**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C.  20549**

**FORM      10-Q**

| ý | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|

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

| Stewardship                Financial Corporation                      |
|-----------------------------------------------------------------------|
| (Exact                name of registrant as specified in its charter) |
|                                                                  |   |   |
| New                Jersey                                             |   | 22-3351447 |
| (State                or other jurisdiction of                        |   | (I.R.S.                Employer Identification No.) |
| incorporation                or organization)                         |   |   |
|                                                                  |   |   |
| 630                Godwin Avenue, Midland Park,  NJ         |   | 07432 |
| (Address                of principal executive offices)               |   | (Zip                Code) |

|                                                                                                             | (201)  444-7100                                                 |   |
|------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------|--------|
|                                                                                                             | (Registrant’s                telephone number, including area code) |   |
|                                                                                                             |                                                                      |   |
|                                                                                                             |                                                                      |   |
| (Former                name, former address and former fiscal year, if changed since last                report) |
|                                                                                                             |                                                                      |   |

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

----

----

**Stewardship      Financial Corporation**

**INDEX**

|                                                                                                                                                                                         | **PAGE**                             |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|
|                                                                                                                                                                                         | **NUMBER**                           |
| **PART                I  -  CONSOLIDATED FINANCIAL                INFORMATION**                                                                                          |                                 |
|                                                                                                                                                                                         |                                 |
| **ITEM                1  -   CONSOLIDATED FINANCIAL                STATEMENTS**                                                                                     |                                 |
|                                                                                                                                                                                         |                                 |
| Consolidated                Statements of Financial Condition at June 30, 2007                and December 31, 2006 (Unaudited)                                                         | 1                                    |
|                                                                                                                                                                                         |                                 |
| Consolidated                Statements of Income for the Six Months ended June                30, 2007 and 2006 (Unaudited)                                                                  | 2                                    |
|                                                                                                                                                                                         |                                 |
| Consolidated                Statements of Income for the Three Months ended                June 30, 2007 and 2006 (Unaudited)                                                                | 3                                    |
|                                                                                                                                                                                         |                                 |
| Consolidated                Statements of Cash Flows for the Six Months ended                June 30, 2007 and 2006 (Unaudited)                                                              | 4                                    |
|                                                                                                                                                                                         |                                 |
| Consolidated                Statement of Changes in Stockholders’ Equity for                the Six Months ended  June 30, 2007 and 2006                (Unaudited)          | 5                                    |
|                                                                                                                                                                                         |                                 |
| Notes                to Consolidated Financial Statements                (Unaudited)                                                                                                         | 6                -                13 |
|                                                                                                                                                                                         |                                 |
| **ITEM                2  -   MANAGEMENT’S DISCUSSION                AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS                OF  OPERATIONS** | 14                - 25               |
|                                                                                                                                                                                         |                                 |
| **ITEM                3 -   QUANTITATIVE AND QUALITATIVE                DISCLOSURE ABOUT MARKET RISK**                                                                        | 26                                   |
|                                                                                                                                                                                         |                                 |
| **ITEM                4 -    CONTROLS AND                PROCEDURES**                                                                                                    | 26                                   |
|                                                                                                                                                                                         |                                 |
| **PART                II  -  OTHER                INFORMATION**                                                                                                          |                                 |
|                                                                                                                                                                                         |                                 |
| **ITEM                1A.  RISK FACTORS**                                                                                                                                          | 27                                   |
|                                                                                                                                                                                         |                                 |
| **ITEM                6 – EXHIBITS**                                                                                                                                                   | 27                                   |
|                                                                                                                                                                                         |                                 |
| **SIGNATURES**                                                                                                                                                                               | 28                                   |
|                                                                                                                                                                                         |                                 |
| **EXHIBIT                INDEX**                                                                                                                                                             | 29                -32                |

----

*Index*

| **Stewardship                Financial Corporation and                Subsidiary**                        |   |
|-----------------------------------------------------------------------------------------------------------|--------|
| **Consolidated                Statements of Financial Condition****(Unaudited)**                          |   |
|                                                                                                      |   |   |   |   |   |   |
|                                                                                                      |   |   |   |   |   |   |
|                                                                                                      |   |   |   |   |   |   |
|                                                                                                      |   | **June                30,** |   |   | **December                31,** |   |
|                                                                                                      |   | **2007** |   |   | **2006** |   |
|                                                                                                      |   |   |   |   |   |   |
| **Assets**                                                                                                |   |   |   |   |   |   |
|                                                                                                      |   |   |   |   |   |   |
| Cash                and due from banks                                                                    |   | $ | 13,208,000 |   |   | $ | 14,861,000 |   |
| Other                interest-earning assets                                                              |   |   | 149,000 |   |   |   | 836,000 |   |
|        Cash                and cash equivalents                        |   |   | 13,357,000 |   |   |   | 15,697,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
| Securities                available for sale                                                              |   |   | 79,219,000 |   |   |   | 72,746,000 |   |
| Securities                held to maturity; estimated fair value                                          |   |   |   |   |   |   |   |   |
|     of                $39,199,000 (2007) and $38,881,000 (2006)                       |   |   | 39,864,000 |   |   |   | 39,163,000 |   |
| FHLB-NY                stock, at cost                                                                     |   |   | 1,827,000 |   |   |   | 1,899,000 |   |
| Loans,                net of allowance for loan losses of                                                 |   |   |   |   |   |   |   |   |
|     of                $ 4,181,000 (2007) and $4,101,000 (2006)                        |   |   | 379,472,000 |   |   |   | 365,443,000 |   |
| Mortgage                loans held for sale                                                               |   |   | 1,672,000 |   |   |   | 2,155,000 |   |
| Premises                and equipment, net                                                                |   |   | 7,469,000 |   |   |   | 7,098,000 |   |
| Accrued                interest receivable                                                                |   |   | 3,069,000 |   |   |   | 2,912,000 |   |
| Intangible                assets                                                                          |   |   | 86,000 |   |   |   | 102,000 |   |
| Other                real estate                                                                          |   |   | 385,000 |   |   |   | - |   |
| Bank                owned life insurance                                                                  |   |   | 8,111,000 |   |   |   | 8,522,000 |   |
| Other                assets                                                                               |   |   | 4,306,000 |   |   |   | 4,012,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
|        Total                assets                                     |   | $ | 538,837,000 |   |   | $ | 519,749,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
| **Liabilities                and stockholders' equity**                                                   |   |   |   |   |   |   |   |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
| **Liabilities**                                                                                           |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                 |   |   |   |   |   |   |   |   |
|     Noninterest-bearing                                                               |   | $ | 101,976,000 |   |   | $ | 92,105,000 |   |
|     Interest-bearing                                                                  |   |   | 349,502,000 |   |   |   | 342,118,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
|         Total                deposits                             |   |   | 451,478,000 |   |   |   | 434,223,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
| Other                borrowings                                                                           |   |   | 25,176,000 |   |   |   | 27,892,000 |   |
| Subordinated                debentures                                                                    |   |   | 7,217,000 |   |   |   | 7,217,000 |   |
| Securities                sold under agreements to repurchase                                             |   |   | 11,697,000 |   |   |   | 9,023,000 |   |
| Accrued                interest payable                                                                   |   |   | 1,867,000 |   |   |   | 1,721,000 |   |
| Accrued                expenses and other liabilities                                                     |   |   | 2,788,000 |   |   |   | 2,367,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
|         Total                liabilities                          |   |   | 500,223,000 |   |   |   | 482,443,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
| Commitments                and contingencies                                                              |   |   | - |   |   |   | - |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
| **Stockholders'                equity**                                                                   |   |   |   |   |   |   |   |   |
| Common                stock, no par value; 10,000,000 shares authorized;                                  |   |   |   |   |   |   |   |   |
|      5,060,038                and 5,017,919 shares issued and outstanding at     |   |   |   |   |   |   |   |   |
|     June                30, 2007 and December 31, 2006, respectively.                 |   |   | 31,348,000 |   |   |   | 31,148,000 |   |
| Retained                earnings                                                                          |   |   | 8,387,000 |   |   |   | 6,750,000 |   |
| Treasury                stock; 9,302 shares outstanding at June 30, 2007.                                 |   |   | (127,000 | ) |   |   | - |   |
| Accumulated                other comprehensive loss                                                       |   |   | (994,000 | ) |   |   | (592,000 | ) |
|                                                                                                      |   |   |   |   |   |   |   |   |
|         Total                stockholders' equity                 |   |   | 38,614,000 |   |   |   | 37,306,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
|         Total                liabilities and stockholders' equity |   | $ | 538,837,000 |   |   | $ | 519,749,000 |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
|                                                                                                      |   |   |   |   |   |   |   |   |
| See                notes to unaudited consolidated financial statements.                                  |   |   |   |   |   |   |   |   |

