for the year ended December 31, 2017:

	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(In thousands)
Commercial real estate		1	$	572	$	582

During the year ended December 31, 2017, the Company recorded a TDR for one commercial real estate loan which capitalized past-due interest over the remaining term of the loan in accordance with their bankruptcy filing.

There were no TDRs that defaulted (90 days or more past due) during the years ended December 31, 2018 and 2017, and for which default was within one year of the restructure date.

Credit Quality Information

The Company utilizes an eleven-grade internal loan rating system for commercial real estate, construction and commercial loans.

Loans rated 1-4: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 5: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 6: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 7: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 8: Loans in this category are considered uncollectible “loss” and of such little value that their continuance as loans is not warranted.

Loans rated 9: Loans in this category are not rated and include commercial loans under $25 thousand with no other outstandings or relationships with the Company.

Loans rated 10: Loans in this category include loans which otherwise require rating but which have not been rated, or loans for which the Company’s loan policy does not require rating.

21

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Loans rated 11: Loans in this category include credit commitments/relationships that cannot be rated due to a lack of financial information or inaccurate financial information. If within 60 days of the assignment of an 11 rating, information is still not available to allow a standard rating, the credit will be rated 6.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans. During each calendar year, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. On a monthly basis, the Company reviews the residential real estate and consumer loan portfolio for credit quality primarily through the use of delinquency reports.

The following table presents the Company’s loans by risk rating:

	December 31, 2018								December 31, 2017
	Commercial Real Estate		Construction		Commercial		Total		Commercial Real Estate		Construction		Commercial		Total
							(In thousands)
Loans rated 1-4	$	144,243	$	106,723	$	65,245	$	316,211	$	134,201	$	120,004	$	67,087	$	321,292
Loans rated 5		917		—		1,645		2,562		1,476		—		301		1,777
Loans rated 6		2,290		—		—		2,290		2,531		—		583		3,114
Loans rated 7		556		—		—		556		576		—		—		576
Total	$	148,006	$	106,723	$	66,890	$	321,619	$	138,784	$	120,004	$	67,971	$	326,759

7. PREMISES AND EQUIPMENT

A summary of the cost and accumulated depreciation and amortization of premises and equipment is as follows:

	December 31,						Estimated Useful Lives In Years
	2018			2017
	(In thousands)
Premises:
Land	$	50		$	50			—
Buildings		701			696			35-40
Leasehold improvements		3,924			3,420			5-15
Equipment		3,704			3,377			3-5
		8,379			7,543
Less accumulated depreciation and amortization		(4,455	)		(4,073	)
Premises and equipment, net	$	3,924		$	3,470

Total depreciation and amortization expense for the years ended December 31, 2018 and 2017 amounted to $767 thousand and $746 thousand, respectively.

22

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Pursuant to terms of non-cancelable lease agreements in effect at December 31, 2018, future minimum rent commitments are as follows:

Year Ending December 31,	Amount
	(In thousands)
2019	$	1,591
2020		1,596
2021		1,428
2022		977
2023		886
Thereafter		1,251
	$	7,729

The leases contain options to extend for up to ten years. The cost of such options is not included above. Total rent expense amounted to $1.4 million and $1.2 million for the years ended December 31, 2018 and 2017, respectively.

8. DEPOSITS

A summary of deposit balances, by type, is as follows:    

	Years Ended December 31,
	2018		2017
	(In thousands)
Demand	$	116,926	$	104,346
NOW		36,944		37,481
Money market		203,578		143,031
Regular and other savings		82,218		98,565
Total non-certificate accounts		439,666		383,423
Term certificates of $250 thousand and greater		106,052		84,299
Term certificates less than $250 thousand		172,213		149,020
Total term certificates		278,265		233,319
Total deposits	$	717,931	$	616,742

Term certificates include brokered deposits amounting to $82.5 million and $65.0 million at December 31, 2018 and 2017, respectively.

23

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

A summary of term certificates by maturity is as follows:    

	December 31, 2018					December 31, 2017
	Amount		Weighted Average Rate			Amount		Weighted Average Rate
			(Dollars in thousands)
Within 1 year	$	228,449		2.01	%	$	175,204		1.27	%
Over 1 year to 2 years		43,237		2.23			43,464		1.44
Over 2 years to 3 years		2,666		1.60			12,016		1.78
Over 3 years to 4 years		3,913		2.09			2,635		1.46
	$	278,265		2.04	%	$	233,319		1.33	%

9. SHORT-TERM BORROWINGS AND AVAILABLE LINES OF CREDIT

At December 31, 2018 and 2017, short-term borrowings consisted entirely of fixed-rate advances from the FHLB with original maturities of less than one year. The weighted average interest rate on advances outstanding at December 31, 2018 and 2017 was 2.44% and 1.53%, respectively. All borrowings from the FHLB are secured by a blanket lien on qualified collateral. (See Notes 6 and 10.)

Borrowings available under an available FHLB variable-rate line of credit amounted to $1.3 million as of December 31, 2018 and 2017, respectively. No advances were outstanding under the line of credit at December 31, 2018 or 2017.

At December 31, 2018 and 2017, the Company has pledged commercial real estate loans of $16.8 million and $19.8 million, respectively, to access the Federal Reserve Bank discount window. At December 31, 2018 and 2017, the available line amounted to $6.8 million and $8.9 million, respectively. No advances were outstanding at December 31, 2018 or 2017.

The Company has $5.0 million of unsecured borrowing capacity with the Co-operative Central Bank, none of which was outstanding at December 31, 2018 and 2017. The Company also has a $5.0 million unsecured line of credit with a correspondent bank. No advances were outstanding at December 31, 2018 or 2017.

10. LONG-TERM DEBT

Long-term debt, and related maturities, at December 31, 2018 and 2017 consists of fixed-rate FHLB advances, as follows:

	Amount				Weighted Average Rates
	2018		2017		2018			2017
	(In thousands)
2019	$	10,000	$	43,500		1.60	%		1.32	%
2020		20,000		10,000		2.03			1.60
2021		8,000		12,000		2.48			1.83
2022*		1,320		11,674		1.84			0.55
2023**		19,208		—		0.91			—
	$	58,528	$	77,174		1.65	%		1.32	%

24

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

* At December 31, 2018 and 2017, includes an amortizing advance amounting $1.3 million and $1.7 million, respectively, requiring monthly principal and interest of $32 thousand.

** At December 31, 2018, includes an amortizing advance amounting to $4.2 million requiring monthly principal and interest of $88 thousand. At December 31, 2018, includes a $15 million advance callable in 2019.

All borrowings from the FHLB are secured by a blanket lien on qualified collateral, defined principally as 75% of the carrying value of first mortgage loans on owner-occupied residential property. (See Note 6.)

11. SUBORDINATED DEBT

On December 17, 2015, the Company closed its private offering of $10.0 million, 6.00% fixed-to-floating rate Subordinated Notes due December 30, 2025 (the “Notes”). The Notes were offered to institutional accredited investors at par. The Company is using the proceeds for general corporate purposes. Interest on the Notes is payable semi-annually in arrears on June 30 and December 30 of each year. The Company recorded issuance costs of $266 thousand, which are being amortized over the period to maturity on an effective interest method. The carrying value, net of issuance costs, totaled $9.8 million at both December 31, 2018 and 2017.

These Notes bear a fixed rate of interest of 6.00% for the first five years at which time, and at any interest payment date thereafter, the Notes may be called at par at the Company’s option. Subsequent to the initial call date, the Notes bear a floating rate of interest that reprices and is payable quarterly at the 3-month LIBOR rate plus 435.5 basis points.

12. INCOME TAXES

Allocation of federal and state income taxes between current and deferred portions is as follows:

	Years Ended December 31,
	2018			2017
	(In thousands)
Current tax provision:
Federal	$	1,669		$	2,608
State		762			716
		2,431			3,324
Deferred tax provision (benefit):
Federal		(170	)		(572	)
State		(85	)		(167	)
Effect of federal tax rate change		—			979
		(255	)		240
Total tax provision	$	2,176		$	3,564

25

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows:

	Years Ended December 31,
	2018			2017
Statutory tax rate		21.0	%		34.0	%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit		6.5			5.4
Income on bank-owned life insurance		(0.6	)		(1.2	)
Tax exempt bond income		(1.0	)		(1.5	)
Share-based compensation		—			0.3
Effect of federal tax rate change		—			14.5
Other, net		0.7			1.3
Effective tax rates		26.6	%		52.8	%

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “Act”). The Act includes a number of changes in existing tax law impacting businesses including, among other things, a reduction in the corporate income tax rate from 34% to 21%, effective on January 1, 2018. As a result of this rate reduction, the Company revalued its net deferred tax asset as of December 22, 2017, resulting in a reduction in the value of the net deferred tax asset of $979 thousand, which was recorded as additional income tax provision in the Company’s consolidated statements of comprehensive income in 2017.

The $979 thousand, in 2017, in income tax provision includes a tax provision of $7 thousand relating to the impact of the rate change on deferred tax items originally recorded through other comprehensive income. This accounting treatment effectively stranded $7 thousand of deferred tax items in accumulated other comprehensive income (“AOCI”). In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from AOCI to retained earnings to eliminate the stranded tax effects resulting from the Act. As permitted, the Company early adopted the ASU and recorded a $7 thousand decrease in retained earnings and a corresponding increase in AOCI as of January 1, 2018.

The tax effects of each item that gives rise to deferred tax assets (liabilities) are as follows:    

	December 31,
	2018			2017
	(In thousands)
Deferred tax assets:
Allowance for loan losses	$	1,894		$	1,730
Employee benefit plans		916			847
Partnerships and other investments		5			3
Net unrealized gain/loss on securities available for sale		199			2
Other, net		17			15
		3,031			2,597
Deferred tax liabilities:
Depreciation and amortization		(198	)		(194	)
Mortgage servicing rights		(27	)		(29	)
Deferred loan fees		(2	)		(22	)
		(227	)		(245	)
Net deferred tax asset	$	2,804		$	2,352

The federal income tax reserve for loan losses at the Company’s base year amounted to $820 thousand. If any portion of the reserve is used for purposes other than to absorb loan losses for which established, approximately 150% of the amount actually used (limited to the amount of the reserve) would be subject to taxation in the year in which used. As the Company intends to use the reserve only to absorb loan losses, a deferred income tax liability of $231 thousand has not been provided.

26

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

The Company’s income tax returns are subject to review and examination by federal and state taxing authorities. The Company is currently open to audit under the applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2015 through 2018. The years open to examination by state taxing authorities vary by jurisdiction; no years prior to 2015 are open.

13. DERIVATIVE INSTRUMENTS

Certain derivative instruments do not meet the requirements to be accounted for as hedging instruments. These undesignated derivative instruments are recognized on the consolidated balance sheet at fair value, with changes in the fair value recorded in miscellaneous income.

Derivative Loan Commitments

Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. The Company enters into commitments to fund residential mortgage loans at specified rates and times in the future, with the intention that these loans will subsequently be sold in the secondary market.

Outstanding derivative loan commitments expose the Company to the potential for changes in the fair value of the underlying loans as interest rates change, along with the value of the loan commitment. If interest rates increase, the value of these loan commitments will decrease. Conversely, if interest rates decrease, the value of these loan commitments will increase. There were no outstanding derivative loan commitments at December 31, 2018 and 2017.

Forward Loan Sale Commitments

To protect against the price risk inherent in derivative loan commitments, the Company utilizes “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. With a “best efforts” contract, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded.

