Cambridge Bancorp Announces First Quarter 2020 Earnings and Declares Dividend

CAMBRIDGE, Mass.--()--Cambridge Bancorp (NASDAQ: CATC) (the “Company”), the parent company of Cambridge Trust Company (the “Bank”), today announced unaudited net income of $7,232,000 for the quarter ended March 31, 2020, an increase of $1,034,000, or 16.7%, compared to net income of $6,198,000 for the quarter ended March 31, 2019. Diluted earnings per share were $1.33 for the first quarter of 2020, representing a 10.7% decrease over diluted earnings per share of $1.49 for the same quarter last year.

Excluding non-operating expenses, operating net income was $7,434,000 for the quarter ended March 31, 2020, an increase of $1,108,000, or 17.5%, compared to operating net income of $6,326,000 for the quarter ended March 31, 2019. Operating diluted earnings per share were $1.37 for the first quarter of 2020, representing a 10.5% decrease over operating diluted earnings per share of $1.53 for the same quarter last year.

First quarter 2020 highlights as compared to the fourth quarter of 2019:

  • Loan growth of $29.1 million, or 1.3%
  • Deposit growth of $31.5 million, or 1.3%
  • Tangible common equity of 9.34%, growth of 4.6%
  • Tangible book value per share of $48.60, growth of 4.2%
  • Prudently increased the allowance for credit losses by $2.0 million primarily as a result of the COVID-19 pandemic
  • Asset quality remains strong with ratio of non-performing loans to total loans of 0.15% and non-performing assets to total assets of 0.20%

COVID-19 response and actions:

During the first quarter of 2020, the Company announced a range of initiatives to help clients, communities, and employees navigate the many financial challenges caused by the novel corona virus (“COVID-19”) pandemic. As a result of the COVID-19 crisis, the Company has taken the following steps to provide support to any client experiencing a hardship during this uncertain time.

For Banking Clients:

  • Access to banking offices by appointment
  • Increased telephone banking support through the Client Resource Center
  • Waived penalties for early certificate of deposit withdrawals
  • Increased ATM withdrawal limits and debit card spending
  • Convenient and secure digital platforms for remote banking

For Consumer Loan Clients:

  • 90-day postponement of residential loan foreclosures
  • Payment deferrals on mortgages and home equity loans, based on need
  • Forgiving late charges for consumer loan payments

For Business and Commercial Banking Clients:

  • Participating in the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) lending program, the Company has processed and obtained SBA approval for 372 loan applications totaling $115.0 million as of April 17, 2020.
  • Increased remote deposit limits
  • Implemented payment relief options for commercial loans, based on need
  • Providing assistance with access to government support and lending programs
  • Treasury management services to support business continuity
  • Secure online and mobile banking platforms

For Wealth Management Clients:

The Company’s wealth management team is closely monitoring the economy and financial markets and continues to actively manage clients’ portfolios through the current volatility. We have urged clients to reach out to their Relationship Manager directly with any questions or concerns.

For Communities:

In addition to the 250 plus organizations the Company supports through its annual charitable giving, the Company is donating an additional $250,000 to organizations supporting those most impacted by COVID-19.

For Employees:

The Company is taking precautions to protect the health and safety of its staff, while continuing to provide uninterrupted service to clients. Efforts include:

  • Temporary closure of all banking office lobbies, with services remaining available by appointment
  • Increased cleaning of all office locations
  • 95% of staff working remotely with the exception of essential banking office employees
  • Teleconferencing for meetings

“We are focused on employee safety and in assisting our clients and communities. During the first quarter, our team worked tirelessly to execute remote operation while continuing to meet the need of clients, whether basic banking needs, loan modification requests or the implementation of the Small Business Administration PPP lending program. I thank my colleagues for their incredible innovation, determination, and effort. I thank clients for their patience and heartfelt messages of concern and appreciation,” noted Denis K. Sheahan, Chairman and CEO.

Balance Sheet

Total assets remained stable from December 31, 2019 and were $2.9 billion as of March 31, 2020.

Cash and cash equivalents decreased by $18.3 million from December 31, 2019 and were $43.0 million as of March 31, 2020.

Total loans increased by $29.1 million, or 1.3%, from December 31, 2019 and stood at $2.3 billion as of March 31, 2020. Loan originations remained strong in the first quarter of 2020; however, expectations for growth moving forward is unpredictable in the current environment.

  • Residential real estate loans decreased by $463,000 from $917.6 million at December 31, 2019 to $917.1 million at March 31, 2020.
  • Commercial real estate loans increased by $29.2 million, from $1.06 billion at December 31, 2019 to $1.09 billion at March 31, 2020.
  • Commercial & industrial loans decreased by $5.6 million from $133.2 million at December 31, 2019 to $127.6 million at March 31, 2020.

The Company’s total investment securities portfolio decreased by $33.6 million, or 8.4%, from $398.5 million at December 31, 2019 to $364.9 million at March 31, 2020 as the Company used investment cash flow to pay down wholesale funding.

Total deposits grew by $31.5 million, or 1.3%, to $2.4 billion at March 31, 2020.

