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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): NOVEMBER 8, 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 November 8, 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 September 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 November 8, 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:  November 8, 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


395695878_sfc1a21.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 Third Quarter of 2018

Midland Park, NJ - November 8, 2018 - Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, today announced results for the three and nine months ended September 30, 2018. The Corporation reported net income of $2.2 million, or $0.25 per share, and $6.3 million, or $0.72 per share, for the three and nine months ended September 30, 2018, respectively, compared to $1.6 million, or $0.19 per share, and $3.9 million, or $0.51 per share, for the corresponding prior year periods.

Stewardship Financial Corporation’s President and Chief Executive Officer Paul Van Ostenbridge, stated, “We are pleased to report another profitable quarter for the Corporation. Results reflected a continued positive trend in the organic growth of both loans and deposits.”

Operating Results
For the three and nine months ended September 30, 2018, the Corporation reported net interest income of $7.2 million and $21.0 million, respectively, demonstrating continued improvement over the $6.8 million and $19.5 million realized in the equivalent prior year periods. Net interest income continues to benefit from a

1


Press Release - Midland Park NJ
Stewardship Financial Corporation continued                     November 8, 2018


steady growth in assets that is being primarily driven by loan growth. Reflective of the current interest rate environment for the last several quarters, net interest margin continues to be relatively stable. "The Corporation has not participated in some of the unsustainable local competitive pricing pressures," noted Van Ostenbridge.

For both the three and nine months ended September 30, 2018, the Corporation recorded reversals of the allowance for loan losses resulting in negative provisions for loan losses of $490,000 and $1.6 million, respectively. This compares to positive provisions for loan losses of $20,000 and $580,000 for the three and nine months ended September 30, 2017, respectively. Notwithstanding the growth in the loan portfolio, the negative loan loss provisions reflect, in part, net recoveries of previously charged off loan balances of $41,000 and $747,000 for the three and nine months ended September 30, 2018, respectively. In addition, the negative provisions for loan losses reflect the continued improvement in the economic conditions and overall real estate climate in the primary business markets in which the Corporation operates. Van Ostenbridge commented, "Our allowance for loan losses to gross loans of 1.08% at September 30, 2018 is in line with peers."

Noninterest income for the three and nine months ended September 30, 2018 was $837,000 and $2.4 million, respectively, compared to $845,000 and $2.5 million in the same prior year periods. In connection with the establishment of a Small Business Administration ("SBA") department in late 2017, noninterest income for the three and nine months ended September 30, 2018 included $70,000 and $129,000, respectively, of gains from the sale of the guaranteed portion of newly originated SBA loans. Offsetting these gains, the three and nine months ended September 30, 2018 reflected $34,000 and $137,000, 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 accounting rules enacted earlier in 2018, equity securities now require a quarterly mark to market through the income statement.

2


Press Release - Midland Park NJ
Stewardship Financial Corporation continued                     November 8, 2018


For the three and nine months ended September 30, 2018, noninterest expenses were $5.6 million and $16.5 million, respectively, compared to $5.0 million and $15.2 million in the comparable prior year periods. An increase in salaries and employee benefits is partially attributable to the costs associated with the establishment of the previously mentioned SBA Lending Department - fully staffed with experienced employees. Certain costs associated with the recent launch of a new and improved website (ASBnow.bank) are also included in noninterest expenses for the three and nine months ended September 30, 2018. Van Ostenbridge noted, "Additional expense is incurred to support continued growth in the balance sheet, but management remains committed to appropriately controlling our expenses.”

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”). Partially offsetting the lower Federal corporate income tax rate was the enactment of legislation by the State of New Jersey in July of 2018, which increased the corporate income tax rate to 11.5% from 9% for taxable income of $1.0 million or more retroactively to January 1, 2018. For the current three and nine month periods the effective tax rate was 27.3% and 26.9%, respectively, compared to an effective tax rate of 37.2% and 36.9% for the three and nine months ended September 30, 2017, respectively.

Balance Sheet / Financial Condition
At September 30, 2018, total assets of $948.1 million reflected a $19.3 million increase from assets of $928.8 million at December 31, 2017. The growth in assets was primarily driven by organic loan originations which contributed to an $18.5 million increase in net loans. During the first nine months of 2018, the loan portfolio reflected unusually high prepayment activity.

At September 30, 2018, total deposits were $786.6 million, showing net growth of $22.5 million since

3


Press Release - Midland Park NJ
Stewardship Financial Corporation continued                     November 8, 2018


December 31, 2017. The Corporation reported net growth of $17.4 million in noninterest-bearing accounts
and $5.0 million in interest-bearing accounts.

The Corporation's regulatory capital levels all remain above the levels considered to be "well capitalized"
under the applicable regulations. The Tier 1 leverage ratio was 9.21% at September 30, 2018 compared to 8.88% at December 31, 2017. The total risk based capital ratio at September 30, 2018 and December 31, 2017 were 14.34% and 14.29%, respectively.

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.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.


4


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,
 
2018
 
2018
 
2018
 
2017
 
2017
 
 
 
 
 
 
 
 
 
 
Selected Financial Condition Data:
 
 
 
 
 
 
 
 
 
     Cash and cash equivalents
$
10,839

 
$
13,529

 
$
22,178

 
$
21,270

 
$
17,213

     Securities available for sale
109,764

 
112,594

 
106,467

 
109,259

 
111,973

     Securities held to maturity
62,227

 
58,471

 
51,894

 
52,442

 
53,323

     Other equity investments
3,661

 
3,694

 
3,706

 
3,756

 
3,760

     FHLB stock
3,552

 
3,087

 
3,039

 
3,715

 
3,919

     Loans held for sale
—

 
607

 
—

 
370

 
688

     Loans receivable:
 
 
 
 
 
 
 
 
 
          Loans receivable, gross
729,475

 
722,148

 
708,169

 
711,720

 
691,953

          Allowance for loan losses
(7,904
)
 
(8,353
)
 
(8,445
)
 
(8,762
)
 
(8,614
)
          Other, net
(483
)
 
(484
)
 
(448
)
 
(397
)
 
(422
)
     Loans receivable, net
721,088

 
713,311

 
699,276

 
702,561

 
682,917

     Bank owned life insurance
21,498

 
21,360

 
21,222

 
21,084

 
20,943

     Other assets
15,484

 
15,034

 
14,659

 
14,309

 
15,958

     Total assets
$
948,113

 
$
941,687

 
$
922,441

 
$
928,766

 
$
910,694

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Noninterest-bearing deposits
$
190,303

 
$
188,343

 
$
178,572

 
$
172,861

 
$
171,609

     Interest-bearing deposits
596,263

 
603,718

 
593,644

 
591,238

 
569,352

     Total deposits
786,566

 
792,061

 
772,216

 
764,099

 
740,961

     Other borrowings
56,800

 
46,700

 
48,760

 
63,760

 
68,760

     Subordinated debentures and


 


 
 
 
 
 
 
        subordinated notes
23,366

 
23,350

 
23,333

 
23,317

 
23,301

     Other liabilities
3,462

 
3,388

 
3,760

 
3,925

 
3,564

     Total liabilities
870,194

 
865,499

 
848,069

 
855,101

 
836,586

     Shareholders' equity
77,919

 
76,188

 
74,372

 
73,665

 
74,108

     Total liabilities and shareholders' equity
$
948,113

 
$
941,687

 
$
922,441

 
$
928,766

 
$
910,694

 
 
 
 
 
 
 
 
 
 
     Gross loans to deposits
92.74
%
 
91.17
%
 
91.71
%
 
93.14
%
 
93.39
%
 
 
 
 
 
 
 
 
 
 
     Equity to assets
8.22
%
 
8.09
%
 
8.06
%
 
7.93
%
 
8.14
%
 
 
 
 
 
 
 
 
 
 
     Shares outstanding
8,678,454

 
8,676,843

 
8,674,890

 
8,652,804

 
8,645,316

     Book value per share
$
8.98

 
$
8.78

 
$
8.57

 
$
8.51

 
$
8.57

 
 
 
 
 
 
 
 
 
 
Asset Quality Data:
 
 
 
 
 
 
 
 
 
     Nonaccrual loans
$
1,271

 
$
1,283

 
$
1,136

 
$
1,194

 
$
806

     Loans past due 90 days or more and
 
 
 
 
 
 
 
 
 
        accruing
—

 
—

 
—

 
—

 
—

     Total nonperforming loans
1,271

 
1,283

 
1,136

 
1,194

 
806

     Other real estate owned
—

 
—

 
—

 
—

 
—

     Total nonperforming assets
$
1,271

 
$
1,283

 
$
1,136

 
$
1,194

 
$
806

 
 
 
 
 
 
 
 
 
 
     Nonperforming loans to total loans
0.17
%
 
0.18
%
 
0.16
%
 
0.17
%
 
0.12
%
     Nonperforming assets to total assets
0.13
%
 
0.14
%
 
0.12
%
 
0.13
%
 
0.09
%
     Allowance for loan losses to total gross
 
 
 
 
 
 
 
 
 
        loans
1.08
%
 
1.16
%
 
1.19
%
 
1.23
%
 
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 nine months ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Selected Operating Data:
 
 
 
 
 
 
 
Interest income
$
9,215

 
$
8,400

 
$
26,622

 
$
23,767

Interest expense
2,013

 
1,577

 
5,589

 
4,230

Net interest income
7,202

 
6,823

 
21,033

 
19,537

Provision for loan losses
(490
)
 
20

 
(1,605
)
 
580

Net interest income after provision for loan losses
7,692

 
6,803

 
22,638

 
18,957

Noninterest income:
 
 
 
 
 
 
 
Fees and service charges
542

 
524

 
1,600

 
1,578

Bank owned life insurance
138

 
141

 
414

 
385

Gain on calls and sales of securities
—

 
1

 
6

 
1

Gain on sales of mortgage loans
12

 
68

 
43

 
123

Gain on sales of SBA loans
70

 
—

 
129

 
—

Gain on sale of other real estate owned
—

 
—

 
—

 
13

Miscellaneous
75

 
111

 
229

 
357

Total noninterest income
837

 
845

 
2,421

 
2,457

Noninterest expenses:
 
 
 
 
 
 
 
Salaries and employee benefits
3,198

 
2,843

 
9,436

 
8,567

Occupancy, net
426

 
414

 
1,271

 
1,216

Equipment
186

 
173

 
555

 
497

Data processing
489

 
444

 
1,451

 
1,369

Advertising
192

 
182

 
556

 
529

FDIC insurance premium
66

 
50

 
200

 
236

Charitable contributions
180

 
130

 
555

 
375

Bank-card related services
133

 
137

 
391

 
421

Other real estate owned, net
—

 
—

 
—

 
24

Miscellaneous
684

 
663

 
2,071

 
1,999

Total noninterest expenses
5,554

 
5,036

 
16,486

 
15,233

Income before income tax expense
2,975

 
2,612

 
8,573

 
6,181

Income tax expense
813

 
972

 
2,302

 
2,282

Net income
$
2,162

 
$
1,640

 
$
6,271

 
$
3,899

 
 
 
 
 
 
 
 
Weighted avg. no. of diluted common shares
8,677,445

 
8,643,737

 
8,670,662

 
7,656,942

Diluted earnings per common share
$
0.25

 
$
0.19

 
$
0.72

 
$
0.51

 
 
 
 
 
 
 
 
Return on average common equity
11.14
%
 
8.83
%
 
11.13
%
 
8.02
%
 
 
 
 
 
 
 
 
Return on average assets
0.90
%
 
0.71
%
 
0.90
%
 
0.60
%
 
 
 
 
 
 
 
 
Yield on average interest-earning assets
4.04
%
 
3.80
%
 
3.99
%
 
3.83
%
Cost of average interest-bearing liabilities
1.18
%
 
0.94
%
 
1.12
%
 
0.89
%
Net interest rate spread
2.86
%
 
2.86
%
 
2.87
%
 
2.94
%
 
 
 
 
 
 
 
 
Net interest margin
3.16
%
 
3.09
%
 
3.15
%
 
3.15
%


6


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,
 
2018
 
2018
 
2018
 
2017
 
2017
Selected Operating Data:
 
 
 
 
 
 
 
 
 
Interest income
$
9,215

 
$
8,868

 
$
8,539

 
$
8,463

 
$
8,400

Interest expense
2,013

 
1,860

 
1,716

 
1,628

 
1,577

Net interest income
7,202

 
7,008

 
6,823

 
6,835

 
6,823

Provision for loan losses
(490
)
 
(780
)
 
(335
)
 
75

 
20

Net interest and dividend income
after provision for loan losses
7,692

 
7,788

 
7,158

 
6,760

 
6,803

Noninterest income:
 
 
 
 
 
 
 
 
 
Fees and service charges
542

 
551

 
507

 
533

 
524

Bank owned life insurance
138

 
138

 
138

 
141

 
141

Gain on calls and sales of securities
—

 
—

 
6

 
—

 
1

Gain on sales of mortgage loans
12

 
9

 
22

 
55

 
68

Gain on sales of SBA loans
70

 
59

 
—

 
—

 
—

Miscellaneous
75

 
102

 
52

 
121

 
111

Total noninterest income
837

 
859

 
725

 
850

 
845

Noninterest expenses:
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
3,198

 
3,129

 
3,109

 
2,888

 
2,843

Occupancy, net
426

 
403

 
442

 
414

 
414

Equipment
186

 
188

 
181

 
176

 
173

Data processing
489

 
478

 
484

 
442

 
444

Advertising
192

 
207

 
157

 
171

 
182

FDIC insurance premium
66

 
70

 
64

 
86

 
50

Charitable contributions
180

 
195

 
180

 
240

 
130

Bank-card related services
133

 
131

 
127

 
130

 
137

Miscellaneous
684

 
703

 
684

 
521

 
663

Total noninterest expenses
5,554

 
5,504

 
5,428

 
5,068

 
5,036

Income before income tax expense
2,975

 
3,143

 
2,455

 
2,542

 
2,612

Income tax expense
813

 
842

 
647

 
2,494

 
972

Net income
$
2,162

 
$
2,301

 
$
1,808

 
$
48

 
$
1,640

 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
Weighted avg. no. of diluted common
shares
8,677,445

 
8,675,868

 
8,658,506

 
8,648,191

 
8,643,737

Diluted earnings per common share
$
0.25

 
$
0.27

 
$
0.21

 
$
0.01

 
$
0.19

 
 
 
 
 
 
 
 
 
 
Return on average common equity
11.14
%
 
12.32
%
 
9.92
%
 
0.26
%
 
8.83
%
 
 
 
 
 
 
 
 
 
 
Return on average assets
0.90
%
 
0.99
%
 
0.80
%
 
0.02
%
 
0.71
%
 
 
 
 
 
 
 
 
 
 
Yield on average interest-earning assets
4.04
%
 
3.99
%
 
3.94
%
 
3.82
%
 
3.80
%
Cost of average interest-bearing liabilities
1.18
%
 
1.12
%
 
1.04
%
 
0.97
%
 
0.94
%
Net interest rate spread
2.86
%
 
2.87
%
 
2.90
%
 
2.85
%
 
2.86
%
 
 
 
 
 
 
 
 
 
 
Net interest margin
3.16
%
 
3.16
%
 
3.15
%
 
3.09
%
 
3.09
%

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
%
 
 
 
 
 


8
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