----

----

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

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

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

| New Jersey                      | 22-3351447                           |
|---------------------------------|--------------------------------------|
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) |
| incorporation or organization)  |                                 |

| 630 Godwin Avenue, Midland Park,  NJ | 07432      |
|------------------------------------------------|------------|
| (Address of principal executive offices)       | (Zip Code) |

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

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

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

----

----

----

INDE

|                                                                                                                  |                                                                                                                           | PAGE NUMBER |
|-----------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|-------------|
| PART I  -  FINANCIAL INFORMATION                                                                  |                                                                                                                           |
|                                                                                                                  |                                                                                                                           |        |
| ITEM 1  -  FINANCIAL STATEMENTS                                                                   |                                                                                                                           |
|                                                                                                                  |                                                                                                                           |        |
|                                                                                                                  | Consolidated Statements of Financial Condition at March 31, 2011 and December 31, 2010 (Unaudited)                             | 1           |
|                                                                                                                  |                                                                                                                           |        |
|                                                                                                                  | Consolidated Statements of Income for the Three Months ended March 31, 2011 and 2010 (Unaudited)                               | 2           |
|                                                                                                                  |                                                                                                                           |        |
|                                                                                                                  | Consolidated Statement of Changes in Stockholders’ Equity for the Three Months ended March 31, 2011 and 2010 (Unaudited) | 3           |
|                                                                                                                  |                                                                                                                           |        |
|                                                                                                                  | Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2011 and 2010 (Unaudited)                 | 4           |
|                                                                                                                  |                                                                                                                           |        |
|                                                                                                                  | Consolidated Statements of Cash Flows for the Three Months ended March 31, 2011 and 2010 (Unaudited)                           | 5 - 6       |
|                                                                                                                  |                                                                                                                           |        |
|                                                                                                                  | Notes to Consolidated Financial Statements (Unaudited)                                                                         | 7 - 23      |
|                                                                                                                  |                                                                                                                           |        |
| ITEM 2  -  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 24 - 31                                                                                                                        |
|                                                                                                                  |                                                                                                                           |        |
| ITEM 3  -  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                       | 32                                                                                                                             |
|                                                                                                                  |                                                                                                                           |        |
| ITEM 4  -  CONTROLS AND PROCEDURES                                                                          | 32                                                                                                                             |
|                                                                                                                  |                                                                                                                           |        |
| PART II  -  OTHER INFORMATION                                                                     |                                                                                                                           |
|                                                                                                                  |                                                                                                                           |        |
| ITEM 6  -  EXHIBITS                                                                                         | 33                                                                                                                             |
|                                                                                                                  |                                                                                                                           |        |
| SIGNATURES                                                                                                            | 34                                                                                                                             |
|                                                                                                                  |                                                                                                                           |        |
| EXHIBIT INDEX                                                                                                         | 35                                                                                                                             |

----

Index

PART I – FINANCIAL 

ew

|                                                                                           |   | March 31,2011 |        |   | December 31,2010 |   |
|------------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|------------------|--------|
| Assets                                                                                         |   |          |        |   |             |   |
|                                                                                           |   |          |        |   |             |   |
| Cash and due from banks                                                                        |   | $             | 28,643,000  |   |             | $      | 19,838,000 |   |
| Other interest-earning assets                                                                  |   |          | 1,018,000   |   |             |   | 145,000 |   |
| Cash and cash equivalents                                                                      |   |          | 29,661,000  |   |             |   | 19,983,000 |   |
|                                                                                           |   |          |        |   |             |   |   |   |
| Securities available for sale                                                                  |   |          | 148,178,000 |   |             |   | 138,628,000 |   |
| Securities held to maturity; estimated fair value of $44,502,000 (2011) and $47,316,000 (2010) |   |          |        |   |             |   |   |   |
|                                                                                           |   |          | 42,460,000  |   |             |   | 45,394,000 |   |
| FHLB-NY stock, at cost                                                                         |   |          | 2,361,000   |   |             |   | 2,497,000 |   |
| Loans, net of allowance for loan losses of $9,874,000 (2011) and $8,490,000 (2010)             |   |          | 449,548,000 |   |             |   | 443,245,000 |   |
| Mortgage loans held for sale                                                                   |   |          | 827,000     |   |             |   | 9,818,000 |   |
| Premises and equipment, net                                                                    |   |          | 6,320,000   |   |             |   | 6,395,000 |   |
| Accrued interest receivable                                                                    |   |          | 2,671,000   |   |             |   | 2,806,000 |   |
| Other real estate owned                                                                        |   |          | 313,000     |   |             |   | 615,000 |   |
| Bank owned life insurance                                                                      |   |          | 9,900,000   |   |             |   | 9,819,000 |   |
| Other assets                                                                                   |   |          | 8,696,000   |   |             |   | 8,918,000 |   |
| Total assets                                                                                   |   | $             | 700,935,000 |   |             | $      | 688,118,000 |   |
|                                                                                           |   |          |        |   |             |   |   |   |
| Liabilities and stockholders' equity                                                           |   |          |        |   |             |   |   |   |
|                                                                                           |   |          |        |   |             |   |   |   |
| Liabilities                                                                                    |   |          |        |   |             |   |   |   |
| Deposits:                                                                                      |   |          |        |   |             |   |   |   |
| Noninterest-bearing                                                                            |   | $             | 113,554,000 |   |             | $      | 99,723,000 |   |
| Interest-bearing                                                                               |   |          | 477,955,000 |   |             |   | 475,880,000 |   |
| Total deposits                                                                                 |   |          | 591,509,000 |   |             |   | 575,603,000 |   |
|                                                                                           |   |          |        |   |             |   |   |   |
| Federal Home Loan Bank of New York Advances                                                    |   |          | 33,000,000  |   |             |   | 36,000,000 |   |
| Subordinated debentures                                                                        |   |          | 7,217,000   |   |             |   | 7,217,000 |   |
| Securities sold under agreements to repurchase                                                 |   |          | 14,643,000  |   |             |   | 14,642,000 |   |
| Accrued interest payable                                                                       |   |          | 839,000     |   |             |   | 977,000 |   |
| Accrued expenses and other liabilities                                                         |   |          | 1,501,000   |   |             |   | 1,547,000 |   |
| Total liabilities                                                                              |   |          | 648,709,000 |   |             |   | 635,986,000 |   |
|                                                                                           |   |          |        |   |             |   |   |   |
| Commitments and contingencies                                                                  |   |          | -           |   |             |   | - |   |
|                                                                                           |   |          |        |   |             |   |   |   |
| Stockholders' equity                                                                           |   |          |        |   |             |   |   |   |
| Preferred stock, no par value; 2,500,000 shares authorized; 10,000 shares                      |   |          |        |   |             |   |   |   |
| issued and outstanding at March 31, 2011 and December 31, 2010                                 |   |          |        |   |             |   |   |   |
| Liquidation preference of $10,000,000                                                          |   |          | 9,811,000   |   |             |   | 9,796,000 |   |
| Common stock, no par value; 10,000,000 shares authorized;                                      |   |          |        |   |             |   |   |   |
| 5,850,470 and 5,847,844 shares issued: 5,850,470 and 5,846,927 shares                          |   |          |        |   |             |   |   |   |
| outstanding at March 31, 2011 and December 31, 2010, respectively                              |   |          | 40,536,000  |   |             |   | 40,516,000 |   |
| Treasury stock, 917 shares outstanding at December 31, 2010                                    |   |          | -           |   |             |   | (13,000 | ) |
| Retained earnings                                                                              |   |          | 2,009,000   |   |             |   | 1,959,000 |   |
| Accumulated other comprehensive loss, net                                                      |   |          | (130,000    | )      |             |   | (126,000 | ) |
| Total stockholders' equity                                                                     |   |          | 52,226,000  |   |             |   | 52,132,000 |   |
|                                                                                           |   |          |        |   |             |   |   |   |
| Total liabilities and stockholders' equity                                                     |   | $             | 700,935,000 |   |             | $      | 688,118,000 |   |

----

Index

ewa

|                                                 |   | Three Months EndedMarch 31, |      |
|------------------------------------------------------|--------|-----------------------------|-----------|
|                                                 |   | 2011                        |      |   | 2010 |   |
| Interest income:                                     |   |                        |      |   |   |   |
| Loans                                                |   | $                           | 6,440,000 |   |   | $ | 6,874,000 |   |
| Securities held to maturity                          |   |                        |      |   |   |   |   |   |
| Taxable                                              |   |                        | 183,000   |   |   |   | 422,000 |   |
| Non-taxable                                          |   |                        | 223,000   |   |   |   | 231,000 |   |
| Securities available for sale                        |   |                        |      |   |   |   |   |   |
| Taxable                                              |   |                        | 839,000   |   |   |   | 880,000 |   |
| Non-taxable                                          |   |                        | 44,000    |   |   |   | 49,000 |   |
| FHLB dividends                                       |   |                        | 38,000    |   |   |   | 37,000 |   |
| Other interest-earning assets                        |   |                        | 8,000     |   |   |   | 2,000 |   |
| Total interest income                                |   |                        | 7,775,000 |   |   |   | 8,495,000 |   |
|                                                 |   |                        |      |   |   |   |   |   |
| Interest expense:                                    |   |                        |      |   |   |   |   |   |
| Deposits                                             |   |                        | 1,289,000 |   |   |   | 1,820,000 |   |
| Borrowed money                                       |   |                        | 537,000   |   |   |   | 496,000 |   |
| Total interest expense                               |   |                        | 1,826,000 |   |   |   | 2,316,000 |   |
|                                                 |   |                        |      |   |   |   |   |   |
| Net interest income before provision for loan losses |   |                        | 5,949,000 |   |   |   | 6,179,000 |   |
| Provision for loan losses                            |   |                        | 1,675,000 |   |   |   | 1,550,000 |   |
| Net interest income after provision for loan losses  |   |                        | 4,274,000 |   |   |   | 4,629,000 |   |
|                                                 |   |                        |      |   |   |   |   |   |
| Noninterest income:                                  |   |                        |      |   |   |   |   |   |
| Fees and service charges                             |   |                        | 511,000   |   |   |   | 469,000 |   |
| Bank owned life insurance                            |   |                        | 80,000    |   |   |   | 86,000 |   |
| Gain on sales of mortgage loans                      |   |                        | 404,000   |   |   |   | 55,000 |   |
| Gain on calls and sales of securities                |   |                        | -         |   |   |   | 328,000 |   |
| Other                                                |   |                        | 89,000    |   |   |   | 73,000 |   |
| Total noninterest income                             |   |                        | 1,084,000 |   |   |   | 1,011,000 |   |
|                                                 |   |                        |      |   |   |   |   |   |
| Noninterest expenses:                                |   |                        |      |   |   |   |   |   |
| Salaries and employee benefits                       |   |                        | 2,236,000 |   |   |   | 2,126,000 |   |
| Occupancy, net                                       |   |                        | 545,000   |   |   |   | 489,000 |   |
| Equipment                                            |   |                        | 258,000   |   |   |   | 309,000 |   |
| Data processing                                      |   |                        | 337,000   |   |   |   | 325,000 |   |
| FDIC insurance premium                               |   |                        | 254,000   |   |   |   | 224,000 |   |
| Charitable contributions                             |   |                        | 100,000   |   |   |   | 165,000 |   |
| Other                                                |   |                        | 954,000   |   |   |   | 786,000 |   |
| Total noninterest expenses                           |   |                        | 4,684,000 |   |   |   | 4,424,000 |   |
| Income before income tax expense                     |   |                        | 674,000   |   |   |   | 1,216,000 |   |
| Income tax expense                                   |   |                        | 191,000   |   |   |   | 345,000 |   |
| Net income                                           |   |                        | 483,000   |   |   |   | 871,000 |   |
| Dividends on preferred stock and accretion           |   |                        | 138,000   |   |   |   | 137,000 |   |
| Net income available to common stockholders          |   | $                           | 345,000   |   |   | $ | 734,000 |   |
|                                                 |   |                        |      |   |   |   |   |   |
| Basic earnings per common share                      |   | $                           | 0.06      |   |   | $ | 0.13 |   |
| Diluted earnings per common share                    |   | $                           | 0.06      |   |   | $ | 0.13 |   |
|                                                 |   |                        |      |   |   |   |   |   |
| Weighted average number of common shares outstanding |   |                        | 5,849,723 |   |   |   | 5,839,974 |   |
| Weighted average number of diluted common            |   |                        |      |   |   |   |   |   |
| shares outstanding                                   |   |                        | 5,849,723 |   |   |   | 5,841,633 |   |

----

Index

war

|                                         |   | Three Months Ended March 31, 2011 |      |
|----------------------------------------------|--------|-----------------------------------|-----------|
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Comprehensive |   |   |   |   |
|                                         |   | Preferred                         |      |   | Common Stock |   |   | Retained |   |   | Treasury |   |   | Gain (Loss), |   |   |   |   |
|                                         |   | Stock                             |      |   | Shares |   |   | Amount |   |   | Earnings |   |   | Stock |   |   | Net |   |   | Total |   |
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- December 31, 2010                 |   | $                                 | 9,796,000 |   |   |   | 5,846,927 |   |   | $ | 40,516,000 |   |   | $ | 1,959,000 |   |   | $ | (13,000 | ) |   | $ | (126,000 | ) |   | $ | 52,132,000 |   |
| Cash dividends paid on common stock          |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | (293,000 | ) |   |   | - |   |   |   | - |   |   |   | (293,000 | ) |
| Payment of discount on dividend              |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| reinvestment plan                            |   |                              | -         |   |   |   | - |   |   |   | (5,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (5,000 | ) |
| Cash dividends accrued on preferred stock    |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | (125,000 | ) |   |   | - |   |   |   | - |   |   |   | (125,000 | ) |
| Common stock issued under stock plans        |   |                              | -         |   |   |   | 3,543 |   |   |   | 12,000 |   |   |   | - |   |   |   | 13,000 |   |   |   | - |   |   |   | 25,000 |   |
| Stock option compensation expense            |   |                              | -         |   |   |   | - |   |   |   | 13,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 13,000 |   |
| Accretion of discount on preferred stock     |   |                              | 13,000    |   |   |   | - |   |   |   | - |   |   |   | (13,000 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Amortization of issuance costs               |   |                              | 2,000     |   |   |   | - |   |   |   | - |   |   |   | (2,000 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Comprehensive income:                        |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                   |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | 483,000 |   |   |   | - |   |   |   | - |   |   |   | 483,000 |   |
| Change in unrealized holding gains on        |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities available for sale arising during |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| the period (net tax benefit of $47,000)      |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (63,000 | ) |   |   | (63,000 | ) |
| Change in fair value of interest rate        |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| swap (net of tax expense of $39,000)         |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 59,000 |   |   |   | 59,000 |   |
| Total comprehensive income                   |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 479,000 |   |
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- March 31, 2011                    |   | $                                 | 9,811,000 |   |   |   | 5,850,470 |   |   | $ | 40,536,000 |   |   | $ | 2,009,000 |   |   | $ | - |   |   | $ | (130,000 | ) |   | $ | 52,226,000 |   |

|                                         |   | Three Months Ended March 31, 2010 |      |
|----------------------------------------------|--------|-----------------------------------|-----------|
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Comprehensive |   |   |   |   |
|                                         |   | Preferred                         |      |   | Common Stock |   |   | Retained |   |   | Treasury |   |   | Gain (Loss), |   |   |   |   |
|                                         |   | Stock                             |      |   | Shares |   |   | Amount |   |   | Earnings |   |   | Stock |   |   | Net |   |   | Total |   |
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- December 31, 2009                 |   | $                                 | 9,736,000 |   |   |   | 5,834,515 |   |   | $ | 40,415,000 |   |   | $ | 2,922,000 |   |   | $ | - |   |   | $ | 438,000 |   |   | $ | 53,511,000 |   |
| Cash dividends paid on common stock          |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | (526,000 | ) |   |   | - |   |   |   | - |   |   |   | (526,000 | ) |
| Payment of discount on dividend              |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| reinvestment plan                            |   |                              | -         |   |   |   | - |   |   |   | (9,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (9,000 | ) |
| Cash dividends accrued on preferred stock    |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | (125,000 | ) |   |   | - |   |   |   | - |   |   |   | (125,000 | ) |
| Common stock issued under stock plans        |   |                              | -         |   |   |   | 3,037 |   |   |   | 24,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 24,000 |   |
| Stock option compensation expense            |   |                              | -         |   |   |   | - |   |   |   | 13,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 13,000 |   |
| Stock options exercised                      |   |                              | -         |   |   |   | 9,376 |   |   |   | 55,000 |   |   |   | - |   |   |   | (43,000 | ) |   |   | - |   |   |   | 12,000 |   |
| Accretion of discount on preferred stock     |   |                              | 12,000    |   |   |   | - |   |   |   | - |   |   |   | (12,000 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Amortization of issuance costs               |   |                              | 2,000     |   |   |   | - |   |   |   | - |   |   |   | (2,000 | ) |   |   | - |   |   |   |   |   |   |   | - |   |
| Comprehensive income:                        |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                   |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | 871,000 |   |   |   | - |   |   |   | - |   |   |   | 871,000 |   |
| Change in unrealized holding gains on        |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities available for sale arising during |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| the period (net tax expense of $76,000)      |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 141,000 |   |   |   | 141,000 |   |
| Reclassification adjustment for gains in     |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net income (net of taxes of $131,000)        |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 196,000 |   |   |   | 196,000 |   |
| Change in fair value of interest rate        |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| swap (net of tax benefit of $70,000)         |   |                              | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (105,000 | ) |   |   | (105,000 | ) |
| Total comprehensive income                   |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,103,000 |   |
|                                         |   |                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- March 31, 2010                    |   | $                                 | 9,750,000 |   |   |   | 5,846,928 |   |   | $ | 40,498,000 |   |   | $ | 3,128,000 |   |   | $ | (43,000 | ) |   | $ | 670,000 |   |   | $ | 54,003,000 |   |

----

Index

war

|                                                          |   | Three Months Ended March 31, |     |
|---------------------------------------------------------------|--------|------------------------------|----------|
|                                                          |   | 2011                         |     |   | 2010 |   |
|                                                          |   |                         |     |   |   |   |
| Net income                                                    |   | $                            | 483,000  |   |   | $ | 871,000 |   |
|                                                          |   |                         |     |   |   |   |   |   |
| Other comprehensive (loss) income:                            |   |                         |     |   |   |   |   |   |
| Change in unrealized holding (losses) gains on securities     |   |                         |     |   |   |   |   |   |
| available for sale arising during the period                  |   |                         | (110,000 | ) |   |   | 872,000 |   |
| Reclassification adjustment for gains in net income           |   |                         | -        |   |   |   | (328,000 | ) |
| Net unrealized (losses) gains                                 |   |                         | (110,000 | ) |   |   | 544,000 |   |
| Tax effect                                                    |   |                         | 47,000   |   |   |   | (207,000 | ) |
| Net unrealized (losses) gains, net of tax amount              |   |                         | (63,000  | ) |   |   | 337,000 |   |
|                                                          |   |                         |     |   |   |   |   |   |
| Change in fair value of interest rate swap                    |   |                         | 98,000   |   |   |   | (175,000 | ) |
| Tax effect                                                    |   |                         | (39,000  | ) |   |   | 70,000 |   |
| Change in fair value of interest rate swap, net of tax amount |   |                         | 59,000   |   |   |   | (105,000 | ) |
|                                                          |   |                         |     |   |   |   |   |   |
| Total other comprehensive (loss) income                       |   |                         | (4,000   | ) |   |   | 232,000 |   |
|                                                          |   |                         |     |   |   |   |   |   |
| Total comprehensive income                                    |   | $                            | 479,000  |   |   | $ | 1,103,000 |   |

|                                                |   | March 31, 2011 |     |   | December 31, 2010 |   |
|-----------------------------------------------------|--------|----------------|----------|--------|-------------------|--------|
|                                                |   |           |     |   |              |   |
| Unrealized gain on securities available for sale    |   | $              | 209,000  |   |              | $      | 272,000 |   |
| Unrealized loss on fair value of interest rate swap |   |           | (339,000 | )      |              |   | (398,000 | ) |
|                                                |   |           |     |   |              |   |   |   |
| Accumulated other comprehensive income, net         |   | $              | (130,000 | )      |              | $      | (126,000 | ) |

