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Stewardship Financial Corporation Announces Earnings For The Second Quarter of 2018

Company Release - 8/9/2018 4:05 PM ET

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 sale112,594  106,467  109,259  111,973  112,511 
Securities held to maturity58,471  51,894  52,442  53,323  52,091 
Other equity investments3,694  3,706  3,756  3,760  3,733 
FHLB stock3,087  3,039  3,715  3,919  5,169 
Loans held for sale607    370  688  446 
Loans receivable:         
Loans receivable, gross722,148  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, net713,311  699,276  702,561  682,917  683,162 
Bank owned life insurance21,360  21,222  21,084  20,943  20,802 
Other assets15,034  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 deposits603,718  593,644  591,238  569,352  543,215 
Total deposits792,061  772,216  764,099  740,961  720,893 
Other borrowings46,700  48,760  63,760  68,760  93,760 
Subordinated debentures and         
subordinated notes23,350  23,333  23,317  23,301  23,284 
Other liabilities3,388  3,760  3,925  3,564  2,859 
Total liabilities865,499  848,069  855,101  836,586  840,796 
Shareholders' equity76,188  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 deposits91.17% 91.71% 93.14% 93.39% 96.00%
          
Equity to assets8.09% 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 loans1,283  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 loans0.18% 0.16% 0.17% 0.12% 0.17%
Nonperforming assets to total assets0.14% 0.12% 0.13% 0.09% 0.13%
Allowance for loan losses to total gross         
loans1.16% 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 expense1,860  1,409  3,576  2,653 
Net interest income7,008  6,534  13,831  12,714 
Provision for loan losses(780) 260  (1,115) 560 
Net interest income after provision for loan losses7,788  6,274  14,946  12,154 
Noninterest income:       
Fees and service charges551  519  1,058  1,054 
Bank owned life insurance138  129  276  244 
Gain on calls and sales of securities    6   
Gain on sales of mortgage loans9  38  31  55 
Gain on sales of SBA loans59    59   
Gain on sale of other real estate owned  13    13 
Miscellaneous102  114  154  246 
Total noninterest income859  813  1,584  1,612 
Noninterest expenses:       
Salaries and employee benefits3,129  2,880  6,238  5,724 
Occupancy, net403  393  845  802 
Equipment188  162  369  324 
Data processing478  456  962  925 
Advertising207  211  364  347 
FDIC insurance premium70  109  134  186 
Charitable contributions195  120  375  245 
Bank-card related services131  142  258  284 
Other real estate owned, net  9    24 
Miscellaneous703  601  1,387  1,336 
Total noninterest expenses5,504  5,083  10,932  10,197 
Income before income tax expense3,143  2,004  5,598  3,569 
Income tax expense842  736  1,489  1,310 
Net income$2,301  $1,268  $4,109  $2,259 
        
Weighted avg. no. of diluted common shares8,675,868  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 equity12.32% 7.37% 11.13% 7.52%
        
Return on average assets0.99% 0.58% 0.90% 0.54%
        
Yield on average interest-earning assets3.99% 3.81% 3.97% 3.84%
Cost of average interest-bearing liabilities1.12% 0.90% 1.08% 0.87%
Net interest rate spread2.87% 2.91% 2.89% 2.97%
        
Net interest margin3.16% 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 expense1,860  1,716  1,628  1,577  1,409 
Net interest income7,008  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 losses7,788  7,158  6,760  6,803  6,274 
Noninterest income:         
Fees and service charges551  507  533  524  519 
Bank owned life insurance138  138  141  141  129 
Gain on calls and sales of securities  6    1   
Gain on sales of mortgage loans9  22  55  68  38 
Gain on sales of SBA loans59         
Gain on sales of other real estate owned        13 
Miscellaneous102  52  121  111  114 
Total noninterest income859  725  850  845  813 
Noninterest expenses:         
Salaries and employee benefits3,129  3,109  2,888  2,843  2,880 
Occupancy, net403  442  414  414  393 
Equipment188  181  176  173  162 
Data processing478  484  442  444  456 
Advertising207  157  171  182  211 
FDIC insurance premium70  64  86  50  109 
Charitable contributions195  180  240  130  120 
Bank-card related services131  127  130  137  142 
Other real estate owned, net        9 
Miscellaneous703  684  521  663  601 
Total noninterest expenses5,504  5,428  5,068  5,036  5,083 
Income before income tax expense3,143  2,455  2,542  2,612  2,004 
Income tax expense842  647  2,494  972  736 
Net income$2,301  $1,808  $48  $1,640  $1,268 
          
          
Weighted avg. no. of diluted common shares8,675,868  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 equity12.32% 9.92% 0.26% 8.83% 7.37%
          
Return on average assets0.99% 0.80% 0.02% 0.71% 0.58%
          
Yield on average interest-earning assets3.99% 3.94% 3.82% 3.80% 3.81%
Cost of average interest-bearing  liabilities1.12% 1.04% 0.97% 0.94% 0.90%
Net interest rate spread2.87% 2.90% 2.85% 2.86% 2.91%
          
Net interest margin3.16% 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 Act1,420 
Adjusted net income$1,468 
  
Weighted avg. no. of diluted common shares8,648,191 
Adjusted diluted earnings per common share$0.17 
  
Adjusted return on average common equity7.82%
  
Adjusted return on average assets0.63%
  

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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Source: Stewardship Financial Corp