NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

Business

Opti m a Bank & Trust C o m p any (the B ank) p rov i des a full range of banking services to individual and corporate customers in southern and c o astal ar e as of New Ha mps h ire. The Bank is subject to the regulations o f certain state and federal agencies and u ndergoes p er i odic exa m inations b y t h ose regulato r y authorities.

On December 5, 2 0 18, C a m bridge Ba n corp (Ca m b ridge), its who l ly owned subsidiar y , Cambridge Trust C o m p any ( C a m bridge Trust) and the Bank entered into an Agreeme n t and Plan o f Merger ( the Merger Agreement), pursuant to which the Bank will m erge with and in t o C a m bridge Trust, in a stock and cash transaction. Under the terms of the m e rger agre e m en t, each sh a re o f the Bank’s c o m m on s t ock will be exchanged f o r either 0 . 3 4 6 8 shares of C a m bridge common stock, o r $ 3 2. 0 0 i n c ash, subject t o custo m ary pro-ration p r ocedures which will result in an aggregate stock / cash consideration m ix of 9 5% / 5 %. Consummation of the m erger is subject to certain condit i ons, a n d is expected to occur in t he second quarter of 2019. See note 14 for f u rther infor m ation.

Basis of Financial Statement Presentation

The financial statements have b een p repared in confo r mity with accounting principles generally accepted in the United States of A merica. In preparing the fi n ancial statements, m anagement is required to make est i mates and ass u m p tions that affect the reported a m ounts of assets and liabilities as of the d ate of the balance sheet and revenues and expenses for the period. Actual r esults could differ significantly from those est i m a t es.

Material est i mat e s that are particularly susceptible to signi f icant change in the near-term relate to the dete r m ination of t he allo w ance for loan losses.   A s ubstantial p o rtion of t he Bank’s l o ans are in t he southern a n d coastal areas of New Hampshire. Acc o rding l y, t he ultimate collectabili t y of a s ubstantial portion of the Bank ’ s loan portfolio is s u sceptible to changes in econo m ic conditions in those areas. In connection w ith the d ete r mination of t he allowance for loan lo s ses, m anag em ent obtains i ndependent appraisals for significant properties.

Investment Securities

Available for sale securities (AFS) co n sist o f debt securities that the Bank anticipates could be made available for sale in response to changes in m arket interest rates, liquidity n eeds, funding sources and other si m ilar factors. These asse t s are sp ecifically identifi e d and are carr i ed at fair v alue. Unrealized holding g ains and losses on these asse ts , n et o f related inco m e ta x es, are e x cl ud ed from earnings and are included in a c c u m ulated o ther c o m prehensive loss and reported a s a separate c o mponent o f st o ckholders’ equit y . Gains and losses on the sale of available for sale s e c urities are c o m puted on the specif i c identification of the adjusted costs of e a ch security sold, are recognized upon realization and are shown separately in the statements of inco m e. Pre m i u ms and discounts o n invest m ent securities a r e a m ortized using m ethods that approx i mate the effective y ield method.

8

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

Manage m ent of the Bank, in addit i on to considering current tr e nds and economic conditions that m ay affect the quality of individual securities within the Bank ’ s i nvest m e nt portfol i o , also considers the Bank’s ability and intent to hold a v ailable for s ale d ebt securities or whether it is m ore likely than n ot it will b e required to sell debt securities before recovery o f the a m ort i zed cost basis. When a decline in f air value of AFS is considered o ther than te m porary and there is intent t o hold the debt securit y , the credit loss portion is recognized in the statements o f inco m e, resulting in t he establis h ment of a n ew c o st basis for the securit y . If the Bank intends to sell the securit y , the e n tire unreal i zed loss for th e security is r ecognized in the statements of income.   There were no o t her-than-tempora r y declines in fair value as of December 31, 20 1 8 and 2 0 17.

Loans and In t erest Income on Loans

Loans are stated at the pri n cipal a m ounts outstand i ng, p lus net d eferred loan o rigination costs. Interest is recognized on loans using the accrual method, unless it is no l onger probable of collection or the loan is 90 d a y s o r more p ast d ue, at which time interest ce a ses to accrue and is recognized o n the cash b asis. Loans are re s tored to accrual status when there has been a p eriod o f sustained positive perfor m ance o n the loans, t he borrower has de m onstra t ed the abili t y to m ake f u ture p a y m ents of p r i ncipal and i n terest, and m anagement b elieves outstand i ng principal and interest rec e iv able are collectible.  Inte r est r e ceived on an i m p aired loan for which the Bank does not expect full co l lection of p rincipal will generally b e recorded as a reduction in the recorded inves t m ent in the loan. When the recorded carr y ing value in t he i m paired loan has been reduced to a point at which u ltimate co l lection is p robab l e, then inter e st income may be recognized.

