Edgar Filing: CENTURY BANCORP INC

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012.

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

Commission file number: 0-15752

CENTURY BANCORP, INC.

(Exact name of registrant as specified in its charter)


COMMONWEALTH OF MASSACHUSETTS		04-2498617
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


400 MYSTIC AVENUE, MEDFORD, MA		02155
(Address of principal executive offices)		(Zip Code)

(781) 391-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one):

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

As of July 31, 2012, the Registrant had outstanding:


Class A Common Stock, $1.00 par value			3,556,554 Shares
Class B Common Stock, $1.00 par value			1,991,880 Shares

Page 1 of 40

Century Bancorp, Inc.


	Index	Page Number
Part I	Financial Information
	Forward Looking Statements		3
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets: June 30, 2012 and December 31, 2011		4
	Consolidated Statements of Income: Three months and six months ended June 30, 2012 and 2011		5
	Consolidated Statements of Comprehensive Income: Three and six months ended June 30, 2012 and 2011		6
	Consolidated Statements of Changes in Stockholders’ Equity: Six months ended June 30, 2012 and 2011		7
	Consolidated Statements of Cash Flows: Six months ended June 30, 2012 and 2011		8
	Notes to Consolidated Financial Statements		9-27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27-38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		38
Item 4.	Controls and Procedures		38
Part II.	Other Information
Item 1.	Legal Proceedings		38
Item 1A.	Risk Factors		39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 3.	Defaults Upon Senior Securities
Item 5.	Other Information		39
Item 6.	Exhibits		39
Signatures			40
Exhibits	Ex-31.1
	Ex-31.2
	Ex-32.1
	Ex-32.2
	Ex-101 Instance Document
	Ex-101 Schema Document
	Ex-101 Calculation Linkbase Document
	Ex-101 Labels Linkbase Document
	Ex-101 Presentation Linkbase Document
	Ex-101 Definition Linkbase Document

Page 2 of 40

Forward Looking Statements

Except for the historical information contained herein, this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Investors are cautioned that forward-looking statements are inherently uncertain. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, (i) the fact that the Company’s success is dependent to a significant extent upon general economic conditions in New England, (ii) the fact that the Company’s earnings depend to a great extent upon the level of net interest income (the difference between interest income earned on loans and investments and the interest expense paid on deposits and other borrowings) generated by the Bank and thus the Bank’s results of operations may be adversely affected by increases or decreases in interest rates, (iii) the fact that the banking business is highly competitive and the profitability of the Company depends upon the Bank’s ability to attract loans and deposits within its market area, where the Bank competes with a variety of traditional banking and other institutions such as credit unions and finance companies, and (iv) the fact that a significant portion of the Company’s loan portfolio is comprised of commercial loans, exposing the Company to the risks inherent in loans based upon analyses of credit risk, the value of underlying collateral, including real estate, and other more intangible factors, which are considered in making commercial loans. Accordingly, the Company’s profitability may be negatively impacted by errors in risk analyses, and by loan defaults, and the ability of certain borrowers to repay such loans may be adversely affected by any downturn in general economic conditions. These factors, as well as general economic and market conditions, may materially and adversely affect the market price of shares of the Company’s common stock. Because of these and other factors, past financial performance should not be considered an indicator of future performance. The forward-looking statements contained herein represent the Company’s judgment as of the date of this Form 10-Q, and the Company cautions readers not to place undue reliance on such statements.

Page 3 of 40

PART I — Item 1

Century Bancorp, Inc.

Consolidated Balance Sheets (unaudited)

(In thousands, except share data)


	June 30, 2012			December 31, 2011
Assets
Cash and due from banks	$	58,530		$	50,187
Federal funds sold and interest-bearing deposits in other banks		270,128			157,579

Total cash and cash equivalents		328,658			207,766

Short-term investments		22,136			18,351
Securities available-for-sale, amortized cost $1,219,888 and $1,244,972, respectively		1,237,024			1,258,676
Securities held-to-maturity, fair value $292,260 and $184,822, respectively		286,662			179,368
Federal Home Loan Bank of Boston stock, at cost		15,146			15,531
Loans, net:
Commercial and industrial		78,971			82,404
Construction and land development		36,422			56,819
Commercial real estate		535,232			487,495
Residential real estate		259,006			239,307
Home equity		112,602			110,786
Consumer and other		6,597			7,681

Total loans, net		1,028,830			984,492
Less: allowance for loan losses		17,979			16,574

Net loans		1,010,851			967,918

Bank premises and equipment		22,887			21,757
Accrued interest receivable		5,872			6,022
Goodwill		2,714			2,714
Core deposit intangible		—			120
Other assets		68,324			65,002

Total assets	$	3,000,274		$	2,743,225

Liabilities
Deposits:
Demand deposits	$	403,999		$	365,854
Savings and NOW deposits		810,018			708,988
Money market accounts		705,963			616,241
Time deposits		419,414			433,501

Total deposits		2,339,394			2,124,584

Securities sold under agreements to repurchase		173,190			143,320
Other borrowed funds		208,553			244,143
Subordinated debentures		36,083			36,083
Due to broker		37,195			—
Other liabilities		35,151			34,446

Total liabilities		2,829,566			2,582,576

Stockholders’ Equity
Preferred stock — $1.00 par value; 100,000 shares authorized; no shares issued and outstanding		—			—
Class A common stock, $1.00 par value per share; authorized 10,000,000 shares; issued 3,556,529 shares and 3,548,317 shares, respectively		3,556			3,548
Class B common stock, $1.00 par value per share; authorized 5,000,000 shares; issued 1,991,880 and 1,994,380 shares, respectively		1,992			1,994
Additional paid-in capital		11,711			11,587
Retained earnings		153,526			146,039

		170,785			163,168
Unrealized gains on securities available-for-sale, net of taxes		10,437			8,319
Pension liability, net of taxes		(10,514	)		(10,838	)

Total accumulated other comprehensive loss, net of taxes		(77	)		(2,519	)

Total stockholders’ equity		170,708			160,649

Total liabilities and stockholders' equity	$	3,000,274		$	2,743,225

See accompanying notes to unaudited consolidated interim financial statements.

Page 4 of 40

Century Bancorp, Inc.

Consolidated Statements of Income (unaudited)

(In thousands, except share data)


	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Interest income
Loans	$	12,572	$	12,012	$	24,620	$	24,117
Securities held-to-maturity		1,924		1,518		3,387		3,291
Securities available-for-sale		5,668		5,709		11,383		11,062
Federal funds sold and interest-bearing deposits in other banks		148		358		287		705

Total interest income		20,312		19,597		39,677		39,175

Interest expense
Savings and NOW deposits		560		719		1,087		1,431
Money market accounts		618		777		1,230		1,482
Time deposits		1,600		2,494		3,281		4,773
Securities sold under agreements to repurchase		88		98		180		208
Other borrowed funds and subordinated debentures		2,057		1,994		4,108		3,839

Total interest expense		4,923		6,082		9,886		11,733

Net interest income		15,389		13,515		29,791		27,442
Provision for loan losses		900		1,200		2,000		2,400

Net interest income after provision for loan losses		14,489		12,315		27,791		25,042
Other operating income
Service charges on deposit accounts		1,922		1,936		3,910		3,823
Lockbox fees		781		734		1,480		1,471
Net gain on sales of investments		442		198		590		362
Other income		843		973		1,627		1,720

Total other operating income		3,988		3,841		7,607		7,376

Operating expenses
Salaries and employee benefits		8,191		7,250		16,332		14,591
Occupancy		1,176		975		2,298		2,226
Equipment		544		534		1,127		1,092
FDIC assessments		445		464		852		1,199
Other		3,095		2,552		5,642		4,877

Total operating expenses		13,451		11,775		26,251		23,985

Income before income taxes		5,026		4,381		9,147		8,433
Provision for income taxes		255		184		568		511

Net income	$	4,771	$	4,197	$	8,579	$	7,922

Share data:
Weighted average number of shares outstanding, basic
Class A		3,556,474		3,543,717		3,553,734		3,540,773
Class B		1,991,880		1,996,880		1,992,818		1,999,818
Weighted average number of shares outstanding, diluted
Class A		5,548,830		5,541,595		5,547,237		5,541,743
Class B		1,991,880		1,996,880		1,992,818		1,999,818
Basic earnings per share:
Class A	$	1.05	$	0.92	$	1.89	$	1.74
Class B	$	0.52	$	0.46	$	0.94	$	0.87
Diluted earnings per share
Class A	$	0.86	$	0.76	$	1.55	$	1.43
Class B	$	0.52	$	0.46	$	0.94	$	0.87

See accompanying notes to unaudited consolidated interim financial statements.

Page 5 of 40

Century Bancorp, Inc.

Consolidated Statements of Comprehensive Income (unaudited)

(In thousands)


	Three months ended June 30,
	2012					2011
Net income				$	4,771				$	4,197
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during period		824					4,175
Less: reclassification adjustment for gains included in net income		(442	)		382		(198	)		3,977

Defined benefit pension plans:
Amortization of prior service cost and loss included in net periodic benefit cost					162					95

Other comprehensive income					544					4,072

Comprehensive income				$	5,315				$	8,269


	Six months ended June 30,
	2012					2011
Net income				$	8,579				$	7,922
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during period		2,708					3,652
Less: reclassification adjustment for gains included in net income		(590	)		2,118		(362	)		3,290

Defined benefit pension plans:
Amortization of prior service cost and loss included in net periodic benefit cost					324					190

Other comprehensive income					2,442					3,480

Comprehensive income				$	11,021				$	11,402

See accompanying notes to unaudited consolidated interim financial statements.

Page 6 of 40

Century Bancorp, Inc.

Consolidated Statements of Changes in Stockholders' Equity (unaudited)

For the Six Months Ended June 30, 2012 and 2011


	Class A Common Stock		Class B Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
	(In thousands)
Balance at December 31, 2010	$	3,529	$	2,011		$	11,537	$	131,526		$	(3,578	)	$	145,025
Net income		—		—			—		7,922			—			7,922
Unrealized holding losses arising during period, net of $2,098 in taxes and $362 in realized net gains		—		—			—		—			3,290			3,290
Pension liability adjustment, net of $126 in taxes		—		—			—		—			190			190
Conversion of class B common stock to class A common stock, 14,500 shares		14		(14	)		—		—			—			—
Stock options exercised, 350 shares		1		—			5		—			—			6
Cash dividends paid, Class A common stock, $.24 per share		—		—			—		(850	)		—			(850	)
Cash dividends paid, Class B common stock, $.12 per share		—		—			—		(241	)		—			(241	)

Balance at June 30, 2011	$	3,544	$	1,997		$	11,542	$	138,357		$	(98	)	$	155,342

Balance at December 31, 2011	$	3,548	$	1,994		$	11,587	$	146,039		$	(2,519	)	$	160,649
Net income		—		—			—		8,579			—			8,579
Unrealized holding gains arising during period, net of $1,314 in taxes and $590 in realized net gains		—		—			—		—			2,118			2,118
Pension liability adjustment, net of $216 in taxes		—		—			—		—			324			324
Conversion of class B common stock to class A common stock, 2,500 shares		2		(2	)		—		—			—			—
Stock options exercised, 5,712 shares		6		—			124		—			—			130
Cash dividends paid, Class A common stock, $.24 per share		—		—			—		(852	)		—			(852	)
Cash dividends paid, Class B common stock, $.12 per share		—		—			—		(240	)		—			(240	)

Balance at June 30, 2012	$	3,556	$	1,992		$	11,711	$	153,526		$	(77	)	$	170,708

See accompanying notes to unaudited consolidated interim financial statements.

