CAMBRIDGE BANCORP (Form: 8-K, Received: 01/23/2019 09:05:29)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 23, 2019

CAMBRIDGE BANCORP

(Exact name of Registrant as Specified in Its Charter)

Massachusetts (State or Other Jurisdiction of Incorporation)	001-38184 (Commission File Number)	04-2777442 (IRS Employer Identification No.)

	1336 Massachusetts Avenue Cambridge, MA 02138
	(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 876-5500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On January 23, 2019, Cambridge Bancorp issued a press release in which it disclosed unaudited financial information for the quarter and year ended December 31, 2018 consolidated earnings. The press release also announced the declaration of a quarterly cash dividend of $0.51 per share. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.

Information contained herein, including Exhibit 99.1, shall not be deemed filed for the purposes of the Securities Exchange Act of 1934, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(a) Not applicable.

(b) Not applicable.

(d) Exhibits.

The exhibits required by this item are set forth on the Exhibit Index.

Exhibit Index

Exhibit Number		Description
99.1*		Press release dated January 23, 2019.

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CAMBRIDGE BANCORP

January 23, 2019
	By:	/s/ Michael F. Carotenuto
		Michael F. Carotenuto
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Ex: 99.1

FOR IMMEDIATE RELEASE

Cambridge Bancorp Announces Record Earnings for 2018 and Declares Increased Dividend

CAMBRIDGE, MA. (January 23, 2019) - Cambridge Bancorp (NASDAQ: CATC) (the “Company”), the parent of Cambridge Trust Company (“Cambridge Trust”), today announced net income of $23,881,000 for the year ended December 31, 2018, representing an increase of $9,065,000, or 61.2%, compared to net income of $14,816,000 for the year ended December 31, 2017. Income before income taxes was $31,088,000 for the year ended December 31, 2018, representing an increase of $2,914,000, or 10.3%, compared to $28,174,000 for the same period of last year. Diluted earnings per share were $5.77 for 2018, representing a 59.8% increase over diluted earnings per share of $3.61 for 2017. Earnings in 2017 were impacted by the Tax Cuts and Jobs Act of 2017, which is discussed in more detail below.

For the quarter ended December 31, 2018, net income was $5,306,000, representing an increase of $4,342,000, as compared to net income of $964,000 for the quarter ended December 31, 2017. Income before income taxes was $6,891,000 for the quarter ended December 31, 2018, representing a decrease of $444,000, or 6.1%, compared to $7,335,000 for the same quarter of last year. Diluted earnings per share were $1.28 for the fourth quarter of 2018, representing an increase of $1.05 over diluted earnings per share of $0.23 for the fourth quarter of 2017.

In the fourth quarter of 2018, Cambridge Bancorp, Cambridge Trust, and Optima Bank & Trust Company (“Optima”) entered into a definitive agreement pursuant to which Optima will merge with and into Cambridge Trust in a stock and cash transaction. The transaction is anticipated to close during the second quarter of 2019 and will enhance and expand the Company’s southern New Hampshire presence. Excluding merger and acquisition expenses incurred related to the pending Optima merger, net income would have been $24,026,000 for the year ended December 31, 2018 and $5,451,000 for the quarter ended December 31, 2018. Net income excluding the impact of merger expenses in 2018 and adjusted for the change in tax law in 2017 was increased by $5,341,000, or 28.6%, for the year ended December 31, 2018 and $618,000, or 12.8%, for the quarter ended December 31, 2018.

As previously reported, earnings in 2017 were impacted by the Tax Cuts and Jobs Act of 2017. Effective in 2018, the change in tax law reduced the Company’s federal tax rate from 35% to 21%. The change in tax law required a one-time non-cash write-down of our net deferred tax assets of $3,869,000 in 2017 as these deferred tax assets were required to be re-measured using the new lower tax rate in 2017. Removing the impact of the charge for the change in tax law, net income would have been $18,685,000 for the year ended December 31, 2017 and $4,833,000 for the quarter ended December 31, 2017. Diluted earnings per share would have been $4.55 for the year ended December 31, 2017 and $1.17 for the quarter ended December 31, 2017.

