UNITED
STATES


SECURITIESAND EXCHANGE
COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-K





(Mark
One)


S           ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934








For the
fiscal year ended December 31, 2007








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





For the
transition period from __________ to ___________








Commission
file number 0-21855





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





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





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





Securities
registered pursuant to Section 12(b) of the
Act:   None








Securities
registered under Section 12(g) of the Act:





Common
      Stock, no par value(Title
      of class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes £    No
S





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes £    No
S





Note –Checking the box above
will not relieve any registrant required to file reports pursuant to Section 13
or 15(d) of the Exchange Act from their obligations under those
Sections.





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







Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. £





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer £
            
            Accelerated
      filer £Non-accelerated
      filer £
            
            Smaller
      reporting company x








Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes £   No
S





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, as of June 30, 2007 was $
60,742,000.





As
of  March 25, 2008,  5,314,325 shares of the registrant’s
common stock, net of treasury stock, were outstanding.









DOCUMENTS
INCORPORATED BY REFERENCE




Item
      6
            Selected
      Financial Data
            
            Registrant’s
      Annual Report to Shareholders under the caption “Consolidated Financial
      Summary of Selected Financial Data.”Item
      7
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            Registrant’s
      Annual Report to Shareholders under the caption “Management’s Discussion
      and Analysis of Financial Condition and Results of
      Operations.”Item
      8
            Financial
      Statements and Supplementary Data
            
            Registrant’s
      Annual Report to  Shareholders under the caption “Consolidated
      Statements Financial  Condition.”Item
      10
            Directors,
      Executive Officers and Corporate Governance
            
            Proxy
      Statement for 2008 Annual Meeting of Shareholders under the caption,
      “Proposal I – Election of Directors” and “Compliance with Section 16(a)
      Beneficial Ownership Reporting,” to be filed no later than April 30,
      2008.Item
      11
            Executive
      Compensation
            
            Proxy
      Statement for 2008 Annual Meeting of  Shareholders under the
      captions, “Compensation of Executive Officers” and “Annual Management
      Compensation and All Other Compensation,” to be filed no later than April
      30, 2008Item
      12
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            
            Proxy
      Statement for 2008 Annual Meeting of Shareholders under the caption,
      “Stock Ownership of Management and Principal Shareholders,” to be filed no
      later than April 30, 2008.Item
      13
            Certain
      Relationships and Related Transactions, and Director
      Independence
            
            Proxy
      Statement for 2008 Annual Meeting of Shareholders under the captions,
      “Proposal I – Election of Directors” and “Certain Relationships and
      Related Transactions,” to be filed not later filed no later than April 30,
      2008.Item
      14
            Principal
      Accountant Fees and Services
            
            Proxy
      Statement for 2008 Annual Meeting of Shareholders under the Caption, “Fees
      Billed by Accounting Firms During Fiscal 2007 and Fiscal 2006,” to be
      filed no later than  April 30,
2008.





Part
I





Item
1  -  Business





General





Stewardship
Financial Corporation (the “Corporation” or “Registrant”) is a one-bank holding
company, which was incorporated under the laws of the State of New Jersey in
January 1995 to serve as a holding company for Atlantic Stewardship Bank (the
“Bank”).  The Corporation was organized at the direction of the Board
of Directors of the Bank for the purpose of acquiring all of the capital stock
of the Bank (the “Acquisition”).  Pursuant to the New Jersey Banking
Act of 1948, as amended (the “New Jersey Banking Act”), and pursuant to approval
of the shareholders of the Bank, the Corporation acquired the Bank and became
its holding company on November 22, 1996.  As part of the Acquisition,
shareholders of the Bank received one share of common stock, no par value
(“Common Stock”) of the Corporation for each outstanding share of the common
stock of the Bank.  The only significant activity of the Corporation
is ownership and supervision of the Bank.





The Bank
is a commercial bank formed under the laws of the State of New Jersey on April
26, 1984.  At December 31, 2007, the Bank operated from its main
office at 630 Godwin Avenue, Midland Park, New Jersey, and its twelve branches
located at 386 Lafayette Avenue, Hawthorne, New Jersey, 1111 Goffle Road,
Hawthorne, New Jersey, 190 Franklin Avenue, Ridgewood, New Jersey, 2
Changebridge Road, Montville, New Jersey, 33 Sicomac Avenue, North Haledon, New
Jersey, 249 Newark Pompton Turnpike, Pequannock, New Jersey, 64 Franklin
Turnpike, Waldwick, New Jersey, 87 Berdan Avenue, Wayne, New Jersey, 400 Hamburg
Turnpike, Wayne, New Jersey, 311 Valley Road, Wayne, New Jersey, 200
Kinderkamack Road, Westwood, New Jersey and 378 Franklin Avenue, Wyckoff, New
Jersey.  The Bank operates ATM machines at all of its branches except
its Lafayette Avenue, Hawthorne branch and operates an offsite branch in the
Christian Health Care Center, Wyckoff, New Jersey.





The
Corporation is subject to the supervision and regulation of the Board of
Governors of the Federal Reserve System (the “FRB”).  The Bank’s
deposits are insured by the Bank Insurance Fund (“BIF”) of the Federal Deposit
Insurance Corporation (“FDIC”) up to applicable limits.  The
operations of the Corporation and the Bank are subject to the supervision
and  regulation of the FRB, FDIC and the New Jersey Department of
Banking and Insurance (the “Department”).  The principal executive
offices of the Corporation are located at 630 Godwin Avenue, Midland Park, New
Jersey 07432, and the telephone number is (201) 444-7100.  Stewardship
Investment Corp. is a wholly-owned non-bank subsidiary of the Bank, whose
primary business is to own and manage the Bank’s investment
portfolio.  Stewardship Realty, LLC is a subsidiary of the Bank, whose
primary business is to own and manage property at 612 Godwin Avenue, Midland
Park, New Jersey.  In addition to the Bank, in 2003, the Corporation
formed a second subsidiary, Stewardship Statutory Trust I for the purpose of
issuing trust preferred securities.





