Cambridge Bancorp (OTCQB: CATC) today announced unaudited net income of $16,896,000 for the year ended December 31, 2016, representing an increase of $1.2 million, or 7.7%, compared to net income of $15,694,000 for the year ended December 31, 2015. Diluted earnings per share (EPS) were $4.15, a 5.6% increase over diluted earnings per share for the prior year.

“We are pleased to report the Bank delivered another record earnings year with robust growth across each of our business lines,” noted Denis K. Sheahan, President and CEO. “Cambridge Trust posted strong profitability metrics for the year with return on average assets of 0.95% and return on average stockholders’ equity of 12.77%.”

The Bank experienced strong loan growth with an overall increase of $127.9 million, or 10.7%, for the year. At year-end 2016, the Bank’s loan portfolio stood at $1.3 billion. Commercial mortgages and commercial and industrial loans showed noteworthy growth for the year, with increases of $105.1 million (20.6%) and $17.3 million (40.9%), respectively. Home equity loans were also up $11.5 million (18.1%) for the year ending December 31, 2016. The Bank’s residential mortgage portfolio decreased by $11.8 million (2.2%) as more new loan production is sold on the secondary market.

The Bank recorded strong core deposit growth in 2016. Deposits grew by $128.8 million, or 8.3%, since year-end 2015, which provided match funding for loan growth. The total cost of deposits was 0.20% for 2016. Total deposits at year-end 2016 were $1.7 billion.

For the year ended December 31, 2016, net interest income increased by $2.0 million, or 3.9%, to $53.7 million compared to $51.6 million for 2015. Interest on loans increased by $3.4 million, or 7.5%, driven by the impact of strong loan growth in both 2015 and 2016. The prolonged low interest rate environment persisted in impacting margins, which have been unfavorable for the industry for some time. The Bank’s net interest margin decreased nine basis points to 3.18% for the year compared to 3.27% for the year ended December 31, 2015.

The Bank’s total investment securities portfolio decreased slightly from $430.2 million to $408.1 million at year-end 2016. The continued lower interest rate environment resulted in a decrease of $723,000 in interest income on investment securities for the year. Long-term borrowings decreased to $3.7 million as of December 31, 2016 as the bank emphasized the use of core deposits to fund balance sheet growth.

Noninterest income totaled $28.7 million for the year 2016 compared to $25.9 million for 2015. The Bank’s Wealth Management income accounted for the largest increase in total noninterest income for the year. Wealth management income increased by $1.1 million, or 6.0%, to $20.4 million compared to $19.2 million for 2015. Wealth Management assets under management (AUM) increased by $243.6 million, or 10.5%, and stood at $2.6 billion at year-end. Assets under management combined with assets under administration were $2.7 billion at year-end 2016 compared to $2.4 billion at year-end 2015.

During the fourth quarter of 2015, the Bank began to enter into loan level derivative contracts to manage commercial loan interest rate risk. This activity generated $1.3 million in loan related derivative income for year ended December 31, 2016. As part of overall balance sheet management, the Bank sold more of its long-term residential mortgage production. Income from gains on loans sold ended $307,000 higher for 2016 versus 2015. Deposit account fee income increased by $598,000, or 25.7%, due primarily to greater commercial cash management income for year-end 2016.

Noninterest income increases were offset by lower gains on disposition of investment securities of $252,000, lower bank owned life insurance income of $55,000, and lower ATM/Debit card fees of $52,000 for the year ended December 31, 2016.

Noninterest expense increased by $3.6 million, or 6.7%, to $56.8 million for the year ended December 31, 2016. The increase in salaries and benefits for the year of $3.7 million is primarily the result of strategic new hires to support business growth, coupled with higher expenses related to long-term equity compensation and health care benefits. The increase of $307,000 in occupancy and equipment for the year is the result of increased cost of facilities and amortization of leasehold improvements. The increase of $217,000 in data processing expense is attributable to increased transaction volumes and new products. The increase of $134,000 in professional services is primarily the result of higher consulting fees. The increases in noninterest expense categories were offset by lower marketing expenses of $674,000 for year-end 2016.

