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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)

 

 

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 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

 

 

 

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

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

47

PART II.

OTHER INFORMATION

48

Item 1.

Legal Proceedings

48

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

48

Item 5.

Other Information

48

Item 6.

Exhibits

49

Signatures

50

 

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(dollars in thousands, except par value)

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

81,748

 

 

$

180,153

 

Investment securities

 

 

 

 

 

 

Available for sale, at fair value (amortized cost $202,688 and $201,270, respectively)

 

 

188,205

 

 

 

197,803

 

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