Photo by James Sanna | Banker & Tradesman Staff

Cambridge Trust Co. executives said Tuesday that the bank expects its deposits won’t keep growing through the end of the year as lenders everywhere face an uphill battle against a weakening economy and rising interest rates on Treasury bonds.

The comments from Chief Financial Officer Michael Carotenuto came during the bank’s third-quarter earnings call.

“Given the pace and magnitude of the most recent interest rate hikes and market competition, we now expect deposits to end the year flat to Q3 levels,” he said. “We retain our focus on client retention, and the cost of deposits, retaining high-value households while secondly adding new households.”

Core deposits – all deposits minus those locked up in certificates of deposit – were down by $105.6 million, or 2.5 percent, from the start of the year. Much of that decline came during the third quarter, the bank’s earning statement says, with $74.8 million walking out the door or into other Cambridge Trust wealth management products over that period as clients bought businesses and real estate and sought out better returns elsewhere, including at competitors, Carotenuto said. The bank’s core deposits closed out the third quarter at $4.06 billion.

To fight the trend, Cambridge Trust joined many other Massachusetts community banks in offering short-term brokered certificates of deposit with a blended interest rate between 2.5 percent and 3 percent, Carotenuto said.

Certificates of deposit totaled $217.9 million at the third quarter’s close, an increase of $55.9 million from the end of 2021. As of Sept. 30, total deposits were up $49.7 million, or 1.1 percent, from the start of the year, to $4.28 billion.

“Clients to a degree are searching for yield and when you’re bombarded in the news every night about the fed increasing rates it’s understandable. Our team is well-conditioned to have conversations with clients to find a solution for that. These are normal conversations that happen in our industry,” Chairman, President and CEO Dennis Sheehan said.

The bank closed out the third quarter with a net interest margin of 2.93 percent, its investor presentation said, up from 2.81 percent in the second quarter. Its cost of deposits had increased slightly, as well, from 0.17 percent in the second quarter to 0.24 percent in the third quarter.

The third quarter was a profitable one for Cambridge Trust despite the volatility whipsawing the stock market and consumers. The bank reported $14.6 million in net income for the quarter, up 7 percent from the second quarter, and $41.6 million year-to-date, a 2 percent increase from the same time last year.

Diluted earnings per share were up 6.7 percent, to $2.07 for the third quarter, compared to $1.94 for the second quarter. Operating net income was $14.7 million for the third quarter, compared to $13.4 million for the second quarter.

Driving this earnings growth was a boost to its asset portfolio. Cambridge Trust saw total assets grow b 5.1 percent, or $251.8 million, to $5.14 billion.

Total loans rose $309.5 million, or 9.3 percent, from $3.32 billion at the close of last year to $3.63 billion on Sept. 30. Over $170 million in new commercial real estate lending drove the increase, followed by a $101 million increase in residential real estate loans and a $26.4 million boost in its commercial and industrial loans.

The bank’s commercial real estate lending closed the third quarter at $1.68 billion, its residential real estate lending at $1.52 billion and its commercial and industrial lending at $295.9 million