CAMBRIDGE BANCORP
ANNUAL REPORT
2013
The mission of the Cambridge Trust Company is to maintain a level of growth
and earnings that will yield a superior return to Stockholders while retaining its
position as a responsible, active and socially sensitive member of its communities.
To achieve this, the Bank will develop and support intelligent and proficient
employees. Through friendly, responsible and trustworthy services, the Bank will
provide sound financial help to existing and prospective customers. The Bank will
continue to provide services to individual, retail and commercial customers located
within its present community and also within areas identified for expansion.
ROBERT J. BETTACCHI
DIRECTORS
Principal/Owner
RJB Consulting
Retired Senior Vice President of
W.R. Grace & Company and
President of Grace Performance Chemicals
DONALD T. BRIGGS
JEANETTE G. CLOUGH
HAMBLETON LORD
JEAN K. MIXER
President
Federal Realty Boston
Senior Vice President – Development
Federal Realty Investment Trust
President and Chief Executive Officer
Mount Auburn Hospital
Managing Director
Launchpad Venture Group
Chief Executive Officer
Mixer Consulting
LEON A. PALANDJIAN
Managing Member
ROBERT S. PETERKIN
Intercontinental Capital Management, LLC
Portfolio Manager
Techari Global Healthcare Fund
Professor of Practice Emeritus
Harvard Graduate School of Education
Principal
Peterkin Consulting Group
JOSEPH V. ROLLER II
President and Chief Executive Officer
Cambridge Bancorp and Cambridge Trust Company
R. GREGG STONE
ANNE M. THOMAS
DAVID C. WARNER
LINDA WHITLOCK
Manager
Kestrel Management, LLC
Retired Special Counsel
City of Somerville
Partner
J. M. Forbes & Co. LLP
Lead Director
Cambridge Bancorp and Cambridge Trust Company
Principal
The Whitlock Group
KATHRYN A. WILLMORE
Retired Vice President and Secretary of the Corporation
Massachusetts Institute of Technology
BYRON E. WOODMAN, JR. President
Monument Group Wealth Advisors, LLC
Monument Group Tax Advisors, LLC
Woodman & Eaton, P.C.
We shape our buildings, and afterwards our buildings shape us.
—Winston Churchill
In remarking as he did in 1943 that “our buildings shape us,”
Churchill was not merely making the unexceptionable observation that
we are influenced by our surroundings, much less proposing that we are
primarily shaped by them. He was, in fact, thinking of a specific building,
namely, the House of Commons, which had been damaged by German
bombs during the Blitz of London. His suggestion was that the structure
of the debating chamber, which was designed to facilitate open argument
between parties seated directly opposite to one another, was worth
maintaining in its essentials while being restored. The character of the
institution could be preserved while the premises were made suitable for
use by future generations. It was the need to renovate which prompted
Churchill to reflect upon the principles that were essential for the building’s
purpose.
Renovations, of course, do not always follow from calamity; they
may also represent welcome opportunities. During the past year, Cambridge
Trust has been presented with just such an opportunity. Last year in this
letter, I noted that: “As 2013 unfolds and with the anticipated relocation
of Wealth Management to 75 State Street in Boston, we will take the
opportunity to renovate the Bank’s Harvard Square headquarters. This will
include major construction on both the first floor and lower level. When
complete, the Bank will have banking premises that better suit current
and future servicing needs of our customers.” What I did not explicitly
note at the time was that our new premises, in being brought up to date,
would continue to reflect the same principles of visibility, accessibility,
and effectiveness that have consistently informed the arrangement of our
1
headquarters. I am happy to report, however, that this is very much the
case.
It is not just our new and improved premises that reflect our
commitment to our customers, shareholders, and the future. 2013 was
characterized by significant achievement—record loan and wealth
management growth, the procurement of a long-term lease for the Harvard
Square headquarters that potentially extends to mid-century, and a range of
exciting new products and investments in technology. These investments
and products address changing customer preferences and ultimately will
enhance the customer experience.
The Bank had an impressive year in 2013, building on the
momentum generated in 2012 through a number of strategic initiatives.
The year ending December 31, 2013 produced another earnings record
with net income of $14,140,000 compared to earnings of $13,403,000
for the year ending December 31, 2012. The year-over-year increase in
earnings of $737,000 was 5.5%.
Diluted earnings per share (EPS) were $3.62 for the year ended
December 31, 2013, compared to $3.45 in the prior year.
Similar to prior years, the Bank’s performance was driven by a
number of factors, the most noteworthy of which were loan growth and
wealth management growth, with assets under management (AUM)
breaking through $2 billion. Deposits increased $128 million in 2013 over
2012. This marks the fifth consecutive year that deposits grew by more
than $100 million.
With total loan growth in 2013 of $200 million, one might
justifiably expect a robust increase in net interest income. This was not the
case, as this Bank and the industry continued to encounter declining net
interest margins. The Federal Reserve Bank’s accommodative monetary
policy kept short-term rates near zero, with longer term rates declining
through the first half of 2013. This decline occurred in response to the
Fed’s monthly purchase of $85 billion in securities through a program
known as quantitative easing.
2
For Cambridge Trust the effect of protracted low interest rates
produced a net interest margin that declined from 3.58% in 2012 to 3.35%
in 2013. Though one might assume that loan growth of $200 million would
produce higher net interest income, it is important to note that a lower
average margin affects all of the Bank’s earning assets (principally loans
and investments), or $1.39 billion, and creates significant drag. In nominal
terms, for the year ending December 31, 2013, net interest income was
$45,466,000 compared to $45,875,000 in 2012. On a more positive note,
these new loans position us well going forward. Moreover, we noted a
bottoming out in rates around mid-year and a slight bias higher toward
year-end.
Year End
2009
2010
2011
2012
2013
4.27 %
4.15 %
$ 993,808
$ 568,568
Deposits (in thousands) ....... $ 872,767
Total Loans (in thousands) .. $ 537,933
Net Interest Margin .............
Noninterest Income
(in thousands)(A)................. $ 16,618
$
$ 19,877
$
$ 13,254
Net Income (in thousands) .. $ 10,277
$
3.53
$
2.75
Basic Earnings/Share .......... $
$
1.40
$
Dividends Declared ............. $
1.34
$
23.73
$
21.95
Book Value .......................... $
1.25 %
Return/Average Assets ........
1.06 %
14.98 %
13.09 %
Return/Average Equity ........
$ 1,125,654
$ 673,265
$ 1,281,333
$ 742,249
$ 1,409,047
$ 942,451
3.90 %
3.58 %
3.35 %
$
18,147
$
12,477
$
3.29
$
1.42
$
25.39
1.06 %
13.26 %
$
20,489
$
13,403
$
3.49
$
1.50
$
27.21
1.00 %
13.39 %
23,181
14,140
3.65
1.59
28.13
0.99 %
13.63 %
(A) Includes $2.8 million pre-tax gain on disposition of merchant services portfolio in 2010
It is especially helpful during periods of protracted margin
pressure to have a diversified revenue stream in the form of noninterest
income. In 2013, we continued to see a significant upswing in this area.
Noninterest income in 2013 was $23,181,000 compared to $20,489,000 in
2012, an increase of $2,692,000 (13.1%). Most of this increase came from
the Bank’s highly successful Wealth Management business where year-
over-year revenues rose $2,155,000 (15.3%). I will have more to say about
Wealth Management later in this report.
It would be fair to say that Massachusetts, like most densely
populated parts of the country, is over-banked. Consumers and businesses
have a wide variety of banks from which to choose. In such a competitive
environment, it is critical that we clearly answer the question, “Why bank
with Cambridge Trust?” and that we make the answers to that question
widely known. To that end, as I reported last year, we have introduced a
3
new brand platform built around the theme of “Life’s Bank.” This platform
was built on the premise that when the inevitable and often unexpected
changes and disruptions of life occur it is good to know that you have
a competent, accessible, and responsive partner to assist you. In 2012,
I noted that we would build on this brand message in 2013. We have
done so with the introduction of two television commercials. Our move
into television represents a new media channel for Cambridge Trust and
demonstrates an amplified level of sophistication for the brand.
The Bank’s sustained earnings growth and returns on average
equity and on average assets position it well in the industry. The return on
average equity in 2013 of 13.63% and return on average assets of 0.99%
place the Bank in a category of high-performing banks. We think it is
important that shareholders benefit from the Bank’s earnings performance.
In that regard, the quarterly dividend was increased by 7.7% to $0.42 per
share.
Consumer Banking
Among the many updates from 2013 to share, one stands out.
Building off momentum generated in 2012, together with an interest rate
environment that drove customers to consider refinancing their mortgages,
Cambridge Trust experienced its strongest year ever in terms of loan
volume. For the year ending December 31, 2013, residential mortgage
loans outstanding increased $110 million (31.7%) to $458 million,
compared to year-end 2012.
Not all mortgages are held on the Bank’s books. Commencing
in 2012, Cambridge Trust sold its 30-year conforming mortgages in the
secondary market but retained the loan servicing. Fees generated from
such transactions are shown on the income statement as “Gain on loans
held for sale.” Readers will note a modest decline in this revenue number
to $519,000 in 2013 compared to $592,000 in 2012. Rising interest rates
in the May/June time frame put the brakes on the “Refi” business for the
remainder of 2013, although we did experience an upswing in purchase
mortgage activity.
4
In the business of banking, the immense regulatory compliance
requirements are constantly changing. Close oversight is necessary,
which is one reason Brian Bacci, Lending Compliance Officer, joined the
Bank. We also recognize the importance of maintaining service levels in
high volume operations areas. In light of that recognition, we promoted
Gabriele Fabrizio to Assistant Vice President.
Technology investments made by the Bank have streamlined and
improved services, providing a better experience for the customer. The
introduction of an online mortgage application is one example. Today, most
customers take advantage of this service, knowing that they may also call
or visit one of our skilled mortgage professionals if they have questions.
Similarly, an increasing number of Cambridge Trust depositors use a new
mobile banking application to deposit checks using their smart phone or
tablet. We plan to introduce mobile banking for business customers in
2014.
A significant undertaking in 2013 affecting consumer and business
customers was the outsourcing of items processing and statement print
processing. As usage of internet and mobile banking has grown, check
writing has declined. Through outsourcing, Cambridge Trust can lower its
costs by utilizing the scale of an outside party, while maintaining its high
quality standards. In addition, the vendor’s scale advantage and multiple
site operations improve the Bank’s disaster readiness.
Undoubtedly, one of the most important investments we made in
2013 was for the renovation of the Bank’s Harvard Square headquarters.
We are committed to this location and have entered into a lease that
provides options extending to 2046. We are also committed to providing
a space that recognizes changes in demographics and habits of usage by
customers, as well as the need for greater privacy and remote access to
bank professionals located away from Harvard Square. To this last point,
we have incorporated video conferencing capability throughout the site.
I should also note that we wanted to preserve an attractive and
comfortable work environment for our employees. We aimed to maintain
a connection with and pay homage to our past, while considering current
5
and future circumstances. Two questions often asked are, “Is there a
fireplace?” and “Will the president sit on the banking floor?” Yes and yes.
Business Banking
There is a certain symmetry to the Business and Consumer
Banking stories in 2013. I noted earlier the robust growth in residential
mortgage lending. Likewise, commercial lending had its strongest year
on record. Commercial loans increased $90 million in 2013, growing
to $414 million. The comparable commercial loan growth in 2012
was approximately $54 million. Most of the $90 million loan increase
originated in the commercial real estate sector. This diversified portfolio
includes multifamily, retail, office, and mixed-use properties. It is worth
noting that loan growth from both new and existing customers produced
the results; this growth will provide momentum going into 2014. In
addition, Glenn Davis, Vice President, joined the lending team in 2013
and made an important contribution to the aforementioned development
of this vital sector.
Cambridge Trust also makes loans available to an array of
agencies in the nonprofit sector. These agencies provide numerous
services to residents in communities we serve. Additionally, in 2013
the Bank made a $1 million loan to Boston Community Capital (BCC).
BCC invests in projects that provide affordable housing, good jobs, and
new opportunities in low-income communities. Such projects help in the
process of connecting these neighborhoods to the mainstream economy.
As the Bank continues to build its commercial loan business,
all members of the team are mindful of the need to maintain a strong
credit culture. Close oversight and attention to asset quality have been
hallmarks of Cambridge Trust. These practices have served the Bank well
through various economic cycles. Net recoveries in 2013 were $260,000.
Non-performing loans at the end of 2013 were $1,703,000, compared
to $1,570,000 at the end of 2012. The Allowance for Loan Losses in
December 31, 2013 was $12,708,000 or 1.35% of loans. The comparable
numbers in 2012 were $10,948,000 and 1.47%, respectively. The Bank
provided more to the Allowance in 2013 than in prior years to reflect the
significant loan growth in 2013. We also added to the support team with
6
the hiring of Justin Drolsbaugh, Commercial Officer, Portfolio Manager,
and Rachel Bandi, Senior Credit Analyst Officer. Joining the Business
Development team was Leslie Hartwell, Assistant Vice President.
Since its formation in 2011, the Innovation Banking Group has
focused on the rapidly changing innovation sector. In this context, they
have consistently raised awareness about the value Cambridge Trust
brings to growing companies. By establishing its niche and articulating its
capabilities, the Bank had a breakthrough year in 2013 with the acquisition
of new loan, deposit, and cash management customers. We were especially
pleased that Tiffany Ormon, Vice President, joined the group.
Wealth Management
By almost any measure, 2013 represented a landmark year for
Cambridge Trust’s Wealth Management business. Highlights include
record assets under management (AUM), record revenues, new growth
in New Hampshire, expanded marketing initiatives, and new premises in
Boston.
For the first time AUM exceeded $2 billion, finishing the year
ending December 31, 2013, at $2,140,000,000. This represents an increase
of $345 million (19.2%) over the prior year-end. Wealth Management
revenues also reached new heights, increasing $2,155,000 (15.3%) in
2013 to $16,265,000. Two factors drove this growth. The Bank has been
consistently successful in attracting new relationship clients, and 2013
was an especially good year. In addition, growth in 2013 was enhanced by
a significant upswing in equity markets. The Dow increased 26.5% and the
S&P 29.6% in 2013.
Year
2009
2010
2011
2012
2013
Wealth Management
Gross Revenues
(in thousands)
Managed Assets
(in millions)
$ 11,353
$ 12,364
$ 13,152
$ 14,110
$ 16,265
7
$ 1,383
$ 1,507
$ 1,468
$ 1,795
$ 2,140
Over the long term, the leverage of rising equity prices on AUM
is one of the benefits of assisting clients with the management of their
investments and with other matters relating to their family’s needs. We
think that there is considerable opportunity to continue our growth. The
appointment of Brian Bickford, Senior Vice President and Investment
Officer, to our New Hampshire team will help us to maximize that
opportunity. I also want to acknowledge the promotion of Aimee Forsythe
to Vice President. Aimee plays a key role in trading and compliance.
