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

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

| 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 o (Do not check if a smaller reporting company) | Smaller reporting company  ý |

----

N

|                                                                                                 |                                                                                                                        | PAGE   |
|------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                 |                                                                                                                        | NUMBER |
| PART I - CONSOLIDATED FINANCIAL INFORMATION                                                          |                                                                                                                        |
|                                                                                                 |                                                                                                                        |   |
| ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS                                                           |                                                                                                                        |
|                                                                                                 |                                                                                                                        |   |
|                                                                                                 | Consolidated Statements of Financial Condition at June 30, 2009 and December 31, 2008 (Unaudited)                           | 1      |
|                                                                                                 |                                                                                                                        |   |
|                                                                                                 | Consolidated Statements of Income for the Three and Six Months ended June 30, 2009 and 2008 (Unaudited)                     | 2      |
|                                                                                                 |                                                                                                                        |   |
|                                                                                                 | Consolidated Statement of Changes in Stockholders’ Equity for the Six Months ended June 30, 2009 and 2008 (Unaudited) | 3      |
|                                                                                                 |                                                                                                                        |   |
|                                                                                                 | Consolidated Statements of Cash Flows for the Six Months ended June 30, 2009 and 2008 (Unaudited)                           | 4 - 5  |
|                                                                                                 |                                                                                                                        |   |
|                                                                                                 | Notes to Consolidated Financial Statements (Unaudited)                                                                      | 6 - 12 |
|                                                                                                 |                                                                                                                        |   |
| ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 13 - 19                                                                                                                     |
|                                                                                                 |                                                                                                                        |   |
| ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                                   | 20                                                                                                                          |
|                                                                                                 |                                                                                                                        |   |
| ITEM 4 - CONTROLS AND PROCEDURES                                                                     | .20                                                                                                                         |
|                                                                                                 |                                                                                                                        |   |
| PART II - OTHER INFORMATION                                                                          |                                                                                                                        |
|                                                                                                 |                                                                                                                        |   |
| ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   | 21                                                                                                                          |
|                                                                                                 |                                                                                                                        |   |
| ITEM 6 - EXHIBITS                                                                                    | 21                                                                                                                          |
|                                                                                                 |                                                                                                                        |   |
| SIGNATURES                                                                                           | 22                                                                                                                          |
|                                                                                                 |                                                                                                                        |   |
| EXHIBIT INDEX                                                                                        | 23                                                                                                                          |

----

Index

| Stewardship Financial Corporation and Subsidiary |
|--------------------------------------------------|
| Consolidated Statements of Financial Condition   |
| (Unaudited)                                      |

|                                                                                                               |   |     |        |   |         |   |
|--------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|--------------|--------|
|                                                                                                               |   | June 30, |        |   | December 31, |   |
|                                                                                                               |   | 2009     |        |   | 2008         |   |
| Assets                                                                                                             |   |     |        |   |         |   |
|                                                                                                               |   |     |        |   |         |   |
| Cash and due from banks                                                                                            |   | $        | 11,325,000  |   |         | $      | 12,719,000 |   |
| Other interest-earning assets                                                                                      |   |     | 76,000      |   |         |   | 95,000 |   |
|        Cash and cash equivalents                                                |   |     | 11,401,000  |   |         |   | 12,814,000 |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
| Securities available for sale                                                                                      |   |     | 87,728,000  |   |         |   | 90,023,000 |   |
| Securities held to maturity; estimated fair value of $74,965,000 (2009) and                                        |   |     |        |   |         |   |   |   |
|     $49,150,000 (2008)                                                                         |   |     | 74,756,000  |   |         |   | 48,856,000 |   |
| FHLB-NY stock, at cost                                                                                             |   |     | 2,538,000   |   |         |   | 2,420,000 |   |
| Loans, net of allowance for loan losses of $6,342,000 (2009) and $5,166,000 (2008)                                 |   |     | 433,667,000 |   |         |   | 434,103,000 |   |
| Mortgage loans held for sale                                                                                       |   |     | 6,379,000   |   |         |   | 394,000 |   |
| Premises and equipment, net                                                                                        |   |     | 7,156,000   |   |         |   | 7,470,000 |   |
| Accrued interest receivable                                                                                        |   |     | 3,197,000   |   |         |   | 3,371,000 |   |
| Bank owned life insurance                                                                                          |   |     | 8,758,000   |   |         |   | 8,599,000 |   |
| Other assets                                                                                                       |   |     | 3,747,000   |   |         |   | 3,766,000 |   |
|        Total assets                                                             |   | $        | 639,327,000 |   |         | $      | 611,816,000 |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
| Liabilities and stockholders' equity                                                                               |   |     |        |   |         |   |   |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
| Liabilities                                                                                                        |   |     |        |   |         |   |   |   |
| Deposits:                                                                                                          |   |     |        |   |         |   |   |   |
|     Noninterest-bearing                                                                        |   | $        | 99,733,000  |   |         | $      | 99,099,000 |   |
|     Interest-bearing                                                                           |   |     | 418,767,000 |   |         |   | 407,432,000 |   |
|         Total deposits                                                     |   |     | 518,500,000 |   |         |   | 506,531,000 |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
| Other borrowings                                                                                                   |   |     | 39,300,000  |   |         |   | 36,900,000 |   |
| Subordinated debentures                                                                                            |   |     | 7,217,000   |   |         |   | 7,217,000 |   |
| Securities sold under agreements to repurchase                                                                     |   |     | 15,163,000  |   |         |   | 15,160,000 |   |
| Accrued interest payable                                                                                           |   |     | 1,602,000   |   |         |   | 1,582,000 |   |
| Accrued expenses and other liabilities                                                                             |   |     | 4,341,000   |   |         |   | 1,630,000 |   |
|         Total liabilities                                                  |   |     | 586,123,000 |   |         |   | 569,020,000 |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
| Commitments and contingencies                                                                                      |   |     | -           |   |         |   | - |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
| Stockholders' equity                                                                                               |   |     |        |   |         |   |   |   |
| Preferred stock, no par value; 2,500,000 shares authorized; 10,000 shares                                          |   |     |        |   |         |   |   |   |
|     issued and outstanding at June 30, 2009.  Liquidation preference of $10,000,000. |   |     | 9,707,000   |   |         |   | - |   |
| Common stock, no par value; 10,000,000 shares authorized;                                                          |   |     |        |   |         |   |   |   |
|     5,584,713 and 5,575,095 shares issued: 5,553,645 and 5,555,095 shares                      |   |     |        |   |         |   |   |   |
|     outstanding at June 30, 2009 and December 31, 2008, respectively                           |   |     | 38,294,000  |   |         |   | 37,962,000 |   |
| Treasury stock, 31,068 and 20,000 shares outstanding at June 30, 2009 and                                          |   |     |        |   |         |   |   |   |
|     December 31, 2008, respectively                                                            |   |     | (379,000    | )      |         |   | (272,000 | ) |
| Retained earnings                                                                                                  |   |     | 5,062,000   |   |         |   | 4,383,000 |   |
| Accumulated other comprehensive income                                                                             |   |     | 520,000     |   |         |   | 723,000 |   |
|         Total stockholders' equity                                         |   |     | 53,204,000  |   |         |   | 42,796,000 |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
|         Total liabilities and stockholders' equity                         |   | $        | 639,327,000 |   |         | $      | 611,816,000 |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
|                                                                                                               |   |     |        |   |         |   |   |   |
| See notes to unaudited consolidated financial statements.                                                          |   |     |        |   |         |   |   |   |

