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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2004
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-21855
Stewardship Financial Corporation
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(Exact name of registrant as specified in its charter)
New Jersey 22-3351447
--------------------------------- -------------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
630 Godwin Avenue, Midland Park, NJ 07432
---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 444-7100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, no par value
------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the Registrant: (1) has filed reports required to
be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes ( ) No (X)
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, as of June 30, 2004 was $62,016,884.
As of March 11, 2005 3,376,845 shares of the registrant's common stock were
outstanding.
For the fiscal year ended December 31, 2004, the registrant had total revenues
of $23,878,000.
DOCUMENTS INCORPORATED BY REFERENCE
Item 6 Selected Financial Data Registrant's Annual Report to Shareholders
under the caption "Consolidated Financial
Summary of Selected Financial Data."
Item 7 Management's Discussion Registrant's Annual Report to Shareholders
and Analysis of Financial under the caption "Management's Discussion
Condition and Results and Analysis of Financial Condition and
of Operations Results of Operations."
Item 7A Quantitative and Qualitative Registrant's Annual Report to Shareholders
Disclosures About Market under the caption "Management's Discussion
Risk and Analysis of Financial Condition and
Results of Operations - Market Risk".
Item 8 Financial Statements and Registrant's Annual Report to Shareholders
Supplementary Data under the caption "Consolidated Statements
Financial Condition."
Item 10 Directors and Executive Proxy Statement for 2005 Annual Meeting
Officers of the Company; of Shareholders under the caption, "Section
Compliance with Section 16(a) Beneficial Ownership Reporting
16(a) of the Exchange Act Compliance," to be filed no later than
April 30, 2005.
Item 11 Executive Compensation Proxy Statement for 2005 Annual Meeting
of Shareholders under the captions,
"Compensation of Executive Officers"
and "Annual Management Compensation
and All Other Compensation," to be filed
no later than April 30, 2005.
Item 12 Security Ownership of Proxy Statement for 2005 Annual Meeting
Certain Beneficial Owners of Shareholders under the caption, "Stock
and Management Ownership of Management and Principal
Shareholders," to be filed no later than
April 30, 2005.
Item 13 Certain Relationships and Proxy Statement for 2005 Annual Meeting
Related Transactions of Shareholders under the caption, "Certain
Relationships and Related Transactions," to be
filed no later than April 30, 2005.
Item 14 Principal Accountant Proxy Statement for 2005 Annual Meeting
Fees and Services of Shareholders under the Caption, "Fees
Billed by KPMG During Fiscal 2004 and Fiscal
2003," to be filed no later than April 30, 2005.
2
Part I
Item 1 - Business
General
Stewardship Financial Corporation (the "Corporation" or "Registrant") is a
one-bank holding company incorporated under the laws of the State of New Jersey
in January 1995 to serve as a holding company for Atlantic Stewardship Bank (the
"Bank"). The Corporation was organized at the direction of the Board of
Directors of the Bank for the purpose of acquiring all of the capital stock of
the Bank (the "Acquisition"). Pursuant to the New Jersey Banking Act of 1948, as
amended (the "New Jersey Banking Act"), and pursuant to approval of the
shareholders of the Bank, the Corporation acquired the Bank and became its
holding company on November 22, 1996. As part of the Acquisition, shareholders
of the Bank received one share of common stock, no par value ("Common Stock") of
the Corporation for each outstanding share of the common stock of the Bank. The
only significant activity of the Corporation is ownership and supervision of the
Bank.
The Bank is a commercial bank formed under the laws of the State of New
Jersey on April 26, 1984. The Bank operates from its main office at 630 Godwin
Avenue, Midland Park, New Jersey, leased space at 666 Godwin Avenue, Midland
Park, New Jersey, and its eight branches located at 386 Lafayette Avenue,
Hawthorne, New Jersey, 1111 Goffle Road, Hawthorne, New Jersey, 190 Franklin
Avenue, Ridgewood, New Jersey, 30 Franklin Turnpike, Waldwick, New Jersey, 87
Berdan Avenue, Wayne, New Jersey, 400 Hamburg Turnpike, Wayne New Jersey, 311
Valley Road, Wayne, New Jersey and 249 Newark Pompton Turnpike, Pequannock, New
Jersey. The Bank operates ATM machines at all of its branches except its
Lafayette Avenue, Hawthorne branch and operates an offsite branch in the
Christian Health Care Center, Wyckoff, New Jersey.