The Company expects that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments. There were no undesignated forward loan sale commitments at December 31, 2018 and 2017

Interest Rate Swap Agreements

The Company has entered into derivative financial instruments in the normal course of business to manage exposure to fluctuations in interest rates for its commercial customers. Typically these agreements have generally been limited to loan level interest rate swap agreements, which are entered into with borrowers and a third party. Typically, the Company enters into a floating-rate loan and a fixed-rate swap directly with a loan customer. The Company offsets the fixed-rate interest rate risk with an identical offsetting swap with a swap dealer. This is referred to as a “back-to-back” swap structure. As this structure has equal and offsetting interest rate contacts, fair value gains and losses recorded each month are offsetting.

The notional amounts are amounts on which calculations, payments, and the value of the derivatives are based. Notional amounts do not represent direct credit exposures. The fair value of the derivative instruments is reflected on the Company’s consolidated balance sheet as other assets and other liabilities as appropriate. Changes in fair values are recorded in miscellaneous income in the consolidated statements of income.

27

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

The table below presents the interest rate swaps outstanding at December 31, 2018 and 2017:

	With commercial loan borrowers December 31,						With third-party financial institutions December 31,
	2018			2017			2018			2017
				(dollars in thousands)
Notional amount	$	28,320		$	17,251		$	28,320		$	17,251
Receive (pay) fixed rate (weighted average)		5.09	%		4.62	%		(5.09	)%		(4.62	)%
Receive (pay) variable rate (weighted average)		(5.06	)%		(4.05	)%		5.06	%		4.05	%
Weighted average remaining years		12.8 years			13.2 years			12.8 years			13.2 years
Unrealized fair value gain (loss)	$	264		$	67		$	(264	)	$	(67	)

14. OTHER COMMITMENTS AND CONTINGENCIES

Credit-related financial instruments

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit which involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the accompanying consolidated balance sheets. At December 31, 2018 and 2017, the following financial instruments were outstanding whose contract amounts represent credit risk:

	December 31,
	2018		2017
	(In thousands)
Commitments to grant loans	$	9,417	$	6,597
Unadvanced funds on home equity lines of credit		41,769		35,759
Unadvanced funds on commercial lines of credit		32,511		30,368
Unadvanced funds on construction loans		65,542		51,409
Standby letters of credit		1,427		1,176
Overdraft lines of credit		486		503

Commitments to grant loans are agreements to lend to a customer 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. The commitments for home equity and commercial lines of credit may expire without being drawn upon, therefore, the total commitment amounts do not necessarily represent future cash requirements. Home equity and certain commercial lines of credit are generally collateralized by real estate or business assets. Commitments to grant loans and unadvanced funds on construction loans are also secured by real estate.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. All letters of credit have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company collateralizes those commitments for which collateral is deemed necessary.

28

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Employment agreements

The Company has entered into employment agreements with certain executives for periods up to three years. The agreements generally provide for specified minimum levels of annual compensation and benefits. In addition, the agreements provide for specified lump sum payments and the continuation of benefits upon certain events of termination, as defined, including a change in control of the Company.

Contingencies

Various legal claims arise from time to time in the normal course of business which, in the opinion of management, will have no material effect on the consolidated financial position of the Company.

15. MINIMUM REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Federal banking regulations require a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6%, a minimum ratio of total capital to risk-weighted assets of 8% and a minimum leverage ratio of 4% for all banking organizations. Additionally, community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets above adequately capitalized levels to avoid being subject to limitations on capital distributions and discretionary bonuses. The capital conservation buffer and certain deductions from and adjustments to regulatory capital and risk-weighted assets were phased in over several years. The required minimum conservation buffer as of December 31, 2018 is 1.875%. The conservation buffer of 2.5% was fully phased in on January 1, 2019. An institution is subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions. Management believes that the Company’s capital levels will remain characterized as “well-capitalized” throughout the phase-in periods.

29

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

As of December 31, 2018, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum Total risk-based, Common Equity Tier 1 risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the recent notification that management believes have changed the Bank’s category. The Bank’s capital amounts and ratios as of December 31, 2018 and 2017 are presented in the following tables:

	Actual					Minimum to be Adequately Capitalized under Prompt Corrective Action Provisions					Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
						(Dollars in thousands)
December 31, 2018
Total capital to risk-weighted assets	$	79,222		12.3	%	$	51,474		8.0	%	$	64,342		10.0	%
Common equity Tier 1 capital to risk-weighted assets		72,484		11.3			28,954		4.5			41,822		6.5
Tier 1 capital to risk-weighted assets		72,484		11.3			38,605		6.0			51,474		8.0
Tier 1 capital to average assets		72,484		8.4			34,347		4.0			42,934		5.0
December 31, 2017
Total capital to risk-weighted assets	$	71,795		11.7	%	$	49,009		8.0	%	$	61,262		10.0	%
Common equity Tier 1 capital to risk-weighted assets		65,642		10.7			27,568		4.5			39,820		6.5
Tier 1 capital to risk-weighted assets		65,642		10.7			36,757		6.0			49,009		8.0
Tier 1 capital to average assets		65,642		8.4			31,382		4.0			39,228		5.0

16. EMPLOYEE BENEFIT PLANS

401(k) plan

The Company has a 401(k) plan which provides for voluntary contributions by participating employees subject to IRS limitations. In 2018 and 2017, the Company matched the employee’s voluntary contribution at a level of 100% of the employee’s contributions up to the first 7% of the employee’s compensation. Total plan expense for the years ended December 31, 2018 and 2017 amounted to $338 thousand and $353 thousand, respectively.

Supplemental retirement agreement

The Company has entered into a supplemental retirement agreement with a current officer, which provides for payments upon attaining the retirement age specified in the agreement. The present value of these future payments is accrued over the remaining service term and at December 31, 2018 and 2017, amounted to $1.3 million and $1.1 million, respectively. Supplemental retirement benefits generally vest as they are accrued, however a termination of employment subsequent to a change in control of the Company will result in the vesting of all benefits that would have accrued to the officer’s normal retirement date. Total supplemental retirement expense for the years ended December 31, 2018 and 2017 amounted to $242 thousand and $224 thousand, respectively.

30

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Endorsement split-dollar life insurance arrangements

The Company is the sole owner of life insurance policies pertaining to certain of the Company’s executives. The Company has entered into agreements with these executives whereby the Company has agreed to maintain a life insurance policy in effect during the executives’ retirement, which will pay to the executives’ estates or beneficiaries a portion of the death benefit that the Company will receive as beneficiary of such policies. Total split-dollar insurance expense totaled $2 thousand and $9 thousand for the years ended December 31, 2018 and 2017, respectively.

Employee bonus program

The Company has established an employee bonus program whereby approximately 10% to 20% of the Company’s consolidated income, before income taxes and incentive compensation expense, is allocated for distribution to eligible employees. Total related bonus expense for the years ended December 31, 2018 and 2017 amounted to $1.4 million and $1.2 million, respectively.

Equity incentive plan

Under the Company’s 2016 Equity Incentive Plan, the Company may grant restricted stock awards to its employees and directors for up to 75,000 shares of its common stock. A restricted stock award (the “award”) is a grant of shares of Company common stock for no consideration, subject to a vesting schedule or the satisfaction of market conditions or performance criteria. Awarded shares are held in reserve for each grantee by the Company’s transfer agent, and will be issued from previously authorized but unissued shares upon vesting. The fair value of the stock awards, based on the market price at the grant date, will be recognized over the five-year vesting period. During 2018, the Board of Directors granted stock awards of 3,000 to certain directors. The fair value of the stock awards, based on the market price of the stock on the grant dates, was recorded as unearned compensation, and is being amortized over the vesting period.

Under the Company’s 2012 Equity Incentive Plan, the Company granted stock options to its employees and directors in the form of incentive stock options and non-qualified stock options totaling 231,894 shares of its common stock. The exercise price of each stock option was not less than the fair market value of the Company’s common stock on the date of grant, and the maximum term of each option is 10 years from the date of each award. The vesting period was five years from the date of grant, with vesting at 20% per year.

Under the 2012 Equity Incentive Plan, the Company also granted stock awards to management, employees and directors. Awarded shares are held in reserve for each grantee by the Company’s transfer agent, and will be issued from previously authorized but unissued shares upon vesting. The fair value of the stock awards, based on the market price at the grant date, is recognized over the five-year vesting period.

The Company’s 2012 Equity Incentive Plan was terminated upon approval of the 2016 Equity Incentive Plan.

31

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Stock Options

A summary of option activity under the 2012 Equity Incentive Plan for the year ended December 31, 2018 is presented below:

	Outstanding									Non-vested
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value		Shares		Weighted Average Grant Date Fair Value
	(In thousands)					(In years)		(In thousands)		(In thousands)
Balance at January 1, 2018		212		$	16.05						18	$	4.29
Vested		—			—						8		4.46
Exercised		(19	)		15.35						—		—
Balance at December 31, 2018		193		$	16.11		4.23	$	2,242		10	$	4.13
Exercisable at December 31, 2018		183		$	15.21		3.85	$	2,094

For the years ended December 31, 2018 and 2017, share-based compensation expense applicable to the stock options was $36 thousand and $169 thousand, respectively. There was no recognized tax benefit related to this expense for the year ended December 31, 2018. The recognized tax benefit related to this expense was $28 thousand for the year ended December 21, 2017.

Unrecognized compensation expense for non-vested stock options totaled $33 thousand as of December 31, 2018, which will be recognized over the remaining vesting period of 1.25 years.

Stock Awards

For the years ended December 31, 2018 and 2017, respectively, 3,000 and 15,000 restricted stock awards were granted with weighted average grant date fair values of $34.00 and $27.22.

The following table presents the activity in non-vested stock awards under the equity incentive plans for the year ended December 31, 2018:

	Number of Shares			Grant-date Fair Value
	(In thousands)
Non-vested stock awards at beginning of year		41		$	23.20
Restricted shares granted		3			34.00
Shares vested		(16	)		23.82
Non-vested stock awards at end of year		28		$	23.97

For the year ended December 31, 2018 and 2017, compensation expense applicable to the stock awards was $343 thousand and $445 thousand, respectively, and the recognized tax benefit related to this expense was $97 thousand and $178 thousand, respectively. Unrecognized compensation expense for non-vested restricted stock totaled $600 thousand as of December 31, 2018, which will be recognized over the remaining weighted average vesting period of 2.91 years.

32

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Employee stock ownership plan

The Company maintains an Employee Stock Ownership Plan (“ESOP”) to provide eligible employees the opportunity to own Company stock. The ESOP is a tax-qualified retirement plan for the benefit of all Company employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits.

The Company granted a loan to the ESOP for the purchase of shares of the Company’s common stock on the closing date of the Company’s mutual to stock conversion in 2012. As of December 31, 2018, the ESOP holds 177,899 shares or 7.0% of the common stock outstanding on that date. The loan obtained by the ESOP from the Company to purchase common stock is payable annually over 15 years at the rate of 3.25% per annum. The loan can be prepaid without penalty. Loan payments are expected to be funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. Cash dividends paid on allocated shares will be distributed to participants and cash dividends paid on unallocated shares will be used to repay the outstanding debt of the ESOP. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid.

At December 31, 2018, the remaining principal balance on the ESOP debt is payable as follows:

Year Ending December 31,	Amount
	(In thousands)
2019	$	127
2020		131
2021		135
2022		140
2023		144
Thereafter		462
	$	1,139

Shares held by the ESOP include the following:

	December 31,
	2018		2017
Allocated		75,193		65,250
Unallocated		102,706		115,543
		177,899		180,793

The fair value of unallocated shares was $2.8 million and $3.4 million at December 31, 2018 and 2017, respectively.

Total compensation expense recognized in connection with the ESOP for the years ended December 31, 2018 and 2017 was $406 thousand and $348 thousand, respectively.

