STOUGHTON, Mass., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Randolph Bancorp, Inc. (NASDAQ Global Market: RNDB), the holding company for Envision Bank, today announced net income of $10.3 million, or $2.01 per basic and diluted share, for the three months ended September 30, 2020 compared to net income of $1.1 million, or $0.21 per basic and diluted share, for the three months ended September 30, 2019. Net income for the nine months ended September 30, 2020 was $14.7 million, or $2.86 per basic and diluted share, compared to net income of $2.6 million, or $0.48 per basic and diluted share, for the nine months ended September 30, 2019. Excluding one-time charges of $1.4 million related to the retirement of senior executives and operating expenses of $229,000 related to addressing the COVID-19 pandemic, earnings were $16.3 million, or $3.17 per share, for the nine months ended September 30, 2020.
The Company also announced today that its Board of Directors has approved a share repurchase program to purchase up to 552,000 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, 2021, and may be suspended or terminated at any time.
At September 30, 2020, total assets amounted to $723.0 million, compared to $724.0 million at June 30, 2020, a decrease of $1.0 million, or 0.1%. An increase in loans held for sale of $26.1 million was offset by a decrease in cash and cash equivalents of $26.9 million relative to the prior quarter.
William M. Parent, President and Chief Executive Officer, stated, “The third quarter was another strong quarter in earnings for our Company. We are very pleased with our performance, especially our mortgage banking operations, which maintained high levels of loans closed, loans sold, and net revenue from loan sales and origination activity. We continue to focus on maintaining a strong balance sheet during these unprecedented times, while the announcement of our new buyback program will enable our Company to deploy excess capital in the most effective manner.”
Third Quarter Operating Results
Net interest income increased by $96,000, or 2.1%, to $4.7 million for the three months ended September 30, 2020 from $4.6 million the same period in the prior year. This increase was primarily due to an increase in the proportion of non-maturity deposits and a decline in the proportion of term certificates from the same period in the prior year. The average balance of savings accounts at the Company increased $63.0 million, or 58.5%, from September 30, 2019 and the average balance of term certificates decreased $51.0 million, or 28.0%, from September 2019, contributing to an 83 basis point decrease in the cost of interest-bearing liabilities. The net interest margin decreased in the third quarter of 2020 to 2.81%, from 2.89% in the third quarter of 2019, due to deposit repricing lagging the decreasing interest-earning asset yields in a declining interest rate environment.
The Company recognized a provision for loan losses of $546,000 for the quarter ended September 30, 2020. The allowance for loan losses was 1.34% and 0.90% of total loans at September 30, 2020 and December 31, 2019, respectively, and was 67.2% and 131.4% of non-performing assets at September 30, 2020 and December 31, 2019, respectively. Nonperforming assets include $2.8 million of credits which were paid in early October. Excluding these loans with payoffs, the allowance for loan losses would have been 92.3% of non-performing assets at September 30, 2020.
Non-interest income increased $13.6 million, or 215.3%, to $19.9 million for the quarter ended September 30, 2020 from $6.3 million in the quarter ended September 30, 2019, principally due to an increase of $12.3 million in the net gain on loan origination and sale activities. Sold mortgage loans reached a volume of $410.4 million in the third quarter of 2020. The increase in the gain on loan origination and sale activities was accompanied by an increase in net mortgage servicing fees due to a fair value adjustment for mortgage servicing rights of $1.1 million, given a recent stabilization of interest rates from the first half of the year. Net mortgage servicing fees for the quarter ended September 30, 2019 included a negative fair valuation adjustment of $522,000.
Non-interest expenses increased $1.3 million to $11.1 million in the quarter ended September 30, 2020 from $9.7 million in the quarter ended September 30, 2019. The increase is principally due to an increase in salaries and employee benefits of $901,000, mainly related to higher commissions and incentives associated with increased residential loan production.
Occupancy and equipment expenses increased $186,000 in the quarter ended September 30, 2020 over the prior year period, partly as a result of increased spending on cleaning and supplies related to the COVID-19 pandemic of $22,000, in addition to increased depreciation of furniture, fixtures and equipment that are expected to be retired as the Company looks to consolidate its office space in light of prolonged remote working arrangements.
Other non-interest expenses comprising professional fees, marketing, FDIC insurance and other non-interest expenses increased by $246,000 in the quarter ended September 30, 2020 versus the prior year period, as elevated mortgage loan production costs and the expiration of an FDIC deposit insurance credit were partially offset by a decrease in discretionary marketing expenses.
Income tax expense of $2.7 million for the quarter ended September 30, 2020 consists of both federal and state tax expenses. The Company’s net operating loss carryforward of $10.8 million from prior years was fully absorbed during the period.
Year-to-Date Operating Results
Net interest income increased by $385,000, or 2.9%, for the nine months ended September 30, 2020 compared to the same period in the prior year. This increase was driven by an increase in the proportion of non-maturity deposits, and a decline in the proportion of term certificates from the prior year. The net interest margin decreased in the first nine months of 2020 to 2.86%, from 2.94% in the first nine months of 2019, due to deposit repricing lagging the decreasing interest-earning asset yields in a declining interest rate environment.
The Company recognized a provision for loan losses of $2.3 million for the nine months ended September 30, 2020 compared to a credit of $144,000 in the prior year period.
Non-interest income increased $24.3 million, or 155.8%, to $39.8 million for the nine months ended September 30, 2020 from $15.6 million in the nine months ended September 30, 2019, principally due to an increase of $26.2 million in the net gain on loan origination and sale activities. Mortgage loans sold were $1.1 billion for the first nine months of 2020. The increase in the gain on loan origination and sale activities was partially offset by a decrease in net mortgage servicing fees due to a fair value adjustment for mortgage servicing rights of $2.0 million in the nine months ended September 30, 2020, given expectations of higher prepayments. The fair value adjustment for mortgage servicing rights was $636,000 in the nine months ended September 30, 2019.
Non-interest expenses increased $6.9 million, or 26.2%, to $33.4 million for the nine months ended September 30, 2020 from $26.5 million for the nine months ended September 30, 2019. Non-interest expenses in the first nine months of 2020 included one-time charges of $1.4 million related to the retirement of senior executives as well as $229,000 of COVID-19 pandemic-related expenses.
In the first nine months of 2020, salaries and employee benefits increased $5.9 million, including one-time charges of $1.4 million for the retirement of senior executives, higher commissions and incentives associated with higher residential loan production, and COVID-19 pandemic-related compensation of $101,000 for front-line and quarantined employees.
Occupancy and equipment expenses increased $423,000 in the first nine months of 2020 over the prior year period, partly as a result of increased spending on cleaning and supplies related to the COVID-19 pandemic of $125,000, as well as increased depreciation of furniture, fixtures and equipment that are expected to be retired as we consolidate our administrative office space in light of prolonged remote working arrangements for certain back-office staff.
Professional fees in the first nine months of 2020 increased $69,000 over the prior year period, primarily related to management succession planning costs. Spending on marketing during the first nine months of 2020 was $186,000 less than in the prior year period, due to fewer marketing campaigns while communities were subject to a stay-at-home order. The increase of $652,000 in other non-interest expenses during the first nine months of 2020 was driven mainly by costs related to higher mortgage loan production.
Income tax expense of $3.3 million for the nine months ended September 30, 2020 consists of both federal and state income taxes, as the Company’s net operating loss carryforward of $12.0 million from prior years was fully absorbed during the period.
Balance Sheet
At September 30, 2020, total assets amounted to $723.0 million compared to $631.0 million at December 31, 2019, an increase of $92.0 million, or 14.6%. Contributing to asset growth was a $15.4 million increase in net loans, mainly driven by the issuance of Paycheck Protection Program loans (“SBA PPP Loans”) for $15.4 million. Cash and cash equivalents increased by $40.8 million during the first nine months of 2020, mainly as a result of strong core growth in deposits and the timing of cash proceeds from loan sales. Loans held for sale increased by $25.0 million to $87.8 million at September 30, 2020 from $62.8 million at December 31, 2019.
The increase in total assets was funded by deposit growth. Non-brokered deposits totaled $485.0 million at September 30, 2020, increasing by $78.8 million, or 19.4%, during the first nine months of 2020. Driving the growth in non-brokered deposits were customers’ receipt of government stimulus, SBA PPP Loans proceeds which were deposited with us, and our focus on deposit gathering prior to the onset of the COVID-19 pandemic. Brokered deposits declined by $53.6 million to $37.3 million at September 30, 2020, from $90.9 million at December 31, 2019. Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank advances increased by $37.8 million to $82.2 million at September 30, 2020, from $44.4 million at December 31, 2019, as a result of the funding of our SBA PPP Loans and other loans with FHLB and Federal Reserve Bank advances.
Total stockholders’ equity was $94.9 million at September 30, 2020 compared to $78.5 million at December 31, 2019. The increase of $16.5 million relates mainly to net income in the period of $14.7 million and an increase in the fair value of available-for-sale securities, net of taxes, of $1.6 million. In addition, the Company repurchased $1.2 million of shares during the first nine months of 2020, and equity adjustments related to the stock benefit plan and the employee stock ownership plan amounted to $1.5 million during the period.
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 Small Business Administration’s Paycheck Protection Program, for which we funded $15.4 million of SBA PPP Loans through September 30, 2020, 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 Most Impacted Sectors for statistics on loan payment deferrals and the commercial loan sectors we believe could 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, lending and operations centers in Stoughton, North Attleboro and Andover, Massachusetts, six loan production offices located throughout Massachusetts and one loan production office in Southern New Hampshire.