----

Index

| Stewardship Financial Corporation and Subsidiary |
|--------------------------------------------------|
| Consolidated Statements of Income                |
| (Unaudited)                                      |

|                                                                                |   | Three Months Ended |      |   | Six Months Ended |   |
|-------------------------------------------------------------------------------------|--------|--------------------|-----------|--------|------------------|--------|
|                                                                                |   | June 30,           |      |   | June 30,         |   |
|                                                                                |   | 2009               |      |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| Interest income:                                                                    |   |               |      |   |             |   |   |   |   |   |   |   |
| Loans                                                                               |   | $                  | 6,658,000 |   |             | $      | 7,076,000 |   |   | $ | 13,266,000 |   |   | $ | 14,261,000 |   |
| Securities held to maturity                                                         |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                             |   |               | 519,000   |   |             |   | 186,000 |   |   |   | 960,000 |   |   |   | 390,000 |   |
|     Non-taxable                                                      |   |               | 219,000   |   |             |   | 210,000 |   |   |   | 432,000 |   |   |   | 417,000 |   |
|     Securities available for sale                               |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                             |   |               | 1,066,000 |   |             |   | 1,113,000 |   |   |   | 2,203,000 |   |   |   | 2,107,000 |   |
| Non-taxable                                                                         |   |               | 52,000    |   |             |   | 41,000 |   |   |   | 104,000 |   |   |   | 68,000 |   |
| FHLB dividends                                                                      |   |               | 26,000    |   |             |   | 48,000 |   |   |   | 45,000 |   |   |   | 82,000 |   |
| Other interest-earning assets                                                       |   |               | 2,000     |   |             |   | 36,000 |   |   |   | 5,000 |   |   |   | 42,000 |   |
| Total interest income                                                               |   |               | 8,542,000 |   |             |   | 8,710,000 |   |   |   | 17,015,000 |   |   |   | 17,367,000 |   |
|                                                                                |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                                                                   |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                            |   |               | 2,203,000 |   |             |   | 2,612,000 |   |   |   | 4,575,000 |   |   |   | 5,522,000 |   |
| Borrowed money                                                                      |   |               | 519,000   |   |             |   | 542,000 |   |   |   | 1,022,000 |   |   |   | 1,127,000 |   |
| Total interest expense                                                              |   |               | 2,722,000 |   |             |   | 3,154,000 |   |   |   | 5,597,000 |   |   |   | 6,649,000 |   |
|                                                                                |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income before provision for loan losses                                |   |               | 5,820,000 |   |             |   | 5,556,000 |   |   |   | 11,418,000 |   |   |   | 10,718,000 |   |
| Provision for loan losses                                                           |   |               | 1,025,000 |   |             |   | 260,000 |   |   |   | 1,175,000 |   |   |   | 360,000 |   |
| Net interest income after provision for loan losses                                 |   |               | 4,795,000 |   |             |   | 5,296,000 |   |   |   | 10,243,000 |   |   |   | 10,358,000 |   |
|                                                                                |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest income:                                                                 |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Fees and service charges                                                            |   |               | 474,000   |   |             |   | 402,000 |   |   |   | 870,000 |   |   |   | 697,000 |   |
| Bank owned life insurance                                                           |   |               | 76,000    |   |             |   | 78,000 |   |   |   | 159,000 |   |   |   | 159,000 |   |
| Gain on sales of mortgage loans                                                     |   |               | 73,000    |   |             |   | 54,000 |   |   |   | 84,000 |   |   |   | 109,000 |   |
| Gain on calls and sales of securities                                               |   |               | 214,000   |   |             |   | 16,000 |   |   |   | 253,000 |   |   |   | 57,000 |   |
| Merchant processing                                                                 |   |               | -         |   |             |   | 361,000 |   |   |   | 118,000 |   |   |   | 730,000 |   |
| Other                                                                               |   |               | 112,000   |   |             |   | 106,000 |   |   |   | 172,000 |   |   |   | 241,000 |   |
| Total noninterest income                                                            |   |               | 949,000   |   |             |   | 1,017,000 |   |   |   | 1,656,000 |   |   |   | 1,993,000 |   |
|                                                                                |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest expenses:                                                               |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                                      |   |               | 2,077,000 |   |             |   | 2,094,000 |   |   |   | 4,136,000 |   |   |   | 4,110,000 |   |
| Occupancy, net                                                                      |   |               | 473,000   |   |             |   | 428,000 |   |   |   | 945,000 |   |   |   | 877,000 |   |
| Equipment                                                                           |   |               | 253,000   |   |             |   | 293,000 |   |   |   | 518,000 |   |   |   | 566,000 |   |
| Data processing                                                                     |   |               | 277,000   |   |             |   | 289,000 |   |   |   | 582,000 |   |   |   | 597,000 |   |
| Advertising                                                                         |   |               | 136,000   |   |             |   | 132,000 |   |   |   | 219,000 |   |   |   | 236,000 |   |
| FDIC insurance premium                                                              |   |               | 519,000   |   |             |   | 73,000 |   |   |   | 689,000 |   |   |   | 146,000 |   |
| Charitable contributions                                                            |   |               | 120,000   |   |             |   | 186,000 |   |   |   | 291,000 |   |   |   | 348,000 |   |
| Stationery and supplies                                                             |   |               | 65,000    |   |             |   | 118,000 |   |   |   | 124,000 |   |   |   | 229,000 |   |
| Merchant processing                                                                 |   |               | -         |   |             |   | 320,000 |   |   |   | 108,000 |   |   |   | 645,000 |   |
| Other                                                                               |   |               | 764,000   |   |             |   | 629,000 |   |   |   | 1,480,000 |   |   |   | 1,287,000 |   |
| Total noninterest expenses                                                          |   |               | 4,684,000 |   |             |   | 4,562,000 |   |   |   | 9,092,000 |   |   |   | 9,041,000 |   |
|                                                                                |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income before income tax expense                                                    |   |               | 1,060,000 |   |             |   | 1,751,000 |   |   |   | 2,807,000 |   |   |   | 3,310,000 |   |
| Income tax expense                                                                  |   |               | 280,000   |   |             |   | 572,000 |   |   |   | 840,000 |   |   |   | 1,070,000 |   |
| Net income                                                                          |   |               | 780,000   |   |             |   | 1,179,000 |   |   |   | 1,967,000 |   |   |   | 2,240,000 |   |
| Dividends on preferred stock and accretion                                          |   |               | 137,000   |   |             |   | - |   |   |   | 229,000 |   |   |   | - |   |
| Net income available to common stockholders                                         |   | $                  | 643,000   |   |             | $      | 1,179,000 |   |   | $ | 1,738,000 |   |   | $ | 2,240,000 |   |
|                                                                                |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per common share                                                     |   | $                  | 0.12      |   |             | $      | 0.21 |   |   | $ | 0.31 |   |   | $ | 0.40 |   |
| Diluted earnings per common share                                                   |   | $                  | 0.12      |   |             | $      | 0.21 |   |   | $ | 0.31 |   |   | $ | 0.40 |   |
|                                                                                |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding                                |   |               | 5,553,645 |   |             |   | 5,580,921 |   |   |   | 5,552,694 |   |   |   | 5,574,821 |   |
| Weighted average number of diluted common                                           |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
|      shares outstanding                                    |   |               | 5,557,890 |   |             |   | 5,591,485 |   |   |   | 5,557,556 |   |   |   | 5,585,834 |   |
|                                                                                |   |               |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Share data has been restated to reflect a 5% stock dividend paid November 17, 2008. |   |               |      |   |             |   |   |   |   |   |   |   |   |

----

Index

| Stewardship Financial Corporation and Subsidiary          |
|-----------------------------------------------------------|
| Consolidated Statement of Changes in Stockholders' Equity |
| (Unaudited)                                               |