  • Core deposits, which the Company defines as all deposits other than certificates of deposit, decreased by $5.6 million, or 0.3%, to $2.2 billion at March 31, 2020.
  • The cost of total deposits for the quarter ended March 31, 2020 was 0.54%, as compared to 0.68% for the quarter ended December 31, 2019, a reduction of 14 basis points driven by reduced interest rates during 2020. At March 31, 2020, the spot cost of deposits was 0.27%.

Certificates of deposit totaled $219.4 million at March 31, 2020, an increase of $37.1 million from $182.3 million at December 31, 2019, primarily due to an increase in short-term brokered certificates of deposit. Total brokered certificates of deposit, which are included within certificates of deposit, were $58.8 million and $7.1 million at March 31, 2020 and December 31, 2019, respectively.

Short-term borrowings were $75.1 million as of March 31, 2020, representing a $60.5 million, or 44.6%, decrease from $135.7 million at December 31, 2019. During the first quarter, the Company utilized cash flow and maturities from the investment portfolio to reduce wholesale funding.

Net Interest and Dividend Income

For the quarter ended March 31, 2020, net interest and dividend income before the provision for loan losses increased by $6.1 million, or 37.8%, to $22.4 million, as compared to $16.3 million for the quarter ended March 31, 2019, primarily due to loan growth.

  • Interest on loans increased by $7.2 million, or 43.7%, which was primarily a result of net loan growth, both organic and due to the merger with Optima in 2019.
  • Interest on deposits increased by $628,000, or 25.1%, as a result of the merger with Optima and due to strong core deposit growth during 2019.

The Company’s net interest margin, on a fully taxable equivalent basis, increased 20 basis points to 3.39% for the quarter ended March 31, 2020, as compared to 3.19% for the quarter ended December 31, 2019. During the quarter, the Company took steps to reduce the cost of deposits to mitigate the impact of falling interest rates on the net interest margin.

Provision for Credit Losses

During the three months ended March 31, 2020, the Company recorded provision for credit losses of $2.0 million, primarily as a result of the expected impact of COVID-19 virus within the current expected credit losses (“CECL”) methodology which is described in more detail below. During the first quarter of 2020, the Company recorded $265,000 in net loan charge-offs.

Noninterest Income

Total noninterest income increased by $861,000, or 10.8%, to $8.8 million for the quarter ended March 31, 2020, as compared to $8.0 million for the quarter ended March 31, 2019, primarily as a result of increases in Wealth Management revenue, loan related derivative income and higher gains on loans sold. Noninterest income was 28.2% of total revenue for the quarter ended March 31, 2020.

  • Wealth Management revenue increased by $503,000, or 8.2% to $6.6 million for the first quarter of 2020, as compared to $6.1 million for the first quarter of 2019. Wealth Management Assets under Management and Administration were $3.1 billion as of March 31, 2020, a decrease of $381.6 million, or 11.1%, from December 31, 2019, primarily as a result of reductions within the equity markets during the first quarter of 2020.
  • Loan related derivative income increased by $74,000, or 17.0%, to $510,000 for the first quarter of 2020, as compared to $436,000 for the first quarter of 2019, due to increased loan volume and the associated derivative transactions executed throughout the quarter.
  • Gain on loans sold increased by $103,000, as compared to the first quarter of 2019, due to increased sales of residential mortgages.

Noninterest Expense

Total noninterest expense increased by $3.6 million, or 21.7%, to $19.9 million for the quarter ended March 31, 2020, as compared to $16.4 million for the quarter ended March 31, 2019, primarily driven by increases in salaries and benefits expense, occupancy and equipment expense, and data processing expense.

  • Salaries and employee benefits expense increased $2.2 million driven by merit increases, increased staffing related to the Optima merger, additions to support business initiatives, and higher employee benefit costs.
  • Occupancy and equipment expense increased $477,000 due to the operation of additional branches and office space as a result of the Optima merger that was not reflected within the first quarter of 2019.
  • Data processing expense increased $339,000 due to the merger with Optima and investments made in technology.

Asset Quality

Non-performing loans totaled $3.4 million, or 0.15% of total loans outstanding as of March 31, 2020. The allowance for loan losses was $20.2 million, or 0.89% of total loans outstanding at March 31, 2020, as compared to $18.2 million, or 0.82% of total loans outstanding at year end 2019. The increase in the allowance to total loans ratio during 2020 was primarily due to the expected impact of the COVID-19 pandemic on loan losses going forward. The Company currently holds $2.5 million in real estate owned property, comprised of two properties, one of which was a previously disclosed acquired commercial real estate loan in New Hampshire.

CECL

The Company adopted ASU 2016-13 - Measurement of Credit Losses on Financial Instruments, in the first quarter of 2020 and recorded a one-time transition amount of $347,000, net of taxes, as a decrease to retained earnings. This amount represents additional reserves for loans and unfunded commitments that existed upon adopting the new guidance. The adoption of ASU 2016-13 did not have a material impact on the Company’s regulatory capital ratios. The CECL methodology requires earlier recognition of credit losses using a lifetime credit loss measurement approach for financial assets carried at amortized cost. The CECL methodology also requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates including economic factors. During the first quarter 2020, the Company increased the allowance for credit losses by approximately $2.0 million primarily due to the forecasted impact of the COVID-19 pandemic on the economic factors utilized within the CECL methodology. This increase was based on the information available to the Company at quarter end and will be updated as greater clarity around the impact of the COVID-19 virus becomes available.

