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

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

| 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 areacode) |

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

| Large      accelerated filer (   )                                                  | Accelerated      filer (    ) |
|----------------------------------------------------------------------------------------------------|---------------------------------------------------|
| Non-accelerated      filer (   ) (Do not check if a smaller reporting      company) | Smaller      reporting company  ( X )   |

----

n

|                                                                                                                                             | PAGE         |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
|                                                                                                                                             | NUMBER       |
| PART      I  -  CONSOLIDATED FINANCIAL      INFORMATION                                                                      |         |
|                                                                                                                                             |         |
| ITEM 1  -   CONSOLIDATED FINANCIAL      STATEMENTS                                                                      |         |
|                                                                                                                                             |         |
| Consolidated Statements of Financial Condition at June 30, 2008      (Unaudited) and December 31, 2007                                           | 1            |
|                                                                                                                                             |         |
| Consolidated Statements of Income for the Six Months ended June      30, 2008 and 2007 (Unaudited)                                               | 2            |
|                                                                                                                                             |         |
| Consolidated Statements of Income for the Three Months ended      June 30, 2008 and 2007 (Unaudited)                                             | 3            |
|                                                                                                                                             |         |
| Consolidated Statements of Cash Flows for the Six Months ended      June 30, 2008 and 2007 (Unaudited)                                           | 4            |
|                                                                                                                                             |         |
| Consolidated Statement of Changes in Stockholders’ Equity for      the Six Months ended  June 30, 2008 and 2007      (Unaudited) | 5            |
|                                                                                                                                             |         |
| Notes to Consolidated Financial Statements      (Unaudited)                                                                                      | 6 -      14  |
|                                                                                                                                             |         |
| ITEM 2   -  MANAGEMENT’S DISCUSSION AND      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF    OPERATIONS              | 15      - 28 |
|                                                                                                                                             |         |
| ITEM 3  -   QUANTITATIVE AND QUALITATIVE      DISCLOSURE ABOUT MARKET RISK                                                   | 28           |
|                                                                                                                                             |         |
| ITEM 4  -   CONTROLS AND      PROCEDURES                                                                                     | 28      - 29 |
|                                                                                                                                             |         |
| PART      II  -  OTHER INFORMATION                                                                                           |         |
|                                                                                                                                             |         |
| ITEM 1A.  RISK FACTORS                                                                                                                 | 30           |
|                                                                                                                                             |         |
| ITEM 4 – SUBMISSION OF MATTERS TO VOTE OF SECURITY      HOLDERS                                                                            | 30           |
|                                                                                                                                             |         |
| ITEM 6 – EXHIBITS                                                                                                                          | 30           |
|                                                                                                                                             |         |
| SIGNATURES                                                                                                                                       | 31           |
|                                                                                                                                             |         |
| EXHIBIT INDEX                                                                                                                                    | 32      -35  |

----

Index

| Stewardship      Financial Corporation and Subsidiary                                             |   |
|---------------------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Financial Condition(Unaudited)                                    |   |
|                                                                                              |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |
|                                                                                              |   | June      30, |   |   | December      31, |   |
|                                                                                              |   | 2008 |   |   | 2007 |   |
|                                                                                              |   |   |   |   |   |   |
| Assets                                                                                            |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |
| Cash      and due from banks                                                                      |   | $ | 14,115,000 |   |   | $ | 11,789,000 |   |
| Other      interest-earning assets                                                                |   |   | 1,118,000 |   |   |   | 143,000 |   |
| Federal      funds sold                                                                           |   |   | 14,400,000 |   |   |   | - |   |
|        Cash      and cash equivalents                          |   |   | 29,633,000 |   |   |   | 11,932,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| Securities      available for sale                                                                |   |   | 96,763,000 |   |   |   | 76,957,000 |   |
| Securities      held to maturity; estimated fair value                                            |   |   |   |   |   |   |   |   |
|     of      $35,681,000 (2008) and $41,508,000 (2007)                         |   |   | 35,889,000 |   |   |   | 41,189,000 |   |
| FHLB-NY      stock, at cost                                                                       |   |   | 2,605,000 |   |   |   | 1,983,000 |   |
| Loans,      net of allowance for loan losses of                                                   |   |   |   |   |   |   |   |   |
|     of      $ 4,768,000 (2008) and $4,457,000 (2007)                          |   |   | 433,921,000 |   |   |   | 415,690,000 |   |
| Mortgage      loans held for sale                                                                 |   |   | 2,072,000 |   |   |   | 1,284,000 |   |
| Premises      and equipment, net                                                                  |   |   | 7,654,000 |   |   |   | 7,950,000 |   |
| Accrued      interest receivable                                                                  |   |   | 3,209,000 |   |   |   | 3,112,000 |   |
| Intangible      assets                                                                            |   |   | 54,000 |   |   |   | 70,000 |   |
| Bank      owned life insurance                                                                    |   |   | 8,432,000 |   |   |   | 8,273,000 |   |
| Other      assets                                                                                 |   |   | 3,823,000 |   |   |   | 3,465,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
|        Total      assets                                       |   | $ | 624,055,000 |   |   | $ | 571,905,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| Liabilities      and stockholders' equity                                                         |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| Liabilities                                                                                       |   |   |   |   |   |   |   |   |
| Deposits:                                                                                         |   |   |   |   |   |   |   |   |
|     Noninterest-bearing                                                       |   | $ | 98,426,000 |   |   | $ | 101,993,000 |   |
|     Interest-bearing                                                          |   |   | 411,459,000 |   |   |   | 370,306,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
|         Total      deposits                               |   |   | 509,885,000 |   |   |   | 472,299,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| Other      borrowings                                                                             |   |   | 41,002,000 |   |   |   | 28,645,000 |   |
| Subordinated      debentures                                                                      |   |   | 7,217,000 |   |   |   | 7,217,000 |   |
| Securities      sold under agreements to repurchase                                               |   |   | 16,192,000 |   |   |   | 17,283,000 |   |
| Accrued      interest payable                                                                     |   |   | 1,939,000 |   |   |   | 2,080,000 |   |
| Accrued      expenses and other liabilities                                                       |   |   | 6,166,000 |   |   |   | 3,291,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
|         Total      liabilities                            |   |   | 582,401,000 |   |   |   | 530,815,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| Commitments      and contingencies                                                                |   |   | - |   |   |   | - |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| Stockholders'      equity                                                                         |   |   |   |   |   |   |   |   |
| Common      stock, no par value; 10,000,000 shares authorized;                                    |   |   |   |   |   |   |   |   |
|     5,318,573      and 5,306,828 shares issued: 5,307,074 and 5,306,828shares |   |   |   |   |   |   |   |   |
|     outstanding      at June 30, 2008 and December 31, 2007, respectively.    |   |   | 34,952,000 |   |   |   | 34,871,000 |   |
| Treasury      stock, 11,499 shares outstanding at June 30, 2008                                   |   |   | (152,000 | ) |   |   | - |   |
| Retained      earnings                                                                            |   |   | 7,227,000 |   |   |   | 5,943,000 |   |
| Accumulated      other comprehensive (loss) gain                                                  |   |   | (373,000 | ) |   |   | 276,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
|         Total      Stockholders' equity                   |   |   | 41,654,000 |   |   |   | 41,090,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
|         Total      liabilities and Stockholders' equity   |   | $ | 624,055,000 |   |   | $ | 571,905,000 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| See      notes to unaudited consolidated financial statements.                                    |   |   |   |   |   |   |   |   |

