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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 sale113,015 115,733 116,244 95,632 98,583
Securities held to maturity52,442 53,323 52,091 52,805 52,330
FHLB stock3,715 3,919 5,169 3,784 3,515
Loans held for sale370 688 446 188 773
Loans receivable:
Loans receivable, gross711,720 691,953 692,056 654,769 604,083
Allowance for loan losses(8,762) (8,614) (8,550) (8,246) (7,905)
Other, net(397) (422) (344) (327) (226)
Loans receivable, net702,561 682,917 683,162 646,196 595,952
Other real estate owned, net 401 401
Bank owned life insurance21,084 20,943 20,802 16,673 16,558
Other assets14,309 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 deposits591,238 569,352 543,215 530,138 489,624
Total deposits764,099 740,961 720,893 700,704 658,930
Other borrowings63,760 68,760 93,760 65,200 59,200
Subordinated debentures and
subordinated notes23,317 23,301 23,284 23,268 23,252
Other liabilities3,925 3,564 2,859 2,810 2,766
Total liabilities855,101 836,586 840,796 791,982 744,148
Shareholders' equity73,665 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 deposits93.14% 93.39% 96.00% 93.44% 91.68%
Equity to assets7.93% 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 loans1,194 806 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 loans0.17% 0.12% 0.17% 0.09% 0.10%
Nonperforming assets to total assets0.13% 0.09% 0.13% 0.12% 0.13%
Allowance for loan losses to total gross
loans1.23% 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 expense1,628 1,103 5,858 4,513
Net interest income6,835 5,897 26,372 22,572
Provision for loan losses75 (300) 655 (1,350)
Net interest income
after provision for loan losses6,760 6,197 25,717 23,922
Noninterest income:
Fees and service charges533 564 2,111 2,159
Bank owned life insurance141 119 526 447
Gain on calls and sales of securities 1 1 63
Gain on sales of mortgage loans55 94 178 164
Gain on sales of other real estate owned 30 13 36
Miscellaneous121 129 478 542
Total noninterest income850 937 3,307 3,411
Noninterest expenses:
Salaries and employee benefits2,888 2,735 11,455 10,980
Occupancy, net414 396 1,630 1,598
Equipment176 156 673 609
Data processing442 481 1,811 1,915
Advertising171 196 700 669
FDIC insurance premium86 21 322 317
Charitable contributions240 135 615 375
Bank-card related services130 148 551 579
Other real estate owned, net 14 24 143
Miscellaneous521 720 2,520 2,717
Total noninterest expenses5,068 5,002 20,301 19,902
Income before income tax expense2,542 2,132 8,723 7,431
Income tax expense2,494 784 4,776 2,695
Net income$48 $1,348 $3,947 $4,736
Weighted avg. no. of diluted common shares8,648,191 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 equity0.26% 10.40% 5.86% 9.43%
Return on average assets0.02% 0.69% 0.45% 0.63%
Yield on average interest-earning assets3.82% 3.77% 3.83% 3.81%
Cost of average interest-bearing liabilities0.97% 0.80% 0.91% 0.85%
Net interest rate spread2.85% 2.97% 2.92% 2.96%
Net interest margin3.09% 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 Act1,420 1,420
Adjusted net income$1,468 $1,348 $5,367 $4,736
Weighted avg. no. of diluted common shares8,648,191 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 equity7.82% 10.40% 7.96% 9.43%
Adjusted return on average assets0.63% 0.69% 0.61% 0.63%


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

Source:Stewardship Financial Corp