Cambridge Bancorp (CATC) 19 Jul 222022 Q2 Earnings call transcript

Good morning. Welcome to the Cambridge Bancorp Second 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. including SEC GAAP earnings filings measures, found may release. those our in and about reconciliation measures to be Information in our All mode. in be participants a will listen-only to there [Operator today’s will ask questions. be Instructions] presentation, an After opportunity [Operator being note Instructions] this Please is recorded. event to like conference the now over would Mr. turn I to Sheahan, Denis President Chief and Chairman, Officer. Executive sir. ahead, go Please

rising within I'm and you, for comments joining to the margin and focus And revenue period remainder solid today asset strength of is period key on rates for regarding we balanced and an led wealth quality, as will commentary against expanding Tom Chief the and growth a and challenging what by conference Banking quarter estimates asset of continued year loan interest markets. sensitive deposit robust Mike will I'm well pleased Mike earnings Chief Fontaine Thank our wealth due report you for our outlook are revenue. an our in by and for volatility our This loan provide seeing Carotenuto. particular, items market asset joined Financial flows. thank My growth, as call local impact within Officer, position. to and today. in of Officer, this our another the and net

Trust, into also together We merger proposed two terrific announced during the which brings Cambridge markets. banks the Northmark Bank second of quarter high-quality in

both growth. second the in during commercial X% residential continued growth quarter loan expected, lending and As with linked-quarter

growth we feel in prospects good commercial ahead, about lending. for Looking continued

as position opportunities. and opportunity margin year still Core of from and and by the for negative performance assets. during strong at clients superb tax and basis and remains provide in declined of by XX will for deposit assets the market a deposits commentary for sensitive We a Wealth total net base. investment payments quarter, of our by the points reflective second quality X%, interest growth funds deposit non-performing and XX decreased the minutes. net flows assets X% X.XX% Management adjusted using basis Mike result asset see core just Asset few revenue expanded with first to respectively. quarter further The points to due core XX%

While during a affected and common with core remain total tangible fee X.XX% XX.XX% negatively wealth quarter, return of return expenses on and revenue on remain the average revenue profitability assets equity controlled operating on basis. an at good

quarter and remain very of in Northmark the effort. feel early Importantly, good approval process to All close the the merger of we fourth on about year, combination. integration long-term this and on track this progress potential we about appears excited

And to days. We We our lending. optimistic XX markets growth demand see opportunity, regarding in it's as than in tough to loan the local always, remain outlook. see longer next particularly continued and commercial commercial loan solid that. near-term Moving

that conditions also activity was economic We space this X% half unemployment Hampshire of our less vacant lending focus, positive, general size In back and affecting Massachusetts but above by the is expect around an significantly in interest strong in with perspective, is remains From estate unemployment Upstream of level than driven markets, a residential lease market sciences the to year activity rates. life slow real X%. large of higher lending absorption the pharma. our category mixed. and New to due

trending subway picked activity space. small this ridership occupancy the downtown tightening Class both companies private positive. vacancy significantly However, X%. just at innovation in and Overall market remains category particularly has in a there A building office regarding over occurring within is up buildings, clear The in low and are data

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

market commercial the start XX. These will I At March the than and quarter-end, everyone. were at range range $XXX $XX pipeline activity we morning, X% million levels the approximately us growth earlier Good Denis Denis. with better mentioned to update allow X% announced year Overall, will pipelines X% you, to for the revised of as respectively. a year our pipelines. to this XX% the update slightly and combined Thank full-year progresses. the range our residential from and with million you lending to

solid XXXX. We remainder deposit continue of to the see opportunities for

profile deposit this be environment. us our However, in to flexible allows

of adding on retention, households. focused retaining client new and deposits, first high cost are secondly, households our valued We the while

we full-year the X% of we X% cash growth the With total such, from to would any anticipate flow expectations to level growth. would to be range X% used deposits XX% now have previously. excess to growth, that As investment and the of be this fund recasted is lending portfolio for expected deposit

