Cambridge Bancorp (CATC) 25 Jan 222021 Q4 Earnings call transcript

Welcome to the Cambridge Bancorp Fourth Quarter Earnings Conference Call.

We will be making forward-looking statements during this call and actual results may differ materially. We encourage you to review the 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, may be found in our SEC filings and our earnings release. in be will participants listen-only mode. All Please Instructions] note, this recorded. being is event [Operator like conference turn would to I now the over Mr. to Chairman, Sheehan, President Chief Executive Dennis Officer. and Please go ahead.

earnings you Thank Carotenuto, my in who Officer, regarding morning you've release. commentary for morning. by and earnings assuming today. estimates Thank will the joined you joining be provide good comments our for Mike I'm conference seen brief our call I'll Financial all XXXX. this Chief

XX in another was Core $X.XX those a money by majority existing of along solid reference, to of some strong in in For advantage this working take common of It this of the balance this was recognize Bancorp on clients those relationship. estimates with with and to Trust And has both time to optimistic dividend XX% of XXXX. loans X% growth Over and take level deposit to market Cambridge we growth remain time. built excluding release. year this cash It on securities. Page and deepen core forward $X I X% growth highlight, deposits at investor PPP growth are the residential working clients was my growth noise share. achieved both posted relationships the Company. loans Mike an and stock the key The the by on your marketing into one-third we with liquidity look with new we I'm per bank included commercial presentation growth is clients in pleased growth to billion of redemptions strong it can and was in sheet deploy and earnings will guiding and more we an the Loans, from that, worked. performance significant to their to aggressive to over and in XXXX in to their the 'XX. level Cambridge it. by regarding of lending, grew for that. deposit to or continued financial report is year marketplace merger hope of X% our and exceed campaign growth deepening we're a X% again for increase and liquidity buttressed

and multifamily, conditions we So both we for it. market dropped the why improve. growth? emphasize. we under and supply nicely consolidation our conditions Hampshire the that economy, bank Housing, life superb, for assets Recent quarter Massachusetts benefit quarter. deliver. and a we of announced no XXXX sectors in for merged talent a and assets that positive all it's Economic and the finally, the X.X% in levels industrial, Wealth XX% in in innovation achieved New in respectively, of and charge-offs. during Connecticut for has both dependable and Hampshire. team low space, are nonperforming Hampshire, lab Management competitor asset exceed fourth the flows grew delinquency, continue remain a being XX%, quarter revenue cover hiring should and New the are We provide the Well, they we housing delighted Massachusetts by to and institution technology periods. a reputation will year-to-date from per X% are equity Returning year for solid initiatives of earnings of operating and sciences, strategy on sales team the are lending about with results common return at an profitability X.XX% the by These execution. and and quality And results optimistic to New year. fourth Strong and on This on will unemployment Trust. ability and of marketplace year, and XX% for to and construction hopefully Hampshire. that the Core in remains this growth conducive larger return Cambridge Massachusetts assets with driven continued both with bank operating Demand tangible an proven stable benefit to in Massachusetts companies both in beyond. for continues to opportunity, remained And XX.XX% alternative joined other in as clients. New share and and consistency solid basis. net

core throughout our client for exceptional build fee responsibly; all and our focus place. one presents continuation support core Trust on for In XXXX. history strategy: in This growth my provide clients, A a proud First, Cambridge of I'm again executing summary, three to diversification. high-quality make then team's of revenue in opportunity our communities and business deposits; areas immensely and We're of service. look the for fun forward XXX-year having who the years. two last to caring another of special lend

ask make few for So to the with that, a this Mike will I comments year. regarding outlook

Thanks, Dennis.

presentation Of not if of earlier likely. expectations. our interest released financial most As increased set you these what, Therefore, any XX of choose mentioned investor our rate can believe scenario estimates you the note, Page today, be XXXX impact on rates. earlier, any, do include of to

However, are a asset benefit that and a sensitive we note we in expect rising rate would environment. I would

would increase with pretax no XX-basis in For point X% note funding I million increase interest provide further interest and approximate in long-term rates or approximately clarity, on annualized basis interest in costs net change our to on an income. short-term rates would $X.X no increase each income that interest an

within scenarios, additional presentation our included please our appendix and of to rate For SEC filings. investor disclosures the refer the

open will now We the questions. line for

with Piper from comes Our Instructions] [Operator question Sandler. Fitzgibbon first Mark

ahead. You may go

morning. good guys, Hey

Good morning.

