Cambridge Bancorp Announces Operating Results for the Second Quarter and Declares Dividend

Investor Relations

Press Release

Cambridge Bancorp Announces Operating Results for the Second Quarter and Declares Dividend

Company Release - 7/20/2021

CAMBRIDGE, Mass., July 20, 2021 /PRNewswire/ -- Cambridge Bancorp (NASDAQ: CATC) (the "Company"), the parent company of Cambridge Trust Company (the "Bank"), today announced unaudited net income of $13,944,000 for the quarter ended June 30, 2021, an increase of $445,000, or 3.3%, as compared to net income of $13,499,000 for the quarter ended March 31, 2021. Diluted earnings per share were $1.98 for the quarter ended June 30, 2021, representing a 3.1% increase over diluted earnings per share of $1.92 for the quarter ended March 31, 2021.

For the six months ended June 30, 2021, unaudited net income was $27,443,000, representing an increase of $21,927,000, or 397.5%, as compared to net income of $5,516,000 for the six months ended June 30, 2020. Diluted earnings per share were $3.91 for the six months ended June 30, 2021, representing a 303.1% increase over diluted earnings per share of $0.97 for the six months ended June 30, 2020. Net income for the six months ended June 30, 2020 was impacted by various items resulting from the Company's merger with Wellesley Bancorp Inc. ("Wellesley") on June 1, 2020 and the effect of the COVID-19 pandemic on the Company's allowance for credit losses.

Operating net income, which excludes merger expenses, the merger related impact to the provision for credit losses and gain on disposition of investment securities was $27,443,000 for the six months ended June 30, 2021, an increase of $12,233,000, or 80.4%, as compared to operating net income of $15,210,000 for the six months ended June 30, 2020. Operating diluted earnings per share were $3.91 for the six months ended June 30, 2021, representing a 45.9% increase over operating diluted earnings per share of $2.68 for the six months ended June 30, 2020. There were no nonoperating adjustments to net income for the quarters ended June 30, 2021 or March 31, 2021.

Second quarter 2021 highlights:

Financial performance ratios for the quarter ended June 30, 2021 were strong with Return on Average Assets ("ROA") of 1.32% and Operating Return on Tangible Common Shareholders' Equity ("ROTCE") of 15.64%.
Total loans, excluding loans under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP"), grew by $158.8 million, or 5.3%, from March 31, 2021 to $3.17 billion at June 30, 2021.
The tangible common equity ratio at June 30, 2021 increased to 8.59% from 8.41% at March 31, 2021.
Asset quality at June 30, 2021 remained excellent with ratios of non-performing loans to total loans and non-performing assets to total assets at 0.17% and 0.13%, respectively.
Tangible book value per share at June 30, 2021 increased to $52.37 from $50.70 at March 31, 2021.

"The second quarter saw continued strength in asset quality, growing capital levels, a return of lending growth and continued growth in core deposits." noted Denis K. Sheahan, Chairman and CEO. "Overall financial performance in the second quarter was solid and I am pleased to see continued strength in our new business pipelines."

Balance Sheet

Total assets increased by $354.0 million, or 9.0%, from $3.95 billion at December 31, 2020 to $4.30 billion at June 30, 2021.

Total loans increased by $127.5 million, or 4.0%, from $3.15 billion at December 31, 2020 to $3.28 billion at June 30, 2021. Excluding PPP loans, total loans increased by $144.1 million, or 4.8%, from December 31, 2020.

Residential real estate loans increased by $47.4 million, from $1.30 billion at December 31, 2020 to $1.35 billion at June 30, 2021.
Commercial real estate loans increased by $79.1 million, from $1.36 billion at December 31, 2020 to $1.44 billion at June 30, 2021.
Commercial and industrial loans, excluding PPP loans, increased by $26.6 million, from $223.7 million at December 31, 2020 to $250.3 million at June 30, 2021.
PPP loans were $107.6 million at June 30, 2021 and are included in commercial and industrial loans on the consolidated balance sheets. Approximately 88.4% of first round PPP loans and 15.8% of round two PPP loans have been or are in the process of being forgiven.

The Company's total investment securities portfolio increased by $220.3 million, or 45.5%, from $484.7 million at December 31, 2020 to $705.0 million at June 30, 2021, as the Company invested excess cash.

Total deposits increased by $361.5 million, or 10.6%, to $3.76 billion at June 30, 2021 from $3.40 billion at December 31, 2020.

Core deposits, which the Company defines as all deposits other than certificates of deposit, increased by $402.4 million, or 12.8%, to $3.55 billion at June 30, 2021, as a result of growth from new and existing client relationships.
The cost of total deposits for the quarter ended June 30, 2021 was 0.11%, as compared to 0.15% for the quarter ended March 31, 2021, a reduction of four basis points. The cost of total deposits for the six months ended June 30, 2021 was 0.13%, as compared to 0.36% for the six months ended June 30, 2020, a reduction of 23 basis points. At June 30, 2021, the spot cost of deposits was 0.11%.

