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Section 1: 10-Q (10-Q)

catc-10q_20190630.htm

 

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 June 30, 2019

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

 

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

 

 

 

  

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  

As of July 31, 2019, the registrant had 4,851,047 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 (Loss)

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

38

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

61

Item 4.

Controls and Procedures

61

PART II.

OTHER INFORMATION

62

Item 1.

Legal Proceedings

62

Item 1A.

Risk Factors

62

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62

Item 3.

Defaults Upon Senior Securities

62

Item 4.

Mine Safety Disclosures

62

Item 5.

Other Information

62

Item 6.

Exhibits

63

Signatures

64

 

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

(dollars in thousands, except par value)

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,557

 

 

$

18,473

 

Investment securities

 

 

 

 

 

 

 

 

Available for sale, at fair value (amortized cost $153,765 and $172,290, respectively)

 

 

153,053

 

 

 

168,163

 

Held to maturity, at amortized cost (fair value $291,993 and $281,310, respectively)

 

 

286,350

 

 

 

282,869

 

Total investment securities

 

 

439,403

 

 

 

451,032

 

Loans held for sale, at lower of cost or fair value

 

 

384

 

 

 

 

Loans

 

 

 

 

 

 

 

 

Residential mortgage

 

 

938,559

 

 

 

604,331

 

Commercial mortgage

 

 

905,442

 

 

 

757,957

 

Home equity

 

 

85,814

 

 

 

69,336

 

Commercial & Industrial

 

 

134,307

 

 

 

93,712

 

Consumer

 

 

32,428

 

 

 

34,436

 

Total loans

 

 

2,096,550

 

 

 

1,559,772

 

Less: allowance for loan losses

 

 

(17,099

)

 

 

(16,768

)

Net loans

 

 

2,079,451

 

 

 

1,543,004

 

Federal Home Loan Bank of Boston Stock, at cost

 

 

8,245

 

 

 

6,844

 

Bank owned life insurance

 

 

36,996

 

 

 

30,933

 

Banking premises and equipment, net

 

 

14,863

 

 

 

8,578

 

Deferred income taxes, net

 

 

7,267

 

 

 

8,717

 

Accrued interest receivable

 

 

7,485

 

 

 

5,762

 

Goodwill

 

 

31,206

 

 

 

412

 

Merger related intangibles

 

 

3,519

 

 

 

 

Other assets

 

 

73,932

 

 

 

27,629

 

Total assets

 

$

2,741,308

 

 

$

2,101,384

 

Liabilities

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

Demand

 

$

587,030

 

 

$

494,492

 

Interest bearing checking

 

 

422,426

 

 

 

431,702

 

Money market

 

 

200,935

 

 

 

135,585

 

Savings

 

 

853,356

 

 

 

628,212

 

Certificates of deposit

 

 

265,918

 

 

 

121,419

 

Total deposits

 

 

2,329,665

 

 

 

1,811,410

 

Short-term borrowings

 

 

103,000

 

 

 

90,000

 

Long-term borrowings

 

 

3,323

 

 

 

3,409

 

Other liabilities

 

 

68,226

 

 

 

29,539

 

Total liabilities

 

 

2,504,214

 

 

 

1,934,358

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Common stock, par value $1.00; Authorized 10,000,000 shares; Outstanding: 4,850,230

   shares and 4,107,051 shares, respectively

 

 

4,850

 

 

 

4,107

 

Additional paid-in capital

 

 

97,844

 

 

 

38,271

 

Retained earnings

 

 

137,036

 

 

 

131,135

 

Accumulated other comprehensive loss

 

 

(2,636

)

 

 

(6,487

)

Total shareholders’ equity

 

 

237,094

 

 

 

167,026

 

Total liabilities and shareholders’ equity

 

$

2,741,308

 

 

$

2,101,384

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(dollars in thousands, except share data)

 

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on taxable loans

 

$

21,355

 

 

$

14,132

 

 

$

37,639

 

 

$

27,510

 

Interest on tax-exempt loans

 

 

124

 

 

 

92

 

 

 

213

 

 

 

188

 

Interest on taxable investment securities

 

 

2,116

 

 

 

1,920

 

 

 

4,096

 

 

 

3,634

 

Interest on tax-exempt investment securities

 

 

575

 

 

 

604

 

 

 

1,146

 

 

 

1,226

 

Dividends on FHLB of Boston stock

 

 

81

 

 

 

58

 

 

 

157

 

 

 

109

 

Interest on overnight investments

 

 

219

 

 

 

130

 

 

 

337

 

 

 

401

 

Total interest and dividend income

 

 

24,470

 

 

 

16,936

 

 

 

43,588

 

 

 

33,068

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

4,379

 

 

 

1,053

 

 

 

6,880

 

 

 

2,015

 

Interest on borrowed funds

 

 

315

 

 

 

29

 

 

 

671

 

 

 

46

 

Total interest expense

 

 

4,694

 

 

 

1,082

 

 

 

7,551

 

 

 

2,061

 

Net interest and dividend income

 

 

19,776

 

 

 

15,854

 

 

 

36,037

 

 

 

31,007

 

