Cambridge Bancorp Announces Results for the Third Quarter and Declares Dividend

CAMBRIDGE, Mass., Oct. 20, 2020 /PRNewswire/ -- Cambridge Bancorp (NASDAQ: CATC) (the "Company"), the parent company of Cambridge Trust Company (the "Bank"), today announced unaudited net income of $13,429,000 for the quarter ended September 30, 2020, an increase of $5,753,000, or 74.9%, as compared to net income of $7,676,000 for the quarter ended September 30, 2019.  Diluted earnings per share were $1.93 for the third quarter of 2020, representing a 22.9% increase over diluted earnings per share of $1.57 for the third quarter of 2019.

Excluding merger expenses, operating net income was $14,319,000 for the quarter ended September 30, 2020, an increase of $6,380,000, or 80.4%, as compared to operating net income of $7,939,000 for the quarter ended September 30, 2019. Operating diluted earnings per share were $2.06 for the third quarter of 2020, representing a 26.4% increase over operating diluted earnings per share of $1.63 for the same period last year.

For the nine months ended September 30, 2020, unaudited net income was $18,944,000, representing an increase of $798,000, or 4.4%, as compared to net income of $18,146,000 for the nine months ended September 30, 2019. Diluted earnings per share were $3.09 for the nine months ended September 30, 2020, representing a 21.8% decrease over diluted earnings per share of $3.95 for the nine months ended September 30, 2019.

The results for the nine months ended September 30, 2020, include the merger accounting impact of the current and expected credit loss accounting standard ("CECL") within the provision for credit losses, merger expenses, and other non-operating items. Excluding these items, operating net income was $29,528,000 for the nine months ended September 30, 2020, an increase of $8,296,000, or 39.1%, as compared to operating net income of $21,232,000 for the nine months ended September 30, 2019. Operating diluted earnings per share were $4.83 for the nine months ended September 30, 2020, representing a 4.5% increase over operating diluted earnings per share of $4.62 for the nine months ended September 30, 2019.  Further discussion of the merger accounting impacts is detailed in the Non-GAAP Reconciliation tables at the end of this document.

Third quarter 2020 highlights:

• Asset quality remains strong with ratios of non-performing loans to total loans and non-performing assets to total assets both at 0.28%. Early stage delinquency (30-89 days delinquent) as of September 30, 2020, represents 0.40% of total loans.
• In continued support of our clients, due to COVID-19, we have deferred or adjusted payments on 3.2% of total loans outstanding at September 30, 2020, as compared to 5.2% at June 30, 2020.
• The allowance for credit loss to total loans is 1.16%, excluding loans made under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP").
• Performance ratios were strong with Operating Return On Assets ("ROA") of 1.43%, Operating Return On Tangible Common Shareholders' Equity ("ROTCE") of 17.12%, and Operating Pre-Tax Pre-Provision ("PTPP") Return on Average Assets ("ROAA") of 2.16%.
• Organic core deposit growth of $98.2 million, or 3.4%, from the quarter end June 30, 2020.
• Tangible common equity ratio of 8.60% at September 30, 2020.
• Tangible book value per share of $48.80 at September 30, 2020.
• A supplemental presentation for the quarter is available on our investor relations website: ir.cambridgetrust.com or within the hyperlink provided within this release. This presentation includes additional detail regarding the loan portfolio, liquidity position, and other financial disclosures.

"The Cambridge Trust team continues to support clients and our communities during this difficult period," noted Denis K. Sheahan, Chairman and CEO. "In addition to continued lending and loan forbearance, where needed, we are open and available to meet client needs and have continued our effort to support the community with charitable giving.  I am proud of the team's accomplishments and, in particular, successfully converting the Wellesley Bank systems at the beginning of October.  The Bank remains on a solid footing with strong capital, liquidity and asset quality."

Balance Sheet

Total assets increased $1.1 billion, or 39.6%, from $2.9 billion at December 31, 2019, inclusive of the Wellesley Bancorp Inc. ("Wellesley") merger, and were $4.0 billion as of September 30, 2020.

Total loans increased by $1.1 billion, or 47.5%, from December 31, 2019, inclusive of the Wellesley merger, and totaled $3.3 billion as of September 30, 2020. The increase in total loans was due to a combination of the merger with Wellesley and organic growth during 2020. A table accompanying this release provides detail regarding organic loan and deposit growth.

Inclusive of Wellesley:

• Residential real estate loans increased by $426.2 million from $917.6 million at December 31, 2019, to $1.3 billion at September 30, 2020.
• Commercial real estate loans increased by $303.8 million, from $1.1 billion at December 31, 2019, to $1.4 billion at September 30, 2020.
• Commercial & industrial loans increased by $294.8 million from $133.2 million at December 31, 2019, to $428.0 million at September 30, 2020.
• Loans under the SBA's PPP amounted to $189.9 million at September 30, 2020. PPP loans are included in commercial and industrial loans.

Excluding Wellesley and PPP loans, total loans grew by $29.9 million, or 1.3%, from December 31, 2019.

As a result of payoffs and paydowns of commercial mortgage loans during the quarter ended September 30, 2020, total loans outstanding were reduced by $48.6 million, or 1.5%, from June 30, 2020. The reduction in commercial mortgage loan balances is due to strong local market demand and the low interest rate environment.