The Corporation is subject to the supervision and regulation of the Board
of Governors of the Federal Reserve System (the "FRB"). The Bank's deposits are
insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation ("FDIC") up to applicable limits. The operations of the Corporation
and the Bank are subject to the supervision and regulation of the FRB, FDIC and
the New Jersey Department of Banking and Insurance (the "Department"). The
principal executive offices of the Corporation are located at 630 Godwin Avenue,
Midland Park, New Jersey 07432, and the telephone number is (201) 444-7100.
Stewardship Investment Corp. is a wholly-owned non-bank subsidiary of the Bank,
whose primary business is to own and manage the Bank's investment portfolio. In
addition to the Bank, in 2003, the Corporation formed a second subsidiary,
Stewardship Statutory Trust I for the purpose of issuing trust preferred
securities.
Business of the Corporation
The Corporation's primary business is the ownership and supervision of the
Bank. The Corporation, through the Bank, conducts a traditional commercial
banking business, and offers services including personal and business checking
accounts and time deposits, money market accounts and regular savings accounts.
The Corporation structures its specific services and charges in a manner
designed to attract the business of the small and medium sized business and
professional community as well as that of individuals residing, working and
shopping in Bergen, Morris and Passaic County, New Jersey. The Corporation
engages in a wide range of lending activities and offers commercial, consumer,
mortgage, home equity and personal loans.
In addition, in forming the Bank, the members of the Board of Directors
envisioned a community-based institution which would serve the local communities
surrounding its branches, while also providing a return to its shareholders.
This vision has been reflected in the Bank's tithing policy, under which the
Bank tithes 10% of its pre-tax profits to worthy Christian organizations and
civic organizations in the communities where the Bank maintains branches.
Service Area
The Corporation's service area primarily consists of the Bergen, Passaic
and Morris County, New Jersey market, although the Corporation makes loans
throughout New Jersey. The Corporation operates its main office in Midland Park,
New Jersey and eight existing branch offices in Hawthorne, Ridgewood, Waldwick,
Wayne and Pequannock, New Jersey.
Competition
The Corporation competes for deposits and loans with commercial banks,
thrifts and other financial institutions, many of which have greater financial
resources than the Corporation. Many large financial institutions in New York
City and other parts of New Jersey compete for the business of New Jersey
residents and companies located in the Corporation's service area. Certain of
these institutions have significantly higher lending limits than the Corporation
and provide services to their customers that the Corporation does not offer.
Management believes the Corporation is able to compete on a substantially
equal basis with its competitors because it provides responsive personalized
services through management's knowledge and awareness of the Corporation's
service area, customers and business.
3
Employees
At December 31, 2004, the Corporation employed 94 full-time employees and
35 part-time employees. None of these employees is covered by a collective
bargaining agreement and the Corporation believes that its employee relations
are good.
Supervision and Regulation
Bank holding companies and banks are extensively regulated under both
federal and state law. These laws and regulations are intended to protect
depositors, not stockholders. To the extent that the following information
describes statutory and regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions and is not
intended to be an exhaustive description of the statutes or regulations
applicable to the Corporation's business. Any change in the applicable law or
regulation may have a material effect on the business and prospects of the
Corporation and the Bank.
Regulation of the Corporation
BANK HOLDING COMPANY ACT. As a bank holding company registered under the
Bank Holding Company Act of 1956, as amended (the "BHCA"), the Corporation is
subject to the regulation and supervision of the FRB. The Corporation is
required to file with the FRB annual reports and other information showing that
its business operations and those of its subsidiaries are limited to banking,
managing or controlling banks, furnishing services to or performing services for
its subsidiaries or engaging in any other activity which the FRB determines to
be so closely related to banking or managing or controlling banks as to be
properly incident thereto.
