8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 25, 2018

CAMBRIDGE BANCORP

(Exact name of Registrant as Specified in Its Charter)

Massachusetts (State or Other Jurisdiction of Incorporation)	001-38184 (Commission File Number)	04-2777442 (IRS Employer Identification No.)
	1336 Massachusetts Avenue Cambridge, MA 02138
	(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 876-5500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On January 25, 2018, Cambridge Bancorp issued a press release in which it disclosed unaudited financial information for the quarter and year ended December 31, 2017 consolidated earnings. The press release also announced the declaration of a quarterly cash dividend of $0.48 per share. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.

Information contained herein, including Exhibit 99.1, shall not be deemed filed for the purposes of the Securities Exchange Act of 1934, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.Financial Statements and Exhibits.

(a)  Not applicable.

(b)  Not applicable.

(c)  Not applicable.

(d) Exhibits.

The exhibits required by this item are set forth on the Exhibit Index.

Exhibit Index

Exhibit Number	Description
99.1*	Press release dated January 25, 2018.

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CAMBRIDGE BANCORP
January 25, 2018	By:	/s/  Denis K. Sheahan
		Denis K. Sheahan
		Chairman, Chief Executive Officer (Principal Executive Officer)
January 25, 2018
	By	/s/  Michael F. Carotenuto
		Michael F. Carotenuto
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

EX-99.1

EX: 99.1

CONTACT:

Cambridge Bancorp

Michael F. Carotenuto

Chief Financial Officer

617-520-5520

FOR IMMEDIATE RELEASE

Cambridge Bancorp Announces Earnings for 2017, Declares Increased Dividend, and Reports the Impact of the Tax Cuts and Jobs Act of 2017

• One-time non-cash tax charge in Q4 2017 of $3.9 million

• Full year 2017 GAAP net income of $14.8 million, Q4 2017 GAAP net income of $964,000

• Excluding tax charge, full year 2017 net income of $18.7 million, or 10.6% increase over 2016

• Excluding tax charge, Q4 2017 net income of $4.8 million, or 9.3% increase over 2016

CAMBRIDGE, MA. (January 25, 2018) - Cambridge Bancorp (NASDAQ: CATC) (the “Company”), the parent of Cambridge Trust Company, today announced unaudited net income of $14,816,000 for the year ended December 31, 2017, a decrease of $2,080,000, or 12.3%, compared to net income of $16,896,000 for the year ended December 31, 2016. Diluted earnings per share were $3.61 for 2017, representing a 13.0% decrease over diluted earnings per share of $4.15 for 2016.

For the three months ended December 31, 2017, unaudited net income was $964,000, representing a decrease of $3,459,000, or 78.2%, compared to net income of $4,423,000 for the three months ended December 31, 2016. Diluted earnings per share were $0.23 for the fourth quarter of 2017, representing a 78.7% decrease over diluted earnings per share of $1.08 for the fourth quarter of 2016.

Impact of Tax Cuts and Jobs Act of 2017

As reported by many financial institutions, earnings in 2017 were impacted by the Tax Cuts and Jobs Act of 2017. Effective in 2018, the change in tax law reduced the Company’s federal tax rate from 35% to 21%.  The change in tax law requires a one-time non-cash write-down of our net deferred tax assets of $3,869,000 as these deferred tax assets were required to be re-measured using the new lower tax rate in 2017. Removing the impact of the charge for the change in tax law, unaudited net income would have been $18,685,000, an increase of $1,789,000, or 10.6%, as compared to $16,896,000 for the year ended December 31, 2016. Removing the impact of the charge for the change in tax law, diluted earnings per share would have been $4.55 for 2017, representing a 9.6% increase over diluted earnings per share of $4.15 for 2016.

Earnings for the three months ended December 31, 2017 were also impacted by the Tax Cuts and Jobs Act of 2017. As discussed above, the change in tax law requires a one-time non-cash write-down of our net deferred tax assets of $3,869,000 as these deferred tax assets were required to be re-measured using the new lower tax rate in 2017. Removing the impact of the charge for the change in tax law, unaudited net income would have been $4,833,000, an increase of $410,000, or 9.3%, as compared to $4,423,000 for the three months ended December 31, 2016. Removing the impact of the charge for the change in tax law, diluted earnings per share would have been $1.17 for the fourth quarter of 2017, representing an 8.3% increase over diluted earnings per share of $1.08 for 2016.