COVID-19

In an effort to better inform shareholders of the potential exposures to the COVID-19 pandemic, we have provided additional detail in the financial section of this document regarding the Bank’s loan portfolio that may be of use to investors.

Forbearance/Modifications. The Company has instituted payment deferral programs to aid existing borrowers with payment forbearance. For commercial and consumer borrowers, we have endeavored to provide payment relief for 90 days for borrowers who have been impacted by the COVID-19 virus and have requested payment assistance. We expect to continue to accrue interest on these loans during the payment deferral period. As of April 17, 2020, the Company has approved 83 commercial loan payment relief requests totaling $31.5 million, or 2.6% of the total commercial loan portfolio and 62 consumer loan payment relief requests totaling $21.0 million, or 2.0% of the total consumer loan portfolio.

Income Taxes

The Company’s effective tax rate was 22.2% for the quarter ended March 31, 2020, as compared to 21.9% for the quarter ended March 31, 2019. The Coronavirus Aid, Relief, and Economic Security (the “CARES Act”) was signed into law on March 27, 2020, to help stimulate the United States economy. One of the business tax provisions of the CARES Act included allowing net operating losses (“NOL”) generated by the Company in tax years 2018 and 2019 to be carried back up to five years at the tax rates in effect during those periods, rather than carried forward at current federal tax rates of 21%. The effect of the Act allowed the Company to recognize lower tax expense associated with NOL carryforwards from 2018 and 2019 (as a result of the Optima merger) and combined with adjustments to state NOL rates, resulted in a benefit of $372,000 in the first quarter of 2020. Additionally, the Company recognized $21,000 of tax benefit resulting from the accounting for share-based payments during the first quarter of 2020.

Dividend & Capital

On April 21, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.53 per share, which is payable on May 21, 2020, to shareholders of record as of the close of business on May 7, 2020. This represents an increase of $0.02 per share, as compared to the $0.51 per share dividend paid in same quarter of 2019.

The Company’s total shareholders’ equity to total assets ratio increased by 40 basis points to 10.44% as of March 31, 2020, as compared to 10.04% as of December 31, 2019. Book value per share grew by $1.90, or 3.58%, to $54.96 as of March 31, 2020, as compared to $53.06 as of December 31, 2019.

The Company’s ratio of tangible common equity to tangible assets increased 4.5%, to 9.34%, at March 31, 2020, from 8.93% at December 31, 2019, primarily due to the Company’s earnings combined with increased valuations of interest rate derivative positions and available for sale investment securities. Tangible book value per share grew by $1.94, or 4.2%, to $48.60 as of March 31, 2020, as compared to $46.66 as of December 31, 2019.

Merger Update

The Company is awaiting regulatory approvals for the proposed merger between the Company and Wellesley Bancorp, Inc. (“Wellesley”). The shareholders of Wellesley and the Company both approved the merger at a special meeting held on March 12, 2020, and March 16, 2020, respectively. The closing of the merger is expected to occur in the second quarter of 2020, subject to customary closing conditions. The addition of Wellesley’s six banking offices will bring the Company’s total full-service banking office count to 22 and allow the Company to enhance and expand the Company’s Greater Boston presence with the addition of Wellesley’s full-service banking offices in Norfolk, Middlesex, and Suffolk Counties.

About Cambridge Bancorp

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 130-year-old Massachusetts chartered commercial bank with approximately $2.9 billion in assets as of March 31, 2020, and a total of 16 Massachusetts and New Hampshire locations. Cambridge Trust Company is one of New England’s leaders in private banking and wealth management with $3.1 billion in client assets under management and administration as of March 31, 2020. 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.

Forward-looking Statements

Certain statements herein may constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about the Company and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company’s future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, the impact of any laws or regulations applicable to the Company, and measures being taken in response to the COVID-19 pandemic and the impact of the COVID-19 pandemic on the Company’s business are forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following: the current global economic uncertainty and economic conditions being less favorable than expected, disruptions to the credit and financial markets, changes in the Company’s accounting policies or in accounting standards, weakness in the real estate market, legislative, regulatory or accounting changes that adversely affect the Company’s business and/or competitive position, the Dodd-Frank Act’s consumer protection regulations, the duration and scope of the COVID-19 pandemic and its impact on levels of consumer confidence, actions governments, businesses and individuals take in response to the COVID-19 pandemic, the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies and economic activity, the pace of recovery when the COVID-19 pandemic subsides, challenges from the integration of the Company and Optima resulting in the combined business not operating as effectively as expected, disruptions in the Company’s ability to access the capital markets, the businesses of the Company and Wellesley may not be combined successfully, or such combination may take longer than expected, the cost savings of the merger with Wellesley may not be fully realized or may take longer to realize than expected, operating costs, customer loss and business disruption following the Wellesley merger, including adverse effects on relationships with employees, may be greater than expected, governmental approvals of the merger with Wellesley may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger, , and other factors that are described in the Company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year end December 31, 2019, which the Company filed on March 16, 2020. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. You are cautioned not to place undue reliance on these forward-looking statements.