2018 Highlights as Compared to 2017 :

•

Revenue of $96.6 million, an increase of 10.0%

•

Total Assets of $2.1 billion, an increase of $151.5 million, or 7.8%

•

Loan growth of $208.9 million, or 15.5%

•

Core deposit growth of $74.4 million, or 4.6%

“We are pleased to report that the Company had a strong year of growth in 2018 as we exceeded $2 billion in assets,” noted Denis K. Sheahan, Chairman and CEO. “Cambridge Bancorp additionally posted record earnings for the year, with profitability metrics remaining strong producing a return on average assets of 1.21% and return on average shareholders’ equity of 15.35% . Our performance was driven by a continued positive trend in loan growth, which has increased $208.9 million, or 15.5% , from year end 2017, and the ability to maintain our net interest margin in a challenging rising in terest rate cycle.”

Balance Sheet

Total assets increased $151.5 million, or 7.8%, from December 31, 2017 and were $2.1 billion as of December 31, 2018.

Total loans increased $208.9 million, or 15.5%, from December 31, 2017 and stood at $1.6 billion as of December 31, 2018. The growth in total loans was due to net loan growth in the commercial real estate, residential real estate, and commercial & industrial portfolios. Commercial real estate loans increased $124.3 million from $633.6 million at December 31, 2017, to $758.0 million at December 31, 2018. Residential real estate loans increased $65.4 million from $538.9 million at December 31, 2017, to $604.3 million at December 31, 2018. Commercial & industrial loans increased $28.4 million from $65.3 million at December 31, 2017, to $93.7 million at December 31, 2018.

The Company’s total investment securities portfolio increased by $13.8 million, or 3.2%, from $437.2 million at December 31, 2017 to $451.0 million at December 31, 2018.

Core deposits, which the Company defines as all deposits other than certificates of deposit, increased by $74.4 million, or 4.6% from December 31, 2017. The cost of total deposits for the quarter ended December 31, 2018 was 0.38%, as compared to 0.22% for the quarter ended December 31, 2017. The cost of total deposits for the year ended December 31, 2018 was 0.28%, as compared to 0.19% for the year ended December 31, 2017. Total deposits at December 31, 2018 were $1.8 billion.

Short-term borrowings increased from $0 at December 31, 2017 to $90.0 million at December 31, 2018, as the Company funded strong loan growth during the year.

Net Interest and Dividend Income

For the quarter ended December 31, 2018, net interest and dividend income after provision for loan losses increased by $923,000, or 6.2%, to $15.7 million, as compared to $14.8 million for the quarter ended December 31, 2017. Interest on loans increased by $2.3 million, or 17.5%, which was driven by a combination of the impact of rising rates on our loan portfolio and net loan growth. Provision for loan losses expense increased $713,000 for the quarter ended December 31, 2018 as the Company experienced strong loan growth during the period. The Company’s net interest margin, on a fully taxable equivalent basis, increased six basis points to 3.32% for the quarter ended December 31, 2018, as compared to 3.26% for the quarter ended December 31, 2017.

For the year ended December 31, 2018, net interest and dividend income after provision for loan losses increased by $4.8 million, or 8.5%, to $62.1 million, as compared to $57.2 million for the year ended December 31, 2017. Interest on loans increased by $6.6 million, or 12.7%, which was driven by a combination of the impact of rising rates on our loan portfolio and net loan growth. Provision for loan losses expense increased $1.1 million for the year ended December 31, 2018 as the Company experienced strong loan growth during the period. The Company’s net interest margin, on a fully taxable equivalent basis, increased eight basis points to 3.33% for the year ended December 31, 2018, as compared to 3.25% for the year ended December 31, 2017.

Noninterest Income

Total noninterest income increased by $463,000, or 6.1%, to $8.0 million for the quarter ended December 31, 2018, as compared to $7.6 million for the quarter ended December 31, 2017, primarily as a result of higher loan related derivative income associated with the Company’s interest rate risk strategy and higher Wealth Management revenue. Noninterest income was 32.9% of total revenue for the quarter ended December 31, 2018. Loan related derivative income increased $298,000 for the fourth quarter of 2018, as compared to the fourth quarter of 2017, due to the volume of loan related derivative transactions executed in the fourth quarter of 2018. Wealth Management revenue increased by $195,000, or 3.3%, for the fourth quarter of 2018, as compared to the fourth quarter of 2017, due to higher average assets under management. Wealth Management Assets under Management and Administration decreased by $209.0 million, or 6.8%, to $2.9 billion as of December 31, 2018, as compared to $3.1 billion as of December 31, 2017, primarily as a result of net asset outflows combined with reductions in the equity markets during the year.

