Stewardship Financial Corporation Reports Earnings for Third Quarter of 2015

MIDLAND PARK, NJ--(Marketwired - November 05, 2015) - Stewardship Financial Corporation (NASDAQ: SSFN), parent company of Atlantic Stewardship Bank, reported net income for the three and nine months ended September 30, 2015, of $1.0 million and $3.1 million, respectively, compared to net income of $552,000 and $1.8 million for the equivalent three and nine month periods in 2014. After dividends on preferred stock, net income available to common shareholders for the current three month period was $886,000, or $0.15 per share, compared to $382,000, or $0.06 per share, for the three months ended September 30, 2014. For the first nine months of 2015, net income available to common shareholders was $2,683,000, or $0.44 per share, compared to $1,272,000, or $0.21 per share, during the same period in 2014.

"We are pleased to continue to report improving results. The stabilization of our asset quality and steady loan growth remain our focus and have contributed to our progress," said Paul Van Ostenbridge, President and Chief Executive Officer of Stewardship Financial Corporation,

Balance Sheet / Financial Condition

Total assets at September 30, 2015 were $707.6 million - an increase when compared to with total assets of $693.6 million at December 31, 2014. For the first nine months of 2015, a $40.8 million net increase in gross loans receivable was the result of new loan originations, partially offset by normal principal amortization and payoffs. On an annualized basis, such loan growth equates to 11.4%. Partially offsetting the loan growth was the previously reported sale of approximately $27.8 million of available for sale securities with higher price volatility. Such sales were conducted to provide a portion of the funding for the loan growth, reflecting an intentional shift to higher yielding assets.

Total deposits were $585.9 million at September 30, 2015, reflecting a $29.4 million increase when compared to deposits of $556.5 million at December 31, 2014. "The focus on loan growth naturally warrants a continued focus on deposit growth," noted Van Ostenbridge. As a result of an increase in deposits, other borrowings decreased $17.2 million to $49.5 million at September 30, 2015.

The increase in subordinated debentures and subordinated notes reflects the previously announced completion of a $16.6 million issuance of fixed rate subordinated notes on August 28, 2015. The subordinated notes have a maturity date of August 28, 2025 and bear interest at the rate of 6.75% per annum. Using the net proceeds of the subordinated note issuance, on September 1, 2015, the Corporation repurchased the $15.0 million of preferred stock, thus ending the Corporation's participation in the U.S. Department of the Treasury's Small Business Lending Fund program ("SBLF").

While tier 1 capital was impacted by the replacement of preferred stock with subordinated debt, which is considered tier 2 capital, regulatory capital levels, at September 30, 2015, continue to exceed the capital requirements for a "well capitalized" institution. The Corporation's tier 1 leverage ratio was 7.66% (4% requirement) and total risk based capital ratio was 14.48% (8% requirement).

Operating Results

For the three and nine months ended September 30, 2015, the Corporation reported net interest income of $5.4 million and $16.3 million, respectively, compared to $5.3 million and $16.0 million for the corresponding prior year periods. The net interest margin for the current three and nine months ended September 30, 2015 was 3.21% and 3.34%, respectively, compared to 3.36% and 3.42% for the three and nine months ended September 30, 2014, respectively. The recent decline in net interest rate margin partially reflects the impact of the $16.6 million of subordinated notes previously discussed. While the cost of the subordinated notes adds to interest expense, on an after tax basis, such increase is approximately offset by the dividends that would have accrued at a rate of 4.56% on the preferred stock resulting in an overall neutral effect on net income available to common shareholders. Furthermore, beginning on March 1, 2016, and for all dividend periods thereafter, the dividend rate on the preferred stock would have been increased and fixed at 9%, making the issuance of the subordinated notes a positive impact to net income available to common shareholders in the future.

Noninterest income for the three and nine months ended September 30, 2015 was $838,000 and $2.6 million, respectively, compared to $764,000 and $2.0 million for the same prior year periods. For the current year periods, fees and service charges reflect increases of $31,000 and $142,000 when compared to 2014. In addition, as a result of the Corporation returning to selling the majority of residential loan production, gains on sales of mortgage loans increased over the prior year three and nine month periods. For the nine months ended September 30 2015, noninterest income included gains of $152,000 from the sale of available for sale securities and $53,000 from the sale of other real estate owned. The prior year nine month period included a loss of $241,000 from the sale of nonperforming loans.

Noninterest expenses totaled $5.1 million and $15.3 million for the three and nine months ended September 30, 2015, relatively consistent with the $5.0 million and $15.2 million incurred for the three and nine months ended September 30, 2014, respectively.

Asset Quality

Van Ostenbridge stated, "The credit metrics of our assets have improved and stabilized." For the three and nine months ended September 30, 2015, results continue to be positively impacted by the Corporation recording negative provisions for loan losses of $400,000 and $1.1 million, respectively. For the prior year, the Corporation recorded a $250,000 provision for loan losses for both the three and nine months ended September 30, 2014. Nonperforming loans were $2.6 million, or 0.50% of total loans at September 30, 2015 compared to $3.6 million, or 0.76%, at December 31, 2014. Total nonperforming assets of $3.2 million, which includes other real estate owned, represented 0.45% of total assets at September 30, 2015 compared to 0.71% at December 31, 2014.

About Stewardship Financial Corporation

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 $8.2 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.