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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission File Number: 001-38184
CAMBRIDGE BANCORP
(Exact Name of Registrant as Specified in its Charter)
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Massachusetts |
04-2777442 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
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1336 Massachusetts Avenue Cambridge, MA |
02138 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (617) 876-5500
Securities registered pursuant to Section 12(b) of the Act:
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Common Stock |
CATC |
NASDAQ |
(Title of each class) |
(Trading symbol) |
(Name of each exchange on which registered) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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☐ |
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Accelerated filer |
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☒ |
Non-accelerated filer |
|
☐ |
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Smaller reporting company |
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☐ |
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Emerging growth company |
|
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 29, 2022 the registrant had 7,000,892 shares of common stock, $1.00 par value per share, outstanding.
Table of Contents
CAMBRIDGE BANCORP AND SUBSIDIARIES
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CAMBRIDGE BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
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March 31, 2022 |
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December 31, 2021 |
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(dollars in thousands, except par value) |
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Assets |
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Cash and cash equivalents |
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$ |
81,748 |
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$ |
180,153 |
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Investment securities |
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Available for sale, at fair value (amortized cost $202,688 and $201,270, respectively) |
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188,205 |
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197,803 |
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Held to maturity, at amortized cost (fair value $1,043,391 and $971,092, respectively) |
|
|
1,115,824 |
|
|
|
977,061 |
|
Total investment securities |
|
|
1,304,029 |
|
|
|
1,174,864 |
|
Loans held for sale, at lower of cost or fair value |
|
|
918 |
|
|
|
1,490 |
|
Loans |
|
|
|
|
|
|
Residential mortgage |
|
|
1,447,141 |
|
|
|
1,415,079 |
|
Commercial mortgage |
|
|
1,579,494 |
|
|
|
1,511,002 |
|
Home equity |
|
|
86,559 |
|
|
|
87,960 |
|
Commercial and industrial |
|
|
262,772 |
|
|
|
269,446 |
|
Consumer |
|
|
41,247 |
|
|
|
35,619 |
|
Total loans |
|
|
3,417,213 |
|
|
|
3,319,106 |
|
Less: allowance for credit losses on loans |
|
|
(34,110 |
) |
|
|
(34,496 |
) |
Net loans |
|
|
3,383,103 |
|
|
|
3,284,610 |
|
Federal Home Loan Bank of Boston Stock, at cost |
|
|
4,816 |
|
|
|
4,816 |
|
Bank owned life insurance |
|
|
47,157 |
|
|
|
46,970 |
|
Banking premises and equipment, net |
|
|
17,136 |
|
|
|
17,326 |
|
Right-of-use asset operating leases |
|
|
29,757 |
|
|
|
31,273 |
|
Deferred income taxes, net |
|
|
10,460 |
|
|
|
9,985 |
|
Accrued interest receivable |
|
|
9,718 |
|
|
|
9,162 |
|
Goodwill |
|
|
51,912 |
|
|
|
51,912 |
|
Merger-related intangibles, net |
|
|
2,526 |
|
|
|
2,617 |
|
Other assets |
|
|
75,099 |
|
|
|
76,366 |
|
Total assets |
|
$ |
5,018,379 |
|
|
$ |
4,891,544 |
|
Liabilities |
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
Demand |
|
$ |
1,426,310 |
|
|
$ |
1,393,935 |
|
Interest-bearing checking |
|
|
785,003 |
|
|
|
763,188 |
|
Money market |
|
|
1,209,765 |
|
|
|
1,104,238 |
|
Savings |
|
|
918,895 |
|
|
|
907,722 |
|
Certificates of deposit |
|
|
133,762 |
|
|
|
162,069 |
|
Total deposits |
