Stewardship Financial Corporation Announces Second Quarter of 2014 Earnings

MIDLAND PARK, NJ--(Marketwired - Aug 5, 2014) -   Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, announced net income for the three months ended June 30, 2014 of $726,000 as compared to net income of $461,000 for the three months ended June 30, 2013. For the six months ended June 30, 2014, the Corporation reported net income of $1.2 million compared to net income of $1.3 million for the corresponding six month period in 2013. After dividends on preferred stock, the net income available to the common shareholders was $890,000, or $0.15 per diluted common share, for the first six months of 2014 compared to $990,000, or $0.17 per diluted common share, for the comparable period of 2013.

For the first six months of 2014, the Corporation did not record a provision for loan losses compared to a provision of $850,000 and $2.5 million for the three and six months ended June 30, 2013, respectively. Paul Van Ostenbridge, Stewardship Financial Corporation's President and Chief Executive Officer stated, "As with the prior quarter, no provision for loan losses was necessary for the six months ended June 30, 2014."

Van Ostenbridge continued noting, "Following our significant improvement in asset quality, the Corporation is demonstrating the ability to sustain our progress." Nonperforming loans totaled $4.9 million, or 1.13% of total loans at June 30, 2014, down slightly from the $5.1 million three months earlier, but a significant improvement when compared to $10.2 million, or 2.34%, at December 31, 2013 and $14.7 million, or 3.33%, a year earlier. Total nonperforming assets, which includes other real estate owned, represented 0.91% of total assets at June 30, 2014 compared to 1.58% and 2.29% at December 31, 2013 and June 30, 2013, respectively.

Components of noninterest income also had a substantial impact on the comparison of current year results with the prior year periods. For the three and six months ended June 30, 2014, the Corporation reported noninterest income of $807,000 and $1.2 million, respectively, compared to $1.0 million and $2.5 million for the corresponding prior year periods. The current six month period includes a loss of $241,000 from the sale of nonperforming loans. Reduced gains on sales of mortgage loans for both the three and six months ended June 30, 2014 are reflective of the impact of rising mortgage rates and corresponding reduction in refinance activity. Further affecting comparisons, the six month period for 2013 included $537,000 as a result of a death benefit insurance payment received.

Net interest income was $5.4 million and $10.7 million for the three and six months ended June 30, 2014, compared to $5.7 million and $11.5 million for the equivalent prior year periods. "The Corporation will continue to manage all expenses, however, the low interest rate environment in which all banks have been operating continues to negatively impact asset yields," said Van Ostenbridge.

Total noninterest expenses were $5.1 million and $10.2 million for the three and six months ended June 30, 2014, consistent with the $5.1 million and $10.1 million incurred for the three and six months ended June 30, 2013, respectively.

Total assets at June 30, 2014 were $671.5 million -- relatively comparable to assets of $673.5 million at December 31, 2013. Likewise, the gross loans receivable balance was not significantly different from December 31, 2013, and was the result of new loan originations being offset by payoffs and normal principal amortization. Securities, in the aggregate, decreased by $4.3 million primarily due to normal pay downs and maturities during the six months ended June 30, 2014. During the current quarter, the Corporation reclassified $24.0 million of securities available for sale to securities held to maturity as the Corporation has the intent and ability to hold these securities until maturity.

Total deposits of $566.4 million at June 30, 2014 reflect a $11.2 million decline when compared to deposits of $577.6 million at December 31, 2013. The composition of deposits continues to show a shift from interest-bearing to noninterest-bearing. From December 31, 2013 to June 30, 2014 the Corporation's noninterest-bearing deposit balances increased $10.1 million and comprised 25.4% of total deposits, up from 23.1% at December 31, 2013.

Capital levels remain strong with a tier 1 leverage ratio of 9.35% and total risk based capital ratio of 14.90%. Van Ostenbridge commented, "We continue to significantly exceed the regulatory capital requirements for a 'well capitalized' institution of 4% and 8%, respectively."

In concluding his remarks, Van Ostenbridge noted, "With the improvement in our asset quality coupled with the moderate, albeit slow, improvement in the economy, our attentions are focused on appropriately underwriting and originating loans and funding such with deposits."

