Cambridge Bancorp Announces Third Quarter Results

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October 18, 2016 9:02 AM EDT

CAMBRIDGE, Mass.--(BUSINESS WIRE)-- Cambridge Bancorp (OTCQB: CATC) today reported unaudited net income of $4,575,000 for the third quarter of 2016 compared to $4,355,000 for the same quarter in 2015. Diluted earnings per share (EPS) were $1.13 for the third quarter of 2016 versus $1.09 for the same quarter in 2015. For the nine months ending September 30, 2016, unaudited net income was $12,473,000 versus $11,824,000 for the same period in 2015. Diluted earnings per share were $3.09 for the nine-month period versus $2.97 for the same period in 2015.

“We are pleased to report another solid increase in the Bank’s quarter-over-quarter performance,” notes Denis K. Sheahan, the Bank’s president and CEO. “Our earnings performance was driven by a sustained trend of growth in loans, which have increased by $119.8 million (10.0%) through September 30, 2016. The Bank recorded strong profitability metrics in the third quarter with return on average assets of 1.02% and return on average stockholders’ equity of 13.59%.”

Net interest income grew to $13.5 million for the third quarter of 2016, an increase of $324,000 (2.5%) over the third quarter of 2015. The increase of $1.3 million (3.4%) in net interest income for the nine-month period of 2016 versus the same period in 2015 was primarily a function of growth in the loan portfolio resulting in higher interest income on loans of $2.5 million (7.4%). Net interest income for the nine-month period was offset by growth in promotionally-priced savings accounts and brokered certificates of deposit which resulted in higher interest expense on total deposits of $891,000 and a decrease in interest on taxable investment securities of $423,000 (9.6%) due to the Bank’s smaller investment portfolio and lower yields.

Noninterest income increased by $1.1 million (17.3%) to $7.6 million for the third quarter of 2016 compared to $6.5 million for the same quarter in 2015. During the fourth quarter of 2015 the Bank began to offer loan level derivative contracts to manage commercial loan interest rate risk. This activity generated $392,000 in loan related income for the third quarter of 2016. Deposit account fees increased by $187,000 due primarily to greater commercial cash management income and gain on loans held for sale increased by $105,000 compared to the same quarter in 2015.

The Bank continued to generate solid Wealth Management income, which totaled $5.5 million for the third quarter of 2016, an increase of $478,000 (9.6%), compared to the same quarter in 2015. Wealth Management assets under management stood at $2.5 billion on September 30, 2016 compared to $2.2 billion on September 30, 2015.

For the third quarter of 2016, noninterest expense totaled $14.2 million, an increase of $1.0 million (8.0%) compared to the same quarter in 2015. The primary factor for the increase in noninterest expense was higher salaries and benefits of $1.0 million (13.6%) as a result of strategic hires and growth in the workforce, along with the cost of retirement plans. Other increases in noninterest expense categories were offset by lower marketing expenses of $124,000 (21.1%).

The industry-wide headwind of contracting margins continued to place a strain on the Bank’s net interest margin. Sustained lower asset yields led to a decrease of eleven basis points in the Bank’s net interest margin for the third quarter of 2016 compared to the same quarter in 2015 and a decrease of ten basis points for the comparable nine-month period.

Total loans outstanding as of September 30, 2016 were $1.3 billion compared to $1.2 billion at the end of last year. The noteworthy growth in the loan portfolio during 2016 is attributable to increases in commercial mortgages of $103.6 million (20.3%), commercial and industrial loans of $13.2 million (31.2%), home equity loans of $9.3 million (14.6%), and consumer loans of $6.9 million (23.7%). The Bank’s residential mortgage portfolio decreased by $13.1 million (2.4%) as more new production is sold on the secondary market.

Non-performing loans as a percentage of total loans stood at 12 basis points on September 30, 2016, relatively unchanged to year-end 2015. Loan quality remains solid and the Allowance for Loan Losses stood at $15.5 million or 1.18% of total loans outstanding at September 30, 2016. At December 31, 2015, the Allowance for Loan Losses was $15.2 million or 1.27% of total loans outstanding. The provision for loan losses for the nine-month period of $338,000 is primarily in response to growth in the loan portfolio.

