CAMBRIDGE, Mass.--(BUSINESS WIRE)--Cambridge Bancorp (NASDAQ: CATC) (the “Company”), the parent of Cambridge Trust Company, today announced unaudited net income of $5,805,000 for the quarter ended March 31, 2018, an increase of $1,477,000, or 34.1%, compared to net income of $4,328,000 for the quarter ended March 31, 2017. Diluted earnings per share were $1.41 for the first quarter of 2018, representing a 33.0% increase over diluted earnings per share of $1.06 for the same quarter last year.
First quarter 2018 highlights as compared to the first quarter of 2017:
- Wealth Management Assets under Management and Administration now at $3.1 billion, an increase of 12.3%
- Revenue of $23.3 million, an increase of 9.6%
- Loan growth of $70.9 million, or 5.4%
- Core deposit growth of $128.6 million, or 8.5%
- Federal statutory corporate tax rate decreased to 21% from 35%
“We are pleased to report the Company delivered strong earnings during the first quarter of 2018,” noted Denis K. Sheahan, Chairman and CEO. “Cambridge Bancorp posted strong profitability metrics for the quarter with annualized return on average assets of 1.21% and annualized return on average shareholders’ equity of 15.80%. In the midst of continued loan payoffs, net loan growth resumed, and the Bank’s focus on core deposits, growth in noninterest income businesses, and expense control led to an increase in income before income taxes of 17.6% in the first quarter versus the same period a year ago.”
Total assets increased $11.8 million, or 0.6%, from December 31, 2017 and were $2.0 billion as of March 31, 2018.
Total loans increased $30.9 million, or 2.3%, from December 31, 2017 and stood at $1.4 billion as of March 31, 2018. The growth in total loans was primarily due to the increase in commercial real estate loans of $22.6 million, from $633.6 million at December 31, 2017 to $656.3 million at March 31, 2018, and increases in commercial and industrial loans of $10.1 million, or 15.4%, from $65.3 million at December 31, 2017 to $75.4 million at March 31, 2018. Net loan growth during the quarter was healthy despite continued strong competition in the greater Boston area and continued elevated levels of loan payoffs.
The Company’s total investment securities portfolio increased by $25.1 million, or 5.7%, from $437.2 million at December 31, 2017 to $462.3 million at March 31, 2018.
Core deposits, which the Company defines as all deposits other than certificates of deposit, increased by $20.6 million, or 1.3%, from December 31, 2017. The cost of total deposits for the quarter ended March 31, 2018 was 0.22%, as compared to 0.17% for the quarter ended March 31, 2017. Total deposits at March 31, 2018 were $1.8 billion.
Net Interest and Dividend Income
For the quarter ended March 31, 2018, net interest and dividend income after provision for loan losses increased by $813,000, or 5.8%, to $14.7 million, as compared to $13.9 million for the quarter ended March 31, 2017. Interest on loans increased $970,000, or 7.8%, which was driven by a combination of net loan growth and the impact of rising rates on our variable rate loan portfolio. The Company’s net interest margin, on a fully taxable equivalent basis, increased two basis points to 3.28% for the quarter ended March 31, 2018, as compared to 3.26% for the quarter ended March 31, 2017 using federal tax rates of 21% and 35%, respectively.
Total noninterest income increased by $851,000, or 11.6%, to $8.2 million for the quarter ended March 31, 2018, as compared to $7.3 million for the quarter ended March 31, 2017, primarily as a result of higher Wealth Management revenue and higher loan related derivative income associated with the Company’s interest rate risk strategy. Noninterest income was 35.1% of total revenue for the quarter ended March 31, 2018. Wealth Management revenue increased by $764,000, or 14.2%, for the first quarter of 2018, as compared to the first quarter of 2017, primarily due to market appreciation. Wealth Management Assets under Management and Administration increased by $54.7 million, or 1.8%, from December 31, 2017 and ended at $3.1 billion as of March 31, 2018. Loan related derivative income increased $284,000 for the first quarter of 2018, as compared to the first quarter of 2017, due to the volume of derivative transactions executed in the first quarter of 2018.
Noninterest income increases were partially offset by lower gains on loans held for sale of $208,000 and lower deposit account fee income of $63,000 for the quarter ended March 31, 2018, as compared to the quarter ended March 31, 2017.
Total noninterest expense increased by $555,000, or 3.7%, to $15.5 million for the quarter ended March 31, 2018, as compared to $14.9 million for the quarter ended March 31, 2017, primarily driven by higher salaries and employee benefits expense and higher marketing expense. The increase in salaries and employee benefits expense of $917,000 was driven by the combination of increased staffing to support business initiatives, higher employee benefit costs, and the adoption of new accounting guidance (“ASU 2017-07”) for net periodic pension costs and net periodic postretirement benefit costs. The amount added to salaries and benefits expense from the adoption of ASU 2017-07 during the first quarter of 2018 was approximately $239,000, which was correspondingly recorded as a decrease in other expense during the first quarter of 2018. The adoption of ASU 2017-07 required that the Company represent the impacted line items for the first quarter of 2017. The result of this retrospective application for the first quarter of 2017 was a decrease in salaries and benefits expense of approximately $56,000 and a corresponding increase in other expense for the same amount. The increase of $168,000 in marketing expense was due to the increased focus of growing brand awareness within our markets.
