**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





For
      the
      quarterly period ended March 31, 2007





(
                  )
            TRANSITION
                REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      transition period from _________ to _________





Commission
      file number 0-21855





Stewardship
                Financial Corporation(Exact
                name of registrant as specified in its
                charter)





New
                  Jersey
              
              22-3351447(State
                  or other jurisdiction of
              
              (I.R.S.
                  Employer Identification No.)incorporation
                  or organization)630
                  Godwin Avenue, Midland Park,  NJ
              
              07432(Address
                  of principal executive offices)
              
              (Zip
                  Code)





(201)  444-7100(Registrant’s
                    telephone number, including area code)





(Former
                name, former address and former fiscal year, if changed since last
                report)





Indicate
      by a checkmark whether the
      registrant (1) has filed all reports required to be filed by Section 13 or
      15(d)
      of the Securities Exchange Act of 1934 during the preceding 12 months (or for
      such shorter period that the registrant was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90
      days.     Yes  ý   No  o





Indicate
      by check mark whether the
      registrant is a large accelerated filer, an accelerated filer, or a
      non-accelerated filer.  See definition of “accelerated filer and large
      accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check
      one):





Large
                accelerated filer o
            Accelerated
                filer o
            Non-accelerated
                filer ý





Indicate
      by check mark whether the
      registrant is a shell company (as defined in Rule 12b-2 of the Exchange
      Act).    Yes oNo ý





The
      number of shares outstanding, net
      of treasury stock of the Issuer’s Common Stock, no par value, as of May 1, 2007
      was 5,042,489.














**Stewardship
      Financial Corporation**





**INDEX**








**PAGE****NUMBER****PART
                I  -  CONSOLIDATED FINANCIAL
                INFORMATION****ITEM
                1  -   CONSOLIDATED FINANCIAL
                STATEMENTS**Consolidated
                Statements of Financial Condition at March 31, 2007 (Unaudited) and
                December 31, 2006
            
            1Consolidated
                Statements of Income for the Three Months ended March 31, 2007 and
                2006
                (Unaudited)
            
            2Consolidated
                Statements of Cash Flows for the Three Months ended March 31, 2007
                and
                2006 (Unaudited)
            
            3Consolidated
                Statement of Changes in Stockholders’ Equity for the Three Months
                ended  March 31, 2007 and 2006 (Unaudited)
            
            4Notes
                to Consolidated Financial Statements (Unaudited)
            
            5
                -
                12**ITEM
                2  -  MANAGEMENT’S DISCUSSION AND
                ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**
            
            13
                - 19**ITEM
                3  -  QUANTITATIVE AND QUALITATIVE
                DISCLOSURE ABOUT MARKET RISK**
            
            20**ITEM
                4 -   CONTROLS AND
                PROCEDURES**
            
            20**PART
                II  -  OTHER
                INFORMATION****ITEM
                1A.  RISK FACTORS**
            
            21**ITEM
                6 – EXHIBITS**
            
            21**SIGNATURES**
            
            22**EXHIBIT
                INDEX**
            
            23
                -26


*Index*


**Stewardship
                                  Financial Corporation and
                                  Subsidiary****Consolidated
                                  Statements of Financial Condition**
                                  **(Unaudited)****March
                                    31,****2007**
                              
                              
                              **December
                                    31,****2006****Assets**Cash
                                  and due from banks
                              
                              $
                              14,424,000
                              
                              
                              $
                              14,861,000Other
                                  interest-earning assets
                              
                              
                              2,194,000
                              
                              
                              
                              836,000Cash
                                  and cash equivalents
                              
                              
                              16,618,000
                              
                              
                              
                              15,697,000Securities
                                  available for sale
                              
                              
                              72,584,000
                              
                              
                              
                              72,746,000Securities
                                  held to maturity; estimated fair valueof
                                  $39,024,000 (2007) and $38,881,000 (2006)
                              
                              
                              39,229,000
                              
                              
                              
                              39,163,000FHLB-NY
                                  stock, at cost
                              
                              
                              1,593,000
                              
                              
                              
                              1,899,000Loans,
                                  net of allowance for loan losses ofof
                                  $ 4,093,000 (2007) and $4,101,000 (2006)
                              
                              
                              366,461,000
                              
                              
                              
                              365,443,000Mortgage
                                  loans held for sale
                              
                              
                              1,019,000
                              
                              
                              
                              2,155,000Premises
                                  and equipment, net
                              
                              
                              7,408,000
                              
                              
                              
                              7,098,000Accrued
                                  interest receivable
                              
                              
                              2,846,000
                              
                              
                              
                              2,912,000Intangible
                                  assets
                              
                              
                              94,000
                              
                              
                              
                              102,000Bank
                                  owned life insurance
                              
                              
                              8,600,000
                              
                              
                              
                              8,522,000Other
                                  assets
                              
                              
                              4,037,000
                              
                              
                              
                              4,012,000Total
                                  assets
                              
                              $
                              520,489,000
                              
                              
                              $
                              519,749,000**Liabilities
                                  and stockholders' equity****Liabilities**Deposits:Noninterest-bearing
                              
                              $
                              93,671,000
                              
                              
                              $
                              92,105,000Interest-bearing
                              
                              
                              346,011,000
                              
                              
                              
                              342,118,000Total
                                  deposits
                              
                              
                              439,682,000
                              
                              
                              
                              434,223,000Other
                                  borrowings
                              
                              
                              21,086,000
                              
                              
                              
                              27,892,000Subordinated
                                  debentures
                              
                              
                              7,217,000
                              
                              
                              
                              7,217,000Securities
                                  sold under agreements to repurchase
                              
                              
                              8,838,000
                              
                              
                              
                              9,023,000Accrued
                                  interest payable
                              
                              
                              2,036,000
                              
                              
                              
                              1,721,000Accrued
                                  expenses and other liabilities
                              
                              
                              3,522,000
                              
                              
                              
                              2,367,000Total
                                  liabilities
                              
                              
                              482,381,000
                              
                              
                              
                              482,443,000Commitments
                                  and contingencies
                              
                              
                              -
                              
                              
                              
                              -**Stockholders'
                                  equity**Common
                                  stock, no par value; 10,000,000 shares authorized;5,019,729
                                  and 5,017,919 shares issued and outstanding atMarch
                                  31, 2007 and December 31, 2006, respectively.
                              
                              
                              31,172,000
                              
                              
                              
                              31,148,000Retained
                                  earnings
                              
                              
                              7,384,000
                              
                              
                              
                              6,750,000Accumulated
                                  other comprehensive loss
                              
                              
                              (448,000
                              )
                              
                              
                              (592,000
                              )Total
                                  stockholders' equity
                              
                              
                              38,108,000
                              
                              
                              
                              37,306,000Total
                                  liabilities and stockholders' equity
                              
                              $
                              520,489,000
                              
                              
                              $
                              519,749,000See
                                  notes to unaudited consolidated financial statements.


1
 *Index*


**Stewardship
                                          Financial Corporation and Subsidiary****Consolidated
                                          Statements of Income****(Unaudited)****Three
                                          Months Ended****March
                                          31,****2007**
                                      
                                      
                                      **2006**Interest
                                          and dividend income:Loans
                                      
                                      $
                                      6,570,000
                                      
                                      
                                      $
                                      5,974,000Securities
                                          held to maturityTaxable
                                      
                                      
                                      229,000
                                      
                                      
                                      
                                      221,000Non-taxable
                                      
                                      
                                      177,000
                                      
                                      
                                      
                                      118,000Securities
                                          available for saleTaxable
                                      
                                      
                                      907,000
                                      
                                      
                                      
                                      637,000Non-taxable
                                      
                                      
                                      14,000
                                      
                                      
                                      
                                      7,000FHLB
                                          dividends
                                      
                                      
                                      26,000
                                      
                                      
                                      
                                      20,000Other
                                          interest-earning assets
                                      
                                      
                                      9,000
                                      
                                      
                                      
                                      7,000Total
                                          interest and dividend income
                                      
                                      
                                      7,932,000
                                      
                                      
                                      
                                      6,984,000Interest
                                          expense:Deposits
                                      
                                      
                                      2,760,000
                                      
                                      
                                      
                                      1,777,000Borrowed
                                          money
                                      
                                      
                                      499,000
                                      
                                      
                                      
                                      530,000Total
                                          interest expense
                                      
                                      
                                      3,259,000
                                      
                                      
                                      
                                      2,307,000Net
                                          interest income before provision for loan
                                          losses
                                      
                                      
                                      4,673,000
                                      
                                      
                                      
                                      4,677,000Provision
                                          for loan losses
                                      
                                      
                                      10,000
                                      
                                      
                                      
                                      50,000Net
                                          interest income after provision for loan
                                          losses
                                      
                                      
                                      4,663,000
                                      
                                      
                                      
                                      4,627,000Noninterest
                                          income:Fees
                                          and service charges
                                      
