Capital Position* 14.2% 13.1% 13.1% 8.7% 8.4% 10.5% 8.5% 7.0% 4.0% 0.0% 4.0% 8.0% 12.0% 16.0% TOTAL CAPITAL TIER 1 CAPITAL TIER I COMMON EQUITY TIER I LEVERAGE TANGIBLE COMMON EQUITY* CATC Minimum Capital Required** MMDA & Other Savings 36% Time Deposits 14% 26% Consumer Deposits- 48% Commercial Deposits- 52% 2019, 2020 and 2022 include acquired balances from Optima Bank & Trust Company, Wellesley Bancorp, Inc., and Northmark Bank, respectively. 1: Adjusted net interest margin excludes the impact of merger ...

Financial Performance - Net income decreased by $7.4 million, or 27.6%, to $19.5 million for the six months ended June 30, 2023, compared to $27.0 million for the same period in 2022[269] - Net income for 2023 was $7.115 billion, a decrease from $13.658 billion in 2022, representing a decline of approximately 48.9%[308] - Operating net income applicable to common shareholders was $9.627 billion for 2023, down from $22.329 billion in 2022, reflecting a decrease of about 56.9%[308] Interest Income and Margin - The Company's net interest margin decreased by 60 basis points to 2.26% for the three months ended June 30, 2023, from 2.86% for the same period in 2022[261] - Net interest income for the six months ended June 30, 2023, was $54,057 thousand, with a net interest margin of 4.12%, compared to 3.96% for the previous quarter[366] - The adjusted net interest margin for the six months ended June 30, 2023, was 2.39%, a decrease of 35 basis points from 2.74% in the same period of 2022[370] - The average rate earned on loans was 4.71%, with interest income of $93,064,000 for the period ending June 30, 2023[338] Interest Expense - Interest expense increased by $22.3 million to $24.4 million for the three months ended June 30, 2023, compared to $2.1 million for the same period in 2022[262] - Interest expense increased by $37.8 million, or 914.7%, to $41.9 million for the six months ended June 30, 2023, compared to $4.1 million for the same period in 2022[300] Assets and Liabilities - Total average interest-earning assets increased by $446.0 million, or 9.3%, to $5.26 billion for the three months ended June 30, 2023, compared to $4.82 billion for the same period in 2022[261] - Total assets decreased by $70.1 million, or 1.3%, from $5.56 billion at December 31, 2022, to $5.49 billion at June 30, 2023[277] - Total liabilities increased to $4,996,377 from $4,550,087, marking an increase of 9.8%[395] Deposits - Total deposits decreased by $372.8 million, or 7.7%, to $4.44 billion at June 30, 2023, from $4.82 billion at December 31, 2022[278] - Demand deposits (non-interest bearing) decreased to $1,059,563 thousand, representing 25.1% of total deposits, down from 28.4%[363] - The average cost of deposits increased to 1.56% for the six months ended June 30, 2023, from 0.17% for the same period in 2022[272] Noninterest Income and Expense - Total noninterest income decreased by $1.8 million, or 7.8%, to $20.7 million for the six months ended June 30, 2023, compared to $22.5 million for the same period in 2022[273] - Total noninterest expense increased by $4.0 million, or 15.4%, to $30.3 million for the three months ended June 30, 2023, compared to $26.3 million for the same period in 2022[267] - Total noninterest expense increased by $6.5 million, or 12.5%, to $58.7 million for the six months ended June 30, 2023, compared to $52.2 million for the same period in 2022[304] Credit Quality - The Company recorded a provision for credit losses of $140,000 for the six months ended June 30, 2023, compared to a release of provision for credit losses of $412,000 for the same period in 2022[301] - Total non-performing loans increased by $657,000, or 10%, as of June 30, 2023, compared to December 31, 2022[327] - The total allowance for credit losses on loans was $38,073,000, representing 100% of the total loans as of June 30, 2023[332] Equity and Capital - Tangible Common Equity increased to $455,469 thousand as of June 30, 2023, compared to $454,191 thousand on March 31, 2023, reflecting a tangible common equity ratio of 8.41%[340] - The company exceeded regulatory minimum levels to be considered "well-capitalized" as of June 30, 2023[406] Borrowings - Total borrowings increased by $303.7 million, or 288.7%, to $408.9 million at June 30, 2023, from $105.2 million at December 31, 2022[307] - The company's remaining borrowing capacity at the FHLB of Boston was approximately $575.5 million as of June 30, 2023[392] Loan Portfolio - Residential mortgage loans held in portfolio were $1.62 billion at June 30, 2023, a decrease of $31.6 million or 1.9% from $1.65 billion at December 31, 2022[314] - The commercial and industrial (C&I) portfolio increased to $367.4 million at June 30, 2023, up from $350.7 million at December 31, 2022, reflecting an increase of about 4.8%[323] - The company originated $420,000 in residential real estate loans for the six months ended June 30, 2023, compared to $5.834 million for the same period in 2022[319]

