Stewardship Financial Corporation Announces Earnings for the First Quarter of 2019

MIDLAND PARK, N.J., April 30, 2019 (GLOBE NEWSWIRE) -- Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, announced net income for the three months ended March 31, 2019 of  $1.6 million, or $0.19 per share.  For the comparable three months ended March 31, 2018, net income was $1.8 million, or $0.21 per share.  As discussed below, results for the prior year period benefited from the Corporation recording a negative provision for loan losses of $335,000 as compared to the positive $65,000 provision for loan losses reflected in the current three month period.

Commenting on the recent quarterly financial results, Paul Van Ostenbridge, President and Chief Executive Officer of Stewardship Financial Corporation, stated, “We are pleased with the start of 2019.  The balance sheet growth experienced in the first quarter, led by loan originations offset by a reduction in the securities portfolio, moved us even closer to being a $1 billion institution.  Likewise, earnings demonstrated a continued strength in core profitability.   With the current flattening yield curve environment, we acknowledge that this is a challenging interest rate environment. Nevertheless, net interest margin remained relatively stable in the most recent quarter."

Operating Results
Net interest income of $7.0 million was reported for the three months ended March 31, 2019.  This represented an improvement over the $6.8 million realized in the comparable prior year period.  The increase was primarily a result of increased interest income on loans due to both higher average balances and loan yields, partially offset by increased interest expense.  When comparing to the most recent previous quarter, net interest margin of 3.12% for the three months ended March 31, 2019 reflected a 1 basis point increase over the 3.11% level for the December 2018 quarter.  The average rate earned on interest-earning assets increased 10 basis points, reflecting an improvement over the 5 basis point increase in the fourth quarter of 2018.  Due to higher rates and a highly competitive deposit environment, the cost of interest-bearing liabilities increased 11 basis points in the first quarter, versus a 13 basis point increase in the preceding quarter.  Van Ostenbridge noted that, "With its significant impact on our profitability, we remained focused on protecting the margin."

As noted previously, for the three months ended March 31, 2019, the Corporation recorded a $65,000 provision for loan losses, compared to a negative provision for loan losses of $335,000 for the three months ended March 31, 2018.  The current period loan loss provision principally reflects the growth in the loan portfolio.  The need for additional loan loss reserves due to such growth was partially offset by the impact from the ongoing improvement in the economic conditions and overall real estate climate in the primary business markets in which the Corporation operates.  In addition, net recoveries of previously charged off loan balances of $27,000 were recognized for the three months ended March 31, 2019.

For the three months ended March 31, 2019, noninterest income was $906,000 compared to $725,000 in the equivalent prior year period.  In connection with the establishment of a Small Business Administration ("SBA") department in late 2017, noninterest income for the three months ended March 31, 2019 included $41,000 of gains from the sale of the guaranteed portion of newly originated SBA loans.  The three months ended March 31, 2019 also included a $22,000 mark-to-market gain on a CRA investment which is classified as an equity security.  This compares to a $74,000 loss in the prior year period.

Noninterest expenses were $5.6 million for the three months ended March 31, 2019 compared to $5.4 million in the same prior year period.  Our commitment to managing our expense structure remains.  Furthermore, when measuring against the most recent previous quarter, our noninterest expenses are in line with the 2018 fourth quarter expenses, despite the seasonally higher first quarter payroll tax expenses.

Balance Sheet / Financial Condition
At March 31, 2019, total assets of $961.1 million reflected a $5.5 million increase from assets of $955.6 million at December 31, 2018.  The $13.4 million increase in the gross loan portfolio reflected a 7.3% annualized growth rate.  In addition, the adoption of new accounting rules resulted in the establishment of a $3.1 million Right of Use Asset for all leases.  Offsetting these asset increases, cash flows from the securities portfolio were used to help fund asset growth, resulting in a $7.0 million decrease in the securities portfolio.

At March 31, 2019, total deposits were $783.6 million, showing minimal growth since December 31, 2018.  Van Ostenbridge reported, "On April 1, 2018, the Bank introduced a new line of relationship-focused deposit accounts and we are optimistic that these new Club accounts will assist and improving our deposit gathering efforts."

At March 31, 2019, the Corporation’s Tier 1 leverage ratio and total risk based capital ratio were 9.48% and 14.31%, respectively.  These ratios remain significantly above the respective 4.0% and 8.0% minimum levels required and result in categorizing the Corporation as a “well capitalized” institution under regulatory guidelines.

About Stewardship Financial Corporation
Stewardship 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 $11.2 million.  We invite you to visit our website at www.ASBnow.bank 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.