Total noninterest income increased by $2.8 million, or 9.1%, to $33.0 million for the year ended December 31, 2018, as compared to $30.2 million for the year ended December 31, 2017, primarily as a result of higher Wealth Management revenue and higher loan related derivative income. Noninterest income was 34.2% of total revenue for year ended December 31, 2018. Wealth Management revenue increased by $2.2 million, or 9.4%, for the year ended December 31, 2018, as compared to the year ended December 31, 2017, due to higher average assets under management during the period. Loan related derivative income increased $871,000 for the year ended December 31, 2018, as compared to the year ended December 31, 2017, due to the volume of loan related derivative transactions executed in 2018.

Noninterest income increases were partially offset by lower gains on loans held for sale of $256,000 for the year ended December 31, 2018, as compared to the year ended December 31, 2017.

Noninterest Expense

Total noninterest expense increased by $1.8 million, or 12.2%, to $16.8 million for the quarter ended December 31, 2018, as compared to $15.0 million for the quarter ended December 31, 2017, primarily driven by higher salaries and benefits expense, marketing expense, data processing expense, and merger expenses. The increase in salaries and benefits of $942,000 was driven by the combination of increased staffing to support business initiatives, higher employee benefit costs including performance based equity compensation, and the current year adoption of accounting guidance (“ASU 2017-07”) for net periodic pension costs and net periodic postretirement benefit costs. The 2018 adoption of ASU 2017-07 required that non-service related pension expense and income items no longer be included in salaries and employee benefits in the Company’s income statement. The non-service related pension expense and income items are instead included in other expenses. Previously reported salaries and employee benefits and other expenses have been restated to reflect the retrospective adoption. The retrospective application for the quarter ended December 31, 2017 was a decrease in salaries and employee benefits and an increase in other expenses of approximately $68,000. The increase of $338,000 in marketing expense was due to the increased focus of growing brand awareness within our markets. The increase of $203,000 in data processing expense was due to investments made in technology. The merger expenses of $201,000 were professional services related to the pending acquisition of Optima.

Total noninterest expense increased by $4.7 million, or 7.9%, to $64.0 million for the year ended December 31, 2018, as compared to $59.3 million for the year ended December 31, 2017, primarily driven by increased salaries and employee benefits expense, marketing expense, data processing expense, and merger expenses. The increase in salaries and benefits expense of $4.8 million was driven by the combination of increased staffing to support business initiatives, higher employee benefit costs including performance based equity compensation, and the adoption of ASU 2017-07. The retrospective application for the twelve months ended December 31, 2017 was a decrease in salaries and employee benefits and an increase in other expenses of approximately $252,000. The

increase of $609,000 in marketing was due to costs related to Cambridge Trust’s rebranding efforts, which included the development of a new brand, website, and advertising campaign. The increase of $221,000 in data processing expense was due to investments made in technology. The merger expenses of $201,000 were professional services related to the pending acquisition of Optima.

Noninterest expense increases were partially offset by lower other expenses of $880,000 resulting from the adoption of ASU 2017-07 as discussed above for the twelve months ended December 31, 2018, as compared to the twelve months ended December 31, 2017.

Asset Quality

Loan quality remained sound with non-performing loans totaling $642,000, or 0.04% of total loans outstanding as of December 31, 2018. The allowance for loan losses was $16.8 million, or 1.08% of total loans outstanding at December 31, 2018, compared to $15.3 million, or 1.13% of total loans outstanding at year end 2017. Net loan charge offs remained low at $53,000 for the year ended December 31, 2018, as compared to $303,000 for the year ended December 31, 2017.

Income Taxes

In accordance with the Tax Cuts and Jobs Act of 2017, the Company’s federal statutory corporate tax rate decreased from 35% to 21% effective January 1, 2018. The effective tax rate was 23.0% for the quarter ended December 31, 2018, as compared to 86.9% for the quarter ended December 31, 2017. For the year ended December 31, 2018, the effective tax rate was 23.2%, as compared to 47.4% for the year ended December 31, 2017. Removing the impact of the charge for the change in tax law, the effective tax rate would have been 34.1% for the quarter ended December 31, 2017 and 33.7% for the year ended December 31, 2017.

