Cambridge Bancorp Announces First Quarter 2022 Earnings and Declares Quarterly Dividend

CAMBRIDGE, Mass., April 20, 2022 /PRNewswire/ -- Cambridge Bancorp (NASDAQ: CATC) (the "Company"), the parent company of Cambridge Trust Company (the "Bank"), today announced unaudited net income of $13.3 million for the quarter ended March 31, 2022. Net income for the first quarter was relatively unchanged as compared to net income of $13.3 million for the quarter ended December 31, 2021. Diluted earnings per share were $1.89 for the quarter ended March 31, 2022, representing a 0.5% increase as compared to diluted earnings per share of $1.88 for the quarter ended December 31, 2021.

First Quarter 2022 Highlights:

• Financial performance ratios for the quarter ended March 31, 2022 were strong with Operating Return on Average Assets ("ROA") of 1.09% and Operating Return on Tangible Common Shareholders' Equity ("ROTCE") of 14.13%.
• Total loans, excluding loans under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP"), increased by $106.7 million, or 3.2%, to $3.4 billion at March 31, 2022 from $3.3 billion at December 31, 2021.
• Core deposits at March 31, 2022 increased by $170.9 million, or 4.1%, from December 31, 2021.
• Asset quality at March 31, 2022, remained excellent with ratios of non-performing loans to total loans and non-performing assets to total assets at 0.17% and 0.12%, respectively.

"The Cambridge Trust Team delivered another quarter of strong performance in a period of market volatility," noted Denis K. Sheahan, Chairman, President and CEO. "New business pipelines remain robust and our balance sheet is positioned to benefit in a rising rate environment."

Balance Sheet

Total assets increased by $126.8 million, or 2.6%, from $4.89 billion at December 31, 2021 to $5.02 billion at March 31, 2022.

Total loans increased by $98.1 million, or 3.0%, from $3.32 billion at December 31, 2021 to $3.42 billion at March 31, 2022. Excluding PPP loans, total loans increased by $106.7 million, or 3.2%, from December 31, 2021.

• Residential real estate loans increased by $32.1 million, from $1.42 billion at December 31, 2021 to $1.45 billion at March 31, 2022.
• Commercial real estate loans increased by $68.5 million, from $1.51 billion at December 31, 2021 to $1.58 billion at March 31, 2022.
• Commercial and industrial loans, excluding PPP loans, were relatively unchanged and totaled $249.2 million at March 31, 2022 and $247.2 million at December 31, 2021.
• PPP loans were $13.6 million and $22.2 million at March 31, 2022 and December 31, 2021, respectively, and are included in commercial and industrial loans on the consolidated balance sheets.

The Company's total investment securities portfolio increased by $129.2 million, or 11.0%, from $1.17 billion at December 31, 2021 to $1.30 billion at March 31, 2022, as the Company invested excess cash.

Total deposits increased by $142.6 million, or 3.3%, to $4.47 billion at March 31, 2022 from $4.33 billion at December 31, 2021.

• Core deposits, which the Company defines as all deposits other than certificates of deposit, increased by $170.9 million, or 4.1%, to $4.34 billion at March 31, 2022, as a result of growth from new and existing client relationships.
• The cost of total deposits for the quarter ended March 31, 2022 was 0.17%, as compared to 0.15% for the quarter ended December 31, 2021, an increase of two basis points. At March 31, 2022, the spot cost of deposits was 0.16%.

Net Interest and Dividend Income

Net interest and dividend income, before the release of credit losses, increased by $96,000, or 0.3%, to $31.9 million for the quarter ended March 31, 2022, from $31.8 million for the quarter ended December 31, 2021. This increase was primarily due to an increase in average earning assets, partially offset by a decrease in PPP loan income.

The Company's net interest margin on a fully taxable equivalent basis decreased by 10 basis points to 2.74% for the quarter ended March 31, 2022, as compared to 2.84% for the quarter ended December 31, 2021.