Total deposits increased by $973.1 million, or 41.3%, to $3.3 billion at September 30, 2020 from $2.4 billion at December 31, 2019, primarily driven by a combination of the impact of the Wellesley merger, organic deposit growth, and funds from the PPP program.

• Core deposits, which the Company defines as all deposits other than certificates of deposit, increased by $838.8 million, or 38.5%, to $3.0 billion at September 30, 2020 from $2.2 billion at December 31, 2019, inclusive of the Wellesley merger.
• Excluding the impact of the Wellesley merger, organic growth in core deposits was $290.0 million, or 13.3%.
• Inclusive of the Wellesley merger, the cost of total deposits for the quarter ended September 30, 2020, was 0.16%, as compared to 0.68% for the quarter ended December 31, 2019, a reduction of 52 basis points driven by a reduction in interest rates during 2020. The cost of total deposits for the nine months ended September 30, 2020 was 0.28%, as compared to 0.71% for the nine months ended September 30, 2019, a reduction of 43 basis points driven by a reduction in interest rates during 2020. At September 30, 2020, the spot cost of deposits was 0.17%.

Certificates of deposit totaled $316.5 million at September 30, 2020, an increase of $134.2 million from $182.3 million at December 31, 2019, primarily due to the Wellesley merger. Total brokered certificates of deposit, which are included within certificates of deposit, were $77.8 million and $7.1 million at September 30, 2020, and December 31, 2019, respectively.

Core deposits during the third quarter increased by $98.2 million, or 3.4%, from June 30, 2020. The growth in core deposits was a function of new business development efforts combined with existing client growth.

Borrowings were relatively unchanged from $135.7 million at December 31, 2019, and totaled $135.8 million as of September 30, 2020.

Net Interest and Dividend Income

For the quarter ended September 30, 2020, net interest and dividend income before the provision for credit losses increased by $13.9 million, or 66.1%, to $35.0 million, as compared to $21.1 million for the quarter ended September 30, 2019. This change was primarily due to loan growth (both organic and as a result of the Wellesley merger), lower costs of funds and loan accretion associated with merger accounting.

The Company's net interest margin, on a fully taxable equivalent basis, inclusive of the Wellesley merger, increased 52 basis points to 3.73% for the quarter ended September 30, 2020, as compared to 3.21% for the quarter ended September 30, 2019. This increase was a function of the Company taking steps to reduce deposit costs combined with the accretion of loan fair value adjustments associated with the Wellesley merger.

In order to provide greater disclosure of the impact of loan related merger accounting and the impact of the SBA's PPP loan program, a reconciliation of the Company's net interest margin to an adjusted net interest margin is shown below. Excluding the impact of merger-related loan accretion and the impact of PPP loans, the adjusted net interest margin for the quarter ended September 30, 2020, was 3.41%, representing a five basis points decrease over the prior quarter adjusted net interest margin of 3.46% and a 20 basis points increase as compared to the net interest margin of 3.21% for the third quarter of 2019. 

 

		Three Months Ended
		September 30, 2020
		Average Balance				Interest Income/ Expenses				Rate Earned/ Paid
		(dollars in thousands)
Total interest-earning assets (GAAP)		$	3,742,726
Net interest income on a fully taxable equivalent basis (GAAP)						$	35,067
Net interest margin (GAAP)											3.73	%
Less: Paycheck Protection Program loan impact			(189,515)				(1,097)				0.08	%
Less: Accretion of loan fair value adjustments							(3,513)				-0.38	%
Adjusted net interest margin on a fully taxable equivalent basis		$	3,553,211			$	30,457				3.41	%

 

Provision for Credit Losses

During the third quarter of 2020, the Company increased its allowance for credit losses by recording a $2.0 million provision for credit losses due to changes in assumptions associated with estimated losses as a result of the novel coronavirus ("COVID-19") pandemic both qualitatively and quantitatively. For the nine months ended September 30, 2020, the Company recorded a total provision for credit losses of $18.4 million, which includes $9.3 million associated with the expected impact of the COVID-19 pandemic on future loan losses and $8.6 million for the recognition of the non-operating impact of the merger related CECL accounting.

Noninterest Income

Total noninterest income increased by $567,000, or 5.5%, to $10.9 million for the quarter ended September 30, 2020, as compared to $10.4 million for the quarter ended September 30, 2019, primarily as a result of increases in wealth management revenue and increases in gains on loans sold. Noninterest income was 23.8% of total revenue for the quarter ended September 30, 2020.

• Wealth management revenue increased by $992,000, or 14.1%, to $8.0 million for the third quarter of 2020, as compared to $7.0 million for the third quarter of 2019. Wealth Management Assets under Management and Administration were $3.9 billion as of September 30, 2020, an increase of $495.6 million, or 14.4%, from December 31, 2019, primarily as a result of the Wellesley merger and appreciation in the equity markets during 2020.
• Gain on loans sold increased by $413,000, to $873,000 for the third quarter of 2020, as compared to $460,000 for the third quarter of 2019, due to increased sales of residential mortgages.

Inclusive of the Wellesley merger, total noninterest income increased by $2.3 million, or 8.5%, to $28.7 million for the nine months ended September 30, 2020, as compared to $26.5 million for the nine months ended September 30, 2019, primarily as a result of increases in wealth management revenue and an increase in gain on loans sold. Noninterest income was 25.0% of total revenue for the nine months ended September 30, 2020.

• Wealth management revenue increased by $2.1 million, or 10.8%, to $21.7 million for the nine months ended September 30, 2020, as compared to $19.6 million for the nine months ended September 30, 2019.
• Gain on loans sold increased by $694,000, to $1.2 million for the nine months ended September 30, 2020, as compared to $491,000 for the nine months ended September 30, 2019, due to increased sales of residential mortgages.

Noninterest Expense

Total noninterest expense increased by $6.6 million, or 34.9%, to $25.4 million for the quarter ended September 30, 2020, as compared to $18.9 million for the quarter ended September 30, 2019, primarily driven by increases in salaries and employee benefits expense, occupancy and equipment expense, data processing expense, and one-time merger-related expenses as described below.

• Salaries and employee benefits expense increased $3.7 million, or 30.5%, driven by increased staffing related to the merger with Wellesley in the second quarter of 2020, additions to support business initiatives, and higher employee benefit costs.
• Occupancy and equipment expense increased $884,000, or 31.7%, primarily as a result of additional banking locations and office space as a result of the mergers with Optima Bank & Trust ("Optima") and Wellesley.
• Data processing expense increased $432,000, or 26.2%, primarily as a result of the merger with Wellesley.
• Merger expenses increased $829,000 to $1.2 million from $339,000 from the same period a year ago, primarily due to one-time non-operating costs associated with the Wellesley merger.

Total noninterest expense increased by $14.2 million, or 25.0%, to $71.0 million for the nine months ended September 30, 2020, as compared to $56.7 million for the nine months ended September 30, 2019. This increase was primarily driven by increases in salaries and employee benefits expense, merger-related expenses, occupancy and equipment expense, and data processing expense as a result of our mergers with Optima in 2019 and Wellesley in 2020 as described below.

• Salaries and employee benefits expense increased $7.9 million, or 23.1%, primarily as a result of increased staffing related to the mergers with Optima and Wellesley in 2019 and 2020, respectively, additions to support business initiatives, normal merit increases and higher employee benefit costs.
• Merger expenses increased $1.9 million to $5.8 million from $3.9 million, primarily due to one-time non-operating costs associated with the Wellesley merger.
• Occupancy and equipment expense increased $1.6 million, or 20.6%, primarily as a result of additional branches and office space as a result of the mergers with Optima and Wellesley.
• Data processing expense increased $1.1 million, or 23.6%, primarily as a result of the mergers with Optima and Wellesley.

Asset Quality 

Non-performing loans totaled $9.2 million, or 0.28% of total loans outstanding as of September 30, 2020. Early stage delinquency (30-89 days delinquent) represented 0.40% of total loans outstanding as of September 30, 2020.

Net loan charge-offs remained low at $213,000, or 0.03% of total loans (annualized) for the three months ended September 30, 2020, as compared to $1.2 million, or 0.23% of total loans (annualized) for the three months ended September 30, 2019.

Net loan charge-offs were $613,000 or 0.02% of total loans for the nine months ended September 30, 2020, as compared to $1.4 million, or 0.06% of total loans for the nine months ended September 30, 2019.

The following table shows additional and historical information regarding non-performing assets, early stage delinquency (30-89 days delinquent), purchased credit deteriorated ("PCD") assets, and troubled debt restructurings:

		Nonperforming Assets
		September 30, 2020				June 30, 2020				December 31, 2019				September 30, 2019
		(dollars in thousands)
Total nonperforming loans		$	9,189			$	10,251			$	5,651			$	3,483
Other real estate owned			1,820				1,970				163				185
Total nonperforming assets		$	11,009			$	12,221			$	5,814			$	3,668
Troubled debt restructurings:
Non-performing (included in total non-performing loans above)		$	811			$	262			$	227			$	234
Performing			—				—				—				—
Total troubled debt restructurings		$	811			$	262			$	227			$	234
Nonperforming loans/total loans			0.28	%			0.31	%			0.25	%			0.16	%
Nonperforming assets/total assets			0.28	%			0.30	%			0.20	%			0.13	%
TDRs/total loans			0.02	%			0.01	%			0.01	%			0.01	%
		Additional Asset Quality Indicators
		September 30, 2020				June 30, 2020				December 31, 2019				September 30, 2019
Purchased Credit Deteriorated ("PCD")/total loans			0.59	%			0.58	%			—				—
Delinquent loans 30-89 days past due/total loans			0.40	%			0.22	%			0.50	%			0.29	%
Quarterly Net charge-offs/total loans (annualized)			0.03	%			0.02	%			0.03	%			0.23	%
Allowance for credit losses/nonperforming loans			390.90	%			331.81	%			321.71	%			517.80	%
Allowance for credit losses/total loans excluding PPP			1.16	%			1.08	%			0.82	%			0.83	%

The allowance for credit losses in total was $35.9 million, or 1.16% of total loans outstanding at September 30, 2020 excluding PPP loans, as compared to $18.2 million, or 0.82% of total loans outstanding at December 31, 2019.