Page 7 of 40

Century Bancorp, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)


	Six months ended June 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,579		$	7,922
Adjustments to reconcile net income to net cash provided by operating activities:
Mortgage loans originated for sale		(2,448	)		—
Proceeds from mortgage loans sold		5,968			—
Gain on sales of mortgage loans held for sale		(131	)		—
Net gain on sales of investments		(590	)		(362	)
Gain on sale of loans		—			(95	)
Provision for loan losses		2,000			2,400
Deferred income taxes		(783	)		(875	)
Net depreciation and amortization		3,158			2,626
Decrease (increase) in accrued interest receivable		150			(453	)
Gain on sale of other real estate owned		(4	)		—
Increase in other assets		(5,311	)		(8,572	)
Increase in other liabilities		1,271			235

Net cash provided by operating activities		11,859			2,826


CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of short-term investments		17,315			41,192
Purchase of short-term investments		(21,100	)		(21,365	)
Proceeds from maturities of securities available-for-sale		318,626			250,729
Proceeds from sales of securities available-for-sale		233,002			20,516
Purchase of securities available-for-sale		(490,103	)		(434,375	)
Proceeds from maturities of securities held-to-maturity		54,211			33,546
Purchase of securities held-to-maturity		(161,722	)		—
Proceeds from sales of loans		—			7,318
Net increase in loans		(48,302	)		(64,601	)
Proceeds from sales of other real estate owned		1,187			—
Capital expenditures		(2,209	)		(1,510	)

Net cash used in investing activities		(99,095	)		(168,550	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in time deposits		(14,087	)		90,070
Net increase in demand, savings, money market and NOW deposits		228,897			64,113
Net proceeds from exercise of stock options		130			6
Cash dividends		(1,092	)		(1,091	)
Net increase in securities sold under agreements to repurchase		29,870			380
Net decrease in other borrowed funds		(35,590	)		(8,975	)

Net cash provided by financing activities		208,128			144,503

Net increase (decrease) in cash and cash equivalents		120,892			(21,221	)
Cash and cash equivalents at beginning of period		207,766			188,552

Cash and cash equivalents at end of period	$	328,658		$	167,331


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	10,022		$	11,704
Income taxes		1,353			1,785
Change in unrealized gains on securities available-for-sale, net of taxes		2,118			3,290
Pension liability adjustment, net of taxes		324			190
Due to broker		37,195			—

See accompanying notes to unaudited consolidated interim financial statements.

Page 8 of 40

Century Bancorp, Inc.

Notes to Unaudited Consolidated Interim Financial Statements

Six Months Ended June 30, 2012 and 2011

Note 1. Basis of Financial Statement Presentation

The consolidated financial statements include the accounts of Century Bancorp, Inc. (the “Company”) and its wholly-owned subsidiary, Century Bank and Trust Company (the “Bank”). The consolidated financial statements also include the accounts of the Bank’s wholly-owned subsidiaries: Century Subsidiary Investments, Inc. (“CSII”); Century Subsidiary Investments, Inc. II (“CSII II”); Century Subsidiary Investments, Inc. III (CSII III”); and Century Financial Services Inc. (“CFSI”). CSII, CSII II, CSII III are engaged in buying, selling and holding investment securities. CFSI has the power to engage in financial agency, securities brokerage, and investment and financial advisory services and related securities credit. The Company also owns 100% of Century Bancorp Capital Trust II (“CBCT II”). The entity is an unconsolidated subsidiary of the Company.

All significant intercompany accounts and transactions have been eliminated in consolidation. The Company provides a full range of banking services to individual, business and municipal customers in Massachusetts. As a bank holding company, the Company is subject to the regulation and supervision of the Federal Reserve Board. The Bank, a state chartered financial institution, is subject to supervision and regulation by applicable state and federal banking agencies, including the Federal Reserve Board, the Federal Deposit Insurance Corporation (the “FDIC”) and the Commonwealth of Massachusetts Commissioner of Banks. The Bank is also subject to various requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. All aspects of the Company’s business are highly competitive. The Company faces aggressive competition from other lending institutions and from numerous other providers of financial services. The Company has one reportable operating segment.

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and general practices within the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. The Company’s quarterly report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as filed with the Securities and Exchange Commission.

Material estimates that are susceptible to change in the near-term relate to the allowance for loan losses. Management believes that the allowance for loan losses is adequate based on independent appraisals and review of other factors, including historical charge-off rates with additional allocations based on risk factors for each category and general economic factors. While management uses available information to recognize loan losses, future additions to the allowance for loan losses may be necessary based on changes in economic conditions. In addition, regulatory agencies periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examination. Certain reclassifications are made to prior-year amounts whenever necessary to conform with the current-year presentation.

Page 9 of 40

Revision of EPS Presentation

The Company determined in the quarter ended June 30, 2012 that although the Class A and Class B common stock have different dividend rates, the Company had not applied the two-class method when calculating earnings per share (“EPS”) separately for the Class A and Class B common stock. This resulted in immaterial revisions to previously reported basic EPS for Class A and Class B common stock and diluted EPS for the Class B common stock as summarized below:

For the quarter ended June 30, 2011:


	As previously reported		As revised
Basic EPS – Class A common	$	0.76	$	0.92
Basic EPS – Class B common	$	0.76	$	0.46
Diluted EPS – Class A common	$	0.76	$	0.76
Diluted EPS – Class B common	$	0.76	$	0.46

For the six months ended June 30, 2011:


	As previously reported		As revised
Basic EPS – Class A common	$	1.43	$	1.74
Basic EPS – Class B common	$	1.43	$	0.87
Diluted EPS – Class A common	$	1.43	$	1.43
Diluted EPS – Class B common	$	1.43	$	0.87

Note 2. Recent Market Developments

The financial services industry continues to face unprecedented challenges in the aftermath of the recent national and global economic crisis. Since June 2009, the US economy has been recovering from the most severe recession and financial crisis since the Great Depression. There have been some improvements in private sector employment, industrial production and US exports; nevertheless, the pace of economic recovery has been extremely slow. The housing markets continue to be depressed. Financial markets have improved since the depths of the crisis, but are still unsettled and volatile. Investors have pulled back from risky assets. Lower equity prices and wider spreads on corporate bonds and other debt instruments and greater pressures on financial institutions have resulted. At the same time, heightened demand for safe assets has put downward pressure on yields. There is continued concern about the US economic outlook and the potential effects of the continued crisis in the European financial markets.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act became law. The Act was intended to address many issues arising in the recent financial crisis and is exceedingly broad in scope affecting many aspects of bank and financial market regulation. The Act requires, or permits by implementing regulation, enhanced prudential standards for banks and bank holding companies inclusive of capital, leverage, liquidity, concentration and exposure measures. In addition, traditional bank regulatory principles such as restrictions on transactions with affiliates and insiders were enhanced. The Act also contains reforms of consumer mortgage lending practices and creates a Bureau of Consumer Financial Protection which is granted broad authority over consumer financial practices of banks and others. It is expected as the specific new or incremental requirements applicable to the Company become effective that the costs and difficulties of remaining compliant with all such

Page 10 of 40

requirements will increase. The Act broadens the base for FDIC assessments to average consolidated assets less tangible equity of financial institutions and also permanently raises the current standard maximum FDIC deposit insurance amount to $250,000. The Act extends unlimited deposit insurance on non-interest bearing transaction accounts through December 31, 2012.

On September 29, 2009, the FDIC adopted a Notice of Proposed Rulemaking (NPR) that would require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The FDIC Board voted to adopt a uniform three-basis point increase in assessment rates effective on January 1, 2011, and extend the restoration period from seven to eight years. This rule was finalized on November 2, 2009. As a result, the Company is carrying a prepaid asset of $3.6 million as of June 30, 2012. The Company’s quarterly risk-based deposit insurance assessments will be paid from this amount until the amount is exhausted or until December 30, 2014, when any amount remaining would be returned to the Company.

On September 30, 2011, the Massachusetts Department of Revenue issued a Draft Directive prohibiting a corporation from pledging more than 50 percent of security corporation stock it owns to secure a borrowing, effective for tax years beginning on or after October, 2012. Century Bank currently utilizes the stock of two of its security corporations to secure Federal Home Loan Bank of Boston (“FHLBB”) advances. Should this draft directive have become effective, Century Bank would have had fewer assets available to secure FHLBB advances, or would have had a higher tax rate if it chose to utilize security corporations to a lesser extent. On April 6, 2012, the Massachusetts Department of Revenue issued an updated Draft Directive allowing a corporation to pledge up to 100% of security corporation stock it owns to secure a borrowing. This revised Draft Directive would allow Century Bank to continue to utilize existing assets to secure FHLBB advances without pledging limitations. On May 24, 2012, the Massachusetts Department of Revenue issued Directive 12-2. The directive states that the pledge by a shareholder of shares of stock of a corporation as security or collateral for a loan to the shareholder, in and of itself, will not preclude classification of the corporation as a security corporation or result in revocation of a corporation’s existing security corporation classification.

Note 3. Stock Option Accounting

Stock option activity under the Company’s stock option plan for the six months ended June 30, 2012 is as follows:


	Amount			Weighted Average Exercise Price
Shares under option:
Outstanding at beginning of year		36,062		$	28.90
Exercised		(5,712	)		22.68
Forfeited		(450	)		22.50

Outstanding at end of period		29,900		$	30.19

Exercisable at end of period		29,900		$	30.19

Available to be granted at end of period		223,534

On June 30, 2012, the outstanding options to purchase 29,900 shares of Class A common stock have exercise prices between $26.68 and $31.83, with a weighted average exercise price of $30.19 and a weighted average remaining contractual life of 1.7 years. The intrinsic value of options exercisable at June 30, 2012 had an aggregate value of $13,300. The intrinsic value of options exercised at June 30, 2012 had an aggregate value of $30,828.

Page 11 of 40

The Company uses the fair value method to account for stock options. All of the Company’s stock options are vested and there were no options granted during the first six months of 2012.

