Stewardship Financial Corporation Reports Results for the Second Quarter of 2012

MIDLAND PARK, NJ--(Marketwire -08/14/12)- Stewardship Financial Corporation (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 For the six months ended 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%