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Stewardship Financial Corporation Reports Earnings for Fourth Quarter and Year Ended December 31, 2016

MIDLAND PARK, N.J., Feb. 23, 2017 (GLOBE NEWSWIRE) -- Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, today reported results for the fourth quarter and full year ended December 31, 2016. For the three months ended December 31, 2016, the Corporation reported net income available to common shareholders of $1.3 million, or $0.22 per diluted common share, compared with $1.1 million, or $0.17 per diluted common share, for the three months ended December 31, 2015. Net income available to common shareholders for the year ended December 31, 2016, of $4.7 million, or $0.78 per diluted common share, represented a 26% increase over the $3.7 million, or $0.62 per diluted common share, earned for the year ended December 31, 2015.

In commenting on the performance, Paul Van Ostenbridge, Stewardship Financial Corporation’s President and Chief Executive Officer, stated, “We are proud to demonstrate our continuing ability to improve earnings. Specifically, for 2016, we achieved 14.7% of growth in our loan portfolio while keeping expenses relatively flat.”

Balance Sheet / Financial Condition
Total assets of $795.5 million at December 31, 2016 reflected an increase when compared with $717.9 million of assets at December 31, 2015. Since December 31, 2015, a $77.6 million increase in gross loans receivable was the result of new loan originations net of normal principal amortization and payoffs. “We are encouraged by the momentum resulting from robust loan production in 2016 but remain vigilant to ensure that loans meet our prudent underwriting standards,” Van Ostenbridge stated.

Deposit balances totaled $658.9 million at December 31, 2016, compared with $604.8 million a year earlier reflecting $54.2 million, or 9.0%, in growth. In addition, in order to fund loan growth and manage interest rate risk, other borrowings increased $19.2 million to $59.2 million at December 31, 2016. Van Ostenbridge noted, “The combination of the increase in deposits as well as the appropriate use of low-cost borrowings is important to our ability to cost-effectively fund the growth we experienced in our loan portfolio.”

Regulatory capital levels at December 31, 2016, continue to remain strong, with a Tier 1 leverage ratio of 7.65% and total risk based capital ratio of 13.10%, far exceeding the regulatory requirements of 4% and 8%, respectively, to be considered a “well capitalized” institution.

Operating Results
Net interest income of $5.9 million and $22.6 million was reported for the three months and year ended December 31, 2016, respectively, compared with $5.4 million and $21.8 million for the same periods in 2015. The net interest margin was 3.18% for both the current three months and year ended December 31, 2016, compared with 3.18% and 3.30% for the three months and year ended December 31, 2015, respectively. In general, the net interest rate spread and net interest margin for the current year periods reflect an overall decline in loan interest rates - a result of the historically low market rates in the current environment. The current year net interest income and margin includes the impact of the $16.6 million of Subordinated Notes issued in August 2015 and the subsequent redemption of preferred stock. When compared with the year ended December 31, 2015, the cost of the Subordinated Notes added a total of $781,000 of interest expense to the current year. However, such increase, on an after-tax basis, is less than the dividends that would have accrued on the preferred stock. The rate on the preferred stock would have been 4.56% until March 1, 2016, when the dividend rate on the preferred stock would have increased and become fixed at 9%.

For the three months ended December 31, 2016, the Corporation reported noninterest income of $937,000 compared with $855,000 for the equivalent prior year period. Noninterest income for the year ended December 31, 2016, was $3.4 million compared with $3.5 million for 2015. The year ended December 31, 2016, included a $44,000 increase in income due to the purchase of an additional $2.0 million of bank owned life insurance. In addition, gain on sales of mortgage loans were $164,000 for the year ended December 31, 2016, compared with gains of $141,000 realized in the prior year. Offsetting these increases, was a $106,000 decrease for the year ended December 31, 2016, due to the fact that noninterest income included only $63,000 of gains on calls and sales of securities, which is below the $169,000 recognized in the prior year. In addition, the year ended December 31, 2016, included only $36,000 of gains on sales of OREO compared with $83,000 of gains during the year ended December 31, 2015.

Noninterest expenses for the three months and year ended December 31, 2016 totaled $5.0 million and $19.9 million, respectively, relatively consistent with the $4.9 million and $20.2 million incurred for the comparable prior year periods. The Corporation continues to appropriately control expenses. Increases in various expenses were offset by decreases in other expenses. A decrease in occupancy expense is partially attributable to the consolidation of two branches in Hawthorne, NJ. A decrease in OREO expense is directly related to the decline in foreclosures and OREO properties. An increase in miscellaneous expense is reflective of higher audit and consulting expenses.

Asset Quality
Both the current year and the prior year period results were positively impacted by the Corporation recording negative provisions for loan losses, reflective of the ongoing analysis that demonstrates constant improvement of credit quality. Results for the three months and year ended December 31, 2016 included negative provisions of $300,000 and $1.4 million, respectively, compared with negative provisions for loan losses of $275,000 and $1.4 million for the comparable prior year periods. The recording of negative provisions for loan losses and the decline in the allowance coverage ratio are directly attributable to improved credit quality metrics of the portfolio and the reduction in the estimated level of allowance for loan losses required. Nonperforming loans continue to decline and were just $606,000, or 0.10% of total loans at December 31, 2016, compared with $1.9 million, or 0.36%, at December 31, 2015. Total nonperforming assets of $1.0 million, which includes other real estate owned, also showed continued improvement and represented just 0.13% of total assets at December 31, 2016, compared with 0.38% at December 31, 2015. The allowance for loan losses represented 1.31% of total gross loans at December 31, 2016, compared with 1.68% a year earlier.

In general, Van Ostenbridge concluded, “While we remain conservative with respect to managing risks, we are progressive in adapting to the needs of an evolving customer base. We believe in our efforts to build relationships and continue our focus on being a community-oriented / customer focused financial institution.”

About Stewardship Financial Corporation
Stewardship Financial Corporation’s subsidiary, Atlantic Stewardship Bank, has 11 banking offices in Midland Park, Hawthorne, Montville, North Haledon, Pequannock, Ridgewood, Waldwick, Wayne (2), Westwood and Wyckoff, NJ. 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 $8.8 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)
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Selected Financial Condition Data:
Cash and cash equivalents$11,680 $21,025 $13,901 $13,319 $10,910
Securities available for sale98,583 103,546 98,533 97,637 93,354
Securities held to maturity52,330 54,179 65,666 62,427 60,738
FHLB Stock3,515 2,425 2,650 2,608 2,608
Loans held for sale773 300 581 783 1,522
Loans receivable:
Loans receivable, gross604,083 552,106 537,638 528,011 526,477
Allowance for loan losses(7,905) (8,150) (8,388) (8,540) (8,823)
Other, net(226) (110) (25) (64) (98)
Loans receivable, net595,952 543,846 529,225 519,407 517,556
Other real estate owned, net401 834 834 1,013 880
Bank owned life insurance16,558 16,439 16,320 14,212 14,111
Other assets15,743 15,333 14,877 15,251 16,209
Total assets$795,535 $757,927 $742,587 $726,657 $717,888
Non-interest bearing deposits$169,306 $172,072 $160,461 $154,201 $147,828
Interest-bearing deposits489,624 474,012 466,008 458,225 456,925
Total deposits658,930 646,084 626,469 612,426 604,753
Other borrowings59,200 35,000 40,000 40,000 40,000
Subordinated debentures and subordinated notes23,252 23,235 23,219 23,203 23,186
Other liabilities2,766 2,040 2,213 1,836 2,376
Total liabilities744,148 706,359 691,901 677,465 670,315
Shareholders' equity51,387 51,568 50,686 49,192 47,573
Total liabilities and shareholders' equity$795,535 $757,927 $742,587 $726,657 $717,888
Gross loans to deposits91.68% 85.45% 85.82% 86.22% 87.06%
Equity to assets6.46% 6.80% 6.83% 6.77% 6.63%
Book value per share$8.39 $8.43 $8.29 $8.05 $7.82
Asset Quality Data:
Nonaccrual loans$606 $929 $949 $2,304 $1,882
Loans past due 90 days or more and accruing
Total nonperforming loans606 929 949 2,304 1,882
Other real estate owned401 834 834 1,013 880
Total nonperforming assets$1,007 $1,763 $1,783 $3,317 $2,762
Nonperforming loans to total loans0.10% 0.17% 0.18% 0.44% 0.36%
Nonperforming assets to total assets0.13% 0.23% 0.24% 0.46% 0.38%
Allowance for loan losses to gross loans1.31% 1.48% 1.56% 1.62% 1.68%


Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
For the three months ended
December 31,
For the year ended
December 31,
2016 2015 2016 2015
Selected Operating Data:
Interest income$7,000 $6,643 $27,085 $25,609
Interest expense1,103 1,198 4,513 3,826
Net interest income5,897 5,445 22,572 21,783
Provision for loan losses(300) (275) (1,350) (1,375)
Net interest income after provision for loan losses6,197 5,720 23,922 23,158
Noninterest income:
Fees and service charges564 558 2,159 2,135
Bank owned life insurance119 103 447 403
Gain on calls and sales of securities1 17 63 169
Gain on sales of mortgage loans94 24 164 141
Gain on sales of other real estate owned30 30 36 83
Other129 123 542 562
Total noninterest income937 855 3,411 3,493
Noninterest expenses:
Salaries and employment benefits2,735 2,719 10,980 10,900
Occupancy, net396 422 1,598 1,739
Equipment156 159 609 655
Data processing481 467 1,915 1,847
FDIC insurance premium21 106 317 423
Other1,213 1,027 4,483 4,615
Total noninterest expenses5,002 4,900 19,902 20,179
Income before income tax expense2,132 1,675 7,431 6,472
Income tax expense784 614 2,695 2,272
Net income1,348 1,061 4,736 4,200
Dividends on preferred stock 456
Net income available to common shareholders$1,348 $1,061 $4,736 $3,744
Weighted avg. no. of diluted common shares6,119,693 6,086,249 6,109,983 6,077,657
Diluted earnings per common share$0.22 $0.17 $0.78 $0.62
Return on average common equity10.40% 8.89% 9.43% 8.14%
Return on average assets0.69% 0.58% 0.63% 0.60%
Yield on average interest-earning assets3.77% 3.87% 3.81% 3.87%
Cost of average interest-bearing liabilities0.80% 0.92% 0.85% 0.77%
Net interest rate spread2.97% 2.95% 2.96% 3.10%
Net interest margin3.18% 3.18% 3.18% 3.30%


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,
2016 2016 2016 2016 2015
Selected Operating Data:
Interest income$7,000 $6,657 $6,979 $6,449 $6,643
Interest expense1,103 1,113 1,124 1,173 1,198
Net interest income5,897 5,544 5,855 5,276 5,445
Provision for loan losses(300) (250) (450) (350) (275)
Net interest income after provision for loan losses6,197 5,794 6,305 5,626 5,720
Noninterest income:
Fees and service charges564 536 530 529 558
Bank owned life insurance119 120 107 101 103
Gain on calls and sales of securities1 6 32 24 17
Gain on sales of mortgage loans94 33 19 18 24
Gain on sales of other real estate owned30 6 30
Other129 128 138 147 123
Total noninterest income937 823 832 819 855
Noninterest expenses:
Salaries and employment benefits2,735 2,788 2,742 2,715 2,719
Occupancy, net396 400 404 398 422
Equipment156 155 148 150 159
Data processing481 485 477 472 467
FDIC insurance premium21 100 90 106 106
Other1,213 1,071 1,138 1,061 1,027
Total noninterest expenses5,002 4,999 4,999 4,902 4,900
Income before income tax expense2,132 1,618 2,138 1,543 1,675
Income tax expense784 583 776 552 614
Net income$1,348 $1,035 $1,362 $991 $1,061
Weighted avg. no. of diluted common shares6,119,693 6,115,987 6,111,729 6,092,351 6,086,249
Diluted earnings per common share$0.22 $0.17 $0.22 $0.16 $0.17
Return on average common equity10.40% 8.06% 11.05% 8.21% 8.89%
Return on average assets0.69% 0.54% 0.74% 0.55% 0.58%
Yield on average interest-earning assets3.77% 3.68% 4.02% 3.79% 3.87%
Cost of average interest-bearing liabilities0.80% 0.83% 0.86% 0.90% 0.92%
Net interest rate spread2.97% 2.85% 3.16% 2.89% 2.95%
Net interest margin3.18% 3.07% 3.38% 3.11% 3.18%

Contact: Claire M. Chadwick EVP and Chief Financial Officer 630 Godwin Avenue Midland Park, NJ 07432 P: 201-444-7100

Source:Stewardship Financial Corporation