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CAMBRIDGE BANCORP (CATC)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 GAAP diluted EPS was $1.02, up 22.9% QoQ on lower non-operating and professional/marketing expenses, while operating diluted EPS was $1.11, down 3.5% QoQ; no S&P Global consensus was available to assess a beat/miss .
  • Total revenue was $38.59M, down 1.6% QoQ and down 24.3% YoY, driven by ongoing net interest margin compression (2.14% in Q4 vs 2.18% in Q3; 3.08% in Q4 2022) as deposit costs continued to rise .
  • Asset quality remains solid but deteriorated sequentially: NPLs/loans rose to 0.41% (from 0.19%) due to one owner-occupied commercial mortgage moving to non-accrual; allowance/loans increased to 0.97% .
  • Funding mix shifted toward FHLB borrowings as wholesale CDs were reduced; available liquidity of ~$2.6B equals ~2x uninsured deposits, supporting confidence into the Eastern Bank merger timeline .
  • Dividend maintained at $0.67/share (declared Jan 29, payable Feb 22), with book value per share up to $68.14 and TBV/share to $59.08, offering capital support; merger exchange ratio set at 4.956 shares of Eastern per CATC share .

What Went Well and What Went Wrong

What Went Well

  • Cost discipline: Noninterest expense fell $2.7M QoQ (-9.3%) on lower non-operating items (-$1.9M QoQ), professional fees (-$0.5M QoQ), and marketing (-$0.38M QoQ), improving the efficiency ratio to 69.72% from 75.64% .
  • Liquidity and capital: Available liquidity stood at ~$2.6B (~2x uninsured deposits), while common equity/assets rose to 9.87% and TCE/TA to 8.67%, underpinning resilience despite funding shifts .
  • CEO confidence on merger execution: “We navigated through 2023 with strong liquidity and robust capital… The timeline for the planned merger with Eastern Bank is progressing as anticipated.” — Denis K. Sheahan, Chairman, President & CEO .

What Went Wrong

  • Margin pressure: NIM (FTE) declined 4 bps QoQ to 2.14% and 94 bps YoY (vs 3.08% in Q4 2022) as deposit costs rose to 2.19% (ex-wholesale 1.89%), reflecting a competitive deposit market .
  • Asset quality: NPLs/loans increased to 0.41% (from 0.19%) on a single commercial mortgage non-accrual; NPAs/assets climbed to 0.31% (from 0.14%) .
  • Revenue headwinds: Total revenue fell to $38.59M from $39.20M in Q3 and $50.95M YoY, with net interest & dividend income down QoQ and YoY amid higher funding costs .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Total Revenue ($USD Millions)$39.79 $39.20 $38.59
Net Interest & Dividend Income ($USD Millions)$29.76 $28.65 $28.15
Noninterest Income ($USD Millions)$10.03 $10.55 $10.44
Provision for Credit Losses ($USD Millions)$0.08 $0.20 $0.57
Noninterest Expense ($USD Millions)$30.35 $29.65 $26.90
Net Income ($USD Millions)$7.12 $6.54 $8.03
Diluted EPS ($)$0.91 $0.83 $1.02
Operating Net Income ($USD Millions)$9.63 $9.06 $8.72
Operating Diluted EPS ($)$1.23 $1.15 $1.11
Margins & ReturnsQ2 2023Q3 2023Q4 2023
Net Interest Margin, FTE (%)2.26% 2.18% 2.14%
Adjusted NIM, FTE (%)2.21% 2.13% 2.10%
Cost of Deposits (%)1.78% 2.09% 2.19%
Cost of Deposits ex-Wholesale (%)1.52% 1.74% 1.89%
Cost of Funds (%)1.86% 2.06% 2.20%
ROA (%)0.52% 0.48% 0.59%
ROE (%)5.43% 4.93% 6.06%
Efficiency Ratio (%)76.26% 75.64% 69.72%
Balance Sheet & CapitalQ2 2023Q3 2023Q4 2023
Total Assets ($USD Billions)$5.49 $5.45 $5.42
Total Loans ($USD Billions)$4.03 $4.03 $4.02
Total Deposits ($USD Billions)$4.44 $4.57 $4.32
Borrowings ($USD Millions)$408.93 $233.91 $452.16
TCE / TA (%)8.41% 8.45% 8.67%
Book Value / Share ($)$67.17 $67.04 $68.14
Tangible Book Value / Share ($)$58.05 $57.96 $59.08
Wealth Mgmt AUM ($USD Billions)$4.10 $4.01 $4.33
Available Liquidity ($USD Billions)~$2.6 ~$2.6 ~$2.6
Asset QualityQ2 2023Q3 2023Q4 2023
NPLs / Total Loans (%)0.18% 0.19% 0.41%
NPAs / Total Assets (%)0.13% 0.14% 0.31%
Allowance / Loans (%)0.95% 0.95% 0.97%
Net Charge-offs (annualized, %)0.00% -0.01% 0.00%
Revenue Composition ($USD Millions)Q2 2023Q3 2023Q4 2023
Net Interest & Dividend Income$29.76 $28.65 $28.15
Wealth Mgmt Revenue$8.08 $8.51 $8.48
Total Noninterest Income$10.03 $10.55 $10.44
Estimates vs Actuals (Q4 2023)ActualS&P Global Consensus
Diluted EPS ($)$1.02 N/A (Unavailable via S&P Global for CATC)
Total Revenue ($USD Millions)$38.59 N/A (Unavailable via S&P Global for CATC)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per Share ($)Q1 2024 payable Feb 22, 2024$0.67 (Q3 2023) $0.67 declared Jan 29, 2024 Maintained
Merger Timeline (Eastern Bankshares)2024Anticipated close in Q1 2024 (announced Sept 19, 2023) “Progressing as anticipated” as of Jan 30, 2024 Maintained trajectory
Exchange Ratio (Eastern)Close4.956 Eastern shares per CATC share 4.956 Eastern shares per CATC share Maintained
Formal Financial Guidance (Revenue, Margins, OpEx, Tax, Segments)Q4 2023None providedNone providedN/A