                                      
                                      394,000
                                      
                                      
                                      
                                      378,000Bank
                                          owned life insurance
                                      
                                      
                                      78,000
                                      
                                      
                                      
                                      80,000Gain
                                          on sales of mortgage loans
                                      
                                      
                                      89,000
                                      
                                      
                                      
                                      50,000Merchant
                                          processing
                                      
                                      
                                      365,000
                                      
                                      
                                      
                                      266,000Miscellaneous
                                      
                                      
                                      70,000
                                      
                                      
                                      
                                      96,000Total
                                          noninterest income
                                      
                                      
                                      996,000
                                      
                                      
                                      
                                      870,000Noninterest
                                          expenses:Salaries
                                          and employee benefits
                                      
                                      
                                      1,794,000
                                      
                                      
                                      
                                      1,621,000Occupancy,
                                          net
                                      
                                      
                                      335,000
                                      
                                      
                                      
                                      314,000Equipment
                                      
                                      
                                      217,000
                                      
                                      
                                      
                                      242,000Data
                                          processing
                                      
                                      
                                      307,000
                                      
                                      
                                      
                                      294,000Advertising
                                      
                                      
                                      76,000
                                      
                                      
                                      
                                      87,000FDIC
                                          insurance premium
                                      
                                      
                                      13,000
                                      
                                      
                                      
                                      13,000Amortization
                                          of intangible assets
                                      
                                      
                                      8,000
                                      
                                      
                                      
                                      10,000Charitable
                                          contributions
                                      
                                      
                                      169,000
                                      
                                      
                                      
                                      181,000Stationery
                                          and supplies
                                      
                                      
                                      83,000
                                      
                                      
                                      
                                      76,000Merchant
                                          processing
                                      
                                      
                                      335,000
                                      
                                      
                                      
                                      242,000Bank-card
                                          related services
                                      
                                      
                                      95,000
                                      
                                      
                                      
                                      121,000Miscellaneous
                                      
                                      
                                      563,000
                                      
                                      
                                      
                                      577,000Total
                                          noninterest expenses
                                      
                                      
                                      3,995,000
                                      
                                      
                                      
                                      3,778,000Income
                                          before income tax expense
                                      
                                      
                                      1,664,000
                                      
                                      
                                      
                                      1,719,000Income
                                          tax expense
                                      
                                      
                                      578,000
                                      
                                      
                                      
                                      610,000Net
                                          income
                                      
                                      $
                                      1,086,000
                                      
                                      
                                      $
                                      1,109,000Basic
                                          earnings per share
                                      
                                      $
                                      0.22
                                      
                                      
                                      $
                                      0.22Diluted
                                          earnings per share
                                      
                                      $
                                      0.21
                                      
                                      
                                      $
                                      0.22Weighted
                                          average number of common shares outstanding
                                      
                                      
                                      5,019,226
                                      
                                      
                                      
                                      4,992,599Weighted
                                          average number of diluted commonshares
                                          outstanding
                                      
                                      
                                      5,060,773
                                      
                                      
                                      
                                      5,050,265Share
                                          data has been restated to reflect a 5%
                                          stock dividend paid November 15,
                                          2006.See
                                          notes to unaudited consolidated financial
                                          statements.


2
 *Index*


**Stewardship
                                      Financial Corporation and Subsidiary****Consolidated
                                      Statements of Cash Flows****(Unaudited)****Three
                                      Months Ended****March
                                      31,****2007**
                                  
                                  
                                  **2006****Cash
                                      flows from operating activities:**Net
                                      income
                                  
                                  $
                                  1,086,000
                                  
                                  
                                  $
                                  1,109,000Adjustments
                                      to reconcile net income tonet
                                      cash provided by operating activities:Depreciation
                                      and amortization of premises and equipment
                                  
                                  
                                  180,000
                                  
                                  
                                  
                                  178,000Amortization
                                      of premiums and accretion of discounts, net
                                  
                                  
                                  39,000
                                  
                                  
                                  
                                  79,000Accretion
                                      of deferred loan fees
                                  
                                  
                                  (34,000
                                  )
                                  
                                  
                                  (29,000
                                  )Provision
                                      for loan losses
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  50,000Originations
                                      of mortgage loans held for sale
                                  
                                  
                                  (7,586,000
                                  )
                                  
                                  
                                  (3,419,000
                                  )Proceeds
                                      from sale of mortgage loans
                                  
                                  
                                  8,811,000
                                  
                                  
                                  
                                  4,989,000Gain
                                      on sale of loans
                                  
                                  
                                  (89,000
                                  )
                                  
                                  
                                  (50,000
                                  )Deferred
                                      income tax expense (benefit)
                                  
                                  
                                  26,000
                                  
                                  
                                  
                                  (10,000
                                  )Amortization
                                      of intangible assets
                                  
                                  
                                  8,000
                                  
                                  
                                  
                                  10,000Nonqualified
                                      stock option expense
                                  
                                  
                                  13,000
                                  
                                  
                                  
                                  17,000Increase
                                      in bank owned life insurance
                                  
                                  
                                  (78,000
                                  )
                                  
                                  
                                  (80,000
                                  )Decrease
                                      in accrued interest receivable
                                  
                                  
                                  66,000
                                  
                                  
                                  
                                  10,000Increase
                                      in other assets
                                  
                                  
                                  (143,000
                                  )
                                  
                                  
                                  (1,039,000
                                  )Increase
                                      in accrued interest payable
                                  
                                  
                                  315,000
                                  
                                  
                                  
                                  323,000Increase
                                      in other liabilities
                                  
                                  
                                  155,000
                                  
                                  
                                  
                                  737,000Net
                                      cash provided by operating activities
                                  
                                  
                                  2,779,000
                                  
                                  
                                  
                                  2,875,000**Cash
                                      flows from investing activities:**Purchase
                                      of securities available for sale
                                  
                                  
                                  (3,217,000
                                  )
                                  
                                  
                                  (2,093,000
                                  )Proceeds
                                      from maturities and principal repaymentson
                                      securities available for sale
                                  
                                  
                                  4,605,000
                                  
                                  
                                  
                                  2,902,000Purchase
                                      of securities held to maturity
                                  
                                  
                                  (2,089,000
                                  )
                                  
                                  
                                  (679,000
                                  )Proceeds
                                      from maturities and principal repayments onsecurities
                                      held to maturity
                                  
                                  
                                  1,842,000
                                  
                                  
                                  
                                  2,331,000Proceeds
                                      from calls on securities held to maturity
                                  
                                  
                                  152,000
                                  
                                  
                                  
                                  -Redemption
                                      of FHLB-NY stock
                                  
                                  
                                  306,000
                                  
                                  
                                  
                                  261,000Net
                                      (decrease) increase in loans
                                  
                                  
                                  (994,000
                                  )
                                  
                                  
                                  114,000Additions
                                      to premises and equipment
                                  
                                  
                                  (490,000
                                  )
                                  
                                  
                                  (370,000
                                  )Net
                                      cash provided by investing activities
                                  
                                  
                                  115,000
                                  
                                  
                                  
                                  2,466,000**Cash
                                      flows from financing activities:**Net
                                      increase (decrease) in noninterest-bearing
                                      deposits
                                  
                                  
                                  1,566,000
                                  
                                  
                                  
                                  (3,138,000
                                  )Net
                                      increase (decrease) in interest-bearing deposits
                                  
                                  
                                  3,893,000
                                  
                                  
                                  
                                  (433,000
                                  )Net
                                      (decrease) increase in securities sold under
                                      agreementsto
                                      repurchase
                                  
                                  
                                  (185,000
                                  )
                                  
                                  
                                  1,375,000Net
                                      decrease in short term borrowings
                                  
                                  
                                  (6,400,000
                                  )
                                  
                                  
                                  (5,400,000
                                  )Payments
                                      on long term borrowings
                                  
                                  
                                  (406,000
                                  )
                                  
                                  
                                  (393,000
                                  )Cash
                                      dividends paid on common stock
                                  
                                  
                                  (452,000
                                  )
                                  
                                  
                                  (169,000
                                  )Payment
                                      of discount on dividend reinvestment plan
                                  
                                  
                                  (11,000
                                  )
                                  
                                  
                                  -Purchase
                                      of treasury stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (103,000
                                  )Issuance
                                      of common stock
                                  
                                  
                                  22,000
                                  
                                  
                                  
                                  38,000Net
                                      cash used in financing activities
                                  
                                  
                                  (1,973,000
                                  )
                                  
                                  
                                  (8,223,000
                                  )Net
                                      increase (decrease) in cash and cash equivalents
                                  
                                  
                                  921,000
                                  
                                  
                                  
                                  (2,882,000
                                  )Cash
                                      and cash equivalents - beginning
                                  
                                  
                                  15,697,000
                                  
                                  
                                  
                                  14,028,000Cash
                                      and cash equivalents - ending
                                  
