Stewardship Financial Corporation Reports Results for the Second Quarter of 2012

MIDLAND PARK, NJ--(Marketwire - Aug 14, 2012) -  Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, reported results for the second quarter of 2012. Although the Corporation remains profitable on a year to date basis, the Corporation had a net loss for the three months ended June 30, 2012 of $324,000, or $0.06 per diluted common share, as compared to net income of $585,000, or $0.08 per diluted common share, for the three months ended June 30, 2011. For the six months ended June 30, 2012, the Corporation reported net income of $452,000 compared to net income of $1.1 million for the corresponding six month period in 2011. After dividends on preferred stock and accretion, net income available to common shareholders was $339,000 for the first six months of 2012, or $0.06 per diluted common share, compared to $792,000, or $0.14 per diluted common share, during the same period in 2011.

The Corporation recorded a $2.9 million provision for loan losses for the three months ended June 30, 2012 bringing the year to date provision for loan losses to $4.7 million. These amounts compare to provision for loan losses of $1.9 million and $3.6 million for the three and six month periods ended June 30, 2011, respectively. Paul Van Ostenbridge, Stewardship Financial Corporation's President and Chief Executive Officer stated, "The current period loan loss provision is indicative of continuing economic conditions that have contributed to an increase in loan delinquencies and the softness in the real estate market. In addition, based on recent developments occurring in August, 2012 surrounding a single borrower, a $3.0 million loan was placed on nonaccrual retroactive to June 30, 2012. Management's evaluation of the collectability of this loan is based on the best information available at this time." The Corporation monitors its loan portfolio and intends to continue to provide for loan loss reserves based on its ongoing periodic review of the loan portfolio and general market conditions. As a measurement of the allowance coverage, the total allowance for loan losses was 2.68% of total loans compared to ratios of 2.54% at December 31, 2011 and 2.40% at June 30, 2011.

Nonperforming loans totaled $29.7 million at June 30, 2012, an increase from $27.7 million at December 31, 2011. As noted previously, included in nonperforming loans at June 30, 2012 is one loan for $3.0 million. Although the loan was not delinquent, the loan was placed on a nonaccrual status based on recent developments surrounding the borrower which may impact the borrower's repayment ability. The increase in nonaccruals due to this loan was partially offset by payments being received on other nonaccrual loans.

While nonperforming loans reflected an increase, positive results were seen in other real estate owned. The balance in other real estate owned at June 30, 2012 of $2.0 million reflects a substantial decrease from the $5.3 million held at December 31, 2011. "Although the legal process can be long and difficult, once a property is acquired through foreclosure or deed-in-lieu of foreclosure, the Corporation has been successful in quickly disposing of the properties," stated Van Ostenbridge.

For the three and six months ended June 30, 2012, the Corporation reported net interest income of $6.0 million and $12.0 million compared to $6.2 million and $12.2 million for the equivalent prior year periods. The net interest margin for the current three and six months ended June 30, 2012 of 3.69% and 3.70%, respectively, compared to 3.89% and 3.86% for the three and six months ended June 30, 2011, respectively.

For the six months ended June 30, 2012, the Corporation reported noninterest income of $2.5 million compared to $2.0 million for the equivalent prior year period. The 2012 period includes increased gains realized primarily from the sale of securities.

Noninterest expenses for the three and six months ended June 30, 2012 was $4.5 million and $9.2 million, respectively -- comparable to the prior year periods.

Total assets at June 30, 2012 were $700.1 million, a slight decrease from assets of $708.8 million at December 31, 2011. Additional liquidity was provided by an increase in cash and cash equivalents. Gross loans receivable decreased $11.1 million from December 31, 2011, reflecting the current reduced demand for loans and our continued emphasis on thorough credit underwriting.

In total, deposits of $593.5 million at June 30, 2012 were relatively unchanged from total deposits at December 31, 2011. However, the composition of deposits reflected a shift from interest-bearing to noninterest-bearing. From December 31, 2011 to June 30, 2012 the Corporation's noninterest-bearing deposit balances increased $8.2 million.

Van Ostenbridge concluded, "We continue to be challenged by a weak economy and problematic credit environment. The need for an elevated loan loss provision and its impact on our current earnings is disappointing. And, as always, our solid capital position provides us the ability to safely manage through this difficult time."