Note 4. Securities Available-for-Sale


	June 30, 2012								December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
U.S. Treasury	$	1,999	$	7	$	—	$	2,006	$	1,999	$	13	$	—	$	2,012
U.S. Government Sponsored Enterprises		44,269		49		31		44,287		174,657		311		11		174,957
Small Business Administration		8,320		95		—		8,415		8,714		87		—		8,801
U.S. Government Agency and Sponsored Enterprises Mortgage Backed Securities		1,076,906		18,282		454		1,094,734		1,020,752		16,262		1,176		1,035,838
Privately Issued Residential Mortgage Backed Securities		3,269		7		154		3,122		3,509		—		311		3,198
Obligations Issued by States and Political Subdivisions		71,405		65		959		70,511		21,515		84		957		20,642
Other Debt Securities		13,221		164		45		13,340		13 ,293		—		683		12,610
Equity Securities		499		110		—		609		533		85		—		618

Total	$	1,219,888	$	18,779	$	1,643	$	1,237,024	$	1,244,972	$	16,842	$	3,138	$	1,258,676

Included in U.S. Government Sponsored Enterprise Securities and U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities are securities at fair value pledged to secure public deposits and repurchase agreements amounting to $518,480,000 and $488,690,000 at June 30, 2012 and December 31, 2011, respectively. Also included in securities available-for-sale are securities pledged for borrowing at the Federal Home Loan Bank of Boston amounting to $261,401,000 and $246,036,000 at June 30, 2012 and December 31, 2011, respectively. The Company realized gross gains of $590,000 from the proceeds of $233,002,000 from the sales of available-for-sale securities for the six months ended June 30, 2012. The Company realized gross gains of $362,000 from the proceeds of $20,516,000 from the sales of available-for-sale securities for the six months ended June 30, 2011.

Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac.

The following table shows the maturity distribution of the Company’s securities available-for-sale at June 30, 2012.


	Amortized Cost		Fair Value
	(In thousands)
Within one year	$	107,680	$	108,256
After one but within five years		930,190		945,124
After five but within ten years		169,462		171,792
More than 10 years		10,557		9,789
Non-maturing		1,999		2,063

Total	$	1,219,888	$	1,237,024

The weighted average remaining life of investment securities available-for-sale at June 30, 2012 was 3.5 years. Included in the weighted average remaining life calculation at June 30, 2012 was $34,269,000 of U.S. Government Sponsored Enterprises obligations that are callable at the discretion of the issuer. These call dates were not utilized in computing the weighted average remaining life. The contractual maturities, which were used in the table above, of mortgage-backed securities will differ from the actual maturities, due to the ability of the issuers to prepay underlying obligations.

Page 12 of 40

As of June 30, 2012 and December 31, 2011, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not likely that it will be required to sell these debt securities before the anticipated recovery of its remaining amortized cost. In making its other-than-temporary impairment evaluation, the Company considered the fact that the principal and interest on these securities are from issuers that are investment grade. The change in the unrealized losses on the state and municipal securities and the nonagency mortgage-backed securities was primarily caused by changes in credit spreads and liquidity issues in the marketplace.

The unrealized loss on U.S. Government Sponsored Enterprises and U.S. Government Sponsored Enterprises Mortgage Backed Securities related primarily to interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.

In evaluating the underlying credit quality of a security, management considers several factors such as the credit rating of the obligor and the issuer, if applicable. Internal reviews of issuer financial statements are performed as deemed necessary. In the case of privately issued mortgage-backed securities, the performance of the underlying loans is analyzed as deemed necessary to determine the estimated future cash flows of the securities. Factors considered include the level of subordination, current and estimated future default rates, current and estimated prepayment rates, estimated loss severity rates, geographic concentrations and origination dates of underlying loans. In the case of marketable equity securities, the severity of the unrealized loss, the length of time the unrealized loss has existed, and the issuer’s financial performance are considered.

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at June 30, 2012. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 23 and 5 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 461 holdings at June 30, 2012.

June 30, 2012

Less than 12 months

12 months or longer

Total

Temporarily Impaired Investments

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

(In thousands)

U.S. Government Sponsored Enterprises

10,013

—

10,013

U.S. Government Agency and Sponsored Enterprises Mortgage Backed Securities

126,302

453

126,302

453

Privately Issued Residential Mortgage Backed Securities

1,957

154

1,957

154

Obligations Issued by States and Political Subdivisions

3,725

959

3,725

959

Other Debt Securities

—

1,455

Total temporarily impaired securities

136,315

485

7,137

1,158

143,452

1,643

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at December 31, 2011. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 60 and 6 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 393 holdings at December 31, 2011.

Page 13 of 40


	December 31, 2011
	Less than 12 months				12 months or longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
U.S. Government Sponsored Enterprises	$	14,989	$	11	$	—	$	—	$	14,989	$	11
U.S. Government Agency and Sponsored Enterprises Mortgage Backed Securities		331,469		1,176		—		—		331,469		1,176
Privately Issued Residential Mortgage Backed Securities		—		—		3,198		311		3,198		311
Obligations Issued by States and Political Subdivisions		—		—		3,725		957		3,725		957
Other Debt Securities		10,542		652		1,468		31		12,010		683
Equity Securities		—		—		—		—		—		—

Total temporarily impaired securities	$	357,000	$	1,839	$	8,391	$	1,299	$	365,391	$	3,138

Note 5. Investment Securities Held-to-Maturity


	June 30, 2012								December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
U.S. Government Sponsored Enterprises	$	7,745	$	38	$	—	$	7,783	$	26,979	$	36	$	2	$	27,013
U.S. Government Agency and Sponsored Enterprises Mortgage Backed Securities		278,917		5,697		137		284,477		152,389		5,435		15		157,809

Total	$	286,662	$	5,735	$	137	$	292,260	$	179,368	$	5,471	$	17	$	184,822

Included in U.S. Government and Agency Securities are securities pledged to secure public deposits and repurchase agreements at fair value amounting to $154,999,000 and $8,885,000 at June 30, 2012 and December 31, 2011, respectively. Also included are securities pledged for borrowing at the Federal Home Loan Bank of Boston at fair value amounting to $118,431,000 and $49,345,000 at June 30, 2012 and December 31, 2011, respectively.

At June 30, 2012 and December 31, 2011, all mortgage-backed securities are obligations of U.S. Government Agencies and Government Sponsored Enterprises. Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac.

The following table shows the maturity distribution of the Company’s securities held-to-maturity at June 30, 2012.


	Amortized Cost		Fair Value
	(In thousands)
Within one year	$	21,486	$	21,676
After one but within five years		211,518		215,957
After five but within ten years		53,378		54,338
More than ten years		280		289

Total	$	286,662	$	292,260

The weighted average remaining life of investment securities held-to-maturity at June 30, 2012 was 3.6 years. Included in the weighted average remaining life calculation at June 30, 2012 were $7,745,000 of U.S. Government Sponsored Enterprises obligations that are callable at the discretion of the issuer. The actual maturities, which were used in the table above, of mortgage-backed securities, will differ from the contractual maturities, due to the ability of the issuers to prepay underlying obligations.

Page 14 of 40

As of June 30, 2012 and December 31, 2011, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not likely that it will be required to sell these debt securities before the anticipated recovery of their remaining amortized costs. In making its other-than-temporary impairment evaluation, the Company considered the fact that the principal and interest on these securities are from issuers that are investment grade.

The unrealized loss on U.S. Government Agency and Sponsored Enterprises Mortgage-Backed Securities related primarily to interest rates and not credit quality, and because the Company does not intend to sell any of these securities and it is not likely that it will be required to sell these securities before the anticipated recovery of the remaining amortized cost, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2012 and December 31, 2011.

The following table shows the temporarily impaired securities of the Company’s held-to-maturity portfolio at June 30, 2012. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 3 and 1 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 105 holdings at June 30, 2012.


	June 30, 2012
	Less Than 12 Months				12 Months or Longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government Sponsored Enterprises	$	—	$	—	$	—	$	—	$	—	$	—
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		20,197		118		5,369		19		25,566		137

Total temporarily impaired securities	$	20,197	$	118	$	5,369	$	19	$	25,566	$	137

The following table shows the temporarily impaired securities of the Company’s held-to-maturity portfolio at December 31, 2011. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 2 and 0 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 92 holdings at December 31, 2011.


	December 31, 2011
	Less Than 12 Months				12 Months or Longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
U.S. Government Sponsored Enterprises	$	4,994	$	2	$	—	$	—	$	4,994	$	2
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		5,367		15		—		—		5,367		15

Total temporarily impaired securities	$	10,361	$	17	$	—	$	—	$	10,361	$	17

Page 15 of 40

Note 6. Allowance for Loan Losses

The Company maintains an allowance for loan losses in an amount determined by management on the basis of the character of the loans, loan performance, the financial condition of borrowers, the value of collateral securing loans and other relevant factors.

The following table summarizes the changes in the Company’s allowance for loan losses for the periods indicated.


	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
	(in thousands)
Allowance for loan losses, beginning of period	$	17,434		$	14,958		$	16,574		$	14,053
Loans charged off		(635	)		(380	)		(1,059	)		(969	)
Recoveries on loans previously charged-off		280			137			464			431

Net charge-offs		(355	)		(243	)		(595	)		(538	)
Provision charged to expense		900			1,200			2,000			2,400

Allowance for loan losses, end of period	$	17,979		$	15,915		$	17,979		$	15,915

Further information pertaining to the allowance for loan losses for the three months ending June 30, 2012 follows:


	Construction and land development			Commercial and industrial			Commercial real estate		Residential real estate			Consumer and other			Home Equity			Unallocated			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance at March 31, 2012	$	2,920		$	3,220		$	7,341	$	1,784		$	317		$	741		$	1,111		$	17,434
Charge-offs		—			(289	)		—		(59	)		(287	)		—			—			(635	)
Recoveries		—			164			2		3			111			—			—			280
Provision		(31	)		371			411		65			152			(60	)		(8	)		900

Balance at June 30, 2012	$	2,889		$	3,466		$	7,754	$	1,793		$	293		$	681		$	1,103		$	17,979

Further information pertaining to the allowance for loan losses for six months ending June 30, 2012 follows:


	Construction and Land Development			Commercial and Industrial			Commercial Real Estate		Residential Real Estate			Consumer			Home Equity			Unallocated		Total
	(Dollars in thousands)
Allowance for loan losses:
Balance at December 31, 2011	$	2,893		$	3,139		$	6,566	$	1,886		$	356		$	704		$	1,030	$	16,574
Charge-offs		—			(399	)		—		(219	)		(441	)		—			—		(1,059	)
Recoveries		—			206			3		9			246			—			—		464
Provision		(4	)		520			1,185		117			132			(23	)		73		2,000

Ending balance at June 30, 2012	$	2,889		$	3,466		$	7,754	$	1,793		$	293		$	681		$	1,103	$	17,979

Amount of allowance for loan losses for loans deemed to be impaired	$	1,000		$	871		$	450	$	92		$	—		$	—		$	—		2,413
Amount of allowance for loan losses for loans not deemed to be impaired	$	1,889		$	2,595		$	7,304	$	1,701		$	293		$	681		$	1,103	$	15,566
Loans:
Ending balance	$	36,422		$	78,971		$	535,232	$	259,006		$	6,597		$	112,602		$	—	$	1,028,830
Loans deemed to be impaired	$	1,500		$	2,328		$	2,321	$	513		$	—		$	—		$	—	$	6,662
Loans not deemed to be impaired	$	34,922		$	76,643		$	532,911	$	258,493		$	6,597		$	112,602		$	—	$	1,022,168

