**UNITED      STATES **

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

| (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 |
|--------------------------|----------------------------------------------------------------------------------------------------------------|

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| 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)                           |

----

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| Large                accelerated filer (  ) | Accelerated                filer (  ) | Non-accelerated                filer (X) |
|--------------------------------------------------|--------------------------------------------|------------------------------------------|

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**Stewardship      Financial Corporation**

**INDEX**

|                                                                                                                                         |                                                                                                                                                            | **PAGE**                             |
|----------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|
|                                                                                                                                         |                                                                                                                                                            | **NUMBER**                           |
| **PART                I - CONSOLIDATED FINANCIAL                INFORMATION**                                                                |                                                                                                                                                            |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **ITEM                1 - CONSOLIDATED FINANCIAL STATEMENTS**                                                                           |                                                                                                                                                            |
|                                                                                                                                         |                                                                                                                                                            |                                 |
|                                                                                                                                         | Consolidated                Statements of Financial Condition at September 30, 2006 (Unaudited)                and                December 31, 2005             | 1                                    |
|                                                                                                                                         |                                                                                                                                                            |                                 |
|                                                                                                                                         | Consolidated                Statements of Income for the Nine Months ended September 30, 2006                and 2005                (Unaudited)                | 2                                    |
|                                                                                                                                         |                                                                                                                                                            |                                 |
|                                                                                                                                         | Consolidated                Statements of Income for the Three Months ended September 30, 2006                and                2005 (Unaudited)               | 3                                    |
|                                                                                                                                         |                                                                                                                                                            |                                 |
|                                                                                                                                         | Consolidated                Statements of Cash Flows for the Nine Months ended September 30,                2006 and                2005 (Unaudited)            | 4                                    |
|                                                                                                                                         |                                                                                                                                                            |                                 |
|                                                                                                                                         | Consolidated                Statement of Changes in Stockholders’ Equity for the Nine Months ended                September 30, 2006 and 2005 (Unaudited) | 5                                    |
|                                                                                                                                         |                                                                                                                                                            |                                 |
|                                                                                                                                         | Notes                to Consolidated Financial Statements (Unaudited)                                                                                           | 6                -                17 |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **ITEM                2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                RESULTS OF OPERATIONS**  | 18                - 30                                                                                                                                          |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **ITEM                3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET                RISK**                                         | 30                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **ITEM                4 - CONTROLS AND PROCEDURES**                                                                                          | 30                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **PART                II - OTHER INFORMATION**                                                                                               |                                                                                                                                                            |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **ITEM                1A. RISK FACTORS**                                                                                                     | 31                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **ITEM                6 - EXHIBITS**                                                                                                         | 31                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **SIGNATURES**                                                                                                                               | 32                                                                                                                                                              |
|                                                                                                                                         |                                                                                                                                                            |                                 |
| **EXHIBIT                INDEX**                                                                                                        | 33-36                                                                                                                                                           |

----

| **Stewardship                  Financial Corporation and                  Subsidiary** |
|----------------------------------------------------------------------------------------|
| **Consolidated                  Statements of Financial Condition**                    |
| **(Unaudited)**                                                                        |
|                                                                                   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |
|                                                                                   |   | **September                  30,** |   | **December                  31,**  |   |
|                                                                                   |   | **2006** |   | **2005**  |   |
|                                                                                   |   |   |   |   |   |
| **Assets**                                                                             |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |
| Cash                  and due from banks                                               |   | $ | 15,791,000 |   | $ | 13,158,000 |   |
| Other                  interest-earning assets                                         |   |   | 549,000 |   |   | 870,000 |   |
| Cash                  and cash equivalents                                             |   |   | 16,340,000 |   |   | 14,028,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |
| Securities                  available for sale                                         |   |   | 66,780,000 |   |   | 64,166,000 |   |
| Securities                  held to maturity; fair value                               |   |   |   |   |   |   |   |
| of                  $38,312,000 (2006) and $37,459,000 (2005)                          |   |   | 38,574,000 |   |   | 37,801,000 |   |
| FHLB-NY                  stock, at cost                                                |   |   | 1,809,000 |   |   | 1,939,000 |   |
| Loans,                  net of allowance for loan losses of                            |   |   |   |   |   |   |   |
| of                  $ 4,086,000 (2006) and $3,847,000 (2005)                           |   |   | 358,511,000 |   |   | 341,976,000 |   |
| Loans                  held for sale                                                   |   |   | 5,952,000 |   |   | 2,041,000 |   |
| Premises                  and equipment, net                                           |   |   | 6,579,000 |   |   | 6,464,000 |   |
| Accrued                  interest receivable                                           |   |   | 2,593,000 |   |   | 2,432,000 |   |
| Intangible                  assets, net of accumulated amortization of                 |   |   |   |   |   |   |   |
| $639,000                  (2006) and $610,000 (2005)                                   |   |   | 111,000 |   |   | 140,000 |   |
| Bank                  owned life insurance                                             |   |   | 8,443,000 |   |   | 8,210,000 |   |
| Other                  assets                                                          |   |   | 3,438,000 |   |   | 3,530,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
| Total                  assets                                                          |   | $ | 509,130,000 |   | $ | 482,727,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
| **Liabilities                  and stockholders' equity**                              |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |
| **Liabilities**                                                                        |   |   |   |   |   |   |   |
| Deposits:                                                                              |   |   |   |   |   |   |   |
| Noninterest-bearing                                                                    |   | $ | 103,220,000 |   | $ | 94,331,000 |   |
| Interest-bearing                                                                       |   |   | 323,529,000 |   |   | 309,135,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
| Total                  deposits                                                        |   |   | 426,749,000 |   |   | 403,466,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
| Other                  borrowings                                                      |   |   | 25,896,000 |   |   | 30,486,000 |   |
| Subordinated                  debentures                                               |   |   | 7,217,000 |   |   | 7,217,000 |   |
| Securities                  sold under agreements to repurchase                        |   |   | 8,879,000 |   |   | 4,731,000 |   |
| Accrued                  interest payable                                              |   |   | 1,705,000 |   |   | 1,086,000 |   |
| Accrued                  expenses and other liabilities                                |   |   | 2,084,000 |   |   | 2,357,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
| Total                  liabilities                                                     |   |   | 472,530,000 |   |   | 449,343,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |
| **Stockholders'                  equity**                                              |   |   |   |   |   |   |   |
| Common                  stock, no par value; 10,000,000 shares authorized;             |   |   |   |   |   |   |   |
| 5,064,806                  and 4,787,889 shares issued and outstanding                 |   |   |   |   |   |   |   |
| at                  September 30, 2006 and December 31, 2005, respectively.            |   |   | 31,781,000 |   |   | 28,211,000 |   |
| Treasury                  stock, 22,380 and 39,581 shares outstanding at               |   |   |   |   |   |   |   |
| September                  30, 2006 and December 31, 2005, respectively                |   |   | (324,000 | ) |   | (556,000 | ) |
| Retained                  earnings                                                     |   |   | 5,882,000 |   |   | 6,647,000 |   |
| Accumulated                  other comprehensive loss                                  |   |   | (739,000 | ) |   | (918,000 | ) |
|                                                                                   |   |   |   |   |   |   |   |
| Total                  stockholders' equity                                            |   |   | 36,600,000 |   |   | 33,384,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
| Total                  liabilities and stockholders' equity                            |   | $ | 509,130,000 |   | $ | 482,727,000 |   |
|                                                                                   |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements.             |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |

*Index*

----

| **Stewardship                  Financial Corporation and Subsidiary**                                                                                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Consolidated                  Statements of Income**                                                                                                                                                    |
| **(Unaudited)**                                                                                                                                                                                           |
|                                                                                                                                                                                                      |   |   |   |   |   |
|                                                                                                                                                                                                      |   |   |   |   |   |
|                                                                                                                                                                                                      |   | **Nine                  Months Ended**  |   |
|                                                                                                                                                                                                      |   | **September                  30,** |   |
|                                                                                                                                                                                                      |   | **2006** |   | **2005** |   |
| Interest                  income:                                                                                                                                                                         |   |   |   |   |   |   |   |
| Loans                                                                                                                                                                                                     |   | $ | 18,963,000 |   | $ | 15,268,000 |   |
| Securities                  held to maturity                                                                                                                                                              |   |   |   |   |   |   |   |
| Taxable                                                                                                                                                                                                   |   |   | 663,000 |   |   | 627,000 |   |
| Non-taxable                                                                                                                                                                                               |   |   | 394,000 |   |   | 421,000 |   |
| Securities                  available for sale                                                                                                                                                            |   |   |   |   |   |   |   |
| Taxable                                                                                                                                                                                                   |   |   | 1,962,000 |   |   | 1,580,000 |   |
| Non-taxable                                                                                                                                                                                               |   |   | 23,000 |   |   | 26,000 |   |
| FHLB-NY                  stock                                                                                                                                                                            |   |   | 77,000 |   |   | 52,000 |   |
| Other                  interest-earning assets                                                                                                                                                            |   |   | 29,000 |   |   | 202,000 |   |
| Total                  interest income                                                                                                                                                                    |   |   | 22,111,000 |   |   | 18,176,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Interest                  expense:                                                                                                                                                                        |   |   |   |   |   |   |   |
| Deposits                                                                                                                                                                                                  |   |   | 6,188,000 |   |   | 3,802,000 |   |
| Borrowed                  money                                                                                                                                                                           |   |   | 1,619,000 |   |   | 879,000 |   |
| Total                  interest expense                                                                                                                                                                   |   |   | 7,807,000 |   |   | 4,681,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                  interest income before provision for loan losses                                                                                                                                     |   |   | 14,304,000 |   |   | 13,495,000 |   |
| Provision                  for loan losses                                                                                                                                                                |   |   | 250,000 |   |   | 450,000 |   |
| Net                  interest income after provision for loan losses                                                                                                                                      |   |   | 14,054,000 |   |   | 13,045,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Noninterest                  income:                                                                                                                                                                      |   |   |   |   |   |   |   |
| Fees                  and service charges                                                                                                                                                                 |   |   | 1,247,000 |   |   | 1,092,000 |   |
| Bank                  owned life insurance                                                                                                                                                                |   |   | 232,000 |   |   | 132,000 |   |
| Merchant                  processing                                                                                                                                                                      |   |   | 884,000 |   |   | 673,000 |   |
| Gain                  on sales of mortgage loans                                                                                                                                                          |   |   | 165,000 |   |   | 167,000 |   |
| Miscellaneous                                                                                                                                                                                             |   |   | 357,000 |   |   | 335,000 |   |
| Total                  noninterest income                                                                                                                                                                 |   |   | 2,885,000 |   |   | 2,399,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Noninterest                  expenses:                                                                                                                                                                    |   |   |   |   |   |   |   |
| Salaries                  and employee benefits                                                                                                                                                           |   |   | 5,045,000 |   |   | 4,565,000 |   |
| Occupancy,                  net                                                                                                                                                                           |   |   | 982,000 |   |   | 742,000 |   |
| Equipment                                                                                                                                                                                                 |   |   | 690,000 |   |   | 547,000 |   |
| Data                  processing                                                                                                                                                                          |   |   | 880,000 |   |   | 850,000 |   |
| Advertising                                                                                                                                                                                               |   |   | 283,000 |   |   | 341,000 |   |
| FDIC                  insurance premium                                                                                                                                                                   |   |   | 38,000 |   |   | 35,000 |   |
| Amortization                  of intangible assets                                                                                                                                                        |   |   | 29,000 |   |   | 30,000 |   |
| Charitable                  contributions                                                                                                                                                                 |   |   | 543,000 |   |   | 580,000 |   |
| Stationery                  and supplies                                                                                                                                                                  |   |   | 240,000 |   |   | 196,000 |   |
| Merchant                  processing                                                                                                                                                                      |   |   | 801,000 |   |   | 598,000 |   |
| Bank-card                  related services                                                                                                                                                               |   |   | 368,000 |   |   | 329,000 |   |
| Miscellaneous                                                                                                                                                                                             |   |   | 1,610,000 |   |   | 1,505,000 |   |
| Total                  noninterest expenses                                                                                                                                                               |   |   | 11,509,000 |   |   | 10,318,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Income                  before income tax expense                                                                                                                                                         |   |   | 5,430,000 |   |   | 5,126,000 |   |
| Income                  tax expense                                                                                                                                                                       |   |   | 1,929,000 |   |   | 1,824,000 |   |
| Net                  income                                                                                                                                                                               |   | $ | 3,501,000 |   | $ | 3,302,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Basic                  earnings per share                                                                                                                                                                 |   | $ | 0.70 |   | $ | 0.66 |   |
| Diluted                  earnings per share                                                                                                                                                               |   | $ | 0.69 |   | $ | 0.66 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Weighted                  average number of common shares outstanding                                                                                                                                     |   |   | 5,019,703 |   |   | 4,983,039 |   |
| Weighted                  average number of diluted common                                                                                                                                                |   |   |   |   |   |   |   |
| shares                  outstanding                                                                                                                                                                       |   |   | 5,068,423 |   |   | 5,042,131 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Share                  data has been restated to reflect a 5% stock dividend paid November                  15,                  2005 and a 5% stock dividend                  payable November 15, 2006. |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements.                                                                                                                                |   |   |   |   |   |   |   |