Financial Data and Key Metrics Changes - The tangible common equity ratio increased to 8.41% in June from 8.32% in March, and tangible book value per share rose to just over $58 [11] - GAAP diluted earnings per share were $0.91, while diluted operating earnings per share were $1.23 for the second quarter [27] - The adjusted net interest margin decreased by 37 basis points to 2.21% from the previous quarter [27] - The cost of deposits, excluding wholesale deposits, increased by 51 basis points to 1.52% [27] Business Line Data and Key Metrics Changes - Commercial and industrial lending grew by 7% in the quarter, particularly in the renewable energy and innovation banking sectors [94] - The consumer lending portfolio performance remained strong, with a shortage of housing supply noted [29] - The commercial real estate lending environment is slow, with the company not attracted to current loan structures or pricing [10] Market Data and Key Metrics Changes - Deposit levels have stabilized, with deposits excluding wholesale funds totaling $4.09 billion, down from $4.13 billion in March [95] - The spot cost of deposits at the end of the quarter was 1.66%, with expectations of net interest margin declining into the low 2s [12] - Non-performing assets remained steady at 0.13% of total assets, unchanged from previous periods [76] Company Strategy and Development Direction - The company is focused on acquiring new clients and talent, having hired four relationship bankers and a new Head of Wealth Management [26] - The strategy includes avoiding a race to the top in interest rates and focusing on relationship-based core deposits [75] - The company is optimistic about future growth opportunities, particularly in the Innovation Banking sector [20] Management's Comments on Operating Environment and Future Outlook - Management noted continued uncertainty regarding interest rates and recession, alongside equity market volatility [25] - The company expects modest growth in deposits for the remainder of the year, with a focus on maintaining strong asset quality [28] - There is an expectation that the net interest margin may decline further, potentially tipping below 2% if deposit growth does not keep pace [106] Other Important Information - The company has been adding derivatives to mitigate the impact of rising interest rates [21] - The weighted average loan-to-value on the total investment office portfolio remains strong at 56% [77] - The company is monitoring the office market closely, particularly in urban areas like Boston, where vacancy rates are a concern [14] Q&A Session Summary Question: Where did the new relationship bankers come from? - The new bankers came from various institutions, including First Republic and Silicon Valley Bank, and are expected to bring benefits to the company [33] Question: What caused the increase in the 30 to 89-day delinquency bucket? - The increase was isolated to one loan in an assisted living facility, with the borrower struggling with cash flow [35] Question: What is the outlook for the commercial real estate market, particularly in Boston? - The company noted a 20% to 25% decline in values since loan inception in Downtown Boston, but overall risk ratings remain stable [36] Question: What is the expectation for the net interest margin moving forward? - The company anticipates a continued decline in the net interest margin, potentially reaching the low 2% range [37] Question: How is the company managing its capital and potential buybacks? - The likelihood of buybacks in the near term is low, with a focus on retaining capital until there is greater clarity on the economic outlook [61]

Financial Performance - Net income decreased by $900,000, or 6.8%, to $12.4 million for the quarter ended March 31, 2023, compared to $13.3 million for the same quarter in 2022[183] - Diluted earnings per share were $1.58 for the quarter ended March 31, 2023, down from $1.89 for the same quarter in 2022[183] - Net interest income for the period was $4,018,082, with a net interest margin of 3.0%[276] - Operating net income for the three months ended March 31, 2023, was $12,722,000, with diluted earnings per share of $1.62[278] - The net interest income for the three months ended March 31, 2023, was $34.176 million, compared to $40.763 million for the same period in 2022[307] - The net interest margin for the three months ended March 31, 2023, was 2.63%, down from 3.08% for the same period in 2022[307] Income and Expenses - Higher noninterest expense increased by $2.5 million, while noninterest income decreased by $639,000, partially offset by an increase in net interest and dividend income of $2.4 million[183] - Total noninterest income decreased by $639,000, or 5.6%, to $10.7 million for the quarter ended March 31, 2023, primarily due to lower wealth management revenue[241] - Total noninterest expense increased by $2.5 million, or 9.5%, to $28.3 million for the quarter ended March 31, 2023, primarily driven by increases in salaries and employee benefits[243] - Interest expense increased by $15.5 million, or 762.2%, to $17.5 million for the quarter ended March 31, 2023, compared to $2.0 million for the same quarter in 2022[212] Assets and Liabilities - As of March 31, 2023, the Company had total assets of approximately $5.5 billion, with total deposits decreasing by $158.6 million, or 3.3%, to $4.66 billion from $4.82 billion at December 31, 2022[205][220] - Total assets as of March 31, 2023, were $5.543 billion, compared to $5.525 billion at December 31, 2022[307] - Total liabilities as of March 31, 2023, were $5.023 billion, compared to $5.014 billion at December 31, 2022[307] - Total borrowings increased by $135.8 million, or 129.1%, to $241.0 million at March 31, 2023, from $105.2 million at December 31, 2022[249] - The Company had access to funds totaling $2.69 billion as of March 31, 2023, including approximately $159.5 million from the Federal Reserve's BTFP[317] Loans and Credit Quality - Total loans decreased by $44.8 million, or 1.1%, from $4.06 billion at December 31, 2022, to $4.02 billion at March 31, 2023[246] - Total non-performing loans increased by $720,000, or 11.0%, to $7.2 million as of March 31, 2023, compared