Page 16 of 40

Further information pertaining to the allowance for loan losses for three months ending June 30, 2011 follows:


	Construction and Land Development		Commercial and Industrial			Commercial Real Estate		Residential Real Estate			Consumer			Home Equity			Unallocated		Total
	(Dollars in thousands)
Allowance for loan losses:
Balance at March 31, 2011	$	1,978	$	3,632		$	6,021	$	1,801		$	286		$	707		$	533	$	14,958
Charge-offs		—		(228	)		—		(1	)		(150	)		(1	)		—		(380	)
Recoveries		—		30			—		—			107			—			—		137
Provision		594		141			300		(55	)		48			69			103		1,200

Balance at June 30, 2011	$	2,572	$	3,575		$	6,321	$	1,745		$	291		$	775		$	636	$	15,915

Further information pertaining to the allowance for loan losses for six months ending June 30, 2011 follows:


	Construction and Land Development		Commercial and Industrial			Commercial Real Estate		Residential Real Estate			Consumer			Home Equity			Unallocated			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance at December 31, 2010	$	1,752	$	3,163		$	5,671	$	1,718		$	298		$	725		$	726		$	14,053
Charge-offs		—		(385	)		—		(281	)		(302	)		(1	)		—			(969	)
Recoveries		—		175			—		14			242			—			—			431
Provision		820		621			650		294			54			51			(90	)		2,400

Balance at June 30, 2011	$	2,572	$	3,574		$	6,321	$	1,745		$	292		$	775		$	636		$	15,915

Amount of allowance for loan losses for loans deemed to be impaired	$	303	$	770		$	394	$	3		$	—		$	—		$	—			1,470
Amount of allowance for loan losses for loans not deemed to be impaired	$	2,269	$	2,804		$	5,927	$	1,742		$	292		$	775		$	636		$	14,445
Loans:
Ending balance	$	55,572	$	88,619		$	470,041	$	232,235		$	6,560		$	110,001		$	—		$	963,028
Loans deemed to be impaired	$	4,000	$	1,861		$	7,867	$	33		$	—		$	—		$	—		$	13,761
Loans not deemed to be impaired	$	51,572	$	86,758		$	462,174	$	232,202		$	6,560		$	110,001		$	—		$	949,267

Page 17 of 40

The Company utilizes a six grade internal loan rating system for commercial real estate, construction and commercial loans as follows:

Loans rated 1-3 (Pass):

Loans in this category are considered “pass” rated loans with low to average risk.

Loans rated 4 (Monitor):

These loans represent classified loans that management is closely monitoring for credit quality. These loans have had or may have minor credit quality deterioration as of June 30, 2012 and December 31, 2011.

Loans rated 5 (Substandard):

Substandard loans represent classified loans that management is closely monitoring for credit quality. These loans have had more significant credit quality deterioration as of June 30, 2012 and December 31, 2011.

Loans rated 6 (Doubtful):

Doubtful loans represent classified loans that management is closely monitoring for credit quality. These loans had more significant credit quality deterioration as of June 30, 2012 and December 31, 2011 and are doubtful for full collection.

Impaired:

Impaired loans represent classified loans that management is closely monitoring for credit quality. A loan is classified as impaired when it is probable that the Company will be unable to collect all amounts due.

The following table presents the Company’s loans by risk rating at June 30, 2012.

Construction
and land
development

Commercial
and
industrial

Commercial
real
estate

(Dollars in thousands)

Grade:

1-3 (Pass)

27,484

76,046

528,630

4 (Monitor)

7,438

597

4,281

5 (Substandard)

—

6 (Doubtful)

—

Impaired

1,500

2,328

2,321

Total

36,422

78,971

535,232

The following table presents the Company’s loans by risk rating at December 31, 2011.


	Construction and land development		Commercial and industrial		Commercial real estate
	(Dollars in thousands)
Grade:
1-3(Pass)	$	48,298	$	80,140	$	478,186
4 (Monitor)		7,021		739		4,748
5 (Substandard)		—		—		—
6 (Doubtful)		—		—		—
Impaired		1,500		1,525		4,561

Total	$	56,819	$	82,404	$	487,495

The Company utilized payment performance as credit quality indicators for residential real estate, consumer and overdrafts, and the home equity portfolio. The indicators are depicted in the table “aging of past due loans,” below.

Page 18 of 40

Further information pertaining to the allowance for loan losses at June 30, 2012 follows:

Accruing
30-89
Days
Past Due

Non
Accrual

Accrual
Greater
Than
90 Days

Total
Past Due

Current
Loans

Total

(Dollars in thousands)

Construction and land development

—

1,500

—

1,500

34,922

36,422

Commercial and industrial

594

1,706

2,357

76,614

78,971

Commercial real estate

2,427

704

—

3,131

532,101

535,232

Residential real estate

2,203

1,287

—

3,490

255,516

259,006

Consumer and overdrafts

—

6,576

6,597

Home equity

179

—

278

112,324

112,602

Total

5,407

5,313

10,777

1,018,053

1,028,830

Further information pertaining to the allowance for loan losses at December 31, 2011 follows:


	Accruing 30-89 Days Past Due		Non Accrual		Accrual Greater Than 90 Days		Total Past Due		Current Loans		Total
	(Dollars in thousands)
Construction and land development	$	—	$	1,500	$	—	$	1,500	$	55,319	$	56,819
Commercial and industrial		1,417		763		18		2,198		80,206		82,404
Commercial real estate		2,528		736		—		3,264		484,231		487,495
Residential real estate		2,635		2,324		—		4,959		234,348		239,307
Consumer and overdrafts		519		9		—		528		7,153		7,681
Home equity		171		495		—		666		110,120		110,786

Total	$	7,270	$	5,827	$	18	$	13,115	$	971,377	$	984,492

A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is impaired, The Company measures impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, the Company measures impairment based on a loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. The Company’s policy for recognizing interest income on impaired loans is contained within Note 1 of the consolidated financial statements.

Page 19 of 40

The following is information pertaining to impaired loans for June 30, 2012:


	Carrying Value		Unpaid Principal Balance		Required Reserve		Average Carrying Value for 3 Months Ending 6/30/12		Average Carrying Value for 6 Months Ending 6/30/12		Interest Income Recognized For 3 Months Ending 6/30/12		Interest Income Recognized For 6 months Ending 6/30/12
	(Dollars in thousands)
With no required reserve recorded:
Construction and land development	$	—	$	—	$	—	$	—	$	643	$	—	$	—
Commercial and industrial		409		454		—		282		334		—		—
Commercial real estate		176		201		—		178		180		—		—
Residential real estate		31		32		—		32		97		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	616	$	687	$	—	$	492	$	1,254	$	—	$	—

With required reserve recorded:
Construction and land development	$	1,500	$	3,292	$	1,000	$	1,500	$	857	$	—	$	—
Commercial and industrial		1,919		2,147		871		1,556		1,408		12		27
Commercial real estate		2,145		2,183		450		3,056		3,410		58		78
Residential real estate		482		482		92		482		657		—		1
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	6,046	$	8,104	$	2,413	$	6,594	$	6,332	$	70	$	106

Total
Construction and land development	$	1,500	$	3,292	$	1,000	$	1,500	$	1,500	$	—	$	—
Commercial and industrial		2,328		2,601		871		1,838		1,742		12		27
Commercial real estate		2,321		2,384		450		3,234		3,590		58		78
Residential real estate		513		514		92		514		754		—		1
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	6,662	$	8,791	$	2,413	$	7,086	$	7,586	$	70	$	106

The following is information pertaining to impaired loans for June 30, 2011:


	Carrying Value		Unpaid Principal Balance		Required Reserve		Average Carrying Value For 3 Months Ending 6/30/11		Average Carrying Value For 6 Months Ending 6/30/11		Interest Income Recognized for 3 Months Ending 6/30/11		Interest Income Recognized for 6 Months Ending 6/30/11
	(Dollars in thousands)
With no required reserve recorded:
Construction and land development	$	1,800	$	3,292	$	—	$	3,450	$	3,686	$	—	$	—
Commercial and industrial		324		725		—		337		407		—		—
Commercial real estate		190		203		—		191		427		—		—
Residential real estate		—		—		—		—		—		—		—
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	2,314	$	4,220	$	—	$	3,978	$	4,520	$	—	$	—

Page 20 of 40


With required reserve recorded:
Construction and land development		2,239	$	5,251	$	303	$	560	$	320	$	—	$	—
Commercial and industrial		1,537		1,551		770		1,189		956		3		6
Commercial real estate		7,677		7,809		394		6,305		4,695		21		33
Residential real estate		33		33		3		34		19		1		1
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	11,486	$	14,644	$	1,470	$	8,088	$	5,990	$	25	$	40

Total
Construction and land development	$	4,039	$	8,543	$	303	$	4,010	$	4,006	$	—	$	—
Commercial and industrial		1,861		2,276		770		1,526		1,362		3		6
Commercial real estate		7,867		8,012		394		6,496		5,123		21		33
Residential real estate		33		33		3		34		19		1		1
Consumer		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—

Total	$	13,800	$	18,864	$	1,470	$	12,066	$	10,510	$	25	$	40

There were no troubled debt restructurings occurring during the six month period ended June 30, 2012.

Troubled Debt Restructurings occurring during the three month period ended June 30, 2011:


	Number of Contracts		Pre-modification outstanding recorded investment		Post- modification outstanding recorded investment
			(Dollars in thousands)
Construction and land development		1	$	39	$	39
Commercial and industrial		4		394		370
Commercial real estate		3		2,201		2,200

Total		8	$	2,634	$	2,609

Troubled Debt Restructurings occurring during the six month period ended June 30, 2011:


	Number of Contracts		Pre-modification outstanding recorded investment		Post- modification outstanding recorded investment
			(Dollars in thousands)
Construction and land development		1	$	39	$	39
Commercial and industrial		6		443		414
Commercial real estate		4		2,641		2,636

Total		11	$	3,123	$	3,089

Troubled Debt Restructurings were identified as a modification where a concession was granted to a customer who is having financial difficulties. This concession may be below market rate, longer amortization/term, and a lower payment amount. The present value calculation of the modification did not result in an increase in the allowance for these loans beyond any previously

Page 21 of 40

established allocations. The loans were modified, for both the commercial and industrial and commercial real estate loans, by reducing interest rates as well as extending terms on the loans. The financial impact of the modifications for performing commercial and industrial loans were $6,770 reduction in principal and $461 reduction in interest payments for the quarter ended June 30, 2011 and $7,010 reduction in principal and $525 reduction in interest payments for the six months ended June 30, 2011. The financial impact of the modifications for performing commercial real estate were $8,399 reduction in principal and $11,267 reduction in interest payments for the quarter ended June 30, 2011 and $8,816 reduction in principal and $13,156 reduction in interest payments for the six months ended June 30, 2011.