----

Index

| Stewardship      Financial Corporation and Subsidiary                                           |   |
|-------------------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Income                                                          |   |
| (Unaudited)                                                                                     |   |
|                                                                                            |   |   |   |   |   |   |
|                                                                                            |   |   |   |   |   |   |
|                                                                                            |   | Six      Months Ended |   |
|                                                                                            |   | June      30, |   |
|                                                                                            |   | 2008 |   |   | 2007 |   |
| Interest      income:                                                                           |   |   |   |   |   |   |
|      Loans                                                             |   | $ | 14,261,000 |   |   | $ | 13,285,000 |   |
|      Securities      held to maturity                                  |   |   |   |   |   |   |   |   |
|        Taxable                                               |   |   | 390,000 |   |   |   | 464,000 |   |
|        Non-taxable                                           |   |   | 417,000 |   |   |   | 356,000 |   |
|      Securities      available for sale                                |   |   |   |   |   |   |   |   |
|        Taxable                                               |   |   | 2,107,000 |   |   |   | 1,837,000 |   |
|        Non-taxable                                           |   |   | 68,000 |   |   |   | 30,000 |   |
|      FHLB      dividends                                               |   |   | 82,000 |   |   |   | 58,000 |   |
|      Other      interest-earning assets                                |   |   | 42,000 |   |   |   | 19,000 |   |
|           Total      interest income          |   |   | 17,367,000 |   |   |   | 16,049,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Interest      expense:                                                                          |   |   |   |   |   |   |   |   |
|      Deposits                                                          |   |   | 5,522,000 |   |   |   | 5,621,000 |   |
|      Borrowed      money                                               |   |   | 1,127,000 |   |   |   | 953,000 |   |
|           Total      interest expense         |   |   | 6,649,000 |   |   |   | 6,574,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Net      interest income before provision for loan losses                                       |   |   | 10,718,000 |   |   |   | 9,475,000 |   |
| Provision      for loan losses                                                                  |   |   | 360,000 |   |   |   | 190,000 |   |
| Net      interest income after provision for loan losses                                        |   |   | 10,358,000 |   |   |   | 9,285,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Noninterest      income:                                                                        |   |   |   |   |   |   |   |   |
|      Fees      and service charges                                     |   |   | 697,000 |   |   |   | 785,000 |   |
|      Bank      owned life insurance                                    |   |   | 159,000 |   |   |   | 160,000 |   |
|      Gain      on sales of mortgage loans                              |   |   | 109,000 |   |   |   | 186,000 |   |
|      Gain      on calls of securities                                  |   |   | 57,000 |   |   |   | - |   |
|      Merchant      processing                                          |   |   | 730,000 |   |   |   | 717,000 |   |
|      Miscellaneous                                                     |   |   | 241,000 |   |   |   | 654,000 |   |
|            Total      noninterest income |   |   | 1,993,000 |   |   |   | 2,502,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Noninterest      expenses:                                                                      |   |   |   |   |   |   |   |   |
|      Salaries      and employee benefits                               |   |   | 4,110,000 |   |   |   | 3,644,000 |   |
|      Occupancy,      net                                               |   |   | 877,000 |   |   |   | 716,000 |   |
|      Equipment                                                         |   |   | 566,000 |   |   |   | 457,000 |   |
|      Data      processing                                              |   |   | 597,000 |   |   |   | 629,000 |   |
|      Advertising                                                       |   |   | 236,000 |   |   |   | 200,000 |   |
|      FDIC      insurance premium                                       |   |   | 146,000 |   |   |   | 26,000 |   |
|      Amortization      of intangible assets                            |   |   | 16,000 |   |   |   | 16,000 |   |
|      Charitable      contributions                                     |   |   | 348,000 |   |   |   | 368,000 |   |
|      Stationery      and supplies                                      |   |   | 229,000 |   |   |   | 193,000 |   |
|      Merchant      processing                                          |   |   | 645,000 |   |   |   | 650,000 |   |
|      Bank-card      related services                                   |   |   | 154,000 |   |   |   | 169,000 |   |
|      Miscellaneous                                                     |   |   | 1,117,000 |   |   |   | 1,109,000 |   |
|           Total      noninterest expenses     |   |   | 9,041,000 |   |   |   | 8,177,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Income      before income tax expense                                                           |   |   | 3,310,000 |   |   |   | 3,610,000 |   |
| Income      tax expense                                                                         |   |   | 1,070,000 |   |   |   | 1,070,000 |   |
| Net      income                                                                                 |   | $ | 2,240,000 |   |   | $ | 2,540,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Basic      earnings per share                                                                   |   | $ | 0.42 |   |   | $ | 0.48 |   |
| Diluted      earnings per share                                                                 |   | $ | 0.42 |   |   | $ | 0.47 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Weighted      average number of common shares outstanding                                       |   |   | 5,312,862 |   |   |   | 5,281,102 |   |
| Weighted      average number of diluted common                                                  |   |   |   |   |   |   |   |   |
|      shares      outstanding                                           |   |   | 5,325,216 |   |   |   | 5,315,539 |   |

| Share      data has been restated to reflect a 5% stock dividend paid November 15,      2007. |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|                                                                                          |   |   |   |   |   |   |   |   |
| See      notes to unaudited consolidated financial statements.                                |   |   |   |   |   |   |   |   |
|                                                                                          |   |   |   |   |   |   |   |   |

----

Index

| Stewardship      Financial Corporation and Subsidiary                                           |   |
|-------------------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Income                                                          |   |
| (Unaudited)                                                                                     |   |
|                                                                                            |   |   |   |   |   |   |
|                                                                                            |   |   |   |   |   |   |
|                                                                                            |   | Three      Months Ended |   |
|                                                                                            |   | June      30, |   |
|                                                                                            |   | 2008 |   |   | 2007 |   |
| Interest      income:                                                                           |   |   |   |   |   |   |
|      Loans                                                             |   | $ | 7,076,000 |   |   | $ | 6,715,000 |   |
|      Securities      held to maturity                                  |   |   |   |   |   |   |   |   |
|        Taxable                                               |   |   | 186,000 |   |   |   | 235,000 |   |
|        Non-taxable                                           |   |   | 210,000 |   |   |   | 179,000 |   |
|      Securities      available for sale                                |   |   |   |   |   |   |   |   |
|        Taxable                                               |   |   | 1,113,000 |   |   |   | 930,000 |   |
|        Non-taxable                                           |   |   | 41,000 |   |   |   | 16,000 |   |
|      FHLB      dividends                                               |   |   | 48,000 |   |   |   | 32,000 |   |
|      Other      interest-earning assets                                |   |   | 36,000 |   |   |   | 10,000 |   |
|           Total      interest income          |   |   | 8,710,000 |   |   |   | 8,117,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Interest      expense:                                                                          |   |   |   |   |   |   |   |   |
|      Deposits                                                          |   |   | 2,612,000 |   |   |   | 2,861,000 |   |
|      Borrowed      money                                               |   |   | 542,000 |   |   |   | 454,000 |   |
|           Total      interest expense         |   |   | 3,154,000 |   |   |   | 3,315,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Net      interest income before provision for loan losses                                       |   |   | 5,556,000 |   |   |   | 4,802,000 |   |
| Provision      for loan losses                                                                  |   |   | 260,000 |   |   |   | 180,000 |   |
| Net      interest income after provision for loan losses                                        |   |   | 5,296,000 |   |   |   | 4,622,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Noninterest      income:                                                                        |   |   |   |   |   |   |   |   |
|      Fees      and service charges                                     |   |   | 402,000 |   |   |   | 391,000 |   |
|      Bank      owned life insurance                                    |   |   | 78,000 |   |   |   | 82,000 |   |
|      Gain      on sales of mortgage loans                              |   |   | 54,000 |   |   |   | 97,000 |   |
|      Gain      on calls of securities                                  |   |   | 16,000 |   |   |   | - |   |
|      Merchant      processing                                          |   |   | 361,000 |   |   |   | 352,000 |   |
|      Miscellaneous                                                     |   |   | 106,000 |   |   |   | 584,000 |   |
|            Total      noninterest income |   |   | 1,017,000 |   |   |   | 1,506,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Noninterest      expenses:                                                                      |   |   |   |   |   |   |   |   |
|      Salaries      and employee benefits                               |   |   | 2,094,000 |   |   |   | 1,850,000 |   |
|      Occupancy,      net                                               |   |   | 428,000 |   |   |   | 381,000 |   |
|      Equipment                                                         |   |   | 293,000 |   |   |   | 240,000 |   |
|      Data      processing                                              |   |   | 289,000 |   |   |   | 322,000 |   |
|      Advertising                                                       |   |   | 132,000 |   |   |   | 124,000 |   |
|      FDIC      insurance premium                                       |   |   | 73,000 |   |   |   | 13,000 |   |
|      Amortization      of intangible assets                            |   |   | 8,000 |   |   |   | 8,000 |   |
|      Charitable      contributions                                     |   |   | 186,000 |   |   |   | 199,000 |   |
|      Stationery      and supplies                                      |   |   | 118,000 |   |   |   | 110,000 |   |
|      Merchant      processing                                          |   |   | 320,000 |   |   |   | 315,000 |   |
|      Bank-card      related services                                   |   |   | 76,000 |   |   |   | 74,000 |   |
|      Miscellaneous                                                     |   |   | 545,000 |   |   |   | 546,000 |   |
|           Total      noninterest expenses     |   |   | 4,562,000 |   |   |   | 4,182,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Income      before income tax expense                                                           |   |   | 1,751,000 |   |   |   | 1,946,000 |   |
| Income      tax expense                                                                         |   |   | 572,000 |   |   |   | 492,000 |   |
| Net      income                                                                                 |   | $ | 1,179,000 |   |   | $ | 1,454,000 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Basic      earnings per share                                                                   |   | $ | 0.22 |   |   | $ | 0.27 |   |
| Diluted      earnings per share                                                                 |   | $ | 0.22 |   |   | $ | 0.27 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Weighted      average number of common shares outstanding                                       |   |   | 5,315,163 |   |   |   | 5,291,897 |   |
| Weighted      average number of diluted common                                                  |   |   |   |   |   |   |   |   |
|      shares      outstanding                                           |   |   | 5,325,224 |   |   |   | 5,317,001 |   |

