SCHEDULE 14A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Stewardship Financial Corporation
(Name of Registrant as Specified in Its Charter)
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Stewardship Financial Corporation
630 Godwin Avenue
Midland Park, New Jersey 07432-1405
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 13, 2003
To Our Shareholders:
The Annual Meeting of Shareholders of Stewardship Financial Corporation
(the "Corporation") will be held at the main office of the Corporation, 630
Godwin Avenue, Midland Park, New Jersey, on May 13, 2003, at 7:00 P.M. for the
following purposes:
1. To elect the three (3) Directors named in the attached Proxy
Statement for three year terms.
2. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on March 31, 2003, are
entitled to notice of, and to vote at, the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, it is requested that the enclosed proxy be
executed and returned to our transfer agent, Registrar and Transfer Company, 10
Commerce Drive, Cranford, NJ 07016, in the envelope provided.
By Order of the Board of Directors
Robert J. Turner
Corporate Secretary
April 4, 2003
Stewardship Financial Corporation
630 Godwin Avenue
Midland Park, New Jersey 07432-1405
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 2003
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Solicitation and Voting of Proxies
This Proxy Statement is being furnished to shareholders of Stewardship
Financial Corporation (the "Corporation") in connection with the solicitation by
the Board of Directors of proxies to be used at the Annual Meeting of
Shareholders and at any adjournment of the meeting. You are cordially invited to
attend the Annual Meeting that will be held at the Corporation's main office at
630 Godwin Avenue, Midland Park, New Jersey, on Tuesday, May 13, 2003 at 7:00
P.M. The 2002 Annual Report to shareholders, including consolidated financial
statements for the fiscal year ended December 31, 2002, and a proxy card
accompany this Proxy Statement, which is first being mailed to shareholders on
or about April 4, 2003.
Regardless of the number of shares of common stock you own, it is
important that you vote by completing the enclosed proxy card and returning it
signed and dated in the enclosed postage paid envelope. Proxies solicited by the
Board of Directors of the Corporation will be voted in accordance with the
direction given therein. Where no instructions are indicated, signed proxy cards
will be voted "FOR" the election of each of the nominees for Directors named in
the Proxy Statement. Should any other matters be properly presented at the
Annual Meeting for consideration, such as consideration of a motion to adjourn
the meeting to another time, the persons named as proxies will have discretion
to vote on those matters according to their best judgment to the same extent as
the person delivering the proxy would be entitled to vote. Other than the matter
set forth in the attached Notice of Annual Meeting of Shareholders, the Board of
Directors knows of no additional matters that may be presented for consideration
at the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by sending a
written notice of revocation to Registrar and Transfer Company, 10 Commerce
Drive, Cranford, NJ 07016. A proxy filed prior to the Annual Meeting may be
revoked by delivering to the Corporation a duly executed proxy bearing a later
date, or by attending the Annual Meeting and voting in person. However, if you
are a shareholder whose shares are not registered in your own name, you will
need appropriate documentation from your record holder to vote personally at the
Annual Meeting.
The cost of solicitation of proxies on behalf of the Board of Directors
will be borne by the Corporation. Proxies may be solicited personally or by mail
or telephone by Directors,
officers and other employees of the Corporation without additional compensation
therefor. The Corporation will also reimburse the reasonable expenses of
brokerage firms and other custodians and nominees for sending proxy materials
to, and obtaining proxies from, beneficial owners.
Voting Securities
The securities which may be voted at the Annual Meeting consist of shares
of common stock, no par value, of the Corporation ("Common Stock") with each
share entitling its owner to one vote on each matter properly brought before the
Annual Meeting. There is no cumulative voting for the election of Directors.
The close of business on March 31, 2003, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
shareholders of record entitled to notice of, and to vote at, the Annual Meeting
or any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 1,983,531 shares.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. In the event that there are not
sufficient votes for a quorum, or to approve or ratify any matter being
presented at the time of the Annual Meeting, the Annual Meeting may be adjourned
in order to permit the further solicitation of proxies.
The proxy card being provided by the Board of Directors enables a
shareholder to vote "FOR" the election of the nominees proposed by the Board of
Directors, or to "WITHHOLD AUTHORITY" to vote for one or more of the nominees
being proposed. Under New Jersey law and the Corporation's bylaws, Directors are
elected by a plurality of votes cast, without regard to either broker non-votes,
or proxies as to which authority to vote for one or more of the nominees being
proposed is withheld.