Note 7. Employee Benefits

The Company provides pension benefits to its employees under a noncontributory, defined benefit plan which is funded on a current basis in compliance with the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) and recognizes costs over the estimated employee service period.

The Company also has a Supplemental Executive Insurance/Retirement Plan (the “Supplemental Plan”) which is limited to certain officers and employees of the Company. The Supplemental Plan is accrued on a current basis and recognizes costs over the estimated employee service period.

Executive officers of the Company and its subsidiaries who have at least one year of service may participate in the Supplemental Plan. The Supplemental Plan is voluntary and participants are required to contribute to its cost. Life insurance policies, which are owned by the Company, are purchased covering the lives of each participant.

Components of Net Periodic Benefit Cost for the Three Months Ended June 30,


	Pension Benefits						Supplemental Insurance/ Retirement Plan
	2012			2011			2012		2011
	(In thousands)
Service cost	$	274		$	211		$	355	$	170
Interest		323			355			231		233
Expected return on plan assets		(410	)		(399	)		—		—
Recognized prior service cost (benefit)		(26	)		(26	)		29		28
Recognized net actuarial losses		184			123			84		32

Net periodic benefit cost	$	345		$	264		$	699	$	463

Components of Net Periodic Benefit Cost for the Six Months Ended June 30,


	Pension Benefits						Supplemental Insurance/ Retirement Plan
	2012			2011			2012		2011
	(In thousands)
Service cost	$	548		$	422		$	711	$	340
Interest		647			710			462		466
Expected return on plan assets		(820	)		(798	)		—		—
Recognized prior service cost (benefit)		(52	)		(52	)		58		56
Recognized net actuarial losses		368			247			168		65

Net periodic benefit cost	$	691		$	529		$	1,399	$	927

Page 22 of 40

Contributions

The Company previously disclosed in its financial statements for the year ended December 31, 2011 that it expected to contribute $1,800,000 to the Pension Plan in 2012. As of June 30, 2012, $900,000 of the contribution had been made. The Company expects to contribute an additional $900,000 by the end of the year.

Note 8. Fair Value Measurements

The Company follows FASB ASC 820-10, Fair Value Measurements and Disclosures, (formerly SFAS 157, “Fair Value Measurements,”) which among other things, requires enhanced disclosures about assets and liabilities carried at fair value. ASC 820-10 establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring financial instruments at fair value. The three broad levels of the hierarchy are as follows:

Level I – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The type of financial instruments included in Level I are highly liquid cash instruments with quoted prices such as G-7 government, agency securities, listed equities and money market securities, as well as listed derivative instruments.

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

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

The results of the fair value hierarchy as of June 30, 2012, are as follows:

Financial Instruments Measured at Fair Value on a Recurring Basis:

Securities AFS Fair Value Measurements Using

Carrying
Value

Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Other
Unobservable
Inputs
(Level 3)

(In thousands)

U.S. Treasury

2,006

—

2,006

—

U.S. Government Sponsored Enterprises

44,287

—

44,287

—

SBA Backed Securities

8,415

—

8,415

—

U.S. Government Agency and Sponsored Mortgage Backed Securities

1,094,734

—

1,094,734

—

Privately Issued Residential Mortgage Backed Securities

3,122

—

3,122

—

Obligations Issued by States and Political Subdivisions

70,511

—

2,117

68,394

Other Debt Securities

13,340

—

13,340

—

Equity Securities

609

226

—

383

Total

1,237,024

226

1,168,021

68,777

Page 23 of 40

Financial Instruments Measured at Fair Value on a Non-recurring Basis:

Impaired Loans

4,630

—

4,630

Impaired loan balances represent those collateral dependent loans where management has estimated the credit loss by comparing the loan’s carrying value against the expected realizable fair value of the collateral. Specific provisions relate to impaired loans recognized for the three and six-month periods ended June 30, 2012 amounted to $367,000 and $1.8 million, respectively. The Company uses appraisals, discounted as appropriate, based on management’s observations of the local real estate market for loans in this category.

There were no transfers between level 1 and 2 for the six months ended June 30, 2012. There were no liabilities measured at fair value on a recurring or nonrecurring basis during the six month period ended June 30, 2012.

The following table presents additional information about assets measured at fair value on a recurring and nonrecurring basis for which the Company has utilized Level 3 inputs to determine fair value (dollars in thousands).


Asset	Fair Value		Valuation Technique	Unobservable Input	Unobservable Input Value or Range
Securities AFS	$	68,777	Discounted cash flow	Discount rate	0% -1% (3)
Impaired Loans		4,630	Appraisal of collateral (1)	Appraisal adjustments (2)	0% - 25% discount

(1)	Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.

(2)	Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated expenses.

(3)	Weighted averages

The changes in Level 3 securities for the six-month period ended June 30, 2012 are shown in the table below:

Auction
Rate
Securities

Obligations
Issued by States
& Political
Subdivisions

Equity
Securities

Total

(In thousands)

Balance at December 31, 2011

3,725

14,772

417

18,914

Purchases

—

64,970

—

64,970

Maturities and calls

—

(15,058

)

(34

)

(15,092

)

Amortization

—

(15

)

—

(15

)

Changes in fair value

—

Balance at June 30, 2012

3,725

64,669

383

68,777

The amortized cost of Level 3 securities was $69,733,000 at June 30, 2012 with an unrealized loss of $956,000. The securities in this category are generally equity investments, municipal securities with no readily determinable fair value or failed auction rate securities. Management evaluated the fair value of these securities based on an evaluation of the underlying issuer, prevailing rates and market liquidity.

Page 24 of 40

The changes in Level 3 securities for the six-month period ended June 30, 2011, are shown in the table below:


	Auction Rate Securities		Obligations Issued by States & Political Subdivisions			Equity Securities		Total
	(In thousands)
Balance at December 31, 2010	$	4,393	$	15,988		$	279	$	20,660
Purchases		—		10,321			—		10,321
Maturities and calls		—		(11,288	)		—		(11,288	)
Amortization		—		—			—		—
Changes in fair value		—		(2	)		—		—

Balance at June 30, 2011	$	4,393	$	15,019		$	279	$	19,691

The amortized cost of Level 3 securities was $19,978,000 at June 30, 2011 with an unrealized loss of $287,000. The securities in this category are generally equity investments, municipal securities with no readily determinable fair value or failed auction rate securities. Management evaluated the fair value of these securities based on an evaluation of the underlying issuer, prevailing rates and market liquidity.

Note 9. Fair values of Financial Instruments

The following methods and assumptions were used by the Company in estimating fair values of its financial instruments. Excluded from this disclosure are all nonfinancial instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The assumptions used below are expected to approximate those that market participants would use in valuing these financial instruments.

Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of timing, amount of expected future cash flows and the credit standing of the issuer. Such estimates do not consider the tax impact of the realization of unrealized gains or losses. In some cases, the fair value estimates cannot be substantiated by comparison to independent markets. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial instrument. Care should be exercised in deriving conclusions about our business, its value or financial position based on the fair value information of financial instruments presented below.

Securities held-to-maturity: The fair values of these securities were based on quoted market prices, where available, as provided by third-party investment portfolio pricing vendors. If quoted market prices were not available, fair values provided by the vendors were based on quoted market prices of comparable instruments in active markets and/or based on a matrix pricing methodology which employs The Bond Market Association’s standard calculations for cash flow and price/yield analysis, live benchmark bond pricing and terms/condition data available from major pricing sources. Management regards the inputs and methods used by third party pricing vendors to be “Level 2 inputs and methods” as defined in the “fair value hierarchy” provided by FASB.

Loans: For variable-rate loans, that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair value of other loans is estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Incremental credit risk for nonperforming loans has been considered.

Time deposits: The fair value of time deposits was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments. The fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

Page 25 of 40

Other borrowed funds: The fair value of other borrowed funds is based on the discounted value of contractual cash flows. The discount rate used is estimated based on the rates currently offered for other borrowed funds of similar remaining maturities.

Subordinated debentures: The fair value of subordinated debentures is based on the discounted value of contractual cash flows. The discount rate used is estimated based on the rates currently offered for other subordinated debentures of similar remaining maturities.

The following presents (in thousands) the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, 2012 and December 31, 2011. This table excludes financial instruments for which the carrying amount approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, short-term investments, FHLBB stock and accrued interest receivable. Financial liabilities for which the fair value approximates carrying value include non-maturity deposits, short- term borrowings and accrued interest payable.


					Fair Value Measurements
	Carrying Amount		Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
June 30, 2012
Financial assets:
Securities held-to-maturity	$	286,662	$	292,260	$	—	$	292,260	$	—
Loans (1)		1,010,851		1,061,540		—		—		1,061,540
Financial liabilities:
Time deposits		419,414		426,036		—		426,036		—
Other borrowed funds		208,553		220,292		—		220,292		—
Subordinated debentures		36,083		43,787		—		—		43,787

December 31, 2011
Financial assets:
Securities held-to-maturity		179,368		184,822		—		184,822		—
Loans (1)		967,918		1,018,822		—		—		1,018,822
Financial liabilities:
Time deposits		433,501		439,711		—		439,711		—
Other borrowed funds		244,143		258,165		—		258,165		—
Subordinated debentures		36,083		43,063		—		—		43,063

(1)	Comprised of loans (including collateral dependent impaired loans), net of deferred loan costs and the allowance for loan losses.

Note 10. Recent Accounting Developments

In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860), Reconsideration of Effective Control for Repurchase Agreements. This update revises the criteria for assessing effective control for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The determination of whether the transfer of a financial asset subject to a repurchase agreement is a sale is based, in part, on whether the entity maintains effective control over the financial asset. This update removes from the assessment of effective control: the criterion requiring the transferor to have the ability to repurchase or redeem the financial asset on substantially the agreed terms, even in the event of default by the transferee, and the related requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets. The amendments in this update will be effective for interim and annual reporting periods beginning on or after December 15, 2011. The amendments will be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date and early adoption is permitted. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

Page 26 of 40

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The guidance clarifies and expands the disclosures pertaining to unobservable inputs used in Level 3 fair value measurements, including the disclosure of quantitative information related to (1) the valuation processes used, (2) the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, and (3) use of a nonfinancial asset in a way that differs from the asset’s highest and best use. The guidance also requires, for public entities, disclosure of the level within the fair value hierarchy for assets and liabilities not measured at fair value in the statement of financial position but for which the fair value is disclosed. The amendments in this Update are to be applied prospectively. The amendments are effective during interim and annual periods beginning after December 15, 2011. Early application was permitted. The Company has presented the requirements for this amendment in footnotes 8 and 9.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income. This ASU amends the disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (OCI) as part of the consolidated statement of changes in stockholders’ equity. Under the amended guidance, all changes in OCI are to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The changes are effective for fiscal years, and interim periods within those years, ending after December 15, 2011, with retrospective application required. Early application is permitted. There was no impact on the Company’s consolidated financial results as the amendments relate only to changes in financial statement presentation. In December 2011, the FASB elected to defer the effective date of those changes in ASU 2011-05 that relate only to the presentation of reclassification adjustments in the statement of income by issuing ASU 2011-12, Comprehensive Income (Topic 220), Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. The Company has presented a separate financial statement as a result of this pronouncement.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment. This ASU is intended to reduce the complexity and cost of performing an evaluation of impairment of goodwill. Under the new guidance, an entity will have the option of first assessing qualitative factors (events and circumstances) to determine whether it is more likely than not (meaning a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If, after considering all relevant events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test will be unnecessary. The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company implemented the provisions of ASU 2011-08 as of January 1, 2012. The adoption of this pronouncement did not have a material effect on the consolidated financial statements.