Net Interest and Dividend Income

For the quarter ended June 30, 2021, net interest and dividend income, before the provision (release) for credit losses, increased by $1.0 million, or 3.1%, to $32.4 million as compared to $31.4 million for the quarter ended March 31, 2021. This increase was primarily due to higher loan accretion associated with merger accounting, an increase in deferred PPP loan income recognized on PPP loans forgiven by the SBA during the quarter and a lower cost of funds, partially offset by lower yields on interest-earning assets during the period.

The Company's net interest margin on a fully taxable equivalent basis decreased by 10 basis points to 3.25% for the quarter ended June 30, 2021, as compared to 3.35% for the quarter ended March 31, 2021.

For the six months ended June 30, 2021, net interest and dividend income before the provision (release) for credit losses increased $12.6 million, or 24.6%, to $63.8 million as compared to $51.2 million for the six months ended June 30, 2021. The Company's net interest margin on a fully taxable equivalent basis decreased 29 basis points to 3.30% for the six months ended June 30, 2021, as compared to 3.59% for six months ended June 30, 2020.

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 June 30, 2021 was 3.01%, representing a 15 basis point decrease from adjusted net interest margin, on a fully taxable equivalent basis, of 3.16% for the quarter ended March 31, 2021.

	Three Months Ended
	June 30, 2021
	Average Balance		Interest Income/ Expenses		Rate Earned/ Paid
	(dollars in thousands)
Total interest-earning assets (GAAP)	$	4,025,340
Net interest income on a fully taxable equivalent basis (GAAP)			$	32,610
Net interest margin on a fully taxable equivalent basis, (GAAP)						3.25	%
Less: Paycheck Protection Program loan impact		(148,767)		(1,721)		-0.05	%
Less: Accretion of loan fair value adjustments				(1,772)		-0.19	%
Adjusted net interest margin on a fully taxable equivalent basis	$	3,876,573	$	29,117		3.01	%
Less: Excess cash impact (1)		(80,337)		(20)		0.06	%
Normalized adjusted net interest margin on a fully taxable equivalent basis	$	3,796,236	$	29,097		3.07	%


	Six Months Ended
	June 30, 2021
	Average Balance		Interest Income/ Expenses		Rate Earned/ Paid
	(dollars in thousands)
Total interest-earning assets (GAAP)	$	3,927,636
Net interest income on a fully taxable equivalent basis (GAAP)			$	64,250
Net interest margin on a fully taxable equivalent basis (GAAP)						3.30	%
Less: Paycheck Protection Program loan impact		(146,927)		(3,318)		-0.05	%
Less: Accretion of loan fair value adjustments				(3,128)		-0.17	%
Adjusted net interest margin on a fully taxable equivalent basis	$	3,780,709	$	57,804		3.08	%
Less: Excess cash impact (1)		(86,088)		(43)		0.07	%
Normalized adjusted net interest margin on a fully taxable equivalent basis	$	3,694,621	$	57,761		3.15	%

(1) Excess cash represents the estimated amount of average cash on the balance sheet that is above normal levels.

Provision for Credit Losses

During the three months ended June 30, 2021, the Company recorded a release of the provision for credit losses of $901,000 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 for both its loan and unfunded commitment portfolios. For the six months ended June 30, 2021, the Company recorded a release of the provision for credit losses of $1.1 million.

Noninterest Income

Total noninterest income increased by $57,000, or 0.5%, to $10.9 million for the quarter ended June 30, 2021, as compared to $10.8 million for the quarter ended March 31, 2021, primarily the result of an increase in wealth management revenue, partially offset by a decrease in gain on loans sold. Noninterest income was 25.2% of total revenue for the quarter ended June 30, 2021.

Wealth management revenue increased by $472,000, or 5.8%, to $8.6 million for the second quarter of 2021, as compared to $8.2 million for the first quarter of 2021. Wealth Management Assets under Management and Administration were $4.5 billion as of June 30, 2021, an increase of 5%, from March 31, 2021, due to appreciation within the equity markets.
Gain on loans sold decreased by $404,000, or 71.0%, to $165,000 for the second quarter of 2021, as compared to $569,000 for the first quarter of 2021, due to lower refinance activity and the corresponding sale of residential mortgages.

Total noninterest income increased by $4.0 million, or 22.3%, to $21.8 million for the six months ended June 30, 2021, as compared to $17.8 million for the six months ended June 30, 2020, primarily as a result of increases in wealth management revenue, gain on loans sold, and loan related derivative income, partially offset by decreases in deposit account fees. Noninterest income was 25.4% of total revenue for the six months ended June 30, 2021.

Wealth management revenue increased by $3.1 million, or 22.8%, to $16.8 million for the six months ended June 30, 2021, as compared to $13.7 million for the six months ended June 30, 2020, primarily due to appreciation within the equity market.
Gain on loans sold increased by $422,000, or 135.3%, to $734,000 for the six months ended June 30, 2021, as compared to $312,000 for the six months ended June 30, 2020, due to increased sales of residential mortgages.
Loan related derivative income increased by $394,000, or 46.7%, to $1.2 million for the six months ended June 30, 2021, as compared to $844,000 for the six months ended June 30, 2020.
Deposit account fees decreased by $528,000, or 35.5%, to $958,000 for the six months ended June 30, 2021, as compared to $1.5 million for the six months ended June 30, 2020, primarily due to a decrease in fee revenue from commercial deposit sweep products.