Stewardship Financial Corporation's subsidiary, 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)
				June 30,				March 31,				December 31,				June 30,
				2014				2014				2013				2013
Selected Financial Condition Data:
	Cash and cash equivalents			$	14,630			$	27,176			$	17,405			$	14,322
	Securities available for sale				144,459				171,692				168,411				181,676
	Securities held to maturity				54,225				24,685				25,964				28,119
	FHLB Stock				2,429				2,133				2,133				2,133
	Loans receivable:
		Loans receivable, gross			433,198				423,471				434,009				442,006
		Allowance for loan losses			(9,825	)			(9,792	)			(9,915	)			(10,787	)
		Other, net			40				105				168				134
	Loans receivable, net				423,413				413,784				424,262				431,353
	Loans held for sale				259				186				2,800				2,054
	Other assets				32,107				32,947				32,533				29,175
	Total assets			$	671,522			$	672,603			$	673,508			$	688,832
	Noninterest-bearing deposits			$	143,711			$	137,687			$	133,565			$	145,388
	Interest-bearing deposits				422,669				437,729				444,026				447,311
	Total deposits				566,380				575,416				577,591				592,699
	Other borrowings				31,000				25,000				25,000				25,000
	Securities sold under agreements to repurchase				7,601				7,601				7,300				7,344
	Subordinated debentures				7,217				7,217				7,217				7,217
	Other liabilities				2,329				2,209				2,621				2,280
	Total liabilities				614,527				617,443				619,729				634,540
	Shareholders' equity				56,995				55,160				53,779				54,292
	Total liabilities and shareholders' equity			$	671,522			$	672,603			$	673,508			$	688,832
	Equity to assets				8.49	%			8.20	%			7.98	%			7.88	%
Asset Quality Data:
	Nonaccrual loans			$	4,875			$	5,073			$	10,219			$	14,716
	Loans past due 90 days or more and accruing				-				-				-				-
	Total nonperforming loans				4,875				5,073				10,219				14,716
	Other real estate owned				1,225				1,789				451				1,072
	Total nonperforming assets			$	6,100			$	6,862			$	10,670			$	15,788
	Nonperforming loans to total loans				1.13	%			1.20	%			2.34	%			3.33	%
	Nonperforming assets to total assets				0.91	%			1.02	%			1.58	%			2.29	%
	Allowance for loan losses to nonperforming loans				201.54	%			193.02	%			97.03	%			73.30	%
	Allowance for loan losses to total gross loans				2.27	%			2.31	%			2.28	%			2.44	%

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,
				2014				2013				2014				2013
Selected Operating Data:
	Interest income			$	6,186			$	6,636			$	12,331			$	13,506
	Interest expense				810				958				1,649				1,962
		Net interest and dividend income			5,376				5,678				10,682				11,544
	Provision for loan losses				-				850				-				2,450
	Net interest and dividend income after provision for loan losses				5,376				4,828				10,682				9,094
	Noninterest income:
		Fees and service charges			504				492				925				948
		Bank owned life insurance			106				77				202				153
		Gain on calls and sales of securities			-				-				-				2
		Gain on sales of mortgage loans			2				298				14				460
		Loss on sales of loans			-				-				(241	)			-
		Gain on sales of other real estate owned			54				-				54				126
		Gain on life insurance proceeds			-				-				-				537
		Other			141				128				252				243
		Total noninterest income			807				995				1,206				2,469
	Noninterest expenses:
		Salaries and employee benefits			2,557				2,711				5,235				5,407
		Occupancy, net			520				503				1,075				1,020
		Equipment			175				199				363				383
		Data processing			435				332				822				660
		FDIC insurance premium			133				276				344				426
		Other			1,286				1,110				2,361				2,167
		Total noninterest expenses			5,106				5,131				10,200				10,063
Income before income tax expense					1,077				692				1,688				1,500
Income tax expense					351				231				456				217
Net income					726				461				1,232				1,283
Dividends on preferred stock					171				127				342				293
Net income available to common stockholders				$	555			$	334			$	890			$	990
Weighted avg. no. of diluted common shares					5,999,897				5,934,549				5,978,511				5,932,774
Diluted earnings per common share				$	0.09			$	0.06			$	0.15			$	0.17
Return on average common equity					5.41	%			3.21	%			4.43	%			4.79	%
Return on average assets					0.44	%			0.27	%			0.37	%			0.38	%
Yield on average interest-earning assets					4.03	%			4.14	%			3.98	%			4.26	%
Cost of average interest-bearing liabilities					0.70	%			0.78	%			0.70	%			0.80	%
Net interest rate spread					3.33	%			3.36	%			3.28	%			3.46	%
Net interest margin					3.51	%			3.55	%			3.45	%			3.66	%