2016 Annual Report

Pentucket BankTraditional Values • Progressive Future

“Thank you...for all you do on behalf of the Bank”

-Charles A. WalkerPresident

A Message From the CEO

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Two thousand sixteen was a milestone year in Pentucket Bank’s rich history as the Bank celebrated its 125th anniversary. Reflecting back on the events and successes of the past year, I am struck by the truth behind the old adage, “the more things change, the more they stay the same.”

In 1891 Pentucket Bank’s founders made the commitment to establish roots in the downtown district of Haverhill, Massachusetts. Since then the Bank has grown tremendously, expanding with the addition of products and service offerings, qualified, dedicated employees and the opening of six convenient branch and office locations in the Merrimack Valley and Southern New Hampshire. These steady and thoughtful changes have allowed the Bank the opportunity to plant new roots into Haverhill’s downtown, re-enforcing the commitment that was made 125 years ago, that Haverhill has always been and will continue to be Pentucket Bank’s hometown.

These roots come in the shape of the newly occupied Pentucket Bank Plaza building, the cornerstone of the newly occupied Harbor Place development project.We are extremely pleased to support this transformative downtown development project. We recently moved several of the Bank’s departments into the fourth floor of the beautiful new commercial office building, located at Harbor Place, under a long-term lease arrangement. We also secured naming rights to the building which will be called “Pentucket Bank Plaza”, as another symbol of our long-term commitment to Haverhill and in particular, to its downtown transformation.

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We look forward to having everyone visit us at our Open House in April, to see our new space and the beautiful views of the Merrimack River, from our Board Room.

A Tribute to Kendall C. SmithFormer President and Dear Friend

On a sad note, I am sorry to report to you the recent passing of a close member of the Pentucket Bank family who was instrumental to the Bank’s growth and success over many years, and someone who was also an icon in the Haverhill community. I’m speaking of

course of Kendall C. Smith, who passed away on February 11, 2017.

Ken was a former Bank President and CEO of Pentucket Bank and worked here for over 26 years; after which time he continued his service to the Bank as a Board Member & Chairman. Ken started with the Bank on March 5, 1984 after a long career at Merrimack Valley Bank/BayBank in Andover, Mass where he started working on the very same day as his mentor, Edmund J. Cote, Jr. Ed eventually joined Pentucket Bank as President and CEO and Ken joined him shortly thereafter as Pentucket’s Executive Vice President. Ken and Ed worked together for more than 50 years and were also best friends. When Ed Cote retired on January 1, 1998, Ken became President and CEO until he retired on June 30, 2010, but he remained dedicated to Pentucket Bank as Chairman of the Board. Ken stepped down as the Bank’s Chairman on January 1, 2016 but remained on the Bank’s Board as a loyal supporter until his passing. Ken was instrumental in the growth of Pentucket Bank over the years and was very proud of his team, the Bank’s success

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and their support of many worthwhile community organizations and causes.

Ken lived life to the fullest. At the Bank he was known as “the fun factor”. He had an outgoing personality and he loved people. He was very active in the community and participated in many community organizations as a volunteer, Board member and leader. He was particularly active with the Salvation Army, Veterans Northeast Outreach Center, Haverhill Rotary Club and Northern Essex Community College, to name a few.

Ken had a passion for what he called “open wheels” auto racing and was very active with the Pines Speedway in Groveland and the New England Super Modified Racing Association (NESMRA), where he previously served as President and where he remained active throughout his life.

Ken was someone who made a positive impression on everyone he met and all who knew him will remember him for the special ways in which he touched their lives; he will be sorely missed. Pentucket Bank has definitely lost one of its best, but Ken’s legacy will go on forever, due to the positive impact he made on the Bank, his staff and the community.

Scott D. CoteChairman of the Board& Chief Executive Officer

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A Message from the President

This past year was another exciting and successful year for Pentucket Bank; not only because we celebrated our 125th anniversary on St. Patrick’s Day; but thanks to an unwavering focus and commitment to our mission statement and our three constituencies – Customers,

Employees and Communities, we experienced another year of strong growth and solid financial results.

In particular our loan balances grew by more than 12% last year and surpassed the half billion dollar mark for the first time in our history. In last year’s Annual Report, we announced our “Investment in the Future” growth strategy, which included a significant investment in additional business and mortgage lending staff, expansion of our Pentucket Financial Services team and a shifting of senior management responsibilities to free up Scott Cote and me to spend even more time assisting our customers, employees and being out in the communities we serve.

We also expanded decision-making authority for a number of our key managers to insure that we remain as responsive as possible to our customers’ needs and continue to deliver the “Pentucket Bank Difference!” every day.