|                                                                                          |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Share      data has been restated to reflect a 5% stock dividend paid November 15,      2007. |   |   |   |   |   |   |   |   |
|                                                                                          |   |   |   |   |   |   |   |   |
| See      notes to unaudited consolidated financial statements.                                |   |   |   |   |   |   |   |   |

----

Index

| Stewardship      Financial Corporation and Subsidiary                                                                                                                                                                                                                                                                                                                                      |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                 |   |
| (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |  Six      Months Ended |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   | June      30, |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   | 2008 |   |   | 2007 |   |
| Cash      flows from operating activities:                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |
| Net      income                                                                                                                                                                                                                                                                                                                                                                            |   | $ | 2,240,000 |   |   | $ | 2,540,000 |   |
| Adjustments      to reconcile net income to                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |
|     net      cash provided by operating activities:                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|         Depreciation      and amortization of premises and equipment                                                                                                                                                                                                                                                                               |   |   | 481,000 |   |   |   | 388,000 |   |
|         Amortization      of premiums and accretion of discounts, net                                                                                                                                                                                                                                                                              |   |   | 60,000 |   |   |   | 76,000 |   |
|         Accretion      of deferred loan fees                                                                                                                                                                                                                                                                                                       |   |   | (133,000 | ) |   |   | (59,000 | ) |
|         Provision      for loan losses                                                                                                                                                                                                                                                                                                             |   |   | 360,000 |   |   |   | 190,000 |   |
|         Originations      of mortgage loans held for sale                                                                                                                                                                                                                                                                                          |   |   | (11,885,000 | ) |   |   | (17,522,000 | ) |
|         Proceeds      from sale of mortgage loans                                                                                                                                                                                                                                                                                                  |   |   | 11,206,000 |   |   |   | 18,191,000 |   |
|         Gain      on sale of loans                                                                                                                                                                                                                                                                                                                 |   |   | (109,000 | ) |   |   | (186,000 | ) |
|         Gain      on calls of securities                                                                                                                                                                                                                                                                                                           |   |   | (57,000 | ) |   |   | - |   |
|         Loss      on sale of equipment                                                                                                                                                                                                                                                                                                             |   |   | 12,000 |   |   |   | - |   |
|         Deferred      income tax benefit                                                                                                                                                                                                                                                                                                           |   |   | (135,000 | ) |   |   | (12,000 | ) |
|         Amortization      of intangible assets                                                                                                                                                                                                                                                                                                     |   |   | 16,000 |   |   |   | 16,000 |   |
|         Nonqualified      stock option expense                                                                                                                                                                                                                                                                                                     |   |   | 24,000 |   |   |   | 26,000 |   |
|         Increase      in bank owned life insurance                                                                                                                                                                                                                                                                                                 |   |   | (159,000 | ) |   |   | (159,000 | ) |
|         Gain      from bank owned life insurance proceeds                                                                                                                                                                                                                                                                                          |   |   | - |   |   |   | (459,000 | ) |
|         Increase      in accrued interest receivable                                                                                                                                                                                                                                                                                               |   |   | (97,000 | ) |   |   | (156,000 | ) |
|         Decrease      (increase) in other assets                                                                                                                                                                                                                                                                                                   |   |   | 185,000 |   |   |   | (34,000 | ) |
|         (Decrease)      increase in accrued interest payable                                                                                                                                                                                                                                                                                       |   |   | (141,000 | ) |   |   | 146,000 |   |
|         Increase      (decrease) in other liabilities                                                                                                                                                                                                                                                                                              |   |   | 1,187,000 |   |   |   | (737,000 | ) |
|                  Net      cash provided by operating activities                                                                                                                                                                                                                                       |   |   | 3,055,000 |   |   |   | 2,249,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |
|     Purchase      of securities available for sale                                                                                                                                                                                                                                                                                                                     |   |   | (36,784,000 | ) |   |   | (12,952,000 | ) |
|     Proceeds      from maturities and principal repayments                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|           on      securities available for sale                                                                                                                                                                                                                                                                                          |   |   | 3,856,000 |   |   |   | 6,954,000 |   |
|     Proceeds      from calls on securities available for sale                                                                                                                                                                                                                                                                                                          |   |   | 13,766,000 |   |   |   | - |   |
|     Purchase      of securities held to maturity                                                                                                                                                                                                                                                                                                                       |   |   | (854,000 | ) |   |   | (4,513,000 | ) |
|     Proceeds      from maturities and principal repayments on                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
|           securities      held to maturity                                                                                                                                                                                                                                                                                               |   |   | 2,118,000 |   |   |   | 3,617,000 |   |
|     Proceeds      from calls on securities held to maturity                                                                                                                                                                                                                                                                                                            |   |   | 4,020,000 |   |   |   | 152,000 |   |
|     (Purchase)      redemption of FHLB-NY stock                                                                                                                                                                                                                                                                                                                        |   |   | (622,000 | ) |   |   | 72,000 |   |
|     Net      increase in loans                                                                                                                                                                                                                                                                                                                                         |   |   | (18,458,000 | ) |   |   | (14,221,000 | ) |
|     Additional      investment in other real estate owned                                                                                                                                                                                                                                                                                                              |   |   | - |   |   |   | (324,000 | ) |
|     Proceeds      from life insurance payout                                                                                                                                                                                                                                                                                                                           |   |   | - |   |   |   | 1,030,000 |   |
|     Additions      to premises and equipment                                                                                                                                                                                                                                                                                                                           |   |   | (201,000 | ) |   |   | (759,000 | ) |
|     Sale      of equipment                                                                                                                                                                                                                                                                                                                                             |   |   | 4,000 |   |   |   | - |   |
|                  Net      cash used in investing activities                                                                                                                                                                                                                                           |   |   | (33,155,000 | ) |   |   | (20,944,000 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |
|      Net      (decrease) increase in noninterest-bearing deposits                                                                                                                                                                                                                                                                                                 |   |   | (3,567,000 | ) |   |   | 9,871,000 |   |
|      Net      increase in interest-bearing deposits                                                                                                                                                                                                                                                                                                               |   |   | 41,153,000 |   |   |   | 7,384,000 |   |
|  Net      (decrease) increase in securities sold under agreements                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |
|          to      repurchase                                                                                                                                                                                                                                                                                                                   |   |   | (1,091,000 | ) |   |   | 2,674,000 |   |
|      Proceeds from      term borrowings                                                                                                                                                                                                                                                                                                                      |   |   | 30,000,000 |   |   |   | - |   |
|      Net      decrease in short term borrowings                                                                                                                                                                                                                                                                                                                   |   |   | (16,800,000 | ) |   |   | (1,900,000 | ) |
|      Payments      on long term borrowings                                                                                                                                                                                                                                                                                                                        |   |   | (843,000 | ) |   |   | (817,000 | ) |
|      Cash      dividends paid on common stock                                                                                                                                                                                                                                                                                                                     |   |   | (956,000 | ) |   |   | (903,000 | ) |
|      Payment      of discount on dividend reinvestment plan                                                                                                                                                                                                                                                                                                       |   |   | (22,000 | ) |   |   | (22,000 | ) |
|      Purchase      of treasury stock                                                                                                                                                                                                                                                                                                                              |   |   | (131,000 | ) |   |   | - |   |
|      Options      exercised                                                                                                                                                                                                                                                                                                                                       |   |   | 36,000 |   |   |   | 45,000 |   |
|      Tax      benefit of stock options                                                                                                                                                                                                                                                                                                                            |   |   | 1,000 |   |   |   | 1,000 |   |
|      Issuance      of common stock                                                                                                                                                                                                                                                                                                                                |   |   | 21,000 |   |   |   | 22,000 |   |
|      Net      cash provided by financing activities                                                                                                                                                                                                                                                                                                               |   |   | 47,801,000 |   |   |   | 16,355,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
|      Net      increase (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                    |   |   | 17,701,000 |   |   |   | (2,340,000 | ) |
|      Cash      and cash equivalents - beginning                                                                                                                                                                                                                                                                                                                   |   |   | 11,932,000 |   |   |   | 15,697,000 |   |
|      Cash      and cash equivalents - ending                                                                                                                                                                                                                                                                                                                      |   | $ | 29,633,000 |   |   | $ | 13,357,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
| Supplemental      disclosures of cash flow information:                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|      Cash      paid during the year for interest                                                                                                                                                                                                                                                                                                                  |   |   | 6,790,000 |   |   |   | 6,428,000 |   |
|      Cash      paid during the year for income taxes                                                                                                                                                                                                                                                                                                              |   |   | 1,144,000 |   |   |   | 1,194,000 |   |
|       Noncash      investing activities - security purchases due brokers                                                                                                                                                                                                                                                                                     |   |   | 1,687,000 |   |   |   | 1,159,000 |   |
|                                                           -      transfer of loan to ORE |   |   | - |   |   |   | 60,975 |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
| See      notes to unaudited consolidated financial statements.                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |

----

Index

| Stewardship      Financial Corporation and Subsidiary                   |
|-------------------------------------------------------------------------|
| Consolidated      Statement of Changes in Stockholders'  Equity         |
| (Unaudited)                                                             |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   | For      the Period Ended June 30, 2008 |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |  Accumulated |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Comprehensive |   |   |   |
|                                                                    |   | Common      Stock |   |   | Treasury      Stock |   |   | Retained |   | Gain      (Loss), |   |   |   |
|                                                                    |   | Shares |   |   | Amount |   |   | Shares |   |   | Amount |   |   | Earnings |   | Net |   | Total |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      -- December 31, 2007                                       |   |   | 5,306,828 |   |   | $ | 34,871,000 |   |   |   | - |   |   | $ | - |   |   | $ | 5,943,000 |   |   | $ | 276,000 |   |   | $ | 41,090,000 |   |
| Dividends      Paid                                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (956,000 | ) |   |   | - |   |   |   | (956,000 | ) |
| Payment      of discount on dividend                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     reinvestment      plan                          |   |   | - |   |   |   | (22,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (22,000 | ) |
| Common      stock issued under stock plans                              |   |   | 1,667 |   |   |   | 21,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 21,000 |   |
| Stock      option compensation expense                                  |   |   | - |   |   |   | 24,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 24,000 |   |
| Stock      options exercised                                            |   |   | 10,078 |   |   |   | 57,000 |   |   |   | (1,499 | ) |   |   | (21,000 | ) |   |   | - |   |   |   | - |   |   |   | 36,000 |   |
| Tax      benefit on stock options exercised                             |   |   |   | 1,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,000 |   |
| Repurchase      common stock                                            |   |   |   |   |   |   |   |   |   |   | (10,000 | ) |   |   | (131,000 | ) |   |   |   |   |   |   |   |   |   |   | (131,000 | ) |
| Comprehensive      income:                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,240,000 |   |   |   | - |   |   |   | 2,240,000 |   |
| Unrealized      holding losses 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 of taxes of $22,000) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 35,000 |   |   |   | 35,000 |   |
| Total      comprehensive income, net of tax                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,591,000 |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      -- June 30, 2008                                           |   |   | 5,318,573 |   |   | $ | 34,952,000 |   |   |   | (11,499 | ) |   | $ | (152,000 | ) |   | $ | 7,227,000 |   |   | $ | (373,000 | ) |   | $ | 41,654,000 |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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

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

----

Index

i

----

Index

|                                        |   | 2008            |         |   | 2007                |   |
|---------------------------------------------|--------|-----------------|--------------|--------|---------------------|--------|
|                                        |   |            |         |   | Weighted            |   |   |   |   |   | Weighted |   |
|                                        |   |            |         |   | Average             |   |   |   |   |   | Average |   |
|                                        |   | Shares          |         |   | Exercise      Price |   |   | Shares |   |   | Exercise      Price |   |
|                                        |   |            |         |   |                |   |   |   |   |   |   |   |
| Outstanding      at beginning of year       |   |            | 36,417       |   |                | $      | 7.56 |   |   |   | 79,193 |   |   | $ | 5.70 |   |
| Granted                                     |   |            | -            |   |                |   | - |   |   |   | - |   |   |   | - |   |
| Exercised                                   |   |            | ( 8,976 | )      |                |   | 4.80 |   |   |   | (41,222 | ) |   |   | 3.86 |   |
| Forfeited                                   |   |            | ( 1,459      | )      |                |   | 11.94 |   |   |   | ( 600 | ) |   |   | 12.27 |   |
| Outstanding      at end of period           |   |            | 25,982       |   |                | $      | 8.27 |   |   |   | 37,371 |   |   | $ | 7.62 |   |
| Options      exercisable                    |   |            | 25,982       |   |                |   |   |   |   |   | 37,371 |   |   |   |   |   |
| Weighted-average      remaining             |   |            |         |   |                |   |   |   |   |   |   |   |   |   |   |   |
|   contractual      life           |   | 2.53      years |         |   |                |   |   |   | 3.05      years |   |   |   |   |   |
| Aggregate      intrinsic value              |   | $               | 123,000      |   |                |   |   |   |   | $ | 249,000 |   |   |   |   |   |
| Intrinsic      value of options exercisable |   | $               | 123,000      |   |                |   |   |   |   | $ | 249,000 |   |   |   |   |   |