Noninterest Expense

Total noninterest expense increased by $1.1 million, or 4.4%, to $25.3 million for the quarter ended June 30, 2021, as compared to $24.2 million for the quarter ended March 31, 2021, primarily driven by increases in marketing expense and salaries and employee benefits expense.

Marketing expense increased by $490,000, or 105.8%, during the quarter ended June 30, 2021, as compared to the quarter ended March 31, 2021, primarily driven by the timing of the Company's marketing campaigns.
Salaries and employee benefits expense increased by $417,000, or 2.6%, during the quarter ended June 30, 2021, primarily driven by decreases in amounts of deferred PPP related loan origination costs (in accordance with Accounting Standards Codification 310-20) and increases in performance-based compensation, as compared to the quarter ended March 31, 2021.

Total noninterest expense increased by $4.0 million, or 8.7%, to $49.5 million for the six months ended June 30, 2021, as compared to $45.5 million for the six months ended June 30, 2020, primarily driven by increases in salaries and employee benefits expense, occupancy and equipment expense, and marketing expense, partially offset by a decrease in nonoperating expenses.

Salaries and employee benefits expense increased by $6.0 million, or 22.4%, primarily related to the merger with Wellesley in the second quarter of 2020, additions to support business initiatives, normal merit increases and increases in employee benefit costs.
Occupancy and equipment expense increased by $1.3 million, or 23.2%, primarily as a result of additional branches and office space as a result of the merger with Wellesley, partially offset by previously announced branch and support office location closures.
Marketing expense increased by $674,000, or 90.8%, primarily driven by increased marketing efforts during the first half of 2021.
Nonoperating expenses decreased by $4.6 million as the Company did not record any nonoperating expenses during the first six months of 2021. The Company recorded nonoperating merger-related expenses of $4.6 million associated with the merger with Wellesley during the first six months of 2020.

Asset Quality

Non-performing loans totaled $5.5 million, or 0.17% of total loans outstanding, at June 30, 2021. The allowance for credit losses was $35.0 million, or 1.10% of total loans outstanding excluding PPP loans, at June 30, 2021, as compared to $35.6 million, or 1.18% of total loans outstanding excluding PPP loans, at March 31, 2021.

The Company recorded net loan recoveries of $46,000, or 0.01% of total loans (annualized), for the quarter ended June 30, 2021, as compared to net loan recoveries of $20,000, or 0.00% of total loans (annualized), for the quarter ended March 31, 2021.

Net loan recoveries were $66,000, or 0.00% of total loans (annualized), for the six months ended June 30, 2021, as compared to net charge-offs of $400,000, or 0.02% of total loans (annualized), for the six months ended June 30, 2020.

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

	Nonperforming Assets
	June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020
	(dollars in thousands)
Total nonperforming loans	$	5,463		$	7,363		$	8,962		$	10,251
Other real estate owned		—			1,820			1,820			1,970
Total nonperforming assets	$	5,463		$	9,183		$	10,782		$	12,221
Troubled debt restructurings ("TDRs"):
Non-performing (included in total non-performing loans above)	$	782		$	796		$	811		$	262
Performing		—			—			—			—
Total troubled debt restructurings	$	782		$	796		$	811		$	262
Nonperforming loans/total loans		0.17	%		0.23	%		0.28	%		0.31	%
Nonperforming assets/total assets		0.13	%		0.22	%		0.27	%		0.30	%
TDRs/total loans		0.02	%		0.03	%		0.03	%		0.01	%
	Additional Asset Quality Indicators
	June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020
Delinquent loans 30-89 days past due/total loans		0.39	%		0.21	%		0.72	%		0.22	%
Quarterly net recoveries (charge-offs)/total loans (annualized)		0.01	%		0.00	%		0.02	%		(0.02)	%
Year to date net recoveries (charge-offs)/total loans		0.00	%		0.00	%		(0.01)	%		(0.02)	%
Allowance for credit losses/nonperforming loans		641.21	%		484.12	%		401.88	%		331.81	%
Allowance for credit losses/total loans ex. PPP loans		1.10	%		1.18	%		1.19	%		1.08	%

Forbearance/Modifications

The Company instituted payment deferral programs to aid borrowers with payment forbearance during the pandemic. For commercial and consumer borrowers, the Company provided payment relief for those who were impacted by the COVID-19 pandemic and had requested payment assistance. The Company had 20 loans totaling $20.1 million on deferral, or 0.6% of total loans outstanding, at June 30, 2021.

Income Taxes

The Company's effective tax rate was 26.3% for the quarter ended June 30, 2021, as compared to 26.0% for the quarter ended March 31, 2021. For the six months ended June 30, 2021, the Company's effective tax rate was 26.1%, as compared to 21.6% for the six months ended June 30, 2020.

Dividend & Capital

On July 19, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.61 per share, which is payable on August 19, 2021, to shareholders of record as of the close of business on August 5, 2021. The Company did not repurchase any shares under its previously announced share repurchase program during the quarter and six months ended June 30, 2021.