Dividend & Capital

On January 22, 2019, the Company’s Board of Directors declared an increased quarterly cash dividend of $0.51 per share, which is payable on February 21, 2019 to shareholders of record as of the close of business on February 7, 2019. This represents an increase of $0.01 as compared to the $0.50 dividend paid in the prior quarter.

The Company’s total shareholders’ equity to total assets ratio increased by 36 basis points to 7.95% as of December 31, 2018, as compared to 7.59% as of December 31, 2017. Book value per share grew by $4.43, or 12.2%, to $40.67 as of December 31, 2018, as compared to $36.24 as of December 31, 2017.

About Cambridge Bancorp

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 128-year-old Massachusetts chartered commercial bank with approximately $2.1 billion in assets and 10 Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, and Weston. Cambridge Trust Company is one of New England’s leaders in private banking and wealth management with $2.9 billion in client assets under management and administration. 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 Company’s Annual Report on Form 10-K, which is posted in the investor relations section of the Company’s website at www.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, and the impact of any laws or regulations applicable to the Company, 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: economic conditions being less favorable than expected, disruptions to the credit and financial markets, 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, disruptions in the Company’s ability to access the capital markets and other factors that are described in the Company’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year end December 31, 2017, which the Company filed on March 21, 2018. 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.

CONTACT:

Cambridge Bancorp

Michael F. Carotenuto

Chief Financial Officer

617-520-5520

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED QUARTERLY RESULTS

December 31, 2018

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(dollars in thousands, except per share data)

Interest and Dividend Income	$	18,385		$	15,744		$	69,055		$	61,191
Interest Expense		1,975			970			5,467			3,587
Net Interest and Dividend Income		16,410			14,774			63,588			57,604
Provision for Loan Losses		715			2			1,502			362
Noninterest Income		8,038			7,575			32,989			30,224
Noninterest Expense		16,842			15,012			63,987			59,292
Income Before Income Taxes		6,891			7,335			31,088			28,174
Income Tax Expense		1,585			6,371			7,207			13,358
Net Income	$	5,306		$	964		$	23,881		$	14,816

Data Per Common Share:
Basic Earnings Per Share	$	1.29		$	0.24		$	5.82		$	3.64
Diluted Earnings Per Share		1.28			0.23			5.77			3.61
Dividends Declared Per Share		0.50			0.47			1.96			1.86

Avg. Common Shares Outstanding:
Basic		4,065,681			4,038,948			4,061,529			4,030,530
Diluted		4,102,546			4,073,707			4,098,633			4,065,754

Selected Operating Ratios:
Net Interest Margin, FTE		3.32	%		3.26	%		3.33	%		3.25	%
Cost of Funds		0.40	%		0.21	%		0.28	%		0.20	%
Cost of Interest Bearing Liabilities		0.59	%		0.31	%		0.43	%		0.29	%
Cost of Deposits		0.38	%		0.22	%		0.28	%		0.19	%
Return on Average Assets		1.04	%		0.20	%		1.21	%		0.79	%
Return on Average Equity		12.95	%		2.61	%		15.35	%		10.47	%
Efficiency Ratio		68.89	%		67.17	%		66.25	%		67.51	%

							December 31,			December 31,
							2018			2017

Total Assets							$	2,101,384		$	1,949,934
Total Loans								1,559,772			1,350,899
Non-Performing Loans								642			1,298
Allowance for Loan Losses								16,768			15,320
Allowance to Total Loans								1.08	%		1.13	%
Total Deposits								1,811,410			1,775,400
Total Shareholders’ Equity								167,026			147,957
Total Shareholders’ Equity to Total Assets								7.95	%		7.59	%
Wealth Management AUM								2,759,547			2,971,322
Wealth Management AUM & AUA								2,876,702			3,085,669
Book Value Per Share								40.67			36.24