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Year to date 2017 highlights as compared to year to date 2016:

• Wealth Management Assets under Management and Administration now at $3.1 billion, an increase of 14.7%

• Revenue of $87.8 million, an increase of 6.7%

• Loan growth of $30.7 million, or 2.3%

• Core deposit growth of $100.7 million, or 6.6%

“We ended 2017 with continued strong earnings during the fourth quarter, excluding the impact of the change in corporate tax rates” noted Denis K. Sheahan, CEO. “Our strategic focus of delivering private banking services to clients continues to position us favorably in the Greater Boston market, and we have begun investing in greater business development efforts for future growth. Additionally, we are pleased to report that the Company ended the year with Wealth Management Assets under Management and Administration of $3.1 billion.”  

Balance Sheet

Total assets increased $100.9 million, or 5.5%, from December 31, 2016 and stood at $1.9 billion as of December 31, 2017.

Total loans increased $30.7 million, or 2.3%, from December 31, 2016 and stood at $1.4 billion as of December 31, 2017. The growth in total loans was primarily due to the increase in commercial real estate loans of $17.5 million, from $616.1 million at December 31, 2016 to $633.6 million at December 31, 2017 and the increase in commercial and industrial loans of $5.6 million, from $59.7 million at December 31, 2016 to $65.3  million at December 31, 2017. Loan growth in 2017 was significantly hampered by payoffs as a result of the vibrant real estate market in the Greater Boston area.  

The Company’s total investment securities portfolio increased by $29.1 million, or 7.1%, from $408.1 million at December 31, 2016 to $437.2 million at December 31, 2017.  

Core deposits, which we define as all deposits other than certificates of deposit, increased by $100.7 million, or   6.6%, from December 31, 2016. The cost of total deposits for the year ended December 31, 2017 was 0.19%, as compared to 0.20% for the year ended December 31, 2016. Total deposits at December 31, 2017 were $1.8 billion, as compared to $1.7 billion at December 31, 2016.

Net Interest and Dividend Income

For the quarter ended December 31, 2017, net interest and dividend income after provision for loan losses increased by $666,000, or 4.7%, to $14.8 million, as compared to $14.1 million for the quarter ended December 31, 2016. Interest on loans increased $698,000, or 5.5%, which was driven by the impact of loan growth and higher yields. The Company’s net interest margin, on a fully tax equivalent basis, increased two basis points to 3.26% for the three months ended December 31, 2017, as compared to 3.24% for the three months ended December 31, 2016.

For the year ended December 31, 2017, net interest and dividend income after provision for loan losses increased by $3.7 million, or 6.9%, to $57.2 million, as compared to $53.5 million for the year ended December 31, 2016. Interest on loans increased by $3.0 million, or 6.1%, primarily driven by the impact of loan growth. The Company’s net interest margin, on a fully tax equivalent basis, increased four basis points to 3.25% for the year ended December 31, 2017, as compared to 3.21% for the year ended December 31, 2016.

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Noninterest Income

Total noninterest income increased by $297,000, or 4.1%, to $7.6 million for the quarter ended December 31, 2017, as compared to $7.3 million for the quarter ended December 31, 2016, primarily as a result of higher Wealth Management revenue. Noninterest income was 33.9% of total revenue for the quarter ended December 31, 2017. Wealth Management revenue increased by $589,000, or 11.0%, for the fourth quarter of 2017, as compared to the fourth quarter of 2016 due to a combination of market appreciation and net new business. Wealth Management Assets under Management increased by $398.6 million, or 15.5%, to $3.0 billion as of December 31, 2017, as compared to $2.6 billion as of December 31, 2016.

Noninterest income increases were partially offset by lower gains on loans held for sale of $294,000 for the quarter ended December 31, 2017, as compared to the quarter ended December 31, 2016.

Total noninterest income increased by $1.6 million, or 5.5%, to $30.2 million for the year ended December 31, 2017, as compared to $28.7 million for the year ended December 31, 2016, primarily as a result of higher Wealth Management revenue. Noninterest income was 34.4% of total revenue for the year ended December 31, 2017. Wealth Management revenue increased by $2.6 million, or 12.9%, for the year ended 2017, as compared to the year ended 2016 due to a combination of market appreciation and net new business.

Noninterest income increases were partially offset by lower gains on loans held for sale of $561,000 and lower loan related derivative income of $543,000 for the year ended December 31, 2017, as compared to the year ended December 31, 2016.

