Stewardship Financial Corporation Announces Earnings for Second Quarter of 2013

MIDLAND PARK, NJ--(Marketwired - Aug 9, 2013) -  Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, announced net income for the three months ended June 30, 2013 of $461,000 as contrasted to a net loss of $324,000 for the three months ended June 30, 2012. For the six months ended June 30, 2013, the Corporation reported net income of $1.3 million compared to net income of $452,000 for the corresponding six month period in 2012. After dividends on preferred stock, the net income available to the common shareholders was $990,000, or $0.17 per diluted common share, for the first six months of 2013 compared to $339,000, or $0.06 per diluted common share, for the comparable period of 2012.

The Corporation reported net interest income of $5.7 million and $11.5 million for the three and six months ended June 30, 2013, compared to $6.0 million and $12.0 million for the equivalent prior year periods. The net interest margin for the current three and six months ended June 30, 2013 of 3.55% and 3.66%, respectively, compared to 3.69% and 3.70% for the three and six months ended June 30, 2012, respectively. The compression in margins continues to be primarily attributable to reduced asset yields resulting from the prolonged, low interest rate environment.

For the three and six months ended June 30, 2013, the Corporation recorded provisions for loan losses of $850,000 and $2.5 million, respectively, compared to $2.9 million and $4.7 million for the three and six months ended June 30, 2012, respectively. Paul Van Ostenbridge, Stewardship Financial Corporation's President and Chief Executive Officer commented, "The 2013 provision for loan losses is partially reflective of the reduction in nonperforming loans. While the economic environment remains challenging for our borrowers, the Corporation has seen stabilization and declines in problem loans over the past twelve months."

Nonperforming loans decreased to $14.7 million, or 3.33% of total loans at June 30, 2013, compared to $18.2 million, or 4.14% at December 31, 2012. At June 30, 2013, nonperforming loans are approximately one-half of the $29.7 million, or 6.68%, reported a year earlier. The ratio of allowance for loan losses to nonperforming loans increased to 73.30% at June 30, 2013, providing additional allowance coverage as compared to 58.31% at December 31, 2012 and 40.13% at June 30, 2012.

With respect to the Corporation's level of non-performing loans, Van Ostenbridge stated, "We continue to be encouraged by our progress over the past year. As problem loans continue to migrate through the lengthy workout phase, often concluding with foreclosure, we believe additional declines in nonperforming loans would occur."

For the three and six months ended June 30, 2013, noninterest income was $1.0 million and $2.5 million, respectively, compared to $1.3 million and $2.9 million for the corresponding prior year periods. While the six month period for 2013 included $537,000 as a result of a death benefit insurance payment received, the 2012 periods include increased gains realized from the sale of securities and other real estate owned.

Total noninterest expenses were $5.1 million and $10.1 million for the three and six months ended June 30, 2013. For the three and six months ended June 30, 2012, noninterest expenses were $4.8 million and $9.7 million, respectively. The increase in noninterest expenses reflects higher salary and employee benefits expense, reflective of increasing regulatory compliance and the attendant staffing necessary to oversee all compliance-related issues. In addition, the increase in salary and employee benefits expense is the result of an increased focus on commercial lending opportunities as well as costs associated with an enhanced credit review function.

Total assets at June 30, 2013 were $688.8 million -- relatively comparable to assets of $688.4 million at December 31, 2012. Gross loans receivable increased $1.6 million from December 30, 2012, reflective of new loans recorded partially offset by payoffs and normal principal amortization.

Total deposits of $592.7 million at June 30, 2013 show $2.4 million of deposit growth when compared to deposits of $590.3 million at December 31, 2012. The composition of deposits continues to reflect a shift from interest-bearing to noninterest-bearing. From December 31, 2012 to June 30, 2013 the Corporation's noninterest-bearing deposit balances increased $21.1 million, or 24.5% of total deposits, up from 21.1% at December 31, 2012.

In concluding his remarks, Van Ostenbridge noted, "We are now seeing slow and steady progress in reducing our problem loans indicating that the resources we have devoted are providing the appropriate results. More improvement is needed and we are fully committed to this goal."

Stewardship Financial Corporation's subsidiary, Atlantic Stewardship Bank, has 13 banking offices in Midland Park, Hawthorne (2), Montville, North Haledon, Pequannock, Ridgewood, Waldwick, Wayne (3), Westwood and Wyckoff, New Jersey. The Bank is known for tithing 10% of its pre-tax profits to Christian and local charities. 