This strategy not only contributed to our strong overall growth last year but it will help insure our growth and sustainability over the long term. In spite of all of the continuing challenges facing our industry, I feel that we are well-positioned to continue to successfully execute our growth strategy

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and carry out our mission for the benefit of our customers, our employees and the communities we serve.

In late February, 2017 we moved some of the Bank’s operations into the 4th floor of the new Harbor Place project in downtown Haverhill. We couldn’t be more excited to be a part of this game changing revitalization that will benefit not only the city of Haverhill, but the entire region of surrounding communities as well.

Thank you to all of the business, political and community leaders who have worked so tirelessly together to make this seemingly impossible dream become a reality.

As I reflect back on all of the Bank’s accomplishments last year, I can’t help but think of all those who have helped us along the way. Thank you to our loyal customers for trusting us to help protect your financial assets and assist you in achieving your financial goals.

To our talented and dedicated employees, who care so much about the Bank, our customers, each other, and our communities – thank you for all you do every day to help the Bank grow and succeed.

Thank you to our business and community partners, and other friends of the Bank for your support and commitment to the Bank’s success.

And a special thanks to our Board Members and our Bank Corporators for your advice and guidance, and for all you do on behalf of the Bank.

Charles A. WalkerPresident

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2016 Highlights

The Bank’s 125th Anniversary was a year of milestones and success; all of which continued to emphasize the key components of our mission statement: Customers. Employees. Community.

Customers:

Employees:The Bank rolled out a peer nominated

employee recognition program in 2016:

The Elite Bankerthis program yielded over 90 employee nominations

and several of these were awarded the Elite Banker distinction!

Community:Pentucket Bank contributed

$475,000 to local non-profit organizations and initiatives for the betterment

of the communities we serve.

Pentucket Bank employees provided over

5,500 volunteer hoursby serving on local non-profit boards

& committees, and assisting with charitable events & initiatives.

Loan outstandings topped

$500,000,000. (half a billion!)

for the first time at the end of 2016!

We added a new service:

Instant IssueDebit Cards

in two of our branches!

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We added a new service:

Instant IssueDebit Cards

in two of our branches!

Reception

Office Space

West Side Main Corridor

Employee Lounge

East Side Main Corridor

Harbor Place Conference Room

Guest Waiting Area

Pentucket Bank Plaza

Feature Wall

Pentucket Bank Plaza Board Room

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2016 Financial Results

We are pleased to report that Pentucket Bank had an outstanding year in 2016, reaching new heights in total loans, and total assets, and nearly reaching record earnings, set in 2013, which exceeded $4 million in net income.

Assets

Total Assets ended the year at $674 million compared to the $651 million reported for 2015. The increase was largely attributable to increased lending activities, driving total assets to an all-time high. Since 2004, total assets have grown by $258 million as reflected in Figure 1, below.

Deposits

Total Deposits ended the year at $549 million compared to the $544 million reported for the prior year. The growth realized in 2016 was driven primarily by increases in checking and savings accounts, partially offset by reductions in certificates of deposit, and money market accounts. Since 2004, total deposits have increased by $204 million as depicted in Figure 2.

$416 $496

$644 $674

0

100

200

300

400

500

600

700

800

2004 2008 2012 2016

Total Assets as of December 31(in Millions)

Figure 1

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Loans

Total Loans reached a record high for the Bank, ending the period at $509 million compared to $448 million for the same period in 2015. The $61 million increase was realized across all major loan products, but business loans represented the majority of the change. As represented in Figure 3, the Bank has more than doubled the $217 million reported in 2004, an increase of $292 million.

$345

$425

$543 $549

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100

200

300

400

500

600

2004 2008 2012 2016

Total Deposits as of December 31(in Millions)

$217

$369

$453 $509

0

100

200

300

400

500

600

2004 2008 2012 2016

Total Loans as of December 31(in Millions)

Figure 3

Figure 2

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Surplus

Surplus, or capital, ended the year at $84 million. As a result, the Bank’s Surplus Ratio reached 12.41%, up from 12.22% reported for 2015. The Bank continues to remain well capitalized as required by new regulatory standards which took effect January 1, 2016. Since 2003, the Bank’s surplus has increased by $36 million, growing consistently, through the retention of strong earnings, as pictured in Figure 4, below.

Earnings

Earnings for 2016 remained very strong, ending the year just under $4.0 million compared to $3.7 million for the prior year. The Bank’s net interest income trend continued in 2016, which is the result of strong loan growth, funded by lower yielding investments and lower cost deposits. We are excited about the opportunities that we see for 2017, building on our overall financial strength and the record setting year we experienced in 2016.