Provision for (Release of) Loan Losses

 

 

596

 

 

 

(79

)

 

 

503

 

 

 

330

 

Net interest and dividend income after provision for

   loan losses

 

 

19,180

 

 

 

15,933

 

 

 

35,534

 

 

 

30,677

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth management revenue

 

 

6,419

 

 

 

6,139

 

 

 

12,543

 

 

 

12,265

 

Deposit account fees

 

 

843

 

 

 

774

 

 

 

1,581

 

 

 

1,524

 

ATM/Debit card income

 

 

379

 

 

 

310

 

 

 

655

 

 

 

581

 

Bank owned life insurance income

 

 

162

 

 

 

136

 

 

 

289

 

 

 

264

 

Gain (loss) on disposition of investment securities

 

 

6

 

 

 

2

 

 

 

(81

)

 

 

2

 

Gain on loans held for sale

 

 

15

 

 

 

18

 

 

 

31

 

 

 

45

 

Loan related derivative income

 

 

5

 

 

 

112

 

 

 

441

 

 

 

584

 

Other income

 

 

316

 

 

 

353

 

 

 

643

 

 

 

757

 

Total noninterest income

 

 

8,145

 

 

 

7,844

 

 

 

16,102

 

 

 

16,022

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

11,459

 

 

 

10,443

 

 

 

22,286

 

 

 

20,516

 

Occupancy and equipment

 

 

2,691

 

 

 

2,219

 

 

 

5,021

 

 

 

4,446

 

Data processing

 

 

1,534

 

 

 

1,289

 

 

 

2,880

 

 

 

2,519

 

Professional services

 

 

760

 

 

 

829

 

 

 

1,567

 

 

 

1,716

 

Marketing

 

 

508

 

 

 

336

 

 

 

912

 

 

 

774

 

FDIC insurance

 

 

278

 

 

 

135

 

 

 

278

 

 

 

286

 

Merger expenses

 

 

3,450

 

 

 

 

 

 

3,541

 

 

 

 

Other expenses

 

 

833

 

 

 

514

 

 

 

1,401

 

 

 

1,009

 

Total noninterest expense

 

 

21,513

 

 

 

15,765

 

 

 

37,886

 

 

 

31,266

 

Income before income taxes

 

 

5,812

 

 

 

8,012

 

 

 

13,750

 

 

 

15,433

 

Income tax expense

 

 

1,540

 

 

 

1,901

 

 

 

3,280

 

 

 

3,517

 

Net income

 

$

4,272

 

 

 

6,111

 

 

$

10,470

 

 

$

11,916

 

Share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, basic

 

 

4,682,109

 

 

 

4,059,927

 

 

 

4,379,141

 

 

 

4,057,156

 

Weighted average number of shares outstanding, diluted

 

 

4,715,724

 

 

 

4,094,489

 

 

 

4,412,239

 

 

 

4,087,790

 

Basic earnings per share

 

$

0.91

 

 

$

1.49

 

 

$

2.37

 

 

$

2.91

 

Diluted earnings per share

 

$

0.90

 

 

$

1.48

 

 

$

2.35

 

 

$

2.89

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(dollars in thousands)

 

Net income

 

$

4,272

 

 

$

6,111

 

 

$

10,470

 

 

$

11,916

 

Other comprehensive income/(loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains/(losses) on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains/(losses) arising during period

 

 

1,453

 

 

 

(423

)

 

 

2,548

 

 

 

(1,775

)

Less: reclassification adjustment for losses/(gains)

  included in net income

 

 

(4

)

 

 

(2

)

 

 

62

 

 

 

(2

)

Total unrealized gains/(losses) on securities

 

 

1,449

 

 

 

(425

)

 

 

2,610

 

 

 

(1,777

)

Derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in interest rate contracts

 

 

1,219

 

 

 

 

 

 

1,189

 

 

 

 

Defined benefit retirement plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in retirement liabilities

 

 

26

 

 

 

10

 

 

 

52

 

 

 

20

 

Other comprehensive income/(loss)

 

 

2,694

 

 

 

(415

)

 

 

3,851

 

 

 

(1,757

)

Comprehensive income

 

$

6,966

 

 

$

5,696

 

 

$

14,321

 

 

$

10,159

 

 

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 June 30,

 

 

 

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 March 31, 2018

 

$

4,101

 

 

$

36,065

 

 

$

119,196

 

 

$

(8,489

)

 

$

150,873

 

Cumulative effect of accounting changes

 

 

 

 

 

 

 

 

(64

)

 

 

64

 

 

 

 

Net income

 

 

 

 

 

 

 

 

6,111

 

 

 

 

 

 

6,111

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

(415

)

 

 

(415

)

Share based compensation

 

 

3

 

 

 

1,087

 

 

 

 

 

 

 

 

 

1,090

 

Dividends declared ($0.48 per share)

 

 

 

 

 

 

 

 

(1,967

)

 

 

 

 

 

(1,967

)

Balance at June 30, 2018

 

$

4,104

 

 

$

37,152

 

 

$

123,276

 

 

$

(8,840

)

 

$

155,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

$

4,124

 