|                                                                       |   | Six Months Ended June 30, 2009 |      |
|----------------------------------------------------------------------------|--------|--------------------------------|-----------|
|                                                                       |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                                       |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |
|                                                                       |   | Preferred                      |      |   | Common Stock |   |   | Treasury |   |   | Retained |   |   | Comprehensive |   |   |   |   |
|                                                                       |   | Stock                          |      |   | Shares |   |   | Amount |   |   | Stock |   |   | Earnings |   |   | Income (Loss) |   |   | Total |   |
|                                                                       |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- December 31, 2008                                               |   | $                              | -         |   |   |   | 5,575,095 |   |   | $ | 37,962,000 |   |   | $ | (272,000 | ) |   | $ | 4,383,000 |   |   | $ | 723,000 |   |   | $ | 42,796,000 |   |
| Proceeds from issuance of preferred                                        |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     stock and a warrant                                |   |                           | 9,731,000 |   |   |   |   |   |   |   | 269,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 10,000,000 |   |
| Preferred stock issuance costs                                             |   |                           | (48,000   | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (48,000 | ) |
| Cash dividends paid on common stock                                        |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,055,000 | ) |   |   | - |   |   |   | (1,055,000 | ) |
| Payment of discount on dividend                                            |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     reinvestment plan                                  |   |                           | -         |   |   |   | - |   |   |   | (23,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (23,000 | ) |
| Cash dividends accrued on preferred                                        |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     stock                                              |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (209,000 | ) |   |   | - |   |   |   | (209,000 | ) |
| Common stock issued under stock plans                                      |   |                           | -         |   |   |   | 2,288 |   |   |   | 22,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 22,000 |   |
| Stock option compensation expense                                          |   |                           | -         |   |   |   | - |   |   |   | 24,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 24,000 |   |
| Stock options exercised                                                    |   |                           | -         |   |   |   | 7,330 |   |   |   | 40,000 |   |   |   | (32,000 | ) |   |   | - |   |   |   | - |   |   |   | 8,000 |   |
| Repurchase of common stock                                                 |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | (75,000 | ) |   |   | - |   |   |   | - |   |   |   | (75,000 | ) |
| Accretion of discount on preferred                                         |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     stock                                              |   |                           | 20,000    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (20,000 | ) |   |   |   |   |   |   | - |   |
| Amortization of issuance costs                                             |   |                           | 4,000     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,000 | ) |   |   |   |   |   |   | - |   |
| Comprehensive income:                                                      |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                 |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,967,000 |   |   |   | - |   |   |   | 1,967,000 |   |
|    Change in unrealized holding gains on                    |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      securities available for sale arising during |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      the period (net tax benefit of $188,000)     |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (297,000 | ) |   |   | (297,000 | ) |
|    Reclassification adjustment for gains in                 |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      net income (net of taxes of $100,000)        |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 153,000 |   |   |   | 153,000 |   |
|    Change in fair value of interest rate                    |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      swap (net of tax benefit of $39,000)         |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (59,000 | ) |   |   | (59,000 | ) |
| Total comprehensive income                                                 |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,764,000 |   |
| Balance -- June 30, 2009                                                   |   | $                              | 9,707,000 |   |   |   | 5,584,713 |   |   | $ | 38,294,000 |   |   | $ | (379,000 | ) |   | $ | 5,062,000 |   |   | $ | 520,000 |   |   | $ | 53,204,000 |   |
|                                                                       |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   | Six Months Ended June 30, 2008 |      |
|                                                                       |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |   |
|                                                                       |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |   |
|                                                                       |   | Preferred                      |      |   | Common Stock |   |   | Treasury |   |   | Retained |   |   | Comprehensive |   |   |   |   |   |
|                                                                       |   | Stock                          |      |   | Shares |   |   | Amount |   |   | Stock |   |   | Earnings |   |   | Income (Loss) |   |   | Total |   |
|                                                                       |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- December 31, 2007                                               |   | $                              | -         |   |   |   | 5,306,828 |   |   | $ | 34,871,000 |   |   | $ | - |   |   | $ | 5,943,000 |   |   | $ | 276,000 |   |   | $ | 11,525,828 |   |
| Cash dividends paid on common stock                                        |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (956,000 | ) |   |   | - |   |   |   | (956,000 | ) |
| Payment of discount on dividend                                            |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
|     reinvestment plan                                  |   |                           | -         |   |   |   | - |   |   |   | (22,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Common stock issued under stock plans                                      |   |                           | -         |   |   |   | 1,667 |   |   |   | 21,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,667 |   |
| Stock option compensation expense                                          |   |                           | -         |   |   |   | - |   |   |   | 24,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Stock options exercised                                                    |   |                           | -         |   |   |   | 10,078 |   |   |   | 57,000 |   |   |   | (21,000 | ) |   |   | - |   |   |   | - |   |   |   | (10,922 | ) |
| Tax benefit on stock options exercised                                     |   |                           |      |   |   |   |   |   |   |   | 1,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| Repurchase common stock                                                    |   |                           |      |   |   |   |   |   |   |   |   |   |   |   | (131,000 | ) |   |   |   |   |   |   |   |   |   |   | (131,000 | ) |
| Comprehensive income:                                                      |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
|    Net income                                               |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,240,000 |   |   |   | - |   |   |   | 2,240,000 |   |
|    Change in unrealized holding gains on                    |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
|      securities available for sale arising during |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
|      the period (net tax benefit of $429,000)     |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (684,000 | ) |   |   | (684,000 | ) |
|    Reclassification adjustment for gains                    |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
|      in net income (net taxes of $22,000)         |   |                           | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 35,000 |   |   |   | 35,000 |   |
| Total comprehensive income                                                 |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,591,000 |   |
| Balance -- June 30, 2008                                                   |   | $                              | -         |   |   |   | 5,318,573 |   |   | $ | 34,952,000 |   |   | $ | (152,000 | ) |   | $ | 7,227,000 |   |   | $ | (373,000 | ) |   | $ | 41,654,000 |   |
|                                                                       |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See notes to unaudited consolidated financial statements.                  |   |                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

Index

| Stewardship Financial Corporation and Subsidiary       |
|--------------------------------------------------------|
| Consolidated Statements of Comprehensive Income (Loss) |
| (Unaudited)                                            |

|                                                                       |   |               |     |   |             |   |       |   |   |   |     |   |
|----------------------------------------------------------------------------|--------|--------------------|----------|--------|------------------|--------|------------|--------|--------|--------|----------|--------|
|                                                                       |   | Three Months Ended |     |   | Six Months Ended |   |
|                                                                       |   | June 30,           |     |   | June 30,         |   |
|                                                                       |   | 2009               |     |   | 2008             |   |       | 2009   |   |   | 2008     |   |
|                                                                       |   |               |     |   |             |   |       |   |   |   |     |   |
| Change in unrealized holding losses on                                     |   |               |     |   |             |   |       |   |   |   |     |   |
|        securities available for sale arising |   |               |     |   |             |   |       |   |   |   |     |   |
|        during the period                     |   | $                  | (937,000 | )      |             | $      | (1,759,000 | )      |   | $      | (485,000 | )      |   | $ | (1,113,000 | ) |
| Reclassification adjustment for gains in net income                        |   |               | 214,000  |   |             |   | 16,000     |   |   |   | 253,000  |   |   |   | 57,000 |   |
| Net unrealized losses                                                      |   |               | (723,000 | )      |             |   | (1,743,000 | )      |   |   | (232,000 | )      |   |   | (1,056,000 | ) |
| Tax effect                                                                 |   |               | (280,000 | )      |             |   | (673,000   | )      |   |   | (88,000  | )      |   |   | (407,000 | ) |
| Net unrealized losses, net of tax amount                                   |   |               | (443,000 | )      |             |   | (1,070,000 | )      |   |   | (144,000 | )      |   |   | (649,000 | ) |
|                                                                       |   |               |     |   |             |   |       |   |   |   |     |   |   |   |   |   |
| Change in fair value of interest rate swap                                 |   |               | (98,000  | )      |             |   | -          |   |   |   | (98,000  | )      |   |   |   |   |
| Tax effect                                                                 |   |               | (39,000  | )      |             |   | -          |   |   |   | (39,000  | )      |   |   | - |   |
| Change in fair value of interest rate swap, net of tax amount              |   |               | (59,000  | )      |             |   | -          |   |   |   | (59,000  | )      |   |   | - |   |
|                                                                       |   |               |     |   |             |   |       |   |   |   |     |   |   |   |   |   |
| Total other comprehensive loss                                             |   | $                  | (502,000 | )      |             | $      | (1,070,000 | )      |   | $      | (203,000 | )      |   | $ | (649,000 | ) |
|                                                                       |   |               |     |   |             |   |       |   |   |   |     |   |   |   |   |   |
| See notes to unaudited consolidated financial statements.                  |   |               |     |   |             |   |       |   |   |   |     |   |   |   |   |   |