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

	December 31, 2018			December 31, 2017
	(dollars in thousands, except par value)
Assets
Cash and cash equivalents	$	18,473		$	103,591
Investment securities
Available for sale, at fair value (amortized cost $172,290 and $208,911, respectively)		168,163			205,017
Held to maturity, at amortized cost (fair value $281,310 and $233,554, respectively)		282,869			232,188
Total investment securities		451,032			437,205
Loans held for sale, at lower of cost or fair value		—			—
Loans
Residential mortgage		604,331			538,920
Commercial mortgage		757,957			633,649
Home equity		69,336			74,444
Commercial & Industrial		93,712			65,295
Consumer		34,436			38,591
Total loans		1,559,772			1,350,899
Less: allowance for loan losses		(16,768	)		(15,320	)
Net loans		1,543,004			1,335,579
Federal Home Loan Bank of Boston Stock, at cost		6,844			4,242
Bank owned life insurance		30,933			31,083
Banking premises and equipment, net		8,578			9,310
Deferred income taxes, net		8,717			8,273
Accrued interest receivable		5,762			5,128
Other assets		28,041			15,523
Total assets	$	2,101,384		$	1,949,934
Liabilities
Deposits
Demand	$	494,492		$	493,613
Interest bearing checking		431,702			462,957
Money market		135,585			69,259
Savings		628,212			589,741
Certificates of deposit		121,419			159,830
Total deposits		1,811,410			1,775,400
Short-term borrowings		90,000			—
Long-term borrowings		3,409			3,579
Other liabilities		29,539			22,998
Total liabilities		1,934,358			1,801,977
Shareholders’ Equity
Common stock, par value $1.00; Authorized 10,000,000 shares; Outstanding: 4,107,051 shares and 4,082,188 shares, respectively		4,107			4,082
Additional paid-in capital		38,271			35,663
Retained earnings		131,135			114,093
Accumulated other comprehensive loss		(6,487	)		(5,881	)
Total shareholders’ equity		167,026			147,957
Total liabilities and shareholders’ equity	$	2,101,384		$	1,949,934

CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2018		2017		2018		2017
	(dollars in thousands, except share data)
Interest and dividend income
Interest on taxable loans	$	15,623	$	13,272	$	57,941	$	51,238
Interest on tax-exempt loans		92		105		371		496
Interest on taxable investment securities		1,887		1,559		7,457		6,321
Interest on tax-exempt investment securities		587		634		2,404		2,600
Dividends on FHLB of Boston stock		85		53		287		245
Interest on overnight investments		111		121		595		291
Total interest and dividend income		18,385		15,744		69,055		61,191
Interest expense
Interest on deposits		1,733		942		5,023		3,125
Interest on borrowed funds		242		28		444		462
Total interest expense		1,975		970		5,467		3,587
Net interest and dividend income		16,410		14,774		63,588		57,604
Provision for Loan Losses		715		2		1,502		362
Net interest and dividend income after provision for loan losses		15,695		14,772		62,086		57,242
Noninterest income
Wealth management revenue		6,147		5,952		25,191		23,029
Deposit account fees		765		755		3,071		3,142
ATM/Debit card income		305		303		1,180		1,182
Bank owned life insurance income		133		136		526		584
Gain (loss) on disposition of investment securities		—		—		2		(3	)
Gain on loans held for sale		17		31		99		355
Loan related derivative income		431		133		1,651		780
Other income		240		265		1,269		1,155
Total noninterest income		8,038		7,575		32,989		30,224
Noninterest expense
Salaries and employee benefits		10,370		9,428		41,212		36,455
Occupancy and equipment		2,336		2,178		9,072		9,114
Data processing		1,329		1,126		5,177		4,956
Professional services		781		724		3,258		3,374
Marketing		860		522		2,229		1,620
FDIC Insurance		137		163		574		629
Merger expenses		201		—		201		—
Other expenses		828		871		2,264		3,144
Total noninterest expense		16,842		15,012		63,987		59,292
Income before income taxes		6,891		7,335		31,088		28,174
Income tax expense		1,585		6,371		7,207		13,358
Net income	$	5,306	$	964	$	23,881	$	14,816
Share data:
Weighted average number of shares outstanding, basic		4,065,681		4,038,948		4,061,529		4,030,530
Weighted average number of shares outstanding, diluted		4,102,546		4,073,707		4,098,633		4,065,754
Basic earnings per share	$	1.29	$	0.24	$	5.82	$	3.64
Diluted earnings per share	$	1.28	$	0.23	$	5.77	$	3.61