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PROPOSAL -- ELECTION OF DIRECTORS
DIRECTOR INFORMATION
The Corporation's Certificate of Incorporation and its bylaws authorize a
minimum of 1 and a maximum of 25 Directors, but leave the exact number to be
fixed by resolution of the Board of Directors. The Board has fixed the current
number of Directors at 10. The Board has been divided into 3 classes. One class
is elected each year to serve a term of 3 years. Directors elected at this
Annual Meeting will be elected to serve for a term of 3 years through May, 2006,
or until their successors are duly elected and qualified.
Each nominee has indicated to the Corporation that he will serve if
elected. The Corporation has no reason to believe that any of the nominees will
be unable to stand for election. Unless authority to vote for any of the
nominees is withheld, it is intended that the shares represented by the enclosed
proxy card, if executed and returned, will be voted FOR the election of the
nominees proposed by the Board of Directors. If, for any reason, any of the
nominees becomes unavailable for election, the proxy solicited by the Board of
Directors will be voted for a substitute nominee selected by the Board of
Directors.
The Board of Directors recommends that you vote FOR the election of the
nominees named in this Proxy Statement.
Information With Respect to the Nominees For Terms Expiring in 2006
The following sets forth the names of the nominees for election for terms
expiring in 2006, their ages, a brief description of their business experience,
including present occupations, and the year in which each became a Director of
the Corporation and Atlantic Stewardship Bank (the "Bank"), a wholly owned
subsidiary of the Corporation. No nominee is a director of another corporation
registered pursuant to Section 12 of the Securities Exchange Act of 1934.
Robert J. Turner, age 62, has been a Director of the Corporation since
1997. Mr. Turner has been a Director of the Bank since 1985. From 1966 to 2002,
Mr. Turner was the President of The Turner Group, an insurance brokerage
company. Mr. Turner is currently retired.
William J. Vander Eems, age 53, has been a Director of the Corporation
since 1997. Mr. Vander Eems has been a Director of the Bank since 1991. Since
1973, Mr. Vander Eems has been the President of William Van Der Eems, Inc., a
general contracting company.
Paul Van Ostenbridge, age 50, has been a Director of the Corporation since
1997 and has served as President and Chief Executive Officer of the Corporation
since 1997. Mr. Van Ostenbridge has been a Director of the Bank since 1985 and
has served as its President and Chief Executive Officer since 1985.
Information With Respect to the Directors With Terms Expiring in 2005
The following sets forth the names of the Directors with terms expiring in
2005, their ages, a brief description of their business experience, including
present occupations, and the year in which each became a Director of the
Corporation and the Bank. None of the following Directors is a director of
another corporation registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
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William C. Hanse, age 68, has been a Director of the Corporation since
1997. Mr. Hanse has been a Director of the Bank since 1985. Since 1990, Mr.
Hanse has been a partner of the law firm Hanse & Hanse.
Margo Lane, age 52, has been a Director of the Corporation since 1997. Ms.
Lane has been a Director of the Bank since 1994. Since 2003, Ms. Lane has been
the Sales & Marketing Coordinator of PBI-Dansensor America Inc., a company that
sells and services equipment for industrial instrumentation and process control.
From 1976 to 2002, Ms. Lane served as the Corporate Communications Manager of
Garden State Paper Company, LLC, a newsprint manufacturing company.
Arie Leegwater, age 69, has been a Director of the Corporation since 1997
and has been Chairman of the Board of Directors since 1997. Mr. Leegwater has
been a Director of the Bank since 1985. Since 1988, Mr. Leegwater has been the
owner of Arie Leegwater Associates LLC, a general contracting company. Since
2002, Arie Leegwater has been a partner in ARIEANJE LLC, a company engaged in
owning and renting real estate.
John L. Steen, age 65, has been a Director of the Corporation since 1997.
Mr. Steen has been a Director of the Bank since 1985. Since 1972, Mr. Steen has
been the President of Steen Sales, Inc., a textile company. Since 1972, Mr.
Steen has been President of Dutch Valley Throwing Co., a textile company.
Information With Respect to the Directors With Terms Expiring in 2004
The following sets forth the names of the Directors with terms expiring in
2004, their ages, a brief description of their recent business experience,
including present occupations, and the year in which each became a Director of
the Corporation and the Bank. None of the following Directors is a director of
another corporation registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
William Almroth, age 72, has been a Director of the Corporation since
1997. Mr. Almroth has been a Director of the Bank since 1993. From 1984 to 1995,
Mr. Almroth served as Senior Vice President of Sony Music Corporation. Mr.
