Cambridge Bancorp (NASDAQ: CATC), the parent company of Cambridge Trust Company, today announced unaudited net income of $13,429,000 for the quarter ended September 30, 2020, an increase of $5,753,000, or 74.9%, as compared to net income of $7,676,000 for the quarter ended September 30, 2019. Diluted earnings per share were $1.93 for the third quarter of 2020, representing a 22.9% increase over diluted earnings per share of $1.57 for the third quarter of 2019.

Excluding merger expenses, operating net income was $14,319,000 for the quarter ended September 30, 2020, an increase of $6,380,000, or 80.4%, as compared to operating net income of $7,939,000 for the quarter ended September 30, 2019. Operating diluted earnings per share were $2.06 for the third quarter of 2020, representing a 26.4% increase over operating diluted earnings per share of $1.63 for the same period last year.

For the nine months ended September 30, 2020, unaudited net income was $18,944,000, representing an increase of $798,000, or 4.4%, as compared to net income of $18,146,000 for the nine months ended September 30, 2019. Diluted earnings per share were $3.09 for the nine months ended September 30, 2020, representing a 21.8% decrease over diluted earnings per share of $3.95 for the nine months ended September 30, 2019.

The results for the nine months ended September 30, 2020, include the merger accounting impact of the current and expected credit loss accounting standard ("CECL") within the provision for credit losses, merger expenses, and other non-operating items. Excluding these items, operating net income was $29,528,000 for the nine months ended September 30, 2020, an increase of $8,296,000, or 39.1%, as compared to operating net income of $21,232,000 for the nine months ended September 30, 2019. Operating diluted earnings per share were $4.83 for the nine months ended September 30, 2020, representing a 4.5% increase over operating diluted earnings per share of $4.62 for the nine months ended September 30, 2019. Further discussion of the merger accounting impacts is detailed in the Non-GAAP Reconciliation tables at the end of this document.

Third quarter 2020 highlights:

• Asset quality remains strong with ratios of non-performing loans to total loans and non-performing assets to total assets both at 0.28%. Early stage delinquency (30-89 days delinquent) as of September 30, 2020, represents 0.40% of total loans.
• In continued support of our clients, due to COVID-19, we have deferred or adjusted payments on 3.2% of total loans outstanding at September 30, 2020, as compared to 5.2% at June 30, 2020.
• The allowance for credit loss to total loans is 1.16%, excluding loans made under the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP").
• Performance ratios were strong with Operating Return On Assets ("ROA") of 1.43%, Operating Return On Tangible Common Shareholders' Equity ("ROTCE") of 17.12%, and Operating Pre-Tax Pre-Provision ("PTPP") Return on Average Assets ("ROAA") of 2.16%.
• Organic core deposit growth of $98.2 million, or 3.4%, from the quarter end June 30, 2020.
• Tangible common equity ratio of 8.60% at September 30, 2020.
• Tangible book value per share of $48.80 at September 30, 2020.
• A supplemental presentation for the quarter is available on our investor relations website: ir.cambridgetrust.com or within the hyperlink provided within this release. This presentation includes additional detail regarding the loan portfolio, liquidity position, and other financial disclosures.

"The Cambridge Trust team continues to support clients and our communities during this difficult period," noted Denis K. Sheahan, Chairman and CEO. "In addition to continued lending and loan forbearance, where needed, we are open and available to meet client needs and have continued our effort to support the community with charitable giving. I am proud of the team's accomplishments and, in particular, successfully converting the Wellesley Bank systems at the beginning of October. The Bank remains on a solid footing with strong capital, liquidity and asset quality."

Balance Sheet

Total assets increased $1.1 billion, or 39.6%, from $2.9 billion at December 31, 2019, inclusive of the Wellesley Bancorp Inc. ("Wellesley") merger, and were $4.0 billion as of September 30, 2020.

