SOURCE: Stewardship Financial Corporation

Stewardship Financial Corporation

November 05, 2015 16:00 ET

Stewardship Financial Corporation Reports Earnings for Third Quarter of 2015

MIDLAND PARK, NJ--(Marketwired - November 05, 2015) - Stewardship Financial Corporation (NASDAQ: SSFN), parent company of Atlantic Stewardship Bank, reported net income for the three and nine months ended September 30, 2015, of $1.0 million and $3.1 million, respectively, compared to net income of $552,000 and $1.8 million for the equivalent three and nine month periods in 2014. After dividends on preferred stock, net income available to common shareholders for the current three month period was $886,000, or $0.15 per share, compared to $382,000, or $0.06 per share, for the three months ended September 30, 2014. For the first nine months of 2015, net income available to common shareholders was $2,683,000, or $0.44 per share, compared to $1,272,000, or $0.21 per share, during the same period in 2014.

"We are pleased to continue to report improving results. The stabilization of our asset quality and steady loan growth remain our focus and have contributed to our progress," said Paul Van Ostenbridge, President and Chief Executive Officer of Stewardship Financial Corporation,

Balance Sheet / Financial Condition

Total assets at September 30, 2015 were $707.6 million - an increase when compared to with total assets of $693.6 million at December 31, 2014. For the first nine months of 2015, a $40.8 million net increase in gross loans receivable was the result of new loan originations, partially offset by normal principal amortization and payoffs. On an annualized basis, such loan growth equates to 11.4%. Partially offsetting the loan growth was the previously reported sale of approximately $27.8 million of available for sale securities with higher price volatility. Such sales were conducted to provide a portion of the funding for the loan growth, reflecting an intentional shift to higher yielding assets.

Total deposits were $585.9 million at September 30, 2015, reflecting a $29.4 million increase when compared to deposits of $556.5 million at December 31, 2014. "The focus on loan growth naturally warrants a continued focus on deposit growth," noted Van Ostenbridge. As a result of an increase in deposits, other borrowings decreased $17.2 million to $49.5 million at September 30, 2015.

The increase in subordinated debentures and subordinated notes reflects the previously announced completion of a $16.6 million issuance of fixed rate subordinated notes on August 28, 2015. The subordinated notes have a maturity date of August 28, 2025 and bear interest at the rate of 6.75% per annum. Using the net proceeds of the subordinated note issuance, on September 1, 2015, the Corporation repurchased the $15.0 million of preferred stock, thus ending the Corporation's participation in the U.S. Department of the Treasury's Small Business Lending Fund program ("SBLF").

While tier 1 capital was impacted by the replacement of preferred stock with subordinated debt, which is considered tier 2 capital, regulatory capital levels, at September 30, 2015, continue to exceed the capital requirements for a "well capitalized" institution. The Corporation's tier 1 leverage ratio was 7.66% (4% requirement) and total risk based capital ratio was 14.48% (8% requirement).

Operating Results

For the three and nine months ended September 30, 2015, the Corporation reported net interest income of $5.4 million and $16.3 million, respectively, compared to $5.3 million and $16.0 million for the corresponding prior year periods. The net interest margin for the current three and nine months ended September 30, 2015 was 3.21% and 3.34%, respectively, compared to 3.36% and 3.42% for the three and nine months ended September 30, 2014, respectively. The recent decline in net interest rate margin partially reflects the impact of the $16.6 million of subordinated notes previously discussed. While the cost of the subordinated notes adds to interest expense, on an after tax basis, such increase is approximately offset by the dividends that would have accrued at a rate of 4.56% on the preferred stock resulting in an overall neutral effect on net income available to common shareholders. Furthermore, beginning on March 1, 2016, and for all dividend periods thereafter, the dividend rate on the preferred stock would have been increased and fixed at 9%, making the issuance of the subordinated notes a positive impact to net income available to common shareholders in the future.

Noninterest income for the three and nine months ended September 30, 2015 was $838,000 and $2.6 million, respectively, compared to $764,000 and $2.0 million for the same prior year periods. For the current year periods, fees and service charges reflect increases of $31,000 and $142,000 when compared to 2014. In addition, as a result of the Corporation returning to selling the majority of residential loan production, gains on sales of mortgage loans increased over the prior year three and nine month periods. For the nine months ended September 30 2015, noninterest income included gains of $152,000 from the sale of available for sale securities and $53,000 from the sale of other real estate owned. The prior year nine month period included a loss of $241,000 from the sale of nonperforming loans.

Noninterest expenses totaled $5.1 million and $15.3 million for the three and nine months ended September 30, 2015, relatively consistent with the $5.0 million and $15.2 million incurred for the three and nine months ended September 30, 2014, respectively.

Asset Quality

Van Ostenbridge stated, "The credit metrics of our assets have improved and stabilized." For the three and nine months ended September 30, 2015, results continue to be positively impacted by the Corporation recording negative provisions for loan losses of $400,000 and $1.1 million, respectively. For the prior year, the Corporation recorded a $250,000 provision for loan losses for both the three and nine months ended September 30, 2014. Nonperforming loans were $2.6 million, or 0.50% of total loans at September 30, 2015 compared to $3.6 million, or 0.76%, at December 31, 2014. Total nonperforming assets of $3.2 million, which includes other real estate owned, represented 0.45% of total assets at September 30, 2015 compared to 0.71% at December 31, 2014.

About Stewardship Financial Corporation

Stewardship Financial Corporation's subsidiary, the Atlantic Stewardship Bank, has 12 banking offices in Midland Park, Hawthorne (2), Montville, 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 $8.2 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)  
                              
   September 30,     June 30,     March 31,     December 31,     September 30,  
   2015     2015     2015     2014     2014  
                                   
Selected Financial Condition Data:                                  
 Cash and cash equivalents  $16,025     $19,782     $21,035     $10,086     $10,850  
 Securities available for sale   86,994      90,850      94,553      124,918      138,255  
 Securities held to maturity   60,252      58,363      55,811      55,097      54,234  
 FHLB Stock   3,035      2,833      3,026      3,777      2,882  
 Loans receivable:                                  
  Loans receivable, gross   518,168      507,105      490,087      477,320      443,006  
  Allowance for loan losses   (8,805 )    (9,299 )    (9,600 )    (9,602 )    (10,094 )
  Other, net   (93 )    (132 )    (7 )    (19 )    (17 )
 Loans receivable, net   509,270      497,674      480,480      467,699      432,895  
                                   
 Loans held for sale   1,570      1,416      798      -      364  
 Other assets   30,503      30,273      30,114      31,974      33,072  
 Total assets  $707,649     $701,191     $685,817     $693,551     $672,552  
                                   
                                   
 Noninterest-bearing deposits  $151,078     $153,546     $141,406     $136,721     $140,345  
 Interest-bearing deposits   434,790      432,453      424,916      419,755      416,666  
 Total deposits   585,868      585,999      566,322      556,476      557,011  
 Other borrowings   49,500      45,000      50,000      66,700      46,800  
 Securities sold under agreements to repurchase   -      -      -      -      100  
 Subordinated debentures   23,176      7,217      7,217      7,217      7,217  
 Other liabilities   2,087      2,123      2,166      4,189      4,166  
 Total liabilities   660,631      640,339      625,705      634,582      615,294  
 Shareholders' equity   47,018      60,852      60,112      58,969      57,258  
 Total liabilities and shareholders' equity  $707,649     $701,191     $685,817     $693,551     $672,552  
                                   
 Gross loans to deposits   88.44 %    86.54 %    86.54 %    85.78 %    79.53 %
                                   
 Equity to assets   6.64 %    8.68 %    8.77 %    8.50 %    8.51 %
                                   
Asset Quality Data:                                  
 Nonaccrual loans  $2,574     $2,539     $2,798     $3,628     $4,434  
 Loans past due 90 days or more and accruing   -      -      -      -      -  
 Total nonperforming loans   2,574      2,539      2,798      3,628      4,434  
 Other real estate owned   587      219      320      1,308      2,090  
 Total nonperforming assets  $3,161     $2,758     $3,118     $4,936     $6,524  
                                   
                                   
 Nonperforming loans to total loans   0.50 %    0.50 %    0.57 %    0.76 %    1.00 %
 Nonperforming assets to total assets   0.45 %    0.39 %    0.45 %    0.71 %    0.97 %
 Allowance for loan losses to nonperforming loans   342.07 %    366.25 %    343.10 %    264.66 %    227.65 %
 Allowance for loan losses to total gross loans   1.70 %    1.83 %    1.96 %    2.01 %    2.28 %
                                   
  
Stewardship Financial Corporation  
Selected Consolidated Financial Information  
(dollars in thousands, except per share amounts)  
(unaudited)  
                                  
        For the three months ended    For the nine months ended  
        September 30,        September 30,      
        2015    2014    2015    2014  
Selected Operating Data:                             
  Interest income   $ 6,412    $ 6,069    $ 18,966    $ 18,400  
  Interest expense     993      791      2,628      2,440  
    Net interest and dividend income     5,419      5,278      16,338      15,960  
  Provision for loan losses     (400 )    250      (1,100 )    250  
  Net interest and dividend income                             
    after provision for loan losses     5,819      5,028      17,438      15,710  
  Noninterest income:                             
    Fees and service charges     541      510      1,577      1,435  
    Bank owned life insurance     103      100      300      302  
    Gain on calls and sales of securities     -      -      152      -  
    Gain on sales of mortgage loans     52      32      117      46  
    Loss on sales of loans     -      -      -      (241 )
    Gain on sales of other real estate owned     -      -      53      54  
    Other     142      122      439      374  
    Total noninterest income     838      764      2,638      1,970  
  Noninterest expenses:                             
    Salaries and employee benefits     2,785      2,624      8,181      7,859  
    Occupancy, net     427      439      1,317      1,514  
    Equipment     175      167      496      530  
    Data processing     468      433      1,380      1,255  
    FDIC insurance premium     87      133      317      477  
    Other     1,183      1,193      3,588      3,554  
    Total noninterest expenses     5,125      4,989      15,279      15,189  
Income before income tax expense     1,532      803      4,797      2,491  
Income tax expense     532      251      1,658      707  
Net income     1,000      552      3,139      1,784  
Dividends on preferred stock     114      170      456      512  
Net income available to common shareholders   $ 886    $ 382    $ 2,683    $ 1,272  
                                  
Weighted avg. no. of diluted common shares     6,091,627      6,026,848      6,074,763      5,994,800  
Diluted earnings per common share   $ 0.15    $ 0.06    $ 0.44    $ 0.21  
                                  
Return on average common equity     7.58 %    3.58 %    7.88 %    4.14 %
                                  
Return on average assets     0.56 %    0.33 %    0.60 %    0.36 %
                                  
Yield on average interest-earning assets     3.80 %    3.85 %    3.87 %    3.94 %
Cost of average interest-bearing liabilities     0.79 %    0.68 %    0.72 %    0.69 %
Net interest rate spread     3.01 %    3.17 %    3.15 %    3.25 %
                                  
Net interest margin     3.21 %    3.36 %    3.34 %    3.42 %
                 
   
Stewardship Financial Corporation  
Selected Consolidated Financial Information  
(dollars in thousands, except per share amounts)  
(unaudited)  
                                         
        For the three months ended  
        September 30,    June 30,    March 31,    December 31,    September 30,  
        2015    2015    2015    2014    2014  
Selected Operating Data:                                    
  Interest income   $ 6,412    $ 6,360    $ 6,194    $ 6,534    $ 6,069  
  Interest expense     993      842      793      767      791  
    Net interest and dividend income     5,419      5,518      5,401      5,767      5,278  
  Provision for loan losses     (400 )    (600 )    (100 )    (300 )    250  
  Net interest and dividend income                                    
    after provision for loan losses     5,819      6,118      5,501      6,067      5,028  
  Noninterest income:                                    
    Fees and service charges     541      557      479      568      510  
    Bank owned life insurance     103      101      96      103      100  
    Gain on calls and sales of securities     -      -      152      165      -  
    Gain on sales of mortgage loans     52      55      10      26      32  
    Loss on sales of loans     -      -      -      -      -  
    Gain on sales of other real estate owned   -      -      53      9      -  
    Other     142      169      128      119      122  
    Total noninterest income     838      882      918      990      764  
  Noninterest expenses:                                    
    Salaries and employee benefits     2,785      2,688      2,708      2,738      2,624  
    Occupancy, net     427      423      467      420      439  
    Equipment     175      165      156      157      167  
    Data processing     468      459      453      447      433  
    FDIC insurance premium     87      117      113      103      133  
    Other     1,183      1,253      1,152      1,179      1,193  
    Total noninterest expenses     5,125      5,105      5,049      5,044      4,989  
Income before income tax expense     1,532      1,895      1,370      2,013      803  
Income tax expense     532      673      453      712      251  
Net income     1,000      1,222      917      1,301      552  
Dividends on preferred stock     114      171      171      171      170  
Net income available to common shareholders   $ 886    $ 1,051    $ 746    $ 1,130    $ 382  
                                         
Weighted avg. no. of diluted common shares     6,091,627      6,086,474      6,045,683      6,030,561      6,026,848  
Diluted earnings per common share   $ 0.15    $ 0.17    $ 0.12    $ 0.19    $ 0.06  
                                         
Return on average common equity     7.58 %    9.25 %    6.77 %    10.41 %    3.58 %
                                         
Return on average assets     0.56 %    0.71 %    0.54 %    0.75 %    0.33 %
                                         
Yield on average interest-earning assets     3.80 %    3.91 %    3.90 %    4.04 %    3.85 %
Cost of average interest-bearing liabilities     0.79 %    0.70 %    0.67 %    0.64 %    0.68 %
Net interest rate spread     3.01 %    3.21 %    3.23 %    3.40 %    3.17 %
                                         
Net interest margin     3.21 %    3.40 %    3.41 %    3.57 %    3.36 %

Contact Information

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