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Stewardship Financial Corporation Announces First Quarter of 2014 Earnings

MIDLAND PARK, NJ -- (Marketwired) -- 05/07/14 -- Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, announced net income for the three months ended March 31, 2014 of $506,000 as compared to net income of $822,000 for the three months ended March 31, 2013. After dividends on preferred stock, the net income available to the common stockholders was $335,000, or $0.06 per common share, for the current 2014 period compared to $656,000, or $0.11 per common share, for the equivalent period of 2013. Items affecting comparisons between the periods are explained below.

Of significant importance for the quarter, the Corporation did not record a provision for loan losses for the three months ended March 31, 2014 in contrast to a provision for loan losses of $1.6 million for the three months ended March 31, 2013. Paul Van Ostenbridge, Stewardship Financial Corporation's President and Chief Executive Officer, commented, "Based on our continued improvement in asset quality and the reserves established over the past few years, no increase in the allowance for loan losses was necessary at March 31, 2014."

Continuing on the Corporation's improvement in the level of problem assets, Van Ostenbridge stated, "We are seeing the results of our committed focus for the last several years on reducing our level of nonperforming loans." Nonperforming loans decreased to $5.1 million, or 1.20% of total loans at March 31, 2014, representing an approximate 50% reduction when compared to $10.2 million, or 2.34%, at December 31, 2013 and over a 70% decline when compared to $17.5 million, or 3.97%, a year earlier.

Total nonperforming assets, which includes other real estate owned, represented just 1.02% of total assets at March 31, 2014, signifying meaningful progress when compared to 1.58% and 2.65% at December 31, 2013 and March 31, 2013, respectively.

The decrease in nonperforming assets is partially attributable to the sale of a small group of nonperforming loans that, at December 31, 2013, the Corporation had categorized as held 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, these loans had a carrying value of $2.8 million. The loans were sold during the three months ended March 31, 2014 and resulted in a net loss to the Corporation of $241,000, reflecting further declines in fair value.

When comparing the current year quarter results with the prior year quarter, components of noninterest income also had a substantial impact. The Corporation reported noninterest income of $399,000 for the three months ended March 31, 2014 compared to $1.5 million for the equivalent prior year period. The current year period includes the previously mentioned loss of $241,000 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 prior year period included $537,000 as a result of a death benefit insurance payment received.

Net interest income was $5.3 million in the first quarter of 2014 compared to $5.9 million a year earlier. "While the Corporation continues to monitor and manage all expenses, the low interest rate environment in which we have been operating has put pressure on asset yields," said Van Ostenbridge.

Total noninterest expenses were $5.1 million for the three months ended March 31, 2014 -- comparable to $4.9 million incurred in the prior year period.

Total assets at March 31, 2014 were $672.6 million, which were comparatively unchanged from assets of $673.5 million at December 31, 2013. Additional liquidity was provided by an increase in cash and cash equivalents. Gross loans receivable decreased $10.5 million from December 31, 2013, reflecting normal payoffs and principal amortization as well as the competitive environment for new loans due to lack of demand. Van Ostenbridge noted, "Our lending efforts are dedicated to building and maintaining a pipeline of loan applications, with underwriting that adheres to our strict guidelines."

Total deposits were $575.4 million at March 31, 2014, reflecting a relatively insignificant decline when compared to deposits of $577.6 million at December 31, 2013. At March 31, 2014 noninterest bearing deposits represented 23.9% of total deposits.

Capital levels continue to significantly exceed the regulatory requirements for a "well capitalized" institution with a tier 1 leverage ratio of 9.22% and a total risk-based capital ratio of 15.13% compared to the regulatory requirements of 4% and 8%, respectively.

Van Ostenbridge concluded, "While the last several years have seen substantial attention and resources devoted to addressing problem loans, the results of those labors are now clearly evident. With asset quality issues now considered to be at a manageable level, our efforts can now be fully directed on our core banking business."

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 $8.1 million.