Business
of the Corporation





The
Corporation’s primary business is the ownership and supervision of the
Bank.  The Corporation, through the Bank, conducts a traditional
commercial banking business, and offers services including personal and business
checking accounts and time deposits, money market accounts and regular savings
accounts.  The Corporation structures its specific products and
services in a manner designed to attract the business of the small and medium
sized business and professional community as well as that of individuals
residing, working and shopping in Bergen, Morris and Passaic counties, New
Jersey.  The Corporation engages in a wide range of lending activities
and offers commercial, consumer, mortgage, home equity and personal
loans.





In
addition, in forming the Bank, the members of the Board of Directors envisioned
a community-based institution which would serve the local communities
surrounding its branches, while also providing a return to its
shareholders.  This vision has been reflected in the Bank’s tithing
policy, under which the Bank tithes 10% of its pre-tax profits to worthy
Christian organizations and civic organizations in the communities where the
Bank maintains branches.





Service
Area





The
Corporation’s service area primarily consists of the Bergen, Passaic and Morris
counties in the New Jersey market, although the Corporation makes loans
throughout New Jersey.  At December 31, 2007, the Corporation operated
its main office in Midland Park, New Jersey and twelve existing branch offices
in Hawthorne, Ridgewood, Montville, North Haledon, Pequannock, Waldwick, Wayne,
Westwood and Wyckoff, New Jersey.





Competition





The
Corporation competes for deposits and loans with commercial banks, thrifts and
other financial institutions, many of which have greater financial resources
than the Corporation.  Many large financial institutions in New York
City and other parts of New Jersey compete for the business of New Jersey
residents and companies located in the Corporation’s service
area.  Certain of these institutions have significantly higher lending
limits than the Corporation and provide services to their customers that the
Corporation does not offer.





Management
believes the Corporation is able to compete on a substantially equal basis with
its competitors because it provides responsive personalized services through
management’s knowledge and awareness of the Corporation’s service area,
customers and business.





Employees





At
December 31, 2007, the Corporation employed 109 full-time
employees and 38 part-time employees.  None of these employees is
covered by a collective bargaining agreement and the Corporation believes that
its employee relations are good.





Supervision
and Regulation





Bank
holding companies and banks are extensively regulated under both federal and
state law.  These laws and regulations are intended to protect
depositors, not stockholders.  To the extent that the following
information describes statutory and regulatory provisions, it is qualified in
its entirety by reference to the particular statutory and regulatory provisions
and is not intended to be an exhaustive description of the statutes or
regulations applicable to the Corporation’s business.  Any change in
the applicable law or regulation may have a material effect on the business and
prospects of the Corporation and the Bank.





Regulation
of the Corporation





BANK HOLDING COMPANY
ACT.As a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the “BHCA”), the Corporation is subject
to the regulation and supervision of the FRB.  The Corporation is
required to file with the FRB annual reports and other information showing that
its business operations and those of its subsidiaries are limited to banking,
managing or controlling banks, furnishing services to or performing services for
its subsidiaries or engaging in any other activity which the FRB determines to
be so closely related to banking or managing or controlling banks as to be
properly incident thereto.





The BHCA
requires, among other things, the prior approval of the FRB in any case where a
bank holding company proposes to (i) acquire all or substantially all of the
assets of any other bank, (ii) acquire direct or indirect ownership or control
of more than 5% of the outstanding voting stock of any bank (unless it owns a
majority of such bank’s voting shares), or (iii) merge or consolidate with any
other bank holding company.  The FRB will not approve any merger,
acquisition, or consolidation that would have a substantially anti-competitive
effect, unless the anti-competitive impact of the proposed transaction is
clearly outweighed by a greater public interest in meeting the convenience and
needs of the community to be served.  The FRB also considers capital
adequacy and other financial and managerial resources and future prospects of
the companies and the banks concerned, together with the convenience and needs
of the community to be served.





Additionally,
the BHCA prohibits a bank holding company, with certain limited exceptions, from
(i) acquiring or retaining direct or indirect ownership or control of more than
5% of the outstanding voting stock of any company which is not a bank or bank
holding company, or (ii) engaging directly or indirectly in activities other
than those of banking, managing or controlling banks, or performing services for
its subsidiaries; unless such non-banking business is determined by the FRB to
be so closely related to banking or managing or controlling banks as to be
properly incident thereto.  In making such determinations, the FRB is
required to weigh the expected benefits to the public, such as greater
convenience, increased competition or gains in efficiency, against the possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.





There are
a number of obligations and restrictions imposed on bank holding companies and
their depository institution subsidiaries by law and regulatory policy that are
designed to minimize potential loss to the depositors of such depository
institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default.  Under a policy of the FRB
with respect to bank holding company operations, a bank holding company is
required to commit resources to support such institutions in circumstances where
it might not do so absent such policy.  The FRB also has the authority
under the BHCA to require a bank holding company to terminate any activity or to
relinquish control of a non-bank subsidiary upon





the FRB’s
determination that such activity or control constitutes a serious risk to the
financial soundness and stability of any bank subsidiary of the bank holding
company.





CAPITAL
ADEQUACY GUIDELINES FOR BANK HOLDING COMPANIES.  The FRB has adopted
risk-based capital guidelines for bank holding companies.  The
risk-based capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets.  Under these guidelines,
assets and off-balance sheet items are assigned to broad risk categories each
with appropriate weights.  The resulting capital ratios represent
capital as a percentage of total risk-weighted assets and off-balance sheet
items.





