Stewardship Financial Corporation Announces Earnings for the Year Ended December 31, 2012

Stewardship Financial Corporation Announces Earnings for the Year Ended 
December 31, 2012 
MIDLAND PARK, NJ -- (Marketwire) -- 03/27/13 --  Stewardship
Financial Corporation (NASDAQ: SSFN), parent of Atlantic Stewardship
Bank, announced net income for the year ended December 31, 2012 of
$520,000 compared to $684,000 for the year ended December 31, 2011.
For the three months ended December 31, 2012, the Corporation
reported a net loss of $260,000 compared to a net loss of $962,000
for the corresponding three month period in 2011. The 2012 fourth
quarter results were negatively impacted by a larger loan loss
provision. After dividends on preferred stock and accretion, net
income available to common shareholders for the year ended December
31, 2012 was $168,000, or $0.03 per diluted common share, compared to
$126,000, or $0.02 per diluted common share, for the prior year. For
the three months ended December 31, 2012, after dividends on
preferred stock and accretion, the Corporation reported a net loss
available to common shareholders of $387,000, or a loss of $0.07 per
diluted common share, compared to a net loss of $1,000,000, or a loss
of $0.17 per diluted common share, for the three months ended
December 31, 2011. 
For the three months ended December 31, 2012 the Corporation recorded
a $3.3 million provision for loan losses, or $10.0 million on a year
to date basis. The prior year provision for loan losses was $4.9
million and $10.8 million for the three months and year ended
December 31, 2011, respectively. Paul Van Ostenbridge, Stewardship
Financial Corporation's President and Chief Executive Officer
commented, "While our provision remained elevated during 2012, we did
achieve a decline in nonperforming assets." 
At December 31, 2012, nonperforming assets totaled $19.3 million, or
2.80% of total assets, representing a $13.7 million decline from
$33.0 million, or 4.66% of total assets, at December 31, 2011. Over
the last several years, the Bank has been challenged by, among other
things, a very slow and difficult foreclosure process in the State of
New Jersey. The decrease in nonperforming assets reflects payments
and payoffs received as well as a recent increase in foreclosures and
the transfer of these loans to Other Real Estate Owned (OREO). Van
Ostenbr
idge noted, "We continue to have success in disposing of the
OREO properties quickly and only a few properties were held at year
end with the majority of these properties under contract for sale." 
The Corporation continuously monitors and evaluates the loan
portfolio and individual loan problems and, based on the ongoing
reviews and general market conditions, establishes an appropriate
level of loan loss reserves. As a measurement of improvement in
allowance coverage, at December 31, 2012 the ratio of allowance for
loans losses to nonperforming loans was 58.31%, representing an
increase compared to an allowance coverage level of 41.84% as of
December 31, 2011. 
The Corporation reported net interest income of $5.7 million and
$23.5 million for the three months and year ended December 31, 2012,
respectively, compared to $6.2 million and $24.6 million for the
equivalent prior year periods. The net interest margin for the
current three months and year ended December 31, 2012 of 3.57% and
3.66%, respectively, compared to 3.75% and 3.83% for the three months
and year ended December 31, 2011, respectively. 
Asset yields continue to be impacted by the prolonged, low interest
rate environment as well as the impact of nonaccrual loans. The
Corporation continues to attempt to offset a portion of the decline
in yields on assets through the managing of funding costs. For
example, in addition to reducing rates of
fered on deposit products,
during the current year the Corporation prepaid $7.0 million of a
higher costing $14.0 million wholesale repurchase agreement. 
For the year ended December 31, 2012 noninterest income of $6.4
million represents an increase of $1.2 million compared to $5.2
million for the prior year. Noninterest income for the current year
included $2.3 million from gains on calls and sales of securities
compared to $1.2 million in 2011. Gains on sales of mortgage loans
totaled $887,000 for 2012, a decrease from $1.2 million for the year
ended December 31, 2011, reflective of retaining a higher amount of
mortgage loans for portfolio. Gains on sales of other real estate
owned of $429,000 for 2012 represent a net amount resulting from
increased OREO activity over the $10,000 realized in 2011. 
Noninterest expenses for the year ended December 31, 2012 increased
over the 2011 level. The current year includes higher salary and
employee benefits expense, partially reflective of an increased focus
on commercial lending opportunities as well as costs associated with
an enhanced credit review function. In addition, the increase in
salary and employee benefits expenses is the result of increasing
regulatory compliance and the attendant staffing necessary to oversee
all compliance-related issues. Also included in other expense for the
current year period is $691,000 related to a prepayment premium
resulting from the repayment of $7 million of a wholesale repurchase
agreement. 
Total assets of $688.4 million at December 31, 2012 showed a decline
when compared to $708.8 million of assets at December 31, 2011. As
well as the above noted deleveraging of the balance sheet, since
December 31, 2011, gross loans receivable have decreased $16.0
million, reflecting modest demand for loans and our ongoing attention
to quality credit underwriting. The Corporation, nevertheless,
continues to actively lend and pursue opportunities to increase
lending to those in the communities we serve. 
Deposit balances were relatively unchanged at $590.3 million at
December 31, 2012 compared to $593.6 million a year earlier. Core
deposit balances (checking, money market and savings accounts) now
comprise 73.5% of total deposits at December 31, 2012 compared to
71.2% just a year earlier. In addition, noninterest-bearing deposits
continued to grow reaching $124.3 million, or 21.1% of deposits, at
December 31, 2012 compared to $115.8 million, or 19.5%, at December
31, 2011. 
The Corporation has been able to manage through the past few
difficult years due, in part, to solid capital levels. Tier 1
leverage ratio of 9.09% and total risk based capital ratio of 14.89%,
showed improvement from the prior year end and far exceed the
regulatory requirements of 4% and 8%, respectively, for a "well
capitalized" institution. 
To summariz
e, Van Ostenbridge stated, "The loan loss provisioning
levels of recent years have been higher than we were previously
accustomed to and have negatively impacted our performance.
Nevertheless, we believe our level of reserves is appropriate and we
are optimistic and encouraged by the recent improvement in our level
of nonperforming assets. We understand that there is still more we
need to accomplish and remain committed to further reductions in our
level of problem assets. We firmly believe our level of loan loss
reserves, coupled with strong liquidity and a sound capital base,
enable us to continue to address workout strategies aimed at reducing
the overall level of nonperforming assets." 
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)                                 
                                                                            
