Form 8-K CAMBRIDGE BANCORP For: Jan 22

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 22, 2020

 

CAMBRIDGE BANCORP

(Exact name of Registrant as Specified in Its Charter)

 

 

Registrant’s Telephone Number, Including Area Code: (617) 876-5500 

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

 

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. ☐

 

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

 

On January 22, 2020, Cambridge Bancorp issued a press release in which it disclosed unaudited financial information for the year ended December 31, 2019. The press release also announced the declaration of a quarterly cash dividend of $0.53 per share. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.

 

Information contained herein, including Exhibit 99.1, shall not be deemed filed for the purposes of the Securities Exchange Act of 1934, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.Financial Statements and Exhibits.

 

(a)  Not applicable.

 

(b)  Not applicable.

 

(c)  Not applicable.

 

(d) Exhibits.

The exhibits required by this item are set forth on the Exhibit Index.

 

 

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Exhibit Index

 

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Ex. 99.1

 

 

 

 

FOR IMMEDIATE RELEASE

 

Cambridge Bancorp Announces Record Operating Earnings in 2019 and Declares Increased Dividend  

 

CAMBRIDGE, MA. (January 22, 2020) - Cambridge Bancorp (NASDAQ: CATC) (the “Company”), the parent of Cambridge Trust Company (“Cambridge Trust”), today announced net income of $25,257,000 for the year ended December 31, 2019, representing an increase of $1,376,000, or 5.8%, compared to net income of $23,881,000 for the year ended December 31, 2018. Diluted earnings per share were $5.37 for 2019, representing a 6.9% decrease over diluted earnings per share of $5.77 for 2018. Net income for 2019 included non-operating expenses of $4.7 million related to costs associated with the Company’s December common stock offering and merger related expenses resulting from the completed merger with Optima Bank & Trust Company (“Optima”) and the pending merger with Wellesley Bancorp, Inc. (“Wellesley”).

 

Excluding non-operating expenses, operating net income was $29,156,000 for the year ended December 31, 2019, an increase of $5,132,000, or 21.4%, as compared to operating net income of $24,024,000 for 2018. Operating diluted earnings per share were $6.20 for 2019, representing a 7% increase over operating diluted earnings per share of $5.80 for 2018.

 

For the quarter ended December 31, 2019, net income was $7,109,000, representing an increase of $1,803,000, or 34.0%, as compared to net income of $5,306,000 for the quarter ended December 31, 2018. Diluted earnings per share were $1.42 for the fourth quarter of 2019, representing an increase of 10.9% over diluted earnings per share of $1.28 for the fourth quarter of 2018.

 

Excluding non-operating expenses, operating net income was $7,922,000 for the quarter ended December 31, 2019, an increase of $2,471,000, or 45.3%, as compared to operating net income of $5,451,000 for 2018. Operating diluted earnings per share were $1.58 for the fourth quarter of 2019, representing a 19.7% increase over operating diluted earnings per share of $1.32 for the fourth quarter in 2018.

 

In the fourth quarter of 2019, Cambridge Bancorp and Wellesley Bancorp, Inc. (“Wellesley”) entered into a definitive agreement pursuant to which Wellesley will merge with and into the Company in an all-stock transaction that is anticipated to close during the second quarter of 2020. The merger is subject to regulatory approval, approval by the Company’s and Wellesley’s shareholders, and the completion of other customary closing conditions. Wellesley shareholders will receive 0.580 shares of the Company’s common stock for each share of Wellesley stock they own on the effective date of the merger. This strategically compelling merger is expected to enhance and expand the Company’s Greater Boston presence with the addition of Wellesley’s six full service banking offices in the Norfolk, Middlesex, and Suffolk Counties of Massachusetts.

 

2019 Highlights as Compared to 2018:

 

 

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“Over the past year, Cambridge Trust has made great strides in laying the foundation for many years to come with the expansion of our markets in New Hampshire and Massachusetts following the merger with Optima and the announced merger with Wellesley, respectively,” noted Denis K. Sheahan, Chairman and CEO. “Added to these accomplishments was solid organic growth in loans, deposits, wealth assets, and operating earnings in 2019. The capital raised in December will allow the Cambridge Trust to take advantage of the growth opportunity ahead.”

 

Balance Sheet

 

Inclusive of the merger with Optima and organic growth, total assets increased $754.2 million, or 35.9%, from December 31, 2018 and were $2.9 billion as of December 31, 2019.

 

Cash and cash equivalents increased $42.9 million from December 31, 2018 and were $61.3 million as of December 31, 2019.

 

Inclusive of the merger with Optima and organic growth, total loans increased $667.0 million, or 42.8%, from December 31, 2018 and stood at $2.2 billion as of December 31, 2019.

 

A table is included accompanying this release to provide detail of organic loan and deposit growth.

 

Organic loan growth:

 

The Company’s total investment securities portfolio decreased by $52.5 million, or 11.6%, from $451.0 million at December 31, 2018 to $398.5 million at December 31, 2019, as cash flows were used to reduce wholesale funding.  

 

Total deposits grew by $547.5 million, or 30.2%, to $2.4 billion at December 31, 2019, from $1.8 billion at December 31, 2018, primarily driven by a combination of the impact of the Optima merger and organic core deposit growth.  

 

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Certificates of deposit, which totaled $182.3 million at December 31, 2019, increased by $60.9 million from $121.4 million at December 31, 2018, primarily due to the merger with Optima. Total brokered certificates of deposit, which are included within certificates of deposit, were $7.1 million and $27.5 million at December 31, 2019 and December 31, 2018, respectively.

 

Short-term borrowings were $135.7 million as of December 31, 2019 representing a $45.7 million, or 50.8%, increase from $90.0 million at December 31, 2018.

 

Net Interest and Dividend Income

 

For the quarter ended December 31, 2019, net interest and dividend income before provision for loan losses increased by $5.2 million, or 31.7%, to $21.6 million, as compared to $16.4 million for the quarter ended December 31, 2018, primarily due to loan growth, both organic and as a result of the Optima merger.

 

 

The Company’s net interest margin, on a fully taxable equivalent basis, decreased 13 basis points to 3.19% for the quarter ended December 31, 2019, as compared to 3.32% for the quarter ended December 31, 2018.

 

For the year ended December 31, 2019, net interest and dividend income before provision for loan losses increased by $15.1 million, or 23.8%, to $78.7 million, as compared to $63.6 million for the year ended December 31, 2018. The Company’s net interest margin, on a fully taxable equivalent basis, decreased 11 basis points to 3.22% for the year ended December 31, 2019, as compared to 3.33% for the year ended December 31, 2018.

 

 

Provision for Loan Losses

 

The provision for loan losses for the quarter ended December 31, 2019 was $331,000, as compared to $715,000 for the quarter ended December 31, 2018.  For 2019, the provision for loan losses was $3.0 million, representing an increase of $1.5 million compared to 2018. The increase is the result of strong loan growth and a $1.2 million charge-off on an acquired commercial real estate loan during the third quarter of 2019.

 

Noninterest Income

 

Total noninterest income increased by $1.9 million, or 23.6%, to $9.9 million for the quarter ended December 31, 2019, as compared to $8.0 million for the quarter ended December 31, 2018, primarily as a result of higher Wealth Management revenue, higher gains on loans sold and higher loan prepayment income, which was partially offset by lower loan related derivative income. Noninterest income was 31.5% of total revenue for the quarter ended December 31, 2019.

 

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Total noninterest income increased by $3.4 million, or 10.3%, to $36.4 million for the year ended December 31, 2019, as compared to $33.0 million for the year ended December 31, 2018, primarily as a result of higher Wealth Management revenue, higher gains on loans sold and higher other income. Noninterest income was 31.6% of total revenue for year ended December 31, 2019.

 

 

Noninterest Expense

 

Total noninterest expense increased by $4.6 million, or 27.2%, to $21.4 million for the quarter ended December 31, 2019, as compared to $16.8 million for the quarter ended December 31, 2018, driven by an increase in non-operating expense, salaries and employee benefit expense, occupancy and equipment expense, data processing fees, and professional service fees. The increase to noninterest expense was partially offset by lower marketing, and FDIC insurance expenses.