The BHCA requires, among other things, the prior approval of the FRB in
any case where a bank holding company proposes to (i) acquire all or
substantially all of the assets of any other bank, (ii) acquire direct or
indirect ownership or control of more than 5% of the outstanding voting stock of
any bank (unless it owns a majority of such bank's voting shares), or (iii)
merge or consolidate with any other bank holding company. The FRB will not
approve any merger, acquisition, or consolidation that would have a
substantially anti-competitive effect, unless the anti-competitive impact of the
proposed transaction is clearly outweighed by a greater public interest in
meeting the convenience and needs of the community to be served. The FRB also
considers capital adequacy and other financial and managerial resources and
future prospects of the companies and the banks concerned, together with the
convenience and needs of the community to be served.
Additionally, the BHCA prohibits a bank holding company, with certain
limited exceptions, from (i) acquiring or retaining direct or indirect ownership
or control of more than 5% of the outstanding voting stock of any company which
is not a bank or bank holding company, or (ii) engaging directly or indirectly
in activities other than those of banking, managing or controlling banks, or
performing services for its subsidiaries; unless such non-banking business is
determined by the FRB to be so closely related to banking or managing or
controlling banks as to be properly incident thereto. In making such
determinations, the FRB is required to weigh the expected benefits to the
public, such as greater convenience, increased competition or gains in
efficiency, against the possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss to the depositors of such
depository institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default. Under a policy of the FRB with respect
to bank holding company operations, a bank holding company is required to commit
resources to support such institutions in circumstances where it might not do so
absent such policy. The FRB also has the authority under the BHCA to require a
bank holding company to terminate any activity or to relinquish control of a
non-bank subsidiary upon the FRB's determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any bank
subsidiary of the bank holding company.
CAPITAL ADEQUACY GUIDELINES FOR BANK HOLDING COMPANIES. The FRB has
adopted risk-based capital guidelines for bank holding companies. The risk-based
capital guidelines are designed to make regulatory capital requirements more
sensitive to differences in risk profiles among banks and bank holding
companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Under these guidelines, assets and
off-balance sheet items are assigned to broad risk categories each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items.
The risk-based guidelines apply on a consolidated basis to bank holding
companies with consolidated assets of $150 million or more. The minimum ratio of
total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least 4% of the total
capital is required to be "Tier I" capital, consisting of common stockholders'
equity and certain preferred stock, less certain goodwill items and other
intangible assets. The remainder, "Tier II Capital," may consist of (a) the
allowance for loan losses of up to 1.25% of risk-weighted assets, (b) excess of
qualifying preferred stock, (c) hybrid capital instruments, (d) debt, (e)
mandatory convertible securities, and (f) qualifying subordinated debt.
4
Total capital is the sum of Tier I and Tier II capital less reciprocal holdings
of other banking organizations' capital instruments, investments in
unconsolidated subsidiaries and any other deductions as determined by the FRB
(determined on a case-by-case basis or as a matter of policy after formal
rule-making).
Bank holding company assets are given risk-weights of 0%, 20%, 50%, and
100%. In addition, certain off-balance sheet items are given similar credit
conversion factors to convert them to asset equivalent amounts to which an
appropriate risk-weight will apply. These computations result in the total
risk-weighted assets. Most loans are assigned to the 100% risk category, except
for performing first mortgage loans fully secured by residential property which
carry a 50% risk-weighting. Most investment securities (including, primarily,
general obligation claims of states or other political subdivisions of the
United States) are assigned to the 20% category, except for municipal or state
revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S.
treasury or obligations backed by the full faith and credit of the U.S.
Government, which have a 0% risk-weight. In converting off-balance sheet items,
direct credit substitutes including general guarantees and standby letters of
credit backing nonfinancial obligations, and undrawn commitments (including
commercial credit lines with an initial maturity of more than one year) have a
50% risk-weighting. Short term commercial letters of credit have a 20%
risk-weighting and certain short-term unconditionally cancelable commitments
have a 0% risk-weighting.
In addition to the risk-based capital guidelines, the FRB has adopted a
minimum Tier I capital (leverage) ratio, under which a bank holding company must
maintain a minimum level of Tier I capital to average total consolidated assets
of at least 3% in the case of a bank holding company that has the highest
regulatory examination rating and is not contemplating significant growth or
expansion. All other bank holding companies are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the stated minimum.