CAMBRIDGE BANCORP AND SUBSIDIARIES

MARGIN & YIELD ANALYSIS

	Three Months Ended
	December 31, 2018									December 31, 2017
	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	$	1,477,038		$	15,623			4.20	%	$	1,335,652		$	13,272			3.94	%
Tax-exempt		9,799			116			4.70			12,502			163			5.17
Securities available for sale ⁽³⁾
Taxable		177,090			753			1.69			212,230			853			1.59
Securities held to maturity
Taxable		194,914			1,134			2.31			140,040			706			2.00
Tax-exempt		75,509			743			3.90			80,057			975			4.83
Cash and due from banks		35,122			111			1.25			60,111			121			0.80
Total interest-earning assets ⁽⁴⁾		1,969,472			18,480			3.72	%		1,840,592			16,090			3.47	%
Non interest-earning assets		78,638									72,940
Allowance for loan losses		(16,318	)								(15,511	)
Total assets	$	2,031,792								$	1,898,021
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Checking accounts	$	392,816		$	81			0.08	%	$	389,305		$	47			0.05	%
Savings accounts		637,434			993			0.62			613,847			506			0.33
Money market accounts		136,923			336			0.97			62,503			24			0.15
Certificates of deposit		117,165			323			1.09			161,286			365			0.90
Total interest-bearing deposits		1,284,338			1,733			0.54			1,226,941			942			0.30
Other borrowed funds		38,375			242			2.50			6,708			28			1.66
Total interest-bearing liabilities		1,322,713			1,975			0.59	%		1,233,649			970			0.31	%
Non-interest-bearing liabilities
Demand deposits		521,993									490,618
Other liabilities		24,500									27,328
Total liabilities		1,869,206									1,751,595
Shareholders’ equity		162,586									146,426
Total liabilities & shareholders’ equity	$	2,031,792								$	1,898,021
Net interest income on a fully taxable equivalent basis					16,505									15,120
Less taxable equivalent adjustment					(180	)								(399	)
Net interest income				$	16,325								$	14,721
Net interest spread ⁽⁵⁾								3.13	%								3.16	%
Net interest margin ⁽⁶⁾								3.32	%								3.26	%

(1)	Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% in 2018 and 35% in 2017.

(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 and dividend income is excluded from interest-earning assets.

(5)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets 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.

CAMBRIDGE BANCORP AND SUBSIDIARIES

MARGIN & YIELD ANALYSIS

	For the Year Ended
	December 31, 2018									December 31, 2017
	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	$	1,407,079		$	57,941			4.12	%	$	1,318,284		$	51,238			3.89	%
Tax-exempt		10,158			469			4.62			15,057			764			5.07
Securities available for sale ⁽³⁾
Taxable		194,419			3,202			1.65			248,787			4,011			1.61
Securities held to maturity
Taxable		189,120			4,255			2.25			111,452			2,310			2.07
Tax-exempt		76,966			3,043			3.95			81,528			4,000			4.91
Cash and due from banks		45,365			595			1.31			41,888			291			0.69
Total interest-earning assets ⁽⁴⁾		1,923,107			69,505			3.61	%		1,816,996			62,614			3.45	%
Non interest-earning assets		73,330									73,532
Allowance for loan losses		(15,857	)								(15,392	)
Total assets	$	1,980,580								$	1,875,136
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Checking accounts	$	409,178		$	247			0.06	%	$	394,132		$	131			0.03	%
Savings accounts		624,421			2,900			0.46			571,659			1,457			0.25
Money market accounts		93,449			597			0.64			68,891			103			0.15
Certificates of deposit		134,007			1,279			0.95			166,410			1,434			0.86
Total interest-bearing deposits		1,261,055			5,023			0.40	%		1,201,092			3,125			0.26	%
Other borrowed funds		18,671			444			2.38			36,074			462			1.28
Total interest-bearing liabilities		1,279,726			5,467			0.43	%		1,237,166			3,587			0.29	%
Non-interest-bearing liabilities
Demand deposits		521,091									470,871
Other liabilities		24,217									25,611
Total liabilities		1,825,034									1,733,648
Shareholders’ equity		155,546									141,488
Total liabilities & shareholders’ equity	$	1,980,580								$	1,875,136
Net interest income on a fully taxable equivalent basis					64,038									59,027
Less taxable equivalent adjustment					(737	)								(1,668	)
Net interest income				$	63,301								$	57,359
Net interest spread ⁽⁵⁾								3.19	%								3.16	%
Net interest margin ⁽⁶⁾								3.33	%								3.25	%

(1)	Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 21% in 2018 and 35% in 2017.

(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 and dividend income is excluded from interest-earning assets.

(5)	Interest rate spread represents the difference between the weighted average yield on interest-earning assets 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.