The
risk-based guidelines apply on a consolidated basis to bank holding companies
with consolidated assets of $150 million or more.  The minimum ratio
of total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%.  At least 4% of
the total capital is required to be “Tier I” capital, consisting of common
stockholders’ equity and certain preferred stock, less certain goodwill items
and other intangible assets.  The remainder, “Tier II Capital,” may
consist of (a) the allowance for loan losses of up to 1.25% of risk-weighted
assets, (b) excess of qualifying preferred stock, (c) hybrid capital
instruments, (d) debt, (e) mandatory convertible securities, and (f) qualifying
subordinated debt.  Total capital is the sum of Tier I and Tier II
capital less reciprocal holdings of other banking organizations’ capital
instruments, investments in unconsolidated subsidiaries and any other deductions
as determined by the FRB (determined on a case-by-case basis or as a matter of
policy after formal rule-making).





Bank
holding company assets are given risk-weights of 0%, 20%, 50%, and
100%.  In addition, certain off-balance sheet items are given similar
credit conversion factors to convert them to asset equivalent amounts to which
an appropriate risk-weight will apply.  These computations result in
the total risk-weighted assets.  Most loans are assigned to the 100%
risk category, except for performing first mortgage loans fully secured by
residential property which carry a 50% risk-weighting. Most investment
securities (including, primarily, general obligation claims of states or other
political subdivisions of the United States) are assigned to the 20% category,
except for municipal or state revenue bonds, which have a 50% risk-weight, and
direct obligations of the U.S. treasury or obligations backed by the full faith
and credit of the U.S. Government, which have a 0% risk-weight.  In
converting off-balance sheet items, direct credit substitutes including general
guarantees and standby letters of credit backing nonfinancial obligations, and
undrawn commitments (including commercial credit lines with an initial maturity
of more than one year) have a 50% risk-weighting.  Short term
commercial letters of credit have a 20% risk-weighting and certain short-term
unconditionally cancelable commitments have a 0% risk-weighting.





In
addition to the risk-based capital guidelines, the FRB has adopted a minimum
Tier I capital (leverage) ratio, under which a bank holding company must
maintain a minimum level of Tier I capital to average total consolidated assets
of at least 3% in the case of a bank holding company that has the highest
regulatory examination rating and is not contemplating significant growth or
expansion.  All other bank holding companies are expected to maintain
a leverage ratio of at least 100 to 200 basis points above the stated
minimum.








FINANCIAL SERVICES MODERNIZATION
LEGISLATION.On November 12, 1999, President Clinton signed
into law the Gramm-Leach-Bliley Financial Services Modernization Act of 1999
(“FSMA”).  The passage of the FSMA removes the barriers to
affiliations among financial service companies by repealing restrictions imposed
under the Glass-Steagall Act of 1933 on banks affiliating with securities firms
and by creating a new financial holding company (“FHC”) under the
BHCA.  A company may form an FHC if all of its insured depository
institution subsidiaries are considered well-capitalized and well-managed, and
hold a satisfactory rating under the Community Reinvestment Act of 1977, as
amended (“CRA”).  An FHC can engage in a prescribed list of financial
services, including insurance and securities underwriting and agency activities,
merchant banking, insurance company portfolio investment activities and
“complementary” financial activities.





To insure
consistency in the treatment of banks and other financial institutions, FSMA
reorganizes regulatory authority of federal agencies over securities and
investment activities.





In the
area of insurance, FSMA designates the insurance products that banks and
subsidiaries may provide, prohibits national banks from underwriting or selling
title insurance if they did not actively conduct those activities before FSMA
and permits national banks to sell title insurance in states where state banks
are specifically authorized to do so.  FSMA requires Federal banking
agencies to prescribe consumer protection regulations for insurance sales by
banks.  FSMA preempts state laws that interfere with affiliations
between banks and insurance companies.  It also initiates a process
for creating a uniformity in licensing of insurance agents on a national
level.








FSMA also
reinforces the barrier separating banking from general commerce by preventing
organizations from applying to the Office of Thrift Supervision to form a
unitary holding company after May 4, 1999.  All existing unitaries can
continue to operate, regardless of current ownership but these unitaries can
only be sold to financial companies.





In
addition to enabling banks and their holding companies to conduct a wide range
of financial activities, the FSMA also contained a number of privacy
requirements with which banks and other financial institutions must
comply.  Under the FSMA, all financial institutions must adopt a
privacy policy and make its policy known to those who became new customers and
provide annual disclosure of its policy to all of its customers.  The
Bank had to provide initial privacy notices to all existing customers by July 1,
2001.  Prior to disclosing a consumers’ nonpublic personal information
(not covered by an exception) with nonaffiliated third parties, financial
institutions must provide a reasonable means and opportunity to opt out of
having information shared.  The exceptions include disclosures of
nonpublic personal information: (i) made in connection with certain processing
and servicing transactions; (ii) with the consent, or at the direction, of a
customer or consumer; (iii) to protect against potential fraud or unauthorized
transactions; (iv) to respond to judicial process; and (v) to provide the
information to an employee of the institution who happens also to be an employee
of a nonaffiliated third party.





The FSMA
also required the issuance of regulations establishing standards governing the
administrative, technical and physical safeguards of customer
information.  By July 1, 2001, all financial institutions had to have
an information security program.  Institutions are required to
identify and assess the risks that may threaten customer information, develop a
written plan containing policies and procedures to manage and control these
risks, implement and test the plan, and adjust the plan on a continuing basis to
account for changes in technology, sensitivity of customer information, and
internal or external threats to information security.