Non-GAAP Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). This information includes operating net income and operating diluted earnings per share, tangible book value per share and the tangible common equity ratio, and return on average assets, return on tangible common equity, and efficiency ratio on an operating basis.

Operating net income and operating diluted earnings per share exclude items that management believes are unrelated to its core banking business such as merger, acquisition, and capital raise expenses, gain (loss) on sale of investment securities, and other items. The Company’s management uses operating net income and operating diluted earnings per share to measure the strength of the Company’s core banking business and to identify trends that may to some extent be obscured by such excluded gains or losses.

Management also supplements its evaluation of financial performance with analysis of tangible book value per share (which is computed by dividing stockholders’ equity less goodwill and acquisition related intangible assets, or “tangible common equity,” by common shares outstanding), the tangible common equity ratio (which is computed by dividing tangible common equity by tangible assets, defined as total assets less goodwill and acquisition related intangibles),analysis of return on average assets and return on tangible common equity on an operating basis and with operating efficiency ratio (which is computed by dividing noninterest expense adjusted for nonoperating expenses and total revenue adjusted for gain/loss on investment securities). The Company has included information on tangible book value per share, the tangible common equity ratio, and return on average assets and return on tangible common equity on an operating basis because management believes that investors may find it useful to have access to the same analytical tool used by management. As a result of merger and acquisition activity, the Company has recognized goodwill and other intangible assets in conjunction with business combination accounting principles. Excluding the impact of goodwill and other intangibles in measuring asset and capital values for the ratios provided, along with other bank standard capital ratios, provides a framework to compare the capital adequacy of the Company to other companies in the financial services industry.

These non-GAAP measures should not be viewed as a substitute for operating results and other financial measures determined in accordance with GAAP. An item which management deems to be non-core and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP performance measures, including operating net income, operating diluted earnings per share, tangible book value per share, the tangible common equity ratio, and return on average assets, return on average equity, and efficiency ratio on an operating basis are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented under “GAAP to Non-GAAP Reconciliations.”

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED QUARTERLY RESULTS

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2019

 

 

 

(dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and Dividend Income

 

$

26,095

 

 

$

26,415

 

 

$

19,118

 

Interest Expense

 

 

3,695

 

 

 

4,807

 

 

 

2,857

 

Net Interest and Dividend Income

 

 

22,400

 

 

 

21,608

 

 

 

16,261

 

Provision (Credit) for Credit Losses

 

 

2,000

 

 

 

331

 

 

 

(93

)

Noninterest Income

 

 

8,818

 

 

 

9,933

 

 

 

7,957

 

Noninterest Expense

 

 

19,925

 

 

 

21,428

 

 

 

16,373

 

Income Before Income Taxes

 

 

9,293

 

 

 

9,782

 

 

 

7,938

 

Income Tax Expense

 

 

2,061

 

 

 

2,673

 

 

 

1,740

 

Net Income

 

$

7,232

 

 

$

7,109

 

 

$

6,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Net Income*

 

$

7,434

 

 

$

7,922

 

 

$

6,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data Per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

1.34

 

 

$

1.43

 

 

$

1.51

 

Diluted Earnings Per Share

 

 

1.33

 

 

 

1.42

 

 

 

1.49

 

Operating Diluted Earnings Per Share*

 

 

1.37

 

 

 

1.58

 

 

 

1.53

 

Dividends Declared Per Share

 

 

0.53

 

 

 

0.51

 

 

 

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avg. Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

5,397,040

 

 

 

4,939,973

 

 

 

4,072,805

 

Diluted

 

 

5,432,099

 

 

 

4,980,439

 

 

 

4,106,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Performance Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Margin, FTE

 

 

3.39

%

 

 

3.19

%

 

 

3.26

%

Cost of Funds

 

 

0.56

%

 

 

0.71

%

 

 

0.57

%

Cost of Interest Bearing Liabilities

 

 

0.80

%

 

 

1.01

%

 

 

0.82

%

Cost of Deposits

 

 

0.54

%

 

 

0.68

%

 

 

0.55

%

Cost of Deposits excluding Wholesale Deposits

 

 

0.53

%

 

 

0.68

%

 

 

0.50

%

Return on Average Assets

 

 

1.02

%

 

 

0.98

%

 

 

1.18

%

Return on Average Earning Assets

 

 

1.09

%

 

 

1.05

%

 

 

1.24

%

Return on Average Equity

 

 

9.99

%

 

 

11.08

%

 

 

14.90

%

Efficiency Ratio*

 

 

63.83

%

 

 

67.94

%

 

 

67.61

%

Operating Efficiency Ratio*

 

 

63.01

%

 

 

65.27

%

 

 

66.99

%

Operating Return on Tang Common Equity*

 

 

11.65

%

 

 

14.29

%

 

 

15.25

%

Operating Return on Average Assets*

 

 

1.05

%

 

 

1.10

%

 

 

1.20

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

2,852,629

 

 

$

2,855,563

 

 

$

2,138,548

 

Total Loans

 

 

2,255,802

 

 

 

2,226,728

 

 

 

1,555,154

 

Non-Performing Loans

 

 

3,379

 

 

 

5,651

 

 

 

626

 

Allowance for Credit Losses

 

 

20,163

 

 

 

18,180

 

 

 

16,652

 

Allowance to Total Loans

 

 

0.89

%

 