                                  $
                                  16,618,000
                                  
                                  
                                  $
                                  11,146,000**Supplemental
                                      disclosures of cash flow information:**Cash
                                      paid during the period for interest
                                  
                                  
                                  2,944,000
                                  
                                  
                                  
                                  1,980,000Cash
                                      paid during the period for income taxes
                                  
                                  
                                  25,000
                                  
                                  
                                  
                                  200,000Noncash
                                      investing activities - security purchase due
                                      broker
                                  
                                  
                                  1,000,000
                                  
                                  
                                  
                                  -Noncash
                                      financing activities - issuance of common stockunder
                                      dividend reinvestment plan
                                  
                                  
                                  -
                                  
                                  
                                  
                                  211,000*See
                                      notes to unaudited consolidated financial statements.*
  3
 *Index*
  **Stewardship
                                  Financial Corporation and Subsidiary****Consolidated
                                  Statement of Changes in Stockholders' Equity****(Unaudited)****For
                                  the Period Ended March 31, 2007****Accumulated****Other****Comprehensive****Common
                                  Stock**
                              
                              
                              **Retained**
                              
                              
                              **Loss,****Shares**
                              
                              
                              **Amount**
                              
                              
                              **Earnings**
                              
                              
                              **Net**
                              
                              
                              **Total**Balance
                                  -- December 31, 2006
                              
                              
                              5,017,919
                              
                              
                              $
                              31,148,000
                              
                              
                              $
                              6,750,000
                              
                              
                              $
                              (592,000
                              )
                              
                              $
                              37,306,000Dividends
                                  Paid
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (452,000
                              )
                              
                              
                              -
                              
                              
                              
                              (452,000
                              )Payment
                                  of discount on dividendreinvestment
                                  plan
                              
                              
                              -
                              
                              
                              
                              (11,000
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (11,000
                              )Common
                                  stock issued under stock plans
                              
                              
                              1,810
                              
                              
                              
                              22,000
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              22,000Stock
                                  option compensation expense
                              
                              
                              -
                              
                              
                              
                              13,000
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              13,000Comprehensive
                                  income:Net
                                  income for the three monthsended
                                  March 31, 2007
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,086,000
                              
                              
                              
                              -
                              
                              
                              
                              1,086,000Unrealized
                                  holding gains on securitiesavailable
                                  for sale arising during the period(net
                                  taxes of $91,000)
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              144,000
                              
                              
                              
                              144,000Total
                                  comprehensive income, net of tax
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              1,230,000Balance
                                  -- March 31, 2007
                              
                              
                              5,019,729
                              
                              
                              $
                              31,172,000
                              
                              
                              $
                              7,384,000
                              
                              
                              $
                              (448,000
                              )
                              
                              $
                              38,108,000




**For
                                the Period Ended March 31, 2006****Accumulated****Other****Comprehensive****Common
                                Stock**
                            
                            
                            **Treasury
                                Stock**
                            
                            
                            **Retained**
                            
                            
                            **Loss,****Shares**
                            
                            
                            **Amount**
                            
                            
                            **Shares**
                            
                            
                            **Amount**
                            
                            
                            **Earnings**
                            
                            
                            **Net**
                            
                            
                            **Total**Balance
                                -- December 31, 2005
                            
                            
                            5,027,283
                            
                            
                            $
                            28,211,000
                            
                            
                            
                            (41,560
                            )
                            
                            $
                            (556,000
                            )
                            
                            $
                            6,647,000
                            
                            
                            $
                            (918,000
                            )
                            
                            $
                            33,384,000Dividends
                                Paid
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (379,000
                            )
                            
                            
                            -
                            
                            
                            
                            (379,000
                            )Common
                                stock issued under dividendreinvestment
                                plan
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            16,166
                            
                            
                            
                            211,000
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            211,000Common
                                stock issued under stock plans
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            2,703
                            
                            
                            
                            37,000
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            37,000Repurchase
                                common stock
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (7,739
                            )
                            
                            
                            (103,000
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (103,000
                            )Stock
                                option compensation expense
                            
                            
                            
                            
                            
                            
                            17,000
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            17,000Comprehensive
                                income:Net
                                income for the three monthsended
                                March 31, 2006
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,109,000
                            
                            
                            
                            -
                            
                            
                            
                            1,109,000Unrealized
                                holding losses on securitiesavailable
                                for sale arising during the period(net
                                tax benefit of $78,000)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (125,000
                            )
                            
                            
                            (125,000
                            )Total
                                comprehensive income, net of tax
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            984,000Balance
                                -- March 31, 2006
                            
                            
                            5,027,283
                            
                            
                            $
                            28,228,000
                            
                            
                            
                            (30,430
                            )
                            
                            $
                            (411,000
                            )
                            
                            $
                            7,377,000
                            
                            
                            $
                            (1,043,000
                            )
                            
                            $
                            34,151,000




See
        notes
        to unaudited consolidated financial statements.
  4
 *Index*
  **Stewardship
          Financial Corporation and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 **March
          31, 2007**
 **(Unaudited)**
 
 
 **Note
          1.  Summary of Significant Accounting Policies**
 
 Certain
          information and footnote disclosures normally included in the unaudited
          consolidated financial statements prepared in accordance with accounting
          principles generally accepted in the United States of America have been
          condensed or omitted pursuant to the rules and regulations of the Securities
          and
          Exchange Commission.  These unaudited condensed consolidated financial
          statements should be read in conjunction with the consolidated financial
          statements and notes thereto included in the Annual Report on Form 10-K
          for the
          fiscal year ended December 31, 2006.
 
 **Principles
          of consolidation**
 
 The
          consolidated financial statements include the accounts of Stewardship Financial
          Corporation, (the “Corporation”) and its wholly owned subsidiary, Atlantic
          Stewardship Bank (the “Bank”).  The Bank includes its wholly owned
          subsidiaries, Stewardship Investment Corp. and Stewardship Realty,
          LLC.  All significant intercompany accounts and transactions have been
          eliminated in the consolidated
          financial  statements.  Certain prior period amounts have
          been reclassified to conform to the current presentation.  The
          consolidated financial statements of the Corporation have been prepared
          in
          conformity with accounting principles generally accepted in the United
          States of
          America.  In preparing the financial statements, management is
          required to make estimates and assumptions that affect the reported amounts
          of
          assets and liabilities as of the dates of the statements of financial condition
          and revenues and expenses during the reporting periods.  Actual
          results could differ significantly from those estimates.
 
 Material
          estimates that are particularly susceptible to significant changes relate
          to the
          determination of the allowance for loan losses.  Management believes
          that the allowance for loan losses is adequate.  While management uses
          available information to recognize losses on loans, future additions to
          the
          allowance for loan losses may be necessary based on changes in economic
          conditions in the market area.
 
 **Share-based
          Payment Cost**
 
 The
          Corporation records all share-based payment cost in accordance
          with Statement of Financial Accounting Standards No. 123 (revised 2004)
“Share-Based Payment” (“SFAS No. 123(R)”).
   5
 *Index*
 
 At
          March
          31, 2007, the Corporation had four types of share-based
          payment programs referred to as the Employee Stock Bonus Plan, the Director
          Stock Plan, the Employee Stock Option Plan and the Stock Option Plan for
          Non-Employee Directors.  The Employee Stock Bonus Plan is intended to
          provide incentives which will retain highly competent key management by
          providing them with a bonus in the form of shares of common stock of the
          Corporation.  The Corporation did not grant shares under this plan
          during the first three months of 2006 or 2007.
 
 The
          Director Stock Plan permits members of the Board of Directors of the Bank
          to
          receive any monthly Board of Directors’ fees in shares of the Corporation’s
          common stock, rather than in cash.  The Corporation recorded $17,000
          and $16,000 in directors expense for the three months ended March 31, 2007
          and
          2006, respectively, relating to this plan.
 