Total loans increased by $1.1 billion, or 47.5%, from December 31, 2019, inclusive of the Wellesley merger, and totaled $3.3 billion as of September 30, 2020. The increase in total loans was due to a combination of the merger with Wellesley and organic growth during 2020. A table accompanying this release provides detail regarding organic loan and deposit growth.

Inclusive of Wellesley:

• Residential real estate loans increased by $426.2 million from $917.6 million at December 31, 2019, to $1.3 billion at September 30, 2020.
• Commercial real estate loans increased by $303.8 million, from $1.1 billion at December 31, 2019, to $1.4 billion at September 30, 2020.
• Commercial & industrial loans increased by $294.8 million from $133.2 million at December 31, 2019, to $428.0 million at September 30, 2020.
• Loans under the SBA's PPP amounted to $189.9 million at September 30, 2020. PPP loans are included in commercial and industrial loans.

Excluding Wellesley and PPP loans, total loans grew by $29.9 million, or 1.3%, from December 31, 2019.

As a result of payoffs and paydowns of commercial mortgage loans during the quarter ended September 30, 2020, total loans outstanding were reduced by $48.6 million, or 1.5%, from June 30, 2020. The reduction in commercial mortgage loan balances is due to strong local market demand and the low interest rate environment.

Total deposits increased by $973.1 million, or 41.3%, to $3.3 billion at September 30, 2020 from $2.4 billion at December 31, 2019, primarily driven by a combination of the impact of the Wellesley merger, organic deposit growth, and funds from the PPP program.

• Core deposits, which the Company defines as all deposits other than certificates of deposit, increased by $838.8 million, or 38.5%, to $3.0 billion at September 30, 2020 from $2.2 billion at December 31, 2019, inclusive of the Wellesley merger.
• Excluding the impact of the Wellesley merger, organic growth in core deposits was $290.0 million, or 13.3%.
• Inclusive of the Wellesley merger, the cost of total deposits for the quarter ended September 30, 2020, was 0.16%, as compared to 0.68% for the quarter ended December 31, 2019, a reduction of 52 basis points driven by a reduction in interest rates during 2020. The cost of total deposits for the nine months ended September 30, 2020 was 0.28%, as compared to 0.71% for the nine months ended September 30, 2019, a reduction of 43 basis points driven by a reduction in interest rates during 2020. At September 30, 2020, the spot cost of deposits was 0.17%.

Certificates of deposit totaled $316.5 million at September 30, 2020, an increase of $134.2 million from $182.3 million at December 31, 2019, primarily due to the Wellesley merger. Total brokered certificates of deposit, which are included within certificates of deposit, were $77.8 million and $7.1 million at September 30, 2020, and December 31, 2019, respectively.

Core deposits during the third quarter increased by $98.2 million, or 3.4%, from June 30, 2020. The growth in core deposits was a function of new business development efforts combined with existing client growth.

Borrowings were relatively unchanged from $135.7 million at December 31, 2019, and totaled $135.8 million as of September 30, 2020.

Net Interest and Dividend Income

For the quarter ended September 30, 2020, net interest and dividend income before the provision for credit losses increased by $13.9 million, or 66.1%, to $35.0 million, as compared to $21.1 million for the quarter ended September 30, 2019. This change was primarily due to loan growth (both organic and as a result of the Wellesley merger), lower costs of funds and loan accretion associated with merger accounting.

The Company's net interest margin, on a fully taxable equivalent basis, inclusive of the Wellesley merger, increased 52 basis points to 3.73% for the quarter ended September 30, 2020, as compared to 3.21% for the quarter ended September 30, 2019. This increase was a function of the Company taking steps to reduce deposit costs combined with the accretion of loan fair value adjustments associated with the Wellesley merger.

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 to an adjusted net interest margin is shown below. Excluding the impact of merger-related loan accretion and the impact of PPP loans, the adjusted net interest margin for the quarter ended September 30, 2020, was 3.41%, representing a five basis points decrease over the prior quarter adjusted net interest margin of 3.46% and a 20 basis points increase as compared to the net interest margin of 3.21% for the third quarter of 2019.