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, 2020

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

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	☐	Small 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  ☒

Common Stock	CATC	NASDAQ
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)

As of April 30, 2020, the registrant had 5,416,875 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	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
PART II.	OTHER INFORMATION	59
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
Signatures		62

i

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

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 $115,485 and $141,109, respectively)		117,947			140,330
Held to maturity, at amortized cost (fair value $256,860 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 on loans		(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

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,		March 31,
	2020		2019
	(dollars in thousands, except share data)
Interest and dividend income
Interest on taxable loans	$	23,338	$	16,284
Interest on tax-exempt loans		198		89
Interest on taxable investment securities		1,723		1,980
Interest on tax-exempt investment securities		595		571
Dividends on FHLB of Boston stock		101		76
Interest on overnight investments		140		118
Total interest and dividend income		26,095		19,118
Interest expense
Interest on deposits		3,129		2,501
Interest on borrowed funds		566		356
Total interest expense		3,695		2,857
Net interest and dividend income		22,400		16,261
Provision (Release) for Credit Losses		2,000		(93	)
Net interest and dividend income after provision (release) for    credit losses		20,400		16,354
Noninterest income
Wealth management revenue		6,627		6,124
Deposit account fees		791		738
ATM/Debit card income		307		276
Bank owned life insurance income		160		127
Loss on disposition of investment securities		—		(87	)
Gain on loans sold		119		16
Loan related derivative income		510		436
Other income		304		327
Total noninterest income		8,818		7,957
Noninterest expense
Salaries and employee benefits		13,016		10,827
Occupancy and equipment		2,807		2,330
Data processing		1,685		1,346
Professional services		859		807
Marketing		256		404
FDIC insurance		179		—
Nonoperating expenses		253		91
Other expenses		870		568
Total noninterest expense		19,925		16,373
Income before income taxes		9,293		7,938
Income tax expense		2,061		1,740
Net income	$	7,232		6,198
Share data:
Weighted average number of shares outstanding, basic		5,397,040		4,072,805
Weighted average number of shares outstanding, diluted		5,432,099		4,106,658
Basic earnings per share	$	1.34	$	1.51
Diluted earnings per share	$	1.33	$	1.49

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 March 31,
	2020			2019
	(dollars in thousands)
Net income	$	7,232		$	6,198
Other comprehensive income, net of tax:
Unrealized gains on available for sale securities
Unrealized holding gains		2,500			1,095
Less: reclassification adjustment for losses   included in net income		—			66
Total unrealized gains on securities		2,500			1,161
Derivatives
Change in interest rate contracts		4,246			(30	)
Defined benefit retirement plans
Change in retirement liabilities		(1	)		26
Other comprehensive income		6,745			1,157
Comprehensive income	$	13,977		$	7,355

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 March 31,
	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) / Income			Total Shareholders’ Equity
	(dollars in thousands, except per share data)
Balance at December 31, 2018	$	4,107	$	38,271		$	131,135		$	(6,487	)	$	167,026
Net income		—		—			6,198			—			6,198
Other comprehensive income		—		—			—			1,157			1,157
Share based compensation		17		(32	)		—			—			(15	)
Dividends declared ($0.51 per share)		—		—			(2,098	)		—			(2,098	)
Balance at March 31, 2019	$	4,124	$	38,239		$	135,235		$	(5,330	)	$	172,268
Balance at December 31, 2019	$	5,401	$	136,766		$	146,875		$	(2,481	)	$	286,561
Cumulative effect of accounting changes (Note 4)		—		—			(347	)		—			(347	)
Net income		—		—			7,232			—			7,232
Other comprehensive income		—		—			—			6,745			6,745
Share based compensation		17		420			—			—			437
Dividends declared ($0.53 per share)		—		—			(2,869	)		—			(2,869	)
Balance at March 31, 2020	$	5,418	$	137,186		$	150,891		$	4,264		$	297,759

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,
	2020			2019
	(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,232		$	6,198
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		2,000			(93	)
Amortization of deferred charges and fees, net		51			199
Depreciation and amortization		78			393
Bank owned life insurance income		(160	)		(127	)
Loss/(gain) on disposition of investment securities		—			87
Share based compensation		437			(15	)
Change in accrued interest receivable		180			(250	)
Deferred income tax expense/(benefit)		2,265			1,202
Change in other assets, net		(23,741	)		(35,439	)
Change in other liabilities, net		19,613			30,638
Change in loans held for sale		(1,329	)		—
Net cash provided by operating activities		6,626			2,793
CASH FLOWS FROM INVESTING ACTIVITIES
Origination of loans		(158,477	)		(107,949	)
Proceeds from principal payments of loans		127,572			112,585
Proceeds from calls/maturities of securities available for sale		25,559			8,825
Proceeds from sales of securities available for sale and held to maturity		—			15,913
Proceeds from calls/maturities of securities held to maturity		11,139			14,882
Purchase of securities held to maturity		—			(30,966	)
Redemption of FHLB of Boston stock		1,586			4,172
Purchase of banking premises and equipment		(364	)		(534	)
Net cash (used in) provided by investing activities		7,015			16,928
CASH FLOWS FROM FINANCING ACTIVITIES
Change in demand, interest bearing, money market and savings accounts		(5,600	)		43,128
Change in certificates of deposit		37,026			47,825
Change in short-term borrowings		(60,544	)		(90,000	)
Repayment of long-term borrowings		—			(43	)
Cash dividends paid on common stock		(2,869	)