----

Index

| Stewardship Financial Corporation and Subsidiary                                                                                            |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                                                                                                       |   |
| (Unaudited)                                                                                                                                 |   |
|                                                                                                                                        |   | Six Months Ended |   |
|                                                                                                                                        |   | June 30, |   |
|                                                                                                                                        |   | 2009 |   | 2008 |   |
| Cash flows from operating activities:                                                                                                       |   |   |   |   |   |   |
| Net income                                                                                                                                  |   | $ | 1,967,000 |   |   | $ | 2,240,000 |   |
| Adjustments to reconcile net income to                                                                                                      |   |   |   |   |   |   |   |   |
| net cash provided by operating activities:                                                                                                  |   |   |   |   |   |   |   |   |
| Depreciation and amortization of premises and equipment                                                                                     |   |   | 423,000 |   |   |   | 481,000 |   |
| Amortization of premiums and accretion of discounts, net                                                                                    |   |   | 305,000 |   |   |   | 60,000 |   |
| Accretion of deferred loan fees                                                                                                             |   |   | (109,000 | ) |   |   | (133,000 | ) |
| Provision for loan losses                                                                                                                   |   |   | 1,175,000 |   |   |   | 360,000 |   |
| Originations of mortgage loans held for sale                                                                                                |   |   | (15,548,000 | ) |   |   | (11,885,000 | ) |
| Proceeds from sale of mortgage loans                                                                                                        |   |   | 9,647,000 |   |   |   | 11,206,000 |   |
| Gain on sales of mortgage loans                                                                                                             |   |   | (84,000 | ) |   |   | (109,000 | ) |
| Gain on calls and sales of securities                                                                                                       |   |   | (253,000 | ) |   |   | (57,000 | ) |
| Loss on sale of equipment                                                                                                                   |   |   | - |   |   |   | 12,000 |   |
| Deferred income tax benefit                                                                                                                 |   |   | (510,000 | ) |   |   | (135,000 | ) |
| Amortization of intangible assets                                                                                                           |   |   | 16,000 |   |   |   | 16,000 |   |
| Nonqualified stock option expense                                                                                                           |   |   | 24,000 |   |   |   | 24,000 |   |
| Increase in bank owned life insurance                                                                                                       |   |   | (159,000 | ) |   |   | (159,000 | ) |
| Decrease (increase) in accrued interest receivable                                                                                          |   |   | 173,000 |   |   |   | (97,000 | ) |
| Decrease in other assets                                                                                                                    |   |   | 602,000 |   |   |   | 185,000 |   |
| Increase (decrease) in accrued interest payable                                                                                             |   |   | 20,000 |   |   |   | (141,000 | ) |
| Increase in other liabilities                                                                                                               |   |   | 260,000 |   |   |   | 1,187,000 |   |
| Net cash (used in) provided by operating activities                                                                                         |   |   | (2,051,000 | ) |   |   | 3,055,000 |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                                                       |   |   |   |   |   |   |   |   |
| Purchase of securities available for sale                                                                                                   |   |   | (35,324,000 | ) |   |   | (36,784,000 | ) |
| Proceeds from maturities and principal repayments on securities available for sale                                                          |   |   | 7,753,000 |   |   |   | 3,856,000 |   |
| Proceeds from calls and sales on securities available for sale                                                                              |   |   | 31,854,000 |   |   |   | 13,766,000 |   |
| Purchase of securities held to maturity                                                                                                     |   |   | (37,268,000 | ) |   |   | (854,000 | ) |
| Proceeds from maturities and principal repayments on securities held to maturity                                                            |   |   | 2,961,000 |   |   |   | 2,118,000 |   |
| Proceeds from calls on securities held to maturity                                                                                          |   |   | 8,465,000 |   |   |   | 4,020,000 |   |
| Purchase of FHLB-NY stock                                                                                                                   |   |   | (118,000 | ) |   |   | (622,000 | ) |
| Net increase in loans                                                                                                                       |   |   | (630,000 | ) |   |   | (18,458,000 | ) |
| Additions to premises and equipment                                                                                                         |   |   | (109,000 | ) |   |   | (201,000 | ) |
| Sale of equipment                                                                                                                           |   |   | - |   |   |   | 4,000 |   |
|                  Net cash used in investing activities |   |   | (22,416,000 | ) |   |   | (33,155,000 | ) |
|                                                                                                                                        |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                                                       |   |   |   |   |   |   |   |   |
| Net increase (decrease) in noninterest-bearing deposits                                                                                     |   |   | 634,000 |   |   |   | (3,567,000 | ) |
| Net increase in interest-bearing deposits                                                                                                   |   |   | 11,335,000 |   |   |   | 41,153,000 |   |
| Net increase (decrease) in securities sold under agreements to repurchase                                                                   |   |   | 3,000 |   |   |   | (1,091,000 | ) |
| Proceeds from term borrowings                                                                                                               |   |   | 6,000,000 |   |   |   | 30,000,000 |   |
| Net decrease in short term borrowings                                                                                                       |   |   | (3,600,000 | ) |   |   | (16,800,000 | ) |
| Payments on long term borrowings                                                                                                            |   |   | - |   |   |   | (843,000 | ) |
| Proceeds from issuance of preferred stock and warrants                                                                                      |   |   | 9,951,000 |   |   |   | - |   |
| Cash dividends paid on common stock                                                                                                         |   |   | (1,055,000 | ) |   |   | (956,000 | ) |
| Cash dividends paid on preferred stock                                                                                                      |   |   | (146,000 | ) |   |   | - |   |
| Payment of discount on dividend reinvestment plan                                                                                           |   |   | (23,000 | ) |   |   | (22,000 | ) |
| Purchase of treasury stock                                                                                                                  |   |   | (75,000 | ) |   |   | (131,000 | ) |
| Options exercised                                                                                                                           |   |   | 8,000 |   |   |   | 36,000 |   |
| Tax benefit of stock options                                                                                                                |   |   | - |   |   |   | 1,000 |   |
| Issuance of common stock                                                                                                                    |   |   | 22,000 |   |   |   | 21,000 |   |
| Net cash provided by financing activities                                                                                                   |   |   | 23,054,000 |   |   |   | 47,801,000 |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                                                                                        |   |   | (1,413,000 | ) |   |   | 17,701,000 |   |
| Cash and cash equivalents - beginning                                                                                                       |   |   | 12,814,000 |   |   |   | 11,932,000 |   |
| Cash and cash equivalents - ending                                                                                                          |   | $ | 11,401,000 |   |   | $ | 29,633,000 |   |

----

Index

| Stewardship Financial Corporation and Subsidiary  |
|---------------------------------------------------|
| Consolidated Statements of Cash Flows (continued) |
| (Unaudited)                                       |

|                                                          |   | Six Months Ended |      |
|---------------------------------------------------------------|--------|------------------|-----------|
|                                                          |   | June 30,         |      |
|                                                          |   | 2009             |      |   | 2008 |   |
| Supplemental disclosures of cash flow information:            |   |             |      |   |   |   |
| Cash paid during the period for interest                      |   | $                | 5,577,000 |   |   | $ | 6,790,000 |   |
| Cash paid during the period for income taxes                  |   | $                | 538,000   |   |   | $ | 1,144,000 |   |
| Noncash investing activities - security purchases due brokers |   | $                | 2,328,000 |   |   | $ | 1,687,000 |   |
|                                                          |   |             |      |   |   |   |   |   |
|                                                          |   |             |      |   |   |   |   |   |
| See notes to unaudited consolidated financial statements.     |   |             |      |   |   |   |   |   |

----

Index

t

----

Index

----

Index

|                               |   | June 30, 2009     |       |
|------------------------------------|--------|-------------------|------------|
|                               |   |              |       |   | Gross |   |   | Gross |   |
|                               |   | Fair              |       |   | Unrealized |   |   | Unrealized |   |
|                               |   | Value             |       |   | Holding Gains |   |   | Holding Losses |   |
|                               |   |              |       |   |   |   |   |   |   |
| U.S. government-sponsored agencies |   | $                 | 25,359,000 |   |   | $ | 177,000 |   |   | $ | 109,000 |   |
| Obligations of state and political |   |              |       |   |   |   |   |   |   |   |   |   |
|   subdivisions           |   |              | 5,610,000  |   |   |   | 18,000 |   |   |   | 157,000 |   |
| Mortgage-backed securities         |   |              | 53,755,000 |   |   |   | 1,041,000 |   |   |   | 31,000 |   |
| Other equity investments           |   |              | 3,004,000  |   |   |   | 37,000 |   |   |   | 15,000 |   |
|                               |   | $                 | 87,728,000 |   |   | $ | 1,273,000 |   |   | $ | 312,000 |   |
|                               |   |              |       |   |   |   |   |   |   |   |   |   |
|                               |   | December 31, 2008 |       |
|                               |   |              |       |   |   | Gross |   |   | Gross |   |
|                               |   | Fair              |       |   | Unrealized |   |   | Unrealized |   |
|                               |   | Value             |       |   | Holding Gains |   |   | Holding Losses |   |
|                               |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies |   | $                 | 49,660,000 |   |   | $ | 741,000 |   |   | $ | 30,000 |   |
| Obligations of state and political |   |              |       |   |   |   |   |   |   |   |   |   |
|   subdivisions           |   |              | 5,820,000  |   |   |   | 6,000 |   |   |   | 190,000 |   |
| Mortgage-backed securities         |   |              | 31,670,000 |   |   |   | 716,000 |   |   |   | 15,000 |   |
| Other equity investments           |   |              | 2,873,000  |   |   |   | - |   |   |   | 35,000 |   |
|                               |   | $                 | 90,023,000 |   |   | $ | 1,463,000 |   |   | $ | 270,000 |   |

