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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 September 30, 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)

 

 

Massachusetts

04-2777442

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

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:

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.

 

Large accelerated filer

 

☐

 

 

 

Accelerated filer

 

☒

Non-accelerated filer

 

☐

 

 

 

Smaller reporting company

 

☐

 

 

 

 

 

 

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 October 27, 2022 the registrant had 7,795,860 shares of common stock, $1.00 par value per share, outstanding.

 

 

Table of Contents

CAMBRIDGE BANCORP AND SUBSIDIARIES

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Unaudited Consolidated Balance Sheets

1

 

Unaudited Consolidated Statements of Income

2

 

Unaudited Consolidated Statements of Comprehensive Income

3

 

Unaudited Consolidated Statements of Changes in Shareholders’ Equity

4

 

Unaudited Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

56

Item 4.

Controls and Procedures

56

PART II.

OTHER INFORMATION

57

Item 1.

Legal Proceedings

57

Item 1A.

Risk Factors

57

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

58

Item 3.

Defaults Upon Senior Securities

59

Item 4.

Mine Safety Disclosures

59

Item 5.

Other Information

59

Item 6.

Exhibits

60

Signatures

61

 

 

 

 

i

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(dollars in thousands, except par value)

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

31,542

 

 

$

180,153

 

Investment securities

 

 

 

 

 

 

Available for sale, at fair value (amortized cost $186,938 and $201,270, respectively)

 

 

158,301

 

 

 

197,803

 

Held to maturity, at amortized cost (fair value $904,315 and $971,092, respectively)

 

 

1,073,904

 

 

 

977,061

 

Total investment securities

 

 

1,232,205

 

 

 

1,174,864

 

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

 

 

—

 

 

 

1,490

 

Loans

 

 

 

 

 

 

Residential mortgage

 

 

1,516,029

 

 

 

1,415,079

 

Commercial mortgage

 

 

1,681,053

 

 

 

1,511,002

 

Home equity

 

 

94,697

 

 

 

87,960

 

Commercial and industrial

 

 

295,893

 

 

 

269,446

 

Consumer

 

 

40,936

 

 

 

35,619

 

Total loans

 

 

3,628,608

 

 

 

3,319,106

 

Less: allowance for credit losses on loans

 

 

(34,748

)

 

 

(34,496

)

Net loans

 

 

3,593,860

 

 

 

3,284,610

 

Federal Home Loan Bank of Boston Stock, at cost

 

 

12,683

 

 

 

4,816

 

Bank owned life insurance

 

 

33,808

 

 

 

46,970

 

Banking premises and equipment, net

 

 

16,866

 

 

 

17,326

 

Right-of-use asset operating leases

 

 

26,705

 

 

 

31,273

 

Deferred income taxes, net

 

 

15,080

 

 

 

9,985

 

Accrued interest receivable

 

 

11,258

 

 

 

9,162

 

Goodwill

 

 

51,912

 

 

 

51,912

 

Merger-related intangibles, net

 

 

2,346

 

 

 

2,617

 

Other assets

 

 

115,094

 

 

 

76,366

 

Total assets

 

$

5,143,359

 

 

$

4,891,544

 

Liabilities

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

Demand

 

$

1,444,765

 

 

$

1,393,935

 

Interest-bearing checking

 

 

688,862

 

 

 

763,188

 

Money market

 

 

1,070,758

 

 

 

1,104,238

 

Savings

 

 

859,102

 

 

 

907,722

 

Certificates of deposit

 

 

217,935

 

 

 

162,069

 

Total deposits

 

 

4,281,422

 

 

 

4,331,152

 

Borrowings

 

 

294,459

 

 

 

16,510

 

Operating lease liabilities

 

 

29,080

 

 

 

33,871

 

Other liabilities

 

 

92,108

 

 

 

72,174

 

Total liabilities

 

 

4,697,069

 

 

 

4,453,707

 

Shareholders’ Equity

 

 

 

 

 

 

Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 7,007,113 shares and 6,968,192 shares, respectively

 

 

7,007

 

 

 

6,968

 

Additional paid-in capital

 

 

230,563

 

 

 

229,205

 

Retained earnings

 

 

231,039

 

 

 

202,874

 

Accumulated other comprehensive loss

 

 

(22,319

)

 

 

(1,210

)

Total shareholders’ equity

 

 

446,290

 

 

 

437,837

 

Total liabilities and shareholders’ equity

 

$

5,143,359

 

 

$

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

 

 

 

Nine Months Ended

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

 

(dollars in thousands, except share data)

 

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on taxable loans

 

$

34,056

 

 

$

30,093

 

 

 

$

92,695

 

 

$

90,975

 

Interest on tax-exempt loans

 

 

367

 

 

 

353

 

 

 

 

1,071

 

 

 

850

 

Interest on taxable investment securities

 

 

5,101

 

 

 

2,502

 

 

 

 

14,501

 

 

 

6,110

 

Interest on tax-exempt investment securities

 

 

601

 

 

 

671

 

 

 

 

1,882

 

 

 

1,962

 

Dividends on FHLB of Boston stock

 

 

106

 

 

 

7

 

 

 

 

163

 

 

 

19

 