----

*Index*

| **Stewardship                  Financial Corporation and                  Subsidiary**                                                 |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Consolidated                  Statements of Income**                                                                                 |   |
| **(Unaudited)**                                                                                                                        |   |
|                                                                                                                                   |   |   |   |   |   |   |
|                                                                                                                                   |   |   |   |   |   |   |
|                                                                                                                                   |   | **Six                  Months Ended** |   |
|                                                                                                                                   |   | **June                  30,** |   |
|                                                                                                                                   |   | **2007** |   |   | **2006** |   |
| Interest                  income:                                                                                                      |   |   |   |   |   |   |
|      Loans                                                                                                    |   | $ | 13,285,000 |   |   | $ | 12,278,000 |   |
|      Securities                  held to maturity                                                             |   |   |   |   |   |   |   |   |
|        Taxable                                                                                      |   |   | 464,000 |   |   |   | 440,000 |   |
|        Non-taxable                                                                                  |   |   | 356,000 |   |   |   | 237,000 |   |
|      Securities                  available for sale                                                           |   |   |   |   |   |   |   |   |
|        Taxable                                                                                      |   |   | 1,837,000 |   |   |   | 1,285,000 |   |
|        Non-taxable                                                                                  |   |   | 30,000 |   |   |   | 13,000 |   |
|      FHLB                  dividends                                                                          |   |   | 58,000 |   |   |   | 47,000 |   |
|      Other                  interest-earning assets                                                           |   |   | 19,000 |   |   |   | 18,000 |   |
|           Total                  interest income                                     |   |   | 16,049,000 |   |   |   | 14,318,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Interest                  expense:                                                                                                     |   |   |   |   |   |   |   |   |
|      Deposits                                                                                                 |   |   | 5,621,000 |   |   |   | 3,792,000 |   |
|      Borrowed                  money                                                                          |   |   | 953,000 |   |   |   | 1,087,000 |   |
|           Total                  interest expense                                    |   |   | 6,574,000 |   |   |   | 4,879,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Net                  interest income before provision for loan losses                                                                  |   |   | 9,475,000 |   |   |   | 9,439,000 |   |
| Provision                  for loan losses                                                                                             |   |   | 190,000 |   |   |   | 160,000 |   |
| Net                  interest income after provision for loan losses                                                                   |   |   | 9,285,000 |   |   |   | 9,279,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Noninterest                  income:                                                                                                   |   |   |   |   |   |   |   |   |
|      Fees                  and service charges                                                                |   |   | 785,000 |   |   |   | 828,000 |   |
|      Bank                  owned life insurance                                                               |   |   | 160,000 |   |   |   | 154,000 |   |
|      Gain                  on sales of mortgage loans                                                         |   |   | 186,000 |   |   |   | 95,000 |   |
|      Merchant                  processing                                                                     |   |   | 717,000 |   |   |   | 562,000 |   |
|                     Life insurance proceeds                                                              |   |   | 459,000 |   |   |   |   – |   |
|      Miscellaneous                                                                                            |   |   | 195,000 |   |   |   | 263,000 |   |
|            Total                  noninterest income                            |   |   | 2,502,000 |   |   |   | 1,902,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Noninterest                  expenses:                                                                                                 |   |   |   |   |   |   |   |   |
|      Salaries                  and employee benefits                                                          |   |   | 3,644,000 |   |   |   | 3,332,000 |   |
|      Occupancy,                  net                                                                          |   |   | 716,000 |   |   |   | 607,000 |   |
|      Equipment                                                                                                |   |   | 457,000 |   |   |   | 489,000 |   |
|      Data                  processing                                                                         |   |   | 629,000 |   |   |   | 571,000 |   |
|      Advertising                                                                                              |   |   | 200,000 |   |   |   | 201,000 |   |
|      FDIC                  insurance premium                                                                  |   |   | 26,000 |   |   |   | 26,000 |   |
|      Amortization                  of intangible assets                                                       |   |   | 16,000 |   |   |   | 19,000 |   |
|      Charitable                  contributions                                                                |   |   | 368,000 |   |   |   | 362,000 |   |
|      Stationery                  and supplies                                                                 |   |   | 193,000 |   |   |   | 153,000 |   |
|      Merchant                  processing                                                                     |   |   | 650,000 |   |   |   | 514,000 |   |
|      Bank-card                  related services                                                              |   |   | 169,000 |   |   |   | 244,000 |   |
|      Miscellaneous                                                                                            |   |   | 1,109,000 |   |   |   | 1,123,000 |   |
|           Total                  noninterest expenses                                |   |   | 8,177,000 |   |   |   | 7,641,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Income                  before income tax expense                                                                                      |   |   | 3,610,000 |   |   |   | 3,540,000 |   |
| Income                  tax expense                                                                                                    |   |   | 1,070,000 |   |   |   | 1,264,000 |   |
| Net                  income                                                                                                            |   | $ | 2,540,000 |   |   | $ | 2,276,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Basic                  earnings per share                                                                                              |   | $ | 0.51 |   |   | $ | 0.45 |   |
| Diluted                  earnings per share                                                                                            |   | $ | 0.50 |   |   | $ | 0.45 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Weighted                  average number of common shares outstanding                                                                  |   |   | 5,029,621 |   |   |   | 5,008,239 |   |
| Weighted                  average number of diluted common                                                                             |   |   |   |   |   |   |   |   |
|      shares                  outstanding                                                                      |   |   | 5,062,418 |   |   |   | 5,060,994 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Share                  data has been restated to reflect a 5% stock dividend paid November                  15,                  2006. |   |   |   |   |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements.                                                             |   |   |   |   |   |   |   |   |

----

*Index*

| **Stewardship                  Financial Corporation and                  Subsidiary**                                                 |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Consolidated                  Statements of Income**                                                                                 |   |
| **(Unaudited)**                                                                                                                        |   |
|                                                                                                                                   |   |   |   |   |   |   |
|                                                                                                                                   |   |   |   |   |   |   |
|                                                                                                                                   |   | **Three                  Months Ended** |   |
|                                                                                                                                   |   | **June                  30,** |   |
|                                                                                                                                   |   | **2007** |   |   | **2006** |   |
| Interest                  income:                                                                                                      |   |   |   |   |   |   |
|      Loans                                                                                                    |   | $ | 6,715,000 |   |   | $ | 6,304,000 |   |
|      Securities                  held to maturity                                                             |   |   |   |   |   |   |   |   |
|        Taxable                                                                                      |   |   | 235,000 |   |   |   | 219,000 |   |
|        Non-taxable                                                                                  |   |   | 179,000 |   |   |   | 119,000 |   |
|      Securities                  available for sale                                                           |   |   |   |   |   |   |   |   |
|        Taxable                                                                                      |   |   | 930,000 |   |   |   | 648,000 |   |
|        Non-taxable                                                                                  |   |   | 16,000 |   |   |   | 6,000 |   |
|      FHLB                  dividends                                                                          |   |   | 32,000 |   |   |   | 27,000 |   |
|      Other                  interest-earning assets                                                           |   |   | 10,000 |   |   |   | 11,000 |   |
|           Total                  interest income                                     |   |   | 8,117,000 |   |   |   | 7,334,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Interest                  expense:                                                                                                     |   |   |   |   |   |   |   |   |
|      Deposits                                                                                                 |   |   | 2,861,000 |   |   |   | 2,015,000 |   |
|      Borrowed                  money                                                                          |   |   | 454,000 |   |   |   | 557,000 |   |
|           Total                  interest expense                                    |   |   | 3,315,000 |   |   |   | 2,572,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Net                  interest income before provision for loan losses                                                                  |   |   | 4,802,000 |   |   |   | 4,762,000 |   |
| Provision                  for loan losses                                                                                             |   |   | 180,000 |   |   |   | 110,000 |   |
| Net                  interest income after provision for loan losses                                                                   |   |   | 4,622,000 |   |   |   | 4,652,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Noninterest                  income:                                                                                                   |   |   |   |   |   |   |   |   |
|      Fees                  and service charges                                                                |   |   | 391,000 |   |   |   | 450,000 |   |
|      Bank                  owned life insurance                                                               |   |   | 82,000 |   |   |   | 74,000 |   |
|      Gain                  on sales of mortgage loans                                                         |   |   | 97,000 |   |   |   | 45,000 |   |
|      Merchant                  processing                                                                     |   |   | 352,000 |   |   |   | 296,000 |   |
|                     Life insurance proceeds                                                              |   |   | 459,000 |   |   |   | – |   |
|      Miscellaneous                                                                                            |   |   | 125,000 |   |   |   | 167,000 |   |
|            Total                  noninterest income                            |   |   | 1,506,000 |   |   |   | 1,032,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Noninterest                  expenses:                                                                                                 |   |   |   |   |   |   |   |   |
|      Salaries                  and employee benefits                                                          |   |   | 1,850,000 |   |   |   | 1,711,000 |   |
|      Occupancy,                  net                                                                          |   |   | 381,000 |   |   |   | 293,000 |   |
|      Equipment                                                                                                |   |   | 240,000 |   |   |   | 247,000 |   |
|      Data                  processing                                                                         |   |   | 322,000 |   |   |   | 277,000 |   |
|      Advertising                                                                                              |   |   | 124,000 |   |   |   | 114,000 |   |
|      FDIC                  insurance premium                                                                  |   |   | 13,000 |   |   |   | 13,000 |   |
|      Amortization                  of intangible assets                                                       |   |   | 8,000 |   |   |   | 9,000 |   |
|      Charitable                  contributions                                                                |   |   | 199,000 |   |   |   | 181,000 |   |
|      Stationery                  and supplies                                                                 |   |   | 110,000 |   |   |   | 77,000 |   |
|      Merchant                  processing                                                                     |   |   | 315,000 |   |   |   | 272,000 |   |
|      Bank-card                  related services                                                              |   |   | 74,000 |   |   |   | 123,000 |   |
|      Miscellaneous                                                                                            |   |   | 546,000 |   |   |   | 546,000 |   |
|           Total                  noninterest expenses                                |   |   | 4,182,000 |   |   |   | 3,863,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Income                  before income tax expense                                                                                      |   |   | 1,946,000 |   |   |   | 1,821,000 |   |
| Income                  tax expense                                                                                                    |   |   | 492,000 |   |   |   | 654,000 |   |
| Net                  income                                                                                                            |   | $ | 1,454,000 |   |   | $ | 1,167,000 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Basic                  earnings per share                                                                                              |   | $ | 0.29 |   |   | $ | 0.23 |   |
| Diluted                  earnings per share                                                                                            |   | $ | 0.29 |   |   | $ | 0.23 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Weighted                  average number of common shares outstanding                                                                  |   |   | 5,039,902 |   |   |   | 5,023,707 |   |
| Weighted                  average number of diluted common                                                                             |   |   |   |   |   |   |   |   |
|      shares                  outstanding                                                                      |   |   | 5,063,811 |   |   |   | 5,075,956 |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| Share                  data has been restated to reflect a 5% stock dividend paid November                  15,                  2006. |   |   |   |   |   |   |   |   |
|                                                                                                                                   |   |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements.                                                             |   |   |   |   |   |   |   |   |