----

Index

ard

|                                                                               |   | Three Months EndedMarch 31, |        |
|------------------------------------------------------------------------------------|--------|-----------------------------|-------------|
|                                                                               |   | 2011                        |        |   | 2010 |   |
| Cash flows from operating activities:                                              |   |                        |        |   |   |   |
| Net income                                                                         |   | $                           | 483,000     |   |   | $ | 871,000 |   |
| Adjustments to reconcile net income to                                             |   |                        |        |   |   |   |   |   |
| net cash provided by operating activities:                                         |   |                        |        |   |   |   |   |   |
| Depreciation and amortization of premises and equipment                            |   |                        | 153,000     |   |   |   | 214,000 |   |
| Amortization of premiums and accretion of discounts, net                           |   |                        | 333,000     |   |   |   | 161,000 |   |
| Accretion of deferred loan fees                                                    |   |                        | (12,000     | ) |   |   | (14,000 | ) |
| Provision for loan losses                                                          |   |                        | 1,675,000   |   |   |   | 1,550,000 |   |
| Originations of mortgage loans held for sale                                       |   |                        | (24,113,000 | ) |   |   | (7,928,000 | ) |
| Proceeds from sale of mortgage loans                                               |   |                        | 33,508,000  |   |   |   | 5,919,000 |   |
| Gain on sales of mortgage loans                                                    |   |                        | (404,000    | ) |   |   | (55,000 | ) |
| Gain on sales and calls of securities                                              |   |                        | -           |   |   |   | (328,000 | ) |
| Deferred income tax benefit                                                        |   |                        | (600,000    | ) |   |   | (544,000 | ) |
| Decrease in accrued interest receivable                                            |   |                        | 135,000     |   |   |   | 122,000 |   |
| Decrease in accrued interest payable                                               |   |                        | (138,000    | ) |   |   | (193,000 | ) |
| Earnings on bank owned life insurance                                              |   |                        | (80,000     | ) |   |   | (86,000 | ) |
| Stock option expense                                                               |   |                        | 13,000      |   |   |   | 13,000 |   |
| Decrease in other assets                                                           |   |                        | 1,172,000   |   |   |   | 532,000 |   |
| Increase in other liabilities                                                      |   |                        | 13,000      |   |   |   | 57,000 |   |
| Net cash provided by operating activities                                          |   |                        | 12,138,000  |   |   |   | 291,000 |   |
|                                                                               |   |                        |        |   |   |   |   |   |
| Cash flows from investing activities:                                              |   |                        |        |   |   |   |   |   |
| Purchase of securities available for sale                                          |   |                        | (16,030,000 | ) |   |   | (3,085,000 | ) |
| Proceeds from maturities and principal repayments on securities available for sale |   |                        | 5,101,000   |   |   |   | 3,944,000 |   |
| Proceeds from sales and calls on securities available for sale                     |   |                        | 1,000,000   |   |   |   | 12,557,000 |   |
| Purchase of securities held to maturity                                            |   |                        | -           |   |   |   | (5,566,000 | ) |
| Proceeds from maturities and principal repayments on securities held to maturity   |   |                        | 1,868,000   |   |   |   | 1,443,000 |   |
| Proceeds from calls on securities held to maturity                                 |   |                        | 1,000,000   |   |   |   | 1,000,000 |   |
| Sale of FHLB-NY stock                                                              |   |                        | 136,000     |   |   |   | 837,000 |   |
| Net increase in loans                                                              |   |                        | (7,966,000  | ) |   |   | (1,698,000 | ) |
| Additions to premises and equipment                                                |   |                        | (78,000     | ) |   |   | (177,000 | ) |
| Net cash provided by (used in) investing activities                                |   |                        | (14,969,000 | ) |   |   | 9,255,000 |   |
|                                                                               |   |                        |        |   |   |   |   |   |
| Cash flows from financing activities:                                              |   |                        |        |   |   |   |   |   |
| Net increase in noninterest-bearing deposits                                       |   |                        | 13,831,000  |   |   |   | 6,224,000 |   |
| Net increase in interest-bearing deposits                                          |   |                        | 2,075,000   |   |   |   | 6,776,000 |   |
| Net increase in securities sold under agreements to repurchase                     |   |                        | 1,000       |   |   |   | 3,000 |   |
| Net decrease in short term borrowings                                              |   |                        | -           |   |   |   | (18,600,000 | ) |
| Repayment of long term borrowings                                                  |   |                        | (3,000,000  | ) |   |   | - |   |
| Cash dividends paid on common stock                                                |   |                        | (293,000    | ) |   |   | (526,000 | ) |
| Cash dividends paid on preferred stock                                             |   |                        | (125,000    | ) |   |   | (125,000 | ) |
| Payment of discount on dividend reinvestment plan                                  |   |                        | (5,000      | ) |   |   | (9,000 | ) |
| Exercise of stock options                                                          |   |                        | -           |   |   |   | 12,000 |   |
| Issuance of common stock                                                           |   |                        | 25,000      |   |   |   | 24,000 |   |
| Net cash provided by (used in) financing activities                                |   |                        | 12,509,000  |   |   |   | (6,221,000 | ) |
|                                                                               |   |                        |        |   |   |   |   |   |
| Net increase in cash and cash equivalents                                          |   |                        | 9,678,000   |   |   |   | 3,325,000 |   |
| Cash and cash equivalents - beginning                                              |   |                        | 19,983,000  |   |   |   | 8,871,000 |   |
| Cash and cash equivalents - ending                                                 |   | $                           | 29,661,000  |   |   | $ | 12,196,000 |   |

----

Index

|                                                          |   | Three Months EndedMarch 31, |      |
|---------------------------------------------------------------|--------|-----------------------------|-----------|
|                                                          |   | 2010                        |      |   | 2010 |   |
| Supplemental disclosures of cash flow information:            |   |                        |      |   |   |   |
| Cash paid during the period for interest                      |   | $                           | 1,964,000 |   |   | $ | 2,509,000 |   |
| Noncash investing activities - security purchases due brokers |   | $                           | -         |   |   | $ | 3,523,000 |   |

----

Index

ard

----

Index

|                                     |   | March 31, 2011 |        |
|------------------------------------------|--------|----------------|-------------|
|                                     |   | Amortized      |        |   | Gross Unrealized |   |   | Fair |   |
|                                     |   | Cost           |        |   | Gains |   |   | Losses |   |   | Value |   |
|                                     |   |           |        |   |   |   |   |   |   |   |   |   |
| U.S. Treasury                            |   | $              | 15,202,000  |   |   | $ | 77,000 |   |   | $ | 29,000 |   |   | $ | 15,250,000 |   |
| U.S. government-sponsored agencies       |   |           | 16,081,000  |   |   |   | 71,000 |   |   |   | 109,000 |   |   |   | 16,043,000 |   |
| Obligations of state and political       |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                             |   |           | 6,242,000   |   |   |   | 148,000 |   |   |   | 64,000 |   |   |   | 6,326,000 |   |
| Mortgage-backed securities - residential |   |           | 107,135,000 |   |   |   | 1,074,000 |   |   |   | 846,000 |   |   |   | 107,363,000 |   |
| Other equity investments                 |   |           | 3,173,000   |   |   |   | 23,000 |   |   |   | - |   |   |   | 3,196,000 |   |
|                                     |   | $              | 147,833,000 |   |   | $ | 1,393,000 |   |   | $ | 1,048,000 |   |   | $ | 148,178,000 |   |

|                                     |   | December 31, 2010 |        |
|------------------------------------------|--------|-------------------|-------------|
|                                     |   | Amortized         |        |   | Gross Unrealized |   |   | Fair |   |
|                                     |   | Cost              |        |   | Gains |   |   | Losses |   |   | Value |   |
|                                     |   |              |        |   |   |   |   |   |   |   |   |   |
| U.S. Treasury                            |   | $                 | 9,141,000   |   |   | $ | 109,000 |   |   | $ | 1,000 |   |   | $ | 9,249,000 |   |
| U.S. government-sponsored agencies       |   |              | 13,600,000  |   |   |   | 97,000 |   |   |   | 111,000 |   |   |   | 13,586,000 |   |
| Obligations of state and political       |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                             |   |              | 4,219,000   |   |   |   | 79,000 |   |   |   | 19,000 |   |   |   | 4,279,000 |   |
| Mortgage-backed securities - residential |   |              | 108,078,000 |   |   |   | 1,169,000 |   |   |   | 920,000 |   |   |   | 108,327,000 |   |
| Other equity investments                 |   |              | 3,135,000   |   |   |   | 52,000 |   |   |   | - |   |   |   | 3,187,000 |   |
|                                     |   | $                 | 138,173,000 |   |   | $ | 1,506,000 |   |   | $ | 1,051,000 |   |   | $ | 138,628,000 |   |

----

Index

|                                     |   | March 31, 2011 |       |
|------------------------------------------|--------|----------------|------------|
|                                     |   | Amortized      |       |   | Gross Unrecognized |   |   | Fair |   |
|                                     |   | Cost           |       |   | Gains |   |   | Losses |   |   | Value |   |
|                                     |   |           |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies       |   | $              | 2,797,000  |   |   | $ | 112,000 |   |   |   | - |   |   | $ | 2,909,000 |   |
| Obligations of state and political       |   |           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                             |   |           | 25,948,000 |   |   |   | 1,279,000 |   |   |   | 1,000 |   |   |   | 27,226,000 |   |
| Mortgage-backed securities - residential |   |           | 13,715,000 |   |   |   | 652,000 |   |   |   | - |   |   |   | 14,367,000 |   |
|                                     |   | $              | 42,460,000 |   |   | $ | 2,043,000 |   |   | $ | 1,000 |   |   | $ | 44,502,000 |   |

|                                     |   | December 31, 2010 |       |
|------------------------------------------|--------|-------------------|------------|
|                                     |   | Amortized         |       |   | Gross Unrecognized |   |   | Fair |   |
|                                     |   | Cost              |       |   | Gains |   |   | Losses |   |   | Value |   |
|                                     |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies       |   | $                 | 4,208,000  |   |   | $ | 146,000 |   |   | $ | - |   |   | $ | 4,354,000 |   |
| Obligations of state and political       |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                             |   |              | 26,148,000 |   |   |   | 1,046,000 |   |   |   | 20,000 |   |   |   | 27,174,000 |   |
| Mortgage-backed securities - residential |   |              | 15,038,000 |   |   |   | 750,000 |   |   |   | - |   |   |   | 15,788,000 |   |
|                                     |   | $                 | 45,394,000 |   |   | $ | 1,942,000 |   |   | $ | 20,000 |   |   | $ | 47,316,000 |   |