|
|
4,473,735 |
|
|
|
4,331,152 |
|
Borrowings |
|
|
16,140 |
|
|
|
16,510 |
|
Operating lease liabilities |
|
|
32,271 |
|
|
|
33,871 |
|
Other liabilities |
|
|
60,068 |
|
|
|
72,174 |
|
Total liabilities |
|
|
4,582,214 |
|
|
|
4,453,707 |
|
Shareholders’ Equity |
|
|
|
|
|
|
Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 7,000,995 shares and 6,968,192 shares, respectively |
|
|
7,001 |
|
|
|
6,968 |
|
Additional paid-in capital |
|
|
228,538 |
|
|
|
229,205 |
|
Retained earnings |
|
|
211,730 |
|
|
|
202,874 |
|
Accumulated other comprehensive loss |
|
|
(11,104 |
) |
|
|
(1,210 |
) |
Total shareholders’ equity |
|
|
436,165 |
|
|
|
437,837 |
|
Total liabilities and shareholders’ equity |
|
$ |
5,018,379 |
|
|
$ |
4,891,544 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
CAMBRIDGE BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2022 |
|
|
March 31, 2021 |
|
|
|
(dollars in thousands, except share data) |
|
Interest and dividend income |
|
|
|
|
|
|
Interest on taxable loans |
|
$ |
28,404 |
|
|
$ |
30,325 |
|
Interest on tax-exempt loans |
|
|
350 |
|
|
|
222 |
|
Interest on taxable investment securities |
|
|
4,411 |
|
|
|
1,585 |
|
Interest on tax-exempt investment securities |
|
|
654 |
|
|
|
658 |
|
Dividends on FHLB of Boston stock |
|
|
25 |
|
|
|
— |
|
Interest on overnight investments |
|
|
54 |
|
|
|
31 |
|
Total interest and dividend income |
|
|
33,898 |
|
|
|
32,821 |
|
Interest expense |
|
|
|
|
|
|
Interest on deposits |
|
|
1,896 |
|
|
|
1,275 |
|
Interest on borrowed funds |
|
|
133 |
|
|
|
140 |
|
Total interest expense |
|
|
2,029 |
|
|
|
1,415 |
|
Net interest and dividend income |
|
|
31,869 |
|
|
|
31,406 |
|
Release of credit losses |
|
|
(412 |
) |
|
|
(206 |
) |
Net interest and dividend income after release of credit losses |
|
|
32,281 |
|
|
|
31,612 |
|
Noninterest income |
|
|
|
|
|
|
Wealth management revenue |
|
|
8,574 |
|
|
|
8,151 |
|
Deposit account fees |
|
|
506 |
|
|
|
474 |
|
ATM/Debit card income |
|
|
379 |
|
|
|
333 |
|
Bank owned life insurance income |
|
|
187 |
|
|
|
196 |
|
Gain on loans sold, net |
|
|
94 |
|
|
|
569 |
|
Loan related derivative income |
|
|
296 |
|
|
|
671 |
|
Other income |
|
|
1,318 |
|
|
|
455 |
|
Total noninterest income |
|
|
11,354 |
|
|
|
10,849 |
|
Noninterest expense |
|
|
|
|
|
|
Salaries and employee benefits |
|
|
17,391 |
|
|
|
16,045 |
|
Occupancy and equipment |
|
|
3,542 |
|
|
|
3,576 |
|
Data processing |
|
|
2,645 |
|
|
|
2,034 |
|
Professional services |
|
|
1,064 |
|
|
|
1,272 |
|
Marketing |
|
|
224 |
|
|
|
463 |
|
FDIC insurance |
|
|
455 |
|
|
|
336 |
|
Other expenses |
|
|
554 |
|
|
|
493 |
|
Total noninterest expense |
|
|
25,875 |
|
|
|
24,219 |
|
Income before income taxes |
|
|
17,760 |
|
|
|
18,242 |
|
Income tax expense |
|
|
4,444 |
|
|
|
4,743 |
|
Net income |
|
$ |
13,316 |
|
|
$ |
13,499 |
|
Share data: |
|
|
|
|
|
|
Weighted average shares outstanding, basic |
|
|
6,948,040 |
|
|
|
6,907,861 |
|
Weighted average shares outstanding, diluted |
|
|
7,010,983 |
|
|
|
6,987,216 |
|
Basic earnings per share |
|
$ |
1.91 |
|
|
$ |
1.95 |
|
Diluted earnings per share |
|
$ |
1.89 |
|
|
$ |
1.92 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
CAMBRIDGE BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
March 31, 2022 |
|
|
March 31, 2021 |
|
|
|
(dollars in thousands) |
|
Net income |
|
$ |
13,316 |
|
|
$ |
13,499 |
|
Other comprehensive loss, net of tax: |
|
|
|
|
|
|
Available for sale securities |
|
|
|
|
|
|
Unrealized holding losses |
|
|
(8,227 |
) |
|
|
(2,887 |
) |
Interest rate swaps designated as cash flow hedges |
|
|
|
|
|
|
Unrealized holding losses |
|
|
(1,226 |
) |
|
|
(322 |
) |
Less: reclassification adjustment for losses realized in net
income |
|
|
(441 |
) |
|
|
(454 |
) |
Total unrealized losses on interest rate swaps |
|
|
(1,667 |
) |
|
|
(776 |
) |
Defined benefit retirement plans |
|
|
|
|
|
|
Change in retirement liabilities |
|
|
— |
|
|
|
8 |
|
Other comprehensive loss |
|
|
(9,894 |
) |
|
|
(3,655 |
) |
Comprehensive income |
|
$ |
3,422 |
|
|
$ |
9,844 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
