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Stewardship Financial Corporation Announces Earnings For The Third Quarter of 2018

Company Release - 11/8/2018 4:05 PM ET

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 sale109,764  112,594  106,467  109,259  111,973 
Securities held to maturity62,227  58,471  51,894  52,442  53,323 
Other equity investments3,661  3,694  3,706  3,756  3,760 
FHLB stock3,552  3,087  3,039  3,715  3,919 
Loans held for sale  607    370  688 
Loans receivable:         
Loans receivable, gross729,475  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, net721,088  713,311  699,276  702,561  682,917 
Bank owned life insurance21,498  21,360  21,222  21,084  20,943 
Other assets15,484  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 deposits596,263  603,718  593,644  591,238  569,352 
Total deposits786,566  792,061  772,216  764,099  740,961 
Other borrowings56,800  46,700  48,760  63,760  68,760 
Subordinated debentures and subordinated notes23,366  23,350  23,333  23,317  23,301 
Other liabilities3,462  3,388  3,760  3,925  3,564 
Total liabilities870,194  865,499  848,069  855,101  836,586 
Shareholders' equity77,919  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 deposits92.74% 91.17% 91.71% 93.14% 93.39%
          
Equity to assets8.22% 8.09% 8.06% 7.93% 8.14%
          
Shares outstanding8,678,454  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 loans1,271  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 loans0.17% 0.18% 0.16% 0.17% 0.12%
Nonperforming assets to total assets0.13% 0.14% 0.12% 0.13% 0.09%
Allowance for loan losses to total gross loans1.08% 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 expense2,013  1,577  5,589  4,230 
Net interest income7,202  6,823  21,033  19,537 
Provision for loan losses(490) 20  (1,605) 580 
Net interest income after provision for loan losses7,692  6,803  22,638  18,957 
Noninterest income:       
Fees and service charges542  524  1,600  1,578 
Bank owned life insurance138  141  414  385 
Gain on calls and sales of securities  1  6  1 
Gain on sales of mortgage loans12  68  43  123 
Gain on sales of SBA loans70    129   
Gain on sale of other real estate owned      13 
Miscellaneous75  111  229  357 
Total noninterest income837  845  2,421  2,457 
Noninterest expenses:       
Salaries and employee benefits3,198  2,843  9,436  8,567 
Occupancy, net426  414  1,271  1,216 
Equipment186  173  555  497 
Data processing489  444  1,451  1,369 
Advertising192  182  556  529 
FDIC insurance premium66  50  200  236 
Charitable contributions180  130  555  375 
Bank-card related services133  137  391  421 
Other real estate owned, net      24 
Miscellaneous684  663  2,071  1,999 
Total noninterest expenses5,554  5,036  16,486  15,233 
Income before income tax expense2,975  2,612  8,573  6,181 
Income tax expense813  972  2,302  2,282 
Net income$2,162  $1,640  $6,271  $3,899 
        
Weighted avg. no. of diluted common shares8,677,445  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 equity11.14% 8.83% 11.13% 8.02%
        
Return on average assets0.90% 0.71% 0.90% 0.60%
        
Yield on average interest-earning assets4.04% 3.80% 3.99% 3.83%
Cost of average interest-bearing liabilities1.18% 0.94% 1.12% 0.89%
Net interest rate spread2.86% 2.86% 2.87% 2.94%
        
Net interest margin3.16% 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 expense2,013  1,860  1,716  1,628  1,577 
Net interest income7,202  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 charges542  551  507  533  524 
Bank owned life insurance138  138  138  141  141 
Gain on calls and sales of securities    6    1 
Gain on sales of mortgage loans12  9  22  55  68 
Gain on sales of SBA loans70  59       
Miscellaneous75  102  52  121  111 
Total noninterest income837  859  725  850  845 
Noninterest expenses:         
Salaries and employee benefits3,198  3,129  3,109  2,888  2,843 
Occupancy, net426  403  442  414  414 
Equipment186  188  181  176  173 
Data processing489  478  484  442  444 
Advertising192  207  157  171  182 
FDIC insurance premium66  70  64  86  50 
Charitable contributions180  195  180  240  130 
Bank-card related services133  131  127  130  137 
Miscellaneous684  703  684  521  663 
Total noninterest expenses5,554  5,504  5,428  5,068  5,036 
Income before income tax expense2,975  3,143  2,455  2,542  2,612 
Income tax expense813  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 equity11.14% 12.32% 9.92% 0.26% 8.83%
          
Return on average assets0.90% 0.99% 0.80% 0.02% 0.71%
          
Yield on average interest-earning assets4.04% 3.99% 3.94% 3.82% 3.80%
Cost of average interest-bearing  liabilities1.18% 1.12% 1.04% 0.97% 0.94%
Net interest rate spread2.86% 2.87% 2.90% 2.85% 2.86%
          
Net interest margin3.16% 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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Source: Stewardship Financial Corp