----

Index

| Available for Sale       |   |                |       |   |                |   |       |      |   |   |             |   |   |      |   |   |             |   |
|--------------------------|--------|---------------------|------------|--------|---------------------|--------|------------|-----------|--------|--------|------------------|--------|--------|-----------|--------|--------|------------------|--------|
| March 31, 2011           |   | Less than 12 Months |       |   | 12 Months or Longer |   |       | Total     |   |
|                     |   | FairValue           |       |   | UnrealizedLosses    |   |       | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                     |   |                |       |   |                |   |       |      |   |   |             |   |   |      |   |   |             |   |
| U.S. Treasury            |   | $                   | 8,576,000  |   |                | $      | (29,000    | )         |   | $      | -                |   |   | $         | -      |   |             | $      | 8,576,000 |   |   | $ | (29,000 | ) |
| U.S. government-         |   |                |       |   |                |   |       |      |   |   |             |   |   |      |   |   |             |   |   |   |   |   |   |   |
| sponsored agencies       |   |                | 5,911,000  |   |                |   | (109,000   | )         |   |   | -                |   |   |      | -      |   |             |   | 5,911,000 |   |   |   | (109,000 | ) |
| Obligations of state and |   |                |       |   |                |   |       |      |   |   |             |   |   |      |   |   |             |   |   |   |   |   |   |   |
| political subdivisions   |   |                | 1,840,000  |   |                |   | (64,000    | )         |   |   | -                |   |   |      | -      |   |             |   | 1,840,000 |   |   |   | (64,000 | ) |
| Mortgage-backed          |   |                |       |   |                |   |       |      |   |   |             |   |   |      |   |   |             |   |   |   |   |   |   |   |
| securities - residential |   |                | 56,894,000 |   |                |   | (846,000   | )         |   |   | -                |   |   |      | -      |   |             |   | 56,894,000 |   |   |   | (846,000 | ) |
| Other equity investments |   |                | -          |   |                |   | -          |      |   |   | -                |   |   |      | -      |   |             |   | - |   |   |   | - |   |
| Total temporarily        |   |                |       |   |                |   |       |      |   |   |             |   |   |      |   |   |             |   |   |   |   |   |   |   |
| impaired securities      |   | $                   | 73,221,000 |   |                | $      | (1,048,000 | )         |   | $      | -                |   |   | $         | -      |   |             | $      | 73,221,000 |   |   | $ | (1,048,000 | ) |

| December 31, 2010        |   | Less than 12 Months |       |   | 12 Months or Longer |   |       | Total     |   |
|--------------------------|--------|---------------------|------------|--------|---------------------|--------|------------|-----------|--------|
|                     |   | FairValue           |       |   | UnrealizedLosses    |   |       | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                     |   |                |       |   |                |   |       |      |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury            |   | $                   | 1,522,000  |   |                | $      | (1,000     | )         |   | $ | - |   |   | $ | - |   |   | $ | 1,522,000 |   |   | $ | (1,000 | ) |
| U.S. government-         |   |                |       |   |                |   |       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies       |   |                | 3,418,000  |   |                |   | (111,000   | )         |   |   | - |   |   |   | - |   |   |   | 3,418,000 |   |   |   | (111,000 | ) |
| Obligations of state and |   |                |       |   |                |   |       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions   |   |                | 1,153,000  |   |                |   | (19,000    | )         |   |   | - |   |   |   | - |   |   |   | 1,153,000 |   |   |   | (19,000 | ) |
| Mortgage-backed          |   |                |       |   |                |   |       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential |   |                | 39,179,000 |   |                |   | (920,000   | )         |   |   | - |   |   |   | - |   |   |   | 39,179,000 |   |   |   | (920,000 | ) |
| Other equity investments |   |                | -          |   |                |   | -          |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total temporarily        |   |                |       |   |                |   |       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impaired securities      |   | $                   | 45,272,000 |   |                | $      | (1,051,000 | )         |   | $ | - |   |   | $ | - |   |   | $ | 45,272,000 |   |   | $ | (1,051,000 | ) |

| Held to Maturity         |   |                |      |   |                |   |   |      |   |   |               |   |   |      |   |   |               |   |
|--------------------------|--------|---------------------|-----------|--------|---------------------|--------|--------|-----------|--------|--------|--------------------|--------|--------|-----------|--------|--------|--------------------|--------|
| March 31, 2011           |   | Less than 12 Months |      |   | 12 Months or Longer |   |   | Total     |   |
|                     |   | FairValue           |      |   | UnrecognizedLosses  |   |   | FairValue |   |   | UnrecognizedLosses |   |   | FairValue |   |   | UnrecognizedLosses |   |
|                     |   |                |      |   |                |   |   |      |   |   |               |   |   |      |   |   |               |   |
| U.S. government-         |   |                |      |   |                |   |   |      |   |   |               |   |   |      |   |   |               |   |
| sponsored agencies       |   | $                   | -         |   |                | $      | -      |      |   | $      | -                  |   |   | $         | -      |   |               | $      | - |   |   | $ | - |   |
| Obligations of state and |   |                |      |   |                |   |   |      |   |   |               |   |   |      |   |   |               |   |   |   |   |   |   |   |
| political subdivisions   |   |                | 1,021,000 |   |                |   | (1,000 | )         |   |   | -                  |   |   |      | -      |   |               |   | 1,021,000 |   |   |   | (1,000 | ) |
| Mortgage-backed          |   |                |      |   |                |   |   |      |   |   |               |   |   |      |   |   |               |   |   |   |   |   |   |   |
| securities - residential |   |                | -         |   |                |   | -      |      |   |   | -                  |   |   |      | -      |   |               |   | - |   |   |   | - |   |
| Total temporarily        |   |                |      |   |                |   |   |      |   |   |               |   |   |      |   |   |               |   |   |   |   |   |   |   |
| impaired securities      |   | $                   | 1,021,000 |   |                | $      | (1,000 | )         |   | $      | -                  |   |   | $         | -      |   |               | $      | 1,021,000 |   |   | $ | (1,000 | ) |

| December 31, 2010        |   | Less than 12 Months |      |   | 12 Months or Longer |   |    | Total     |   |
|--------------------------|--------|---------------------|-----------|--------|---------------------|--------|---------|-----------|--------|
|                     |   | FairValue           |      |   | UnrecognizedLosses  |   |    | FairValue |   |   | UnrecognizedLosses |   |   | FairValue |   |   | UnrecognizedLosses |   |
|                     |   |                |      |   |                |   |    |      |   |   |   |   |   |   |   |   |   |   |
| U.S. government-         |   |                |      |   |                |   |    |      |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies       |   | $                   | -         |   |                | $      | -       |      |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Obligations of state and |   |                |      |   |                |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions   |   |                | 1,403,000 |   |                |   | (20,000 | )         |   |   | - |   |   |   | - |   |   |   | 1,403,000 |   |   |   | (20,000 | ) |
| Mortgage-backed          |   |                |      |   |                |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential |   |                | -         |   |                |   | -       |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total temporarily        |   |                |      |   |                |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impaired securities      |   | $                   | 1,403,000 |   |                | $      | (20,000 | )         |   | $ | - |   |   | $ | - |   |   | $ | 1,403,000 |   |   | $ | (20,000 | ) |

----

Index

|                                             |   | March 31,2011 |        |   | December 31,2010 |   |
|--------------------------------------------------|--------|---------------|-------------|--------|------------------|--------|
|                                             |   |          |        |   |             |   |
| Commercial:                                      |   |          |        |   |             |   |
| Secured by real estate                           |   | $             | 63,126,000  |   |             | $      | 65,200,000 |   |
| Other                                            |   |          | 42,404,000  |   |             |   | 44,327,000 |   |
| Commercial real estate                           |   |          | 235,620,000 |   |             |   | 219,875,000 |   |
| Construction:                                    |   |          |        |   |             |   |   |   |
| Commercial                                       |   |          | 25,116,000  |   |             |   | 28,652,000 |   |
| Residential                                      |   |          | 279,000     |   |             |   | 875,000 |   |
| Residential real estate                          |   |          | 45,892,000  |   |             |   | 42,145,000 |   |
| Consumer:                                        |   |          |        |   |             |   |   |   |
| Secured by real estate                      |   |          | 45,702,000  |   |             |   | 49,360,000 |   |
| Other                                            |   |          | 1,308,000   |   |             |   | 1,280,000 |   |
| Other                                            |   |          | 60,000      |   |             |   | 152,000 |   |
| Total gross loans                           |   |          | 459,507,000 |   |             |   | 451,866,000 |   |
|                                             |   |          |        |   |             |   |   |   |
| Less:  Deferred loan cost, net of fees |   |          | 85,000      |   |             |   | 131,000 |   |
| Allowance for loan losses                        |   |          | 9,874,000   |   |             |   | 8,490,000 |   |
|                                             |   |          | 9,959,000   |   |             |   | 8,621,000 |   |
|                                             |   |          |        |   |             |   |   |   |
| Loans, net                                  |   | $             | 449,548,000 |   |             | $      | 443,245,000 |   |

----

Index

|                                  |   | Three Months Ended March 31, |      |
|---------------------------------------|--------|------------------------------|-----------|
|                                  |   | 2011                         |      |   | 2010 |   |
|                                  |   |                         |      |   |   |   |
| Balance, beginning of period          |   | $                            | 8,490,000 |   |   | $ | 6,920,000 |   |
| Provision charged to operations       |   |                         |      |   |   |   |   |   |
| Commercial:                           |   |                         |      |   |   |   |   |   |
| Secured by real estate                |   |                         | 1,201,000 |   |   |   |   |   |
| Other                                 |   |                         | 150,000   |   |   |   |   |   |
| Commercial real estate                |   |                         | 297,000   |   |   |   |   |   |
| Construction:                         |   |                         |      |   |   |   |   |   |
| Commercial                            |   |                         | (166,000  | ) |   |   |   |   |
| Residential                           |   |                         | (3,000    | ) |   |   |   |   |
| Residential real estate               |   |                         | 104,000   |   |   |   |   |   |
| Consumer:                             |   |                         |      |   |   |   |   |   |
| Secured by real estate                |   |                         | 82,000    |   |   |   |   |   |
| Other                                 |   |                         | (1,000    | ) |   |   |   |   |
| Other                                 |   |                         | 3,000     |   |   |   |   |   |
| Unallocated                           |   |                         | 8,000     |   |   |   |   |   |
| Total provision charged to operations |   |                         | 1,675,000 |   |   |   | 1,550,000 |   |
|                                  |   |                         |      |   |   |   |   |   |
| Loans charged off                     |   |                         |      |   |   |   |   |   |
| Commercial:                           |   |                         |      |   |   |   |   |   |
| Secured by real estate                |   |                         | 91,000    |   |   |   |   |   |
| Other                                 |   |                         | 37,000    |   |   |   |   |   |
| Commercial real estate                |   |                         | 104,000   |   |   |   |   |   |
| Construction:                         |   |                         |      |   |   |   |   |   |
| Commercial                            |   |                         | 9,000     |   |   |   |   |   |
| Residential                           |   |                         | -         |   |   |   |   |   |
| Residential real estate               |   |                         | -         |   |   |   |   |   |
| Consumer:                             |   |                         |      |   |   |   |   |   |
| Secured by real estate                |   |                         | 59,000    |   |   |   |   |   |
| Other                                 |   |                         | -         |   |   |   |   |   |
| Other                                 |   |                         | 3,000     |   |   |   |   |   |
| Total loans charged off               |   |                         | 303,000   |   |   |   | 369,000 |   |
|                                  |   |                         |      |   |   |   |   |   |
| Recoveries of loans charged off       |   |                         |      |   |   |   |   |   |
| Commercial:                           |   |                         |      |   |   |   |   |   |
| Secured by real estate                |   |                         | 10,000    |   |   |   |   |   |
| Other                                 |   |                         | 1,000     |   |   |   |   |   |
| Commercial real estate                |   |                         | -         |   |   |   |   |   |
| Construction:                         |   |                         |      |   |   |   |   |   |
| Commercial                            |   |                         | -         |   |   |   |   |   |
| Residential                           |   |                         | -         |   |   |   |   |   |
| Residential real estate               |   |                         | -         |   |   |   |   |   |
| Consumer:                             |   |                         |      |   |   |   |   |   |
| Secured by real estate                |   |                         | -         |   |   |   |   |   |
| Other                                 |   |                         | -         |   |   |   |   |   |
| Other                                 |   |                         | 1,000     |   |   |   |   |   |
| Total recoveries of loans charged off |   |                         | 12,000    |   |   |   | 73,000 |   |
| Balance, end of period                |   | $                            | 9,874,000 |   |   | $ | 8,174,000 |   |

