CAMBRIDG E SAVINGS BANK Annual Report 2019

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President’s Letter

As a mutual bank, we take the long view, which allows us to make

considerable investments in our products, our technology, and our

infrastructure so that we can better serve our customers. Last year, we

did just that by bringing together our non-branch employees that were

spread out among our Harvard Square, Alewife, and Arlington Center

locations into one core operations center located along the Route 128

corridor in Waltham where employees can work more collaboratively

for the benefit of serving our customers. Our Belmont branch location

was renovated and designed in our universal banker model so that any

branch employee can serve the needs of any customer. We launched

a new online account opening platform for consumer checking and

deposit products, which reduced the application and account funding

time to just under five minutes. And to complement that innovation, we

also analyzed new customer journey touchpoints during the application

and through to the on-boarding of that account relationship, so that

we can clearly analyze opportunities for continual improvement in the

customer experience. We have always been focused on delivering the

best experiences for our customers, but in our business, the landscape

of customer expectations and digital capabilities change rapidly, and

we need to stay abreast of such changes. To drive our strategy going

forward and to strengthen our relationship-centric approach across the

organization, we hired our first Chief Customer Officer, Katie Catlender.

Our commitment is to continue to create value and build capabilities

that enhance our customers’ financial well-being.

Our commitment to our community remains strong. Together with

our charitable foundation, and in combination with our employees,

we contributed $1.2 MM and 4,500 volunteer hours to approximately

275 non-profit organizations in 2019. We also provided classes and

seminars to approximately 4,000 participants through our financial

education programs.

In addition, at the end of last year, we announced that we entered into a

definitive merger agreement in which we will acquire Melrose Bank. This

transaction will close in the second quarter of this year. We are thrilled to

expand our presence in Middlesex County with a bank that shares similar

core values and approach to serving customers and the community.

In closing, while I know this year will be difficult, I have faith in the human

spirit as I have witnessed the resolve and creativity of our customers,

community leaders, and especially our employees, who remain true to our

core values of compassion, caring for others, and a deep commitment to

excellence. Together, we will be there for each other and come out of this

experience stronger than ever.

Sincerely,

Wayne PatenaudePresident and CEO | Cambridge Savings Bank

As I write this letter, we are working relentlessly to support our customers,

our community and our employees as a result of the COVID-19 pandemic.

While this report is meant to be a reflection of 2019 performance, I want

to acknowledge this unprecedented time. In a matter of weeks, we have

responded to the pandemic thoughtfully by protecting our customers’ and

employees’ health, providing financial relief programs for our customers,

supporting federal programs such as the CARES Act, and responding to

community needs through enhanced charitable giving. There is no playbook

for a time like this, and our team’s singular focus has been on supporting

the financial well-being of the customers and communities we serve.

It almost feels uncomfortable to review our achievements in 2019 when

the world is coping with such challenge brought on by the COVID-19

pandemic, but I believe it is important now more than ever to share them

as a reflection of our strength and vitality. Looking back on this past year,

the CSB team has a lot to be proud of — we hit our targeted earnings, we

delivered new product and service capabilities, and we remained steadfast

in our commitments to our customers and the communities we serve.

The economic landscape was a very different one last year, interest rates

reversed direction quickly in 2019 and we were faced with an inverted yield

curve for a good part of the year that resulted in a larger decline in our net

interest margin than anticipated. Even so, we surpassed our asset growth

targets through exceptional results from Commercial Real Estate lending,

increased residential originations, growth in our Commercial & Industrial

portfolio, and outstanding performance of our newest business line, Asset

Based Lending. Our net income was $38.7 million, which was consistent with

the high level of earnings achieved in 2018, despite the challenging interest

rate environment last year. Our return on assets (ROA) was 0.96% compared

to a ROA of 1.05% in 2018, and our net interest margin, which measures the

difference between our interest income and interest expense, relative to our

interest-earning assets, was 3.22%, compared to 3.33% in 2018.

collaborative, creative, and empowered to deliver a superior

customer—centric experience. Our success is driven by the

unique contributions of each person. Each individual is

important, but together, we are even better. We are committed

to doing the right things for the right reasons, being a strong

community partner through our support of organizations

that make a difference, and treating people the way they

want to be treated. We are CSB. We are committed to

you.

