Stewardship Financial Corporation Reports Earnings for Third Quarter of 2013

MIDLAND PARK, NJ--(Marketwired - Nov 8, 2013) -  Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, reported net income for the three and nine months ended September 30, 2013 of $522,000 and $1,805,000, respectively, compared to $328,000 and $780,000 for the corresponding three and nine month periods in 2012. After dividends on preferred stock and accretion, net income available to common shareholders for the current three month period was $352,000, or $0.06 per diluted common share, compared to $216,000, or $0.04 per diluted common share, for the three months ended September 30, 2012. For the first nine months of 2013, net income available to common shareholders was $1,342,000, or $0.23 per diluted common share, compared to $555,000, or $0.09 per diluted common share, during the same period in 2012.

Stewardship Financial Corporation's President and Chief Executive Officer Paul Van Ostenbridge commented, "We are pleased to report solid earnings combined with improving and stabilizing asset quality."

Net interest income was $5.6 million and $17.1 million for the three and nine months ended September 30, 2013, compared to $5.9 million and $17.9 million for the equivalent prior year periods. In addressing net interest income, Van Ostenbridge offered that "In this prolonged, low interest rate environment, compression in margins remains primarily attributable to reduced asset yields." The net interest margin for the current three and nine months ended September 30, 2013 of 3.49% and 3.60%, respectively, compared to 3.62% and 3.67% for the three and nine months ended September 30, 2012, respectively.

For the three and nine months ended September 30, 2013 the Corporation recorded a provision for loan losses of $900,000 and $3.4 million, respectively. Reflective of improvement in nonperforming assets, the current year levels show significant declines from the prior year loan loss provisions of $2.0 million and $6.7 million for the three and nine months ended September 30 2012, respectively.

Nonperforming assets at September 30, 2013 of $15.7 million, or 2.28% of total assets, represented a $12.3 million decline from the $28.0 million, or 4.10% of total assets, at September 30, 2012. Commenting on the Corporation's level of non-performing loans, Van Ostenbridge stated, "Despite the lengthy workout and foreclosure process, we are reassured by the decline in our level of nonperforming assets over the past twelve months and are committed to continue our focus on asset quality."

The Corporation reported noninterest income of $971,000 and $3.4 million for the three and nine months ended September 30, 2013, respectively, compared to $1.7 million and $4.6 million for the equivalent prior year periods. While the nine month period for 2013 included $537,000 as a result of a death benefit insurance payment received, the 2012 periods included greater gains realized from the sale of securities. The gains for the three months ended September 30, 2012 reflected a transaction 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 was partially offset by a prepayment premium, which is included as a component of other noninterest expense.

Noninterest expenses for the three and nine months ended September 30, 2013 were $4.9 million and $14.9 million as compared to $5.2 million and $14.8 million in the comparable prior year periods. Included in noninterest expenses in the prior year periods is a $691,000 prepayment premium incurred with the repayment of the above noted wholesale repurchase agreement. While the Corporation remains dedicated to controlling expenses, an increase in noninterest expenses, excluding the prior year one-time charge, is partially due to higher salary and employee benefits expense. Such increase 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.

At September 30, 2013 total assets were $689.2 million, generally unchanged from the $688.4 million of assets at December 31, 2012. The loan portfolio balance remained relatively flat when compared to December 31, 2012, as a result of the new loan production being offset by loan workouts as well as payoffs and normal principal amortization.

Deposits were $577.2 million at September 30, 2013, compared to deposits of $590.3 million at December 31, 2012. Average core deposit balances continue to see growth. Noninterest-bearing deposits now total $139.9 million, or 24.2% of total deposits at September 30, 2013, up from $124.3 million, or 21.1% at December 31, 2012.

As a summary, Van Ostenbridge stated, "Based on the progress we have seen over the past year, we have demonstrated our commitment to improving asset quality and remain encouraged and confident in our ability to continue to show progress in 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)
				September 30,				June 30,				December 31,				September 30,
				2013				2013				2012				2012
Selected Financial Condition Data:
	Cash and cash equivalents			$	15,400			$	14,322			$	21,016			$	17,387
	Securities available for sale				183,411				181,676				174,700				173,999
	Securities held to maturity				26,161				28,119				29,718				31,890
	FHLB Stock				2,813				2,133				2,213				2,213
	Loans receivable:
		Loans receivable, gross			439,339				442,006				440,423				437,999
		Allowance for loan losses			(10,704	)			(10,787	)			(10,641	)			(12,598	)
		Other, net			164				134				50				93
	Loans receivable, net				428,799				431,353				429,832				425,494
	Loans held for sale				910				2,054				784				938
	Other assets				31,734				29,175				30,125				31,891
	Total assets			$	689,228			$	688,832			$	688,388			$	683,812
	Noninterest-bearing deposits			$	139,918			$	145,388			$	124,286			$	125,060
	Interest-bearing deposits				437,238				447,311				465,968				458,366
	Total deposits				577,156				592,699				590,254				583,426
	Other borrowings				40,100				25,000				25,000				25,000
	Securities sold under agreements to repurchase				8,044				7,344				7,343				7,342
	Subordinated debentures				7,217				7,217				7,217				7,217
	Other liabilities				2,433				2,280				2,228				2,953
	Shareholders' equity				54,278				54,292				56,346				57,874
	Total liabilities and shareholders' equity			$	689,228			$	688,832			$	688,388			$	683,812
	Equity to assets				7.88	%			7.88	%			8.19	%			8.46	%
Asset Quality Data:
	Nonaccrual loans			$	15,269			$	14,716			$	18,011			$	24,960
	Loans past due 90 days or more and accruing				-				-				237				75
	Total nonperforming loans				15,269				14,716				18,248				25,035
	Other real estate owned				470				1,072				1,058				2,985
	Total nonperforming assets			$	15,739			$	15,788			$	19,306			$	28,020
	Nonperforming loans to total loans				3.48	%			3.33	%			4.14	%			5.72	%
	Nonperforming assets to total assets				2.28	%			2.29	%			2.80	%			4.10	%
	Allowance for loan losses to nonperforming loans				70.10	%			73.30	%			58.31	%			50.32	%
	Allowance for loan losses to total gross loans				2.44	%			2.44	%			2.42	%			2.88	%

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
				For the three months ended								For the nine months ended
				September 30,								September 30,
				2013				2012				2013				2012
Selected Operating Data:
	Interest income			$	6,536			$	7,120			$	20,042			$	21,953
	Interest expense				940				1,259				2,902				4,081
		Net interest and dividend income			5,596				5,861				17,140				17,872
	Provision for loan losses				900				2,000				3,350				6,665
	Net interest and dividend income after provision for loan losses				4,696				3,861				13,790				11,207
	Noninterest income:
		Fees and service charges			459				496				1,407				1,542
		Bank owned life insurance			98				83				251				244
		Gain on calls and sales of securities			-				891				2				1,336
		Gain on sales of mortgage loans			150				162				610				727
		Gain (loss) on sales of other real estate owned			156				(37	)			282				432
		Gain on life insurance proceeds			-				-				537				-
		Other			108				87				351				331
		Total noninterest income			971				1,682				3,440				4,612
	Noninterest expenses:
		Salaries and employee benefits			2,570				2,394				7,977				7,037
		Occupancy, net			518				494				1,538				1,452
		Equipment			197				240				580				731
		Data processing			327				324				987				974
		FDIC insurance premium			220				154				646				457
		Other			1,042				1,563				3,209				4,195
		Total noninterest expenses			4,874				5,169				14,937				14,846
Income before income tax expense					793				374				2,293				973
Income tax expense					271				46				488				193
Net income					522				328				1,805				780
Dividends on preferred stock					170				112				463				225
Net income available to common shareholders				$	352			$	216			$	1,342			$	555
Weighted avg. no. of diluted common shares					5,939,958				5,916,123				5,935,195				5,903,598
Diluted earnings per common share				$	0.06			$	0.04			$	0.23			$	0.09
Return on average common equity					3.59	%			1.97	%			4.40	%			1.70	%
Return on average assets					0.30	%			0.19	%			0.35	%			0.15	%
Yield on average interest-earning assets					4.07	%			4.37	%			4.20	%			4.49	%
Cost of average interest-bearing liabilities					0.76	%			0.97	%			0.79	%			1.04	%
Net interest rate spread					3.31	%			3.40	%			3.41	%			3.45	%
Net interest margin					3.49	%			3.62	%			3.60	%			3.67	%