----

Index

|                               |   | June 30, 2009     |       |
|------------------------------------|--------|-------------------|------------|
|                               |   |              |       |   | Gross |   |   | Gross |   |   |   |   |
|                               |   | Carrying          |       |   | Unrecognized |   |   | Unrecognized |   |   | Fair |   |
|                               |   | Value             |       |   | Holding Gains |   |   | Holding Losses |   |   | Value |   |
|                               |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies |   | $                 | 28,153,000 |   |   | $ | 143,000 |   |   | $ | 324,000 |   |   | $ | 27,972,000 |   |
| Obligations of state and political |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   subdivisions           |   |              | 24,559,000 |   |   |   | 287,000 |   |   |   | 304,000 |   |   |   | 24,542,000 |   |
| Mortgage-backed securities         |   |              | 22,044,000 |   |   |   | 479,000 |   |   |   | 72,000 |   |   |   | 22,451,000 |   |
|                               |   | $                 | 74,756,000 |   |   | $ | 909,000 |   |   | $ | 700,000 |   |   | $ | 74,965,000 |   |
|                               |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   | December 31, 2008 |       |
|                               |   |              |       |   |   | Gross |   |   | Gross |   |   |   |   |   |
|                               |   | Carrying          |       |   | Unrecognized |   |   | Unrecognized |   |   | Fair |   |
|                               |   | Value             |       |   | Holding Gains |   |   | Holding Losses |   |   | Value |   |
|                               |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies |   | $                 | 10,290,000 |   |   | $ | 217,000 |   |   | $ | - |   |   | $ | 10,507,000 |   |
| Obligations of state and political |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   subdivisions           |   |              | 23,048,000 |   |   |   | 110,000 |   |   |   | 301,000 |   |   |   | 22,857,000 |   |
| Mortgage-backed securities         |   |              | 15,518,000 |   |   |   | 271,000 |   |   |   | 3,000 |   |   |   | 15,786,000 |   |
|                               |   | $                 | 48,856,000 |   |   | $ | 598,000 |   |   | $ | 304,000 |   |   | $ | 49,150,000 |   |

|                                  |   | June 30, 2009 |       |
|---------------------------------------|--------|---------------|------------|
|                                  |   | Amortized     |       |   | Fair |   |
|                                  |   | Cost          |       |   | Value |   |
|                                  |   |          |       |   |   |   |
| Maturity                              |   |          |       |   |   |   |
| Available for sale                    |   |          |       |   |   |   |
| Within one year                       |   | $             | 460,000    |   |   | $ | 461,000 |   |
| After one year, but within five years |   |          | 2,304,000  |   |   |   | 2,289,000 |   |
| After five year, but within ten years |   |          | 8,741,000  |   |   |   | 8,809,000 |   |
| After ten years                       |   |          | 19,535,000 |   |   |   | 19,410,000 |   |
| Mortgage-backed securities            |   |          | 52,745,000 |   |   |   | 53,755,000 |   |
| Total                                 |   | $             | 83,785,000 |   |   | $ | 84,724,000 |   |
|                                  |   |          |       |   |   |   |   |   |
| Held to maturity                      |   |          |       |   |   |   |   |   |
| Within one year                       |   | $             | 1,027,000  |   |   | $ | 1,028,000 |   |
| After one year, but within five years |   |          | 7,984,000  |   |   |   | 8,063,000 |   |
| After five year, but within ten years |   |          | 29,172,000 |   |   |   | 28,938,000 |   |
| After ten years                       |   |          | 14,529,000 |   |   |   | 14,485,000 |   |
| Mortgage-backed securities            |   |          | 22,044,000 |   |   |   | 22,451,000 |   |
| Total                                 |   | $             | 74,756,000 |   |   | $ | 74,965,000 |   |

----

Index

| Available for Sale                                                              |                |       |                |   |     |   |         |      |   |   |         |    |
|---------------------------------------------------------------------------------|---------------------|------------|---------------------|--------|----------|--------|--------------|-----------|--------|--------|--------------|---------|
| June 30, 2009                                                                   | Less than 12 Months |       | 12 Months or Longer |   | Total    |   |
|                                                                            | Fair                |       | Unrecognized        |   | Fair     |   | Unrecognized |      | Fair   |   | Unrecognized |    |
|                                                                            | Value               |       | Losses              |   | Value    |   | Losses       |      | Value  |   | Losses       |    |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |
| U.S. government-                                                                |                |       |                |   |     |   |         |      |   |   |         |    |
|   sponsored agencies                                                  | $                   | 9,237,000  |                | $      | (84,000  | )      | $            | 1,975,000 |   | $      | (25,000      | )       | $ | 11,212,000 |   | $ | (109,000 | ) |
| Obligations of state and                                                        |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   political subdivisions                                              |                | 2,986,000  |                |   | (91,000  | )      |         | 1,040,000 |   |   | (66,000      | )       |   | 4,026,000 |   |   | (157,000 | ) |
| Mortgage-backed                                                                 |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   securities                                                          |                | 1,971,000  |                |   | (31,000  | )      |         | -         |   |   | -            |    |   | 1,971,000 |   |   | (31,000 | ) |
| Other equity investments                                                        |                | 30,000     |                |   | (5,000   | )      |         | 30,000    |   |   | (10,000      | )  |   | 60,000 |   |   | (15,000 | ) |
|      Total temporarily                                 |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|           impaired securities | $                   | 14,224,000 |                | $      | (211,000 | )      | $            | 3,045,000 |   | $      | (101,000     | )       | $ | 17,269,000 |   | $ | (312,000 | ) |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
| December 31, 2008                                                               | Less than 12 Months |       | 12 Months or Longer |   | Total    |   |
|                                                                            | Fair                |       | Unrecognized        |   | Fair     |   | Unrecognized |      | Fair   |   | Unrecognized |    |
|                                                                            | Value               |       | Losses              |   | Value    |   | Losses       |      | Value  |   | Losses       |    |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
| U.S. government-                                                                |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   sponsored agencies                                                  | $                   | 7,464,000  |                | $      | (30,000  | )      | $            | -         |   | $      | -            |    | $ | 7,464,000 |   | $ | (30,000 | ) |
| Obligations of state and                                                        |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   political subdivisions                                              |                | 4,709,000  |                |   | (190,000 | )      |         | -         |   |   | -            |    |   | 4,709,000 |   |   | (190,000 | ) |
| Mortgage-backed                                                                 |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   securities                                                          |                | 1,651,000  |                |   | (8,000   | )      |         | 438,000   |   |   | (7,000       | )       |   | 2,089,000 |   |   | (15,000 | ) |
| Other equity investments                                                        |                | 40,000     |                |   | (4,000   | )      |         | 2,742,000 |   |   | (31,000      | )       |   | 2,782,000 |   |   | (35,000 | ) |
|      Total temporarily                                 |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|           impaired securities | $                   | 13,864,000 |                | $      | (232,000 | )      | $            | 3,180,000 |   | $      | (38,000      | )       | $ | 17,044,000 |   | $ | (270,000 | ) |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
| Held to Maturity                                                                |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
| June 30, 2009                                                                   | Less than 12 Months |       | 12 Months or Longer |   | Total    |   |
|                                                                            | Fair                |       | Unrecognized        |   | Fair     |   | Unrecognized |      | Fair   |   | Unrecognized |    |
|                                                                            | Value               |       | Losses              |   | Value    |   | Losses       |      | Value  |   | Losses       |    |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
| U.S. government-                                                                |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   sponsored agencies                                                  | $                   | 13,183,000 |                | $      | (323,000 | )      | $            | -         |   | $      | -            |    | $ | 13,183,000 |   | $ | (323,000 | ) |
| Obligations of state and                                                        |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   political subdivisions                                              |                | 9,332,000  |                |   | (250,000 | )      |         | 586,000   |   |   | (54,000      | )       |   | 9,918,000 |   |   | (304,000 | ) |
| Mortgage-backed                                                                 |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   securities                                                          |                | 5,420,000  |                |   | (72,000  | )      |         | 6,000     |   |   | (1,000       | )       |   | 5,426,000 |   |   | (73,000 | ) |
|      Total temporarily                                 |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|           impaired securities | $                   | 27,935,000 |                | $      | (645,000 | )      | $            | 592,000   |   | $      | (55,000      | )       | $ | 28,527,000 |   | $ | (700,000 | ) |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
| December 31, 2008                                                               | Less than 12 Months |       | 12 Months or Longer |   | Total    |   |
|                                                                            | Fair                |       | Unrecognized        |   | Fair     |   | Unrecognized |      | Fair   |   | Unrecognized |    |
|                                                                            | Value               |       | Losses              |   | Value    |   | Losses       |      | Value  |   | Losses       |    |
|                                                                            |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
| U.S. government-                                                                |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   sponsored agencies                                                  | $                   | -          |                | $      | -        |   | $            | -         |   | $      | -            |    | $ | - |   | $ | - |   |
| Obligations of state and                                                        |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   political subdivisions                                              |                | 13,440,000 |                |   | (301,000 | )      |         | -         |   |   | -            |    |   | 13,440,000 |   |   | (301,000 | ) |
| Mortgage-backed                                                                 |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|   securities                                                          |                | 2,715,000  |                |   | (3,000   | )      |         | -         |   |   | -            |    |   | 2,715,000 |   |   | (3,000 | ) |
|      Total temporarily                                 |                |       |                |   |     |   |         |      |   |   |         |    |   |   |   |   |   |   |
|           impaired securities | $                   | 16,155,000 |                | $      | (304,000 | )      | $            | -         |   | $      | -            |    | $ | 16,155,000 |   | $ | (304,000 | ) |