The Company's ratio of tangible common equity to tangible assets increased to 8.59% as of June 30, 2021, from 8.41% at March 31, 2021, primarily due to increased earnings during the quarter ended June 30, 2021. Tangible common equity to tangible assets, excluding PPP loans, increased to 8.81% as of June 30, 2021, as compared to 8.75% at March 31, 2021. Tangible book value per share grew by $1.67, or 3.3%, to $52.37 at June 30, 2021, as compared to $50.70 at March 31, 2021.

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 detail 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 10:00 a.m. Eastern Time on Tuesday, July 20, 2021 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/10157396/e9555740cc.

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 131-year-old Massachusetts chartered commercial bank with approximately $4.3 billion in assets at June 30, 2021, 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 $4.5 billion in client assets under management and administration as of June 30, 2021. 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 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, 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, 2020, which the Company filed on March 15, 2021. 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 (including and excluding PPP loans), operating return on average assets, operating return on tangible common equity, operating efficiency ratio, and operating pre-tax pre-provision income and return on average assets.

Operating net income and operating diluted earnings per share exclude items that management believes are unrelated to its core banking business such as merger, acquisition, and capital raise 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 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, the operating efficiency ratio (which is computed by dividing noninterest expense adjusted for nonoperating expenses and total revenue adjusted for gain/(loss) on disposition of investment securities), operating pre-tax pre-provision income over average assets (which is computed by dividing income before taxes adjusted for the provision (release) for credit losses, nonoperating expenses, and gain/(loss) on disposition of investment securities over average assets). 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 nonoperating 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

CAMBRIDGE BANCORP AND SUBSIDIARIES QUARTERLY UNAUDITED RESULTS

	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,
	2021			2021			2020			2021			2020
	(dollars in thousands, except per share data)
Interest and Dividend Income	$	33,528		$	32,821		$	30,531		$	66,349		$	56,626
Interest Expense		1,147			1,415			1,742			2,562			5,437
Net Interest and Dividend Income		32,381			31,406			28,789			63,787			51,189
Provision (Release) for Credit Losses		(901)			(206)			14,430			(1,107)			16,430
Noninterest Income		10,906			10,849			8,972			21,755			17,790
Noninterest Expense		25,273			24,219			25,587			49,492			45,512
Income (Loss) Before Income Taxes		18,915			18,242			(2,256)			37,157			7,037
Income Tax Expense (Benefit)		4,971			4,743			(540)			9,714			1,521
Net Income (Loss)	$	13,944		$	13,499		$	(1,716)		$	27,443		$	5,516
Operating Net Income*	$	13,944		$	13,499		$	7,778		$	27,443		$	15,210

Data Per Common Share:
Basic Earnings (Loss) Per Share	$	2.00		$	1.95		$	(0.29)		$	3.95		$	0.97
Diluted Earnings (Loss) Per Share		1.98			1.92			(0.29)			3.91			0.97
Operating Diluted Earnings Per Share*		1.98			1.92			1.31			3.91			2.68
Dividends Declared Per Share		0.61			0.55			0.53			1.16			1.06
Average Common Shares Outstanding:
Basic		6,930,268			6,907,861			5,912,889			6,918,779			5,652,908
Diluted		6,998,936			6,987,216			5,912,889			6,993,437			5,670,438

Selected Performance Ratios:
Net Interest Margin, FTE		3.25	%		3.35	%		3.77	%		3.30	%		3.59	%
Adjusted Net Interest Margin, FTE		3.01	%		3.16	%		3.46	%		3.08	%		3.38	%
Cost of Funds		0.11	%		0.15	%		0.23	%		0.13	%		0.38	%
Cost of Interest-Bearing Liabilities		0.18	%		0.23	%		0.33	%		0.21	%		0.55	%
Cost of Deposits		0.11	%		0.15	%		0.21	%		0.13	%		0.36	%
Cost of Deposits excluding Wholesale Deposits		0.11	%		0.14	%		0.19	%		0.12	%		0.34	%
Return on Average Assets		1.32	%		1.35	%		(0.21)	%		1.33	%		0.36	%
Return on Average Equity		13.57	%		13.53	%		(2.10)	%		13.55	%		3.58	%
Efficiency Ratio*		58.38	%		57.32	%		67.76	%		57.86	%		65.98	%
Operating Return on Average Assets*		1.32	%		1.35	%		0.95	%		1.33	%		1.00	%
Operating Return on Tangible Common Equity*		15.64	%		15.65	%		10.92	%		15.65	%		11.26	%
Operating Efficiency Ratio*		58.38	%		57.32	%		56.30	%		57.86	%		59.34	%
	June 30,			March 31,			December 31,			June 30,
	2021			2021			2020			2020