33

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

17. RELATED PARTY TRANSACTIONS

Information pertaining to loans to directors, executive officers and their affiliates (exclusive of loans to any such persons which in the aggregate do not exceed $60 thousand) is as follows:

	Years Ended December 31,
	2018			2017
	(In thousands)
Balance at beginning of year	$	3,460		$	3,356
Principal additions (1)		5,820			1,097
Principal reductions (2)		(1,407	)		(993	)
Balance at end of year	$	7,873		$	3,460

(1) In 2018, includes $5.7 million of loans associated with a newly appointed director during the year, which represent the outstanding loan balances at the effective date of appointment.

(2) In 2018, includes amounts associated with individuals no longer considered to be an insider as of December 31, 2018.

Such loans are made in the ordinary course of business at the Company’s normal credit terms, except for certain loans, which were granted with an interest rate discount of 0.50% under the Company’s Mortgage Discount Program. This program applies only to fixed-or adjustable-rate mortgage loans that are held in the Company’s portfolio. The program is offered to all full- and part-time employees of the Company and to all members of its Board of Directors.

Deposits from related parties held by the Bank amounted to $7.8 million at December 31, 2018 and 2017, respectively.

18. RESTRICTIONS ON DIVIDENDS, LOANS AND ADVANCES

Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Company. The total amount of dividends which may be paid in any calendar year cannot exceed the Bank’s net income for the current year, plus the Bank’s net income retained for the previous two years, without regulatory approval. Loans or advances are limited to 10% of the Bank’s capital stock and surplus on a secured basis.

19. FAIR VALUES OF ASSETS AND LIABILITIES

Determination of fair value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the assets and liabilites.

34

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

The following methods and assumptions were used by the Company in estimating fair value disclosures:

Cash, cash equivalents and certificates of deposit: The carrying amounts approximate fair values based on the short-term nature of the assets.

Securities available for sale: Fair value measurements are obtained from a third-party pricing service and are not adjusted by management. All securities are measured at fair value in Level 2 based on valuation models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

Federal Home Loan Bank stock: The carrying value of FHLB stock is deemed to approximate fair value, based on the redemption provisions of the FHLB of Boston.

Loans held for sale: Fair values are based on commitments in effect from investors or prevailing market prices.

Loans, net: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposits: The fair values disclosed for non-certificate deposit accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings: The carrying amount of short-term borrowings approximates fair value, based on the short-term nature of the liabilities.

Long-term debt: The fair values of long-term debt are estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.

Subordinated debt: The fair values reported for subordinated debentures are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar terms and maturities.

Accrued interest: The carrying amounts of accrued interest approximate fair value

Forward loan sale commitments and derivative loan commitments: The fair value of forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans, including servicing values as applicable. The fair value of derivative loan commitments also considers the probability of such commitments being exercised.

Interest rate swap agreements: The fair values of interest rate swap agreements are based on a valuation model that uses primarily observable inputs, such as benchmark yield curves and interest rates and also the value associated with the counterparty risk. Credit risk adjustments consider factors such as the likelihood of default by the Company and its counterparties, its net exposure and remaining contractual life.

Off-balance sheet instruments: Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair values of these instruments are considered immaterial.

35

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis at December 31, 2018 and 2017 are summarized below:

	Level 1		Level 2		Level 3		Total Fair Value
	(In thousands)
December 31, 2018
Assets
Securities available for sale	$	—	$	66,770	$	—	$	66,770
Interest rate swap agreements		—		264		—		264
	$	—	$	67,034	$	—	$	67,034
Liabilites
Interest rate swap agreements	$	—	$	264	$	—	$	264
December 31, 2017
Assets
Securities available for sale	$	—	$	66,486	$	—	$	66,486
Interest rate swap agreements		—		67		—		67
	$	—	$	66,533	$	—	$	66,533
Liabilites
Interest rate swap agreements	$	—	$	67	$	—	$	67

Assets and liabilities measured at fair value on a non-recurring basis

The Company may also be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market (“LOCOM”) accounting or write-downs of individual assets.

There are no assets or liabilities at December 31, 2018 and 2017 measured at fair value on a non-recurring basis.

36

Wellesley Bancorp, Inc. and Subsidiary

Years Ended December 31, 2018 and 2017

Notes to Consolidated Financial Statements

Summary of fair values of financial instruments

The estimated fair values, and related carrying amounts of the Company’s financial instruments are outlined in the tables below. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.

	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
			(In thousands)
December 31, 2018
Financial assets:
Cash and cash equivalents	$	42,650	$	42,650	$	—	$	—	$	42,650
Certificates of deposit		100		100		—		—		100
Securities available for sale		66,770		—		66,770		—		66,770
FHLB stock		4,747		—		—		4,747		4,747
Loans, net		737,032		—		—		732,427		732,427
Accrued interest receivable		2,288		—		—		2,288		2,288
Interest rate swap agreements		264		—		264		—		264
Financial liabilities:
Deposits	$	717,931	$	—	$	—	$	716,685	$	716,685
Short-term borrowings		15,000		—		15,000		—		15,000
Long-term debt		58,528		—		58,192		—		58,192
Subordinated debt		9,832		—		—		9,691		9,691
Accrued interest payable		487		—		—		487		487
Interest rate swap agreements		264		—		264		—		264
December 31, 2017
Financial assets:
Cash and cash equivalents	$	28,462	$	28,462	$	—	$	—	$	28,462
Certificates of deposit		100		100		—		—		100
Securities available for sale		66,486		—		66,486		—		66,486
FHLB stock		5,937		—		—		5,937		5,937
Loans, net		686,302		—		—		694,614		694,614
Accrued interest receivable		2,140		—		—		2,140		2,140
Interest rate swap agreements		67		—		67		—		67
Financial liabilities:
Deposits	$	616,742	$	—	$	—	$	615,653	$	615,653
Short-term borrowings		38,000		—		38,000		—		38,000
Long-term debt		77,174		—		76,906		—		76,906
Subordinated debt		9,802		—		—		9,598		9,598
Accrued interest payable		286		—		—		286		286
Interest rate swap agreements		67		—		67		—		67

37

EX-99.5

Exhibit 99.5

WELLESLEY BANCORP, INC.

Table of Contents

		Page No.
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018		2
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018		3
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018		4
	Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2019 and 2018		6
	Notes to Consolidated Financial Statements		7

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

CONSOLIDATED BALANCE SHEETS

	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Assets
Cash and due from banks	$	7,305		$	7,678
Short-term investments		74,048			34,972
Total cash and cash equivalents		81,353			42,650
Certificates of deposit		100			100
Securities available for sale, at fair value		33,793			66,770
Federal Home Loan Bank of Boston stock, at cost		6,162			4,747
Loans held for sale		6,351			—
Loans		832,803			743,770
Less allowance for loan losses		(7,218	)		(6,738	)
Loans, net		825,585			737,032
Bank-owned life insurance		7,946			7,769
Operating lease, right-of-use asset		6,852			—
Premises and equipment, net		3,785			3,924
Accrued interest receivable		2,769			2,288
Net deferred tax asset		2,717			2,804
Other assets		8,454			3,336
Total assets	$	985,867		$	871,420
Liabilities and Stockholders’ Equity
Deposits:
Non-interest-bearing	$	133,187		$	116,926
Interest-bearing		625,558			601,005
Total deposits		758,745			717,931
Short-term borrowings		51,000			15,000
Long-term borrowings		77,533			58,528
Subordinated debt		9,854			9,832
Lease liability		6,907			—
Accrued expenses and other liabilities		10,043			4,999
Total liabilities		914,082			806,290
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none issued		—			—
Common stock, $0.01 par value; 14,000,000 shares authorized, 2,569,542 and 2,525,611 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		26			25
Additional paid-in capital		27,500			26,462
Retained earnings		44,598			40,203
Accumulated other comprehensive income (loss)		592			(533	)
Unearned compensation – ESOP		(931	)		(1,027	)
Total stockholders’ equity		71,785			65,130
Total liabilities and stockholders’ equity	$	985,867		$	871,420

See accompanying notes to consolidated financial statements.

2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2019			2018			2019			2018
	(Dollars in thousands, except per share data)
Interest and dividend income:
Interest and fees on loans and loans held for sale	$	9,769		$	7,941		$	27,940		$	22,702
Debt securities:
Taxable		335			364			1,076			1,050
Tax-exempt		76			82			238			246
Short-term investments and certificates of deposit		270			143			577			376
FHLB stock		75			86			213			244
Total interest and dividend income		10,525			8,616			30,044			24,618
Interest expense:
Deposits		2,606			1,668			7,665			4,318
Short-term borrowings		338			244			703			442
Long-term debt		521			273			1,154			1,004
Subordinated debt		157			158			471			474
Total interest expense		3,622			2,343			9,993			6,238
Net interest income		6,903			6,273			20,051			18,380
Provision for loan losses		70			130			480			390
Net interest income, after provision for loan losses		6,833			6,143			19,571			17,990
Non-interest income:
Customer service fees		43			42			131			130
Mortgage banking activities		102			35			181			72
Income on bank-owned life insurance		60			60			177			175
Wealth management fees		402			407			1,228			1,208
Miscellaneous		355			17			809			200
Total non-interest income		962			561			2,526			1,785
Non-interest expense:
Salaries and employee benefits		3,052			2,660			9,214			8,074
Occupancy and equipment		842			782			2,466			2,201
Data processing		325			265			930			734
FDIC insurance		11			150			336			486
Professional fees		191			159			637			572
Other general and administrative		579			566			1,871			1,666
Total non-interest expense		5,000			4,582			15,454			13,733
Income before income taxes		2,795			2,122			6,643			6,042
Provision for income taxes		759			565			1,800			1,628
Net income		2,036			1,557			4,843			4,414
Other comprehensive income:
Net unrealized holding (loss) gains on available-for-sale securities		(92	)		(267	)		1,509			(1,343	)
Income tax benefit (expense)		17			54			(384	)		335
Total other comprehensive (loss) gain income		(75	)		(213	)		1,125			(1,008	)
Comprehensive income	$	1,961		$	1,344		$	5,968		$	3,406
Earnings per common share:
Basic	$	0.82		$	0.65		$	1.97		$	1.84
Diluted	$	0.80		$	0.62		$	1.91		$	1.77
Weighted average shares outstanding:
Basic		2,472,267			2,408,091			2,454,103			2,398,671
Diluted		2,554,454			2,511,241			2,545,786			2,499,093

See accompanying notes to consolidated financial statements.

