(X)
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
( )
|
TRANSITION
REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Stewardship
Financial Corporation
|
|
(Exact
name of registrant as specified in its charter)
|
|
New
Jersey
|
22-3351447
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
|
630
Godwin Avenue, Midland Park, NJ
|
07432
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(201) 444-7100
|
(Registrant’s
telephone number, including area
code)
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Large
accelerated filer ( )
|
Accelerated
filer ( )
|
Non-accelerated
filer ( ) (Do not check if a smaller reporting
company)
|
Smaller
reporting company ( X )
|
PAGE
|
|
NUMBER
|
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
|
6 -
14
|
|
15
- 28
|
|
28
|
|
28
- 29
|
|
30
|
|
30
|
|
30
|
|
31
|
|
32
-35
|
Stewardship
Financial Corporation and Subsidiary
|
||||||||
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
|
||||||||
Assets
|
||||||||
Cash
and due from banks
|
$ | 14,115,000 | $ | 11,789,000 | ||||
Other
interest-earning assets
|
1,118,000 | 143,000 | ||||||
Federal
funds sold
|
14,400,000 | - | ||||||
Cash
and cash equivalents
|
29,633,000 | 11,932,000 | ||||||
Securities
available for sale
|
96,763,000 | 76,957,000 | ||||||
Securities
held to maturity; estimated fair value
|
||||||||
of
$35,681,000 (2008) and $41,508,000 (2007)
|
35,889,000 | 41,189,000 | ||||||
FHLB-NY
stock, at cost
|
2,605,000 | 1,983,000 | ||||||
Loans,
net of allowance for loan losses of
|
||||||||
of
$ 4,768,000 (2008) and $4,457,000 (2007)
|
433,921,000 | 415,690,000 | ||||||
Mortgage
loans held for sale
|
2,072,000 | 1,284,000 | ||||||
Premises
and equipment, net
|
7,654,000 | 7,950,000 | ||||||
Accrued
interest receivable
|
3,209,000 | 3,112,000 | ||||||
Intangible
assets
|
54,000 | 70,000 | ||||||
Bank
owned life insurance
|
8,432,000 | 8,273,000 | ||||||
Other
assets
|
3,823,000 | 3,465,000 | ||||||
Total
assets
|
$ | 624,055,000 | $ | 571,905,000 | ||||
Liabilities
and stockholders' equity
|
||||||||
Liabilities
|
||||||||
Deposits:
|
||||||||
Noninterest-bearing
|
$ | 98,426,000 | $ | 101,993,000 | ||||
Interest-bearing
|
411,459,000 | 370,306,000 | ||||||
Total
deposits
|
509,885,000 | 472,299,000 | ||||||
Other
borrowings
|
41,002,000 | 28,645,000 | ||||||
Subordinated
debentures
|
7,217,000 | 7,217,000 | ||||||
Securities
sold under agreements to repurchase
|
16,192,000 | 17,283,000 | ||||||
Accrued
interest payable
|
1,939,000 | 2,080,000 | ||||||
Accrued
expenses and other liabilities
|
6,166,000 | 3,291,000 | ||||||
Total
liabilities
|
582,401,000 | 530,815,000 | ||||||
Commitments
and contingencies
|
- | - | ||||||
Stockholders'
equity
|
||||||||
Common
stock, no par value; 10,000,000 shares authorized;
|
||||||||
5,318,573
and 5,306,828 shares issued: 5,307,074 and 5,306,828
shares
|
||||||||
outstanding
at June 30, 2008 and December 31, 2007, respectively.
|
34,952,000 | 34,871,000 | ||||||
Treasury
stock, 11,499 shares outstanding at June 30, 2008
|
(152,000 | ) | - | |||||
Retained
earnings
|
7,227,000 | 5,943,000 | ||||||
Accumulated
other comprehensive (loss) gain
|
(373,000 | ) | 276,000 | |||||
Total
Stockholders' equity
|
41,654,000 | 41,090,000 | ||||||
Total
liabilities and Stockholders' equity
|
$ | 624,055,000 | $ | 571,905,000 | ||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and Subsidiary
|
||||||||
Consolidated
Statements of Income
|
||||||||
(Unaudited)
|
||||||||
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2008
|
2007
|
|||||||
Interest
income:
|
||||||||
Loans
|
$ | 14,261,000 | $ | 13,285,000 | ||||
Securities
held to maturity
|
||||||||
Taxable
|
390,000 | 464,000 | ||||||
Non-taxable
|
417,000 | 356,000 | ||||||
Securities
available for sale
|
||||||||
Taxable
|
2,107,000 | 1,837,000 | ||||||
Non-taxable
|
68,000 | 30,000 | ||||||
FHLB
dividends
|
82,000 | 58,000 | ||||||
Other
interest-earning assets
|
42,000 | 19,000 | ||||||
Total
interest income
|
17,367,000 | 16,049,000 | ||||||
Interest
expense:
|
||||||||
Deposits
|
5,522,000 | 5,621,000 | ||||||
Borrowed
money
|
1,127,000 | 953,000 | ||||||
Total
interest expense
|
6,649,000 | 6,574,000 | ||||||
Net
interest income before provision for loan losses
|
10,718,000 | 9,475,000 | ||||||
Provision
for loan losses
|
360,000 | 190,000 | ||||||
Net
interest income after provision for loan losses
|
10,358,000 | 9,285,000 | ||||||
Noninterest
income:
|
||||||||
Fees
and service charges
|
697,000 | 785,000 | ||||||
Bank
owned life insurance
|
159,000 | 160,000 | ||||||
Gain
on sales of mortgage loans
|
109,000 | 186,000 | ||||||
Gain
on calls of securities
|
57,000 | - | ||||||
Merchant
processing
|
730,000 | 717,000 | ||||||
Miscellaneous
|
241,000 | 654,000 | ||||||
Total
noninterest income
|
1,993,000 | 2,502,000 | ||||||
Noninterest
expenses:
|
||||||||
Salaries
and employee benefits
|
4,110,000 | 3,644,000 | ||||||
Occupancy,
net
|
877,000 | 716,000 | ||||||
Equipment
|
566,000 | 457,000 | ||||||
Data
processing
|
597,000 | 629,000 | ||||||
Advertising
|
236,000 | 200,000 | ||||||
FDIC
insurance premium
|
146,000 | 26,000 | ||||||
Amortization
of intangible assets
|
16,000 | 16,000 | ||||||
Charitable
contributions
|
348,000 | 368,000 | ||||||
Stationery
and supplies
|
229,000 | 193,000 | ||||||
Merchant
processing
|
645,000 | 650,000 | ||||||
Bank-card
related services
|
154,000 | 169,000 | ||||||
Miscellaneous
|
1,117,000 | 1,109,000 | ||||||
Total
noninterest expenses
|
9,041,000 | 8,177,000 | ||||||
Income
before income tax expense
|
3,310,000 | 3,610,000 | ||||||
Income
tax expense
|
1,070,000 | 1,070,000 | ||||||
Net
income
|
$ | 2,240,000 | $ | 2,540,000 | ||||
Basic
earnings per share
|
$ | 0.42 | $ | 0.48 | ||||
Diluted
earnings per share
|
$ | 0.42 | $ | 0.47 | ||||
Weighted
average number of common shares outstanding
|
5,312,862 | 5,281,102 | ||||||
Weighted
average number of diluted common
|
||||||||
shares
outstanding
|
5,325,216 | 5,315,539 |
Share
data has been restated to reflect a 5% stock dividend paid November 15,
2007.
|
||||||||
See
notes to unaudited consolidated financial statements.
|
||||||||
Stewardship
Financial Corporation and Subsidiary
|
||||||||
Consolidated
Statements of Income
|
||||||||
(Unaudited)
|
||||||||
Three
Months Ended
|
||||||||
June
30,
|
||||||||
2008
|
2007
|
|||||||
Interest
income:
|
||||||||
Loans
|
$ | 7,076,000 | $ | 6,715,000 | ||||
Securities
held to maturity
|
||||||||
Taxable
|
186,000 | 235,000 | ||||||
Non-taxable
|
210,000 | 179,000 | ||||||
Securities
available for sale
|
||||||||
Taxable
|
1,113,000 | 930,000 | ||||||
Non-taxable
|
41,000 | 16,000 | ||||||
FHLB
dividends
|
48,000 | 32,000 | ||||||
Other
interest-earning assets
|
36,000 | 10,000 | ||||||
Total
interest income
|
8,710,000 | 8,117,000 | ||||||
Interest
expense:
|
||||||||
Deposits
|
2,612,000 | 2,861,000 | ||||||
Borrowed
money
|
542,000 | 454,000 | ||||||
Total
interest expense
|
3,154,000 | 3,315,000 | ||||||
Net
interest income before provision for loan losses
|
5,556,000 | 4,802,000 | ||||||
Provision
for loan losses
|
260,000 | 180,000 | ||||||
Net
interest income after provision for loan losses
|
5,296,000 | 4,622,000 | ||||||
Noninterest
income:
|
||||||||
Fees
and service charges
|
402,000 | 391,000 | ||||||
Bank
owned life insurance
|
78,000 | 82,000 | ||||||
Gain
on sales of mortgage loans
|
54,000 | 97,000 | ||||||
Gain
on calls of securities
|
16,000 | - | ||||||
Merchant
processing
|
361,000 | 352,000 | ||||||
Miscellaneous
|
106,000 | 584,000 | ||||||
Total
noninterest income
|
1,017,000 | 1,506,000 | ||||||
Noninterest
expenses:
|
||||||||
Salaries
and employee benefits
|
2,094,000 | 1,850,000 | ||||||
Occupancy,
net
|
428,000 | 381,000 | ||||||
Equipment
|
293,000 | 240,000 | ||||||
Data
processing
|
289,000 | 322,000 | ||||||
Advertising
|
132,000 | 124,000 | ||||||
FDIC
insurance premium
|
73,000 | 13,000 | ||||||
Amortization
of intangible assets
|
8,000 | 8,000 | ||||||
Charitable
contributions
|
186,000 | 199,000 | ||||||
Stationery
and supplies
|
118,000 | 110,000 | ||||||
Merchant
processing
|
320,000 | 315,000 | ||||||
Bank-card
related services
|
76,000 | 74,000 | ||||||
Miscellaneous
|
545,000 | 546,000 | ||||||
Total
noninterest expenses
|
4,562,000 | 4,182,000 | ||||||
Income
before income tax expense
|
1,751,000 | 1,946,000 | ||||||
Income
tax expense
|
572,000 | 492,000 | ||||||
Net
income
|
$ | 1,179,000 | $ | 1,454,000 | ||||
Basic
earnings per share
|
$ | 0.22 | $ | 0.27 | ||||
Diluted
earnings per share
|
$ | 0.22 | $ | 0.27 | ||||
Weighted
average number of common shares outstanding
|
5,315,163 | 5,291,897 | ||||||
Weighted
average number of diluted common
|
||||||||
shares
outstanding
|
5,325,224 | 5,317,001 |
Share
data has been restated to reflect a 5% stock dividend paid November 15,
2007.