*Index*

----

| **Stewardship                  Financial Corporation and Subsidiary**                                                                                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Consolidated                  Statements of Income**                                                                                                                                                    |
| **(Unaudited)**                                                                                                                                                                                           |
|                                                                                                                                                                                                      |   |   |   |   |   |
|                                                                                                                                                                                                      |   |   |   |   |   |
|                                                                                                                                                                                                      |   | **Three                  Months Ended**  |   |
|                                                                                                                                                                                                      |   | **September                  30,**  |   |
|                                                                                                                                                                                                      |   | **2006** |   | **2005** |   |
| Interest                  income:                                                                                                                                                                         |   |   |   |   |   |   |   |
| Loans                                                                                                                                                                                                     |   | $ | 6,685,000 |   | $ | 5,399,000 |   |
| Securities                  held to maturity                                                                                                                                                              |   |   |   |   |   |   |   |
| Taxable                                                                                                                                                                                                   |   |   | 223,000 |   |   | 211,000 |   |
| Non-taxable                                                                                                                                                                                               |   |   | 157,000 |   |   | 135,000 |   |
| Securities                  available for sale                                                                                                                                                            |   |   |   |   |   |   |   |
| Taxable                                                                                                                                                                                                   |   |   | 677,000 |   |   | 586,000 |   |
| Non-taxable                                                                                                                                                                                               |   |   | 10,000 |   |   | 9,000 |   |
| FHLB-NY                  stock                                                                                                                                                                            |   |   | 30,000 |   |   | 20,000 |   |
| Other                  interest-earning assets                                                                                                                                                            |   |   | 11,000 |   |   | 101,000 |   |
| Total                  interest income                                                                                                                                                                    |   |   | 7,793,000 |   |   | 6,461,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Interest                  expense:                                                                                                                                                                        |   |   |   |   |   |   |   |
| Deposits                                                                                                                                                                                                  |   |   | 2,396,000 |   |   | 1,562,000 |   |
| Borrowed                  money                                                                                                                                                                           |   |   | 532,000 |   |   | 285,000 |   |
| Total                  interest expense                                                                                                                                                                   |   |   | 2,928,000 |   |   | 1,847,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Net                  interest income before provision for loan losses                                                                                                                                     |   |   | 4,865,000 |   |   | 4,614,000 |   |
| Provision                  for loan losses                                                                                                                                                                |   |   | 90,000 |   |   | 150,000 |   |
| Net                  interest income after provision for loan losses                                                                                                                                      |   |   | 4,775,000 |   |   | 4,464,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Noninterest                  income:                                                                                                                                                                      |   |   |   |   |   |   |   |
| Fees                  and service charges                                                                                                                                                                 |   |   | 419,000 |   |   | 376,000 |   |
| Bank                  owned life insurance                                                                                                                                                                |   |   | 78,000 |   |   | 77,000 |   |
| Merchant                  processing                                                                                                                                                                      |   |   | 322,000 |   |   | 240,000 |   |
| Gain                  on sales of mortgage loans                                                                                                                                                          |   |   | 70,000 |   |   | 66,000 |   |
| Miscellaneous                                                                                                                                                                                             |   |   | 94,000 |   |   | 95,000 |   |
| Total                  noninterest income                                                                                                                                                                 |   |   | 983,000 |   |   | 854,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Noninterest                  expenses:                                                                                                                                                                    |   |   |   |   |   |   |   |
| Salaries                  and employee benefits                                                                                                                                                           |   |   | 1,713,000 |   |   | 1,587,000 |   |
| Occupancy,                  net                                                                                                                                                                           |   |   | 375,000 |   |   | 254,000 |   |
| Equipment                                                                                                                                                                                                 |   |   | 201,000 |   |   | 168,000 |   |
| Data                  processing                                                                                                                                                                          |   |   | 309,000 |   |   | 298,000 |   |
| Advertising                                                                                                                                                                                               |   |   | 82,000 |   |   | 113,000 |   |
| FDIC                  insurance premium                                                                                                                                                                   |   |   | 12,000 |   |   | 11,000 |   |
| Amortization                  of intangible assets                                                                                                                                                        |   |   | 10,000 |   |   | 11,000 |   |
| Charitable                  contributions                                                                                                                                                                 |   |   | 181,000 |   |   | 210,000 |   |
| Stationery                  and supplies                                                                                                                                                                  |   |   | 87,000 |   |   | 59,000 |   |
| Merchant                  processing                                                                                                                                                                      |   |   | 287,000 |   |   | 214,000 |   |
| Bank-card                  related services                                                                                                                                                               |   |   | 124,000 |   |   | 116,000 |   |
| Miscellaneous                                                                                                                                                                                             |   |   | 487,000 |   |   | 511,000 |   |
| Total                  noninterest expenses                                                                                                                                                               |   |   | 3,868,000 |   |   | 3,552,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Income                  before income tax expense                                                                                                                                                         |   |   | 1,890,000 |   |   | 1,766,000 |   |
| Income                  tax expense                                                                                                                                                                       |   |   | 665,000 |   |   | 607,000 |   |
| Net                  income                                                                                                                                                                               |   | $ | 1,225,000 |   | $ | 1,159,000 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Basic                  earnings per share                                                                                                                                                                 |   | $ | 0.24 |   | $ | 0.23 |   |
| Diluted                  earnings per share                                                                                                                                                               |   | $ | 0.24 |   | $ | 0.23 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Weighted                  average number of common shares outstanding                                                                                                                                     |   |   | 5,042,256 |   |   | 5,008,925 |   |
| Weighted                  average number of diluted common                                                                                                                                                |   |   |   |   |   |   |   |
| shares                  outstanding                                                                                                                                                                       |   |   | 5,083,245 |   |   | 5,071,444 |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| Share                  data has been restated to reflect a 5% stock dividend paid November                  15,                  2005 and a 5% stock dividend                  payable November 15, 2006. |   |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
|                                                                                                                                                                                                      |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements.                                                                                                                                |   |   |   |   |   |   |   |

*Index*

----

| **Stewardship                  Financial Corporation and Subsidiary**           |
|---------------------------------------------------------------------------------|
| **Consolidated                  Statements of Cash Flows**                      |
| **Unaudited**                                                                   |
|                                                                            |   |   |   |   |   |
|                                                                            |   | **Nine                  Months Ended****September                  30,**  |   |
|                                                                            |   | **2006** |   | **2005** |   |
| **Cash                  flows from operating activities:**                      |   |   |   |   |   |   |   |
| Net                  income                                                     |   |   | 3,501,000 |   | $ | 3,302,000 |   |
| Adjustments                  to reconcile net income to                         |   |   |   |   |   |   |   |
| net                  cash provided by operating activities:                     |   |   |   |   |   |   |   |
| Depreciation                  and amortization of premises and equipment        |   |   | 544,000 |   |   | 438,000 |   |
| Amortization                  of premiums and accretion of discounts, net       |   |   | 199,000 |   |   | 333,000 |   |
| Accretion                  of deferred loan fees                                |   |   | (94,000 | ) |   | (107,000 | ) |
| Provision                  for loan losses                                      |   |   | 250,000 |   |   | 450,000 |   |
| Originations                  of mortgage loans held for sale                   |   |   | (17,318,000 | ) |   | (20,105,000 | ) |
| Proceeds                  from sale of mortgage loans                           |   |   | 17,073,000 |   |   | 17,074,000 |   |
| Gain                  on sale of loans                                          |   |   | (165,000 | ) |   | (167,000 | ) |
| Deferred                  income tax benefit                                    |   |   | (103,000 | ) |   | (179,000 | ) |
| Amortization                  of intangible assets                              |   |   | 29,000 |   |   | 30,000 |   |
| Nonqualified                  stock option expense                              |   |   | 38,000 |   |   | - |   |
| Increase                  in accrued interest receivable                        |   |   | (161,000 | ) |   | (277,000 | ) |
| Increase                  in accrued interest payable                           |   |   | 619,000 |   |   | 580,000 |   |
| Increase                  in bank owned life insurance                          |   |   | (233,000 | ) |   | (132,000 | ) |
| Decrease                  in other assets                                       |   |   | 82,000 |   |   | 60,000 |   |
| Decrease                  in other liabilities                                  |   |   | (99,000 | ) |   | (13,000 | ) |
| Net                  cash provided by operating activities                      |   |   | 4,162,000 |   |   | 1,287,000 |   |
|                                                                            |   |   |   |   |   |   |   |
| **Cash                  flows from investing activities:**                      |   |   |   |   |   |   |   |
| Purchase                  of securities available for sale                      |   |   | (11,260,000 | ) |   | (14,910,000 | ) |
| Proceeds                  from maturities and principal repayments              |   |   |   |   |   |   |   |
| on                  securities available for sale                               |   |   | 8,867,000 |   |   | 5,320,000 |   |
| Proceeds                  from sales and calls on securities available for sale |   |   | - |   |   | 500,000 |   |
| Purchase                  of securities held to maturity                        |   |   | (11,430,000 | ) |   | (5,324,000 | ) |
| Proceeds                  from maturities and principal repayments on           |   |   |   |   |   |   |   |
| securities                  held to maturity                                    |   |   | 9,579,000 |   |   | 5,634,000 |   |
| Proceeds                  from calls of securities held to maturity             |   |   | 950,000 |   |   | - |   |
| Redemption                  (purchase) of FHLB-NY stock                         |   |   | 130,000 |   |   | (3,000 | ) |
| Net                  increase in loans                                          |   |   | (20,192,000 | ) |   | (29,277,000 | ) |
| Purchase                  of bank owned life insurance                          |   |   | - |   |   | (8,000,000 | ) |
| Additions                  to premises and equipment                            |   |   | (659,000 | ) |   | (2,860,000 | ) |
| Net                  cash used in investing activities                          |   |   | (24,015,000 | ) |   | (48,920,000 | ) |
|                                                                            |   |   |   |   |   |   |   |
| **Cash                  flows from financing activities:**                      |   |   |   |   |   |   |   |
| Net                  increase in noninterest-bearing deposits                   |   |   | 8,889,000 |   |   | 2,170,000 |   |
| Net                  increase in interest-bearing deposits                      |   |   | 14,394,000 |   |   | 50,510,000 |   |
| Net                  increase in securities sold under                          |   |   |   |   |   |   |   |
| agreement                  to repurchase                                        |   |   | 4,148,000 |   |   | 1,910,000 |   |
| Net                  decrease in short term borrowings                          |   |   | (3,400,000 | ) |   | (7,500,000 | ) |
| Payments                  on long term borrowings                               |   |   | (1,190,000 | ) |   | (1,152,000 | ) |
| Cash                  dividends paid on common stock                            |   |   | (733,000 | ) |   | (397,000 | ) |
| Payment                  of discount on dividend reinvestment plan              |   |   | (10,000 | ) |   | - |   |
| Purchase                  of treasury stock                                     |   |   | (235,000 | ) |   | - |   |
| Exercise                  of stock options                                      |   |   | 233,000 |   |   | 143,000 |   |
| Issuance                  of common stock                                       |   |   | 69,000 |   |   | 51,000 |   |
| Net                  cash provided by financing activities                      |   |   | 22,165,000 |   |   | 45,735,000 |   |
|                                                                            |   |   |   |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents           |   |   | 2,312,000 |   |   | (1,898,000 | ) |
| Cash                  and cash equivalents - beginning                          |   |   | 14,028,000 |   |   | 24,792,000 |   |
| Cash                  and cash equivalents - ending                             |   | $ | 16,340,000 |   | $ | 22,894,000 |   |
|                                                                            |   |   |   |   |   |   |   |
| **Supplemental                  disclosures of cash flow information:**         |   |   |   |   |   |   |   |
| Cash                  paid during the year for interest                         |   |   | 7,198,000 |   |   | 4,124,000 |   |
| Cash                  paid during the year for income taxes                     |   |   | 2,080,000 |   |   | 1,855,000 |   |
| Noncash                  financing activities - issuance of common stock        |   |   |   |   |   |   |   |
| under                  dividend reinvestment plan                               |   |   | 412,000 |   |   | 529,000 |   |
| Noncash                  transfer of credit card loans to loans held for sale   |   |   | 3,501,000 |   |   | - |   |
|                                                                            |   |   |   |   |   |   |   |
| *See                  notes to unaudited consolidated financial statements.*    |   |   |   |   |   |   |   |
|                                                                            |   |   |   |   |   |   |   |