to December 31, 2022, primarily due to an increase in residential loans on non-accrual[270] - The allowance for credit losses at the end of the period was $38.005 million, up from $37.774 million at December 31, 2022, representing 0.95% of loans outstanding[301] - The Company recorded a provision for credit losses of $60,000 for the quarter ended March 31, 2023, compared to a release of provision for credit losses of $412,000 for the same quarter in 2022[213] Interest Rate Risk - The Company’s financial condition is subject to risks including changes in interest rates, which could affect interest rate spreads and net interest income[183] - The Company actively manages its interest rate sensitivity position to control exposure of net interest income to risks associated with interest rate movements[339] - The average rate earned on interest-earning assets was 4.3%, while the average rate paid on interest-bearing liabilities was 2.5%[276] - The Company uses interest rate sensitivity analysis and gap analysis to manage interest rate risk[312] Regulatory and Compliance - The Dodd-Frank Act's consumer protection regulations may adversely affect the Company's business and financial condition[183] - The Company exceeded regulatory capital requirements as of March 31, 2023, to be considered "well-capitalized"[319] - The Company’s ability to pay dividends is subject to regulatory review and restrictions, primarily relying on dividends received from the Bank[345] Deposits and Funding - The Company relies on competitive pricing and products to attract and retain deposits, with a variety of deposit accounts offered[329] - The Company’s total deposits as of March 31, 2023, amounted to $4,656,776 thousand, a decrease from $4,815,376 thousand as of December 31, 2022[330] - The total amount of wholesale certificates of deposit increased to $523,176 thousand, representing 11.2% of total deposits, up from 7.9% ($381,559 thousand) in the previous quarter[330] - The Company’s retail certificates of deposit under $250,000 increased to $138,476 thousand, representing 3.0% of total deposits, up from 2.5% ($117,532 thousand) in the previous quarter[330]

Financial Data and Key Metrics Changes - The GAAP earnings per share for the first quarter were $1.58, with diluted earnings per share at $1.62 [42] - The adjusted net interest margin decreased by 43 basis points to 2.58% [42] - The cost of deposits, excluding wholesale deposits, increased by 56 basis points to 1.01% [23] - The return on average assets was 0.93%, and the return on tangible common equity was 11.52% [23] - Tangible common equity increased from 8.12% at year-end 2022 to 8.32% as of March 31, 2023 [35] Business Line Data and Key Metrics Changes - Loan balances decreased by $45 million or 1.1% due to slowing market activity and reduced consumer activity [24] - Wealth management assets increased primarily due to market appreciation and positive net flows during the quarter [24] - The provision for credit loss ratio is expected to be between 0.90% and 1% for the year [27] Market Data and Key Metrics Changes - Uninsured deposits dropped significantly to 33% from 52% at year-end [19] - Total uninsured deposits were $1.5 billion as of March 31, with available liquidity at $2.7 billion [19] - The market spot deposit rate was 1.26% excluding wholesale [69] Company Strategy and Development Direction - The company aims to focus on opportunities arising from disruption in the banking sector, particularly in client and talent acquisition [14] - The integration of Northmark Bank systems was successfully completed, with expected cost savings of 35% [34][52] - The company plans to manage operating expenses closely, with a growth range of 0% to 3% for the full year [46] Management's Comments on Operating Environment and Future Outlook - Management noted that deposit repricing requests have significantly decreased, indicating stabilization [14] - The outlook for the net interest margin in the second quarter is expected to decline into the 220s, with modest compression anticipated [25] - Management expressed optimism about the potential for improved loan activity in the second half of the year [71] Other Important Information - The company experienced a net deposit outflow of $81 million or 1.9% in March, primarily to larger banks and money market funds [17] - Non-performing assets remained at 0.13% of total assets, unchanged from year-end 2022 [39] - The company is assessing its commercial real estate loan portfolio, maintaining a focus on multifamily properties [20] Q&A Session Summary Question: What are the current spot deposit rates? - The market spot deposit rate was reported at 1.26% excluding wholesale [69] Question: How is the margin expected to trend? - The margin is expected to decline modestly, potentially approaching 2% by the end of the year if the Federal Reserve cuts rates [70] Question: What are the expected cost synergies from the Northmark systems conversion? - The expected cost savings from the Northmark integration are guided at 35%, which has been achieved [52] Question: Why did interest-bearing checking balances increase while other core deposit balances fell? - The increase in interest-bearing checking balances was due to the use of the IntraFi product, with a modest overall reduction of about 2% when combining demand and interest-bearing checking [58] Question: What is the outlook for loan growth? - Loan growth is expected to remain flat in the short term due to reduced borrower demand, but there are pockets of opportunity anticipated in the second half of the year [71]