 

0.82

%

 

 

1.07

%

Net charge-offs to Total Loans (annualized)

 

 

0.05

%

 

 

0.07

%

 

 

0.01

%

Total Deposits

 

 

2,390,359

 

 

 

2,358,878

 

 

 

1,902,383

 

Total Shareholders’ Equity

 

 

297,759

 

 

 

286,561

 

 

 

172,268

 

Total Shareholders’ Equity to Total Assets

 

 

10.44

%

 

 

10.04

%

 

 

8.06

%

Wealth Management AUM

 

 

2,932,393

 

 

 

3,287,371

 

 

 

2,990,375

 

Wealth Management AUM & AUA

 

 

3,071,266

 

 

 

3,452,852

 

 

 

3,099,478

 

Book Value Per Share

 

$

54.96

 

 

$

53.06

 

 

$

41.78

 

Tangible Common Equity Ratio*

 

 

9.34

%

 

 

8.93

%

 

 

8.04

%

Tangible Book Value Per Share*

 

$

48.60

 

 

$

46.66

 

 

$

41.68

 

* See GAAP to Non-GAAP Reconciliations

 

 

 

 

 

 

 

 

 

 

 

 

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31, 2020

 

December 31, 2019

 

 

(dollars in thousands, except par value)

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

42,989

 

 

$

61,335

 

Investment securities

 

 

 

 

 

 

 

 

Available for sale, at fair value (amortized cost $115,550 and $141,109, respectively)

 

 

117,947

 

 

 

140,330

 

Held to maturity, at amortized cost (fair value $256,975 and $264,114, respectively)

 

 

246,906

 

 

 

258,172

 

Total investment securities

 

 

364,853

 

 

 

398,502

 

Loans held for sale, at lower of cost or fair value

 

 

2,875

 

 

 

1,546

 

Loans

 

 

 

 

 

 

 

 

Residential mortgage

 

 

917,103

 

 

 

917,566

 

Commercial mortgage

 

 

1,089,796

 

 

 

1,060,574

 

Home equity

 

 

83,066

 

 

 

80,675

 

Commercial & Industrial

 

 

127,648

 

 

 

133,236

 

Consumer

 

 

38,189

 

 

 

34,677

 

Total loans

 

 

2,255,802

 

 

 

2,226,728

 

Less: allowance for credit losses

 

 

(20,163

)

 

 

(18,180

)

Net loans

 

 

2,235,639

 

 

 

2,208,548

 

Federal Home Loan Bank of Boston Stock, at cost

 

 

6,268

 

 

 

7,854

 

Bank owned life insurance

 

 

37,479

 

 

 

37,319

 

Banking premises and equipment, net

 

 

14,593

 

 

 

14,756

 

Right-of-use asset operating leases

 

 

32,312

 

 

 

33,587

 

Deferred income taxes, net

 

 

3,721

 

 

 

8,229

 

Accrued interest receivable

 

 

6,872

 

 

 

7,052

 

Goodwill

 

 

31,206

 

 

 

31,206

 

Merger related intangibles, net

 

 

3,248

 

 

 

3,338

 

Other assets

 

 

70,574

 

 

 

42,291

 

Total assets

 

$

2,852,629

 

 

$

2,855,563

 

Liabilities

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

Demand

 

$

608,240

 

 

$

630,593

 

Interest bearing checking

 

 

506,654

 

 

 

450,098

 

Money market

 

 

175,158

 

 

 

181,406

 

Savings

 

 

880,944

 

 

 

914,499

 

Certificates of deposit

 

 

219,363

 

 

 

182,282

 

Total deposits

 

 

2,390,359

 

 

 

2,358,878

 

Short-term borrowings

 

 

75,147

 

 

 

135,691

 

Long-term borrowings

 

 

 

 

 

 

Operating lease liabilities

 

 

33,813

 

 

 

35,054

 

Other liabilities

 

 

55,551

 

 

 

39,379

 

Total liabilities

 

 

2,554,870

 

 

 

2,569,002

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 5,417,983 shares and 5,400,868 shares, respectively

 

 

5,418

 

 

 

5,401

 

Additional paid-in capital

 

 

137,186

 

 

 

136,766

 

Retained earnings

 

 

150,891

 

 

 

146,875

 

Accumulated other comprehensive income (loss)

 

 

4,264

 

 

 

(2,481

)

Total shareholders’ equity

 

 

297,759

 

 

 

286,561

 

Total liabilities and shareholders’ equity

 

$

2,852,629

 

 

$

2,855,563

 

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

2020

 

2019

 

2019

 

 

 

(dollars in thousands, except share data)

 

 

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on taxable loans

 

$

23,338

 

 

$

23,463

 

 

$

16,284

 

 

Interest on tax-exempt loans

 

 

198

 

 

 

199

 

 

 

89

 

 

Interest on taxable investment securities

 

 

1,723

 

 

 

1,889

 

 

 

1,980

 

 

Interest on tax-exempt investment securities

 

 

595

 

 

 

580

 

 

 

571

 

 

Dividends on FHLB of Boston stock

 

 

101

 

 

 

109

 

 

 

76

 

 

Interest on overnight investments

 

 

140

 

 

 

175

 

 

 

118

 

 

Total interest and dividend income

 

 

26,095

 

 

 

26,415

 

 

 

19,118

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

3,129

 

 

 

4,152

 

 

 

2,501

 

 

Interest on borrowed funds

 

 

566

 

 

 

655

 

 

 

356

 

 

Total interest expense

 

 

3,695

 

 

 

4,807

 

 

 

2,857

 

 

Net interest and dividend income

 

 

22,400

 

 

 

21,608

 

 

 

16,261

 

 

Provision (Credit) for Credit Losses

 

 

2,000

 

 

 

331

 

 

 

(93

)

 

Net interest and dividend income after provision for credit losses

 

 

20,400

 

 

 

21,277

 

 

 

16,354

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth management revenue

 

 

6,627

 

 

 

6,923

 

 

 

6,124

 

 

Deposit account fees

 

 

791

 

 

 

790

 

 

 

738

 

 

ATM/Debit card income

 

 

307

 

 

 

367

 

 

 

276

 

 

Bank owned life insurance income

 

 

160

 

 

 

158

 

 

 

127

 

 

Gain (loss) on disposition of investment securities

 

 

 

 

 

 

 

 

(87

)

 

Gain on loans sold

 

 

119

 

 

 

679

 

 

 

16

 

 

Loan related derivative income

 

 

510

 

 

 

103

 

 

 

436

 

 

Other income

 

 

304

 

 

 

913

 

 

 

327

 

 

Total noninterest income

 

 

8,818

 

 

 

9,933

 

 

 

7,957

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

13,016

 

 

 

13,141

 

 

 

10,827

 

 

Occupancy and equipment

 

 

2,807

 

 

 

3,042

 

 

 

2,330

 

 

Data processing

 

 

1,685

 

 

 

1,700

 

 

 

1,346

 

 

Professional services

 

 

859

 

 

 

1,212

 

 

 

807

 

 

Marketing

 

 

256

 

 

 

585

 

 

 

404

 

 

FDIC insurance

 

 

179

 

 

 

(78

)

 

 

 

 

Nonoperating expenses

 

 

253

 

 

 

841

 

 

 

91

 

 

Other expenses

 

 

870

 

 

 

985

 

 

 

568

 

 

Total noninterest expense

 

 

19,925

 

 

 

21,428

 

 

 

16,373

 

 

Income before income taxes

 

 

9,293

 

 

 

9,782

 

 

 

7,938

 

 

Income tax expense

 

 

2,061

 

 

 

2,673

 

 

 

1,740

 

 

Net income

 

$

7,232

 

 

 

7,109

 

 

 

6,198

 

 

Share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, basic

 

 

5,397,040

 

 

 

4,939,973

 

 

 

4,072,805

 

 

Weighted average number of shares outstanding, diluted

 

 

5,432,099

 

 

 

4,980,439

 

 

 

4,106,658

 

 

Basic earnings per share

 

$

1.34

 

 

$

1.43

 

 

$

1.51

 

 

Diluted earnings per share

 

$

1.33

 

 

$

1.42

 

 

$

1.49

 

 

CAMBRIDGE BANCORP AND SUBSIDIARIES

MARGIN & YIELD ANALYSIS

 

 

 

Three Months Ended

 

 

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

 

 

 

Average

Balance

 

Interest

Income/

Expenses (1)

 

Rate

Earned/

Paid (1)

 

Average

Balance

 

Interest

Income/

Expenses (1)

 

Rate

Earned/

Paid (1)

 

Average

Balance

 

Interest

Income/

Expenses (1)

 

Rate

Earned/

Paid (1)

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

$

2,204,862

 

 

$

23,338

 

 

 

4.26

%

 

$

2,201,984

 

 

$

23,463

 

 

 

4.23

%

 

$

1,543,585

 

 

$

16,284

 

 

 

4.28

%

Tax-exempt

 

 

23,605

 

 

 

250

 

 

 

4.26

 

 

 

25,344

 

 

 

253

 

 

 

3.96

 

 

 

9,743

 

 

 

112

 

 

 

4.66

 

Securities available for sale (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

133,402

 

 

 

660

 

 

 

1.99

 

 

 

147,852

 

 

 

722

 

 

 

1.94

 

 

 

164,607

 

 

 

712

 

 

 

1.75

 

Securities held to maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

169,433

 

 

 

1,063

 

 

 

2.52

 

 

 

187,584

 

 

 

1,167

 

 

 

2.47

 

 

 

209,347

 

 

 

1,268

 

 

 

2.46

 

Tax-exempt

 

 

83,193

 

 

 

754

 

 

 

3.65

 

 

 

78,172

 

 

 

734

 

 

 

3.73

 

 

 

73,851

 

 

 

723

 

 

 

3.97

 

Cash and cash equivalents

 

 

59,845

 

 

 

140

 

 

 

0.94

 

 

 

57,036

 

 

 

175

 

 

 

1.22

 

 

 

33,025

 

 

 

118

 

 

 

1.45

 

Total interest-earning assets (4)

 

 

2,674,340

 

 

 

26,205

 

 

 

3.94

%

 

 

2,697,972

 

 

 

26,514

 

 

 

3.90

%

 

 

2,034,158

 

 

 

19,217

 

 

 

3.83

%

Non interest-earning assets

 

