Stewardship Financial Corporation Reports Fourth Quarter and Year End 2017 Earnings

MIDLAND PARK, N.J., Feb. 22, 2018 (GLOBE NEWSWIRE) — Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, reported results for fourth quarter and full year ended December 31, 2017.  Net income for the three months and year ended December 31, 2017 was reported at $48,000 and $3.9 million, respectively.  Both the three months and the year ended December 31, 2017 were impacted by a charge of $1.4 million as a result of the enactment of the Tax Cuts and Jobs Act (“Tax Act”) in December 2017.  For the three months and year ended December 31, 2016 net income was $1.3 million and $4.7 million, respectively.

On December 22, 2017, the Tax Act was enacted which reduced the Federal statutory tax rate for corporations from 35% to 21% effective in 2018.  While the Tax Act will lower the Corporation’s future tax rate, it also required the Corporation to revalue its net deferred tax assets to account for the future impact of the lower corporate tax rates.  As a result, the Corporation recognized a charge of $1.4 million for the quarter and year ended December 31, 2017 related to the revaluation of the net deferred tax assets.  Excluding the impact of the Tax Act, net income for the three months and year ended December 31, 2017 was $1.5 million and $5.4 million, respectively.  (Please refer to the Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of the Tax Act).

In reflecting on the Corporation’s 2017 accomplishments, Paul Van Ostenbridge, President and Chief Executive Officer of Stewardship Financial Corporation, highlighted the following:

  • $133.2 million of growth in assets;
  • Asset growth was driven by 18% of loan growth;
  • 16% of deposit growth provided the funding needs;
  • Net interest income increased 17%;
  • A successful capital raise was completed in April 2017;
  • Our newest location opened in Morristown, NJ in June 2017;
  • The formation of a Small Business Administration (SBA) Department occurred in the fall of 2017 – improving our ability to provide lending solutions for small businesses that do not meet traditional lending requirements;
  • Expenses were maintained, even with the growth in the balance sheet.

“The Corporation remains committed to building on the successes of the year just ended, including prudently growing the loan portfolio to further improve our strong core earnings.”

Operating Results
Net interest income of $6.8 million and $26.4 million was reported for the three months and year ended December 31, 2017, respectively.  Current net interest income levels reflect improvement over the $5.9 million and $22.6 million reported in the comparable prior year periods, with the current year increases primarily driven by growth in the loan portfolio.  Average loan balances increased $133.4 million and $131.4 million for the three months and year ended December 31, 2017, respectively, over the comparable prior year periods.  The net interest margins for the current three month period and the year were 3.09% and 3.13%, respectively, compared to 3.18% for both the three months and year ended December 31, 2016.  The margins continue to reflect an environment with a flattened yield curve.

Due in a large part to growth in the loan portfolio, the Corporation recorded provisions for loan losses for the three months and year ended December 31, 2017 of $75,000 and $655,000, respectively.  For the three months and year ended December 31, 2016 negative provisions for loan losses were $300,000 and $1.35 million, respectively.  With relatively stable credit quality, the allowance for loan losses to total gross loans declined to 1.23% at December 31, 2017 compared to 1.31% at December 31, 2016.

For the three months and year ended December 31, 2017, noninterest income was $850,000 and $3.3 million, respectively, compared to $937,000 and $3.4 million in the equivalent prior year periods.  For the three months and year ended December 31, 2017, noninterest income included $55,000 and $178,000 of gains on sales of mortgage loans, respectively, compared to $94,000 and $164,000 for the comparable prior year periods.  For the year ended December 31, 2017, noninterest income included $1,000 of gains on calls and sales of securities compared to $63,000 for the comparable prior year period.

Noninterest expenses for the three months and year ended December 31, 2017 were $5.1 million and $20.3 million, respectively, compared to $5.0 million and $19.9 million in the comparable prior year periods.  Van Ostenbridge stated, “We have been committed to managing our infrastructure and containing costs while growing the balance sheet and are encouraged by the efficiencies realized.”

Balance Sheet / Financial Condition
Total assets of $928.8 million at December 31, 2017 reflected a $133.2 million increase, or 17%, since December 31, 2016.  The asset growth continues to be driven by organic loan originations which resulted in a $107.6 million year-over-year increase in the gross loan portfolio.

Deposit balances totaled $764.1 million at December 31, 2017, reflecting $105.2 million of net growth when compared to $658.9 million a year earlier.  A mix of organic growth and the retention / expansion of existing relationships has resulted in solid increases in deposits.  Van Ostenbridge noted, “Essentially, we have demonstrated our ability to fund the increase in loans with deposit growth.”  Other borrowings were $63.8 million at December 31, 2017 compared to $59.2 million at December 31, 2016.   Approximately $20 million of the growth in other borrowings can be attributed to a leverage strategy undertaken in conjunction with the capital raise in April 2017.

All regulatory capital levels at December 31, 2017 continue to reflect a strong capital position with ratios in excess of the levels to be considered “well capitalized” under the applicable regulations.  The Tier 1 leverage ratio was 8.88% and 7.65% at December 31, 2017 and 2016, respectively.  Total risk based capital ratio was 14.29% at December 31, 2017 compared to 13.10% at December 31, 2016.

About Stewardship Financial Corporation
Stewardship Financial Corporation’s subsidiary, the Atlantic Stewardship Bank, is a full-service community bank serving both individuals and businesses. ASB is known for tithing, or sharing, 10% of its taxable income with nonprofit, educational, charitable and/or evangelical religious organizations.  To date, ASB’s total tithing donations total over $ 9.3 million.  ASB maintains 12 banking locations in NJ including; Hawthorne, Midland Park, Montville, Morristown, North Haledon, Pequannock, Ridgewood, Waldwick, Westwood, Wyckoff and two offices in Wayne.  ASB invites you to visit their website at www.asbnow.com for additional information and to learn more.

Forward Looking Statements
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.

Explanation of Non-GAAP Financial Measures
Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  This press release also contains certain supplemental non-GAAP information that the Corporation’s management uses in its analysis of the Corporation’s financial results.  Specifically, the Corporation provides measures based on what it believes are its operating earnings on a consistent basis, and excludes material non-routine operating items which affect the GAAP reporting of results of operations.  The Corporation’s management believes that providing this information to analysts and investors allows them to better understand and evaluate the Corporation’s core financial results for the periods in question.  These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.  See accompanying non-GAAP tables.

 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                   
  December 31,   September 30,   June 30,   March 31,   December 31,
  2017   2017   2017   2017   2016
                   
Selected Financial Condition Data:                  
Cash and cash equivalents $ 21,270     $ 17,213     $ 19,459     $ 12,793     $ 11,680  
Securities available for sale 113,015     115,733     116,244     95,632     98,583  
Securities held to maturity 52,442     53,323     52,091     52,805     52,330  
FHLB stock 3,715     3,919     5,169     3,784     3,515  
Loans held for sale 370     688     446     188     773  
Loans receivable:                  
Loans receivable, gross 711,720     691,953     692,056     654,769     604,083  
Allowance for loan losses (8,762 )   (8,614 )   (8,550 )   (8,246 )   (7,905 )
Other, net (397 )   (422 )   (344 )   (327 )   (226 )
Loans receivable, net 702,561     682,917     683,162     646,196     595,952  
Other real estate owned, net             401     401  
Bank owned life insurance 21,084     20,943     20,802     16,673     16,558  
Other assets 14,309     15,958     15,934     15,927     15,743  
Total assets $ 928,766     $ 910,694     $ 913,307     $ 844,399     $ 795,535  
                   
                   
Noninterest-bearing deposits $ 172,861     $ 171,609     $ 177,678     $ 170,566     $ 169,306  
Interest-bearing deposits 591,238     569,352     543,215     530,138     489,624  
Total deposits 764,099     740,961     720,893     700,704     658,930  
Other borrowings 63,760     68,760     93,760     65,200     59,200  
Subordinated debentures and                  
subordinated notes 23,317     23,301     23,284     23,268     23,252  
Other liabilities 3,925     3,564     2,859     2,810     2,766  
Total liabilities 855,101     836,586     840,796     791,982     744,148  
Shareholders’ equity 73,665     74,108     72,511     52,417     51,387  
Total liabilities and shareholders’ equity $ 928,766     $ 910,694     $ 913,307     $ 844,399     $ 795,535  
                   
Gross loans to deposits 93.14 %   93.39 %   96.00 %   93.44 %   91.68 %
                                       
Equity to assets 7.93 %   8.14 %   7.94 %   6.21 %   6.46 %
                                       
Book value per share $ 8.51     $ 8.57     $ 8.39     $ 8.55     $ 8.39  
                                       
Asset Quality Data:                                      
Nonaccrual loans $ 1,194     $ 806     $ 826     $ 592     $ 606  
Loans past due 90 days or more and                                      
accruing         320          
Total nonperforming loans 1,194     806     1,146     592     606  
Other real estate owned             401     401  
Total nonperforming assets $ 1,194     $ 806     $ 1,146     $ 993     $ 1,007  
                                       
Nonperforming loans to total loans 0.17 %   0.12 %   0.17 %   0.09 %   0.10 %
Nonperforming assets to total assets 0.13 %   0.09 %   0.13 %   0.12 %   0.13 %
Allowance for loan losses to total gross                                      
loans 1.23 %   1.24 %   1.24 %   1.26 %   1.31 %

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                   
      For the three months ended   For the year ended
      December 31,   December 31,
      2017   2016   2017   2016
Selected Operating Data:              
  Interest income $ 8,463     $ 7,000     $ 32,230     $ 27,085  
  Interest expense 1,628     1,103     5,858     4,513  
    Net interest income 6,835     5,897     26,372     22,572  
  Provision for loan losses 75     (300 )   655     (1,350 )
  Net interest income              
    after provision for loan losses 6,760     6,197     25,717     23,922  
  Noninterest income:              
    Fees and service charges 533     564     2,111     2,159  
    Bank owned life insurance 141     119     526     447  
    Gain on calls and sales of securities     1     1     63  
    Gain on sales of mortgage loans 55     94     178     164  
    Gain on sales of other real estate owned     30     13     36  
    Miscellaneous 121     129     478     542  
    Total noninterest income 850     937     3,307     3,411  
  Noninterest expenses:              
    Salaries and employee benefits 2,888     2,735     11,455     10,980  
    Occupancy, net 414     396     1,630     1,598  
    Equipment 176     156     673     609  
    Data processing 442     481     1,811     1,915  
    Advertising 171     196     700     669  
    FDIC insurance premium 86     21     322     317  
    Charitable contributions 240     135     615     375  
    Bank-card related services 130     148     551     579  
    Other real estate owned, net     14     24     143  
    Miscellaneous 521     720     2,520     2,717  
    Total noninterest expenses 5,068     5,002     20,301     19,902  
Income before income tax expense 2,542     2,132     8,723     7,431  
Income tax expense 2,494     784     4,776     2,695  
Net income $ 48     $ 1,348     $ 3,947     $ 4,736  
                   
Weighted avg. no. of diluted common shares 8,648,191     6,119,693     7,906,791     6,109,983  
Diluted earnings per common share $ 0.01     $ 0.22     $ 0.50     $ 0.78  
                   
Return on average common equity 0.26 %   10.40 %   5.86 %   9.43 %
                                   
Return on average assets 0.02 %   0.69 %   0.45 %   0.63 %
                                   
Yield on average interest-earning assets 3.82 %   3.77 %   3.83 %   3.81 %
Cost of average interest-bearing liabilities 0.97 %   0.80 %   0.91 %   0.85 %
Net interest rate spread 2.85 %   2.97 %   2.92 %   2.96 %
                                   
Net interest margin 3.09 %   3.18 %   3.13 %   3.18 %

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                         
        For the three months ended
        December 31,   September 30,   June 30,   March 31,   December 31,
        2017   2017   2017   2017   2016
Selected Operating Data:                    
  Interest income   $ 8,463     $ 8,400     $ 7,943     $ 7,424     $ 7,000  
  Interest expense   1,628     1,577     1,409     1,244     1,103  
    Net interest income   6,835     6,823     6,534     6,180     5,897  
  Provision for loan losses   75     20     260     300     (300 )
  Net interest and dividend income                    
    after provision for loan losses   6,760     6,803     6,274     5,880     6,197  
  Noninterest income:                    
    Fees and service charges   533     524     519     535     564  
    Bank owned life insurance   141     141     129     115     119  
    Gain on calls and sales of                    
      securities       1             1  
    Gain on sales of mortgage loans   55     68     38     17     94  
    Gain on sales of other real estate                    
      owned           13         30  
    Miscellaneous   121     111     114     132     129  
    Total noninterest income   850     845     813     799     937  
  Noninterest expenses:                    
    Salaries and employee benefits   2,888     2,843     2,880     2,844     2,735  
    Occupancy, net   414     414     393     409     396  
    Equipment   176     173     162     162     156  
    Data processing   442     444     456     469     481  
    Advertising   171     182     211     136     196  
    FDIC insurance premium   86     50     109     77     21  
    Charitable contributions   240     130     120     125     135  
    Bank-card related services   130     137     142     142     148  
    Other real estate owned, net           9     15     14  
    Miscellaneous   521     663     601     735     720  
    Total noninterest expenses   5,068     5,036     5,083     5,114     5,002  
Income before income tax expense   2,542     2,612     2,004     1,565     2,132  
Income tax expense   2,494     972     736     574     784  
Net income   $ 48     $ 1,640     $ 1,268     $ 991     $ 1,348  
                         
Weighted avg. no. of diluted common                    
shares   8,648,191     8,643,737     8,174,484     6,124,926     6,119,693  
Diluted earnings per common share   $ 0.01     $ 0.19     $ 0.16     $ 0.16     $ 0.22  
                         
Return on average common equity   0.26 %   8.83 %   7.37 %   7.71 %   10.40 %
                                             
Return on average assets   0.02 %   0.71 %   0.58 %   0.49 %   0.69 %
                                             
Yield on average interest-earning assets   3.82 %   3.80 %   3.81 %   3.88 %   3.77 %
Cost of average interest-bearing                                        
liabilities   0.97 %   0.94 %   0.90 %   0.84 %   0.80 %
Net interest rate spread   2.85 %   2.86 %   2.91 %   3.04 %   2.97 %
                                             
Net interest margin   3.09 %   3.09 %   3.14 %   3.23 %   3.18 %

Stewardship Financial Corporation
Non-GAAP Reconciliation
(dollars in thousands, except per share amounts)
(unaudited)
                   
      For the three months ended   For the year ended
      December 31,   December 31,
      2017   2016   2017   2016
               
Net income $ 48     $ 1,348     $ 3,947     $ 4,736  
  Impact of Tax Act 1,420         1,420      
Adjusted net income $ 1,468     $ 1,348     $ 5,367     $ 4,736  
                   
Weighted avg. no. of diluted common shares 8,648,191     6,119,693     7,906,791     6,109,983  
Adjusted diluted earnings per common share $ 0.17     $ 0.22     $ 0.68     $ 0.78  
                   
Adjusted return on average common equity 7.82 %   10.40 %   7.96 %   9.43 %
                                   
Adjusted return on average assets 0.63 %   0.69 %   0.61 %   0.63 %
                   

 

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