Noninterest Expense

Total noninterest expense increased by $417,000, or 2.9%, to $15.0 million for the quarter ended December 31, 2017, as compared to $14.6 million for the quarter ended December 31, 2016, primarily driven by higher salaries and benefits expense, marketing expense, and professional services. The increase in salaries and benefits of $398,000 was the result of the combination of increased staffing to support business initiatives and higher employee benefit costs. The Company announced a hard freeze of its defined benefit pension plan as of December 31, 2017. The increase of $204,000 in marketing expense is largely due to the timing of a strategic advertising campaign during the fourth quarter of 2017. The increase of $187,000 in professional services is primarily due to recruiting fees.

Noninterest expense increases were partially offset by decreases in data processing costs of $154,000 and lower occupancy and equipment expense of $124,000 for the quarter ended December 31, 2017, as compared to December 31, 2016.  

Total noninterest expense increased by $2.5 million, or 4.5%, to $59.3 million for the year ended December 31, 2017, as compared to $56.8 million for the year ended December 31, 2016, primarily driven by higher salaries and benefits expense and professional services. The increase in salaries and benefits expense of $2.2 million is primarily due to annual merit increases, increased staffing to support business initiatives, and higher employee benefit costs. The increase in professional services of $980,000 is a result of increased recruitment fees, legal costs, audits and exams, compensation consulting, marketing consulting, training and development, and costs associated with the registration of our securities with the U.S. Securities and Exchange Commission.

Noninterest expense increases were partially offset by decreases in occupancy and equipment expense of $217,000 and lower FDIC insurance expense of $205,000 for the year ended December 31, 2017, as compared to the year ended December 31, 2016.

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Asset Quality

Loan quality remained sound with non-performing loans totaling $1.3 million, or 0.10% of total loans outstanding as of December 31, 2017. The allowance for loan losses was $15.3 million, or 1.13% of total loans outstanding at December 31, 2017, as compared to $15.3 million, or 1.16% of total loans outstanding at year end 2016.

Income Taxes

In accordance with the Tax Cuts and Jobs Act of 2017, the Company re-measured its net deferred tax assets which resulted in a one-time non-cash write-down of its net deferred tax assets and recognized an additional income tax expense of $3.9 million for the year ended December 31, 2017. The effective tax rate was 86.9% for the quarter ended December 31, 2017, as compared to 34.9% for the quarter ended December 31, 2016. For the year ended December 31, 2017, the effective tax rate was 47.4%, as compared to 33.6% for the year ended December 31, 2016. Removing the impact of the charge for the change in tax law, the effective tax rate would have been 34.1% for the quarter ended December 31, 2017 and 33.7% for the year ended December 31, 2017. Additionally, the Company recognized $221,000 of tax benefit resulting from the adoption of new accounting guidance for share-based payments during 2017.

Dividend

On January 22, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.48 per share, which is payable on February 22, 2018 to shareholders of record as of the close of business on February 8, 2018. This represents an increase of $0.02 per share, as compared to $0.46 per share declared during the first quarter of 2017.

About Cambridge Bancorp

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 127-year-old Massachusetts chartered commercial bank with $1.9 billion in assets and 11 Massachusetts locations in Cambridge, Boston, Belmont, Concord, Lexington, and Weston. Cambridge Trust Company is one of New England’s leaders in wealth management with $3.1 billion in client assets under management and administration. The Wealth Management group maintains offices in Boston, Massachusetts and Concord, Manchester and Portsmouth, New Hampshire.

The accompanying unaudited condensed interim and annual consolidated financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Registration Statement on Form 10, which is posted in the investor relations section of our website at www.cambridgetrust.com.