Allowance for Loan Losses

The allowance for loan lo s ses is establ i shed b y m anag e m ent to absorb p r obable future charge-offs o f loans de e m ed uncollectible. This allow a nce is incr e a s ed b y pr o vis i ons charged to operating expense and by recoveries on loans pr e v iously charged o ff. L oan losses are ch ar g ed a g ai n st t h e all o wa n ce w he n management b elieves that the collectibi l ity o f the l o an p r i ncipal is unl i k e l y . M anage m ent, consideri n g current info r mation and e v ents regarding t h e borrowers’ abili t y to repay their obligations, considers loans to b e i m paired when it is p robable that t he Bank will be unable to collect all amounts d u e according to the contractual te r m s of the note agreement. W hen a loan is cons id ered to be impaired, the a m ount o f the i m pai r ment is m e a sured ba sed on the present value of expected future cash flows d iscounted at the note’s effective inte r est rate, or the fair value of collateral if t he loan is collateral dependent. I m p ai r ment losses are included in the allowance for loan losses through a charge to provision for loan losses.

Manag e m ent believes that the allowance for loan losses is ade q uate. Arriving at an appropr i ate level o f allowance for loan l oss invol v es judgment; the pri m ary considerations are the level o f deli n quencies (based on contractual te r m s ), the nature o f the loan portfolio, p r i or l oan loss experience by lo a n categor y , and qualitative factors includ i ng the l ocal econo m ic conditions and current r eal estate m a rket trends. While m ana g e m ent uses a vailable information to recognize losses on loans, future additions to the allowance may be n eces s ar y . In addition, v arious regulatory ag encies, a s a n integral part o f their ex a m ination process, p er i odically review the Bank ’ s allowance for loan losses.   Such ag encies may require the B ank to recognize additions to the all o wance based on judg m ents d ifferent from those o f management.

9

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

The qualitative factors are deter m ined b ased on the var i ous risk characteristi c s of e ach portfolio se g m en t . Risk charac te ristics releva n t to each portfolio seg m ent are as follows:

Residential r e al esta t e and ho m e equity l ines of credit: The Bank generally does not o rig i nate loans with a loan-to-value ratio g reater than 80 p ercent and does not gra n t subp r i m e loans. L oans with lo a n-to-value ratios greater than 85 percent require the purchase of p rivate m o rtgage insurance unless strong mitigating factors are identified. L oans in these s e gments are collateralized p r i m arily b y owner-occupied residential real e state and repa y m ent i s d ependent on the credit quality of the indivi d u al bo r rower. The overall health of the econ o m y , includi n g une m p loyment rates a n d h o using pr i ce s , may have an effect on the credit quality in th e se se g ments.

C o mmercial real es t ate a n d m u lti-f a mily residential: Loans in these s e g m ents are p r i m ari l y inco m e-producing properties throughout southern and coas t al areas of N ew Ha m p shire. The und e rl y i ng cash flows generated by t he p r o perties may b e adversely i m p acted b y a downturn i n the econ o m y as evidenced by increased v acancy rates which, in turn, m ay have an effect on the credit quality in t hese s e g m ents. Manage m ent periodically o btains rent ro l ls and conti n ually m on i tors the cash flows of these loans.

Construction loans: The l o ans in this segment are p rimarily r esidential and commercial construction-to-pe r m anent loans collate r alized by owner-occupied re s idential a n d comme r cial r e al es t ate, and repa y m e n t is d ependent on the credit q u ali t y of t he indivi d u al bo r rower. The o verall health o f the econ o m y , includi n g une m p lo y m ent rates and housing prices, may have an effect on the credit quality in this seg m e nt.

C o mmercial lo ans: Loans in this seg m e nt are made to business e s and are generally secured by assets of the business. Repa y m ent is expected from the c a sh flows o f the b usiness. A weakened econo m y , and resultant dec r eased cons u mer spending, may have an effect on the credit quality in this seg m e nt.

Consumer lo a ns: Loans in this se g m ent a re g enerally u nsecured and repa y m ent is d ependent o n the credit quali t y of the indiv i dual b o rrower.

A substantial portion of the loan port f ol i o consists o f l o ans to borrowers in southern and coastal areas of New Ha m p shire. The ability o f t h e Bank’s debtors to honor the i r contracts is d ependent up o n the real estate and general econ o mic conditions in these area s .

Origination Fees and Costs

Loan origination fees and direct o rigination costs are deferr e d and a m ortized over the life of the related loan on the level y ield m e t hod. A m o rtization ceases while loa n s a r e on nonaccrual status. The Bank does not anticipate prepa y m ents in d eter m ining the a m ortization but recognizes the a mortization at the t i m e of prepa y m ent.