----

*Index*

| **Stewardship                  Financial Corporation and                  Subsidiary**                                                                                                                                                                                                                                                                                                                 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Consolidated                  Statements of Cash Flows**                                                                                                                                                                                                                                                                                                                                             |   |
| **(Unaudited)**                                                                                                                                                                                                                                                                                                                                                                                        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | **Six                  Months Ended** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | **June                  30,**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   | **2007** |    | **2006** |   |
| **Cash                  flows from operating activities:**                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |
| Net                  income                                                                                                                                                                                                                                                                                                                                                                            |   | $ | 2,540,000 |   |   | $ | 2,276,000 |   |
| Adjustments                  to reconcile net income to                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |
|     net                  cash provided by operating activities:                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|         Depreciation                  and amortization of premises and equipment                                                                                                                                                                                                                                                                               |   |   | 388,000 |   |   |   | 379,000 |   |
|         Amortization                  of premiums and accretion of discounts, net                                                                                                                                                                                                                                                                              |   |   | 76,000 |   |   |   | 146,000 |   |
|         Accretion                  of deferred loan fees                                                                                                                                                                                                                                                                                                       |   |   | (59,000 | ) |   |   | (58,000 | ) |
|         Provision                  for loan losses                                                                                                                                                                                                                                                                                                             |   |   | 190,000 |   |   |   | 160,000 |   |
|         Originations                  of mortgage loans held for sale                                                                                                                                                                                                                                                                                          |   |   | (17,522,000 | ) |   |   | (9,383,000 | ) |
|         Proceeds                  from sale of mortgage loans                                                                                                                                                                                                                                                                                                  |   |   | 18,191,000 |   |   |   | 10,181,000 |   |
|         Gain                  on sale of loans                                                                                                                                                                                                                                                                                                                 |   |   | (186,000 | ) |   |   | (95,000 | ) |
|         Deferred                  income tax benefit                                                                                                                                                                                                                                                                                                           |   |   | (12,000 | ) |   |   | (49,000 | ) |
|         Amortization                  of intangible assets                                                                                                                                                                                                                                                                                                     |   |   | 16,000 |   |   |   | 19,000 |   |
|         Nonqualified                  stock option expense                                                                                                                                                                                                                                                                                                     |   |   | 26,000 |   |   |   | 24,000 |   |
|         Increase                  in bank owned life insurance                                                                                                                                                                                                                                                                                                 |   |   | (159,000 | ) |   |   | (155,000 | ) |
|         Life                  insurance proceeds                                                                                                                                                                                                                                                                                                               |   |   | (459,000 | ) |   |   | - |   |
|         Increase                  in accrued interest receivable                                                                                                                                                                                                                                                                                               |   |   | (156,000 | ) |   |   | (147,000 | ) |
|         Increase                  (decrease) in other assets                                                                                                                                                                                                                                                                                                   |   |   | (34,000 | ) |   |   | 48,000 |   |
|         Increase                  in accrued interest payable                                                                                                                                                                                                                                                                                                  |   |   | 146,000 |   |   |   | 236,000 |   |
|         Decrease                  in other liabilities                                                                                                                                                                                                                                                                                                         |   |   | (737,000 | ) |   |   | (730,000 | ) |
|                  Net                  cash provided by operating activities                                                                                                                                                                                                                                       |   |   | 2,249,000 |   |   |   | 2,852,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| **Cash                  flows from investing activities:**                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|     Purchase                  of securities available for sale                                                                                                                                                                                                                                                                                                                     |   |   | (12,952,000 | ) |   |   | (5,613,000 | ) |
|     Proceeds                  from maturities and principal repayments                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|           on                  securities available for sale                                                                                                                                                                                                                                                                                          |   |   | 6,954,000 |   |   |   | 6,595,000 |   |
|     Purchase                  of securities held to maturity                                                                                                                                                                                                                                                                                                                       |   |   | (4,513,000 | ) |   |   | (6,813,000 | ) |
|     Proceeds                  from maturities and principal repayments on                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
|           securities                  held to maturity                                                                                                                                                                                                                                                                                               |   |   | 3,617,000 |   |   |   | 5,668,000 |   |
|     Proceeds                  from calls on securities held to maturity                                                                                                                                                                                                                                                                                                            |   |   | 152,000 |   |   |   | - |   |
|     Purchase                  of FHLB-NY stock                                                                                                                                                                                                                                                                                                                                     |   |   | 72,000 |   |   |   | 224,000 |   |
|     Net                  increase in loans                                                                                                                                                                                                                                                                                                                                         |   |   | (14,221,000 | ) |   |   | (13,919,000 | ) |
|     Additional                  investment in other real estate owned                                                                                                                                                                                                                                                                                                              |   |   | (324,000 | ) |   |   | - |   |
|     Proceeds                  from life insurance payout                                                                                                                                                                                                                                                                                                                           |   |   | 1,030,000 |   |   |   | - |   |
|     Additions                  to premises and equipment                                                                                                                                                                                                                                                                                                                           |   |   | (759,000 | ) |   |   | (453,000 | ) |
|                  Net                  cash used in investing activities                                                                                                                                                                                                                                           |   |   | (20,944,000 | ) |   |   | (14,311,000 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| **Cash                  flows from financing activities:**                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|      Net                  increase (decrease) in noninterest-bearing deposits                                                                                                                                                                                                                                                                                                 |   |   | 9,871,000 |   |   |   | (4,138,000 | ) |
|      Net                  increase in interest-bearing deposits                                                                                                                                                                                                                                                                                                               |   |   | 7,384,000 |   |   |   | 19,628,000 |   |
|      Net                  increase in securities sold under agreements                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
|          to                  repurchase                                                                                                                                                                                                                                                                                                                   |   |   | 2,674,000 |   |   |   | 2,689,000 |   |
|      Net                  decrease in short term borrowings                                                                                                                                                                                                                                                                                                                   |   |   | (1,900,000 | ) |   |   | (5,900,000 | ) |
|      Payments                  on long term borrowings                                                                                                                                                                                                                                                                                                                        |   |   | (817,000 | ) |   |   | (790,000 | ) |
|      Cash                  dividends paid on common stock                                                                                                                                                                                                                                                                                                                     |   |   | (903,000 | ) |   |   | (348,000 | ) |
|      Payment                  of discount on dividend reinvestment plan                                                                                                                                                                                                                                                                                                       |   |   | (22,000 | ) |   |   | - |   |
|      Purchase                  of treasury stock                                                                                                                                                                                                                                                                                                                              |   |   | - |   |   |   | (103,000 | ) |
|      Options                  exercised                                                                                                                                                                                                                                                                                                                                       |   |   | 45,000 |   |   |   | 101,000 |   |
|      Tax                  benefit of stock options                                                                                                                                                                                                                                                                                                                            |   |   | 1,000 |   |   |   | 174,000 |   |
|      Issuance                  of common stock                                                                                                                                                                                                                                                                                                                                |   |   | 22,000 |   |   |   | 49,000 |   |
|      Net                  cash provided by financing activities                                                                                                                                                                                                                                                                                                               |   |   | 16,355,000 |   |   |   | 11,362,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
|      Net                  decrease in cash and cash equivalents                                                                                                                                                                                                                                                                                                               |   |   | (2,340,000 | ) |   |   | (97,000 | ) |
|      Cash                  and cash equivalents - beginning                                                                                                                                                                                                                                                                                                                   |   |   | 15,697,000 |   |   |   | 14,028,000 |   |
|      Cash                  and cash equivalents - ending                                                                                                                                                                                                                                                                                                                      |   | $ | 13,357,000 |   |   | $ | 13,931,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| **Supplemental                  disclosures of cash flow information:**                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |
|      Cash                  paid during the period for interest                                                                                                                                                                                                                                                                                                           |   |   | 6,428,000 |   |   |   | 4,643,000 |   |
|      Cash                  paid during the period for income taxes                                                                                                                                                                                                                                                                                                       |   |   | 1,194,000 |   |   |   | 1,500,000 |   |
|       Noncash                  investing activities - security purchases due brokers                                                                                                                                                                                                                                                                                     |   |   | 1,159,000 |   |   |   | - |   |
|                                                           -                  transfer of loan to ORE |   |   | 60,975 |   |   |   | - |   |
|       Noncash                  financing activities - issuance of common stock                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |
|           under                  dividend reinvestment plan                                                                                                                                                                                                                                                                                          |   |   | - |   |   |   | 412,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| *See                  notes to unaudited consolidated financial statements.*                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |

----

*Index*

| **Stewardship                  Financial Corporation and Subsidiary**                 |
|--------------------------------------------------------------------------------------------------------------------------|
| **Consolidated                  Statement of Changes in Stockholders' Equity**        |
| **(Unaudited)**                                                                       |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   | **For                  the Period Ended June 30, 2007**             |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Accumulated** |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Other** |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Comprehensive**  |   |   |
|                                                                                                                     |   | **Common                  Stock** |   |   | **Treasury                  Stock** |   |   | **Retained** |   | **Loss,**  |   |   |
|                                                                                                                     |   | **Shares** |   |   | **Amount** |   |   | **Shares** |   |   | **Amount** |   |   | **Earnings** |   | **Net**  | **Total** |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  -- December 31, 2006                                                                            |   |   | 5,017,919 |   |   | $ | 31,148,000 |   |   |   | - |   |   | $ | - |   |   | $ | 6,750,000 |   |   | $ | (592,000 | ) |   | $ | 37,306,000 |   |
| Cash                  dividends paid                                                                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (903,000 | ) |   |   | - |   |   |   | (903,000 | ) |
| Payment                  of discount on dividend                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     reinvestment                  plan                                                               |   |   | - |   |   |   | (22,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (22,000 | ) |
| Common                  stock issued under stock plans                                                                   |   |   | 1,810 |   |   |   | 22,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 22,000 |   |
| Stock                  option compensation expense                                                                       |   |   | - |   |   |   | 26,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 26,000 |   |
| Stock                  options exercised                                                                                 |   |   | 40,309 |   |   |   | 173,000 |   |   |   | (9,302 | ) |   |   | (127,000 | ) |   |   | - |   |   |   | - |   |   |   | 46,000 |   |
| Tax                  benefit on stock options exercised                                                                  |   |   |   | 1,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,000 |   |
| Comprehensive                  income:                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net                  income for the six months                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        ended                  June 30, 2007                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,540,000 |   |   |   | - |   |   |   | 2,540,000 |   |
| Unrealized                  holding losses on securities                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available                  for sale arising during the period                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     (net                  of tax benefit of $249,000)                                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (402,000 | ) |   |   | (402,000 | ) |
| Total                  comprehensive income, net of tax                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,138,000 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  -- June 30, 2007                                                                                |   |   | 5,060,038 |   |   | $ | 31,348,000 |   |   |   | (9,302 | ) |   | $ | (127,000 | ) |   | $ | 8,387,000 |   |   | $ | (994,000 | ) |   | $ | 38,614,000 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                           |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       |      |   |   |       |   |
|--------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|--------|-------------------------------------|--------|------------|--------------|--------|-----------------|------------|--------|--------|--------------|----------|---------------|-----------|--------|-----------|--------|-------------------------|-----------------|------------|-----------|--------|--------|------------|--------|
|                                                                           |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       |      |   |   |       |   |
|                                                                           |   | **For                  the Period Ended June 30, 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   | )         |   | $      | 33,384,000 |   |
| Cash                  dividends paid                                           |   |                                                                                                                                                    | -         |   |                                |   | -          |         |   |            | -          |   |   |         | -        |          |      |   | (760,000  | )      |                    |            | -          |      |   |   | (760,000   | )      |
| Common                  stock issued under dividend                            |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       |      |   |
|     reinvestment                  plan                     |   |                                                                                                                                                    | -         |   |                                |   | -          |         |   |            | 31,263     |   |   |         | 412,000  |          |      |   | -         |   |                    |            | -          |      |   |   | 412,000    |   |
| Common                  stock issued under stock plans                         |   |                                                                                                                                                    | -         |   |                                |   | -          |         |   |            | 3,544      |   |   |         | 49,000   |          |      |   | -         |   |                    |            | -          |      |   |   | 49,000     |   |
| Repurchase                  common stock                                       |   |                                                                                                                                                    | -         |   |                                |   | -          |         |   |            | (7,739     | )      |   |         | (103,000 | )             |      |   | -         |   |                    |            | -          |      |   |   | (103,000   | )      |
| Stock                  option compensation expense                             |   |                                                                                                                                                    | -         |   |                                |   | 24,000     |         |   |            | -          |   |   |         | -        |          |      |   | -         |   |                    |            | -          |      |   |   | 24,000     |   |
| Exercise                  of stock options                                     |   |                                                                                                                                                    | 37,523    |   |                                |   | 233,000    |         |   |            | (9,450     | )      |   |         | (132,000 | )             |      |   | -         |   |                    |            | -          |      |   |   | 101,000    |   |
| Tax                  benefit on stock options exercised                        |   |                                                                                                                                                    | -         |   |                                |   | 174,000    |         |   |            | -          |   |   |         | -        |          |      |   | -         |   |                    |            | -          |      |   |   | 174,000    |   |
| Comprehensive                  income:                                         |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       |      |   |   |       |   |
|    Net                  income for the six months               |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       |      |   |   |       |   |
|        ended                  June 30, 2006 |   |                                                                                                                                                    | -         |   |                                |   | -          |         |   |            | -          |   |   |         | -        |          |      |   | 2,276,000 |   |                    |            | -          |      |   |   | 2,276,000  |   |
| Unrealized                  holding losses on securities                       |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       |      |   |
| available                  for sale arising during the period                  |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       |      |   |
|     (net                  tax benefit of $331,000)         |   |                                                                                                                                                    | -         |   |                                |   | -          |         |   |            | -          |   |   |         | -        |          |      |   | -         |   |                    |            | (528,000   | )         |   |   | (528,000   | )      |
| Total                  comprehensive income, net of tax                        |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       | 1,748,000 |   |
|                                                                           |   |                                                                                                                                                    |      |   |                                |   |       |         |   |            |       |   |   |         |     |          |      |   |      |   |                    |            |       |      |   |   |       |   |
| Balance                  -- June 30, 2006                                      |   |                                                                                                                                                    | 5,064,806 |   |                                | $      | 28,642,000 |         |   |            | (23,942    | )      |   | $            | (330,000 | )             |      | $      | 8,163,000 |   |                    | $               | (1,446,000 | )         |   | $      | 35,029,000 |   |

|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  notes to unaudited consolidated financial statements. |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