 The
          Employee Stock Option Plan provides for options to purchase shares of Common
          Stock to be issued to employees of the Corporation at the discretion of
          the
          Compensation Committee of the Board of Directors.  The following table
          represents the stock activity for the three months ended March 31, 2007
          and
          2006:
  2007
                    
                    
                    2006Weighted
                    
                    
                    
                    
                    
                    WeightedAverage
                    
                    
                    
                    
                    
                    AverageShares
                    
                    
                    Exercise
                        Price
                    
                    
                    Shares
                    
                    
                    Exercise
                        PriceOutstanding
                        at beginning of year
                    
                    
                    75,422
                    
                    
                    $
                    5.98
                    
                    
                    
                    75,989
                    
                    
                    $
                    6.03Granted
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Forfeited
                    
                    
                    486
                    
                    
                    
                    12.96
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
                        at end of period
                    
                    
                    74,936
                    
                    
                    $
                    5.94
                    
                    
                    
                    75,989
                    
                    
                    $
                    6.03Options
                        exercisable
                    
                    
                    74,936
                    
                    
                    
                    
                    
                    
                    
                    75,989Weighted-average
                        remainingcontractual
                        life
                    
                    1.68
                        years
                    
                    
                    
                    
                    
                    
                    2.74
                        yearsAggregate
                        intrinsic value
                    
                    $
                    567,000
                    
                    
                    
                    
                    
                    
                    $
                    581,000
 The
          2001
          Stock Option Plan for Non-Employee Directors provided for options to purchase
          shares of common stock to be issued to Non-Employee Directors of the
          Corporation.  In accordance with the provisions of SFAS No. 123(R),
          the Corporation recorded $14,000 and $16,000 of director’s compensation expense
          for share-based payments for the three months ended March 31, 2007 and
          March 31,
          2006, respectively.  This expense relates to non-qualified stock
          options that were outstanding but not yet vested as of March 31, 2007 and
          March
          31, 2006.  Due to the relatively small amount of compensation expense,
          basic and diluted earnings per share, income from continuing  6
 *Index*
 
 operations,
          income before taxes, net income, cash flow from operations and cash flow
          from
          financing activities were not significantly impacted.
  The
          2006
          Stock Option Plan for Non-Employee Directors, which provides for options
          to
          purchase shares of common stock to be issued to non-employee directors,
          was
          adopted by the shareholders at the Annual Meeting in May,
          2006.  Options were granted on June 30, 2006.
 
 The
          following table represents the stock activity for non-employee Directors
          for the
          three months ended March 31, 2007 and 2006:
 
 2007
                    
                    
                    2006Weighted
                    
                    
                    
                    
                    
                    WeightedAverage
                    
                    
                    
                    
                    
                    AverageShares
                    
                    
                    Exercise
                        Price
                    
                    
                    Shares
                    
                    
                    Exercise
                        PriceOutstanding
                        at beginning of year
                    
                    
                    57,860
                    
                    
                    $
                    12.96
                    
                    
                    
                    45,568
                    
                    
                    $
                    7.12Granted
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Expired
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
                        at end of period
                    
                    
                    57,860
                    
                    
                    $
                    12.96
                    
                    
                    
                    45,568
                    
                    
                    $
                    7.12Options
                        exercisable
                    
                    
                    5,360
                    
                    
                    
                    
                    
                    
                    
                    18,765Weighted-average
                        remainingcontractual
                        life
                    
                    4.98
                        years
                    
                    
                    
                    
                    
                    
                    0.62
                        yearsAggregate
                        intrinsic value
                    
                    $
                    31,000
                    
                    
                    
                    
                    
                    
                    $
                    299,000
 
 
 As
          of
          March 31, 2007, there were approximately $198,000 of total unrecognized
          compensation costs related to nonvested stock options.  These costs
          are expected to be recognized over the next 4.1 years.
  **Note
          2.   Basis of presentation**
  The
          interim unaudited consolidated financial statements included herein have
          been
          prepared in accordance with instructions for Form 10-Q and the rules and
          regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do
          not include information or footnotes necessary for a complete presentation
          of
          consolidated financial condition, results of operations, and cash flows
          in
          conformity with accounting principles generally accepted in the United
          States of
          America.  However, all adjustments, consisting only of normal
          recurring adjustments, which in the opinion of management are necessary
          for a
          fair presentation of the consolidated financial statements, have been
          included.  The results of operations for the three months ended March
          31, 2007 are not necessarily indicative of the results which may be expected
          for
          the entire year.  All share and per share amounts have been restated
          for stock splits and stock dividends.
  7
 *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 fair value of the Corporation's securities
          available for sale as of  March 31, 2007 and December 31,
          2006.  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.
  March
                                    31, 2007Gross
                                
                                
                                GrossFair
                                
                                
                                Unrealized
                                
                                
                                UnrealizedValue
                                
                                
                                Holding
                                    Gains
                                
                                
                                Holding
                                    LossesU.S.
                                    government-sponsored agencies
                                
                                
                                32,932,000
                                
                                
                                
                                40,000
                                
                                
                                
                                242,000Obligations
                                    of state and politicalsubdivisions
                                
                                
                                1,826,000
                                
                                
                                
                                1,000
                                
                                
                                
                                26,000Mortgage-backed
                                    securities
                                
                                
                                36,712,000
                                
                                
                                
                                57,000
                                
                                
                                
                                547,000Community
                                    Reinvestment Act Fund
                                
                                
                                1,114,000
                                
                                
                                
                                -
                                
                                
                                
                                19,000$
                                72,584,000
                                
                                
                                $
                                98,000
                                
                                
                                $
                                834,000December
                                    31, 2006Gross
                                
                                
                                GrossAmortized
                                
                                
                                Unrealized
                                
                                
                                UnrealizedCost
                                
                                
                                Holding
                                    Gains
                                
                                
                                Holding
                                    LossesU.S.
                                    Treasury securitiesU.S.
                                    government-sponsored agencies
                                
                                $
                                32,117,000
                                
                                
                                $
                                28,000
                                
                                
                                $
                                347,000Obligations
                                    of state and politicalsubdivisions
                                
                                
                                1,823,000
                                
                                
                                
                                -
                                
                                
                                
                                30,000Mortgage-backed
                                    securities
                                
                                
                                37,707,000
                                
                                
                                
                                40,000
                                
                                
                                
                                641,000Community
                                    Reinvestment Act Fund
                                
                                
                                1,099,000
                                
                                
                                
                                -
                                
                                
                                
                                21,000$
                                72,746,000
                                
                                
                                $
                                68,000
                                
                                
                                $
                                1,039,000
 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 March 31, 2007 and December
          31,
          2006.  Securities held to maturity are stated at cost, adjusted for
          amortization of premiums and accretion of discounts.
 
 March
                                    31, 2007Carrying
                                  Value
                                
                                
                                Gross
                                  Unrecognized
                                  Holding
                                    Gains
                                
                                
                                Gross
                                  Unrecognized
                                  Holding
                                    Losses
                                
                                
                                Fair
                                  ValueU.S.
                                    Treasury securities
                                
                                $
                                501,000
                                
                                
                                $
                                -
                                
                                
                                $
                                1,000
                                
                                
                                $
                                500,000U.S.
                                    government-sponsored agencies
                                
                                
                                11,274,000
                                
                                
                                
                                19,000
                                
                                
                                
                                75,000
                                
                                
                                
                                11,218,000Obligations
                                    of state and politicalsubdivisions
                                
                                
                                20,447,000
                                
                                
                                
                                59,000
                                
                                
                                
                                148,000
                                
                                
                                
                                20,358,000Mortgage-backed
                                    securities
                                
                                
                                7,007,000
                                
                                
                                
                                36,000
                                
                                
                                
                                95,000
                                
                                
                                
                                6,948,000$
                                39,229,000
                                
                                
                                $
                                114,000
                                
                                
                                $
                                319,000
                                
                                
                                $
                                39,024,000December
                                    31, 2006Carrying
                                  Value
                                
                                
                                Gross
                                  Unrecognized
                                  Holding
                                    Gains
                                
                                
                                Gross
                                  Unrecognized
                                  Holding
                                    Losses
                                
                                
                                Fair
                                  ValueU.S.
                                    Treasury securities
                                
                                $
                                502,000
                                
                                
                                $
                                -
                                
                                
                                $
                                2,000
                                
                                
                                $
                                500,000U.S.
                                    government-sponsored agencies
                                
                                
                                10,776,000
                                
                                
                                
                                8,000
                                
                                
                                
                                109,000
                                
                                
                                
                                10,675,000Obligations
                                    of state and politicalsubdivisions
                                
                                
                                20,516,000
                                
                                
                                
                                53,000
                                
                                
                                
                                154,000
                                
                                
                                
                                20,415,000Mortgage-backed
                                    securities
                                
                                
                                7,369,000
                                
                                
                                
                                32,000
                                
                                
                                
                                110,000
                                
                                
                                
                                7,291,000$
                                39,163,000
                                
                                
                                $
                                93,000
                                
                                
                                $
                                375,000
                                
                                
                                $
                                38,881,000
 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").
 