Noninterest expense increases were partially offset by lower other expenses of $418,000 primarily resulting from the adoption of new accounting guidance for net periodic pension cost and net periodic postretirement benefit cost as discussed above, lower data processing costs of $93,000, and lower occupancy and equipment expenses of $26,000 for the quarter ended March 31, 2018, as compared to March 31, 2017.
Loan quality remained sound with non-performing loans totaling $1.5 million, or 0.11% of total loans outstanding as of March 31, 2018. The allowance for loan losses was $15.7 million, or 1.14% of total loans outstanding at March 31, 2018, as compared to $15.3 million, or 1.13% of total loans outstanding at year end 2017.
In accordance with the Tax Cuts and Jobs Act of 2017, the Company’s federal statutory corporate tax rate decreased from 35% to 21% effective January 1, 2018. The effective tax rate was 21.8% for the quarter ended March 31, 2018, as compared to 31.4% for the quarter ended March 31, 2017. Additionally, the Company recognized $148,000 of tax benefit resulting from the accounting for share-based payments during the first quarter of 2018.
On April 17, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.48 per share, which is payable on May 17, 2018 to shareholders of record as of the close of business on May 3, 2018. This represents an increase of $0.02 per share, as compared to $0.46 per share declared during the same quarter of 2017.
About Cambridge Bancorp
Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 128-year-old Massachusetts chartered commercial bank with $2.0 billion in assets and 10 Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, and Weston. Cambridge Trust Company is one of New England’s leaders in wealth management with $3.1 billion in client assets under management and administration. The Wealth Management group maintains offices in Boston, Massachusetts and Concord, Manchester, and Portsmouth, New Hampshire.
The accompanying unaudited condensed interim and annual consolidated financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, which is posted in the investor relations section of the Company’s website at www.cambridgetrust.com.
Certain statements herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements are intended to take advantage of the “safe harbor” provisions of the PSLRA. These statements are based on the beliefs and assumptions of management of the Company and its subsidiaries and on the information available to management at the time that these statements were made. Since these statements reflect the views of management concerning future events, these statements involve risks, uncertainties, and assumptions. As a result, actual results may differ from those contemplated by these statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Such statements may be identified by the use of words such as “believe,” “expect,” “anticipate,” “forecast,” “estimate,” “intend,” “will,” “would,” “should,” “could,” “may,” or similar words. There are a number of factors, many of which are beyond the Company’s control, that could cause actual conditions, events, or results to differ materially from those in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, changes in the interest rate environment, unfavorable or less than favorable changes in general economic conditions (nationally or regionally), our ability to continue to increase loans and deposit growth, increased competitive pressures among depository and other financial institutions, legislative and regulatory changes that adversely affect the businesses in which the Company is engaged, changes in the securities market, and other factors that are described in the Company’s filings with the Securities and Exchange Commission. Readers should not place undue reliance on these forward-looking statements, which speak only as of the date they are made. The Company disclaims any intent or obligation to update any forward-looking statements, whether in response to new information, future events, or otherwise, except as may be required by law.
CAMBRIDGE BANCORP AND SUBSIDIARIES
|Three Months Ended|
|(dollars in thousands, except per share data)|
|Interest and Dividend Income||$||16,132||$||14,673|
|Net Interest and Dividend Income||15,153||13,961|
|Provision for Loan Losses||409||30|
|Income Before Income Taxes||7,421||6,312|
|Income Tax Expense||1,616||1,984|
Data Per Common Share:
|Basic Earnings Per Share||$||1.42||$||1.07|
|Diluted Earnings Per Share||$||1.41||$||1.06|
|Dividends Declared Per Share||$||0.48||$||0.46|
|Avg. Common Shares Outstanding:|
Selected Operating Ratios:
|Net Interest Margin, FTE||3.28||%||3.26||%|
|Cost of Funds||0.21||%||0.16||%|
|Cost of Interest Bearing Liabilities||0.31||%||0.24||%|
|Cost of Deposits||0.22||%||0.17||%|
|Return on Average Assets||1.21||%||0.95||%|
|Return on Average Equity||15.80||%||12.93||%|
