Stewardship Financial Corporation Announces Year Ended December 31, 2013 Earnings

MIDLAND PARK, NJ--(Marketwired - Feb 25, 2014) -  Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, reported net income for the year ended December 31, 2013 of $2.5 million compared to $520,000 for the year ended December 31, 2012. For the three months ended December 31, 2013, the Corporation reported net income of $665,000 compared to a net loss of $260,000 for the corresponding three month period in 2012. After dividends on preferred stock and accretion, net income available to common shareholders for the year ended December 31, 2013 was $1.8 million, or $0.31 per diluted common share, compared to $168,000, or $0.03 per diluted common share, for the prior year. For the three months ended December 31, 2013, after dividends on preferred stock and accretion, the Corporation reported net income available to common shareholders of $495,000, or $0.08 per diluted common share, compared to a net loss of $387,000, or a loss of $0.07 per diluted common share, for the three months ended December 31, 2012.

Reflecting on the annual results, Paul Van Ostenbridge, Stewardship Financial Corporation's President and Chief Executive Officer, commented, "We are very pleased to announce significantly stronger earnings linked with substantial improvement in asset quality."

Net interest income was $5.6 million and $22.8 million for the three months and year ended December 31, 2013, compared to $5.7 million and $23.5 million for the equivalent prior year periods. The net interest margin for the three months and year ended December 31, 2013 of 3.54% and 3.59%, respectively, compared to 3.57% and 3.66% for the three months and year ended December 31, 2012, respectively. "In this prolonged, low interest rate environment, compression in margins remains primarily attributable to reduced asset yields," Van Ostenbridge commented.

For the three months and year ended December 31, 2013 the Corporation recorded a $425,000 and $3.8 million provision for loan losses, respectively. For the prior year, a provision for loan losses of $3.3 million and $10.0 million for the three months and year ended December 31, 2012, respectively, was recorded. Van Ostenbridge stated, "The decline in our provision is reflective of an improvement in credit quality and a reduction in nonperforming assets."

At December 31, 2013, nonperforming assets totaled $10.7 million, or 1.58% of total assets, representing an $8.6 million decline from $19.3 million, or 2.80% of total assets, at December 31, 2012. Van Ostenbridge noted, "We have spent the last few years focused on addressing nonperforming loans and Other Real Estate Owned (OREO) acquired as a result of foreclosure and the 2013 year end balances reflect the results of such efforts." During the fourth quarter of 2013, the Corporation categorized a small group of nonperforming loans as available 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, the decrease in nonperforming assets is partially attributed to the sale of these loans which had a carrying value of $3.6 million. The loans were sold prior to December 31, 2013 and resulted in a net loss to the Corporation of $372,000, reflecting further declines in fair value.

The Corporation reported noninterest income of $525,000 and $4.0 million for the three months and year ended December 31, 2013, respectively, compared to $1.8 million and $6.4 million for the equivalent prior year periods. The current year periods include the previously mentioned loss of $372,000 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 full year period for 2013 included $537,000 as a result of a death benefit insurance payment received. The 2012 periods included significant gains realized from the sale of securities, primarily reflecting transactions executed to lower the Company's risk exposure to rising interest rates and deleverage the balance sheet through the partial prepayment of a higher costing wholesale repurchase agreement. The resulting prior year gain on sale of securities was partially offset by a prepayment premium on a wholesale repurchase agreement, which is included as a component of other noninterest expense for the year ended December 31, 2012.

Noninterest expenses for the three months and year ended December 31, 2013 were $4.9 million and $19.8 million as compared to $4.8 million and $19.7 million in the comparable prior year periods. While the Corporation remains dedicated to controlling expenses, higher salary and employee benefits expense is reflective of staffing necessary to address both increasing regulatory compliance as well the increase in staffing required to focus on commercial lending opportunities and an enhanced credit review function. As noted above, included in noninterest expenses in the year ended December 31, 2012 is a $691,000 prepayment premium incurred with the $7.0 million repayment of a wholesale repurchase agreement.

Total assets of $673.5 million at December 31, 2013 showed a slight decline when compared to $688.4 million of assets at December 31, 2012. Since December 31, 2012, gross loans receivable have decreased $6.4 million as a result of the new loan production being offset by loan workouts as well as payoffs and normal principal amortization. The decline includes the impact of the above discussed $3.6 million nonperforming loan sale. In addition, $2.8 million of other nonperforming loans, representing the lower of cost or estimated fair value of the underlying collateral less costs to sell, have been categorized as available for sale at December 31, 2013.

Deposit balances totaled $577.6 million at December 31, 2013 compared to $590.3 million a year earlier. Core deposit balances (checking, money market and savings accounts) continue to see growth and comprise 76.4% of total deposits at December 31, 2013. In addition, noninterest-bearing deposits continued to grow reaching $133.6 million, or 23.1% of deposits, at December 31, 2013 compared to $124.3 million, or 21.1%, at December 31, 2012.