Forbearance/Modifications 

The Company has instituted payment deferral programs to aid existing borrowers with payment forbearance. For commercial and consumer borrowers, the Company has endeavored to provide payment relief for borrowers who have been impacted by the COVID-19 pandemic and have requested payment assistance. Detailed information on payment deferrals is included within the supplemental earning release information that can be found within the link below or at ir.cambridgetrust.com.

Income Taxes

Inclusive of the impact of the Wellesley merger, the Company's effective tax rate was 27.2% for the quarter ended September 30, 2020, as compared to 26.1% for the quarter ended September 30, 2019. For the nine months ended September 30, 2020, the Company's effective tax rate was 25.7%, as compared to 24.8% for the nine months ended September 30, 2019.

Dividend & Capital

On October 19, 2020, the Company's Board of Directors declared a quarterly cash dividend of $0.53 per share, which is payable on November 19, 2020, to shareholders of record as of the close of business on November 5, 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 130 basis points to 9.86% as of September 30, 2020, as compared to 8.56% as of September 30, 2019. Book value per share increased by $6.56, or 13.1%, to $56.73 as of September 30, 2020, as compared to $50.17 as of September 30, 2019.

The Company's ratio of tangible common equity to tangible assets increased to 8.60% at September 30, 2020, from 7.43% at September 30, 2019, primarily as a result of the capital offering in December of 2019, increased earnings during the period, increased valuations of interest rate derivative positions, and an increase in unrealized gains in the available for sale investments portfolio. Tangible book value per share increased by $5.77, or 13.4% to $48.80 as of September 30, 2020, as compared to $43.03 as of September 30, 2019. 

Supplemental Earnings Release Information:
Click here to download

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 $4.0 billion in assets as of September 30, 2020, and a total of 22 Massachusetts and New Hampshire locations. Cambridge Trust Company is one of New England's leaders in private banking and wealth management with $3.9 billion in client assets under management and administration as of September 30, 2020. The Wealth Management group maintains offices in Boston and Wellesley, 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 and Wellesley resulting in the combined business not operating as effectively as expected, disruptions in the Company's ability to access the capital markets, 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, 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 17, 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 disposition 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 shareholders' 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 the operating efficiency ratio (which is computed by dividing noninterest expense adjusted for non-operating expenses and total revenue adjusted for gain/(loss) on disposition of 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 nonoperating 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."

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

 

CAMBRIDGE BANCORP AND SUBSIDIARIES QUARTERLY UNAUDITED RESULTS
		Three Months Ended												Nine Months Ended
		September 30,				June 30, 2020				September 30,				September 30,
		2020				2020				2019				2020				2019
		(dollars in thousands, except per share data)
Interest and Dividend Income		$	36,881			$	30,531			$	26,336			$	93,506			$	69,924
Interest Expense			1,919				1,742				5,285				7,355				12,836
Net Interest and Dividend Income			34,962				28,789				21,051				86,151				57,088
Provision for Credit Losses			2,000				14,430				2,170				18,430				2,673
Noninterest Income			10,933				8,972				10,366				28,723				26,468
Noninterest Expense			25,445				25,587				18,863				70,958				56,749
Income (Loss) Before Income Taxes			18,450				(2,256)				10,384				25,486				24,134
Income Tax Expense (Benefit)			5,021				(540)				2,708				6,542				5,988
Net Income (Loss)		$	13,429			$	(1,716)			$	7,676			$	18,944			$	18,146
Operating Net Income*		$	14,319			$	7,788			$	7,939			$	29,528			$	21,232
Data Per Common Share:
Basic Earnings (Loss) Per Share		$	1.94			$	(0.29)			$	1.58			$	3.11			$	3.98
Diluted Earnings (Loss) Per Share			1.93				(0.29)				1.57				3.09				3.95
Operating Diluted Earnings Per Share*			2.06				1.32				1.63				4.83				4.62
Dividends Declared Per Share			0.53				0.53				0.51				1.59				1.53
Avg. Common Shares Outstanding:
Basic			6,918,692				5,912,889				4,815,020				6,078,586				4,525,178
Diluted			6,954,324				5,912,889				4,842,965				6,113,828				4,552,092
Selected Performance Ratios:
Net Interest Margin, FTE			3.73	%			3.77	%			3.21	%			3.65	%			3.23	%
Adjusted Net Interest Margin, FTE			3.41	%			3.46	%			3.21	%			3.65	%			3.23	%
Cost of Funds			0.20	%			0.23	%			0.80	%			0.31	%			0.72	%
Cost of Interest Bearing Liabilities			0.31	%			0.33	%			1.12	%			0.46	%			1.01	%
Cost of Deposits			0.16	%			0.21	%			0.78	%			0.28	%			0.71	%
Cost of Deposits excl. Wholesale Deposits			0.14	%			0.19	%			0.76	%			0.26	%			0.66	%
Return on Average Assets			1.34	%			(0.21)	%			1.10	%			0.75	%			0.97	%
Return on Average Equity			13.78	%			(2.10)	%			12.70	%			7.53	%			11.52	%
Efficiency Ratio*			55.44	%			67.76	%			60.04	%			61.77	%			67.92	%
Operating Return on Average Assets*			1.43	%			0.95	%			1.13	%			1.17	%			1.13	%
Operating Return on Tangible Common Equity*			17.12	%			10.92	%			15.36	%			13.48	%			14.99	%
Operating Efficiency Ratio*			52.90	%			56.30	%			58.97	%			56.77	%			63.21	%
		September 30,				June 30,				December 31,				September 30,
		2020				2020				2019				2019
Total Assets		$	3,987,109			$	4,022,750			$	2,855,563			$	2,841,868
Total Loans			3,284,286				3,332,884				2,226,728				2,179,882
Total Deposits			3,331,942				3,275,843				2,358,878				2,407,859
Allowance for Credit Losses			35,920				34,014				18,180				18,035
Allowance to Total Loans (excluding PPP)			1.16	%			1.08	%			0.82	%			0.83	%
Non-Performing Loans			9,189				10,251				5,651				3,483
Nonperforming loans/total loans			0.28	%			0.31	%			0.25	%			0.16	%
QTD Net charge-offs to Total Loans (annualized)			0.03	%			0.02	%			0.03	%			0.23	%
Tangible Common Equity Ratio*			8.60	%			8.27	%			8.93	%			7.43	%
Book Value Per Share		$	56.73			$	55.29			$	53.06			$	50.17
Tangible Book Value Per Share*		$	48.80			$	47.34			$	46.66			$	43.03
Wealth Management AUM			3,791,064				3,572,286				3,287,371				3,119,041
Wealth Management AUM & AUA			3,948,478				3,731,226				3,452,852				3,278,046
* See GAAP to Non-GAAP Reconciliations