----

Index

|        |                      |   | June 30,    |        |   | December 31, |        |
|-------------|---------------------------|--------|-------------|-------------|--------|--------------|-------------|
|        |                      |   | 2009        |        |   | 2008         |        |
|        |                      |   |        |        |   |         |        |
| Mortgage    |                      |   |        |        |   |         |
|        | Residential               |   | $           | 38,188,000  |   |         | $           | 40,337,000 |   |
|        | Commercial                |   |        | 230,400,000 |   |         |        | 226,183,000 |   |
| Commercial  |                      |   | 101,601,000 |        |   |         | 100,282,000 |   |
| Equity      |                      |   |        | 23,115,000  |   |         |        | 21,208,000 |   |
| Installment |                      |   | 46,829,000  |        |   |         | 51,290,000  |   |
| Other       |                      |   |        | 301,000     |   |         |        | 356,000 |   |
|        |   Total loans   |   |        | 440,434,000 |   |         |        | 439,656,000 |   |
|        |                      |   |        |        |   |         |        |   |   |
| Less:       | Deferred loan fees        |   |        | 425,000     |   |         |        | 387,000 |   |
|        | Allowance for loan losses |   |        | 6,342,000   |   |         |        | 5,166,000 |   |
|        |                      |   |        | 6,767,000   |   |         |        | 5,553,000 |   |
|        |                      |   |        |        |   |         |        |   |   |
|        | Loans, net                |   | $           | 433,667,000 |   |         | $           | 434,103,000 |   |

|                            |   | Six Months Ended June 30, |      |
|---------------------------------|--------|---------------------------|-----------|
|                            |   | 2009                      |      |   | 2008 |   |
|                            |   |                      |      |   |   |   |
| Balance, beginning of period    |   | $                         | 5,166,000 |   |   | $ | 4,457,000 |   |
| Provision charged to operations |   |                      | 1,175,000 |   |   |   | 360,000 |   |
| Recoveries of loans charged off |   |                      | 92,000    |   |   |   | 19,000 |   |
| Loans charged off               |   |                      | (91,000   | ) |   |   | (68,000 | ) |
|                            |   |                      |      |   |   |   |   |   |
| Balance, end of period          |   | $                         | 6,342,000 |   |   | $ | 4,768,000 |   |

|                                                              |   | June 30, |       |   | December 31, |   |
|-------------------------------------------------------------------|--------|----------|------------|--------|--------------|--------|
|                                                              |   | 2009     |       |   | 2008         |   |
|                                                              |   |     |       |   |         |   |
| Impaired loans                                                    |   |     |       |   |         |   |
|     With related allowance for loan losses    |   | $        | 8,186,000  |   |         | $      | 2,762,000 |   |
|     Without related allowance for loan losses |   |     | 3,347,000  |   |         |   | 1,468,000 |   |
| Total impaired loans                                              |   | $        | 11,533,000 |   |         | $      | 4,230,000 |   |
|                                                              |   |     |       |   |         |   |   |   |
| Related allowance for loan losses                                 |   | $        | 1,526,000  |   |         | $      | 481,000 |   |

----

Index

| Notional amount | $ 7,000,000              |
|-----------------|--------------------------|
| Pay rate        | 7.00%                    |
| Receive rate    | 3 month LIBOR plus 2.95% |
| Maturity        | March 17, 2016           |
| Unrealized loss | $ 99,000                 |

----

Index

|                          |   | Fair Value Measurements Using: |       |
|-------------------------------|--------|--------------------------------|------------|
|                          |   |                           |       |   | Quoted Prices in |   |   | Significant |   |   |   |   |
|                          |   |                           |       |   | Active Markets |   |   | Other |   |   | Significant |   |
|                          |   |                           |       |   | for Identical |   |   | Observable |   |   | Unobservable |   |
|                          |   | Carrying                       |       |   | Assets |   |   | Inputs |   |   | Inputs |   |
|                          |   | Value                          |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                          |   | At June 30, 2009               |       |
| Assets:                       |   |                           |       |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |                           |       |   |   |   |   |   |   |   |   |   |
| U.S. government -             |   |                           |       |   |   |   |   |   |   |   |   |   |
| sponsered agencies            |   | $                              | 25,359,000 |   |   | $ | - |   |   | $ | 25,359,000 |   |   | $ | - |   |
| Obligations of state and      |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |                           | 5,610,000  |   |   |   | - |   |   |   | 5,610,000 |   |   |   | - |   |
| Mortgage-backed securities    |   |                           | 53,755,000 |   |   |   | - |   |   |   | 53,755,000 |   |   |   | - |   |
| Other securities              |   |                           | 3,004,000  |   |   |   | - |   |   |   | 3,004,000 |   |   |   | - |   |
| Total available for           |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   sale securities   |   | $                              | 87,728,000 |   |   | $ | - |   |   | $ | 87,728,000 |   |   | $ | - |   |
|                          |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                   |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap            |   | $                              | 99,000     |   |   | $ | - |   |   | $ | 99,000 |   |   | $ | - |   |
|                          |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          |   | At December 31, 2008           |       |
| Assets:                       |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government -             |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsered agencies            |   | $                              | 49,660,000 |   |   | $ | - |   |   | $ | 49,660,000 |   |   | $ | - |   |
| Obligations of state and      |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |                           | 5,820,000  |   |   |   | - |   |   |   | 5,820,000 |   |   |   | - |   |
| Mortgage-backed securities    |   |                           | 31,670,000 |   |   |   | - |   |   |   | 31,670,000 |   |   |   | - |   |
| Other securities              |   |                           | 2,873,000  |   |   |   | - |   |   |   | 2,873,000 |   |   |   | - |   |
| Total available for           |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   sale securities   |   | $                              | 90,023,000 |   |   | $ | - |   |   | $ | 90,023,000 |   |   | $ | - |   |

----

Index

|           |   |                 |      |   | Fair Value Measurements Using:                              |   |
|----------------|--------|----------------------|-----------|--------|-------------------------------------------------------------|--------|
|           |   | CarryingValue        |      |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
|           |   | At June 30, 2009     |      |
| Assets:        |   |                 |      |   |                                                        |   |   |   |   |   |   |   |
| Impaired loans |   | $                    | 6,660,000 |   |                                                        | $      | - |   |   | $ | - |   |   | $ | 6,660,000 |   |
|           |   |                 |      |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |
|           |   | At December 31, 2008 |      |
| Assets:        |   |                 |      |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans |   | $                    | 2,281,000 |   |                                                        | $      | - |   |   | $ | - |   |   | $ | 2,281,000 |   |

|                                                           |   | June 30, 2009          |    |   | December 31, 2008 |   |
|----------------------------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                                           |   | Carrying               |    |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
|                                                           |   | Amount                 |    |   | Fair Value        |   |   | Amount |   |   | Fair Value |   |
|                                                           |   | (Dollars in thousands) |    |
| Financial assets:                                              |   |                   |    |   |              |   |   |   |   |   |   |   |
|      Cash and cash equivalents        |   | $                      | 11,401  |   |              | $      | 11,401 |   |   | $ | 12,814 |   |   | $ | 12,814 |   |
|      Securities held to maturity      |   |                   | 74,756  |   |              |   | 74,965 |   |   |   | 48,856 |   |   |   | 49,150 |   |
|      FHLB-NY stock                    |   |                   | 2,538   |   |              |   | N/A |   |   |   | 2,420 |   |   |   | N/A |   |
|      Net loans                        |   |                   | 433,667 |   |              |   | 433,951 |   |   |   | 434,103 |   |   |   | 436,193 |   |
|      Accrued interest receivable      |   |                   | 3,197   |   |              |   | 3,197 |   |   |   | 3,371 |   |   |   | 3,371 |   |
|                                                           |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                         |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
|      Deposits                         |   |                   | 518,500 |   |              |   | 520,850 |   |   |   | 506,531 |   |   |   | 508,325 |   |
|      Securities sold under agreements |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
|         to repurchase  |   |                   | 15,163  |   |              |   | 15,163 |   |   |   | 15,160 |   |   |   | 15,160 |   |
|      Other borrowings                 |   |                   | 39,300  |   |              |   | 36,383 |   |   |   | 36,900 |   |   |   | 34,973 |   |
|      Subordinated debenture           |   |                   | 7,217   |   |              |   | 5,040 |   |   |   | 7,217 |   |   |   | 7,399 |   |
|      Accrued interest payable         |   |                   | 1,602   |   |              |   | 1,602 |   |   |   | 1,582 |   |   |   | 1,582 |   |

