Cambridge Bancorp (OTCBB: CATC) today reported unaudited net income of $3,641,000 for the second quarter of 2014 compared to $3,475,000 for the same quarter in 2013. The increase in earnings of $166,000 (4.8%) was attributable to growth in both net interest income and noninterest income, offset by an increase in noninterest expense. Diluted earnings per share were $0.92 for the second quarter of 2014 compared to $0.89 for the same quarter in 2013. For the six months ended June 30, 2014, unaudited net income was $7,152,000, an increase of $346,000 (5.1%) compared to $6,806,000 for the first half of 2013. Diluted earnings per share were $1.81 for the first six months of 2014 versus $1.75 for the same period in 2013.

“We are pleased to report favorable results in an environment characterized by continued low interest rates and intense competition,” notes Joseph V. Roller II, president and CEO. “While the pace of economic growth has been moderate, the Bank continues to build momentum across all business lines, especially Lending and Wealth Management,” said Roller.

Net interest income of $11.8 million for the second quarter of 2014 was $720,000 (6.5%) higher than the same quarter in 2013. For the six months ended June 30, 2014, net interest income of $23.6 million was $1.6 million (7.2%) higher than the same period in 2013.

Noninterest income increased by $571,000 (10.3%) to $6.1 million for the second quarter of 2014 compared to $5.5 million for the same quarter in 2013. The Bank continued to build wealth management income, which increased by $473,000 (12.2%) compared to the same quarter in 2013.

Assets under management grew to $2.3 billion at the end of the second quarter 2014 from $2.1 billion at year-end 2013. Other contributors to the noninterest income increase for the second quarter of 2014 were gains from the disposition of investment securities of $151,000, debit card income of $33,000, and other income of $68,000, as compared to the same quarter in 2013. Noninterest income gains were offset by lower income produced from gains on loans sold of $105,000, bank owned life insurance of $25,000, and deposit account fees of $24,000.

The Bank’s net interest margin stabilized after a prolonged period of decreases due to the low rate environment. The Bank’s net interest margin stood at 3.32% for the second quarter of 2014 compared to 3.31% for the same quarter in 2013. There was an increase of three basis points for the comparable six-month period.

For the second quarter of 2014, noninterest expense totaled $12.4 million, an increase of $1.1 million (10.1%) compared to the same quarter in 2013. This increase was attributable to the Bank making strategic investments in human capital, systems capabilities, and its office premises. The primary factors for the increase in noninterest expense were higher salaries and benefits of $542,000 (8.3%), data processing of $239,000 (26.1%), and occupancy and equipment of $169,000 (8.5%).

Since year-end 2013, total loans outstanding have increased by $44.6 million (4.7%) to $987.0 million. The solid increase in loans outstanding is attributable to residential mortgage and home equity loan growth of $20.2 million (4.0%) and commercial mortgage loan growth of $18.7 million (5.1%). The low interest rates provide an attractive environment for qualified households to purchase or access home equity and businesses looking to purchase or refinance properties.

Non-performing loans as a percentage of total loans stood at 0.14% at June 30, 2014, a slight decrease from 0.18% at December 31, 2013. Loan quality remains sound and the Allowance for Loan Losses stood at $13.2 million or 1.34% of total loans outstanding at June 30, 2014. At December 31, 2013, the Allowance for Loan Losses was $12.7 million or 1.35% of total loans outstanding. The provision for loan losses was $150,000 for the current quarter.

Total deposits experienced a seasonal drop of $98.7 million (7.0%) since year-end 2013, yet increased by $63.4 million (5.1%) over June 30, 2013.

Total assets at second quarter 2014 end were $1.5 billion, relatively flat since year-end 2013.

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 124-year-old Massachusetts chartered commercial bank with $1.5 billion in total assets and 12 Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, Lincoln, and Weston, as well as an Innovation Banking Group office located in the Cambridge Innovation Center. Cambridge Trust Company is one of New England’s leaders in wealth management with $2.3 billion in client assets under management. The Wealth Management group maintains offices in Boston, Massachusetts, and Concord and Portsmouth, New Hampshire.