Total deposits grew by $67.0 million (4.3%) since year-end 2015. A particular highlight in the deposit category was the growth in commercial checking and commercial savings, which have increased by $104.2 million (20.3%) since year-end 2015. Total deposits at third quarter end were $1.6 billion.

Total assets as of September 30, 2016 were $1.8 billion.

About Cambridge Bancorp

Cambridge Bancorp and its subsidiary, Cambridge Trust Company, are based in Cambridge, Massachusetts, in the heart of Harvard Square. Cambridge Trust Company is a 126-year-old Massachusetts chartered commercial bank with $1.8 billion in total assets and 11 Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, and Weston. Cambridge Trust Company is one of New England’s leaders in wealth management with $2.5 billion in client assets under management. The Wealth Management group maintains offices in Boston, Massachusetts, and Concord, Manchester, and Portsmouth, New Hampshire.

The accompanying unaudited condensed interim consolidated financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Cambridge Bancorp 2015 Annual Report, which is posted in the investor relations section of our website at www.cambridgetrust.com. We will also post supplemental financial information for the third quarter of 2016 at the same site later this month. Interim results are not necessarily reflective of the results for the entire year.

Financial Highlights:

CAMBRIDGE BANCORP
QUARTERLY UNAUDITED RESULTS
September 30, 2016
Dollar amounts in thousands (except share data)
       
 
Quarter Ended Nine Months Ended
September 30, September 30,
  2016   2015   2016   2015
 
Interest Income $ 14,315 $ 13,923 $ 42,365 $ 40,285
Interest Expense   795   727   2,592   1,834
Net Interest Income 13,520 13,196 39,773 38,451
Provision for Loan Losses 113 125 338 1,075
Non-Interest Income 7,615 6,494 21,383 19,370
Non-Interest Expense   14,163   13,115   42,155   39,211
Income Before Taxes 6,859 6,450 18,663 17,535
Income Taxes   2,284   2,095   6,190   5,711
Net Income $ 4,575 $ 4,355 $ 12,473 $ 11,824
 

Data Per Common Share:

 
Basic Earnings Per Share $ 1.13 $ 1.09 $ 3.09 $ 2.97
Diluted Earnings Per Share $ 1.13 $ 1.09 $ 3.09 $ 2.97
Dividends Declared Per Share $ 0.46 $ 0.45 $ 1.38 $ 1.35
 
Avg. Common Shares Outstanding:
Basic 3,996,687 3,949,469 3,982,696 3,933,529
Diluted 4,043,651 3,997,145 4,029,281 3,985,902
 

Selected Operating Ratios:

 
Net Interest Margin 3.16% 3.27% 3.17% 3.27%
Return on Average Assets 1.02% 1.03% 0.94% 0.96%
Return on Average Equity 13.59% 14.20% 12.69% 13.10%
 
 
September 30, December 31, September 30,
  2016   2015   2015
 
Total Assets $ 1,801,055 $ 1,706,201 $ 1,687,143
Total Loans 1,312,021 1,192,214 1,191,269
Non-Performing Loans 1,574 1,481 1,235
Allowance for Loan Losses 15,537 15,191 15,264
Allowance to Total Loans 1.18% 1.27% 1.28%
Total Deposits 1,624,264 1,557,224 1,479,422
Total Stockholders' Equity 136,228 125,063 125,332
Wealth Management AUM 2,542,677 2,329,208

2,222,754

 
Book Value Per Share $ 33.76 $ 31.26 $ 31.35
Tangible Book Value Per Share $ 33.51 $ 31.04 $ 31.12
 
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED BALANCE SHEETS
         
September 30, December 31,
2016   2015  
(In thousands)
ASSETS
 
Cash and cash equivalents $ 19,016 $ 24,645
 
Investment securities:
Available for sale, at fair value 322,736 347,173
Held to maturity, at amortized cost 84,943   83,063  
Total investment securities 407,679 430,236
 
Loans held for sale, at lower of cost or fair value 3,268 —
 
Loans:
Residential mortgage 533,106 546,245
Commercial mortgage 614,652 511,071
Home equity 72,791 63,522
Commercial & Industrial 55,621 42,384
Consumer 35,851   28,992  
Total loans 1,312,021 1,192,214
Allowance for loan losses (15,537 ) (15,191 )
Net loans 1,296,484 1,177,023
 