----

Index

|                 |   | March 31, 2011 |        |
|----------------------|--------|----------------|-------------|
|                 |   | Commercial     |        |   | CommercialReal Estate |   |   | Construction |   |   | ResidentialReal Estate |   |   | Consumer |   |   | OtherLoans |   |   | Unallocated |   |   | Total |   |
|                 |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan   |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| losses:              |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending allowance     |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| balance attributable |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to loans             |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                 |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually         |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for        |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment           |   | $              | 2,167,000   |   |   | $ | 157,000 |   |   | $ | 35,000 |   |   | $ | 10,000 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 2,369,000 |   |
|                 |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Collectively         |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for        |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment           |   |           | 2,812,000   |   |   |   | 3,148,000 |   |   |   | 717,000 |   |   |   | 278,000 |   |   |   | 532,000 |   |   |   | 3,000 |   |   |   | 15,000 |   |   |   | 7,505,000 |   |
| Total ending         |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| allowance            |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| balance              |   | $              | 4,979,000   |   |   | $ | 3,305,000 |   |   | $ | 752,000 |   |   | $ | 288,000 |   |   | $ | 532,000 |   |   | $ | 3,000 |   |   | $ | 15,000 |   |   | $ | 9,874,000 |   |
|                 |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans:               |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| individually         |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for        |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment           |   | $              | 7,987,000   |   |   | $ | 11,912,000 |   |   | $ | 2,296,000 |   |   | $ | 1,106,000 |   |   | $ | 829,000 |   |   | $ | - |   |   | $ | - |   |   | $ | 24,130,000 |   |
|                 |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| collectively         |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for        |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment           |   |           | 97,543,000  |   |   |   | 223,708,000 |   |   |   | 23,099,000 |   |   |   | 44,786,000 |   |   |   | 46,181,000 |   |   |   | 60,000 |   |   |   | - |   |   |   | 435,377,000 |   |
| Total ending         |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loan balance         |   | $              | 105,530,000 |   |   | $ | 235,620,000 |   |   | $ | 25,395,000 |   |   | $ | 45,892,000 |   |   | $ | 47,010,000 |   |   | $ | 60,000 |   |   | $ | - |   |   | $ | 459,507,000 |   |

----

Index

|                 |   | December 31, 2010 |        |
|----------------------|--------|-------------------|-------------|
|                 |   | Commercial        |        |   | CommercialReal Estate |   |   | Construction |   |   | ResidentialReal Estate |   |   | Consumer |   |   | OtherLoans |   |   | Unallocated |   |   | Total |   |
|                 |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan   |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| losses:              |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending allowance     |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| balance attributable |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to loans             |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                 |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually         |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for        |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment           |   | $                 | 1,336,000   |   |   | $ | 276,000 |   |   | $ | 29,000 |   |   | $ | 3,000 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 1,644,000 |   |
|                 |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Collectively         |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for        |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment           |   |              | 2,409,000   |   |   |   | 2,836,000 |   |   |   | 901,000 |   |   |   | 181,000 |   |   |   | 510,000 |   |   |   | 2,000 |   |   |   | 7,000 |   |   |   | 6,846,000 |   |
| Total ending         |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| allowance            |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| balance              |   | $                 | 3,745,000   |   |   | $ | 3,112,000 |   |   | $ | 930,000 |   |   | $ | 184,000 |   |   | $ | 510,000 |   |   | $ | 2,000 |   |   | $ | 7,000 |   |   | $ | 8,490,000 |   |
|                 |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans:               |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| individually         |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for        |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment           |   | $                 | 7,852,000   |   |   | $ | 10,540,000 |   |   | $ | 2,303,000 |   |   | $ | 1,106,000 |   |   | $ | 829,000 |   |   | $ | - |   |   | $ | - |   |   | $ | 22,630,000 |   |
|                 |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| collectively         |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for        |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment           |   |              | 101,675,000 |   |   |   | 209,335,000 |   |   |   | 27,224,000 |   |   |   | 41,039,000 |   |   |   | 49,811,000 |   |   |   | 152,000 |   |   |   | - |   |   |   | 429,236,000 |   |
| Total ending         |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loan balance         |   | $                 | 109,527,000 |   |   | $ | 219,875,000 |   |   | $ | 29,527,000 |   |   | $ | 42,145,000 |   |   | $ | 50,640,000 |   |   | $ | 152,000 |   |   | $ | - |   |   | $ | 451,866,000 |   |

|                     |   | March 31,2011 |       |   | December 31,2010 |   |
|--------------------------|--------|---------------|------------|--------|------------------|--------|
|                     |   |          |       |   |             |   |
| Commercial:              |   |          |       |   |             |   |
| Secured by real estate   |   | $             | 6,139,000  |   |             | $      | 5,924,000 |   |
| Other                    |   |          | 1,728,000  |   |             |   | 1,798,000 |   |
| Commercial real estate   |   |          | 11,912,000 |   |             |   | 10,540,000 |   |
| Construction:            |   |          |       |   |             |   |   |   |
| Commercial               |   |          | 2,017,000  |   |             |   | 2,020,000 |   |
| Residential              |   |          | 279,000    |   |             |   | 283,000 |   |
| Residential real estate  |   |          | 1,106,000  |   |             |   | 1,106,000 |   |
| Consumer:                |   |          |       |   |             |   |   |   |
| Secured by real estate   |   |          | 829,000    |   |             |   | 829,000 |   |
| Other                    |   |          | -          |   |             |   | - |   |
| Other                    |   |          | -          |   |             |   | - |   |
|                     |   |          |       |   |             |   |   |   |
| Total nonperfoming loans |   | $             | 24,010,000 |   |             | $      | 22,500,000 |   |

----

Index

|                                | At and for the three months ended March 31, 2011 |                   |
|-------------------------------------|--------------------------------------------------|------------------------|
|                                |                                             | UnpaidPrincipalBalance |   |   | RecordedInvestment |   |   | Allowance forLoan LossesAllocated |   |   | AverageRecordedInvestment |   |   | InterestIncomeRecognized |   |
|                                |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With no related allowance recorded: |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial:                         |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate              |                                             | $                      | 1,623,000 |   |   | $ | 1,342,000 |   |   |   |   |   | $ | 1,127,000 |   |   | $ | - |   |
| Other                               |                                             |                   | 300,000 |   |   |   | 287,000 |   |   |   |   |   |   | 453,000 |   |   |   | 2,000 |   |
| Commercial real estate              |                                             |                   | 5,282,000 |   |   |   | 4,561,000 |   |   |   |   |   |   | 4,380,000 |   |   |   | - |   |
| Construction:                       |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                          |                                             |                   | 1,549,000 |   |   |   | 1,501,000 |   |   |   |   |   |   | 1,503,000 |   |   |   | - |   |
| Residential                         |                                             |                   | 281,000 |   |   |   | 279,000 |   |   |   |   |   |   | 281,000 |   |   |   | - |   |
| Residential real estate             |                                             |                   | 287,000 |   |   |   | 287,000 |   |   |   |   |   |   | 502,000 |   |   |   | - |   |
| Consumer:                           |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate              |                                             |                   | 1,037,000 |   |   |   | 829,000 |   |   |   |   |   |   | 829,000 |   |   |   | - |   |
| Other                               |                                             |                   | - |   |   |   | - |   |   |   |   |   |   | - |   |   |   | - |   |
| Other                               |                                             |                   | - |   |   |   | - |   |   |   |   |   |   | - |   |   |   | - |   |
|                                |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:         |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial:                         |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate              |                                             |                   | 5,667,000 |   |   |   | 4,797,000 |   |   | $ | 1,412,000 |   |   |   | 4,905,000 |   |   |   | - |   |
| Other                               |                                             |                   | 1,578,000 |   |   |   | 1,561,000 |   |   |   | 755,000 |   |   |   | 1,436,000 |   |   |   | - |   |
| Commercial real estate              |                                             |                   | 7,829,000 |   |   |   | 7,351,000 |   |   |   | 157,000 |   |   |   | 6,846,000 |   |   |   | - |   |
| Construction:                       |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                          |                                             |                   | 959,000 |   |   |   | 516,000 |   |   |   | 35,000 |   |   |   | 516,000 |   |   |   | - |   |
| Residential                         |                                             |                   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential real estate             |                                             |                   | 844,000 |   |   |   | 819,000 |   |   |   | 10,000 |   |   |   | 605,000 |   |   |   | - |   |
| Consumer:                           |                                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate              |                                             |                   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other                               |                                             |                   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Other                               |                                             |                   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total nonperfoming loans            |                                             | $                      | 27,236,000 |   |   | $ | 24,130,000 |   |   | $ | 2,369,000 |   |   | $ | 23,383,000 |   |   | $ | 2,000 |   |