|March 31,||December 31,||March 31,|
|Allowance for Loan Losses||15,732||15,320||15,289|
|Allowance to Total Loans||1.14||%||1.13||%||1.17||%|
|Total Shareholders’ Equity||150,873||147,957||138,427|
|Wealth Management AUM||$||2,974,798||$||2,971,322||$||2,681,102|
|Wealth Management AUM & AUA||$||3,140,370||$||3,085,669||$||2,797,430|
|Book Value Per Share||$||36.79||$||36.24||$||34.00|
CAMBRIDGE BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
|March 31, 2018||December 31, 2017|
|(dollars in thousands, except par value)|
|Cash and cash equivalents||$||56,265||$||103,591|
|Available for sale, at fair value (amortized cost $203,592 and $208,911, respectively)||197,935||205,017|
|Held to maturity, at amortized cost (fair value $262,432 and $233,554, respectively)||264,409||232,188|
|Total investment securities||462,344||437,205|
|Loans held for sale, at lower of cost or fair value||—||—|
|Commercial & Industrial||75,365||65,295|
|Less: allowance for loan losses||(15,732||)||(15,320||)|
|Stock in FHLB of Boston, at cost||4,242||4,242|
|Bank owned life insurance||30,535||31,083|
|Banking premises and equipment, net||9,316||9,310|
|Deferred income taxes, net||7,910||8,273|
|Accrued interest receivable||5,059||5,128|
|Interest bearing checking||436,841||462,957|
|Certificates of deposit||146,247||159,830|
Common stock, par value $1.00; Authorized 10,000,000 shares;
shares and 4,082,188 shares, respectively
|Additional paid-in capital||36,065||35,663|
|Accumulated other comprehensive loss||(8,489||)||(5,881||)|
|Total shareholders’ equity||150,873||147,957|
|Total liabilities and shareholders’ equity||$||1,961,750||$||1,949,934|
CAMBRIDGE BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
|For the Three Months Ended March 31,|
|(dollars in thousands, except share data)|
|Interest and dividend income|
|Interest on taxable loans||$||13,378||$||12,373|
|Interest on tax-exempt loans||96||131|
|Interest on taxable investment securities||1,714||1,394|
|Interest on tax-exempt investment securities||622||665|
|Dividends on FHLB of Boston stock||51||42|
|Interest on overnight investments||271||68|
|Total interest and dividend income||16,132||14,673|
|Interest on deposits||962||691|
|Interest on borrowed funds||17||21|
|Total interest expense||979||712|
|Net interest and dividend income||15,153||13,961|
|Provision for loan losses||409||30|
Net interest and dividend income after provision for
|Wealth management revenue||6,126||5,362|
|Deposit account fees||750||813|
|ATM/Debit card income||271||259|
|Bank owned life insurance income||128||162|
|(Loss) gain on disposition of investment securities||—||(2||)|
|Gain on loans held for sale||27||235|
|Loan related derivative income||472||188|
|Total noninterest income||8,178||7,327|
|Salaries and employee benefits||10,073||9,156|
|Occupancy and equipment||2,227||2,253|
|Total noninterest expense||15,501||14,946|
|Income before income taxes||7,421||6,312|
|Income tax expense||1,616||1,984|
|Weighted average number of shares outstanding, basic||4,053,355||4,011,925|
|Weighted average number of shares outstanding, diluted||4,071,975||4,050,791|
|Basic earnings per share||$||1.42||$||1.07|
|Diluted earnings per share||$||1.41||$||1.06|
CAMBRIDGE BANCORP AND SUBSIDIARIES
MARGIN & YIELD ANALYSIS
|Three Months Ended|
|March 31, 2018||March 31, 2017|
|(dollars in thousands)|
|Securities available for sale (3)|
|Securities held to maturity|
|Cash and due from banks||76,931||271||1.43||46,427||68||0.59|
|Total interest-earning assets (4)||1,893,212||16,272||3.49||%||1,785,121||15,060||3.42||%|
|Non interest-earning assets||68,608||71,278|
|Allowance for loan losses||(15,479||)||(15,248||)|
|LIABILITIES AND SHAREHOLDERS’ EQUITY|
|Money market accounts||65,749||25||0.15||70,444||26||0.15|
|Certificates of deposit||152,880||341||0.90||170,338||354||0.84|
|Total interest-bearing deposits||1,266,628||962||0.31||1,218,137||691||0.23|
|Other borrowed funds||3,551||17||1.94||4,919||21||1.73|
|Total interest-bearing liabilities||1,270,179||979||0.31||%||1,223,056||712||0.24||%|
|Total liabilities & shareholders’ equity||$||1,946,341||$||1,841,151|
|Net interest income on a fully taxable equivalent basis||15,293||14,348|
|Less taxable equivalent adjustment||(191||)||(429||)|
|Net interest income||$||15,102||$||13,919|
|Net interest spread (5)||3.17||%||3.19||%|
|Net interest margin (6)||3.28||%||3.26||%|
(1) Annualized on a fully taxable equivalent basis calculated using a
federal tax rate of 21% in 2018 and 35% in 2017.
(2) Nonaccrual loans are included in average amounts outstanding.
(3) Average balances of securities available for sale calculated utilizing amortized cost.
(4) Federal Home Loan Bank stock balance and dividend income is excluded from interest-earning assets.
(5) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(6) Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets.