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Section 1: 8-K (8-K)

Document


 
 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
 
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 9, 2018
 
 
 
 
 
 
Stewardship Financial Corporation
(Exact Name of Registrant as Specified in Charter)
 
 
 
 
New Jersey
(State or other jurisdiction of
incorporation)
1-33377
(Commission File Number)
22-3351447
(I.R.S. Employer Identification No.)
 
 
 
630 Godwin Avenue
Midland Park, NJ
(Address of principal executive offices)
 
07432
(Zip Code)
 
 
 
Registrant’s telephone number, including area code: (201) 444-7100

Not Applicable
(Former name or former address, if changed since last report)
 
 
 
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 
 
 
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
Emerging growth company [ ]
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
 
 






Item 2.02. Results of Operations and Financial Condition
 
On August 9, 2018, Stewardship Financial Corporation (the "Corporation") issued a press release, furnished as Exhibit 99.1 and incorporated in this Item 2.02 by reference, announcing the Corporation’s financial results for the quarter ended June 30, 2018.
The information contained in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished, and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18. Furthermore, the information contained in this Current Report on Form 8-K, including Exhibit 99.1, shall not be incorporated by reference into any registration statement filed by the Corporation under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. The furnishing of the information in this Report is not intended to, and does not, constitute a determination or admission by the Corporation that the information in this Report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Corporation.
 
Item 9.01. Financial Statements and Exhibits
 
The following exhibit is furnished pursuant to Item 2.02 and shall not be deemed to be "filed":
 
Exhibit No.  
 
Description
 
 
 
 
 
 
Press Release dated August 9, 2018





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
STEWARDSHIP FINANCIAL CORPORATION
 
 
 
 
Date:  August 10, 2018
 
 
 
 
 
 
 
 
By:
 /s/ Claire M. Chadwick
 
 
Name:
Claire M. Chadwick
 
 
Title:
Executive Vice President and Chief Financial Officer
 
 
 
 
 
 





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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


394600268_sfc1a18.jpg

For Immediate Release
 
Contact:
 
 
 
Claire M. Chadwick
 
 
 
Executive Vice President and
 
 
 
Chief Financial Officer
 
 
 
630 Godwin Avenue
 
 
 
Midland Park, NJ 07432
 
 
 
P: 201.444.7100
 
    
PRESS RELEASE

Stewardship Financial Corporation Announces
Earnings For The Second Quarter of 2018

Midland Park, NJ - August 9, 2018 - 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 Results
The 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

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Press Release - Midland Park NJ
Stewardship Financial Corporation continued                         August 9, 2018


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

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Press Release - Midland Park NJ
Stewardship Financial Corporation continued                         August 9, 2018


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 Condition
Total 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.

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Press Release - Midland Park NJ
Stewardship Financial Corporation continued                         August 9, 2018


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 $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.


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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
%

5



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
%


6



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
%

7



Stewardship Financial Corporation
Non-GAAP Reconciliation
(dollars in thousands, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
For the three
months 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
%
 
 
 
 
 


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