|
||||||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and Subsidiary
|
||||||||
Consolidated
Statements of Cash Flows
|
||||||||
(Unaudited)
|
||||||||
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 2,240,000 | $ | 2,540,000 | ||||
Adjustments
to reconcile net income to
|
||||||||
net
cash provided by operating activities:
|
||||||||
Depreciation
and amortization of premises and equipment
|
481,000 | 388,000 | ||||||
Amortization
of premiums and accretion of discounts, net
|
60,000 | 76,000 | ||||||
Accretion
of deferred loan fees
|
(133,000 | ) | (59,000 | ) | ||||
Provision
for loan losses
|
360,000 | 190,000 | ||||||
Originations
of mortgage loans held for sale
|
(11,885,000 | ) | (17,522,000 | ) | ||||
Proceeds
from sale of mortgage loans
|
11,206,000 | 18,191,000 | ||||||
Gain
on sale of loans
|
(109,000 | ) | (186,000 | ) | ||||
Gain
on calls of securities
|
(57,000 | ) | - | |||||
Loss
on sale of equipment
|
12,000 | - | ||||||
Deferred
income tax benefit
|
(135,000 | ) | (12,000 | ) | ||||
Amortization
of intangible assets
|
16,000 | 16,000 | ||||||
Nonqualified
stock option expense
|
24,000 | 26,000 | ||||||
Increase
in bank owned life insurance
|
(159,000 | ) | (159,000 | ) | ||||
Gain
from bank owned life insurance proceeds
|
- | (459,000 | ) | |||||
Increase
in accrued interest receivable
|
(97,000 | ) | (156,000 | ) | ||||
Decrease
(increase) in other assets
|
185,000 | (34,000 | ) | |||||
(Decrease)
increase in accrued interest payable
|
(141,000 | ) | 146,000 | |||||
Increase
(decrease) in other liabilities
|
1,187,000 | (737,000 | ) | |||||
Net
cash provided by operating activities
|
3,055,000 | 2,249,000 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of securities available for sale
|
(36,784,000 | ) | (12,952,000 | ) | ||||
Proceeds
from maturities and principal repayments
|
||||||||
on
securities available for sale
|
3,856,000 | 6,954,000 | ||||||
Proceeds
from calls on securities available for sale
|
13,766,000 | - | ||||||
Purchase
of securities held to maturity
|
(854,000 | ) | (4,513,000 | ) | ||||
Proceeds
from maturities and principal repayments on
|
||||||||
securities
held to maturity
|
2,118,000 | 3,617,000 | ||||||
Proceeds
from calls on securities held to maturity
|
4,020,000 | 152,000 | ||||||
(Purchase)
redemption of FHLB-NY stock
|
(622,000 | ) | 72,000 | |||||
Net
increase in loans
|
(18,458,000 | ) | (14,221,000 | ) | ||||
Additional
investment in other real estate owned
|
- | (324,000 | ) | |||||
Proceeds
from life insurance payout
|
- | 1,030,000 | ||||||
Additions
to premises and equipment
|
(201,000 | ) | (759,000 | ) | ||||
Sale
of equipment
|
4,000 | - | ||||||
Net
cash used in investing activities
|
(33,155,000 | ) | (20,944,000 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Net
(decrease) increase in noninterest-bearing deposits
|
(3,567,000 | ) | 9,871,000 | |||||
Net
increase in interest-bearing deposits
|
41,153,000 | 7,384,000 | ||||||
Net
(decrease) increase in securities sold under agreements
|
||||||||
to
repurchase
|
(1,091,000 | ) | 2,674,000 | |||||
Proceeds from
term borrowings
|
30,000,000 | - | ||||||
Net
decrease in short term borrowings
|
(16,800,000 | ) | (1,900,000 | ) | ||||
Payments
on long term borrowings
|
(843,000 | ) | (817,000 | ) | ||||
Cash
dividends paid on common stock
|
(956,000 | ) | (903,000 | ) | ||||
Payment
of discount on dividend reinvestment plan
|
(22,000 | ) | (22,000 | ) | ||||
Purchase
of treasury stock
|
(131,000 | ) | - | |||||
Options
exercised
|
36,000 | 45,000 | ||||||
Tax
benefit of stock options
|
1,000 | 1,000 | ||||||
Issuance
of common stock
|
21,000 | 22,000 | ||||||
Net
cash provided by financing activities
|
47,801,000 | 16,355,000 | ||||||
Net
increase (decrease) in cash and cash equivalents
|
17,701,000 | (2,340,000 | ) | |||||
Cash
and cash equivalents - beginning
|
11,932,000 | 15,697,000 | ||||||
Cash
and cash equivalents - ending
|
$ | 29,633,000 | $ | 13,357,000 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid during the year for interest
|
6,790,000 | 6,428,000 | ||||||
Cash
paid during the year for income taxes
|
1,144,000 | 1,194,000 | ||||||
Noncash
investing activities - security purchases due brokers
|
1,687,000 | 1,159,000 | ||||||
-
transfer of loan to ORE
|
- | 60,975 | ||||||
See
notes to unaudited consolidated financial statements.
|
Stewardship
Financial Corporation and Subsidiary
|
||||||||||||||||||||||||||||
Consolidated
Statement of Changes in Stockholders'
Equity
|
||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
For
the Period Ended June 30, 2008
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||
Comprehensive
|
||||||||||||||||||||||||||||
Common
Stock
|
Treasury
Stock
|
Retained
|
Gain
(Loss),
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Earnings
|
Net
|
Total
|
||||||||||||||||||||||
Balance
-- December 31, 2007
|
5,306,828 | $ | 34,871,000 | - | $ | - | $ | 5,943,000 | $ | 276,000 | $ | 41,090,000 | ||||||||||||||||
Dividends
Paid
|
- | - | - | - | (956,000 | ) | - | (956,000 | ) | |||||||||||||||||||
Payment
of discount on dividend
|
||||||||||||||||||||||||||||
reinvestment
plan
|
- | (22,000 | ) | - | - | - | - | (22,000 | ) | |||||||||||||||||||
Common
stock issued under stock plans
|
1,667 | 21,000 | - | - | - | - | 21,000 | |||||||||||||||||||||
Stock
option compensation expense
|
- | 24,000 | - | - | - | - | 24,000 | |||||||||||||||||||||
Stock
options exercised
|
10,078 | 57,000 | (1,499 | ) | (21,000 | ) | - | - | 36,000 | |||||||||||||||||||
Tax
benefit on stock options exercised
|
1,000 | 1,000 | ||||||||||||||||||||||||||
Repurchase
common stock
|
(10,000 | ) | (131,000 | ) | (131,000 | ) | ||||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||
Net
income
|
- | - | - | - | 2,240,000 | - | 2,240,000 | |||||||||||||||||||||
Unrealized
holding losses on securities
|
||||||||||||||||||||||||||||
available
for sale arising during the period
|
||||||||||||||||||||||||||||
(net
tax benefit of $429,000)
|
- | - | - | - | - | (684,000 | ) | (684,000 | ) | |||||||||||||||||||
Reclassification
adjustment for gains in
|
||||||||||||||||||||||||||||
net
income (net of taxes of $22,000)
|
- | - | - | - | - | 35,000 | 35,000 | |||||||||||||||||||||
Total
comprehensive income, net of tax
|
1,591,000 | |||||||||||||||||||||||||||
Balance
-- June 30, 2008
|
5,318,573 | $ | 34,952,000 | (11,499 | ) | $ | (152,000 | ) | $ | 7,227,000 | $ | (373,000 | ) | $ | 41,654,000 | |||||||||||||
For
the Period Ended June 30, 2007
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||
Comprehensive
|
||||||||||||||||||||||||||||
Common
Stock
|
Treasury
Stock
|
Retained
|
Loss,
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Earnings
|
Net
|
Total
|
||||||||||||||||||||||
Balance
-- December 31, 2006
|
5,017,919 | $ | 31,148,000 | - | $ | - | $ | 6,750,000 | $ | (592,000 | ) | $ | 37,306,000 | |||||||||||||||
Dividends
Paid
|
- | - | (903,000 | ) | - | (903,000 | ) | |||||||||||||||||||||
Payment
of discount on dividend
|
||||||||||||||||||||||||||||
reinvestment
plan
|
- | (22,000 | ) | - | - | (22,000 | ) | |||||||||||||||||||||
Common
stock issued under stock plans
|
1,810 | 22,000 | - | - | 22,000 | |||||||||||||||||||||||
Repurchase
common stock
|
- | - | - | - | - | |||||||||||||||||||||||
Stock
option compensation expense
|
- | 26,000 | - | - | 26,000 | |||||||||||||||||||||||
Stock
options exercised
|
40,309 | 173,000 | (9,302 | ) | (127,000 | ) | - | - | 46,000 | |||||||||||||||||||
Tax
benefit on stock options exercised
|
1,000 | 1,000 | ||||||||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||
Net income
|
- | - | 2,540,000 | - | 2,540,000 | |||||||||||||||||||||||
Unrealized
holding losses on securities
|
||||||||||||||||||||||||||||
available
for sale arising during the period
|
||||||||||||||||||||||||||||
(net
tax benefit of $249,000)
|
- | - | - | (402,000 | ) | (402,000 | ) | |||||||||||||||||||||
Total
comprehensive income, net of tax
|
2,138,000 | |||||||||||||||||||||||||||
Balance
-- June 30, 2007
|
5,060,038 | $ | 31,348,000 | (9,302 | ) | $ | (127,000 | ) | $ | 8,387,000 | $ | (994,000 | ) | $ | 38,614,000 |
See
notes to unaudited consolidated financial statements.