Moving margin. to the net interest adjusted

expect prior of for benefit better fourth net rising margin would net interest year-end, by guidance we the continue increase X.XX% X.XX%. range in in We to net environment. were rate X%. our adjusted to fed margin to interest put above funds this be full-year quarter to X.X% would of to XXXX, XXXX X.XX% This to the than the X.XX% If of interest to quarter our margin expect

levels, to of equity non-interest minus to X% income. income and lower are current markets equity XXXX. conforming due as markets, of of our mortgages. corresponding X% declines contemplated to Moving be the to XXXX non-interest forecast full-year compared income than within Non-interest less going sales wealth is growth estimates at for the minus previously stay If the revenue to

rise, assets. expected X% While and for be portfolio, on tangible it will It continued we to of our of our of equity to makes XX% there but immune it held portfolio for manageable securities rates to of rising given use sale investments maturity up only rates that are our not is negative the total remainder available impact as year. total common is small and a the outlook the

per this rates, during share As value equity you continued book the within common nicely interest release, grew tangible quarter's can see quarter. tangible within despite increases both and

the expect previously XX% also end rate the operating We on XX% for range tax lower effective to to be provided. of the

As of rate the increase from open estimates approximately which the insurance quarter, owned life we for bank line tax life remain surrendered the was our income. in shown expense bank non-operating insurance owned completely which quarter, during rest questions. intact. we of created quarter The now last X.X% within an increased reconciliation this a by the offset policy, income will And for

you. Thank

question-and-answer of We will begin Fitzgibbon Instructions] today go question comes Mark the now Sandler. session. The first [Operator Piper ahead. Please from

morning. Good guys. Hey,

Mark. morning, Good

couple A questions deposits. around of

of commercial you customers? curious, there starting costs on points feel X those guys to impressive I deposits. had You have sort I'm are any at pretty pressure from deposit guess, pricing basis business deposit

the in so In saw XX% the modeling Sure. risk. deposit within to expectations it's you'll last see cycle cycle, slide than within we higher Mike. beta interest rate going this different we and asset beta liability a that our We're – be have that. certainly Mark, is that

better. that expecting and to do hoping we're we're higher So than

would I questions to expected. it clients to great clients but be It's quickly. expected. It's surprise is are increasing be aggressive, add certainly overly fed no getting not Mark, rates with some deposit the this from to Denis. We're rates questioning certainly

Is more deposits from your sounds deposit it fair? in not expecting you're that on like But run-off XQ. guidance Okay.

fair, That's Yes. Mark.

by clients with tax We quarter opportunities, seasonal payments. of of investment this our larger advantage It exacerbated taking component big associated some have some was somewhat certainly a clients.

factors key are quarter. those two this so And the

little and any a Are then you're et economy, Okay. I employment either any the of heard seeing watching there, concerned in you pretty of distress portfolios hints sort about that comments And or picture or businesses being of related cetera, good. out sort the to your of consumers things about?

do go None. conditioning No. about when and feel this some delinquency. very We feel certainly the weakness recession, if to very always there'll and be about of we one organization imagine, asset we would think quality about bad very, asset good good I quality. but about making loans times we we're mean,

business. client Okay. the sort Last was of of shifting terms sort difficult holding that year. so Denis around space. classes? about this behavior I I far [pad] are in of Management all I asset was seeing people Are what of you guess, behavior? sort market in Obviously, they curious question Are or had customer Wealth

certainly stress and to clients – stress. that that So with conditioned work our we're through

these occasion, can certainly stressful to that we periods. of are clients about not, through a You and you that of where to volatility, the with clients try on majority lot we cash to coach on go of rare that. successful; vast we relationship but And nature that's to the totally going our not we the But the time, this time, are get them and markets. are and more questions we're There you're that. have them coach conversations to what's of wants do occasions going the we kind most doing with expect there are the with the have client a in of is

did loan Okay. million? then clarify, pipeline was one And final the to one Mike, say $XXX just you

The yes, Mark, commercial loan pipeline, million. $XXX

Great. Thank you.

from KBW. of Chris Please Your ahead. next O'Connell question go comes

Hi. Good morning, gentlemen.

morning. Good

Hey, Chris.

