Photo by James Sanna | Banker & Tradesman Staff
Recent market volatility has affected Cambridge Trust Co.’s wealth management business, with the bank’s assets under management dropping by more than $640 million in the second quarter.
Cambridge Trust President and CEO Denis Sheahan said during the second quarter earnings call yesterday that the bank is seeing stress among its wealth clients.
“There’s certainly stress,” Sheahan said in response to an analyst’s question about customer behaviors. “And we’re conditioned to work with our clients through that stress.”
The bank had total wealth assets under management of $4 billion at the end of the second quarter, down 13.8 percent from the first quarter. In addition to equity and bond market conditions driving down values, Cambridge Trust has seen net outflows of wealth management assets so far in 2022 totaling $166 million, according to the bank’s second quarter investor presentation.
Cambridge Trust had second quarter net income of $13.7 million, or diluted earnings per share were $1.94, compared to $13.9 million, or diluted earnings per share of $1.98, in the second quarter of 2021. Net income in the first quarter of 2022 was $13.3 million, or diluted earnings per share of $1.89.
Revenue tied to Cambridge Trust’s wealth management business was $8.1 million, down 5.3 percent compared to the first quarter.
Michael Carotenuto, Cambridge Trust’s chief financial officer, said during the call that the bank has adjusted its full-year outlook for growth in the wealth management business, expecting now to see assets under management decline by 3 percent to 6 percent.
Sheahan said providing coaching through stressful periods is part of the relationship Cambridge Trust has with its clients.
“You can expect with this kind of volatility you’re going to have more conversations with clients, and we certainly are doing that,” Sheahan said.
While market conditions have hurt the wealth management business, Cambridge Trust continued to see commercial loans grow. The bank has a commercial pipeline of $110 million, and Carotenuto said the bank now expects loan growth for the year between 8 percent to10 percent, higher than the original forecast of 6 percent to 8 percent in growth.
“Looking ahead, we feel good about continued prospects for growth in commercial lending,” Sheahan said.
Cambridge Trust saw 3 percent loan growth in the second quarter, and total loans in 2022 have increased year-to-date by $204.4 million, or 6.2 percent, to $3.52 billion as of June 30.
Total assets have increased by $166.4 million, or 3.4 percent, since Dec. 31 to $5.06 billion.
Total deposits have decreased year-to-date by $67.1 million, or 1.5 percent, to $4.26 billion as of June 30. During the second quarter, core deposits decreased by 4.6 percent. Sheahan attributed the decline to seasonal effects, with clients using funds for tax payments, as well as investment opportunities clients saw during the quarter.
Cambridge Trust had expected 8 percent to 10 percent deposit growth in 2022 but has adjusted that outlook to 5 percent to 7 percent. Carotenuto said the bank would look to add commercial and consumer deposits, including checking and money market accounts, taking an approach similar to what the bank did last year when it added $1 billion in deposits.
Cambridge Trust’s proposed merger with North Andover-based Northmark Bank is on track to close early in the fourth quarter, Sheahan said.
“Importantly, we feel very good about the Northmark merger approval process and integration efforts,” Sheahan said. He added: “We remain excited about the long-term potential of this combination.”