----

Index

|                                        |   | 2008            |   |   | 2007                |   |
|---------------------------------------------|--------|-----------------|--------|--------|---------------------|--------|
|                                        |   |            |   |   | Weighted            |   |   |   |   |   | Weighted |   |
|                                        |   |            |   |   | Average             |   |   |   |   |   | Average |   |
|                                        |   | Shares          |   |   | Exercise      Price |   |   | Shares |   |   |  Exercise      Price |   |
|                                        |   |            |   |   |                |   |   |   |   |   |   |   |
| Outstanding      at beginning of year       |   |            | 57,446 |   |                | $      | 12.35 |   |   |   | 60,753 |   |   | $ | 12.34 |   |
| Granted                                     |   |            | -      |   |                |   | - |   |   |   | - |   |   |   | - |   |
| Exercised                                   |   |            | 1,102  |   |                |   | - |   |   |   | 1,102 |   |   |   | 12.24 |   |
| Expired                                     |   |            | -      |   |                |   | - |   |   |   | - |   |   |   | - |   |
| Outstanding      at end of period           |   |            | 56,344 |   |                | $      | 12.35 |   |   |   | 59,651 |   |   | $ | 12.35 |   |
| Options      exercisable                    |   |            | 23,269 |   |                |   |   |   |   |   | 15,551 |   |   |   |   |   |
| Weighted-average      remaining             |   |            |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
|   contractual      life           |   | 3.72      years |   |   |                |   |   |   | 4.73      years |   |   |   |   |   |
| Aggregate      intrinsic value              |   | $               | 37,000 |   |                |   |   |   |   | $ | 116,000 |   |   |   |   |   |
| Intrinsic      value of options exercisable |   | $               | 12,000 |   |                |   |   |   |   | $ | 26,000 |   |   |   |   |   |

----

Index

| Stewardship      Financial Corporation and Subsidiary                                                                                                                                      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Notes      to Consolidated Financial Statements Continued                                                                                                                                  |
| (Unaudited)                                                                                                                                                                                |
|                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Note      3.   Securities Available for Sale                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The      fair value of the available for sale securities and the related gross      unrealized gains and losses recognized in accumulated      other comprehensive income were as follows: |
|                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                               |   | June      30, 2008 |       |
|--------------------------------------------------------------------|--------|--------------------|------------|
|                                                               |   |               |       |   | Gross |   | Gross |   |
|                                                               |   | Fair               |       | Unrealized |   | Unrealized |   |
|                                                               |   | Value              |       | Holding      Gains |   | Holding      Losses |   |
|                                                               |   |               |       |   |   |   |   |   |   |
|     U.S.      government-sponsored agencies    |   | $                  | 50,606,000 |   |   | $ | 368,000 |   |   | $  | 511,000 |   |
|     Obligations      of state and political    |   |               |       |   |   |   |   |   |   |   |   |   |
|          subdivisions |   |               | 5,699,000  |   |   |   | 2,000 |   |   |   | 168,000 |   |
|     Mortgage-backed      securities            |   |               | 37,719,000 |   |   |   | 113,000 |   |   |   | 369,000 |   |
|     Other      securities                      |   |               | 2,739,000  |   |   |   | - |   |   |   | 44,000 |   |
|                                                               |   | $                  | 96,763,000 |   |   | $ | 483,000 |   |   | $ | 1,092,000 |   |

|                                                               |   | December      31, 2007 |       |
|--------------------------------------------------------------------|--------|------------------------|------------|
|                                                               |   |                   |       | Gross |   | Gross |   |
|                                                               |   | Fair                   |       | Unrealized |   | Unrealized |   |
|                                                               |   | Value                  |       | Holding      Gains |   | Holding      Losses |   |
|                                                               |   |                   |       |   |   |   |   |   |   |
|     U.S.      government-sponsored agencies    |   | $                      | 35,693,000 |   |   | $ | 495,000 |   |   | $ | 4,000 |   |
|     Obligations      of state and political    |   |                   |       |   |   |   |   |   |   |   |   |   |
|          subdivisions |   |                   | 2,903,000  |   |   |   | 2,000 |   |   |   | 29,000 |   |
|     Mortgage-backed      securities            |   |                   | 37,131,000 |   |   |   | 205,000 |   |   |   | 205,000 |   |
|     Other      securities                      |   |                   | 1,230,000  |   |   |   | - |   |   |   | 17,000 |   |
|                                                               |   | $                      | 76,957,000 |   |   | $ | 702,000 |   |   | $ | 255,000 |   |

| On      a quarterly basis, the Corporation makes an assessment to determine      whether there have been any events  or economic circumstances to      indicate that a security is impaired on an other-than-temporary      basis.  The Corporation considers many factors including the      length of time the security has had a market value less than the cost      basis; the intent and ability of the  Corporation to hold the      security for a period of time sufficient for a recovery in value; and      recent events specific to the issuer or industry.  Management      considers the decline in market value of these securities to be      temporary. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Mortgage-backed      securities are comprised primarily of government agencies such as the      Government National Mortgage Association ("GNMA") and government-sponsored      agencies such as the Federal National Mortgage Association ("FNMA") and      the Federal Home Loan Mortgage Corporation ("FHLMC").                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Note      4.   Securities Held to Maturity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| The      following is a summary of the contractual maturities and related      unrecognized gains and losses of securities held to    maturity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

|                                                               |   | June      30, 2008 |       |
|--------------------------------------------------------------------|--------|--------------------|------------|
|                                                               |   |               |       |   | Gross |   |   | Gross |   |   |   |   |
|                                                               |   | Carrying           |       |   | Unrecognized |   |   | Unrecognized |   |   | Fair |   |
|                                                               |   | Value              |       |   | Holding      Gains |   |   | Holding      Losses |   |   | Value |   |
|                                                               |   |               |       |   |   |   |   |   |   |   |   |   |
|     U.S.      Treasury securities              |   | $                  | 500,000    |   |   | $ | 5,000 |   |   | $ | - |   |   | $ | 505,000 |   |
|     U.S.      government-sponsored agencies    |   |               | 7,290,000  |   |   |   | 61,000 |   |   |   | 7,000 |   |   |   | 7,344,000 |   |
|     Obligations      of state and political    |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          subdivisions |   |               | 22,968,000 |   |   |   | 55,000 |   |   |   | 328,000 |   |   |   | 22,695,000 |   |
|     Mortgage-backed      securities            |   |               | 5,131,000  |   |   |   | 48,000 |   |   |   | 42,000 |   |   |   | 5,137,000 |   |
|                                                               |   | $                  | 35,889,000 |   |   | $ | 169,000 |   |   | $ | 377,000 |   |   | $ | 35,681,000 |   |

|                                                               |   | December      31, 2007 |       |
|--------------------------------------------------------------------|--------|------------------------|------------|
|                                                               |   |                   |       |   |   | Gross |   |   | Gross |   |   |   |   |   |
|                                                               |   | Carrying               |       |   | Unrecognized |   |   | Unrecognized |   |   | Fair |   |
|                                                               |   | Value                  |       |   | Holding      Gains |   |   | Holding      Losses |   |   | Value |   |
|                                                               |   |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     U.S.      Treasury securities              |   | $                      | 501,000    |   |   | $ | 5,000 |   |   | $ | - |   |   | $ | 506,000 |   |
|     U.S.      government-sponsored agencies    |   |                   | 12,331,000 |   |   |   | 135,000 |   |   |   | 1,000 |   |   |   | 12,465,000 |   |
|     Obligations      of state and political    |   |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          subdivisions |   |                   | 22,569,000 |   |   |   | 204,000 |   |   |   | 40,000 |   |   |   | 22,733,000 |   |
|     Mortgage-backed      securities            |   |                   | 5,788,000  |   |   |   | 48,000 |   |   |   | 32,000 |   |   |   | 5,804,000 |   |
|                                                               |   | $                      | 41,189,000 |   |   | $ | 392,000 |   |   | $ | 73,000 |   |   | $ | 41,508,000 |   |

| On      a quarterly basis, the Corporation makes an assessment to determine      whether there have been any events  or economic circumstances to      indicate that a security is impaired on an other-than-temporary      basis.  The Corporation considers many factors including the      length of time the security has had a market value less than the cost      basis; the intent and ability of the  Corporation to hold the      security for a period of time sufficient for a recovery in value; and      recent events specific to the issuer or industry.  Management      considers the decline in market value of these securities to be      temporary. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Mortgage-backed      securities are comprised primarily of government agencies such as GNMA and      government-sponsored agencies such as FNMA and  FHLMC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

----

Index

| Stewardship      Financial Corporation and Subsidiary     |
|-----------------------------------------------------------|
| Notes      to Consolidated Financial Statements Continued |
| (Unaudited)                                               |
|                                                      |
| Note      5.   Loans                       |

|                                                                                       |   | June      30, |        |   | December      31, |   |
|--------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                                                                                       |   | 2008          |        |   | 2007              |   |
|                                                                                       |   |          |        |   |              |   |
|                                                                                       |   |          |        |   |              |   |
| Mortgage                                                                                   |   |          |        |   |              |   |
|      Residential                                                  |   | $             | 40,737,000  |   |              | $      | 44,719,000 |   |
|      Commercial                                                   |   |          | 226,195,000 |   |              |   | 209,082,000 |   |
| Commercial                                                                                 |   |          | 96,248,000  |   |              |   | 89,845,000 |   |
| Equity                                                                                     |   |          | 20,705,000  |   |              |   | 19,723,000 |   |
| Installment                                                                                |   |          | 54,929,000  |   |              |   | 56,796,000 |   |
| Other                                                                                      |   |          | 300,000     |   |              |   | 424,000 |   |
|         Total      loans                           |   |          | 439,114,000 |   |              |   | 420,589,000 |   |
|                                                                                       |   |          |        |   |              |   |   |   |
| Less:  Deferred      loan fees                                                   |   |          | 425,000     |   |              |   | 442,000 |   |
|           Allowance      for loan losses |   |          | 4,768,000   |   |              |   | 4,457,000 |   |
|                                                                                       |   |          | 5,193,000   |   |              |   | 4,899,000 |   |
|                                                                                       |   |          |        |   |              |   |   |   |
|         Loans,      net                            |   | $             | 433,921,000 |   |              | $      | 415,690,000 |   |

|                                                    |   |                           |      |   |   |   |      |   |
|---------------------------------------------------------|--------|--------------------------------|-----------|--------|--------|--------|-----------|--------|
|                                                    |   |                           |      |   |   |   |      |   |
| Note      6.   Allowance for loan losses |   |                           |      |   |   |   |      |   |
|                                                    |   |                           |      |   |   |   |      |   |
|                                                    |   |                           |      |   |   |   |      |   |
|                                                    |   | Six      Months Ended June 30, |      |
|                                                    |   | 2008                           |      |   | 2007   |   |
|                                                    |   |                           |      |   |   |   |      |   |
| Balance,      beginning of period                       |   | $                              | 4,457,000 |   |   | $      | 4,101,000 |   |
| Provision      charged to operations                    |   |                           | 360,000   |   |   |   | 190,000   |   |
| Recoveries      of loans charged off                    |   |                           | 19,000    |   |   |   | 5,000     |   |
| Loans      charged off                                  |   |                           | (68,000   | )      |   |   | (115,000  | )      |
|                                                    |   |                           |      |   |   |   |      |   |
| Balance,      end of period                             |   | $                              | 4,768,000 |   |   | $      | 4,181,000 |   |

----

Index

| Stewardship      Financial Corporation and Subsidiary     |
|-----------------------------------------------------------|
| Notes      to Consolidated Financial Statements Continued |
| (Unaudited)                                               |
|                                                      |
|                                                      |
| Note      7.  Loan Impairment                   |

|                                                                   |   | June      30, |    |   | December      31, |   |
|------------------------------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                                                   |   | 2008          |    |   | 2007              |   |
|                                                                   |   |          |    |   |              |   |
| Impaired      loans                                                    |   |          |    |   |              |   |
|     With      related allowance for loan losses    |   | $             | 319,000 |   |              | $      | 222,000 |   |
|     Without      related allowance for loan losses |   |          | 132,000 |   |              |   | 233,000 |   |
| Total      impaired loans                                              |   | $             | 451,000 |   |              | $      | 455,000 |   |
|                                                                   |   |          |    |   |              |   |   |   |
| Related      allowance for loan losses                                 |   | $             | 91,000  |   |              | $      | 39,000 |   |

----

Index

|                               |   |              |       |   | Fair      Value Measurements at June 30, 2008 Using                             |   |
|------------------------------------|--------|-------------------|------------|--------|---------------------------------------------------------------------------------|--------|
|                               |   | June      30,2008 |       |   | Quoted      Prices inActive      Markets forIdentical      Assets(Level      1) |   |   | SignificantOtherObservableInputs(Level      2) |   |   | SignificantUnobservableInputs(Level      3) |   |
| Assets:                            |   |              |       |   |                                                                            |   |   |   |   |   |   |   |
| Available      for sale securities |   | $                 | 96,763,000 |   |                                                                            | $      | - |   |   | $ | 96,763,000 |   |   | $ | - |   |

----

Index

----

Index

|                                        |   | Three      Months Ended                    |   |   | Six      Months Ended |   |
|---------------------------------------------|--------|--------------------------------------------|--------|--------|-----------------------|--------|
|                                        |   | June      30,                              |   |   | June      30,         |   |
|                                        |   | 2008                                       |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
|                                        |   | (In      thousands, except per share data) |   |
|                                        |   |                                       |   |   |                  |   |   |   |   |   |   |   |
| Net      income                             |   | $                                          | 1,179  |   |                  | $      | 1,454 |   |   | $ | 2,240 |   |   | $ | 2,540 |   |
|                                        |   |                                       |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares                |   |                                       | 5,315  |   |                  |   | 5,292 |   |   |   | 5,313 |   |   |   | 5,281 |   |
| Effect      of dilutive stock options       |   |                                       | 10     |   |                  |   | 25 |   |   |   | 12 |   |   |   | 35 |   |
| Total      weighted average dilutive shares |   |                                       | 5,325  |   |                  |   | 5,314 |   |   |   | 5,325 |   |   |   | 5,316 |   |
|                                        |   |                                       |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Basic      earnings per share               |   | $                                          | 0.22   |   |                  | $      | 0.27 |   |   | $ | 0.42 |   |   | $ | 0.48 |   |
| Diluted      earnings per share             |   | $                                          | 0.22   |   |                  | $      | 0.27 |   |   | $ | 0.42 |   |   | $ | 0.47 |   |

----

Index

c

----

Index

----

Index

----

Index

|                                                        |   |        Analysis      of Net Interest Income (Unaudited) |
|--------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |        For      the Six Months Ended June 30,           |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   | 2008                                                         |   |   | 2007 |   |
|                                                   |   |                                                         |   |   |   |   |   | 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)                                     |   | $                                                            | 429,754 |   |   | $ | 14,284 |   |   |   | 6.68 | % |   | $ | 374,235 |   |   | $ | 13,285 |   |   |   | 7.16 | % |
| Taxable      investment securities (1)                 |   |                                                         | 98,703 |   |   |   | 2,579 |   |   |   | 5.25 |   |   |   | 91,293 |   |   |   | 2,359 |   |   |   | 5.21 |   |
| Tax-exempt      investment securities (1) (2)          |   |                                                         | 26,652 |   |   |   | 709 |   |   |   | 5.35 |   |   |   | 22,267 |   |   |   | 559 |   |   |   | 5.06 |   |
| Other      interest-earning assets                     |   |                                                         | 3,463 |   |   |   | 42 |   |   |   | 2.44 |   |   |   | 490 |   |   |   | 19 |   |   |   | 7.82 |   |
| Total      interest-earning assets                     |   |                                                         | 558,572 |   |   |   | 17,614 |   |   |   | 6.34 |   |   |   | 488,285 |   |   |   | 16,222 |   |   |   | 6.70 |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning      assets:                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance      for loan losses                         |   |                                                         | (4,557 | ) |   |   |   |   |   |   |   |   |   |   | (4,111 | ) |   |   |   |   |   |   |   |   |
| Other      assets                                      |   |                                                         | 34,046 |   |   |   |   |   |   |   |   |   |   |   | 34,078 |   |   |   |   |   |   |   |   |   |
| Total      assets                                      |   | $                                                            | 588,061 |   |   |   |   |   |   |   |   |   |   | $ | 518,252 |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities      and Stockholders' Equity              |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities:                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      demand deposits                  |   | $                                                            | 160,346 |   |   | $ | 1,466 |   |   |   | 1.84 | % |   | $ | 121,042 |   |   | $ | 1,379 |   |   |   | 2.30 | % |
| Savings      deposits                                  |   |                                                         | 36,798 |   |   |   | 123 |   |   |   | 0.67 |   |   |   | 37,642 |   |   |   | 141 |   |   |   | 0.76 |   |
| Time      deposits                                     |   |                                                         | 180,238 |   |   |   | 3,933 |   |   |   | 4.39 |   |   |   | 182,482 |   |   |   | 4,101 |   |   |   | 4.53 |   |
| Repurchase      agreements                             |   |                                                         | 16,467 |   |   |   | 279 |   |   |   | 3.41 |   |   |   | 9,862 |   |   |   | 224 |   |   |   | 4.58 |   |
| FHLB      borrowing                                    |   |                                                         | 42,996 |   |   |   | 603 |   |   |   | 2.82 |   |   |   | 22,049 |   |   |   | 485 |   |   |   | 4.44 |   |
| Subordinated      debenture                            |   |                                                         | 7,217 |   |   |   | 245 |   |   |   | 6.83 |   |   |   | 7,217 |   |   |   | 244 |   |   |   | 6.82 |   |
| Total      interest-bearing liabilities                |   |                                                         | 444,062 |   |   |   | 6,649 |   |   |   | 3.01 |   |   |   | 380,294 |   |   |   | 6,574 |   |   |   | 3.49 |   |
| Non-interest-bearing      liabilities:                 |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand      deposits                                   |   |                                                         | 97,374 |   |   |   |   |   |   |   |   |   |   |   | 95,181 |   |   |   |   |   |   |   |   |   |
| Other      liabilities                                 |   |                                                         | 4,762 |   |   |   |   |   |   |   |   |   |   |   | 4,565 |   |   |   |   |   |   |   |   |   |
| Stockholders'      equity                              |   |                                                         | 41,863 |   |   |   |   |   |   |   |   |   |   |   | 38,212 |   |   |   |   |   |   |   |   |   |
| Total      liabilities and stockholders' equity        |   | $                                                            | 588,061 |   |   |   |   |   |   |   |   |   |   | $ | 518,252 |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income (taxable equivalent basis)    |   |                                                         |   |   |   | $ | 10,965 |   |   |   |   |   |   |   |   |   |   | $ | 9,648 |   |   |   |   |   |
| Tax      Equivalent adjustment                         |   |                                                         |   |   |   |   | (247 | ) |   |   |   |   |   |   |   |   |   |   | (173 | ) |   |   |   |   |
| Net      interest income                               |   |                                                         |   |   |   | $  | 10,718 |   |   |   |   |   |   |   |   |   |   | $  | 9,475 |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest spread (taxable equivalent basis)    |   |                                                         |   |   |   |   |   |   |   |   | 3.33 | % |   |   |   |   |   |   |   |   |   |   | 3.21 | % |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      yield on interest-earning                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   assets      (taxable equivalent basis) (3) |   |                                                         |   |   |   |   |   |   |   |   | 3.95 | % |   |   |   |   |   |   |   |   |   |   | 3.98 | % |

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

----

Index

----

Index

----

Index

----

Index

|                                                   |   |        Analysis      of Net Interest Income (Unaudited) |
|--------------------------------------------------------|--------|--------------------------------------------------------------|
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |        For      the Three Months Ended June 30,         |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   | 2008                                                         |   |   | 2007 |   |
|                                                   |   |                                                         |   |   |   |   |   | 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)                                     |   | $                                                            | 435,060 |   |   | $ | 7,088 |   |   |   | 6.55 | % |   | $ | 376,149 |   |   | $ | 6,715 |   |   |   | 7.16 | % |
| Taxable      investment securities (1)                 |   |                                                         | 102,683 |   |   |   | 1,347 |   |   |   | 5.28 |   |   |   | 91,744 |   |   |   | 1,197 |   |   |   | 5.23 |   |
| Tax-exempt      investment securities (1) (2)          |   |                                                         | 27,607 |   |   |   | 367 |   |   |   | 5.35 |   |   |   | 22,344 |   |   |   | 283 |   |   |   | 5.08 |   |
| Other      interest-earning assets                     |   |                                                         | 6,704 |   |   |   | 36 |   |   |   | 2.16 |   |   |   | 562 |   |   |   | 10 |   |   |   | 7.14 |   |
| Total      interest-earning assets                     |   |                                                         | 572,054 |   |   |   | 8,838 |   |   |   | 6.21 |   |   |   | 490,799 |   |   |   | 8,205 |   |   |   | 6.71 |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning      assets:                      |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance      for loan losses                         |   |                                                         | (4,626 | ) |   |   |   |   |   |   |   |   |   |   | (4,121 | ) |   |   |   |   |   |   |   |   |
| Other      assets                                      |   |                                                         | 34,752 |   |   |   |   |   |   |   |   |   |   |   | 34,559 |   |   |   |   |   |   |   |   |   |
| Total      assets                                      |   | $                                                            | 602,180 |   |   |   |   |   |   |   |   |   |   | $ | 521,237 |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities      and Stockholders' Equity              |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities:                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      demand deposits                  |   | $                                                            | 165,352 |   |   | $ | 597 |   |   |   | 1.45 | % |   | $ | 122,565 |   |   | $ | 719 |   |   |   | 2.35 | % |
| Savings      deposits                                  |   |                                                         | 37,199 |   |   |   | 54 |   |   |   | 0.58 |   |   |   | 38,240 |   |   |   | 71 |   |   |   | 0.74 |   |
| Time      deposits                                     |   |                                                         | 184,594 |   |   |   | 1,961 |   |   |   | 4.27 |   |   |   | 182,565 |   |   |   | 2,071 |   |   |   | 4.55 |   |
| Repurchase      agreements                             |   |                                                         | 16,251 |   |   |   | 135 |   |   |   | 3.34 |   |   |   | 10,531 |   |   |   | 121 |   |   |   | 4.61 |   |
| FHLB      borrowing                                    |   |                                                         | 47,033 |   |   |   | 285 |   |   |   | 2.44 |   |   |   | 19,568 |   |   |   | 211 |   |   |   | 4.33 |   |
| Subordinated      debenture                            |   |                                                         | 7,217 |   |   |   | 122 |   |   |   | 6.80 |   |   |   | 7,217 |   |   |   | 122 |   |   |   | 6.78 |   |
| Total      interest-bearing liabilities                |   |                                                         | 457,646 |   |   |   | 3,154 |   |   |   | 2.77 |   |   |   | 380,686 |   |   |   | 3,315 |   |   |   | 3.49 |   |
| Non-interest-bearing      liabilities:                 |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand      deposits                                   |   |                                                         | 97,565 |   |   |   |   |   |   |   |   |   |   |   | 97,434 |   |   |   |   |   |   |   |   |   |
| Other      liabilities                                 |   |                                                         | 4,688 |   |   |   |   |   |   |   |   |   |   |   | 4,573 |   |   |   |   |   |   |   |   |   |
| Stockholders'      equity                              |   |                                                         | 42,281 |   |   |   |   |   |   |   |   |   |   |   | 38,544 |   |   |   |   |   |   |   |   |   |
| Total      liabilities and stockholders' equity        |   | $                                                            | 602,180 |   |   |   |   |   |   |   |   |   |   | $ | 521,237 |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest income (taxable equivalent basis)    |   |                                                         |   |   |   | $ | 5,684 |   |   |   |   |   |   |   |   |   |   | $ | 4,890 |   |   |   |   |   |
| Tax      Equivalent adjustment                         |   |                                                         |   |   |   |   | (128 | ) |   |   |   |   |   |   |   |   |   |   | (88 | ) |   |   |   |   |
| Net      interest income                               |   |                                                         |   |   |   | $  | 5,556 |   |   |   |   |   |   |   |   |   |   | $  | 4,802 |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      interest spread (taxable equivalent basis)    |   |                                                         |   |   |   |   |   |   |   |   | 3.44 | % |   |   |   |   |   |   |   |   |   |   | 3.21 | % |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      yield on interest-earning                     |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   assets      (taxable equivalent basis) (3) |   |                                                         |   |   |   |   |   |   |   |   | 3.99 | % |   |   |   |   |   |   |   |   |   |   | 4.00 | % |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|  | (1)  | For      purpose of these calculations, nonaccruing loans are included in the      average balance.  Fees are included in loan      interest.  Loans and total interest-earning assets are net      of unearned income.  Securities are included at amortized      cost. |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2)  | The      tax equivalent adjustments are based on a marginal tax rate of      34%. |
|--|-----------|-----------------------------------------------------------------------------------|

|  | (3)  | Net      interest income (taxable equivalent basis) divided by average      interest-earning assets. |
|--|-----------|------------------------------------------------------------------------------------------------------|

----

Index

----

Index

----

Index

|                                                                                               |   | 06/30/08                    |   |   | 03/31/08 |   |   | 12/31/07 |   |   | 09/30/07 |   |
|----------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
|                                                                                               |   | (Dollars      in thousands) |   |
| Nonaccrual      loans: (1)                                                                         |   | $                           | 451    |   |     | $      | 360    |     |   | $      | 455      |   |   | $ | 238 |   |
| Loans      past due 90 days or more: (2)                                                           |   |                        | 840    |   |     |   | 703    |     |   |   | 26       |   |   |   | 28 |   |
|      Total      nonperforming loans                                       |   | $                           | 1,291  |   |     | $      | 1,063  |     |   | $      | 481      |   |   | $ | 266 |   |
|                                                                                               |   |                        |   |   |     |   |   |     |   |   |     |   |   |   |   |   |
| Other      real estate owned                                                                       |   | $                           | -      |   |     | $      | -      |     |   | $      | -        |   |   | $ | 353 |   |
|                                                                                               |   |                        |   |   |     |   |   |     |   |   |     |   |   |   |   |   |
| Total      nonperforming loans                                                                     |   | $                           | 1,291  |   |     | $      | 1,063  |     |   | $      | 481      |   |   | $ | 619 |   |
|                                                                                               |   |                        |   |   |     |   |   |     |   |   |     |   |   |   |   |   |
| Allowance      for loan losses                                                                     |   | $                           | 4,768  |   |     | $      | 4,571  |     |   | $      | 4,457    |   |   | $ | 4,249 |   |
|                                                                                               |   |                        |   |   |     |   |   |     |   |   |     |   |   |   |   |   |
| Nonaccrual      loans to total loans                                                               |   |                        | 0.10   | %      |     |   | 0.08   | %        |   |   | 0.11     | %      |   |   | 0.06 | % |
| Nonperforming      loans to total      loans          |   |                        | 0.29   | %      |     |   | 0.25   | %        |   |   | 0.11     | %      |   |   | 0.07 | % |
| Nonperforming      loans to total assets                                       |   |                        | 0.21   | %      |     |   | 0.18   | %        |   |   | 0.08     | %      |   |   | 0.05 | % |
| Nonperforming      assets to total assets                                                          |   |                        | 0.21   | %      |     |   | 0.18   | %        |   |   | 0.08     | %      |   |   | 0.11 | % |
| Allowance      for loan losses to total loans                                                      |   |                        | 1.09   | %      |     |   | 1.07   | %        |   |   | 1.06     | %      |   |   | 1.07 | % |
| Allowance      for loan losses to nonperforming loans                                              |   |                        | 369.30 | %      |     |   | 430.13 | %        |   |   | 926.61   | %      |   |   | 1,597.4 | % |

----

Index

----

Index

|                    |   | Required |   |   | Actual |   |   | Excess |   |
|-------------------------|--------|----------|--------|--------|--------|--------|--------|--------|--------|
| Risk-based      Capital |   |     |   |   |   |   |   |   |   |
| Tier      1             |   |     | 4.00   | %      |   |   | 10.36  | %      |   |   | 6.36 | % |
| Total                   |   |     | 8.00   | %      |   |   | 11.37  | %      |   |   | 3.37 | % |
| Leverage      Ratio     |   |     | 4.00   | %      |   |   | 8.12   | %      |   |   | 4.12 | % |

----

Index

t

o

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

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

----

Index

|   | (c) | Changes      in internal controls. |
|--------|-----|------------------------------------|

----

Index

n

|                                                | Votes      for | Votes      Withheld |
|-----------------------------------------------------|----------------|---------------------|
|                                                |           |                |
| Election      of Director                           |           |                |
|      William      C. Hanse | 4,101,083      | 33,756              |
|      Margo      Lane       | 4,109,637      | 25,203              |
|      Arie      Leegwater   | 4,106,812      | 28,028              |
|      John      L. Steen    | 4,071,044      | 63,795              |

b

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

----

Index

A

| Date:     August 13,      2008 | By:    | /s/ Paul Van Ostenbridge                                                |
|---------------------------------------------------------|--------|-------------------------------------------------------------------------|
|                                                    |   |            Paul Van Ostenbridge                |
|                                                    |   |            President and Chief Executive       |
|                                                    |   |               Officer           |
|                                                    |   |            (authorized officer on behalf       |
|                                                    |   |               of registrant)    |
|                                                    |   |                                                                    |
|                                                    |   |                                                                    |
|                                                    |   |                                                                    |
| Date:     August 13,      2008 | By:    | /s/ Julie E. Holland                                                    |
|                                                    |   |            Julie E. Holland                    |
|                                                    |   |            Senior Vice President and Treasurer |
|                                                    |   |            (principal accounting officer)      |

----

Index

| EXHIBITNUMBER |  DESCRIPTION                                                                                                                                                                             |   |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|          |                                                                                                                                                                                          |   |
| 31.1          | Certification      of Paul Van Ostenbridge required by Rule 13a-14(a) or Rule      15d-14(a)                                                                                             |   |
| 31.2          | Certification      of Julie Holland required by Rule 13a-14(a) or Rule 15d-14(a)                                                                                                         |   |
| 32.1          | Certification      of Paul Van Ostenbridge and Julie Holland required by Rule 13a-14(b) or      Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18      U.S.C. Section 1350 |