Stewardship Financial Corporation Reports Third Quarter 2010 Results

MIDLAND PARK, NJ--(Marketwire - November 1, 2010) - Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, reported net income for the three months ended September 30, 2010 of $340,000, or $0.03 per diluted common share, as compared to earnings of $893,000, or $0.13 per diluted common share, for the three months ended September 30, 2009. For the nine months ended September 30, 2010, the Corporation reported net income of $146,000 compared to net income of $2.9 million for the corresponding nine month period in 2009. After dividends on preferred stock, the net loss to the common shareholders was $266,000 for the first nine months of 2010, or $0.05 per diluted common share, compared to net income of $2.5 million, or $0.43 per diluted common share, during the same period in 2009. The reduced earnings in the current year periods is primarily related to a higher provision for loan losses.

Stewardship Financial Corporation's President and Chief Executive Officer Paul Van Ostenbridge commented, "We continue to address asset quality and are working to reduce the current elevated level of nonperforming loans." Modest improvement was seen, with September 30, 2010 nonperforming loans amounting to $24.5 million, representing 5.43% of total loans, which compares favorably to $26.9 million, or 5.88% at June 30, 2010. In addition, the level of loans past due between 30-89 days remained at $4.0 million at the end of September, reflecting stabilization when compared to June and a significant improvement from a $9.7 million level at the end of March.

For the three months ended September 30, 2010 the Corporation recorded a $1.5 million provision for loan losses, or $7.8 million on a year to date basis. At September 30, 2010, the total allowance for loan losses represented 2.07% of total loans compared to a ratio of 1.91% at June 30, 2010 and 1.50% as of December 31, 2009. Furthermore, the ratio of allowance for loans losses to nonperforming loans was 38.09% at September 30, 2010, providing improved allowance coverage as compared to levels of 32.48% and 30.20% as of June 30, 2010 and December 31, 2009, respectively.

For the three and nine months ended September 30, 2010 net interest income was generally comparable to the prior year periods. The net interest spread of 3.53% for the three months ended September 30, 2010 increased slightly from 3.47% for the three months ended September 30, 2009. Net interest margin decreased slightly to 3.83% for the current three month period from 3.92% for the same prior year period. The reported net interest spread and margin for the nine months ended September 30, 2010 of 3.56% and 3.90%, respectively, show improvement when compared to the net interest spread and margin of 3.44% and 3.89%, respectively, for the nine months ended September 30, 2009. Disciplined pricing of deposit products served to offset a decline in yields on earning assets in the current year periods.

Focus on controlling noninterest expense continues, with the goal of operating more efficiently in the current business environment. A portion of the increase in expenses in the current year, nevertheless, is associated with managing the higher volume of nonperforming loans.

Total assets of $680.1 million at September 30, 2010 show a modest increase when compared to $663.8 million of assets at December 31, 2009. While deposit growth has been strong, loan demand is more reflective of consumer and business spending patterns in these times of economic uncertainty. In the current environment, therefore, the balance sheet has benefited from planned additional liquidity.

Deposits continue to grow, reaching $565.8 million at September 30, 2010 compared to deposits of $529.9 million at December 31, 2009. Noninterest-bearing deposits represented 18.2% of total deposits at September 30, 2010, up from 16.7% at December 31, 2009. The increase in deposits has enabled the Corporation to reduce other borrowings by $18.6 million since December 31, 2009.

With a tier 1 leverage ratio of 8.64% and total risk based capital ratio of 13.29%, the Corporation's capital ratios far exceed the regulatory requirements for a "well capitalized" institution. Maintaining strong capital levels remains a primary objective of our Board.

In closing Van Ostenbridge reiterated, "Our ability to grow net interest income as well as fees and service charges improves our core earnings during this difficult period. By reducing our nonperforming assets we will be in a position to lower our provision for loan losses which, in turn, will generate even stronger earnings."

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. The Bank is currently celebrating its twenty-fifth year of operation. The Bank's tithe amounts to over $7.0 million in total donations since the program began.

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)

                                September    June     December   September
                                   30,        30,        31,        30,
                                  2010       2010       2009       2009
                                ---------  ---------  ---------  ---------
Selected Financial Condition
 Data:
   Cash and cash equivalents    $  25,158  $  19,452  $   8,871  $  13,646
   Securities available for
    sale                          127,348    116,009    103,026     90,460
   Securities held to maturity     47,434     56,836     67,717     75,232
   FHLB Stock                       2,497      2,497      3,227      3,195
   Loans receivable:
        Loans receivable, gross   450,507    458,102    460,476    451,229
        Allowance for loan
         losses                    (9,327)    (8,745)    (6,920)    (7,249)
        Other, net                   (290)      (350)      (437)      (428)
                                ---------  ---------  ---------  ---------
   Loans receivable, net          440,890    449,007    453,119    443,552

   Loans held for sale              9,326      3,059        660      1,018
   Other assets                    27,409     28,050     27,224     22,518
                                ---------  ---------  ---------  ---------
   Total assets                 $ 680,062  $ 674,910  $ 663,844  $ 649,621
                                =========  =========  =========  =========

   Deposits:
   Total deposits               $ 565,845  $ 561,183  $ 529,930  $ 514,612
   Other borrowings                36,000     36,000     54,600     53,900
   Subordinated debentures          7,217      7,217      7,217      7,217
   Securities sold under
    agreements to repurchase       15,241     15,400     15,396     16,019
   Other liabilities                2,910      2,412      3,190      3,801
   Stockholders' equity            52,849     52,698     53,511     54,072
                                ---------  ---------  ---------  ---------
   Total liabilities and
    stockholders' equity        $ 680,062  $ 674,910  $ 663,844  $ 649,621
                                =========  =========  =========  =========

   Book value per common share  $    7.37  $    7.39  $    7.50  $    7.60

   Equity to assets                  7.77%      7.81%      8.06%      8.32%

Asset Quality Data:
   Nonaccrual loans             $  24,334  $  25,712  $  19,656  $  14,536
   Loans past due 90 days or
    more and accruing                  10          -        415        728
   Restructured loans                 140      1,210      2,846      2,417
                                ---------  ---------  ---------  ---------
   Total nonperforming loans       24,484     26,922     22,917     17,681
   Other real estate owned            356          -          -          -
                                ---------  ---------  ---------  ---------
   Total nonperforming assets   $  24,840  $  26,922  $  22,917  $  17,681
                                =========  =========  =========  =========


   Non-performing loans to
    total loans                      5.43%      5.88%      4.98%      3.92%
   Non-performing assets to
    total assets                     3.65%      3.99%      3.45%      2.72%
   Allowance for loan losses to
    nonperforming loans             38.09%     32.48%     30.20%     41.00%
   Allowance for loan losses to
    total gross loans                2.07%      1.91%      1.50%      1.61%




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

                                For the three months  For the nine months
                                        ended                 ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Selected Operating Data:
  Interest income               $   8,095  $   8,610  $  24,791  $  25,625
  Interest expense                  2,145      2,634      6,739      8,231
                                ---------  ---------  ---------  ---------
    Net interest income             5,950      5,976     18,052     17,394
  Provision for loan losses         1,500      1,200      7,755      2,375
                                ---------  ---------  ---------  ---------
  Net interest income after
   provision for loan losses        4,450      4,776     10,297     15,019
  Noninterest income:
    Fees and service charges          514        492      1,486      1,362
    Bank owned life insurance          82         79        249        238
    Gain on sales of mortgage
     loans                             94        188        215        272
    Gain on calls and sales of
     securities                         -          2        802        255
    Merchant processing                 -          -          -        118
    Other                              69         60        265        232
                                ---------  ---------  ---------  ---------
    Total noninterest income          759        821      3,017      2,477
  Noninterest expenses:
    Salaries and employee
     benefits                       2,077      2,128      6,151      6,264
    Occupancy, net                    501        453      1,471      1,398
    Equipment                         285        277        871        795
    Data processing                   334        300        986        882
    FDIC insurance premium            251        197        712        886
    Charitable contributions          150        120        300        411
    Merchant processing                 -          -          -        108
    Other                           1,010        871      2,712      2,694
                                ---------  ---------  ---------  ---------
    Total noninterest expenses      4,608      4,346     13,203     13,438
                                ---------  ---------  ---------  ---------
Income before income taxes            601      1,251        111      4,058
Income tax (benefit) expense          261        358        (35)     1,198
                                ---------  ---------  ---------  ---------
Net income                            340        893        146      2,860
Dividends on preferred stock
 and accretion                        137        138        412        367
                                ---------  ---------  ---------  ---------
Net (loss) income available
 to common stockholders         $     203  $     755  $    (266) $   2,493
                                =========  =========  =========  =========

Weighted avg. no. of diluted
 common shares                  5,842,366  5,837,797  5,842,565  5,836,225
Diluted (loss) earnings per
 common share                   $    0.03  $    0.13  $   (0.05) $    0.43

Return on average common
 equity                              1.51%      5.59%     -0.66%      6.37%

Return on average assets             0.20%      0.55%      0.03%      0.60%

Yield on average
 interest-earning assets             5.18%      5.61%      5.32%      5.69%
Cost of average
 interest-bearing liabilities        1.65%      2.14%      1.76%      2.25%
                                ---------  ---------  ---------  ---------
Net interest rate spread             3.53%      3.47%      3.56%      3.44%
                                =========  =========  =========  =========

Net interest margin                  3.83%      3.92%      3.90%      3.89%

Contact Information: Contact: Claire M. Chadwick SVP and Chief Financial Officer 630 Godwin Avenue Midland Park, NJ 07432 201-444-7100