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, which forward looking statements 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)
				June 30,				March 31,				December 31,				June 30,
				2013				2013				2012				2012
Selected Financial Condition Data:
	Cash and cash equivalents			$	14,322			$	26,144			$	21,016			$	25,340
	Securities available for sale				181,676				175,493				174,700				172,712
	Securities held to maturity				28,119				28,548				29,718				32,993
	FHLB Stock				2,133				2,213				2,213				2,213
	Loans receivable:
		Loans receivable, gross			442,006				441,533				440,423				445,267
		Allowance for loan losses			(10,787	)			(11,512	)			(10,641	)			(11,934	)
		Other, net			134				62				50				45
	Loans receivable, net				431,353				430,083				429,832				433,378
	Loans held for sale				2,054				2,101				784				3,334
	Other assets				29,175				29,344				30,125				30,158
	Total assets			$	688,832			$	693,926			$	688,388			$	700,128
	Noninterest-bearing deposits			$	145,388			$	132,960			$	124,286			$	124,017
	Interest-bearing deposits				447,311				462,578				465,968				469,478
	Total deposits				592,699				595,538				590,254				593,495
	Other borrowings				25,000				25,000				25,000				25,000
	Securities sold under agreements to repurchase				7,344				7,344				7,343				14,342
	Subordinated debentures				7,217				7,217				7,217				7,217
	Other liabilities				2,280				2,152				2,228				2,183
	Shareholders' equity				54,292				56,675				56,346				57,891
	Total liabilities and shareholders' equity			$	688,832			$	693,926			$	688,388			$	700,128
	Equity to assets				7.88	%			8.17	%			8.19	%			8.27	%
Asset Quality Data:
	Nonaccrual loans			$	14,716			$	17,479			$	18,011			$	29,541
	Loans past due 90 days or more and accruing				-				50				237				200
	Total nonperforming loans				14,716				17,529				18,248				29,741
	Other real estate owned				1,072				876				1,058				1,991
	Total nonperforming assets			$	15,788			$	18,405			$	19,306			$	31,732
	Nonperforming loans to total loans				3.33	%			3.97	%			4.14	%			6.68	%
	Nonperforming assets to total assets				2.29	%			2.65	%			2.80	%			4.53	%
	Allowance for loan losses to nonperforming loans				73.30	%			65.67	%			58.31	%			40.13	%
	Allowance for loan losses to total gross loans				2.44	%			2.61	%			2.42	%			2.68	%

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,
				2013				2012				2013				2012
Selected Operating Data:
	Interest income			$	6,636			$	7,317			$	13,506			$	14,833
	Interest expense				958				1,357				1,962				2,822
		Net interest and dividend income			5,678				5,960				11,544				12,011
	Provision for loan losses				850				2,900				2,450				4,665
	Net interest and dividend income after provision for loan losses				4,828				3,060				9,094				7,346
	Noninterest income:
		Fees and service charges			492				531				948				1,046
		Bank owned life insurance			77				81				153				161
		Gain on calls and sales of securities			-				12				2				445
		Gain on sales of mortgage loans			298				154				460				565
		Gain on sales of other real estate owned			-				370				126				469
		Gain on life insurance proceeds			-				-				537				-
		Other			128				133				243				244
		Total noninterest income			995				1,281				2,469				2,930
	Noninterest expenses:
		Salaries and employee benefits			2,711				2,257				5,407				4,643
		Occupancy, net			503				471				1,020				958
		Equipment			199				243				383				491
		Data processing			332				316				660				650
		FDIC insurance premium			276				155				426				303
		Other			1,110				1,382				2,167				2,632
		Total noninterest expenses			5,131				4,824				10,063				9,677
Income (loss) before income tax expense (benefit)					692				(483	)			1,500				599
Income tax expense (benefit)					231				(159	)			217				147
Net income (loss)					461				(324	)			1,283				452
Dividends on preferred stock					127				38				293				113
Net income (loss) available to common shareholders				$	334			$	(362	)		$	990			$	339
Weighted avg. no. of diluted common shares					5,934,549				5,902,167				5,932,774				5,897,266
Diluted earnings (loss) per common share				$	0.06			$	(0.06	)		$	0.17			$	0.06
Return on average common equity					3.21	%			-3.31	%			4.79	%			1.56	%
Return on average assets					0.27	%			-0.18	%			0.38	%			0.13	%
Yield on average interest-earning assets					4.14	%			4.51	%			4.26	%			4.55	%
Cost of average interest-bearing liabilities					0.78	%			1.04	%			0.80	%			1.08	%
Net interest rate spread					3.36	%			3.47	%			3.46	%			3.47	%
Net interest margin					3.55	%			3.69	%			3.66	%			3.70	%