|
2008
|
2007
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Shares
|
Exercise
Price
|
Shares
|
Exercise
Price
|
|||||||||||||
Outstanding
at beginning of year
|
36,417 | $ | 7.56 | 79,193 | $ | 5.70 | ||||||||||
Granted
|
- | - | - | - | ||||||||||||
Exercised
|
( 8,976 | ) | 4.80 | (41,222 | ) | 3.86 | ||||||||||
Forfeited
|
( 1,459 | ) | 11.94 | ( 600 | ) | 12.27 | ||||||||||
Outstanding
at end of period
|
25,982 | $ | 8.27 | 37,371 | $ | 7.62 | ||||||||||
Options
exercisable
|
25,982 | 37,371 | ||||||||||||||
Weighted-average
remaining
|
||||||||||||||||
contractual
life
|
2.53
years
|
3.05
years
|
||||||||||||||
Aggregate
intrinsic value
|
$ | 123,000 | $ | 249,000 | ||||||||||||
Intrinsic
value of options exercisable
|
$ | 123,000 | $ | 249,000 |
2008
|
2007
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
|
Shares
|
Exercise
Price
|
Shares
|
Exercise
Price
|
||||||||||||
Outstanding
at beginning of year
|
57,446 | $ | 12.35 | 60,753 | $ | 12.34 | ||||||||||
Granted
|
- | - | - | - | ||||||||||||
Exercised
|
1,102 | - | 1,102 | 12.24 | ||||||||||||
Expired
|
- | - | - | - | ||||||||||||
Outstanding
at end of period
|
56,344 | $ | 12.35 | 59,651 | $ | 12.35 | ||||||||||
Options
exercisable
|
23,269 | 15,551 | ||||||||||||||
Weighted-average
remaining
|
||||||||||||||||
contractual
life
|
3.72
years
|
4.73
years
|
||||||||||||||
Aggregate
intrinsic value
|
$ | 37,000 | $ | 116,000 | ||||||||||||
Intrinsic
value of options exercisable
|
$ | 12,000 | $ | 26,000 |
Stewardship
Financial Corporation and Subsidiary
|
|||||||||||||
Notes
to Consolidated Financial Statements Continued
|
|||||||||||||
(Unaudited)
|
|||||||||||||
Note
3. Securities Available for Sale
|
|||||||||||||
The
fair value of the available for sale securities and the related gross
unrealized gains and losses recognized in accumulated
other comprehensive income were as follows:
|
|||||||||||||
June
30, 2008
|
||||||||||||
Gross
|
Gross
|
|||||||||||
Fair
|
Unrealized
|
Unrealized
|
||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
||||||||||
U.S.
government-sponsored agencies
|
$ | 50,606,000 | $ | 368,000 | $ | 511,000 | ||||||
Obligations
of state and political
|
||||||||||||
subdivisions
|
5,699,000 | 2,000 | 168,000 | |||||||||
Mortgage-backed
securities
|
37,719,000 | 113,000 | 369,000 | |||||||||
Other
securities
|
2,739,000 | - | 44,000 | |||||||||
$ | 96,763,000 | $ | 483,000 | $ | 1,092,000 |
December
31, 2007
|
||||||||||||
Gross
|
Gross
|
|||||||||||
Fair
|
Unrealized
|
Unrealized
|
||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
||||||||||
U.S.
government-sponsored agencies
|
$ | 35,693,000 | $ | 495,000 | $ | 4,000 | ||||||
Obligations
of state and political
|
||||||||||||
subdivisions
|
2,903,000 | 2,000 | 29,000 | |||||||||
Mortgage-backed
securities
|
37,131,000 | 205,000 | 205,000 | |||||||||
Other
securities
|
1,230,000 | - | 17,000 | |||||||||
$ | 76,957,000 | $ | 702,000 | $ | 255,000 |
On
a quarterly basis, the Corporation makes an assessment to determine
whether there have been any events or economic circumstances to
indicate that a security is impaired on an other-than-temporary
basis. The Corporation considers many factors including the
length of time the security has had a market value less than the cost
basis; the intent and ability of the Corporation to hold the
security for a period of time sufficient for a recovery in value; and
recent events specific to the issuer or industry. Management
considers the decline in market value of these securities to be
temporary.
|
Mortgage-backed
securities are comprised primarily of government agencies such as the
Government National Mortgage Association ("GNMA") and government-sponsored
agencies such as the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC").
|
Note
4. Securities Held to Maturity
|
The
following is a summary of the contractual maturities and related
unrecognized gains and losses of securities held to
maturity:
|
June
30, 2008
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Carrying
|
Unrecognized
|
Unrecognized
|
Fair
|
|||||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
Value
|
|||||||||||||
U.S.
Treasury securities
|
$ | 500,000 | $ | 5,000 | $ | - | $ | 505,000 | ||||||||
U.S.
government-sponsored agencies
|
7,290,000 | 61,000 | 7,000 | 7,344,000 | ||||||||||||
Obligations
of state and political
|
||||||||||||||||
subdivisions
|
22,968,000 | 55,000 | 328,000 | 22,695,000 | ||||||||||||
Mortgage-backed
securities
|
5,131,000 | 48,000 | 42,000 | 5,137,000 | ||||||||||||
$ | 35,889,000 | $ | 169,000 | $ | 377,000 | $ | 35,681,000 |
December
31, 2007
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Carrying
|
Unrecognized
|
Unrecognized
|
Fair
|
|||||||||||||
Value
|
Holding
Gains
|
Holding
Losses
|
Value
|
|||||||||||||
U.S.
Treasury securities
|
$ | 501,000 | $ | 5,000 | $ | - | $ | 506,000 | ||||||||
U.S.
government-sponsored agencies
|
12,331,000 | 135,000 | 1,000 | 12,465,000 | ||||||||||||
Obligations
of state and political
|
||||||||||||||||
subdivisions
|
22,569,000 | 204,000 | 40,000 | 22,733,000 | ||||||||||||
Mortgage-backed
securities
|
5,788,000 | 48,000 | 32,000 | 5,804,000 | ||||||||||||
$ | 41,189,000 | $ | 392,000 | $ | 73,000 | $ | 41,508,000 |
On
a quarterly basis, the Corporation makes an assessment to determine
whether there have been any events or economic circumstances to
indicate that a security is impaired on an other-than-temporary
basis. The Corporation considers many factors including the
length of time the security has had a market value less than the cost
basis; the intent and ability of the Corporation to hold the
security for a period of time sufficient for a recovery in value; and
recent events specific to the issuer or industry. Management
considers the decline in market value of these securities to be
temporary.
|
Mortgage-backed
securities are comprised primarily of government agencies such as GNMA and
government-sponsored agencies such as FNMA and
FHLMC.
|
Stewardship
Financial Corporation and Subsidiary
|
Notes
to Consolidated Financial Statements Continued
|
(Unaudited)
|
Note
5. Loans
|
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Mortgage
|
||||||||
Residential
|
$ | 40,737,000 | $ | 44,719,000 | ||||
Commercial
|
226,195,000 | 209,082,000 | ||||||
Commercial
|
96,248,000 | 89,845,000 | ||||||
Equity
|
20,705,000 | 19,723,000 | ||||||
Installment
|
54,929,000 | 56,796,000 | ||||||
Other
|
300,000 | 424,000 | ||||||
Total
loans
|
439,114,000 | 420,589,000 | ||||||
Less: Deferred
loan fees
|
425,000 | 442,000 | ||||||
Allowance
for loan losses
|
4,768,000 | 4,457,000 | ||||||
5,193,000 | 4,899,000 | |||||||
Loans,
net
|
$ | 433,921,000 | $ | 415,690,000 |
Note
6. Allowance for loan losses
|
||||||||
Six
Months Ended June 30,
|
||||||||
2008
|
2007
|
|||||||
Balance,
beginning of period
|
$ | 4,457,000 | $ | 4,101,000 | ||||
Provision
charged to operations
|
360,000 | 190,000 | ||||||
Recoveries
of loans charged off
|
19,000 | 5,000 | ||||||
Loans
charged off
|
(68,000 | ) | (115,000 | ) | ||||
Balance,
end of period
|
$ | 4,768,000 | $ | 4,181,000 |
Stewardship
Financial Corporation and Subsidiary
|
Notes
to Consolidated Financial Statements Continued
|
(Unaudited)
|
Note
7. Loan Impairment
|
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Impaired
loans
|
||||||||
With
related allowance for loan losses
|
$ | 319,000 | $ | 222,000 | ||||
Without
related allowance for loan losses
|
132,000 | 233,000 | ||||||
Total
impaired loans
|
$ | 451,000 | $ | 455,000 | ||||
Related
allowance for loan losses
|
$ | 91,000 | $ | 39,000 |
Fair
Value Measurements at June 30, 2008 Using
|
||||||||||||||||
June
30,
2008
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
|||||||||||||
Assets:
|
||||||||||||||||
Available
for sale securities
|
$ | 96,763,000 | $ | - | $ | 96,763,000 | $ | - |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(In
thousands, except per share data)
|
||||||||||||||||
Net
income
|
$ | 1,179 | $ | 1,454 | $ | 2,240 | $ | 2,540 | ||||||||
Weighted
average shares
|
5,315 | 5,292 | 5,313 | 5,281 | ||||||||||||
Effect
of dilutive stock options
|
10 | 25 | 12 | 35 | ||||||||||||
Total
weighted average dilutive shares
|
5,325 | 5,314 | 5,325 | 5,316 | ||||||||||||
Basic
earnings per share
|
$ | 0.22 | $ | 0.27 | $ | 0.42 | $ | 0.48 | ||||||||
Diluted
earnings per share
|
$ | 0.22 | $ | 0.27 | $ | 0.42 | $ | 0.47 |
Analysis
of Net Interest Income (Unaudited)
|
||||||||||||||||||||||||
For
the Six Months Ended June 30,
|
||||||||||||||||||||||||
2008
|
2007
|
|||||||||||||||||||||||
Average
|
Average
|
|||||||||||||||||||||||
Interest
|
Rates
|
Interest
|
Rates
|
|||||||||||||||||||||
Average
|
Income/
|
Earned/
|
Average
|
Income/
|
Earned/
|
|||||||||||||||||||
Balance
|
Expense
|
Paid
|
Balance
|
Expense
|
Paid
|
|||||||||||||||||||
|
(Dollars
in thousands)
|
|||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans
(1) (2)
|
$ | 429,754 | $ | 14,284 | 6.68 |