In order to provide greater disclosure of the impact of loan related merger accounting and the impact of the SBA's PPP loan program, a reconciliation of the Company's net interest margin, on a fully taxable equivalent basis, to an adjusted net interest margin, on a fully taxable equivalent basis, is shown below. Excluding the impact of merger related loan accretion and the impact of PPP loans, the adjusted net interest margin, on a fully taxable equivalent basis, for the quarter ended March 31, 2022, was 2.67%, representing a three basis point decrease from the adjusted net interest margin, on a fully taxable equivalent basis, of 2.70% for the quarter ended December 31, 2021.

Release of Credit Losses 

During the quarter ended March 31, 2022, the Company recorded a release of credit losses of $412,000, as compared to a release of credit losses of $273,000 for the quarter ended December 31, 2021, as a result of improving forward-looking economic assumptions and the resulting decrease in loss expectations in the Company's allowance for credit losses modeling.

Noninterest Income 

Total noninterest income decreased by $100,000, or 0.9%, to $11.4 million for the quarter ended March 31, 2022, as compared to $11.5 million for the quarter ended December 31, 2021. This change was primarily the result of lower wealth management revenue and lower loan related derivative income, partially offset by higher other income. Noninterest income was 26.3% of total revenue for the quarter ended March 31, 2022. 

• Wealth management revenue decreased by $451,000, or 5.0%, to $8.6 million for the first quarter of 2022, as compared to $9.0 million for the fourth quarter of 2021. Wealth Management Assets under Management and Administration were $4.7 billion at March 31, 2022, a decrease of $193.8 million, or 4.0%, from December 31, 2021, primarily due to declines within the equity markets.
• Loan related derivative income decreased by $200,000, or 40.3%, to $296,000 for the quarter ended March 31, 2022, as compared to $496,000 for the quarter ended December 31, 2021.
• Other income increased by $577,000, or 77.9%, to $1.3 million for the quarter ended March 31, 2022, as compared to $741,000 for the quarter ended December 31, 2021, primarily due to equity warrant revenue associated with an Innovation Banking loan in addition to gains recognized on a community development fund investment.

Noninterest Expense 

Total noninterest expense increased by $407,000, or 1.6%, to $25.9 million for the quarter ended March 31, 2022, as compared to $25.5 million for the quarter ended December 31, 2021. During the quarter ended March 31, 2022, there were increases in salary and employee benefits expense, partially offset by decreases in non-operating expenses, professional services expense, and marketing expense as compared to the quarter ended December 31, 2021. 

• Salary and employee benefits expense increased by $1.2 million, or 7.3%, to $17.4 million for the quarter ended March 31, 2022, from $16.2 million for the quarter ended December 31, 2021, primarily due to the seasonality of higher employee benefit costs during the first quarter combined with recent staffing additions and regular merit increases.
• There were no non-operating expenses for the quarter ended March 31, 2022, as compared to $331,000 for the quarter ended December 31, 2021.
• Professional services decreased by $290,000, or 21.4%, to $1.1 million for the quarter ended March 31, 2022, from $1.4 million for the quarter ended December 31, 2021, primarily due to lower consulting fees associated with the wealth management system conversion completed in the fourth quarter of 2021 and lower recruiting expenses.
• Marketing expense decreased by $288,000, or 56.3%, to $224,000 for the quarter ended March 31, 2022, from $512,000 for the quarter ended December 31, 2021, due to timing of marketing spend.

Asset Quality 

Non-performing loans totaled $5.9 million, or 0.17% of total loans outstanding, at March 31, 2022. The allowance for credit losses was $34.1 million, or 1.00% of total loans outstanding excluding PPP loans, at March 31, 2022, as compared to $34.5 million, or 1.05% of total loans outstanding excluding PPP loans, at December 31, 2021.

The Company recorded net loan recoveries of $13,000, or 0.00% of total loans (annualized), for both the quarters ended March 31, 2022 and  December 31, 2021.

