Stewardship Financial (SSFN) 8-K Earnings For The Second Quarter of 2017

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

Stewardship Financial Corporation Announces

Earnings For The Second Quarter of 2017

Midland Park, NJ - August 8, 2017- Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, announced net income for the three and six months ended June 30, 2017 of $1.3 million and $2.3 million, respectively, compared to net income of $1.4 million and $2.4 million for the three and six months ended June 30, 2016. Current year periods were relatively comparable to the same prior year periods, however, the three and six month periods of 2017 reflected provision for loan losses of $260,000 and $560,000 as a result of robust loan growth, while the three and six months ended June 30, 2016 included recoveries of the allowance for loan losses of $450,000 and $800,000, respectively.

Earlier in the quarter, the Corporation announced the successful completion of an underwritten public offering of 2,509,090 shares of the Corporation’s common stock, which included 327,272 shares issued pursuant to the full exercise of the underwriter’s over-allotment option, at a price to the public of $8.25 per share, for aggregate gross proceeds of $20.7 million. The net proceeds to the Corporation, after deducting the underwriting discount and offering expenses, were $18.9 million. The Corporation expects to use the net proceeds of this offering to support organic growth and other general corporate purposes. In connection with the raise of capital, an approximate $20.0 million leverage transaction was completed.

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Press Release - Midland Park NJ

Stewardship Financial Corporation continued August 8, 2017

Further, the Corporation celebrated the June 2017 opening of a new branch and loan production office in Morristown, New Jersey. Paul Van Ostenbridge, Stewardship Financial Corporation’s President and Chief Executive Officer remarked that, “Our Morristown location, which expands our presence in Morris County, will continue to meet the needs of our customers. This new location offers additional conveniences such as advanced technology with a new Interactive Teller Machine, which combines ATM functions with access to a live teller, as well as lending solutions tailored to meet customers’ requests with a commercial lender on-site to provide localized decision-making.”

With respect to the activity during 2017, Van Ostenbridge noted, “In addition to a number of positive accomplishments, the Corporation continued to demonstrate the ability to generate solid core earnings. We were able to maintain expense levels and provide for loan loss reserves for our increasing loan portfolio while continuing to grow assets and increase revenue.”

Operating Results

The Corporation reported net interest income of $6.5 million and $12.7 million for the three and six months ended June 30, 2017, respectively, compared to $5.9 million and $11.1 million for the comparable prior year periods. Net interest income benefited from the recent growth in the average balance of the loan portfolio. The net interest margin for the current three and six month periods was 3.14% and 3.18%, respectively, compared to 3.38% and 3.24% for the three and six months ended June 30, 2016. The compression in margin in the 2017 periods when compared to prior periods is generally reflective of asset growth in an environment with a flattening of the yield curve and, to a lesser extent, the impact of the previously mentioned leverage strategy.

For the three and six months ended June 30, 2017, noninterest income was $813,000 and $1.6 million, respectively, compared to $832,000 and $1.7 million in the equivalent prior year periods. Excluding $32,000

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Stewardship Financial Corporation continued August 8, 2017

and $56,000 of gains from securities transactions, noninterest income would have been $800,000 and $1.6 million for the three and six months ended June 30, 2016, which are comparable to the current year periods.

Noninterest expenses for the three and six months ended June 30, 2017 were $5.1 million and $10.2 million, respectively, compared to $5.0 million and $9.9 million in the comparable prior year periods.“Even with the substantial growth in assets, we have been able to effectively manage our infrastructure and expenses, resulting in an improvement in our efficiency,” stated Van Ostenbridge.

Balance Sheet / Financial Condition

Total assets at June 30, 2017 were $913.3 million, reflecting an increase of $117.8 million from the $795.5 million of assets at December 31, 2016. The strong organic loan origination levels accounted for $88.0 million of net growth in the gross loan portfolio during the six months ended June 30, 2017.

The continued funding of loan growth has been supported by deposits and, to a lesser extent, borrowings. Total deposits were $720.9 million at June 30, 2017, reflecting net growth of $62.0 million since December 31, 2016. Other borrowings increased to $93.8 million at June 30, 2017 compared to $59.2 million at December 31, 2016. Approximately $20 million of the growth in other borrowings can be attributed to the $20.0 million leverage strategy.

Regulatory capital levels at June 30, 2017 include the net proceeds of $18.9 million from the Corporation's public offering of common stock. The Corporation’s Tier 1 leverage ratio and total risk based capital ratio were 9.15% and 14.36%, respectively, compared to 7.65% and 13.10% at December 31, 2016, respectively.

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Stewardship Financial Corporation continued                         August 8, 2017

About Stewardship Financial Corporation

Stewardship Financial Corporation’s subsidiary, the Atlantic Stewardship Bank, is a full-service community bank serving both individuals and businesses. ASB is known for tithing, or sharing, 10% of its taxable income with nonprofit, educational, charitable and/or evangelical religious organizations. To date, ASB’s total tithing donations total over $ 9.3 million. ASB maintains 12 banking locations in NJ including; Hawthorne, Midland Park, Montville, Morristown, North Haledon, Pequannock, Ridgewood, Waldwick, Westwood, Wyckoff and two offices in Wayne. ASB invites you to visit their website at www.asbnow.com for additional information and to learn more.

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,
	2017			2017			2016			2016			2016
Selected Financial Condition Data:
Cash and cash equivalents	$	19,459		$	12,793		$	11,680		$	21,025		$	13,901
Securities available for sale	116,244			95,632			98,583			103,546			98,533
Securities held to maturity	52,091			52,805			52,330			54,179			65,666
FHLB stock	5,169			3,784			3,515			2,425			2,650
Loans held for sale	446			188			773			300			581
Loans receivable:
Loans receivable, gross	692,056			654,769			604,083			552,106			537,638
Allowance for loan losses	(8,550		)	(8,246		)	(7,905		)	(8,150		)	(8,388		)
Other, net	(344		)	(327		)	(226		)	(110		)	(25		)
Loans receivable, net	683,162			646,196			595,952			543,846			529,225
Other real estate owned, net	—			401			401			834			834
Bank owned life insurance	20,802			16,673			16,558			16,439			16,320
Other assets	15,934			15,927			15,743			15,333			14,877
Total assets	$	913,307		$	844,399		$	795,535		$	757,927		$	742,587
Noninterest-bearing deposits	$	177,678		$	170,566		$	169,306		$	172,072		$	160,461
Interest-bearing deposits	543,215			530,138			489,624			474,012			466,008
Total deposits	720,893			700,704			658,930			646,084			626,469
Other borrowings	93,760			65,200			59,200			35,000			40,000
Subordinated debentures and subordinated notes	23,284			23,268			23,252			23,235			23,219
Other liabilities	2,859			2,810			2,766			2,040			2,213
Total liabilities	840,796			791,982			744,148			706,359			691,901
Shareholders' equity	72,511			52,417			51,387			51,568			50,686
Total liabilities and shareholders' equity	$	913,307		$	844,399		$	795,535		$	757,927		$	742,587
Gross loans to deposits	96.00		%	93.44		%	91.68		%	85.45		%	85.82		%
Equity to assets	7.94		%	6.21		%	6.46		%	6.80		%	6.83		%
Book value per share	$	8.39		$	8.55		$	8.39		$	8.43		$	8.29
Asset Quality Data:
Nonaccrual loans	$	826		$	592		$	606		$	929		$	949
Loans past due 90 days or more and accruing	320			—			—			—			—
Total nonperforming loans	1,146			592			606			929			949
Other real estate owned	—			401			401			834			834
Total nonperforming assets	$	1,146		$	993		$	1,007		$	1,763		$	1,783
Nonperforming loans to total loans	0.17		%	0.09		%	0.10		%	0.17		%	0.18		%
Nonperforming assets to total assets	0.13		%	0.12		%	0.13		%	0.23		%	0.24		%
Allowance for loan losses to total gross loans	1.24		%	1.26		%	1.31		%	1.48		%	1.56		%

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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,
			2017			2016			2017			2016
Selected Operating Data:
	Interest income		$	7,943		$	6,979		$	15,367		$	13,428
	Interest expense		1,409			1,124			2,653			2,297
		Net interest income	6,534			5,855			12,714			11,131
	Provision for loan losses		260			(450		)	560			(800		)
	Net interest income
		after provision for loan losses	6,274			6,305			12,154			11,931
	Noninterest income:
		Fees and service charges	519			530			1,054			1,059
		Bank owned life insurance	129			107			244			208
		Gain on calls and sales of securities	—			32			—			56
		Gain on sales of mortgage loans	38			19			55			37
		Gain on sales of other real estate owned	13			6			13			6
		Miscellaneous	114			138			246			285
		Total noninterest income	813			832			1,612			1,651
	Noninterest expenses:
		Salaries and employee benefits	2,880			2,742			5,724			5,457
		Occupancy, net	393			404			802			802
		Equipment	162			148			324			298
		Data processing	456			477			925			949
		Advertising	211			157			347			308
		FDIC insurance premium	109			90			186			196
		Charitable contributions	120			90			245			160
		Bank-card related services	142			150			284			281
		Other real estate owned, net	9			28			24			102
		Miscellaneous	601			713			1,336			1,348
		Total noninterest expenses	5,083			4,999			10,197			9,901
Income before income tax expense			2,004			2,138			3,569			3,681
Income tax expense			736			776			1,310			1,328
Net income			$	1,268		$	1,362		$	2,259		$	2,353
Weighted avg. no. of diluted common shares			8,174,484			6,111,729			7,155,367			6,102,040
Diluted earnings per common share			$	0.16		$	0.22		$	0.32		$	0.39
Return on average common equity			7.37		%	11.05		%	7.52		%	9.64		%
Return on average assets			0.58		%	0.74		%	0.54		%	0.65		%
Yield on average interest-earning assets			3.81		%	4.02		%	3.84		%	3.91		%
Cost of average interest-bearing liabilities			0.90		%	0.86		%	0.87		%	0.88		%
Net interest rate spread			2.91		%	3.16		%	2.97		%	3.03		%
Net interest margin			3.14		%	3.38		%	3.18		%	3.24		%

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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,
			2017			2017			2016			2016			2016
Selected Operating Data:
	Interest income		$	7,943		$	7,424		$	7,000		$	6,657		$	6,979
	Interest expense		1,409			1,244			1,103			1,113			1,124
		Net interest income	6,534			6,180			5,897			5,544			5,855
	Provision for loan losses		260			300			(300		)	(250		)	(450		)
	Net interest and dividend income
		after provision for loan losses	6,274			5,880			6,197			5,794			6,305
	Noninterest income:
		Fees and service charges	519			535			564			536			530
		Bank owned life insurance	129			115			119			120			107
		Gain on calls and sales of securities	—			—			1			6			32
		Gain on sales of mortgage loans	38			17			94			33			19
		Gain on sales of other real estate owned	13			—			30			—			6
		Miscellaneous	114			132			129			128			138
		Total noninterest income	813			799			937			823			832
	Noninterest expenses:
		Salaries and employee benefits	2,880			2,844			2,735			2,788			2,742
		Occupancy, net	393			409			396			400			404
		Equipment	162			162			156			155			148
		Data processing	456			469			481			485			477
		Advertising	211			136			196			165			157
		FDIC insurance premium	109			77			21			100			90
		Charitable contributions	120			125			135			80			90
		Bank-card related services	142			142			148			150			150
		Other real estate owned, net	9			15			14			27			28
		Miscellaneous	601			735			720			649			713
		Total noninterest expenses	5,083			5,114			5,002			4,999			4,999
Income before income tax expense			2,004			1,565			2,132			1,618			2,138
Income tax expense			736			574			784			583			776
Net income			$	1,268		$	991		$	1,348		$	1,035		$	1,362
Weighted avg. no. of diluted common shares			8,174,484			6,124,926			6,119,693			6,115,987			6,111,729
Diluted earnings per common share			$	0.16		$	0.16		$	0.22		$	0.17		$	0.22
Return on average common equity			7.37		%	7.71		%	10.40		%	8.06		%	11.05		%
Return on average assets			0.58		%	0.49		%	0.69		%	0.54		%	0.74		%
Yield on average interest-earning assets			3.81		%	3.88		%	3.77		%	3.68		%	4.02		%
Cost of average interest-bearing liabilities			0.90		%	0.84		%	0.80		%	0.83		%	0.86		%
Net interest rate spread			2.91		%	3.04		%	2.97		%	2.85		%	3.16		%
Net interest margin			3.14		%	3.23		%	3.18		%	3.07		%	3.38		%

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