When there is a good story to tell and valuable insights to share,
it is important that the Bank project these messages in the market. In
this instance, as part of Cambridge Trust’s expanded brand awareness
campaign, we incorporated a Wealth Management theme into one of
the Bank’s television advertisements. We also introduced a video series,
accessible on the Bank’s website (www.cambridgetrust.com), featuring
Jim Spencer, Chief Investment Officer. “Finding Opportunity in a Complex
Market,” provides an inside look at how today’s headlines are tomorrow’s
opportunities. This will be a regular video series that over time will grow
to include other members of the Wealth Management team, including both
Investment and Trust Officers.
Clearly, the capstone for 2013 for Wealth Management – and
Cambridge Trust – was the relocation of all Massachusetts Wealth
Management staff to 75 State Street in Boston’s Financial District. The
move makes a strong statement about the strategic importance of Wealth
Management. It testifies to the Bank’s commitment to grow the business
over the long term. Moreover, we created an office environment that is
consistent with and conducive to the kind of sophisticated financial advice
our clients expect.
* * * * * *
There are other employees of the Bank that I want to recognize
in this report. Their contributions had a positive impact on the Bank’s
performance, across many areas of the organization. Alan Collopy was
promoted to Operations Officer; Joseph Lombardi to Assistant Controller;
and Basharat Sheikh to Assistant Treasurer. We were also very fortunate to
have Joseph Cardarelli, Vice President, Information Technology Manager
8
and Linda Sullivan, Human Resources Officer, join the Bank team during
2013.
* * * * * *
Board governance and oversight have been consistent strengths of
Cambridge Trust. Our engaged, diverse, and experienced Board helps to
ensure that management executes on its plans to achieve strategic goals.
In 2013, Donald Briggs was appointed to the Board. Don is President
– Federal Realty Boston and Senior Vice President – Development for
Federal Realty Investment Trust, an equity real estate investment trust
specializing in the ownership, management, and redevelopment of high-
quality retail real estate in the country’s best markets. His extensive real
estate development experience and familiarity with the greater Boston
market have made Don a valuable contributor to the Board.
* * * * * *
Back in 2011, a year marked by considerable uncertainty in
the global economy and financial markets, I observed that under such
conditions, “challenges multiply at a rapid pace. In attempting to keep
up with or even to exceed that pace, organizations and individuals may
find themselves moving quickly in a number of directions all at once.”
Such activity may yield the impression of productivity. But when efforts,
no matter how strenuous, do not build upon a firm base of existing
achievements and positions, it is that much harder to build momentum.
Although the global financial crisis has abated, the pressure
to maintain our focus on the positions that are the key sources of our
momentum and to continue building remain. That pressure, however, is
not wholly negative. To be sure, it entails dealing with challenges arising
from external conditions. Yet it also entails the need continually to excel
in view of our own standards and our commitment to betterment across the
board.
As I look out over the next three to five years, I am confident that
we can continue to execute on our strategy as we have consistently done
in the past. But keeping up with our past achievements and maintaining
our current capabilities is not enough. The changing and more intensely
9
competitive environment during this period will challenge us in ways that
we may not fully perceive at this time. Nimbleness, foresight, innovation,
and a readiness to take action will be requirements, not merely attractive
options.
While we cannot know the future, we can know our own capabilities
well enough to gain insight into how they can be improved. As Peter
Drucker once noted, “Knowledge has to be improved, challenged, and
increased constantly, or it vanishes.” The task of improving our knowledge
of what we can do requires being willing to think in innovative ways about
what we might do beyond our current capabilities. It involves knowing
that we can always do better and insisting upon finding new approaches to
problem-solving, as well as idea generation and development. Ideation (the
process of generating new ideas) occurs most fruitfully under conditions
of openness and collaboration. We are already taking steps to enhance our
environment in this regard.
2013 has been a year in which the Bank made significant strides
with respect to the task of building momentum for the future. It was a
year in which we generated new sources of momentum, rather than merely
drawing fuel from ones we had previously established. We look forward
to reporting on the Bank’s progress across all fronts in 2014 through our
forthcoming quarterly reports.
In closing, I wish to express my appreciation to our shareholders
for your confidence in Cambridge Trust Company and for your support.
We will remain focused on performing at a high level, while operating
with accountability and integrity.
Respectfully submitted,
Joseph V. Roller II
President and CEO
February 26, 2014
10
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Cambridge Bancorp:
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Cambridge Bancorp and its
subsidiaries, which comprise the consolidated balance sheets as of December 31, 2013 and 2012,
and the related consolidated statements of income, comprehensive income, changes in stockholders’
equity, and cash flows for the years then ended, and the related notes to the consolidated financial
statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with U.S. generally accepted accounting principles; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation
of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors’ Responsibility
REPORT OF INDEPENDENT AUDITORS
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.
To the Board of Directors and Stockholders of Cambridge Bancorp:
We have audited the accompanying consolidated balance sheets of Cambridge Bancorp and
subsidiaries (the “Corporation”) as of December 31, 2011 and 2010, and the related consolidated
statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for
the years then ended. These consolidated financial statements are the responsibility of the
Corporation’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Cambridge Bancorp and its subsidiaries as of December 31, 2013
and 2012, and the results of their operations and their cash flows for the years then ended in accordance
with U.S. generally accepted accounting principles.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Corporation as of December 31, 2011 and 2010, and the results
of their operations and their cash flows for the years then ended in conformity with U.S. generally
accepted accounting principles.
Report on Other Legal and Regulatory Requirements
We also have examined in accordance with attestation standards established by the American
Institute of Certified Public Accountants, the Corporation’s internal control over financial reporting
as of December 31, 2011, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and
our report dated March 2, 2012 expressed an unqualified opinion on the effectiveness of the Bank’s
internal control over financial reporting.
We also have examined, in accordance with attestation standards established by the American Institute
of Certified Public Accountants, Cambridge Trust Company’s internal control over financial reporting
as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and
our report dated February 26, 2014 expressed an unqualified opinion on the effectiveness of Cambridge
Trust Company’s internal control over financial reporting.
Boston, Massachusetts
Boston, Massachusetts
February 26, 2014
March 2, 2012
11
CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2013
2012
(In thousands)
Cash and cash equivalents ...........................................................
$
88,107
$
59,923
ASSETS
Investment securities:
Available for sale, at fair value ..............................................
Held to maturity, at amortized cost ........................................
Total investment securities ...............................................
Loans held for sale, at lower of cost or fair value .......................
Loans:
Residential mortgage .............................................................
Commercial mortgage ............................................................
Home equity ...........................................................................
Commercial ............................................................................
Consumer ...............................................................................
Total loans ........................................................................
Allowance for loan losses ......................................................
Net loans ..........................................................................
388,793
59,181
447,974
403
458,176
363,294
46,635
50,758
23,588
942,451
(12,708)
929,743
Federal Home Loan Bank of Boston stock, at cost .....................
Bank owned life insurance...........................................................
Banking premises and equipment, net .........................................
Accrued interest receivable..........................................................
Other assets ..................................................................................
Total assets .................................................................
6,231
23,555
9,951
3,626
24,120
$ 1,533,710
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand ..................................................................................
Interest bearing checking .......................................................
Money market ........................................................................
Savings ...................................................................................
Certificates of deposit ............................................................
Total deposits ...................................................................
$ 382,255
335,010
78,410
489,160
124,212
1,409,047
Long-term borrowings .................................................................
Other liabilities ............................................................................
Total liabilities..................................................................
—
15,380
1,424,427
Stockholders’ equity:
Common stock, par value $1.00; Authorized
10,000,000 shares; Outstanding: 3,884,851 and
3,854,951 shares, respectively .............................................
Additional paid-in capital ......................................................
Retained earnings ...................................................................
Accumulated other comprehensive income ...........................
Total stockholders’ equity ..........................................
Total liabilities and stockholders’ equity ...................
3,885
26,027
83,479
(4,108)
109,283
$ 1,533,710
The accompanying notes are an integral part of these
consolidated financial statements.
12
502,318
71,133
573,451
1,684
347,908
276,428
50,574
47,570
19,769
742,249
(10,948)
731,301
5,010
22,903
6,214
3,877
13,623
$ 1,417,986
$ 329,211
363,575
60,850
393,541
134,156
1,281,333
20,000
11,762
1,313,095
3,855
24,421
75,787
828
104,891
$ 1,417,986
CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2012
2013
(In thousands, except
per share data)
Interest income:
Interest on loans ..................................................................
Interest on taxable investment securities ............................
Interest on tax exempt investment securities ......................
Dividends on FHLB of Boston stock ..................................
Interest on overnight investments .......................................
Total interest income .....................................................
$
Interest expense:
Interest on deposits .............................................................
Interest on borrowed funds .................................................
Total interest expense ....................................................
Net interest income .......................................................
Provision for loan losses ...........................................................
Net interest income after provision for loan losses .......
Noninterest income:
Wealth management income ...............................................
Deposit account fees ...........................................................
ATM/Debit card income .....................................................
Bank owned life insurance income .....................................
Gain on disposition of investment securities ......................
Gain on loans held for sale ..................................................
Other income .......................................................................
Total noninterest income ...............................................
Noninterest expense:
Salaries and employee benefits ...........................................
Occupancy and equipment ..................................................
Data processing ...................................................................
Professional services ...........................................................
Marketing ............................................................................
FDIC Insurance ...................................................................
Other expenses ....................................................................
Total noninterest expense ..............................................
Income before income taxes .........................................
Income tax expense ...................................................................
Net income ....................................................................
Per share data:
Basic earnings per common share .......................................
Diluted earnings per common share ...................................
Average shares outstanding - basic .....................................
Average shares outstanding - diluted ..................................
$
$
$
35,669
9,905
2,028
20
39
47,661
1,970
224
2,194
45,467
1,500
43,967
16,265
2,567
1,182
652
1,121
519
875
23,181
26,995
8,163
4,012
1,548
1,822
739
2,832
46,111
21,037
6,897
14,140
3.65
3.62
3,839,146
3,907,201
The accompanying notes are an integral part of these
consolidated financial statements.
13
$
$
$
$
33,984
13,003
2,029
25
25
49,066
2,219
972
3,191
45,875
800
45,075
14,110
2,398
1,043
713
882
592
751
20,489
27,835
7,660
3,560
1,585
1,842
704
2,661
45,847
19,717
6,314
13,403
3.49
3.45
3,839,681
3,879,607
CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
2012
2013
(In thousands)
Net income ...................................................................................
$
14,140
$
13,403
Other comprehensive income/(loss), net of tax:
Defined benefit retirement plans:
Change in unfunded retirement liability ..........................
5,671
Unrealized gains/(losses) on Available for Sale securities:
Unrealized holding gains/(losses) arising
during the period ............................................................
Less: reclassification adjustment for gains
recognized in net income ...............................................
Other comprehensive income/(loss) ............................................
(9,887)
(720)
(4,936)
104
(302)
(568)
(766)
Comprehensive income ....................................................
$
9,204
$
12,637
The accompanying notes are an integral part of these
consolidated financial statements.
14
l
a
t
o
T
’
s
r
e
d
l
o
h
k
c
o
t
S
y
t
i
u
q
E
d
e
t
a
l
u
m
u
c
c
A
r
e
h
t
O
e
v
i
s
n
e
h
e
r
p
m
o
C
)
s
s
o
L
(
/
e
m
o
c
n
I
d
e
n
i
a
t
e
R
s
g
n
i
n
r
a
E
l
a
n
o
i
t
i
d
d
A
n
i
-
d
i
a
P
l
a
t
i
p
a
C
n
o
m
m
o
C
k
c
o
t
S
)
a
t
a
d
e
r
a
h
s
r
e
p
t
p
e
c
x
e
,
s
d
n
a
s
u
o
h
t
n
I
(
S
E
I
R
A
I
D
I
S
B
U
S
D
N
A
P
R
O
C
N
A
B
E
G
D
I
R
B
M
A
C
Y
T
I
U
Q
E
’
S
R
E
D
L
O
H
K
C
O
T
S
N
I
S
E
G
N
A
H
C
F
O
S
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
3
3
6
,
6
9
$
4
9
5
,
1
$
2
3
2
,
8
6
$
1
0
0
,
3
2
$
6
0
8
,
3
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
1
5
5
2
4
4
5
9
4
7
3
6
,
2
1
)
3
0
1
(
)
4
6
7
,
5
(
1
9
8
,
4
0
1
9
3
4
0
6
6
5
9
5
4
0
2
,
9
)
2
4
3
(
)
4
6
1
,
6
(
)
6
6
7
(
—
—
—
—
—
8
2
8
)
6
3
9
,
4
(
—
—
—
—
—
—
—
—
3
0
4
,
3
1
)
4
8
(
)
4
6
7
,
5
(
7
8
7
,
5
7
0
4
1
,
4
1
—
—
—
)
4
8
2
(
)
4
6
1
,
6
(
—
9
3
4
8
3
6
8
7
5
—
)
9
4
(
—
—
2
2
7
1
—
)
9
(
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
C
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
k
c
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
n
o
i
t
p
o
k
c
o
t
s
f
o
e
s
i
c
r
e
x
E
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
P
S
D
d
n
a
P
O
S
E
o
t
d
e
u
s
s
i
k
c
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
e
r
a
h
s
r
e
p
9
5
.
1
$
(
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
d
e
s
a
h
c
r
u
p
e
r
k
c
o
t
S
—
9
2
5
7
2
4
0
8
4
—
)
6
1
(
—
2
2
5
1
5
1
—
)
3
(
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
C
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
k
c
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
n
o
i
t
p
o
k
c
o
t
s
f
o
e
s
i
c
r
e
x
E
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
P
S
D
d
n
a
P
O
S
E
o
t
d
e
u
s
s
i
k
c
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
e
r
a
h
s
r
e
p
0
5
.
1
$
(
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
d
e
s
a
h
c
r
u
p
e
r
k
c
o
t
S
15
1
2
4
,
4
2
5
5
8
,
3
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
3
8
2
,
9
0
1
$
)
8
0
1
,
4
(
$
9
7
4
,
3
8
$
7
2
0
,
6
2
$
5
8
8
,
3
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
e
s
e
h
t
f
o
t
r
a
p
l
a
r
g
e
t
n
i
n
a
e
r
a
s
e
t
o
n
g
n
i
y
n
a
p
m
o
c
c
a
e
h
T
.
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
CAMBRIDGE BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows provided by operating activities:
Net income .............................................................................
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses ..................................................
Amortization of deferred charges/(income), net ..............
Depreciation and amortization .........................................
Bank owned life insurance income ..................................
Gain on disposition of investment securities ...................
Compensation expense from stock option
and restricted stock grants ..............................................
Change in loans held for sale ...........................................
Change in accrued interest receivable, deferred
taxes, other assets and other liabilities ...........................
Other, net ..........................................................................
Net cash provided by operating activities ..................
Year Ended December 31,
2012
2013
(In thousands)
$
14,140
$
13,403
1,500
720
1,569
(652)
(1,121)
439
1,281
4,998
321
23,195
800
1,360
1,430
(713)
(882)
551
(1,684)
(8,655)
291
5,901
Cash flows used by investing activities:
Origination of loans ...............................................................
(333,266)
(205,096)
Purchase of:
Investment securities - AFS .............................................
Investment securities - HTM ...........................................
Maturities, calls and principal payments of:
Loans ................................................................................
Investment securities - AFS .............................................
Investment securities - HTM ...........................................
Proceeds from sale of investment securities - AFS ................
Purchase of bank owned life insurance ..................................
Change in FHLB of Boston stock ..........................................
Purchase of banking premises and equipment .......................
Net cash used by investing activities .........................
Cash flows provided by financing activities:
Net increase in deposits .........................................................
Net decrease in short-term borrowings ..................................
Repayment of long-term borrowings .....................................
Proceeds from issuance of common stock .............................
Repurchase of common stock ................................................
Cash dividends paid on common stock ..................................
Net cash provided by financing activities ..................
Net increase in cash and cash equivalents ...................................
Cash and cash equivalents at beginning of year ..........................
Cash and cash equivalents at end of year .....................................
Supplemental disclosure of cash flow information:
Cash paid for interest .............................................................
Cash paid for income taxes ....................................................
Non-cash transactions:
(55,577)
(4,427)
132,692
117,713
16,361
35,557
—
(1,221)
(5,306)
(97,474)
127,714
—
(20,000)
1,255
(342)
(6,164)
102,463
28,184
59,923
88,107
2,196
3,610
$
$
Change in AOCI, net of taxes ..........................................
(4,936)
The accompanying notes are an integral part of these
consolidated financial statements.
16
(201,506)
(824)
135,435
130,165
3,933
37,786
(5,000)
(204)
(1,428)
(106,739)
155,679
(2,500)
(10,000)
937
(103)
(5,764)
138,249
37,411
22,512
59,923
3,205
6,350
(766)
$
$
CAMBRIDGE BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
1. THE BUSINESS
The accompanying consolidated financial statements include the accounts of Cambridge
Bancorp (the “Corporation”) and its wholly owned subsidiary, Cambridge Trust Company
(the “Bank”), and the Bank’s subsidiaries, Cambridge Trust Company of New Hampshire,
Inc., CTC Security Corporation, CTC Security Corporation II and CTC Security
Corporation III. References to the Corporation herein relate to the consolidated group of
companies. All significant intercompany accounts and transactions have been eliminated in
preparation of the consolidated financial statements.
The Corporation is a state chartered, federally registered bank holding company
headquartered in Cambridge, Massachusetts, that was incorporated in 1983. The
Corporation is closely held and has less than two thousand shareholders of record and,
accordingly, is not required to file quarterly, annual or other public reports with the
Securities and Exchange Commission (“SEC”). The Corporation is the sole stockholder of
the Bank, a Massachusetts trust company chartered in 1890 which is a community-oriented
commercial bank. The community banking business, the Corporation’s only reportable
operating segment, consists of commercial banking, consumer banking, and trust and
investment management services and is managed as a single strategic unit.
The Bank offers a full range of commercial and consumer banking services through
its network of 12 full-service banking offices in Massachusetts. The Bank is engaged
principally in the business of attracting deposits from the public and investing those
deposits. The Bank invests those funds in various types of loans, including residential and
commercial real estate, and a variety of commercial and consumer loans. The Bank also
invests its deposits and borrowed funds in investment securities and has three wholly-
owned Massachusetts Security Corporations, CTC Security Corporation, CTC Security
Corporation II and CTC Security Corporation III, for this purpose. Deposits at the Bank are
insured by the Federal Deposit Insurance Corporation (“FDIC”) for the maximum amount
permitted by FDIC Regulations.
Trust and investment management services are offered through the Bank’s full-service
branches in Massachusetts, a wealth management office located in Boston, and two wealth
management offices located in New Hampshire. The Bank also utilizes its non-depository
trust company, Cambridge Trust Company of New Hampshire, Inc., in providing wealth
management services in New Hampshire. The assets held for wealth management
customers are not assets of the Bank and, accordingly, are not reflected in the accompanying
consolidated balance sheets. Total assets managed on behalf of wealth management clients
were approximately $2,140,000,000 and $1,795,000,000 at December 31, 2013 and 2012,
respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared in conformity with U.S. generally accepted
accounting principles (“GAAP”) and general practices within the banking industry.
17
Use of Estimates
In preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet and revenues and expenses for the period. Actual results could
differ from these estimates. Material estimates that are particularly susceptible to change
relate to the determination of the allowance for loan losses and review of goodwill for
impairment.
Reclassifications
Certain amounts in the prior year’s financial statements may have been reclassified to
conform with the current year’s presentation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, amounts due from banks and overnight
investments.
Investment Securities
Investment securities are classified as either ‘held to maturity’ or ‘available for sale’ in
accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting
Standards Codification (“ASC”) 320, “Investments – Debt and Equity Securities.”
Debt securities that management has the positive intent and ability to hold to maturity
are classified as held to maturity and are carried at cost, adjusted for the amortization
of premiums and the accretion of discounts, using the effective-yield method. U.S.
Government Sponsored Enterprise (“GSE”) obligations represent debt securities issued
by the Federal Farm Credit Bank (“FFCB”), the Federal Home Loan Banks (“FHLB”), the
Government National Mortgage Association (“GNMA”), the Federal National Mortgage
Association (“FNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”).
Mortgage-backed securities represent Pass-Through Certificates and Collateralized
Mortgage Obligations (“CMOs”) either issued by, or collateralized by securities issued by,
GNMA, FNMA or FHLMC. Mortgage-backed securities are adjusted for amortization of
premiums and accretion of discounts, using the effective-yield method over the estimated
average lives of the investments.
Debt and equity securities not classified as held to maturity are classified as available for
sale and carried at fair value with unrealized after-tax gains and losses reported net as a
separate component of stockholders’ equity. Stockholders’ equity included net unrealized
losses of $3,432,000 at December 31, 2013 and net unrealized gains of $7,174,000 at
December 31, 2012. These amounts are net of deferred taxes receivable of $1,847,000 and
net taxes payable of $4,109,000, in each of the respective years. The Corporation classifies
its securities based on its intention at the time of purchase.
Declines in the fair value of investment securities below their amortized cost that are
deemed to be other-than-temporary are reflected in earnings as realized losses to the extent
the impairment is related to credit losses. The amount of the impairment related to other
factors is recognized in other comprehensive income. In estimating other-than-temporary
impairment losses, management considers (1) the length of time and the extent to which
the fair value has been less than cost; (2) the financial condition and near-term prospects of
the issuer; and (3) the Corporation’s intent to sell the security or whether it is more likely
than not that the Corporation will be required to sell the debt security before its anticipated
recovery.
18
Loans and the Allowance for Loan Losses
Loans are reported at the amount of their outstanding principal, including deferred loan
origination fees and costs, reduced by unearned discounts and the allowance for loan losses.
Loan origination fees, net of related direct incremental loan origination costs, are deferred
and recognized as income over the contractual lives of the related loans as an adjustment
to the loan yield, using a method which approximates the interest method. Unearned
discount is recognized as an adjustment to the loan yield, using the interest method over
the contractual life of the related loan. When a loan is paid off, the unamortized portion of
net fees or unearned discount is recognized as interest income.
Loans are considered delinquent when a payment of principal and/or interest becomes past
due 30 days following its scheduled payment due date.
Loans on which the accrual of interest has been discontinued are designated non-accrual
loans. Accrual of interest income is discontinued when concern exists as to the collectability
of principal or interest, or typically when a loan becomes over 90 days delinquent.
Additionally, when a loan is placed on non-accrual status, all interest previously accrued
but not collected is reversed against current period income. Loans are removed from non-
accrual when they become less than 90 days past due and when concern no longer exists
as to the collectability of principal or interest. Interest collected on non-accruing loans is
either applied against principal or reported as income according to management’s judgment
as to the collectability of principal.
A loan is considered impaired when, based on current information and events, it is probable
that the Corporation will be unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement. Under certain
circumstances, the Corporation may restructure the terms of a loan as a concession to
a borrower. These restructured loans are generally also considered impaired loans.
Impairment is measured on a loan-by-loan basis for commercial mortgage and commercial
loans by either the present value of expected future cash flows discounted at the loan’s
effective interest rate, the loan’s obtainable market price, or the fair value of the collateral
if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are
collectively evaluated for impairment. Accordingly, the Corporation does not separately
identify individual residential mortgage, home equity or consumer loans for impairment
disclosures unless they have been modified in a troubled debt restructuring.
The provision for loan losses and the level of the allowance for loan losses reflects
management’s estimate of probable loan losses inherent in the loan portfolio at the balance
sheet date. Management uses a systematic process and methodology to establish the
allowance for loan losses each quarter. To determine the total allowance for loan losses,
an estimate is made by management of the allowance needed for each of the following
segments of the loan portfolio: (a) residential mortgage loans, (b) commercial mortgage
loans, (c) home equity loans, (d) commercial & industrial loans, and (e) consumer loans.
Portfolio segments are further disaggregated into classes of loans. The establishment
of the allowance for each portfolio segment is based on a process consistently applied
that evaluates the risk characteristics relevant to each portfolio segment and takes into
consideration multiple internal and external factors. Internal factors include (a) historic
levels and trends in charge-offs, delinquencies, risk ratings, and foreclosures, (b) level
and changes in industry, geographic and credit concentrations, (c) underwriting policies
and adherence to such policies, and (d) the experience of, and any changes in, lending and
19
credit personnel. External factors include (a) conditions and trends in the local and national
economy and (b) levels and trends in national delinquent and non-performing loans. An
additional unallocated component is maintained based on a judgmental process whereby
management considers qualitative and quantitative assessments of other environmental
factors not included above.
The Bank evaluates certain loans within the commercial & industrial, commercial mortgage
and commercial construction loan portfolios individually for specific impairment. A loan
is considered impaired when, based on current information and events, it is probable that
the Bank will be unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired. Loans are
selected for evaluation based upon internal risk rating, delinquency status, or non-accrual
status. A specific allowance amount is allocated to an individual loan when such loan has
been deemed impaired and when the amount of the probable loss is able to be estimated.
Estimates of loss may be determined by the present value of anticipated future cash flows,
the loan’s observable fair market value, or the fair value of the collateral, if the loan is
collateral dependent.
Risk characteristics relevant to each portfolio segment are as follows:
Residential mortgage and home equity loans – The Bank generally does not originate loans
in these segments with a loan-to-value ratio greater than 80 percent and does not grant
subprime loans. Loans in these segments are secured by one-to-four family residential
real estate and repayment is primarily dependent on the credit quality of the individual
borrower.
Commercial mortgage loans – The Bank generally does not originate loans in this segment
with a loan-to-value ratio greater than 75 percent. Loans in this segment are secured by
owner-occupied and nonowner-occupied commercial real estate and repayment is primarily
dependent on the cash flows of the property (if nonowner-occupied) or of the business (if
owner-occupied).
Commercial loans – Loans in this segment are made to businesses and are generally
secured by equipment, accounts receivable or inventory, as well as the personal guarantees
of the principal owners of the business and repayment is primarily dependent on the cash
flows generated by the business.
Consumer loans – Loans in this segment are made to individuals and can be secured
or unsecured. Repayment is primarily dependent on the credit quality of the individual
borrower.
The majority of the Bank’s loans are concentrated in Eastern Massachusetts and therefore
the overall health of the local economy, including unemployment rates, vacancy rates, and
consumer spending levels, can have a material effect on the credit quality of all of these
portfolio segments.
The process to determine the allowance for loan losses requires management to exercise
considerable judgment regarding the risk characteristics of the loan portfolio segments and
the effect of relevant internal and external factors.
20
The provision for loan losses charged to operations is based on management’s judgment of
the amount necessary to maintain the allowance at a level adequate to provide for probable
loan losses. When management believes that the collectability of a loan’s principal balance,
or portions thereof, is unlikely, the principal amount is charged against the allowance for
loan losses. Recoveries on loans that have been previously charged off are credited to the
allowance for loan losses as received. The allowance is an estimate, and ultimate losses
may vary from current estimates. As adjustments become necessary, they are reported in
the results of operations through the provision for loan losses in the period in which they
become known.
Residential mortgage loans originated and intended for sale in the secondary market are
classified as held for sale at the time of their origination and are carried at the lower of cost
or fair value. Changes in fair value relating to loans held for sale below the loans cost basis
are charged against earnings. Gains and losses on the actual sale of the residential loans are
recorded in earnings as net gains (losses) on loans held for sale.
Rights to service mortgage loans for others are recognized as an asset. The total cost of
originated loans that are sold with servicing rights retained is allocated between the loan
servicing rights and the loans without servicing rights based on their relative fair values.
Capitalized loan servicing rights are included in other assets and are amortized as an offset
to other income over the period of estimated net servicing income. They are evaluated for
impairment at each reporting date based on their fair value. Impairment is measured on an
aggregated basis according to interest rate band and period of origination. The fair value
is estimated based on the present value of expected cash flows, incorporating assumptions
for discount rate, prepayment speed and servicing cost. Any impairment is recognized as
a charge to earnings.
Bank Owned Life Insurance
Bank owned life insurance (“BOLI”) represents life insurance on the lives of certain
employees who have provided positive consent allowing the Bank to be the beneficiary of
such policies. Since the Bank is the primary beneficiary of the insurance policies, increases
in the cash value of the policies, as well as insurance proceeds received, are recorded
in other noninterest income, and are not subject to income taxes. The cash value of the
policies is included in other assets. The Bank reviews the financial strength of the insurance
carriers prior to the purchase of BOLI and at least annually thereafter.
Banking Premises and Equipment
Land is stated at cost. Buildings, leasehold improvements and equipment are stated at cost,
less accumulated depreciation and amortization, which is computed using the straight-line
method over the estimated useful lives of the assets or the terms of the leases, if shorter.
The cost of ordinary maintenance and repairs is charged to expense when incurred.
Other Real Estate Owned
Other real estate owned (“OREO”) consists of properties formerly pledged as collateral
to loans, which have been acquired by the Bank through foreclosure proceedings or
acceptance of a deed in lieu of foreclosure. Upon transfer of a loan to foreclosure status, an
appraisal is obtained and any excess of the loan balance over the fair value, less estimated
costs to sell, is charged against the allowance for loan losses. Expenses and subsequent
adjustments to the fair value are treated as other operating expense.
21
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of net assets
acquired in a business combination. Goodwill and intangible assets that are not amortized
are tested for impairment, based on their fair values, at least annually. Identifiable intangible
assets that are subject to amortization are also reviewed for impairment based on their fair
value. Any impairment is recognized as a charge to earnings and the adjusted carrying
amount of the intangible asset becomes its new accounting basis. The remaining useful
life of an intangible asset that is being amortized is also evaluated each reporting period
to determine whether events and circumstances warrant a revision to the remaining period
of amortization.
Income Taxes
The Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction,
and in the state of Massachusetts and other states as required.
The Corporation uses the asset and liability method of accounting for income taxes. Deferred
tax assets and liabilities are reflected at currently enacted income tax rates applicable to the
period in which the deferred tax assets or liabilities are expected to be realized or settled.
As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes. Deferred tax assets are reviewed quarterly and
reduced by a valuation allowance if, based upon the information available, it is more likely
than not that some or all of the deferred tax assets will not be realized.
Interest and penalties related to unrecognized tax benefits, if incurred, are recognized as a
component of income tax expense.
Wealth Management Income
Income from investment management and fiduciary activities is recognized on the accrual
basis of accounting.
Pension and Retirement Plans
The Corporation sponsors a defined benefit pension plan and a postretirement health
care plan covering substantially all employees hired before May 2, 2011. Benefits for the
pension plan are based primarily on years of service and the employee’s average monthly
pay during the five highest consecutive plan years of the employee’s final ten years.
Benefits for the postretirement health care plan are based on years of service. Expense for
both of these plans is recognized over the employee’s service life utilizing the projected
unit credit actuarial cost method. Contributions are periodically made to the pension plan
so as to comply with the Employee Retirement Income Security Act (“ERISA”) funding
standards and the Internal Revenue Code of 1986, as amended.
The Corporation also has a non-qualified retirement plan to provide supplemental retirement
benefits to certain executives. Expense for this plan is recognized over the executive’s
service life utilizing the projected unit credit actuarial cost method.
Stock-Based Compensation
The cost of stock-based awards (stock options, restricted stock and/or restricted stock
units of the Corporation) is determined at the grant date as measured by the fair value of
the award. Stock-based awards requiring future service are recognized as compensation
expense over the relevant service period. Stock-based awards that do not require future
22
service are expensed immediately. The Corporation estimates expected forfeitures in
determining compensation expense.
Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures” establishes a fair value hierarchy
that gives the highest priority to quoted prices in active markets and the lowest priority to
unobservable data and requires fair value measurements to be disclosed by level within the
hierarchy. The three broad levels defined by the fair value hierarchy are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities
as of the reported date. The type of financial instruments included in Level 1 are highly
liquid cash instruments with quoted prices such as government or agency securities, listed
equities and money market securities, as well as listed derivative instruments.
Level 2 – Pricing inputs are other than quoted prices in active markets, which are either
directly or indirectly observable as of the reported date. The nature of these financial
instruments includes cash instruments for which quoted prices are available but traded less
frequently, derivative instruments whose fair value has been derived using a model where
inputs to the model are directly observable in the market, or can be derived principally
from or corroborated by observable market data, and instruments that are fair valued using
other financial instruments, the parameters of which can be directly observed. Instruments
which are generally included in this category are corporate bonds and loans, mortgage
whole loans, municipal bonds and over-the-counter derivatives.
Level 3 – Instruments that have little to no pricing observability as of the reported
date. These financial instruments do not have two-way markets and are measured using
management’s best estimate of fair value, where the inputs into the determination of
fair value require significant management judgment to estimation. Instruments that are
included in this category generally include certain commercial mortgage loans, certain
private equity investments, distressed debt, non-investment grade residual interests in
securitizations, as well as certain highly structured over-the-counter derivative contracts.
Earnings per Share
Basic earnings per share are computed by dividing net income by the weighted average
number of common shares outstanding for each period presented. Diluted earnings per
share are computed by dividing net income by the weighted average number of common
shares outstanding plus the dilutive effect of stock options outstanding.
Subsequent Events
Management has reviewed events occurring through February 26, 2014, the date the
consolidated financial statements were issued and determined that no subsequent events
occurred requiring accrual or disclosure.
3. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2012, the FASB issued Accounting Standards Update No. 2012-02, “Testing
Indefinite-Lived Assets for Impairment” (“ASU 2012-02”). The objective of ASU 2012-
02 is to reduce the cost and complexity of performing an impairment test for indefinite-
lived asset categories by simplifying how an entity performs the testing of those assets.
Similar to the amendments to goodwill impairment testing issued in September 2011, an
23
entity has the option first to assess qualitative factors to determine whether the existence of
events and circumstances indicates that it is more likely than not that the indefinite-lived
intangible asset is impaired. If an entity concludes that it is not more likely than not that the
indefinite-lived intangible asset is impaired, then the entity is not required to take further
action. If an entity concludes otherwise, then it is required to determine the fair value
of the indefinite-lived intangible asset and perform the quantitative impairment test. The
provisions of ASU 2012-02 were effective for annual and interim goodwill impairment
tests performed for fiscal years beginning after September 15, 2012, with early adoption
permitted. The adoption of ASU 2012-02 on January 1, 2013 did not have any impact on
the Corporation’s consolidated financial statements.
In February 2013, the FASB issued Accounting Standards Update No. 2013-02,
“Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income” (ASU 2013-02”). ASU 2013-02 requires an entity to
report the effect of significant reclassifications out of accumulated other comprehensive
income on the respective line items in net income or as a separate disclosure in the notes
to the financial statements. The new standard was effective for annual periods beginning
January 1, 2013. As ASU 2013-02 provides only guidance on the disclosure of amounts
reclassified out of accumulated other comprehensive income, its adoption did not have any
impact on the Corporation’s consolidated financial statements.
4. CASH AND DUE FROM BANKS
At December 31, 2013 and 2012, cash and due from banks totaled $88,107,000 and
$59,923,000, respectively. Of this amount, $8,977,000 and $8,849,000, respectively, were
maintained to satisfy the reserve requirements of the Federal Reserve Bank of Boston
(“FRB Boston”). Additionally, at both December 31, 2013 and 2012, $1,000,000 was
pledged to the New Hampshire Banking Department relating to Cambridge Trust Company
of New Hampshire, Inc.’s operations in that State.
24
5. INVESTMENT SECURITIES
Investment securities have been classified in the accompanying consolidated balance
sheets according to management’s intent. The carrying amounts of securities and their
approximate fair values were as follows:
Amortized
Cost
December 31, 2013
Unrealized
Gains
Losses
(In thousands)
Fair
Value
Securities available for sale:
U.S. GSE obligations ............................ $
Mortgage-backed securities ..................
Corporate debt securities .......................
Mutual funds .........................................
Total securities available for sale ....
75,056
296,336
22,008
672
394,072
Securities held to maturity:
—
U.S. GSE obligations ............................
3,327
Mortgage-backed securities ..................
55,854
Municipal securities ..............................
59,181
Total securities held to maturity ......
Total investment securities .............. $ 453,253
$
$
54
2,594
622
—
3,270
—
214
2,239
2,453
5,723
$
$
(1,866) $
(6,608)
(16)
(59)
(8,549)
73,244
292,322
22,614
613
388,793
—
—
(179)
(179)
—
3,541
57,914
61,455
(8,728) $ 450,248
Amortized
Cost
December 31, 2012
Unrealized
Gains
Losses
(In thousands)
Fair
Value
Securities available for sale:
U.S. GSE obligations ............................ $ 100,074
371,288
Mortgage-backed securities ..................
19,001
Corporate debt securities .......................
Mutual funds .........................................
672
491,035
Total securities available for sale ....
Securities held to maturity:
12,499
U.S. GSE obligations ............................
5,322
Mortgage-backed securities ..................
53,312
Municipal securities ..............................
Total securities held to maturity ......
71,133
Total investment securities .............. $ 562,168
$
$
773
9,808
811
—
11,392
220
387
4,574
5,181
16,573
$
$
(23) $ 100,824
381,036
(60)
19,812
—
646
(26)
502,318
(109)
—
—
(6)
(6)
12,719
5,709
57,880
76,308
(115) $ 578,626
All of the Corporation’s mortgage-backed securities have been issued by, or are
collateralized by securities issued by, either GNMA, FNMA or FHLMC.
25
The amortized cost and fair value of debt investments, aggregated by contractual maturity,
are shown below. Maturities of mortgage-backed securities do not take into consideration
scheduled amortization or prepayments. Actual maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Within One Year
After One, But
Within Five Years
After Five, But
Within Ten Years
After Ten Years
Amortized
Cost
Fair
Value Cost
Amortized
Fair
Value
Amortized Fair
Value
Cost
Amortized
Cost
Fair
Value
(In thousands)
At December 31, 2013:
Debt securities
available for sale:
U.S. GSE
obligations .............. $ — $ — $ 50,077 $ 49,263 $ 24,979 $ 23,981 $
— $
—
Mortgage-backed
securities .................
Corporate debt
securities .................
Total debt
securities
available
for sale ................
Debt securities held
to maturity:
U.S. GSE
obligations ..............
Mortgage-backed
securities .................
Municipal
securities .................
Total debt
securities held
to maturity ...........
Total debt
—
—
—
3,092
3,301
1,819
1,979
291,425
287,042
—
21,008
21,619
1,000
995
—
—
—
—
74,177
74,183
27,798
26,955
291,425
287,042
—
36
—
—
—
—
—
38
1,124
1,190
2,036
2,169
—
131
—
144
1,150
1,165
12,196
12,829
33,491
34,867
9,017
9,053
1,186
1,203
13,320
14,019
35,527
37,036
9,148
9,197
securities ............. $ 1,186 $ 1,203 $ 87,497 $ 88,202 $ 63,325 $ 63,991 $ 300,573 $ 296,239
The following table shows the Corporation’s securities with gross unrealized losses,
aggregated by investment category and length of time that individual securities have been
in a continuous loss position:
Less than One Year
Fair
Value
Unrealized
Losses
One Year or Longer
Fair
Value
Unrealized
Losses
Total
Fair
Value
Unrealized
Losses
(In thousands)
$ 63,176
205,790
2,994
6,636
278,596
—
$ (1,866)
(5,726)
(16)
(121)
(7,729)
—
$
—
21,182
—
514
21,696
613
$
—
(882)
—
(58)
(940)
(59)
$ 63,176
226,972
2,994
7,150
300,292
613
$ (1,866)
(6,608)
(16)
(179)
(8,669)
(59)
At December 31, 2013:
U.S. GSE obligations ............
Mortgage-backed securities ...
Corporate debt securities .......
Municipal securities ...............
Subtotal, debt securities .....
Mutual funds ..........................
Total temporarily
impaired securities ...........
$ 278,596
$ (7,729)
$ 22,309
$
(999)
$ 300,905
$ (8,728)
26
Less than One Year
Fair
Value
Unrealized
Losses
One Year or Longer
Fair
Value
Unrealized
Losses
Total
Fair
Value
Unrealized
Losses
(In thousands)
At December 31, 2012:
U.S. GSE obligations .............
Mortgage-backed securities ...
Corporate debt securities .......
Municipal securities ...............
Subtotal, debt securities .....
Mutual funds ..........................
$ 9,972
27,806
—
566
38,344
—
Total temporarily
$
$
$
(23)
(60)
—
(6)
(89)
—
—
—
—
—
—
646
—
—
—
—
—
(26)
$ 9,972
27,806
—
566
38,344
646
$
(23)
(60)
—
(6)
(89)
(26)
impaired securities ...........
$ 38,344
$
(89)
$
646
$
(26)
$ 38,990
$
(115)
Securities are evaluated by management for other than temporary impairment on at least
a quarterly basis, and more frequently when economic or market conditions warrant such
evaluation. Consideration is given to (1) the length of time and the extent to which the
fair value has been less than cost; (2) the financial condition and near-term prospects
of the issuer; and (3) the intent and ability of the Corporation to retain its investment
in the issuer for a period of time sufficient to allow for any anticipated recovery in fair
value. As of December 31, 2013, ninety-five debt securities and one equity security had
gross unrealized losses, with an aggregate depreciation of 2.82% from the Corporation’s
amortized cost basis. The largest unrealized loss percentage of any single security was
10.42% (or $33,000) of its amortized cost. The largest unrealized dollar loss of any single
security was $382,000 (or 7.70%) of its amortized cost. The Corporation believes that the
nature and duration of impairment on its debt security positions are primarily a function
of interest rate movements and changes in investment spreads, and does not consider full
repayment of principal on the reported debt obligations to be at risk. Since nearly all of
these securities are rated “investment grade” and a) the Corporation does not intend to sell
these securities before recovery, and b) that it is more likely than not that the Corporation
will not be required to sell these securities before recovery, the Corporation does not
consider these securities to be other-than-temporarily impaired as of December 31, 2013.
The following table sets forth information regarding sales of investment securities and the
resulting gains or losses from such sales.
Year Ended December 31,
2012
2013
(In thousands)
Amortized cost of securities sold ...........................................
Gain realized on securities sold .............................................
Proceeds from securities sold ...........................................
$
$
34,436
1,121
35,557
$
$
36,904
882
37,786
6. LOANS AND ALLOWANCE FOR LOAN LOSSES
The Bank originates loans to businesses and individuals on both a collateralized and an
uncollateralized basis. The Bank’s customer base is concentrated in Eastern Massachusetts.
The Bank has diversified the risk in its commercial loan portfolio by lending to businesses
in a wide range of industries while maintaining no significant individual industry
concentration. The majority of loans to individuals are collateralized by residential real
estate, marketable securities or other assets.
27
Loans outstanding are detailed by category as follows:
December 31,
2013
2012
(In thousands)
Residential real estate:
Mortgages - fixed rate (20 & 30 year) ...................................
Mortgages - fixed rate (15 year) .............................................
Mortgages - fixed rate (10 year) .............................................
Mortgages - adjustable rate ....................................................
Deferred costs net of unearned fees .......................................
Total residential real estate ...............................................
$
Commercial real estate:
Mortgages - nonowner occupied ............................................
Mortgages - owner occupied ..................................................
Construction ...........................................................................
Deferred costs net of unearned fees .......................................
Total commercial real estate ............................................
Home equity:
Home equity - lines of credit .................................................
Home equity - term loans .......................................................
Deferred costs net of unearned fees .......................................
Total home equity.............................................................
Commercial:
Commercial and industrial .....................................................
Deferred costs net of unearned fees .......................................
Total commercial..............................................................
Consumer:
Secured ...................................................................................
Unsecured ..............................................................................
Deferred costs net of unearned fees .......................................
Total consumer .................................................................
134,498
123,627
56,426
143,159
466
458,176
304,509
44,999
13,584
202
363,294
43,521
2,985
129
46,635
50,513
245
50,758
20,931
2,643
14
23,588
$
135,466
106,250
44,327
61,736
129
347,908
216,643
51,665
7,886
234
276,428
47,359
3,090
125
50,574
47,265
305
47,570
16,879
2,870
20
19,769
Total loans ........................................................................