We invite you to visit our website at 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)

                                  March 31,     December 31,    March 31,
                                     2014           2013           2013
                                -------------  -------------  -------------

Selected Financial Condition
  Cash and cash equivalents     $      27,176  $      17,405  $      26,144
  Securities available for sale       171,692        168,411        175,493
  Securities held to maturity          24,685         25,964         28,548
  FHLB Stock                            2,133          2,133          2,213
  Loans receivable:
    Loans receivable, gross           423,471        434,009        441,533
    Allowance for loan losses          (9,792)        (9,915)       (11,512)
    Other, net                            105            168             62
                                -------------  -------------  -------------
  Loans receivable, net               413,784        424,262        430,083

  Loans held for sale                     186          2,800          2,101
  Other assets                         32,947         32,533         29,344
                                -------------  -------------  -------------
  Total assets                  $     672,603  $     673,508  $     693,926
                                =============  =============  =============

  Noninterest-bearing deposits  $     137,687  $     133,565  $     132,960
  Interest-bearing deposits           437,729        444,026        462,578
                                -------------  -------------  -------------
  Total deposits                      575,416        577,591        595,538
  Other borrowings                     25,000         25,000         25,000
  Securities sold under
   agreements to repurchase             7,601          7,300          7,344
  Subordinated debentures               7,217          7,217          7,217
  Other liabilities                     2,209          2,621          2,152
                                -------------  -------------  -------------
  Total liabilities                   617,443        619,729        637,251
  Shareholders' equity                 55,160         53,779         56,675
                                -------------  -------------  -------------
  Total liabilities and
   shareholders' equity         $     672,603  $     673,508  $     693,926
                                =============  =============  =============

  Equity to assets                       8.20%          7.98%          8.17%

Asset Quality Data:
  Nonaccrual loans              $       5,073  $      10,219  $      17,479
  Loans past due 90 days or
   more and accruing                        -              -             50
                                -------------  -------------  -------------
  Total nonperforming loans             5,073         10,219         17,529
  Other real estate owned               1,789            451            876
                                -------------  -------------  -------------
  Total nonperforming assets    $       6,862  $      10,670  $      18,405
                                =============  =============  =============

  Nonperforming loans to total
   loans                                 1.20%          2.34%          3.97%
  Nonperforming assets to total
   assets                                1.02%          1.58%          2.65%
  Allowance for loan losses to
   nonperforming loans                 193.02%         97.03%         65.67%
  Allowance for loan losses to
   total gross loans                     2.31%          2.28%          2.61%

                     Stewardship Financial Corporation
                Selected Consolidated Financial Information
              (dollars in thousands, except per share amounts)

                                                     For the three months
                                                          March 31,
                                                       2014         2013
                                                   -----------  -----------
Selected Operating Data:
  Interest income                                  $     6,145  $     6,870
  Interest expense                                         839        1,004
                                                   -----------  -----------
    Net interest and dividend income                     5,306        5,866
  Provision for loan losses                                  -        1,600
                                                   -----------  -----------
  Net interest and dividend income after provision
   for loan losses                                       5,306        4,266
  Noninterest income:
    Fees and service charges                               421          456
    Bank owned life insurance                               96           76
    Gain on calls and sales of securities                    -            2
    Gain on sales of mortgage loans                         12          162
    Loss on sales of loans                                (241)           -
    Gain on sales of other real estate owned                 -          126
    Gain on life insurance proceeds                          -          537
    Other                                                  111          115
                                                   -----------  -----------
    Total noninterest income                               399        1,474
  Noninterest expenses:
    Salaries and employee benefits                       2,678        2,696
    Occupancy, net                                         555          517
    Equipment                                              188          184
    Data processing                                        387          328
    FDIC insurance premium                                 211          150
    Other                                                1,075        1,057
                                                   -----------  -----------
    Total noninterest expenses                           5,094        4,932
                                                   -----------  -----------
  Income before income tax expense (benefit)               611          808
  Income tax expense (benefit)                             105          (14)
                                                   -----------  -----------
  Net income                                               506          822
  Dividends on preferred stock and accretion               171          166
                                                   -----------  -----------
  Net income available to common stockholders      $       335  $       656
                                                   ===========  ===========

  Weighted avg. no. of diluted common shares         5,956,887    5,930,981
  Diluted earnings per common share                $      0.06  $      0.11

  Return on average common equity                         3.41%        6.39%

  Return on average assets                                0.31%        0.49%

  Yield on average interest-earning assets                3.97%        4.34%
  Cost of average interest-bearing liabilities            0.71%        0.82%
                                                   -----------  -----------
  Net interest rate spread                                3.26%        3.52%
                                                   ===========  ===========

  Net interest margin                                     3.44%        3.72%

Claire M. Chadwick
EVP and Chief Financial Officer
630 Godwin Avenue
Midland Park, NJ 07432

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