%
|
$ | 374,235 | $ | 13,285 | 7.16 |
%
|
||||||||||||
Taxable
investment securities (1)
|
98,703 | 2,579 | 5.25 | 91,293 | 2,359 | 5.21 | ||||||||||||||||||
Tax-exempt
investment securities (1) (2)
|
26,652 | 709 | 5.35 | 22,267 | 559 | 5.06 | ||||||||||||||||||
Other
interest-earning assets
|
3,463 | 42 | 2.44 | 490 | 19 | 7.82 | ||||||||||||||||||
Total
interest-earning assets
|
558,572 | 17,614 | 6.34 | 488,285 | 16,222 | 6.70 | ||||||||||||||||||
Non-interest-earning
assets:
|
||||||||||||||||||||||||
Allowance
for loan losses
|
(4,557 | ) | (4,111 | ) | ||||||||||||||||||||
Other
assets
|
34,046 | 34,078 | ||||||||||||||||||||||
Total
assets
|
$ | 588,061 | $ | 518,252 | ||||||||||||||||||||
Liabilities
and Stockholders' Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Interest-bearing
demand deposits
|
$ | 160,346 | $ | 1,466 | 1.84 |
%
|
$ | 121,042 | $ | 1,379 | 2.30 |
%
|
||||||||||||
Savings
deposits
|
36,798 | 123 | 0.67 | 37,642 | 141 | 0.76 | ||||||||||||||||||
Time
deposits
|
180,238 | 3,933 | 4.39 | 182,482 | 4,101 | 4.53 | ||||||||||||||||||
Repurchase
agreements
|
16,467 | 279 | 3.41 | 9,862 | 224 | 4.58 | ||||||||||||||||||
FHLB
borrowing
|
42,996 | 603 | 2.82 | 22,049 | 485 | 4.44 | ||||||||||||||||||
Subordinated
debenture
|
7,217 | 245 | 6.83 | 7,217 | 244 | 6.82 | ||||||||||||||||||
Total
interest-bearing liabilities
|
444,062 | 6,649 | 3.01 | 380,294 | 6,574 | 3.49 | ||||||||||||||||||
Non-interest-bearing
liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
97,374 | 95,181 | ||||||||||||||||||||||
Other
liabilities
|
4,762 | 4,565 | ||||||||||||||||||||||
Stockholders'
equity
|
41,863 | 38,212 | ||||||||||||||||||||||
Total
liabilities and stockholders' equity
|
$ | 588,061 | $ | 518,252 | ||||||||||||||||||||
Net
interest income (taxable equivalent basis)
|
$ | 10,965 | $ | 9,648 | ||||||||||||||||||||
Tax
Equivalent adjustment
|
(247 | ) | (173 | ) | ||||||||||||||||||||
Net
interest income
|
$ | 10,718 | $ | 9,475 | ||||||||||||||||||||
Net
interest spread (taxable equivalent basis)
|
3.33 |
%
|
3.21 |
%
|
||||||||||||||||||||
Net
yield on interest-earning
|
||||||||||||||||||||||||
assets
(taxable equivalent basis) (3)
|
3.95 |
%
|
3.98 |
%
|
__________________________
|
(1) For
purpose of these calculations, nonaccruing loans are included in the
average balance. Fees are included in loan
interest. Loans and total interest-earning
|
assets
are net of unearned income. Securities are included at
amortized cost.
|
(2) The
tax equivalent adjustments are based on a marginal tax rate of
34%.
|
(3) Net
interest income (taxable equivalent basis) divided by average
interest-earning assets.
|
|
Analysis
of Net Interest Income (Unaudited)
|
|||||||||||||||||||||||
|
For
the Three Months Ended June 30,
|
|||||||||||||||||||||||
2008
|
2007
|
|||||||||||||||||||||||
Average
|
Average
|
|||||||||||||||||||||||
Interest
|
Rates
|
Interest
|
Rates
|
|||||||||||||||||||||
Average
|
Income/
|
Earned/
|
Average
|
Income/
|
Earned/
|
|||||||||||||||||||
Balance
|
Expense
|
Paid
|
Balance
|
Expense
|
Paid
|
|||||||||||||||||||
|
(Dollars in thousands) | |||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||
Loans
(1) (2)
|
$ | 435,060 | $ | 7,088 | 6.55 | % | $ | 376,149 | $ | 6,715 | 7.16 | % | ||||||||||||
Taxable
investment securities (1)
|
102,683 | 1,347 | 5.28 | 91,744 | 1,197 | 5.23 | ||||||||||||||||||
Tax-exempt
investment securities (1) (2)
|
27,607 | 367 | 5.35 | 22,344 | 283 | 5.08 | ||||||||||||||||||
Other
interest-earning assets
|
6,704 | 36 | 2.16 | 562 | 10 | 7.14 | ||||||||||||||||||
Total
interest-earning assets
|
572,054 | 8,838 | 6.21 | 490,799 | 8,205 | 6.71 | ||||||||||||||||||
Non-interest-earning
assets:
|
||||||||||||||||||||||||
Allowance
for loan losses
|
(4,626 | ) | (4,121 | ) | ||||||||||||||||||||
Other
assets
|
34,752 | 34,559 | ||||||||||||||||||||||
Total
assets
|
$ | 602,180 | $ | 521,237 | ||||||||||||||||||||
Liabilities
and Stockholders' Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||
Interest-bearing
demand deposits
|
$ | 165,352 | $ | 597 | 1.45 | % | $ | 122,565 | $ | 719 | 2.35 | % | ||||||||||||
Savings
deposits