*Index*

**Stewardship      Financial Corporation and Subsidiary**

**Notes      to Consolidated Financial Statements**

**June      30, 2007**

**(Unaudited)**

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

**Principles      of consolidation**

**Share-based      Payment Cost**

----

*Index*

|                                            |   | 2007                      |    |   | 2006                          |   |
|-------------------------------------------------|--------|---------------------------|---------|--------|-------------------------------|--------|
|                                            |   |                      |    |   | Weighted                      |   |   |   |   |   | Weighted |   |
|                                            |   |                      |    |   | Average                       |   |   |   |   |   | Average |   |
|                                            |   | Shares                    |    |   | Exercise                Price |   |   | Shares |   |   | Exercise                Price |   |
|                                            |   |                      |    |   |                          |   |   |   |   |   |   |   |
| Outstanding                at beginning of year |   |                      | 75,422  |   |                          | $      | 5.98 |   |   |   | 75,989 |   |   | $ | 6.03 |   |
| Granted                                         |   |                      | -       |   |                          |   | - |   |   |   | - |   |   |   | - |   |
| Exercised                                       |   |                      | 39,259  |   |                          |   | 4.05 |   |   |   | - |   |   |   | - |   |
| Forfeited                                       |   |                      | 572     |   |                          |   | 12.89 |   |   |   | 486 |   |   |   | 12.96 |   |
| Outstanding                at end of period     |   |                      | 35,591  |   |                          | $      | 8.01 |   |   |   | 75,502 |   |   | $ | 5.99 |   |
| Options                exercisable              |   |                      | 35,591  |   |                          |   |   |   |   |   | 75,502 |   |   |   |   |   |
| Weighted-average                remaining       |   |                      |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| contractual                life                 |   | 3.05                years |    |   |                          |   |   |   | 2.21                years |   |   |   |   |   |
| Aggregate                intrinsic value        |   | $                         | 249,000 |   |                          |   |   |   |   | $ | 519,000 |   |   |   |   |   |

----

*Index*

| Dividend                yield          | 2.25%                  |
|----------------------------------------|------------------------|
| Expected                volatility     | 36.72%                 |
| Risk-free                interest rate | 5.21%                  |
| Expected                life           | 6                years |

|                                             |   | 2007       |    |   | 2006           |   |
|--------------------------------------------------|--------|---------------------------|---------|--------|-------------------------------|--------|
|                                             |   |                      |    |   | Weighted                      |   |   |   |   |   | Weighted |   |
|                                             |   |                      |    |   | Average                       |   |   |   |   |   | Average |   |
|                                             |   | Shares                    |    |   | Exercise                Price |   |   | Shares |   |   | Exercise                Price |   |
|                                             |   |                      |    |   |                          |   |   |   |   |   |   |   |
| Outstanding                at beginning of year  |   |                      | 57,860  |   |                          | $      | 12.96 |   |   |   | 45,568 |   |   | $ | 7.12 |   |
| Granted                                          |   |                      | -       |   |                          |   | - |   |   |   | 52,500 |   |   |   | 12.86 |   |
| Exercised                                        |   |                      | 1,050   |   |                          |   | 12.86 |   |   |   | 37,523 |   |   |   | 6.20 |   |
| Expired                                          |   |                      | -       |   |                          |   | - |   |   |   | 2,685 |   |   |   | 6.20 |   |
| Outstanding                at end of period      |   |                      | 56,810  |   |                          | $      | 12.96 |   |   |   | 57,860 |   |   | $ | 12.96 |   |
| Options                exercisable               |   |                      | 14,810  |   |                          |   |   |   |   |   | 5,360 |   |   |   |   |   |
| Weighted-average                remaining        |   |                      |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| contractual                life                  |   | 4.73                years |    |   |                          |   |   |   | 5.45                years |   |   |   |   |   |
| Aggregate                intrinsic value         |   | $                         | 116,000 |   |                          |   |   |   |   | $ | - |   |   |   |   |   |
| Weighted-average                fair value of    |   |                      |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| options                granted during the period |   |                      |    |   |                          |   |   |   |   | $ | 4.55 |   |   |   |   |   |

**Note      2.   Basis of presentation**

----

*Index*

**Stewardship      Financial Corporation and Subsidiary**

**Notes      to Consolidated Financial Statements Continued**

**(Unaudited)**

**Note      3.   Securities Available for Sale**

|                                                               |   | June                  30, 2007       |       |
|--------------------------------------------------------------------|--------|--------------------------------------------------------------------|------------|
|                                                               |   |                                                               |       |   | Gross |   |   | Gross |   |
|                                                               |   | Fair                                                               |       |   | Unrealized |   |   | Unrealized |   |
|                                                               |   | Value                                                              |       |   | Holding                  Gains |   |   | Holding                  Losses |   |
|                                                               |   |                                                               |       |   |   |   |   |   |   |
| U.S.                  government-sponsored agencies                |   | $                                                             | 39,432,000 |   |   | $  | 14,000 |   |   | $  | 488,000 |   |
| Obligations                  of state and political                |   |                                                               |       |   |   |   |   |   |   |   |   |   |
|          subdivisions |   |                                                               | 2,402,000  |   |   |   | - |   |   |   | 70,000 |   |
| Mortgage-backed                  securities                        |   |                                                               | 36,243,000 |   |   |   | 5,000 |   |   |   | 1,038,000 |   |
|     Other                  securities          |   |                                                               | 1,142,000  |   |   |   | - |   |   |   | 44,000 |   |
|                                                               |   | $                                                                  | 79,219,000 |   |   | $ | 19,000 |   |   | $ | 1,640,000 |   |

|                                                               |   | December                  31, 2006       |       |
|--------------------------------------------------------------------|--------|------------------------------------------------------------------------|------------|
|                                                               |   |                                                                   |       |   | Gross |   |   | Gross |   |
|                                                               |   | Amortized                                                              |       |   | Unrealized |   |   | Unrealized |   |
|                                                               |   | Cost                                                                   |       |   | Holding                  Gains |   |   | Holding                  Losses |   |
|                                                               |   |                                                                   |       |   |   |   |   |   |   |
| U.S.                  Treasury securities                          |   |                                                                   |       |   |   |   |   |   |   |
| U.S.                  government-sponsored agencies                |   | $                                                                      | 32,117,000 |   |   | $ | 28,000 |   |   | $ | 347,000 |   |
| Obligations                  of state and political                |   |                                                                   |       |   |   |   |   |   |   |   |   |   |
|          subdivisions |   |                                                                   | 1,823,000  |   |   |   | - |   |   |   | 30,000 |   |
| Mortgage-backed                  securities                        |   |                                                                   | 37,707,000 |   |   |   | 40,000 |   |   |   | 641,000 |   |
|     Other                  securities          |   |                                                                   | 1,099,000  |   |   |   | - |   |   |   | 21,000 |   |
|                                                               |   | $                                                                      | 72,746,000 |   |   | $ | 68,000 |   |   | $ | 1,039,000 |   |

**Note      4.   Securities Held to Maturity**

|                                                               |   | June                    30, 2007 |       |
|--------------------------------------------------------------------|--------|----------------------------------|------------|
|                                                               |   |                             |       |   | Gross |   |   | Gross |   |   |   |   |
|                                                               |   | Carrying                         |       |   | Unrecognized |   |   | Unrecognized |   |   | Fair |   |
|                                                               |   | Value                            |       |   | Holding                    Gains |   |   | Holding                    Losses |   |   | Value |   |
|                                                               |   |                             |       |   |   |   |   |   |   |   |   |   |
| U.S.                    Treasury securities                        |   | $                                | 501,000    |   |   | $ | - |   |   | $ | 3,000 |   |   | $ | 498,000 |   |
| U.S.                    government-sponsored agencies              |   |                             | 11,275,000 |   |   |   | 6,000 |   |   |   | 127,000 |   |   |   | 11,154,000 |   |
| Obligations                    of state and political              |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          subdivisions |   |                             | 21,549,000 |   |   |   | 2,000 |   |   |   | 398,000 |   |   |   | 21,153,000 |   |
| Mortgage-backed                    securities                      |   |                             | 6,524,000  |   |   |   | 19,000 |   |   |   | 164,000 |   |   |   | 6,379,000 |   |
|     Other                    securities        |   |                             | 15,000     |   |   |   | - |   |   |   | - |   |   |   | 15,000 |   |
|                                                               |   | $                                | 39,864,000 |   |   | $ | 27,000 |   |   | $ | 692,000 |   |   | $ | 39,199,000 |   |

