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Stewardship Financial Corporation Announces Earnings For The Second Quarter of 2018

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MIDLAND PARK, N.J., Aug. 09, 2018 (GLOBE NEWSWIRE) -- Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, announced net income for the three and six months ended June 30, 2018 of $2.3 million, or $0.27 per share, and $4.1 million, or $0.47 per share, respectively.  For the equivalent prior year periods, net income was $1.3 million, or $0.16 per share, and $2.3 million, or $0.32 per share, respectively.

Paul Van Ostenbridge, Stewardship Financial Corporation's President and Chief Executive Officer, commented, "We are pleased to, once again, report a successful quarter for the Corporation.  While the environment for loans and deposits continues to be very competitive, we are focused on quality loan and deposit growth with an emphasis on expanding existing relationships and developing new ones."

Operating Results
The Corporation reported net interest income of $7.0 million and $13.8 million for the three and six months ended June 30, 2018, respectively, reflecting increases over $6.5 million and $12.7 million realized in the comparable prior year periods.  "Net interest income benefited from a steady increase in assets and, to a lesser extent, a net interest margin that has been stable to slightly widening over the past several quarters," Van Ostenbridge stated.

The Corporation recorded reversal of the allowance for loan losses resulting in negative provisions for loan losses for both the three and six months ended June 30, 2018 of $780,000 and $1.1 million, respectively.  For the three and six months ended June 30, 2017, positive provision for loan losses of $260,000 and $560,000, respectively, were reported.  While growth in the loan portfolio generally requires the establishment of additional reserves, the negative loan loss provisions reflect net recoveries of previously charged off loan balances of $688,000 and $706,000 for the three and six months ended June 30, 2018, respectively.  The negative provisions for loan losses also reflect the continued improvement in the economic conditions and overall real estate climate in the primary business markets in which the Corporation operates.

For the three and six months ended June 30, 2018, noninterest income was $859,000 and $1.6 million, respectively, compared to $813,000 and $1.6 million in the corresponding prior year periods.  In connection with the establishment of a Small Business Administration ("SBA") department in late 2017, noninterest income for both the three and six months ended June 30, 2018 included $59,000 of gains from the sale of the guaranteed portion of newly originated SBA loans.  The three and six months ended June 30, 2018 reflected $29,000 and $103,000, respectively, of negative mark to market adjustments of a CRA investment which is classified as an equity security.  Such security has been owned for years for CRA purposes, but under newly enacted accounting rules, equity securities now require a quarterly mark to market through the income statement.

Noninterest expenses for the three and six months ended June 30, 2018 were $5.5 million and $10.9 million, respectively, compared to $5.1 million and $10.2 million in the comparable prior year periods.  The largest increase in expenses in 2018 occurred in salaries and employee benefits, which includes the costs associated with the establishment of the previously mentioned SBA Lending Department - fully staffed with experienced employees, as well as normal salary increases.  "As we remain focused on growing the balance sheet, the Corporation will continue to appropriately manage our expenses," noted Van Ostenbridge.

Results for the current year periods included the impact of a reduction in the Federal corporate income tax rate from 35% to 21% effective January 1, 2018 as a result of the enactment of the Tax Cuts and Jobs Act ("Tax Act").  For the current three and six month periods the effective tax rate was 26.8% and 26.6%, respectively, compared to an effective tax rate of 36.7% for both the three and six months ended June 30, 2017.

Balance Sheet / Financial Condition
Total assets at June 30, 2018 were $941.7 million, showing an increase of $12.9 million from the $928.8 million of assets at December 31, 2017.  Net loans increased $10.8 million representing new originations that were partially offset by several larger loan payoffs during the first six months of 2018 as well as normal principal amortization.

Total deposits were $792.1 million at June 30, 2018, indicating net growth of $28.0 million since December 31, 2017.  The growth in deposits primarily consisted of a $15.5 million increase in noninterest-bearing accounts and a $12.5 million increase in interest-bearing accounts.

All regulatory capital levels at June 30, 2018 remain above the levels considered to be "well capitalized" under the applicable regulations.  The Corporation's Tier 1 leverage ratio and total risk based capital ratio at June 30, 2018 were 9.15% and 14.28%, respectively.

About Stewardship Financial Corporation
Stewardship Financial Corporation's subsidiary, the Atlantic Stewardship Bank, has 12 banking offices in Midland Park, Hawthorne, Montville, Morristown, North Haledon, Pequannock, Ridgewood, Waldwick, Wayne (2), Westwood and Wyckoff, New Jersey.  The Bank is known for tithing 10% of its pre-tax profits to Christian and local charities.  To date, the Bank's tithe donations total over $10.1 million.  We invite you to visit our website at www.asbnow.com for additional information.