The accompanying unaudited condensed interim consolidated financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Cambridge Bancorp 2013 Annual Report, which is posted in the investor relations section of our website at www.cambridgetrust.com/annualreport. We will also post supplemental financial information for second quarter of 2014 at the same site later this month. Interim results are not necessarily reflective of the results for the entire year.

Financial Highlights:

CAMBRIDGE BANCORP
QUARTERLY UNAUDITED RESULTS
June 30, 2014
Dollar amounts in thousands (except share data)
       
 
Quarter Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
 
Interest Income $ 12,318 $ 11,595 $ 24,655 $ 23,180
Interest Expense   516     513     1,032     1,136  
Net Interest Income 11,802 11,082 23,623 22,044
Provision for Loan Losses 150 200 525 400
Non-Interest Income 6,101 5,530 12,146 11,419
Non-Interest Expense   12,392     11,259     24,659     22,928  
Income Before Taxes 5,361 5,153 10,585 10,135
Income Taxes   1,720     1,678     3,433     3,329  
Net Income $ 3,641   $ 3,475   $ 7,152   $ 6,806  
 

Data Per Common Share:

 
Basic Earnings Per Share $ 0.92 $ 0.90 $ 1.83 $ 1.76
Diluted Earnings Per Share $ 0.92 $ 0.89 $ 1.81 $ 1.75
Dividends Declared Per Share $ 0.42 $ 0.39 $ 0.84 $ 0.78
 
Avg. Common Shares Outstanding:
Basic 3,887,707 3,837,776 3,873,549 3,826,454
Diluted 3,973,372 3,907,458 3,960,288 3,897,744
 

Selected Operating Ratios:

 
Net Interest Margin 3.32 % 3.31 % 3.34 % 3.31 %
Return on Average Assets 0.97 % 0.99 % 0.96 % 0.98 %
Return on Average Equity 12.70 % 13.23 % 12.64 % 13.04 %
 
 
June 30, December 31, June 30,
2014 2013 2013
 
Total Assets $ 1,527,063 $ 1,533,710 $ 1,425,825
Total Loans 987,038 942,451 831,930
Non-Performing Loans 1,386 1,703 1,441
Allowance for Loan Losses 13,242 12,708 11,353
Allowance to Non-Performing Loans 955.53 % 746.11 % 787.77 %
Allowance to Total Loans 1.34 % 1.35 % 1.36 %
Total Deposits 1,310,337 1,409,047 1,246,979
Total Stockholders' Equity 117,242 109,283 101,563
 
Book Value Per Share $ 29.76 $ 28.13 $ 26.17
Tangible Book Value Per Share $ 29.57 $ 27.93 $ 25.96
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED BALANCE SHEETS
       
June 30, December 31,
2014 2013
(In thousands)
ASSETS
 
Cash and cash equivalents $ 21,583 $ 88,107
 
Investment securities:
Available for sale, at fair value 379,277 388,793
Held to maturity, at amortized cost 79,259   59,181  
Total investment securities 458,536 447,974
 
Loans held for sale, at lower of cost or fair value 816 403
 
Loans:
Residential mortgage 475,478 458,176
Commercial mortgage 382,001 363,294
Home equity 49,568 46,635
Commercial 53,577 50,758
Consumer 26,414   23,588  
Total loans 987,038 942,451
Allowance for loan losses (13,242 ) (12,708 )
Net loans 973,796 929,743
 
Stock in FHLB of Boston, at cost 7,465 6,231
Bank owned life insurance 28,860 23,555
Banking premises and equipment, net 8,953 9,951
Accrued interest receivable 3,707 3,626
Other assets 23,347   24,120  
Total assets $ 1,527,063   $ 1,533,710  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deposits:
Demand $ 401,280 $ 382,255
Interest bearing checking 307,707 335,010
Money market 73,787 78,410
Savings 406,744 489,160
Certificates of deposit 120,819   124,212  
Total deposits 1,310,337 1,409,047
 