 

$

38,239

 

 

$

135,235

 

 

$

(5,330

)

 

$

172,268

 

Net income

 

 

 

 

 

 

 

 

4,272

 

 

 

 

 

 

4,272

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

2,694

 

 

 

2,694

 

Share based compensation

 

 

3

 

 

 

911

 

 

 

 

 

 

 

 

 

914

 

Dividends declared ($0.51 per share)

 

 

 

 

 

 

 

 

(2,471

)

 

 

 

 

 

(2,471

)

Common stock issued for merger

 

 

723

 

 

 

58,694

 

 

 

 

 

 

 

 

 

59,417

 

Balance at June 30, 2019

 

$

4,850

 

 

$

97,844

 

 

$

137,036

 

 

$

(2,636

)

 

$

237,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

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, 2017

 

$

4,082

 

 

$

35,663

 

 

$

114,093

 

 

$

(5,881

)

 

$

147,957

 

Cumulative effect of accounting changes

 

 

 

 

 

 

 

 

1,202

 

 

 

(1,202

)

 

 

 

Net income

 

 

 

 

 

 

 

 

11,916

 

 

 

 

 

 

11,916

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

(1,757

)

 

 

(1,757

)

Share based compensation

 

 

22

 

 

 

1,489

 

 

 

 

 

 

 

 

 

1,511

 

Dividends declared ($0.96 per share)

 

 

 

 

 

 

 

 

(3,935

)

 

 

 

 

 

(3,935

)

Balance at June 30, 2018

 

$

4,104

 

 

$

37,152

 

 

$

123,276

 

 

$

(8,840

)

 

$

155,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

$

4,107

 

 

$

38,271

 

 

$

131,135

 

 

$

(6,487

)

 

$

167,026

 

Net income

 

 

 

 

 

 

 

 

10,470

 

 

 

 

 

 

10,470

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

3,851

 

 

 

3,851

 

Share based compensation

 

 

20

 

 

 

879

 

 

 

 

 

 

 

 

 

899

 

Dividends declared ($1.02 per share)

 

 

 

 

 

 

 

 

(4,569

)

 

 

 

 

 

(4,569

)

Common stock issued for merger

 

 

723

 

 

 

58,694

 

 

 

 

 

 

 

 

 

59,417

 

Balance at June 30, 2019

 

$

4,850

 

 

$

97,844

 

 

$

137,036

 

 

$

(2,636

)

 

$

237,094

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4


 

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

 

(dollars in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

10,470

 

 

$

11,916

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

503

 

 

 

330

 

Amortization of deferred charges and fees, net

 

 

255

 

 

 

459

 

Net (Accretion)/Amortization of merger-related intangibles

 

 

(247

)

 

 

 

Depreciation and amortization

 

 

881

 

 

 

919

 

Bank owned life insurance income

 

 

(289

)

 

 

(264

)

Loss/(gain) on disposition of investment securities

 

 

81

 

 

 

(2

)

Share based compensation

 

 

899

 

 

 

1,511

 

Change in accrued interest receivable

 

 

(595

)

 

 

(151

)

Deferred income tax (benefit)/expense

 

 

885

 

 

 

350

 

Change in other assets, net

 

 

(5,860

)

 

 

(6,247

)

Change in other liabilities, net

 

 

774

 

 

 

1,302

 

Change in loans held for sale

 

 

(384

)

 

 

(566

)

Net cash provided by operating activities

 

 

7,373

 

 

 

9,557

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Origination of loans

 

 

(273,385

)

 

 

(245,108

)

Proceeds from principal payments of loans

 

 

212,719

 

 

 

194,855

 

Proceeds from calls/maturities of securities available for sale

 

 

13,876

 

 

 

10,770

 

Proceeds from sales of securities available for sale

 

 

26,150

 

 

 

702

 

Proceeds from calls/maturities of securities held to maturity

 

 

32,216

 

 

 

17,200

 

Purchase of securities held to maturity

 

 

(35,958

)

 

 

(64,960

)

Proceeds from settlement of bank owned life insurance policies

 

 

 

 

 

676

 

Redemption (purchase) of FHLB of Boston stock

 

 

65

 

 

 

(271

)

Purchase of banking premises and equipment

 

 

(880

)

 

 

(726

)

Net cash acquired in business combinations

 

 

2,063

 

 

 

 

Net cash (used in) provided by investing activities

 

 

(23,134

)

 

 

(86,862

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Change in demand, interest bearing, money market and savings accounts

 

 

59,049

 

 

 

35,461

 

Change in certificates of deposit

 

 

(18,090

)

 

 

(22,608

)

Change in short-term borrowings

 

 

(459

)

 

 

 

Repayment of long-term borrowings

 

 

(86

)

 

 

(85

)

Cash dividends paid on common stock

 

 

(4,569

)

 

 

(3,935

)

Net cash provided by (used in) financing activities

 

 

35,845

 

 

 

8,833

 

Net (decrease)/increase in cash and cash equivalents

 

 

20,084

 

 

 

(68,472

)

Cash and cash equivalents at beginning of period

 

 

18,473

 

 

 

103,591