Stewardship Financial Corporation Announces Earnings For The Third Quarter of 2018

Globe Newswire 8-Nov-2018 4:05 PM

MIDLAND PARK, N.J., Nov. 08, 2018 (GLOBE NEWSWIRE) -- Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, today announced results for the three and nine months ended September 30, 2018.  The Corporation reported net income of $2.2 million, or $0.25 per share, and $6.3 million, or $0.72 per share, for the three and nine months ended September 30, 2018, respectively, compared to $1.6 million, or $0.19 per share, and $3.9 million, or $0.51 per share, for the corresponding prior year periods.

Stewardship Financial Corporation's President and Chief Executive Officer Paul Van Ostenbridge, stated, "We are pleased to report another profitable quarter for the Corporation.  Results reflected a continued positive trend in the organic growth of both loans and deposits."

Operating Results
For the three and nine months ended September 30, 2018, the Corporation reported net interest income of $7.2 million and $21.0 million, respectively, demonstrating continued improvement over the $6.8 million and $19.5 million realized in the equivalent prior year periods.  Net interest income continues to benefit from a steady growth in assets that is being primarily driven by loan growth.  Reflective of the current interest rate environment for the last several quarters, net interest margin continues to be relatively stable.  "The Corporation has not participated in some of the unsustainable local competitive pricing pressures," noted Van Ostenbridge.

For both the three and nine months ended September 30, 2018, the Corporation recorded reversals of the allowance for loan losses resulting in negative provisions for loan losses of $490,000 and $1.6 million, respectively.  This compares to positive provisions for loan losses of $20,000 and $580,000 for the three and nine months ended September 30, 2017, respectively.  Notwithstanding the growth in the loan portfolio, the negative loan loss provisions reflect, in part, net recoveries of previously charged off loan balances of $41,000 and $747,000 for the three and nine months ended September 30, 2018, respectively.  In addition, the negative provisions for loan losses reflect the continued improvement in the economic conditions and overall real estate climate in the primary business markets in which the Corporation operates.  Van Ostenbridge commented, "Our allowance for loan losses to gross loans of 1.08% at September 30, 2018 is in line with peers."

Noninterest income for the three and nine months ended September 30, 2018 was $837,000 and $2.4 million, respectively, compared to $845,000 and $2.5 million in the same prior year periods.  In connection with the establishment of a Small Business Administration ("SBA") department in late 2017, noninterest income for the three and nine months ended September 30, 2018 included $70,000 and $129,000, respectively, of gains from the sale of the guaranteed portion of newly originated SBA loans.  Offsetting these gains, the three and nine months ended September 30, 2018 reflected $34,000 and $137,000, 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 accounting rules enacted earlier in 2018, equity securities now require a quarterly mark to market through the income statement.

For the three and nine months ended September 30, 2018, noninterest expenses were $5.6 million and $16.5 million, respectively, compared to $5.0 million and $15.2 million in the comparable prior year periods.  An increase in salaries and employee benefits is partially attributable to the costs associated with the establishment of the previously mentioned SBA Lending Department - fully staffed with experienced employees.  Certain costs associated with the recent launch of a new and improved website (ASBnow.bank) are also included in noninterest expenses for the three and nine months ended September 30, 2018.  Van Ostenbridge noted, "Additional expense is incurred to support continued growth in the balance sheet, but management remains committed to appropriately controlling our expenses."

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").  Partially offsetting the lower Federal corporate income tax rate was the enactment of legislation by the State of New Jersey in July of 2018, which increased the corporate income tax rate to 11.5% from 9% for taxable income of $1.0 million or more retroactively to January 1, 2018.  For the current three and nine month periods the effective tax rate was 27.3% and 26.9%, respectively, compared to an effective tax rate of 37.2% and 36.9% for the three and nine months ended September 30, 2017, respectively.

Balance Sheet / Financial Condition
At September 30, 2018, total assets of $948.1 million reflected a $19.3 million increase from assets of  $928.8 million at December 31, 2017.  The growth in assets was primarily driven by organic loan originations which contributed to an $18.5 million increase in net loans.   During the first nine months of 2018, the loan portfolio reflected unusually high prepayment activity.

At September 30, 2018, total deposits were $786.6 million, showing net growth of $22.5 million since December 31, 2017.  The Corporation reported net growth of $17.4 million in noninterest-bearing accounts and $5.0 million in interest-bearing accounts.

The Corporation's regulatory capital levels all remain above the levels considered to be "well capitalized" under the applicable regulations.  The Tier 1 leverage ratio was 9.21% at September 30, 2018 compared to 8.88% at December 31, 2017.  The total risk based capital ratio at September 30, 2018 and December 31, 2017 were 14.34% and 14.29%, 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.bank 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)
                                       
  September 30,   June 30,   March 31,   December 31,   September 30,
  2018   2018   2018   2017   2017
                                       
Selected Financial Condition Data:                                      
Cash and cash equivalents $ 10,839     $ 13,529     $ 22,178     $ 21,270     $ 17,213  
Securities available for sale 109,764     112,594     106,467     109,259     111,973  
Securities held to maturity 62,227     58,471     51,894     52,442     53,323  
Other equity investments 3,661     3,694     3,706     3,756     3,760  
FHLB stock 3,552     3,087     3,039     3,715     3,919  
Loans held for sale     607         370     688  
Loans receivable:                  
Loans receivable, gross 729,475     722,148     708,169     711,720     691,953  
Allowance for loan losses (7,904 )   (8,353 )   (8,445 )   (8,762 )   (8,614 )
Other, net (483 )   (484 )   (448 )   (397 )   (422 )
Loans receivable, net 721,088     713,311     699,276     702,561     682,917  
Bank owned life insurance 21,498     21,360     21,222     21,084     20,943  
Other assets 15,484     15,034     14,659     14,309     15,958  
Total assets $ 948,113     $ 941,687     $ 922,441     $ 928,766     $ 910,694  
                   
                   
Noninterest-bearing deposits $ 190,303     $ 188,343     $ 178,572     $ 172,861     $ 171,609  
Interest-bearing deposits 596,263     603,718     593,644     591,238     569,352  
Total deposits 786,566     792,061     772,216     764,099     740,961  
Other borrowings 56,800     46,700     48,760     63,760     68,760  
Subordinated debentures and subordinated notes 23,366     23,350     23,333     23,317     23,301  
Other liabilities 3,462     3,388     3,760     3,925     3,564  
Total liabilities 870,194     865,499     848,069     855,101     836,586  
Shareholders' equity 77,919     76,188     74,372     73,665     74,108  
Total liabilities and shareholders' equity $ 948,113     $ 941,687     $ 922,441     $ 928,766     $ 910,694  
                   
Gross loans to deposits 92.74 %   91.17 %   91.71 %   93.14 %   93.39 %
                   
Equity to assets 8.22 %   8.09 %   8.06 %   7.93 %   8.14 %
                   
Shares outstanding 8,678,454     8,676,843     8,674,890     8,652,804     8,645,316  
Book value per share $ 8.98     $ 8.78     $ 8.57     $ 8.51     $ 8.57  
                   
Asset Quality Data:                  
Nonaccrual loans $ 1,271     $ 1,283     $ 1,136     $ 1,194     $ 806  
Loans past due 90 days or more and accruing                  
Total nonperforming loans 1,271     1,283     1,136     1,194     806  
Other real estate owned                  
Total nonperforming assets $ 1,271     $ 1,283     $ 1,136     $ 1,194     $ 806  
                   
Nonperforming loans to total loans 0.17 %   0.18 %   0.16 %   0.17 %   0.12 %
Nonperforming assets to total assets 0.13 %   0.14 %   0.12 %   0.13 %   0.09 %
Allowance for loan losses to total gross loans 1.08 %   1.16 %   1.19 %   1.23 %   1.24 %
                             


Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                               
  For the three months ended   For the nine months ended
  September 30,   September 30,
  2018   2017   2018   2017
Selected Operating Data:                              
Interest income $ 9,215     $ 8,400     $ 26,622     $ 23,767  
Interest expense 2,013     1,577     5,589     4,230  
Net interest income 7,202     6,823     21,033     19,537  
Provision for loan losses (490 )   20     (1,605 )   580  
Net interest income after provision for loan losses 7,692     6,803     22,638     18,957  
Noninterest income:              
Fees and service charges 542     524     1,600     1,578  
Bank owned life insurance 138     141     414     385  
Gain on calls and sales of securities     1     6     1  
Gain on sales of mortgage loans 12     68     43     123  
Gain on sales of SBA loans 70         129      
Gain on sale of other real estate owned             13  
Miscellaneous 75     111     229     357  
Total noninterest income 837     845     2,421     2,457  
Noninterest expenses:              
Salaries and employee benefits 3,198     2,843     9,436     8,567  
Occupancy, net 426     414     1,271     1,216  
Equipment 186     173     555     497  
Data processing 489     444     1,451     1,369  
Advertising 192     182     556     529  
FDIC insurance premium 66     50     200     236  
Charitable contributions 180     130     555     375  
Bank-card related services 133     137     391     421  
Other real estate owned, net             24  
Miscellaneous 684     663     2,071     1,999  
Total noninterest expenses 5,554     5,036     16,486     15,233  
Income before income tax expense 2,975     2,612     8,573     6,181  
Income tax expense 813     972     2,302     2,282  
Net income $ 2,162     $ 1,640     $ 6,271     $ 3,899  
               
Weighted avg. no. of diluted common shares 8,677,445     8,643,737     8,670,662     7,656,942  
Diluted earnings per common share $ 0.25     $ 0.19     $ 0.72     $ 0.51  
               
Return on average common equity 11.14 %   8.83 %   11.13 %   8.02 %
               
Return on average assets 0.90 %   0.71 %   0.90 %   0.60 %
               
Yield on average interest-earning assets 4.04 %   3.80 %   3.99 %   3.83 %
Cost of average interest-bearing liabilities 1.18 %   0.94 %   1.12 %   0.89 %
Net interest rate spread 2.86 %   2.86 %   2.87 %   2.94 %
               
Net interest margin 3.16 %   3.09 %   3.15 %   3.15 %
                       


Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                                       
  For the three months ended
  September 30,   June 30,   March 31,   December 31,   September 30,
  2018   2018   2018   2017   2017
Selected Operating Data:                                      
Interest income $ 9,215     $ 8,868     $ 8,539     $ 8,463     $ 8,400  
Interest expense 2,013     1,860     1,716     1,628     1,577  
Net interest income 7,202     7,008     6,823     6,835     6,823  
Provision for loan losses (490 )   (780 )   (335 )   75     20  
Net interest and dividend income
after provision for loan losses
7,692     7,788     7,158     6,760     6,803  
Noninterest income:                  
Fees and service charges 542     551     507     533     524  
Bank owned life insurance 138     138     138     141     141  
Gain on calls and sales of securities         6         1  
Gain on sales of mortgage loans 12     9     22     55     68  
Gain on sales of SBA loans 70     59              
Miscellaneous 75     102     52     121     111  
Total noninterest income 837     859     725     850     845  
Noninterest expenses:                  
Salaries and employee benefits 3,198     3,129     3,109     2,888     2,843  
Occupancy, net 426     403     442     414     414  
Equipment 186     188     181     176     173  
Data processing 489     478     484     442     444  
Advertising 192     207     157     171     182  
FDIC insurance premium 66     70     64     86     50  
Charitable contributions 180     195     180     240     130  
Bank-card related services 133     131     127     130     137  
Miscellaneous 684     703     684     521     663  
Total noninterest expenses 5,554     5,504     5,428     5,068     5,036  
Income before income tax expense 2,975     3,143     2,455     2,542     2,612  
Income tax expense 813     842     647     2,494     972  
Net income $ 2,162     $ 2,301     $ 1,808     $ 48     $ 1,640  
                   
                   
Weighted avg. no. of diluted common
shares
8,677,445     8,675,868     8,658,506     8,648,191     8,643,737  
Diluted earnings per common share $ 0.25     $ 0.27     $ 0.21     $ 0.01     $ 0.19  
                   
Return on average common equity 11.14 %   12.32 %   9.92 %   0.26 %   8.83 %
                   
Return on average assets 0.90 %   0.99 %   0.80 %   0.02 %   0.71 %
                   
Yield on average interest-earning assets 4.04 %   3.99 %   3.94 %   3.82 %   3.80 %
Cost of average interest-bearing  liabilities 1.18 %   1.12 %   1.04 %   0.97 %   0.94 %
Net interest rate spread 2.86 %   2.87 %   2.90 %   2.85 %   2.86 %
                   
Net interest margin 3.16 %   3.16 %   3.15 %   3.09 %   3.09 %
                             


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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