|                                                               |   |                               |       |
|--------------------------------------------------------------------|--------|------------------------------------|------------|
|                                                               |   | December                  31, 2006 |       |
|                                                               |   |                               |       |   | Gross |   |   | Gross |   |   |   |   |
|                                                               |   | Carrying                           |       |   | Unrecognized |   |   | Unrecognized |   |   | Fair |   |
|                                                               |   | Value                              |       |   | Holding                  Gains |   |   | Holding                  Losses |   |   | Value |   |
|                                                               |   |                               |       |   |   |   |   |   |   |   |   |   |
| U.S.                  Treasury securities                          |   | $                                  | 502,000    |   |   | $ | - |   |   | $ | 2,000 |   |   | $ | 500,000 |   |
| U.S.                  government-sponsored agencies                |   |                               | 10,776,000 |   |   |   | 8,000 |   |   |   | 109,000 |   |   |   | 10,675,000 |   |
| Obligations                  of state and political                |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          subdivisions |   |                               | 20,516,000 |   |   |   | 53,000 |   |   |   | 154,000 |   |   |   | 20,415,000 |   |
| Mortgage-backed                  securities                        |   |                               | 7,369,000  |   |   |   | 32,000 |   |   |   | 110,000 |   |   |   | 7,291,000 |   |
|                                                               |   | $                                  | 39,163,000 |   |   | $ | 93,000 |   |   | $ | 375,000 |   |   | $ | 38,881,000 |   |

----

*Index*

**Stewardship        Financial Corporation and Subsidiary**

**Notes        to Consolidated Financial Statements Continued**

**(Unaudited)**

**Note        5.   Loans**

|                                                                                                     |   | June                    30, |        |   | December                    31, |   |
|----------------------------------------------------------------------------------------------------------|--------|-----------------------------|-------------|--------|---------------------------------|--------|
|                                                                                                     |   | 2007                        |        |   | 2006                            |   |
|                                                                                                     |   |                        |        |   |                            |   |
|                                                                                                     |   |                        |        |   |                            |   |
| Mortgage                                                                                                 |   |                        |        |   |                            |   |
|      Residential                                                                |   | $                           | 47,394,000  |   |                            | $      | 47,020,000 |   |
|      Commercial                                                                 |   |                        | 179,629,000 |   |                            |   | 177,411,000 |   |
| Commercial                                                                                               |   |                        | 84,761,000  |   |                            |   | 72,606,000 |   |
| Equity                                                                                                   |   |                        | 19,451,000  |   |                            |   | 20,010,000 |   |
| Installment                                                                                              |   |                        | 52,518,000  |   |                            |   | 52,389,000 |   |
| Other                                                                                                    |   |                        | 325,000     |   |                            |   | 560,000 |   |
|         Total                    loans                           |   |                        | 384,078,000 |   |                            |   | 369,996,000 |   |
|                                                                                                     |   |                        |        |   |                            |   |   |   |
| Less:  Deferred                    loan fees                                                   |   |                        | 425,000     |   |                            |   | 452,000 |   |
|           Allowance                    for loan losses |   |                        | 4,181,000   |   |                            |   | 4,101,000 |   |
|                                                                                                     |   |                        | 4,606,000   |   |                            |   | 4,553,000 |   |
|                                                                                                     |   |                        |        |   |                            |   |   |   |
|         Loans,                    net                            |   | $                           | 379,472,000 |   |                            | $      | 365,443,000 |   |

|                                                                      |   |                                         |      |   |   |   |      |   |
|---------------------------------------------------------------------------|--------|----------------------------------------------|-----------|--------|--------|--------|-----------|--------|
|                                                                      |   |                                         |      |   |   |   |      |   |
| **Note                    6.   Allowance for loan losses** |   |                                         |      |   |   |   |      |   |
|                                                                      |   |                                         |      |   |   |   |      |   |
|                                                                      |   |                                         |      |   |   |   |      |   |
|                                                                      |   | Six                    Months Ended June 30, |      |
|                                                                      |   | 2007                                         |      |   | 2006   |   |
|                                                                      |   |                                         |      |   |   |   |      |   |
| Balance,                    beginning of period                           |   | $                                            | 4,101,000 |   |   | $      | 3,847,000 |   |
| Provision                    charged to operations                        |   |                                         | 190,000   |   |   |   | 160,000   |   |
| Recoveries                    of loans charged off                        |   |                                         | 5,000     |   |   |   | 24,000    |   |
| Loans                    charged off                                      |   |                                         | (115,000  | )      |   |   | (20,000   | )      |
|                                                                      |   |                                         |      |   |   |   |      |   |
| Balance,                    end of period                                 |   | $                                            | 4,181,000 |   |   | $      | 4,011,000 |   |

----

*Index*

**Stewardship        Financial Corporation and Subsidiary**

**Notes        to Consolidated Financial Statements Continued**

**(Unaudited)**

**Note        7.  Loan Impairment**

|                                                                               |   | June                  30, |         |   | December                  31, |   |
|------------------------------------------------------------------------------------|--------|---------------------------|--------------|--------|-------------------------------|--------|
|                                                                               |   | 2007                      |    | 2006   |                          |
|                                                                               |   |                      |         |   |                          |   |
| Impaired                  loans                                                    |   |                      |         |   |                          |   |
|     With                  related allowance for loan losses    |   | $                         | 101,000      |   |                          | $      | 223,000 |   |
|     Without                  related allowance for loan losses |   |                      | 199,000      |   |                          |   | 221,000 |   |
| Total                  impaired loans                                              |   | $                         | 300,000      |   |                          | $      | 444,000 |   |
|                                                                               |   |                      |         |   |                          |   |   |   |
| Related                  allowance for loan losses                                 |   | $                         | 25,000       |   |                          | $      | 110,000 |   |

----

*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”**

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

**SFAS      No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities –Including an amendment of FASB Statement No. 115”**

----

*Index*

**Note      9.   Earnings Per Share**

|                                                  |   | Three                Months Ended                     |   |   | Six                Months Ended |   |
|-------------------------------------------------------|--------|-------------------------------------------------------|--------|--------|---------------------------------|--------|
|                                                  |   | June                30,                               |   |   | June                30,         |   |
|                                                  |   | 2007                                                  |   |   | 2006                            |   |   | 2007 |   |   | 2006 |   |
|                                                  |   | (Dollars and                shares in thousands) |   |
| Net                income                             |   | $                                                     | 1,454  |   |                            | $      | 1,167 |   |   | $ | 2,540 |   |   | $ | 2,276 |   |
|                                                  |   |                                                  |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                average shares                |   |                                                  | 5,040  |   |                            |   | 5,024 |   |   |   | 5,030 |   |   |   | 5,008 |   |
| Effect                of dilutive stock options       |   |                                                  | 24     |   |                            |   | 52 |   |   |   | 32 |   |   |   | 53 |   |
| Total                weighted average dilutive shares |   |                                                  | 5,064  |   |                            |   | 5,076 |   |   |   | 5,062 |   |   |   | 5,061 |   |
|                                                  |   |                                                  |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share               |   | $                                                     | 0.29   |   |                            | $      | 0.23 |   |   | $ | 0.51 |   |   | $ | 0.45 |   |
| Diluted                earnings per share             |   | $                                                     | 0.29   |   |                            | $      | 0.23 |   |   | $ | 0.50 |   |   | $ | 0.45 |   |