 

CAMBRIDGE BANCORP AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS
		September 30, 2020				June 30, 2020				December 31, 2019
		(dollars in thousands, except par value)
Assets
Cash and cash equivalents		$	64,520			$	60,742			$	61,335
Investment securities
Available for sale, at fair value (amortized cost $148,635, $130,761, and $141,109, respectively)			152,105				134,227				140,330
Held to maturity, at amortized cost (fair value $252,428, $257,121, and $264,114, respectively)			240,015				244,551				258,172
Total investment securities			392,120				378,778				398,502
Loans held for sale, at lower of cost or fair value			7,379				2,614				1,546
Loans
Residential mortgage			1,343,815				1,351,308				917,566
Commercial mortgage			1,364,387				1,413,427				1,060,574
Home equity			108,343				116,067				80,675
Commercial & Industrial			428,024				414,243				133,236
Consumer			39,717				37,839				34,677
Total loans			3,284,286				3,332,884				2,226,728
Less: allowance for credit losses on loans			(35,920)				(34,014)				(18,180)
Net loans			3,248,366				3,298,870				2,208,548
Federal Home Loan Bank of Boston Stock, at cost			6,492				9,262				7,854
Bank owned life insurance			45,948				45,747				37,319
Banking premises and equipment, net			18,255				18,482				14,756
Right-of-use asset operating leases			37,347				38,912				33,587
Deferred income taxes, net			11,514				11,855				8,229
Accrued interest receivable			9,375				8,631				7,052
Goodwill			51,912				51,912				31,206
Merger related intangibles, net			3,068				3,158				3,338
Other assets			90,813				93,787				42,291
Total assets		$	3,987,109			$	4,022,750			$	2,855,563
Liabilities
Deposits
Demand		$	1,011,382			$	929,846			$	630,593
Interest bearing checking			592,113				606,999				450,098
Money market			436,120				419,537				181,406
Savings			975,811				960,847				914,499
Certificates of deposit			316,516				358,614				182,282
Total deposits			3,331,942				3,275,843				2,358,878
Borrowings			135,805				237,897				135,691
Subordinated debt			9,959				9,920				—
Operating lease liabilities			38,930				40,453				35,054
Other liabilities			77,400				75,577				39,379
Total liabilities			3,594,036				3,639,690				2,569,002
Shareholders' Equity
Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 6,928,288 shares, 6,927,699 shares, and 5,400,868 shares, respectively			6,928				6,928				5,401
Additional paid-in capital			225,361				224,540				136,766
Retained earnings			156,062				146,305				146,875
Accumulated other comprehensive income (loss)			4,722				5,287				(2,481)
Total shareholders' equity			393,073				383,060				286,561
Total liabilities and shareholders' equity		$	3,987,109			$	4,022,750			$	2,855,563

 