----

Index

|                                |   | At and for the year ended December 31, 2010 |       |
|-------------------------------------|--------|---------------------------------------------|------------|
|                                |   | Unpaid PrincipalBalance                     |       |   | RecordedInvestment |   |   | Allowance forLoan LossesAllocated |   |   | AverageRecordedInvestment |   |   | InterestIncomeRecognized |   |
|                                |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| With no related allowance recorded: |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial:                         |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate              |   | $                                           | 1,037,000  |   |   | $ | 911,000 |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                               |   |                                        | 646,000    |   |   |   | 618,000 |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate              |   |                                        | 4,808,000  |   |   |   | 4,199,000 |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction:                       |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                          |   |                                        | 1,540,000  |   |   |   | 1,504,000 |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                         |   |                                        | 284,000    |   |   |   | 283,000 |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential real estate             |   |                                        | 716,000    |   |   |   | 716,000 |   |   |   |   |   |   |   |   |   |   |   |   |
| Consumer:                           |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate              |   |                                        | 1,037,000  |   |   |   | 829,000 |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                               |   |                                        | -          |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                               |   |                                        | -          |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:         |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial:                         |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate              |   |                                        | 6,056,000  |   |   |   | 5,013,000 |   |   | $ | 730,000 |   |   |   |   |   |   |   |   |   |
| Other                               |   |                                        | 1,311,000  |   |   |   | 1,310,000 |   |   |   | 606,000 |   |   |   |   |   |   |   |   |   |
| Commercial real estate              |   |                                        | 6,777,000  |   |   |   | 6,341,000 |   |   |   | 276,000 |   |   |   |   |   |   |   |   |   |
| Construction:                       |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial                          |   |                                        | 959,000    |   |   |   | 516,000 |   |   |   | 29,000 |   |   |   |   |   |   |   |   |   |
| Residential                         |   |                                        | -          |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Residential real estate             |   |                                        | 415,000    |   |   |   | 390,000 |   |   |   | 3,000 |   |   |   |   |   |   |   |   |   |
| Consumer:                           |   |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate              |   |                                        | -          |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Other                               |   |                                        | -          |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Other                               |   |                                        | -          |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   |   |   |
| Total nonperfoming loans            |   | $                                           | 25,586,000 |   |   | $ | 22,630,000 |   |   | $ | 1,644,000 |   |   | $ | 23,766,000 |   |   | $ | 216,000 |   |

|                    |   | March 31, 2011     |       |
|-------------------------|--------|--------------------|------------|
|                    |   | 30-59 DaysPast Due |       |   | 60-89 DaysPast Due |   |   | Greater than90 DaysPast Due |   |   | TotalPast Due |   |   | LoansNotPast Due |   |   | Total |   |
|                    |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial:             |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   | $                  | 3,233,000  |   |   | $ | 414,000 |   |   | $ | 5,565,000 |   |   | $ | 9,212,000 |   |   | $ | 53,914,000 |   |   | $ | 63,126,000 |   |
| Other                   |   |               | 50,000     |   |   |   | - |   |   |   | 1,728,000 |   |   |   | 1,778,000 |   |   |   | 40,626,000 |   |   |   | 42,404,000 |   |
| Commercial real estate: |   |               | 7,212,000  |   |   |   | 213,000 |   |   |   | 10,550,000 |   |   |   | 17,975,000 |   |   |   | 217,645,000 |   |   |   | 235,620,000 |   |
| Construction:           |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial              |   |               | 272,000    |   |   |   | - |   |   |   | 916,000 |   |   |   | 1,188,000 |   |   |   | 23,928,000 |   |   |   | 25,116,000 |   |
| Residential             |   |               | -          |   |   |   | - |   |   |   | 279,000 |   |   |   | 279,000 |   |   |   | - |   |   |   | 279,000 |   |
| Residential real estate |   |               | 1,302,000  |   |   |   | - |   |   |   | 1,106,000 |   |   |   | 2,408,000 |   |   |   | 43,484,000 |   |   |   | 45,892,000 |   |
| Consumer:               |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   |               | 290,000    |   |   |   | - |   |   |   | 829,000 |   |   |   | 1,119,000 |   |   |   | 44,583,000 |   |   |   | 45,702,000 |   |
| Other                   |   |               | 2,000      |   |   |   | - |   |   |   | - |   |   |   | 2,000 |   |   |   | 1,306,000 |   |   |   | 1,308,000 |   |
| Other                   |   |               | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 60,000 |   |   |   | 60,000 |   |
| Total                   |   | $                  | 12,361,000 |   |   | $ | 627,000 |   |   | $ | 20,973,000 |   |   | $ | 33,961,000 |   |   | $ | 425,546,000 |   |   | $ | 459,507,000 |   |

----

Index

|                    |   | December 31, 2010  |      |
|-------------------------|--------|--------------------|-----------|
|                    |   | 30-59 DaysPast Due |      |   | 60-89 DaysPast Due |   |   | Greater than90 DaysPast Due |   |   | TotalPast Due |   |   | LoansNotPast Due |   |   | Total |   |
|                    |   |               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial:             |   |               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   | $                  | 490,000   |   |   | $ | 4,014,000 |   |   | $ | 2,296,000 |   |   | $ | 6,800,000 |   |   | $ | 58,400,000 |   |   | $ | 65,200,000 |   |
| Other                   |   |               | -         |   |   |   | - |   |   |   | 1,798,000 |   |   |   | 1,798,000 |   |   |   | 42,529,000 |   |   |   | 44,327,000 |   |
| Commercial real estate: |   |               | 1,789,000 |   |   |   | 2,324,000 |   |   |   | 6,650,000 |   |   |   | 10,763,000 |   |   |   | 209,112,000 |   |   |   | 219,875,000 |   |
| Construction:           |   |               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial              |   |               | -         |   |   |   | 2,731,000 |   |   |   | 916,000 |   |   |   | 3,647,000 |   |   |   | 25,005,000 |   |   |   | 28,652,000 |   |
| Residential             |   |               | -         |   |   |   | - |   |   |   | 283,000 |   |   |   | 283,000 |   |   |   | 592,000 |   |   |   | 875,000 |   |
| Residential real estate |   |               | -         |   |   |   | 458,000 |   |   |   | 1,106,000 |   |   |   | 1,564,000 |   |   |   | 40,581,000 |   |   |   | 42,145,000 |   |
| Consumer:               |   |               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   |               | 114,000   |   |   |   | 449,000 |   |   |   | 829,000 |   |   |   | 1,392,000 |   |   |   | 47,968,000 |   |   |   | 49,360,000 |   |
| Other                   |   |               | 3,000     |   |   |   | - |   |   |   | - |   |   |   | 3,000 |   |   |   | 1,277,000 |   |   |   | 1,280,000 |   |
| Other                   |   |               | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 152,000 |   |   |   | 152,000 |   |
| Total                   |   | $                  | 2,396,000 |   |   | $ | 9,976,000 |   |   | $ | 13,878,000 |   |   | $ | 26,250,000 |   |   | $ | 425,616,000 |   |   | $ | 451,866,000 |   |

|   | Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention, which, if left uncorrected, may result in deterioration of the repayment prospects for the asset or the Bank’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. While potentially weak, the borrower is currently marginally acceptable and loss of principal or interest is not presently envisioned. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Substandard – Substandard loans are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the repayment and liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Doubtful – A loan with all weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently know facts, conditions, and values, highly questionable or improbable. The likelihood of loss is extremely high, but because of certain important and reasonably specific factors, an estimated loss is deferred until a more exact status can be determined. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Loss – A loan classified Loss is considered uncollectible and of such little value that its continuance as an asset is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off a basically worthless asset even though partial recovery may be effected in the future. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|                    |   | March 31, 2011 |        |
|-------------------------|--------|----------------|-------------|
|                    |   | Pass           |        |   | SpecialMention |   |   | Substandard |   |   | Doubtful |   |   | Loss |   |   | Total |   |
|                    |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial:             |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   | $              | 56,987,000  |   |   | $ | 867,000 |   |   | $ | 2,074,000 |   |   | $ | 3,198,000 |   |   | $ | - |   |   | $ | 63,126,000 |   |
| Other                   |   |           | 40,557,000  |   |   |   | 583,000 |   |   |   | - |   |   |   | 1,264,000 |   |   |   | - |   |   |   | 42,404,000 |   |
| Commercial real estate: |   |           | 223,709,000 |   |   |   | 5,689,000 |   |   |   | 5,440,000 |   |   |   | 782,000 |   |   |   | - |   |   |   | 235,620,000 |   |
| Construction:           |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial              |   |           | 23,098,000  |   |   |   | 1,611,000 |   |   |   | 407,000 |   |   |   | - |   |   |   | - |   |   |   | 25,116,000 |   |
| Residential             |   |           | -           |   |   |   | 279,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 279,000 |   |
| Total                   |   | $              | 344,351,000 |   |   | $ | 9,029,000 |   |   | $ | 7,921,000 |   |   | $ | 5,244,000 |   |   | $ | - |   |   | $ | 366,545,000 |   |

|                    |   | December 31, 2010 |        |
|-------------------------|--------|-------------------|-------------|
|                    |   | Pass              |        |   | SpecialMention |   |   | Substandard |   |   | Doubtful |   |   | Loss |   |   | Total |   |
|                    |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial:             |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   | $                 | 59,206,000  |   |   | $ | 4,173,000 |   |   | $ | 1,801,000 |   |   | $ | - |   |   | $ | 20,000 |   |   | $ | 65,200,000 |   |
| Other                   |   |              | 42,399,000  |   |   |   | 618,000 |   |   |   | - |   |   |   | 1,267,000 |   |   |   | 43,000 |   |   |   | 44,327,000 |   |
| Commercial real estate: |   |              | 209,512,000 |   |   |   | 4,668,000 |   |   |   | 5,695,000 |   |   |   | - |   |   |   | - |   |   |   | 219,875,000 |   |
| Construction:           |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial              |   |              | 26,631,000  |   |   |   | 1,614,000 |   |   |   | 407,000 |   |   |   | - |   |   |   | - |   |   |   | 28,652,000 |   |
| Residential             |   |              | 592,000     |   |   |   | 283,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 875,000 |   |
| Total                   |   | $                 | 338,340,000 |   |   | $ | 11,356,000 |   |   | $ | 7,903,000 |   |   | $ | 1,267,000 |   |   | $ | 63,000 |   |   | $ | 358,929,000 |   |

|                    |   | March 31, 2011 |       |
|-------------------------|--------|----------------|------------|
|                    |   | Performing     |       |   | Nonperforming |   |   | Total |   |
|                    |   |           |       |   |   |   |   |   |   |
| Residential real estate |   | $              | 43,483,000 |   |   | $ | 2,409,000 |   |   | $ | 45,892,000 |   |
| Consumer:               |   |           |       |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   |           | 44,583,000 |   |   |   | 1,119,000 |   |   |   | 45,702,000 |   |
| Other                   |   |           | 1,306,000  |   |   |   | 2,000 |   |   |   | 1,308,000 |   |
| Total                   |   | $              | 89,372,000 |   |   | $ | 3,530,000 |   |   | $ | 92,902,000 |   |

|                    |   | December 31, 2010 |       |
|-------------------------|--------|-------------------|------------|
|                    |   | Performing        |       |   | Nonperforming |   |   | Total |   |
|                    |   |              |       |   |   |   |   |   |   |
| Residential real estate |   | $                 | 40,581,000 |   |   | $ | 1,564,000 |   |   | $ | 42,145,000 |   |
| Consumer:               |   |              |       |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   |              | 47,968,000 |   |   |   | 1,392,000 |   |   |   | 49,360,000 |   |
| Other                   |   |              | 1,277,000  |   |   |   | 3,000 |   |   |   | 1,280,000 |   |
| Total                   |   | $                 | 89,826,000 |   |   | $ | 2,959,000 |   |   | $ | 92,785,000 |   |

----

Index

| Notional amount |   |                     | $7,000,000 |   |
|-----------------|--------|--------------------------|------------|--------|
| Pay rate        |   |                     | 7.00%      |   |
| Receive rate    |   | 3 month LIBOR plus 2.95% |       |
| Maturity        |   | March 17, 2016           |       |
| Unrealized loss |   |                     | $(566,000) |   |

| Cash Flow Hedging Relationship |   | Amount of Gain (Loss), Net of Taxes,Recognized in Other Comprehensive Incomeon Derivative (Effective Portion) |   |
|--------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|
|                           |   | For the three months ended March 31,                                                                          |   |
|                           |   | 2011                                                                                                          |   |   | 2010 |   |
|                           |   |                                                                                                          |   |   |   |   |
| Cash flow hedge                |   | $                                                                                                             | 59,000 |   |   | $ | (105,000 | ) |

----

Index

|                          |   | Fair Value Measurements Using: |        |
|-------------------------------|--------|--------------------------------|-------------|
|                          |   | CarryingValue                  |        |   | Quoted Prices inActive Marketsfor IdenticalAssets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
|                          |   | At March 31, 2011              |        |
| Assets:                       |   |                           |        |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |                           |        |   |   |   |   |   |   |   |   |   |
| U.S. Treasuries               |   | $                              | 15,250,000  |   |   | $ | - |   |   |   | 15,250,000 |   |   | $ | - |   |
| U.S. government -             |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsered agencies            |   |                           | 16,043,000  |   |   |   | - |   |   |   | 16,043,000 |   |   |   | - |   |
| Obligations of state and      |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |                           | 6,326,000   |   |   |   | - |   |   |   | 6,326,000 |   |   |   | - |   |
| Mortgage-backed               |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential      |   |                           | 107,363,000 |   |   |   | - |   |   |   | 107,363,000 |   |   |   | - |   |
| Other equity investments      |   |                           | 3,196,000   |   |   |   | - |   |   |   | 3,196,000 |   |   |   | - |   |
| Total available for           |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sale securities               |   | $                              | 148,178,000 |   |   | $ | - |   |   | $ | 148,178,000 |   |   | $ | - |   |
|                          |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                  |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap            |   | $                              | 566,000     |   |   | $ | - |   |   | $ | 566,000 |   |   | $ | - |   |

|                          |   | At December 31, 2010 |        |
|-------------------------------|--------|----------------------|-------------|
| Assets:                       |   |                 |        |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |                 |        |   |   |   |   |   |   |   |   |   |
| U.S. Treasuries               |   | $                    | 9,249,000   |   |   | $ | - |   |   | $ | 9,249,000 |   |   | $ | - |   |
| U.S. government -             |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsered agencies            |   |                 | 13,586,000  |   |   |   | - |   |   |   | 13,586,000 |   |   |   | - |   |
| Obligations of state and      |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |                 | 4,279,000   |   |   |   | - |   |   |   | 4,279,000 |   |   |   | - |   |
| Mortgage-backed               |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential      |   |                 | 108,327,000 |   |   |   | - |   |   |   | 108,327,000 |   |   |   | - |   |
| Other equity investments      |   |                 | 3,187,000   |   |   |   | - |   |   |   | 3,187,000 |   |   |   | - |   |
| Total available for           |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sale securities               |   | $                    | 138,628,000 |   |   | $ | - |   |   | $ | 138,628,000 |   |   | $ | - |   |
|                          |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                  |   |                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap            |   | $                    | 664,000     |   |   | $ | - |   |   | $ | 664,000 |   |   | $ | - |   |

----

Index

|                   |   |              |       |   | Fair Value Measurements Using:                             |   |
|------------------------|--------|-------------------|------------|--------|------------------------------------------------------------|--------|
|                   |   | CarryingValue     |       |   | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
|                   |   | At March 31, 2011 |       |
| Assets:                |   |              |       |   |                                                       |   |   |   |   |   |   |   |
| Impaired loans         |   |              |       |   |                                                       |   |   |   |   |   |   |   |
| Commercial:            |   |              |       |   |                                                       |   |   |   |   |   |   |   |
| Secured by real estate |   | $                 | 3,385,000  |   |                                                       | $      | - |   |   | $ | - |   |   | $ | 3,385,000 |   |
| Other                  |   |              | 498,000    |   |                                                       |   | - |   |   |   | - |   |   |   | 498,000 |   |
| Commercial real estate |   |              | 7,194,000  |   |                                                       |   | - |   |   |   | - |   |   |   | 7,194,000 |   |
| Construction:          |   |              |       |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Commercial             |   |              | 481,000    |   |                                                       |   | - |   |   |   | - |   |   |   | 481,000 |   |
| Residential            |   |              | 809,000    |   |                                                       |   | - |   |   |   | - |   |   |   | 809,000 |   |
|                   |   | $                 | 12,367,000 |   |                                                       | $      | - |   |   | $ | - |   |   | $ | 12,367,000 |   |

|                   |   | At December 31, 2010 |       |
|------------------------|--------|----------------------|------------|
| Assets:                |   |                 |       |   |   |   |   |   |   |   |   |   |
| Impaired loans         |   |                 |       |   |   |   |   |   |   |   |   |   |
| Commercial:            |   |                 |       |   |   |   |   |   |   |   |   |   |
| Secured by real estate |   | $                    | 4,283,000  |   |   | $ | - |   |   | $ | - |   |   | $ | 5,326,000 |   |
| Other                  |   |                 | 704,000    |   |   |   | - |   |   |   | - |   |   |   | 704,000 |   |
| Commercial real estate |   |                 | 6,065,000  |   |   |   | - |   |   |   | - |   |   |   | 6,065,000 |   |
| Construction:          |   |                 |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial             |   |                 | 487,000    |   |   |   | - |   |   |   | - |   |   |   | 487,000 |   |
| Residential            |   |                 | 387,000    |   |   |   | - |   |   |   | - |   |   |   | 387,000 |   |
|                   |   | $                    | 11,926,000 |   |   | $ | - |   |   | $ | - |   |   | $ | 12,969,000 |   |

----

Index

|                             |   | March 31, 2011         |        |   | December 31, 2010   |   |
|----------------------------------|--------|------------------------|-------------|--------|---------------------|--------|
|                             |   | CarryingAmount         |        |   | EstimatedFair Value |   |   | CarryingAmount |   |   | EstimatedFair Value |   |
|                             |   | (Dollars in thousands) |        |
| Financial assets:                |   |                   |        |   |                |   |   |   |   |   |   |   |
| Cash and cash equivalents        |   | $                      | 29,661,000  |   |                | $      | 29,661,000 |   |   | $ | 19,983,000 |   |   | $ | 19,983,000 |   |
| Securities available for sale    |   |                   | 148,178,000 |   |                |   | 148,178,000 |   |   |   | 138,628,000 |   |   |   | 138,628,000 |   |
| Securities held to maturity      |   |                   | 42,460,000  |   |                |   | 44,502,000 |   |   |   | 45,394,000 |   |   |   | 47,316,000 |   |
| FHLB-NY stock                    |   |                   | 2,361,000   |   |                |   | N/A |   |   |   | 2,497,000 |   |   |   | N/A |   |
| Net loans                        |   |                   | 449,548,000 |   |                |   | 453,004,000 |   |   |   | 443,245,000 |   |   |   | 445,671,000 |   |
| Accrued interest receivable      |   |                   | 2,671,000   |   |                |   | 2,671,000 |   |   |   | 2,806,000 |   |   |   | 2,806,000 |   |
|                             |   |                   |        |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:           |   |                   |        |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                         |   |                   | 591,509,000 |   |                |   | 592,871,000 |   |   |   | 575,603,000 |   |   |   | 577,485,000 |   |
| FHLB-NY Advances                 |   |                   | 33,000,000  |   |                |   | 31,774,000 |   |   |   | 36,000,000 |   |   |   | 33,892,000 |   |
| Securities sold under agreements |   |                   |        |   |                |   |   |   |   |   |   |   |   |   |   |   |
| to repurchase                    |   |                   | 14,643,000  |   |                |   | 14,643,000 |   |   |   | 14,642,000 |   |   |   | 14,642,000 |   |
| Subordinated debenture           |   |                   | 7,217,000   |   |                |   | 6,932,000 |   |   |   | 7,217,000 |   |   |   | 6,803,000 |   |
| Accrued interest payable         |   |                   | 839,000     |   |                |   | 839,000 |   |   |   | 977,000 |   |   |   | 977,000 |   |
| Interest rate swap               |   |                   | 566,000     |   |                |   | 566,000 |   |   |   | 664,000 |   |   |   | 664,000 |   |