Interest on overnight investments

 

 

41

 

 

 

28

 

 

 

 

137

 

 

 

87

 

Total interest and dividend income

 

 

40,272

 

 

 

33,654

 

 

 

 

110,449

 

 

 

100,003

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

2,846

 

 

 

1,086

 

 

 

 

6,586

 

 

 

3,367

 

Interest on borrowed funds

 

 

1,148

 

 

 

147

 

 

 

 

1,535

 

 

 

428

 

Total interest expense

 

 

3,994

 

 

 

1,233

 

 

 

 

8,121

 

 

 

3,795

 

Net interest and dividend income

 

 

36,278

 

 

 

32,421

 

 

 

 

102,328

 

 

 

96,208

 

Provision for (Release of) credit losses

 

 

612

 

 

 

86

 

 

 

 

200

 

 

 

(1,021

)

Net interest and dividend income after provision for (release of) credit losses

 

 

35,666

 

 

 

32,335

 

 

 

 

102,128

 

 

 

97,229

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth management revenue

 

 

8,239

 

 

 

9,238

 

 

 

 

24,935

 

 

 

26,012

 

Deposit account fees

 

 

841

 

 

 

462

 

 

 

 

2,079

 

 

 

1,420

 

ATM/Debit card income

 

 

413

 

 

 

406

 

 

 

 

1,219

 

 

 

1,144

 

Bank owned life insurance income

 

 

144

 

 

 

199

 

 

 

 

1,674

 

 

 

604

 

Gain on loans sold, net

 

 

—

 

 

 

45

 

 

 

 

98

 

 

 

779

 

Loan related derivative income

 

 

213

 

 

 

390

 

 

 

 

554

 

 

 

1,628

 

Other income

 

 

593

 

 

 

375

 

 

 

 

2,387

 

 

 

1,283

 

Total noninterest income

 

 

10,443

 

 

 

11,115

 

 

 

 

32,946

 

 

 

32,870

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

17,341

 

 

 

16,404

 

 

 

 

51,780

 

 

 

48,912

 

Occupancy and equipment

 

 

3,511

 

 

 

3,303

 

 

 

 

10,666

 

 

 

10,382

 

Data processing

 

 

2,592

 

 

 

2,052

 

 

 

 

7,838

 

 

 

6,265

 

Professional services

 

 

749

 

 

 

1,468

 

 

 

 

2,883

 

 

 

4,037

 

Marketing

 

 

731

 

 

 

608

 

 

 

 

1,173

 

 

 

2,024

 

FDIC insurance

 

 

453

 

 

 

305

 

 

 

 

1,380

 

 

 

902

 

Non-operating expenses

 

 

150

 

 

 

787

 

 

 

 

396

 

 

 

787

 

Other expenses

 

 

814

 

 

 

597

 

 

 

 

2,397

 

 

 

1,707

 

Total noninterest expense

 

 

26,341

 

 

 

25,524

 

 

 

 

78,513

 

 

 

75,016

 

Income before income taxes

 

 

19,768

 

 

 

17,926

 

 

 

 

56,561

 

 

 

55,083

 

Income tax expense

 

 

5,152

 

 

 

4,607

 

 

 

 

14,971

 

 

 

14,321

 

Net income

 

$

14,616

 

 

$

13,319

 

 

 

$

41,590

 

 

$

40,762

 

Share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic

 

 

6,971,583

 

 

 

6,932,882

 

 

 

 

6,961,833

 

 

 

6,924,168

 

Weighted average shares outstanding, diluted

 

 

7,018,832

 

 

 

6,999,773

 

 

 

 

7,010,197

 

 

 

6,991,175

 

Basic earnings per share

 

$

2.09

 

 

$

1.91

 

 

 

$

5.94

 

 

$

5.86

 

Diluted earnings per share

 

$

2.07

 

 

$

1.89

 

 

 

$

5.90

 

 

$

5.80

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

2

 

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

September 30, 2022

 

 

September 30, 2021

 

 

 

(dollars in thousands)

 

Net income

 

$

14,616

 

 

$

13,319

 

 

$

41,590

 

 

$

40,762

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding losses

 

 

(6,402

)

 

 

(873

)

 

 

(18,766

)

 

 

(2,725

)

Interest rate swaps designated as cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses)

 

 

(150

)

 

 

74

 

 

 

(1,633

)

 

 

(245

)

Less: reclassification adjustment for gains (losses) realized in net income

 

 

14

 

 

 

(511

)

 

 

(710

)

 

 

(1,431

)

    Total unrealized losses on interest rate swaps

 

 

(136

)

 

 

(437

)

 

 

(2,343

)

 

 

(1,676

)

Defined benefit retirement plans

 

 

 

 

 

 

 

 

 

 

 

 

Change in retirement liabilities

 

 

—

 

 

 

8

 

 

 

—

 

 

 

23

 

Other comprehensive loss

 

 

(6,538

)

 

 

(1,302

)

 

 

(21,109

)

 

 

(4,378

)

Comprehensive income

 

$

8,078

 

 

$

12,017

 

 

$

20,481

 

 

$

36,384

 

 

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

 

 

 

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 June 30, 2021

 

$

6,966

 

 

$