FINANCIAL SERVICES MODERNIZATION LEGISLATION. On November 12, 1999, President
Clinton signed into law the Gramm-Leach-Bliley Financial Services Modernization
Act of 1999 ("FSMA"). The passage of the FSMA removes the barriers to
affiliations among financial service companies by repealing restrictions imposed
under the Glass-Steagall Act of 1933 on banks affiliating with securities firms
and by creating a new financial holding company ("FHC") under the BHCA. A
company may form an FHC if all of its insured depository institution
subsidiaries are considered well-capitalized and well-managed, and hold a
satisfactory rating under the Community Reinvestment Act of 1977, as amended
("CRA"). An FHC can engage in a prescribed list of financial services, including
insurance and securities underwriting and agency activities, merchant banking,
insurance company portfolio investment activities and "complementary" financial
activities.
To insure consistency in the treatment of banks and other financial
institutions, FSMA reorganizes regulatory authority of federal agencies over
securities and investment activities.
In the area of insurance, FSMA designates the insurance products that
banks and subsidiaries may provide, prohibits national banks from underwriting
or selling title insurance if they did not actively conduct those activities
before FSMA and permits national banks to sell title insurance in states where
state banks are specifically authorized to do so. FSMA requires Federal banking
agencies to prescribe consumer protection regulations for insurance sales by
banks. FSMA preempts state laws that interfere with affiliations between banks
and insurance companies. It also initiates a process for creating a uniformity
in licensing of insurance agents on a national level.
FSMA also reinforces the barrier separating banking from general commerce
by preventing organizations from applying to the Office of Thrift Supervision to
form a unitary holding company after May 4, 1999. All existing unitaries can
continue to operate, regardless of current ownership but these unitaries can
only be sold to financial companies.
In addition to enabling banks and their holding companies to conduct a
wide range of financial activities, the FSMA also contained a number of privacy
requirements with which banks and other financial institutions must comply.
Under the FSMA, all financial institutions must adopt a privacy policy and make
its policy known to those who became new customers and provide annual disclosure
of its policy to all of its customers. The Bank had to provide initial privacy
notices to all existing customers by July 1, 2001. Prior to disclosing a
consumers' nonpublic personal information (not covered by an exception) with
nonaffiliated third parties, financial institutions must provide a reasonable
means and opportunity to opt out of having information shared. The exceptions
include disclosures of nonpublic personal information: (i) made in connection
with certain processing and servicing transactions; (ii) with the consent, or at
the direction, of a customer or consumer; (iii) to protect against potential
fraud or unauthorized transactions; (iv) to respond to judicial process; and (v)
to provide the information to an employee of the institution who happens also to
be an employee of a nonaffiliated third party.
The FSMA also required the issuance of regulations establishing standards
governing the administrative, technical and physical safeguards of customer
information. By July 1, 2001, all financial institutions had to have an
information security program. Institutions are required to identify and assess
the risks that may threaten customer information, develop a written plan
containing policies and procedures to manage and control these risks, implement
and test the plan, and adjust the plan on a continuing basis to account for
changes in technology, sensitivity of customer information, and internal or
external threats to information security.
5
Additional proposals to change the regulations and laws governing the
banking and financial services industry are frequently introduced in the state
legislatures, before various banking regulatory agencies, and in Congress. The
likelihood and timing of any such changes and the impact of such changes might
have on the Corporation cannot be determined at this time.
Regulation of the Bank
As a New Jersey-chartered commercial bank, the Bank is subject to the
regulation, supervision, and control of the Department. As a FDIC-insured
institution, the Bank is subject to regulation, supervision and control by the
FDIC, an agency of the federal government. The regulations of the FDIC and the
Department impact virtually all activities of the Bank, including the minimum
level of capital the Bank must maintain, the ability of the Bank to pay
dividends, the ability of the Bank to expand through new branches or
acquisitions, and various other matters.
INSURANCE OF DEPOSITS. The Bank's deposits are insured up to a maximum of
$100,000 per depositor under the BIF. The FDIC has established a risk-based
assessment system for all insured depository institutions. Under this system,
the FDIC has established an insurance premium assessment system based upon: (i)
the probability that the insurance fund will incur a loss with respect to the
institution; (ii) the likely amount of the loss; and (iii) the revenue needs of
the insurance fund. In compliance with this mandate, FDIC has developed a matrix
that sets the assessment premium for a particular institution in accordance with
its capital level and overall rating by the primary regulatory. Under the matrix
as currently in effect, the assessment rate ranges from 0 to 27 basis points of
assessed deposits.
DIVIDEND RIGHTS. Under the New Jersey Banking Act, a Bank may declare and
pay dividends only if, after payment of the dividend, the capital stock of the
Bank will be unimpaired and either the Bank will have a surplus of not less than
50% of its capital stock or the payment of the dividend will not reduce the
Bank's surplus.
BIF PREMIUMS AND THE RECAPITALIZATION OF SAIF. The Bank is a member of the
Bank Insurance Fund ("BIF") of the FDIC. The FDIC also maintains another
insurance fund, the Savings Association Insurance Fund ("SAIF"), which primarily
covers savings and loan association deposits but also covers deposits that are
acquired by a BIF-insured institution from a savings and loan association
("OAKAR"). On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
"Deposit Act") became law. The primary purpose of the Deposit Act was to
recapitalize the SAIF by charging all SAIF member institutions a one-time
special assessment. The Deposit Act was designed to lead to an equalization of
the deposit insurance assessments between BIF and SAIF insured institutions, and
to separate out from insurance assessments payments required for debt service
and principal repayment on bonds issued by the Federal Finance Corporation
("FICO") in the mid-1980s to fund a portion of the thrift bailout. Under the
Deposit Act, the FDIC charged assessments for SAIF and BIF deposits in a 5 to 1
ratio to pay FICO bonds until January 1, 2000, at which time the assessment
became equal. During 2004 a FICO rate of approximately 1.47 basis points was
charged on BIF and SAIF deposits.
INTERSTATE BANKING. On September 29, 1994, the Riegle-Neal Interstate
Banking and Branching Efficiency Act (the "Interstate Act") was enacted. The
Interstate Act generally enhances the ability of bank holding companies to
conduct their banking business across state borders. The Interstate Act has two
main provisions. The first provision generally provides that commencing on
September 29, 1995, bank holding companies may acquire banks located in any
state regardless of the provisions of state law. These acquisitions are subject
to certain restrictions, including caps on the total percentage of deposits that
a bank holding company may control both nationally and in any single state. New
Jersey law currently allows interstate acquisitions by bank holding companies
whose home state has "reciprocal" legislation which would allow acquisitions by
New Jersey based holding companies. The second major provision of the Interstate
Act permitted, beginning on June 1, 1997, banks located in different states to
merge and continue to operate as a single institution in more than one state.
States could have, by legislation passed before June 1, 1997, opted out of the
interstate bank merger provisions of the Interstate Act. In addition, states
could have elected to opt in and allow interstate bank mergers prior to June 1,
1997. A final provision of the Interstate Act permits banks located in one state
to establish new branches in another state without obtaining a separate bank
charter in that state, but only if the state in which the branch is located has
adopted legislation specifically allowing interstate de novo branching. In April
1996, the New Jersey legislature passed legislation which would permit
interstate bank mergers prior to June 1, 1997, provided that the home state of
the institution acquiring the New Jersey institution permits interstate mergers
prior to June 1, 1997. In addition, the legislation permits an out-of-state
institution to acquire an existing branch of a New Jersey-based institution, and
thereby conduct business in New Jersey. The legislation is likely to enhance
competition in the New Jersey marketplace as bank holding companies located
outside of New Jersey become increasingly able to acquire institutions located
within the State of New Jersey.
6
Item 2. Properties
The Corporation conducts its business through its main office located at
630 Godwin Avenue, Midland Park, New Jersey, a mortgage lending office located
at 666 Godwin Avenue, Midland Park, New Jersey, and its eight branch offices.
The property located in Montville, New Jersey has been leased for a future
branch location, pending regulatory and local zoning approval. A lease entered
into in 2003 for a property in Oakland was canceled in 2004 without penalty due
the failure to get zoning approval. The following table sets forth certain
information regarding the Corporation's properties as of December 31, 2004.
Leased Date of Lease
Location or Owned Expiration
- -------- -------- ----------
630 Godwin Avenue Owned --
Midland Park, NJ
386 Lafayette Avenue Owned --
Hawthorne, NJ
190 Franklin Avenue Leased 09/30/07
Ridgewood, NJ
30 Franklin Turnpike Leased 02/28/07
Waldwick, NJ
87 Berdan Avenue Leased 06/30/09
Wayne, NJ
311 Valley Road Leased 11/30/08
Wayne, NJ
249 Newark Pompton Turnpike Owned --
Pequannock, NJ
1111 Goffle Road Leased 05/31/06
Hawthorne, NJ
666 Godwin Avenue Leased 10/31/08
Midland Park, NJ
3 Changebridge Road Leased 03/31/15
Montville, New Jersey
400 Hamburg Turnpike Leased 04/30/14
Wayne, New Jersey
Item 3 - Legal Proceedings
The Corporation and the Bank are periodically parties to or otherwise
involved in legal proceedings arising in the normal course of business, such as
claims to enforce liens, claims involving the making and servicing of real
property loans, and other issues incident to the Bank's business. Management
does not believe that there is any pending or threatened proceeding against the
Corporation or the Bank which, if determined adversely, would have a material
effect on the business or financial position of the Corporation or the Bank.
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted for a vote of the Registrant's shareholders
during the fourth quarter of fiscal 2004.
7
Part II
Item 5 - Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock began trading on the OTC Bulletin Board under
the symbol "SSFN". As of December 31, 2004, there were 900 shareholders of
record of the Common Stock.
The following table sets forth the quarterly high and low bid prices of
the Common Stock as reported on the OTC Bulletin Board for the quarterly periods
presented. The prices below reflect inter-dealer prices, without retail markup,
markdown or commissions, and may not represent actual transactions. The stock
prices and cash dividends set forth below also reflect adjustments related to 5%
stock dividends paid in November, 2004 and 2003 and a 3 for 2 stock split that
occurred in July 2003.
Bid
-------------------
Cash
High Low Dividend
---- --- --------
Year Ended December 31, 2004
Fourth quarter $23.09 $20.35 $0.08
Third quarter 22.90 22.09 0.08
Second quarter 23.10 21.19 0.07
First quarter 23.81 20.52 0.07
Year Ended December 31, 2003
Fourth quarter $25.23 $19.95 $0.07
Third quarter 20.85 14.96 0.06
Second quarter 17.53 11.19 0.06
First quarter 11.48 10.94 0.06
The Corporation may pay dividends as declared from time to time by the
Corporation's Board of Directors out of funds legally available therefore,
subject to certain restrictions. Since dividends from the Bank will be the
Corporation's main source of income, any restriction on the Bank's ability to
pay dividends will act as a restriction on the Corporation's ability to pay
dividends. Under the New Jersey Banking Act, the Bank may not pay a cash
dividend unless, following the payment of such dividend, the capital stock of
the Bank will be unimpaired and (i) the Bank will have a surplus of no less than
50% of its capital stock or (ii) the payment of such dividend will not reduce
the surplus of the Bank. In addition, the Bank cannot pay dividends if doing so
would reduce its capital below the regulatory imposed minimums.
During fiscal 2004, the Corporation paid quarterly cash dividends totaling
$0.30 per share for an annual dividend payout ratio of 26.5%. During fiscal
2003, the Corporation paid quarterly cash dividends totaling $0.25 per share for
an annual dividend payout ratio of 23.4%.
Item 6 - Selected Financial Data
The information required by this item is incorporated by reference from
page A-1 of the Registrant's Annual Report to Shareholders under the caption
"Consolidated Financial Summary of Selected Financial Data."
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is incorporated by reference from
page A-2 of the Registrant's Annual Report to Shareholders under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is incorporated by reference from
page A-14 of the Registrant's Annual Report to Shareholders under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk."
8
Item 8 - Financial Statements and Supplementary Data
The information required by this item is incorporated by reference from
page A-19 of the Registrant's Annual Report to Shareholders under the caption
"Consolidated Statements of Financial Condition"
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 9A - Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Based on their evaluation as of the end of the period covered by this
Annual Report on Form 10-K, our principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934 (the "Exchange Act")) are effective to ensure that information required to
be disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.
(b) Changes in internal controls.
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Part III
Item 10 - Directors and Executive Officers of the Registrant
Information concerning directors and executive officers will be included
in the definitive Proxy Statement for the Corporation's 2005 Annual Meeting of
Shareholders under the caption "Proposal I- Election of Directors and
information concerning compliance with Section 16(a) of the Exchange Act will be
included under the caption "Compliance with Section 16(a) Beneficial Ownership
Reporting Compliance," each of which is incorporated herein by reference. It is
expected that such Proxy Statement will be filed with the Securities and
Exchange Commission no later than April 30, 2005.
Code of Ethics
The Corporation has adopted a Code of Ethical Conduct for Senior Financial
Managers that applies to its principal executive officer, principal financial
officer, principal accounting officer, controller and any other person
performing similar functions. The Corporation's Code of Ethical Conduct for
Senior Financial Managers is posted on its website, www.asbnow.com. The
Corporation intends to satisfy the disclosure requirement under Item 10 of Form
8-K regarding an amendment to, or waiver from, a provision of its Code of
Ethical Conduct for Senior Financial Managers by filing an 8-K.
Audit Committee and Audit Committee Financial Expert
The members of our audit committee as of December 31, 2004 were John
Murphy (Chairman), Harold Dyer, John L. Steen and Robert Turner. The Board of
Directors determined that John J. Murphy was an "audit committee financial
expert" as defined by the Securities and Exchange Commission. On January 20,
2005, John J. Murphy resigned as a director of Stewardship Financial
Corporation. On February 15, 2005 a new audit committee was formed with members
Harold Dyer (Chairman), John Steen, and Abe Van Wingerden. All members of our
audit committee are "independent" for the purposes of Rule 4200(a)(15) of the
NASD's listing standards.
As of this date, the Board of Directors has determined that no audit committee
member currently qualifies as an "audit committee financial expert" as defined
by the Securities and Exchange Commission. Although none of the audit committee
members qualifies as an "audit committee financial expert" the Board has
determined that each member is fully qualified to oversee the accounting and
financial reporting processes of the Corporation and its subsidiaries and the
audits of the financial statements of the Corporation. It is anticipated that
with the search for a new board member ongoing, a board member who qualifies as
an "audit committee financial expert" will be appointed to the audit committee
as soon as practicable.
9
Item 11 - Executive Compensation
Information concerning executive compensation will be included in the
definitive Proxy Statement for the Corporation's 2005 Annual Meeting of
Shareholders under the captions "Executive Compensation and All Other
Compensation," which is incorporated herein by reference. It is expected that
such Proxy Statement will be filed with the Securities and Exchange Commission
no later than April 30, 2005.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The following table provides information with respect to the equity
securities that are authorized for issuance under our compensation plans as of
December 31, 2004:
Equity Compensation Plan Information
Number of
securities
remaining available
for future issuance
Number of securities under equity
to be issued upon compensation plans
exercise of Weighted-average exercise (excluding
outstanding options, price of outstanding options, securities reflected
warrants and rights (a) warrants and rights (b) in column (a)) (c)
----------------------- ----------------------------- --------------------
Equity compensation plans approved by
security holders 100,757 9.58 231,672
Equity compensation plans not approved by
security holders 0 0.00 399,145
Total 100,757 9.58 630,817
The equity compensation plans not approved by security holders are the
Stock Bonus Plan and the Directors Stock Plan. The Stock Bonus Plan is intended
to provide incentives which will retain highly competent key management
employees of the Corporation by providing them with a bonus in the form of
shares of the common stock of the Corporation. The Corporation has not granted
shares under this plan since 1998. The Director Stock Plan permits members of
the Board of Directors to receive any monthly Board of Directors' fees in shares
of the Corporation's common stock, rather than in cash. The Corporation issued
1,613 shares during 2004.
Information concerning security ownership of certain beneficial owners and
management will be included in the definitive Proxy Statement for the
Corporation's 2005 Annual Meeting of Shareholders under the caption "Stock
Ownership of Management and Principal Shareholders," which is incorporated
herein by reference. It is expected that such Proxy Statement will be filed with
the Securities and Exchange Commission no later than April 30, 2005.