                                  December 31,  September 30,  December 31, 
                                      2012           2012          2011     
                                  ------------  -------------  ------------ 
                                                                            
Selected Financial Condition                                                
 Data:                                                                      
  Cash and cash equivalents       $     21,016  $      17,387  $     13,698 
  Securities available for sale        174,700        173,999       170,925 
  Securities held to maturity           29,718         31,890        38,354 
  FHLB Stock                             2,213          2,213         2,478 
  Loans receivable:                                                         
    Loans receivable, gross            440,423        437,999       456,413 
    Allowance for loan losses          (10,641)       (12,598)      (11,604)
    Other, net                              50             93            (6)
                                  ------------  -------------  ------------ 
  Loans receivable, net                429,832        425,494       444,803 
                                                                            
  Loans held for sale                      784            938         4,711 
  Other assets                          30,125         31,891        33,849 
                                  ------------  -------------  ------------ 
  Total assets                    $    688,388  $     683,812  $    708,818 
                                  ============  =============  ============ 
                                                                            
                                                                            
  Noninterest-bearing deposits    $    124,286  $     125,060  $    115,776 
  Interest-bearing deposits            465,968        458,366       477,776 
                                  ------------  -------------  ------------ 
  Total deposits                       590,254        583,426       593,552 
  Other borrowings                      25,000         25,000        32,700 
  Securities sold under                                                     
   agreements to repurchase              7,343          7,342        14,342 
  Subordinated debentures                7,217          7,217         7,217 
  Other liabilities                      2,228          2,953         3,215 
  Stockholders' equity                  56,346         57,874        57,792 
                                  ------------  -------------  ------------ 
  Total liabilities and                                                     
   stockholders' equity           $    688,388  $     683,812  $    708,818 
                                  ============  =============  ============ 
                                                                            
  Book value per common share     $       6.98  $        7.25  $       7.28 
                                                                            
  Equity to assets                        8.19%          8.46%         8.15%
                                                                            
Asset Quality Data:                                                         
  Nonaccrual loans                $     18,011  $      24,960  $     27,736 
  Loans past due 90 days or more                                            
   and accruing                            237             75             - 
                                  ------------  -------------  ------------ 
  Total nonperforming loans             18,248         25,035        27,736 
  Other real estate owned                1,058          2,985         5,288 
                                  ------------  -------------  ------------ 
  Total nonperforming assets      $     19,306  $      28,020  $     33,024 
                                  ============  =============  ============ 
                                                                            