3

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2019 and 2018

											Accumulated Other
	Common Stock					Additional Paid-in		Retained			Comprehensive Income			Unearned Compensation-			Total Stockholders’
	Shares			Amount		Capital		Earnings			(Loss)			ESOP			Equity
								(Dollars in thousands)
Balance at December 31, 2017		2,506,532		$	25	$	25,601	$	34,736		$	39		$	(1,156	)	$	59,245
Comprehensive income		—			—		—		1,437			(653	)		—			784
Reclassification related to Tax Cuts and Jobs Act		—			—		—		(7	)		7			—			—
Dividends paid to common stockholders ($0.05 per share)		—			—		—		(127	)		—			—			(127	)
Share-based compensation-equity incentive plan		—			—		107		—			—			—			107
ESOP shares committed to be allocated (3,209)		—			—		61		—			—			33			94
Balance at March 31, 2018		2,506,532		$	25	$	25,769	$	36,039		$	(607	)	$	(1,123	)	$	60,103
Comprehensive income		—			—		—		1,420			(149	)		—			1,271
Dividends paid to common stockholders ($0.055 per share)		—			—		—		(137	)		—			—			(137	)
Restricted stock forfeitures		(400	)
Share-based compensation-equity incentive plan		—			—		100		—			—			—			100
ESOP shares committed to be allocated (3,210)		—			—		72		—			—			31			103
Balance at June 30, 2018		2,506,132		$	25	$	25,941	$	37,322		$	(756	)	$	(1,092	)	$	61,440
Comprehensive income		—			—		—		1,557			(213	)		—			1,344
Dividends paid to common stockholders ($0.055 per share)		—			—		—		(139	)		—			—			(139	)
Stock options exercised		19,054			—		154		—			—			—			154
Share-based compensation-equity incentive plan		—			—		106		—			—			—			106
ESOP shares committed to be allocated (3,210)		—			—		77		—			—			33			110
Balance at September 30, 2018		2,525,186		$	25	$	26,278	$	38,740		$	(962	)	$	(1,059	)	$	63,022

4

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2019 and 2018

												Accumulated
						Additional						Other			Unearned			Total
	Common Stock					Paid-in			Retained			Comprehensive			Compensation-			Stockholders’
	Shares			Amount		Capital			Earnings			Income (Loss)			ESOP			Equity
						(Dollars in thousands)
Balance at December 31, 2018		2,525,611		$	25	$	26,462		$	40,203		$	(533	)	$	(1,027	)	$	65,130
Comprehensive income		—			—		—			1,302			643			—			1,945
Restricted stock awards grant		11,500			—		—			—			—			—			—
Stock options exercised		2,553			—		48			—			—			—			48
Restricted stock forfeitures		(2,000	)		—		—			—			—			—			—
Dividends paid to common stockholders ($ 0.055 per share)		—			—		—			(140	)		—			—			(140	)
Share-based compensation-equity incentive plan		—			—		102			—			—			—			102
ESOP shares committed to be allocated (3,209)		—			—		64			—			—			32			96
Balance at March 31, 2019		2,537,664		$	25	$	26,676		$	41,365		$	110		$	(995	)	$	67,181
Comprehensive income		—			—		—			1,505			557			—			2,062
Stock options exercised		21,901			1		351			—			—			—			352
Dividends paid to common stockholders ($0.06 per share)		—			—		—			(153	)		—			—			(153	)
Share-based compensation-equity incentive plan		—			—		99			—			—			—			99
ESOP shares committed to be allocated (3,210)		—			—		75			—			—			32			107
Balance at June 30, 2019		2,559,565		$	26	$	27,201		$	42,717		$	667		$	(963	)	$	69,648
Comprehensive income		—			—		—			2,036			(75	)		—			1,961
Restricted stock awards grant		3,000			—		—			—			—			—			—
Stock options exercised		11,027			—		169			—			—			—			169
Restricted stock forfeitures		(4,050	)		—		(36	)		—			—			—			(36	)
Dividends paid to common stockholders ($0.06 per share)		—			—		—			(155	)		—			—			(155	)
Share-based compensation-equity incentive plan		—			—		97			—			—			—			97
ESOP shares committed to be allocated (3,210)		—			—		69			—			—			32			101
Balance at September 30, 2019		2,569,542		$	26	$	27,500		$	44,598		$	592		$	(931	)	$	71,785

See accompanying notes to consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	2019			2018
	(In thousands)
Cash flows from operating activities:
Net income	$	4,843		$	4,414
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for loan losses		480			390
Depreciation and amortization		611			574
Net amortization of securities		129			117
Gains on sales of securities, net		8			—
Principal balance of loans sold		13,782			5,857
Loans originated for sale		(20,133	)		(6,555	)
Accretion of net deferred loan fees		(493	)		(435	)
Amortization of subordinated debt issuance costs		22			23
Income on bank-owned life insurance		(177	)		(175	)
Deferred income tax provision		(297	)		(262	)
ESOP expense		304			307
Share-based compensation		262			313
Net change in other assets and liabilities		(467	)		(500	)
Net cash provided (used) by operating activities		(1,126	)		4,068
Cash flows from investing activities:
Activity in securities available for sale:
Maturities, prepayments and calls		5,944			8,289
Purchases		—			(10,914	)
Proceeds from sales		28,406			—
Purchase (redemption) of Federal Home Loan Bank stock		(1,415	)		471
Net loan originations		(88,540	)		(33,703	)
Additions to premises and equipment		(534	)		(728	)
Proceeds on sale of premises and equipment		28			63
Net cash used by investing activities		(56,111	)		(36,522	)
Cash flows from financing activities:
Net increase in deposits		40,814			53,761
Proceeds from issuance of long-term debt		33,000			36,000
Repayments of long-term debt		(13,995	)		(50,817	)
Increase (decrease) in short-term borrowings		36,000			(10,500	)
Stock options exercised		568			154
Common stock repurchased		1			—
Cash dividends paid on common stock		(448	)		(403	)
Net cash provided by financing activities		95,940			28,195
Net change in cash and cash equivalents		38,703			(4,259	)
Cash and cash equivalents at beginning period		42,650			28,462
Cash and cash equivalents at end of period	$	81,353		$	24,203
Supplementary information:
Interest paid	$	9,762		$	6,083
Income taxes paid		1,838			2,086

See accompanying notes to consolidated financial statements.

6

WELLESLEY BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND CONSOLIDATION

The accompanying unaudited interim consolidated financial statements include the accounts of Wellesley Bancorp, Inc. (the “Company”) and its wholly-owned subsidiary, Wellesley Bank (the “Bank”), the principal operating entity, and its wholly-owned subsidiaries: Wellesley Securities Corporation, which engages in the business of buying, selling and dealing in securities exclusively on its own behalf; Wellesley Investment Partners, LLC, formed to provide investment management services for individuals, not-for-profit entities and businesses; and Central Linden, LLC, to hold, manage and sell foreclosed real estate. All significant intercompany balances and transactions have been eliminated in consolidation. Assets under management at Wellesley Investment Partners, LLC are not included in these consolidated financial statements because they are not assets of the Company. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2018 Annual Report on Form 10-K. The results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or for any other period.

NOTE 2 – LOAN POLICIES

The loan portfolio consists of real estate, commercial and other loans to the Company’s customers in our primary market areas in eastern Massachusetts. The ability of the Company’s debtors to honor their contracts is dependent upon the economy in general and the state of real estate and construction sectors within our markets.

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred loan origination fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

Interest is generally not accrued on loans that are identified as impaired or loans which are ninety days or more past due. Past due status is based on the contractual terms of the loan. Interest income previously accrued on such loans is reversed against current period interest income. Interest income on non-accrual loans is recognized only to the extent of interest payments received and is first applied to the outstanding principal balance when collectibility of principal is in doubt. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured through sustained payment performance for at least six months.

Allowance for loan losses

The allowance for loan losses is established through a provision for loan losses charged to earnings as losses are estimated to occur. Loan losses are charged against the allowance when management believes the uncollectibility of the loan balance is confirmed. Subsequent recoveries are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components.

7

General component

The general component is based on the following loan segments: residential real estate, commercial real estate, construction, commercial, home equity lines of credit and other consumer. Management considers a rolling average of historical losses for each segment based on a time frame appropriate to capture relevant loss data for each loan segment, generally three and 10 years. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume, concentrations and terms of loans; level of collateral protection; effects of changes in risk selection and underwriting standards; experience/ability /depth of lending management and staff; and national and local economic trends and conditions. There were no significant changes to the Company’s policies or methodology pertaining to the general component of the allowance during 2019 or 2018.

The qualitative factor adjustments are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate – The Company generally does not originate loans with a loan-to-value ratio greater than 80 percent and does not originate subprime loans. Most loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality of this segment.

Commercial real estate – Loans in this segment are primarily income-producing properties in the Company’s primary market areas in eastern Massachusetts. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which, in turn, will have an effect on the credit quality in this segment. Management typically obtains rent rolls annually and continually monitors the cash flows of these loans.

Construction – Loans in this segment include speculative construction loans primarily on residential properties for which payment is derived from the sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions. Residential construction loans in this segment also include loans to build one-to-four family owner-occupied properties which are subject to the same credit quality factors as residential real estate.

Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Home equity lines of credit – Loans in this segment are collateralized by one-to-four family residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Other consumer – Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

Allocated component

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the fair value of the loan or, if the loan is collateral dependent, by the fair value of the collateral less estimated costs to sell. An allowance is established when the discounted cash flows or collateral value of the impaired loan are lower than the carrying value of that loan. Large groups of smaller-balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify performing individual residential and consumer loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.

8

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring (“TDR”). All TDRs are initially classified as impaired.

Unallocated component

An unallocated component is maintained to cover additional uncertainties in management’s estimation of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

NOTE 3 – COMPREHENSIVE INCOME

Accounting principles generally require that recognized revenue, expenses, and gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the stockholders’ equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income/loss.

The components of accumulated other comprehensive income (loss) and related tax effects are as follows:

	September 30,			December 31,
	2019			2018
	(In thousands)
Unrealized holding gains (losses) on securities available for sale	$	777		$	(732	)
Tax effect		(185	)		199
Net-of tax amount	$	592		$	(533	)

NOTE 4 – RECENT ACCOUNTING AND REGULATORY PRONOUNCEMENTS

Effective January 1, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which requires a lessee to record a right-of-use asset and liability representing the obligation to make lease payments for long-term leases. Upon adoption of the ASU, the Company recorded an increase in assets of $7.8 million and an increase in liabilities of $7.8 million on the Consolidated Balance Sheets as a result of recognizing the right-of-use assets and lease liabilities.

In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Entities will now use forward-looking information to better form their credit loss estimates. Credit losses on available-for-sale debt securities should be measured in a manner similar to current GAAP; however, recognized credit losses will be presented as an allowance rather than as a write-down. This ASU was scheduled to be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. However, the FASB recently voted to propose delaying the standard by three years for small reporting companies, which includes Wellesley Bank. To date, the Company has implemented a committee led by the Company’s Chief Financial Officer, which includes the Chief Lending Officer, to assist in identifying, implementing and evaluating the impact of the required changes to the loan loss estimation model and processes. The Company has evaluated the portfolio segments and various methodologies and is currently evaluating potential loss modeling processes as well as related controls and procedures. Management will continue to closely monitor legislative developments.

9

NOTE 5 – SECURITIES AVAILABLE FOR SALE

The amortized cost and fair value of securities available for sale, with gross unrealized gains and losses, follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
			(In thousands)
September 30, 2019
Residential mortgage-backed securities:
Government National Mortgage Association	$	2,869	$	79	$	(24	)	$	2,924
Government-sponsored enterprises		2,381		63		(9	)		2,435
SBA and other asset-backed securities		4,211		176		(2	)		4,385
State and municipal bonds		7,459		387		—			7,846
Government-sponsored enterprise obligations		7,000		—		(6	)		6,994
Corporate bonds		9,096		139		(26	)		9,209
	$	33,016	$	844	$	(67	)	$	33,793
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
			(In thousands)
December 31, 2018
Residential mortgage-backed securities:
Government National Mortgage Association	$	3,846	$	44	$	(43	)	$	3,847
Government-sponsored enterprises		11,382		29		(188	)		11,223
SBA and other asset-backed securities		11,720		64		(157	)		11,627
State and municipal bonds		12,908		111		(111	)		12,908
Government-sponsored enterprise obligations		8,000		—		(187	)		7,813
Corporate bonds		18,151		28		(322	)		17,857
U.S. Treasury bills		1,495		—		—			1,495
	$	67,502	$	276	$	(1,008	)	$	66,770

For the three and nine months ended September 30, 2019, proceeds from sales of available-for-sale securities amounted to $28.4 million with gross realized gains of $145 thousand and gross realized losses of $137 thousand, which are included in miscellaneous income.

There were no sales of available-for-sale securities for the three and nine months ended September 30, 2018.