Total loans outstanding at year-end 2016 were $1.3 billion compared to $1.2 billion at year-end 2015. Loan quality remained sound across consumer and commercial customer bases with non-performing loans totaling $1.7 million, or 0.13%, of total loans outstanding at December 31, 2016, a modest increase of $195,000 compared to the year-end 2015. The Allowance for Loan Losses was $15.3 million, or 1.16%, of total loans outstanding at year-end 2016. At December 31, 2015, the Allowance for Loan Losses was $15.2 million, or 1.27%, of total loans outstanding. The provision for loan losses of $132,000 during 2016 was primarily driven by loan growth and changes in the mix of the portfolio.

Total assets at year-end 2016 were $1.8 billion versus $1.7 billion year-end 2015.

About Cambridge Bancorp

Cambridge Bancorp and its subsidiary, Cambridge Trust Company, are based in Cambridge, Massachusetts, in the heart of Harvard Square. Cambridge Trust Company is a 127-year-old Massachusetts chartered commercial bank with $1.8 billion in total assets and 11 Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, and Weston. Cambridge Trust Company is one of New England’s leaders in wealth management with $2.6 billion in client assets under management. The Wealth Management group maintains offices in Boston, 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 Cambridge Bancorp 2015 Annual Report, which is posted in the investor relations section of our website at www.cambridgetrust.com. We will also post the Cambridge Bancorp 2016 Annual Report at the same site later this quarter.

Financial Highlights:

                       
CAMBRIDGE BANCORP
QUARTERLY UNAUDITED RESULTS
December 31, 2016
Dollar amounts in thousands (except share data)
 
 
Quarter Ended Year Ended
December 31, December 31,
2016 2015 2016 2015
 
Interest Income $ 14,663 $ 14,056 $ 57,028 $ 54,341
Interest Expense   763     860     3,355     2,694  
Net Interest Income 13,900 13,196 53,673 51,647
Provision for (Release of) Loan Losses (206 ) - 132 1,075
Non-Interest Income 7,278 6,495 28,661 25,865
Non-Interest Expense   14,595     13,981     56,750     53,192  
Income Before Taxes 6,789 5,710 25,452 23,245
Income Taxes   2,366     1,840     8,556     7,551  
Net Income $ 4,423   $ 3,870   $ 16,896   $ 15,694  
 

Data Per Common Share:

 
Basic Earnings Per Share $ 1.10 $ 0.97 $ 4.19 $ 3.94
Diluted Earnings Per Share $ 1.08 $ 0.97 $ 4.15 $ 3.93
Dividends Declared Per Share $ 0.46 $ 0.45 $ 1.84 $ 1.80
 
Avg. Common Shares Outstanding:
Basic 3,995,495 3,951,736 3,990,343 3,938,117
Diluted 4,034,687 4,008,334 4,028,944 3,993,599
 

Selected Operating Ratios:

 
Net Interest Margin 3.22 % 3.28 % 3.18 % 3.27 %
Return on Average Assets 0.97 % 0.91 % 0.95 % 0.95 %
Return on Average Equity 12.94 % 12.36 % 12.77 % 12.91 %
 
 
December 31, December 31,
2016 2015
 
Total Assets $ 1,848,999 $ 1,706,201
Total Loans 1,320,154 1,192,214
Non-Performing Loans 1,676 1,481
Allowance for Loan Losses 15,261 15,191
Allowance to Total Loans 1.16 % 1.27 %
Total Deposits 1,686,038 1,557,224
Total Stockholders' Equity 134,671 125,063
Wealth Management AUM 2,572,760 2,329,208
 
Book Value Per Share $ 33.36 $ 31.26
Tangible Book Value Per Share $ 33.06 $ 31.04
 
           
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED BALANCE SHEETS
   
December 31,
2016 2015
(In thousands)
ASSETS
 
Cash and cash equivalents

 

$

54,050

 

$

24,645

 
Investment securities:
Available for sale, at fair value 325,641 347,173
Held to maturity, at amortized cost   82,502     83,063  
Total investment securities 408,143 430,236
 
Loans held for sale, at lower of cost or fair value 6,506 —
 
Loans:
Residential mortgage 534,404 546,245
Commercial mortgage 616,140 511,071
Home equity 75,051 63,522
Commercial & Industrial 59,706 42,384
Consumer   34,853     28,992  
Total loans 1,320,154 1,192,214
Allowance for loan losses   (15,261 )   (15,191 )
Net loans 1,304,893 1,177,023
 