Short-term borrowings 85,000 —
Long-term borrowings — —
Other liabilities 14,484   15,380  
Total liabilities 1,409,821   1,424,427  
Stockholders' equity:
Common stock, par value $1.00; Authorized
10,000,000 shares; Outstanding: 3,939,405 and
3,884,851 shares, respectively 3,939 3,885
Additional paid-in capital 27,791 26,027
Retained earnings 86,913 83,479
Accumulated other comprehensive income/(loss) (1,401 ) (4,108 )
Total stockholders’ equity 117,242   109,283  
Total liabilities and stockholders’ equity $ 1,527,063   $ 1,533,710  
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
           
Quarter Ended June 30,
2014 2013
(In thousands, except per share data)
 
Interest income:
Interest on loans $ 9,871 $ 8,614
Interest on taxable investment securities 1,729 2,466
Interest on tax exempt investment securities 681 504
Dividends on FHLB of Boston stock 23 5
Interest on overnight investments 14 6
Total interest income 12,318 11,595
 
Interest expense:
Interest on deposits 482 481
Interest on borrowed funds 34 32
Total interest expense 516 513
 
Net interest income 11,802 11,082
 
Provision for loan losses 150 200
 
Net interest income after provision for loan losses 11,652 10,882
 
Noninterest income:
Wealth management income 4,348 3,875
Deposit account fees 609 633
ATM/Debit card income 334 301
Bank owned life insurance income 141 166
Gain on disposition of investment securities 356 205
Gain on loans held for sale 32 137
Other income 281 213
Total noninterest income 6,101 5,530
 
Noninterest expense:
Salaries and employee benefits 7,063 6,521
Occupancy and equipment 2,168 1,999
Data processing 1,156 917
Professional services 437 416
Marketing 529 465
FDIC Insurance 197 181
Other expenses 842 760
Total noninterest expense 12,392 11,259
 
Income before income taxes 5,361 5,153
 
Income tax expense 1,720 1,678
   
Net income $ 3,641 $ 3,475
 
Per share data:
 
Basic earnings per common share $ 0.92 $ 0.90
Diluted earnings per common share $ 0.92 $ 0.89
 
Average shares outstanding - basic 3,887,707 3,837,776
Average shares outstanding - diluted 3,973,372 3,907,458
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
             
Quarter Ended June 30,
2014 2013
(In thousands)
 
 
Net income $ 3,641 $ 3,475
 
Other comprehensive income/(loss), net of tax:
Defined benefit retirement plans:
Change in unfunded retirement liability (2 ) (85 )
Unrealized gains/(losses) on Available for
Sale securities:
Unrealized holding gains/(losses) arising
during the period 1,948 (5,938 )
Less: reclassification adjustment for gains
recognized in net income (228 ) (131 )
   
Other comprehensive income/(loss) 1,718 (6,154 )
   
Comprehensive income/(loss) $ 5,359   $ (2,679 )
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
           
Six Months Ended June 30,
2014 2013
(In thousands, except per share data)
 
Interest income:
Interest on loans $ 19,537 $ 16,979
Interest on taxable investment securities 3,762 5,160
Interest on tax exempt investment securities 1,283 1,011
Dividends on FHLB of Boston stock 46 10
Interest on overnight investments 27 20
Total interest income 24,655 23,180
 
Interest expense:
Interest on deposits 977 975
Interest on borrowed funds 55 161
Total interest expense 1,032 1,136
 