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Cambridge Bancorp is a Massachusetts-based bank holding company operating 22 banking and 5 wealth management offices with **$5.6 billion in assets** and **$4.1 billion AUM** - Cambridge Bancorp is a bank holding company operating 22 banking and 5 wealth management offices in Eastern Massachusetts and New Hampshire through its subsidiary, Cambridge Trust Company[631](index=631&type=chunk) Company Financial Snapshot (as of Dec 31, 2022) | Metric | Value | | :--- | :--- | | Total Assets | ~$5.6 billion | | Assets under Management & Administration | ~$4.1 billion | - The company completed its merger with Northmark Bank in October 2022, acquiring **$428.7 million in assets** and recording **$12.6 million in goodwill**, following the Wellesley Bancorp merger in June 2020[678](index=678&type=chunk)[679](index=679&type=chunk)[680](index=680&type=chunk) - The company is extensively regulated by the Federal Reserve, MA DOB, and FDIC, impacting its operations, capital structure, and dividend policies[688](index=688&type=chunk)[691](index=691&type=chunk)[692](index=692&type=chunk) [Supervision and Regulation](index=7&type=section&id=Supervision%20and%20Regulation) The company and its banking subsidiary are subject to a comprehensive regulatory framework, including capital adequacy rules, dividend restrictions, and consumer protection laws, aimed at protecting depositors and the banking system - The Company is expected to act as a source of financial and managerial strength for its subsidiary Bank, potentially requiring resource commitment[702](index=702&type=chunk) - Dividends from the Bank are the Company's main cash source, with Federal Reserve policy restricting payments to past year's income and requiring support for the subsidiary[5](index=5&type=chunk) Minimum Capital Ratios (including Capital Conservation Buffer) | Capital Ratio | Minimum Requirement | | :--- | :--- | | Common Equity Tier 1 (CET1) to risk-weighted assets | 7.0% | | Tier 1 capital to risk-weighted assets | 8.5% | | Total capital to risk-weighted assets | 10.5% | | Tier 1 leverage ratio | 4.0% | - The Bank's deposit accounts are insured by the FDIC's DIF up to **$250,000** per depositor, and the Bank is rated "well-capitalized" under PCA standards[78](index=78&type=chunk)[76](index=76&type=chunk) [Human Capital](index=15&type=section&id=Human%20Capital) As of December 31, 2022, the company employed 447 individuals, with a focus on diversity, equity, and inclusion, and supports employee development through various programs Workforce Diversity (as of Dec 31, 2022) | Group | Overall Workforce | VP & Above | | :--- | :--- | :--- | | Female | 51% | 41% | | Racially/Ethnically Diverse | 22% | 11% | - The company requires all Vice President level and above searches to include at least one racially or ethnically diverse candidate and one female candidate[125](index=125&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces various risks including economic downturns, interest rate volatility, loan portfolio credit risk, extensive regulation, cybersecurity threats, and acquisition integration challenges - The company's success is highly dependent on economic conditions in Eastern Massachusetts and New Hampshire due to limited geographic diversification[130](index=130&type=chunk) - Interest rate variations can negatively affect financial performance by narrowing spreads and impacting net interest income[132](index=132&type=chunk)[454](index=454&type=chunk) - The company's loan portfolio, including commercial real estate and commercial & industrial loans, carries greater credit risk than residential mortgages[134](index=134&type=chunk)[455](index=455&type=chunk) - Extensive government regulation, potential capital requirement changes, and the LIBOR transition pose significant legal and operational risks[192](index=192&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - Cybersecurity threats, including data breaches and fraud, could disrupt operations, and the company faces risks integrating acquisitions, such as realizing cost savings[207](index=207&type=chunk)[210](index=210&type=chunk) [Item 1B. Unresolved Staff Comments](index=27&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[258](index=258&type=chunk) [Item 2. Properties](index=27&type=section&id=Item%202.%20Properties) The company operates 22 banking offices and five wealth management offices, with its headquarters in Cambridge, Massachusetts - The Company operates 22 banking offices, with its main office and headquarters in Cambridge, Massachusetts[259](index=259&type=chunk) [Item 3. Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material pending legal proceedings, with no expected material adverse effects from ordinary course claims - The Company is not currently party to any material pending legal proceedings[260](index=260&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[261](index=261&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under "CATC", with **7.83 million shares outstanding** as of March 2023, and an active share repurchase program alongside declared cash dividends - The Company's common stock trades on the NASDAQ Stock Market under the symbol "CATC"[265](index=265&type=chunk) Shareholder and Dividend Information | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Dividends Declared Per Share | $2.56 | $2.38 | - The Board authorized a share repurchase program for up to **5.0%** of outstanding common stock in March 2022, replaced by a similar 2023 program in March 2023[274](index=274&type=chunk)[275](index=275&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, net