Total Assets	$	4,303,287		$	4,253,173		$	3,949,297		$	4,022,750
Total Loans		3,281,149			3,180,371			3,153,648			3,332,884
Total Deposits		3,764,558			3,730,065			3,403,083			3,275,843
Allowance for Credit Losses		35,029			35,646			36,016			34,014
Allowance to Total Loans (ex. PPP)		1.10	%		1.18	%		1.19	%		1.08	%
Non-Performing Loans		5,463			7,363			8,962			10,251
Non-Performing Loans/Total loans		0.17	%		0.23	%		0.28	%		0.31	%
QTD Net Recoveries (Charge-offs) to Total Loans (annualized)		0.01	%		0.00	%		0.02	%		(0.02)	%
Tangible Common Equity Ratio*		8.59	%		8.41	%		8.91	%		8.27	%
Tangible Common Equity Ratio (ex. PPP)*		8.81	%		8.75	%		9.20	%		8.68	%
Book Value Per Share	$	60.23		$	58.57		$	58.00		$	55.29
Tangible Book Value Per Share*	$	52.37		$	50.70		$	50.07		$	47.34
Wealth Management AUM		4,282,204			4,083,811			3,994,152			3,572,286
Wealth Management AUM & AUA		4,471,157			4,267,326			4,167,903			3,731,226
* See GAAP to Non-GAAP Reconciliations

CAMBRIDGE BANCORP AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS

	June 30, 2021		December 31, 2020
	(dollars in thousands, except par value)
Assets
Cash and cash equivalents	$	98,789	$	75,785
Investment securities
Available for sale, at fair value (amortized cost $211,990 and $234,252, respectively)		212,266		237,030
Held to maturity, at amortized cost (fair value $499,885 and $260,139, respectively)		492,782		247,672
Total investment securities		705,048		484,702
Loans held for sale, at lower of cost or fair value		911		6,909
Loans
Residential mortgage		1,346,262		1,298,868
Commercial mortgage		1,438,084		1,358,962
Home equity		92,983		106,194
Commercial and industrial		357,937		347,855
Consumer		45,883		41,769
Total loans		3,281,149		3,153,648
Less: allowance for credit losses on loans		(35,029)		(36,016)
Net loans		3,246,120		3,117,632
Federal Home Loan Bank of Boston Stock, at cost		4,816		5,734
Bank owned life insurance		46,574		46,169
Banking premises and equipment, net		17,586		18,158
Right-of-use asset operating leases		33,536		34,927
Deferred income taxes, net		10,486		11,639
Accrued interest receivable		8,983		9,514
Goodwill		51,912		51,912
Merger related intangibles, net		2,797		2,977
Other assets		75,729		83,239
Total assets	$	4,303,287	$	3,949,297
Liabilities
Deposits
Demand	$	1,208,951	$	1,006,132
Interest bearing checking		672,794		625,650
Money market		726,101		532,218
Savings		942,865		984,262
Certificates of deposit		213,847		254,821
Total deposits		3,764,558		3,403,083
Borrowings		17,244		32,992
Operating lease liabilities		35,923		37,448
Other liabilities		66,061		74,042
Total liabilities		3,883,786		3,547,565
Shareholders ' Equity
Common stock, par value $1.00; Authorized: 10,000,000 shares; Outstanding: 6,965,557 shares and 6,926,728 shares, respectively		6,966		6,927
Additional paid-in capital		228,387		226,967
Retained earnings		184,790		165,404
Accumulated other comprehensive income (loss)		(642)		2,434
Total shareholders' equity		419,501		401,732
Total liabilities and shareholders' equity	$	4,303,287	$	3,949,297

CAMBRIDGE BANCORP AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended						Six Months Ended
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(dollars in thousands, except share data)
Interest and dividend income
Interest on taxable loans	$	30,557	$	30,325	$	28,130	$	60,882	$	51,468
Interest on tax-exempt loans		275		222		211		497		409
Interest on taxable investment securities		2,023		1,585		1,521		3,608		3,244
Interest on tax-exempt investment securities		633		658		601		1,291		1,196
Dividends on FHLB of Boston stock		12		—		52		12		153
Interest on overnight investments		28		31		16		59		156
Total interest and dividend income		33,528		32,821		30,531		66,349		56,626
Interest expense
Interest on deposits		1,006		1,275		1,396		2,281		4,525
Interest on borrowed funds		141		140		282		281		848
Interest on subordinated debt		—		—		64		—		64
Total interest expense		1,147		1,415		1,742		2,562		5,437
Net interest and dividend income		32,381		31,406		28,789		63,787		51,189
Provision (release) for credit losses		(901)		(206)		14,430		(1,107)		16,430
Net interest and dividend income after provision (release) for credit losses		33,282		31,612		14,359		64,894		34,759
Noninterest income
Wealth management revenue		8,623		8,151		7,035		16,774		13,662
Deposit account fees		484		474		695		958		1,486
ATM/Debit card income		405		333		290		738		597
Bank owned life insurance income		209		196		165		405		325
Gain on disposition of investment securities		—		—		69		—		69
Gain on loans sold		165		569		193		734		312
Loan related derivative income		567		671		334		1,238		844
Other income		453		455		191		908		495
Total noninterest income		10,906		10,849		8,972		21,755		17,790
Noninterest expense
Salaries and employee benefits		16,462		16,045		13,542		32,508		26,558
Occupancy and equipment		3,503		3,576		2,938		7,079		5,745
Data processing		2,179		2,034		1,832		4,213		3,517
Professional services		1,297		1,272		1,098		2,569		1,957
Marketing		953		463		486		1,416		742
FDIC insurance		261		336		318		597		497
Nonoperating expenses		—		—		4,366		—		4,619
Other expenses		618		493		1,007		1,110		1,877
Total noninterest expense		25,273		24,219		25,587		49,492		45,512
Income (loss) before income taxes		18,915		18,242		(2,256)		37,157		7,037
Income tax expense (benefit)		4,971		4,743		(540)		9,714		1,521
Net income (loss)	$	13,944		13,499		(1,716)	$	27,443	$	5,516
Share data:
Weighted average number of shares outstanding, basic		6,930,268		6,907,861		5,912,889		6,918,779		5,652,908
Weighted average number of shares outstanding, diluted		6,998,936		6,987,216		5,912,889		6,993,437		5,670,438
Basic earnings (loss) per share	$	2.00	$	1.95	$	(0.29)	$	3.95	$	0.97
Diluted earnings (loss) per share	$	1.98	$	1.92	$	(0.29)	$	3.91	$	0.97

