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Stewardship Financial Corporation Announces First Quarter of 2014 Earnings


May 7, 2014 - Midland Park, NJ

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 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)

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

Selected Financial Condition
Data:
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)
(unaudited)

For the three months
ended
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%


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

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