Stock in FHLB of Boston, at cost 4,098 6,465
Bank owned life insurance 30,499 29,887
Banking premises and equipment, net 10,451 11,371
Accrued interest receivable 4,627 4,222
Other assets   25,732     22,352  
Total assets

 

$

1,848,999

 

 

$

1,706,201

 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deposits:
Demand

 

$

472,923

 

$

436,998

Interest bearing checking 430,706 370,400
Money market 72,057 73,911
Savings 539,190 497,525
Certificates of deposit   171,162     178,390  
Total deposits 1,686,038 1,557,224
 
Short-term borrowings — —
Long-term borrowings 3,746 3,910
Other liabilities   24,544     20,004  
Total liabilities   1,714,328     1,581,138  
Stockholders' equity:
Common stock, par value $1.00; Authorized:
10,000,000 shares; Outstanding: 4,036,879 and
4,000,181 shares, respectively 4,037 4,000
Additional paid-in capital 33,253 30,427
Retained earnings 107,262 99,064
Accumulated other comprehensive income/(loss)   (9,881 )   (8,428 )
Total stockholders’ equity   134,671     125,063  
Total liabilities and stockholders’ equity

 

$

1,848,999

 

 

$

1,706,201

 
 
           
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
       
Quarter Ended December 31,
2016 2015
(In thousands, except per share data)
 
Interest income:
Interest on loans

 

$

12,679

 

$

11,769

Interest on taxable investment securities 1,251 1,519
Interest on tax exempt investment securities 666 698
Dividends on FHLB of Boston stock 47 56
Interest on overnight investments   20     14
Total interest income   14,663     14,056
 
Interest expense:
Interest on deposits 734 824
Interest on borrowed funds   29     36
Total interest expense   763     860
 
Net interest income 13,900 13,196
 
Provision for (release of) loan losses   (206 )   —
 
Net interest income after provision for (release of) loan losses   14,106     13,196
 
Noninterest income:
Wealth management income 5,363 4,855
Deposit account fees 788 608
ATM/Debit card income 288 304
Bank owned life insurance income 138 162
Gain on disposition of investment securities — —
Gain on loans held for sale 325 114
Loan related derivative income 132 260
Other income   244     192
Total noninterest income   7,278     6,495
 
Noninterest expense:
Salaries and employee benefits 9,098 7,711
Occupancy and equipment 2,302 2,549
Data processing 1,280 1,258
Professional services 537 778
Marketing 318 618
FDIC Insurance 206 221
Other expenses   854     846
Total noninterest expense   14,595     13,981
 
Income before income taxes 6,789 5,710
 
Income tax expense 2,366 1,840
   
Net income

 

$

4,423

 

 

$

3,870

 
Per share data:
 
Basic earnings per common share

 

$

1.10

 

$

0.97

Diluted earnings per common share

 

$

1.08

 

$

0.97

 
Average shares outstanding - basic 3,995,495 3,951,736
Average shares outstanding - diluted 4,034,687 4,008,334
 
           
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
       
Quarter Ended December 31,
2016 2015
(In thousands)
 
 
Net income

 

$

4,423

 

$

3,870

 
Other comprehensive income/(loss), net of tax:
Defined benefit retirement plans:
Change in unfunded retirement liability (788 ) (275 )
Unrealized gains/(losses) on Available for
Sale of securities:
Unrealized holding gains/(losses) arising
during the period (3,727 ) (2,143 )
Less: reclassification adjustment for gains
recognized in net income — —
   
Other comprehensive income/(loss) (4,515 ) (2,418 )
   
Comprehensive income/(loss)

 

$

(92

)

 

$

1,452

 
 
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                   
Year Ended December 31,
2016 2015
(In thousands, except per share data)
 
Interest income:
Interest on loans

 

$

48,768

 

$

45,358

Interest on taxable investment securities 5,230 5,921
Interest on tax exempt investment securities 2,737 2,766
Dividends on FHLB of Boston stock 179 259
Interest on overnight investments   114   37
Total interest income   57,028   54,341
 
Interest expense:
Interest on deposits 3,260 2,459
Interest on borrowed funds   95   235
Total interest expense   3,355   2,694
 