Almroth is currently retired.
Harold Dyer, age 75, has been a Director of the Corporation since 1997.
Mr. Dyer has been a Director of the Bank since 1985. From 1957 to 1981, Mr. Dyer
was President of White Laundry, Inc., a laundry service company. Mr. Dyer is
currently retired.
Abe Van Wingerden, age 66, has been a Director of the Corporation and the
Bank since 2001. Since 1985, Mr. Van Wingerden has been the President of Abe Van
Wingerden Company, Inc. T/A Van Wingerden Farms, a retailer of garden equipment
and supplies.
Board and Committee Meetings
The Board of Directors of the Corporation held 14 meetings during 2002.
The Board of Directors holds regularly scheduled meetings each month and special
meetings as circumstances require. All of the Directors of the Corporation
attended at least 75% of the total number of Board meetings held during 2002. In
addition, each Director who is a member of a committee of the Board of Directors
attended at least 75% of the meetings for each committee of which he is a
member. Each Director of the Corporation is also a Director of the Bank.
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Report of the Audit Committee
The Corporation and the Bank have a standing Audit Committee of the Board
of Directors. The Audit Committee met 5 times during 2002. In 2002, the Audit
Committee consisted of Directors Dyer (Chairman), Almroth, Hanse, Steen and
Turner. Arie Leegwater was also a member of the Audit Committee until his
resignation in November of 2002. Mr. Leegwater received certain payments in the
aggregate amount of approximately $10,000 during the fiscal year ended December
31, 2002, from the Bank for contracting services he provided. Mr. Leegwater
resigned from the Audit Committee because he believed that under future rules
and regulations of the SEC or of an exchange where the common stock of the
Corporation would be traded, he would not be considered independent as a result
of receipt of the payments, and therefore would be prohibited from being a
member of the Audit Committee.
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Board has adopted a
written charter setting out the audit related functions that the Audit Committee
is to perform. The audit functions of the Audit Committee are to: (i) monitor
the integrity of the Corporation's financial reporting process and systems of
internal controls; (ii) monitor the independence and performance of the
Corporation's independent external audit and internal audit functions; (iii)
provide avenues of communication among the independent auditor, management,
internal auditors and the Board of Directors; and (iv) encourage the adherence
to, and continuous improvement of, the Corporation's policies, procedures and
practices at all levels. We also review and evaluate the recommendations of the
independent certified public accountant, receive all reports of examination of
the Corporation and the Bank by appropriate regulatory agencies, analyze such
regulatory reports, and inform the Board of the results of our analysis of the
regulatory reports. In addition, we receive reports directly from the
Corporation's internal auditors and recommend any action to be taken in
connection therewith.
We meet with both the independent auditors and the internal auditors, each
of whom has unrestricted access to the committee. We also meet with management
periodically to consider the adequacy of the Corporation's internal controls and
the objectivity of its financial reporting. We discuss these matters with the
independent auditors, internal auditors and appropriate financial personnel of
the Corporation.
We recommend to the Board the appointment of the independent auditors and
periodically review their performance and independence from management.
The Directors who serve on the committee are all "independent" for the
purposes of Rule 4200(a)(14) of the NASD's listing standards. That is, the Board
of Directors has determined that none of us has a relationship with the
Corporation and the Bank that may interfere with our independence from the
Corporation and its management.
Management has primary responsibility for the Corporation's financial
statements and the overall reporting process, including the Corporation's system
of internal controls.
The independent auditors audit the financial statements prepared by
management, express an opinion as to whether those financial statements fairly
present the financial position, results of operations, and cash flows of the
Corporation in conformity with generally accepted accounting principles and
discuss with us any issues they believe should be raised with us.
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This year, we reviewed the Corporation's audited financial statements and
met with both management and KPMG LLP, the Corporation's independent auditors,
to discuss those financial statements. Management has represented to us that the
financial statements were prepared in accordance with generally accepted
accounting principles.
We have received from and discussed with KPMG LLP the written disclosure
and the letter required by Independence Standards Boards No. 1 (Independence
Discussions with Audit Committees). These items relate to that firm's
independence from the Corporation. We also discussed with KPMG LLP any matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
Based on these reviews and discussions, we recommended to the Board that
the Corporation's audited financial statements be included in the Corporation's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002.