CAMBRIDGE BANCORP AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
		Three Months Ended												Nine Months Ended
		September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
		(dollars in thousands, except share data)
Interest and dividend income
Interest on taxable loans		$	34,468			$	28,130			$	23,280			$	85,936			$	60,919
Interest on tax-exempt loans			243				211				172				652				385
Interest on taxable investment securities			1,404				1,521				1,978				4,648				6,074
Interest on tax-exempt investment securities			631				601				563				1,827				1,709
Dividends on FHLB of Boston stock			127				52				124				280				281
Interest on overnight investments			8				16				219				163				556
Total interest and dividend income			36,881				30,531				26,336				93,506				69,924
Interest expense
Interest on deposits			1,354				1,396				4,609				5,879				11,489
Interest on borrowed funds			376				282				676				1,223				1,347
Interest on subordinated debt			189				64				—				253				—
Total interest expense			1,919				1,742				5,285				7,355				12,836
Net interest and dividend income			34,962				28,789				21,051				86,151				57,088
Provision for credit losses			2,000				14,430				2,170				18,430				2,673
Net interest and dividend income after provision for credit losses			32,962				14,359				18,881				67,721				54,415
Noninterest income
Wealth management revenue			8,025				7,035				7,033				21,686				19,576
Deposit account fees			603				695				814				2,089				2,395
ATM/Debit card income			349				290				391				946				1,046
Bank owned life insurance income			201				165				165				526				454
Gain (loss) on disposition of investment securities			—				69				2				69				(79)
Gain on loans sold			873				193				460				1,185				491
Loan related derivative income			292				334				1,130				1,137				1,571
Other income			590				191				371				1,085				1,014
Total noninterest income			10,933				8,972				10,366				28,723				26,468
Noninterest expense
Salaries and employee benefits			15,744				13,542				12,067				42,302				34,353
Occupancy and equipment			3,676				2,938				2,792				9,421				7,813
Data processing			2,084				1,832				1,652				5,601				4,532
Professional services			1,151				1,098				844				3,108				2,411
Marketing			420				486				263				1,162				1,175
FDIC insurance			313				318				91				810				369
Nonoperating expenses			1,168				4,366				339				5,787				3,880
Other expenses			889				1,007				815				2,767				2,216
Total noninterest expense			25,445				25,587				18,863				70,958				56,749
Income (loss) before income taxes			18,450				(2,256)				10,384				25,486				24,134
Income tax expense (benefit)			5,021				(540)				2,708				6,542				5,988
Net income (loss)		$	13,429				(1,716)				7,676			$	18,944			$	18,146
Share data:
Weighted average number of shares outstanding, basic			6,918,692				5,912,889				4,815,020				6,078,586				4,525,178
Weighted average number of shares outstanding, diluted			6,954,324				5,912,889				4,842,965				6,113,828				4,552,092
Basic earnings (loss) per share		$	1.94			$	(0.29)			$	1.58			$	3.11			$	3.98
Diluted earnings (loss) per share		$	1.93			$	(0.29)			$	1.57			$	3.09			$	3.95

 

CAMBRIDGE BANCORP AND SUBSIDIARIES MARGIN & YIELD ANALYSIS
		Three Months Ended
		September 30, 2020												June 30, 2020												September 30, 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		$	3,288,304			$	34,468				4.17	%		$	2,660,482			$	28,130				4.25	%		$	2,103,892			$	23,280				4.39	%
Tax-exempt			18,940				307				6.45				21,004				267				5.11				19,441				218				4.45
Securities available for sale (3)
Taxable			129,957				524				1.60				115,875				557				1.93				149,045				704				1.87
Securities held to maturity
Taxable			147,771				880				2.37				158,431				964				2.45				204,279				1,274				2.47
Tax-exempt			90,698				799				3.50				84,885				760				3.60				74,246				713				3.81
Cash and cash equivalents			67,056				8				0.05				45,437				16				0.14				57,937				219				1.50
Total interest-earning assets (4)			3,742,726				36,986				3.93	%			3,086,114				30,694				4.00	%			2,608,840				26,408				4.02	%
Non interest-earning assets			281,910												233,240												184,151
Allowance for credit losses			(33,872)												(23,272)												(17,392)
Total assets		$	3,990,764											$	3,296,082											$	2,775,599
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits
Checking accounts		$	577,294			$	164				0.11	%		$	541,482			$	209				0.16	%		$	422,395			$	117				0.11	%
Savings accounts			963,253				565				0.23				915,835				462				0.20				873,853				2,591				1.18
Money market accounts			435,417				245				0.22				270,951				140				0.21				209,922				743				1.40
Certificates of deposit			333,366				380				0.45				230,798				585				1.02				243,892				1,158				1.88
Total interest-bearing deposits			2,309,330				1,354				0.23				1,959,066				1,396				0.29				1,750,062				4,609				1.04
Subordinated debt			9,936				189				7.57				3,266				64				7.88				—				—				—
Other borrowed funds			177,423				376				0.84				138,052				282				0.82				115,809				676				2.32
Total interest-bearing liabilities			2,496,689				1,919				0.31	%			2,100,384				1,742				0.33	%			1,865,871				5,285				1.12	%
Non-interest-bearing liabilities
Demand deposits			986,590												770,202												596,646
Other liabilities			119,762												97,431												73,293
Total liabilities			3,603,041												2,968,017												2,535,810
Shareholders' equity			387,723												328,065												239,789
Total liabilities & shareholders' equity		$	3,990,764											$	3,296,082											$	2,775,599
Net interest income on a fully taxable equivalent basis							35,067												28,952												21,123
Less taxable equivalent adjustment							(232)												(215)												(196)
Net interest income						$	34,835											$	28,737											$	20,927
Net interest spread (5)											3.63	%											3.67	%											2.89	%
Net interest margin (6)											3.73	%											3.77	%											3.21	%

(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 is excluded from interest-earning assets and associated dividend income is excluded from interest income.
(5)	Net interest spread represents the difference between the weighted average yield on interest-earning assets, inclusive of PPP loans originated during 2020, 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, inclusive of PPP loans originated during 2020.