 

192,184

 

 

 

 

 

 

 

 

 

 

 

188,557

 

 

 

 

 

 

 

 

 

 

 

114,505

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(18,423

)

 

 

 

 

 

 

 

 

 

 

(18,373

)

 

 

 

 

 

 

 

 

 

 

(16,688

)

 

 

 

 

 

 

 

 

Total assets

 

$

2,848,101

 

 

 

 

 

 

 

 

 

 

$

2,868,156

 

 

 

 

 

 

 

 

 

 

$

2,131,975

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Checking accounts

 

$

457,189

 

 

$

159

 

 

 

0.14

%

 

$

427,475

 

 

$

121

 

 

 

0.11

%

 

$

391,863

 

 

$

82

 

 

 

0.08

%

Savings accounts

 

 

888,973

 

 

 

1,772

 

 

 

0.80

 

 

 

916,575

 

 

 

2,420

 

 

 

1.05

 

 

 

688,951

 

 

 

1,486

 

 

 

0.87

 

Money market accounts

 

 

193,048

 

 

 

449

 

 

 

0.94

 

 

 

216,858

 

 

 

678

 

 

 

1.24

 

 

 

130,226

 

 

 

380

 

 

 

1.18

 

Certificates of deposit

 

 

187,318

 

 

 

749

 

 

 

1.61

 

 

 

204,654

 

 

 

933

 

 

 

1.81

 

 

 

153,257

 

 

 

553

 

 

 

1.46

 

Total interest-bearing deposits

 

 

1,726,528

 

 

 

3,129

 

 

 

0.73

 

 

 

1,765,562

 

 

 

4,152

 

 

 

0.93

 

 

 

1,364,297

 

 

 

2,501

 

 

 

0.74

 

Other borrowed funds

 

 

127,389

 

 

 

566

 

 

 

1.79

 

 

 

125,368

 

 

 

655

 

 

 

2.07

 

 

 

54,124

 

 

 

356

 

 

 

2.67

 

Total interest-bearing liabilities

 

 

1,853,917

 

 

 

3,695

 

 

 

0.80

%

 

 

1,890,930

 

 

 

4,807

 

 

 

1.01

%

 

 

1,418,421

 

 

 

2,857

 

 

 

0.82

%

Non-interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

622,892

 

 

 

 

 

 

 

 

 

 

 

645,807

 

 

 

 

 

 

 

 

 

 

 

484,068

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

80,089

 

 

 

 

 

 

 

 

 

 

 

76,876

 

 

 

 

 

 

 

 

 

 

 

60,810

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

2,556,898

 

 

 

 

 

 

 

 

 

 

 

2,613,613

 

 

 

 

 

 

 

 

 

 

 

1,963,299

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

291,203

 

 

 

 

 

 

 

 

 

 

 

254,543

 

 

 

 

 

 

 

 

 

 

 

168,676

 

 

 

 

 

 

 

 

 

Total liabilities & shareholders’ equity

 

$

2,848,101

 

 

 

 

 

 

 

 

 

 

$

2,868,156

 

 

 

 

 

 

 

 

 

 

$

2,131,975

 

 

 

 

 

 

 

 

 

Net interest income on a fully taxable equivalent basis

 

 

 

 

 

 

22,510

 

 

 

 

 

 

 

 

 

 

 

21,707

 

 

 

 

 

 

 

 

 

 

 

16,360

 

 

 

 

 

Less taxable equivalent adjustment

 

 

 

 

 

 

(211

)

 

 

 

 

 

 

 

 

 

 

(208

)

 

 

 

 

 

 

 

 

 

 

(175

)

 

 

 

 

Net interest income

 

 

 

 

 

$

22,299

 

 

 

 

 

 

 

 

 

 

$

21,499

 

 

 

 

 

 

 

 

 

 

$

16,185

 

 

 

 

 

Net interest spread (5)

 

 

 

 

 

 

 

 

 

 

3.14

%

 

 

 

 

 

 

 

 

 

 

2.89

%

 

 

 

 

 

 

 

 

 

 

3.01

%

Net interest margin (6)

 

 

 

 

 

 

 

 

 

 

3.39

%

 

 

 

 

 

 

 

 

 

 

3.19

%

 

 

 

 

 

 

 

 

 

 

3.26

%

(1)

Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21%.

(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)

Net interest 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.

GAAP to Non-GAAP Reconciliations (dollars in thousands except per share data)

Statement on Non-GAAP Measures: The Company believes the presentation of the following non-GAAP financial measures provides useful supplemental information that is essential to an investor’s proper understanding of the results of operations and financial condition of the Company. Management uses non-GAAP financial measures in its analysis of the Company’s performance. These non-GAAP measures should not be viewed as substitutes for the financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

 

 

Three Months Ended

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

Operating Net Income / Operating Diluted Earnings Per Share

 

2020

 

2019

 

2019

 

 

 

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (a GAAP measure)

 

$

7,232

 

 

$

7,109

 

 

$

6,198

 

 

Add: Merger and Capital Raise Expenses (Pretax)

 

 

253

 

 

 

841

 

 

 

91

 

 

Add: (Gain)/loss on disposition of investment securities

 

 

 

 

 

 

 

 

87

 

 

