Randolph Bancorp, Inc. Announces Fourth Quarter and Year End 2018 Financial Results


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