Mike, full with assumption that. X.XX% hikes rate the year net no just for margin embedded to the X.XX% in interest to of adjusted clarify,

purchase PPP. that Is be from excludes should adjustments, there residual from is accounting impact else we that? any that anything So excluded thinking

No, Mark. that's correct,

items. two Just those

coming clients, somewhere the this From secondly, Okay. it's Obviously, or where looked pressure from? still bit then net like low. guess, a upward deposits of worth cost I rose curious, And else? But it I'm very high your quarter. is corporations

went was are With merger in us. sticking as -- spend are prospects the out increased institutions aggressively marketplace, of some to go looking more up through noise an -- the sort out all from capture and wanted We our It was the mergers. clients exactly and their what for for aggressively. we strategic to Mark, try marketing This and was our and that's financial when did. share us they're going opportunity around other we head this

bank of strong. As growth my is I was one-third last in really deposit referenced comments, the which to new in year households our

Okay, great.

we securities bit loans? and as Would sort that you into I growth, of sheet about balance slow does probably remix sort fair? out cash the be short-term first guess, So in little quarter as of a think it of

Yes, it frenzy I particularly 'XX. in it on slow of so, the was We'd expect yes. would mean, think side in somewhat 'XX. to I quite deposit a activity,

Okay. share rate you average then, the as the And us size with and could maybe well? pipelines, of complexion loan your

Mark. Sure,

have commercial house, the $XX of we few side the net on of a So payoffs. about expected million

On the of pipeline. $XX terms residential side, we million have about in

loan $XXX it's it's And the terms depending of of rates, terms Xs in the mid-Xs. total million So then pipeline. about to low right, anywhere in upon in product,

of And system your I was does lastly, allows facilitate an approach? Okay. more curious, open to new management wealth what I'm guess architecture I And you it do. curious then

Sure.

clients improve. a end wealth front the So There on new it aggregation. will for systems, is has do ability that the account to

in wherever all else, your client-facing the company aggregate in can That's portal. of and both all inside relationship, the place. you one So

have, account In didn't it's the the it's more that client. terms way more of much paper ability such division, sleeve advantages of we our wealth a system a into to for also the up Previously, core efficient, one system old business, open multiple had the accounts. to and throughout There's less productive strategies much executing use intense. as

business. scaling number So terms benefits a us of in will there's help that of that

having In have architecture, open that. more a being -- we of terms

facilitate So to not; the necessarily that that's more expand the system or itself doesn't strategic. ability

Thank you.

Sure.

Chris Our next with Instructions] O'Connell from question [Operator KBW. comes

now may You go ahead.

gentlemen. morning, Good

buildup coming the are liquidity you yields the at securities at? of more on securities are of looking what as kind in the guys here, new into wondering, just work putting book, So

Yes.

would anywhere to say I mid-Xs low So Xs. between,

pace as XXXX? that you book, And Okay, of the future throughout in going great. as how do see growth securities the far

Yes.

to Chris, growth. obviously, would ahead continue of and is priority liquidity our growth the So grow extent deposit for to loan the to loans that, be use that

to portfolio. continue into securities will We the put

it's mentioned, from some cash take securities for time to in to remix back us Denis the... and going As

those? far And as market as on Understood. the money rate was what campaign the goes,

to not strategy. going sort very on Yes. about the business talk it, That's We're Chris. part of rate of

to going get that. not we're So into

rate Okay. quarter. this see interest-bearing Like, costs in another be the -- should is, deposit for was spread I evenly quarter? Was guess you at money throughout what I'm deposit that in uptick next the the market the campaign quarter? expecting could getting we increase

was quarter. throughout the No, it

the in that all down best fourth to our was So quarter. funding we're we it going continue the Chris to cost campaign that as have work to -- but ran during do past,

color Okay, guide. got then, or income just I was how it. on a clarity derivative And jump quarter? Understood. after little the are going some to bit expecting guys fee In you a of forward this hoping particular, get

based mean, grow range that is preference to expect upon client in we but I continue Chris. certainly, income there, derivative put that Yes. would we that to out

seems considerably Great. that I net was level mean, relative few that lot. income the other should loan fees this were prepayment past And -- quarter? like hamper up a of in how it up growth much was to the But quarters? the

throughout activity the that the the about activity quarter year. happened worth impacted I was there little prepayment mean, of we've certainly, payoff I $XXX,XXX a full what income. quarter mean, that bit noninterest as seen was there during was it, -- some during

quarters, a this greater far as previous kind And like much loan off -- as net it was headwind was quarter? versus paying But to how growth of

Chris. was say wouldn't about It that. same, the I

Okay.