$
942,451
$
742,249
Certain directors and officers of the Corporation are customers of the Bank. Loans to these
parties are made in the ordinary course of business at the Bank’s normal credit terms,
including interest rate and collateral requirements, and do not represent more than a normal
risk of collection. At December 31, 2013 and 2012, total loans outstanding to these related
parties were $729,000 and $752,000, respectively. During 2013, $50,000 of additions and
$73,000 of repayments were made to these loans, compared to $916,000 of additions and
$950,000 of repayments made during 2012.
28
The following table sets forth information regarding non-performing loans.
Non-accrual loans ..................................................................
Loans past due >90 days, but still accruing ...........................
Troubled debt restructurings ..................................................
Total non-performing loans ..............................................
A breakdown of non-accrual loans receivable is as follows:
Non-accrual loans:
Residential mortgage loans .............................................
Commercial mortgage loans ...........................................
Home equity loans ..........................................................
Commercial loans ...........................................................
Consumer loans ...............................................................
Total ..........................................................................
December 31,
2013
2012
(In thousands)
1,582
121
—
1,703
$
$
1,570
—
—
1,570
December 31,
2013
2012
(In thousands)
645
379
340
218
—
1,582
$
$
708
—
322
537
3
1,570
$
$
$
$
The following table contains period-end balances of loans receivable disaggregated by
credit quality indicator:
December 31, 2013
(In thousands)
Residential
Mortgages
Home
Equity
Consumer
Credit risk profile based on payment activity:
Performing .....................................................
Non-performing .............................................
Total .........................................................
$
$
457,531
645
458,176
$
$
46,174
461
46,635
$
$
23,588
—
23,588
Commercial
Mortgages Commercial
Credit risk profile by internally assigned grade:
Pass ..............................................................................................
Special mention ............................................................................
Substandard ..................................................................................
Doubtful .......................................................................................
Total .......................................................................................
$
$
362,195
470
629
—
363,294
$
$
47,366
1,080
2,312
—
50,758
With respect to residential real estate, home equity and consumer loans, the Bank utilizes
the following categories as indicators of credit quality:
• Performing – These loans are accruing and are considered having low to moderate
risk.
• Non-performing – These loans either have been placed on non-accrual, or are past
due more than ninety days but are still accruing, and may contain greater than
average risk.
29
With respect to commercial real estate and commercial loans, the Bank utilizes a ten grade
internal loan rating system as an indicator of credit quality. The grades are as follows:
• Loans rated 1-6 (Pass) – These loans are considered “pass” rated with low to average
risk.
• Loans rated 7 (Special Mention) – These loans have potential weaknesses warranting
close attention which if left uncorrected may result in deterioration of the credit at
some future date.
• Loans rated 8 (Substandard) – These loans have well-defined weaknesses that
jeopardize the orderly liquidation of the debt under the original loan terms. Loss
potential exists but is not identifiable in any one customer.
• Loans rated 9 (Doubtful) – These loans have pronounced weaknesses that make full
collection highly questionable and improbable.
• Loans rated 10 (Loss) – These loans are considered uncollectible and continuance as
a bankable asset is not warranted.
The following table contains period-end balances of loans receivable disaggregated by past
due status:
December 31, 2013
Current
30 - 59
Days
60 - 89
Days
90 Days
or Greater
Total
Past Due
Total
Loans
(In thousands)
Greater
Than 90
Days But
Accruing
$ 457,673 $ 289
$ 201 $
13 $ 503 $ 458,176 $ —
767
362,527
38
46,157
252
50,429
23,091
496
$ 939,877 $ 1,842
—
—
77
1
$ 279 $
767
478
329
497
—
—
121
440
—
—
—
—
453 $ 2,574 $ 942,451 $ 121
363,294
46,635
50,758
23,588
Loans receivable:
Residential mortgage
loans .........................
Commercial mortgage
loans .........................
Home equity loans .....
Commercial loans ......
Consumer loans ..........
Total .....................
The following table contains period-end balances of the allowance for loan losses and
related loans receivable disaggregated by impairment method:
Residential
Mortgages
Commercial Home
Mortgages
Equity
Commercial
Consumer Unallocated
Total
December 31, 2013
(In thousands)
Allowance for loan losses:
Individually evaluated
for impairment ..............
$
— $
— $ — $
— $ — $
— $
—
Collectively evaluated
for impairment ..............
Total.............................
$
4,490
4,490 $
5,954
5,954 $
476
476 $
845
845 $
302
302 $
641
12,708
641 $ 12,708
Loans receivable:
Individually evaluated
for impairment ..............
$
— $
379 $ — $
131 $ —
$
510
Collectively evaluated
for impairment ..............
Total.............................
362,915
458,176
$ 458,176 $ 363,294 $ 46,635 $
46,635
23,588
50,627
50,758 $ 23,588
941,941
$ 942,451
30
Residential
Mortgages
Commercial Home
Mortgages
Equity
Commercial
Consumer Unallocated
Total
December 31, 2012
(In thousands)
Allowance for loan losses:
Individually evaluated
for impairment ..............
$
— $
— $ — $
— $ — $
— $
—
Collectively evaluated
for impairment ..............
Total.............................
$
3,792
3,792 $
4,850
4,850 $
551
551 $
824
824 $
273
273 $
10,948
658
658 $ 10,948
Loans receivable:
Individually evaluated
for impairment ..............
$
— $
— $ — $
489 $ —
$
489
Collectively evaluated
for impairment ..............
347,908
Total............................. $ 347,908 $ 276,428 $ 50,574 $
276,428
50,574
47,081
19,769
47,570 $ 19,769
741,760
$ 742,249
As discussed in Note 2, Summary of Significant Accounting Policies, the provision for loan
losses is evaluated on a regular basis by management in order to determine the adequacy
of the allowance for loan losses.
Changes in the allowance for loan losses were as follows:
Residential
Mortgages
Commercial Home
Mortgages
Equity
Commercial
Consumer Unallocated
Total
December 31, 2013
(In thousands)
Balance at beginning
of year ..............................
Provision for loan losses .
Loans charged off ...........
Recoveries ......................
Balance at end of year ........
$
$
3,792 $
639
—
59
4,490 $
4,850 $
1,096
—
8
5,954 $
551 $
(60)
(15)
—
476 $
824 $
(191)
(25)
237
845 $
273 $
33
(21)
17
302 $
658 $ 10,948
(17) 1,500
(61)
—
321
—
641 $ 12,708
An analysis of mortgage servicing rights follows:
Balance at December 31, 2011 .............................
Mortgage servicing rights capitalized .............
Amortization charged against servicing
income ...........................................................
Change in impairment reserve ........................
Balance at December 31, 2012 .............................
Mortgage servicing rights capitalized .............
Amortization charged against servicing
income ...........................................................
Change in impairment reserve ........................
Balance at December 31, 2013 .............................
Mortgage
Servicing
Rights
$
$
—
223
(7)
—
216
263
(83)
—
396
Valuation
Allowance
(In thousands)
Total
$
$
—
—
—
(1)
(1)
—
—
(11)
(12)
$
$
—
223
(7)
(1)
215
263
(83)
(11)
384
31
7. FEDERAL HOME LOAN BANK OF BOSTON STOCK
As a voluntary member of the FHLB of Boston (“FHLB Boston”), the Bank is
required to invest in stock of the FHLB Boston (which is considered a restricted equity
security) in an amount based upon its outstanding advances from the FHLB Boston. At
December 31, 2013, the Bank’s investment in FHLB Boston stock exceeded its required
investment by $3,001,000. No market exists for shares of this stock. The Bank’s cost for
FHLB Boston stock is equal to its par value. Upon redemption of the stock, which is at the
discretion of the FHLB Boston, the Bank would receive an amount equal to the par value
of the stock. At its discretion, the FHLB Boston may also declare dividends on its stock.
The Bank’s investment in FHLB Boston stock is reviewed for impairment at each
reporting date based on the ultimate recoverability of the cost basis of the stock. As of
December 31, 2013, no impairment has been recognized.
8. BANKING PREMISES AND EQUIPMENT
A summary of the cost and accumulated depreciation and amortization of property,
leasehold improvements and equipment is presented below:
December 31,
2013
2012
Estimated
Useful Lives
(In thousands)
Land ......................................................................
Building and leasehold improvements ..................
Equipment, including vaults .................................
Construction in process .........................................
Subtotal ...........................................................
Accumulated depreciation and amortization ........
Total ................................................................
$ 1,116
12,577
16,399
2,620
32,712
(22,761)
$ 9,951
$ 1,116
11,702
14,519
69
27,406
(21,192)
$ 6,214
1-30 years
3-20 years
Total depreciation expense for the years ended December 31, 2013 and 2012 amounted to
approximately $1,569,000 and $1,430,000, respectively, and is included in occupancy and
equipment expenses in the accompanying consolidated statements of income.
9. GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying value of goodwill and other intangible assets, which are
included in other assets in the accompanying consolidated balance sheets, were as follows:
Balance at December 31, 2011 .............................
Amortization expense .....................................
Balance at December 31, 2012 .............................
Amortization expense .....................................
Balance at December 31, 2013 .............................
Goodwill
$
$
412
—
412
—
412
Customer
Intangibles
(In thousands)
$
$
12
(12)
—
—
—
Total
Intangibles
$
$
424
(12)
412
—
412
32
Goodwill and intangible assets that are not amortized are tested for impairment, based
on their fair values, at least annually. As of December 31, 2013, no impairment has been
recognized.
10. DEPOSITS
Deposits are summarized as follows:
Demand deposits (non-interest bearing) ................................
Interest bearing checking .......................................................
Money market ........................................................................
Savings ...................................................................................
Certificates of deposit under $100,000 ..................................
Certificates of deposit $100,000 or greater ............................
Total deposits ...................................................................
December 31,
2013
2012
(In thousands)
$
382,255
335,010
78,410
489,160
52,025
72,187
$ 1,409,047
$ 329,211
363,575
60,850
393,541
55,729
78,427
$ 1,281,333
Certificates of deposit had the following schedule of maturities:
Less than 3 months remaining ...............................................
3 to 5 months remaining ........................................................
6 to 11 months remaining .......................................................
12 to 23 months remaining ....................................................
24 to 47 months remaining ....................................................
48 months or more remaining ................................................
Total certificates of deposit ..............................................
December 31,
2013
2012
(In thousands)
$
$
44,631
21,546
23,042
20,707
10,036
4,250
124,212
$
46,001
27,058
22,860
20,884
14,433
2,920
$ 134,156
Interest expense on certificates of deposit $100,000 or greater was $533,000 and $642,000
for the years ended December 31, 2013 and 2012, respectively.
11. SHORT-TERM BORROWINGS
Information relating to activity and rates paid on short-term borrowings is presented below:
Year Ended December 31,
2012
2013
(Dollars in thousands)
Short-term borrowings:
Average daily balance ......................................................
Average interest rate.........................................................
Highest month-end balance ..............................................
$
42,753
$ 17,270
0.26 %
0.27 %
$
72,000
$ 59,000
33
12. LONG-TERM BORROWINGS
Long-term borrowings consisted of the following:
December 31, 2013
Amount
Rate
December 31, 2012
Rate
Amount
(Dollars in thousands)
Wholesale Repurchase Agreements:
Due 03/03/2013; callable quarterly
beginning 03/03/2011 ............................ $
—
—
$
20,000
3.25%
All short- and long-term borrowings with the FHLB Boston are secured by the Bank’s
stock in the FHLB Boston and a blanket lien on “qualified collateral” defined principally
as 90% of the market value of certain U.S. Government and GSE obligations and 75% of
the carrying value of certain residential mortgage loans. Based upon collateral pledged,
the Bank’s unused borrowing capacity with the FHLB Boston at December 31, 2013 was
approximately $264,263,000.
The Bank also has a line of credit with the FRB Boston. At December 31, 2013, the Bank
had pledged commercial real estate and commercial & industrial loans with aggregate
principal balances of approximately $260,704,000 as collateral for this line of credit. Based
upon the collateral pledged, the Bank’s unused borrowing capacity with the FRB Boston at
December 31, 2013 was approximately $161,829,000.
13. INCOME TAXES
The components of income tax expense were as follows:
Current:
Federal ..............................................................................
State ..................................................................................
Total current expense .................................................
Deferred:
Federal ..............................................................................
State ..................................................................................
Total deferred (benefit)/expense.................................
Total income tax expense ...........................................
Year Ended December 31,
2012
2013
(In thousands)
$
$
6,324
1,009
7,333
(340)
(96)
(436)
6,897
$
$
2,971
202
3,173
2,449
692
3,141
6,314
34
The following is a reconciliation of the total income tax provision, calculated at statutory
federal income tax rates, to the income tax provision in the consolidated statements of
income:
Provision at statutory rates .....................................................
Increase/(decrease) resulting from:
State tax, net of federal tax benefit ...................................
Tax-exempt income ..........................................................
ESOP dividends ...............................................................
Bank owned life insurance ...............................................
Other ................................................................................
Total income tax expense ...........................................
Year Ended December 31,
2012
2013
(In thousands)
$
7,363
$
6,901
593
(710)
(176)
(228)
55
6,897
581
(710)
(163)
(249)
(46)
$
6,314
$
As of December 31, 2013 and 2012, the Corporation had no unrecognized tax assets or
liabilities.
The Corporation’s net deferred tax asset consisted of the following components:
Gross deferred tax assets:
Allowance for loan losses ................................................
Accrued retirement benefits .............................................
Unrealized gains on AFS securities .................................
Depreciation of premises and equipment .........................
Goodwill ..........................................................................
Rent ..................................................................................
ESOP dividends ...............................................................
Equity based compensation ..............................................
Other ................................................................................
Total gross deferred tax assets ...................................
Gross deferred tax liabilities:
Unrealized gains on AFS securities .................................
Accrued retirement benefits .............................................
Deferred loan origination costs ........................................
Mortgage servicing rights ................................................
Total gross deferred tax liabilities ..............................
Net deferred tax asset .................................................
December 31,
2013
2012
(In thousands)
$
$
5,191
—
1,847
338
129
228
206
231
171
8,341
—
(616)
(444)
(157)
(1,217)
7,124
$
$
4,472
2,901
—
753
255
210
190
271
132
9,184
(4,108)
—
(340)
(88)
(4,536)
4,648
It is management’s belief, that it is more likely than not, that the reversal of deferred tax
liabilities and results of future operations will generate sufficient taxable income to realize
the deferred tax assets. In addition, the Corporation’s net deferred tax asset is supported
by recoverable income taxes. Therefore, no valuation allowance was required at either
December 31, 2013 or 2012 for the deferred tax assets. It should be noted, however, that
factors beyond management’s control, such as the general state of the economy and real
estate values, can affect future levels of taxable income and that no assurance can be given
that sufficient taxable income will be generated in future periods to fully absorb deductible
temporary differences.
35
At December 31, 2013 and 2012, the Corporation had no unrecognized tax benefits or any
uncertain tax positions. The Corporation does not expect the total amount of unrecognized
tax benefits to significantly increase in the next twelve months.
The Corporation’s federal income tax returns are open and subject to examination from the
2010 tax return year and forward. The Corporation’s state income tax returns are generally
open from the 2010 and later tax return years based on individual state statute of limitations.
14. PENSION AND RETIREMENT PLANS
The Corporation has a noncontributory, defined benefit pension plan (“Pension Plan”)
covering substantially all employees hired before May 2, 2011. Employees in positions
requiring at least 1,000 hours of service per year were eligible to participate upon the
attainment of age 21 and the completion of one year of service. Benefits are based primarily
on years of service and the employee’s average monthly pay during the five highest
consecutive plan years of the employee’s final ten years. The Corporation also provides
supplemental retirement benefits to certain executive officers of the Corporation under
the terms of Supplemental Executive Retirement Agreements (“Supplemental Retirement
Plan”). The Supplemental Retirement Plan became effective on October 1, 1989. Benefits to
be paid under the plan are contractually agreed upon and detailed in individual agreements
with the executives. The Corporation uses a December 31 measurement date each year to
determine the benefit obligations for these plans.
Projected benefit obligations and funded status were as follows:
Pension
Plan
2013
2012
Supplemental
Retirement Plan
2012
2013
(In thousands)
Change in projected benefit obligation:
Obligation at beginning of year ............ $ 32,580
1,539
1,300
(4,386)
(824)
30,209
Service cost ...........................................
Interest cost ...........................................
Actuarial (gain)/loss ..............................
Benefits paid ..........................................
Obligation at end of year .................
$
$ 28,444
1,542
1,212
2,097
(715)
32,580
$
6,837
630
273
(1,402)
(122)
6,216
Change in plan assets:
Fair value at beginning of year .............
Actual return on plan assets ..................
Employer contribution ..........................
Benefits paid ..........................................
Fair value at end of year ..................
33,156
5,307
1,000
(824)
38,639
19,445
3,426
11,000
(715)
33,156
—
—
122
(122)
—
5,586
544
237
592
(122)
6,837
—
—
122
(122)
—
Overfunded (underfunded) status
at end of year ......................................... $
8,430
$
576
$
(6,216)
$
(6,837)
36
Amounts recognized in the consolidated balance sheets consisted of:
Pension
Plan
2013
2012
Supplemental
Retirement Plan
2012
2013
(In thousands)
Other assets (liabilities) ............................... $
8,430
$
576
$
(6,216)
$
(6,837)
Amounts recognized in accumulated other comprehensive income consisted of:
Pension
Plan
2013
2012
Supplemental
Retirement Plan
2012
2013
(In thousands)
Net actuarial (gain)/loss .............................. $
Prior service cost/(benefit) ..........................
$
1,709
(34)
1,675
$
$
9,656
(38)
9,618
$
$
(344)
—
(344)
$
$
1,164
26
1,190
Information for pension plans with an accumulated benefit obligation in excess of plan
assets:
Pension
Plan
2013
2012
Supplemental
Retirement Plan
2012
2013
(In thousands)
Projected benefit obligation ........................ $ 30,209
25,513
Accumulated benefit obligation ..................
38,639
Fair value of plan assets ..............................
$ 32,580
27,088
33,156
$
6,216
6,216
—
$
6,837
6,837
—
During 2012, the Corporation contributed $11,000,000 to the Pension Plan, which resulted
in a funded status in excess of the accumulated benefit obligation as of December 31, 2012
and 2013.
37
The components of net periodic benefit cost and amounts recognized in other comprehensive
income were as follows:
Pension
Plan
2013
2012
Supplemental
Retirement Plan
2012
2013
(In thousands)
Net periodic benefit cost:
Service cost ........................................... $
Interest cost ...........................................
Expected return on assets ......................
1,539
1,300
(2,487)
$
1,542
1,212
(1,508)
$
Amortization of prior service
cost/(benefit) .......................................
(4)
6
Amortization of net actuarial
(gain)/loss ............................................
Net periodic benefit cost .................
741
1,089
804
2,056
$
630
273
—
79
53
1,035
Amounts recognized in other
comprehensive income:
Net actuarial (gain)/loss ........................
Amortization of prior service
(7,947)
(625)
(1,402)
cost/(benefit) .......................................
4
(6)
(79)
Total recognized in other
comprehensive income ..................
(7,943)
(631)
(1,481)
544
237
—
79
1
861
592
(79)
513
Total recognized in net periodic
benefit cost and other
comprehensive income .................. $
(6,854)
$
1,425
$
(446)
$
1,374
Weighted-average assumptions used to determine projected benefit obligations are as
follows:
Pension
Plan
2013
2012
Supplemental
Retirement Plan
2012
2013
Discount rate ...............................................
Rate of compensation increase ....................
5.00%
4.00%
4.00%
4.00%
5.00%
NA
4.00%
NA
Weighted-average assumptions used to determine net periodic benefit cost are as follows:
Pension
Plan
2013
2012
Supplemental
Retirement Plan
2012
2013
Discount rate ...............................................
Expected long-term return on plan assets ...
Rate of compensation increase ....................
4.00%
7.50%
4.00%
4.25%
7.50%
4.00%
4.00%
NA
NA
4.25%
NA
NA
The expected long-term rate of return has been established based on the ongoing investment
of pension plan assets in a diversified portfolio of equities and fixed income securities. The
components of the expected long-term rate of return include annual expectations for a
risk-free rate of return of approximately 3.00% per year, plus long-term annual inflation at
approximately 3.00% per year, plus a risk premium rate of return of approximately 1.50%
per year.
38
The Corporation maintains an Investment Policy for its defined benefit pension plan. The
objective of this policy is to seek a balance between capital appreciation, current income,
and preservation of capital, with a longer term tilt towards equities because of the extended
time horizon of the pension plan. The Investment Policy guidelines suggest that the target
asset allocation percentages are from 60% to 85% in equities, from 10% to 55% in fixed
income debt securities and cash, and from 0% to 10% in real assets. The Corporation does
not expect to make a contribution to its defined benefit pension plan in 2014.
The Corporation’s defined pension plan weighted-average asset allocations by asset
category were as follows:
Equity securities ..........................................................................
Debt securities .............................................................................
Cash and equivalents ...................................................................
Total ......................................................................................
December 31,
2013
74%
23
3
100%
2012
50%
22
28
100%
The three broad levels of fair values used to measure the pension plan assets are as follows:
• Level 1 – Quoted prices for identical assets in active markets.
• Level 2 – Quoted prices for similar assets in active markets; quoted prices for
identical or similar assets in inactive markets; and model-derived valuations in
which all significant inputs and significant value drivers are observable in active
markets.
• Level 3 – Valuations derived from techniques in which one or more significant
inputs or significant value drivers are unobservable in the markets and which reflect
the Corporation’s market assumptions.
The following table summarizes the various categories of the pension plan’s assets:
Asset category:
Cash and cash equivalents .................
Equity securities:
Common stocks:
Large cap core ........................
Mid cap core ..........................
International ...........................
Mutual funds:
Fixed income ..........................
Mid cap blend ........................
International ...........................
Total .................................
Fair Value as of December 31, 2013
Level 1
Level 2
Level 3
Total
(In thousands)
$ 1,147
$
—
$
—
$ 1,147
14,381
3,394
2,630
8,993
1,731
6,363
$ 38,639
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
14,381
3,394
2,630
8,993
1,731
6,363
$ 38,639
$
There were no transfers between fair value levels during the years ended December 31,
2013 and 2012.
39
The Corporation offers postretirement health care benefits for current and future retirees
of the Bank. Employees receive a fixed monthly benefit at age 65 toward the purchase of
postretirement medical coverage. The benefit received is based on the employee’s years
of active service. The Corporation uses a December 31 measurement date each year to
determine the benefit obligation for this plan.
Projected benefit obligations and funded status were as follows:
Change in projected benefit obligation:
Obligation at beginning of year ........................................
Service cost .......................................................................
Interest cost .......................................................................
Actuarial (gain)/loss ..........................................................
Benefits paid ......................................................................
Obligation at end of year .............................................
$
Change in plan assets:
Fair value at beginning of year .........................................
Actual return on plan assets ..............................................
Employer contribution ......................................................
Benefits paid ......................................................................
Fair value at end of year ..............................................
Postretirement
Healthcare Plan
2013
2012
(In thousands)
$
628
14
22
(124)
(32)
508
—
—
32
(32)
—
695
15
25
(67)
(40)
628
—
—
40
(40)
—
Overfunded (underfunded) status at end of year .....................
$
(508)
$
(628)
Amounts recognized in the consolidated balance sheets consisted of:
Postretirement
Healthcare Plan
2013
2012
(In thousands)
Other assets (liabilities) ...........................................................
$
(508)
$
(628)
Amounts recognized in accumulated other comprehensive income consisted of:
Net actuarial (gain)/loss ..........................................................
Prior service cost/(benefit) ......................................................
Postretirement
Healthcare Plan
2013
2012
(In thousands)
$
$
(170)
(20)
(190)
$
$
(52)
(28)
(80)
40
Information for pension plans with an accumulated benefit obligation in excess of plan
assets:
Postretirement
Healthcare Plan
2013
2012
(In thousands)
Projected benefit obligation ....................................................
Accumulated benefit obligation ..............................................
Fair value of plan assets ..........................................................
$
508
508
—
$
628
628
—
The components of net periodic benefit cost and amounts recognized in other comprehensive
income were as follows:
Net periodic benefit cost:
Service cost .......................................................................
Interest cost .......................................................................
Expected return on assets ..................................................
Amortization of prior service cost/(benefit) ......................
Amortization of net actuarial (gain)/loss ..........................
Net periodic benefit cost .............................................
$
Amounts recognized in other comprehensive income:
Net actuarial (gain)/loss ....................................................
Amortization of prior service cost/(benefit) ......................
Amortization of net actuarial (gain)/loss ..........................
Total recognized in other comprehensive income.......
Postretirement
Healthcare Plan
2013
2012
(In thousands)
$
14
22
—
(8)
(5)
23
(124)
8
5
(111)
15
25
—
(8)
(1)
31
(67)
8
1
(58)
Total recognized in net periodic benefit cost
and other comprehensive income ..............................
$
(88)
$
(27)
Weighted-average assumptions used to determine projected benefit obligations are as
follows:
Discount rate ...........................................................................
Rate of compensation increase ................................................
Postretirement
Healthcare Plan
2013
5.00%
NA
2012
4.00%
NA
41
Weighted-average assumptions used to determine net periodic benefit cost are as follows:
Discount rate ...........................................................................
Expected long-term return on plan assets ...............................
Rate of compensation increase ................................................
Assumed health care cost trend rates are as follows:
Health care cost trend rate assumed for next year ...............
Rate to which the cost trend rate is assumed
to decline (the ultimate trend rate) .....................................
Year that the rate reaches the ultimate trend rate .................
Postretirement
Healthcare Plan
2013
2012
4.00%
NA
NA
4.25%
NA
NA
December 31,
2013
2012
5.00%
5.00%
2014
6.00%
5.00%
2014
Assumed health care trend rates have a significant effect on the amounts reported for the
health care plans. A one-percentage-point change in assumed health care cost trend rates
would have the following effects:
One Percentage Point
Increase
Decrease
(In thousands)
Effect on total service and interest cost ...............................
Effect on postretirement benefit obligation ..........................
$
396
9,422
$
(363)
(8,670)
Benefits expected to be paid in the next ten years are as follows:
Year ended
December 31,
Pension
Plan
2014
2015
2016
2017
2018
2019-2023 inclusive
Ten year total
$
1,017
1,108
1,150
1,212
1,363
8,764
$ 14,614
Supplemental
Retirement
Plan
Post-
retirement
Healthcare
Plan
(In thousands)
$
$
472
470
468
473
560
3,185
5,628
$
$
35
36
35
34
33
173
346
Total
$
$
1,524
1,614
1,653
1,719
1,956
12,122
20,588
42
The estimated amounts that will be amortized from accumulated other comprehensive
income into net periodic benefit cost during 2014 are as follows:
Pension
Plan
Supplemental
Retirement
Plan
Post-
retirement
Healthcare
Plan
(In thousands)
Total
Prior service cost ....................
Net (gain)/loss ........................
Total .................................
$
$
4
—
4
$
$
—
—
—
$
$
(8)
(12)
(20)
$
$
(4)
(12)
(16)
The Corporation maintains a Profit Sharing Plan (“PSP”) that provides for deferral of
federal and state income taxes on employee contributions allowed under Section 401(k)
of federal law. The Corporation matches employee contributions up to 100% of the first
3% of each participant’s salary. Each year, the Corporation may also make a discretionary
contribution to the PSP. Employees are eligible to participate in the 401(k) feature of
the PSP on the first business day of the quarter following their initial date of service and
attainment of age 21. Employees are eligible to participate in discretionary contribution
feature of the PSP on January 1 and July 1 of each year provided they have attained the age
of 21 and the completion of twelve months of service consisting of at least 1,000 hours.
The Corporation has an Employee Stock Ownership Plan (“ESOP”) for its eligible
employees. Employees are eligible to participate upon the attainment of age 21 and the
completion of 12 months of service consisting of at least 1,000 hours. It is anticipated that
the ESOP will purchase from the Corporation shares presently authorized but unissued at a
price determined by an independent appraiser and certified by a committee of the trustees
of the ESOP. Purchases of the Corporation’s stock by the ESOP will be funded solely by
employer contributions. At December 31, 2013 and 2012, the ESOP owned 314,773 shares
and 308,968 shares, respectively, of the Corporation’s common stock.
Total expenses related to the Profit Sharing and ESOP Plans for the years ended
December 31, 2013 and 2012, amounted to approximately $516,000 and $900,000,
respectively.
15. STOCK OPTION AND DIRECTOR STOCK PLANS
In 1993, the Corporation adopted a Stock Option Plan for key employees as an incentive
for them to assist the Corporation in achieving long-range performance goals. During
2005, the Corporation’s shareholders amended the plan to permit the issuance of restricted
stock, restricted stock units (“RSUs”) and stock appreciation rights (“SARs”).
43
Stock options time-vest over a five-year period. All options expire 10 years from the date
granted and have been issued at fair value at the date of grant which, in some instances,
may be less than publicly traded values. A summary of stock options outstanding as
of December 31, 2013 and 2012, and changes during the years ended on those dates is
presented below:
2013
2012
Weighted
Average
Exercise
Price
Number
of Options
Weighted
Average
Exercise
Price
Number
of Options
Stock options:
Outstanding at beginning of year ....
Granted ......................................
Forfeited ....................................
Expired ......................................
Exercised ...................................
Outstanding at end of year ..............
$
312,916
—
—
(42,121)
(22,018)
248,777
30.25
—
—
34.11
28.95
29.71
$
350,535
—
—
(22,264)
(15,355)
312,916
30.12
—
—
29.15
28.76
30.25
Exercisable at end of year ...............
248,777
$
29.71
257,666
$
30.48
The following table summarizes information about stock options outstanding at
December 31, 2013:
Range of
Exercise Price
$25.00 - $29.99
$30.00 - $34.99
Options Outstanding
Number
Outstanding
at 12/31/13 Contractual Life
Weighted
Average
Remaining
180,827
67,950
248,777
2.6 years
1.8 years
2.4 years
Weighted
Average
Exercise
Price
$ 28.89
$ 31.92
$ 29.71
Options Exercisable
Weighted
Average
Exercisable Exercise
Price
at 12/31/13
Number
180,827
67,950
248,777
$
$
$
28.89
31.92
29.71
Restricted stock awards time-vest over a five-year period and have been fair valued as of
the date of grant. The holders of restricted stock awards participate fully in the rewards of
stock ownership of the Corporation, including voting and dividend rights. A summary of
non-vested restricted shares outstanding as of December 31, 2013 and 2012, and changes
during the years ended on those dates is presented below:
2013
2012
Weighted
Average
Grant
Value
Number
of Shares
Weighted
Average
Grant
Value
Number
of Shares
Restricted stock:
Non-vested at beginning of year .....
Granted ......................................
Vested ........................................
Forfeited ....................................
Non-vested at end of year ...............
$
45,704
1,200
(14,852)
(300)
31,752
33.34
40.09
32.82
32.03
33.85
$
33,978
23,210
(10,422)
(1,062)
45,704
31.99
34.46
31.73
30.54
33.34
44
Restricted stock unit awards vest based upon the Corporation’s performance over a
three-year period and have been fair valued as of the date of grant. The holders of
performance-based RSU awards do not participate in the rewards of stock ownership of the
Corporation until vested. A summary of non-vested restricted stock units outstanding as of
December 31, 2013 and 2012, and changes during the years ended on those dates is
presented below:
2013
2012
Weighted
Average
Grant
Value
Number
of Shares
Weighted
Average
Grant
Value
Number
of Shares
Restricted stock units:
Non-vested at beginning of year .....
Granted ......................................
Vested (Performance achieved) .
Forfeited ....................................
Expired (Performance
not achieved) ...........................
Non-vested at end of year ...............
$
26,205
9,880
—
—
(8,870)
27,215
33.22
40.70
—
—
30.80
36.73
$
18,150
9,010
—
(955)
—
26,205
32.56
34.39
—
31.62
—
33.22
Total expense related to the Stock Option Plan for the years ended December 31, 2013 and
2012, amounted to approximately $404,000 and $546,000, respectively.
In 1993, the Corporation initiated a Director Stock Plan (“DSP”). The DSP provides that
Directors of the Corporation receive their annual retainer fee in the form of stock in the
Corporation. Total shares issued under the DSP in the years ending December 31, 2013 and
2012 were 4,821 and 4,185, respectively.
16. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
To meet the financing needs of its customers, the Bank is a party to financial instruments
with off-balance-sheet risk in the normal course of business. These financial instruments
are primarily comprised of commitments to extend credit and standby letters of credit.
Those instruments involve, to varying degrees, elements of credit and interest rate risk in
excess of the amounts recognized in the consolidated balance sheets.
The Bank’s exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for loan commitments and standby letters of credit is represented by
the contractual amount of those instruments assuming that the amounts are fully advanced
and that collateral or other security is of no value. The Bank uses the same credit policies
in making commitments and conditional obligations as it does for on-balance-sheet
instruments.
45
Off-balance-sheet financial instruments with contractual amounts that present credit risk
included the following:
Standby letters of credit ........................................................
Commitments to extend credit:
Unused portion of existing lines of credit .......................
Origination of new loans .................................................
Commitments to sell loans ....................................................
Liabilities associated with letters of credit ............................
December 31,
2013
2012
(In thousands)
$
18,775
$
6,093
170,354
22,894
800
145
160,394
32,864
6,250
33
Standby letters of credit are conditional commitments issued by the Bank to guarantee
performance of a customer to a third party. Those guarantees are primarily issued to
support public and private borrowing arrangements. Most guarantees extend for one year.
The credit risk involved in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. The collateral supporting those commitments varies
and may include real property, accounts receivable or inventory. Commitments to extend
credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since some of the commitments
may expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer’s creditworthiness
on a case-by-case basis. The amount of collateral obtained upon extension of the credit is
based on management’s credit evaluation of the customer. Collateral held varies, but may
include primary residences, accounts receivable, inventory, property, plant and equipment,
and income-producing commercial real estate.
17. COMMITMENTS AND CONTINGENCIES
The Corporation is obligated under various lease agreements covering its main office,
branch offices and other locations. These agreements are accounted for as operating leases
and their terms expire between 2014 and 2022 and, in some instances, contain options to
renew for periods up to twenty-five years. The total minimum rentals due in future periods
under these agreements in effect at December 31, 2013 were as follows:
Year Ended
December 31,
2014
2015
2016
2017
2018
Thereafter
Total minimum lease payments
$
Future Minimum
Lease Payments
(In thousands)
3,461
4,023
3,658
2,673
2,463
4,674
20,952
$
Several lease agreements contain clauses calling for escalation of minimum lease payments
contingent on increases in real estate taxes, gross income adjustments, percentage
increases in the consumer price index and certain ancillary maintenance costs. Total
46
rental expense amounted to approximately $4,009,000 and $3,777,000 for the years ended
December 31, 2013 and 2012, respectively.
Under the terms of a sublease agreement, the Corporation will receive minimum annual
rental payments of approximately $29,000 through July 31, 2019. Total rental income
amounted to approximately $32,000 and $35,000 for the years ended December 31, 2013
and 2012, respectively.
The Bank is involved in various legal actions arising in the normal course of business.
Although the ultimate outcome of these actions cannot be ascertained at this time, it is
the opinion of management, after consultation with counsel, that the resolution of such
actions will not have a material adverse effect on the consolidated financial condition of
the Corporation.
The Corporation has entered into agreements with its President and with certain other senior
officers, whereby, following the occurrence of a change in control of the Corporation, if
employment is terminated (except because of death, retirement, disability or for “cause”
as defined in the agreements) or is voluntarily terminated for “good reason,” as defined in
the agreements, said officers will be entitled to receive additional compensation, as defined
in the agreements.
18. STOCKHOLDERS’ EQUITY
Capital guidelines issued by the Federal Reserve Board (“FRB”) and by the FDIC
require that the Corporation and the Bank maintain minimum capital levels for capital
adequacy purposes. These regulations also require banks and their holding companies
to maintain higher capital levels to be considered “well-capitalized”. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material effect
on the Corporation’s financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, there are specific capital guidelines that
involve quantitative measures of assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices. The risk-based capital rules are designed
to make regulatory capital more sensitive to differences in risk profiles among bank and
bank holding companies, to account for off-balance-sheet exposure and to minimize
disincentives for holding liquid assets. Management believes that as of December 31, 2013
and 2012, the Corporation and the Bank met all applicable minimum capital requirements
and were considered “well-capitalized” by both the FRB and the FDIC. There have been
no events or conditions since the end of the year that management believes would have
changed the Corporation’s or the Bank’s category.
47
The Corporation’s and the Bank’s actual and required capital measures were as follows:
Actual
Amount
Ratio
Minimum To Be
Well-Capitalized Under
Prompt Corrective
Action Provisions
Amount
Ratio
Minimum For Capital
Adequacy Purposes
Ratio
Amount
(Dollars in thousands)
At December 31, 2013:
Cambridge Bancorp:
Total capital
(to risk-weighted assets) .... $ 123,992
13.4%
$ 74,117
8.0%
$ 92,646
10.0%
Tier I capital
(to risk-weighted assets) .....
112,881
12.2%
37,058
4.0%
55,588
Tier I capital
(to average assets) ..............
112,881
7.6%
59,160
4.0%
73,950
6.0%
5.0%
Cambridge Trust Company:
Total capital
(to risk-weighted assets) .... $ 121,869
13.2%
$ 74,117
8.0%
$ 92,646
10.0%
Tier I capital
(to risk-weighted assets) .....
110,758
12.0%
37,058
4.0%
55,588
Tier I capital
(to average assets) ..............
110,758
7.5%
59,048
4.0%
73,810
6.0%
5.0%
At December 31, 2012:
Cambridge Bancorp:
Total capital
(to risk-weighted assets) .... $ 112,915
15.2%
$ 59,480
8.0%
$ 74,350
10.0%
Tier I capital
(to risk-weighted assets) .....
103,601
13.9%
29,740
4.0%
44,610
Tier I capital
(to average assets) ..............
103,601
7.5%
55,069
4.0%
68,836
6.0%
5.0%
Cambridge Trust Company:
Total capital
(to risk-weighted assets) .... $ 112,025
15.1%
$ 59,480
8.0%
$ 74,350
10.0%
Tier I capital
(to risk-weighted assets) .....
102,711
13.8%
29,740
4.0%
44,610
Tier I capital
(to average assets) ..............
102,711
7.5%
55,013
4.0%
68,766
6.0%
5.0%
19. OTHER INCOME
The components of other income were as follows:
Year Ended December 31,
2012
2013
(In thousands)
Safe deposit box income ........................................................
Loan fee income .....................................................................
Miscellaneous income ............................................................
Total other income ...........................................................
$
$
345
282
248
875
$
$
343
171
237
751
48
20. OTHER OPERATING EXPENSES
The components of other operating expenses were as follows:
Year Ended December 31,
2012
2013
(In thousands)
Contributions / Public relations .............................................
Director fees ...........................................................................
Printing and supplies ..............................................................
Travel and entertainment .......................................................
Postage ...................................................................................
Dues and memberships ..........................................................
Security ..................................................................................
Other losses ............................................................................
Amortization of intangible assets ...........................................
Miscellaneous expense ...........................................................
Total other operating expenses .........................................
$
$
489
473
373
325
283
276
254
129
—
230
2,832
$
$
507
418
408
282
313
245
166
91
12
219
2,661
21. OTHER COMPREHENSIVE INCOME
Comprehensive income is defined as all changes to equity except investments by and
distributions to stockholders. Net income is a component of comprehensive income,
with all other components referred to in the aggregate as ‘other comprehensive income’.
The Corporation’s other comprehensive income consists of unrealized gains or losses
on securities held at year-end classified as available-for-sale and the component of the
unfunded retirement liability computed in accordance with the requirements of ASC 715,
“Compensation – Retirement Benefits”. The before-tax and after-tax amount of each of
these categories, as well as the tax (expense)/benefit of each, is summarized as follows:
Year Ended December 31, 2013
Tax
(Expense)
or Benefit
(In thousands)
Net-of-tax
Amount
Before Tax
Amount
Defined benefit retirement plans:
Change in unfunded retirement liability .....
Unrealized gains/(losses) on AFS securities:
Unrealized holding gains/(losses) arising
$
9,587
$
(3,916)
$
5,671
during the period .......................................
(15,441)
Reclassification adjustment for gains
recognized in net income ..........................
(1,121)
(6,975)
$
$
5,554
401
2,039
(9,887)
(720)
(4,936)
$
49
Before Tax
Amount
Year Ended December 31, 2012
Tax
(Expense)
or Benefit
(In thousands)
Net-of-tax
Amount
Defined benefit retirement plans:
Change in unfunded retirement liability .....
Unrealized gains/(losses) on AFS securities:
Unrealized holding gains/(losses) arising
during the period .......................................
Reclassification adjustment for gains
recognized in net income ..........................
$
176
$
(72)
$
104
(499)
(882)
(1,205)
$
$
197
314
439
(302)
(568)
(766)
$
Reclassifications out of Accumulated Other Comprehensive Income (“AOCI”) are
presented below:
Year Ended December 31, 2013
Details about
AOCI
Components
Amount
Reclassified
from AOCI
Affected Line Item
on the
Statement of Income
(In thousands)
Unrealized gains/(losses) on AFS securities:
$
$
1,121
(401)
720
Gain on disposition of
investment securities
Income tax expense
Net income
22. EARNINGS PER SHARE
The following represents a reconciliation between basic and diluted earnings per share:
Year Ended December 31, 2013
Diluted
Basic
EPS
EPS
Numerator:
Net income .......................................................................
$ 14,015,000
$ 14,140,000
Denominator:
Weighted average common shares outstanding ...............
Dilutive effect of stock options ........................................
Total shares ................................................................
3,839,146
—
3,839,146
3,839,146
68,055
3,907,201
Earnings per share ..................................................................
$
3.65
$
3.62
Year Ended December 31, 2012
Diluted
Basic
EPS
EPS
Numerator:
Net income .......................................................................
$ 13,403,000
$ 13,403,000
Denominator:
Weighted average common shares outstanding ...............
Dilutive effect of stock options ........................................
Total shares ................................................................
3,839,681
—
3,839,681
3,839,681
39,926
3,879,607
Earnings per share ..................................................................
$
3.49
$
3.45
50
23. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following is a summary of the carrying values and estimated fair values of the
Corporation’s significant financial instruments as of the dates indicated.
Financial assets:
Cash and cash equivalents .................
Securities - available for sale .............
Securities - held to maturity ...............
Loans held for sale .............................
Loans, net ...........................................
FHLB Boston stock............................
Accrued interest receivable ................
Mortgage servicing rights ..................
Financial liabilities:
Deposits..............................................
Long-term borrowings .......................
December 31, 2013
Carrying Estimated
Fair Value
Value
December 31, 2012
Carrying Estimated
Fair Value
Value
(In thousands)
$
88,107
388,793
59,181
403
929,743
6,231
3,626
384
$
88,107
388,793
61,455
405
935,837
6,231
3,626
438
$
59,923
502,318
71,133
1,684
731,301
5,010
3,877
215
$
59,923
502,318
76,308
1,687
753,285
5,010
3,877
254
1,409,047
—
1,407,948
—
1,281,333
20,000
1,280,932
20,121
The Corporation follows ASC 820, “Fair Value Measurements and Disclosures” for
financial assets and liabilities. ASC 820 defines fair value, establishes a framework for
measuring fair value and expands disclosure requirements about fair value measurements.
ASC 820, among other things, emphasizes that fair value is a market-based measurement,
not an entity-specific measurement, and states that a fair value measurement should be
determined based on the assumptions the market participants would use in pricing the
asset or liability. In addition, ASC 820 specifies a hierarchy of valuations techniques based
on whether the types of valuation information (“inputs”) are observable or unobservable.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Corporation’s market assumptions. These two types of
inputs have created the following fair value hierarchy:
• Level 1 – Quoted prices for identical assets or liabilities in active markets.
• Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted
prices for identical or similar assets or liabilities in inactive markets; and model-
derived valuations in which all significant inputs and significant value drivers are
observable in active markets.
• Level 3 – Valuations derived from techniques in which one or more significant
inputs or significant value drivers are unobservable in the markets and which reflect
the Corporation’s market assumptions.
Under ASC 820, fair values are based on the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. When available, the Corporation uses quoted market prices to determine
fair value. If quoted prices are not available, fair value is based upon valuation techniques
such as matrix pricing or other models that use, where possible, current market-based or
independently sourced market parameters, such as interest rates. If observable market-
51
based inputs are not available, the Corporation uses unobservable inputs to determine
appropriate valuation adjustments using methodologies applied consistently over time.
Valuation techniques based on unobservable inputs are highly subjective and require
judgments regarding significant matters such as the amount and timing of future cash
flows and the selection of discount rates that may appropriately reflect market and credit
risks. Changes in these judgments often have a material impact on the fair value estimates.
In addition, since these estimates are as of a specific point in time, they are susceptible
to material near-term changes. The fair values disclosed do not reflect any premium or
discount that could result from offering significant holdings of financial instruments at
bulk sale, nor do they reflect the possible tax ramifications or estimated transaction costs.
Changes in economic conditions may also dramatically affect the estimated fair values.
The Corporation uses fair value measurements to record fair value adjustments to certain
assets and to determine fair value disclosures. Securities available for sale are recorded
at fair value on a recurring basis. Additionally, from time to time, the Corporation may
be required to record at fair value other assets on a nonrecurring basis, such as collateral
dependent impaired loans.
The following table summarizes certain assets reported at fair value:
Measured on a recurring basis:
Securities available for sale:
U.S. GSE obligations ...................
Mortgage-backed securities .........
Corporate debt securities ..............
Mutual funds ................................
Measured on a recurring basis:
Securities available for sale:
U.S. GSE obligations ...................
Mortgage-backed securities .........
Corporate debt securities ..............
Mutual funds ................................
Fair Value as of December 31, 2013
Level 1
Level 2
Level 3
Total
(In thousands)
$
$
—
—
—
613
$
73,244
292,322
22,614
—
—
—
—
—
$
73,244
292,322
22,614
613
Fair Value as of December 31, 2012
Level 1
Level 2
Level 3
Total
(In thousands)
$
$
—
—
—
646
$ 100,824
381,036
19,812
—
—
—
—
—
$ 100,824
381,036
19,812
646
52
The following is a description of the principal valuation methodologies used by the
Corporation to estimate the fair values of its financial instruments.
Investment Securities
For investment securities, fair values are primarily based upon valuations obtained from
a national pricing service which uses matrix pricing with inputs that are observable in
the market or can be derived from, or corroborated by, observable market data. When
available, quoted prices in active markets for identical securities are utilized.
Loans Held for Sale
For loans held for sale, fair values are estimated using projected future cash flows,
discounted at rates based upon either trades of similar loans or mortgage-backed securities,
or at current rates at which similar loans would be made to borrowers with similar credit
ratings and for similar remaining maturities.
Loans
For most categories of loans, fair values are estimated using projected future cash flows,
discounted at rates based upon either trades of similar loans or mortgage-backed securities,
or at current rates at which similar loans would be made to borrowers with similar credit
ratings and for similar remaining maturities. Loans that are deemed to be impaired in
accordance with ASC 310, “Receivables”, are valued based upon the lower of cost or fair
value of the underlying collateral.
FHLB Boston Stock
The fair value of FHLB Boston stock equals its carrying value since such stock is only
redeemable at its par value.
Mortgage Servicing Rights
The fair value of mortgage servicing rights is estimated based on the present value of
expected cash flows, incorporating assumptions for discount rate, prepayment speed and
servicing cost.
Deposits
The fair value of non-maturity deposit accounts is the amount payable on demand at the
reporting date. This amount does not take into account the value of the Bank’s long-term
relationships with core depositors. The fair value of fixed-maturity certificates of deposit
is estimated using a replacement cost of funds approach and is based upon rates currently
offered for deposits of similar remaining maturities.
Long-term Borrowings
For long-term borrowings, fair values are estimated using future cash flows, discounted
at rates based upon current costs for debt securities with similar terms and remaining
maturities.
Other Financial Assets and Liabilities
Cash and cash equivalents, accrued interest receivable and short-term borrowings have fair
values which approximate their respective carrying values because these instruments are
payable on demand or have short-term maturities and present relatively low credit risk and
interest rate risk.
53
Off-Balance-Sheet Financial Instruments
In the course of originating loans and extending credit, the Bank will charge fees in
exchange for its commitment. While these commitment fees have value, the Bank has not
estimated their value due to the short-term nature of the underlying commitments and their
immateriality.
Values Not Determined
In accordance with ASC 820, the Corporation has not estimated fair values for non-
financial assets such as banking premises and equipment, goodwill, the intangible value
of the Bank’s portfolio of loans serviced for itself and the intangible value inherent in the
Bank’s deposit relationships (i.e., core deposits), among others. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the Corporation.
54
CAMBRIDGE TRUST COMPANY – OFFICERS
Joseph V. Roller II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . President & Chief Executive Officer
Lynne M. Burrow . . . . . . . . . . . . . . . . . . . . . . . Executive Vice President & Chief Information Officer
Michael A. Duca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Vice President, Wealth Management
Albert R. Rietheimer . . . . . . . . . . . . . . . . . Senior Vice President, Chief Financial Officer & Treasurer
Robert C. Davis . . . . . . . . . . . . . . . . . . . . . . . .Senior Vice President, Chief Credit Officer & Secretary
Martin B. Millane, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President & Chief Lending Officer
James F. Spencer . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President & Chief Investment Officer
Noreen A. Briand . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President & Human Resources Director
Thomas A. Johnson . . . . . . Senior Vice President, Consumer Banking Director & Assistant Secretary
Robert N. Siegrist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Senior Vice President & Marketing Director
David G. Strachan, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President & Trust Officer
David E. Walker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President & Investment Officer
Julie A. Alix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President & Trust Officer
Elaine M. Arseneault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Susan K. Barry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Carol J. Bartalussi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Jo-Ann E. Bussiere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Stephen A. Caputo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Kathleen E. Carlson . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Business Development Officer
Joseph D. Cardarelli . . . . . . . . . . . . . . . . . . . . . . . Vice President & Information Technology Manager
Susan I. Chiappisi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President & Trust Officer
Jeffrey B. Churchill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Glenn P. Davis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President, Commercial Real Estate
Jason R. DeMello . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Business Development Officer
Edward F. Fitzgerald, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President, Business Banking Officer
Aimee B. Forsythe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Investment Officer
Ana Maria Foster . . . . . . . . . . . . . . . . . . . . Vice President, Compliance & Risk Management Officer
Peter J. Halberstadt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
John A. Haley . . . . . . . . . . . . . . . . . . . . . . Vice President & Director of Wealth Management Services
Ryan M. Hanna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Investment Officer
Eric C. Jussaume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Investment Officer
Brian A. Kelley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Matthew S. Lieber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President & Trust Officer
M. Lynne Linnehan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Robert J. MacAllister . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Business Development Officer
Andrew J. Mahoney, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Robert P. Maloof . . . . . . . . . . . . . . . . . . . .Vice President & Manager, Commercial Credit Department
CAMBRIDGE TRUST COMPANY – OFFICERS (continued)
Jane E. Mason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President, Relationship Manager
Roma A. Mayur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Laura C. McGregor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President & Trust Officer
Stuart J. McGuirk . . . . . . . . . . . . . . . . . . . . . Vice President, Business Analyst & Compliance Officer
Steven J. Mead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President, Commercial Real Estate
Patricia J. Mullin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Tiffany N. Ormon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Frank Pasciuto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Robert C. Pasciuto, Esq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President & Trust Officer
Steven G. Pisan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Salvatore M. Sagarese . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Joseph P. Sapienza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President & Controller
Dina M. Scianna . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President, Business Development Manager
Stacy Sheehan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Brian J. Sokolowski . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Investment Officer
W. Todd Spoor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
David S. Tait . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President, Commercial Real Estate
Ann K. Tucker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President
Eric G. Warasta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Investment Officer
John M. Winslow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Director of Internal Audit
William M. Yates . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Business Development Officer
Jennifer A. Casey . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Director of Training
Julia M. Cawley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Operations Officer
John H. Chambers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Vice President
Christopher E. Durning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Vice President
Gabriele Fabrizio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Operations Officer
Stephen W. Hall . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Information Security Officer
Patricia E. Hartnett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Vice President
Leslie L. Hartwell . . . . . . . . . . . . . . . . . . . .Assistant Vice President & Business Development Officer
Kathryn L. Hersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Investment Officer
Eugene K. Kalaw . . . . . . . . . . . . . . . . . . . .Assistant Vice President & Business Development Officer
Ana M. Mojica-Boyd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Vice President
Maria Montgomery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Vice President
Richard A. Moquin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Tax Officer
Mary Colt Navins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Vice President
Susan A. O’Keefe . . . . . . . . . . . . . Assistant Vice President & Business Banking Operations Manager
Barbara E. Piacentino . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Operations Officer
CAMBRIDGE TRUST COMPANY – OFFICERS (continued)
Stephen I. Sall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Loan Review Officer
Charles E. Samour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Security Officer
Angela L. Vitagliano . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Vice President & Operations Officer
Basharat H. Sheikh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Treasurer
Clinton D. Williams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Treasurer
Ping H. Wong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assistant Treasurer
Brian T. Bacci . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lending Compliance Officer
Rachel S. Bandi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Senior Credit Analyst Officer
Pooja Bhandary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Operations Officer
JoAnn M. Cavallaro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative Officer
Alan M. Collopy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operations Officer
Erin J. Cooper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business Development Officer
Renée L. Daniell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Operations Officer
Justin H. Drolsbaugh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Officer, Portfolio Manager
Mark J. Earnest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Banking Officer, Portfolio Manager
Alice J. Flanagan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Trust Officer
Medard H. Kadima . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Security Officer
Ann C. Kuske . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operations Officer
Joseph D. Lombardi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Controller
Karina Q. Pinella . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Senior Credit Analyst Officer
Leah Siporin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Marketing Officer
Peter C. Stoneman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer Loan Officer
Linda G. Sullivan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Human Resources Officer
James R. Weishaupt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operations Officer
James J. Zurn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer Loan Officer
CAMBRIDGE TRUST COMPANY OF NEW HAMPSHIRE – OFFICERS
Susan Martore-Baker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .President
Brian A. Bickford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President & Investment Officer
Judith V. Goodnow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President & Trust Officer
Maureen Kelliher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President & Investment Officer
Brian J. Krol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President & Investment Officer
Michael P. Panebianco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vice President & Trust Officer
CAMBRIDGE TRUST COMPANY – EMPLOYEES
Ambrose, Aliya
Alvarez, Yolamary
Bailey, Adrienne
Basnyat, Nivedita
Bennett, Michael
Bober, Jeffrey
Burke, Sandra
Carnazzo, Gail
Catanzano, Joseph
Cedrone, Jeffrey
Chowdhury, Farzana
Cole, Jeffrey
Cope, Andrea
Costello, Laura
Cronburg, Wendy
Curtin, Stephen
Dalomba, Christian
Dean, Shellie
DeAngelis, Maryellen
DeDominicis, Catherine
DePierro, Caityln
Dillon, Janice
Diloyan, Anahit
Djatsa, Viviane
Dodge, Jeanne
Dutt, Anita
Fin, Bernadette
Flanagan, Ryan
Flores, Cynthia
Frederique, Jude
Frost, David
Gallant, Derek
Gentle, Nerissa
Gielczyk, Michael
Gilkes, Yvette
Gilpin, Kaitlyn
Greco, Randi
Greene, Mary
Hamblen, Sally
Hanna, Amy
Howard, Margaret
Hutchinson, Beverly
Islam, Khondaker
Jacobs, Catherine
Jorge, Adelaide
Kantor, Jasmine
Kaufman, Theresa
Keenan, Robert
Kingsford, Alessandra
Kirwin, Marie
Kumari, Anita
Kuzmich, Katherine
Kvitman, Marina
LaMorticelli, René
Layne, Tanisha
Lazzari, Linda
Leonard, Ketline
Leonard, Sean
Lettieri, Robyn
Levine, Patricia
Lim, Raymond
Liu, Rose
Lombardo, Joseph
Lucas, Nicole
Manessis, Demetrios
Marcantonio, Paul
McCarty, William
McGilvray, Elizabeth
McWilliams, Katherine
Mei, Yi Lan
Membrino, Patricia
Mesina, Rosita
Mesquita, Heidy
Miranda, Ana Paula
Mui, Donna
Mulcahy, Deborah
Murphy, Barbara
Nardella, Justine
Nichols, Pamela
O’Leary, Brendan
O’Rourke, Alan
Palacios, Maria Del Mar
Park, David
Perry Durkee, Christina
Phuyal, Puja
Prager, Robert
Quigley, Maria
Reed, Michael
Resende, Jonathan
Ricker, Kelly
Rudden, Thomas
Sands, Janet
Serio, Linda
Shahi, Bala
Shay, Debbie
Small, Jasmine
Smith, Zachary
Sottile, Charlotte
Soul, Jr., Harwood
Sprague, Cynthia
Stephano, Susan
Stone, Jason
Sullivan, Mary
Tamasi, Joanne
Thain, Lina
Toronto, Melissa
Trebicka, Daniela
Truesdale, Stacey
Truong, Andrew
Usova, Victoria
Vallejo, Ivan
Vaudo Tobin, Rita
Vitale, Louis
Vo, Lana
White, Kristen
Wu, Qihui
Yearwood, Carol
Zaring, Victoria
Zelman, Carol Jean
CAMBRIDGE TRUST COMPANY OF NEW HAMPSHIRE – EMPLOYEES
Cannon, Susan
Schwechheimer, Brenda
Talbot, Michele
Travers, Janelle
Corporate Headquarters
1336 Massachusetts Avenue • Cambridge, MA 02138
617-876-5500
Branch Offices
Harvard Square • 1336 Massachusetts Avenue • Cambridge, MA 02138
Huron Village • 353 Huron Avenue • Cambridge, MA 02138
Kendall Square • 326 Main Street • Cambridge, MA 02142
Porter Square • 1720 Massachusetts Avenue • Cambridge, MA 02138
University Park at MIT • 350 Massachusetts Avenue • Cambridge, MA 02139
Beacon Hill • 65 Beacon Street • Boston, MA 02108
South End • 565 Tremont Street • Boston, MA 02118
361 Trapelo Road • Belmont, MA 02478
75 Main Street • Concord, MA 01742
1690 Massachusetts Avenue • Lexington, MA 02420
152 Lincoln Road • Lincoln, MA 01773
494 Boston Post Road • Weston, MA 02493
Wealth Management Offices
75 State Street • Boston, MA 02109
116 North Main Street • Concord, NH 03301
One Harbour Place • Portsmouth, NH 03801
Innovation Banking Group Office
Cambridge Innovation Center • One Broadway • Cambridge, MA 02142
Website
www.cambridgetrust.com