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CST: 08/12/2019 16:19:44   

Stewardship Financial Corporation Reports Results for the Second Quarter of 2019

131 Days ago

MIDLAND PARK, N.J., July 30, 2019 (GLOBE NEWSWIRE) -- Stewardship Financial Corporation (Nasdaq:SSFN), parent company of Atlantic Stewardship Bank, today reported results for the second quarter.  For the three and six months ended June 30, 2019 net income was $1.5 million, or $0.17 per share, and $3.1 million, or $0.36 per share, respectively.  Net income for the equivalent prior year periods was $2.3 million, or $0.27 per share, and $4.1 million, or $0.47 per share, respectively.  Results for the prior year three and six month periods benefited from the Corporation recording negative provisions for loan losses of $780,000 and $1.1 million, respectively, as compared to the positive $330,000 and $395,000 provisions for loan losses reflected in the current three and six month periods, respectively.  In addition, the current year periods were adversely impacted by merger-related expenses of $291,000 associated with the previously reported contemplated merger with Columbia Financial, Inc.

Paul Van Ostenbridge, President and Chief Executive Officer of Stewardship Financial Corporation, commented, “We are pleased with the Corporation's year-to-date performance.  Since the beginning of the year, we have demonstrated steady organic loan growth supported by a stable net interest margin."

Van Ostenbridge continued, "We are very optimistic about our contemplated merger with Columbia Financial.  The required regulatory approval process is underway and we continue to plan for our special meeting of shareholders seeking shareholder approval for the merger.  A fourth quarter close is still expected.  We believe the combined organization will create an institution that can serve the changing needs of customers and result in the development of strong loan and deposit portfolios."

Operating Results
The Corporation reported net interest income of $7.2 million for the three months ended June 30, 2019 compared to $7.0 million earned in the equivalent prior year period.  For the six months ended June 30, 2019, net interest income was $14.1 million, which also represented an improvement over the $13.8 million earned in the comparable prior year period.  The increases for both the three and six month periods were primarily a result of higher interest income on loans, due to both growth in average balances and greater loan yields, partially offset by increased interest expense.  The average rate earned on interest-earning assets has shown modest increases over the last five quarters due, in part, to loans repricing at higher rates.  An increase in the cost of interest-bearing liabilities, however, is the result of higher rates and the highly competitive environment for deposits.  Net interest margin of 3.13% for the three months ended June 30, 2019 reflected general stability over the last several quarters with a reported net interest margin of 3.12% and 3.11% for the prior two quarters, respectively.  Van Ostenbridge commented, "While the market for loans and deposits continues to be very competitive, which tends to drive yields on loans down and rates on deposits up, we were able to manage the continuing pressure on our net interest margin."

As previously mentioned, for the three and six months ended June 30, 2019, the Corporation recorded $330,000 and $395,000 in provisions for loan losses, compared to negative provisions for loan losses of $780,000 and $1.1 million for the three and six months ended June 30, 2018.  While the primary business markets in which the Corporation operates show ongoing improvement in the economic conditions and overall real estate climate, the loan loss provisions for the current periods principally reflect the growth in the loan portfolio.

For the three and six months ended June 30, 2019, noninterest income was $935,000 and $1.8 million, respectively, compared to $859,000 and $1.6 million in the equivalent prior year periods.  In addition to growth in fees and service charges, gains on sales of loans contributed to solid increases in non-interest income.  The three months ended June 30, 2019 included $23,000 of gains from the sales of mortgage loans and $71,000 of gains from the sale of the guaranteed portion of newly originated Small Business Administration ("SBA") loans.  On a year-to-date basis, for the six months ended June 30, 2019, mortgage loan sale gains were $48,000 and SBA loan sale gains were $112,000.  For both the three and six month periods, these reported gains were in excess of the equivalent prior year gains.  Noninterest income for the current three and six months also included mark-to-market gains on a CRA investment, which is classified as an equity security, of $24,000 and $46,000, respectively, compared to $29,000 and $103,000 of losses for the three and six months ended June 30, 2018, respectively.

Noninterest expenses were $5.8 million and $11.4 million for the three and six months ended June 30, 2019, respectively, compared to $5.5 million and $10.9 million in the same prior year periods.  Included in the current year periods was $291,000 of merger-related expenses incurred to date.

Balance Sheet / Financial Condition
Total assets at June 30, 2019 of $964.3 million reflected an $8.7 million increase from assets of $955.6 million at December 31, 2018.  During the first six months of 2019, the gross loan portfolio increased $23.2 million, reflecting a healthy 6.3% annualized growth rate.  Asset growth since the prior year end included the establishment of a Right of Use Asset for all leases, as required due to the adoption of new accounting rules.  At June 30, 2019, the Right of Use Asset was $2.9 million.  Offsetting these asset increases, cash flows from the securities portfolio were used to help fund asset growth, resulting in a $12.7 million decrease in the securities portfolio since the end of last year.

At June 30, 2019, total deposits were $781.9 million, very comparable to the $782.1 million at December 31, 2018.  Van Ostenbridge commented, "While we were faced with a significant amount of maturities of interest-bearing deposits during the second quarter, we were able to retain a majority of these deposits.  The runoff of a portion of these maturities was offset by an increase in noninterest-bearing deposits, which is reflective of our focus on building lasting customer relationships and low cost, core deposits."  During the first six months of 2019, non-interest bearing demand deposits grew $8.3 million, equating to an annualized growth rate of over 9%.

At June 30, 2019, the Corporation’s regulatory capital ratios reflected a well-capitalized institution.  The Tier 1 leverage ratio and total risk based capital ratio were 9.52% and 14.18%, respectively, compared to the respective minimum required levels of 4.0% and 8.0%.

About Stewardship Financial Corporation
Stewardship Financial Corporation is a one-bank holding company, incorporated under the laws of the State of New Jersey in January of 1995, which serves as a holding company for Atlantic Stewardship Bank.  Stewardship’s primary business is the ownership and supervision of Atlantic Stewardship Bank. Stewardship, through Atlantic Stewardship Bank conducts commercial banking business and offers services including personal and business checking accounts, time deposits, money market accounts and regular savings accounts. Stewardship manages its business through its main office located at 630 Godwin Avenue, Midland Park, New Jersey, and through its twelve branch 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 $11.2 million.  We invite you to visit our website at www.ASBnow.bank for additional information.

Forward-Looking Statements
Certain statements herein constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by words such as “believes,” “will,” “would,” “expects,” “project,” “may,” “could,” “developments,” “strategic,” “launching,” “opportunities,” “anticipates,” “estimates,” “intends,” “plans,” “targets” and similar expressions. These statements are based upon the current beliefs and expectations of the Corporation’s management and are subject to significant risks and uncertainties.

Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. The following factors, among others, could cause actual results to differ materially from the anticipated results expressed in the forward-looking statements: (i) governmental approvals of the merger may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger or otherwise; (ii) the shareholders of Stewardship may fail to approve the merger; (iii) the interest rate environment may further compress margins and adversely affect new interest income; (iv) the risks associated with continued diversification of assets and adverse changes to credit quality; and (v) changes in legislation, regulations and policies. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Stewardship’s reports (such as the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission (the “SEC”) and available at the SEC’s Internet website (www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to Stewardship or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Except as required by law, Stewardship does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

Additional Information about the Proposed Merger and Where to Find It
In connection with the proposed merger, Stewardship has filed a proxy statement with the SEC. Shareholders of Stewardship are urged to read the proxy statement and other relevant documents and any amendments or supplements to those documents, because they will contain important information which should be considered before making any decision regarding the proposed merger. A free copy of the proxy statement, as well as other filings containing information about Columbia or Stewardship, as and when they become available, may be obtained at the SEC’s Internet site (http://www.sec.gov). Copies of the proxy statement may also be obtained, free of charge, from Stewardship’s website (www.asbnow.bank) under the “Investor Relations” tab, or by contacting Stewardship’s investor relations department at Stewardship Financial Corporation, 630 Godwin Avenue, Midland Park, NJ 07432, Attention: Investor Relations, Telephone 201.444.7100.

Certain Information Regarding Participants
Stewardship and its directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies of Stewardship’s shareholders in connection with the proposed merger. You can find information about Stewardship’s executive officers and directors in the materials filed by Stewardship with the SEC. Additional information regarding the interests of Stewardship’s participants and other persons who may be deemed participants in the transaction and a description of their direct and indirect  interests, by security holdings or otherwise, may be obtained by reading the proxy statements filed by Stewardship with the SEC on April 5, 2019 and other relevant documents regarding the proposed merger filed with the SEC. Free copies of these documents may be obtained as described in the preceding paragraph.


 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                   
  June 30,
 2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
 2018
                   
Selected Financial Condition Data:                  
Cash and cash equivalents $ 12,610     $ 13,157     $ 16,823     $ 10,839     $ 13,529  
Securities available for sale 96,117     102,519     108,811     109,764     112,594  
Securities held to maturity 62,264     61,586     62,308     62,227     58,471  
Other equity investments 1,693     1,670     1,648     3,661     3,694  
FHLB stock 4,091     3,922     3,965     3,552     3,087  
Loans held for sale 469                 607  
Loans receivable:                  
Loans receivable, gross 756,994     747,180     733,787     729,475     722,148  
Allowance for loan losses (8,404 )   (8,018 )   (7,926 )   (7,904 )   (8,353 )
Other, net (535 )   (459 )   (457 )   (483 )   (484 )
Loans receivable, net 748,055     738,703     725,404     721,088     713,311  
Premises and equipment, net 7,146     7,262     7,007     6,920     6,952  
Right of use asset 2,917     3,092              
Bank owned life insurance 21,908     21,771     21,636     21,498     21,360  
Other assets 6,994     7,448     8,028     8,564     8,082  
Total assets $ 964,264     $ 961,130     $ 955,630     $ 948,113     $ 941,687  
                   
                   
Noninterest-bearing deposits $ 182,971     $ 176,356     $ 174,717     $ 190,303     $ 188,343  
Interest-bearing deposits 598,974     607,260     607,374     596,263     603,718  
Total deposits 781,945     783,616     782,091     786,566     792,061  
Other borrowings 67,400     63,900     65,700     56,800     46,700  
Subordinated debentures and subordinated notes 23,415     23,398     23,382     23,366     23,350  
Lease liability 3,043     3,217              
Other liabilities 4,371     4,708     4,307     3,462     3,388  
Total liabilities 880,174     878,839     875,480     870,194     865,499  
Shareholders' equity 84,090     82,291     80,150     77,919     76,188  
Total liabilities and shareholders' equity $ 964,264     $ 961,130     $ 955,630     $ 948,113     $ 941,687  
                   
Gross loans to deposits 96.81 %   95.35 %   93.82 %   92.74 %   91.17 %
                   
Equity to assets 8.72 %   8.56 %   8.39 %   8.22 %   8.09 %
                   
Shares outstanding 8,714,222     8,712,023     8,680,388     8,678,454     8,676,843  
Book value per share $ 9.65     $ 9.45     $ 9.23     $ 8.98     $ 8.78  
                   
Asset Quality Data:                  
Nonaccrual loans $ 1,906     $ 1,776     $ 1,544     $ 1,271     $ 1,283  
Loans past due 90 days or more and accruing                  
Total nonperforming loans 1,906     1,776     1,544     1,271     1,283  
Other real estate owned                  
Total nonperforming assets $ 1,906     $ 1,776     $ 1,544     $ 1,271     $ 1,283  
                   
Nonperforming loans to total loans 0.25 %   0.24 %   0.21 %   0.17 %   0.18 %
Nonperforming assets to total assets 0.20 %   0.18 %   0.16 %   0.13 %   0.14 %
Allowance for loan losses to total gross loans 1.11 %   1.07 %   1.08 %   1.08 %   1.16 %
                             


 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
               
  For the three months ended
June 30,
  For the six months ended
June 30,
  2019   2018   2019   2018
Selected Operating Data:              
Interest income $ 9,772     $ 8,868     $ 19,173     $ 17,407  
Interest expense 2,608     1,860     5,025     3,576  
Net interest income 7,164     7,008     14,148     13,831  
Provision for loan losses 330     (780 )   395     (1,115 )
Net interest income after provision for loan losses 6,834     7,788     13,753     14,946  
Noninterest income:              
Fees and service charges 572     551     1,134     1,058  
Bank owned life insurance 138     138     273     276  
Gain on calls and sales of securities 1         3     6  
Gain on sales of mortgage loans 23     9     48     31  
Gain on sales of SBA loans 71     59     112     59  
Gain (loss) on equity investments
24     (29 )   46     (103 )
Miscellaneous 106     131     225     257  
Total noninterest income 935     859     1,841     1,584  
Noninterest expenses:              
Salaries and employee benefits 3,102     3,129     6,239     6,238  
Occupancy, net 417     403     866     845  
Equipment 234     188     439     369  
Data processing 515     478     1,018     962  
Advertising 194     207     377     364  
FDIC insurance premium 65     70     129     134  
Charitable contributions 175     195     370     375  
Bank-card related services 138     131     269     258  
Merger related expenses 291         291      
Miscellaneous 655     703     1,380     1,387  
Total noninterest expenses 5,786     5,504     11,378     10,932  
Income before income tax expense 1,983     3,143     4,216     5,598  
Income tax expense 530     842     1,116     1,489  
Net income $ 1,453     $ 2,301     $ 3,100     $ 4,109  
               
Weighted avg. no. of basic and diluted common shares 8,713,110     8,675,868     8,700,609     8,667,235  
Basic and diluted earnings per common share $ 0.17     $ 0.27     $ 0.36     $ 0.47  
               
Return on average common equity 7.01 %   12.32 %   7.61 %   11.13 %
               
Return on average assets 0.61 %   0.99 %   0.65 %   0.90 %
               
Yield on average interest-earning assets 4.27 %   3.99 %   4.23 %   3.97 %
Cost of average interest-bearing liabilities 1.52 %   1.12 %   1.47 %   1.08 %
Net interest rate spread 2.75 %   2.87 %   2.76 %   2.89 %
               
Net interest margin 3.13 %   3.16 %   3.12 %   3.15 %


Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
                   
  For the three months ended
  June 30,
2019
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
 2018
Selected Operating Data:                  
Interest income $ 9,772     $ 9,401     $ 9,377     $ 9,215     $ 8,868  
Interest expense 2,608     2,417     2,247     2,013     1,860  
Net interest income 7,164     6,984     7,130     7,202     7,008  
Provision for loan losses 330     65     (10 )   (490 )   (780 )
Net interest and dividend income after provision for loan losses 6,834     6,919     7,140     7,692     7,788  
Noninterest income:                  
Fees and service charges 572     562     628     542     551  
Bank owned life insurance 138     135     138     138     138  
Gain (loss) on calls and sales of securities 1     2     (192 )        
Gain on sales of mortgage loans 23     25     27     12     9  
Gain on sales of SBA loans 71     41     64     70     59  
Gain (loss) on equity investments 24     22     217     (34 )   (29 )
Miscellaneous 106     119     114     109     131  
Total noninterest income 935     906     996     837     859  
Noninterest expenses:                  
Salaries and employee benefits 3,102     3,137     3,200     3,198     3,129  
Occupancy, net 417     449     430     426     403  
Equipment 234     205     191     186     188  
Data processing 515     503     496     489     478  
Advertising 194     183     159     192     207  
FDIC insurance premium 65     64     77     66     70  
Charitable contributions 175     195     355     180     195  
Bank-card related services 138     131     142     133     131  
Merger related expenses 291                  
Miscellaneous 655     725     609     684     703  
Total noninterest expenses 5,786     5,592     5,659     5,554     5,504  
Income before income tax expense 1,983     2,233     2,477     2,975     3,143  
Income tax expense 530     586     718     813     842  
Net income $ 1,453     $ 1,647     $ 1,759     $ 2,162     $ 2,301  
                   
                   
Weighted avg. no. of basic and diluted common shares 8,713,110     8,687,969     8,679,304     8,677,445     8,675,868  
Basic and diluted earnings per common share $ 0.17     $ 0.19     $ 0.20     $ 0.25     $ 0.27  
                   
Return on average common equity 7.01 %   8.22 %   8.86 %   11.14 %   12.32 %
                   
Return on average assets 0.61 %   0.70 %   0.73 %   0.90 %   0.99 %
                   
Yield on average interest-earning assets 4.27 %   4.19 %   4.09 %   4.04 %   3.99 %
Cost of average interest-bearing liabilities 1.52 %   1.42 %   1.31 %   1.18 %   1.12 %
Net interest rate spread 2.75 %   2.77 %   2.78 %   2.86 %   2.87 %
                   
Net interest margin 3.13 %   3.12 %   3.11 %   3.16 %   3.16 %
                             

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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