$48 $53

$69

$84

0

10

20

30

40

50

60

70

80

90

2004 2008 2012 2016

Total Surplus as of December 31(in Millions)

Figure 4

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Pentucket BankStatement of Condition

(unaudited) Assets 12/31/16 12/31/15 Cash and due from banks 11,718,000 40,097,000 Investment securities 120,193,000 130,431,000 Loans outstanding 508,951,000 447,878,000 Reserve for possible loan losses (4,215,000) (3,966,000)Bank premises and equipment 12,462,000 11,848,000 Other real estate owned 355,000 0 Other assets 24,813,000 24,648,000 Total Assets 674,277,000 650,936,000 Liabilities and Surplus Deposits 548,654,000 543,923,000 Borrowed funds 34,331,000 19,086,000 Other liabilities 7,620,000 8,361,000 Total Liabilities 590,605,000 571,370,000 Surplus 83,672,000 79,566,000 Total Liabilities and Surplus 674,277,000 650,936,000

12/31/16 12/31/15 Interest and dividend income 22,774,000 22,236,000 Interest expense (3,266,000) (3,589,000)Net interest income 19,508,000 18,647,000 Provision for loan losses (210,000) (445,000)Non-interest income 2,181,000 2,152,000 Operating expenses (18,903,000) (18,362,000)Net operating income 2,576,000 1,992,000 Net gain on sales of investments and other assets 2,669,000 2,752,000 Provision for income taxes (1,287,000) (1,039,000)Net Income 3,958,000 3,705,000

Statement of Income(unaudited)

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Officers

Scott D. Cote Chairman of the Board / Chief Executive Officer

Charles A. Walker President

Diane L. Galvin Executive Vice President / Chief Operating Officer

Gregory J. Shaw First Senior Vice President/ Chief Risk Officer

David A. Bennett Senior Vice President

Treasurer & Chief Financial OfficerJoyce A. Bergeron

Senior Vice President / Customer Support ManagerJohn B. DeBaun

Senior Vice President Market Lending Manager- New Hampshire

Allison M. Field Senior Vice President

Sales Management & Retail BankingStephen M. Jaskelevicus

Senior Vice President Market Lending Manager- Massachusetts

Lori J. Luponi Senior Vice President

Risk Officer & Audit ManagerKevin E. McKinnon

Senior Vice President / Investment ExecutiveHolly E. Pouliot

Senior Vice President IT Manager & Information Security Officer

Steven G. StewartSenior Vice President / Commercial Loan Officer

Carol A. WilsonSenior Vice President / Human Resources Manager

Susan V. Cammett Vice President

Loan Administration OfficerDavid J. Croley

Vice President / IT ManagerMichele M. Curtis

Vice President / Customer Support Manager

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Karl J. Denu Vice President / Controller

Marie FerrisVice President / Commercial Loan Officer

Claire M. Koffman Vice President / Compliance Manager

Eric G. Leuteritz Vice President / Commercial Loan Officer

Jean L. McCann Vice President / Commercial Loan Officer

Leanne M. Petrou Vice President

Marketing & Community Relations OfficerThomas D. Whelton

Vice President / Business Systems Manager Christine A. Whittaker

Vice President Residential & Consumer Lending Manager

Andrew AgyeiAssistant Vice President / Senior Credit Officer

Saima Alrai Assistant Vice President

Senior Branch Manager / SalemAmy L. Barcelos

Assistant Vice President / Business Process ManagerMarion T. Donahue

Assistant Vice President Senior Branch Manager / North Andover

Michael R. Gueli, Jr. Assistant Vice President

Senior Branch Manager / StadiumPatricia L. Guerin

Assistant Vice President Senior Branch Manager / Westgate

Marianne LannanAssistant Vice President

Senior UnderwriterAdam J. Mead

Assistant Vice President / Commercial Loan OfficerMichael V. Milano

Assistant Vice President Credit Administration Officer

Eric L. ParadisAssistant Vice President / Database Manager

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Kerrianne Petalidas Assistant Vice President / Mortgage Loan Officer

Samantha A. Petrou Assistant Vice President / Credit Analyst

Michelle QueenanAssistant Vice President / Human Resources Officer

Pamela J. Webster Assistant Vice President / eBanking Manager

Pamela F. Wellington Assistant Vice President

Senior Branch Manager / HampsteadNicole Apkarian

Assistant Branch Administrative OfficerRichard M. Aziz Jr.BSA / AML OfficerAmanda L. Bonin

Deposit Operations ManagerSusan Celeste

Electronic Banking OfficerEzequiel Cruz

Assistant Branch Manager / North Andover Dawn M. George

Assistant Branch Manager / HampsteadChristine M. Gould

Deposit Operations OfficerJohn E. Hobbs

Information Technology Systems EngineerMaureen A. Kanavos

Systems OfficerMelissa B. Kindig

Residential & Consumer Loan Closing OfficerAndrea S. Leal-JessieMortgage Loan OfficerLeeann G. Mahoney Administrative Officer