|
37,199 | 54 | 0.58 | 38,240 | 71 | 0.74 | ||||||||||||||||||
Time
deposits
|
184,594 | 1,961 | 4.27 | 182,565 | 2,071 | 4.55 | ||||||||||||||||||
Repurchase
agreements
|
16,251 | 135 | 3.34 | 10,531 | 121 | 4.61 | ||||||||||||||||||
FHLB
borrowing
|
47,033 | 285 | 2.44 | 19,568 | 211 | 4.33 | ||||||||||||||||||
Subordinated
debenture
|
7,217 | 122 | 6.80 | 7,217 | 122 | 6.78 | ||||||||||||||||||
Total
interest-bearing liabilities
|
457,646 | 3,154 | 2.77 | 380,686 | 3,315 | 3.49 | ||||||||||||||||||
Non-interest-bearing
liabilities:
|
||||||||||||||||||||||||
Demand
deposits
|
97,565 | 97,434 | ||||||||||||||||||||||
Other
liabilities
|
4,688 | 4,573 | ||||||||||||||||||||||
Stockholders'
equity
|
42,281 | 38,544 | ||||||||||||||||||||||
Total
liabilities and stockholders' equity
|
$ | 602,180 | $ | 521,237 | ||||||||||||||||||||
Net
interest income (taxable equivalent basis)
|
$ | 5,684 | $ | 4,890 | ||||||||||||||||||||
Tax
Equivalent adjustment
|
(128 | ) | (88 | ) | ||||||||||||||||||||
Net
interest income
|
$ | 5,556 | $ | 4,802 | ||||||||||||||||||||
Net
interest spread (taxable equivalent basis)
|
3.44 | % | 3.21 | % | ||||||||||||||||||||
Net
yield on interest-earning
|
||||||||||||||||||||||||
assets
(taxable equivalent basis) (3)
|
3.99 | % | 4.00 | % | ||||||||||||||||||||
(1)
|
For
purpose of these calculations, nonaccruing loans are included in the
average balance. Fees are included in loan
interest. Loans and total interest-earning assets are net
of unearned income. Securities are included at amortized
cost.
|
(2)
|
The
tax equivalent adjustments are based on a marginal tax rate of
34%.
|
(3)
|
Net
interest income (taxable equivalent basis) divided by average
interest-earning assets.
|
06/30/08
|
03/31/08
|
12/31/07
|
09/30/07
|
|||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
Nonaccrual
loans: (1)
|
$ | 451 | $ | 360 | $ | 455 | $ | 238 | ||||||||
Loans
past due 90 days or more: (2)
|
840 | 703 | 26 | 28 | ||||||||||||
Total
nonperforming loans
|
$ | 1,291 | $ | 1,063 | $ | 481 | $ | 266 | ||||||||
Other
real estate owned
|
$ | - | $ | - | $ | - | $ | 353 | ||||||||
Total
nonperforming loans
|
$ | 1,291 | $ | 1,063 | $ | 481 | $ | 619 | ||||||||
Allowance
for loan losses
|
$ | 4,768 | $ | 4,571 | $ | 4,457 | $ | 4,249 | ||||||||
Nonaccrual
loans to total loans
|
0.10 | % | 0.08 | % | 0.11 | % | 0.06 | % | ||||||||
Nonperforming
loans to total
loans
|
0.29 | % | 0.25 | % | 0.11 | % | 0.07 | % | ||||||||
Nonperforming
loans to total assets
|
0.21 | % | 0.18 | % | 0.08 | % | 0.05 | % | ||||||||
Nonperforming
assets to total assets
|
0.21 | % | 0.18 | % | 0.08 | % | 0.11 | % | ||||||||
Allowance
for loan losses to total loans
|
1.09 | % | 1.07 | % | 1.06 | % | 1.07 | % | ||||||||
Allowance
for loan losses to nonperforming loans
|
369.30 | % | 430.13 | % | 926.61 | % | 1,597.4 | % |
Required
|
Actual
|
Excess
|
||||||||||
Risk-based
Capital
|
||||||||||||
Tier
1
|
4.00 | % | 10.36 | % | 6.36 | % | ||||||
Total
|
8.00 | % | 11.37 | % | 3.37 | % | ||||||
Leverage
Ratio
|
4.00 | % | 8.12 | % | 4.12 | % |
|
(a)
|
Evaluation
of internal controls and procedures
|
|
(b)
|
Management’s
Report on Internal Control over Financial
Reporting
|
|
(c)
|
Changes
in internal controls.
|
Votes
for
|
Votes
Withheld
|
|
Election
of Director
|
||
William
C. Hanse
|
4,101,083
|
33,756
|
Margo
Lane
|
4,109,637
|
25,203
|
Arie
Leegwater
|
4,106,812
|
28,028
|
John
L. Steen
|
4,071,044
|
63,795
|
|
(a)
|
Exhibits
|
Date: August 13,
2008
|
By:
|
/s/ Paul Van Ostenbridge
|
Paul Van Ostenbridge
|
||
President and Chief Executive
|
||
Officer
|
||
(authorized officer on behalf
|
||
of registrant)
|
||
Date: August 13,
2008
|
By:
|
/s/ Julie E. Holland
|
Julie E. Holland
|
||
Senior Vice President and Treasurer
|
||
(principal accounting officer)
|
EXHIBIT
NUMBER
|
DESCRIPTION
|
|
Certification
of Paul Van Ostenbridge required by Rule 13a-14(a) or Rule
15d-14(a)
|
||
Certification
of Julie Holland required by Rule 13a-14(a) or Rule 15d-14(a)
|
||
Certification
of Paul Van Ostenbridge and Julie Holland required by Rule 13a-14(b) or
Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. Section 1350
|