Additional
proposals to change the regulations and laws governing the banking and financial
services industry are frequently introduced in the state legislatures, before
various banking regulatory agencies, and in Congress.  The likelihood
and timing of any such changes and the impact of such changes might have on the
Corporation cannot be determined at this time.





Regulation
of the Bank





As a New
Jersey-chartered commercial bank, the Bank is subject to the regulation,
supervision, and control of the Department.  As a FDIC-insured
institution, the Bank is subject to regulation, supervision and control by the
FDIC, an agency of the federal government.  The regulations of the
FDIC and the Department impact virtually all activities of the Bank, including
the minimum level of capital the Bank must maintain, the ability of the Bank to
pay dividends, the ability of the Bank to expand through new branches or
acquisitions, and various other matters.





INSURANCE
OF DEPOSITS.  The FDIC merged the Bank Insurance Fund (“BIF”) and the
Savings Association Insurance Fund (“SAIF”) into the Deposit Insurance Fund
(“DIF”) effective March 31, 2006.  As part of this legislation several
changes were implemented.  Effective April 1, 2006, the insurance
coverage limit for retirement accounts was increased to $250,000 with all other
accounts remaining at $100,000 coverage.





The FDIC
amended it risk-based assessment system for 2007 to implement authority granted
by the Federal Deposit Insurance Reform Act of 2005 (“Reform
Act”).  Under the revised system, insured institutions are assigned to
one of four risk categories based on supervisory evaluations, regulatory capital
levels and certain other factors.  An institution’s assessment rate
depends on the category to which it is assigned.  Risk category I,
which contains the least risky depository institutions is expected to include
more than 90% of all institutions.  Assessment rates are determined by
the FDIC and currently range from five to seven basis points for the healthiest
institutions (Risk Category I.)  Institutions in Risk Category II,
III, and IV will be assessed at annual rates of 10, 28 and 43 basis points,
respectively.  The FDIC may adjust rates uniformly from one quarter to
the next, except that no single adjustment can exceed three basis
points.





The
Reform Act also provided for a one-time credit for eligible institutions based
on their assessment base as of December 31, 1996.  Subject to certain
limitations with respect to institutions that are exhibiting weaknesses, credits
can be used to offset assessments until exhausted.  The Bank’s
one-time credit was $157,000, which was recognized in 2007.  The
Reform Act also provided for the possibility that the FDIC may pay dividends to
insured institutions once the Deposit Insurance Fund reserve ratio equals or
exceeds 1.35% of estimated insured deposits.  The Bank’s assessment
for the year ended December 31, 2007 was $11,000.





In
addition to the assessment for deposit insurance, institutions are required to
make payments on bonds issued in the late 1980s by the Financing Corporation
(FICO) issued in connection with the failure of certain savings and loan
associations.  This payment is established quarterly and averaged 1.16
basis points.  The Corporation paid $51,000 in 2007 under this
assessment.








DIVIDEND
RIGHTS.  Under the New Jersey Banking Act, a Bank may declare and pay
dividends only if, after payment of the dividend, the capital stock of the Bank
will be unimpaired and either the Bank will have a surplus of not less than 50%
of its capital stock or the payment of the dividend will not reduce the Bank’s
surplus.





CHECK
CLEARING FOR THE 21STCENTURY
ACT.  (“Check 21 Act”)  Effective October 28, 2004, the
Federal Reserve adopted final amendments to Regulation CC and its commentary to
implement the Check 21 Act.  The Check 21 Act was enacted on October
28, 2003, and became effective on October 28, 2005.





To
facilitate check truncation and electronic check exchange, the Check 21 Act
authorizes a new negotiable instrument called a “substitute check” and provides
that a properly prepared substitute check is the legal equivalent of the
original check for all purposes.  A substitute check is a paper
reproduction of the original check that can be processed just like the original
check .  The Check 21 Act does not require any bank to create
substitute checks or to accept checks electronically.  The Federal
Reserve’s amendments: (i) set forth the requirements of the Check 21 Act that
apply to all banks, including those that choose not to create substitute checks;
(ii) provide a model disclosure and model notices relating to substitute checks;
and (iii) set forth bank endorsement and identification requirements for
substitute checks.  The amendments to Regulation CC also clarify some
existing provisions of the rule and commentary.





USA
PATRIOT ACT OF 2001. (“Patriot Act”)  -  On October 26,
2001, the Patriot Act was signed into law.  Enacted in response to the
terrorist attacks in New York, Pennsylvania, and Washington D.C. on September
11, 2001, the Patriot Act is intended to strengthen the ability of U.S. law
enforcement and the intelligence community to work cohesively to combat
terrorism on a variety of fronts.  The potential impact of the Patriot
Act on financial institutions of all kinds is significant and
wide-ranging.  The Patriot Act contains sweeping anti-money laundering
and financial transparency laws and requires various regulations, including, but
not limited to: (a) due diligence requirements for financial institutions that
administer, maintain, or manage private bank accounts or correspondent accounts
for non-U.S. persons; (b) standards for verifying customer identification at
account opening; (c) rules to promote cooperation among financial institutions,
regulators and law enforcement entities in identifying parties that may be
involved in terrorism or money laundering; (d) reports of nonfinancial trades
and business filed with the Treasury Department’s Financial Crimes Enforcement
Network for transactions exceeding $10,000; and (e) filing of suspicious
activities reports by brokers and dealers if they believe a customer may be
violating U.S. laws and regulations.








Item
1A.  Risk Factors





Investments
in the common stock of Stewardship Financial Corporation involve
risk.  The following discussion highlights the risks management
believes are material for our Corporation, but does not necessarily include all
risks that we may face.