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

Executive Overview

Century Bancorp, Inc. (together with its bank subsidiary, unless the context otherwise requires, the “Company”) is a Massachusetts state chartered bank holding company headquartered in Medford, Massachusetts. The Company is a Massachusetts corporation formed in 1972 and has one banking subsidiary (the “Bank”): Century Bank and Trust Company formed in 1969. The Company had total assets of

Page 27 of 40

approximately $3.0 billion as of June 30, 2012. The Company presently operates 25 banking offices in 18 cities and towns in Massachusetts ranging from Braintree in the south to Beverly in the north. The Bank’s customers consist primarily of small and medium-sized businesses and retail customers in these communities and surrounding areas, as well as local governments and institutions throughout Massachusetts.

During July 2010, the Company entered into a lease agreement to open a branch located at Newton Centre in Newton, Massachusetts. The branch opened on June 20, 2011.

During September 2010, the Company entered into a lease agreement to open a branch located in Andover, Massachusetts. The branch opened on July 16, 2012.

During June 2012, the Company entered into a lease agreement to open a branch located in Wellesley, Massachusetts. The branch is scheduled to open during the fourth quarter of 2012.

During July 2012, the Company received state regulatory approval to close a branch at Chestnut Hill in Newton, Massachusetts. The branch is scheduled to close during the third quarter of 2012 and the accounts will be temporarily moved to the Brookline, Massachusetts branch. During July 2012, the Company entered into a lease agreement and received regulatory approval to open a branch at a new location at Chestnut Hill in Newton, Massachusetts. The branch is scheduled to open during the fourth quarter of 2013 and the accounts that were temporarily moved to the Brookline, Massachusetts branch will be moved to the new branch at Chestnut Hill in Newton, Massachusetts.

The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income and fees from loans, deposits, as well as operating expenses, the provision for loan losses, the impact of federal and state income taxes and the relative levels of interest rates and economic activity.

The Company offers a wide range of services to commercial enterprises, state and local governments and agencies, non-profit organizations and individuals. It emphasizes service to small and medium-sized businesses and retail customers in its market area. The Company makes commercial loans, real estate and construction loans and consumer loans, and accepts savings, time, and demand deposits. In addition, the Company offers to its corporate and institutional customers automated lock box collection services, cash management services and account reconciliation services, and actively promotes the marketing of these services to the municipal market. Also, the Company provides full service securities brokerage services through a program called Investment Services at Century Bank, which is supported by LPL Financial, a full-service securities brokerage business.

The Company is also a provider of financial services, including cash management, transaction processing and short term financing to municipalities in Massachusetts and Rhode Island. The Company has deposit relationships with approximately 189 (54%) of the 351 cities and towns in Massachusetts.

Net income for the second quarter ended June 30, 2012 was $4,771,000, or $0.86 per Class A share diluted, compared to net income of $4,197,000, or $0.76 per Class A share diluted, for the second quarter ended June 30, 2011. Net income for the six months ended June 30, 2012 was $8,579,000, or $1.55 per Class A share diluted, compared to net income of $7,922,000, or $1.43 per Class A share diluted, for the same period a year ago. Earnings per share (EPS) for each class of stock and time period is as follows:


	Three months ended June 30, 2012		Three months ended June 30, 2011
Basic EPS – Class A common	$	1.05	$	0.92
Basic EPS – Class B common	$	0.52	$	0.46
Diluted EPS – Class A common	$	0.86	$	0.76
Diluted EPS – Class B common	$	0.52	$	0.46

Page 28 of 40


	Six months ended June 30, 2012		Six months ended June 30, 2011
Basic EPS – Class A common	$	1.89	$	1.74
Basic EPS – Class B common	$	0.94	$	0.87
Diluted EPS – Class A common	$	1.55	$	1.43
Diluted EPS – Class B common	$	0.94	$	0.87

Net interest income totaled $29.8 million for the first six months of 2012 compared to $27.4 million for the same period in 2011. The 8.6% increase in net interest income for the period is due to an 10.6% increase in the average balances of earning assets, combined with a similar increase in deposits, offset by a decrease in the net interest margin. The net interest margin decreased from 2.53% on a fully taxable equivalent basis in 2011 to 2.50% on the same basis for 2012. The company collected approximately $600,000 of prepayment penalties during the first six months of 2012.

The trends in the net interest margin are illustrated in the graph below:

LOGO

The primary factor accounting for the general decrease in the net interest margin for the third quarter of 2010 was a large influx of deposits, primarily from municipalities, and a corresponding increase in short-term investments. Pricing discipline continued through the first quarter of 2011. The net interest margin fell somewhat during the second quarter of 2011 mainly as a result of increased deposits and corresponding lower yield short-term investments. During the third quarter of 2011 through the second quarter of 2012, management stabilized the net interest margin by continuing to lower cost of funds, and by deploying excess liquidity through expansion of the investment portfolio.

While management will continue its efforts to improve the net interest margin, there can be no assurance that certain factors beyond its control, such as the prepayment of loans and changes in market interest rates, will continue to positively impact the net interest margin.

For the three months ended June 30, 2012, the loan loss provision was $900,000 compared to a provision of $1.2 million for the same period last year. For the six months ended June 30, 2012, the loan loss provision was $2.0 million compared to a provision of $2.4 million for the same period last year. The decrease in the provision, for both periods, was primarily as a result of a decline in the balance of construction loans, partially offset by an increase in commercial real estate loans. During the six months ended June 30, 2012, management provided $1.0 million for one large construction loan. Nonperforming loans decreased to $5.3 million at June 30, 2012 from $12.3 million on June 30, 2011.

The Company capitalized on favorable market conditions for the second quarter and six months ended June 30, 2012 and realized net gains on sales of investments of $442,000 and $590,000 as compared to $198,000 and $362,000 for the same periods in 2011. Included in operating expenses for the first six months ended June 30, 2012 are

Page 29 of 40

FDIC assessments of $852,000, compared to $1.2 million for the same period in 2011. FDIC assessments decreased primarily as a result of a decrease in the assessment rate, offset somewhat by an increase in the assessment base.

For the first six months of 2012, the Company’s effective income tax rate was 6.2% compared to 6.1% for last year’s corresponding period. The effective income tax rate has remained low primarily as a result of tax-exempt income.

Financial Condition

Loans

On June 30, 2012, total loans outstanding were $1.0 billion, an increase of 4.5% from the total on December 31, 2011. At June 30, 2012, commercial real estate loans accounted for 52.0% and residential real estate loans, including home equity loans, accounted for 36.1% of total loans.

Commercial and industrial loans decreased to $79.0 million at June 30, 2012 from $82.4 million at December 31, 2011. Construction loans decreased to $36.4 million at June 30, 2012 from $56.8 million on December 31, 2011, primarily as a result of a large loan moving into permanent financing.

Allowance for Loan Losses

The allowance for loan loss at June 30, 2012 was $18.0 million as compared to $16.6 million at December 31, 2011. The increase was due to quantitative factors associated with the loan loss reserve requirement. As part of the analysis, management provided $1.0 million for one large construction loan in the first quarter of 2012. Also, the level of the allowance for loan losses to total loans increased from 1.68% at December 31, 2011 to 1.75% at June 30, 2012. The dollar amount of the allowance for loan losses and the level of the allowance for loan losses to total loans increased, primarily as a result of increases in required specific reserves associated with impaired loans. Also, the allowance for loan losses increased as a result of growth in the commercial real estate portfolio which increased from $487.5 million at December 31, 2011 to $535.2 million at June 30, 2012. In evaluating the allowance for loan losses the Company considered the following categories to be higher risk:

•

Construction loans: The outstanding loan balance of construction loans at June 30, 2012 is $36.4 million as compared to $56.8 million at December 31, 2011. A major factor in nonaccrual loans is one large construction loan. Based on this fact, and the general local conditions facing construction, management closely monitors all construction loans and considers this type of loans to be higher risk.

•

Higher balance loans: Loans greater than $1.0 million are considered “high balance loans”. The balance of these loans is $525.3 million at June 30, 2012 as compared to $489.1 million at December 31, 2011. These loans are considered higher risk due to the concentration in individual loans. Additional allowance allocations are made based upon the level of high balance loans. Included in high balance loans are loans greater than $10.0 million. The balance of these loans, which is included in the loans greater than $1.0 million category, is $212.1 million, at June 30, 2012 as compared to $189.2 million at December 31, 2011. Additional allowance allocations are made based upon the level of this type of high balance loans that is separate and greater than the $1.0 million allocation.

•

Small business loans: The outstanding loan balances of small business loans is $42.5 million at June 30, 2012 as compared to $44.0 million at December 31, 2011. These are considered higher risk loans because small businesses have been negatively impacted by the current economic conditions. In a liquidation

Page 30 of 40

scenario, the collateral, if any, is often not sufficient to fully recover the outstanding balance of the loan. As a result, the Company often seeks additional collateral prior to renewing maturing small business loans. In addition, the payment status of the loans is monitored closely in order to initiate collection efforts in a timely fashion.

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


	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
	(in thousands)
Allowance for loan losses, beginning of period	$	17,434		$	14,958		$	16,574		$	14,053
Loans charged off		(635	)		(380	)		(1,059	)		(969	)
Recoveries on loans previously charged-off		280			137			464			431

Net charge-offs		(355	)		(243	)		(595	)		(538	)
Provision charged to expense		900			1,200			2,000			2,400

Allowance for loan losses, end of period	$	17,979		$	15,915		$	17,979		$	15,915

The Company may experience increased levels of nonaccrual loans if borrowers are negatively impacted by future negative economic conditions. Management continually monitors trends in the loan portfolio to determine the appropriate level of allowance for loan losses. At the current time, management believes that the allowance for loan losses is adequate.

Nonperforming Assets

The following table sets forth information regarding nonperforming assets held by the Bank at the dates indicated:


	June 30, 2012			December 31, 2011
	(Dollars in thousands)
Nonaccruing loans	$	5,313		$	5,827
Loans past due 90 days or more and still accruing	$	57		$	18
Other real estate owned	$	—		$	1,183
Nonaccruing loans as a percentage of total loans		0.52	%		0.59	%
Accruing troubled debt restructures	$	2,274		$	4,634

Loans past due greater than 90 days and accruing represent loans that matured and the borrower has continued to make regular principal and interest payments as if the loan had been renewed when, in fact, renewal had not yet taken place. It is expected that the loans will be renewed or paid in full without any loss.

