STOUGHTON, Mass., Feb. 26, 2019 (GLOBE NEWSWIRE) -- Randolph Bancorp, Inc. (the "Company") (NASDAQ Global Market: RNDB), the holding company for Envision Bank (the "Bank"), today announced a net loss of $228,000, or $0.04 per share, for the fourth quarter of 2018 compared to a net loss of $1.6 million, or $0.28 per share, for the fourth quarter of 2017. For the year ended December 31, 2018, the Company recognized a net loss of $2.1 million, or $0.37 per share, compared to a net loss of $2.1 million, or $0.39 per share, for the year ended December 31, 2017.
The operating results for the fourth quarter and full year in both 2018 and 2017 were affected by non-recurring items. Excluding non-recurring items, the net loss was $1.6 million in the fourth quarter of 2018 compared to a net loss of $1.0 million in the fourth quarter of 2017, while the net loss for the year ended December 31, 2018 was $3.7 million compared to a net loss of $1.0 million for the year ended December 31, 2017.
The following non-recurring items, all presented on a pre-tax basis, were excluded from the results discussed in the preceding paragraph:
- Gains on the sale of buildings of $2.5 million in 2018, including a gain of $2.3 million in the fourth quarter in connection with the sale of a former branch location in downtown Boston.
- Restructuring charges of $1.0 million in 2018, including $875,000 in the fourth quarter, and $594,000 in 2017, all of which was recorded in the fourth quarter. The restructuring charge in both years involved workforce reductions in mortgage banking operations. The 2018 charge also included contractual costs associated with office space no longer being used in Andover following consolidation of mortgage banking operations in the Bank's North Attleboro location.
- Merger and integration costs of $531,000 in 2017 related to the acquisition of First Eastern Bankshares Corporation.
- An insurance recovery for property damage of $90,000 in 2018.
During 2018, the Company increased its total assets by $82.4 million, or 15.5%, from $531.9 million at December 31, 2017 to $614.3 million at December 31, 2018. During 2018, net loans increased $83.5 million, or 20.8%, while deposits, excluding brokered deposits, increased $16.7 million, or 4.6%. Additional brokered deposits and Federal Home Loan Bank of Boston ("FHLBB") advances of $53.6 million and $13.1 million, respectively, were also utilized to fund the Bank's asset growth in 2018.
James P. McDonough, President and Chief Executive Officer, stated, "During the fourth quarter we took several major actions to better position our mortgage banking operations for the future. First, we extended our geographic footprint to Central and Western Massachusetts with fully staffed loan origination offices in Westborough, West Springfield and Wilbraham, adding fourteen experienced loan originators to our team. In January of this year, we added three additional experienced loan originators serving the important MetroWest region of the Boston market. To support these additions and to help us manage the Bank's liquidity position, we hired an individual experienced in the sale of residential mortgage loans, primarily jumbo and adjustable rate mortgage loans, directly to other financial institutions. These additions significantly enhance our capacity to generate additional revenues in a period when the industry is facing the dual challenge of lower loan refinancing volume and margin compression on loan sales."
Mr. McDonough added, "We also addressed the cost structure in our mortgage banking business by consolidating all residential loan origination operations in our North Attleboro office. We believe this consolidation will increase operating efficiency and help us with the consistent delivery of outstanding customer service. The decision to consolidate all residential loan origination activities was not an easy one. We continue to perform certain lending related activities at our Andover office. However, we are now using only 25% of the space we lease in Andover. The cost of taking these actions, including transition payments to new mortgage loan originators, severance payments for employees affected by the consolidation of mortgage banking operations, and recognition of our contractual obligation for leased space no longer being used amounted to $1.5 million in 2018. Because of these actions, we believe that we enter 2019 well positioned for a turnaround in our operating results."
Year End Operating Results
Net interest income increased by $1.9 million for the year ended December 31, 2018 compared to the prior year. This increase was due to growth in average interest-earning assets of $74.0 million in 2018, partially offset by a decrease in net interest margin of 12 basis points from 3.22% in 2017 to 3.10% in 2018. These results reflect the continued leveraging of capital raised in our 2016 initial public offering. The decrease in net interest margin is due to a reduction in the ratio of average interest-earning assets to average interest-bearing liabilities from 135.8% in 2017 to 129.1% in 2018, as well as increases in the cost of deposits and borrowings attributable to steady increases in the federal funds rate during the past two years combined with a flattening yield curve.
The Company recognized a provision for loan losses of $762,000 for the year ended December 31, 2018 compared to a provision of $540,000 in the prior year. The provisions in 2017 and 2018 were primarily the result of loan growth of approximately 20% experienced in both years. All internal measures of asset quality, including delinquency data, loan charge-offs, classified loan balances and nonaccrual loan balances have remained positive, reflecting the strength of the regional and local economy. The allowance for loan losses was 0.91% of total loans at December 31, 2018 compared to 0.92% at December 31, 2017.
Non-interest income increased $720,000 to $13.7 million for the year ended December 31, 2018 from $13.0 million for the year ended December 31, 2017. Included in non-interest income in 2018 were gains of $2.5 million resulting from building sales and a $90,000 insurance recovery. Excluding such non-recurring items, non-interest income was $11.1 million for the year ended December 31, 2018, a decrease of $1.8 million from the prior year. This decrease was principally due to a reduction of $1.6 million, or 17.6%, in gains on loan origination and sales activities attributable to the declining profit margin realized on loan sales throughout 2018. This margin compression was due to a number of factors including competitive pressures as banks and other lenders competed based on rate to maintain market share, lower demand for FHA loans which have a higher profit margin than conforming conventional loans, and a softening in pricing for mortgage-backed securities used to package the conventional mortgages we sell to the secondary market. Other components of non-interest income decreased $234,000 between years due primarily to a $209,000 reduction in net mortgage servicing fees. This decrease was attributable to a reversal of $334,000 in the valuation allowance for mortgage servicing rights in 2017 compared to $82,000 in 2018.
Non-interest expenses increased $1.9 million to $31.7 million for the year ended December 31, 2018 from $29.8 million for the year ended December 31, 2017. Excluding non-recurring items relating to restructuring charges of $1.0 million in 2018 and $594,000 in 2017, and merger integration costs of $531,000 in 2017, non-interest expenses increased $2.0 million, or 7.0%, in 2018. This increase was primarily due to an increase of $1.0 million in salaries and employee benefits attributable to transition payments to new loan originators of $893,000, employee severance obligations (not included in restructuring expenses) of $325,000, an increase in stock-based compensation of $388,000 following the initial award of restricted stock and stock options in October 2017, and increased loan originator commissions of $747,000 due primarily to a 13.6% increase in residential mortgage loan originations in 2018. These increases were partially offset by lower salaries and benefits associated with the reduction in the number of full-time equivalent employees from 220 at the beginning of 2017 to 194 at December 31, 2018, as well as an increase in the deferral of loan origination costs associated with the increase in loan originations in 2018.
Also contributing to the increase in non-interest expenses were higher occupancy and equipment costs of $218,000. This increase is due to additional rent expense and depreciation associated with the Andover office as well as the relocation of two existing branches to new locations (Stoughton in September 2017 and Braintree in April 2018). Marketing expenses increased $152,000 in 2018 principally due to advertising costs associated with the re-branding to Envision Bank. Other non-interest expenses increased $783,000 in 2018 principally as a result of a full year of stock-based compensation for directors, talent acquisition costs, as well as increased operating costs associated with higher volumes of both loan originations and debit card usage.
The Company recognized a tax benefit of $443,000 for the year ended December 31, 2017 compared to a tax provision of $31,000 for the year ended December 31, 2018. The tax benefit in 2017 resulted from repeal of the Alternative Minimum Tax ("AMT") beginning in 2018 as set forth in the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). The Tax Act provides that existing AMT credit carryforwards become refundable during the period 2018-2021. As a result, the Company reversed the valuation allowance of $462,000 which had been established in prior years and recognized a tax benefit for this amount. State tax provisions of $31,000 and $19,000 were recognized in 2018 and 2017, respectively.
The Company has a net operating loss ("NOL") carryforward at December 31, 2018 of $13.6 million. Since 2014, the NOL carryforward as well as other deferred tax assets have been subject to a full valuation allowance which amounted to $3.2 million at December 31, 2018 and $2.8 million at December 31, 2017.
Fourth Quarter Operating Results
Net interest income increased $580,000 in the quarter ended December 31, 2018 compared to the same period in the prior year. This increase was due to the growth in average interest-earning assets of $98.9 million between quarters, partially offset by a decrease in the net interest margin from 3.17% in the fourth quarter of 2017 to 3.01% in the fourth quarter of 2018. These results reflect the continued leveraging of capital raised in our 2016 initial public offering. The decrease in net interest margin is due to a reduction in the ratio of average interest-earning assets to average interest-bearing liabilities from 132.7% in the fourth quarter of 2017 to 126.5% in the fourth quarter of 2018, as well as increases in the cost of deposits and borrowings attributable to steady increases in the federal funds rate during the past two years combined with a flattening yield curve.
The Company recognized a provision for loan losses of $579,000 and $205,000 for the quarters ended December 31, 2018 and 2017, respectively. As previously noted, the Company's key measures continue to show strong asset quality. The quarterly provisions in 2018 and 2017 are primarily due to loan growth. The provision in the fourth quarter of 2018 also included $149,000 for an impaired consumer loan.
Non-interest income increased $2.7 million from $2.5 million for the quarter ended December 31, 2017 to $5.3 million for the same period of 2018. Included in non-interest income in the fourth quarter of 2018 was a gain of $2.3 million on the sale of our former branch location in downtown Boston. Excluding this non-recurring item, non-interest income was $3.0 million for the quarter ended December 31, 2018, an increase of $476,000 from the fourth quarter of 2017 largely due to an increase of $295,000 in net gains on loan origination and sale activities. During the quarter ended December 31, 2018, loan sales totaled $118.3 million compared to $95.5 million during the same period of 2017. The increase in loan sales was primarily due to the sale of loans originated in prior quarters aided by improved market conditions during the fourth quarter. Also contributing to the increase in non-interest income between periods was an impairment write-down of $225,000 in the prior year period on a branch office scheduled to be closed.
Non-interest expenses increased $1.3 million from $8.1 million for the quarter ended December 31, 2017 to $9.3 million for the quarter ended December 31, 2018. Excluding non-recurring items relating to restructuring charges of $875,000 in the fourth quarter of 2018 and $594,000 in the fourth quarter of 2017, non-interest expenses increased $1.0 million or 13.4%, between periods. This increase is primarily due to higher salaries and employee benefits associated with transition payments to loan originators of $589,000, severance obligations (not included in the restructuring charge) of $325,000 and higher commissions expense of $333,000, partially offset by higher deferral of loan origination costs due to an increase in residential and commercial real estate loan originations in the fourth quarter of 2018. Increases in mortgage banking operating costs associated with higher loan activity and new software tools, and talent acquisition costs were largely offset by a reduction in marketing costs in the fourth quarter of 2018. In the fourth quarter of 2017, additional marketing costs were incurred in preparation for the re-branding to Envision Bank.
The Company recognized a tax benefit of $295,000 for the quarter ended December 31, 2017 compared to a tax provision of $17,000 for the quarter ended December 31, 2018. As previously discussed, the Company reversed $462,000 of the deferred tax asset valuation allowance that had been established for AMT credit carryforwards upon passage of the Tax Act in December 2017. Partially offsetting this benefit was a tax provision of $166,000, of which $154,000 represented the reversal of previously recorded tax benefits in 2017. These benefits were due to and had been fully offset by taxes provided for other comprehensive income attributable to appreciation in the fair value of available-for-sale securities. This appreciation was wiped out in the fourth quarter of 2017 by unrealized losses on these securities.
Balance Sheet
Total assets were $614.3 million at December 31, 2018 compared to $531.9 million at December 31, 2017, an increase of $82.4 million, or 15.5%. This growth is due to an increase of $83.5 million in the loan portfolio and a $13.1 million increase in loans held for sale, partially offset by an $11.0 million decrease in investment securities and a $2.3 million decrease in premises and equipment. The increase in loans and decrease in investment securities reflect the Company's strategy in recent years of shifting a higher proportion of its interest-earning assets into the higher yielding loan portfolio.
Net loans totaled $483.8 million at December 31, 2018, an increase of $83.5 million, or 20.8%, from December 31, 2017. Of this increase, $52.9 million, $16.8 million and $14.9 million was due to growth in residential mortgage loans (including home equity lines of credit), construction loans and commercial real estate loans, respectively. Commercial and industrial loans decreased $3.5 million during 2018 due primarily to repayments on loan participations acquired in 2017. No new participations were acquired during 2018. Consumer loans increased $3.1 million during 2018 due to purchases of auto loans.
Deposits increased $70.3 million, or 19.2%, to $437.1 million at December 31, 2018 from $366.8 million at December 31, 2017. Included in this increase was a $53.6 million increase in brokered deposits. Excluding the impact of brokered deposits, deposits increased $16.7 million, or 4.6%. This retail growth was concentrated in term certificates which increased $14.1 million during 2018 as customers responded to special offerings of such deposits.
The Company increased its borrowings from the FHLBB by $13.1 million during 2018 to help fund loan growth. Borrowings at December 31, 2018 totaled $89.0 million, including $84.2 million in overnight and one-month advances. At December 31, 2018, available borrowing capacity at the FHLBB amounted to $90.3 million based on qualified collateral as of that date.
Stockholders' equity decreased $3.5 million to $78.0 million at December 31, 2018 compared to $81.5 million at December 31, 2017. The decrease is due to the net loss of $2.1 million, a reduction in the fair value of available for sale securities of $710,000 and stock repurchases of $1.7 million. These decreases were partially offset by equity adjustments of $1.0 million associated with the employee stock ownership plan and stock awards. The Company's Tier 1 capital (to average assets) ratio was 14.08% at December 31, 2018 compared to 15.95% at December 31, 2017.
About Randolph Bancorp, Inc.
Randolph Bancorp, Inc. is the holding company for Envision Bank and its Envision Mortgage Division. Envision Bank is a full-service community bank with five retail branch locations, loan operations centers in North Attleboro and Stoughton, Massachusetts, seven loan production offices located throughout Massachusetts and one loan production office in New Hampshire.
Randolph Bancorp, Inc. is the sole member of Envision Bank Foundation, Inc. (the "Foundation"), a nonprofit corporation organized in 2016 to financially support community projects that improve the quality of life in markets served by Envision Bank. Since 2016, the Foundation has funded projects focused on support of military veterans and education. At December 31, 2108, the Foundation had total assets of $2.8 million.
Forward Looking Statements
Certain statements contained in this press release that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among others, the risks outlined in the Company's Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures, such as tangible book value per share, return on average assets, return on average equity, non-interest income to total income and the efficiency ratio, and, where applicable, as adjusted for non-recurring items. These non-GAAP financial measures provide information for investors to effectively analyze financial trends of on-going business activities, and to enhance comparability with peers across the financial services sector. A table reconciling the Company's GAAP to non-GAAP net income (loss) is attached.
Randolph Bancorp, Inc.
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
| December 31, | December 31, | |||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | 3,451 | $ | 3,562 | ||||
| Interest-bearing deposits | 3,667 | 5,260 | ||||||
| Total cash and cash equivalents | 7,118 | 8,822 | ||||||
| Certificates of deposit | 2,205 | 2,940 | ||||||
| Securities available for sale, at fair value | 50,556 | 61,576 | ||||||
| Loans held for sale, at fair value | 38,474 | 25,390 | ||||||
| Loans, net of allowance for loan losses of $4,437 in 2018 and $3,737 in 2017 | 483,846 | 400,373 | ||||||
| Federal Home Loan Bank of Boston stock, at cost | 4,700 | 3,310 | ||||||
| Accrued interest receivable | 1,504 | 1,432 | ||||||
| Mortgage servicing rights | 7,786 | 6,397 | ||||||
| Premises and equipment, net | 6,368 | 8,670 | ||||||
| Bank-owned life insurance | 8,256 | 8,037 | ||||||
| Foreclosed real estate | 65 | 193 | ||||||
| Other assets | 3,462 | 4,752 | ||||||
| Total assets | $ | 614,340 | $ | 531,892 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Deposits: | ||||||||
| Non-interest bearing | $ | 64,229 | $ | 62,130 | ||||
| Interest bearing | 312,322 | 297,690 | ||||||
| Brokered | 60,579 | 7,016 | ||||||
| Total deposits | 437,130 | 366,836 | ||||||
| Federal Home Loan Bank of Boston advances | 89,036 | 75,954 | ||||||
| Mortgagors' escrow accounts | 2,129 | 907 | ||||||
| Post-employment benefit obligations | 2,551 | 2,750 | ||||||
| Other liabilities | 5,533 | 3,962 | ||||||
| Total liabilities | 536,379 | 450,409 | ||||||
| Stockholders' Equity: | ||||||||
| Common stock | 60 | 61 | ||||||
| Additional paid-in capital | 55,608 | 56,493 | ||||||
| Retained earnings | 28,329 | 30,415 | ||||||
| ESOP-Unearned compensation | (4,132 | ) | (4,319 | ) | ||||
| Accumulated other comprehensive loss, net of tax | (1,904 | ) | (1,167 | ) | ||||
| Total stockholders' equity | 77,961 | 81,483 | ||||||
| Total liabilities and stockholders' equity | $ | 614,340 | $ | 531,892 | ||||
Randolph Bancorp, Inc.
Consolidated Statements of Operations
(Dollars in thousands except per share amounts)
(Unaudited)
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Interest and dividend income: | ||||||||||||||||
| Loans | $ | 5,624 | $ | 4,051 | $ | 19,541 | $ | 15,099 | ||||||||
| Other interest and dividend income | 426 | 441 | 1,743 | 1,841 | ||||||||||||
| Total interest and dividend income | 6,050 | 4,492 | 21,284 | 16,940 | ||||||||||||
| Interest expense | 1,630 | 652 | 4,588 | 2,110 | ||||||||||||
| Net interest income | 4,420 | 3,840 | 16,696 | 14,830 | ||||||||||||
| Provision for loan losses | 579 | 205 | 762 | 540 | ||||||||||||
| Net interest income after provision for loan losses | 3,841 | 3,635 | 15,934 | 14,290 | ||||||||||||
| Non-interest income: | ||||||||||||||||
| Customer service fees | 368 | 345 | 1,464 | 1,455 | ||||||||||||
| Gain on loan origination and sale activities, net | 2,183 | 1,888 | 7,539 | 9,151 | ||||||||||||
| Mortgage servicing fees, net | 329 | 324 | 1,264 | 1,473 | ||||||||||||
| Gain on sales of buildings | 2,261 | - | 2,476 | - | ||||||||||||
| Other | 144 | (9 | ) | 940 | 884 | |||||||||||
| Total non-interest income | 5,285 | 2,548 | 13,683 | 12,963 | ||||||||||||
| Non-interest expenses: | ||||||||||||||||
| Salaries and employee benefits | 5,599 | 4,673 | 19,765 | 18,731 | ||||||||||||
| Occupancy and equipment | 716 | 698 | 2,873 | 2,655 | ||||||||||||
| Professional fees | 340 | 324 | 1,164 | 1,344 | ||||||||||||
| Marketing | 274 | 365 | 1,141 | 989 | ||||||||||||
| Restructuring charges | 875 | 594 | 968 | 594 | ||||||||||||
| Merger and integration costs | - | - | - | 531 | ||||||||||||
| Other non-interest expenses | 1,533 | 1,402 | 5,761 | 4,978 | ||||||||||||
| Total non-interest expenses | 9,337 | 8,056 | 31,672 | 29,822 | ||||||||||||
| Loss before income taxes | (211 | ) | (1,873 | ) | (2,055 | ) | (2,569 | ) | ||||||||
| Income tax provision (benefit) | 17 | (295 | ) | 31 | (443 | ) | ||||||||||
| Net loss | $ | (228 | ) | $ | (1,578 | ) | $ | (2,086 | ) | $ | (2,126 | ) | ||||
| Loss per share (basic and diluted) | $ | (0.04 | ) | $ | (0.28 | ) | $ | (0.37 | ) | $ | (0.39 | ) | ||||
| Weighted average shares outstanding | 5,526,416 | 5,597,762 | 5,570,720 | 5,468,514 | ||||||||||||
Randolph Bancorp, Inc.
Average Balances/Yields
(Dollars in thousands)
(Unaudited)
| Average Balance and Yields | |||||||||||||||||||||||
| For the Three Months Ended December 31, | |||||||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||||||
| Average | Interest | Average | Average | Interest | Average | ||||||||||||||||||
| Outstanding | Earned/ | Yield/ | Outstanding | Earned/ | Yield/ | ||||||||||||||||||
| (Dollars in thousands) | Balance | Paid | Rate | Balance | Paid | Rate | |||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||
| Loans (1) | $ | 526,192 | $ | 5,624 | 4.28 | % | $ | 414,762 | $ | 4,050 | 3.91 | % | |||||||||||
| Investment securities(2) (3) | 58,055 | 403 | 2.78 | % | 66,486 | 455 | 2.74 | % | |||||||||||||||
| Interest-earning deposits | 4,474 | 27 | 2.41 | % | 8,612 | 30 | 1.39 | % | |||||||||||||||
| Total interest-earning assets | 588,721 | 6,054 | 4.11 | % | 489,860 | 4,535 | 3.70 | % | |||||||||||||||
| Noninterest-earning assets | 28,310 | 27,827 | |||||||||||||||||||||
| Total assets | $ | 617,031 | $ | 517,687 | |||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Savings accounts | 101,566 | 52 | 0.20 | % | 102,307 | 42 | 0.16 | % | |||||||||||||||
| NOW accounts | 42,291 | 50 | 0.47 | % | 45,056 | 56 | 0.50 | % | |||||||||||||||
| Money market accounts | 60,442 | 200 | 1.32 | % | 61,559 | 89 | 0.58 | % | |||||||||||||||
| Term certificates | 162,570 | 693 | 1.71 | % | 93,547 | 246 | 1.05 | % | |||||||||||||||
| Total interest-bearing deposits | 366,869 | 995 | 1.08 | % | 302,469 | 433 | 0.57 | % | |||||||||||||||
| FHLB advances | 98,460 | 635 | 2.58 | % | 66,703 | 219 | 1.31 | % | |||||||||||||||
| Total interest-bearing liabilities | 465,329 | 1,630 | 1.40 | % | 369,172 | 652 | 0.71 | % | |||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||
| Noninterest-bearing deposits | 66,608 | 59,128 | |||||||||||||||||||||
| Other noninterest-bearing liabilities | 6,851 | 5,526 | |||||||||||||||||||||
| Total liabilities | 538,788 | 433,826 | |||||||||||||||||||||
| Total equity | 78,243 | 83,861 | |||||||||||||||||||||
| Total liabilities and equity | $ | 617,031 | $ | 517,687 | |||||||||||||||||||
| Net interest income | $ | 4,424 | $ | 3,883 | |||||||||||||||||||
| Interest rate spread(4) | 2.71 | % | 2.99 | % | |||||||||||||||||||
| Net interest-earning assets(5) | $ | 123,392 | $ | 120,688 | |||||||||||||||||||
| Net interest margin(6) | 3.01 | % | 3.17 | % | |||||||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 126.52 | % | 132.69 | % | |||||||||||||||||||
(1) Includes nonaccruing loan balances and interest received on such loans.
(2) Includes carrying value of securities classified as available-for-sale, FHLB of Boston stock and investment in the Depositors Insurance Fund.
(3) Includes tax equivalent adjustments for municipal securities, based on an effective tax rate of 21% for 2018 and 34.0% in 2017, of $4,000, $43,000 for 2018 and 2017, respectively.
(4) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(5) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(6) Net interest margin represents net interest income divided by average total interest-earning assets.
Randolph Bancorp, Inc.
Average Balances/Yields
(Dollars in thousands)
(Unaudited)
| Average Balance and Yields | |||||||||||||||||||||||
| For the Year Ended December 31, | |||||||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||||||
| Average | Interest | Average | Average | Interest | Average | ||||||||||||||||||
| Outstanding | Earned/ | Yield/ | Outstanding | Earned/ | Yield/ | ||||||||||||||||||
| (Dollars in thousands) | Balance | Paid | Rate | Balance | Paid | Rate | |||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||
| Loans (1) | $ | 471,849 | $ | 19,541 | 4.14 | % | $ | 388,623 | $ | 15,099 | 3.89 | % | |||||||||||
| Investment securities(2) (3) | 61,566 | 1,658 | 2.69 | % | 68,995 | 1,920 | 2.78 | % | |||||||||||||||
| Interest-earning deposits | 6,689 | 117 | 1.75 | % | 8,505 | 100 | 1.18 | % | |||||||||||||||
| Total interest-earning assets | 540,104 | 21,316 | 3.95 | % | 466,123 | 17,119 | 3.67 | % | |||||||||||||||
| Noninterest-earning assets | 26,621 | 29,304 | |||||||||||||||||||||
| Total assets | $ | 566,725 | $ | 495,427 | |||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Savings accounts | 103,228 | 185 | 0.18 | % | 103,670 | 163 | 0.16 | % | |||||||||||||||
| NOW accounts | 42,449 | 205 | 0.48 | % | 46,259 | 217 | 0.47 | % | |||||||||||||||
| Money market accounts | 67,817 | 674 | 0.99 | % | 56,535 | 277 | 0.49 | % | |||||||||||||||
| Term certificates | 132,984 | 2,006 | 1.51 | % | 90,879 | 899 | 0.99 | % | |||||||||||||||
| Total interest-bearing deposits | 346,478 | 3,070 | 0.89 | % | 297,343 | 1,556 | 0.52 | % | |||||||||||||||
| FHLB advances | 71,990 | 1,518 | 2.11 | % | 46,019 | 554 | 1.20 | % | |||||||||||||||
| Total interest-bearing liabilities | 418,468 | 4,588 | 1.10 | % | 343,362 | 2,110 | 0.61 | % | |||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||
| Noninterest-bearing deposits | 62,350 | 61,871 | |||||||||||||||||||||
| Other noninterest-bearing liabilities | 6,295 | 6,040 | |||||||||||||||||||||
| Total liabilities | 487,113 | 411,273 | |||||||||||||||||||||
| Total equity | 79,612 | 84,154 | |||||||||||||||||||||
| Total liabilities and equity | $ | 566,725 | $ | 495,427 | |||||||||||||||||||
| Net interest income | $ | 16,728 | $ | 15,009 | |||||||||||||||||||
| Interest rate spread(4) | 2.85 | % | 3.06 | % | |||||||||||||||||||
| Net interest-earning assets(5) | $ | 121,636 | $ | 122,760 | |||||||||||||||||||
| Net interest margin(6) | 3.10 | % | 3.22 | % | |||||||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 129.07 | % | 135.75 | % | |||||||||||||||||||
(1) Includes nonaccruing loan balances and interest received on such loans.
(2) Includes carrying value of securities classified as available-for-sale, FHLB of Boston stock and investment in the Depositors Insurance Fund.
(3) Includes tax equivalent adjustments for municipal securities, based on an effective tax rate of 21% for 2018 and 34.0% in 2017, of $32,000, $179,000 for 2018 and 2017, respectively.
(4) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(5) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(6) Net interest margin represents net interest income divided by average total interest-earning assets.
Randolph Bancorp, Inc.
Rate/Volume Analysis
(Dollars in thousands)
(Unaudited)
| 3 Months Ended | |||||||||||
| December 31, 2018 v. 2017 | |||||||||||
| Increase (Decrease) | Total | ||||||||||
| Due to Changes in | Increase | ||||||||||
| Volume | Rate | (Decrease) | |||||||||
| Interest-earning assets: | |||||||||||
| Loans | $ | 1,164 | $ | 410 | $ | 1,574 | |||||
| Investment securities | (58 | ) | 6 | (52 | ) | ||||||
| Interest-earning deposits | (18 | ) | 15 | (3 | ) | ||||||
| Total interest-earning assets | 1,088 | 431 | 1,519 | ||||||||
| Interest-bearing liabilities: | |||||||||||
| Savings accounts | - | 10 | 10 | ||||||||
| NOW accounts | (3 | ) | (3 | ) | (6 | ) | |||||
| Money market accounts | (2 | ) | 113 | 111 | |||||||
| Term certificates | 243 | 204 | 447 | ||||||||
| Total interest-bearing deposits | 238 | 324 | 562 | ||||||||
| FHLBB advances | 137 | 279 | 416 | ||||||||
| Total interest-bearing liabilities | 375 | 603 | 978 | ||||||||
| Change in net interest income | 713 | (172 | ) | 541 | |||||||
| Year Ended | |||||||||||
| December 31, 2018 v. 2017 | |||||||||||
| Increase (Decrease) | Total | ||||||||||
| Due to Changes in | Increase | ||||||||||
| Volume | Rate | (Decrease) | |||||||||
| Interest-earning assets: | |||||||||||
| Loans | $ | 3,397 | $ | 1,045 | $ | 4,442 | |||||
| Investment securities | (202 | ) | (60 | ) | (262 | ) | |||||
| Interest-earning deposits | (25 | ) | 42 | 17 | |||||||
| Total interest-earning assets | 3,170 | 1,027 | 4,197 | ||||||||
| Interest-bearing liabilities: | |||||||||||
| Savings accounts | (1 | ) | 23 | 22 | |||||||
| NOW accounts | (18 | ) | 6 | (12 | ) | ||||||
| Money market accounts | 65 | 332 | 397 | ||||||||
| Term certificates | 519 | 588 | 1,107 | ||||||||
| Total interest-bearing deposits | 565 | 949 | 1,514 | ||||||||
| FHLBB advances | 413 | 551 | 964 | ||||||||
| Total interest-bearing liabilities | 978 | 1,500 | 2,478 | ||||||||
| Change in net interest income | 2,192 | (473 | ) | 1,719 | |||||||
Randolph Bancorp, Inc.
Segment Information
(Dollars in thousands)
(Unaudited)
| For the Year Ended December 31, 2018 | ||||||||||||
| Envision Bank | Envision Mortgage | Consolidated Total | ||||||||||
| Net interest income | $ | 15,664 | $ | 1,032 | $ | 16,696 | ||||||
| Provision for loan losses | 762 | - | 762 | |||||||||
| Net interest income after provision for loan losses | 14,902 | 1,032 | 15,934 | |||||||||
| Non-interest income: | ||||||||||||
| Customer service fees | 1,344 | 120 | 1,464 | |||||||||
| Gain on loan origination and sale activities, net (1) | - | 8,859 | 8,859 | |||||||||
| Mortgage servicing fees, net | (310 | ) | 1,574 | 1,264 | ||||||||
| Gain on sales of buildings | 2,476 | - | 2,476 | |||||||||
| Other | 520 | 420 | 940 | |||||||||
| Total non-interest income | 4,030 | 10,973 | 15,003 | |||||||||
| Non-interest expenses: | ||||||||||||
| Salaries and employee benefits | 6,793 | 12,972 | 19,765 | |||||||||
| Occupancy and equipment | 1,507 | 1,366 | 2,873 | |||||||||
| Restructuring charges | - | 968 | 968 | |||||||||
| Other non-interest expenses | 4,476 | 3,590 | 8,066 | |||||||||
| Total non-interest expenses | 12,776 | 18,896 | 31,672 | |||||||||
| Income (loss) before income taxes and elimination of inter-segment profit | $ | 6,156 | $ | (6,891 | ) | (735 | ) | |||||
| Elimination of inter-segment profit | (1,320 | ) | ||||||||||
| Loss before income taxes | (2,055 | ) | ||||||||||
| Income tax expense | 31 | |||||||||||
| Net loss | $ | (2,086 | ) | |||||||||
| Total Assets December 31, 2018 | $ | 526,871 | $ | 87,469 | $ | 614,340 | ||||||
(1) Before elimination of inter-segment profit
The information above was derived from the internal management reporting system used by management to measure performance of the segments.
Randolph Bancorp, Inc.
Segment Information
(Dollars in thousands)
(Unaudited)
| For the Year Ended December 31, 2017 | ||||||||||||
| Envision Bank | Envision Mortgage | Consolidated Total | ||||||||||
| Net interest income | $ | 13,827 | $ | 1,003 | $ | 14,830 | ||||||
| Provision for loan losses | 540 | - | 540 | |||||||||
| Net interest income after provision for loan losses | 13,287 | 1,003 | 14,290 | |||||||||
| Non-interest income: | ||||||||||||
| Customer service fees | 1,355 | 100 | 1,455 | |||||||||
| Gain on loan origination and sale activities, net (1) | - | 10,047 | 10,047 | |||||||||
| Mortgage servicing fees, net | (258 | ) | 1,731 | 1,473 | ||||||||
| Other | 408 | 476 | 884 | |||||||||
| Total non-interest income | 1,505 | 12,354 | 13,859 | |||||||||
| Non-interest expenses: | ||||||||||||
| Salaries and employee benefits | 6,243 | 12,488 | 18,731 | |||||||||
| Occupancy and equipment | 1,392 | 1,263 | 2,655 | |||||||||
| Restructuring charges | - | 594 | 594 | |||||||||
| Merger and integration costs | 19 | 512 | 531 | |||||||||
| Other non-interest expenses | 3,955 | 3,356 | 7,311 | |||||||||
| Total non-interest expenses | 11,609 | 18,213 | 29,822 | |||||||||
| Income (loss) before income taxes and elimination of inter-segment profit | $ | 3,183 | $ | (4,856 | ) | (1,673 | ) | |||||
| Elimination of inter-segment profit | (896 | ) | ||||||||||
| Loss before income taxes | (2,569 | ) | ||||||||||
| Income tax benefit | (443 | ) | ||||||||||
| Net loss | $ | (2,126 | ) | |||||||||
| Total Assets December 31, 2017 | $ | 468,515 | $ | 63,377 | $ | 531,892 | ||||||
(1) Before elimination of inter-segment profit
The information above was derived from the internal management reporting system used by management to measure performance of the segments.
Randolph Bancorp, Inc.
Reconciliation of GAAP to Non-GAAP Net Loss
(In thousands)
(Unaudited)
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net loss - GAAP basis | $ | (228 | ) | $ | (1,578 | ) | $ | (2,086 | ) | $ | (2,126 | ) | ||||
| Non-interest income adjustments: | ||||||||||||||||
| Gain on sales of buildings | (2,261 | ) | - | (2,476 | ) | - | ||||||||||
| Gain on insurance recovery | - | - | (90 | ) | - | |||||||||||
| Non-interest expense adjustments: | ||||||||||||||||
| Restructuring charges | 875 | 594 | 968 | 594 | ||||||||||||
| Merger and integration costs | - | - | - | 531 | ||||||||||||
| Net loss - Non-GAAP basis | $ | (1,614 | ) | $ | (984 | ) | $ | (3,684 | ) | $ | (1,001 | ) | ||||
The Company's management believes that the presentation of net loss on a non-GAAP basis excluding non-recurring items provides useful information for evaluating operating results and any related trends that may be affecting the Company's business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP.
Randolph Bancorp, Inc.
Selected Financial Highlights
(Unaudited)
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Return on average assets: (1) | ||||||||||||||||
| GAAP | (0.15 | %) | (1.22 | %) | (0.37 | %) | (0.43 | %) | ||||||||
| Non-GAAP (2) | (1.05 | %) | (0.76 | %) | (0.65 | %) | (0.20 | %) | ||||||||
| Return on average equity: (1) | ||||||||||||||||
| GAAP | (1.17 | %) | (7.53 | %) | (2.62 | %) | (2.54 | %) | ||||||||
| Non-GAAP (2) | (8.25 | %) | (4.69 | %) | (4.63 | %) | (1.19 | %) | ||||||||
| Net interest margin | 3.01 | % | 3.17 | % | 3.10 | % | 3.22 | % | ||||||||
| Non-interest income to total income: | ||||||||||||||||
| GAAP | 46.63 | % | 36.19 | % | 39.13 | % | 43.35 | % | ||||||||
| Non-GAAP (2) | 33.33 | % | 36.19 | % | 34.31 | % | 43.35 | % | ||||||||
| Efficiency ratio: | ||||||||||||||||
| GAAP | 96.21 | % | 126.11 | % | 104.26 | % | 107.30 | % | ||||||||
| Non-GAAP (2) | 113.68 | % | 116.81 | % | 110.39 | % | 103.25 | % | ||||||||
| Tier 1 capital to average assets (3) | 14.08 | % | 15.95 | % | 14.08 | % | 15.95 | % | ||||||||
| Nonperforming assets as a percentage of total assets | 0.61 | % | 0.46 | % | 0.61 | % | 0.46 | % | ||||||||
| Allowance for loan losses as a percentage of total loans (4) | 0.91 | % | 0.92 | % | 0.91 | % | 0.92 | % | ||||||||
| Allowance for loan losses as a percentage of non-performing loans | 121.06 | % | 165.94 | % | 121.06 | % | 165.94 | % | ||||||||
| Tangible book value per share | 13.19 | 13.49 | 13.19 | 13.49 | ||||||||||||
(1) Annualized for quarterly periods presented
(2) See page 13 - Reconciliation of GAAP to Non-GAAP Net Loss
(3) Average assets calculated on a quarterly basis for all periods presented
(4) Total loans excludes loans held for sale but includes net deferred loan costs and fees
For More Information, Contact:
Michael K. Devlin, Executive Vice President and Chief Financial Officer (617-925-1961)
mdevlin@envisionbank.com
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