  8
 *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 set forth the composition of loans as of
          the periods indicated.
  March
                              31,
                          
                          
                          December
                              31,2007
                          
                          
                          2006MortgageResidential
                          
                          $
                          47,811,000
                          
                          
                          $
                          47,020,000Commercial
                          
                          
                          174,665,000
                          
                          
                          
                          177,411,000Commercial
                          
                          
                          76,359,000
                          
                          
                          
                          72,606,000Equity
                          
                          
                          19,106,000
                          
                          
                          
                          20,010,000Installment
                          
                          
                          52,598,000
                          
                          
                          
                          52,389,000Other
                          
                          
                          446,000
                          
                          
                          
                          560,000Total
                              loans
                          
                          
                          370,985,000
                          
                          
                          
                          369,996,000Less:  Deferred
                              loan fees
                          
                          
                          431,000
                          
                          
                          
                          452,000Allowance
                              for loan losses
                          
                          
                          4,093,000
                          
                          
                          
                          4,101,0004,524,000
                          
                          
                          
                          4,553,000Loans,
                              net
                          
                          $
                          366,461,000
                          
                          
                          $
                          365,443,000
  **Note
                          6.   Allowance for loan losses**Three
                          Months Ended March 31,2007
                      
                      
                      2006Balance,
                          beginning of period
                      
                      $
                      4,101,000
                      
                      
                      $
                      3,847,000Provision
                          charged to operations
                      
                      
                      10,000
                      
                      
                      
                      50,000Recoveries
                          of loans charged off
                      
                      
                      1,000
                      
                      
                      
                      23,000Loans
                          charged off
                      
                      
                      (19,000
                      )
                      
                      
                      -Balance,
                          end of period
                      
                      $
                      4,093,000
                      
                      
                      $
                      3,920,000




9
 *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, loans more than 90 days past due and restructured
              loans.   The following table sets forth information regarding the
              impaired loans as of the periods indicated.


March
                            31,
                        
                        
                        December
                            31,2007
                        
                        2006Impaired
                            loansWith
                            related allowance for loan losses
                        
                        $
                        247,000
                        
                        
                        $
                        223,000Without
                            related allowance for loan losses
                        
                        
                        198,000
                        
                        
                        
                        221,000Total
                            impaired loans
                        
                        $
                        445,000
                        
                        
                        $
                        444,000Related
                            allowance for loan losses
                        
                        $
                        110,000
                        
                        
                        $
                        110,000


10
 *Index*
  **Stewardship
        Financial Corporation and Subsidiary**
 **Notes
        to Consolidated Financial Statements Continued**
 **(Unaudited)**
 
 
 **Note
        8.  Recent Accounting Pronouncements**
 
 
 **FIN
        48, “Accounting for Uncertainty in Income Taxes”**
 The
          Corporation adopted FASB Interpretation 48, “Accounting for Uncertainty in
          Income Taxes” (“FIN 48”), as of January 1, 2007.  A tax position is
          recognized as a benefit only if it is “more likely than not” that the tax
          position would be sustained in a tax examination, with a tax examination
          being
          presumed to occur.  The amount recognized is the largest amount of tax
          benefit that is greater than 50% likely of being realized on
          examination.  For tax positions not meeting the “more likely than not”
test, no tax benefit is recorded.  The adoption had no affect on the
          Corporation’s financial statements.
 
 The
          Corporation and its subsidiaries are subject to U.S. federal income tax
          as well
          as income tax of the state of New Jersey.  The Corporation is no
          longer subject to examination by taxing authorities for years before
          2002.  The Corporation has no unrecognized tax benefits and does not
          anticipate any increase in unrecognized benefits during 2007 relative to
          any tax
          positions taken prior to January 1, 2007.
 
 The
          Corporation recognizes interest and/or penalties related to income tax
          matters
          in income tax expense.  The Corporation did not have any amounts
          accrued for interest and penalties at January 1, 2007.
  **SFAS
        No. 157, “Fair Value Measurements”**
 
 In
        September 2006, the FASB issued Statement of Financial Accounting Standard
        No.
        157, “Fair Value Measurements” (SFAS No. 157).  This statement defines
        fair value, establishes a framework for measuring fair value and expands
        disclosures about fair value measurements.  SFAS No. 157 establishes a
        fair value hierarchy about the assumptions used to measure fair value and
        clarifies assumptions about risk and the effect of a restriction on the sale
        or
        use of an asset.  The standard is effective for fiscal years beginning
        after November 15, 2007.  The Corporation has not completed its
        evaluation of the impact of the adoption of this standard.
 
 **SFAS
        No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities –
Including an amendment of FASB Statement No. 115”**
 
 In
        February, 2007, the FASB issued Statement of Financial Accounting Standard
        No.
        159, “The Fair Value Option for Financial Assets and Financial Liabilities –
Including an amendment of FASB Statement No. 115” (SFAS No.
        159).  This statement permits the measurement of many financial
        instruments and certain other assets and liabilities at fair value on an
        instrument-by-instrument basis.  SFAS No. 159 is effective as of the
        beginning of the fiscal year for fiscal years beginning after November 15,
        2007.  Early adoption is permitted provided, among other things, an
        entity elects to adopt within the first 120 days of that fiscal
        year.  The Corporation does not anticipate adopting SFAS No. 159
        before the required implementation date of January 1, 2008.  The
        Corporation has not completed its evaluation of the impact of the adoption
        of
        this standard.
 
 
 **Note
        9.   Earnings Per Share**
 
 Basic
        earnings per share is calculated by dividing net income by the average daily
        number of common shares outstanding during the period.  Common stock
        equivalents are not included in the
  11
 *Index*
  calculation.  Diluted
        earnings per share is computed similar to that of basic earnings per share
        except that the denominator is increased to include the number of additional
        common shares that would have been outstanding if all potential dilutive
        common
        shares were issued.
 
 The
        following is a reconciliation of the calculation of basic and diluted earnings
        per share.
 
 Three
                        Months EndedMarch
                        31,2007
                    
                    
                    2006Net
                        income
                    
                    $
                    1,086
                    
                    
                    $
                    1,109Weighted
                        average shares
                    
                    
                    5,019
                    
                    
                    
                    4,993Effect
                        of dilutive stock options
                    
                    
                    42
                    
                    
                    
                    57Total
                        weighted average dilutive shares
                    
                    
                    5,061
                    
                    
                    
                    5,050Basic
                        earnings per share
                    
                    $
                    0.22
                    
                    
                    $
                    0.22Diluted
                        earnings per share
                    
                    $
                    0.21
                    
                    
                    $
                    0.22
 
 Stock
        options for 57,860 and 5,105 shares of common stock were not considered in
        computing diluted earnings per share for 2007 and 2006, respectively because
        they were antidilutive.
 
 All
        share
        and per share amounts have been restated to reflect a 5% stock dividend paid
        November 15, 2006.
 
 
 **Note
        10.  Comprehensive Income**
 
 Total
        comprehensive income includes net income and other comprehensive income which
        is
        comprised of unrealized holding gains and losses on securities available
        for
        sale, net of taxes.  The Corporation’s total comprehensive income for
        the three months ended March 31, 2007 and 2006 was $1.2 million and $1.0
        million, respectively.  The difference between the Corporation’s net
        income and total comprehensive income for these periods relates to the change
        in
        the net unrealized holding gains and losses on securities available for sale
        during the applicable period of time.
   12
 *Index*
  **Stewardship
        Financial Corporation**
 **Management’s
        Discussion and Analysis of**
 **Financial
        Condition and Results of Operations**
 
 
 This
        Form
        10-Q contains certain “forward looking statements” within the meaning of the
        Private Securities Litigation Reform Act of 1995, and may be identified by
        the
        use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,”
“estimated,” and “potential.”  Examples of forward looking statements
        include, but are not limited to, estimates with respect to the financial
        condition, results of operations and business of the Corporation that are
        subject to various factors which could cause actual results to differ materially
        from these estimates.  These factors include: changes in general,
        economic, and market conditions, legislative and regulatory conditions, or
        the
        development of an interest rate environment that adversely affects the
        Corporation’s interest rate spread or other income anticipated from operations
        and investments.  As used in this Form 10-Q, “we” and “us” and “our”
refer to Stewardship Financial Corporation, its consolidated subsidiary,
        Atlantic Stewardship Bank, or both of them depending on the
        context.
 
 
 **Critical
        Accounting Policies and Estimates**
 
 “Management’s
        Discussion and Analysis of Financial Condition and Results of Operations,” as
        well as disclosures found elsewhere in this Form 10-Q, are based upon the
        Corporation’s consolidated financial statements, which have been prepared in
        accordance with accounting principles generally accepted in the United States
        of
        America.  The preparation of these financial statements requires the
        Corporation to make estimates and judgments that affect the reported amounts
        of
        assets, liabilities, revenues and expenses.  Note 1 to the
        Corporation’s Audited Consolidated Financial Statements for the year ended
        December 31, 2006 included in our Annual Report on Form 10-K for the year
        ended
        December 31, 2006, as supplemented by this report, contains a summary of
        the
        Corporation’s significant accounting policies.  Management also
        believes the Corporation’s policy with respect to the methodology for the
        determination of the allowance for loan losses involves a higher degree of
        complexity and requires management to make difficult and subjective judgments
        which often require assumptions or estimates about highly uncertain
        matters.  Changes in these judgments, assumptions or estimates could
        materially impact results of operations.  The Audit Committee and the
        Board of Directors periodically review this critical policy and its
        application.
 