Net interest income 53,673 51,647
 
Provision for loan losses   132   1,075
 
Net interest income after provision for loan losses   53,541   50,572
 
Noninterest income:
Wealth management income 20,389 19,242
Deposit account fees 2,922 2,324
ATM/Debit card income 1,140 1,192
Bank owned life insurance income 612 667
Gain on disposition of investment securities 438 690
Gain on loans held for sale 916 609
Loan related derivative income 1,323 260
Other income   921   881
Total noninterest income   28,661   25,865
 
Noninterest expense:
Salaries and employee benefits 34,529 30,838
Occupancy and equipment 9,331 9,024
Data processing 5,024 4,807
Professional services 2,394 2,260
Marketing 1,706 2,380
FDIC Insurance 834 854
Other expenses   2,932   3,029
Total noninterest expense   56,750   53,192
 
Income before income taxes 25,452 23,245
 
Income tax expense 8,556 7,551
   
Net income

 

$

16,896

 

$

15,694

 
Per share data:
 
Basic earnings per common share

 

$

4.19

 

$

3.94

Diluted earnings per common share

 

$

4.15

 

$

3.93

 
Average shares outstanding - basic 3,990,343 3,938,117
Average shares outstanding - diluted 4,028,944 3,993,599
 
           
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
       
Year Ended December 31,
2016 2015
(In thousands)
 
 
Net income

 

$

16,896

 

$

15,694

 
Other comprehensive income/(loss), net of tax:
Defined benefit retirement plans:
Change in unfunded retirement liability (437 ) 40
Unrealized gains/(losses) on Available for
Sale of securities:
Unrealized holding gains/(losses) arising
during the period (735 ) (980 )
Less: reclassification adjustment for gains
recognized in net income (281 ) (443 )
   
Other comprehensive income/(loss) (1,453 ) (1,383 )
   
Comprehensive income/(loss)

 

$

15,443

 

 

$

14,311

 
 
           
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
       
Year Ended December 31,
2016 2015
(In thousands)
Cash flows provided by operating activities:
Net income

 

$

16,896

 

$

15,694

Adjustments to arrive at net cash provided by operating activities:
Provision for loan losses 132 1,075
Amortization of deferred charges and fees, net 1,655 1,027
Depreciation and amortization 2,107 1,935
Bank owned life insurance income (612 ) (667 )
Gain on disposition of investment securities (438 ) (690 )
Compensation expense from stock options, RSU's
and restricted stock grants 968 498
Change in loans held for sale (6,506 ) 284
Change in accrued interest receivable, deferred taxes,
other assets and other liabilities 963 835
Other, net   42     25  
Net cash provided by operating activities   15,207     20,016  
Cash flows used by investing activities:
Origination of loans (275,866 ) (260,020 )
Purchase of:
Investment securities - AFS (154,719 ) (225,912 )
Investment securities - HTM (11,238 ) (9,691 )
Maturities, calls and principal payments of:
Loans 147,282 148,049
Investment securities - AFS 156,272 168,787
Investment securities - HTM 11,450 6,206
Proceeds from sales of investment securities - AFS & HTM 18,070 47,625
Change in FHLB of Boston stock 2,367 1,490
Purchase of banking premises and equipment   (1,187 )   (4,939 )
Net cash used by investing activities   (107,569 )   (128,405 )
Cash flows provided by financing activities:
Change in deposits 128,733 186,688
Change in short-term borrowings — (69,000 )
Proceeds from long-term borrowings — 3,950
Repayment of long-term borrowings (164 ) (40 )
Proceeds from issuance of common stock 2,186 1,841
Repurchase of common stock (1,560 ) (667 )
Cash dividends paid on common stock   (7,428 )   (7,178 )
Net cash provided by financing activities   121,767     115,594  
Net increase/(decrease) in cash and cash equivalents 29,405 7,205
Cash and cash equivalents at beginning of period   24,645     17,440  
Cash and cash equivalents at end of period

 

$

54,050

 

 

$

24,645

 
 
Supplemental disclosure of cash flow information:
Cash paid for interest

 

$

3,371

 

$

2,644

Cash paid for income taxes 9,205 8,220
Non-cash transactions:
Change in accumulated other comprehensive
income/(loss), net of taxes (1,453 ) (1,383 )