CAMBRIDGE BANCORP AND SUBSIDIARIES MARGIN & YIELD ANALYSIS

	Three Months Ended
	June 30, 2021							March 31, 2021							June 30, 2020
	Average Balance		Interest Income/ Expenses ⁽¹⁾		Rate Earned/ Paid ⁽¹⁾			Average Balance		Interest Income/ Expenses ⁽¹⁾		Rate Earned/ Paid ⁽¹⁾			Average Balance		Interest Income/ Expenses ⁽¹⁾		Rate Earned/ Paid ⁽¹⁾
	(dollars in thousands)
ASSETS
Interest-earning assets
Loans ⁽²⁾
Taxable	$	3,195,077	$	30,557		3.84	%	$	3,142,319	$	30,325		3.91	%	$	2,660,482	$	28,130		4.25	%
Tax-exempt		33,039		348		4.22			26,279		281		4.34			21,004		267		5.11
Securities available for sale ⁽³⁾
Taxable		218,230		651		1.20			229,693		694		1.23			115,875		557		1.93
Securities held to maturity
Taxable		343,380		1,372		1.60			183,678		891		1.97			158,431		964		2.45
Tax-exempt		102,650		801		3.13			102,348		832		3.30			84,885		760		3.60
Cash and cash equivalents		132,964		28		0.08			144,567		31		0.09			45,437		16		0.14
Total interest-earning assets ⁽⁴⁾		4,025,340		33,757		3.36	%		3,828,884		33,054		3.50	%		3,086,114		30,694		4.00	%
Noninterest-earning assets		251,641							259,248							233,240
Allowance for credit losses		(36,183)							(35,988)							(23,272)
Total assets	$	4,240,798						$	4,052,144						$	3,296,082
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits
Checking accounts	$	671,424	$	51		0.03	%	$	632,754	$	83		0.05	%	$	541,482	$	209		0.16	%
Savings accounts		959,606		174		0.07			977,415		272		0.11			915,835		462		0.20
Money market accounts		706,100		467		0.27			586,142		537		0.37			270,951		140		0.21
Certificates of deposit		218,738		314		0.58			239,356		383		0.65			230,798		585		1.02
Total interest-bearing deposits		2,555,868		1,006		0.16			2,435,667		1,275		0.21			1,959,066		1,396		0.29
Subordinated debt		—		—		—			—		—		—			3,266		64		7.88
Other borrowed funds		18,288		141		3.09			22,009		140		2.58			138,052		282		0.82
Total interest-bearing liabilities		2,574,156		1,147		0.18	%		2,457,676		1,415		0.23	%		2,100,384		1,742		0.33	%
Non-interest-bearing liabilities
Demand deposits		1,156,854							1,085,048							770,202
Other liabilities		97,515							104,744							97,431
Total liabilities		3,828,525							3,647,468							2,968,017
Shareholders' equity		412,273							404,676							328,065
Total liabilities & shareholders' equity	$	4,240,798						$	4,052,144						$	3,296,082
Net interest income on a fully taxable equivalent basis				32,610							31,639							28,952
Less taxable equivalent adjustment				(241)							(233)							(215)
Net interest income			$	32,369						$	31,406						$	28,737
Net interest spread ⁽⁵⁾						3.18	%						3.27	%						3.67	%
Net interest margin ⁽⁶⁾						3.25	%						3.35	%						3.77	%


(1)	Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% in 2021 and 2020.
(2)	Nonaccrual loans are included in average amounts outstanding.
(3)	Average balances of securities available for sale calculated utilizing amortized cost.
(4)	Federal Home Loan Bank stock balance is excluded from interest-earning assets and associated dividend income is excluded from interest income.
(5)	Net interest spread represents the difference between the weighted average yield on interest-earning assets, inclusive of PPP loans originated during 2020 and 2021, and the weighted average cost of interest-bearing liabilities.
(6)	Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets, inclusive of PPP loans originated during 2020 and 2021.

