Q3 2021 Cambridge Bancorp Earnings Call

Welcome to the Cambridge, Bancorp's third quarter earnings Conference call.

We'll be making forward looking statements during this call and actual results may differ materially we encourage you.

He was a disclaimer in our earnings release dealing with forward looking information, which applies to statements made in this call.

In addition, some of our discussion may include references to non-GAAP financial measures information about those measures, including reconciliation to GAAP measures maybe found in our SEC filings and in our earnings release.

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I would now like to turn the conference over to Mr. Dennis Sheahan, Chairman, President and Chief Executive Officer. Please go ahead Sir.

Thank you good morning, everyone and thank you for joining our earnings conference call today.

I'm joined as always by Mike <unk>, our Chief Financial Officer.

Hopefully you had an opportunity to see our earnings announcement from just a few hours ago. It shows again that Cambridge Bancorp in Cambridge Trust company had another strong quarter of growth and financial performance.

Core deposit growth.

It was again, a key highlight with growth of 5% in the quarter or 20% annualized.

We plan to remain focused on deposit growth and are comfortable with the elevated level of balance sheet liquidity. It brings in the near term. We are confident we can deploy this liquidity into loans over the medium to long term.

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Loans, excluding PPP redemptions grew in the quarter by 2% or 8% annualized and both commercial and residential lending and we remain optimistic regarding continued growth in the fourth quarter.

Market conditions remain conducive to achieving this growth.

So why are we optimistic about growth.

Economic conditions are good and our marketplace in Massachusetts in particular, the life Sciences and innovation economy.

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Jennifer is benefiting our lending sectors that we emphasize such as housing, especially.

In multifamily and.

Industrial lab space and construction.

Recent bank consolidations should provide opportunity as we are an alternative to the larger merged companies for both talent and clients.

Demand continues to exceed supply for housing.

Especially at low interest rates are beneficial to borrower activity.

And finally, our team has a reputation of being stable and dependable in the marketplace with a proven ability to deliver.

Returning to the quarter asset quality remains superb.

Wealth management revenue grew 7%.

The third quarter, and we achieved positive net flows for both the quarter and year to date periods.

Core profitability remained solid with return on average assets of $1, two 5% and return on tangible common equity at 14, 9% on an operating basis.

These results.

Driven by consistency in strategy and solid execution first provide exceptional client service.

This provides opportunity to focus on our three core areas of business strategy grow core deposits.

And responsibly and build high quality fee revenue diversification.

In other areas I'm proud of our team's engagement in strengthening the communities, where we work and live by volunteering through financial contributions and in lending commitment.

Our recent signs of this commitment was in our agreement to provide $110 million in lending to support affordable housing in Massachusetts.

In collaboration with the Massachusetts housing partnership.

And one of the largest affordable lending commitments in their history.

Our success is based upon the support of our clients and our communities and we look to pay it back.

Our team is also working diligently on the <unk>.

Land wealth management systems conversion, which is on track to happen this quarter.

This is an important and intense initiatives and I greatly appreciate the effort my colleagues are putting forth on this endeavor.

So with that I will now open the call for questions.

We will now begin.

And an answer session to ask a question you May Press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

Jay Your question. Please press Star then two.

Our first question today comes from Mark.

The question is given with Piper Sandler.

Hey, guys good morning.

Good morning, good morning, Mark.

I guess first question I am curious are you continuing to hire lenders and relationship people or has the pace of that hiring slowed and also I'm curious about whether we're likely to see more branch consolidation.

So first mark on the lenders, we're actively having conversations.

With talent on.

On the lending front.

As you know with some of the bank consolidation that's happened in our marketplace. There are those that may not want to work for the new entity. So we're active in <unk>.

Mark for stations, there and we would hope to be successful and will update you on that.

Both on the lending side and also on the wealth management side in coming quarters. There is some opportunity there in terms of branch consolidation. We've I think we've closed three offices in the last 18 months or so.

We.

<unk> look at our network to see if those offices are meeting our performance standards and.

If they don't or we see an opportunity to consolidate and become more efficient. We will continue to look at that we have no further closures planned on the near term horizon.

Okay.

All right and then excuse me secondly, I wondered if you could share with us.

The size of the loan pipelines complexion, and maybe what commercial line utilization rates look like today.

Sure Mark so as of today, the commercial portfolio is about $80 million and that's pretty comparable to where it was at the end of the second quarter.

So we see opportunity for continued growth there and then in terms of line utilization is in the mid <unk> on the C&I side of the house.

Okay, Great and then Mike.

Mike could you share with us your sort of thoughts on the margin.

We move into the fourth quarter.

Sure Youre going to Youre going to see a little bit.

Continued moderate pressure on the margin if you look at what happened during the third quarter right about five basis points of that margin compression was primarily because of the success of our deposit gathering efforts and the reinvestment of that into the securities portfolio. So if we're continuing to see success in deposits, you're going to see a little bit more pressure.

Okay, Great and then lastly.

On those four remaining loans in deferral.

What sector of those loans.

Sure Mark just give me a minute to pull that up.

I think.

So I think two of them are residential and two of them are commercial and one of them is a restaurant.

No.

That's what it is.

Okay, great. Thank you.

Okay.

Our next question comes from Kelly Motta with K B W.

Good morning Denny.

This is Mike.

Circling back to loan growth I believe you gave six to eight.

<unk> as a.

Kind of goal for the year target just with the really strong growth. These past two quarters wondering if you.

You had an update Barry.

In terms of kind of what you expect thanks.

Yeah. So so kelly it looks like based upon what we're seeing right now we're going.

Yeah.

Low double digit depending upon what happens here in the fourth quarter. So we're optimistic about continued growth.

Great.

And Mike.

Mike.

Maybe on the securities purchases to can you just give some color on kind of what you're buying yields duration that sort of thing.

B, assuming it's short.

Your outlook for growth, but.

Any color would be helpful. Thanks.

Sure. So on the investment portfolio, we're buying shorten moderate duration and the effective duration. There is about four four and a half years and the yield of the portfolio right now it's about one 7%.

Okay.

And then finally on the buyback.

You've held on that.

Given you've had some really good balance sheet growth just wanted to see if you had any updated thoughts on potential use of the buyback.

Okay.

Kelly This is Dennis at this point.

The buyback.

The capability to execute a buyback is in place, but we don't have a plan to execute at this point in time.

Tangible common is in the mid eights.

Our growth has been better than we anticipated coming into the year. So we're not planning on executing a buyback at this point, but.

Evaluated every quarter as we as we as we always do.

Great. Thank you I'll step back.

Thanks Kelly.

This concludes our question and answer session I would like to turn the call back over to Denis Sheahan for any closing remarks.

Thanks, everybody for joining us we appreciate your.

We will re interest and we look forward to speaking you following our year end earnings announcements.

Okay.

The conference has now concluded.

You for attending today's presentation you may now disconnect.