Cash and Cash Equivalents

Cash and cash equivalents remained relatively stable during the second quarter of 2012. As part of the Company’s contingency liquidity plan, federal funds lines of credit totaling $59 million were either confirmed or established during the quarter.

Short-term Investments

Short-term investments decreased mainly as a result of increases in longer term higher yielding investments.

Page 31 of 40

Investments

Management continually evaluates its investment alternatives in order to properly manage the overall balance sheet mix. The timing of purchases, sales and reinvestments, if any, will be based on various factors including expectation of movements in market interest rates, deposit flows and loan demand. Notwithstanding these events, it is the intent of management to grow the earning asset base mainly through loan originations while funding this growth through a mix of retail deposits, FHLB advances, and retail repurchase agreements.

Securities Available-for-Sale (at Fair Value)


	June 30, 2012		December 31, 2011
	(In thousands)
U.S. Treasury	$	2,006	$	2,012
U.S. Government Sponsored Enterprises		44,287		174,957
Small Business Administration		8,415		8,801
U.S Government Agency and Sponsored Enterprise Mortgage-backed Securities		1,094,734		1,035,838
Privately Issued Residential Mortgage-backed Securities		3,122		3,198
Obligations issued by States and Political Subdivisions		70,511		20,642
Other Debt Securities		13,340		12,610
Equity Securities		609		618

Total Securities Available–for-Sale	$	1,237,024	$	1,258,676

During the first six months of 2012 the Company capitalized on favorable market conditions and realized $590,000 of gains on sales of investments. The sales of

investments represented 44 U.S. Government Sponsored Enterprise bonds totaling $233.0 million.

Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac.

Securities Held-to-Maturity (at Amortized Cost)


	June 30, 2012		December 31, 2011
	(In thousands)
U.S. Government Sponsored Enterprises	$	7,745	$	26,979
U.S. Government Agency and Sponsored Enterprise Mortgage-backed Securities		278,917		152,389

Total Securities Held-to-Maturity	$	286,662	$	179,368

At June 30, 2012 and December 31, 2011, all mortgage-backed securities are obligations of U.S. Government Sponsored Enterprises.

Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac.

Securities Available-for-Sale

The securities available-for-sale portfolio totaled $1.2 billion at June 30, 2012, a decrease of 1.7% from December 31, 2011. Purchases of securities available-for-sale totaled $490.1 million for the six months ended June 30, 2012. The portfolio is concentrated in United States Government Sponsored Enterprises, Mortgage-backed Securities and Obligations issued by States and Political Subdivisions and had an estimated weighted average remaining life of 3.5 years.

Page 32 of 40

The majority of the Company’s securities AFS are classified as Level 2. The fair values of these securities are generally obtained from a pricing service, which provides the Company with a description of the inputs generally utilized for each type of security. These inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Market indicators and industry and economic events are also monitored.

Securities available-for-sale totaling $68.8 million, or 2.3% of assets are classified as Level 3. These securities are generally failed auction rate securities, equity investments or obligations of states and political subdivisions with no readily determinable fair value. Failed auction rate securities were reclassified to Level 3 during the first quarter of 2009 due to the lack of an active market. Fair values for Level 3 securities are, generally, arrived at based upon a review of market trades of similar instruments, if any, as well as an analysis of the security based upon market liquidity and prevailing market interest rates.

Securities Held-to-Maturity

The securities held-to-maturity portfolio totaled $286.7 million on June 30, 2012, an increase of 59.8% from the total on December 31, 2011. The increase was mainly attributable to purchases with extended maturities that were included in this portfolio. The portfolio is concentrated in United States Government Sponsored Enterprises and Mortgage-backed Securities and had an estimated weighted average remaining life of 3.6 years.

Federal Home Loan Bank of Boston Stock

The Bank, as a member of the Federal Home Loan Bank of Boston (“FHLBB”) system, is required to maintain an investment in capital stock of the FHLBB. Based on redemption provisions, the stock has no quoted market value and is carried at cost. At its discretion, the FHLBB may declare dividends on the stock. The Company reviews for impairment based on the ultimate recoverability of the cost basis in the stock. For the quarter ended June 30, 2012, the FHLBB reported preliminary net income of $56.0 million. The FHLBB also declared a dividend equal to an annual yield of 0.52%. As of June 30, 2012, no impairment has been recognized.

Deposits and Borrowed Funds

On June 30, 2012, deposits totaled $2.3 billion, representing a 10.1% increase from December 31, 2011. Total deposits increased primarily as a result of increases in money market, savings and NOW. Savings and NOW and money market increased as the Company continued to offer attractive rates for these types of deposits during the first six months of the year. Borrowed funds totaled $381.7 million compared to $387.5 million at December 31, 2011. Borrowed funds decreased mainly as a result of matured term borrowings from the FHLBB.

Stockholders’ Equity

At June 30, 2012, total equity was $170.7 million compared to $160.6 million at December 31, 2011. The Company’s equity increased primarily as a result of earnings and other comprehensive income, net of taxes, offset somewhat by dividends paid. The Company’s leverage ratio stood at 6.90% at June 30, 2012, compared to 7.00% at June 30, 2011. This decline in the leverage ratio is due to an increase in assets, offset by an increase in stockholders’ equity. The Company’s Tier 1 capital-to-risk assets and total capital-to-risk assets stood at 14.36% and 15.61%, respectively, at June 30, 2012. Book value as of June 30, 2012 was $30.77 per share.

Page 33 of 40

Results of Operations

The following table sets forth the distribution of the Company’s average assets, liabilities and stockholders’ equity, and average rates earned or paid on a fully taxable equivalent basis for each of the three-month periods indicated.


	Three Months Ended
	June 30, 2012									June 30, 2011
	(In thousands)
	Average Balance			Interest(1)			Average Yield/ Rate			Average Balance			Interest(1)			Average Yield/ Rate
ASSETS
Interest-earning assets:
Loans (2)
Loans taxable	$	716,312		$	8,847			4.96	%	$	715,660		$	9,261			5.19	%
Loans tax-exempt		290,473			5,586			7.72			239,458			4,386			7.35
Securities available-for-sale (5):
Taxable		1,191,417			5,590			1.88			1,001,008			5,654			2.26
Tax-exempt		44,170			119			1.08			22,483			83			1.48
Securities held-to-maturity:
Taxable		305,679			1,924			2.52			200,397			1,518			3.03
Tax-exempt		—			—			—			—			—			—
Interest-bearing deposits in other banks		213,618			149			0.27			326,498			358			0.43

Total interest-earning assets		2,761,669			22,215			3.23	%		2,505,504			21,260			3.40	%
Non interest-earning assets		170,904									155,367
Allowance for loan losses		(17,694	)								(15,442	)

Total assets	$	2,914,879								$	2,645,429

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
NOW accounts	$	589,929		$	404			0.28	%	$	480,764		$	490			0.41	%
Savings accounts		273,821			156			0.23			252,251			228			0.36
Money market accounts		666,706			618			0.37			597,852			777			0.52
Time deposits		428,240			1,600			1.50			500,924			2,494			2.00

Total interest-bearing deposits		1,958,696			2,778			0.57			1,831,791			3,989			0.87
Securities sold under agreements to repurchase		167,030			88			0.21			117,758			98			0.33
Other borrowed funds and subordinated debentures		214,521			2,057			3.86			202,084			1,995			3.96

Total interest-bearing liabilities		2,340,247			4,923			0.85	%		2,151,633			6,082			1.13	%

Non interest-bearing liabilities
Demand deposits		368,926									312,276
Other liabilities		36,978									28,680

Total liabilities		2,746,151									2,492,589

Stockholders’ equity		168,728									152,840
Total liabilities & stockholders’ equity	$	2,914,879								$	2,645,429

Net interest income on a fully taxable equivalent basis					17,292									15,178
Less taxable equivalent adjustment					(1,903	)								(1,663	)

Net interest income				$	15,389								$	13,515


Net interest spread (3)								2.38	%								2.27	%

Net interest margin (4)								2.52	%								2.43	%

(1)	On a fully taxable equivalent basis calculated using a federal tax rate of 34%.

(2)	Nonaccrual loans are included in average amounts outstanding.

(3)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(4)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

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

Page 34 of 40


	Six Months Ended
	June 30, 2012									June 30, 2011
	(In thousands)
	Average Balance			Interest(1)			Average Yield/ Rate			Average Balance			Interest(1)			Average Yield/ Rate
ASSETS
Interest-earning assets:
Loans (2)
Loans taxable	$	708,333		$	17,666			5.02	%	$	708,874		$	18,703			5.31	%
Loans tax-exempt		288,170			10,685			7.46			231,202			8,580			7.47
Securities available-for-sale (5):
Taxable		1,216,754			11,252			1.85			965,020			10,946			2.27
Tax-exempt		33,331			199			1.19			25,325			175			1.38
Securities held-to-maturity:
Taxable		255,609			3,387			2.65			205,996			3,291			3.20
Tax-exempt		—			—			—			—			—			—
Interest-bearing deposits in other banks		200,066			287			0.28			306,157			705			0.46

Total interest-earning assets		2,702,263			43,476			3.23	%		2,442,574			42,400			3.49	%
Non interest-earning assets		168,967									153,553
Allowance for loan losses		(17,386	)								(15,017	)

Total assets	$	2,853,844								$	2,581,110

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
NOW accounts	$	556,208		$	768			0.28	%	$	472,707		$	973			0.42	%
Savings accounts		273,991			319			0.23			249,224			458			0.37
Money market accounts		656,661			1,230			0.38			570,448			1,482			0.52
Time deposits		422,256			3,281			1.56			473,464			4,773			2.03

Total interest-bearing deposits		1,909,116			5,598			0.59			1,765,843			7,686			0.88
Securities sold under agreements to repurchase		161,112			180			0.22			123,582			208			0.34
Other borrowed funds and subordinated debentures		216,214			4,108			3.82			202,782			3,839			3.82

Total interest-bearing liabilities		2,286,442			9,886			0.87	%		2,092,207			11,733			1.13	%

Non interest-bearing liabilities
Demand deposits		364,588									310,522
Other liabilities		36,565									28,801

Total liabilities		2,687,595									2,431,530

Stockholders’ equity		166,249									149,580
Total liabilities & stockholders’ equity	$	2,853,844								$	2,581,110

Net interest income on a fully taxable equivalent basis					33,590									30,667
Less taxable equivalent adjustment					(3,799	)								(3,225	)

Net interest income				$	29,791								$	27,442


Net interest spread (3)								2.36	%								2.36	%

Net interest margin (4)								2.50	%								2.53	%

(1)	On a fully taxable equivalent basis calculated using a federal tax rate of 34%.

(2)	Nonaccrual loans are included in average amounts outstanding.

(3)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(4)	Net interest margin represents net interest income as a percentage of average interest-earning assets.