CAMBRIDGE BANCORP AND SUBSIDIARIES MARGIN & YIELD ANALYSIS

	Six Months Ended
	June 30, 2021							June 30, 2020
	Average Balance		Interest Income/ Expenses ⁽¹⁾		Rate Earned/ Paid ⁽¹⁾			Average Balance		Interest Income/ Expenses ⁽¹⁾		Rate Earned/ Paid ⁽¹⁾
	(dollars in thousands)
ASSETS
Interest-earning assets
Loans ⁽²⁾
Taxable	$	3,168,843	$	60,882		3.87	%	$	2,432,672	$	51,468		4.25	%
Tax-exempt		29,678		629		4.27			22,305		518		4.67
Securities available for sale ⁽³⁾
Taxable		223,930		1,344		1.21			124,651		1,218		1.96
Securities held to maturity
Taxable		263,970		2,264		1.73			163,932		2,026		2.49
Tax-exempt		102,500		1,634		3.21			84,039		1,514		3.62
Cash and cash equivalents		138,715		59		0.09			52,627		156		0.60
Total interest-earning assets ⁽⁴⁾		3,927,636		66,812		3.43	%		2,880,226		56,900		3.97	%
Non-interest-earning assets		255,441							212,712
Allowance for loan losses		(36,086)							(20,848)
Total assets	$	4,146,991						$	3,072,090
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits
Checking accounts	$	652,196	$	134		0.04	%	$	499,335	$	368		0.15	%
Savings accounts		968,461		446		0.09			902,404		2,232		0.50
Money market accounts		646,453		1,004		0.31			231,999		589		0.51
Certificates of deposit		228,990		697		0.61			209,058		1,336		1.29
Total interest-bearing deposits		2,496,100		2,281		0.18	%		1,842,796		4,525		0.49	%
Subordinated debt		—		—		—			1,633		64		7.88
Other borrowed funds		20,138		281		2.81			132,720		848		1.28
Total interest-bearing liabilities		2,516,238		2,562		0.21	%		1,977,149		5,437		0.55	%
Non-interest-bearing liabilities
Demand deposits		1,121,149							696,547
Other liabilities		101,109							88,760
Total liabilities		3,738,496							2,762,456
Shareholders' equity		408,495							309,634
Total liabilities & shareholders' equity	$	4,146,991						$	3,072,090
Net interest income on a fully taxable equivalent basis				64,250							51,463
Less taxable equivalent adjustment				(475)							(427)
Net interest income			$	63,775						$	51,036
Net interest spread ⁽⁵⁾						3.23	%						3.42	%
Net interest margin ⁽⁶⁾						3.30	%						3.59	%


(1)	Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% in 2021 and 2020.
(2)	Nonaccrual loans are included in average amounts outstanding.
(3)	Average balances of securities available for sale calculated utilizing amortized cost.
(4)	Federal Home Loan Bank stock balance is excluded from interest-earning assets and associated dividend income is excluded from interest income.
(5)	Net interest spread represents the difference between the weighted average yield on interest-earning assets, inclusive of PPP loans originated during 2020 and 2021, and the weighted average cost of interest-bearing liabilities.
(6)	Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets, inclusive of PPP loans originated during 2020 and 2021.

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.

	Three Months Ended						Six Months Ended
Operating Net Income / Operating Diluted Earnings Per Share	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(dollars in thousands, except share data)

Net Income (a GAAP measure)	$	13,944	$	13,499	$	(1,716)	$	27,443	$	5,516
Add: Merger expenses		—		—		4,366		—		4,619
Add: Gain on disposition of investment securities		—		—		(69)		—		(69)
Add: Provision established for acquired Wellesley loans		—		—		8,638		—		8,638
Tax effect of non-operating adjustments ⁽¹⁾		—		—		(3,441)		—		(3,504)
Operating Net Income (a non-GAAP measure)	$	13,944	$	13,499	$	7,778	$	27,443	$	15,200
Less: Dividends and Undistributed Earnings Allocated to Participating Securities (GAAP)		(67)		(57)		(4)		(126)		(20)
Operating Income Applicable to Common Shareholders (a non-GAAP measure)	$	13,877	$	13,442	$	7,774	$	27,317	$	15,180
Weighted Average Diluted Shares		6,998,936		6,987,216		5,912,889		6,993,437		5,670,438
Operating Diluted Earnings Per Share (a non-GAAP measure)	$	1.98	$	1.92	$	1.31	$	3.91	$	2.68

(1)

The net tax benefit associated with nonoperating items is determined by assessing whether each nonoperating item is included or excluded from net taxable income and applying the Company's combined marginal tax rate to only those items included in net taxable income. The tax effect for the quarter ended June 30, 2020 has been updated to reflect the final tax deductibility for the year.

	June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020
	(dollars in thousands)
Tangible Common Equity:
Shareholders' equity (GAAP)	$	419,501		$	407,673		$	401,732		$	383,060
Less: Goodwill and acquisition related intangibles (GAAP)		(54,709)			(54,799)			(54,889)			(55,070)
Tangible Common Equity (a non-GAAP measure)		364,792			352,874			346,843			327,990
Total assets (GAAP)		4,303,287			4,253,173			3,949,297			4,022,750
Less: Goodwill and acquisition related intangibles (GAAP)		(54,709)			(54,799)			(54,889)			(55,070)
Tangible assets (a non-GAAP measure)	$	4,248,578		$	4,198,374		$	3,894,408		$	3,967,680
Tangible Common Equity Ratio (a non-GAAP measure)		8.59	%		8.41	%		8.91	%		8.27	%