10

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

Loan Servicing

The Bank recognizes as separate assets the rights t o s ervice m ortgage loans for o thers, and pe r forms an ass e s s ment o f capitali z ed m ortgage se r vicing rights for i m pai r m en t, b ased on the current f a ir value of those rights. The Bank capitalizes m o rtgage servicing rights a t their fair v alues upon the sale of the related loans.   Capitalized m ortgage servicing rights are a m ort i zed in proport i on to , and o v er t h e p eriod of, est i mated future net serv i cing income. Fair values are est i ma t ed u sing bid quotati o ns received fr o m dealers for s i milar instr u ments. For purposes of me a suring i m p ai r ment, the rights are stratified, a s necessar y , b a sed on interest rates and the expected m a t urities of the under l y i n g l o ans.

Federal Home Loan B a nk Stock

Stock in the Federal H o me Loan Bank (FHLB) is a re q u ired inve s tment due to me m b ership in FHLB, and is carried at co st and can be rede e med at the FHLB subject to c urrent rede m ption policies.

Other Real Estate Owned (OREO)

Collateral acquired th r ou g h foreclosure is recorded at fair v a lue, l e ss est i mated costs to sell, at the time of acquisition. The excess, if an y , o f the loan b alance over the fair value of the p roper t y at th e time of transfer fr o m loans to OREO, is charged to the allow a nce for l o an l osses. Subsequent d eclin e s in the fair value of the p roperties are recorded as noninterest expense. Net operating inc o me o r expense related to foreclosed p roper t y is inc l uded i n non in terest expense in t he a cco m p an y ing st a t e m ents of inc o m e. There are inherent uncertainties i n the ass u m p tions with respect to t he estimated fair v alue of o ther real es t ate owned, and t h e a m ounts ulti m ately realized on other real estate o wned may d iffer from the a m ounts reflected in the acc o m p an y i ng financial stat e ments. There was no OREO at Dece m b er 31, 2 0 1 8 and 2 0 17.

Bank Premises and E q uip m ent

Bank pre m i se s and equipment are stated at cost less a c c u m u lat e d depreciation. D epreciation is c o m puted b y the straight-line method over the estimated u sef u l lives of the asse t s. L e as e hold i m provements a r e a m ortized over the shorter of the expected lease te r m o r the e s ti m a te d u seful life. Maintenance and repairs are charged to current expense as incurred and the cost o f m ajor renewals and betterments are capitalized.

Income Taxes

The Bank fo l lows the asset and liabili t y method of a ccounting for inco m e t ax e s, whereby deferred tax asse t s and liabilities are re cognized for the future tax conse q uences attributable to differences b etween the financial statement ca r r y i ng a m oun t s of existing asse t s and liabilities and their respective tax bases. Defer r ed tax asse t s and liabilities are measured using enacted tax rates expected to app l y to ta x able inco m e in the y ears i n which tho s e t e m porary differences a r e expected to b e recovered or settled. If it is not dete r m ined that realizati o n of t he d eferred tax asse t s is m ore likely than n ot t o occur, then a valuation allowance is established. The effect o n deferred tax assets a n d liabilities of a change in tax rates i s recognized in income in the period that in cludes the enact m ent date. See note 9 for additional i n f o rmation.

11

OPTIMA BANK & TRUST COMPANY

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

Asse t s and liabilities are established for certain tax p ositions taken o r positions expected to be taken in income tax returns when such positions are judged t o n ot m eet t he “ m or e-likel y -than-not” thr e shold, b ased upon t h e technical m erits o f the position. Estimated interest and penalties, if applicable, related to uncertain tax positions are included as a co m ponent o f income tax e x p ense. Man age m ent has d ete r m in e d that the Bank has not taken, nor does it expect to take, any u ncertain tax positions in any income tax return.

Advertising and Marketing Expense

Advertising and m arketing costs a r e e x pensed as i n curred.   Ad v ertising and marketing expense was approxi m ately $ 3 05, 0 00 a nd $ 393 , 800 i n 2 0 18 and 2 017, respectively.

Stock-Based Compensation

Stock-based c o m pensation represents t h e cost rela t ed to stock - based awards to e m p lo y ees and directors. The Bank m e asures stock - based c o m p e nsation cost at the grant d a t e b ased upon the est i m a t ed fair val u e of the award, and recognizes the cost as expense on a straight - line basis over the e m plo y ee requisite service period. Forfeitur e s are recognized as they o ccur. The B ank estimates the fair value of stock options u sing the Black-Scholes valuati o n m ethod.