Net interest income 23,623 22,044
 
Provision for loan losses 525 400
 
Net interest income after provision for loan losses 23,098 21,644
 
Noninterest income:
Wealth management income 8,533 7,620
Deposit account fees 1,242 1,281
ATM/Debit card income 611 557
Bank owned life insurance income 305 342
Gain on disposition of investment securities 878 805
Gain on loans held for sale 57 435
Other income 520 379
Total noninterest income 12,146 11,419
 
Noninterest expense:
Salaries and employee benefits 14,156 13,290
Occupancy and equipment 4,265 4,063
Data processing 2,287 1,900
Professional services 991 928
Marketing 1,058 930
FDIC Insurance 391 362
Other expenses 1,511 1,455
Total noninterest expense 24,659 22,928
 
Income before income taxes 10,585 10,135
 
Income tax expense 3,433 3,329
   
Net income $ 7,152 $ 6,806
 
Per share data:
 
Basic earnings per common share $ 1.83 $ 1.76
Diluted earnings per common share $ 1.81 $ 1.75
 
Average shares outstanding - basic 3,873,549 3,826,454
Average shares outstanding - diluted 3,960,288 3,897,744
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
             
Six Months Ended June 30,
2014 2013
(In thousands)
 
 
Net income $ 7,152 $ 6,806
 
Other comprehensive income/(loss), net of tax:
Defined benefit retirement plans:
Change in unfunded retirement liability (4 ) (170 )
Unrealized gains/(losses) on Available for
Sale securities:
Unrealized holding gains/(losses) arising
during the period 3,274 (7,531 )
Less: reclassification adjustment for gains
recognized in net income (563 ) (516 )
   
Other comprehensive income/(loss) 2,707 (8,217 )
   
Comprehensive income/(loss) $ 9,859   $ (1,411 )
 
CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
           
Six Months Ended June 30,
2014 2013
(In thousands)
Cash flows provided by operating activities:
Net income $ 7,152 $ 6,806
Adjustments to arrive at net cash provided by operating activities:
Provision for loan losses 525 400
Amortization of deferred charges/(income), net 480 608
Depreciation and amortization 922 767
Bank owned life insurance income (305 ) (342 )
Gain on disposition of investment securities (878 ) (805 )
Compensation expense from stock option
and restricted stock grants 955 229
Change in loans held for sale (413 ) 1,684
Change in accrued interest receivable, deferred taxes,
other assets and other liabilities (1,671 ) 3,200
Other, net 17   36  
Net cash provided by operating activities 6,784   12,583  
Cash flows used by investing activities:
Origination of loans (112,954 ) (151,184 )
Purchase of:
Investment securities - AFS (38,741 ) (50,544 )
Investment securities - HTM (22,370 ) (498 )
Maturities, calls and principal payments of:
Loans 68,203 61,328
Investment securities - AFS 25,087 52,626
Investment securities - HTM 2,266 6,709
Proceeds from sale of investment securities - AFS 27,924 28,702
Purchase of bank owned life insurance (5,000 ) —
Decrease/(increase) in FHLB of Boston stock (1,234 ) (396 )
Purchase of banking premises and equipment 76   (2,895 )
Net cash provided/(used) by investing activities (56,743 ) (56,152 )
Cash flows provided by financing activities:
Net increase/(decrease) in deposits (98,710 ) (34,354 )
Net increase/(decrease) in short-term borrowings 85,000 63,000
Repayment of long-term borrowings — (20,000 )
Proceeds from issuance of common stock 941 913
Repurchase of common stock (503 ) (42 )
Cash dividends paid on common stock (3,293 ) (3,017 )
Net cash provided/(used) by financing activities (16,565 ) 6,500  
Net increase/(decrease) in cash and cash equivalents (66,524 ) (37,069 )
Cash and cash equivalents at beginning of period 88,107   59,923  
Cash and cash equivalents at end of period $ 21,583   $ 22,854  
 
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,036 $ 1,141
Cash paid for income taxes 4,305 80
Non-cash transactions:
Change in accumulated other comprehensive income, net of taxes 2,707 (8,217 )