The Corporation's capital levels remain strong. Tier 1 leverage ratio of 9.04% and total risk based capital ratio of 14.78%, remained relatively stable year over year and still far exceed the regulatory requirements of 4% and 8%, respectively, for a "well capitalized" institution.

In summary, Van Ostenbridge stated, "Over the last few years the Corporation has been committed to improving asset quality. The significant progress seen in the past year represents the results of our commitment. We are encouraged and confident that our current level of loan loss reserves, coupled with strong liquidity and a sound capital base, enable us to move forward."

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. To date, the Bank's tithe donations total $7.9 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)
				December 31,				September 30,				December 31,
				2013				2013				2012
Selected Financial Condition Data:
	Cash and cash equivalents			$	17,405			$	15,400			$	21,016
	Securities available for sale				168,411				183,411				174,700
	Securities held to maturity				25,964				26,161				29,718
	FHLB Stock				2,133				2,813				2,213
	Loans receivable:
		Loans receivable, gross			434,009				439,339				440,423
		Allowance for loan losses			(9,915	)			(10,704	)			(10,641	)
		Other, net			168				164				50
	Loans receivable, net				424,262				428,799				429,832
	Loans held for sale				2,800				910				784
	Other assets				32,533				31,734				30,125
	Total assets			$	673,508			$	689,228			$	688,388
	Noninterest-bearing deposits			$	133,565			$	139,918			$	124,286
	Interest-bearing deposits				444,026				437,238				465,968
	Total deposits				577,591				577,156				590,254
	Other borrowings				25,000				40,100				25,000
	Securities sold under agreements to repurchase				7,300				8,044				7,343
	Subordinated debentures				7,217				7,217				7,217
	Other liabilities				2,621				2,433				2,228
	Shareholders' equity				53,779				54,278				56,346
	Total liabilities and shareholders' equity			$	673,508			$	689,228			$	688,388
	Equity to assets				7.98	%			7.88	%			8.19	%
Asset Quality Data:
	Nonaccrual loans			$	10,219			$	15,269			$	18,011
	Loans past due 90 days or more and accruing				-				-				237
	Total nonperforming loans				10,219				15,269				18,248
	Other real estate owned				451				470				1,058
	Total nonperforming assets			$	10,670			$	15,739			$	19,306
	Nonperforming loans to total loans				2.34	%			3.48	%			4.14	%
	Nonperforming assets to total assets				1.58	%			2.28	%			2.80	%
	Allowance for loan losses to nonperforming loans				97.03	%			70.10	%			58.31	%
	Allowance for loan losses to total gross loans				2.28	%			2.44	%			2.42	%

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
				For the three months ended December 31,								For the year ended December 31,
				2013				2012				2013				2012
Selected Operating Data:
	Interest income			$	6,529			$	6,754			$	26,571			$	28,707
	Interest expense				911				1,094				3,813				5,175
		Net interest and dividend income			5,618				5,660				22,758				23,532
	Provision for loan losses				425				3,330				3,775				9,995
	Net interest and dividend income after provision for loan losses				5,193				2,330				18,983				13,537
	Noninterest income:
		Fees and service charges			458				456				1,865				1,998
		Bank owned life insurance			100				81				351				325
		Gain on calls and sales of securities			151				1,004				153				2,340
		Gain on sales of mortgage loans			39				160				649				887
		Loss on sales of loans			(372	)			-				(372	)			-
		Gain on sales of other real estate owned			44				(3	)			326				429
		Gain on life insurance proceeds			-				-				537				-
		Other			105				79				456				410
		Total noninterest income			525				1,777				3,965				6,389
	Noninterest expenses:
		Salaries and employee benefits			2,524				2,433				10,501				9,470
		Occupancy, net			507				515				2,045				1,967
		Equipment			214				240				794				971
		Data processing			438				317				1,425				1,291
		FDIC insurance premium			230				155				876				612
		Other			988				1,147				4,197				5,342
		Total noninterest expenses			4,901				4,807				19,838				19,653
Income (loss) before income tax expense (benefit)					817				(700	)			3,110				273
Income tax expense (benefit)					152				(440	)			640				(247	)
Net income (loss)					665				(260	)			2,470				520
Dividends on preferred stock and accretion					170				127				633				352
Net income (loss) available to common stockholders				$	495			$	(387	)		$	1,837			$	168
Weighted avg. no. of diluted common shares					5,942,585				5,923,113				5,937,058				5,908,503
Diluted (loss) earnings per common share				$	0.08			$	(0.07	)		$	0.31			$	0.03
Return on average common equity					4.95	%			-3.56	%			4.54	%			0.39	%
Return on average assets					0.39	%			-0.15	%			0.36	%			0.07	%
Yield on average interest-earning assets					4.10	%			4.24	%			4.17	%			4.44	%
Cost of average interest-bearing liabilities					0.74	%			0.86	%			0.78	%			1.00	%
Net interest rate spread					3.36	%			3.38	%			3.39	%			3.44	%
Net interest margin					3.54	%			3.57	%			3.59	%			3.66	%