10

The amortized cost and fair value of debt securities by contractual maturity at September 30, 2019 are as follows:

	Amortized Cost		Fair Value
	(In thousands)
Within 1 year	$	2,349	$	2,349
After 1 year to 5 years		9,809		9,853
After 5 years to 10 years		7,799		8,108
After 10 years		3,598		3,739
		23,555		24,049
Mortgage- and asset-backed securities		9,461		9,744
	$	33,016	$	33,793

Expected maturities may differ from contractual maturities because the issuer, in certain instances, has the right to call or prepay obligations with or without call or prepayment penalties.

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than Twelve Months					Over Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
				(In thousands)
September 30, 2019
Residential mortgage-backed securities:
Government National Mortgage Association	$	—		$	—	$	(24	)	$	904
Government-sponsored enterprises		—			—		(9	)		367
SBA and other asset-backed securities		(2	)		305		—			—
State and municipal bonds		—			—		—			—
Government-sponsored enterprise obligations		(6	)		2,994		—			—
Corporate bonds		—			—		(26	)		1,835
	$	(8	)	$	3,299	$	(59	)	$	3,106
	Less Than Twelve Months					Over Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
				(In thousands)
December 31, 2018
Residential mortgage-backed securities:
Government National Mortgage Association	$	—		$	—	$	(43	)	$	1,755
Government-sponsored enterprises		(1	)		103		(187	)		7,880
SBA and other asset-backed securities		—			—		(157	)		5,455
State and municipal bonds		(2	)		386		(109	)		6,257
Government-sponsored enterprise obligations		—			—		(187	)		7,813
Corporate bonds		(29	)		5,705		(293	)		11,124
	$	(32	)	$	6,194	$	(976	)	$	40,284

11

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluations. At September 30, 2019, various debt securities have unrealized losses with aggregate depreciation of 1.03% from their aggregate amortized cost basis. These unrealized losses relate principally to the effect of interest rate changes on the fair value of debt securities and not an increase in credit risk of the issuers. As the Company does not intend to sell the securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity, the Company does not consider these securities to be other-than-temporarily impaired at September 30, 2019.

NOTE 6 – LOANS AND ALLOWANCE FOR LOAN LOSSES

A summary of the ending balances of loans is as follows:

	September 30, 2019			December 31, 2018
	(In thousands)
Real estate loans:
Residential – fixed	$	71,834		$	64,218
Residential – variable		319,236			318,292
Commercial		166,193			148,006
Construction		150,732			106,723
		707,995			637,239
Commercial loans:
Secured		82,784			61,563
Unsecured		5,144			5,327
		87,928			66,890
Consumer loans:
Home equity lines of credit		36,955			39,486
Other		165			163
		37,120			39,649
Total loans		833,043			743,778
Net deferred originations costs		(240	)		(8	)
Total loans, net of deferred fees		832,803			743,770
Less:
Allowance for loan losses		(7,218	)		(6,738	)
Loans, net	$	825,585		$	737,032

12

The following table summarizes the changes in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2019 and 2018:

	Residential			Commercial									Home			Other
	Real Estate			Real Estate			Construction			Commercial			Equity			Consumer			Unallocated			Total
										(In thousands)
Three Months Ended September 30, 2019
Allowance at June 30, 2019	$	2,151		$	1,522		$	1,626		$	1,352		$	262		$	3		$	232		$	7,148
Provision (credit) for loan losses		(35	)		(34	)		211			30			(25	)		—			(77	)		70
Allowance at September 30, 2019	$	2,116		$	1,488		$	1,837		$	1,382		$	237		$	3		$	155		$	7,218
Three Months Ended September 30, 2018
Allowance at June 30, 2018	$	1,999		$	1,615		$	1,459		$	962		$	257		$	4		$	117		$	6,413
Provision (credit) for loan losses		108			4			5			(10	)		(6	)		(1	)		30			130
Allowance at September 30, 2018	$	2,107		$	1,619		$	1,464		$	952		$	251		$	3		$	147		$	6,543
Nine Months Ended September 30, 2019
Allowance at December 31, 2018	$	2,216		$	1,602		$	1,462		$	1,124		$	257		$	3		$	74		$	6,738
Provision (credit) for loan losses		(100	)		(114	)		375			258			(20	)		—			81			480
Allowance at September 30, 2019	$	2,116		$	1,488		$	1,837		$	1,382		$	237		$	3		$	155		$	7,218
Nine Months Ended September 30, 2018
Allowance at December 31, 2017	$	1,722		$	1,520		$	1,661		$	917		$	237		$	2		$	94		$	6,153
Provision (credit) for loan losses		385			99			(197	)		35			14			1			53			390
Allowance at September 30, 2018	$	2,107		$	1,619		$	1,464		$	952		$	251		$	3		$	147		$	6,543
Further information pertaining to the allowance for loan losses is as follows:
	Residential
	Real			Commercial									Home			Other
	Estate			Real Estate			Construction			Commercial			Equity			Consumer			Unallocated			Total
										(In thousands)
September 30, 2019
Allowance related to impaired loans	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Allowance related to non-impaired loans		2,116			1, 488			1,837			1,382			237			3			155			7,218
Total allowance	$	2,116		$	1,488		$	1,837		$	1,382		$	237		$	3		$	155		$	7,218
Impaired loan balances	$	728		$	2,635		$	—		$	796		$	500		$	—		$	—		$	4,659
Non-impaired loan balances		390,342			163,558			150,732			87,132			36,455			165			—			828,384
Total loans	$	391,070		$	166,193		$	150,732		$	87,928		$	36,955		$	165		$	—		$	833,043
December 31, 2018
Allowance related to impaired loans	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Allowance related to non-impaired loans		2,216			1,602			1,462			1,124			257			3			74			6,738
Total allowance	$	2,216		$	1,602		$	1,462		$	1,124		$	257		$	3		$	74		$	6,738
Impaired loan balances	$	746		$	2,846		$	—		$	—		$	—		$	—		$	—		$	3,592
Non-impaired loan balances		381,764			145,160			106,723			66,890			39,486			163			—			740,186
Total loans	$	382,510		$	148,006		$	106,723		$	66,890		$	39,486		$	163		$	—		$	743,778

13

The following is a summary of past due and non-accrual loans at September 30, 2019 and December 31, 2018:

									Past Due 90
					Past Due				Days or
					90				More
	30-59 Days		60-89 Days		Days or		Total		and Still		Non-accrual
	Past Due		Past Due		More		Past Due		Accruing		Loans
	(In thousands)
September 30, 2019
Residential real estate	$	568	$	—	$	—	$	568	$	—	$	568
Commercial real estate		—		—		548		548		—		548
Consumer loans		—		500		—		500		—		500
Total	$	568	$	500	$	548	$	1,616	$	—	$	1,616
December 31, 2018
Residential real estate	$	1,551	$	—	$	—	$	1,551	$	—	$	581
Commercial real estate		—		—		556		556		—		556
Total	$	1,551	$	—	$	556	$	2,107	$	—	$	1,137

The following is a summary of impaired loans:

	September 30, 2019				December 31, 2018
			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal
	Investment		Balance		Investment		Balance
			(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	728	$	745	$	746	$	764
Commercial real estate		2,635		2,760		2,846		2,974
Commercial loans		796		796		—		—
Consumer loans		500		500		—		—
Total impaired loans	$	4,659	$	4,801	$	3,592	$	3,738

Further information pertaining to impaired loans follows:

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
					Interest						Interest
					Income						Income
	Average		Interest		Recognized		Average		Interest		Recognized
	Recorded		Income		on Cash		Recorded		Income		on Cash
	Investment		Recognized		Basis		Investment		Recognized		Basis
	(In thousands)
Residential real estate	$	731	$	8	$	6	$	738	$	23	$	18
Commercial real estate		2,669		24		—		2,739		84		11
Commercial loans		790		14				519		31
Consumer loans		125		—				42		—
Total	$	4,315	$	46	$	6	$	4,038	$	138	$	29

14

	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
					Interest						Interest
					Income						Income
	Average		Interest		Recognized		Average		Interest		Recognized
	Recorded		Income		on Cash		Recorded		Income		on Cash
	Investment		Recognized		Basis		Investment		Recognized		Basis
	(In thousands)
Residential real estate	$	821	$	13	$	2	$	421	$	25	$	5
Commercial real estate		2,949		32		6		1,627		61		34
Total	$	3,770	$	45	$	8	$	2,048	$	86	$	39

New TDRs were recorded totaling $2.6 million, which included a new commitment of $500 thousand, in the three and nine months ended September 30, 2019 as a working capital, line of credit was granted to an existing impaired commercial loan relationship, consisting of two commercial real estate loans.

There were no new troubled debt restructurings recorded during the three and nine months ended September 30, 2018.

There were no TDRs that defaulted, generally considered 90 days past due or longer, during the three and nine months ended September 30, 2019 and 2018, and for which default was within one year of the restructure date. TDRs did not have a material impact on the allowance for loan losses for the three and nine months ended September 30, 2019 and 2018.

Credit Quality Information

The Company utilizes an eleven-grade internal loan rating system for commercial real estate, construction and commercial loans.

Loans rated 1-4: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 5: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 6: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 7: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 8: Loans in this category are considered uncollectible “loss” and of such little value that their continuance as loans is not warranted.

Loans rated 9: Loans in this category only include commercial loans under $25 thousand with no other outstandings or relationships with the Company.

Loans rated 10: Loans in this category include loans which otherwise require rating but which have not been rated, or loans for which the Company’s loan policy does not require rating.

15

Loans rated 11: Loans in this category include credit commitments/relationships that cannot be rated due to a lack of financial information or inaccurate financial information. If within 60 days of the assignment of an 11 rating, information is still not available to allow a standard rating, the credit will be rated 6.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans. During each calendar year, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. On a monthly basis, the Company reviews the residential real estate and consumer loan portfolio for credit quality primarily through the use of delinquency reports.

The following table presents the Company’s loans by risk rating:

	September 30, 2019								December 31, 2018
	Commercial								Commercial
	Real Estate		Construction		Commercial		Total		Real Estate		Construction		Commercial		Total
	(In thousands)
Loans rated 1-4	$	162,523	$	150,732	$	86,211	$	399,466	$	144,243	$	106,723	$	65,245	$	316,211
Loans rated 5		885		—		1,049		1,934		917		—		1,645		2,562
Loans rated 6		2,237		—		668		2,905		2,290		—		—		2,290
Loans rated 7		548		—		—		548		556		—		—		556
Total	$	166,193	$	150,732	$	87,928	$	404,853	$	148,006	$	106,723	$	66,890	$	321,619

NOTE 7 – DERIVATIVE INSTRUMENTS

Certain derivative instruments do not meet the requirements to be accounted for as hedging instruments. These undesignated derivative instruments are recognized on the consolidated balance sheet at fair value, with changes in the fair value recorded in miscellaneous income.

Derivative Loan Commitments

Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. The Company enters into commitments to fund residential mortgage loans at specified rates and times in the future, with the intention that these loans will subsequently be sold in the secondary market.

Outstanding derivative loan commitments expose the Company to the potential for changes in the fair value of the underlying loans as interest rates change, along with the value of the loan commitment. If interest rates increase, the value of these loan commitments will decrease. Conversely, if interest rates decrease, the value of these loan commitments will increase. The notional amount of undesignated derivative loan commitments was $1.8 million at September 30, 2019. The fair value of these commitments was an asset of $5 thousand.

There were no outstanding derivative loan commitments at December 31, 2018.

Forward Loan Sale Commitments

To protect against the price risk inherent in derivative loan commitments, the Company utilizes “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. With a “best efforts” contract, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded.

The Company expects that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments. The notional amount of undesignated forward loan sale commitments was $8.9 million at September 30, 2019. The fair value of these commitments was an asset of $3 thousand.