----

Index

|                                        |   | Three Months Ended                    |   |   | Six Months Ended |   |
|---------------------------------------------|--------|---------------------------------------|--------|--------|------------------|--------|
|                                        |   | June 30,                              |   |   | June 30,         |   |
|                                        |   | 2009                                  |   |   | 2008             |   |   | 2009 |   |   | 2008 |   |
|                                        |   | (in thousands, except per share data) |   |
|                                        |   |                                  |   |   |             |   |   |   |   |   |   |   |
| Net income                                  |   | $                                     | 780    |   |             | $      | 1,179 |   |   | $ | 1,967 |   |   | $ | 2,240 |   |
| Dividends on preferred stock and accretion  |   |                                  | 137    |   |             |   | - |   |   |   | 229 |   |   |   | - |   |
| Net income available to common stockholders |   | $                                     | 643    |   |             | $      | 1,179 |   |   | $ | 1,738 |   |   | $ | 2,240 |   |
|                                        |   |                                  |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares                     |   |                                  | 5,554  |   |             |   | 5,581 |   |   |   | 5,553 |   |   |   | 5,575 |   |
| Effect of dilutive stock options            |   |                                  | 4      |   |             |   | 10 |   |   |   | 5 |   |   |   | 12 |   |
| Total weighted average dilutive shares      |   |                                  | 5,558  |   |             |   | 5,591 |   |   |   | 5,558 |   |   |   | 5,586 |   |
|                                        |   |                                  |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per common share             |   | $                                     | 0.12   |   |             | $      | 0.21 |   |   | $ | 0.31 |   |   | $ | 0.40 |   |
|                                        |   |                                  |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per common share           |   | $                                     | 0.12   |   |             | $      | 0.21 |   |   | $ | 0.31 |   |   | $ | 0.40 |   |

----

Index

----

Index

s

----

Index

----

Index

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

|                                              |   | 2009                   |    |   | 2008     |   |
|---------------------------------------------------|--------|------------------------|---------|--------|----------|--------|
|                                              |   |                   |    |   |     |   |   | 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) (2)                                     |   | $                      | 438,675 |   |     | $      | 6,670 |   |   |   | 6.10 | % |   | $ | 435,060 |   |   | $ | 7,088 |   |   |   | 6.55 | % |
| Taxable investment securities (1)                 |   |                   | 146,204 |   |     |   | 1,612 |   |   |   | 4.42 |   |   |   | 102,683 |   |   |   | 1,347 |   |   |   | 5.58 |   |
| Tax-exempt investment securities (1) (2)          |   |                   | 29,520  |   |     |   | 397 |   |   |   | 5.39 |   |   |   | 27,607 |   |   |   | 367 |   |   |   | 5.35 |   |
| Other interest-earning assets                     |   |                   | 96      |   |     |   | 2 |   |   |   | 8.36 |   |   |   | 6,704 |   |   |   | 36 |   |   |   | 2.16 |   |
| Total interest-earning assets                     |   |                   | 614,495 |   |     |   | 8,681 |   |   |   | 5.67 |   |   |   | 572,054 |   |   |   | 8,838 |   |   |   | 6.21 |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets:                      |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                         |   |                   | (5,385  | )      |     |   |   |   |   |   |   |   |   |   | (4,626 | ) |   |   |   |   |   |   |   |   |
| Other assets                                      |   |                   | 33,943  |   |     |   |   |   |   |   |   |   |   |   | 34,752 |   |   |   |   |   |   |   |   |   |
| Total assets                                      |   | $                      | 643,053 |   |     |   |   |   |   |   |   |   |   | $ | 602,180 |   |   |   |   |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                     |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                  |   | $                      | 182,967 |   |     | $      | 580 |   |   |   | 1.27 | % |   | $ | 165,352 |   |   | $ | 597 |   |   |   | 1.45 | % |
| Savings deposits                                  |   |                   | 42,510  |   |     |   | 56 |   |   |   | 0.53 |   |   |   | 37,199 |   |   |   | 54 |   |   |   | 0.58 |   |
| Time deposits                                     |   |                   | 194,692 |   |     |   | 1,567 |   |   |   | 3.23 |   |   |   | 184,594 |   |   |   | 1,961 |   |   |   | 4.27 |   |
| Repurchase agreements                             |   |                   | 15,163  |   |     |   | 190 |   |   |   | 5.03 |   |   |   | 16,251 |   |   |   | 135 |   |   |   | 3.34 |   |
| FHLB borrowing                                    |   |                   | 49,487  |   |     |   | 253 |   |   |   | 2.05 |   |   |   | 47,033 |   |   |   | 285 |   |   |   | 2.44 |   |
| Subordinated debenture                            |   |                   | 7,217   |   |     |   | 76 |   |   |   | 4.22 |   |   |   | 7,217 |   |   |   | 122 |   |   |   | 6.80 |   |
| Total interest-bearing liabilities                |   |                   | 492,036 |   |     |   | 2,722 |   |   |   | 2.22 |   |   |   | 457,646 |   |   |   | 3,154 |   |   |   | 2.77 |   |
| Non-interest-bearing liabilities:                 |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                   |   |                   | 92,789  |   |     |   |   |   |   |   |   |   |   |   | 97,565 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                 |   |                   | 4,270   |   |     |   |   |   |   |   |   |   |   |   | 4,688 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                              |   |                   | 53,958  |   |     |   |   |   |   |   |   |   |   |   | 42,281 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity        |   | $                      | 643,053 |   |     |   |   |   |   |   |   |   |   | $ | 602,180 |   |   |   |   |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (taxable equivalent basis)    |   |                   |    | 5,959  |     |   |   |   |   |   |   |   |   |   |   | 5,684 |   |   |   |   |   |
| Tax Equivalent adjustment                         |   |                   |    |   |     |   | (139 | ) |   |   |   |   |   |   |   |   |   |   | (128 | ) |   |   |   |   |
| Net interest income                               |   |                   |    |   |     | $      | 5,820 |   |   |   |   |   |   |   |   |   |   | $ | 5,556 |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread (taxable equivalent basis)    |   |                   |    |   |     |   |   | 3.45 | % |   |   |   |   |   |   |   |   |   |   | 3.44 | % |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on interest-earning                     |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   assets (taxable equivalent basis) (3) |   |                   |    |   |     |   |   |   |   |   | 3.89 | % |   |   |   |   |   |   |   |   |   |   | 3.99 | % |

|      (1)      For purpose of these calculations, nonaccruing loans are included in the average balance.  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