*Index*

----

| **Stewardship                  Financial Corporation and Subsidiary**          |   |
|--------------------------------------------------------------------------------|--------|
| **Consolidated                  Statement of Changes in Stockholders' Equity** |   |
| **(Unaudited)**                                                                |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |  **For                  the Nine Months Ended September 30, 2006**  |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |  **Accumulated** |   |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   | **Other** |   |   |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   **Comprehensive** |   |   |
|                                                                           |   | **Common                  Stock** |   | **Treasury                  Stock** |   | **Retained** |   | **Loss,**  |   |   |   |
|                                                                           |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |   | **Earnings** |   | **Net**  |   | **Total** |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  -- December 31, 2005                                  |   |   | 4,787,889 |   | $ | 28,211,000 |   |   | (39,581 | ) | $ | (556,000 | ) | $ | 6,647,000 |   | $ | (918,000 | ) | $ | 33,384,000 |   |
| Dividends                  paid                                                |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (1,145,000 | ) |   | - |   |   | (1,145,000 | ) |
| 5%                  stock dividend (payable                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| November                  15, 2006)                                            |   |   | 241,181 |   |   | 3,135,000 |   |   | (1,066 | ) |   | (14,000 | ) |   | (3,121,000 | ) |   | - |   |   | - |   |
| Common                  stock issued under stock plans                         |   |   | - |   |   | - |   |   | 34,637 |   |   | 481,000 |   |   | - |   |   | - |   |   | 481,000 |   |
| Payment                  of discount on dividend                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| reinvestment                  plan                                             |   |   | - |   |   | (10,000 | ) |   | - |   |   | - |   |   | - |   |   | - |   |   | (10,000 | ) |
| Repurchase                  common stock                                       |   |   | - |   |   | - |   |   | (7,370 | ) |   | (103,000 | ) |   | - |   |   | - |   |   | (103,000 | ) |
| Exercise                  of stock options                                     |   |   | 35,736 |   |   | 233,000 |   |   | (9,000 | ) |   | (132,000 | ) |   | - |   |   | - |   |   | 101,000 |   |
| Stock                  options earned                                          |   |   | - |   |   | 38,000 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 38,000 |   |
| Tax                  benefit on stock options exercised                        |   |   | - |   |   | 174,000 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 174,000 |   |
| Comprehensive                  income:                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income for the nine months                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ended                  September 30, 2006                                      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 3,501,000 |   |   | - |   |   | 3,501,000 |   |
| Unrealized                  holding gains on securities                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available                  for sale arising during the period                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (net                  taxes of $113,000)                                       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 179,000 |   |   | 179,000 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  comprehensive income, net of tax                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 3,680,000 |   |
|                                                                           |   |                  |   |
| Balance                  -- September 30, 2006                                 |   |   | 5,064,806 |   | $ | 31,781,000 |   |   | (22,380 | ) | $ | (324,000 | ) | $ | 5,882,000 |   | $ | (739,000 | ) | $ | 36,600,000 |   |

|                                                                       |   | **For                  the Nine Months Ended September 30, 2005** |      |
|----------------------------------------------------------------------------|--------|-------------------------------------------------------------------|-----------|
|                                                                       |   |                                                              |      |   |   |   |   |   |   |   |   |
|                                                                       |   |                                                              |      |   |   |   |  **Accumulated** |   |   |
|                                                                       |   |                                                              |      |   |   |   |   | **Other** |   |   |   |
|                                                                       |   |                                                              |      |   |   |   |  **Comprehensive** |   |   |
|                                                                       |   | **Common                  Stock**                                 |      | **Retained** |   | **Loss,** |   |   |   |
|                                                                       |   | **Shares**                                                        |      | **Amount** |   | **Earnings** |   | **Net** |   | **Total** |   |
|                                                                       |   |                                                              |      |   |   |   |   |   |   |   |   |
| Balance                  -- December 31, 2004                              |   |                                                              | 3,534,282 |   | $ | 23,893,000 |   | $ | 6,746,000 |   | $ | (179,000 | ) | $ | 30,460,000 |   |
| Dividends                  paid                                            |   |                                                              | -         |   |   | - |   |   | (926,000 | ) |   | - |   |   | (926,000 | ) |
| Stock                  Split - 4 for 3                                     |   |                                                              | 1,190,344 |   |   | - |   |   | - |   |   | - |   |   | - |   |
| 5%                  stock dividend (payable                                |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| November                  15, 2005)                                        |   |                                                              | 238,743   |   |   | 3,336,000 |   |   | (3,336,000 | ) |   | - |   |   | - |   |
| Common                  stock issued under stock plans                     |   |                                                              | 33,732    |   |   | 580,000 |   |   | - |   |   | - |   |   | 580,000 |   |
| Exercise                  of stock options                                 |   |                                                              | 16,475    |   |   | 143,000 |   |   | - |   |   | - |   |   | 143,000 |   |
| Tax                  benefit on stock options exercised                    |   |                                                              | -         |   |   | 70,000 |   |   | - |   |   | - |   |   | 70,000 |   |
| Comprehensive                  income:                                     |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income for the nine months                            |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ended                  September 30, 2005                                  |   |                                                              | -         |   |   | - |   |   | 3,302,000 |   |   | - |   |   | 3,302,000 |   |
| Unrealized                  holding losses on securities                   |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available                  for sale arising during the period              |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (net                  tax benefit of $199,000)                             |   |                                                              | -         |   |   | - |   |   | - |   |   | (317,000 | ) |   | (317,000 | ) |
| Total                  comprehensive income, net of tax                    |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   | 2,985,000 |   |
|                                                                       |   |                 |      |
| Balance                  -- September 30, 2005                             |   |                                                              | 5,013,576 |   | $ | 28,022,000 |   | $ | 5,786,000 |   | $ | (496,000 | ) | $ | 33,312,000 |   |
|                                                                       |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements. |   |                                                              |      |   |   |
|                                                                       |   |                                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |

*Index*

----

**Stewardship        Financial Corporation and Subsidiary**

**Notes        to Consolidated Financial Statements**

**September        30, 2006**

**(Unaudited)**

**Note        1. Summary of Significant Accounting Policies**

**Principles        of consolidation**

**Share-based        Payment Cost**

*Index*

----

|                                               |   | 2006   |   |                  2005      |   |
|----------------------------------------------------|--------|--------|--------|---------------------------------|--------|
|                                               |   |   |   | Weighted                        |   |   |   | Weighted |   |
|                                               |   |   |   | Average                         |   |   |   | Average |   |
|                                               |   | Shares |   | Exercise                  Price |   | Shares |   | Exercise                  Price |   |
|                                               |   |   |   |                            |   |   |   |   |   |
|                                               |   |   |   |                            |   |   |   |   |   |
| Outstanding                  at beginning of year  |   |   | 75,989 |                            | $      | 6.03 |   |   | 78,422 |   | $ | 6.11 |   |
| Granted                                            |   |   | -      |                            |   | - |   |   | - |   |   | - |   |
| Exercised                                          |   |   | -      |                            |   | - |   |   | 1,623 |   |   | 6.21 |   |
| Forfeited                                          |   |   | 486    |                            |   | 12.96 |   |   | 729 |   |   | 12.96 |   |
| Outstanding                  at end of period      |   |   | 75,503 |                            | $      | 5.99 |   |   | 76,070 |   | $ | 6.04 |   |
| Options                  exercisable          |   |   | 75,503 |                            |   |   |   |   | 69,020 |   |   |   |   |
| Weighted-average                  fair value of    |   |   |   |                            |   |   |   |   |   |   |   |   |   |
| options                  granted during the period |   |   | -      |                            |   |   |   |   | - |   |   |   |   |