in of as Prepayments, year. the overall the back they were in not as were year significant prior last half

happened time, year. but Chris, last where wasn't of payoffs certainly quarter it in they the there'll back be So some every time half from significant to

shock in you're variance increase sensitivity far there NIM or super the variables disclosed versus And basis Okay, got Or mentioned guys between that which are point X.X%. those like color what color. I XX is being the that as for what up just the down Is differences basis guys like, betas as And that basis that assumed about? helpful. asset point guide, higher clear the two? XXX what is it. point was the you you the in XX the wondering, is being talking the

Sure.

increase on in funding of of about talked portfolio I points. the terms shocks assume our change that an immediate guide entire costs, pretax Chris. that million The no $X.X XXX assumes basis the So deposit in increase

to given portfolio So impact fact shock a going the you book, larger in scenario. from is our see an it's NIM have terms loan of can that deposit than our

there's like to you of the within would more towards assets expectation pure rate interest what appendix tried we if you and some color feel happen ramps So institution floating look probably a provide the rates. really, on can gradual increased of the

Got the are have -- the assumed shock scenario you it. what in And or... do the what betas being

Yes, Chris. they're scenarios, of consistent all across the

one them the them So we're of -- versus shocks each between ramps. are not in changing beta assumptions,

Yes. just No. had versus in to kind like assumed in the what what I wondering actual is. you just are the past? I I a Because of meant more you being guys how beta. past have was estimates the have low put cycle, guess, up beta of fairly that the conservative guys

Yes.

materials. So not going conservative within was rate put our at But interest We last in rising we're that -- appendix beta to our we're assumptions included betas. not exact for look rates out time to cycle, the rising appropriately the if our believe going XX%. last you I'm

Understood. Makes sense.

Okay, then, fees remaining how just cleanup now? the great. PPP is much is questions. couple And a of One

$XXX,XXX. A little over

Great. as accretion to do income year? next any outlook you And have for

fair accretion million on $X guess between our the million and somewhere side. on loan value Yes, $X is

was team, -- are of from your kind I how XXXX? hire Or guide? you lender for The were good you efforts to taking OpEx wealth And that there? wondering markets. in -- the advantage add taking just of M&A progress lastly, there making of disruption expect is that people if some And guys that, guys' is disruption overall general in and kind hires incorporated saw do the the and or Great. hires in I so,

Dennis, is on team happy five Yes, this the side. joined they wealth was very So that of us. Chris. there a I'm

organization keep We we're had. for looking. brought we'll two them. in the conversations and larger in are the very be on lenders later to alternative still to work of good also part everybody There wants Not and a the year

not we'll afraid have opened included the expense beyond So what in that candidates terms the we're estimates. are positions certainly growth of looking. go We operating for has assumed for But keep in sure. to right Mike

you. That's Great. I all had. Thank

Sure.

James. Raymond next with Wallace Our comes William question from

You go may now ahead.

Thanks.

-- if just couple questions. follow-up liquidity. want I a of to quick Mike, Just about talk

loan and not in less you the to matrix that growth look do get more enough securities you deposit make hold decision more outstrips aggressive planning hikes and a do you sheet Could just liquidity that would Fed all to you securities changes? how really investing get portfolio -- Or So fund that I'm really you attractive? want bit curious sure to balance said yields cash loan if you're growth. have on growth? you little to start the on

So it be during It's of or this at period the to think growth quickly not saw XXXX. Wally, I magnitude pace outstrips you securities of continue What loan The saying how the clarify if the that depends that upon growth to going deposit time. just we're in actually for in I part, I to just portfolio. first was need to going that. invest was

we're happens that In what's we're versus, what to would regarding cash before terms see to portfolio. us, to the happening inflation decisions aggressive going environment, the holding environment of happening investment a in, in look more we stance make rate I any what's around rising a with in say,

So tell. time will

the Okay, maybe optimizing from earning two-three leaves if of And assuming some of now, your mix, kind think you fair then, years about the this you think enough. as asset liquidity system.

average would think optimized you be? assets XX% of of mix do kind now. an Your right loans are Where earning

I -- say, The would Wally, XX% XX% cash. XX% Certainly, to in or Dennis. securities say portfolio, it's better.

the excluding year just guidance, that I'm cleanup guide, the slide a expenses Great. is on based the And -- has based the non-operating the expense in guide last XXXX? expense -- that the then, expense, growth just the on slide, the non-operating that sorry, question, in

about stated Wally. is GAAP that's No, expenses. XXX It's starting the there, point

much. appreciate very all you I Thank That's have. I great. it. Okay,

Wally. Thanks,

concludes to would remarks. conference over Dennis the closing our This Sheehan session. question-and-answer like for I any back to turn

next speaking joining for you to -- look to to our everybody release. you you speaking our next earnings Thank after We forward us. after

for The conference presentation. today's has now attending you concluded. Thank

You may disconnect. now