Stewardship Financial Corporation Announces First Quarter of 2014 Earnings

MIDLAND PARK, NJ--(Marketwired - May 7, 2014) -  Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, announced net income for the three months ended March 31, 2014 of $506,000 as compared to net income of $822,000 for the three months ended March 31, 2013. After dividends on preferred stock, the net income available to the common stockholders was $335,000, or $0.06 per common share, for the current 2014 period compared to $656,000, or $0.11 per common share, for the equivalent period of 2013. Items affecting comparisons between the periods are explained below.

Of significant importance for the quarter, the Corporation did not record a provision for loan losses for the three months ended March 31, 2014 in contrast to a provision for loan losses of $1.6 million for the three months ended March 31, 2013. Paul Van Ostenbridge, Stewardship Financial Corporation's President and Chief Executive Officer, commented, "Based on our continued improvement in asset quality and the reserves established over the past few years, no increase in the allowance for loan losses was necessary at March 31, 2014."

Continuing on the Corporation's improvement in the level of problem assets, Van Ostenbridge stated, "We are seeing the results of our committed focus for the last several years on reducing our level of nonperforming loans." Nonperforming loans decreased to $5.1 million, or 1.20% of total loans at March 31, 2014, representing an approximate 50% reduction when compared to $10.2 million, or 2.34%, at December 31, 2013 and over a 70% decline when compared to $17.5 million, or 3.97%, a year earlier. 

Total nonperforming assets, which includes other real estate owned, represented just 1.02% of total assets at March 31, 2014, signifying meaningful progress when compared to 1.58% and 2.65% at December 31, 2013 and March 31, 2013, respectively.

The decrease in nonperforming assets is partially attributable to the sale of a small group of nonperforming loans that, at December 31, 2013, the Corporation had categorized as held for sale at the lower of cost or fair value of the underlying collateral, less cost to sell. After charge-offs previously recorded on these loans recognized against the allowance for loan losses, these loans had a carrying value of $2.8 million. The loans were sold during the three months ended March 31, 2014 and resulted in a net loss to the Corporation of $241,000, reflecting further declines in fair value.

When comparing the current year quarter results with the prior year quarter, components of noninterest income also had a substantial impact. The Corporation reported noninterest income of $399,000 for the three months ended March 31, 2014 compared to $1.5 million for the equivalent prior year period. The current year period includes the previously mentioned loss of $241,000 from the sale of nonperforming loans as well as reduced gains on sales of mortgage loans reflective of the impact of rising mortgage rates and corresponding reduction in refinance activity. In addition, the prior year period included $537,000 as a result of a death benefit insurance payment received.

Net interest income was $5.3 million in the first quarter of 2014 compared to $5.9 million a year earlier. "While the Corporation continues to monitor and manage all expenses, the low interest rate environment in which we have been operating has put pressure on asset yields," said Van Ostenbridge.

Total noninterest expenses were $5.1 million for the three months ended March 31, 2014 -- comparable to $4.9 million incurred in the prior year period.

Total assets at March 31, 2014 were $672.6 million, which were comparatively unchanged from assets of $673.5 million at December 31, 2013. Additional liquidity was provided by an increase in cash and cash equivalents. Gross loans receivable decreased $10.5 million from December 31, 2013, reflecting normal payoffs and principal amortization as well as the competitive environment for new loans due to lack of demand. Van Ostenbridge noted, "Our lending efforts are dedicated to building and maintaining a pipeline of loan applications, with underwriting that adheres to our strict guidelines."

Total deposits were $575.4 million at March 31, 2014, reflecting a relatively insignificant decline when compared to deposits of $577.6 million at December 31, 2013. At March 31, 2014 noninterest bearing deposits represented 23.9% of total deposits.

Capital levels continue to significantly exceed the regulatory requirements for a "well capitalized" institution with a tier 1 leverage ratio of 9.22% and a total risk-based capital ratio of 15.13% compared to the regulatory requirements of 4% and 8%, respectively.

Van Ostenbridge concluded, "While the last several years have seen substantial attention and resources devoted to addressing problem loans, the results of those labors are now clearly evident. With asset quality issues now considered to be at a manageable level, our efforts can now be fully directed on our core banking business."

Stewardship Financial Corporation's subsidiary, the Atlantic Stewardship Bank, has 12 banking offices in Midland Park, Hawthorne (2), Montville, 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 $8.1 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.

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
				March 31,				December 31,				March 31,
				2014				2013				2013
Selected Financial Condition Data:
	Cash and cash equivalents			$	27,176			$	17,405			$	26,144
	Securities available for sale				171,692				168,411				175,493
	Securities held to maturity				24,685				25,964				28,548
	FHLB Stock				2,133				2,133				2,213
	Loans receivable:
		Loans receivable, gross			423,471				434,009				441,533
		Allowance for loan losses			(9,792	)			(9,915	)			(11,512	)
		Other, net			105				168				62
	Loans receivable, net				413,784				424,262				430,083
	Loans held for sale				186				2,800				2,101
	Other assets				32,947				32,533				29,344
	Total assets			$	672,603			$	673,508			$	693,926
	Noninterest-bearing deposits			$	137,687			$	133,565			$	132,960
	Interest-bearing deposits				437,729				444,026				462,578
	Total deposits				575,416				577,591				595,538
	Other borrowings				25,000				25,000				25,000
	Securities sold under agreements to repurchase				7,601				7,300				7,344
	Subordinated debentures				7,217				7,217				7,217
	Other liabilities				2,209				2,621				2,152
	Total liabilities				617,443				619,729				637,251
	Shareholders' equity				55,160				53,779				56,675
	Total liabilities and shareholders' equity			$	672,603			$	673,508			$	693,926
	Equity to assets				8.20	%			7.98	%			8.17	%
Asset Quality Data:
	Nonaccrual loans			$	5,073			$	10,219			$	17,479
	Loans past due 90 days or more and accruing				-				-				50
	Total nonperforming loans				5,073				10,219				17,529
	Other real estate owned				1,789				451				876
	Total nonperforming assets			$	6,862			$	10,670			$	18,405
	Nonperforming loans to total loans				1.20	%			2.34	%			3.97	%
	Nonperforming assets to total assets				1.02	%			1.58	%			2.65	%
	Allowance for loan losses to nonperforming loans				193.02	%			97.03	%			65.67	%
	Allowance for loan losses to total gross loans				2.31	%			2.28	%			2.61	%

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
				For the three months ended
				March 31,
				2014				2013
Selected Operating Data:
	Interest income			$	6,145			$	6,870
	Interest expense				839				1,004
		Net interest and dividend income			5,306				5,866
	Provision for loan losses				-				1,600
	Net interest and dividend income after provision for loan losses				5,306				4,266
	Noninterest income:
		Fees and service charges			421				456
		Bank owned life insurance			96				76
		Gain on calls and sales of securities			-				2
		Gain on sales of mortgage loans			12				162
		Loss on sales of loans			(241	)			-
		Gain on sales of other real estate owned			-				126
		Gain on life insurance proceeds			-				537
		Other			111				115
		Total noninterest income			399				1,474
	Noninterest expenses:
		Salaries and employee benefits			2,678				2,696
		Occupancy, net			555				517
		Equipment			188				184
		Data processing			387				328
		FDIC insurance premium			211				150
		Other			1,075				1,057
		Total noninterest expenses			5,094				4,932
	Income before income tax expense (benefit)				611				808
	Income tax expense (benefit)				105				(14	)
	Net income				506				822
	Dividends on preferred stock and accretion				171				166
	Net income available to common stockholders			$	335			$	656
	Weighted avg. no. of diluted common shares				5,956,887				5,930,981
	Diluted earnings per common share			$	0.06			$	0.11
	Return on average common equity				3.41	%			6.39	%
	Return on average assets				0.31	%			0.49	%
	Yield on average interest-earning assets				3.97	%			4.34	%
	Cost of average interest-bearing liabilities				0.71	%			0.82	%
	Net interest rate spread				3.26	%			3.52	%
	Net interest margin				3.44	%			3.72	%