There were no undesignated forward loan sale commitments at December 31, 2018.

16

Interest Rate Swap Agreements

The Company has entered into derivative financial instruments in the normal course of business to manage exposure to fluctuations in interest rates for its commercial customers. Typically these agreements have generally been limited to loan level interest rate swap agreements, which are entered into with borrowers and a third party. Typically, the Company enters into a floating-rate loan and a fixed-rate swap directly with a loan customer. The Company offsets the fixed-rate interest rate risk with an identical offsetting swap with a swap dealer. This is referred to as a “back-to-back” swap structure. As this structure has equal and offsetting interest rate contracts, fair value gains and losses recorded each month are offsetting.

The notional amounts are amounts on which calculations, payments, and the value of the derivatives are based. Notional amounts do not represent direct credit exposures. The fair value of the derivative instruments is reflected on the Company’s consolidated balance sheet as other assets and other liabilities as appropriate. Changes in fair values are recorded in miscellaneous income in the consolidated statements of comprehensive income. A deposit account totaling $3.0 million is currently pledged to secure the Company’s liability for the offsetting interest rate swaps.

A summary of the interest rate swaps is as follows:

	With commercial		With third-party
	loan borrowers		financial institutions
	September 30,	December 31,	September 30,	December 31,
	2019	2018	2019	2018
	(dollars in thousands)
Notional amount	$66,098	$28,320	$66,098	$28,320
Receive (pay) fixed rate weighted average	4.68%	5.09%	(4.68%)	(5.09%)
Receive (pay) variable rate weighted average	(4.23%)	(5.06%)	4.23%	5.06%
Weighted average remaining years	10.7 years	12.8 years	10.7 years	12.8 years
Unrealized fair value gain (loss)	$4,832	$264	$(4,832)	$(264)

NOTE 8 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value hierarchy

The Company groups its assets measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 – Valuation is based on quoted market prices in active exchange markets for identical assets and liabilities. Valuations are obtained from readily available pricing sources.

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. Valuations are obtained from readily available pricing sources.

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as those for which the determination of fair value requires significant management judgment or estimation.

Transfers between levels are recognized at the end of a reporting period, if applicable.

17

Determination of fair value

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the assets and liabilities.

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis at September 30, 2019 and December 31, 2018 are summarized below.

							Total
	Level 1		Level 2		Level 3		Fair Value
			(In thousands)
September 30, 2019
Assets
Securities available for sale	$	—	$	33,793	$	—	$	33,793
Interest rate swap agreements		—		4,832		—		4,832
Derivative loan commitments		—		—		5		5
Forward loan sale commitments		—		—		3		3
	$	—	$	38,625	$	8	$	38,633
Liabilities
Interest rate swap agreements	$	—	$	4,832	$	—	$	4,832
December 31, 2018
Assets
Securities available for sale	$	—	$	66,770	$	—	$	66,770
Interest rate swap agreements		—		264		—		264
	$	—	$	67,034	$	—	$	67,034
Liabilities
Interest rate swap agreements	$	—	$	264	$	—	$	264

Fair value measurements for securities available for sale are obtained from a third-party pricing service and are not adjusted by management. All securities are measured at fair value in Level 2 based on valuation models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

The fair values of interest rate swap agreements are based on a valuation model that uses primarily observable inputs, such as benchmark yield curves and interest rates and also the value associated with the counterparty risk. Credit risk adjustments consider factors such as the likelihood of default by the Company and its counterparties, its net exposure and remaining contractual life.

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The fair value of forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans, including servicing values as applicable. The fair value of derivative loan commitments also considers the probability of such commitments being exercised.

Assets measured at fair value on a non-recurring basis

The Company may also be required, from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market (“LOCOM”) accounting or write-downs of individual assets. Fair values for loans held for sale are based on commitments in effect from investors or prevailing market rates.

	September 30, 2019						December 31, 2018
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
					(In thousands)
Loans held for sale	$	—	$	—	$	6,351	$	—	$	—	$	—

There were no liabilities measured at fair value on a non-recurring basis at September 30, 2019 and December 31, 2018.

19

Summary of fair values of financial instruments

The estimated fair values and related carrying amounts of the Company’s financial instruments are outlined in the table below. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.

	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
	(In thousands)
September 30, 2019
Financial assets:
Cash and cash equivalents	$	81,353	$	81,353	$	—	$	—	$	81,353
Certificates of deposit		100		100		—		—		100
Securities available for sale		33,793		—		33,793		—		33,793
FHLB stock		6,162		—		—		6,162		6,162
Loans held for sale		6,351		—		—		6,351		6,351
Loans, net		825,585		—		—		833,926		833,926
Accrued interest receivable		2,769		—		—		2,769		2,769
Interest rate swap agreements		4,832		—		4,832		—		4,832
Derivative loan commitments		5		—		—		5		5
Forward loan sale commitments		3		—		—		3		3
Financial liabilities:
Deposits	$	758,745	$	—	$	—	$	758,924	$	758,924
										51,000
Short-term borrowings		51,000		—		51,000		—		18,000
Long-term debt		77,533		—		77,702		—		77,702
Subordinated debt		9,854		—		—		9,765		9,765
Accrued interest payable		716		—		—		716		716
Interest rate swap agreements		4,832		—		4,832		—		4,832
December 31, 2018
Financial assets:
Cash and cash equivalents	$	42,650	$	42,650	$	—	$	—	$	42,650
Certificates of deposit		100		100		—		—		100
Securities available for sale		66,770		—		66,770		—		66,770
FHLB stock		4,747		—		—		4,747		4,747
Loans, net		737,032		—		—		732,427		732,427
Accrued interest receivable		2,288		—		—		2,288		2,288
Interest rate swap agreements		264		—		264		—		264
Financial liabilities:
Deposits	$	717,931	$	—	$	—	$	716,685	$	716,685
Short-term borrowings		15,000		—		15,000		—		15,000
Long-term debt		58,528		—		58,192		—		58,192
Subordinated debt		9,832		—		—		9,691		9,691
Accrued interest payable		487		—		—		487		487
Interest rate swap agreements		264		—		264		—		264

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NOTE 9 – EMPLOYEE STOCK OWNERSHIP PLAN

The Bank maintains an Employee Stock Ownership Plan (the “ESOP”) to provide eligible employees the opportunity to own Company stock. This plan is a tax-qualified retirement plan for the benefit of all Company employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits.

The Company granted a loan to the ESOP to purchase shares of the Company’s common stock on the closing date of the Company’s mutual-to-stock conversion in 2012. As of September 30, 2019, the ESOP held 176,177 shares or 6.9% of the common stock outstanding on that date. The loan is payable annually over 15 years at the rate of 3.25% per annum. The loan can be prepaid without penalty. Loan payments are expected to be funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. Cash dividends paid on allocated shares are reinvested into shares to participants and cash dividends paid on unallocated shares will be used to repay the outstanding debt of the ESOP. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid.

Shares held by the ESOP at September 30, 2019 include the following:

Allocated	73,471
Committed to be allocated	9,629
Unallocated	93,077
	176,177

The fair value of unallocated shares was $2.9 million at September 30, 2019.

Total compensation expense recognized in connection with the ESOP for the three months ended September 30, 2019 and 2018 was $101 thousand and $109 thousand, respectively. ESOP-related compensation expense was $304 thousand and $307 thousand for the nine months ended September 30, 2019 and 2018, respectively.

NOTE 10 – EQUITY INCENTIVE PLANS

Under the Company’s 2016 Equity Incentive Plan, the Company may grant restricted stock awards to its employees and directors for up to 75,000 shares of its common stock. A restricted stock award (the “award”) is a grant of shares of Company common stock for no consideration, subject to a vesting schedule or the satisfaction of market conditions or performance criteria. Awarded shares are held in reserve for each grantee by the Company’s transfer agent, and will be issued from previously authorized but unissued shares upon vesting. The fair value of the stock awards, based on the market price at the grant date, will be recognized over the five-year vesting period. At September 30, 2019, there remain 20,550 shares available to award under the Plan.

Under the Company’s 2012 Equity Incentive Plan the Company granted stock options to its employees and directors in the form of incentive stock options and non-qualified stock options totaling 231,894 shares of its common stock. The exercise price of each stock option was not less than the fair market value of the Company’s common stock on the date of grant, and the maximum term of each option is 10 years from the date of each award. The vesting period was five years from the date of grant, with vesting at 20% per year.

Under the 2012 Equity Incentive Plan, the Company also granted stock awards to management, employees and directors. Awarded shares are held in reserve for each grantee by the Company’s transfer agent, and were issued from previously authorized but unissued shares upon vesting. The fair value of the stock awards, based on the market price at the grant date, is recognized over the five-year vesting period.

The Company’s 2012 Equity Incentive Plan was terminated upon approval of the 2016 Equity Incentive Plan.

21

Stock Options

A summary of option activity under the 2012 Equity Incentive Plan for the nine months ended September 30, 2019 is presented below:

	Outstanding
						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
	Shares			Exercise Price		Term		Value
	(In thousands)					(In years)		(In thousands)
Balance at January 1, 2019		193		$	16.11
Forfeited		(3	)		19.07
Exercised		(35	)		16.01
Balance at September 30, 2019		155		$	16.09		3.45	$	2,339
Exercisable at September 30, 2019		148		$	15.33		3.16	$	2,193

	Non-vested
				Weighted
				Average
				Grant Date
	Shares			Fair Value
	(In thousands)
Balance at January 1, 2019		10		$	4.13
Forfeited		(3	)		4.01
Balance at September 30, 2019		7		$	4.18

For the three months ended September 30, 2019 and 2018, compensation expense applicable to the stock options was $4 thousand and $9 thousand, respectively. There was no recognized tax benefit related to this expense for the period ended September 30, 2019 and September 30, 2018, respectively.

For the nine months ended September 30, 2019 and 2018, compensation expense applicable to the stock options was $17 thousand and $28 thousand, respectively. There was no recognized tax benefit related to this expense for the period ended September 30, 2019 and September 30, 2018, respectively.

Unrecognized compensation expense for non-vested stock options totaled $6 thousand as of September 30, 2019, which will be recognized over the remaining weighted average vesting period of 0.4 years.

Stock Awards

For the nine months ended September 30, 2019, there were 14,500 restricted stock awards granted with a weighted average grant date fair value of $28.88.

The following table presents the activity in non-vested stock awards under the equity incentive plans for the nine months ended September 30, 2019:

	Number of Shares			Grant-date Fair Value
	(In thousands)
Balance at January 1, 2019		27		$	23.97
Restricted shares granted		15			28.88
Restricted shares forfeited		(6	)		24.39
Balance at September 30, 2019		36		$	25.83

There was no activity in non-vested restricted stock awards under the 2016 or the 2012 Equity Incentive Plan for the three and nine months ended September 30, 2018.

22

For the three months ended September 30, 2019 and 2018, compensation expense applicable to the stock awards was $56 thousand and $97 thousand, respectively, and the recognized tax benefit related to this expense was $16 thousand and $27 thousand, respectively.

For the nine months ended September 30, 2019 and 2018, compensation expense applicable to the stock awards was $245 thousand and $285 thousand, respectively, and the recognized tax benefit related to this expense was $69 thousand and $80 thousand, respectively.

Unrecognized compensation expense for non-vested restricted stock totaled $626 thousand as of September 30, 2019, which will be recognized over the remaining weighted average vesting period of 2.27 years.