Submitted by:
Harold Dyer, Chairman
William M. Almroth
William C. Hanse
John L. Steen
Robert J. Turner
Audit Committee, Stewardship Financial Corporation
Nominating Committee The Corporation also maintains a Nominating
Committee. The Nominating Committee makes nominations for candidates to serve on
the Corporation's Board of Directors. In 2002, the Nominating Committee
consisted of Directors Dyer (Chairman) and Van Wingerden. The Nominating
Committee met twice during 2002. The Nominating Committee does not have
procedures in place to consider nominees by shareholders.
Personnel Committee The Bank maintains a Personnel Committee which sets
the compensation for the executive officers of the Corporation and the Bank. In
2002, the Personnel Committee consisted of Directors Almroth (Chairman), Lane,
Leegwater, Turner and Van Ostenbridge. The Personnel Committee met 4 times
during 2002. Messrs. Almroth, Leegwater, Turner and Ms. Lane are not employees
of the Corporation or of the Bank.
Stock Compensation Committee The Corporation maintains a Stock
Compensation Committee. During 2002, the Stock Compensation Committee consisted
of Directors Almroth (Chairman), Lane and Vander Eems. The Stock Compensation
Committee met 1 time during 2002. The Stock Committee recommends the issuance of
stock options in accordance with the 1995 Employee Stock Option Plan and stock
bonuses in accordance with the Stock Bonus Plan.
Personnel Committee and Stock Option Committee Interlocks and Insider
Participation
Mr. Van Ostenbridge is a member of the Bank's Personnel Committee and is
the Chief Executive Officer and President of the Corporation and the Bank;
however, he is excluded from all discussions regarding any compensation matter
related directly to him. During 2002, no executive officer of the Corporation
(i) served as a member of the compensation committee of another entity, one of
whose executive officers served on the Bank's Personnel Committee or
Corporation's Stock Compensation Committee, (ii) served as a director of another
entity, one of
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whose executive officers served on the Bank's Personnel Committee or
Corporation's Stock Compensation Committee, or (iii) was a member of the
compensation committee of another entity one of whose executive officers served
as a Director of the Corporation.
Compensation of Directors
Directors' Fees Directors of the Corporation and the Bank, other than full
time employees of the Corporation and the Bank, receive fees of $975 per Board
meeting attended, with the exception of the Chairman who receives $1,950 per
meeting attended. Directors of the Corporation and the Bank, other than full
time employees of the Corporation and the Bank, also receive a fee of $200 per
committee meeting attended.
Stock Option Plan for Non-Employee Directors The Corporation maintained
the Stewardship Financial Corporation 1995 Stock Option Plan for Non-Employee
Directors (the "1995 Non-Employee Plan"). The maximum number of shares of Common
Stock subject to stock options granted under the 1995 Non-Employee Plan was
82,047, as adjusted for stock splits and stock dividends. As of September 30,
2002, all of the stock options were granted and all options were exercised. The
Corporation maintains the Stewardship Financial Corporation 2001 Stock Option
Plan for Non-Employee Directors (the "2001 Non-Employee Plan"). The maximum
number of shares of Common Stock subject to stock options granted under the 2001
Non-Employee Plan is 66,150 as adjusted for stock dividends. As of March 6,
2003, 49,612 of the stock options have been granted, of which 1,102 options have
been exercised. The purchase price of the shares of Common Stock subject to
options under the 2001 Non-Employee Plan is 100 percent of the fair market value
on the date such option is granted. The plan expires on May 9, 2011.
EXECUTIVE OFFICERS
Our executive officers are as follows:
Name Age Position
---- --- --------
Paul Van Ostenbridge 50 President and Chief Executive Officer
Julie E. Holland 43 Vice President and Treasurer
Timothy G. Madden 53 Vice President
Officers are not appointed for fixed terms. Biographical information for
our current officers who are not also Directors follows.
Julie E. Holland, age 43, has been Vice President and Treasurer of the
Corporation since 1997. Ms. Holland joined the Bank in 1994 and has been Vice
President and Treasurer of the Bank since 1997.
Timothy G. Madden, age 53, has served as Vice President of the Corporation
since 2002. Mr. Madden joined the Bank in 2001 and has served as its Vice
President since 2001. From 1989 until 2001, Mr. Madden served as the Vice
President of Private Banking at Summit Bank. Mr. Madden has 30 years experience
in credit, sales and management in the commercial banking field.
