STEWARDSHIP FINANCIAL CORP - FORM 8-K - EX-99.1

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8-K - 8-K - STEWARDSHIP FINANCIAL CORP	form8k-15300_ssfn.htm

EXHIBIT 99.1

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

Stewardship Financial Corporation Announces Earnings for

Fourth Quarter and Year Ended December 31, 2015

Midland Park, NJ – February 24, 2016 – Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, today announced results for the fourth quarter and full year ended December 31, 2015. For the three months ended December 31, 2015, the Corporation reported net income available to common shareholders of $1.1 million, or $0.17 per diluted common share, compared to $1.1 million, or $0.19 per diluted common share, for the three months ended December 31, 2014. Net income available to common shareholders for the year ended December 31, 2015 of $3.7 million, or $0.62 per diluted common share, represented a significant increase over the $2.4 million, or $0.40 per diluted common share, earned for the year ended December 31, 2014.

Discussing the results, Paul Van Ostenbridge, Stewardship Financial Corporation’s President and Chief Executive Officer, commented, “Earnings reflect the impact of our loan growth and focus on noninterest income, while maintaining expense control. For 2015, we achieved 10.3% of growth in our loan portfolio and a 6.6% increase in fees and service charges while keeping expenses relatively flat.”

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Stewardship Financial Corporation, continued	February 24, 2016

Balance Sheet / Financial Condition

Total assets of $717.9 million at December 31, 2015 reflected an increase when compared to $693.6 million of assets at December 31, 2014. Since December 31, 2014, a $49.2 million increase in gross loans receivable was the result of new loan originations net of normal principal amortization and payoffs. In terms of total assets, the loan growth was partially offset by the previously reported sale of approximately $27.8 million of available for sale securities with higher price volatility. These sales provided a portion of the funding needed for the loan growth as well as a purposeful shift into higher yielding assets.

Deposit balances totaled $604.8 million at December 31, 2015 compared to $556.5 million a year earlier reflecting $48.3 million, or 8.7%, of growth. Van Ostenbridge noted, “This increase in deposits was important in our ability to cost effectively fund the growth we experienced in our loan portfolio.” In addition, as a result of an increase in deposits, other borrowings decreased $26.7 million to $40.0 million at December 31, 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 continued to exceed the capital requirements for a “well

Press Release - Midland Park, NJ
Stewardship Financial Corporation, continued	February 24, 2016

capitalized” institution. At December 31, 2015, the Corporation reported a tier 1 leverage ratio of 7.67% (4% requirement) and total risk based capital ratio of 14.34% (8% requirement).

Operating Results

Net interest income of $5.4 million and $21.8 million was reported for the three months and year ended December 31, 2015, respectively, compared to $5.8 million and $21.7 million for the same periods in 2014. The net interest margin for the current three months and year ended December 31, 2015 was 3.18% and 3.30%, respectively, compared to 3.57% and 3.46% for the three months and year ended December 31, 2014, respectively. The reduction 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.

For the three months ended December 31, 2015, the Corporation reported noninterest income of $855,000 compared to $990,000 for the equivalent prior year period. Noninterest income for the year ended December 31, 2015 was $3.5 million compared to $3.0 million for 2014. On a year-over-year basis, fees and service charges reflect an increase of $132,000. In addition, the current year gains on sales of mortgage loans of $141,000 represented a nearly 50% increase over 2014. Finally, the year ended December 31, 2014 included a loss of $241,000 from the sale of nonperforming loans.

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Stewardship Financial Corporation, continued	February 24, 2016

Noninterest expenses for the three months and year ended December 31, 2015 totaled $4.9 million and $20.2 million, relatively consistent with the $5.0 million and $20.2 million incurred for the comparable prior year periods.

Asset Quality

“We believe the stabilization of our nonperforming assets has been clearly demonstrated”, stated Van Ostenbridge. For the three months and year ended December 31, 2015, results continue to be positively impacted by the Corporation recording negative provisions for loan losses of $275,000 and $1.4 million, respectively. For the prior year, the Corporation recorded negative provisions of $300,000 and $50,000 for the three months and year ended December 31, 2014. The allowance for loan losses represented 1.68% of total gross loans compared to 2.01% at December 31, 2014. The recording of negative provisions for loan losses and the decline in the allowance coverage ratio are directly attributable to improved credit quality metrics of the portfolio and the reduction in the estimated level of allowance for loan losses required. Nonperforming loans were $1.9 million, or 0.36% of total loans at December 31, 2015 compared to $3.6 million, or 0.76%, at December 31, 2014. Total nonperforming assets of $2.8 million, which includes other real estate owned, represented 0.38% of total assets at December 31, 2015 compared to 0.71% at December 31, 2014.

Press Release - Midland Park, NJ
Stewardship Financial Corporation, continued	February 24, 2016

About Stewardship Financial Corporation

Stewardship Financial Corporation’s subsidiary, 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 $8.6 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)

	December 31,			September 30,			June 30,			March 31,			December 31,
	2015			2015			2015			2015			2014

Selected Financial Condition Data:
Cash and cash equivalents	$	10,910		$	16,025		$	19,782		$	21,035		$	10,086
Securities available for sale		93,354			86,994			90,850			94,553			124,918
Securities held to maturity		60,738			60,252			58,363			55,811			55,097
FHLB Stock		2,608			3,035			2,833			3,026			3,777
Loans receivable:
Loans receivable, gross		526,477			518,168			507,105			490,087			477,320
Allowance for loan losses		(8,823	)		(8,805	)		(9,299	)		(9,600	)		(9,602	)
Other, net		(98	)		(93	)		(132	)		(7	)		(19	)
Loans receivable, net		517,556			509,270			497,674			480,480			467,699

Loans held for sale		1,522			1,570			1,416			798			—
Other assets		31,200			30,503			30,273			30,114			31,974
Total assets	$	717,888		$	707,649		$	701,191		$	685,817		$	693,551


Noninterest-bearing deposits	$	147,828		$	151,078		$	153,546		$	141,406		$	136,721
Interest-bearing deposits		456,925			434,790			432,453			424,916			419,755
Total deposits		604,753			585,868			585,999			566,322			556,476
Other borrowings		40,000			49,500			45,000			50,000			66,700
Subordinated debentures		23,186			23,176			7,217			7,217			7,217
Other liabilities		2,376			2,087			2,123			2,166			4,189
Total liabilities		670,315			660,631			640,339			625,705			634,582
Shareholders' equity		47,573			47,018			60,852			60,112			58,969
Total liabilities and shareholders' equity	$	717,888		$	707,649		$	701,191		$	685,817		$	693,551

Gross loans to deposits		87.06%			88.44%			86.54%			86.54%			85.78%

Equity to assets		6.63%			6.64%			8.68%			8.77%			8.50%

Book value per share	$	7.82		$	7.72		$	7.53		$	7.42		$	7.29

Asset Quality Data:
Nonaccrual loans	$	1,882		$	2,574		$	2,539		$	2,798		$	3,628
Loans past due 90 days or more and accruing		—			—			—			—			—
Total nonperforming loans		1,882			2,574			2,539			2,798			3,628
Other real estate owned		880			587			219			320			1,308
Total nonperforming assets	$	2,762		$	3,161		$	2,758		$	3,118		$	4,936


Nonperforming loans to total loans		0.36%			0.50%			0.50%			0.57%			0.76%
Nonperforming assets to total assets		0.38%			0.45%			0.39%			0.45%			0.71%
Allowance for loan losses to nonperforming loans		468.81%			342.07%			366.25%			343.10%			264.66%
Allowance for loan losses to total gross loans		1.68%			1.70%			1.83%			1.96%			2.01%

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,
	2015			2014			2015			2014
Selected Operating Data:
Interest income	$	6,643		$	6,534		$	25,609		$	24,934
Interest expense		1,198			767			3,826			3,207
Net interest and dividend income		5,445			5,767			21,783			21,727
Provision for loan losses		(275	)		(300	)		(1,375	)		(50	)
Net interest and dividend income
after provision for loan losses		5,720			6,067			23,158			21,777
Noninterest income:
Fees and service charges		558			568			2,135			2,003
Bank owned life insurance		103			103			403			405
Gain on calls and sales of securities		17			165			169			165
Gain on sales of mortgage loans		24			26			141			72
Loss on sales of loans		—			—			—			(241	)
Gain on sales of other real estate owned		30			9			83			63
Other		123			119			562			493
Total noninterest income		855			990			3,493			2,960
Noninterest expenses:
Salaries and employee benefits		2,719			2,738			10,900			10,597
Occupancy, net		422			420			1,739			1,934
Equipment		159			157			655			687
Data processing		467			447			1,847			1,702
FDIC insurance premium		106			103			423			580
Other		1,027			1,179			4,615			4,733
Total noninterest expenses		4,900			5,044			20,179			20,233
Income before income tax expense		1,675			2,013			6,472			4,504
Income tax expense		614			712			2,272			1,419
Net income		1,061			1,301			4,200			3,085
Dividends on preferred stock		—			171			456			683
Net income available to common shareholders	$	1,061		$	1,130		$	3,744		$	2,402

Weighted avg. no. of diluted common shares		6,086,249			6,030,561			6,077,657			6,003,814
Diluted earnings per common share	$	0.17		$	0.19		$	0.62		$	0.40

Return on average common equity		8.89%			10.41%			8.14%			5.77%

Return on average assets		0.58%			0.75%			0.60%			0.46%

Yield on average interest-earning assets		3.87%			4.04%			3.87%			3.96%
Cost of average interest-bearing liabilities		0.92%			0.64%			0.77%			0.68%
Net interest rate spread		2.95%			3.40%			3.10%			3.28%

Net interest margin		3.18%			3.57%			3.30%			3.46%

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,
	2015			2015			2015			2015			2014
Selected Operating Data:
Interest income	$	6,643		$	6,412		$	6,360		$	6,194		$	6,534
Interest expense		1,198			993			842			793			767
Net interest and dividend income		5,445			5,419			5,518			5,401			5,767
Provision for loan losses		(275	)		(400	)		(600	)		(100	)		(300	)
Net interest and dividend income
after provision for loan losses		5,720			5,819			6,118			5,501			6,067
Noninterest income:
Fees and service charges		558			541			557			479			568
Bank owned life insurance		103			103			101			96			103
Gain on calls and sales of securities		17			—			—			152			165
Gain on sales of mortgage loans		24			52			55			10			26
Loss on sales of loans		—			—			—			—			—
Gain on sales of other real estate owned		30			—			—			53			9
Other		123			142			169			128			119
Total noninterest income		855			838			882			918			990
Noninterest expenses:
Salaries and employee benefits		2,719			2,785			2,688			2,708			2,738
Occupancy, net		422			427			423			467			420
Equipment		159			175			165			156			157
Data processing		467			468			459			453			447
FDIC insurance premium		106			87			117			113			103
Other		1,027			1,183			1,253			1,152			1,179
Total noninterest expenses		4,900			5,125			5,105			5,049			5,044
Income before income tax expense		1,675			1,532			1,895			1,370			2,013
Income tax expense		614			532			673			453			712
Net income		1,061			1,000			1,222			917			1,301
Dividends on preferred stock		—			114			171			171			171
Net income available to common shareholders	$	1,061		$	886		$	1,051		$	746		$	1,130

Weighted avg. no. of diluted common shares		6,086,249			6,091,627			6,086,474			6,045,683			6,030,561
Diluted earnings per common share	$	0.17		$	0.15		$	0.17		$	0.12		$	0.19

Return on average common equity		8.89%			7.58%			9.25%			6.77%			10.41%

Return on average assets		0.58%			0.56%			0.71%			0.54%			0.75%

Yield on average interest-earning assets		3.87%			3.80%			3.91%			3.90%			4.04%
Cost of average interest-bearing liabilities		0.92%			0.79%			0.70%			0.67%			0.64%
Net interest rate spread		2.95%			3.01%			3.21%			3.23%			3.40%

Net interest margin		3.18%			3.21%			3.40%			3.41%			3.57%

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