Cambridge Savings Bank is

CSB CORE VALUES

DEDICATED TO COLLABORATIONWe value the contributions of all and blend the skills and perspectives of individual colleagues to get a result that is greater

than the sum of the individual parts. Our success is built on relationships and our ability to work together effectively.

DEEP COMMITMENT TO EXCELLENCEWe believe that excellence is more than what we provide, it’s how we think and act. It’s more than just fixing a problem, it is having

a focus on providing a superior experience each and every time.

PASSIONATE ABOUT CREATIVITYFor us creativity is a willingness to try new approaches with vigor, energy and enthusiasm. It’s having the courage to ask

questions which push the boundaries. This value affirms our commitment to seek new approaches to service.

GROUNDED IN INTEGRITYWe are each personally accountable for the highest standards of behavior, including honesty and fairness in all aspects of our work.

We do what is right, not what is easiest or most popular. Trust, respect and integrity is at the foundation of all of our relationships.

LIMITLESS COMPASSION AND CARING FOR OTHERSWe have a predisposition to help others and the desire to identify with their experience through empathy, and consideration for their needs and values.

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Consolidated Balance Sheets | Years Ended December 31, 2019 and 2018 (In Thousands)

CAMBRIDGE FINANCIAL GROUP, INC. AND SUBSIDIARYConsolidated Statements of Net Income | Years Ended December 31, 2019 and 2018 (In Thousands)

CAMBRIDGE FINANCIAL GROUP, INC. AND SUBSIDIARY

2019 2018

Assets

Cash and due from banks $61,133 $25,196

Short-term investments 48,290 51,785

Total cash and cash equivalents 109,423 76,981

Marketable equity securities, at fair value 10,144 -

Investment securities available-for-sale, at fair value 496,688 512,775

Investment securities held-to-maturity, at amortized cost 91,930 86,948

Loans held for sale, net 3,740 1,711

Loans:

Commercial real estate loans 2,105,029 1,879,336

Residential mortgage loans 790,976 743,474

Commercial and industrial loans 402,332 324,988

Other loans 91,452 90,307

Total loans 3,389,789 3,038,105

Less - allowance for loan losses (34,102) (32,788)

Net loans 3,355,687 3,005,317

Premises and equipment, net 55,695 41,899

Deferred tax asset, net 15,548 15,827

Bank-owned life insurance 68,139 66,779

Other assets 90,295 74,904

Total assets $4,297,289 $3,883,141

Liabilities and Equity Capital

Liabilities:

Deposits $3,150,863 $2,980,204

Advances from Federal Home Loan Bank of Boston 597,125 414,891

Other borrowings and capital lease obligations 49,867 65,022

Accrued expenses and other liabilities 71,596 42,950

Total liabilities 3,869,451 3,503,067

Equity Capital:

Undistributed earnings 419,649 381,468

Accumulated other comprehensive income (loss) 8,189 (1,394)

Total equity capital 427,838 380,074

Total liabilities and equity capital $4,297,289 $3,883,141

2019 2018

Interest income:

Commercial real estate loans $91,548 $82,182

Residential mortgage loans 28,368 25,566

Commercial and industrial loans 19,626 16,201

Other loans 4,605 4,006

Investment securities and short-term investments 20,942 19,183

Total interest and dividend income 165,089 147,138

Interest expense:

Deposits 29,185 20,128

Advances from Federal Home Loan Bank of Boston 12,037 9,000

Other borrowings and capital lease obligations 624 329

Total interest expense 41,846 29,457

Net interest and dividend income 123,243 117,681

Provision for loan losses 1,625 2,775

Net interest and dividend income after provision for loan losses 121,618 114,906

Noninterest income:

Deposit account fees 5,798 5,452

Rental income 3,845 3,904

Gain on marketable equity securities, net 3,106 -

Gain on sales and calls of securities available-for-sale, net 95 1,588

Mortgage banking gains 1,889 1,101

Gain (loss) on limited partnership tax credit investments 929 (3,716)

Other 2,413 2,585

Total noninterest income 18,075 10,914

Noninterest expense:

Salaries and employee benefits 50,854 46,677

Office occupancy and equipment 17,799 14,052

FDIC deposit insurance 685 1,520

Other operating expenses 21,286 18,380

Total noninterest expense 90,624 80,629

Income before income taxes 49,069 45,191

Income tax expense 10,344 6,266

Net income $38,725 $38,925

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CFG TRUSTEES & CORPORATORS CSB DIRECTORS

Robert P. Reardon* Retired | Former Director of Assessment City of Cambridge

Michael J. Costello Retired | Former Partner PricewaterhouseCoopers LLP

Anne Adams Cushman Principal | Owner Advise & Consult

Jayne K. Donahue Retired | Former Executive Vice President and General Auditor State Street Corporation

Thomas W. Falwell, Esq. Partner | Attorney Comins & Newbury LLP

Kevin J. Fitzgerald Retired | Former Chairman and CEO Cambridge Financial Group and Cambridge Savings Bank

Neal Hesler Founder Hesler & Associates

Howard B. Hodgson, Jr. Vice Chairman of Investment Committees Cabot Properties, Inc.

Kurt V. Johnson Senior Vice President Corporate & Business Development GreatHorn, Inc.

C. Brendan Noonan III, Esq. President C. Brendan Noonan & Company, Inc.

Emily Ou Managing Director Retail Leasing Cushman & Wakefield

Charles D. Keefe, Jr. Owner Keefe Funeral Home

Ara Krafian Chairman and CEO Symmes Maini & McKee Associates

Charles R. Laverty, III General Counsel Laverty Lohnes Properties

Charles H. Lyons President Lyons Consulting, LLC

Edward L. Marsteiner, II Partner and Director of Acquisitions National Development

Alan McClennen, Jr. Planning and Development Consultant

Faith D. McDonald Retired | Former Deputy Director City of Cambridge

Daniel Mee President Dillion Capital Advisors, LLC

Robert Metafora Chairman and CEO CFE International

Amey D. Moot Management Consultant Precision Thinking

Julia McClennen Murphy Project Manager Vanasse Hangen Brustlin, Inc.

Robert W. Murray President and CEO Murray Hills, Inc.

Katherine Rafferty Director of Community Affairs Mt. Auburn Hospital

Wayne F. Patenaude President and CEO Cambridge Financial Group and Cambridge Savings Bank

Mary Ann Pesce Retired | Former President Global Personal Care Procter & Gamble

Robert J. Ramsey Principal and Owner W.T. Phelan & Co.

Harborne W. Stuart, Jr. Adjunct Professor School of Engineering and Applied Sciences Columbia University

Robert M. Wilson Retired | Former President and CEO Cambridge Financial Group and Cambridge Savings Bank

CFG TRUSTEES & CORPORATORS

Stephen J. Coukos, Esq. Executive Vice President and General Counsel Cambridge Financial Group and Cambridge Savings Bank

John P. DiGiovanni President Trinity Property Management

CFG CORPORATORS

Anthony Ackil Founder & CEO Streetlight Ventures

Mary Rose Bolton Retired | Former Senior Advisor to the Director Harvard University Art Museum

Frederick Ryan Retired | Former Chief of Police Arlington Police Department

Travis J. Snell President Concord Property Management

Joia Spooner-Fleming R&D Associate Director Procter & Gamble

Roberta G. Sydney President Sydney Associates, Inc.

Douglas Thayer President | Owner Thayer & Associates, Inc.

Monique D. Thompson Business Analyst | Interface Manager MA Department of Public Health

Pamela J. Toulopoulos Co-Owner JVT Realty

Laura Vail Wooster Business Advisor and Social Entrepreneur

Joanna Vanden Director of Operations | Administration Social Finance, Inc.