Item 13 - Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions will
be included in the definitive Proxy Statement for the Corporation's 2005 Annual
Meeting of Shareholders under the caption "Interest of Management and Others in
Certain Transactions," which is incorporated herein by reference. It is expected
that such Proxy Statement will be filed with the Securities and Exchange
Commission no later than April 30, 2005.
Item 14 - Principal Accountant Fees and Services
Information concerning principal accountant fees and services will be
included in the definitive Proxy Statement for the corporation's 2005 Annual
Meeting of Shareholders under the caption "Fees Billed by KPMG During Fiscal
2004 and Fiscal 2003," which is incorporated herein by reference. It is expected
that such Proxy Statement will be filed with the Securities and Exchange
Commission no later than April 30, 2005.
10
Part IV
Item 15 - Exhibits, Financial Statement Schedules
(a) Exhibits
Exhibit
Number Description of Exhibits
- ------ -----------------------
3(i) Certificate of Incorporation of the Corporation (1)
3(ii) Bylaws of the Corporation (1)
10(i) 1995 Incentive Stock Option Plan (1)
10(ii) 1995 Stock Option Plan for Non-Employee Directors (1)
10(iii) 1995 Employee Stock Purchase Plan (2)
10(iv) Stock Bonus Plan (2)
10(v) Stewardship Financial Corporation Dividend Reinvestment Plan (3)
10(vi) Stewardship Financial Corporation Director Stock Plan (4)
10(vii) Amended and Restated 1995 Stock Option Plan (5)
10(viii) Amended and Restated Director Stock Plan (5)
10(ix) Dividend Reinvestment Plan (6)
13 Annual Report to Shareholders for the year ended December 31,
2004
21 Subsidiaries of the Registrant
23 Consent of KPMG LLP
31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Vice President, Accounting pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Vice President,
Accounting pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
- ----------
(1) Incorporated by reference from Exhibits 5(B)(3)(i), 5(B)(3)(ii),
5(B)(3)(iii), 5(B)(10)(a), 5(B)(10)(b), 5(B)(21) from the Corporation's
Registration Statement on Form 8-B, Registration No. 0-21855, filed
December 10, 1996.
(2) Incorporated by reference from Exhibits 4(c) to 23(d) from the
Corporation's Registration Statement on Form S-8, Registration No.
333-20793, filed January 31, 1997.
(3) Incorporated by reference from Exhibit 4(a) from the Corporation's
Registration Statement on Form S-3, Registration No. 333-20699, filed
January 30, 1997.
(4) Incorporated by reference from Exhibit 4(a) from the Corporation's
Registration Statement on Form S-8, Registration No. 333-31245, filed July
11, 1997.
(5) Incorporated by reference from Exhibits 10(vii) and 10(viii) from the
Corporation's Annual Report on Form 10-KSB, filed March 31, 1999.
(6) Incorporated by reference from Exhibit 4(a) from the Corporation's
Registration Statement on Form S-3, Registration No. 333-54738, filed
January 31, 2001.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
STEWARDSHIP FINANCIAL CORPORATION
By: /s/ Paul Van Ostenbridge
------------------------------------------
Paul Van Ostenbridge
Chief Executive Officer
Dated: March 15, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Paul Van Ostenbridge Chief Executive Officer March 15, 2005
-------------------------- (Principal Executive Officer)
Paul Van Ostenbridge
/s/ Julie E. Holland Vice President, Accounting March 15, 2005
-------------------------- (Principal Financial
Julie E. Holland Officer and Principal
Accounting Officer)
/s/ Harold Dyer Director March 15, 2005
--------------------------
Harold Dyer
/s/ William Hanse Director March 15, 2005
--------------------------
William Hanse
/s/ Margo Lane Director March 15, 2005
--------------------------
Margo Lane
/s/ Arie Leegwater Chairman of the Board March 15, 2005
--------------------------
Arie Leegwater
/s/ John L. Steen Vice Chairman of the March 15, 2005
-------------------------- Board
John L. Steen
/s/ Robert Turner Secretary and Director March 15, 2005
--------------------------
Robert Turner
/s/ William J. VanderEems Director March 15, 2005
--------------------------
William J. VanderEems
/s/ Abe Van Wingerden Director March 15, 2005
--------------------------
Abe Van Wingerden
12