Forward-looking Statements

Certain statements herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements are intended to take advantage of the “safe harbor” provisions of the PSLRA. These statements are based on the beliefs and assumptions of management of the Company and its subsidiaries and on the information available to management at the time that these statements were made. Since these statements reflect the views of management concerning future events, these statements involve risks, uncertainties, and assumptions. As a result, actual results may differ from those contemplated by these statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Such statements may be identified by the use of words such as “believe,” “expect,” “anticipate,” “forecast,” “estimate,” “intend,” “will,” “would,” “should,” “could,” “may,” or similar words. There are a number of factors, many of which are beyond the Company’s control that could

4

cause actual conditions, events or results to differ materially from those in the forward-looking statements.  Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, changes in the interest rate environment, unfavorable or less than favorable changes in general economic conditions (nationally or regionally), our ability to continue to increase loans and deposit growth, increased competitive pressures among depository and other financial institutions, legislative and regulatory changes that adversely affect the businesses in which the Company is engaged, changes in the securities market, and other factors that are described in the Company’s filings with the Securities and Exchange Commission. Readers should not place undue reliance on these forward-looking statements, which speak only as of the date they are made. The Company disclaims any intent or obligation to update any forward-looking statements, whether in response to new information, future events, or otherwise, except as may be required by law.

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CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED QUARTERLY RESULTS

December 31, 2017

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2017			2016			2017			2016
	(dollar amounts in thousands, except per share data)
Interest and Dividend Income	$	15,744		$	14,663		$	61,191		$	57,028
Interest Expense		970			763			3,587			3,355
Net Interest and Dividend Income		14,774			13,900			57,604			53,673
Provision for (Release of) Loan Losses		2			(206	)		362			132
Noninterest Income		7,575			7,278			30,224			28,661
Noninterest Expense		15,012			14,595			59,292			56,750
Income Before Taxes		7,335			6,789			28,174			25,452
Income Taxes		6,371			2,366			13,358			8,556
Net Income	$	964		$	4,423		$	14,816		$	16,896
Data Per Common Share:
Basic Earnings Per Share	$	0.24		$	1.10		$	3.64		$	4.19
Diluted Earnings Per Share	$	0.23		$	1.08		$	3.61		$	4.15
Dividends Declared Per Share	$	0.47		$	0.46		$	1.86		$	1.84
Avg. Common Shares Outstanding:
Basic		4,038,948			3,995,495			4,030,530			3,990,343
Diluted		4,073,707			4,034,687			4,065,754			4,028,944
Selected Operating Ratios:
Net Interest Margin, FTE		3.26	%		3.24	%		3.25	%		3.21	%
Cost of Funds		0.21	%		0.17	%		0.20	%		0.20	%
Cost of Interest Bearing Liabilities		0.31	%		0.25	%		0.29	%		0.29	%
Cost of Deposits		0.22	%		0.18	%		0.19	%		0.20	%
Return on Average Assets		0.20	%		0.97	%		0.79	%		0.95	%
Return on Average Equity		2.61	%		12.94	%		10.47	%		12.77	%
Efficiency Ratio		67.17	%		68.92	%		67.51	%		68.93	%
							December 31,			December 31,
							2017			2016
Total Assets							$	1,949,934		$	1,848,999
Total Loans								1,350,899			1,320,154
Non-Performing Loans								1,298			1,676
Allowance for Loan Losses								15,320			15,261
Allowance to Total Loans								1.13	%		1.16	%
Total Deposits								1,775,400			1,686,038
Total Shareholders’ Equity								147,957			134,671
Wealth Management AUM							$	2,971,322		$	2,572,760
Wealth Management AUM & AUA							$	3,085,669		$	2,689,103
Book Value Per Share							$	36.24		$	33.36

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CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

	December 31, 2017			December 31, 2016
	(dollars in thousands, except par value)
Assets
Cash and cash equivalents	$	103,591		$	54,050
Investment securities
Available for sale, at fair value (amortized cost $208,911 and $329,726, respectively)		205,017			325,641
Held to maturity, at amortized cost (fair value $233,554 and $83,755, respectively)		232,188			82,502
Total investment securities		437,205			408,143
Loans held for sale, at lower of cost or fair value		-			6,506
Loans
Residential mortgage		538,920			534,404
Commercial mortgage		633,649			616,140
Home equity		74,444			75,051
Commercial & Industrial		65,295			59,706
Consumer		38,591			34,853
Total loans		1,350,899			1,320,154
Less: allowance for loan losses		(15,320	)		(15,261	)
Net loans		1,335,579			1,304,893
Stock in FHLB of Boston, at cost		4,242			4,098
Bank owned life insurance		31,083			30,499
Banking premises and equipment, net		9,310			10,451
Deferred income taxes, net		8,273			13,693
Accrued interest receivable		5,128			4,627
Other assets		15,523			12,039
Total assets	$	1,949,934		$	1,848,999
Liabilities
Deposits
Demand	$	493,613		$	472,923
Interest bearing checking		462,957			430,706
Money market		69,259			72,057
Savings		589,741			539,190
Certificates of deposit		159,830			171,162
Total deposits		1,775,400			1,686,038
Short-term borrowings		—			—
Long-term borrowings		3,579			3,746
Other liabilities		22,998			24,544
Total liabilities		1,801,977			1,714,328
Shareholders’ Equity
Common stock, par value $1.00; Authorized 10,000,000 shares; Outstanding: 4,082,188    shares and 4,036,879 shares, respectively		4,082			4,037
Additional paid-in capital		35,663			33,253
Retained earnings		114,093			107,262
Accumulated other comprehensive loss		(5,881	)		(9,881	)
Total shareholders’ equity		147,957			134,671
Total liabilities and shareholders’ equity	$	1,949,934		$	1,848,999