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Compensation of Executive Officers
Personnel Committee Report on Executive Compensation. The Bank maintains a
Personnel Committee, which oversees executive compensation issues. The
compensation payable to the Bank's executive officers is determined by the Board
of Directors of the Bank upon recommendation of the Personnel Committee, without
the participation of Mr. Van Ostenbridge on any compensation matter related
directly to him.
Executive Compensation Policy. The Bank's policy is to compensate its
executives fairly and adequately for the responsibility assumed by them for the
success and direction of the Bank, the effort expended in discharging that
responsibility and the results achieved directly or indirectly from each
executive's performance. "Fair and adequate compensation" is established after
careful review of: (i) the Bank's earnings; (ii) the Bank's performance as
compared to other companies of similar size and market area; and (iii) a
comparison of what the market demands for compensation of similarly situated and
experienced executives.
Total compensation takes into consideration a mix of base salary, bonus,
perquisites and stock options. The particular mix is established in order to
competitively attract competent professionals, retain those professionals and
reward extraordinary achievement. The Board of Directors also considers net
income for the year and earnings per share of the Corporation and the Bank
before finalizing officer increases for the coming year.
Based upon its current levels of compensation, the Bank is not affected by
the provisions of the Internal Revenue Code that limit the deductibility to a
corporation of compensation in excess of $1,000,000 paid to any of its top five
executives. Thus, the Bank has no policy regarding that subject.
Base Salary. The Board of Directors of the Bank bears the responsibility
for establishing base salary. Salary is minimum compensation for any particular
position and is not tied to any performance formula or standard. However, that
is not to say that poor performance will not result in termination. Acceptable
performance is expected of all executive officers as a minimum standard. To
establish salary, the following criteria are used: (i) position description;
(ii) director responsibility assumed; (iii) comparative studies of peer group
compensation (special weight is given to local factors as opposed to national
averages); (iv) earnings performance of the Bank resulting in availability of
funds; and (v) competitive level of salary to be maintained to attract and
retain qualified and experienced executives.
Stock Options. Recommendations for stock option awards are made by the
Personnel Committee to the Stock Compensation Committee, which then makes
recommendations to the entire Board of Directors for final action. The Personnel
Committee meets to evaluate meritorious performance of all officers and
employees for consideration to receive stock options.
The Personnel Committee makes awards based upon the following criteria:
(i) position of the officer or employee in the Bank; (ii) the benefit that the
Bank has derived as a result of the efforts of the award candidate under
consideration; and (iii) the Bank's desire to encourage long term employment of
the award candidate.
Perquisites, such as Corporation and Bank automobiles and their related
expenses and auxiliary insurance benefits, which the Board of Directors of the
Bank may approve from time to time, are determined and awarded pursuant to
evaluation under the same criteria used to establish base salary.
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Compensation of CEO. Paul Van Ostenbridge is President and Chief Executive
Officer of the Corporation and the Bank. Mr. Van Ostenbridge has held his
respective positions at the Corporation and the Bank since the inception of both
companies. The Corporation and the Bank have continued to make progress toward
their goals during Mr. Van Ostenbridge's tenure as President and Chief Executive
Officer. In 2002, Mr. Van Ostenbridge's total annual salary compensation
increased 3.99% above his total annual salary compensation in 2001. The Board of
Directors determined that this increase represents fair compensation in view of
Mr. Van Ostenbridge's level of personal performance in 2002, the results
achieved by the Corporation and the Bank, and the compensation levels of other
executives in the banking industry.
Members of the Personnel Committee
William Almroth (Chairman)
Margo Lane
Arie Leegwater
Robert J. Turner
Paul Van Ostenbridge
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Summary Compensation Table
The following table sets forth a summary for the last three fiscal years
of the cash and non-cash compensation awarded to, earned by, or paid to the
President and Chief Executive Officer of the Corporation and any other executive
officer whose individual remuneration exceeded $100,000.
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Name & Underlying All Other
Principal Position Year Salary ($) Bonus ($)(1) Options/SARs (#) Compensation
Paul Van Ostenbridge 2002 182,500 34,335 0 28,231
President and Chief 2001 175,500 28,843 0 27,045
Executive Officer (2) 2000 168,500 25,350 2,205 26,668
Timothy G .Madden 2002 110,250 14,740 0 5,295
Vice President and Sr 2001 105,000 0 0 0
Commercial Loan Manager (3)
Julie E. Holland 2002 82,300 10,988 0 11,960
Vice President and 2001 79,300 9,369 0 11,582
Treasurer (4) 2000 76,300 7,990 551 12,036
----------
(1) Includes bonuses earned through the Executive Compensation Plan and
accrued during 2002, 2001 and 2000, which were paid in the first quarter
of the following calendar years.