CAMBRIDGE BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
Common
Stock |
|
|
Additional
Paid-In
Capital |
|
|
Retained
Earnings |
|
|
Accumulated
Other
Comprehensive
Income
(Loss) |
|
|
Total
Shareholders’
Equity |
|
|
|
(dollars in thousands, except per share data) |
|
Balance at December 31, 2020 |
|
$ |
6,927 |
|
|
$ |
226,967 |
|
|
$ |
165,404 |
|
|
$ |
2,434 |
|
|
$ |
401,732 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
13,499 |
|
|
|
— |
|
|
|
13,499 |
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,655 |
) |
|
|
(3,655 |
) |
Share based compensation and other share-based activity |
|
|
33 |
|
|
|
(126 |
) |
|
|
— |
|
|
|
— |
|
|
|
(93 |
) |
Dividends declared ($0.55 per share) |
|
|
— |
|
|
|
— |
|
|
|
(3,810 |
) |
|
|
— |
|
|
|
(3,810 |
) |
Balance at March 31, 2021 |
|
$ |
6,960 |
|
|
$ |
226,841 |
|
|
$ |
175,093 |
|
|
$ |
(1,221 |
) |
|
$ |
407,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
|
$ |
6,968 |
|
|
$ |
229,205 |
|
|
$ |
202,874 |
|
|
$ |
(1,210 |
) |
|
$ |
437,837 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
13,316 |
|
|
|
— |
|
|
|
13,316 |
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,894 |
) |
|
|
(9,894 |
) |
Share based compensation and other share-based activity |
|
|
33 |
|
|
|
(667 |
) |
|
|
— |
|
|
|
— |
|
|
|
(634 |
) |
Dividends declared ($0.64 per share) |
|
|
— |
|
|
|
— |
|
|
|
(4,460 |
) |
|
|
— |
|
|
|
(4,460 |
) |
Balance at March 31, 2022 |
|
$ |
7,001 |
|
|
$ |
228,538 |
|
|
$ |
211,730 |
|
|
$ |
(11,104 |
) |
|
$ |
436,165 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
CAMBRIDGE BANCORP AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(dollars in thousands) |
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net income |
|
$ |
13,316 |
|
|
$ |
13,499 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Release of credit losses |
|
|
(412 |
) |
|
|
(206 |
) |
Amortization (accretion) of deferred charges and fees, net |
|
|
733 |
|
|
|
(382 |
) |
(Accretion), depreciation, and amortization, net |
|
|
52 |
|
|
|
(763 |
) |
Bank owned life insurance income |
|
|
(187 |
) |
|
|
(196 |
) |
Share-based compensation and other share-based activity |
|
|
(634 |
) |
|
|
(93 |
) |
Change in accrued interest receivable |
|
|
(556 |
) |
|
|
643 |
|
Deferred income tax expense |
|
|
2,960 |
|
|
|
1,730 |
|
Change in loans held for sale |
|
|
572 |
|
|
|
3,556 |
|
Change in other assets, net |
|
|
(2,180 |
) |
|
|
5,777 |
|
Change in other liabilities, net |
|
|
(11,055 |
) |
|
|
(12,037 |
) |
Net cash provided by operating activities |
|
|
2,609 |
|
|
|
11,528 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
Origination of loans |
|
|
(274,217 |
) |
|
|
(353,256 |
) |
Proceeds from principal payments of loans |
|
|
199,307 |
|
|
|
328,758 |
|
Purchase of loans |
|
|
(22,497 |
) |
|
|
— |
|
Proceeds from calls/maturities of securities available for sale |
|
|
8,624 |
|
|
|
10,444 |
|
Purchase of securities available for sale |
|
|
(10,169 |
) |
|
|
(167,019 |
) |
Proceeds from calls/maturities of securities held to maturity |
|
|
37,173 |
|
|
|
12,099 |
|
Purchase of securities held to maturity |
|
|
(176,574 |
) |
|
|
— |
|
Redemption of FHLB of Boston stock |
|
|
— |
|
|
|
670 |
|
Purchase of banking premises and equipment |
|
|
(460 |
) |
|
|
(310 |
) |
Net cash used in investing activities |
|
|
(238,813 |
) |
|
|
(168,614 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Change in demand, interest bearing, money market and savings accounts |
|
|
170,890 |
|
|
|
352,936 |
|
Change in certificates of deposit |
|
|
(28,278 |
) |
|
|
(25,846 |
) |
Change in borrowings |
|
|
(353 |
) |
|
|
(15,346 |
) |
Cash dividends paid on common stock |
|
|
(4,460 |
) |
|
|
(3,810 |
) |
Net cash provided by financing activities |
|
|
137,799 |
|
|
|
307,934 |
|
Net change in cash and cash equivalents |
|
|
(98,405 |
) |
|
|
150,848 |
|
Cash and cash equivalents at beginning of period |
|
|
180,153 |
|
|
|
75,785 |
|
Cash and cash equivalents at end of period |
|
$ |
81,748 |
|
|
$ |
226,633 |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
Interest |
|
$ |
2,033 |
|
|
$ |
1,527 |