 

 

Total noninterest expense increased by $14.2 million, or 22.2%, to $78.2 million for the year ended December 31, 2019, as compared to $64.0 million for the year ended December 31, 2018, primarily driven by an increase in non-operating expenses, salaries and employee benefit expense, occupancy and equipment expense, data processing fees, and professional service fees. The increase to noninterest expense was partially offset by lower marketing, and FDIC insurance expenses.

 

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Asset Quality

 

Non-performing loans totaling $5.7 million, or 0.25% of total loans outstanding as of December 31, 2019, included $2.5 million attributed to a non-performing acquired commercial real estate loan. The allowance for loan losses was $18.2 million, or 0.82% of total loans outstanding at December 31, 2019, compared to $16.8 million, or 1.08% of total loans outstanding at year end 2018. The decrease in the allowance to loans ratio during 2019 was primarily due to the impact of loans acquired in connection with the Optima merger. During the fourth quarter of 2019, the Company recorded $185,000 in net loan charge-offs. Net loan charge-offs were $1.6 million for the year ended 2019.

 

Income Taxes

 

The Company’s effective tax rate was 27.3% for the quarter ended December 31, 2019, as compared to 23.0% for the quarter ended December 31, 2018, primarily driven by the costs associated with the pending Wellesley and the equity offering. For the year ended December 31, 2019, the effective tax rate was 25.5%, as compared to 23.2% for the year ended December 31, 2018.

 

Capital & Dividend

 

The Company’s total shareholders’ equity to total assets ratio increased 26.3%, to 10.04%, as of December 31, 2019, as compared to 7.95% as of December 31, 2018. The Company completed an equity offering during the fourth quarter of 2019 and issued 550,850 shares of common stock, and received proceeds of $38.2 million net of underwriting fees. We expect to use the net proceeds from this offering for general corporate purposes, including funding organic growth and potential acquisitions.

 

On January 21, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.53 per share, which is payable on February 20, 2020 to shareholders of record as of the close of business on February 6, 2020. This represents an increase of $0.02, as compared to the $0.51 dividend paid in same quarter of 2019.

 

The Company’s ratio of tangible common equity to tangible assets increased 12.6%, to 8.93%, at December 31, 2019 from 7.93% at December 31, 2018, primarily due to receipt of proceeds in the capital offering, partially offset by growth and the impact of goodwill and acquisition related intangibles recorded as a result of the merger with Optima. Tangible book value per share grew by $6.09, or 15.0%, to $46.66 as of December 31, 2019, as compared to $40.57 as of December 31, 2018.  

 

About Cambridge Bancorp

 

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 129-year-old Massachusetts chartered commercial bank with approximately $2.9 billion in assets and a total of 16 banking offices in Massachusetts and New Hampshire. Cambridge Trust Company is one of New England’s leaders in private banking and wealth management with $3.5 billion in client assets under management and administration. The Wealth Management group maintains offices in Boston, Massachusetts; 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.

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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, and the impact of any laws or regulations applicable to the Company, 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: 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, challenges from the integration of the Company and Optima resulting in the combined business not operating as effectively as expected, disruptions in the Company’s ability to access the capital markets, the businesses of the Company and Wellesley may not be combined successfully, or such combination may take longer than expected, 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, governmental approvals of the merger with Wellesley may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger, the shareholders of the Company and Wellesley may fail to approve the merger, and other factors that are described in the Company’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year end December 31, 2018, which the Company filed on March 18, 2019. 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 and return on average equity 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 and acquisition expenses, gain (loss) on sale 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 stockholders’ 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) and with analysis of return on average assets and return on average common equity on an operating basis. The Company has included information on tangible book value per share, the tangible common equity ratio, and return on average assets and return on average 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

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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 non-core 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 and return on average equity 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

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CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED QUARTERLY RESULTS

 

 

*See GAAP to Non-GAAP Reconciliations.

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CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

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CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

 

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CAMBRIDGE BANCORP AND SUBSIDIARIES

MARGIN & YIELD ANALYSIS

 

 

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CAMBRIDGE BANCORP AND SUBSIDIARIES

MARGIN & YIELD ANALYSIS

 

 

 

 

 

 

 

 

 

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Organic Loan and Deposit Growth (dollars in thousands)

 

 

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.

 

 

 

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The following tables summarize the calculation of the Company’s tangible common equity ratio and tangible book value per share for the periods indicated:

 

 

 

 

 

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