Our
operations are subject to interest rate risk and changes in interest rates may
negatively affect financial performance.





Our
earnings and cash flows are largely dependent upon our net interest
income.  Net interest income is the difference between interest income
earned on interest-earning assets such as loans and securities and interest
expense paid on interest-bearing liabilities such as deposits and borrowed
money.  Changes in the general level of interest rates may have an
adverse affect on our business, financial condition and results of
operations.  Interest rates are highly sensitive to many factors that
are beyond our control, including general economic conditions and the policies
of governmental and regulatory agencies such as the Federal Reserve
Bank.  Changes in monetary policy and interest rates can also
adversely affect our ability to originate loans and deposits, fair value of
financial assets and liabilities, and the average duration of our assets and
liabilities.





Our
allowance for loan losses may be insufficient.





There are
inherent risks associated with our lending activities.  There are
risks inherent in making any loan, including dealing with individual borrowers,
nonpayment, uncertainties as to the future value of collateral and changes in
economic and industry conditions.  We attempt to mitigate and manage
credit risk through prudent loan underwriting and approval procedures,
monitoring of loan concentrations and periodic independent review of outstanding
loans.  We cannot be assured that these procedures will reduce credit
risk inherent in the business.





We make
various assumptions and judgments about the collectibility of our loan
portfolio, including the creditworthiness of our borrowers and the value of the
real estate and assets serving as collateral for loan repayments.  In
determining the size of our allowance for loan loss, we rely on our experience
and our evaluation of economic conditions.  If our assumptions prove
to be incorrect, our current allowance may not be sufficient to cover probable
incurred loan losses and adjustments may be necessary





to allow
for different economic conditions or adverse developments in our
portfolio.  Significant additions to our allowance for loan losses
would materially decrease our net income.





Our
profitability depends significantly on economic conditions.  Our
geographic concentration in northern New Jersey could be impacted by changes in
local economic conditions.





Our
success depends on the general economic conditions of the nation, the state of
New Jersey, and the Northern New Jersey area.  Unlike larger banks
that are more geographically diversified, we provide financial services to
customers primarily in the market areas in which we operate.  The
local economic conditions of these areas have a significant impact on our
commercial, real estate and construction loans, the ability of our borrowers to
repay these loans and the value of the collateral securing these
loans.





Competition
within the financial services industry could adversely affect our
profitability.





We face
strong competition from banks, other financial institutions, money market mutual
funds and brokerage firms within the New York metropolitan area.  A
number of these entities have substantially greater resources and lending
limits, larger branch systems and a wider array of banking
services.  If we are unsuccessful in competing effectively, we will
lose market share and may suffer a reduction in our margins and suffer adverse
consequences to the results of operations and financial condition.





Federal
and State Regulations could restrict our business and non-compliance would
result in penalties, litigation and damage to our reputation.





We
operate in a highly regulated environment and are subject to extensive
regulation, supervision, and examination by the Federal Deposit Insurance
Corporation (“FDIC”), the Board of Governors of the Federal Reserve System (the
“Federal Reserve”) and the State of New Jersey.  Such regulation and
supervision of the activities in which an institution may engage is primarily
intended for the protection of the depositors and the federal deposit insurance
funds.  These regulations affect our lending practices, capital
structure, investment practices, dividend policy and overall
operations.  Changes to statutes, regulations, regulatory policies,
and interpretations of policies and regulations could subject the Corporation to
additional costs, limit the types of financial services and products we may
offer and/or increase the ability of non-banks to offer competing financial
services and products, among other things.  Failure to comply with
law, regulations or policies could result in sanctions by regulatory agencies,
civil money penalties and/or reputation damage, which could have a material
adverse effect on our business, financial condition and results of
operations.  While we have polices and procedures designed to prevent
any such violations, there can be no assurances that such violations will not
occur.





A
breach of information security or compliance breach by one of our vendors could
negatively affect our reputation and business.





We rely
upon a variety of computing platforms and networks over the internet for the
purpose of data processing, communication and information
exchange.  Despite the safeguards instituted by management, such
systems are susceptible to a breach of security.  In addition, we rely
on the service of a variety of third-party vendors to meet our processing
needs.  If confidential information is compromised, financial losses,
costs and damages could occur.  Such costs and or losses could
materially affect our earnings.  In addition the negative affect on
our reputation could affect our ability to deliver products and services
successfully to new and existing customers.





The
trading volume of our stock remains low which could impact stock
prices.





The
trading history of our common stock has been characterized by relatively low
trading volume.  The value of a shareholder’s investment may be
subject to decreases due to the volatility of the price of our common stock
which trades on the NASDAQ Stock Market.





The
market price of our common stock may be volatile and subject to fluctuations in
response to numerous factors, including, but not limited to, the factors
discussed in the other risk factors and the following:


·
            actual
      or anticipated fluctuation in operating
results;


·
            changes
      in interest rates;


·
            changes
      in legal or regulatory environment;


·
            press
      releases, publicity, or
announcements;


·
            changes
      in expectation of our future financial
  performance;


·
            future
      sales of our common stock;


·
            changes
      in economic conditions; and


·
            other
      developments affecting our corporation or our
  competitors





These
factors may adversely affect the trading price of our common stock, regardless
of our actual operating performance, and could prevent a shareholder from
selling common stock at or above the current market price.





We
may not be able to pay dividends in the future in accordance with past
practice.





The
Corporation has traditionally paid a quarterly dividend to
stockholders.  The payment of dividends is subject to legal and
regulatory restrictions.  Any payment of dividends in the future will
depend, in large part, on the Corporation’s earnings, capital requirements,
financial condition and other factors considered relevant by the Corporation’s
Board of Directors.