The following table shows additional and historical information regarding non-performing assets, early-stage delinquency (30-89 days delinquent), and troubled debt restructurings: 

Income Taxes 

The Company's effective tax rate was 25.0% for the quarter ended March 31, 2022, as compared to 26.5% for the quarter ended December 31, 2021.

Dividend and Capital

On April 19, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.64 per share, which is payable on May 19, 2022, to shareholders of record as of the close of business on May 5, 2022. The Company did not repurchase any shares under its previously announced share repurchase program during the three months ended March 31, 2022.

The Company's ratio of tangible common equity to tangible assets decreased to 7.69% at March 31, 2022 from 7.92% at December 31, 2021, primarily due to increases in unrealized losses within the Company's available for sale investment securities portfolio combined with asset growth during the quarter ended March 31, 2022.

Tangible book value per share decreased by $0.49, or 0.9%, to $54.52 at March 31, 2022, as compared to $55.01 at December 31, 2021, as a result of increases in unrealized losses within the Company's available for sale investment securities portfolio partially offset by income earned during the quarter ended March 31, 2022.

Investor Conference Call and Investor Presentation

An investor presentation is available on the investor relations section of the Company's website: http://ir.cambridgetrust.com or within the hyperlink provided below. This presentation includes additional details regarding the Company's loan portfolio, liquidity position, and other financial disclosures. Click here to download.

Cambridge Bancorp will also conduct a conference call/webcast at 11:00 a.m. Eastern Time on Wednesday, April 20, 2022, to discuss the results for the quarter. Participants are encouraged to pre-register for the conference call using the following link: https://dpregister.com/sreg/10163886/f179f311fe.

Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the call. Participants may pre-register at any time prior to the call and will immediately receive simple instructions via email. Additionally, participants may reach the registration link and access the webcast by logging in through the investor section of the Company's website at http://ir.cambridgetrust.com.

Those parties who do not have Internet access or are otherwise unable to pre-register for this event may still participate at the above time by dialing 1-866-777-2509 and asking the operator to join the Cambridge Bancorp (CATC) earnings call. Participants are requested to dial-in a few minutes before the scheduled start of the call. The webcast will be archived for three months on our investor relations website at https://ir.cambridgetrust.com/news-market-information/presentations/default.aspx.

About Cambridge Bancorp

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 132-year-old Massachusetts chartered commercial bank with approximately $5.0 billion in assets at March 31, 2022, and a total of 19 Massachusetts and New Hampshire locations. Cambridge Trust Company is one of New England's leaders in private banking and wealth management with $4.7 billion in client assets under management and administration at March 31, 2022. The Wealth Management group maintains offices in Boston and Wellesley, Massachusetts and 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 http://ir.cambridgetrust.com.

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, the impact of any laws or regulations applicable to the Company, and measures being taken in response to the COVID-19 pandemic and the impact of the COVID-19 pandemic on the Company's business 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: the current global economic uncertainty and 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; the duration and scope of the COVID-19 pandemic and its impact on levels of consumer confidence; actions that governments, businesses and individuals take in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; a prolonged resurgence in the severity of the COVID-19 pandemic due to variants and mutations of the virus; the pace of recovery when the COVID-19 pandemic subsides; challenges from the integration of the Company and Wellesley resulting in the combined business not operating as effectively as expected; disruptions in the Company's ability to access the capital markets; 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 merger with Wellesley, including adverse effects on relationships with employees, may be greater than expected; and other factors that are described in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year end December 31, 2021, which the Company filed on March 14, 2022. 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, operating return on average assets, operating return on tangible common equity, and operating efficiency ratio.

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 disposition 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 an analysis of tangible book value per share (which is computed by dividing shareholders' 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), return on average assets and return on tangible common equity on an operating basis, and the operating efficiency ratio (which is computed by dividing noninterest expense adjusted for non-operating expenses and total revenue adjusted for gain/(loss) on disposition of investment securities). The Company has included information on these non-GAAP financial measures because the Company 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 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-operating 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 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