Hey.

or if of So a that's effective those So I to the to starting in that given it's deposit above follow-up close – have know if to question. wondering betas a to you from said XX%, little assuming quarter? was be of last there the guys you're that guidance point the as upside guide? some kind X.XX% is guide here just to you as XX% guidance. through I the are NIM betas But if third we're hoping of you become start could the And I'm way within the at cycle. deposit third when the those above during on move later a because getting NIM that and your rates third quarter quarter moved for included the of core Are betas X.XX% assuming being to kind some in yet there not to significant that that

Certainly, Chris. Yes.

range we're guide that higher standpoint, the end from be So able that potential the to deposit do cost sure. there's of for for NIM to to that better at extent a the

included costs some move forward expecting within and are that We here, increased forecast. that's as funding we

to might Mike, is you X.XX% X.XX% for clarify that full-year. the Also, Chris

for It's the full-year.

expect X%. You over be to

In quarter. the fourth

Yes, quarter. in the fourth

you. Yes. Thank

as during And dropped there least the the until balance gets this great. stay as cash the at Does low quarter. closed? year far are you deal guys that thinking about Okay, then pretty

We least be think your point to Yes. at deal least levels closes. it'll for these at around still the –

that's a think assessment. fair I

the fairly about They rest growth particular I normalized of were seem are the giving of and primarily you the thinking that then this flows, kind the and core to any the of deposit to good from deposit continue quarter you guidance? And in of that this it pockets factors getting about you're are as kind present Great. mean, I in commercial the growth thinking is the sources side on confidence impacted How traction have know get Okay. be customers? forward? going growth seasonally substantially. quarter to or

think households, we consumer first our which we so we from and or us. need to consumer growing grow when And which about growing from deposits, Chris, important from I both are look certainly, when we're market a continue checking consumers to would standpoint, Yes. about desired standpoint, looking whether households, money deposits grow be commercial operating think options. to way savings accounts mean, a they to at

all had worth over a that So at base. of when we'll back tools our growth. last what to we $X look billion deposit deposit grow we available you of did use And year,

year. we to that – in in able ways prior we in to intend to So that continue the grow grow were

Okay. I And at I positive up XX% revised X% mean, to with growth the side, the prior. guidance core it. from growth the Got loan on understand

given much a to the commercial the bit resi were even fairly you that want you flat same XX% given pull light X% That up third of being on be now? it more a Given and quarter of resi side kind like end still that third particularly Am ends guys bogey hard fourth fairly frankly, see up to a on to conservative stay on being kind right? solid easy side. the being pipeline the down, if that last to the unless a right in get than still where I Or just guys quarter seems could range. and it's relative like commercial quite seems out quarter that the ends quarter even pipeline, to at if going to basis to rates about through up core the stronger the thinking

both in update next it's standpoint. be that standpoint. able see we're XX commercial earnings to I it's and positive extent days from quarter think, there than certainly going out overachieve Chris, to hard We'll to you an the to a more the NIM

the those one and last for for side? commercial where missed mentioned us then And and if are it, I you yields origination And me. Great. you but through the the mind on I apologize both coming walking guys resi

Sure.

and the mid-fours, it the side go upon could up it's product, the the On from house, there. commercial of down in depending

say high-fours. the I residential side it's would of On house, the the

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

to Denis concludes This session. the our remarks. turn Instructions] Sheahan back [Operator would any for like conference question-and-answer I closing over to

forward at We everybody. the to of to end Thanks, our quarter. look speaking you next

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

You may now disconnect.