*Index*

----

|                                               |   |  2006 |   | 2005                            |   |
|----------------------------------------------------|--------|------------|--------|---------------------------------|--------|
|                                               |   |       |   | Weighted                        |   | Weighted |   |   |   |
|                                               |   |       |   | Average                         |   | Average |   |   |   |
|                                               |   | Shares     |   | Exercise                  Price |   | Shares |   | Exercise                  Price |   |
|                                               |   |       |   |                            |   |   |   |   |   |
|                                               |   |       |   |                            |   |   |   |   |   |
| Outstanding                  at beginning of year  |   |       | 45,568 |                            | $      | 7.12 |   |   | 69,690 |   | $ | 6.98 |   |
| Granted                                            |   |       | 52,500 |                            |   | 12.86 |   |   | - |   |   | - |   |
| Exercised                                          |   |       | 37,523 |                            |   | 6.20 |   |   | 21,441 |   |   | 6.20 |   |
| Expired                                            |   |       | 2,685  |                            |   | 6.20 |   |   | 8,041 |   |   | 12.96 |   |
| Outstanding                  at end of period      |   |       | 57,860 |                            | $      | 12.96 |   |   | 40,208 |   | $ | 6.20 |   |
| Options                  exercisable               |   |       | 5,360  |                            |   |   |   |   | 18,765 |   |   |   |   |
| Weighted-average                  fair value of    |   |       |   |                            |   |   |   |   |   |   |   |   |   |
| options                  granted during the period |   | $          | 4.55   |                            |   |   |   |   | - |   |   |   |   |
|                                               |   |       |   |                            |   |   |   |   |   |   |   |   |   |

*Index*

----

|                                                               |   | Three                  Months Ended |                      | Nine                  Months Ended  |   |
|--------------------------------------------------------------------|--------|-------------------------------------|---------------------------|-------------------------------------|--------|
|                                                               |   | September                  30, 2005 |                      | September                  30, 2005 |   |
|                                                               |   |                                |                      |                                |   |
| **Net                  Income:**                                   |   |                                |                      |                                |   |   |   |
| Net                  income as reported                            |   | $                                   | 1,159,000                 |                                | $      | 3,302,000 |   |
| Stock-based                  compensation expense included in net  |   |                                |                      |                                |   |   |   |
| Income,                  net of related tax effects                |   |                                | 3,000                     |                                |   | 9,000 |   |
| Total                  stock-based compensation expense determined |   |                                |                      |                                |   |   |   |
| Under                  fair value based method for all awards,     |   |                                |                      |                                |   |   |   |
| Net                  of related tax effects                        |   |                                | (                  17,000 | )                                   |   | (                  53,000 | ) |
| Pro                  forma net income                              |   | $                                   | 1,145,000                 |                                | $      | 3,258,000 |   |
|                                                               |   |                                |                      |                                |   |   |   |
| **Earnings                  per share:**                           |   |                                |                      |                                |   |   |   |
| As                  reported basic earnings per share              |   | $                                   | 0.23                      |                                | $      | 0.66 |   |
| As                  reported diluted earnings per share            |   |                                | 0.23                      |                                |   | 0.66 |   |
| Pro                  forma basic earnings per share                |   |                                | 0.23                      |                                |   | 0.65 |   |
| Pro                  form diluted earnings per share               |   |                                | 0.23                      |                                |   | 0.64 |   |

|                                      | Director                       | Director                       | Director                       |
|-------------------------------------------|--------------------------------|--------------------------------|--------------------------------|
|                                      | Stock                  Options | Stock                  Options | Stock                  Options |
|                                      | 2001                           | 2005                           | 2006                           |
|                                      |                           |                           |                           |
| Dividend                  yield           | 1.62%                          | 1.79%                          | 2.25%                          |
| Expected                  volatility      | 39.76%                         | 33.19%                         | 36.72%                         |
| Risk-free                  interest rate  | 6.65%                          | 4.34%                          | 5.21%                          |
| Expected                  life            | 7                  years       | 5                  years       | 6                  years       |
| Fair                  value at grant date | $2.80                          | $4.29                          | $4.55                          |

*Index*

----

**Note        2. Basis of presentation**

*Index*

----

| **Stewardship                  Financial Corporation and Subsidiary****Notes                  to Consolidated Financial Statements Continued**                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **(Unaudited)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| **Note                  3. Securities Available for Sale**                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| The                  following table sets forth the amortized cost and fair value of                  the                  Corporation's securities available for sale as of September                  30, 2006 and December 31, 2005. In accordance with Statement of                  Financial                  Accounting Standards No. 115, "Accounting for                  Certain Investments in Debt and Equity Securities", securities                  available                  for sale are carried at fair value. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |

|                                                  |   |                    September                    30, 2006       |       |
|-------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|------------|
|                                                  |   |                                                                                              |       | Gross |   |   |   |  Gross |   |
|                                                  |   | Amortized                                                                                         |       | Unrealized |   | Unrealized |   | Fair |   |
|                                                  |   | Cost                                                                                              |       |  Holding                    Gains |   |  Holding                    Losses |   |  Value |   |
|                                                  |   |                                                                                              |       |    |   |    |   |    |   |
| U.S.                    government-sponsored agencies |   | $                                                                                            | 35,933,000 |   | $  | 38,000 |   | $  | 507,000 |   | $  | 35,464,000 |   |
| Obligations                    of state and political |   |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |
| subdivisions                                          |   |                                                                                              | 1,856,000  |   |   | 1,000 |   |   | 28,000 |   |   | 1,829,000 |   |
| Mortgage-backed                    securities         |   |                                                                                              | 29,083,000 |   |   | 26,000 |   |   | 705,000 |   |   | 28,404,000 |   |
| Community                    Reinvestment Act Fund    |   |                                                                                              | 1,108,000  |   |   | - |   |   | 25,000 |   |   | 1,083,000 |   |
|                                                  |   | $                                                                                                 | 67,980,000 |   | $ | 65,000 |   | $ | 1,265,000 |   | $ | 66,780,000 |   |

|                                                |   |  December                  31, 2005       |       |
|-----------------------------------------------------|--------|------------------------------------------------------------------------------|------------|
|                                                |   |                                                                         |       |  Gross |   | Gross |   |   |   |
|                                                |   | Amortized                                                                    |       | Unrealized |   | Unrealized |   | Fair |   |
|                                                |   |  Cost                                                                   |       | Holding                  Gains |   | Holding                  Losses |   | Value |   |
|                                                |   |                                                                         |       |    |   |    |   |    |   |
| U.S.                  Treasury securities           |   | $                                                                            | 501,000    |   | $ | - |   | $ | 5,000 |   | $ | 496,000 |   |
| U.S.                  government-sponsored agencies |   |                                                                         | 33,140,000 |   |   | - |   |   | 662,000 |   |   | 32,478,000 |   |
| Obligations                  of state and political |   |                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| subdivisions                                        |   |                                                                         | 2,068,000  |   |   | - |   |   | 37,000 |   |   | 2,031,000 |   |
| Mortgage-backed                  securities         |   |                                                                         | 28,879,000 |   |   | 8,000 |   |   | 777,000 |   |   | 28,110,000 |   |
| Community                  Reinvestment Act Fund    |   |                                                                         | 1,071,000  |   |   | - |   |   | 20,000 |   |   | 1,051,000 |   |
|                                                |   | $                                                                            | 65,659,000 |   | $ | 8,000 |   | $ | 1,501,000 |   | $ | 64,166,000 |   |

| 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 table sets forth the amortized cost and fair value of                  the                  Corporation's securities held to maturity as                  of September 30, 2006 and December 31, 2005. Securities held to                  maturity                  are stated at cost, adjusted for amortization of premiums                  and accretion of                  discounts.                                                                                                                                                                                                                                                                                                                                                                                                                                       |

|                                              |   |                September                30, 2006       |       |
|---------------------------------------------------|--------|-------------------------------------------------------------------------------------------|------------|
|                                              |   |                                                                                      |       | Gross |   |  Gross |   |    |   |
|                                              |   | Carrying                                                                                  |       |  Unrecognized |   |  Unrecognized |   | Fair |   |
|                                              |   | Value                                                                                     |       | Holding                Gains |   | Holding                Losses |   |  Value |   |
|                                              |   |                                                                                      |       |    |   |    |   |    |   |
| U.S.                Treasury securities           |   | $                                                                                         | 502,000    |   | $ | - |   | $ | 1,000 |   | $ | 501,000 |   |
| U.S.                government-sponsored agencies |   |                                                                                      | 11,775,000 |   |   | 13,000 |   |   | 105,000 |   |   | 11,683,000 |   |
| Obligations                of state and political |   |                                                                                      |       |   |   |   |   |   |   |   |   |   |   |
| subdivisions                                      |   |                                                                                      | 18,993,000 |   |   | 33,000 |   |   | 114,000 |   |   | 18,912,000 |   |
| Mortgage-backed                securities         |   |                                                                                      | 7,304,000  |   |   | 31,000 |   |   | 119,000 |   |   | 7,216,000 |   |
|                                              |   | $                                                                                         | 38,574,000 |   | $ | 77,000 |   | $ | 339,000 |   | $ | 38,312,000 |   |

|                                                |   |                  December                  31, 2005       |       |
|-----------------------------------------------------|--------|----------------------------------------------------------------------------------------------|------------|
|                                                |   |                                                                                         |       | Gross |   |  Gross |   |    |   |
|                                                |   |  Carrying                                                                               |       | Unrecognized |   | Unrecognized |   | Fair |   |
|                                                |   | Value                                                                                        |       | Holding                  Gains |   | Holding                  Losses |   |  Value |   |
|                                                |   |                                                                                         |       |    |   |    |   |    |   |
| U.S.                  Treasury securities           |   | $                                                                                            | 1,004,000  |   | $ | 2,000 |   | $ | 1,000 |   | $ | 1,005,000 |   |
| U.S.                  government-sponsored agencies |   |                                                                                         | 12,113,000 |   |   | 1,000 |   |   | 180,000 |   |   | 11,934,000 |   |
| Obligations                  of state and political |   |                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| subdivisions                                        |   |                                                                                         | 15,747,000 |   |   | 27,000 |   |   | 128,000 |   |   | 15,646,000 |   |
| Mortgage-backed                  securities         |   |                                                                                         | 8,937,000  |   |   | 60,000 |   |   | 123,000 |   |   | 8,874,000 |   |
|                                                |   | $                                                                                            | 37,801,000 |   | $ | 90,000 |   | $ | 432,000 |   | $ | 37,459,000 |   |

*Index*

----

| **Stewardship                  Financial Corporation and Subsidiary****Notes                  to Consolidated Financial Statements Continued****(Unaudited)**                                                                                                                                                                                                                                                                                                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |
| **Note                  5. Loans**                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |
| The                  Corporation's primary market area for lending is the small and                  medium                  sized business and professional community, as well as the individuals                  residing, working and shopping in                  Bergen, Passaic and Morris counties, New Jersey. The following                  table sets                  forth the composition of loans as of the periods                  indicated. |

|                                                  |   | September                  30, |        | December                  31, |   |
|-------------------------------------------------------|--------|--------------------------------|-------------|-------------------------------|--------|
|                                                  |   | 2006                           |        | 2005                          |   |
|                                                  |   |                           |        |                          |   |
|                                                  |   |                           |        |                          |   |
| Mortgage                                              |   |                           |        |                          |   |  |   |
| Residential                                           |   | $                              | 46,098,000  |                          | $      | 45,604,000 |   |
| Commercial                                            |   |                           | 169,586,000 |                          |   | 163,309,000 |   |
| Commercial                                            |   |                           | 74,698,000  |                          |   | 65,011,000 |   |
| Equity                                                |   |                           | 19,819,000  |                          |   | 20,271,000 |   |
| Installment                                           |   |                           | 52,459,000  |                          |   | 51,540,000 |   |
| Other                                                 |   |                           | 374,000     |                          |   | 506,000 |   |
| Total                  loans                          |   |                           | 363,034,000 |                          |   | 346,241,000 |   |
|                                                  |   |                           |        |                          |   |   |   |
| Less:                    Deferred loan fees |   |                           | 437,000     |                          |   | 418,000 |   |
| Allowance                  for loan losses            |   |                           | 4,086,000   |                          |   | 3,847,000 |   |
|                                                  |   |                           | 4,523,000   |                          |   | 4,265,000 |   |
|                                                  |   |                           |        |                          |   |   |   |
| Loans,                  net                           |   | $                              | 358,511,000 |                          | $      | 341,976,000 |   |

| **Note                6. Allowance for loan losses** |   |                                                               |      |   |   |
|------------------------------------------------------|--------|--------------------------------------------------------------------|-----------|--------|--------|
|                                                 |   |                                                               |      |   |   |
|                                                 |   |                Nine                Months Ended September 30, |      |
|                                                 |   | 2006                                                               |      | 2005   |   |
|                                                 |   |                                                               |      |   |   |
| Balance,                beginning of period          |   | $                                                                  | 3,847,000 |   | $      | 3,299,000 |   |
| Provision                charged to operations       |   |                                                               | 250,000   |   |   | 450,000 |   |
| Recoveries                of loans charged off       |   |                                                               | 26,000    |   |   | 4,000 |   |
| Loans                charged off                     |   |                                                               | (37,000   | )      |   | (39,000 | ) |
|                                                 |   |                                                               |      |   |   |   |   |
| Balance,                end of period                |   | $                                                                  | 4,086,000 |   | $      | 3,714,000 |   |
|                                                 |   |                                                               |      |   |   |   |   |

*Index*

----

| **Stewardship                  Financial Corporation and Subsidiary**                                                                                                                                                                                                                                    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Notes                  to Consolidated Financial Statements Continued**                                                                                                                                                                                                                                |
| **(Unaudited)**                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |
| **Note                  7. Loan Impairment**                                                                                                                                                                                                                                                             |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |
| The                  Corporation has defined the population of impaired loans to include                  all                  nonaccrual loans. The following                  table sets forth information regarding the impaired loans as of                  the                  periods indicated. |

|                                                       |   | September                  30, |    | December                  31, |   |
|------------------------------------------------------------|--------|--------------------------------|---------|-------------------------------|--------|
|                                                       |   | 2006                           |    | 2005                          |   |
|                                                       |   |                           |    |                          |   |
| Impaired                  loans                            |   |                           |    |                          |   |   |   |
| With                  related allowance for loan losses    |   | $                              | 80,000  |                          | $      | 152,000 |   |
| Without                  related allowance for loan losses |   |                           | 123,000 |                          |   | 320,000 |   |
| Total                  impaired loans                      |   | $                              | 203,000 |                          | $      | 472,000 |   |
|                                                       |   |                           |    |                          |   |   |   |
| Related                  allowance for loan losses         |   | $                              | 35,000  |                          | $      | 29,000 |   |
|                                                       |   |                           |    |                          |   |   |   |

*Index*

----

**Stewardship        Financial Corporation and Subsidiary**

**Notes        to Consolidated Financial Statements Continued**

**(Unaudited)**

**Note        8. Recent Accounting Pronouncements**

**SFAS        No. 155, “Accounting for Certain Hybrid Financial        Instruments”**

**SFAS        No. 156, “Accounting for Servicing of Financial Assets”**

*Index*

----

**FIN        48, “Accounting for Uncertainty in Income Taxes”**

**SFAS        No. 157, “Fair Value Measurements”**

**SFAS        No. 158, “Employers’ Accounting for Defined Benefit Pension and Other        Postretirement Plans - An Amendment of FASB Statements No. 87, 88, 106, and        132R”**

**Staff        Accounting Bulletin 108, “Financial Statements - Considering the Effects of        Prior Year Misstatements when Quantifying Misstatements in Current Year        Financial Statements”**

*Index*

----

**EITF        06-4 “Accounting for Deferred Compensation and Postretirement Benefit Aspects of        Endorsement Split-Dollar Life Insurance Arrangements”**

*Index*

----

**Note        9. Earnings Per Share**

|                                                    |   | Three                  Months Ended |   | Nine                  Months Ended |   |
|---------------------------------------------------------|--------|-------------------------------------|--------|------------------------------------|--------|
|                                                    |   | September                  30,      |   | September                  30,     |   |
|                                                    |   | 2006                                |   | 2005                               |   | 2006 |   | 2005 |   |
|                                                    |   |                                |   |                               |   |   |   |   |   |
| Net                  income                             |   | $                                   | 1,225  |                               | $      | 1,159 |   | $ | 3,501 |   | $ | 3,302 |   |
|                                                    |   |                                |   |                               |   |   |   |   |   |   |   |   |   |
| Weighted                  average shares                |   |                                | 5,042  |                               |   | 5,009 |   |   | 5,020 |   |   | 4,983 |   |
| Effect                  of dilutive stock options       |   |                                | 41     |                               |   | 62 |   |   | 48 |   |   | 59 |   |
| Total                  weighted average dilutive shares |   |                                | 5,083  |                               |   | 5,071 |   |   | 5,068 |   |   | 5,042 |   |
|                                                    |   |                                |   |                               |   |   |   |   |   |   |   |   |   |
| Basic                  earnings per share               |   | $                                   | 0.24   |                               | $      | 0.23 |   | $ | 0.70 |   | $ | 0.66 |   |
| Diluted                  earnings per share             |   | $                                   | 0.24   |                               | $      | 0.23 |   | $ | 0.69 |   | $ | 0.66 |   |

**Note        10. Comprehensive Income**

*Index*

----

**Stewardship      Financial Corporation**

**Management’s      Discussion and Analysis of**

**Financial      Condition and Results of Operations**

**Critical      Accounting Policies and Estimates**

*Index*

----

**Financial      Condition**

*Index*

----

**Results      of Operations**

**Nine      Months Ended September 30, 2006 and 2005**

*Index*

----

| Analysis                  of Net Interest Income                  (Unaudited)       |
|-------------------------------------------------------------------------------------------------------------------|
|                                                                                                              |   |   |   |    |   |   |   |    |   |    |   |   |   |
| For                  the Nine Months Ended September                  30,           |
|                                                                                                              |   |   |   |    |   |   |   |    |   |    |   |   |   |
|                                                                                                              |   |                  2006   |   |                  2005   |   |
|                                                                                                              |   |   |   |    |   | 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)                                                                                        |   | $ | 356,857 |   | $ | 18,963 |   |   |                     7.10% |   | $ | 309,682 |   | $ | 15,268 |   |   |    6.59% |   |
| Taxable                  investment securities (1)                                                                |   |   | 85,211 |   |   | 2,702 |   |   | 4.24 |   |   | 79,347 |   |   | 2,259 |   |   | 3.81 |   |
| Tax-exempt                  investment securities (1) (2)                                                         |   |   | 17,877 |   |   | 606 |   |   | 4.53 |   |   | 19,349 |   |   | 658 |   |   | 4.55 |   |
| Other                  interest-earning assets                                                                    |   |   | 498 |   |   | 29 |   |   | 7.79 |   |   | 8,923 |   |   | 202 |   |   | 3.03 |   |
| Total                  interest-earning assets                                                                    |   |   | 460,443 |   |   | 22,300 |   |   | 6.48 |   |   | 417,301 |   |   | 18,387 |   |   | 5.89 |   |
|                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning                  assets:                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                  for loan losses                                                                        |   |   | (3,993 | ) |   |   |   |   |   |   |   | (3,530 | ) |   |   |   |   |   |   |
| Other                  assets                                                                                     |   |   | 32,584 |   |   |   |   |   |   |   |   | 27,276 |   |   |   |   |   |   |   |
| Total                  assets                                                                                     |   | $ | 489,034 |   |   |   |   |   |   |   | $ | 441,047 |   |   |   |   |   |   |   |
|                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Stockholders' Equity**                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits                                                                 |   | $ | 115,775 |   | $ | 1,433 |   |   | 1.65 |   | $ | 135,216 |   | $ | 1,128 |   |   | 1.12 |   |
| Savings                  deposits                                                                                 |   |   | 43,026 |   |   | 188 |   |   | 0.58 |   |   | 49,003 |   |   | 217 |   |   | 0.59 |   |
| Time                  deposits                                                                                    |   |   | 154,696 |   |   | 4,567 |   |   | 3.95 |   |   | 107,756 |   |   | 2,457 |   |   | 3.05 |   |
| Repurchase                  agreements                                                                            |   |   | 6,755 |   |   | 220 |   |   | 4.35 |   |   | 2,776 |   |   | 53 |   |   | 2.55 |   |
| FHLB                  Borrowing                                                                                   |   |   | 31,333 |   |   | 1,034 |   |   | 4.41 |   |   | 17,254 |   |   | 461 |   |   | 3.57 |   |
| Subordinated                  debenture                                                                           |   |   | 7,217 |   |   | 365 |   |   | 6.76 |   |   | 7,217 |   |   | 365 |   |   | 6.76 |   |
| Total                  interest-bearing liabilities                                                               |   |   | 358,802 |   |   | 7,807 |   |   | 2.91 |   |   | 319,222 |   |   | 4,681 |   |   | 1.96 |   |
| Non-interest-bearing                  liabilities:                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                  deposits                                                                                  |   |   | 91,335 |   |   |   |   |   |   |   |   | 86,414 |   |   |   |   |   |   |   |
| Other                  liabilities                                                                                |   |   | 3,991 |   |   |   |   |   |   |   |   | 3,497 |   |   |   |   |   |   |   |
| Stockholders'                  equity                                                                             |   |   | 34,906 |   |   |   |   |   |   |   |   | 31,914 |   |   |   |   |   |   |   |
| Total                  liabilities and stockholders' equity                                                       |   | $ | 489,034 |   |   |   |   |   |   |   | $ | 441,047 |   |   |   |   |   |   |   |
|                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income (taxable equivalent basis)                                                   |   |   |   |   | $ | 14,493 |   |   |   |   |   |   |   | $ | 13,706 |   |   |   |   |
| Tax                  equivalent adjustment                                                                        |   |   |   |   |   | (189 | ) |   |   |   |   |   |   |   | (211 | ) |   |   |   |
| Net                  interest income                                                                              |   |   |   |   |   | 14,304 |   |   |   |   |   |   |   |   | 13,495 |   |   |   |   |
|                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest spread (taxable equivalent basis)                                                   |   |   |   |   |   |   |   |   |                     3.57% |   |   |   |   |   |   |   |   |                     3.93% |   |
|                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  yield on interest-earning                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets                  (taxable equivalent basis) (3)                                                            |   |   |   |   |   |   |   |   |                     4.21% |   |   |   |   |   |   |   |   |                     4.39% |   |

| (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.                                                                                                                                                                                                                                        |

*Index*

----

*Index*

----

**Results      of Operations**

**Three      Months Ended September 30, 2006 and 2005**

*Index*

----

*Index*

----

| Analysis                  of Net Interest Income (Unaudited)               |
|----------------------------------------------------------------------------|
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| For                  the Three Months Ended September                  30, |

|                                                            |   |   2006 |    |    2005 |   |
|-----------------------------------------------------------------|--------|------------------|---------|------------------------|--------|
|                                                            |   |             |    |              |   | 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)                                      |   | $                | 366,340 |                   | $      | 6,685 |   |   |                     7.24% |   | $ | 321,177 |   | $ | 5,399 |   |   |                     6.67% |   |
| Taxable                  investment securities (1)              |   |             | 83,904  |                   |   | 930 |   |   | 4.40 |   |   | 84,136 |   |   | 817 |   |   | 3.85 |   |
| Tax-exempt                  investment securities (1) (2)       |   |             | 20,361  |                   |   | 242 |   |   | 4.72 |   |   | 18,999 |   |   | 210 |   |   | 4.39 |   |
| Other                  interest-earning assets                  |   |             | 627     |                   |   | 11 |   |   | 6.96 |   |   | 12,081 |   |   | 101 |   |   | 3.32 |   |
| Total                  interest-earning assets                  |   |             | 471,232 |                   |   | 7,868 |   |   | 6.62 |   |   | 436,393 |   |   | 6,527 |   |   | 5.93 |   |
|                                                            |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning                  assets:                   |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                  for loan losses                      |   |             | (4,061  | )                      |   |   |   |   |   |   |   | (3,670 | ) |   |   |   |   |   |   |
| Other                  assets                                   |   |             | 32,791  |                   |   |   |   |   |   |   |   | 28,572 |   |   |   |   |   |   |   |
| Total                  assets                                   |   | $                | 499,962 |                   |   |   |   |   |   |   | $ | 461,295 |   |   |   |   |   |   |   |
|                                                            |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Stockholders' Equity**       |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                  |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits               |   | $                | 113,829 |                   | $      | 546 |   |   |                     1.90% |   | $ | 136,318 |   | $ | 411 |   |   |                     1.20% |   |
| Savings                  deposits                               |   |             | 41,388  |                   |   | 61 |   |   | 0.58 |   |   | 47,697 |   |   | 71 |   |   | 0.59 |   |
| Time                  deposits                                  |   |             | 168,333 |                   |   | 1,789 |   |   | 4.22 |   |   | 127,242 |   |   | 1,079 |   |   | 3.36 |   |
| Repurchase                  agreements                          |   |             | 8,106   |                   |   | 95 |   |   | 4.65 |   |   | 2,474 |   |   | 20 |   |   | 3.21 |   |
| FHLB                  Borrowing                                 |   |             | 27,489  |                   |   | 315 |   |   | 4.55 |   |   | 15,607 |   |   | 143 |   |   | 3.64 |   |
| Subordinated                  debenture                         |   |             | 7,217   |                   |   | 122 |   |   | 6.71 |   |   | 7,217 |   |   | 122 |   |   | 6.71 |   |
| Total                  interest-bearing liabilities             |   |             | 366,362 |                   |   | 2,928 |   |   | 3.17 |   |   | 336,555 |   |   | 1,846 |   |   | 2.18 |   |
| Non-interest-bearing                  liabilities:              |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                  deposits                                |   |             | 93,296  |                   |   |   |   |   |   |   |   | 87,860 |   |   |   |   |   |   |   |
| Other                  liabilities                              |   |             | 4,314   |                   |   |   |   |   |   |   |   | 4,006 |   |   |   |   |   |   |   |
| Stockholders'                  equity                           |   |             | 35,990  |                   |   |   |   |   |   |   |   | 32,874 |   |   |   |   |   |   |   |
| Total                  liabilities and stockholders' equity     |   | $                | 499,962 |                   |   |   |   |   |   |   | $ | 461,295 |   |   |   |   |   |   |   |
|                                                            |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income (taxable equivalent basis) |   |             |    |                   | $      | 4,940 |   |   |   |   |   |   |   | $ | 4,681 |   |   |   |   |
| Tax                  equivalent adjustment                      |   |             |    |                   |   | (75 | ) |   |   |   |   |   |   |   | (67 | ) |   |   |   |
| Net                  interest income                            |   |             |    |                   |   | 4,865 |   |   |   |   |   |   |   |   | 4,614 |   |   |   |   |
|                                                            |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest spread (taxable equivalent basis) |   |             |    |                   |   |   |   |   |                     3.45% |   |   |   |   |   |   |   |   |                     3.75% |   |
|                                                            |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  yield on interest-earning                  |   |             |    |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets                  (taxable equivalent basis) (3)          |   |             |    |                   |   |   |   |   |                     4.17% |   |   |   |   |   |   |   |   |                     4.27% |   |

| (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.                                                                                                                                                                                                                                        |

*Index*

----

*Index*

----

**Asset      Quality**

|                                                    |   | 09/30/06                              |   | 06/30/06 |   | 03/31/06 |   | 12/31/05 |   |
|---------------------------------------------------------|--------|---------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                                    |   | (Dollars                in Thousands) |   |
| Nonaccrual                loans: (1)                    |   | $                                     | 203    |     | $      | 258      |   | $        | 184    |   | $ | 472 |   |
| Loans                past due 90 days or more: (2)      |   |                                  | 157    |     |   | 11       |   |     | 5      |   |   | 55 |   |
| Total                nonperforming loans                |   | $                                     | 360    |     | $      | 269      |   | $        | 189    |   | $ | 527 |   |
|                                                    |   |                                  |   |     |   |     |   |     |   |   |   |   |   |
| Allowance                for loan losses                |   | $                                     | 4,086  |     | $      | 4,011    |   | $        | 3,920  |   | $ | 3,299 |   |
|                                                    |   |                                  |   |     |   |     |   |     |   |   |   |   |   |
| Nonaccrual                loans to total loans          |   |                                  | 0.06   | %        |   | 0.07     | %      |     | 0.05   | % |   | 0.14 | % |
| Nonperforming                loans to total loans       |   |                                  | 0.10   | %        |   | 0.08     | %      |     | 0.06   | % |   | 0.15 | % |
| Nonperforming                loans to total assets      |   |                                  | 0.07   | %        |   | 0.05     | %      |     | 0.04   | % |   | 0.11 | % |
| Allowance                for loan losses to total loans |   |                                  | 1.11   | %        |   | 1.11     | %      |     | 1.13   | % |   | 1.11 | % |

*Index*

----

**Market      Risk**

*Index*

----

**Capital      Adequacy**

|                              |   | Required | Actual | Excess |
|-----------------------------------|--------|----------|--------|--------|
| Risk-based                Capital |   |     |   |   |
| Tier                1             |   | 4.00%    | 11.33% | 7.33%  |
| Total                             |   | 8.00%    | 12.38% | 4.38%  |
| Leverage                Ratio     |   | 4.00%    | 8.84%  | 4.84%  |

**Liquidity      and Capital Resources**

*Index*

----

**ITEM      3. Quantitative and Qualitative Disclosures about Market      Risk**

**ITEM      4. Controls and Procedures**

*Index*

----

**Stewardship      Financial Corporation**

**Part      II -- Other Information**

Item      1A.   Risk      Factors 

Item      6.   Exhibits

|   | (a) | Exhibits |
|--------|-----|----------|

*Index*

----

SIGNATURES

| Date:  | November                14, 2006 |   | By:    | /s/                Paul Van Ostenbridge            |
|--------|----------------------------------|--------|--------|----------------------------------------------------|
|   |                             |   |   | Paul                Van Ostenbridge                |
|   |                             |   |   | President                and Chief Executive       |
|   |                             |   |   | Officer                                            |
|   |                             |   |   | (authorized                officer on behalf       |
|   |                             |   |   | of                registrant)                      |
|   |                             |   |   |                                               |
|   |                             |   |   |                                               |
|   |                             |   |   |                                               |
| Date:  | November                14, 2006 |   | By:    | /s/                Julie E. Holland                |
|   |                             |   |   | Julie                E. Holland                    |
|   |                             |   |   | Senior                Vice President and Treasurer |
|   |                             |   |   | (principal                accounting officer)      |

*Index*

----

**EXHIBIT      INDEX**

| EXHIBITNUMBER |  DESCRIPTION                                                                                                                                                                                                                                            |   |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|          |                                                                                                                                                                                                                                                         |   |
| 31.1          | Certification                of Paul Van Ostenbridge required by Rule 13a-14(a) or Rule 15d-14(a)                                                                                                                                                            |   |
|          |                                                                                                                                                                                                                                                         |   |
| 31.2          | Certification                of Julie E. Holland required by Rule 13a-14(a) or Rule                15d-14(a)                                                                                                                                                 |   |
|          |                                                                                                                                                                                                                                                         |   |
| 32.1          | Certification                of Paul Van Ostenbridge and Julie E. 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 |   |

*Index*