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

Page 35 of 40

The following table presents certain information on a fully-tax equivalent basis regarding changes in the Company’s interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to changes in rate and changes in volume.


	Three Months Ended June 30, 2012 Compared with Three Months Ended June 30, 2011									Six Months Ended June 30, 2012 Compared with Six Months Ended June 30, 2011
	Increase/(Decrease) Due to Change in									Increase/(Decrease) Due to Change in
	Volume			Rate			Total			Volume			Rate			Total
	(in thousands)									(in thousands)
Interest income:
Loans
Taxable	$	8		$	(422	)	$	(414	)	$	(14	)	$	(1,023	)	$	(1,037	)
Tax-exempt		966			234			1,200			2,125			(20	)		2,105
Securities available-for-sale
Taxable		979			(1,043	)		(64	)		2,547			(2,241	)		306
Tax-exempt		63			(27	)		36			50			(26	)		24
Securities held-to-maturity
Taxable		695			(289	)		406			713			(617	)		96
Interest-bearing deposits in other banks		(97	)		(112	)		(209	)		(194	)		(224	)		(418	)

Total interest income		2,614			(1,659	)		955			5,227			(4,151	)		1,076

Interest expense:
Deposits:
NOW accounts		96			(182	)		(86	)		154			(359	)		(205	)
Savings accounts		18			(90	)		(72	)		42			(181	)		(139	)
Money market accounts		81			(240	)		(159	)		204			(456	)		(252	)
Time deposits		(330	)		(564	)		(894	)		(475	)		(1,017	)		(1,492	)

Total interest-bearing deposits		(135	)		(1,076	)		(1,211	)		(75	)		(2,013	)		(2,088	)
Securities sold under agreements to repurchase		33			(43	)		(10	)		54			(82	)		(28	)
Other borrowed funds and subordinated debentures		117			(55	)		62			266			3			269

Total interest expense		15			(1,174	)		(1,159	)		245			(2,092	)		(1,847	)

Change in net interest income	$	2,599		$	(485	)	$	2,114		$	4,982		$	(2,059	)	$	2,923

Net Interest Income

For the three months ended June 30, 2012, net interest income on a fully taxable equivalent basis totaled $17.3 million compared to $15.2 million for the same period in 2011, an increase of $2.1 million or 13.9%. This increase in net interest income for the period is due to a 10.2% increase in the average balances of earning assets, combined with a similar increase in deposits, as well as an increase in the net interest margin. The net interest margin increased from 2.43% on a fully taxable equivalent basis in 2011 to 2.52% on the same basis for 2012. The Company collected approximately $600,000 of prepayment penalties during the second quarter of 2012.

For the six months ended June 30, 2012, net interest income on a fully taxable equivalent basis totaled $33.6 million compared to $30.7 million for the same period in 2011, an increase of $2.9 million or 9.5%. This increase in net interest income for the period is due to a 10.6% increase in the average balances of earning assets, combined with a similar increase in deposits, offset by a decrease in the net interest margin. The net interest margin decreased from 2.53% on a fully taxable equivalent basis in 2011 to 2.50% on the same basis for 2012.

Page 36 of 40

Provision for Loan Losses

For the three months ended June 30, 2012, the loan loss provision was $900,000 compared to a provision of $1.2 million for the same period last year. For the six months ended June 30, 2012, the loan loss provision was $2.0 million compared to a provision of $2.4 million for the same period last year. The decrease in the provision for the three and six months ended June 30, 2012, was primarily due to changes in the composition of the loan portfolio. The level of the allowance for loan losses to total loans increased from 1.68% at December 31, 2011 to 1.75% at June 30, 2012. The increase was primarily the result of an increase in required specific reserves associated with impaired loans.

Non-Interest Income and Expense

Other operating income for the quarter ended June 30, 2012 increased by $147,000 to $4.0 million from $3.8 million for the same period last year. This was mainly attributable to an increase in net gains on sales of investments of $244,000. There was a decrease in service charges on deposit accounts of $14,000, which was mainly attributable to a decrease in overdraft charges. Lockbox fees increased by $47,000 as a result of increased customer volume. Other income decreased by $130,000 mainly as a result of decreases in net gains on sales of loans and a decrease in the growth of cash surrender values on life insurance policies, which was attributable to lower returns on life insurance policies.

Other operating income for the six months ended June 30, 2012 increased by $231,000 to $7.6 million from $7.4 million for the same period last year. This was mainly attributable to an increase in net gains on sales of investments of $228,000. There was a increase in service charges on deposit accounts of $87,000, which was mainly attributable to an increase in customer activity. Lockbox fees increased by $9,000 as a result of increased customer volume. Other income decreased by $93,000 mainly as a result of decreases in brokerage commissions and a decrease in the growth of cash surrender values on life insurance policies, which was attributable to lower returns on life insurance policies.

For the quarter ended June 30, 2012, operating expenses increased by $1.7 million or 14.2% to $13.5 million, from the same period last year. The increase in operating expenses for the quarter was mainly attributable to an increase of $941,000 in salaries and employee benefits, $543,000 in other expenses and $211,000 occupancy and equipment expenses. Salaries and employee benefits increased mainly as a result of merit increases, increased staffing levels and pension costs. Occupancy and equipment increased mainly as a result of costs associated with the Newton Centre branch opening during the second quarter of 2011. Other expenses increased mainly as a result of increases in contributions and software maintenance.

For the six months ended June 30, 2012, operating expenses increased by $2.3 million or 9.4% to $26.3 million, from the same period last year. The increase in operating expenses for the six months was mainly attributable to an increase of $1.7 million in salaries and employee benefits, $765,000 in other expenses and $107,000 occupancy and equipment expenses. This was offset somewhat by a decrease of $347,000 in FDIC assessments. Salaries and employee benefits increased mainly as a result of merit increases, increased staffing levels and pension costs. Occupancy and equipment increased mainly as a result of costs associated with the Newton Centre branch opening during the second quarter of 2011. Other expenses increased mainly as a result of increases in contribution, software maintenance and marketing expenses. FDIC assessments decreased mainly as a result of a decrease in the assessment rate, offset somewhat by an increase in the assessment base.

Page 37 of 40

Income Taxes

For the second quarter of 2012, the Company’s income tax expense totaled $255,000 on pretax income of $5.0 million resulting in an effective tax rate of 5.1%. For last year’s corresponding quarter, the Company’s income tax expense totaled $184,000 on pretax income of $4.4 million resulting in an effective tax rate of 4.2%. For the six months ended June 30, 2012, the Company’s income tax expense totaled $568,000 on pretax income of $9.1 million resulting in an effective tax rate of 6.2%. For last year’s corresponding period, the Company’s income tax expense totaled $511,000 on pretax income of $8.4 million resulting in an effective tax rate of 6.1%. The effective income tax rate for both the quarter and the six month periods remained low primarily as a result of tax-exempt income.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. To that end, management actively monitors and manages its interest rate risk exposure. The Company’s profitability is affected by fluctuations in interest rates. A sudden and substantial increase or decrease in interest rates may adversely impact the Company’s earnings to the extent that the interest rates tied to specific assets and liabilities do not change at the same speed, to the same extent, or on the same basis. The Company monitors the impact of changes in interest rates on its net interest income using several tools. The Company’s primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company’s net interest income and capital, while structuring the Company’s asset-liability structure to obtain the maximum yield-cost spread on that structure. Management believes that there has been no material changes in the interest rate risk reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the Securities and Exchange Commission. The information is contained in the Form 10-K within the Market Risk and Asset Liability Management section of Management’s Discussion and Analysis of Results of Operations and Financial Condition.

Item 4. Controls and Procedures

The Company’s management, with participation of the Company’s principal executive and financial officers, has evaluated its disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, the Company’s management, with participation of its principal executive and financial officers, have concluded that the Company’s disclosure controls and procedures effectively ensure that information required to be disclosed in the Company’s filings and submissions with the Securities and Exchange Commission under the Exchange Act is accumulated and reported to Company management (including the principal executive officers and the principal financial officer) as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. In addition, the Company has evaluated its internal control over financial reporting and during the second quarter of 2012 there has been no change in its internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1

Legal proceedings — At the present time, the Company is not engaged in any legal proceedings which, if adversely determined to the Company, would have a material adverse impact on the Company’s financial condition or results of operations. From time to time, the Company is party to routine legal proceedings within the normal course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the Company’s financial condition and results of operation.

Page 38 of 40

Item 1A

Risk Factors – Please read “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. There have been no material changes since this 10-K was filed. These risks are not the only ones facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely effect the Company’s business, financial condition and operating results.

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds –

(a) — (b) Not applicable.

(c) The following table sets forth information with respect to any purchase made by or on behalf of Century Bancorp, Inc. or any “affiliated purchaser,” as defined in 204.10b-18(a)(3) under the Exchange Act, of shares of Century Bancorp, Inc. Class A common stock during the indicated periods:


	Issuer Purchases of Equity Securities
Period	Total number of shares purchased		Weighted Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs			Maximum number of shares that may yet be purchased under the plans or programs (1)
April 1 – April 30, 2012		—	$	—			—		300,000
May 1 – May 31, 2012		—	$	—		—			300,000
June 1 – June 30, 2012		—	$	—		—			300,000

(1)	On July 10, 2012, the Company announced a reauthorization of the Class A common stock repurchase program to repurchase up to 300,000 shares. The Company placed no deadline on the repurchase program. There were no shares purchased other than through a publicly announced plan or program.

Item 3

Defaults Upon Senior Securities – None

Item 5

Other Information – None

Item 6

Exhibits

31.1 Certification of President and Chief Executive Officer of the Company Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14.

31.2 Certification of Chief Financial Officer of the Company Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14.

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

+ 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+ + 101.INS XBRL Instance Document

+ + 101.SCH XBRL Taxonomy Extension Schema

Page 39 of 40

+ + 101.CAL XBRL Taxonomy Extension Calculation Linkbase

+ + 101.LAB XBRL Taxonomy Extension Label Linkbase

+ + 101.PRE XBRL Taxonomy Extension Presentation Linkbase

+ + 101.DEF XBRL Taxonomy Definition Linkbase

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

As provided in Rule 406T of regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 and consists of the following materials from Century Bancorp Inc.’s Quarterly Report on 10-Q for the quarter ended June 30, 2012, formatted in XBRL: (i) Consolidated Balance Sheets at June 30, 2012 and December 31, 2012; (ii) Consolidated Statements of Income for the three months ended June 30, 2012 and 2011; (iii) Consolidated Statements of Comprehensive Income for the six months ended June 30, 2012 and 2011; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2012 and 2011; (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011; and (vi) Notes to Unaudited Consolidated Interim Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date:		August 7, 2012				Century Bancorp, Inc.

/s/ Barry R. Sloane

Barry R. Sloane

President and Chief Executive Officer

/s/ William P. Hornby

William P. Hornby, CPA

Chief Financial Officer and Treasurer

(Principal Accounting Officer)

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