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CAMBRIDGE BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended December 31,					Twelve Months Ended December 31,
	2017		2016			2017			2016
	(dollars in thousands, except share data)
Interest and dividend income
Interest on taxable loans	$	13,272	$	12,557		$	51,238		$	48,353
Interest on tax-exempt loans		105		122			496			415
Interest on taxable investment securities		1,559		1,251			6,321			5,230
Interest on tax-exempt investment securities		634		666			2,600			2,737
Dividends on FHLB of Boston stock		53		47			245			179
Interest on overnight investments		121		20			291			114
Total interest and dividend income		15,744		14,663			61,191			57,028
Interest expense
Interest on deposits		942		734			3,125			3,260
Interest on borrowed funds		28		29			462			95
Total interest expense		970		763			3,587			3,355
Net interest and dividend income		14,774		13,900			57,604			53,673
Provision for loan losses		2		(206	)		362			132
Net interest and dividend income after provision for    loan losses		14,772		14,106			57,242			53,541
Noninterest income
Wealth management revenue		5,952		5,363			23,029			20,389
Deposit account fees		755		788			3,142			2,922
ATM/Debit card income		303		288			1,182			1,140
Bank owned life insurance income		136		138			584			612
(Loss) gain on disposition of investment securities		—		—			(3	)		438
Gain on loans held for sale		31		325			355			916
Loan related derivative income		133		132			780			1,323
Other income		265		244			1,155			921
Total noninterest income		7,575		7,278			30,224			28,661
Noninterest expense
Salaries and employee benefits		9,496		9,098			36,707			34,529
Occupancy and equipment		2,178		2,302			9,114			9,331
Data processing		1,126		1,280			4,956			5,024
Professional services		724		537			3,374			2,394
Marketing		522		318			1,620			1,706
FDIC Insurance		163		206			629			834
Other expenses		803		854			2,892			2,932
Total noninterest expense		15,012		14,595			59,292			56,750
Income before income taxes		7,335		6,789			28,174			25,452
Income tax expense		6,371		2,366			13,358			8,556
Net income	$	964	$	4,423		$	14,816		$	16,896
Share data
Weighted average number of shares outstanding, basic		4,038,948		3,995,495			4,030,530			3,990,343
Weighted average number of shares outstanding, diluted		4,073,707		4,034,687			4,065,754			4,028,944
Basic earnings per share	$	0.24	$	1.10		$	3.64		$	4.19
Diluted earnings per share	$	0.23	$	1.08		$	3.61		$	4.15

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CAMBRIDGE BANCORP AND SUBSIDIARIES