Earnings Call Themes & Trends

Note: No Q4 2023 earnings call transcript was found in the document catalog for the period requested.

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Deposit cost pressureCost of deposits 1.78%; spot non-wholesale 1.66% 2.09%; spot non-wholesale 1.82% 2.19%; non-wholesale 1.89% Rising
Net interest marginNIM (FTE) 2.26% 2.18% 2.14% Compressing
Funding mix (FHLB vs wholesale CDs)Shift to FHLB; borrowings up $168M QoQ Borrowings down $175M QoQ as lower-cost funding used Borrowings up $218M QoQ; migrated from wholesale CDs Active re-optimization
Liquidity~$2.6B (~2x uninsured deposits) ~$2.6B (~2x uninsured deposits) ~$2.6B (~2x uninsured deposits) Stable/ample
Asset qualityNPLs/loans 0.18% 0.19% 0.41% due to one CRE non-accrual Deteriorated
Merger execution (Eastern)Northmark systems conversion; senior WM hire Eastern merger announced; CEO to lead Eastern Merger progressing as anticipated Advancing

Management Commentary

  • “We navigated through 2023 with strong liquidity and robust capital levels, despite a challenging environment in terms of interest rates and the impact to deposit and loan growth. The timeline for the planned merger with Eastern Bank is progressing as anticipated.” — Denis K. Sheahan, Chairman, President & CEO .
  • On strategic rationale: “We are pleased to announce our plans to merge with Eastern Bank given our shared focus on delivering exceptional service… and the opportunity this combination brings…” — Denis K. Sheahan .
  • Funding strategy: Company migrated wholesale funding toward FHLB Boston borrowings during Q4 to reduce higher-priced wholesale CDs .
  • Market backdrop: Deposit market remains competitive, contributing to higher deposit costs .

Q&A Highlights

No Q4 2023 earnings call transcript was available in the period requested; no Q&A content to report.

Estimates Context

  • S&P Global consensus estimates for CATC Q4 2023 EPS and revenue were unavailable via our SPGI integration for this ticker at the time of this analysis. We attempted retrieval but found no CIQ mapping; thus, no beat/miss assessment versus Street can be made. Where estimates are needed, PMs should treat current values as final actuals and monitor external sources for consensus updates [Attempted S&P Global; unavailable].

Key Takeaways for Investors

  • Margin headwinds persisted: NIM declined 4 bps QoQ to 2.14% as deposit costs rose, indicating continued pressure until repricing dynamics and funding mix shift provide relief .
  • Cost control improved operating efficiency: Noninterest expense fell 9.3% QoQ, driving the efficiency ratio to 69.7% (from 75.6%), a positive for near-term earnings stability .
  • Asset quality slippage is idiosyncratic but notable: NPLs/loans moved to 0.41% on one loan; continued low charge-offs and a 0.97% allowance/loans provide loss absorption .
  • Balance sheet prudence: Liquidity of ~$2.6B (~2x uninsured deposits) and higher TCE/TA (8.67%) underpin confidence through merger execution and funding transitions .
  • Funding mix tactics: Replacing higher-priced wholesale CDs with FHLB borrowings should help funding costs, but deposit competition remains a near-term headwind to NIM .
  • Dividend support maintained: $0.67/share declared for Q1 2024, with BVPS/TBVPS up QoQ, suggesting capital strength despite margin pressures .
  • Merger narrative as potential catalyst: Execution with Eastern Bank, exchange ratio of 4.956, and CEO transition could drive rerating; watch regulatory timeline and integration milestones .
All data and statements above are sourced from Cambridge Bancorp’s 8-K earnings press releases and exhibits for Q2, Q3, and Q4 2023. Specific citations: Q4 2023 **[711772_0000950170-24-008544_catc-20240130.htm:0]**-**[711772_0000950170-24-008544_catc-ex99_1.htm:17]**; Q3 2023 **[711772_0000950170-23-053640_catc-20231017.htm:0]**-**[711772_0000950170-23-053640_catc-ex99_1.htm:18]**; Q2 2023 **[711772_0000950170-23-033257_catc-20230717.htm:0]**-**[711772_0000950170-23-033257_catc-ex99_1.htm:18]**.