Stewardship Financial Corporation's subsidiary, the 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 $7.7 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,
				2012				2012				2011				2011
Selected Financial Condition Data:
	Cash and cash equivalents			$	25,340			$	24,181			$	13,698			$	25,866
	Securities available for sale				172,712				175,102				170,925				145,891
	Securities held to maturity				32,993				36,353				38,354				41,426
	FHLB Stock				2,213				2,266				2,478				2,491
	Loans receivable:
		Loans receivable, gross			445,267				453,671				456,413				468,668
		Allowance for loan losses			(11,934	)			(13,097	)			(11,604	)			(11,230	)
		Other, net			45				62				(6	)			(109	)
	Loans receivable, net				433,378				440,636				444,803				457,329
	Loans held for sale				3,334				1,395				4,711				-
	Other assets				30,158				32,112				33,849				27,386
	Total assets			$	700,128			$	712,045			$	708,818			$	700,389
	Noninterest-bearing deposits			$	124,017			$	118,597			$	115,776			$	114,518
	Interest-bearing deposits				469,478				483,486				477,776				473,900
	Total deposits				593,495				602,083				593,552				588,418
	Other borrowings				25,000				28,000				32,700				33,000
	Securities sold under agreements to repurchase				14,342				14,342				14,342				15,791
	Subordinated debentures				7,217				7,217				7,217				7,217
	Other liabilities				2,183				2,348				3,215				2,316
	Stockholders' equity				57,891				58,055				57,792				53,647
	Total liabilities and stockholders' equity			$	700,128			$	712,045			$	708,818			$	700,389
	Book value per common share			$	7.27			$	7.31			$	7.28			$	7.49
	Equity to assets				8.27	%			8.15	%			8.15	%			7.66	%
Asset Quality Data:
	Nonaccrual loans			$	29,541			$	26,823			$	27,736			$	23,834
	Loans past due 90 days or more and accruing				200				-				-				2,342
	Total nonperforming loans				29,741				26,823				27,736				26,176
	Other real estate owned				1,991				3,840				5,288				275
	Total nonperforming assets			$	31,732			$	30,663			$	33,024			$	26,451
	Nonperforming loans to total loans				6.68	%			5.91	%			6.08	%			5.59	%
	Nonperforming assets to total assets				4.53	%			4.31	%			4.66	%			3.78	%
	Allowance for loan losses to nonperforming loans				40.13	%			48.83	%			41.84	%			42.90	%
	Allowance for loan losses to total gross loans				2.68	%			2.89	%			2.54	%			2.40	%

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,
				2012				2011				2012				2011
Selected Operating Data:
	Interest income			$	7,317			$	8,033			$	14,833			$	15,808
	Interest expense				1,357				1,812				2,822				3,638
		Net interest and dividend income			5,960				6,221				12,011				12,170
	Provision for loan losses				2,900				1,915				4,665				3,590
	Net interest and dividend income after provision for loan losses				3,060				4,306				7,346				8,580
	Noninterest income:
		Fees and service charges			531				538				1,046				1,049
		Bank owned life insurance			81				81				161				161
		Gain on calls and sales of securities			12				21				445				21
		Gain on sales of mortgage loans			154				186				565				590
		Other			133				117				244				206
		Total noninterest income			911				943				2,461				2,027
	Noninterest expenses:
		Salaries and employee benefits			2,257				2,261				4,643				4,497
		Occupancy, net			471				475				958				1,020
		Equipment			243				238				491				496
		Data processing			316				338				650				675
		FDIC insurance premium			155				147				303				401
		Charitable contributions			25				75				175				175
		Other			987				1,002				1,988				1,956
		Total noninterest expenses			4,454				4,536				9,208				9,220
(Loss) income before income tax (benefit) expense					(483	)			713				599				1,387
Income tax (benefit) expense					(159	)			128				147				319
Net (loss) income					(324	)			585				452				1,068
Dividends on preferred stock and accretion					38				138				113				276
Net (loss) income available to common stockholders				$	(362	)		$	447			$	339			$	792
Weighted avg. no. of diluted common shares					5,902,167				5,850,506				5,897,266				5,850,116
Diluted (loss) earnings per common share				$	(0.06	)		$	0.08			$	0.06			$	0.14
Return on average common equity					-3.31	%			4.11	%			1.56	%			3.70	%
Return on average assets					-0.18	%			0.34	%			0.13	%			0.31	%
Yield on average interest-earning assets					4.51	%			4.99	%			4.55	%			4.99	%
Cost of average interest-bearing liabilities					1.04	%			1.37	%			1.08	%			1.38	%
Net interest rate spread					3.47	%			3.62	%			3.47	%			3.61	%
Net interest margin					3.69	%			3.89	%			3.70	%			3.86	%