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

|                                              |   | 2009                   |    |   | 2008     |   |
|---------------------------------------------------|--------|------------------------|---------|--------|----------|--------|
|                                              |   |                   |    |   |     |   |   | 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) (2)                                     |   | $                      | 437,806 |   |     | $      | 13,290 |   |   |   | 6.12 | % |   | $ | 429,754 |   |   | $ | 14,284 |   |   |   | 6.68 | % |
| Taxable investment securities (1)                 |   |                   | 140,508 |   |     |   | 3,208 |   |   |   | 4.60 |   |   |   | 98,703 |   |   |   | 2,579 |   |   |   | 5.25 |   |
| Tax-exempt investment securities (1) (2)          |   |                   | 29,230  |   |     |   | 787 |   |   |   | 5.43 |   |   |   | 26,652 |   |   |   | 709 |   |   |   | 5.35 |   |
| Other interest-earning assets                     |   |                   | 90      |   |     |   | 5 |   |   |   | 11.20 |   |   |   | 3,463 |   |   |   | 42 |   |   |   | 2.44 |   |
| Total interest-earning assets                     |   |                   | 607,634 |   |     |   | 17,290 |   |   |   | 5.74 |   |   |   | 558,572 |   |   |   | 17,614 |   |   |   | 6.34 |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets:                      |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                         |   |                   | (5,300  | )      |     |   |   |   |   |   |   |   |   |   | (4,557 | ) |   |   |   |   |   |   |   |   |
| Other assets                                      |   |                   | 34,514  |   |     |   |   |   |   |   |   |   |   |   | 34,046 |   |   |   |   |   |   |   |   |   |
| Total assets                                      |   | $                      | 636,848 |   |     |   |   |   |   |   |   |   |   | $ | 588,061 |   |   |   |   |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                     |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                  |   | $                      | 175,167 |   |     | $      | 1,097 |   |   |   | 1.26 | % |   | $ | 160,346 |   |   | $ | 1,466 |   |   |   | 1.84 | % |
| Savings deposits                                  |   |                   | 41,449  |   |     |   | 114 |   |   |   | 0.55 |   |   |   | 36,798 |   |   |   | 123 |   |   |   | 0.67 |   |
| Time deposits                                     |   |                   | 203,244 |   |     |   | 3,364 |   |   |   | 3.34 |   |   |   | 180,238 |   |   |   | 3,933 |   |   |   | 4.39 |   |
| Repurchase agreements                             |   |                   | 15,162  |   |     |   | 378 |   |   |   | 5.03 |   |   |   | 16,467 |   |   |   | 279 |   |   |   | 3.41 |   |
| FHLB borrowing                                    |   |                   | 47,822  |   |     |   | 484 |   |   |   | 2.04 |   |   |   | 42,996 |   |   |   | 603 |   |   |   | 2.82 |   |
| Subordinated debenture                            |   |                   | 7,217   |   |     |   | 160 |   |   |   | 4.47 |   |   |   | 7,217 |   |   |   | 245 |   |   |   | 6.83 |   |
| Total interest-bearing liabilities                |   |                   | 490,061 |   |     |   | 5,597 |   |   |   | 2.30 |   |   |   | 444,062 |   |   |   | 6,649 |   |   |   | 3.01 |   |
| Non-interest-bearing liabilities:                 |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                   |   |                   | 90,802  |   |     |   |   |   |   |   |   |   |   |   | 97,374 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                 |   |                   | 4,255   |   |     |   |   |   |   |   |   |   |   |   | 4,762 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                              |   |                   | 51,730  |   |     |   |   |   |   |   |   |   |   |   | 41,863 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity        |   | $                      | 636,848 |   |     |   |   |   |   |   |   |   |   | $ | 588,061 |   |   |   |   |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (taxable equivalent basis)    |   |                   |    | 11,693 |     |   |   |   |   |   |   |   |   |   |   | 10,965 |   |   |   |   |   |
| Tax Equivalent adjustment                         |   |                   |    |   |     |   | (275 | ) |   |   |   |   |   |   |   |   |   |   | (247 | ) |   |   |   |   |
| Net interest income                               |   |                   |    |   |     | $      | 11,418 |   |   |   |   |   |   |   |   |   |   | $ | 10,718 |   |   |   |   |   |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread (taxable equivalent basis)    |   |                   |    |   |     |   |   | 3.42 | % |   |   |   |   |   |   |   |   |   |   | 3.33 | % |
|                                              |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on interest-earning                     |   |                   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   assets (taxable equivalent basis) (3) |   |                   |    |   |     |   |   |   |   |   | 3.88 | % |   |   |   |   |   |   |   |   |   |   | 3.95 | % |

|      (1)      For purpose of these calculations, nonaccruing loans are included in the average balance.  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

|                                            |   | June 30, |   |   | March 31, |   |   | December 31, |   |   | September 30, |   |
|-------------------------------------------------|--------|----------|--------|--------|-----------|--------|--------|--------------|--------|--------|---------------|--------|
|                                            |   | 2009     |   |   | 2009      |   |   | 2008         |   |   | 2008          |   |
|                                            |   |     |   |   |      |   |   |         |   |   |          |   |
| Nonaccrual loans (1)                            |   | $        | 11,533 |   |      | $      | 6,592  |         |   | $      | 4,230         |   |   | $ | 6,884 |   |
| Loans past due 90 days or more and accruing (2) |   |     | -      |   |      |   | 414    |         |   |   | 353           |   |   |   | 268 |   |
| Total nonperforming loans                       |   |     | 11,533 |   |      |   | 7,006  |         |   |   | 4,583         |   |   |   | 7,152 |   |
|                                            |   |     |   |   |      |   |   |         |   |   |          |   |   |   |   |   |
| Restructured loans                              |   |     | 2,460  |   |      |   | 2,375  |         |   |   | 1,855         |   |   |   | - |   |
|                                            |   |     |   |   |      |   |   |         |   |   |          |   |   |   |   |   |
| Total nonperforming loans                       |   | $        | 13,993 |   |      | $      | 9,381  |         |   | $      | 6,438         |   |   | $ | 7,152 |   |
|                                            |   |     |   |   |      |   |   |         |   |   |          |   |   |   |   |   |
| Allowance for loan losses                       |   | $        | 6,342  |   |      | $      | 5,324  |         |   | $      | 5,166         |   |   | $ | 5,930 |   |
|                                            |   |     |   |   |      |   |   |         |   |   |          |   |   |   |   |   |
| Nonperforming loans to total loans              |   |     | 3.18   | %      |      |   | 2.15   | %            |   |   | 1.46          | %      |   |   | 1.61 | % |
| Nonperforming loans to total assets             |   |     | 2.19   | %      |      |   | 1.45   | %            |   |   | 1.05          | %      |   |   | 1.17 | % |
| Allowance for loan losses to total loans        |   |     | 1.44   | %      |      |   | 1.22   | %            |   |   | 1.18          | %      |   |   | 1.34 | % |
| Allowance for loan losses to                    |   |     |   |   |      |   |   |         |   |   |          |   |   |   |   |   |
| nonperforming loans                             |   |     | 45.32  | %      |      |   | 56.75  | %            |   |   | 80.24         | %      |   |   | 82.91 | % |

----

Index

----

Index

|                                                                     | Required | Actual | Excess |
|--------------------------------------------------------------------------|----------|--------|--------|
|                                                                     |     |   |   |
| Leverage Ratio                                                           | 4.00%    | 9.28%  | 5.28%  |
| Risk-based Capital                                                       |     |   |   |
|            Tier 1 | 4.00%    | 12.46% | 8.46%  |
|            Total       | 8.00%    | 13.71% | 5.71%  |

----

Index

u

e

|   | (a) | Evaluation of internal controls and procedures. |
|--------|-----|-------------------------------------------------|

|   | (b) | Management’s Report on Internal Control over Financial Reporting |
|--------|-----|------------------------------------------------------------------------|

|   | (c) | Changes in internal controls over financial reporting. |
|--------|-----|--------------------------------------------------------|

----

Index

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

|                                                                               | Votes for | Votes Withheld      |
|------------------------------------------------------------------------------------|-----------|---------------------|
| Election of Director                                                               |      |                |
|           Robert J. Turner       | 3,957,518 | 317,163   |
|           William J. Vander Eems | 4,209,788 | 64,893              |
|           Paul Van Ostenbridge   | 4,268,780 |   5,902        |

| Item6. | Exhibits |
|--------|----------|

----

Index

A

|                             | Stewardship Financial Corporation |
|----------------------------------|-----------------------------------|
|                             |                              |   |
|                             |                              |   |
| Date:  August 14, 2009 | By:                               | /s/ Paul Van Ostenbridge |
|                             |                              | Paul Van Ostenbridge |
|                             |                              | President and Chief Executive Officer |
|                             |                              | (Principal Executive Officer) |
|                             |                              |   |
|                             |                              |   |
|                             |                              |   |
|                             |                              |   |
| Date:  August 14, 2009 | By:                               | /s/ Claire M. Chadwick |
|                             |                              | Claire M. Chadwick |
|                             |                              | Senior Vice President and Chief Financial Officer |
|                             |                              | (Principal Financial and Accounting Officer) |

----

Index

B

| ExhibitNumber |   |  Description of Exhibits                                                                                                  |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                           |
| 31.1          |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                             |
| 31.2          |   | Certification of Chief Financial pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                     |
| 32.1          |   | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |