Randolph Bancorp, Inc. Announces Third Quarter 2021 Financial Results, Initiates Quarterly Cash Dividend, and Announces Share Buyback Program

QUINCY, Mass., Oct. 26, 2021 (GLOBE NEWSWIRE) — Randolph Bancorp, Inc. (the “Company”) (NASDAQ Global Market: RNDB), the holding company for Envision Bank (the “Bank”), today announced net income of $3.1 million, or $0.64 per basic share and $0.62 per diluted share, for the three months ended September 30, 2021 compared to net income of $1.6 million, or $0.32 per basic and $0.31 per diluted share, for the three months ended June 30, 2021 and net income of $10.3 million, or $2.01 per basic and diluted share, for the three months ended September 30, 2020. Excluding one-time events of $139,000 in severance expenses and $190,000 in other outsourcing expenses, net income on a non-GAAP basis was $3.4 million, or $0.67 per diluted share, for the three months ended September 30, 2021. Excluding one-time events of $145,000 in severance expenses, $71,000 in other outsourcing expenses, and $29,000 in losses on disposals of fixed assets, net income on a non-GAAP basis was $1.8 million, or $0.34 per diluted share, for the three months ended June 30, 2021. Excluding $22,000 of operating expenses related to addressing the COVID-19 pandemic, net income on a non-GAAP basis for the three months ended September 30, 2020 was $10.3 million, or $2.01 per diluted share.

For the nine months ended September 30, 2021, net income was $8.8 million, or $1.78 per basic share and $1.71 per diluted share, compared to net income of $14.7 million, or $2.86 per basic and diluted share, for the nine months ended September 30, 2020. Net income on a non-GAAP basis, excluding certain nonrecurring items, was $9.3 million, or $1.80 per diluted share, for the nine months ended September 30, 2021, compared to net income on a non-GAAP basis, excluding other certain nonrecurring items, of $16.0 million, or $3.12 per diluted share, for the nine months ended September 30, 2020.

The Company announced that its Board of Directors declared a regular quarterly dividend of $0.15 per common share. The dividend will be payable on or about November 23, 2021, to shareholders of record as of November 9, 2021.

Additionally, the Company announced today a new share repurchase program to purchase up to 510,000 shares of its common stock, representing approximately 10.0% of the Company’s outstanding common stock. Repurchases under this program may be made in open market transactions. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. The repurchase program does not obligate the Company to purchase any particular number of shares. The repurchase program will expire on October 29, 2022, and may be suspended or terminated at any time.

At September 30, 2021, total assets amounted to $751.1 million, compared to $744.1 million at June 30, 2021, an increase of $7.0 million, or 0.9%. Total loans increased by $23.6 million, or 4.3%, to $570.0 million at September 30, 2021 from $546.4 million at June 30, 2021, and loans held for sale increased by $1.1 million to $75.4 million at September 30, 2021 from $74.3 million at June 30, 2021. Compared to September 30, 2020, total assets grew $28.1 million, or 3.9% from $723.0 million. The growth from the prior year period was driven by an increase in total loans of $80.0 million, or 16.3%, partially offset by a decrease in loans held for sale of $12.4 million and a decrease in cash and cash equivalents of $36.3 million.

William M. Parent, President and Chief Executive Officer, stated, “The third quarter was a strong quarter for our Company, as our local economy continued to progress to more normal post pandemic operations. Strong loan growth, net interest margin expansion, net interest income growth, improved credit metrics and mortgage banking income drove strong earnings contributions across our organization. Our decision to initiate a regular quarterly dividend reflects the continued improvement in our operating performance and our optimism for what lies ahead for our Company. This dividend also complements our share buyback program, which, along with continued organic growth, gives us versatility to deploy our excess capital in a balanced and effective manner.”

Third Quarter Operating Results
Net interest income increased by $777,000, or 14.9%, to $6.0 million for the three months ended September 30, 2021 from $5.2 million for the three months ended June 30, 2021. This increase was primarily due to $318,000 of fee accretion earned from the Small Business Administration’s Paycheck Protection Program (“SBA PPP”), commercial real estate loan growth, and a decrease in the rates paid on term certificates of deposit. The yield earned on interest-earning assets increased by 33 basis points from the prior quarter, and the rate paid on interest-bearing liabilities improved by 6 basis points from the prior quarter. Accordingly, the net interest margin increased by 38 basis points, to 3.38% in the third quarter from 3.00% in the second quarter.

Net interest income increased by $1.3 million, or 28.0%, to $6.0 million for the three months ended September 30, 2021 from $4.7 million in the same period in the prior year. Relative to the prior year quarter, the net interest margin increased by 57 basis points to 3.38%, from 2.81%. The improvement reflects average loan growth of $82.1 million from the prior year quarter, while the cost of interest-bearing liabilities decreased by 38 basis points, and the yield on interest-earning assets increased by 25 basis points between periods.

The Company recognized a credit for loan losses of $90,000 for the quarter ended September 30, 2021, driven by changes in the qualitative factors related to the impact of the COVID-19 pandemic used in the Company’s calculation, along with improvements in overall credit quality trends, which were partially offset by total loan growth of $23.6 million from the prior quarter. The allowance for loan losses was 1.13%, 1.19% and 1.34% of total loans at September 30, 2021, June 30, 2021 and September 30, 2020, respectively, and was 427.7%, 101.9% and 67.2% of non-performing assets at September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

Non-interest income increased $1.3 million, or 19.6%, to $8.1 million for the quarter ended September 30, 2021 from $6.8 million in the quarter ended June 30, 2021, due to an increase of $1.5 million in the net gain on loan origination and sale activities, partially offset by a decrease in net mortgage servicing fees of $107,000. Sold mortgages totaled $260.5 million in the third quarter of 2021, compared to $342.8 million in the second quarter of 2021. The third quarter of 2021 ended with a mortgage pipeline of $158.1 million, compared to a pipeline of $139.7 million at the end of the second quarter of 2021. The stabilization of the mortgage banking pipeline was a key contributor to the improvement in the gain on loan origination and sale activities from the prior quarter. Mortgage servicing fees decreased $107,000, or 28.1%, to $274,000 for the third quarter of 2021 from $381,000 in the second quarter of 2021 as a result of expenses paid to the bank’s new mortgage sub-servicer of $252,000 for the last two months of the quarter, partially offset by a positive fair value adjustment of $38,000 in the third quarter of 2021, compared to a provision of $65,000 for the second quarter of 2021, based on an increase in mortgage interest rates, and a decrease in the monthly amortization of mortgage servicing rights from the prior quarter, which reflects slower prepayment speeds.

Non-interest income decreased $11.7 million, or 59.0%, to $8.1 million for the quarter ended September 30, 2021 from $19.9 million for the quarter ended September 30, 2020, principally due to a decrease of $10.9 million in the net gain on loan origination and sale activities, and a decrease of $906,000 in net mortgage servicing fees. Sold mortgage loans totaled $260.5 million in the third quarter of 2021, compared to sold mortgage loans of $410.4 million during the third quarter of 2020. The third quarter of 2021 ended with a mortgage pipeline of $158.1 million, compared to a pipeline of $418.9 million at the end of the third quarter of 2020. Mortgage servicing fees decreased $906,000 in the quarter ended September 30, 2021, principally due to a positive valuation adjustment of mortgage servicing rights of $1.1 million in the quarter ended September 30, 2020.

Non-interest expenses decreased $768,000, or 7.2%, to $9.9 million in the quarter ended September 30, 2021 from $10.6 million in the quarter ended June 30, 2021. The decrease was due to a decrease in salaries and employee benefits expense of $929,000, or 12.7%, primarily attributed to lower commissions and incentives associated with a normalization of residential loan production and by reductions in headcount related to the bank’s outsourcing of mortgage loan servicing, partially offset by $190,000 of one-time conversion expenses related to the new mortgage loan sub-servicer included in other non-interest expenses.

Non-interest expenses decreased $1.2 million to $9.9 million in the quarter ended September 30, 2021 from $11.1 million in the quarter ended September 30, 2020. The decrease is principally due to a decrease in salaries and employee benefits of $1.5 million, primarily attributed to lower commissions and incentives associated with a normalization of residential loan production and reduced headcount, partially offset by a $253,000 increase in other non-interest expenses, which included one-time conversion expenses for the bank’s new mortgage loan sub-servicer, as well as increases related to fees and stock-based compensation paid to new members of the Company’s Board of Directors.

The income tax expense was $1.2 million for the three months ended September 30, 2021 compared to income tax benefit of $162,000 for the three months ended June 30, 2021 and income tax expense of $2.7 million for the three months ended September 30, 2020. During the three months ended June 30, 2021, the Company reversed a valuation allowance on its charitable contribution carryforwards totaling $531,000. The remaining income tax expense for 2021 is expected to reflect an effective tax rate of 28.5%.

Year-to-Date Operating Results
Net interest income increased by $2.4 million, or 17.6%, to $16.3 million, for the nine months ended September 30, 2021 from $13.8 million for the nine months ended September 30, 2020. The change reflects the shortening and downward pricing of deposit liabilities, and to a lesser extent, loan growth. The composition of our deposit base improved as the average balance of savings and NOW accounts for the nine months ended September 30, 2021 increased $35.9 million, or 23.2%, and $12.9 million, or 23.7%, respectively, from the nine months ended September 30, 2020, while the average balance of our term certificates decreased $54.4 million, or 34.1%, from the prior year. The activity resulted in a 58 basis point decrease in the cost of interest-bearing liabilities. Average loan growth of $53.7 million, or 9.7% from the prior year more than offset a 23 basis point decline in loan yields.

The Company recognized a credit for loan losses of $330,000 for the nine months ended September 30, 2021 compared to a provision of $2.3 million in the prior year period. At September 30, 2021, improvements to qualitative factors related to the impact of the COVID-19 pandemic, the economic outlook, and credit quality trends all helped to generate the credit for loan losses, partially offset by provisions for loan growth.

Non-interest income decreased $12.4 million, or 31.2%, to $27.4 million for the nine months ended September 30, 2021 from $39.8 million in the nine months ended September 30, 2020, principally due to a decrease of $15.7 million in the net gain on loan origination and sale activities. Mortgage loans sold were $1.1 billion in the first nine months of 2021, unchanged from the first nine months of 2020. Net gain on loan origination and sale activities decreased, as a result of both lower loan sale margins and the impact of a shrinking mortgage banking pipeline during the nine months ended September 30, 2021, compared to an increasing mortgage banking pipeline during the nine months ended September 30, 2020. Mortgage servicing fees increased $2.9 million in the first nine months of 2021 to $1.4 million from a loss of $1.4 million in the first nine months of 2020, primarily due to positive fair value adjustments of $395,000 in the first nine months of 2021 and impairment charges of $2.0 million in the first nine months of 2020.

Non-interest expenses decreased $952,000, or 2.9%, to $32.4 million for the nine months ended September 30, 2021 from $33.4 million for the nine months ended September 30, 2020. Non-interest expenses in the first nine months of 2020 included one-time charges of $1,375,000 related to the retirement of senior executives as well as $229,000 of COVID-19 pandemic-related expenses. Occupancy and equipment expenses decreased $316,000 in the first nine months of 2021 over the prior year period, as the Company migrated to a hybrid work environment and reduced its overall real estate footprint by closing six loan production offices, a lending center office, and by reducing the office space for the bank’s main administrative office since the prior year, and a reduction in COVID-19 pandemic related spending. These decreases were partially offset by increases in other non-interest expenses of $1.1 million, related to one-time conversion expenses for the bank’s new mortgage sub-servicer, increases to board fees and stock-based compensation paid to new members of the bank’s Board of Directors, and the bank’s provision for unfunded commitments for commercial real estate and commercial construction originations.

Income tax expenses decreased to $2.7 million for the nine months ended September 30, 2021 from $3.3 million for the nine months ended September 30, 2020. The current period included a reversal of a charitable contribution carryforward valuation allowance, and the prior period included the utilization of net operating loss carryforwards.

Balance Sheet
At September 30, 2021, total assets amounted to $751.1 million, compared to $744.1 million at June 30, 2021, an increase of $7.0 million, or 0.9%. A $24.0 million increase in net loans from the prior quarter was partially offset by a $22.0 million decrease in cash and cash equivalents. Net loan growth of 4.4% was driven by commercial real estate growth of $17.4 million, or 10.4%, and home equity and construction loan growth of $5.6 million and $5.4 million, respectively. Deposits increased by $1.4 million in the quarter, including an increase of $9.4 million in non-interest bearing deposits. In addition, the Company increased borrowings by $12.9 million in the quarter.

Total assets at September 30, 2021 increased $28.1 million, or 3.9% from $723.0 million at September 30, 2020. Contributing to asset growth was a $80.1 million increase in net loans to $564.6 million at September 30, 2021 from $484.5 million at September 30, 2020. Cash and cash equivalents decreased by $36.2 million, or 73.8%, to $12.9 million at September 30, 2021 from $49.1 million at September 30, 2020, mainly to fund growth in net loans. Commercial real estate loans increased by $43.2 million, or 30.5%, as we focus on diversifying our loan mix. The increase in total assets from the prior year quarter was also funded by continued deposit growth. Retail deposits totaled $523.3 million at September 30, 2021, increasing by $38.3 million, or 7.9%, from $485.0 million at September 30, 2020. Driving the growth in retail deposits was customers’ receipt of government stimulus and our focus on deposit gathering. Federal Home Loan Bank of Boston (“FHLBB”) advances decreased by $4.0 million to $62.9 million at September 30, 2021, from $66.9 million at September 30, 2020, and Federal Reserve Bank advances decreased by $15.3 million.

Total stockholders’ equity was $100.6 million at September 30, 2021 compared to $100.7 million at June 30, 2021. The decrease of $113,000 reflects share repurchases during the period of $3.4 million, partially offset by net income of $3.1 million.

Total stockholders’ equity was $100.6 million at September 30, 2021 compared to $94.9 million at September 30, 2020. The increase of $5.7 million relates mainly to net income from the previous twelve months of $14.1 million, partially offset by share repurchases of $8.8 million.

COVID-19 Impact
In response to the impact of the COVID-19 pandemic on our customers and our business, the Company implemented a series of measures through the date of this release, including participation in the SBA PPP, for which we funded $26.2 million of SBA PPP Loans through September 30, 2021, and granting payment deferrals for residential mortgage, home equity and certain commercial borrowers who were current in their payments at the time the deferral was requested. Depending on the circumstances of the borrowers, the forbearance calls for a reduced or full deferral of payment. Please refer to the Loan Payment Deferrals and COVID-19 Highly Impacted Sectors for statistics on loan payment deferrals and the commercial loan sectors we believe could continue to be exposed to the economic impact of the COVID-19 pandemic.

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 Quincy, Massachusetts, three loan production offices located in Massachusetts and one loan production office in Southern New Hampshire.

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. We may also make forward-looking statements in other documents we file with the Securities and Exchange Commission (“SEC”), in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “assume”, “outlook”, “will”, “should”, and other expressions that predict or indicate future events and trends and which do not relate to historical matters. 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 negative impacts and disruptions of the COVID-19 pandemic and the measures taken to contain its spread on the Company’s employees, customers, business operations, credit quality, financial position, liquidity and results of operations; changes in the general business and economic conditions on a national basis and in the local markets in which the Company operates, including changes that adversely affect borrowers’ ability to service and repay the Company’s loans; changes in consumer behavior due to changing political, business and economic conditions or legislative or regulatory initiatives; reputational risk relating to the Company’s participation in the SBA PPP and other pandemic-related legislative and regulatory initiatives and programs; turbulence in the capital and debt markets and the impact of such conditions on the Company’s business activities; and the risk factors described in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the SEC. 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 return on average assets, return on average equity, the efficiency ratio, profit percentage, tangible book value per share, non-interest income to total income 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.

(1) Includes nonaccruing loan balances and interest received on such loans.
(2) Includes carrying value of securities classified as available-for-sale and FHLBB stock.
(3) Includes tax equivalent adjustments for municipal securities, based on a statutory tax rate of 21%, of $1,000, $1,000 and $1,000 for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, 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.

(1) Includes nonaccruing loan balances and interest received on such loans.
(2) Includes carrying value of securities classified as available-for-sale and FHLBB stock.
(3) Includes tax equivalent adjustments for municipal securities, based on a statutory tax rate of 21%, of $3,000 and $4,000 for the nine months ended September 30, 2021 and 2020, 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.