Stock in FHLB of Boston, at cost 5,014 6,465
Bank owned life insurance 30,361 29,887
Banking premises and equipment, net 10,908 11,371
Accrued interest receivable 4,175 4,222
Other assets 24,150   22,352  
Total assets $ 1,801,055   $ 1,706,201  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deposits:
Demand $ 452,121 $ 436,998
Interest bearing checking 362,489 370,400
Money market 87,160 73,911
Savings 541,583 497,525
Certificates of deposit 180,911   178,390  
Total deposits 1,624,264 1,557,224
 
Short-term borrowings 12,600 —
Long-term borrowings 3,787 3,910
Other liabilities 24,176   20,004  
Total liabilities 1,664,827   1,581,138  
Stockholders' equity:

Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 4,035,006 and 4,000,181 shares, respectively

4,035 4,000
Additional paid-in capital 32,756 30,427
Retained earnings 104,804 99,064
Accumulated other comprehensive income/(loss) (5,367 ) (8,428 )
Total stockholders’ equity 136,228   125,063  
Total liabilities and stockholders’ equity $ 1,801,055   $ 1,706,201  
 
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
       
Quarter Ended September 30,
2016 2015
(In thousands, except per share data)
 
Interest income:
Interest on loans $ 12,438 $ 11,673
Interest on taxable investment securities 1,115 1,456
Interest on tax exempt investment securities 688 689
Dividends on FHLB of Boston stock 52 98
Interest on overnight investments 22 7
Total interest income 14,315 13,923
 
Interest expense:
Interest on deposits 769 658
Interest on borrowed funds 26 69
Total interest expense 795 727
 
Net interest income 13,520 13,196
 
Provision for loan losses 113 125
 
Net interest income after provision for loan losses 13,407 13,071
 
Noninterest income:
Wealth management income 5,481 5,003
Deposit account fees 766 579
ATM/Debit card income 285 299
Bank owned life insurance income 149 160
Gain on disposition of investment securities 3 19
Gain on loans held for sale 305 200
Loan related derivative income 392 —
Other income 234 234
Total noninterest income 7,615 6,494
 
Noninterest expense:
Salaries and employee benefits 8,620 7,587
Occupancy and equipment 2,278 2,184
Data processing 1,279 1,208
Professional services 654 636
Marketing 463 587
FDIC Insurance 176 214
Other expenses 693 699
Total noninterest expense 14,163 13,115
 
Income before income taxes 6,859 6,450
 
Income tax expense 2,284 2,095
Net income $ 4,575 $ 4,355
 
Per share data:
 
Basic earnings per common share $ 1.13 $ 1.09
Diluted earnings per common share $ 1.13 $ 1.09
 
Average shares outstanding - basic 3,996,687 3,949,469
Average shares outstanding - diluted 4,043,651 3,997,145
 
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
       
Quarter Ended September 30,
2016   2015  
(In thousands)
 
 
Net income $ 4,575 $ 4,355
 
Other comprehensive income/(loss), net of tax:
Defined benefit retirement plans:
Change in unfunded retirement liability 117 105

Unrealized gains/(losses) on Available for Sale securities:

Unrealized holding gains/(losses) arising during the period

(401 ) 1,100

Less: reclassification adjustment for gains recognized in net income

(2 ) (13 )
Other comprehensive income/(loss) (286 ) 1,192  
Comprehensive income/(loss) $ 4,289   $ 5,547  
 
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
       
Nine Months Ended September 30,
2016 2015
(In thousands, except per share data)
 
Interest income:
Interest on loans $ 36,089 $ 33,589
Interest on taxable investment securities 3,979 4,402
Interest on tax exempt investment securities 2,071 2,068
Dividends on FHLB of Boston stock 132 203
Interest on overnight investments 94 23
Total interest income 42,365 40,285
 
Interest expense:
Interest on deposits 2,526 1,635
Interest on borrowed funds 66 199
Total interest expense 2,592 1,834
 
Net interest income 39,773 38,451
 
Provision for loan losses 338 1,075
 
Net interest income after provision for loan losses 39,435 37,376
 
Noninterest income:
Wealth management income 15,026 14,387
Deposit account fees 2,134 1,716
ATM/Debit card income 852 888
Bank owned life insurance income 474 505
Gain on disposition of investment securities 438 690
Gain on loans held for sale 591 495
Loan related derivative income 1,191 —
Other income 677 689
Total noninterest income 21,383 19,370
 
Noninterest expense:
Salaries and employee benefits 25,431 23,127
Occupancy and equipment 7,029 6,475
Data processing 3,744 3,549
Professional services 1,857 1,482
Marketing 1,388 1,762
FDIC Insurance 628 633
Other expenses 2,078 2,183
Total noninterest expense 42,155 39,211
 
Income before income taxes 18,663 17,535
 
Income tax expense 6,190 5,711
Net income $ 12,473 $ 11,824
 
Per share data:
 
Basic earnings per common share $ 3.09 $ 2.97
Diluted earnings per common share $ 3.09 $ 2.97
 
Average shares outstanding - basic 3,982,696 3,933,529
Average shares outstanding - diluted 4,029,281 3,985,902
 
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
       
Nine Months Ended September 30,
2016   2015  
(In thousands)
 
 
Net income $ 12,473 $ 11,824
 
Other comprehensive income/(loss), net of tax:
Defined benefit retirement plans:
Change in unfunded retirement liability 351 315

Unrealized gains/(losses) on Available for Sale securities:

Unrealized holding gains/(losses) arising during the period

2,992 1,163

Less: reclassification adjustment for gains recognized in net income

(281 ) (443 )
Other comprehensive income/(loss) 3,062   1,035  
Comprehensive income/(loss) $ 15,535   $ 12,859  
 
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
           
Nine Months Ended September 30,
2016   2015  
(In thousands)
Cash flows provided by operating activities:
Net income $ 12,473 $ 11,824
Adjustments to arrive at net cash provided by operating activities:
Provision for loan losses 338 1,075
Amortization of deferred charges and fees, net 1,232 873
Depreciation and amortization 1,554 1,322
Bank owned life insurance income (474 ) (505 )
Gain on disposition of investment securities (438 ) (690 )

Compensation expense from stock option and restricted stock grants

670 425
Change in loans held for sale (3,268 ) (7 )

Change in accrued interest receivable, deferred taxes, other assets and other liabilities

1,197 (190 )
Other, net 38   20  
Net cash provided by operating activities 13,322   14,147  
Cash flows used by investing activities:
Origination of loans (234,039 ) (214,599 )
Purchase of:
Investment securities - AFS (129,733 ) (129,973 )
Investment securities - HTM (10,719 ) (7,640 )
Maturities, calls and principal payments of:
Loans 113,837 103,735
Investment securities - AFS 140,336 87,653
Investment securities - HTM 8,521 4,969
Proceeds from sales of investment securities - AFS & HTM 18,070 47,625
Change in FHLB of Boston stock 1,451 (654 )
Purchase of banking premises and equipment (1,091 ) (3,606 )
Net cash used by investing activities (93,367 ) (112,490 )
Cash flows provided by financing activities:
Change in deposits 66,979 108,886
Change in short-term borrowings 12,600 (9,000 )
Repayment of long-term borrowings (123 ) —
Proceeds from long-term borrowings — 3,950
Proceeds from issuance of common stock 1,962 1,589
Repurchase of common stock (1,432 ) (422 )
Cash dividends paid on common stock (5,570 ) (5,377 )
Net cash provided by financing activities 74,416   99,626  
Net increase/(decrease) in cash and cash equivalents (5,629 ) 1,283
Cash and cash equivalents at beginning of period 24,645   17,440  
Cash and cash equivalents at end of period $ 19,016   $ 18,723  
 
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,612 $ 1,799
Cash paid for income taxes 6,550 6,080
Non-cash transactions:

Change in accumulated other comprehensive income/(loss), net of taxes

3,062 1,035

Cambridge Bancorp
Albert R. Rietheimer, 617-441-1516
Chief Financial Officer & Treasurer

Source: Cambridge Bancorp


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