income decreased to **$52.9 million** despite an 11.9% rise in net interest income, as total assets grew to **$5.56 billion** and loans to **$4.06 billion**, largely influenced by the Northmark merger Key Financial Highlights (2022 vs 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | $52.9 million | $54.0 million | | Diluted EPS | $7.30 | $7.69 | | Net Interest Income | $143.2 million | $128.0 million | | Total Assets | $5.56 billion | $4.89 billion | | Total Loans | $4.06 billion | $3.32 billion | | Total Deposits | $4.82 billion | $4.33 billion | - The increase in total assets, loans, and deposits in 2022 was significantly influenced by the acquisition of Northmark Bank[550](index=550&type=chunk)[551](index=551&type=chunk)[555](index=555&type=chunk) - The net interest margin decreased by **20 basis points** to **2.92%** in 2022 from **3.12%** in 2021, impacted by higher funding costs[371](index=371&type=chunk) - Noninterest income decreased by **3.0%** to **$43.0 million** in 2022, primarily due to a **$2.0 million** decline in wealth management revenue from market downturns[375](index=375&type=chunk)[376](index=376&type=chunk) [Critical Accounting Estimates](index=30&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting estimates are the Allowance for Credit Losses (ACL) and Income Taxes, both requiring significant management judgment and susceptible to change - The company's critical accounting estimates are the Allowance for Credit Losses (ACL) and Income Taxes, involving significant judgment and susceptibility to change[311](index=311&type=chunk) - The ACL methodology under CECL uses a discounted cash flow method incorporating probability of default and loss given default, based on a reasonable forecast period[312](index=312&type=chunk)[314](index=314&type=chunk) - Qualitative adjustments to the ACL account for factors not fully captured by quantitative models, such as portfolio concentrations and underwriting changes[316](index=316&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Net income decreased to **$52.9 million** in 2022 due to higher noninterest expenses and credit loss provisions, despite a **$15.2 million** increase in net interest income Comparison of Operations (2022 vs. 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | $52.9M | $54.0M | | Diluted EPS | $7.30 | $7.69 | | Net Interest Income | $143.2M | $128.0M | | Provision for (Release of) Credit Losses | $3.9M | ($1.3M) | | Noninterest Income | $43.0M | $44.3M | | Noninterest Expense | $110.4M | $100.5M | - The increase in net interest income was primarily due to growth in average earning assets and higher asset yields, partially offset by lower PPP loan income and higher deposit costs[332](index=332&type=chunk) - Noninterest expense increased by **9.9%**, driven by higher salaries and benefits (**$5.0 million** increase), data processing fees (**$1.9 million** increase), and non-operating merger expenses (**$1.9 million** increase)[378](index=378&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk) [Changes in Financial Condition](index=38&type=section&id=Changes%20in%20Financial%20Condition) As of December 31, 2022, total assets grew **13.7%** to **$5.56 billion**, and total loans increased **22.4%** to **$4.06 billion**, largely due to the Northmark merger and organic growth - Total assets increased by **$668.2 million (13.7%)** to **$5.56 billion** at year-end 2022[550](index=550&type=chunk) - Total loans grew by **$743.8 million (22.4%)**, with organic growth (excluding the Northmark merger) accounting for **$440.5 million (13.3%)**[551](index=551&type=chunk)[552](index=552&type=chunk) - Total deposits increased by **$484.2 million (11.2%)**, but organic core deposits decreased by **$216.8 million (5.2%)** due to the rising interest rate environment[555](index=555&type=chunk)[556](index=556&type=chunk) Key Equity Metrics (per share) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Book Value | $66.38 | $62.83 | | Tangible Book Value (Non-GAAP) | $57.15 | $55.01 | [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company manages liquidity through core deposits and wholesale funding, with **$1.5 billion** in funding capacity, and both the company and Bank exceeded regulatory capital requirements, maintaining a "well capitalized" status - The Company's primary liquidity source is core deposits, supplemented by FHLB borrowings and other wholesale funding, with total available funding capacity of **$1.5 billion** at December 31, 2022[599](index=599&type=chunk) - Total shareholders' equity increased to **$517.6 million** at year-end 2022 from **$437.8 million** at year-end 2021, mainly due to the Northmark Merger equity issuance and net income[602](index=602&type=chunk) Company Capital Ratios (as of Dec 31, 2022) | Ratio | Actual | Well-Capitalized Minimum | | :--- | :--- | :--- | | Total Capital | 13.52% | 10.0% (Bank) | | Tier 1 Capital | 12.45% | 8.0% (Bank) | | Common Equity Tier 1 | 12.45% | 6.5% (Bank) | | Tier 1 Leverage | 8.51% | 5.0% (Bank) | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, managed by ALCO using simulation modeling to assess impacts on net interest income and economic value of equity under various rate shock scenarios - The company's main market risk is interest rate risk, managed by the Asset/Liability Committee (ALCO) to control exposure of net interest income and capital[581](index=581&type=chunk)[584](index=584&type=chunk) Net Interest Income Sensitivity (Instantaneous Rate Shock, as of Dec 31, 2022) | Rate Change (bps) | Year 1 % Change | Year 2 % Change | | :--- | :--- | :--- | | +300 | (1.8%) | 16.6% | | +200 | (1.3%) | 13.8% | | +100 | (0.5%) | 11.7% | | -100 | 1.6% | 6.6% | | -200 | 0.8% | 1.3% | - An EVE analysis at year-end 2022 estimated a **5.6%** decrease for an instantaneous **+200 basis point** rate increase, and a **1.3%** increase for a **-100 basis point** decrease[590](index=590&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=58&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2022 and prior years, along with detailed notes and an unqualified auditor's opinion on both financial statements and internal controls [Notes to Consolidated Financial Statements](index=64&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial results, including CECL adoption, merger specifics, investment and loan portfolio compositions, derivatives, fair value measurements, and capital adequacy - The company's allowance for credit losses on loans was **$37.8 million** as of December 31, 2022, calculated under the CECL methodology[234](index=234&type=chunk)[374](index=374&type=chunk) Investment Securities Portfolio (Amortized Cost, Dec 31, 2022) | Category | Amortized Cost | | :--- | :--- | | Available for Sale | $182.0 million | | Held to Maturity | $1,052.0 million | | **Total** | **$1,234.0 million** | Loan Portfolio Composition (Dec 31, 2022) | Loan Type | Amount | % of Total | | :--- | :--- | :--- | | Commercial Mortgage | $1,914.4M | 47% | | Residential Mortgage | $1,648.8M | 40% | | Commercial & Industrial | $350.7M | 9% | | Home Equity | $111.4M | 3% | | Consumer | $37.6M | 1% | | **Total Loans** | **$4,062.9M** | **100%** | - The company uses interest rate swaps and floors to mitigate interest rate risk, with **$250.0 million** in notional hedging derivatives and **$499.6 million** in non-designated interest rate contracts as of December 31, 2022[416](index=416&type=chunk)[564](index=564&type=chunk) [Item 9A. Controls and Procedures](index=114&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with new controls implemented for the Northmark Bank integration - The CEO and CFO concluded the company's disclosure controls and procedures were effective as of December 31, 2022[502](index=502&type=chunk) - Changes to internal controls were made during Q4 2022 to integrate the Northmark Merger[504](index=504&type=chunk) - Management assessed internal controls over financial reporting as effective based on the COSO 2013 framework, affirmed by the independent auditor[508](index=508&type=chunk)[510](index=510&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=116&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance, including the Audit Committee and Code of Ethics, is incorporated by reference from the 2023 Proxy Statement - The information required for this item is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement[514](index=514&type=chunk) [Item 11. Executive Compensation](index=116&type=section&id=Item%2011.%20Executive%20Compensation) Detailed information on executive and director compensation is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - The information required for this item is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement[515](index=515&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=116&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership by beneficial owners and management, and equity compensation plan details, is incorporated by reference from the 2023 Proxy Statement - The information required for this item is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement[729](index=729&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=116&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related person transactions and Board of Directors' independence is incorporated by reference from the 2023 Proxy Statement - The information required for this item is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement[730](index=730&type=chunk)[747](index=747&type=chunk) [Item 14. Principal Accounting Fees and Services](index=116&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on fees paid to and services provided by the independent registered public accounting firm is incorporated by reference from the 2023 Proxy Statement - The information required for this item is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement[744](index=744&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=117&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K report, including merger agreements, corporate governance documents, and certifications - This section lists all financial statements, schedules, and exhibits filed with the annual report, with financial statements located in Item 8[717](index=717&type=chunk)[718](index=718&type=chunk) - Exhibits filed include merger agreements for Northmark Bank and Wellesley Bancorp, corporate governance documents, and various executive compensation and retirement plans[720](index=720&type=chunk)[721](index=721&type=chunk) [Item 16. Form 10-K Summary](index=122&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for this item - None[724](index=724&type=chunk)[749](index=749&type=chunk)

CAMBRIDGE BANCORP | --- | --- | --- | --- | --- | |-------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | 03 Company Profile | | | | | | 07 Financial Highlights | | | | | | 20 | | | | | | Strategic Focus 26 | | | | | | Appendix | | | | | CAMBRIDGE BANC As of December 31, 2022 ▪ Private Bank & Wealth Management Firm ▪ Client Wealth Assets: $4.1 billion • Gross Loans: $4.1 billion ▪ Noninterest income: 23% of revenue ▪ Market Cap: $664 million* 3 • Market of operation ...