 The
        allowance for loan losses is based upon management’s evaluation of the adequacy
        of the allowance, including an assessment of known and inherent risks in
        the
        portfolio, giving consideration to the size and composition of the loan
        portfolio, actual loan loss experience, level of delinquencies, detailed
        analysis of individual loans for which full collectibility may not be assured,
        the existence and estimated net realizable value of any underlying collateral
        and guarantees securing the loans, and current economic and market
        conditions.  Although management uses the best information available,
        the level of the allowance for loan losses remains an estimate that is subject
        to significant judgment and short-term change.  Various regulatory
        agencies, as an integral part of their examination process, periodically
        review
        the
  13
 *Index*
  Corporation’s
        allowance for loan losses.  Such agencies may require the Corporation
        to make additional provisions for loan losses based upon information available
        to them at the time of their examination.  Furthermore, the majority
        of the Corporation’s loans are secured by real estate in the State of New
        Jersey.  Accordingly, the collectibility of a substantial portion of
        the carrying value of the Corporation’s loan portfolio is susceptible to changes
        in local market conditions and may be adversely affected should real estate
        values decline or the northern New Jersey area experience an adverse economic
        shock.  Future adjustments to the allowance for loan losses may be
        necessary due to economic, operating, regulatory and other conditions beyond
        the
        Corporation’s control.
 
 **Financial
        Condition**
 
 Total
        assets increased by $740,000, or 0.1%, from $519.7 million at December 31,
        2006
        to $520.5 million at March 31, 2007.  Net loans increased $1.0
        million, despite large payoffs within the construction loan
        portfolio.  The composition of the loan portfolio is basically
        unchanged at March 31, 2007 when compared with the portfolio at December
        31,
        2006.
 
 Deposits
        totaled $439.7 million at March 31, 2007, an increase of $5.5 million, or
        1.3%,
        from $434.2 million at December 31, 2006.  Noninterest-bearing
        deposits increased $1.6 million, or 1.7%, to $93.7 million at March 31, 2007
        and
        interest-bearing deposits increased $3.9 million, or 1.1%, to $346.0 million
        at
        March 31, 2007.  The Corporation continues to experience strong
        competition in attracting deposits.  The inverted yield curve and
        current level of interest rates continue to make it difficult to attract
        core
        deposits.  The Corporation has utilized the brokered certificate of
        deposit market to provide additional funding and currently has $16 million
        as of
        March 31, 2007 compared to $19.7 million as of December 31, 2006.  The
        Corporation opened its eleventh branch in Wyckoff, Bergen County, New Jersey
        in
        March 2007 and is looking forward to opening its twelfth branch in Westwood,
        Bergen County, New Jersey in the fourth quarter of 2007.  It is
        anticipated that these two new branches will attract new customers to our
        organization and provide an increase to our deposit and lending
        balances.
 
 
 **Results
        of Operations**
 **Three
        Months Ended March 31, 2007 and 2006**
 
 General
 
 The
        Corporation reported net income of $1.09 million, or $0.21 diluted earnings
        per
        share for the three months ended March 31, 2007, compared to $1.11 million,
        or
        $0.22 diluted earnings per share for the same period in 2006.  The
        slight decrease of $23,000 was primarily caused by an increase in noninterest
        expense and a decrease in net interest income, partially offset by an increase
        in noninterest income and a decrease in the provision for loan
        losses.
 
 
 
  14
 *Index*
  Net
        interest income
 
 Net
        interest income decreased $4,000, or 0.1%, for the three months ended March
        31,
        2007 as compared with the corresponding period in 2006.  The decrease
        was primarily due to an increase in interest expense.
 
 Total
        interest income on a tax equivalent basis increased $976,000, or 13.9%,
        primarily due to an increase in the average earning assets and an increase
        in
        yields on interest-earning assets.  Due to an increase in yields in
        the loan and investment portfolio, tax equivalent yields on interest earning
        assets increased 38 basis points from 6.31% for the three months ended March
        31,
        2006 to 6.69% for the same period in 2007.  The average balance of
        interest-earning assets increased $33.1 million, or 7.3%, from $452.6 million
        for the three months ended March 31, 2006 to $485.7 million for the same period
        in 2007, primarily caused by strong loan demand and an increase in taxable
        and
        tax-exempt investment securities.  The Corporation continued to
        experience an increase in loan demand which caused loans on average to increase
        $23.6 million to an average of $372.3 million for the three months ended
        March
        31, 2007, from an average of $348.7 million for the comparable period in
        2006.  Taxable investment securities increased $4.2 million to an
        average of $90.8 million and tax-exempt securities increased $5.4 million
        to an
        average of $22.2 million.
 
 Interest
        paid on deposits and borrowed money increased by $952,000, or 41.3%, due
        to an
        increase in average deposits and an increase in rates paid on
        deposits.  The average balance of total interest-bearing deposits and
        borrowed money increased to $379.9 million for the three months ended March
        31,
        2007 from $355.0 million for the comparable 2006 period, primarily as a result
        of the Corporation’s expanding customer base, new product offerings and the use
        of the brokerage certificate of deposit market.  Yields on deposits
        and borrowed money increased from 2.64% for the three month period ended
        March
        31, 2006 to 3.48% for the comparable period in 2007.  Rising
        short-term interest rates and an extremely competitive market has caused
        the
        Corporation to raise yields on deposits in order to fund the asset
        base.
 
 The
        following table reflects the components of the Corporation’s net interest income
        for the quarter ended March 31, 2007 and 2006 including, (1) average assets,
        liabilities, and stockholders’ equity, (2) interest income earned on
        interest-earning assets and interest expense paid on interest-bearing
        liabilities, (3) average yields earned on interest-earning assets and average
        rates paid on interest-bearing liabilities, and (4) net yield on
        interest-earning assets.  Nontaxable income from investment securities
        and loans is presented on a tax-equivalent basis assuming a statutory tax
        rate
        of 34%.  This was accomplished by adjusting non-taxable income upward
        to make it equivalent to the level of taxable income required to earn the
        same
        amount after taxes.
  Analysis
                                              of Net Interest Income (Unaudited)
                                            
                                            For
                                              the Three Months Ended March 31,2007
                                          
                                          2006Average
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          AverageInterest
                                          
                                          
                                          Rates
                                          
                                          
                                          
                                          
                                          Interest
                                          
                                          
                                          RatesAverage
                                          
                                          
                                          Income/
                                          
                                          
                                          Earned/
                                          
                                          Average
                                          
                                          
                                          Income/
                                          
                                          
                                          Earned/Balance
                                          
                                          
                                          Expense
                                          
                                          
                                          Paid
                                          
                                          Balance
                                          
                                          
                                          Expense
                                          
                                          
                                          Paid(Dollars
                                              in thousands)**Assets**Interest-earning
                                              assets:Loans
                                              (1)
                                          
                                          $
                                          372,299
                                          
                                          
                                          $
                                          6,570
                                          
                                          
                                          
                                          7.16
                                          %
                                          
                                          $
                                          348,697
                                          
                                          
                                          $
                                          5,974
                                          
                                          
                                          
                                          6.95
                                          %Taxable
                                              investment securities (1)
                                          
                                          
                                          90,837
                                          
                                          
                                          
                                          1,162
                                          
                                          
                                          
                                          5.19
                                          
                                          
                                          
                                          86,645
                                          
                                          
                                          
                                          878
                                          
                                          
                                          
                                          4.11Tax-exempt
                                              investment securities (1) (2)
                                          
                                          
                                          22,190
                                          
                                          
                                          
                                          276
                                          
                                          
                                          
                                          5.04
                                          
                                          
                                          
                                          16,817
                                          
                                          
                                          
                                          182
                                          
                                          
                                          
                                          4.39Other
                                              interest-earning assets
                                          
                                          
                                          418
                                          
                                          
                                          
                                          9
                                          
                                          
                                          
                                          8.73
                                          
                                          
                                          
                                          483
                                          
                                          
                                          
                                          7
                                          
                                          
                                          
                                          5.88Total
                                              interest-earning assets
                                          
                                          
                                          485,744
                                          
                                          
                                          
                                          8,017
                                          
                                          
                                          
                                          6.69
                                          
                                          
                                          
                                          452,642
                                          
                                          
                                          
                                          7,041
                                          
                                          
                                          
                                          6.31Non-interest-earning
                                              assets:Allowance
                                              for loan losses
                                          
                                          
                                          (4,102
                                          )
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (3,965
                                          )Other
                                              assets
                                          
                                          
                                          33,809
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          31,972Total
                                              assets
                                          
                                          $
                                          515,451
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          $
                                          480,649**Liabilities
                                              and Stockholders' Equity**Interest-bearing
                                              liabilities:Interest-bearing
                                              demand deposits
                                          
                                          $
                                          119,502
                                          
                                          
                                          $
                                          660
                                          
                                          
                                          
                                          2.24
                                          %
                                          
                                          $
                                          118,775
                                          
                                          
                                          $
                                          407
                                          
                                          
                                          
                                          1.39
                                          %Savings
                                              deposits
                                          
                                          
                                          37,037
                                          
                                          
                                          
                                          70
                                          
                                          
                                          
                                          0.77
                                          
                                          
                                          
                                          44,674
                                          
                                          
                                          
                                          64
                                          
                                          
                                          
                                          0.58Time
                                              deposits
                                          
                                          
                                          182,399
                                          
                                          
                                          
                                          2,030
                                          
                                          
                                          
                                          4.51
                                          
                                          
                                          
                                          144,849
                                          
                                          
                                          
                                          1,306
                                          
                                          
                                          
                                          3.66Repurchase
                                              agreements
                                          
                                          
                                          9,185
                                          
                                          
                                          
                                          103
                                          
                                          
                                          
                                          4.55
                                          
                                          
                                          
                                          5,635
                                          
                                          
                                          
                                          55
                                          
                                          
                                          
                                          3.96FHLB
                                              borrowing
                                          
                                          
                                          24,558
                                          
                                          
                                          
                                          274
                                          
                                          
                                          
                                          4.52
                                          
                                          
                                          
                                          33,784
                                          
                                          
                                          
                                          353
                                          
                                          
                                          
                                          4.24Subordinated
                                              debenture
                                          
                                          
                                          7,217
                                          
                                          
                                          
                                          122
                                          
                                          
                                          
                                          6.86
                                          
                                          
                                          
                                          7,255
                                          
                                          
                                          
                                          122
                                          
                                          
                                          
                                          6.82Total
                                              interest-bearing liabilities
                                          
                                          
                                          379,898
                                          
                                          
                                          
                                          3,259
                                          
                                          
                                          
                                          3.48
                                          
                                          
                                          
                                          354,972
                                          
                                          
                                          
                                          2,307
                                          
                                          
                                          
                                          2.64Non-interest-bearing
                                              liabilities:Demand
                                              deposits
                                          
                                          
                                          92,902
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          88,953Other
                                              liabilities
                                          
                                          
                                          4,773
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          2,717Stockholders'
                                              equity
                                          
                                          
                                          37,878
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          34,007Total
                                              liabilities and stockholders' equity
                                          
                                          $
                                          515,451
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          $
                                          480,649Net
                                              interest income (taxable equivalent
                                              basis)
                                          
                                          
                                          $
                                          4,758
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          $
                                          4,734Tax
                                              Equivalent adjustment
                                          
                                          
                                          
                                          
                                          
                                          
                                          (85
                                          )
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (57
                                          )Net
                                              interest income
                                          
                                          
                                          
                                          
                                          
                                          
                                          4,673
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          4,677Net
                                              interest spread (taxable equivalent
                                              basis)
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          3.21
                                          %
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          3.67
                                          %Net
                                              yield on interest-earningassets
                                              (taxable equivalent basis) (3)
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          3.97
                                          %
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          4.24
                                          %
  (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.
  15
 *Index*
  Provision
        for loan losses
 
 The
        Corporation maintains an allowance for loan losses at a level considered
        by
        management to be adequate to cover the inherent losses associated with its
        loan
        portfolio, after giving consideration to changes in general market conditions,
        current charge-off experience, level of nonperforming loans and in the nature
        and volume of the Corporation’s loan activity.  The allowance for loan
        losses is based on estimates, and provisions are charged to operations during
        the period in which such additions are deemed necessary.
 
 The
        provision charged to operations totaled $10,000 and $50,000 during the three
        months ended March 31, 2007 and 2006, respectively.  The decrease in
        the provision was primarily due to the flat growth in the loan portfolio
        caused
        by large payoffs in the construction lending area as projects were successfully
        completed during the first quarter and the improved asset quality of the
        portfolio.  See “Asset Quality” section for summary of allowance for
        loan losses and nonperforming assets.  The Corporation monitors its
        loan portfolio and intends to continue to provide for loan loss reserves
        based
        on its ongoing periodic review of the loan portfolio and general market
        conditions.
 
 
 Noninterest
        income
 
 Noninterest
        income increased $126,000, or 14.5%, from $870,000 for the three month period
        ended March 31, 2006 to $996,000 for the comparable period in 2007. Income
        derived from the merchant credit card processing program increased $99,000
        due
        to an expanding merchant base and deposit related fees increased $16,000
        for the
        three month period ended March 31, 2007 compared to the same period for 2006
        due
        to the implementation of an overdraft protection program which was offered
        to
        customers beginning March 1, 2006.  In addition, the increase in
        mortgage activity allowed the Corporation to improve the volume of loans
        held
        for sale and realize additional income of $39,000 compared to
        2006.  Miscellaneous income decreased primarily due to a
        reduction in credit card processing income of $26,000 as the Corporation
        sold
        its credit card portfolio in the fourth quarter of 2006.
 
 
 Noninterest
        expense
 
 Noninterest
        expense increased by approximately $217,000, or 5.7%, to $4.0 million for
        the
        three months ended March 31, 2007, compared to $3.8 million for the same
        2006
        period.  Salaries and employee benefits, the major component of
        noninterest expense, increased $173,000, or 10.7%, during the three months
        ended
        March 31, 2007.  This increase was due to general increases for merit
        and performance and increases in staffing to support the new Wyckoff
        branch.  The increase in the merchant card processing business caused
        merchant processing expense to increase $93,000 in the first quarter of
        2007.  Bank card related expenses have decreased $26,000 due to the
        reduction in expense related to credit card processing as a result of the
        sale
        of the portfolio in the fourth quarter of 2006.
  16
 *Index*
  
 Income
        taxes
 
 Income
        tax expense totaled $578,000 for the three months ended March 31, 2007, for
        an
        effective tax rate of 34.7%.  For the three months ended March 31,
        2006, income tax expense totaled $610,000, for an effective tax rate of
        35.5%.  The effective tax rate has decreased due to the effect of
        increasing the Corporation’s investments in tax-exempt securities.
 
 
 **Asset
        Quality**
 
 The
        Corporation’s principal earning assets are its loans to businesses and
        individuals located in northern New Jersey.  Inherent in the lending
        function is the risk of deterioration in the borrowers’ ability to repay their
        loans under their existing loan agreements.  Risk elements include
        nonaccrual loans, past due and restructured loans, potential problem loans,
        loan
        concentrations and other real estate owned.  The following table shows
        the composition of nonperforming assets at the end of the last four
        quarters:
 
 03/31/07
                  
                  
                  12/31/06
                  
                  
                  09/30/06
                  
                  
                  06/30/06(Dollars
                      in Thousands)Nonaccrual
                      loans: (1)
                  
                  $
                  445
                  
                  
                  $
                  444
                  
                  
                  $
                  203
                  
                  
                  $
                  258Loans
                      past due 90 days or more: (2)
                  
                  
                  5
                  
                  
                  
                  1,090
                  
                  
                  
                  157
                  
                  
                  
                  11Total
                      nonperforming loans
                  
                  $
                  450
                  
                  
                  $
                  1,534
                  
                  
                  $
                  360
                  
                  
                  $
                  269Allowance
                      for loan losses
                  
                  $
                  4,093
                  
                  
                  $
                  4,101
                  
                  
                  $
                  4,086
                  
                  
                  $
                  4,011Nonaccrual
                      loans to total loans
                  
                  
                  0.12
                  %
                  
                  
                  0.12
                  %
                  
                  
                  0.06
                  %
                  
                  
                  0.07
                  %Nonperforming
                      loans to total loans
                  
                  
                  0.12
                  %
                  
                  
                  0.41
                  %
                  
                  
                  0.10
                  %
                  
                  
                  0.08
                  %Nonperforming
                      loans to total assets
                  
                  
                  0.09
                  %
                  
                  
                  0.30
                  %
                  
                  
                  0.07
                  %
                  
                  
                  0.05
                  %Allowance
                      for loan losses to total loans
                  
                  
                  1.10
                  %
                  
                  
                  1.11
                  %
                  
                  
                  1.11
                  %
                  
                  
                  1.11
                  %
 
 (1)  Generally
        represents loans to which the payments of interest or principal are in arrears
        for a period of more than 90 days.  Interest previously accrued on
        these loans and not yet paid is reversed and charged against income during
        the
        current period.  Interest earned thereafter is only included in income
        to the extent that it is received in cash.
 
 (2)  Represents
        loans to which payments of interest or principal are contractually past due
        90
        days or more but which are currently accruing income at the contractually
        stated
        rates.  A determination is made to continue accruing income on those
        loans which are sufficiently collateralized and on which management believes
        all
        interest and principal owed will be collected.
 
 There
        were no loans at March 31, 2007 other than those included in the above table,
        where the Corporation was aware of any credit conditions of any borrowers
        that
        would indicate a strong possibility of the borrowers not complying with the
        present terms and conditions of repayment and which may result in such loans
        being included as non-accrual, past due or restructured at a future
        date.
 