 

CAMBRIDGE BANCORP AND SUBSIDIARIES MARGIN & YIELD ANALYSIS
		Nine Months Ended
		September 30, 2020												September 30, 2019
		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		$	2,719,965			$	85,936				4.22	%		$	1,868,256			$	60,919				4.36	%
Tax-exempt			21,175				825				5.20				14,619				487				4.45
Securities available for sale (3)
Taxable			126,433				1,742				1.84				156,414				2,164				1.85
Securities held to maturity
Taxable			158,506				2,906				2.45				210,747				3,910				2.48
Tax-exempt			86,275				2,313				3.58				74,508				2,163				3.88
Cash and cash equivalents			57,472				163				0.38				48,750				556				1.52
Total interest-earning assets (4)			3,169,826				93,885				3.96	%			2,373,294				70,199				3.95	%
Non interest-earning assets			236,346												153,760
Allowance for loan losses			(25,221)												(16,999)
Total assets		$	3,380,951											$	2,510,055
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits
Checking accounts		$	525,511			$	532				0.14	%		$	413,773			$	319				0.10	%
Savings accounts			922,835				2,797				0.40				797,187				6,288				1.05
Money market accounts			300,300				834				0.37				180,729				1,803				1.33
Certificates of deposit			250,796				1,716				0.91				226,908				3,079				1.81
Total interest-bearing deposits			1,999,442				5,879				0.39	%			1,618,597				11,489				0.95	%
Subordinated debt			4,421				253				7.64				—				—				—
Other borrowed funds			147,730				1,223				1.11				73,686				1,347				2.44
Total interest-bearing liabilities			2,151,593				7,355				0.46	%			1,692,283				12,836				1.01	%
Non-interest-bearing liabilities
Demand deposits			793,934												541,110
Other liabilities			99,168												66,141
Total liabilities			3,044,695												2,299,534
Shareholders' equity			336,256												210,521
Total liabilities & shareholders' equity		$	3,380,951											$	2,510,055
Net interest income on a fully taxable equivalent basis							86,530												57,363
Less taxable equivalent adjustment							(659)												(556)
Net interest income						$	85,871											$	56,807
Net interest spread (5)											3.50	%											2.94	%
Net interest margin (6)											3.65	%											3.23	%

(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 is excluded from interest-earning assets and associated dividend income is excluded from interest income.
(5)	Net interest spread represents the difference between the weighted average yield on interest-earning assets, inclusive of PPP loans originated during 2020, 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, inclusive of PPP loans originated during 2020.

 

Organic Loan and Deposit Growth (dollars in thousands)
																		September 2020 vs December 2019
		September 30, 2020				June 30, 2020				December 31, 2019				Balance Acquired				Organic Growth/(Decline) $				Organic Growth/(Decline) %
Loans
Residential mortgage		$	1,343,815				1,351,308			$	917,566			$	403,855			$	22,394			2.4%
Commercial mortgage			1,364,387				1,413,427				1,060,574				290,909				12,904			1.2%
Home equity			108,343				116,067				80,675				36,213				(8,545)			(10.6%)
Commercial & Industrial			428,024				414,243				133,236				138,953				155,835			117.0%
Consumer			39,717				37,839				34,677				103				4,937			14.2%
Total loans		$	3,284,286			$	3,332,884			$	2,226,728			$	870,033			$	187,525			8.4%
PPP Loans (1)			(189,916)				(189,306)				—				(32,289)				(157,627)				—
Total Loans excluding PPP		$	3,094,370			$	3,143,578			$	2,226,728			$	837,744			$	29,898			1.3%
Deposits
Demand		$	1,011,382			$	929,846			$	630,593				175,912			$	204,877			32.5%
Interest bearing checking			592,113				606,999				450,098				49,944				92,071			20.5%
Money market			436,120				419,537				181,406				250,226				4,488			2.5%
Savings			975,811				960,847				914,499				72,700				(11,388)			(1.2%)
Core deposits			3,015,426				2,917,229				2,176,596				548,782				290,048			13.3%
Certificates of deposit			316,516				358,614				182,282				212,096				(77,862)			(42.7%)
Total deposits		$	3,331,942			$	3,275,843			$	2,358,878			$	760,878			$	212,186			9.0%

(1)	PPP loans are included within Commercial and Industrial.

 

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												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
Operating Net Income / Operating Diluted Earnings Per Share		2020				2020				2019				2020				2019
		(in thousands, except share data)
Net (Loss) Income (a GAAP measure)		$	13,429			$	(1,716)			$	7,676			$	18,944			$	18,146
Add: Merger and Capital issuance expenses			1,168				4,366				339				5,787				3,880
Add: (Gain) Loss on disposition of investment securities			—				(69)				(2)				(69)				79
Add: Provision established for acquired Wellesley loans			—				8,638				—				8,638				—
Tax effect of non-operating adjustments(1)			(278)				(3,431)				(74)				(3,772)				(873)
Operating Net Income (a non-GAAP measure)		$	14,319			$	7,788			$	7,939			$	29,528			$	21,232
Less: Dividends and Undistributed Earnings Allocated to Participating Securities (GAAP)			(13)				(4)				(59)				(22)				(183)
Operating Income Applicable to Common Shareholders (a non-GAAP measure)		$	14,306			$	7,784			$	7,880			$	29,506			$	21,049
Weighted Average Diluted Shares			6,954,324				5,912,889				4,842,965				6,113,828				4,552,092
Operating Diluted Earnings Per Share (a non-GAAP measure)		$	2.06			$	1.32			$	1.63			$	4.83			$	4.62

(1)	The net tax benefit associated with nonoperating items is determined by assessing whether each nonoperating 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.