|
Income taxes |
|
|
7,790 |
|
|
|
1,590 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
CAMBRIDGE BANCORP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of Cambridge Bancorp (the “Company”) and its wholly owned subsidiary, Cambridge Trust Company (the “Bank”), and the Bank’s wholly owned subsidiaries, Cambridge Trust Company of New Hampshire Inc., CTC Security Corporation, and CTC Security Corporation III. References to the Company herein relate to the consolidated group of companies. All significant intercompany accounts and transactions have been eliminated in preparation of the consolidated financial statements.
The Company is a state-chartered, federally registered bank holding company headquartered in Cambridge, Massachusetts and was incorporated in 1983. The Company is the sole shareholder of the Bank, a Massachusetts trust company chartered in 1890, which is a commercial bank. The Company operates as a private bank offering a full range of private banking and wealth management services to its clients. The private banking business, the Company’s only reportable operating segment, is managed as a single strategic unit.
The unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) and disclosures necessary to present fairly the Company’s financial position, as of March 31, 2022 and December 31, 2021, and the results of operations and cash flows for the interim periods presented in accordance with generally accepted accounting principles in the United States (“GAAP”). Interim results are not necessarily reflective of the results of the entire year.
For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2022.
2. Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates. The allowance for credit losses is particularly subject to change.
3. Subsequent Events
Management has reviewed events occurring through May 5, 2022, the date the unaudited consolidated financial statements were available to be issued and determined that no subsequent events occurred requiring adjustment to or disclosure in these unaudited consolidated financial statements.
4. Recently Issued Accounting Guidance
Accounting Pronouncements Yet to be Adopted
In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU eliminate the accounting guidance for troubled debt restructurings (“TDRs”) by creditors in Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. For public business entities, the amendments in this ASU require an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact the adoption of this guidance will have on the disclosures within its consolidated financial statements.
In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method . The amendments in this ASU allow multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. The amendments in the ASU also clarify the accounting for and promote consistency in the reporting of hedge basis adjustments applicable to both a single hedged layer and multiple hedged layers. These amendments are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is currently assessing the impact the adoption of this guidance will have on its consolidated financial statements.
6
5. Cash and cash equivalents
At March 31, 2022 and December 31, 2021, cash and cash equivalents totaled $81.7 million and $180.2 million, respectively. There were no amounts required to be maintained at the Federal Reserve Bank of Boston at March 31, 2022 and December 31, 2021. At March 31, 2022 and December 31, 2021, the Company pledged $500,000 to the New Hampshire Banking Department relating to Cambridge Trust Company of New Hampshire, Inc.’s operations in that state. The Company did not have any cash pledged as collateral to derivative counterparties at March 31, 2022, as compared to the $13.3 million pledged at December 31, 2021. See Note 16- Derivatives and Hedging Activities for a discussion of the Company’s derivative and hedging activities.
6. Investment Securities
Investment securities have been classified in the unaudited consolidated balance sheets according to management’s intent. The carrying amounts of securities and their approximate fair values were as follows: