Stewardship Financial (SSFN) 8-K Earnings For The Second Quarter of 2018

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

1

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

2

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.

3

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.

4

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		%

8