(2) The amounts disclosed as All Other Annual Compensation for Mr. Van
Ostenbridge include the imputed value of personal car allowance, Bank
matching contributions to its 401(k) Plan, Profit Sharing Plan, group term
life insurance and long term disability, and the Bank's portion for
medical and vision insurance contributions.
(3) The amounts disclosed as All Other Annual Compensation for Mr. Madden
include the imputed value of Bank matching contributions to its 401(k)
Plan, Profit Sharing Plan, group term life insurance and long term
disability, and the Bank's portion for medical and vision insurance
contributions.
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(4) The amounts disclosed as All Other Annual Compensation for Ms. Holland
include the imputed value of Bank matching contributions to its 401(k)
Plan, Profit Sharing Plan, group term life insurance and long term
disability, and the Bank's portion for medical and vision insurance
contributions.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth information regarding the aggregated
option exercises during the fiscal year ended December 31, 2002, and the value
of unexercised options held as of December 31, 2002, by each executive officer
named in the Summary Compensation Table. The potential value of unexercised
in-the-money options is based on the closing per share sales price of the
Corporation's common stock of $18.75 on December 31, 2002.
Number of Securities Value of Unexcercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at December 31, December 31,
Name Exercise Realized 2002 (#) 2002 ($)
--------------------------------------------------- -------------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Paul Van Ostenbridge 2,126 $16,713 16,959 2,647 $139,098 $9,675
Timothy G. Madden 0 0 0 0 0 0
Julie E. Holland 0 0 5,038 758 $41,532 $3,163
Employee Stock Option Plan. The Corporation maintains the Stewardship
Financial Corporation 1995 Stock Option Plan (the "Employee Plan"). Under
the Employee Plan, 86,149 shares of Common Stock have been reserved for
issuance. Employees of the Corporation, the Bank, and any subsidiaries
which the Corporation may incorporate or acquire are eligible to
participate in the Employee Plan. The Personnel Committee manages the
Employee Plan and selects participants from the eligible employees. No
options granted under the Employee Plan may be exercised more than 10
years after the date of its grant. The purchase price for shares of Common
Stock subject to options under the Plan may not be less than 100% of the
fair market value on the date such options are granted.
Employee Stock Purchase Plan. The Corporation maintains the Stewardship
Financial Corporation 1995 Employee Stock Purchase Plan (the "Purchase
Plan"). Under the Purchase Plan, 95,721 shares of Common Stock have been
reserved for issuance. Shares acquired under the Purchase Plan may be
obtained, at the discretion of the Corporation, from the authorized but
unissued shares of Common Stock or from the open market. Employees of the
Corporation, the Bank and any subsidiaries which the Corporation may
incorporate or acquire who work at least 20 hours per week are eligible to
participate in the Purchase Plan. Shares are purchased for
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participants through payroll deductions in a maximum amount of 10% of a
participant's total compensation per pay period. Eligible employees must
notify the Bank of their participation in the Purchase Plan and the amount
of payroll deductions that will be applied to purchase shares for them.
The funds contributed by each participant are used to purchase shares of
Common Stock at 95% of the fair market value.
OTHER MATTERS RELATING TO EXECUTIVE OFFICERS
AND DIRECTORS
Certain Relationships
The Bank has made in the past and, assuming continued satisfaction of
generally applicable credit standards, expects to continue to make loans to the
Corporation's and the Bank's Directors and executive officers and to
corporations, organizations or other entities for which they serve as officers
or directors, or in which they have beneficial ownership interests of 10 percent
or more. These loans have all been made in the ordinary course of banking
business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than the normal risk of collectability or
present other unfavorable features.
Stock Ownership of Management and Principal Shareholders
The following table sets forth information concerning the beneficial
ownership of the Corporation's Common Stock as of March 6, 2003, by (i) each
person who is known by the Corporation to own beneficially more than five
percent (5%) of the issued and outstanding Common Stock, (ii) each Director and
nominee for Director of the Corporation, (iii) each executive officer of the
Corporation named in the Summary Compensation Table and (iv) all Directors and
executive officers of the Corporation as a group. Other than as set forth in
this table, the Corporation is not aware of any individual or group, which holds
in excess of five percent (5%) of the outstanding common stock.