MARGIN & YIELD ANALYSIS

	Three Months Ended
	December 31, 2017									December 31, 2016
	Average Balance			Interest Income/ Expenses(1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)
	(dollars in thousands)
ASSETS
Interest-earning assets
Loans (2)
Taxable	$	1,335,652		$	13,272			3.94	%	$	1,304,703		$	12,557			3.83	%
Tax-exempt		12,502			163			5.17			19,084			188			3.92
Securities available for sale (3)
Taxable		212,230			853			1.59			316,235			1,242			1.56
Securities held to maturity
Taxable		140,040			706			2.00			777			9			4.61
Tax-exempt		80,057			975			4.83			82,897			1,025			4.92
Cash and due from banks		60,111			121			0.80			31,074			20			0.26
Total interest-earning assets (4)		1,840,592			16,090			3.47	%		1,754,770			15,041			3.41	%
Non interest-earning assets		72,940									72,837
Allowance for loan losses		(15,511	)								(15,520	)
Total assets	$	1,898,021								$	1,812,087
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Checking accounts	$	389,305		$	47			0.05	%	$	376,588		$	16			0.02	%
Savings accounts		613,847			506			0.33			544,596			316			0.23
Money market accounts		62,503			24			0.15			81,865			31			0.15
Certificates of deposit		161,286			365			0.90			177,822			371			0.83
Total interest-bearing deposits		1,226,941			942			0.30			1,180,871			734			0.25
Other borrowed funds		6,708			28			1.66			11,421			29			1.01
Total interest-bearing liabilities		1,233,649			970			0.31	%		1,192,292			763			0.25	%
Non-interest-bearing liabilities
Demand deposits		490,618									460,117
Other liabilities		27,328									23,663
Total liabilities		1,751,595									1,676,072
Shareholders’ equity		146,426									136,015
Total liabilities & shareholders’ equity	$	1,898,021								$	1,812,087
Net interest income on a fully taxable equivalent basis					15,120									14,278
Less taxable equivalent adjustment					(399	)								(425	)
Net interest income				$	14,721								$	13,853
Net interest spread (5)								3.16	%								3.16	%
Net interest margin (6)								3.26	%								3.24	%

(1) Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 35%.

(2) Nonaccrual loans are included in average amounts outstanding.

(3) Average balances of securities available for sale calculated utilizing amortized cost.

(4) Federal Home Loan Bank stock balance and dividend income is excluded from interest-earning assets.

(5) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(6) Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets.

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CAMBRIDGE BANCORP AND SUBSIDIARIES

MARGIN & YIELD ANALYSIS

	For the Year Ended
	December 31, 2017									December 31, 2016
	Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)			Average Balance			Interest Income/ Expenses (1)			Rate Earned/ Paid (1)
	(dollars in thousands)
ASSETS
Interest-earning assets
Loans (2)
Taxable	$	1,318,284		$	51,238			3.89	%	$	1,249,205		$	48,353			3.87	%
Tax-exempt		15,057			764			5.07			15,973			638			3.99
Securities available for sale (3)
Taxable		248,787			4,011			1.61			334,292			5,184			1.55
Securities held to maturity
Taxable		111,452			2,310			2.07			979			46			4.70
Tax-exempt		81,528			4,000			4.91			82,797			4,211			5.09
Cash and due from banks		41,888			291			0.69			35,895			114			0.32
Total interest-earning    assets (4)		1,816,996			62,614			3.45	%		1,719,141			58,546			3.41	%
Non interest-earning assets		73,532									73,559
Allowance for loan losses		(15,392	)								(15,371	)
Total assets	$	1,875,136								$	1,777,329
LIABILITIES AND    SHAREHOLDERS’ EQUITY
Interest-bearing deposits
Checking accounts	$	394,132		$	131			0.03	%	$	365,946		$	82			0.02	%
Savings accounts		571,659			1,457			0.25			538,297			1,567			0.29
Money market accounts		68,891			103			0.15			79,409			131			0.16
Certificates of deposit		166,410			1,434			0.86			176,550			1,480			0.84
Total interest-bearing    deposits		1,201,092			3,125			0.26			1,160,202			3,260			0.28
Other borrowed funds		36,074			462			1.28			7,489			95			1.27
Total interest-bearing    liabilities		1,237,166			3,587			0.29	%		1,167,691			3,355			0.29	%
Non-interest-bearing liabilities
Demand deposits		470,871									454,977
Other liabilities		25,611									22,394
Total liabilities		1,733,648									1,645,062
Shareholders’ equity		141,488									132,267
Total liabilities &    shareholders’ equity	$	1,875,136								$	1,777,329
Net interest income on a fully    taxable equivalent basis					59,027									55,191
Less taxable equivalent adjustment					(1,668	)								(1,697	)
Net interest income				$	57,359								$	53,494
Net interest spread (5)								3.16	%								3.12	%
Net interest margin (6)								3.25	%								3.21	%

(1) Annualized on a fully taxable equivalent basis calculated using a federal tax rate of 35%.

(2) Nonaccrual loans are included in average amounts outstanding.

(3) Average balances of securities available for sale calculated utilizing amortized cost.

(4) Federal Home Loan Bank stock balance and dividend income is excluded from interest-earning assets.

(5) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(6) Net interest margin represents net interest income on a fully tax equivalent basis as a percentage of average interest-earning assets.

10