Cambridge Bancorp Announces Record Earnings for Full-Year 2012

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Cambridge Bancorp (OTCBB: CATC) today announced unaudited net income of $13,403,000 for the year ended December 31, 2012, representing an increase of $926,000, or 7.4%, compared to net income of $12,477,000 for the year ended December 31, 2011. Diluted earnings per share (EPS) were $3.45, a 6.2% increase over diluted earnings per share for the prior year.

“We are pleased to report solid financial performance for the year of 2012”

“We are pleased to report solid financial performance for the year of 2012,” noted Joseph V. Roller II, president and CEO. “Our across-the-board balance sheet growth and steady increase in noninterest income demonstrate that we continue to achieve our goals throughout the Bank while offering a customer-centric banking experience.”

The Bank experienced another historic year for deposit growth with an increase of $155.7 million, or 13.8%, as consumers and businesses continued to place their liquid funds with sound financial institutions. Loan growth achieved similar success with an overall increase of $69.0 million, or 10.2%, for the year. Both residential and commercial mortgages showed solid growth for the year, with increases of $17.0 million (5.1%) and $44.8 million (19.4%), respectively. Home equity loans were down by $10.7 million for the year ending December 31, 2012 as many consumers elected to refinance second mortgages into first mortgages due to favorable interest rates.

For the year ended December 31, 2012 net interest income increased $2,143,000, or 4.9%, to $45.9 million compared to $43.7 million for 2011. The increase in net interest income for the year was driven primarily by loan growth, as well as a reduction in deposit costs.

The sustained low interest rate environment resulted in lower yields earned on investment securities and continued to place further pressure on loan pricing. These were the principal causes for the decrease in the Bank’s net interest margin of 32 basis points to 3.58% for the year compared to 3.90% for the year ended December 31, 2011.

Noninterest income totaled $20.5 million for the year 2012 compared to $18.1 million for 2011. The Bank’s Wealth Management income accounted for a $958,000, or 40.9%, of the upswing in total noninterest income for the year. In addition, during 2012 the Bank began selling 30-year conforming loans to the secondary market. This new revenue source produced gains on loans sold of $592,000 for the year. Other contributors to the noninterest income increase were higher gains on disposition of investment securities of $330,000, higher deposit account and cash management fees of $219,000, and higher bank-owned life insurance income of $194,000 compared to the prior year.

Noninterest expense increased by $3.2 million, or 7.4%, to $45.8 million for the year ended December 31, 2012. The increase is primarily the result of additional investments in salaries and benefits of $2.7 million, and occupancy and equipment of $337,000. The increase of $139,000 in marketing for the year is primarily the result of promoting the Bank’s new South End branch, which opened in November of 2012.

Total loans outstanding at year-end 2012 were $742.2 million compared to $673.3 million at year-end 2011. Loan quality remained sound across consumer and corporate customer bases with non-performing loans totaling $1.6 million at December 31, 2012, an increase of $366,000 compared to the year-end 2011. The Allowance for Loan Losses was $10.9 million, or 1.47%, of total loans outstanding at year-end 2012. At December 31, 2011, the Allowance for Loan Losses was $10.2 million, or 1.51%, of total loans outstanding. The provision for loan losses of $800,000 during 2012 was $200,000 lower than the prior year’s provision. This decrease was primarily in response to the strength of the loan portfolio in conjunction with the stable levels of non-performers.

In the fourth quarter of 2012 unaudited net income was $3,003,000, compared to $2,910,000 for the same quarter in 2011.

“Results for the fourth quarter were highlighted by an uptrend in noninterest income,” said Mr. Roller. “We continue to see solid growth in Wealth Management income, which increased $431,000 (13.8%) for the fourth quarter of 2012 as compared to the fourth quarter of 2011. Gains on loans sold for the quarter produced revenue of $316,000 for the quarter. Noninterest expense was $1.1 million higher for the quarter compared to the same quarter last year due to increases in salaries and benefits and marketing expenditures. The Bank’s net interest margin decreased 24 basis points to 3.55% for the fourth quarter compared to 3.79% for the quarter ended December 31, 2011. While we do not anticipate a change in interest rates for some time, the Bank has momentum and is positioned well to compete in this environment.”