Item
1B.  Unresolved Staff Comments





None







Item
2.  Properties





The
Corporation conducts its business through its main office located at 630 Godwin
Avenue, Midland Park, New Jersey and its nine branch offices.  The
property located at 612 Godwin Avenue is to be used for future administrative
offices, pending the obtainment of all appropriate approvals and completing
construction.  The following table sets forth certain information
regarding the Corporation’s properties as of December 31, 2007.








Leased
            
            Date
      of LeaseLocation
            
            or Owned
            
            Expiration612
      Godwin Avenue
            
            Owned
            
            ---Midland
      Park, NJ630
      Godwin Avenue
            
            Owned
            
            ---Midland
      Park, NJ386
      Lafayette Avenue
            
            Owned
            
            ---Hawthorne,
      NJ1111
      Goffle Road
            
            Leased
            
            05/31/11Hawthorne,
      NJ2
      Changebridge Road
            
            Leased
            
            06/30/15Montville,
      NJ249
      Newark Pompton Turnpike
            
            Owned
            
            ---Pequannock,
      NJ190
      Franklin Avenue
            
            Leased
            
            09/30/12Ridgewood,
      NJ64
      Franklin Turnpike
            
            Owned
            
            ---Waldwick,
      NJ87
      Berdan Avenue
            
            Leased
            
            06/30/09Wayne,
      NJ311
      Valley Road
            
            Leased
            
            11/30/08Wayne,
      NJ400
      Hamburg Turnpike
            
            Leased
            
            04/30/14Wayne,
      New Jersey378
      Madison Avenue
            
            Leased
            
            05/31/26Wyckoff,
      New Jersey200
      Kinderkamack Road
            
            Leased
            
            05/20/26Westwood,
      New Jersey33
      Sicomac AvenueNorth
      Haledon, New Jersey
            
            Leased
            
            10/31/14







Item
3  -  Legal Proceedings





The
Corporation and the Bank are periodically parties to or otherwise involved in
legal proceedings arising in the normal course of business, such as claims to
enforce liens, claims involving the making and servicing of real property loans,
and other issues incident to the Bank’s business.  Management does not
believe that there is any pending or threatened proceeding against the
Corporation or the Bank which, if determined adversely, would have a material
effect on the business or financial position of the Corporation or the
Bank.






Item
4  -  Submission of Matters to a Vote of Security
Holders





No
matters were submitted for a vote of the Registrant’s shareholders during the
fourth quarter of fiscal 2007.





Part
II








Item
5  -  Market for the Registrant’s Common Equity and Related
Stockholder Matters and Issuer Purchases of Equity Securities





Until
March 27, 2007, the Corporation’s Common Stock traded on the OTC Bulletin Board
under the symbol “SSFN”.  As of March 28, 2007, the Corporation’s
Common Stock has been traded on the Nasdaq Stock Market also under the symbol
“SSFN”. As of December
31, 2007, there were 982 shareholders of record of the Common
Stock.





The
following table sets forth the quarterly high and low bid prices of the Common
Stock as reported on the OTC Bulletin Board and the Nasdaq Stock Market for the
quarterly periods presented.  The prices below reflect inter-dealer
prices, without retail markup, markdown or commissions, and may not represent
actual transactions.  The stock prices and cash dividends set forth
below also reflect adjustments related to 5% stock dividends paid in November,
2007 and 2006.








BidCashHigh
            
            
            Low
            
            
            DividendYear
      Ended December 31, 2007Fourth
      quarter
            
            $
            14.76
            
            
            $
            13.00
            
            
            $
            0.09Third
      quarter
            
            
            15.71
            
            
            
            13.10
            
            
            
            0.09Second
      quarter
            
            
            15.22
            
            
            
            12.67
            
            
            
            0.08First
      quarter
            
            
            13.10
            
            
            
            12.10
            
            
            
            0.08Year
      Ended December 31, 2006Fourth
      quarter
            
            $
            13.81
            
            
            $
            11.47
            
            
            $
            0.08Third
      quarter
            
            
            13.15
            
            
            
            11.79
            
            
            
            0.07Second
      quarter
            
            
            13.61
            
            
            
            11.79
            
            
            
            0.07First
      quarter
            
            
            14.51
            
            
            
            12.80
            
            
            
            0.07





The
Corporation may pay dividends as declared from time to time by the Corporation’s
Board of Directors out of funds legally available therefore, subject to certain
restrictions.  Since dividends from the Bank will be the Corporation’s
main source of income, any restriction on the Bank’s ability to pay dividends
will act as a restriction on the Corporation’s ability to pay
dividends.  Under the New Jersey Banking Act, the Bank may not pay a
cash dividend unless, following the payment of such dividend, the capital stock
of the Bank will be unimpaired and (i) the Bank will have a surplus of no less
than 50% of its capital stock or (ii) the payment of such dividend will not
reduce the surplus of the Bank.  In addition, the Bank cannot pay
dividends if doing so would reduce its capital below the regulatory imposed
minimums.





During
fiscal 2007, the Corporation paid quarterly cash dividends totaling $0.34 per
share for an annual dividend payout ratio of 39.4%.  During fiscal
2006, the Corporation paid quarterly cash dividends totaling $0.29 per share for
an annual dividend payout ratio of 32.2%.





Item
6  -  Selected Financial Data





The
information required by this item is incorporated by reference from page A-2 of
the Registrant’s Annual Report to Shareholders under the caption “Consolidated
Financial Summary of Selected Financial Data.”







Item
7  -  Management’s Discussion and Analysis of Financial
Condition and Results of Operations





The
information required by this item is incorporated by reference from page A-3 of
the Registrant’s Annual Report to Shareholders under the caption “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.”