NOTE 11 – EARNINGS PER COMMON SHARE

Basic earnings per share represents net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. Under the Company’s 2012 and 2016 Equity Incentive Plans, stock awards contain non-forfeitable dividend rights. Accordingly, these shares are considered outstanding for computation of basic earnings per share. Potential common shares that may be issued by the Company relate to outstanding stock options and are determined using the treasury stock method.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(In thousands, except earnings per share amounts)
Net income applicable to common stock	$	2,036		$	1,557		$	4,843		$	4,414
Average number of common shares issued		2,567			2,516			2,552			2,509
Less: Average unallocated ESOP shares		(95	)		(108	)		(98	)		(111	)
Average number of common shares outstanding used to calculate basic earnings per common share		2,472			2,408			2,454			2,398
Effect of dilutive stock options		82			103			92			101
Average number of common shares outstanding used to calculate diluted earnings per share		2,554			2,511			2,546			2,499
Earnings per common share:
Basic	$	0.82		$	0.65		$	1.97		$	1.84
Diluted	$	0.80		$	0.62		$	1.91		$	1.77

There were no anti-dilutive options that would have been excluded from the computations of diluted earnings per share for the three and nine months ended September 30, 2019 and 2018. Anti-dilutive shares are common stock equivalents with exercise prices in excess of the average market value of the Company’s stock for the periods presented.

NOTE 12 – LEASES

Effective January 1, 2019, operating leases are included in operating lease right-of-use (“ROU”) asset and liabilities in our consolidated balance sheet. These operating leases provide the physical facilities for our sales and service locations, administration and operations offices, and ATMs.

23

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities were recognized at the accounting adoption date based on the present value of lease payments over the remaining lease term. As our leases do not provide an implicit rate, we use the Federal Home Loan Bank borrowing rates that best align with the lease term in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease, which we include when it is reasonably certain that we will exercise that option. For operating leases, the lease expense is recognized on a straight-line basis over the lease term. The operating lease expense for the three and nine months ended September 30, 2019 was $403 thousand and $1.2 million, respectively.

The table below summarizes other information related to our operating leases as of September 30, 2019:

Cash flows from operating leases, in thousands, year to date 2019	$	1,194
Weighted average remaining lease term, in years		5.4
Weighted average discount rate		3.13	%

The table below summarizes the maturity of the operating lease liabilities as of September 30, 2019:

	(In thousands)
2019	$	402
2020		1,632
2021		1,483
2022		1,182
2023		1,101
Thereafter		1,912
Total lease payments		7,712
Less imputed interest		(805	)
Present value of lease liabilities	$	6,907

The Bank is under agreement to take possession of an additional 4,431 square feet of office space in 2020 for a term of 74 months that is expected to increase the Bank’s ROU assets by $1.3 million.

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EX-99.6

Exhibit: 99.6

UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

Merger with Wellesley Bancorp, Inc.

On December 5, 2019, Cambridge Bancorp, a Massachusetts corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Cambridge Trust Company, the Company’s subsidiary bank (“Cambridge Trust”), Wellesley Bancorp, Inc. (“Wellesley”), and Wellesley Bank, Wellesley’s subsidiary bank (“Wellesley Bank”), pursuant to which Wellesley will merge with and into the Company and Wellesley Bank will merge with and into Cambridge Trust, with the Company and Cambridge Trust as the surviving entities (collectively, the “Mergers”). As a result of the Mergers, each share of Wellesley common stock will be exchanged for 0.580 shares of the Company’s common stock.

The following unaudited pro forma combined consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and combine the historical consolidated financial position and results of operations of the Company and its subsidiaries and Wellesley as an acquisition by the Company of Wellesley using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. Under the acquisition method of accounting, the assets and liabilities of Wellesley were recorded by the Company at their respective fair values as of the date the Mergers were completed. Certain reclassifications were made to Wellesley’s historical financial information to conform to the Company’s presentation of financial information. All significant pro forma adjustments and underlying assumptions are described in the accompanying notes. The unaudited pro forma combined consolidated statements of income give effect to the Mergers as if they occurred on January 1, 2018. The unaudited pro forma combined consolidated balance sheet gives effect to the Mergers as if they occurred on September 30, 2019. The unaudited pro forma combined financial statements should be read in conjunction with: the Company’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, which were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and the Company’s unaudited financial statements and the related notes thereto as of and for the nine months ended September 30, 2019, which were included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2019, which were filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 18, 2019, and November 7, 2019, respectively, and Wellesley’s audited consolidated financial statements as of and for the year ended December 31, 2018 and 2017 and Wellesley unaudited consolidated financial statements as of and for the nine months ended September 30, 2019, which are being filed as Exhibit 99.4 and Exhibit 99.5 to this Current Report on Form 8-K, respectively.

The unaudited pro forma combined consolidated financial statements are presented for illustrative purposes only, do not indicate the actual financial results of the combined company had the Mergers occurred on January 1, 2018 at the beginning of each period presented, nor are they indicative of the Company’s future financial position or financial results.

Merger with Optima Bank & Trust Company

On April 17, 2019, the Company, completed its previously announced acquisition of Optima Bank & Trust Company (“Optima”), pursuant to an Agreement and Plan of Merger, dated as of December 5, 2018 (the “Optima Merger Agreement”), by and between Cambridge, Cambridge Trust Company and Optima. Under the terms of the Optima Merger Agreement, Optima merged with and into Cambridge Trust Company (the “Optima Merger”), with Cambridge Trust Company being the surviving entity. As a result of the Optima Merger, each share of Optima common stock was exchanged for either (i) 0.3468 shares of Cambridge common stock, (ii) $32.00 in cash, or (iii) a combination of the two, subject to customary pro ration procedures, which resulted in an aggregated stock / cash consideration mix of 95 percent / 5 percent.

The following unaudited pro forma combined consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and combine the historical consolidated financial position and results of operations of Cambridge and its subsidiaries and Optima as an acquisition by Cambridge of Optima using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. Under the acquisition method of accounting, the assets and liabilities of Optima were recorded by Cambridge at their respective fair values as of the date the Optima Merger was completed. Certain reclassifications were made to Optima’s historical financial information to conform to Cambridge’s presentation of financial information. All significant pro forma adjustments and underlying assumptions are described in the accompanying notes. The unaudited pro forma combined consolidated statements of income give effect to the Optima Merger as if it occurred on January 1, 2018. The unaudited pro forma combined consolidated balance sheet gives effect to the Optima Merger as if it occurred on September 30, 2019. The unaudited pro forma combined financial statements should be read in conjunction with: Cambridge’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, which were included in Cambridge’s Annual Report on Form 10-K for the year ended December 31, 2018, and Cambridge’s unaudited financial statements and the related notes thereto as of and for the six months ended June 30, 2019, which were included in Cambridge’s Quarterly Report on Form 10-Q for the six months ended June 30, 2019, which were filed with the SEC on March 18, 2019, and August 8, 2019, respectively and Optima’s audited financial statements as of and for the year ended December 31, 2018 and 2017 and Optima’s unaudited condensed financial statements as of and for the three months ended March 31, 2019, which were filed with the SEC on October 22, 2019 as Exhibits 99.1 and 99.2, respectively, to the Company’s Current Report on Form 8-K.

*                    *                     *

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

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS

	September 30, 2019
	Cambridge (as Reported)			Wellesley (as Reported)			Adjustments for Cambridge’s Acquisition of Wellesley			Cambridge (Pro Forma with Wellesley)			Adjustments for Capital Raise			Cambridge (Pro Forma with Wellesley and Capital Raise)
	(dollars in thousands, except par value)
Assets
Cash and cash equivalents	$	68,949		$	81,353		$	(15,128	)(1)	$	135,174		$	33,250	(12)	$	168,424
Investment securities
Available for sale, at fair value		148,068			33,793			288	(2)		182,149			—			182,149
Held to maturity, at amortized cost		269,475			100			—			269,575			—			269,575
Total investment securities		417,543			33,893			288			451,724			—			451,724
Loans held for sale, at lower of cost or fair value		2,082			6,351			—			8,433			—			8,433
Loans		2,179,882			832,803			(10,351	)(3)		3,002,334			—			3,002,334
Less: allowance for loan losses		(18,035	)		(7,218	)		7,218	(4)		(18,035	)		—			(18,035	)
Net loans		2,161,847			825,585			(3,133	)		2,984,299			—			2,984,299
Federal Home Loan Bank of Boston Stock, at cost		9,159			6,162			—			15,321			—			15,321
Bank owned life insurance		37,161			7,946			—			45,107			—			45,107
Banking premises and equipment, net		14,954			3,785			—			18,739			—			18,739
Right-of-use asset, operating leases		34,553			6,852			—			41,405			—			41,405
Deferred income taxes, net		7,939			2,717			(798	)(5)		9,858			—			9,858
Accrued interest receivable		6,959			2,769			—			9,728			—			9,728
Goodwill		31,206			—			44,883	(6)		76,089			—			76,089
Merger related intangibles		3,429			—			6,930	(7)		10,359			—			10,359
Other assets		46,087			8,454			—			54,541			—			54,541
Total assets	$	2,841,868		$	985,867		$	33,042		$	3,860,777		$	33,250		$	3,894,027
Liabilities
Deposits
Demand	$	654,133		$	133,187		$	—		$	787,320		$	—		$	787,320
Interest bearing checking		429,755			42,162			—			471,917			—			471,917
Money market		214,721			280,434			—			495,155			—			495,155
Savings		876,392			72,807			—			949,199			—			949,199
Certificates of deposit		232,858			230,155			671	(8)		463,684			—			463,684
Total deposits		2,407,859			758,745			671			3,167,275			—			3,167,275
Short-term borrowings		113,935			51,000			—			164,935			—			164,935
Long-term borrowings		—			77,533			285	(9)		77,818			—			77,818
Subordinated debt		—			9,854			—			9,854			—			9,854
Operating lease liabilities		35,990			6,907			—			42,897			—			42,897
Other liabilities		40,739			10,043			—			50,782			—			50,782
Total liabilities		2,598,523			914,082			956			3,513,561			—			3,513,561
Shareholders’ Equity
Common stock		4,850			26			1,452	(10)		6,328			452	(12)		6,779
Additional paid-in capital		98,256			27,500			74,893	(11)		200,649			32,798	(12)		233,448
Retained earnings		142,237			44,598			(44,598	)(11)		142,237			—			142,237
Accumulated other comprehensive loss		(1,998	)		592			(592	)(11)		(1,998	)		—			(1,998	)
Unearned compensation - ESOP		—			(931	)		931	(11)		—			—			—
Total shareholders’ equity		243,345			71,785			32,086			347,216			33,250			380,466
Total liabilities and shareholders’ equity	$	2,841,868		$	985,867		$	33,042		$	3,860,777		$	33,250		$	3,894,027

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

(1) Includes $4.8 million paid to the holders of Wellesley stock options and estimated after-tax merger expenses of $10.7 million

(2) Represents the estimated adjustment to increase investments to fair market value

(3) Represents the estimated adjustment to reduce loans to fair market value

(4) Reflects the elimination of Wellesley’s existing loan loss reserve at acquisition

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

(6) Represents the preliminary estimated amount of goodwill, based on issuance of 1,477,645 CATC shares outstanding at $77.50 per share (December 3, 2019, closing price)

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

(8) Represents the estimated amount to increase time deposits to fair market value

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

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

(11) Represents the amount to eliminate Wellesley equity accounts and record the estimated additional paid-in capital

(12) Represents the amount to record the issuance of 451,612 CATC shares at $77.50 per share (December 3, 2019, closing price), less estimated issuance costs of $1.8 million

