Stewardship Financial Corporation Announces First Quarter of 2013 Earnings

MIDLAND PARK, NJ--(Marketwired - May 9, 2013) - Stewardship Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship Bank, announced net income for the three months ended March 31, 2013 of $822,000 as compared to net income of $776,000 for the three months ended March 31, 2012. After dividends on preferred stock, the net income available to the common stockholders was $656,000, or $0.11 per diluted common share, for the current 2013 period compared to $701,000, or $0.12 per diluted common share, for the comparable period of 2012.

Net interest income was $5.9 million in the first quarter of 2013 compared to $6.1 million a year earlier. "In this prolonged, low interest rate environment, the Corporation continues to monitor and manage all expenses in order to alleviate some of the pressure on our asset yields," said Paul Van Ostenbridge, Stewardship Financial Corporation's President and Chief Executive Officer.

The Corporation recorded a $1.6 million provision for loan losses for the three months ended March 31, 2013 compared to a provision for loan losses of $1.8 million for the three months ended March 31, 2012. Van Ostenbridge commented, "The 2013 provision for loan losses, while lower than the prior year, remains elevated as a result of the continued challenging economic environment and its impact on our borrowers."

Non-performing loans decreased to $17.5 million, or 3.97% of total loans at March 31, 2013, compared to $26.8 million, or 5.91% a year earlier and $18.2 million, or 4.14% at December 31, 2012. The ratio of allowance for loan losses to nonperforming loans increased to 65.67% at March 31, 2013, providing additional allowance coverage as compared to 48.83% at March 31, 2012 and 58.31% at December 31, 2012.

Addressing the Corporation's problem assets, Van Ostenbridge stated, "Over the last year we have seen a significant decline in our level of nonperforming loans. While problem loans continue to migrate through the lengthy workout phase, including a very slow New Jersey foreclosure process, we are encouraged by the recent progress."

The Corporation reported noninterest income of $1.5 million for the three months ended March 31, 2013 compared to $1.6 million for the equivalent prior year period. During the first quarter of 2013, noninterest income included $537,000 as a result of a death benefit insurance payment received. For the three months ended March 31, 2012 the Corporation realized a $433,000 gain from the sale of securities. Gain on sales of mortgage loans totaled $162,000 for the three months ended March 31, 2013, a decrease from $411,000 for the three months ended March 31, 2012, partially reflective of retaining a higher amount of mortgage loan originations for our portfolio.

Total noninterest expenses were $4.9 million for the three months ended March 31, 2013 -- comparable to the prior year period.

Total assets at March 31, 2013 were $693.9 million, representing a slight increase from assets of $688.4 million at December 31, 2012. Additional liquidity was provided by increases in cash and cash equivalents. Gross loans receivable increased $1.1 million from December 31, 2012, whereby new loans recorded were partially offset by payoffs and normal principal amortization.

Total deposits were $595.5 million at March 31, 2013, reflecting $5.3 million of deposit growth when compared to deposits of $590.3 million at December 31, 2012. The net growth in deposits during the first quarter of 2013 consisted of an $8.7 million increase in noninterest-bearing deposits and a $3.4 million decline in balances in interest-bearing accounts. At March 31, 2013 noninterest bearing deposits represented 22.3% of total deposits, up from 19.7% a year earlier.

Capital levels continue to significantly exceed the regulatory requirements for a "well capitalized" institution with a tier 1 leverage ratio of 9.27% and total risk based capital ratio of 15.08%.

Van Ostenbridge concluded, "While the substantial attention and resources devoted to addressing problem loans is showing results, we clearly recognize that there is more to accomplish. We are confident of our ability to implement appropriate loan work out strategies that improve asset quality and maximize loan repayments, supported by an appropriate level of loan loss reserves, coupled with a sound capital base."

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, 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)
			March 31,				December 31,				March 31,
			2013				2012				2012
Selected Financial Condition Data:
	Cash and cash equivalents		$	26,144			$	21,016			$	24,181
	Securities available for sale			175,493				174,700				175,102
	Securities held to maturity			28,548				29,718				36,353
	FHLB Stock			2,213				2,213				2,266
	Loans receivable:
	Loans receivable, gross			441,533				440,423				453,671
	Allowance for loan losses			(11,512	)			(10,641	)			(13,097	)
	Other, net			62				50				62
	Loans receivable, net			430,083				429,832				440,636
	Loans held for sale			2,101				784				1,395
	Other assets			29,344				30,125				32,112
	Total assets		$	693,926			$	688,388			$	712,045
	Noninterest-bearing deposits		$	132,960			$	124,286			$	118,597
	Interest-bearing deposits			462,578				465,968				483,486
	Total deposits			595,538				590,254				602,083
	Other borrowings			25,000				25,000				28,000
	Securities sold under agreements to repurchase			7,344				7,343				14,342
	Subordinated debentures			7,217				7,217				7,217
	Other liabilities			2,152				2,228				2,348
	Stockholders' equity			56,675				56,346				58,055
	Total liabilities and stockholders' equity		$	693,926			$	688,388			$	712,045
	Equity to assets			8.17	%			8.19	%			8.15	%
Asset Quality Data:
	Nonaccrual loans		$	17,479			$	18,011			$	26,823
	Loans past due 90 days or more and accruing			50				237				-
	Total nonperforming loans			17,529				18,248				26,823
	Other real estate owned			876				1,058				3,840
	Total nonperforming assets		$	18,405			$	19,306			$	30,663
	Nonperforming loans to total loans			3.97	%			4.14	%			5.91	%
	Nonperforming assets to total assets			2.65	%			2.80	%			4.31	%
	Allowance for loan losses to nonperforming loans			65.67	%			58.31	%			48.83	%
	Allowance for loan losses to total gross loans			2.61	%			2.42	%			2.89	%

Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
				For the three months ended
				March 31,
				2013				2012
Selected Operating Data:
	Interest income			$	6,870			$	7,516
	Interest expense				1,004				1,465
		Net interest and dividend income			5,866				6,051
	Provision for loan losses				1,600				1,765
	Net interest and dividend income after provision for loan losses				4,266				4,286
	Noninterest income:
		Fees and service charges			456				515
		Bank owned life insurance			76				80
		Gain on calls and sales of securities			2				433
		Gain on sales of mortgage loans			162				411
		Gain on sales of other real estate owned			126				99
		Gain on life insurance proceeds			537				-
		Other			115				111
		Total noninterest income			1,474				1,649
	Noninterest expenses:
		Salaries and employee benefits			2,696				2,386
		Occupancy, net			517				487
		Equipment			184				248
		Data processing			328				334
		FDIC insurance premium			150				148
		Other			1,057				1,250
		Total noninterest expenses			4,932				4,853
	Income before income tax expense (benefit)				808				1,082
	Income tax expense (benefit)				(14	)			306
	Net income				822				776
	Dividends on preferred stock				166				75
	Net income available to common stockholders			$	656			$	701
	Weighted avg. no. of diluted common shares				5,930,981				5,892,366
	Diluted earnings per common share			$	0.11			$	0.12
	Return on average common equity				6.39	%			6.47	%
	Return on average assets				0.49	%			0.44	%
	Yield on average interest-earning assets				4.39	%			4.59	%
	Cost of average interest-bearing liabilities				0.82	%			1.11	%
	Net interest rate spread				3.57	%			3.48	%
	Net interest margin				3.76	%			3.71	%