SSFN Stewardship Financial Corporation

Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, announced net income for the three and six months ended June 30, 2018 of $2.3 million, or $0.27 per share, and $4.1 million, or $0.47 per share, respectively.  For the equivalent prior year periods, net income was $1.3 million, or $0.16 per share, and $2.3 million, or $0.32 per share, respectively.

Paul Van Ostenbridge, Stewardship Financial Corporation’s President and Chief Executive Officer, commented, “We are pleased to, once again, report a successful quarter for the Corporation.  While the environment for loans and deposits continues to be very competitive, we are focused on quality loan and deposit growth with an emphasis on expanding existing relationships and developing new ones.”

Operating ResultsThe Corporation reported net interest income of $7.0 million and $13.8 million for the three and six months ended June 30, 2018, respectively, reflecting increases over $6.5 million and $12.7 million realized in the comparable prior year periods.  "Net interest income benefited from a steady increase in assets and, to a lesser extent, a net interest margin that has been stable to slightly widening over the past several quarters," Van Ostenbridge stated.

The Corporation recorded reversal of the allowance for loan losses resulting in negative provisions for loan losses for both the three and six months ended June 30, 2018 of $780,000 and $1.1 million, respectively.  For the three and six months ended June 30, 2017, positive provision for loan losses of $260,000 and $560,000, respectively, were reported.  While growth in the loan portfolio generally requires the establishment of additional reserves, the negative loan loss provisions reflect net recoveries of previously charged off loan balances of $688,000 and $706,000 for the three and six months ended June 30, 2018, respectively.  The negative provisions for loan losses also reflect the continued improvement in the economic conditions and overall real estate climate in the primary business markets in which the Corporation operates.

For the three and six months ended June 30, 2018, noninterest income was $859,000 and $1.6 million, respectively, compared to $813,000 and $1.6 million in the corresponding prior year periods.  In connection with the establishment of a Small Business Administration ("SBA") department in late 2017, noninterest income for both the three and six months ended June 30, 2018 included $59,000 of gains from the sale of the guaranteed portion of newly originated SBA loans.  The three and six months ended June 30, 2018 reflected $29,000 and $103,000, 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 newly enacted accounting rules, equity securities now require a quarterly mark to market through the income statement.

Noninterest expenses for the three and six months ended June 30, 2018 were $5.5 million and $10.9 million, respectively, compared to $5.1 million and $10.2 million in the comparable prior year periods.  The largest increase in expenses in 2018 occurred in salaries and employee benefits, which includes the costs associated with the establishment of the previously mentioned SBA Lending Department - fully staffed with experienced employees, as well as normal salary increases.  "As we remain focused on growing the balance sheet, the Corporation will continue to appropriately manage our expenses,” noted Van Ostenbridge.

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”).  For the current three and six month periods the effective tax rate was 26.8% and 26.6%, respectively, compared to an effective tax rate of 36.7% for both the three and six months ended June 30, 2017.

Balance Sheet / Financial ConditionTotal assets at June 30, 2018 were $941.7 million, showing an increase of $12.9 million from the $928.8 million of assets at December 31, 2017.  Net loans increased $10.8 million representing new originations that were partially offset by several larger loan payoffs during the first six months of 2018 as well as normal principal amortization.

Total deposits were $792.1 million at June 30, 2018, indicating net growth of $28.0 million since December 31, 2017.  The growth in deposits primarily consisted of a $15.5 million increase in noninterest-bearing accounts and a $12.5 million increase in interest-bearing accounts.

All regulatory capital levels at June 30, 2018 remain above the levels considered to be "well capitalized" under the applicable regulations.  The Corporation’s Tier 1 leverage ratio and total risk based capital ratio at June 30, 2018 were 9.15% and 14.28%, respectively.

About Stewardship Financial CorporationStewardship 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.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)
																				June 30,						March 31,						December 31,						September 30,						June 30,
																				2018						2018						2017						2017						2017
Selected Financial Condition Data:
Cash and cash equivalents																				$			13,529			$			22,178			$			21,270			$			17,213			$			19,459
Securities available for sale																				112,594						106,467						109,259						111,973						112,511
Securities held to maturity																				58,471						51,894						52,442						53,323						52,091
Other equity investments																				3,694						3,706						3,756						3,760						3,733
FHLB stock																				3,087						3,039						3,715						3,919						5,169
Loans held for sale																				607						—						370						688						446
Loans receivable:
Loans receivable, gross																				722,148						708,169						711,720						691,953						692,056
Allowance for loan losses																				(8,353				)		(8,445				)		(8,762				)		(8,614				)		(8,550				)
Other, net																				(484				)		(448				)		(397				)		(422				)		(344				)
Loans receivable, net																				713,311						699,276						702,561						682,917						683,162
Bank owned life insurance																				21,360						21,222						21,084						20,943						20,802
Other assets																				15,034						14,659						14,309						15,958						15,934
Total assets																				$			941,687			$			922,441			$			928,766			$			910,694			$			913,307
Noninterest-bearing deposits																				$			188,343			$			178,572			$			172,861			$			171,609			$			177,678
Interest-bearing deposits																				603,718						593,644						591,238						569,352						543,215
Total deposits																				792,061						772,216						764,099						740,961						720,893
Other borrowings																				46,700						48,760						63,760						68,760						93,760
Subordinated debentures and
subordinated notes																				23,350						23,333						23,317						23,301						23,284
Other liabilities																				3,388						3,760						3,925						3,564						2,859
Total liabilities																				865,499						848,069						855,101						836,586						840,796
Shareholders' equity																				76,188						74,372						73,665						74,108						72,511
Total liabilities and shareholders' equity																				$			941,687			$			922,441			$			928,766			$			910,694			$			913,307
Gross loans to deposits																				91.17				%		91.71				%		93.14				%		93.39				%		96.00				%
Equity to assets																				8.09				%		8.06				%		7.93				%		8.14				%		7.94				%
Book value per share																				$			8.78			$			8.57			$			8.51			$			8.57			$			8.39
Asset Quality Data:
Nonaccrual loans																				$			1,283			$			1,136			$			1,194			$			806			$			826
Loans past due 90 days or more and
accruing																				—						—						—						—						320
Total nonperforming loans																				1,283						1,136						1,194						806						1,146
Other real estate owned																				—						—						—						—						—
Total nonperforming assets																				$			1,283			$			1,136			$			1,194			$			806			$			1,146
Nonperforming loans to total loans																				0.18				%		0.16				%		0.17				%		0.12				%		0.17				%
Nonperforming assets to total assets																				0.14				%		0.12				%		0.13				%		0.09				%		0.13				%
Allowance for loan losses to total gross
loans																				1.16				%		1.19				%		1.23				%		1.24				%		1.24				%

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
																For the three months ended																For the six months ended
																June 30,																June 30,
																2018										2017						2018										2017
Selected Operating Data:
Interest income																$							8,868			$			7,943			$							17,407			$			15,367
Interest expense																1,860										1,409						3,576										2,653
Net interest income																7,008										6,534						13,831										12,714
Provision for loan losses																(780								)		260						(1,115								)		560
Net interest income after provision for loan losses																7,788										6,274						14,946										12,154
Noninterest income:
Fees and service charges																551										519						1,058										1,054
Bank owned life insurance																138										129						276										244
Gain on calls and sales of securities																—										—						6										—
Gain on sales of mortgage loans																9										38						31										55
Gain on sales of SBA loans																59										—						59										—
Gain on sale of other real estate owned																—										13						—										13
Miscellaneous																102										114						154										246
Total noninterest income																859										813						1,584										1,612
Noninterest expenses:
Salaries and employee benefits																3,129										2,880						6,238										5,724
Occupancy, net																403										393						845										802
Equipment																188										162						369										324
Data processing																478										456						962										925
Advertising																207										211						364										347
FDIC insurance premium																70										109						134										186
Charitable contributions																195										120						375										245
Bank-card related services																131										142						258										284
Other real estate owned, net																—										9						—										24
Miscellaneous																703										601						1,387										1,336
Total noninterest expenses																5,504										5,083						10,932										10,197
Income before income tax expense																3,143										2,004						5,598										3,569
Income tax expense																842										736						1,489										1,310
Net income																$							2,301			$			1,268			$							4,109			$			2,259
Weighted avg. no. of diluted common shares																8,675,868										8,174,484						8,667,235										7,155,367
Diluted earnings per common share																$							0.27			$			0.16			$							0.47			$			0.32
Return on average common equity																12.32								%		7.37				%		11.13								%		7.52				%
Return on average assets																0.99								%		0.58				%		0.90								%		0.54				%
Yield on average interest-earning assets																3.99								%		3.81				%		3.97								%		3.84				%
Cost of average interest-bearing liabilities																1.12								%		0.90				%		1.08								%		0.87				%
Net interest rate spread																2.87								%		2.91				%		2.89								%		2.97				%
Net interest margin																3.16								%		3.14				%		3.15								%		3.18				%

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
	For the three months ended
	June 30,						March 31,						December 31,						September 30,						June 30,
	2018						2018						2017						2017						2017
Selected Operating Data:
Interest income	$			8,868			$			8,539			$			8,463			$			8,400			$			7,943
Interest expense	1,860						1,716						1,628						1,577						1,409
Net interest income	7,008						6,823						6,835						6,823						6,534
Provision for loan losses	(780				)		(335				)		75						20						260
Net interest and dividend income after provision for loan losses	7,788						7,158						6,760						6,803						6,274
Noninterest income:
Fees and service charges	551						507						533						524						519
Bank owned life insurance	138						138						141						141						129
Gain on calls and sales of securities	—						6						—						1						—
Gain on sales of mortgage loans	9						22						55						68						38
Gain on sales of SBA loans	59						—						—						—						—
Gain on sales of other real estate owned	—						—						—						—						13
Miscellaneous	102						52						121						111						114
Total noninterest income	859						725						850						845						813
Noninterest expenses:
Salaries and employee benefits	3,129						3,109						2,888						2,843						2,880
Occupancy, net	403						442						414						414						393
Equipment	188						181						176						173						162
Data processing	478						484						442						444						456
Advertising	207						157						171						182						211
FDIC insurance premium	70						64						86						50						109
Charitable contributions	195						180						240						130						120
Bank-card related services	131						127						130						137						142
Other real estate owned, net	—						—						—						—						9
Miscellaneous	703						684						521						663						601
Total noninterest expenses	5,504						5,428						5,068						5,036						5,083
Income before income tax expense	3,143						2,455						2,542						2,612						2,004
Income tax expense	842						647						2,494						972						736
Net income	$			2,301			$			1,808			$			48			$			1,640			$			1,268
Weighted avg. no. of diluted common shares	8,675,868						8,658,506						8,648,191						8,643,737						8,174,484
Diluted earnings per common share	$			0.27			$			0.21			$			0.01			$			0.19			$			0.16
Return on average common equity	12.32				%		9.92				%		0.26				%		8.83				%		7.37				%
Return on average assets	0.99				%		0.80				%		0.02				%		0.71				%		0.58				%
Yield on average interest-earning assets	3.99				%		3.94				%		3.82				%		3.80				%		3.81				%
Cost of average interest-bearing  liabilities	1.12				%		1.04				%		0.97				%		0.94				%		0.90				%
Net interest rate spread	2.87				%		2.90				%		2.85				%		2.86				%		2.91				%
Net interest margin	3.16				%		3.15				%		3.09				%		3.09				%		3.14				%

Stewardship Financial Corporation
Non-GAAP Reconciliation
(dollars in thousands, except per share amounts)
(unaudited)
							For the threemonths 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. ChadwickExecutive Vice President andChief Financial Officer630 Godwin AvenueMidland Park, NJ 07432P: 201.444.7100