 The
        Corporation’s lending activities are concentrated in loans secured by real
        estate located in northern New Jersey.  Accordingly, the
        collectibility of a substantial portion of the Corporation’s loan portfolio is
        susceptible to changes in real estate market conditions in northern New
        Jersey.
  17
 *Index*
  
 **Market
        Risk**
 
 The
        Corporation’s primary exposure to market risk arises from changes in market
        interest rates (“interest rate risk”).  The Corporation’s
        profitability is largely dependent upon its ability to manage interest rate
        risk.  Interest rate risk can be defined as the exposure of the
        Corporation’s net interest income to adverse movements in interest
        rates.  Although the Corporation manages other risks, such as credit
        and liquidity risk, in the normal course of its business, management considers
        interest rate risk to be its most significant market risk and it could
        potentially have the largest material effect on the Corporation’s financial
        condition.  The Corporation manages its interest rate risk by
        utilizing an asset/liability simulation model and by measuring and managing
        its
        interest sensitivity gap.  Interest sensitivity gap is determined by
        analyzing the difference between the amount of interest-earning assets maturing
        or repricing within a specific time period and the amount of interest-bearing
        liabilities maturing or repricing within the same period of time.  The
        Asset Liability Committee reviews and discusses these measurements on a monthly
        basis.
 
 The
        Corporation does not have any material exposure to foreign currency exchange
        rate risk or commodity price risk.  The Corporation did not enter into
        any market sensitive instruments for trading purposes nor did it engage in
        any
        hedging transactions utilizing derivative financial instruments during the
        three
        months ended March 31, 2007.
 
 The
        Corporation is, however, a party to financial instruments with off-balance
        sheet
        risk in the normal course of business to meet the financing needs of its
        customers.  These instruments, which include commitments to extend
        credit and standby letters of credit, involve, to varying degrees, elements
        of
        credit and interest rate risk in excess of the amount recognized in the
        consolidated statement of condition.  Commitments to extend credit are
        agreements to lend to a customer as long as there is no violation of any
        condition established in the contract.  Commitments generally have
        fixed expiration dates and may require collateral from the borrower if deemed
        necessary by the Corporation.  Standby letters of credit are
        conditional commitments issued by the Corporation to guarantee the performance
        of a customer to a third party up to a stipulated amount and with specified
        terms and conditions.  Commitments to extend credit and standby
        letters of credit are not recorded on the Corporation’s consolidated balance
        sheet until the instrument is exercised.
 
 **Capital
        Adequacy**
 
 The
        Corporation is subject to capital adequacy guidelines promulgated by the
        Board
        of Governors of the Federal Reserve System (“FRB”).  The Bank is
        subject to similar capital adequacy requirements imposed by the Federal Deposit
        Insurance Corporation.  The FRB has issued regulations to define the
        adequacy of capital based upon the sensitivity of assets and off-balance
        sheet
        exposures to risk factors.   Four categories of risk weights (0%,
        20%, 50%, and 100%) were established to be applied to different types of
        balance
        sheet assets and off-balance sheet exposures.  The aggregate of the
        risk-weighted items (risk-based assets) is the denominator of the ratio,
        the
        numerator is risk-based capital.  Under the regulations, risk-based
        capital has
  18
 *Index*
  been
        classified into two categories.  Tier 1 capital includes common and
        qualifying perpetual preferred stockholders’ equity less
        goodwill.  Tier 2 capital includes mandatory convertible debt,
        allowance for loan losses, subject to certain limitations, and certain
        subordinated and term debt securities.  Total qualifying capital
        consists of Tier 1 capital and Tier 2 capital; however; the amount of Tier
        2
        capital may not exceed the amount of Tier 1 capital.  At March 31,
        2007, the minimum risk-based capital requirements to be considered adequately
        capitalized were 4% for Tier 1 capital and 8% for total capital.
 
 Federal
        banking regulators have also adopted leverage capital guidelines to supplement
        the risk-based measures.  The leverage ratio is determined by dividing
        Tier 1 capital as defined under the risk-based guidelines by average total
        assets (non risk-adjusted) for the preceding quarter.  At March 31,
        2007 the minimum leverage ratio requirement to be considered well capitalized
        was 4%.  The following table reflects the Corporation’s capital ratios
        at March 31, 2007.
 
 
 Required
                    
                    Actual
                    
                    ExcessRisk-based
                        CapitalTier
                        1
                    
                    
                    4.00
                    %
                    
                    
                    11.39
                    %
                    
                    
                    7.39
                    %Total
                    
                    
                    8.00
                    %
                    
                    
                    12.41
                    %
                    
                    
                    4.41
                    %Leverage
                        Ratio
                    
                    
                    4.00
                    %
                    
                    
                    8.82
                    %
                    
                    
                    4.82
                    %
 
 
 **Liquidity
        and Capital Resources**
 
 The
        Corporation’s primary sources of funds are deposits, repayments of loans and
        mortgage-backed securities, maturities of investment securities and funds
        provided from operations.  While scheduled loan and mortgage-backed
        securities amortization and maturities of investment securities are a relatively
        predictable source of funds, deposit flow and prepayments on loans and
        mortgage-backed securities are greatly influenced by market interest rates,
        economic conditions and competition.  The Corporation’s liquidity,
        represented by cash and cash equivalents, is a product of its operating,
        investing and financing activities.
 
 The
        primary source of cash from operating activities is net income. Liquidity
        management is both a daily and long-term function of business
        management.  Excess liquidity is generally invested in short-term
        investments, such as federal funds sold.  The Corporation anticipates
        that it will have sufficient funds available to meet its current loan
        commitments.  At March 31, 2007, the Corporation has outstanding loan
        commitments of $16.9 million and unused lines and letters of credit totaling
        $108.2 million.  Certificates of deposit scheduled to mature in one
        year or less, at March 31, 2007, totaled $141.1 million.  Management
        believes that a significant portion of such deposits will remain with the
        Corporation.  Cash and cash equivalents increased $921,000 during the
        first three months of 2007.  Net operating and
        investing activities provided $3.8 million, and $115,000,
        respectively, and financing activities used $2.0 million.
  19
 *Index*
  
 **ITEM
        3.  Quantitative and Qualitative Disclosures about
        Market Risk**
 
 Disclosure
        about quantitative and qualitative market risk is located in the Market Risk
        section of Management’s Discussion and Analysis of Financial Condition and
        Results of Operations.
 
 
 **ITEM
        4.  Controls and Procedures**
 
 The
        Corporation’s management, with the participation of the Corporation’s chief
        executive officer and principal accounting officer, has evaluated the
        effectiveness of the Corporation’s disclosure controls and procedures as of
        March 31, 2007.  Based on this evaluation, the Corporation’s chief
        executive officer and principal accounting officer concluded that the
        Corporation disclosure controls and procedures are effective for recording,
        processing, summarizing and reporting the information the Corporation is
        required to disclose in the reports it files under the Securities Exchange
        Act
        of 1934, within the time periods specified in the SEC’s rules and
        forms.  Such evaluation did not identify any change in the
        Corporation’s internal control over financial reporting that occurred during the
        quarter ended March 31, 2007 that has materially affected, or is reasonably
        likely to materially affect, the Corporation’s internal control over financial
        reporting.
 
 
  20
 *Index*
  **Stewardship
        Financial Corporation**
 **Part
        II -- Other Information**
 
 
 Item1A.
              Risk
                  Factors
 
 There
        have been no material changes in risk factors described in the Corporation’s
        Annual Report on Form 10-K for the year ended December 31, 2006.
 
 
 Item
                  6.
              Exhibits
 
 (a)
              Exhibits
 See
        Exhibit Index following this report.
 
 
 
  21
 *Index*
  
 SIGNATURES
 
 
 
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned, thereunto
        duly authorized.
 
 
 
 
 
 Stewardship
        Financial Corporation
 
 
 
 
 
 Date:
                May
                    11, 2007
                
                By:
                /s/  
                    Paul Van
                    OstenbridgePaul
                    Van OstenbridgePresident
                    and Chief ExecutiveOfficer(authorized
                    officer on behalfof
                    registrant)Date:
                May
                    11, 2007
                
                By:
                /s/  
                    Julie E. HollandJulie
                    E. HollandSenior
                    Vice President and Treasurer(principal
                    accounting officer)
 
 
  22
 *Index*
  
 **EXHIBITINDEX**
 
 
 EXHIBIT
                  NUMBER
                DESCRIPTION31.1
                Certification
                    of Paul Van Ostenbridge required by Rule 13a-14(a) or Rule
                    15d-14(a)31.2
                Certification
                    of Julie Holland required by Rule 13a-14(a) or Rule
                    15d-14(a)32.1
                Certification
                    of Paul Van Ostenbridge and Julie Holland required by Rule 13a-14(b)
                    or
                    Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002,
                    18
                    U.S.C. Section 1350


23