Total deposits at year-end 2012 were $1.3 billion compared to $1.1 billion at year-end 2011.

Total assets at year-end 2012 were $1.4 billion versus $1.3 billion year-end 2011.

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 123-year-old Massachusetts chartered commercial bank with $1.4 billion in total assets and 12 Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, Lincoln and Weston. Cambridge Trust Company is one of New England’s leaders in wealth management with $1.8 billion in client assets under management. In addition, Cambridge Trust Company of New Hampshire offers wealth management services at two New Hampshire locations, Concord and Portsmouth.

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 2011 Annual Report, which is posted in the investor relations section of our website at www.cambridgetrust.com. We will also post the Cambridge Bancorp 2012 Annual Report at the same site later this quarter.

Financial Highlights:

CAMBRIDGE BANCORP
QUARTERLY UNAUDITED RESULTS
December 31, 2012
Dollar amounts in thousands (except share data)
	Three Months Ended						Year Ended
	December 31,						December 31,
	2012			2011			2012			2011
Interest Income	$	12,327		$	12,191		$	49,066		$	47,663
Interest Expense		711			969			3,191			3,931
Net Interest Income		11,616			11,222			45,875			43,732
Provision for Loan Losses		100			250			800			1,000
Non-Interest Income		5,216			4,318			20,489			18,147
Non-Interest Expense		12,217			11,157			45,847			42,685
Income Before Taxes		4,515			4,133			19,717			18,194
Income Taxes		1,512			1,223			6,314			5,717
Net Income	$	3,003		$	2,910		$	13,403		$	12,477
Data Per Common Share:
Basic Earnings Per Share	$	0.78		$	0.77		$	3.49		$	3.29
Diluted Earnings Per Share	$	0.77		$	0.76		$	3.45		$	3.25
Dividends Declared Per Share	$	0.39		$	0.37		$	1.50		$	1.42
Avg. Common Shares Outstanding:
Basic		3,851,439			3,799,977			3,839,681			3,791,167
Diluted		3,900,315			3,836,814			3,879,607			3,834,569
Selected Operating Ratios:
Net Interest Margin		3.55	%		3.79	%		3.58	%		3.90	%
Return on Average Assets, after taxes		0.87	%		0.93	%		1.00	%		1.06	%
Return on Average Equity, after taxes		11.63	%		11.86	%		13.39	%		13.26	%
							December 31,			December 31,
							2012			2011
Total Assets							$	1,417,986		$	1,275,860
Total Loans								742,249			673,265
Non-Performing Loans								1,570			1,204
Allowance for Loan Losses								10,948			10,159
Allowance to Non-Performing Loans								697.25	%		844.09	%
Allowance to Total Loans								1.47	%		1.51	%
Total Deposits								1,281,333			1,125,654
Total Stockholders' Equity								104,891			96,633
Book Value Per Share							$	27.21		$	25.39
Tangible Book Value Per Share							$	27.05		$	25.28

CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED BALANCE SHEETS
					December 31,
					2012			2011
					(In thousands)
ASSETS
Cash and due from banks				$	59,923		$	22,512
Overnight investments					—			—
		Total cash and cash equivalents			59,923			22,512
Investment securities:
	Available for sale, at fair value				502,318			470,232
	Held-to-maturity, at amortized cost				71,133			74,256
		Total investment securities			573,451			544,488
Loans held for sale, at lower of cost or fair value					1,684			—
Loans:
	Residential mortgage				347,908			330,933
	Commercial mortgage				276,428			231,595
	Home equity				50,574			61,307
	Commercial				47,570			38,260
	Consumer				19,769			11,170
		Total loans			742,249			673,265
	Allowance for loan losses				(10,948	)		(10,159	)
		Net loans			731,301			663,106
Stock in FHLB of Boston, at cost					5,010			4,806
Bank owned life insurance					22,903			17,331
Banking premises and equipment, net					6,214			6,216
Accrued interest receivable					3,877			4,423
Other assets					13,623			12,978
			Total assets	$	1,417,986		$	1,275,860
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
	Demand			$	329,211		$	285,724
	Interest bearing checking				363,575			316,454
	Money market				60,850			58,532
	Savings				393,541			328,771
	Certificates of deposit				134,156			136,173
		Total deposits			1,281,333			1,125,654
Short-term borrowings					—			2,500
Long-term borrowings					20,000			30,000
Other liabilities					11,762			21,073
			Total liabilities		1,313,095			1,179,227
Stockholders' equity:
	Common stock, par value $1.00; Authorized
		5,000,000 shares; Outstanding: 3,876,930 and
		3,805,748 shares, respectively			3,855			3,806
	Additional paid-in capital				24,421			23,001
	Retained earnings				75,787			68,232
	Accumulated other comprehensive income				828			1,594
			Total stockholders’ equity		104,891			96,633
			Total liabilities and stockholders’ equity	$	1,417,986		$	1,275,860

CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
				Three Months Ended December 31,
				2012		2011
				(In thousands, except per share data)
Interest income:
	Interest on loans		$	8,919	$	8,330
	Interest on taxable investment securities			2,886		3,338
	Interest on tax exempt investment securities			506		502
	Dividends on FHLB of Boston stock			7		4
	Interest on overnight investments			9		17
		Total interest income		12,327		12,191
Interest expense:
	Interest on deposits			542		673
	Interest on borrowed funds			169		296
		Total interest expense		711		969
		Net interest income		11,616		11,222
Provision for loan losses				100		250
		Net interest income after provision for loan losses		11,516		10,972
Noninterest income:
	Wealth management income			3,553		3,122
	Deposit account fees			620		575
	ATM/Debit card income			275		251
	Bank owned life insurance income			169		128
	Gain on disposition of investment securities			129		87
	Gain on loans held for sale			316		—
	Other income			154		155
		Total noninterest income		5,216		4,318
Noninterest expense:
	Salaries and employee benefits			7,687		6,916
	Occupancy and equipment			1,967		1,876
	Data processing			888		888
	Professional services			322		276
	Marketing			487		373
	FDIC Insurance			179		155
	Other expenses			687		673
		Total noninterest expense		12,217		11,157
		Income before income taxes		4,515		4,133
Income tax expense				1,512		1,223
		Net income	$	3,003	$	2,910
Per share data:
	Basic earnings per common share		$	0.78	$	0.77
	Diluted earnings per common share		$	0.77	$	0.76
	Average shares outstanding - basic			3,851,439		3,799,977
	Average shares outstanding - diluted			3,900,315		3,836,814

CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
				Three Months Ended December 31,
				2012			2011
				(In thousands)
Net income			$	3,003		$	2,910
Other comprehensive income/(loss), net of tax:
	Defined benefit retirement plans:
		Change in unfunded retirement liability		391			(2,846	)
	Unrealized gains/(losses) on Available for
	Sale securities:
		Unrealized holding gains/(losses) arising
		during the period		(1,109	)		(279	)
		Less: reclassification adjustment for gains
		recognized in net income		(89	)		(58	)
Other comprehensive income/(loss)				(807	)		(3,183	)
		Comprehensive income/(loss)	$	2,196		$	(273	)

CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
				Year Ended December 31,
				2012		2011
				(In thousands, except per share data)
Interest income:
	Interest on loans		$	33,984	$	32,401
	Interest on taxable investment securities			13,003		13,219
	Interest on tax exempt investment securities			2,029		1,987
	Dividends on FHLB of Boston stock			25		14
	Interest on overnight investments			25		42
		Total interest income		49,066		47,663
Interest expense:
	Interest on deposits			2,219		2,745
	Interest on borrowed funds			972		1,186
		Total interest expense		3,191		3,931
		Net interest income		45,875		43,732
Provision for loan losses				800		1,000
		Net interest income after provision for loan losses		45,075		42,732
Noninterest income:
	Wealth management income			14,110		13,152
	Deposit account fees			2,398		2,179
	ATM/Debit card income			1,043		981
	Bank owned life insurance income			713		519
	Gain on disposition of investment securities			882		552
	Gain on loans held for sale			592		—
	Other income			751		764
		Total noninterest income		20,489		18,147
Noninterest expense:
	Salaries and employee benefits			27,835		25,116
	Occupancy and equipment			7,660		7,323
	Data processing			3,560		3,594
	Professional services			1,585		1,588
	Marketing			1,842		1,703
	FDIC Insurance			704		752
	Other expenses			2,661		2,609
		Total noninterest expense		45,847		42,685
		Income before income taxes		19,717		18,194
Income tax expense				6,314		5,717
		Net income	$	13,403	$	12,477
Per share data:
	Basic earnings per common share		$	3.49	$	3.29
	Diluted earnings per common share		$	3.45	$	3.25
	Average shares outstanding - basic			3,839,681		3,791,167
	Average shares outstanding - diluted			3,879,607		3,834,569

CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
				Year Ended December 31,
				2012			2011
				(In thousands)
Net income			$	13,403		$	12,477
Other comprehensive income/(loss), net of tax:
	Defined benefit retirement plans:
		Change in unfunded retirement liability		104			(2,941	)
	Unrealized gains/(losses) on Available for
	Sale securities:
		Unrealized holding gains/(losses) arising
		during the period		(302	)		2,259
		Less: reclassification adjustment for gains
		recognized in net income		(568	)		(351	)
Other comprehensive income/(loss)				(766	)		(1,033	)
		Comprehensive income/(loss)	$	12,637		$	11,444

CAMBRIDGE BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
						Year Ended December 31,
						2012			2011
						(In thousands)
Cash flows provided by operating activities:
	Net income				$	13,403		$	12,477
	Adjustments to arrive at net cash provided by operating activities:
		Provision for loan losses				800			1,000
		Amortization of deferred charges/(income), net				1,360			561
		Depreciation and amortization				1,430			1,441
		Bank owned life insurance income				(713	)		(519	)
		Gain on disposition of investment securities				(882	)		(552	)
		Compensation expense from stock option
			and restricted stock grants			551			401
		Change in loans held for sale				(1,684	)		—
		Change in accrued interest receivable, deferred taxes,
			other assets and other liabilities			(8,655	)		359
		Other, net				291			481
				Net cash provided by operating activities		5,901			15,649
Cash flows used by investing activities:
	Origination of loans					(205,096	)		(211,667	)
	Purchase of:
		Investment securities - AFS				(201,506	)		(235,502	)
		Investment securities - HTM				(824	)		(2,531	)
	Maturities, calls and principal payments of:
		Loans				135,435			106,443
		Investment securities - AFS				130,165			164,920
		Investment securities - HTM				3,933			9,526
	Proceeds from sale of investment securities - AFS					37,786			38,540
	Purchase of bank owned life insurance					(5,000	)		(5,001	)
	Net increase in FHLB of Boston stock					(204	)		—
	Purchase of banking premises and equipment					(1,428	)		(1,614	)
				Net cash used by investing activities		(106,739	)		(136,886	)
Cash flows provided by financing activities:
	Net increase in deposits					155,679			131,846
	Net (decrease)/increase in short-term borrowings					(2,500	)		598
	Repayment of long-term borrowings					(10,000	)		—
	Proceeds from issuance of common stock					937			1,224
	Repurchase of common stock					(103	)		(287	)
	Cash dividends paid on common stock					(5,764	)		(5,388	)
				Net cash provided by financing activities		138,249			127,993
Net increase in cash and cash equivalents						37,411			6,756
Cash and cash equivalents at beginning of period						22,512			15,756
Cash and cash equivalents at end of period					$	59,923		$	22,512
Supplemental disclosure of cash flow information:
	Cash paid for interest				$	3,205		$	3,946
	Cash paid for income taxes					6,350			6,475
	Non-cash transactions:
		Change in accumulated other comprehensive income, net of taxes				(766	)		(1,033	)