----

Index

|                                        |   | Three Months EndedMarch 31, |      |
|---------------------------------------------|--------|-----------------------------|-----------|
|                                        |   | 2011                        |      |   | 2010 |   |
|                                        |   |                        |      |   |   |   |
| Net income                                  |   | $                           | 483,000   |   |   | $ | 871,000 |   |
| Dividends on preferred stock and accretion  |   |                        | 138,000   |   |   |   | 137,000 |   |
| Net income available to common stockholders |   | $                           | 345,000   |   |   | $ | 734,000 |   |
|                                        |   |                        |      |   |   |   |   |   |
| Weighted average shares                     |   |                        | 5,849,723 |   |   |   | 5,839,974 |   |
| Effect of dilutive stock options            |   |                        | -         |   |   |   | 1,659 |   |
| Total weighted average dilutive shares      |   |                        | 5,849,723 |   |   |   | 5,841,633 |   |
|                                        |   |                        |      |   |   |   |   |   |
| Basic earnings per common share             |   | $                           | 0.06      |   |   | $ | 0.13 |   |
|                                        |   |                        |      |   |   |   |   |   |
| Diluted earnings per common share           |   | $                           | 0.06      |   |   | $ | 0.13 |   |

----

Index

ana

----

Index

----

Index

|                                           |   | 2011                   |    |   | 2010                   |   |
|------------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|
|                                           |   | AverageBalance         |    |   | InterestIncome/Expense |   |   | AverageRatesEarned/Paid |   |   | AverageBalance |   |   | InterestIncome/Expense |   |   | AverageRatesEarned/Paid |   |
|                                           |   | (Dollars in thousands) |    |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                         |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                       |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1) (2)                                  |   | $                      | 456,285 |   |                   | $      | 6,451 |   |   |   | 5.73 | % |   | $ | 462,022 |   |   | $ | 6,886 |   |   |   | 6.04 | % |
| Taxable investment securities (1)              |   |                   | 155,127 |   |                   |   | 1,060 |   |   |   | 2.77 |   |   |   | 133,319 |   |   |   | 1,339 |   |   |   | 4.07 |   |
| Tax-exempt investment securities (1) (2)       |   |                   | 31,030  |   |                   |   | 396 |   |   |   | 5.18 |   |   |   | 32,307 |   |   |   | 412 |   |   |   | 5.17 |   |
| Other interest-earning assets                  |   |                   | 592     |   |                   |   | 8 |   |   |   | 7.89 |   |   |   | 120 |   |   |   | 2 |   |   |   | 6.76 |   |
| Total interest-earning assets                  |   |                   | 643,034 |   |                   |   | 7,915 |   |   |   | 4.99 |   |   |   | 627,768 |   |   |   | 8,639 |   |   |   | 5.58 |   |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets:                   |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                      |   |                   | (8,777  | )      |                   |   |   |   |   |   |   |   |   |   | (7,310 | ) |   |   |   |   |   |   |   |   |
| Other assets                                   |   |                   | 51,857  |   |                   |   |   |   |   |   |   |   |   |   | 37,608 |   |   |   |   |   |   |   |   |   |
| Total assets                                   |   | $                      | 686,114 |   |                   |   |   |   |   |   |   |   |   | $ | 658,066 |   |   |   |   |   |   |   |   |   |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                  |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits               |   | $                      | 249,366 |   |                   | $      | 476 |   |   |   | 0.77 | % |   | $ | 222,691 |   |   | $ | 769 |   |   |   | 1.40 | % |
| Savings deposits                               |   |                   | 48,369  |   |                   |   | 31 |   |   |   | 0.26 |   |   |   | 47,299 |   |   |   | 50 |   |   |   | 0.42 |   |
| Time deposits                                  |   |                   | 175,300 |   |                   |   | 782 |   |   |   | 1.81 |   |   |   | 171,333 |   |   |   | 1,001 |   |   |   | 2.37 |   |
| Repurchase agreements                          |   |                   | 14,643  |   |                   |   | 181 |   |   |   | 5.01 |   |   |   | 15,398 |   |   |   | 182 |   |   |   | 4.79 |   |
| FHLB-NY borrowing                              |   |                   | 35,268  |   |                   |   | 232 |   |   |   | 2.67 |   |   |   | 45,817 |   |   |   | 246 |   |   |   | 2.19 |   |
| Subordinated debenture                         |   |                   | 7,217   |   |                   |   | 124 |   |   |   | 6.97 |   |   |   | 7,217 |   |   |   | 68 |   |   |   | 3.82 |   |
| Total interest-bearing liabilities             |   |                   | 530,163 |   |                   |   | 1,826 |   |   |   | 1.40 |   |   |   | 509,755 |   |   |   | 2,316 |   |   |   | 1.84 |   |
| Non-interest-bearing liabilities:              |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                |   |                   | 100,315 |   |                   |   |   |   |   |   |   |   |   |   | 89,993 |   |   |   |   |   |   |   |   |   |
| Other liabilities                              |   |                   | 3,125   |   |                   |   |   |   |   |   |   |   |   |   | 3,993 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                           |   |                   | 52,511  |   |                   |   |   |   |   |   |   |   |   |   | 54,325 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity     |   | $                      | 686,114 |   |                   |   |   |   |   |   |   |   |   | $ | 658,066 |   |   |   |   |   |   |   |   |   |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (taxable equivalent basis) |   |                   |    |   |                   |   | 6,089 |   |   |   |   |   |   |   |   |   |   |   | 6,323 |   |   |   |   |   |
| Tax Equivalent adjustment                      |   |                   |    |   |                   |   | (140 | ) |   |   |   |   |   |   |   |   |   |   | (144 | ) |   |   |   |   |
| Net interest income                            |   |                   |    |   |                   | $      | 5,949 |   |   |   |   |   |   |   |   |   |   | $ | 6,179 |   |   |   |   |   |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread (taxable equivalent basis) |   |                   |    |   |                   |   |   |   |   |   | 3.59 | % |   |   |   |   |   |   |   |   |   |   | 3.74 | % |
|                                           |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on interest-earning                  |   |                   |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets (taxable equivalent basis) (3)          |   |                   |    |   |                   |   |   |   |   |   | 3.84 | % |   |   |   |   |   |   |   |   |   |   | 4.08 | % |

----

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

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

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

----

Index

----

Index

|                                            |   | March 31,2011 |   |   | December 31,2010 |   |   | September 30,2010 |   |   | June 30,2010 |   |
|-------------------------------------------------|--------|---------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|--------------|--------|
|                                            |   |          |   |   |             |   |   |              |   |   |         |   |
| Nonaccrual loans (1)                            |   | $             | 24,010 |   |             | $      | 22,500 |              |   | $      | 24,334       |   |   | $ | 25,712 |   |
| Loans past due 90 days or more and accruing (2) |   |          | -      |   |             |   | -      |              |   |   | 10           |   |   |   | - |   |
| Restructured loans                              |   |          | 120    |   |             |   | 130    |              |   |   | 140          |   |   |   | 1,210 |   |
| Total nonperforming loans                       |   |          | 24,130 |   |             |   | 22,630 |              |   |   | 24,484       |   |   |   | 26,922 |   |
|                                            |   |          |   |   |             |   |   |              |   |   |         |   |   |   |   |   |
| Other real estate owned                         |   |          | 313    |   |             |   | 615    |              |   |   | 356          |   |   |   | - |   |
| Total nonperforming assets                      |   | $             | 24,443 |   |             | $      | 23,245 |              |   | $      | 24,840       |   |   | $ | 26,922 |   |
|                                            |   |          |   |   |             |   |   |              |   |   |         |   |   |   |   |   |
| Allowance for loan losses                       |   | $             | 9,874  |   |             | $      | 8,490  |              |   | $      | 9,327        |   |   | $ | 8,745 |   |
|                                            |   |          |   |   |             |   |   |              |   |   |         |   |   |   |   |   |
| Nonperforming loans to total gross loans        |   |          | 5.25   | %      |             |   | 5.01   | %                 |   |   | 5.43         | %      |   |   | 5.88 | % |
| Nonperforming assets to total assets            |   |          | 3.49   | %      |             |   | 3.38   | %                 |   |   | 3.65         | %      |   |   | 3.99 | % |
| Allowance for loan losses to total gross loans  |   |          | 2.15   | %      |             |   | 1.88   | %                 |   |   | 2.07         | %      |   |   | 1.91 | % |
| Allowance for loan losses to                    |   |          |   |   |             |   |   |              |   |   |         |   |   |   |   |   |
| nonperforming loans                             |   |          | 40.92  | %      |             |   | 37.52  | %                 |   |   | 38.09        | %      |   |   | 32.48 | % |

----

Index

----

Index

|               |   | Actual |   |   | Required forCapitalAdequacyPurposes |   |   | To Be WellCapitalizedUnder PromptCorrectiveActionRegulations |   |
|--------------------|--------|--------|--------|--------|-------------------------------------|--------|--------|--------------------------------------------------------------|--------|
| Leverage ratio     |   |   |   |   |                                |   |   |                                                         |   |
| Corporation        |   |   | 8.65   | %      |                                |   | 4.00   | %                                                            |   |   | N/A |   |
| Bank               |   |   | 8.14   | %      |                                |   | 4.00   | %                                                            |   |   | 5.00 | % |
|               |   |   |   |   |                                |   |   |                                                         |   |   |   |   |
| Risk-based capital |   |   |   |   |                                |   |   |                                                         |   |   |   |   |
| Tier I             |   |   |   |   |                                |   |   |                                                         |   |   |   |   |
| Corporation        |   |   | 12.21  | %      |                                |   | 4.00   | %                                                            |   |   | N/A |   |
| Bank               |   |   | 11.46  | %      |                                |   | 4.00   | %                                                            |   |   | 6.00 | % |
| Total              |   |   |   |   |                                |   |   |                                                         |   |   |   |   |
| Corporation        |   |   | 13.47  | %      |                                |   | 8.00   | %                                                            |   |   | N/A |   |
| Bank               |   |   | 12.72  | %      |                                |   | 8.00   | %                                                            |   |   | 10.00 | % |

----

Index

----

Index

tita

on

----

Index

 Part II 

te

----

Index

SIGNATUR

|               | Stewardship Financial Corporation |                                               |
|--------------------|-----------------------------------|----------------------------------------------------|
|               |                              |                                               |
|               |                              |                                               |
| Date: May 16, 2011 | By:                          | /s/ Paul Van Ostenbridge                           |   |
|               |                              | Paul Van Ostenbridge                               |   |
|               |                              | President and Chief Executive Officer              |   |
|               |                              |  (Principal Executive Officer)                |   |
|               |                              |                                               |   |
|               |                              |                                               |   |
|               |                              |                                               |   |
| Date: May 16, 2011 | By:                               | /s/ Claire M. Chadwick                             |   |
|               |                              | Claire M. Chadwick                                 |   |
|               |                              | Senior Vice President and Chief Financial Officer  |   |
|               |                              |  (Principal Financial and Accounting Officer) |   |

----

Index

EXHIBIT INDEX

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

----