**Note      10.  Comprehensive Income**

----

*Index*

**Item       2.**

**Stewardship      Financial Corporation**

**Management’s      Discussion and Analysis of**

**Financial      Condition and Results of Operations**

**Critical        Accounting Policies and Estimates**

----

*Index*

**Financial        Condition**

----

*Index*

**Results          of Operations**

**Six          Months Ended June 30, 2007 and 2006**

----

*Index*

| Analysis                    of Net Interest Income (Unaudited) |
|----------------------------------------------------------------|
|                                                           |

| For                    the Six Months Ended June 30, |
|------------------------------------------------------|
|                                                 |

|                                                               |   |    2007                           |    |   |    2006 |   |
|--------------------------------------------------------------------|--------|-----------------------------------------------------------------|---------|--------|------------------------|--------|
|                                                               |   |                                                            |    |   |                   |   |   | Average |   |   |   |   |   |   |   |   | Average |   |
|                                                               |   |                                                            |    |   | Interest               |   |   | Rates |   |   |   |   |   | Interest |   |   | Rates |   |
|                                                               |   | Average                                                         |    |   | Income/                |   |   | Earned/ |   |   | Average |   |   | Income/ |   |   | Earned/ |   |
|                                                               |   | Balance                                                         |    |   | Expense                |   |   | Paid |   |   | Balance |   |   | Expense |   |   | Paid |   |
|                                                               |   |                    (Dollars                  in thousands) |    |
| **Assets**                                                         |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets:                          |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                  (1)                                         |   | $                                                               | 374,235 |   |                   | $      | 13,285 |   |   |   | 7.16 | % |   | $ | 352,037 |   |   | $ | 12,278 |   |   |   | 7.03 | % |
| Taxable                  investment securities (1)                 |   |                                                            | 91,293  |   |                   |   | 2,359 |   |   |   | 5.21 |   |   |   | 85,874 |   |   |   | 1,772 |   |   |   | 4.16 |   |
| Tax-exempt                  investment securities (1) (2)          |   |                                                            | 22,267  |   |                   |   | 559 |   |   |   | 5.02 |   |   |   | 16,614 |   |   |   | 364 |   |   |   | 4.38 |   |
| Other                  interest-earning assets                     |   |                                                            | 490     |   |                   |   | 19 |   |   |   | 7.82 |   |   |   | 432 |   |   |   | 18 |   |   |   | 8.40 |   |
| Total                  interest-earning assets                     |   |                                                            | 488,285 |   |                   |   | 16,222 |   |   |   | 6.70 |   |   |   | 454,957 |   |   |   | 14,432 |   |   |   | 6.40 |   |
|                                                               |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning                  assets:                      |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                  for loan losses                         |   |                                                            | (4,111  | )      |                   |   |   |   |   |   |   |   |   |   | (3,959 | ) |   |   |   |   |   |   |   |   |
| Other                  assets                                      |   |                                                            | 34,078  |   |                   |   |   |   |   |   |   |   |   |   | 31,517 |   |   |   |   |   |   |   |   |   |
| Total                  assets                                      |   | $                                                               | 518,252 |   |                   |   |   |   |   |   |   |   |   | $ | 482,515 |   |   |   |   |   |   |   |   |   |
|                                                               |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Stockholders' Equity**          |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                     |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  demand deposits                  |   | $                                                               | 121,042 |   |                   | $      | 1,379 |   |   |   | 2.30 | % |   | $ | 116,764 |   |   | $ | 887 |   |   |   | 1.53 | % |
| Savings                  deposits                                  |   |                                                            | 37,642  |   |                   |   | 141 |   |   |   | 0.76 |   |   |   | 43,858 |   |   |   | 127 |   |   |   | 0.58 |   |
| Time                  deposits                                     |   |                                                            | 182,482 |   |                   |   | 4,101 |   |   |   | 4.53 |   |   |   | 147,764 |   |   |   | 2,778 |   |   |   | 3.79 |   |
| Repurchase                  agreements                             |   |                                                            | 9,862   |   |                   |   | 224 |   |   |   | 4.58 |   |   |   | 6,068 |   |   |   | 125 |   |   |   | 4.15 |   |
| FHLB                  Borrowing                                    |   |                                                            | 22,049  |   |                   |   | 485 |   |   |   | 4.44 |   |   |   | 33,286 |   |   |   | 719 |   |   |   | 4.36 |   |
| Subordinated                  debenture                            |   |                                                            | 7,217   |   |                   |   | 244 |   |   |   | 6.82 |   |   |   | 7,217 |   |   |   | 243 |   |   |   | 6.79 |   |
| Total                  interest-bearing liabilities                |   |                                                            | 380,294 |   |                   |   | 6,574 |   |   |   | 3.49 |   |   |   | 354,957 |   |   |   | 4,879 |   |   |   | 2.77 |   |
| Non-interest-bearing                  liabilities:                 |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                  deposits                                   |   |                                                            | 95,181  |   |                   |   |   |   |   |   |   |   |   |   | 89,375 |   |   |   |   |   |   |   |   |   |
| Other                  liabilities                                 |   |                                                            | 4,565   |   |                   |   |   |   |   |   |   |   |   |   | 3,828 |   |   |   |   |   |   |   |   |   |
| Stockholders'                  equity                              |   |                                                            | 38,212  |   |                   |   |   |   |   |   |   |   |   |   | 34,355 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and stockholders' equity        |   | $                                                               | 518,252 |   |                   |   |   |   |   |   |   |   |   | $ | 482,515 |   |   |   |   |   |   |   |   |   |
|                                                               |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income (taxable equivalent basis)    |   |                                                            |    |   |                   | $      | 9,648 |   |   |   |   |   |   |   |   |   |   | $ | 9,553 |   |   |   |   |   |
| Tax                  equivalent adjustment                         |   |                                                            |    |   |                   |   | (173 | ) |   |   |   |   |   |   |   |   |   |   | (114 | ) |   |   |   |   |
| Net                  interest income                               |   |                                                            |    |   |                   |   | 9,475 |   |   |   |   |   |   |   |   |   |   |   | 9,439 |   |   |   |   |   |
|                                                               |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest spread (taxable equivalent basis)    |   |                                                            |    |   |                   |   |   |   |   |   | 3.21 | % |   |   |   |   |   |   |   |   |   |   | 3.63 | % |
|                                                               |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  yield on interest-earning                     |   |                                                            |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   assets                  (taxable equivalent basis) (3) |   |                                                            |    |   |                   |   |   |   |   |   | 3.98 | % |   |   |   |   |   |   |   |   |   |   | 4.23 | % |

|      (1)                          For purpose of these calculations, nonaccruing loans are included                    in                    the average balance.  Fees are included in loan                    interest.  Loans and total interest-earning assets are net of                    unearned income.  Securities are included at amortized                    cost.   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      (2)                          The tax equivalent adjustments are based on a marginal tax                    rate of 34%.                                                                                                                                                                                                               |
|      (3)                          Net interest income (taxable equivalent basis) divided by average                    interest-earning assets.                                                                                                                                                                                                      |