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Number of Shares Percent
Name of Beneficial Owner Beneficially Owned(1) of Class
William Almroth (2) 104,863 5.28
Harold Dyer (3) 23,730 1.20
William C. Hanse (4) 46,855 2.36
Margo Lane (5) 14,941 *
Arie Leegwater (6) 27,567 1.39
John L. Steen (7) 49,479 2.49
Robert J. Turner (8) 48,215 2.43
William J. Vander Eems (9) 77,739 3.92
Paul Van Ostenbridge (10) 27,829 1.39
Abe Van Wingerden (11) 80,623 4.07
Julie E. Holland (12) 6,197 *
Timothy G. Madden 1,356 *
Directors and Executive Officers
of the Corporation and Bank as a group
(12 persons) 509,394 25.27
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* Indicates less than 1% of the outstanding shares of the Corporation's
Common Stock.
(1) Beneficially owned shares include shares over which the named person
exercises either sole or shared voting power or sole or shared investment
power. They also include shares owned (i) by a spouse, minor children or
by relatives sharing the same home, (ii) by entities owned or controlled
by the named person and (iii) if the named person has the right to acquire
such shares within 60 days by the exercise of any right or option. Unless
otherwise noted, all shares are owned of record and beneficially by the
named person, either directly or through the Corporation's Dividend
Reinvestment Plan.
(2) Includes 62,172 shares held by Mr. Almroth's spouse in her own name
and 1,102 shares purchasable pursuant to stock options exerciseable within
60 days of March 6, 2003, but not the 4,410 shares potentially available
in the future by exercise of his stock options not exerciseable within 60
days of March 6, 2003. Mr. Almroth disclaims beneficial ownership of the
interest held by his spouse.
(3) Includes 1,102 shares purchasable pursuant to stock options
exerciseable within 60 days of March 6, 2003, but not the 4,410 shares
potentially available in the future by exercise of his stock options not
exerciseable within 60 days of March 6, 2003.
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(4) Includes 17,374 shares held jointly by Mr. Hanse and his spouse; 4,310
shares held by Mr. Hanse's spouse in her own name; and 1,102 shares
purchasable pursuant to stock options exerciseable within 60 days of March
6, 2003, but not the 4,410 shares potentially available in the future by
exercise of his stock options not exerciseable within 60 days of March 6,
2003. Mr. Hanse disclaims beneficial ownership of the interest held by his
spouse.
(5) Includes 4,468 shares held jointly by Mrs. Lane and her spouse, 306
shares held by Mrs. Lane's spouse as custodian for their children, and
1,102 shares purchasable pursuant to stock options exerciseable within 60
days of March 6, 2003, but not the 4,410 shares potentially available in
the future by exercise of her stock options not exerciseable within 60
days of March 6, 2003. Mrs. Lane disclaims beneficial ownership of the
interest held by her spouse.
(6) Includes 6,476 shares held jointly by Mr. Leegwater and his spouse;
8,766 shares held by trusts of which Mr. Leegwater is the trustee; and
1,102 shares purchasable pursuant to stock options exerciseable within 60
days of March 6, 2003, but not the 4,410 shares potentially available in
the future by exercise of his stock options not exerciseable within 60
days of March 6, 2003. Mr. Leegwater disclaims beneficial ownership of the
interest owned by his spouse.
(7) Includes 1,102 shares purchasable pursuant to stock options
exerciseable within 60 days of March 6, 2003, but not the 4,410 shares
potentially available in the future by exercise of his stock options not
exerciseable within 60 days of March 6, 2003.
(8) Includes 9,988 shares held jointly by Mr. Turner and his spouse, 1,296
shares held by Mr. Turner's spouse in her own name, and 1,102 shares
purchasable pursuant to stock options exerciseable within 60 days of March
6, 2003, but not the 4,410 shares potentially available in the future by
exercise of his stock options not exerciseable within 60 days of March 6,
2003. Mr. Turner disclaims beneficial ownership of the interest held by
his spouse.
(9) Includes 18,326 shares held by Mr. Vander Eems' spouse in her own
name; 5,653 shares held by Mr. Vander Eems as custodian for his children;
and 1,102 shares purchasable pursuant to stock options exerciseable within
60 days of March 6, 2003, but not the 4,410 shares potentially available
in the future by exercise of his stock options not exerciseable within 60
days of March 6, 2003. Mr. Vander Eems disclaims beneficial ownership of
the interest held by his spouse.
(10) Includes 18,243 shares purchasable pursuant to stock options
exerciseable within 60 days of March 6, 2003, but not the 1,363 shares
potentially available in the future by exercise of his stock options not
exerciseable within 60 days of March 6, 2003.
(11) Includes 69,792 shares held by Mr. Van Wingerden and his spouse, but
not the shares potentially available in the future by exercise of his
stock options not exerciseable within 60 days of March 6, 2003. Mr. Van
Wingerden disclaims beneficial ownership of the interest held by his
spouse.
(12) Includes 5,455 shares purchasable pursuant to stock options
exerciseable within 60 days of March 6, 2003, but not the 341 shares
potentially available in the future by exercise of her stock options not
exercisable within 60 days of March 6, 2003.
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PERFORMANCE GRAPH
The Performance Line Graph presents the total return to the Corporation's
shareholders for the period December 31, 1997 through December 31, 2002. The
Corporation's common stock is compared to the Nasdaq Composite Index and a peer
group consisting of ten banks located in the Mid-Atlantic region with total
asset size similar to that of the Corporation. The peer group consists of First
Washington Financial Corporation, Mid Penn Bancorp Inc., Codorus Valley Bancorp,
Peoples Financial Services Corp., Slippery Rock Financial Corp., Eagle Bancorp
Inc., Community Bancorp of New Jersey, Carrollton Bancorp, Jefferson Bancorp and
Union National Financial Corp. The information in this graph is not necessarily
indicative of the Corporation's future performance.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors, and persons who own more than 10% of a
registered class of the Corporation's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and greater than 10% shareholders are required by regulation
of the Securities and Exchange Commission to furnish the Corporation with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Corporation believes
that, during the fiscal year ended December 31, 2002, all filing requirements
applicable to its officers, Directors and greater than 10% shareholders were
timely met.
INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Corporation and the
Bank has recommended to such Boards that they retain the firm of KPMG LLP to act
as independent public accountants for the Corporation and the Bank for the
fiscal year ending 2003. KPMG LLP has acted as the Corporation's and the Bank's
independent public accountants for the fiscal years ended December 31, 1996
through 2002.
KPMG LLP has advised the Corporation that one or more of its
representatives will be present at the Annual Meeting to make a statement if
they so desire and to respond to appropriate questions.
Audit Fees
The aggregate fees billed for professional services by KPMG LLP in
connection with the audit of the financial statements for the fiscal year ended
2002, and the reviews of the financial statements for each of the first three
fiscal quarters in 2002, were approximately $63,030.
Financial Information Systems Design and Implementation Fees
There were no fees billed for professional services by KPMG LLP in
connection with professional services involving financial information systems
design and implementation.
All Other Fees
In addition to fees billed for audit services and the interim reviews of
the financial statements for the fiscal year ended 2002, KPMG LLP billed the
Corporation $22,500 for tax compliance services.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the independence of KPMG LLP.
ANNUAL REPORT ON FORM 10-KSB
The Corporation will furnish without charge its annual report on Form
10-KSB upon receipt of your written request therefor. Requests should be sent to
the Secretary of the Corporation at 630 Godwin Avenue, Midland Park, New Jersey
07432.
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SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals to be included in the
Corporation's 2004 proxy materials must submit such proposals to the Secretary
of the Corporation at 630 Godwin Avenue, Midland Park, New Jersey 07432 by
December 6, 2003. For any proposal that is not submitted for inclusion in next
year's proxy materials, but is instead sought to be presented directly at the
2004 Annual Meeting, SEC rules permit the Corporation to exercise discretionary
voting authority to the extent conferred by proxy if the Corporation: (1)
receives notice of the proposal before February 18, 2004 and advises
shareholders in the 2004 proxy statement of the nature of the proposal and how
management intends to vote on such matter or (2) does not receive notice of the
proposal before February 18, 2004. Notices of intention to present proposals at
the 2004 Annual Meeting should be submitted to the Secretary of the Corporation
at 630 Godwin Avenue, Midland Park, New Jersey 07432.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come
before the Annual Meeting; however, in the event such other matters come before
the meeting, it is the intention of the persons named in the proxy to vote on
any such matters in accordance with the recommendation of the Board of
Directors.
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