                                                                            
  Nonperforming loans to total                                              
   loans                                  4.14%          5.72%         6.08%
  Nonperforming assets to total                                             
   assets                                 2.80%          4.10%         4.66%
  Allowance for loan losses to                                              
   nonperforming loans                   58.31%         50.32%        41.84%
  Allowance for loan losses to                                              
   total gross loans                      2.42%          2.88%         2.54%
                                                                            
                                                                            
                                                                            
                     Stewardship Financial Corporation                      
                Selected Consolidated Financial Information                 
              (dollars in thousands, except per share amounts)              
                                (unaudited)                                 
                                                                            
                              For the three months        For the year      
                                      ended                   ended         
                                  December 31,            December 31,      
                                2012        2011        2012        2011    
                             ----------  ----------  ----------  ---------- 
Selected Operating Data:                                                    
  Interest income            $    6,754  $    7,748  $   28,707  $   31,574 
  Interest expense                1,094       1,594       5,175       6,964 
                             ----------  ----------  ----------  ---------- 
    Net interest and                                                        
     dividend income              5,660       6,154      23,532      24,610 
  Provision for loan losses       3,330       4,925       9,995      10,845 
                             ----------  ----------  ----------  ---------- 
  Net interest and dividend                                                 
   income after provision                                                   
   for loan losses                2,330       1,229      13,537      13,765 
  Noninterest income:                                                       
    Fees and service charges        456         524       1,998       2,074 
    Bank owned life                                                         
     insurance                       81          81         325         325 
    Gain on calls and sales                                                 
     of securities                1,004         686       2,340       1,161 
    Gain on sales of                                                        
     mortgage loans                 160         374         887       1,209 
    Gain (loss) on sales of                                                 
     other real estate owned         (3)          -         429          10 
    Other                            79         118         410         391 
                             ----------  ----------  ----------  ---------- 
    Total noninterest income      1,777       1,783       6,389       5,170 
  Noninterest expenses:                                                     
    Salaries and employee                                                   
     benefits                     2,433       2,106       9,470       8,983 
    Occupancy, net                  515         487       1,967       2,023 
    Equipment                       240         239         971         970 
    Data processing                 317         341       1,291       1,351 
    FDIC insurance premium          155         161         612         714 
    Other                         1,147       1,487       5,342       4,625 
                             ----------  ----------  ----------  ---------- 
    Total noninterest                                                       
     expenses                     4,807       4,821      19,653      18,666 
                             ----------  ----------  ----------  ---------- 
Income (loss) before income                                            
     
 tax expense (benefit)             (700)     (1,809)        273         269 
Income tax expense (benefit)       (440)       (847)       (247)       (415)
                             ----------  ----------  ----------  ---------- 
Net income (loss)                  (260)       (962)        520         684 
Dividends on preferred stock                                                
 and accretion                      127          38         352         558 
                             ----------  ----------  ----------  ---------- 
Net income (loss) available                                                 
 to common stockholders      $     (387) $   (1,000) $      168  $      126 
                             ==========  ==========  ==========  ========== 
                                                                            
Weighted avg. no. of diluted                                                
 common shares                5,923,113   5,866,575   5,908,503   5,861,465 
Diluted (loss) earnings per                                                 
 common share                $    (0.07) $    (0.17) $     0.03  $     0.02 
                                                                            
Return on average common                                                    
 equity                           -3.56%      -8.82%       0.39%       0.29%
                                                                            
Return on average assets          -0.15%      -0.53%       0.07%       0.10%
                                                                            
Yield on average interest-                                                  
 earning assets                    4.24%       4.70%       4.44%       4.89%
Cost of average interest-                                                   
 bearing liabilities               0.86%       1.20%       1.00%       1.31%
                             ----------  ----------  ----------  ---------- 
Net interest rate spread           3.38%       3.50%       3.44%       3.58%
                             ==========  ==========  ==========  ========== 
                                                                            
Net interest margin                3.57%       3.75%       3.66%       3.83%

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