----

*Index*

----

*Index*

----

*Index*

**Results        of Operations**

**Three        Months Ended June 30, 2007 and 2006**

----

*Index*

|                                                                    |   | Analysis                        of Net Interest Income (Unaudited) For                        the Three Months Ended June 30,  |    |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                    |   | 2007                                                                                                                                     |    | 2006       |   |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   | Average |   |   |   |   |   |   |   | Average |   |
|                                                                    |   |                                                                                                                                     |    |   | Interest |   |   | Rates |   |   |   |   | Interest |   |   | Rates |   |
|                                                                    |   | Average                                                                                                                                  |    |   | Income/ |   |   | Earned/ |   | Average |   |   | Income/ |   |   | Earned/ |   |
|                                                                    |   | Balance                                                                                                                                  |    |   | Expense |   |   | Paid |   | Balance |   |   | Expense |   |   | Paid |   |
|                                                                    |   | (Dollars                        in thousands)                                |    |
| **Assets**                                                              |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                        assets:                         |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                        (1)                                        |   | $                                                                                                                                        | 376,149 |   |   | $ | 6,715 |   |   |   | 7.16 | % |   | $ | 355,341 |   |   | $ | 6,304 |   |   |   | 7.12 | % |
| Taxable                        investment securities (1)                |   |                                                                                                                                     | 91,744  |   |   |   | 1,197 |   |   |   | 5.23 |   |   |   | 85,118 |   |   |   | 894 |   |   |   | 4.21 |   |
| Tax-exempt                        investment securities (1) (2)         |   |                                                                                                                                     | 22,344  |   |   |   | 283 |   |   |   | 5.07 |   |   |   | 16,413 |   |   |   | 182 |   |   |   | 4.44 |   |
| Other                        interest-earning assets                    |   |                                                                                                                                     | 562     |   |   |   | 10 |   |   |   | 7.14 |   |   |   | 597 |   |   |   | 11 |   |   |   | 7.39 |   |
| Total                        interest-earning assets                    |   |                                                                                                                                     | 490,799 |   |   |   | 8,205 |   |   |   | 6.71 |   |   |   | 457,469 |   |   |   | 7,391 |   |   |   | 6.48 |   |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning                        assets:                     |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                        for loan losses                        |   |                                                                                                                                     | (4,121  | ) |   |   |   |   |   |   |   |   |   |   | (3,986 | ) |   |   |   |   |   |   |   |   |
| Other                        assets                                     |   |                                                                                                                                     | 34,559  |   |   |   |   |   |   |   |   |   |   |   | 32,761 |   |   |   |   |   |   |   |   |   |
| Total                        assets                                     |   | $                                                                                                                                        | 521,237 |   |   |   |   |   |   |   |   |   |   | $ | 486,244 |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                        and Stockholders' Equity**         |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                        liabilities:                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                        demand deposits                 |   | $                                                                                                                                        | 122,565 |   |   | $ | 719 |   |   |   | 2.35 |                        % |   | $ | 114,840 |   |   | $ | 481 |   |   |   | 1.68 | % |
| Savings                        deposits                                 |   |                                                                                                                                     | 38,240  |   |   |   | 71 |   |   |   | 0.74 |   |   |   | 43,084 |   |   |   | 63 |   |   |   | 0.59 |   |
| Time                        deposits                                    |   |                                                                                                                                     | 182,565 |   |   |   | 2,071 |   |   |   | 4.55 |   |   |   | 151,860 |   |   |   | 1,471 |   |   |   | 3.89 |   |
| Repurchase                        agreements                            |   |                                                                                                                                     | 10,531  |   |   |   | 121 |   |   |   | 4.61 |   |   |   | 6,515 |   |   |   | 70 |   |   |   | 4.31 |   |
| FHLB                        Borrowing                                   |   |                                                                                                                                     | 19,568  |   |   |   | 211 |   |   |   | 4.33 |   |   |   | 32,842 |   |   |   | 365 |   |   |   | 4.46 |   |
| Subordinated                        debenture                           |   |                                                                                                                                     | 7,217   |   |   |   | 122 |   |   |   | 6.78 |   |   |   | 7,217 |   |   |   | 122 |   |   |   | 6.78 |   |
| Total                        interest-bearing liabilities               |   |                                                                                                                                     | 380,686 |   |   |   | 3,315 |   |   |   | 3.49 |   |   |   | 356,358 |   |   |   | 2,572 |   |   |   | 2.89 |   |
| Non-interest-bearing                        liabilities:                |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                        deposits                                  |   |                                                                                                                                     | 97,434  |   |   |   |   |   |   |   |   |   |   |   | 91,370 |   |   |   |   |   |   |   |   |   |
| Other                        liabilities                                |   |                                                                                                                                     | 4,573   |   |   |   |   |   |   |   |   |   |   |   | 3,851 |   |   |   |   |   |   |   |   |   |
| Stockholders'                        equity                             |   |                                                                                                                                     | 38,544  |   |   |   |   |   |   |   |   |   |   |   | 34,665 |   |   |   |   |   |   |   |   |   |
| Total                        liabilities and stockholders' equity       |   | $                                                                                                                                        | 521,237 |   |   |   |   |   |   |   |   |   |   | $ | 486,244 |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        interest income (taxable equivalent basis)   |   |                                                                                                                                     | $       | 4,890 |   |   |   |   |   |   |   |   |   |   | $ | 4,819 |   |   |   |   |   |
| Tax                        equivalent adjustment                        |   |                                                                                                                                     |    |   |   |   | (88 | ) |   |   |   |   |   |   |   |   |   |   | (57 | ) |   |   |   |   |
| Net                        interest income                              |   |                                                                                                                                     |    |   |   |   | 4,802 |   |   |   |   |   |   |   |   |   |   |   | 4,762 |   |   |   |   |   |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        interest spread (taxable equivalent basis)   |   |                                                                                                                                     |    |   |   |   |   | 3.21 |                        % |   |   |   |   |   |   |   |   |   |   | 3.59 | % |
|                                                                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        yield on interest-earning                    |   |                                                                                                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         assets (taxable equivalent basis) (3) |   |                                                                                                                                     |    |   |   |   |   |   |   |   | 4.00 | %  |   |   |   |   |   |   |   |   |   |   | 4.23 | %  |

|      (1)                          For purpose of these calculations, nonaccruing loans are included                    in the                    average balance.  Fees are included in loan                    interest.  Loans and total interest-earning assets are net of                    unearned income.  Securities are included at amortized                    cost. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      (2)                          The tax equivalent adjustments are based on a                    marginal tax rate of 34%.                                                                                                                                                                                                        |
|      (3)                          Net interest income (taxable equivalent basis) divided                    by average interest-earning assets.                                                                                                                                                                                                    |

----

*Index*

----

*Index*

----

*Index*

**Asset        Quality**

|                                                                         |   | 06/30/07                                |   |   | 03/31/07 |   |   | 12/31/06 |   |   | 09/30/06 |   |
|------------------------------------------------------------------------------|--------|-----------------------------------------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                                                         |   | (Dollars                  in Thousands) |   |
| Nonaccrual                  loans: (1)                                       |   | $                                       | 300    |   |     | $      | 445    |     |   | $      | 444      |   |   | $ | 203 |   |
| Loans                  past due 90 days or more: (2)                         |   |                                    | 10     |   |     |   | 5      |     |   |   | 1,090    |   |   |   | 157 |   |
|      Total                  nonperforming loans     |   | $                                       | 310    |   |     | $      | 450    |     |   | $      | 1,534    |   |   | $ | 360 |   |
|                                                                         |   |                                    |   |   |     |   |   |     |   |   |     |   |   |   |   |   |
| Other                  real estate owned                                     |   | $                                       | 385    |   |     | $      | -      |     |   | $      | -        |   |   | $ | - |   |
|                                                                         |   |                                    |   |   |     |   |   |     |   |   |     |   |   |   |   |   |
| Total                  nonperforming assets                                  |   | $                                       | 695    |   |     | $      | 450    |     |   | $      | 1,534    |   |   | $ | 360 |   |
|                                                                         |   |                                    |   |   |     |   |   |     |   |   |     |   |   |   |   |   |
| Allowance                  for loan losses                                   |   | $                                       | 4,181  |   |     | $      | 4,093  |     |   | $      | 4,101    |   |   | $ | 4,086 |   |
|                                                                         |   |                                    |   |   |     |   |   |     |   |   |     |   |   |   |   |   |
| Nonaccrual                  loans to total loans                             |   |                                    | 0.08   | %      |     |   | 0.12   | %        |   |   | 0.12     | %      |   |   | 0.06 | % |
| Nonperforming                  loans to total loans                          |   |                                    | 0.08   | %      |     |   | 0.12   | %        |   |   | 0.41     | %      |   |   | 0.10 | % |
| Nonperforming                  loans to total assets     |   |                                    | 0.06   | %      |     |   | 0.09   | %        |   |   | 0.30     | %      |   |   | 0.07 | % |
| Nonperforming                  assets to total assets                        |   |                                    | 0.13   | %      |     |   | 0.09   | %        |   |   | 0.30     | %      |   |   | 0.07 | % |
| Allowance                  for loan losses to total loans                    |   |                                    | 1.09   | %      |     |   | 1.10   | %        |   |   | 1.11     | %      |   |   | 1.11 | % |

----

*Index*

**Market        Risk**

**Capital        Adequacy**

----

*Index*

|                                | Required | Actual | Excess |
|-------------------------------------|----------|--------|--------|
| Risk-based                  Capital |     |   |   |
| Tier                  1             | 4.00%    | 11.23% | 7.23%  |
| Total                               | 8.00%    | 12.25% | 4.25%  |
| Leverage                  Ratio     | 4.00%    | 8.92%  | 4.92%  |

**Liquidity        and Capital Resources**

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

----

*Index*

**ITEM        4.  Controls and Procedures**

----

*Index*

**Stewardship      Financial Corporation**

**Part      II -- Other Information**

e

|                                  | Votes                  for | Votes                  Withheld           |
|---------------------------------------|----------------------------|-------------------------------------------|
|                                  |                       |                                      |
| Election                  of Director |                       |                                      |
| Harold                  Dyer          | 3,019,280                  | 828,784                                   |
| Abe                  Van Wingerden    | 3,591,803                  |  256,261                             |
| Michael                  Westra       | 3,843,852                  |                      4,212 |
| Howard                  Yeaton        | 3,836,189                  |   11,875                        |

t

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

----

*Index*

A

|   |                           |   |   |                                                |
|--------|--------------------------------|--------|--------|-----------------------------------------------------|
|   |                           |   |   |                                                |
| Date:  | August                10, 2007 |   | By:    | /s/                  Paul Van Ostenbridge |
|   |                           |   |   | Paul                Van Ostenbridge                 |
|   |                           |   |   | President                and Chief Executive        |
|   |                           |   |   | Officer                                             |
|   |                           |   |   | (authorized                officer on behalf        |
|   |                           |   |   | of                registrant)                       |
|   |                           |   |   |                                                |
|   |                           |   |   |                                                |
|   |                           |   |   |                                                |
| Date:  | August                10, 2007 |   | By:    | /s/                  Julie E. Holland     |
|   |                           |   |   | Julie                E. Holland                     |
|   |                           |   |   | Senior                Vice President and Treasurer  |
|   |                           |   |   | (principal                accounting officer)       |

----

*Index*

**EXHIBIT      INDEX**

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