Tangible Common Equity (excluding PPP loans):
Tangible Common Equity (a non-GAAP measure)	$	364,792		$	352,874		$	346,843		$	327,990
Tangible assets (a non-GAAP measure)	$	4,248,578		$	4,198,374		$	3,894,408		$	3,967,680
Less: PPP loans		(107,638)			(165,679)			(124,201)			(189,306)
Tangible assets (excluding PPP Loans) (a non-GAAP measure)	$	4,140,940		$	4,032,695		$	3,770,207		$	3,778,374
Tangible Common Equity Ratio (excluding PPP Loans) (a non-GAAP measure)		8.81	%		8.75	%		9.20	%		8.68	%

Tangible Book Value Per Share:
Tangible Common Equity (a non-GAAP measure)	$	364,792		$	352,874		$	346,843		$	327,990
Common shares outstanding		6,965,557			6,960,194			6,926,728			6,927,699
Tangible Book Value Per Share (a non-GAAP measure)	$	52.37		$	50.70		$	50.07		$	47.34

	Three Months Ended									Six Months Ended
	June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	(dollars in thousands)
Efficiency Ratio: (1)
Noninterest expense	$	25,273		$	24,219		$	25,587		$	49,492		$	45,512
Net interest and dividend income	$	32,381		$	31,406		$	28,789		$	63,787		$	51,189
Total noninterest income		10,906			10,849			8,972			21,755			17,790
Total revenue	$	43,287		$	42,255		$	37,761		$	85,542		$	68,979
Efficiency Ratio		58.38	%		57.32	%		67.76	%		57.86	%		65.98	%

Operating Efficiency Ratio: (2)
Noninterest expense	$	25,273		$	24,219		$	25,587		$	49,492		$	45,512
Merger expenses (Pretax)		—			—			(4,366)			—			(4,619)
Operating expense (a non-GAAP measure)	$	25,273		$	24,219		$	21,221		$	49,492		$	40,893
Total revenue	$	43,287		$	42,255		$	37,761		$	85,542		$	68,979
Add: Gain on disposition of investment securities		—			—			(69)			—			(69)
Operating revenue (a non-GAAP measure)	$	43,287		$	42,255		$	37,692		$	85,542		$	68,910
Operating Efficiency Ratio (a non-GAAP measure)		58.38	%		57.32	%		56.30	%		57.86	%		59.34	%

	Three Months Ended									Six Months Ended
	June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	(dollars in thousands)
Operating Return on Tangible Common Equity: (3)
Operating Net Income (a non-GAAP measure)	$	13,944		$	13,499		$	7,788		$	27,443		$	15,200
Average common equity	$	412,273		$	404,676		$	328,065		$	408,495		$	309,634
Average goodwill and merger related intangibles		(54,752)			(54,847)			(41,240)			(54,799)			(37,874)
Average tangible common equity (a non-GAAP measure)	$	357,521		$	349,829		$	286,825		$	353,696		$	271,760
Operating Return on Tangible Common Equity (a non-GAAP measure)		15.64	%		15.65	%		10.92	%		15.65	%		11.25	%

Operating Return on Average Assets: (4)
Operating Net Income (a non-GAAP measure)	$	13,944		$	13,499		$	7,788		$	27,443		$	15,200
Average assets	$	4,240,798		$	4,052,144		$	3,296,082		$	4,146,991		$	3,072,090
Operating Return on Average Assets (a non-GAAP measure)		1.32	%		1.35	%		0.95	%		1.33	%		0.99	%

	Three Months Ended									Six Months Ended
	June 30, 2021			March 31, 2021			June 30, 2020				June 30, 2021			June 30, 2020
	(dollars in thousands)
Operating Pre-Tax Pre-Provision (PTPP) Income (5)
(Loss) Income before income taxes (GAAP)	$	18,915		$	18,242		$	(2,256)			$	37,157		$	7,037
Add: Provision (Release) for Credit Losses (GAAP)		(901)			(206)			14,430				(1,107)			16,430
Add: Nonoperating expenses (GAAP)		—			—			4,366				—			4,619
Add: Gain on disposition of investment securities (GAAP)		—			—			(69)				—			(69)
Operating PTPP Income (a non-GAAP measure)	$	18,014		$	18,036		$	16,471			$	36,050		$	28,017
Average assets		4,240,798			4,052,144			3,296,082				4,146,991			3,072,090
Operating PTPP Return on Average Assets (a non-GAAP measure)		1.70	%		1.81	%		2.01	%			1.75	%		1.83	%


(1)	The efficiency ratio represents noninterest expense as a percentage of the sum of net interest and dividend income and noninterest income.
(2)	Operating efficiency ratio represents operating expense as a percentage of operating revenue.
(3)	Operating return on tangible common equity represents operating net income as a percentage of average tangible common equity.
(4)	Operating return on average assets represents operating net income as a percentage of average assets.
(5)	Operating Pre-Tax Pre-Provision (PTPP) Income represents income before income taxes adjusted for provision (release) for credit losses, nonoperating expenses, and gain on disposition of investment securities as a percentage of average assets.

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SOURCE Cambridge Bancorp