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

	For the Nine Months Ended September 30, 2019
	Cambridge (as Reported)			Optima (through April 17, 2019)			Adjustments for Cambridge’s Acquisition of Optima			Cambridge (Pro Forma with Optima)			Wellesley (as Reported)		Adjustments for Cambridge’s Acquisition of Wellesley			Cambridge (Pro Forma with Wellesley)			Cambridge (Pro Forma with Wellesley and Capital Raise)
	(dollars in thousands, except share data)
Interest and dividend income
Interest on taxable loans	$	60,919		$	6,050		$	591	(1)	$	67,560		$	27,867	$	687	(8)	$	96,114		$	96,114
Interest on tax-exempt loans		385			30			—			415			73		—			488			488
Interest on taxable investment securities		6,074			155			—			6,229			1,076		(49	)(9)		7,256			7,256
Interest on tax-exempt investment securities		1,709			—			—			1,709			238		—			1,947			1,947
Dividends on FHLB of Boston stock		281			18			—			299			213		—			512			512
Interest on overnight investments		556			196			—			752			577		—			1,329			1,329
Total interest and dividend income		69,924			6,449			591			76,964			30,044		638			107,646			107,646
Interest expense
Interest on deposits		11,489			1,941			63	(2)		13,493			7,665		(535	)(10)		20,623			20,623
Interest on borrowed funds		1,347			195			—			1,542			2,328		(226	)(11)		3,644			3,644
Total interest expense		12,836			2,136			63			15,035			9,993		(761	)		24,267			24,267
Net interest and dividend income		57,088			4,313			528			61,929			20,051		1,399			83,379			83,379
Provision for Loan Losses		2,673			70			—			2,743			480		—			3,223			3,223
Net interest and dividend income after provision for loan losses		54,415			4,243			528			59,186			19,571		1,399			80,156			80,156
Noninterest income
Wealth management revenue		19,576			—			—			19,576			1,228		—			20,804			20,804
Deposit account fees		2,395			69			—			2,464			74		—			2,538			2,538
ATM/Debit card income		1,046			99			—			1,145			57		—			1,202			1,202
Bank owned life insurance income		454			36			—			490			177		—			667			667
Gain (loss) on disposition of investment securities		(79	)		—			—			(79	)		8		—			(71	)		(71	)
Gain on loans held for sale		491			47			—			538			161		—			699			699
Loan related derivative income		1,571			—			—			1,571			771		—			2,342			2,342
Other income		1,014			53			—			1,067			50		—			1,117			1,117
Total noninterest income		26,468			304			—			26,772			2,526		—			29,298			29,298
Noninterest expense
Salaries and employee benefits		34,353			2,238			—			36,591			9,214		—			45,805			45,805
Occupancy and equipment		7,813			678			18	(3)		8,509			2,466		—			10,975			10,975
Data processing		4,532			216			—			4,748			930		—			5,678			5,678
Professional services		2,411			414			—			2,825			637		—			3,462			3,462
Marketing		1,175			94			—			1,269			197		—			1,466			1,466
FDIC Insurance		369			4			—			373			336		—			709			709
Merger expenses		3,880			3,381			(7,261	)(4)		—			—		—			—			—
Other expenses		2,216			195			120	(5)		2,531			1,674		945	(12)		5,150			5,150
Total noninterest expense		56,749			7,220			(7,123	)		56,846			15,454		945			73,245			73,245
Income before income taxes		24,134			(2,673	)		7,651			29,112			6,643		454			36,209			36,209
Income tax expense (benefit)		5,988			(570	)		1,836	(6)		7,254			1,800		116	(13)		9,170			9,170
Net income	$	18,146			(2,103	)		5,815		$	21,858		$	4,843	$	338		$	27,039		$	27,039
Share data:
Weighted average number of shares outstanding, basic		4,525,178			2,192,588			—			4,948,444	(7)		2,454,103		—			6,426,088	(14)		6,877,701	(15)
Weighted average number of shares outstanding, diluted		4,552,092			2,325,417			—			4,975,358	(7)		2,545,786		—			6,453,002	(14)		6,904,615	(15)
Basic earnings per share	$	3.98		$	(0.96	)	$	—		$	4.42		$	1.97	$	—		$	4.21		$	3.93
Diluted earnings per share	$	3.95		$	(0.90	)	$	—		$	4.39		$	1.91	$	—		$	4.19		$	3.92

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

Notes for Merger with Optima:

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

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

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

(4) Represents the elimination of merger expenses in connection with the Optima merger

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

(6) Represents the Income tax effect of pro forma adjustments utilizing an effective tax rate of 24%

(7) Pro forma weighted average shares include 722,746 shares issued to former Optima shareholders

Notes for Merger with Wellesley:

(8) Represents accretion income as a result of the fair market value adjustment on loans of $10.4 million

(9) Represents amortization expense as a result of the fair market value adjustment on Investment Securities of $288,000

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

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

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

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

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

(15) Pro forma weighted average shares include 451,612 shares to be issued in connection with the capital raise

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

	For the Year Ended December 31, 2018
	(dollars in thousands, except share data)
	Cambridge (as Reported)		Optima (as Reported)		Adjustments for Cambridge’s Acquisition of Optima			Cambridge (Pro Forma with Optima)			Wellesley (as Reported)		Adjustments for Cambridge’s Acquisition of Wellesley			Cambridge (Pro Forma with Wellesley)			Cambridge (Pro Forma with Wellesley and Capital Raise)
	(dollars in thousands, except share data)
Interest and dividend income
Interest on taxable loans	$	57,941	$	19,604	$	2,038	(1)	$	79,583		$	30,927	$	874	(8)	$	111,384		$	111,384
Interest on tax-exempt loans		371		30		—			401			101		—			502			502
Interest on taxable investment securities		7,457		580		—			8,037			1,441		(65	)(9)		9,413			9,413
Interest on tax-exempt investment securities		2,404		15		—			2,419			327		—			2,746			2,746
Dividends on FHLB of Boston stock		287		56		—			343			333		—			676			676
Interest on overnight investments		595		263		—			858			509		—			1,367			1,367
Total interest and dividend income		69,055		20,548		2,038			91,641			33,638		809			126,088			126,088
Interest expense
Interest on deposits		5,023		5,949	$	253	(2)		11,225			6,442		(652	)(10)		17,015			17,015
Interest on borrowed funds		444		3		—			447			2,467		(243	)(11)		2,671			2,671
Total interest expense		5,467		5,952		253			11,672			8,909		(895	)		19,686			19,686
Net interest and dividend income		63,588		14,596		1,785			79,969			24,729		1,704			106,402			106,402
Provision for Loan Losses		1,502		246		—			1,748			585		—			2,333			2,333
Net interest and dividend income after provision for loan losses		62,086		14,350		1,785			78,221			24,144		1,704			104,069			104,069
Noninterest income
Wealth management revenue		25,191		—		—			25,191			1,616		—			26,807			26,807
Deposit account fees		3,071		245		—			3,316			87		—			3,403			3,403
ATM/Debit card income		1,180		344		—			1,524			89		—			1,613			1,613
Bank owned life insurance income		526		153		—			679			234		—			913			913
Gain (loss) on disposition of investment securities		2		22		—			24			—		—			24			24
Gain on loans held for sale		99		206		—			305			64		—			369			369
Loan related derivative income		1,651		—		—			1,651			340		—			1,991			1,991
Other income		1,269		335		—			1,604			156		—			1,760			1,760
Total noninterest income		32,989		1,305		—			34,294			2,586		—			36,880			36,880
Noninterest expense
Salaries and employee benefits		41,212		7,104		—			48,316			10,842		—			59,158			59,158
Occupancy and equipment		9,072		2,185		54	(3)		11,311			3,004		—			14,315			14,315
Data processing		5,177		552		—			5,729			990		—			6,719			6,719
Professional services		3,258		959		—			4,217			766		—			4,983			4,983
Marketing		2,229		305		—			2,534			323		—			2,857			2,857
FDIC Insurance		574		495		—			1,069			626		—			1,695			1,695
Merger expenses		201		—		(201	)(4)		—			—		—			—			—
Other expenses		2,264		477		360	(5)		3,101			2,012		1,260	(12)		6,373			6,373
Total noninterest expense		63,987		12,077		213			76,277			18,563		1,260			96,100			96,100
Income before income taxes		31,088		3,578		1,572			36,238			8,167		444			44,849			44,849
Income tax expense		7,207		1,002		377	(6)		8,586			2,176		113	(13)		10,875			10,875
Net income	$	23,881		2,576		1,195		$	27,652		$	5,991	$	331		$	33,974		$	33,974
Share data:
Weighted average number of shares outstanding, basic		4,061,529		2,069,880		—			4,784,275	(7)		2,404,371		—			6,261,920	(14)		6,713,532	(15)
Weighted average number of shares outstanding, diluted		4,098,633		2,331,569		—			4,821,379	(7)		2,502,784		—			6,299,024	(14)		6,750,636	(15)
Basic earnings per share	$	5.82	$	1.24	$	—		$	5.78		$	2.49	$	—		$	5.43		$	5.06
Diluted earnings per share	$	5.77	$	1.10	$	—		$	5.74		$	2.40	$	—		$	5.39		$	5.03

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

Notes for Merger with Optima:    

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

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

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

(4) Represents the elimination of merger expenses in connection with the Optima merger

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

(6) Represents the Income tax effect of pro forma adjustments utilizing an effective tax rate of 24%

(7) Pro forma weighted average shares include 722,746 shares issued to former Optima shareholders

Notes for Merger with Wellesley:    

(8) Represents accretion income as a result of the fair market value adjustment on loans of $10.4 million

(9) Represents amortization expense as a result of the fair market value adjustment on Investment Securities of $288,000

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

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

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

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

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

(15) Pro forma weighted average shares include 451,612 shares to be issued in connection with the capital raise

Preliminary Purchase Price Allocation

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

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

Purchase Price Calculation
Shares outstanding		2,570
ESOP plan termination		(22	)
Shares outstanding		2,548
Shares exchanged for stock		2,548
Stock value	$	44.95
Aggregate value of shares receiving stock	$	114,533
Aggregate value to option holders	$	4,466
Aggregate Purchase Price	$	118,999
Preliminary pro forma goodwill
Fair value of assets acquired:
Cash and cash equivalents	$	81,353
Investments available for sale		34,181
Loans held for sale		6,351
Loans, net		822,452
Other assets		37,887
Core deposit intangible		6,930
Total assets acquired	$	989,154
Fair value of liabilities assumed:
Deposits		759,416
Borrowings		138,672
Other liabilities		16,950
Total liabilities assumed	$	915,038
Net assets acquired		74,116
Preliminary pro forma goodwill	$	44,883

Note 1—Basis of Presentation

The unaudited pro forma combined consolidated financial information and notes have been prepared to illustrate the effects of the Merger involving Cambridge and Optima using the acquisition method of accounting, with Cambridge treated as the acquirer, as if the Merger had been consummated January 1, 2018. The unaudited pro forma combined consolidated financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of each period presented, nor does it necessarily indicate the results of operations in future periods of

the combined entity. Under the acquisition method of accounting, the assets and liabilities of Optima, as of the effective date of the Merger, were recorded by Cambridge at their respective fair values and the excess of the Merger consideration over the fair value of the net assets was allocated to goodwill and other intangible assets.

Forward-looking Statements

Certain statements herein may constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about Cambridge and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding Cambridge’s future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to Cambridge, 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: economic conditions being less favorable than expected, disruptions to the credit and financial markets, weakness in the real estate market, legislative, regulatory or accounting changes that adversely affect Cambridge’s business and/or competitive position, the Dodd-Frank Act’s consumer protection regulations, disruptions in Cambridge’s ability to access the capital markets, changes to accounting standards and other factors that are described in Cambridge’s filings with the U.S. Securities and Exchange Commission, including Cambridge’s Annual Report on Form 10-K for the year end December 31, 2018, which Cambridge filed on March 18, 2019. Cambridge 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.