Item
7A  -  Quantitative and Qualitative Disclosures About Market
Risk
 
 Not
applicable to smaller reporting companies.


Item
8  -  Financial Statements and Supplementary
Data





The
information required by this item is incorporated by reference from page A-20 of
the Registrant’s Annual Report to Shareholders under the caption “Consolidated
Statements of Financial Condition.”






Item
9  -  Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure





None.






Item
9A  -  Controls and Procedures








(a)
            Evaluation
      of internal controls and procedures.





Based on
their evaluation as of the end of the period covered by this Annual Report on
Form 10-K, our principal executive officer and principal financial officer have
concluded that our internal controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange
Act”)) are effective to ensure that information required to be disclosed by us
in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms.




(b)
            Management's
      Report on Internal Control over Financial
  Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) of the
Exchange Act. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements and can only provide
reasonable assurance with respect to financial statement preparation. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.





We
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2007. In making this assessment, we used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) inInternal
Control—Integrated Framework. Based on our assessment using those
criteria, our management (including our Chief Executive Officer and Principal
Accounting Officer) concluded that our internal control over financial reporting
was effective as of December 31, 2007.




This
Annual Report on Form 10-K does not include an attestation report of the
Corporation’s registered public accounting firm regarding internal control over
financial reporting.  Management’s report was not subject to attestation by
the Corporation’s registered public accounting firm pursuant to temporary rules
of the Securities and Exchange Commission that permit the Corporation to provide
only management’s report in this Annual Report on Form 10-K.





(b)
            Changes
      in internal controls.





There
were no significant changes in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.





Part
III





Item
10  -  Directors, Executive Officers and Corporate
Governance




Information
concerning directors and executive officers will be included in the definitive
Proxy Statement for the Corporation’s 2008 Annual Meeting of Shareholders under
the caption “Proposal I- Election of Directors” and information





concerning
compliance with Section 16(a) of the Exchange Act will be included under the
caption “Compliance with Section 16(a) Beneficial Ownership Reporting,” each of
which is incorporated herein by reference.  It is expected that such
Proxy Statement will be filed with the Securities and Exchange Commission no
later than April 30, 2008.





Code of
Ethics





The
Corporation has adopted a Code of Ethical Conduct for Senior Financial Managers
that applies to its principal executive officer, principal financial officer,
principal accounting officer, controller and any other person performing similar
functions.  The Corporation’s Code of Ethical Conduct for Senior
Financial Managers is posted on its website, www.asbnow.com.  The
Corporation intends to satisfy the disclosure requirement under Item 5.05 of
Form 8-K regarding an amendment to, or waiver from, a provision of its Code of
Ethical Conduct for Senior Financial Managers by filing an 8-K and by posting
such information on its website.





Audit
Committee and Audit Committee Financial Expert





The
members of our audit committee as of December 31, 2007 were Harold Dyer, John L.
Steen, Michael Westra and Howard Yeaton (Chairman).  The Audit
Committee determined that Michael Westra and Howard Yeaton were “audit committee
financial experts” as defined by the Securities and Exchange
Commission.   All members of our audit committee are
“independent” for purposes of Rule 4200(a)(15) of NASD’s listing
standards.








Item
11  -  Executive Compensation





Information
concerning executive compensation will be included in the definitive Proxy
Statement for the Corporation’s 2008 Annual Meeting of Shareholders under the
caption “Executive Compensation” which is incorporated herein by
reference.  It is expected that such Proxy Statement will be filed
with the Securities and Exchange Commission no later than April 30,
2008.








Item
12  -  Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters





The
following table provides information with respect to the equity securities that
are authorized for issuance under our compensation plans as of December 31,
2007:





Equity
Compensation Plan Information





Number
      of securities to be issued upon exercise of outstanding options, warrants and rights
            
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
            
            
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column (a))(a)
            
            
            (b)
            
            
            (c)Equity
      compensation plans approved by security holders
            
            
            93,863
            
            
            $
            10.49
            
            
            
            359,740Equity
      compensation plans not approved by security holders
            
            
            -
            
            
            $
            -
            
            
            
            603,360Total
            
            
            93,863
            
            
            $
            10.49
            
            
            
            963,100








The
equity compensation plans not approved by security holders are the Stock Bonus
Plan and the Directors Stock Plan.  The Stock Bonus Plan is intended
to provide incentives which will retain highly competent key management
employees of the Corporation by providing them with a bonus in the form of
shares of the common stock of the Corporation.  The Corporation has
not granted shares under this plan since 1998.  The Director Stock
Plan permits members of the Board of Directors to receive any monthly Board of
Directors’ fees in shares of the Corporation’s common stock, rather than in
cash. The





Corporation
issued 2,026 shares from treasury stock and purchased 3,017 shares in the open
market during 2006 for the benefit of the Director Stock Plan.





Information
concerning security ownership of certain beneficial owners and management will
be included in the definitive Proxy Statement for the Corporation’s 2008 Annual
Meeting of Shareholders under the caption “Stock Ownership of Management and
Principal Shareholders,” which is incorporated herein by
reference.  It is expected that such Proxy Statement will be filed
with the Securities and Exchange Commission no later than April 30,
2008.








Item
13  -  Certain Relationships and Related Transactions, and
Director Independence





Information
concerning certain relationships and related transactions will be included in
the definitive Proxy Statement for the Corporation’s 2008 Annual Meeting of
Shareholders under the captions “Proposal I – Election of Directors”
and  “Certain Relationships and Related Transactions,” which is
incorporated herein by reference.  It is expected that such Proxy
Statement will be filed with the Securities and Exchange Commission no later
than April 30, 2008.