 

		September 30, 2020				June 30, 2020				December 31, 2019				September 30, 2019
		(in thousands, except share data)
Tangible Common Equity:
Shareholders' equity (GAAP)		$	393,073			$	383,060			$	286,561			$	243,345
Less: Goodwill and acquisition related intangibles (GAAP)			(54,980)				(55,070)				(34,544)				(34,635)
Tangible Common Equity (a non-GAAP measure)			338,093				327,990				252,017				208,710
Total assets (GAAP)			3,987,109				4,022,750				2,855,563				2,841,868
Less: Goodwill and acquisition related intangibles (GAAP)			(54,980)				(55,070)				(34,544)				(34,635)
Tangible assets (a non-GAAP measure)		$	3,932,129			$	3,967,680			$	2,821,019			$	2,807,233
Tangible Common Equity Ratio (a non-GAAP measure)			8.60	%			8.27	%			8.93	%			7.43	%
Tangible Book Value Per Share:
Tangible Common Equity (a non-GAAP measure)		$	338,093			$	327,990			$	252,017			$	208,710
Common shares outstanding			6,928,288				6,927,699				5,400,868				4,849,988
Tangible Book Value Per Share (a non-GAAP measure)		$	48.80			$	47.34			$	46.66			$	43.03

 

		Three Months Ended												Nine Months Ended
		September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
		(in thousands, except share data)
Efficiency Ratio: (1)
Noninterest expense		$	25,445			$	25,587			$	18,863			$	70,958			$	56,749
Net interest and dividend income			34,962				28,789				21,051				86,151				57,088
Total noninterest income			10,933				8,972				10,366				28,723				26,468
Total revenue		$	45,895			$	37,761			$	31,417			$	114,874			$	83,556
Efficiency Ratio			55.44	%			67.76	%			60.04	%			61.77	%			67.92	%
Operating Efficiency Ratio: (2)
Noninterest expense		$	25,445			$	25,587			$	18,863			$	70,958			$	56,749
Merger and capital issuance expenses (Pretax)			(1,168)				(4,366)				(339)				(5,787)				(3,880)
Operating expense (a non-GAAP measure)			24,277				21,221				18,524				65,171				52,869
Total revenue		$	45,895			$	37,761			$	31,417			$	114,874			$	83,556
Add: (Gain) Loss on disposition of investment securities			—				(69)				(2)				(69)				79
Operating revenue (a non-GAAP measure)		$	45,895			$	37,692			$	31,415			$	114,805			$	83,635
Operating Efficiency Ratio (a non-GAAP measure)			52.90	%			56.30	%			58.97	%			56.77	%			63.21	%
Operating Return on Tangible Common Equity: (3)
Operating Net Income (a non-GAAP measure)		$	14,319			$	7,788			$	7,939			$	29,528			$	21,232
Average common equity		$	387,723			$	328,065			$	239,789			$	336,256			$	210,521
Average Goodwill and merger related intangibles			(55,030)				(41,240)				(34,692)				(43,634)				(21,201)
Average tangible common equity		$	332,693			$	286,825			$	205,097			$	292,622			$	189,320
Operating Return on Tangible Common Equity (a non-GAAP measure)			17.12	%			10.92	%			15.36	%			13.48	%			14.99	%
Operating Return on Average Assets: (4)
Operating Net Income (a non-GAAP measure)		$	14,319			$	7,788			$	7,939			$	29,528			$	21,232
Average assets		$	3,990,764			$	3,296,082			$	2,775,599			$	3,380,951			$	2,510,055
Operating Return on Average Assets (a non-GAAP measure)			1.43	%			0.95	%			1.13	%			1.17	%			1.13	%
		Three Months Ended												Nine Months Ended
		September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
		(in thousands)												(in thousands)
Operating Pre-Tax Pre-Provision (PTPP) Income (5)
Income (Loss) before income taxes (GAAP)		$	18,450			$	(2,256)			$	10,384			$	25,486			$	24,134
Add: Provision for Credit Losses (GAAP)			2,000				14,430				2,170				18,430				2,673
Add: Merger and Capital issuance expenses (GAAP)			1,168				4,366				339				5,787				3,880
Add: (Gain) Loss on disposition of investment securities (GAAP)			—				(69)				(2)				(69)				79
Operating PTPP Income (a non-GAAP measure)		$	21,618			$	16,471			$	12,891			$	49,634			$	30,766
Average assets			3,990,764				3,296,082				2,775,599				3,380,951				2,510,055
Operating PTPP Return on Average Assets (a non-GAAP measure)			2.16	%			2.01	%			1.84	%			1.96	%			1.64	%

(1)	The efficiency ratio represents noninterest expense as a percentage of the sum of net interest income and noninterest income.
(2)	Operating efficiency ratio represents operating expense as a percentage of operating income.
(3)	Operating return on tangible common equity represents operating net income as a percentage of average tangible common equity.
(4)	Operating return on average assets represents operating net income as a percentage of average assets.
(5)	Operating Pre-Tax Pre-Provision (PTPP) Income represents income/(loss) before income taxes adjusted for provision for credit losses, merger expenses, and gain/loss on disposition of investment securities as a percentage of average assets.

 

 

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SOURCE Cambridge Bancorp