Ada H. Wong President Lexington Enterprises, Inc.

EXECUTIVE TEAM

Wayne F. Patenaude President and Chief Executive Officer

Ian M. Brandon Senior Vice President Head of Commercial Real Estate

Katie Catlender Executive Vice President Chief Customer Officer

Timothy Bowe Managing Director Evergreen Technology Consulting

J. Daniel Bowen Senior Vice President Nordblom Company

Gerald D. Cohen President SF Properties, Inc.

Allison R. Coleman Chief Executive Officer Capital Link, Inc.

Peter Daly Executive Director Homeowner’s Rehab, Inc.

Bruce J. Embry, Esq. Founder and Partner Gregg, Hunt, Ahern & Embry

Catherine Faddis President and CIO Grace Capital

Gary J. Gianino CFO Sawyer Realty Holdings, LLC

Frederick V. Gilgun, Jr., Esq. Principal | Attorney Nicholson, Sreter & Gilgun, P.C.

Allison Goodwin Director of Finance Torrington Properties, Inc.

John T. Gosselin, Esq. Managing Partner Gosselin & Kyrinkidis, P.C.

David S. Hall Development Partner The Hanover Company

Michelle D. Holmes Associate Professor of Medicine Brigham and Women’s Hospital

David P. Cedrone Senior Vice President Head of Consumer and Small Business Banking

Stephen J. Coukos, Esq. Executive Vice President and General Counsel

Michael Gilles Executive Vice President Chief Operating Officer

Linda Grace Executive Vice President Chief Human Resources Officer

Stephen Leonard Senior Vice President Head of Corporate Banking

Michael Lindgren Executive Vice President Chief Lending Officer

Dana Philbrook Senior Vice President Chief Financial Officer

Lisa Rodericks Senior Vice President Chief Marketing Officer

Carol Sexton Senior Vice President Head of Retail Banking

Michael St JeanSenior Vice President Chief Credit Officer

Mark Tracy Senior Vice President Chief Technology and Operations Officer

DIRECTORS, TRUSTEES, CORPORATORS, & EXECUTIVES

*Chairman of Cambridge Financial Group (CFG) Board of Trustees and Cambridge Savings Bank (CSB) Board of Directors

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Arlington Center 626 Massachusetts Avenue Arlington, MA 02476 617.441.4204

Arlington Heights 1300 Massachusetts Avenue Arlington, MA 02476 617.441.4205

East Arlington 188 Massachusetts Avenue Arlington, MA 02474 617.441.4203

Bedford 181 Great Road Bedford, MA 01730 617.441.4206

Belmont Center 40 Leonard Street Belmont, MA 02478 617.441.4327

Burlington–3rd Ave 140 Middlesex Turnpike Burlington, MA 01803 617.441.7045

Burlington–Cambridge Street 214 Cambridge Street Burlington, MA 01803 617.441.4207

Cambridge—Central Square 630 Massachusetts Avenue Cambridge, MA 02139 617.441.4298

Cambridge—Harvard Square 1374 Massachusetts Avenue Cambridge, MA 02138 617.441.4154

Cambridge—Inman Square 1378 Cambridge Street Cambridge, MA 02139 617.441.4287

Cambridge—Porter Square 53 White Street Cambridge, MA 02140 617.441.4270

Charlestown 1 Thompson Square Charlestown, MA 02129 617.398.5700

Concord 202 Sudbury Road Concord, MA 01742 617.441.7115

Lexington Center 1781 Massachusetts Avenue Lexington, MA 02420 781.861.1980

Newton Centre 739 Beacon Street Newton, MA 02459 617.441.7065

Watertown 54 Arsenal Street Watertown, MA 02472 617.441.7088

BRANCH LOCATIONS

Cambridge Financial Group is the mutual holding company for:

CSB Operations Center | 81 Wyman Street, Waltham, MA

1374 Massachusetts Avenue | Cambridge, MA 02138

888.418.5626 | cambridgesavings.com