Item
14  -  Principal Accountant Fees and Services





Information
concerning principal accountant fees and services will be included in the
definitive Proxy Statement for the Corporation’s 2008 Annual Meeting of
Shareholders under the caption “Fees Billed by Accountants During Fiscal 2007
and Fiscal 2006,” which is incorporated herein by reference.  It is
expected that such Proxy Statement which will be filed with the Securities and
Exchange Commission no later than April 30, 2008.








Part
IV





Item
15  -  Exhibits, Financial Statement Schedules





(a)  Exhibits





ExhibitNumber
            
            Description of Exhibits3(i)
            
            Certificate
      of Incorporation of the Corporation (1)3(ii)
            
            Bylaws
      of the Corporation (1)10(i)
            
            1995
      Incentive Stock Option Plan (1)10(ii)
            
            1995
      Stock Option Plan for Non-Employee Directors (1)10(iii)
            
            1995
      Employee Stock Purchase Plan (2)10
      (iv)
            
            Stock
      Bonus Plan (2)10
      (v)
            
            Stewardship
      Financial Corporation Dividend Reinvestment Plan (3)10
      (vi)
            
            Stewardship
      Financial Corporation Director Stock Plan (4)10(vii)
            
            Amended
      and Restated 1995 Stock Option Plan (5)10(viii)
            
            Amended
      and Restated Director Stock Plan (5)10(ix)
            
            Dividend
      Reinvestment Plan (6)10(x)
            
            2001
      Stock Option Plan  For Non-Employee
  Directors(7)10(xi)
            
            Dividend
      Reinvestment Plan (8)10(xii)
            
            2006
      Stock Option Plan for Non-Employee Directores (9)13
            
            Annual
      Report to Shareholders for the year ended December 31,
  200814
            
            Code
      of Ethics21
            
            Subsidiaries
      of the Registrant23.1
            
            Consent
      of Crowe Chizek and Company LLC31.1
            
            Certification
      of Chief Executive Officer pursuant to Section 302of
      the Sarbanes-Oxley Act of 2002.31.2
            
            Certification
      of Senior Vice President, Accounting pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            
            Certification
      of Chief Executive Officer and Senior Vice President, Accounting pursuant
      to Section 906 of the Sarbanes-Oxley Act of
  2002.


_____________________________________


(1)
            Incorporated
      by reference from Exhibits 5(B)(3)(i), 5(B)(3)(ii), 5(B)(3)(iii),
      5(B)(10)(a), 5(B)(10)(b), 5(B)(21) from the Corporation’s Registration
      Statement on Form 8-B, Registration No.  0-21855, filed December
      10, 1996.





(2)
            Incorporated
      by reference from Exhibits 4(c) to 23(d) from the Corporation’s
      Registration Statement on Form S-8, Registration No. 333-20793, filed
      January 31, 1997.





(3)
            Incorporated
      by reference from Exhibit 4(a) from the Corporation’s Registration
      Statement on Form S-3, Registration No. 333-20699, filed January 30,
      1997.





(4)
            Incorporated
      by reference from Exhibit 4(a) from the Corporation’s Registration
      Statement on Form S-8, Registration No. 333-31245,filed July 11,
      1997.





(5)
            Incorporated
      by reference from Exhibits 10(vii) and 10(viii) from the Corporation’s
      Annual Report on Form 10-KSB, filed March 31,
  1999.





(6)
            Incorporated
      by reference from Exhibit 4(a) from the Corporation’s Registration
      Statement on Form S-3, Registration No. 333-54738, filed January 31,
      2001.





(7)
            Incorporated
      by reference from Exhibit 4(b) from the Corporation’s Registration
      Statement on Form S-8, Registration No. 333-87842, filed May 8,
      2002.





(8)
            Incorporated
      by reference from Exhibit 4(a) from the Corporation’s Registration
      Statement on Form S-3, Registration No. 333-133632, filed April 28,
      2006.





(9)
            Incorporated
      by reference from Exhibit 5(a) from the Corporation’s Registration
      Statement on Form S-8, Registration No. 333-135462, filed June 29,
      2006.





SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.








STEWARDSHIP
      FINANCIAL CORPORATIONBy
      :
            /s/  Paul Van
      OstenbridgePaul
      Van OstenbridgeChief
      Executive OfficerDated:  March
      31, 2008





Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.








Name
            
            Title
            
            Date/s/  Paul Van
      Ostenbridge
            
            Chief
      Executive Officer
            
            March
      31, 2008Paul
      Van Ostenbridge
            
            (Principal
      Executive Officer)/s/  Julie E.
      Holland
            
            Senior
      Vice President, Accounting
            
            March
      31, 2008Julie
      E. Holland
            
            (Principal
      FinancialOfficer and
      Principal Accounting
      Officer)/s/  Harold
      Dyer
            
            Director
            
            March
      31, 2008Harold
      Dyer/s/  William
      Hanse
            
            Chairman
      of the Board
            
            March
      31, 2008William
      Hanse/s/  Margo
      Lane
            
            Director
            
            March
      31, 2008Margo
      Lane/s/  Arie
      Leegwater
            
            Director
            
            March
      31, 2008Arie
      Leegwater/s/  John L.
      Steen
            
            Director
            
            March
      31, 2008John
      L. Steen/s/  Robert
      Turner
            
            Secretary
      and Director
            
            March
      31, 2008Robert
      Turner/s/  William J.
      VanderEems
            
            Director
            
            March
      31, 2008William
      J. VanderEems/s/   Abe Van
      Wingerden
            
            Vice
      Chairman of the Board
            
            March
      31, 2008Abe
      Van Wingerden/s/  Michael
      Westra
            
            Director
            
            March
      31, 2008Michael
      Westra/s/  Howard
      Yeaton
            
            Director
            
            March
      31, 2008Howard
      Yeaton