John J. MorrowSenior Branch Manager - Main Office

Jennifer Orlando Branch Officer

Lisa M. Phillips Assistant Branch Manager / Stadium

Jose I. Pino Marketing & Community Relations Officer

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Timothy P. RileyFacilities ManagerJody P. Ronayne

Mortgage Loan OfficerJoanne M. Sulis

Executive AssistantRenee A. Sylvester

Assistant Branch Manager / SalemDonna C. White

Loan Administrative OfficerKevin J. Woodbury

Assistant Branch Manager - Main OfficeJoseph A. Cleary

Clerk of the Corporation & Board of Directors

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John G. AlbertSalvatore J. AmbraSven A. AmirianRichard K. AtwoodSteven A. Baddour Melinda E. BarrettDarlene M. Beal Paul A. BergmanFrancis J. Berube, Jr.Nelson D. Blinn Alan J. BoisvertCheryl-Ann BoloukJ. Bradford BrooksVirginia A. BusbyRichard N. CammettRonald P. Carpenito Kenneth J. CavallaroEdward P. CherneskyJames P. Cleary, IIIMichael A. CollinsKevin B. ComeauRobert J. Conte, Jr. Edmund J. Cote, Jr.Albert F. Curran, Jr.Kevin M. CyrEdward C. DavidFaith E. DelaneyBrian S. DempseyAlan R. DeNaro William P. DeRosa David W. DiBurroRobert E. DiBurroThomas A. DiPietroLoren G. DuboisJoseph F. Dugas, Jr.Arthur E. Durkin Richard S. EmeryCharles W. Ermer Brian C. FarmerDavid J. Frahm

Harry W. Fry, Jr.Stephen C. GalinskyDiane L. GalvinMichael A. GersteinDr. Lane A. GlennJon D. GuarinoRobert D. HarbDavid R. HartMichael J. HartBernard F. Hoar, Jr.Daniel K. HoganBradley HowellMark KazanjianMarsha V. KazarosianVictoria A. KennedyKara M. KosmesDr. Henry E. LaBrancheNorman J. LandryDonald P. LaRiviereDr. D. Palmer Lewis, Jr.Peter N. LilliosJeffrey G. LinehanPaul A. MagliocchettiDianne E. McDermott Michael S. McGonagle Sheryl A. MeehanMichael J. MiglioriBrian T. MorisseauSteven A. MurphyPaula A. NewcombDaniel J. NorrisDiane M. NunleyMary O’NeilEugene J. O’NeillSally L. O’RorkePaul E. PandelenaGerard A. Pare’Dawn Pease Robert L. Perryman, Jr.Angelo Petrozzelli

Members of the Corporation(In addition to the Trustees)

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Members of the Corporation cont’d

Board of Directors

* Terrence A. Beaton * ◊c William J. Klueber♦ Peter A. Carbone * c Joseph A. Cleary* ◊c Scott D. Cote, Sr.† Jefferson W. Davis* Thomas Desmet♦ E. Lynn Garner

*Executive Committee ♦Audit Committee† CRA & Compliance Committee ◊ Asset Liability Committee

Nominating Committee Compensation Committee

♦◊ Ronald J. Pollina Elizabeth E. Rogers♦ Timothy J. Schiavoni † Theodore Xenakis

David M. PevnaRobert A. PigeonThomas M. PignatielloJohn E. Ratka Michael F. ReillyPhillip R. RiceHolly A. RocheHarold B. RogersShaw M. RosenElizabeth A. RothBarbara J. Rowell James A. RurakPeter G. Shaheen William J. Shaheen David E. Shaw

Megan B. SheaWilliam T. SherryRosemary SmedileMacgregor SmithGregory W. Stark, Jr.Jered StewartThomas J. Sullivan Dr. Firouz M. TehraniJoseph J. TerrazzanoRev. W. David ThomasCharles R. Traver Susan A. Veasey Neil F. WallaceHarold I. WilliamsDonna Yameen

Charles A. Walker◊ †

Branches • Locations

www.pentucketbank.com

Member FDIC • Member DIF NMLS#700602

Main OfficeOne Merrimack StreetHaverhill, MA 01830

978-372-7731

North Broadway Crossing234 North Broadway - Route 28

Salem, NH 03079603-893-3588

North Andover 1065 Osgood Street

North Andover, MA 01845978-984-6300

Stadium120 Lincoln Avenue Haverhill, MA 01830

978-372-1197

Westgate395 Lowell Avenue

Haverhill, MA 01832978-373-3021

Executive Offices Pentucket Bank Plaza

2 Merrimack StreetHaverhill, MA 01830

Hampstead Commons201 Route 111

Hampstead, NH 03841603-329-7333