Tax effect of Merger and Capital Raise Expenses, and Gain (loss) on disposition of investment securities(1)

 

 

(51

)

 

 

(28

)

 

 

(50

)

 

Operating Net Income (a non-GAAP measure)

 

$

7,434

 

 

$

7,922

 

 

$

6,326

 

 

Less: Dividends and Undistributed Earnings Allocated to Participating Securities (GAAP)

 

 

(16

)

 

 

(57

)

 

 

(61

)

 

Operating Income Applicable to Common Shareholders (a non-GAAP measure)

 

$

7,418

 

 

$

7,865

 

 

$

6,265

 

 

Weighted Average Diluted Shares

 

 

5,432,099

 

 

4,980,439

 

 

 

4,106,658

 

 

Operating Diluted Earnings Per Share (a non-GAAP measure)

 

$

1.37

 

 

$

1.58

 

 

$

1.53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

The net tax benefit associated with noncore items is determined by assessing whether each noncore item is included or excluded from net taxable income and applying the Company’s combined marginal tax rate to only those items included in net taxable income.

 

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

 

 

(in thousands, except share data)

 

Tangible Common Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity (GAAP)

 

$

297,759

 

 

$

286,561

 

 

$

172,268

 

Less: Goodwill and acquisition related intangibles (GAAP)

 

 

(34,454

)

 

 

(34,544

)

 

 

(412

)

Tangible Common Equity (a non-GAAP measure)

 

 

263,305

 

 

 

252,017

 

 

 

171,856

 

Total assets (GAAP)

 

 

2,852,629

 

 

 

2,855,563

 

 

 

2,138,548

 

Less: Goodwill and acquisition related intangibles (GAAP)

 

 

(34,454

)

 

 

(34,544

)

 

 

(412

)

Tangible assets (a non-GAAP measure)

 

$

2,818,175

 

 

$

2,821,019

 

 

$

2,138,136

 

Tangible Common Equity Ratio (a non-GAAP measure)

 

 

9.34

%

 

 

8.93

%

 

 

8.04

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Book Value Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Common Equity (a non-GAAP measure)

 

$

263,305

 

 

$

252,017

 

 

$

171,856

 

Common shares outstanding

 

 

5,417,983

 

 

 

5,400,868

 

 

 

4,123,618

 

Tangible Book Value Per Share (a non-GAAP measure)

 

$

48.60

 

 

$

46.66

 

 

$

41.68

 

 

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

 

 

(in thousands, except share data)

 

Efficiency Ratio:

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

$

19,925

 

 

$

21,428

 

 

$

16,373

 

Net interest and dividend income

 

 

22,400

 

 

 

21,608

 

 

 

16,261

 

Total noninterest income

 

 

8,818

 

 

 

9,933

 

 

 

7,957

 

Total revenue

 

$

31,218

 

 

$

31,541

 

 

$

24,218

 

Efficiency Ratio

 

 

63.83

%

 

 

67.94

%

 

 

67.61

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Efficiency Ratio:

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

$

19,925

 

 

$

21,428

 

 

$

16,373

 

Nonoperating expenses

 

 

(253

)

 

 

(841

)

 

 

(91

)

Operating expense

 

 

19,672

 

 

 

20,587

 

 

 

16,282

 

Total revenue

 

$

31,218

 

 

$

31,541

 

 

$

24,218

 

Add: (Gain)/loss on disposition of investment securities

 

 

 

 

 

 

 

 

87

 

Operating revenue

 

$

31,218

 

 

$

31,541

 

 

$

24,305

 

Operating Efficiency Ratio (a non-GAAP measure)

 

 

63.01

%

 

 

65.27

%

 

 

66.99

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Return on Tangible Common Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Operating net income

 

$

7,434

 

 

$

7,922

 

 

$

6,326

 

Average tangible common equity:

 

 

 

 

 

 

 

 

 

 

 

 

Average common equity

 

$

291,203

 

 

$

254,543

 

 

$

168,676

 

Average Goodwill and merger related intangibles

 

 

(34,508

)

 

 

(34,597

)

 

 

(413

)

Average tangible common equity

 

$

256,695

 

 

$

219,946

 

 

$

168,263

 

Operating Return on Tangible Common Equity (a non-GAAP measure)

 

 

11.65

%

 

 

14.29

%

 

 

15.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Return on Average Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Operating net income

 

$

7,434

 

 

$

7,922

 

 

$

6,326

 

Average assets

 

$

2,848,101

 

 

$

2,868,156

 

 

$

2,131,975

 

Operating Return on Average Assets (a non-GAAP measure)

 

 

1.05

%

 

 

1.10

%

 

 

1.20

%

COVID-19 Additional Disclosures

Commercial & Industrial Loan Portfolio by Industry (Click here to download image)

Commercial Real Estate Loan Portfolio by Sector (Click here to download image)

The objective of these additional disclosures is to provide shareholders with greater detail on the Company’s potential exposure as a result of the COVID-19 pandemic however this is not meant to be an all-encompassing review of exposures either direct or indirect.

Contacts

Cambridge Bancorp
Michael F. Carotenuto
Chief Financial Officer
617-520-5520

Contacts

Cambridge Bancorp
Michael F. Carotenuto
Chief Financial Officer
617-520-5520