The information disclosed in this document contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and may be identified by the use of such words as "believe," "expect," "anticipate," "should," "plan," "estimate," and "potential."  Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of the Corporation that are subject to various factors which could cause actual results to differ materially from these estimates.  These factors include changes in general, economic and market conditions, legislative and regulatory conditions, or the development of an interest rate environment that adversely affects the Corporation's interest rate spread or other income anticipated from operations and investments.

 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                   
  June 30,   March 31,   December 31,   September 30,   June 30,
  2018   2018   2017   2017   2017
Selected Financial Condition Data:                  
Cash and cash equivalents $ 13,529     $ 22,178     $ 21,270     $ 17,213     $ 19,459  
Securities available for sale 112,594     106,467     109,259     111,973     112,511  
Securities held to maturity 58,471     51,894     52,442     53,323     52,091  
Other equity investments 3,694     3,706     3,756     3,760     3,733  
FHLB stock 3,087     3,039     3,715     3,919     5,169  
Loans held for sale 607         370     688     446  
Loans receivable:                  
Loans receivable, gross 722,148     708,169     711,720     691,953     692,056  
Allowance for loan losses (8,353 )   (8,445 )   (8,762 )   (8,614 )   (8,550 )
Other, net (484 )   (448 )   (397 )   (422 )   (344 )
Loans receivable, net 713,311     699,276     702,561     682,917     683,162  
Bank owned life insurance 21,360     21,222     21,084     20,943     20,802  
Other assets 15,034     14,659     14,309     15,958     15,934  
Total assets $ 941,687     $ 922,441     $ 928,766     $ 910,694     $ 913,307  
                   
                   
Noninterest-bearing deposits $ 188,343     $ 178,572     $ 172,861     $ 171,609     $ 177,678  
Interest-bearing deposits 603,718     593,644     591,238     569,352     543,215  
Total deposits 792,061     772,216     764,099     740,961     720,893  
Other borrowings 46,700     48,760     63,760     68,760     93,760  
Subordinated debentures and                  
subordinated notes 23,350     23,333     23,317     23,301     23,284  
Other liabilities 3,388     3,760     3,925     3,564     2,859  
Total liabilities 865,499     848,069     855,101     836,586     840,796  
Shareholders' equity 76,188     74,372     73,665     74,108     72,511  
Total liabilities and shareholders' equity $ 941,687     $ 922,441     $ 928,766     $ 910,694     $ 913,307  
                   
Gross loans to deposits 91.17 %   91.71 %   93.14 %   93.39 %   96.00 %
                   
Equity to assets 8.09 %   8.06 %   7.93 %   8.14 %   7.94 %
                   
Book value per share $ 8.78     $ 8.57     $ 8.51     $ 8.57     $ 8.39  
                   
Asset Quality Data:                  
Nonaccrual loans $ 1,283     $ 1,136     $ 1,194     $ 806     $ 826  
Loans past due 90 days or more and                  
accruing                 320  
Total nonperforming loans 1,283     1,136     1,194     806     1,146  
Other real estate owned                  
Total nonperforming assets $ 1,283     $ 1,136     $ 1,194     $ 806     $ 1,146  
                   
Nonperforming loans to total loans 0.18 %   0.16 %   0.17 %   0.12 %   0.17 %
Nonperforming assets to total assets 0.14 %   0.12 %   0.13 %   0.09 %   0.13 %
Allowance for loan losses to total gross                  
loans 1.16 %   1.19 %   1.23 %   1.24 %   1.24 %
                             


 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
               
  For the three months ended   For the six months ended
  June 30,
  June 30,
  2018
  2017
  2018
  2017
Selected Operating Data:                              
Interest income $ 8,868     $ 7,943     $ 17,407     $ 15,367  
Interest expense 1,860     1,409     3,576     2,653  
Net interest income 7,008     6,534     13,831     12,714  
Provision for loan losses (780 )   260     (1,115 )   560  
Net interest income after provision for loan losses 7,788     6,274     14,946     12,154  
Noninterest income:              
Fees and service charges 551     519     1,058     1,054  
Bank owned life insurance 138     129     276     244  
Gain on calls and sales of securities         6      
Gain on sales of mortgage loans 9     38     31     55  
Gain on sales of SBA loans 59         59      
Gain on sale of other real estate owned     13         13  
Miscellaneous 102     114     154     246  
Total noninterest income 859     813     1,584     1,612  
Noninterest expenses:              
Salaries and employee benefits 3,129     2,880     6,238     5,724  
Occupancy, net 403     393     845     802  
Equipment 188     162     369     324  
Data processing 478     456     962     925  
Advertising 207     211     364     347  
FDIC insurance premium 70     109     134     186  
Charitable contributions 195     120     375     245  
Bank-card related services 131     142     258     284  
Other real estate owned, net     9         24  
Miscellaneous 703     601     1,387     1,336  
Total noninterest expenses 5,504     5,083     10,932     10,197  
Income before income tax expense 3,143     2,004     5,598     3,569  
Income tax expense 842     736     1,489     1,310  
Net income $ 2,301     $ 1,268     $ 4,109     $ 2,259  
               
Weighted avg. no. of diluted common shares 8,675,868     8,174,484     8,667,235     7,155,367  
Diluted earnings per common share $ 0.27     $ 0.16     $ 0.47     $ 0.32  
               
Return on average common equity 12.32 %   7.37 %   11.13 %   7.52 %
               
Return on average assets 0.99 %   0.58 %   0.90 %   0.54 %
               
Yield on average interest-earning assets 3.99 %   3.81 %   3.97 %   3.84 %
Cost of average interest-bearing liabilities 1.12 %   0.90 %   1.08 %   0.87 %
Net interest rate spread 2.87 %   2.91 %   2.89 %   2.97 %
               
Net interest margin 3.16 %   3.14 %   3.15 %   3.18 %
                       


 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                                       
  For the three months ended
  June 30,
  March 31,
  December 31,
  September 30,
  June 30,
  2018
  2018
  2017
  2017
  2017
Selected Operating Data:                                      
Interest income $ 8,868     $ 8,539     $ 8,463     $ 8,400     $ 7,943  
Interest expense 1,860     1,716     1,628     1,577     1,409  
Net interest income 7,008     6,823     6,835     6,823     6,534  
Provision for loan losses (780 )   (335 )   75     20     260  
Net interest and dividend income after provision for loan losses 7,788     7,158     6,760     6,803     6,274  
Noninterest income:                  
Fees and service charges 551     507     533     524     519  
Bank owned life insurance 138     138     141     141     129  
Gain on calls and sales of securities     6         1      
Gain on sales of mortgage loans 9     22     55     68     38  
Gain on sales of SBA loans 59                  
Gain on sales of other real estate owned                 13  
Miscellaneous 102     52     121     111     114  
Total noninterest income 859     725     850     845     813  
Noninterest expenses:                  
Salaries and employee benefits 3,129     3,109     2,888     2,843     2,880  
Occupancy, net 403     442     414     414     393  
Equipment 188     181     176     173     162  
Data processing 478     484     442     444     456  
Advertising 207     157     171     182     211  
FDIC insurance premium 70     64     86     50     109  
Charitable contributions 195     180     240     130     120  
Bank-card related services 131     127     130     137     142  
Other real estate owned, net                 9  
Miscellaneous 703     684     521     663     601  
Total noninterest expenses 5,504     5,428     5,068     5,036     5,083  
Income before income tax expense 3,143     2,455     2,542     2,612     2,004  
Income tax expense 842     647     2,494     972     736  
Net income $ 2,301     $ 1,808     $ 48     $ 1,640     $ 1,268  
                   
                   
Weighted avg. no. of diluted common shares 8,675,868     8,658,506     8,648,191     8,643,737     8,174,484  
Diluted earnings per common share $ 0.27     $ 0.21     $ 0.01     $ 0.19     $ 0.16  
                   
Return on average common equity 12.32 %   9.92 %   0.26 %   8.83 %   7.37 %
                   
Return on average assets 0.99 %   0.80 %   0.02 %   0.71 %   0.58 %
                   
Yield on average interest-earning assets 3.99 %   3.94 %   3.82 %   3.80 %   3.81 %
Cost of average interest-bearing  liabilities 1.12 %   1.04 %   0.97 %   0.94 %   0.90 %
Net interest rate spread 2.87 %   2.90 %   2.85 %   2.86 %   2.91 %
                   
Net interest margin 3.16 %   3.15 %   3.09 %   3.09 %   3.14 %
                             


 
Stewardship Financial Corporation
Non-GAAP Reconciliation
(dollars in thousands, except per share amounts)
(unaudited)
   
  For the three
months ended,
  December 31,
 2017
   
Net income $ 48  
Impact of Tax Act 1,420  
Adjusted net income $ 1,468  
   
Weighted avg. no. of diluted common shares 8,648,191  
Adjusted diluted earnings per common share $ 0.17  
   
Adjusted return on average common equity 7.82 %
   
Adjusted return on average assets 0.63 %
   

Contact:
Claire M. Chadwick
Executive Vice President and
Chief Financial Officer
630 Godwin Avenue
Midland Park, NJ 07432
P: 201.444.7100

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