Financial Performance - Net income increased by $1.3 million, or 9.7%, to $14.6 million for the quarter ended September 30, 2022, compared to $13.3 million for the same quarter in 2021[166] - Diluted earnings per share were $2.07 for the quarter ended September 30, 2022, compared to $1.89 for the same quarter in 2021[166] - Net income increased by $828,000, or 2.0%, to $41.6 million for the nine months ended September 30, 2022, compared to $40.8 million for the same period in 2021[182] Income and Revenue - Net interest and dividend income before the provision for credit losses increased by $3.9 million, or 11.9%, to $36.3 million for the quarter ended September 30, 2022, compared to $32.4 million for the same quarter in 2021[167] - Total interest and dividend income increased by $6.6 million, or 19.7%, to $40.3 million for the quarter ended September 30, 2022, primarily due to growth in loan and investment securities portfolios[170] - Net interest and dividend income increased by $6.1 million, or 6.4%, to $102.3 million for the nine months ended September 30, 2022, primarily due to an increase in average earning assets[183] Expenses - The increase in noninterest expense for the quarter ended September 30, 2022, was $817,000, alongside an increase in income tax expense of $545,000 and a provision for credit losses of $526,000[166] - Total noninterest expense increased by $817,000, or 3.2%, to $26.3 million for the quarter ended September 30, 2022, primarily driven by increases in salaries and employee benefits[178] - Total noninterest expense increased by $3.5 million, or 4.7%, to $78.5 million for the nine months ended September 30, 2022, primarily due to higher salaries and employee benefits[194] Assets and Liabilities - As of September 30, 2022, the Company had total assets of approximately $5.1 billion and Assets under Management and Administration of approximately $3.8 billion[152] - Total assets increased by $251.8 million, or 5.1%, from $4.89 billion at December 31, 2021, to $5.14 billion at September 30, 2022[198] - Total liabilities amounted to $4,584,330 thousand, while shareholders' equity was $439,611 thousand, leading to total assets of $5,023,941 thousand[268] Loans and Credit - Total loans increased by $309.5 million, or 9.3%, from $3.32 billion at December 31, 2021, to $3.63 billion at September 30, 2022[199] - The total loan portfolio amounted to $3.63 billion as of September 30, 2022, an increase of $309.5 million, or 9.3%, from $3.32 billion at December 31, 2021[222] - Total non-performing loans rose by $997,000, or 18.5%, to $6.383 million at September 30, 2022, compared to $5.386 million at December 31, 2021[249] Deposits - Total deposits decreased by $49.7 million, or 1.1%, to $4.28 billion at September 30, 2022, from $4.33 billion at December 31, 2021[202] - Demand deposits (non-interest bearing) increased to $1,444,765 thousand, accounting for 33.7% of total deposits, compared to 32.1% in the previous year[261] Interest Rates and Margins - The net interest margin for the period was 2.95%, compared to 2.86% in the previous quarter, indicating an improvement in profitability[265] - Adjusted net interest margin for the nine months ended September 30, 2022, was 2.80%, a decrease of 22 basis points from 3.02% for the same period in 2021[274] - The Company actively manages interest rate risk through various tools, including interest rate sensitivity analysis and net interest margin reports[280] Mergers and Acquisitions - The Company completed the Northmark Merger on October 1, 2022, paying total consideration of $62.8 million and assuming $316.5 million in loans while acquiring $373.0 million in deposits[158] Equity and Capital - Total shareholders' equity increased by $8.5 million, or 1.9%, to $446.3 million at September 30, 2022, from $437.8 million at December 31, 2021[206] - The Company exceeded regulatory minimum levels to be considered "well-capitalized" as of September 30, 2022[296] Risk Management - The Company continues to diversify its loan risks among various sectors, with no significant concentrations in any one business sector[242] - The Company regularly reviews debt securities for expected credit loss using both qualitative and quantitative criteria[220]

Financial Performance - Net income for the quarter ended June 30, 2022, decreased by $286,000, or 2.1%, to $13.7 million compared to $13.9 million for the same quarter in 2021[173] - Diluted earnings per share were $1.94 for the quarter ended June 30, 2022, down from $1.98 for the quarter ended June 30, 2021[173] - Net income decreased by $469,000, or 1.7%, to $27.0 million for the six months ended June 30, 2022, compared to $27.4 million for the same period in 2021[189] - Wealth Management revenues totaled $16.696 million for the six months ended June 30, 2022, a slight decrease of 0.5% from $16.774 million for the same period in 2021[200] Assets and Liabilities - Total assets as of June 30, 2022, were approximately $5.1 billion[159] - Total assets increased by $166.4 million, or 3.4%, from $4.89 billion at December 31, 2021, to $5.06 billion at June 30, 2022[204] - Total liabilities reached $4,578,541 thousand, while shareholders' equity stood at $436,661 thousand[272] - Total deposits decreased by $67.1 million, or 1.5%, to $4.26 billion at June 30, 2022, from $4.33 billion at December 31, 2021[208] Loans and Credit Quality - Total loans increased by $204.4 million, or 6.2%, from $3.32 billion at December 31, 2021, to $3.52 billion at June 30, 2022[206] - Non-performing loans increased by $493,000, or 9.1%, to $5.879 million as of June 30, 2022, with non-performing loans as a percentage of gross loans rising to 0.17% from 0.16%[253] - The Company did not record an allowance for credit losses on its investment securities as of June 30, 2022, indicating a stable credit quality assessment[225] - The allowance for credit losses at the end of the period was $34,124 thousand, slightly down from $34,496 thousand at December 31, 2021[262] Interest Income and Expenses - Net interest and dividend income before the release of credit losses increased by $1.8 million, or 5.6%, to $34.2 million for the quarter ended June 30, 2022, compared to $32.4 million for the same quarter in 2021[174] - Total interest and dividend income increased by $2.8 million, or 8.2%, to $36.3 million for the quarter ended June 30, 2022, compared to $33.5 million for the same quarter in 2021[177] - Interest expense increased by $951,000, or 82.9%, to $2.1 million for the quarter ended June 30, 2022, compared to $1.1 million for the same quarter in 2021[178] - The company reported a net interest spread of 2.76% and a net interest margin of 2.86%[272] Mergers and Acquisitions - The Company has entered into a definitive agreement to merge with Northmark, with the transaction expected to close in the fourth quarter of 2022[165] - Each share of Northmark common stock will be exchanged for 0.9950 shares of the Company's common stock in the merger[165] Operational Focus - The Company has diversified its commercial operations to include Renewable Energy and Innovation Banking, focusing on New England-based entrepreneurs[164] - The Company emphasizes service to consumers and small- and medium-sized businesses, originating various types of loans including commercial and residential real estate loans[161] Tax and Regulatory Compliance - The effective tax rate increased to 28.2% for the quarter ended June 30, 2022, compared to 26.3% for the same quarter in 2021[188] - The Company exceeded regulatory minimum levels to be considered "well-capitalized" as of June 30, 2022[302] Market Conditions and Risks - The impact of the COVID-19 pandemic remains uncertain, with potential future credit losses expected as fiscal stimulus programs are exhausted[171] - The Company’s profitability is sensitive to fluctuations in interest rates, which may impact earnings if asset and liability rates do not adjust similarly[283] - A sudden increase of 300 basis points in interest rates could lead to a projected 4.3% decrease in net interest income in Year 1[288]

Financial Performance - Net income decreased by $183,000, or 1.4%, to $13.3 million for the quarter ended March 31, 2022, compared to $13.5 million for the same quarter in 2021[155]. - Total interest and dividend income rose by $1.1 million, or 3.3%, to $33.9 million for the quarter ended March 31, 2022, from $32.8 million in the prior year[160]. - Net interest income for the quarter ended March 31, 2022, was $31.844 million, compared to $31.746 million for the same period in 2021[240]. - The net interest margin for the quarter ended March 31, 2022, was 2.74%, a decrease from 2.84% in the previous quarter[240]. - Total noninterest income increased by $505,000, or 4.7%, to $11.4 million for the quarter ended March 31, 2022, from $10.8 million in the prior year[165]. Interest Income and Expense - Net interest and dividend income before the release of credit losses increased by $463,000, or 1.5%, to $31.9 million for the quarter ended March 31, 2022, compared to $31.4 million for the same quarter in 2021[156]. - Interest on loans decreased by $1.8 million, or 5.9%, due to lower Paycheck Protection Program loan-related income and lower loan yields[158]. - Interest on investment securities increased by $2.8 million, or 125.8%, primarily due to growth in the investment portfolio[158]. - Interest on deposits increased by $621,000, or 48.7%, due to deposit growth[158]. - Interest expense increased by $614,000, or 43.4%, to $2.0 million for the quarter ended March 31, 2022, compared to $1.4 million for the same quarter in 2021[161]. Assets and Liabilities - The Company had total assets of approximately $5.0 billion as of March 31, 2022[143]. - Total assets increased by $126.8 million, or 2.6%, from $4.89 billion at December 31, 2021, to $5.02 billion at March 31, 2022[170]. - Total average interest-earning assets increased by $925.0 million, or 24.2%, to $4.75 billion for the quarter ended March 31, 2022, compared to $3.83 billion for the same quarter in 2021[159]. - Total deposits grew by $142.6 million, or 3.3%, to $4.47 billion at March 31, 2022, from $4.33 billion at December 31, 2021[177]. - Total borrowings decreased to $16.1 million as of March 31, 2022, down from $16.5 million at December 31, 2021, a reduction of $370,000[237]. Equity and Capital - The Company's effective tax rate was 25.0% for the quarter ended March 31, 2022, down from 26.0% for the same quarter in 2021[169]. - Total shareholders' equity decreased to $436.2 million from $437.8 million, primarily due to unrealized losses and dividend payments[268]. - The ratio of tangible common equity to tangible assets decreased 23 basis points to 7.69% at March 31, 2022, from 7.92% at December 31, 2021[181]. - Tangible Common Equity as of March 31, 2022, is $381.727 million, a slight decrease from $383.308 million on December 31, 2021, and an increase from $352.874 million on March 31, 2021[185]. - The Company exceeded regulatory minimum levels to be considered "well-capitalized" as of March 31, 2022[269]. Loan Portfolio - The total loans outstanding were $3.42 billion as of March 31, 2022, compared to $3.32 billion at December 31, 2021[196]. - The residential mortgage portfolio was $1.45 billion as of March 31, 2022, an increase of $32.1 million, or 2.3%, from $1.42 billion at December 31, 2021, representing 43% of total loans[196]. - Commercial real estate (CRE) loans totaled $1.58 billion as of March 31, 2022, an increase of $68.5 million, or 4.5%, from $1.51 billion at December 31, 2021, representing 46% of total loans[208]. - The commercial and industrial (C&I) portfolio totaled $262.8 million at March 31, 2022, down from $269.4 million at December 31, 2021, representing 8% of total loans[217]. - Non-performing loans increased by $557,000, or 10.3%, to $5,943,000 as of March 31, 2022, compared to $5,386,000 as of December 31, 2021[224]. Risk Management and Liquidity - The Company actively manages interest rate risk through various tools, including interest rate sensitivity analysis and gap analysis[252]. - The Company’s liquidity management includes core deposits, selling investment securities, and borrowing from the FHLB of Boston[265]. - The Company had access to funds totaling $1.85 billion as of March 31, 2022, to manage liquidity needs[265]. - The economic value of equity ratio was estimated at 12.9% with a 200 basis point increase in interest rates, and 9.9% with a 100 basis point decrease[260]. - A 300 basis point parallel rate shock is projected to decrease net interest income by 1.2% in Year 1 and increase it by 14.4% in Year 2[255].