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Cambridge Bancorp earnings (NASDAQ: CATC) are most likely to surge next year on the back of the acquisition of Northmark Bank in the fourth quarter of 2022. Organic loan growth will further support earnings. Moreover, the delayed effect of rising interest rates The net profit margin boosts earnings this year. Overall, Cambridge Bancorp expects him to report earnings of $8.49 per share in 2023. That’s a 16% increase from his estimated earnings per share of $7.34 in 2022. The December 2023 target price suggests a high upside from current market prices. Therefore, I have a Buy rating on Cambridge Bancorp.
Organic commercial loan growth adds to acquisition benefits
Cambridge Bancorp has completed its acquisition of Northmark Bank in October 2022, according to a recent announcement. As of the end of March 2022, Target had total loans worth $314 million, according to details provided in a previous press release. The acquisition therefore increased Cambridge Bancorp’s loan portfolio by approximately 9%. In addition, the acquisition adds his $381 million deposit to Cambridge’s balance sheet, showing growth of 8.9%.
The prospects for organic growth, as opposed to acquisition growth, are less bright. High interest rates will hurt organic loan growth in the coming quarters, especially in the mortgage segment. Mortgages and home equity credit loans accounted for approximately 44% of all loans. A slowdown in this segment will therefore have a significant impact on total loan growth.
The outlook for commercial loans is modestly positive with a strong job market indicating solid economic activity. Cambridge Bancorp has operations in Massachusetts and New Hampshire, both of which currently have higher unemployment rates than most other states.

Taking these factors into account, we expect our loan portfolio to grow 9% in the fourth quarter of 2022, for full-year loan growth of 19%. In 2023, we expect our loan portfolio to grow by 4%. On the other hand, we expect deposits to increase more or less in line with lending. The following table shows my balance sheet estimates.
financial position | FY18 | FY19 | 2020 | 21st year | FY22E | FY23E |
net loan | 1,543 | 2,209 | 3,118 | 3,285 | 3,917 | 4,076 |
net lending growth | 15.5% | 43.1% | 41.2% | 5.4% | 19.3% | 4.1% |
Other earning assets | 451 | 400 | 492 | 1,176 | 1,343 | 1,384 |
deposit | 1,811 | 2,359 | 3,403 | 4,331 | 4,667 | 4,856 |
Borrowings and Subdebt | 93 | 136 | 33 | 17 | 321 | 331 |
common stock | 167 | 287 | 402 | 438 | 515 | 561 |
Book value per share ($) | 40.8 | 61.5 | 63.3 | 62.6 | 66.0 | 71.8 |
Tangible BVPS ($) | 40.7 | 54.1 | 54.7 | 54.8 | 59.1 | 64.9 |
Source: SEC filings, authors’ estimates (in millions of US dollars unless otherwise specified) |
Delayed impact of rate hike benefits margins this year
Cambridge Bancorp’s net interest margin increased by just 9 basis points in the third quarter following a 12 basis point increase in the second quarter. Cambridge Bancorp’s loan portfolio has been significantly delayed in revaluation due to high mortgage balances. At the same time, due to the large balance of floating rate deposits, deposits are quickly revalued. At the end of September 2022, these deposits, including interest-bearing checking, savings and money market accounts, accounted for 61% of total deposits. As a result, most of the benefits from last year’s Federal Fund rate hike will be felt again this year. from.
A 200 basis point increase in interest rates could increase net interest income by 1.6% in the first year and 15.1% in the second, according to management’s simulation model results presented in the 10-Q filing. I have.

Q3 2022 10-Q Filing
Given these factors, we expect our profit margin to increase by 5 basis points in the fourth quarter of 2022. In addition, we expect margins to increase by 40 basis points in 2023.
Revenue expected to surge 16%
Acquired and organic loan growth will drive earnings this year. In addition, earnings will be supported by margin expansion. Meanwhile, merger-related costs in the fourth quarter of 2022 will weigh on earnings. In addition, high inflation drives up operating costs. Conversely, we expect our allowance for expected credit losses to remain at normal levels. He expects net preparation costs to account for about 0.1% of total lending in 2023, close to the 2017-2019 average.
Overall, we expect Cambridge Bancorp’s 2022 earnings to fall 5% year-on-year to $7.34 per share. In 2023, we expect earnings to grow 16% to $8.49 per share. The following table shows my income statement estimates.
Profit and loss statement | FY18 | FY19 | 2020 | 21st year | FY22E | FY23E |
net interest income | 64 | 79 | 120 | 128 | 141 | 178 |
Bad debt allowance | 2 | 3 | 18 | (1) | 1 | Four |
non-interest income | 33 | 36 | 40 | 44 | 43 | 43 |
non-interest expenses | 64 | 78 | 98 | 100 | 111 | 126 |
Net profit – Ordinary Sh. | twenty four | twenty five | 32 | 54 | 53 | 66 |
EPS – diluted ($) | 5.77 | 5.37 | 5.03 | 7.69 | 7.34 | 8.49 |
Source: SEC Filings, Earnings Releases, authors’ estimates (in millions of US dollars unless otherwise specified) |
My estimates are based on certain macroeconomic assumptions that may not materialize. Therefore, your actual earnings may differ significantly from my estimates.
High price increases justify purchase valuation
Cambridge Bancorp’s annual dividend has increased each year since 2004. Given its earnings outlook, the company is likely to continue its dividend trend this year. Therefore, I expect the company to increase his dividend by $0.02 per share to $0.66 per share in the first quarter of 2023. Earnings and dividend estimates suggest a payout ratio of 31% in 2023. 39% average. Based on my dividend forecast, Cambridge Bancorp is offering his futures dividend yield of 3.2%.
We use historical price-to-tangible assets (“P/TB”) and price-to-earnings (“P/E”) multiples to value Cambridge Bancorp. 1.37 in the past as shown below.
FY19 | 2020 | 21st year | average | |||
T. Book value per share ($) | 54.1 | 54.7 | 54.8 | |||
Average Market Price ($) | 79.3 | 60.3 | 84.8 | |||
Past P/TB | 1.47 times | 1.10 times | 1.55 times | 1.37 times | ||
Source: Company Finance, Yahoo Finance, Author’s Estimates |
Multiplying the average P/TB multiple by the projected tangible book value of $64.9 per share yields a target price of $89.1 at the end of 2023. This price target represents a 7.4% increase from the January 3 closing price. The following table shows the target price sensitivity to the P/TB ratio.
P/TB multiple | 1.17 times | 1.27 times | 1.37 times | 1.47 times | 1.57 times |
TBVPS – December 2023 ($) | 64.9 | 64.9 | 64.9 | 64.9 | 64.9 |
Target price ($) | 76.1 | 82.6 | 89.1 | 95.6 | 102.1 |
Market price ($) | 83.0 | 83.0 | 83.0 | 83.0 | 83.0 |
Upside/(Downside) | (8.3)% | (0.5)% | 7.4% | 15.2% | 23.0% |
Source: Author’s estimate |
As you can see below, the stock has historically traded at an average P/E of around 12.6x.
FY19 | 2020 | 21st year | average | |||
Earnings Per Share ($) | 5.37 | 5.03 | 7.69 | |||
Average Market Price ($) | 79.3 | 60.3 | 84.8 | |||
Past PER | 14.8 times | 12.0x | 11.0 times | 12.6 times | ||
Source: Company Finance, Yahoo Finance, Author’s Estimates |
Multiplying the average P/E multiple by the expected earnings per share of $8.49 yields a target price of $106.9 at the end of 2023. This target price represents a 28.8% increase from the January 3 closing price. The following table shows the sensitivity of the target price to the P/E ratio.
PER Multiple | 10.6 times | 11.6 times | 12.6 times | 13.6 times | 14.6 times |
EPS 2023 ($) | 8.49 | 8.49 | 8.49 | 8.49 | 8.49 |
Target price ($) | 89.9 | 98.4 | 106.9 | 115.4 | 123.9 |
Market price ($) | 83.0 | 83.0 | 83.0 | 83.0 | 83.0 |
Upside/(Downside) | 8.4% | 18.6% | 28.8% | 39.1% | 49.3% |
Source: Author’s estimate |
Equally weighting the target prices from the two valuation methods yields a total Target price $98.0, which represents an increase of 18.1% from the current market price. Adding future dividend yields gives a total expected return of 21.3%. Therefore, I have a Buy rating on Cambridge Bancorp.